<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to __________
Commission file number 33-75154
--------
J.B. POINDEXTER & CO., INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0312814
----------------------- ------------------------
(State or other jurisdiction (I.R.S. Employer
ofincorporation of organization) Identification No.)
1100 LOUISIANA
SUITE 5400
HOUSTON, TEXAS
77002
---------------------------------------------
(Address of principal executive offices)
(Zip code)
(713) 655-9800
----------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
There were 3,059 shares of Common Stock, $.01 par value, of the registrant
outstanding as of August 13, 1996.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
J. B. POINDEXTER & CO.,INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1996 1995
------------- -------------
(Unaudited)
<S> <C> <C>
Current assets
Cash including restricted cash. . . . . . . . . . . . . . . . . . $ 1,981 $ 1,714
Accounts receivable, net of allowance for doubtful. . . . . . . .
accounts of $2,577 and $2,626, respectively. . . . . . . . . . 38,802 33,848
Inventories, net. . . . . . . . . . . . . . . . . . . . . . . . . 55,885 51,937
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 3,397 3,417
Prepaid expenses and other. . . . . . . . . . . . . . . . . . . . 3,461 2,299
------------- -------------
Total current assets. . . . . . . . . . . . . . . . . . . . 103,526 93,215
Property, plant and equipment, net . . . . . . . . . . . . . . . . . 51,157 52,746
Goodwill, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,072 22,860
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,700 11,973
------------- -------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 188,455 $ 180,794
============= =============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Short term debt . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,844 $ 4,184
Current portion of long-term debt . . . . . . . . . . . . . . . . 1,886 2,337
Borrowings under revolving credit facility. . . . . . . . . . . . 25,244 24,288
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . 24,980 13,826
Accrued interest payable. . . . . . . . . . . . . . . . . . . . . 1,555 1,899
Accrued income taxes. . . . . . . . . . . . . . . . . . . . . . . 363
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . 18,678 16,887
------------- -------------
Total current liabilities. . . . . . . . . . . . . . . . . . . 74,187 63,784
Noncurrent liabilities
Long-term debt, less current portion. . . . . . . . . . . . . . . 103,866 104,543
Employee benefit obligations and other. . . . . . . . . . . . . . 3,206 3,016
------------- -------------
Total noncurrent liabilities . . . . . . . . . . . . . . . . . 107,072 107,559
Stockholder's equity
Common stock and paid-in capital. . . . . . . . . . . . . . . . . 16,486 16,486
Cumulative translation adjustment . . . . . . . . . . . . . . . . 53 46
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . (9,343) (7,081)
------------- -------------
Total stockholders equity. . . . . . . . . . . . . . . . . . . 7,196 9,451
------------- -------------
Total liabilities and stockholders equity. . . . . . . . . . . $ 188,455 $ 180,794
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
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<PAGE> 3
J. B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . $ 122,132 $ 125,434 $ 221,034 $ 236,616
Cost of sales. . . . . . . . . . . . . . . . . . . 94,333 99,113 173,676 188,462
---------- ---------- --------- ---------
Gross profit . . . . . . . . . . . . . . . . . . . 27,799 26,321 47,358 48,154
Selling, general and administrative expense. . . . 21,601 19,732 42,316 38,482
Other income, net. . . . . . . . . . . . . . . . . (135) (61) (105) (154)
---------- ---------- --------- ---------
Operating income . . . . . . . . . . . . . . . . . 6,333 6,650 5,147 9,826
Interest expense . . . . . . . . . . . . . . . . . 4,140 3,798 8,055 7,580
---------- ---------- --------- ---------
Income before income taxes and
extraordinary loss. . . . . . . . . . . . . . 2,193 2,852 (2,908) 2,246
Income tax provision . . . . . . . . . . . . . . . 1,079 1,309 (906) 1,197
---------- ---------- --------- ---------
Income before extraordinary loss . . . . . . . . . 1,114 1,543 (2,002) 1,049
Extraordinary loss on refinancing of
revolver debt, net of tax benefit of $135 . . 260 - 260 -
---------- ---------- --------- ---------
Net income (loss). . . . . . . . . . . . . . . . . $ 854 $ 1,543 $ (2,262) $ 1,049
========== ========== ========= =========
Earnings (loss) per share:
Income before extraordinary loss. . . . . . . $ 364 $ 504 $ (654) $ 343
Extraordinary loss. . . . . . . . . . . . . . 85 0 85 0
---------- ---------- --------- ---------
Net income (loss) . . . . . . . . . . . . . . $ 279 $ 504 $ (739) $ 343
========== ========== ========= =========
Weighted average shares outstanding. . . . . . . . 3,059 3,059 3,059 3,059
========== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-3-
<PAGE> 4
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in Thousands)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1996 1995
-------- --------
<S> <C> <C>
Net income (loss) $ (2,262) $ 1,049
Adjustments to reconcile net income to net cash used in operating activities:. . . . . .
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,007 4,937
Extraordinary loss on extinguishment of debt, net of tax . . . . . . . . . . . . . . . 260 -
Loss (Gain) on sale of equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 (79)
Deferred federal income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . (863) (526)
Increase in accrued pension liabilities. . . . . . . . . . . . . . . . . . . . . . . . (131) 81
Increase (decrease) in operating cash flows resulting from changes in:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,991) (7,719)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,017) (9,165)
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (443) (255)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,221 (664)
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (874) 1,191
Accrued expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,932 (511)
-------- --------
Net cash provided (used) in operating activities . . . . . . . . . . . . . . . . . . 5,930 (11,661)
-------- --------
Cash flow used in investing activities:
Purchases of businesses, net of cash acquired. . . . . . . . . . . . . . . . . . . . . - (10,238)
Proceeds from disposition of equipment . . . . . . . . . . . . . . . . . . . . . 351 138
Acquisition of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . (3,404) (6,452)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (13)
-------- --------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . . . . . (3,053) (16,565)
-------- --------
Cash flow (used) provided by financing activities: . . . . . . . . . . . . . . . . . . .
Net proceeds (payments) of revolving lines of credit and short-term debt . . . . . . . (1,379) 21,462
Net proceeds (payments) of long-term debt and capital leases . . . . . . . . . . . . . (1,081) (930)
Refinancing costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (150) -
-------- --------
Net cash provided by financing activities. . . . . . . . . . . . . . . . . . . . . . (2,610) 20,532
-------- --------
Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . 267 (7,694)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . 1,714 9,119
-------- --------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . $ 1,981 $ 1,425
======== ========
Supplemental information:
Cash paid for income taxes, net of refunds . . . . . . . . . . . . . . . . . . . . . . $ 507 $ 324
======== ========
Cash paid for interest cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,463 $ 7,065
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-4-
<PAGE> 5
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) ORGANIZATION AND BUSINESS. J.B. Poindexter & Co., Inc. (JBPCO) and its
subsidiaries (the Subsidiaries, and together with JBPCO, the Company), operate
manufacturing and wholesale distribution businesses. Subsidiaries consist of
Morgan Trailer Mfg Co., (Morgan), Truck Accessories Group, Inc., (TAG), Lowy
Group, Inc. (Lowy), EFP Corporation (EFP), and Magnetic Instruments Corp.
(Magnetic Instruments).
The Company incurred a net loss for the year-ended December 31, 1995, of
$8,536,000 and a net loss of $2,262,000 for the six months ended June 30, 1996.
Excluding an extraordinary loss net of tax effects of $260,000 related to the
refinancing of the Company's revolving credit facility, the net loss was
$2,002,000 for the six months ended June 30, 1996. Consolidated losses were
attributable to operating losses at the Truck Accessories Group, primarily as a
result of manufacturing problems associated with new product development,
design changes and the production and finishing processes. The Company showed
an improvement of $7,690,000 in net results during the six months ended June
30, 1996 compared to the six months ended December 31, 1995 during which the
Company incurred a net loss of $9,692,000. See Management's Discussion and
Analysis of Financial Condition and Results of Operations for further
discussion of TAG operations.
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the
information furnished reflects all adjustments, consisting only of normal
recurring adjustments, which are necessary for a fair presentation of the
results of the interim periods. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. However, the Company believes that the disclosures are
adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto for the year ended December 31, 1995
filed with the Securities and Exchange Commission on Form 10-K.
(2) EARNINGS PER SHARE. Primary earnings per share is calculated by
dividing net income by the weighted average number of shares outstanding during
the period. No common stock equivalents exist.
-5-
<PAGE> 6
(3) INVENTORIES. Consolidated net inventories consist of the following (in
thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- -------------
<S> <C> <C>
FIFO Basis Inventory:
Raw Materials. . . . . . . . . . . . . . 18,043 $ 19,267
Work in Process. . . . . . . . . . . . . 12,061 8,094
Finished Goods . . . . . . . . . . . . . 13,444 13,588
---------- ----------
43,548 40,949
---------- ----------
LIFO Basis Inventory:
Raw Materials. . . . . . . . . . . . . . 2,816 2,245
Work in Process. . . . . . . . . . . . . 1,409 1,529
Finished Goods . . . . . . . . . . . . . 8,112 7,214
--------- ----------
12,337 10,988
--------- ----------
Total Inventory . . . . . . . . . . . . . . . . $ 55,885 $ 51,937
========= ==========
</TABLE>
If the first-in, first-out method had been used for all inventory,
inventories would have approximated the reported value at June 30, 1996 and
would have been $352,000 greater than reported at December 31, 1995.
(4) REVOLVING LOAN AGREEMENT
On June 28, 1996, the Company entered into a new secured revolving loan
agreement (Revolving Loan Agreement) with a new lender providing for borrowings
by its Subsidiaries of up to $50.0 million. The arrangement allows the
Company to borrow up to the lesser of $50,000,000 or a percentage of eligible
accounts receivable and of eligible inventory of the Subsidiaries. The
Revolving Loan Agreement provides for borrowings at variable rates of interest,
based on either LIBOR (5.44 percent at August 9, 1996) or U.S. prime rate (8.25
percent at August 9, 1996), and expires June 28, 1999. Interest is payable
monthly. The Subsidiaries are guarantors of this indebtedness to which
inventory and receivables are pledged. At June 30, 1996, the Company had total
borrowings of $25,244,000, bank acceptances of $1,844,000 and stand by letters
of credit of $3,253,000 outstanding pursuant to the Revolving Loan Agreement.
At June 30, 1996, the Company's unused available borrowings under the Revolving
Loan Agreement totaled approximately $19,463,000.
Effective June 28, 1996, the Company used proceeds of $24,321,000 from
the Revolving Loan Agreement to repay all indebtedness outstanding under the
Revolving Credit Agreement entered into on May 23, 1994.
-6-
<PAGE> 7
The Revolving Loan Agreement contains provisions allowing the lender to
accelerate debt repayment upon the occurrence of an event the lender determines
to represent a material adverse change. Additionally, the Company's cash
balance is restricted under the terms of the Revolving Loan Agreement,
accordingly, balances outstanding under the Revolving Loan Agreement are
classified as a current liability.
(5) BUSINESS COMBINATIONS
On June 29, 1995, the Truck Accessories Group, acquired substantially all
of the assets of two companies, 20th Century Fiberglass, Inc., (20th Century),
and Century Distributing, Inc., (Century Distributing) and effective June 30,
1995, the Truck Accessories Group acquired substantially all of the assets of
Brown Industries Ltd., Pro-More Industries Ltd., and Lo Rider Industries Inc.,
(Raider Industries).
The results of all businesses acquired have been included in the
consolidated financial statements from the dates of acquisition. In allocating
purchase price, the assets acquired and liabilities assumed were assigned and
recorded based on estimates of fair value.
The Company's consolidated results of operations on an unaudited pro
forma basis, as though the businesses acquired during fiscal year 1995 had been
acquired on January 1, 1995, are as follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995
-----------------
(UNAUDITED)
<S> <C>
Pro forma net sales . . . . . . . . . . . . . . . . $ 260,315
Pro forma operating income . . . . . . . . . . . . . 10,830
Pro forma income before extraordinary loss . . . . . 1,324
Pro forma net income . . . . . . . . . . . . . . . . 1,324
Pro forma income per common
and common equivalent share -
Income before extraordinary loss. . . . . . . 433
Net income . . . . . . . . . . . . . . . . . 433
</TABLE>
These pro forma results are presented for informational purposes only
and do not purport to show the actual results which would have occurred had the
business combinations been consummated on January 1, 1995, nor should they be
viewed as indicative of future results of operations.
(6) CONTINGENCIES.
CLAIMS AND LAWSUITS. The Company is involved in certain claims and
lawsuits arising in the normal course of business. In the opinion of
management, the ultimate resolution of these matters will not have a material
adverse effect on the financial position or results of operations of the
Company.
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<PAGE> 8
CONCENTRATION OF CREDIT RISK. Morgan had three customers in 1996 and
two customers in 1995 (truck rental companies) accounting for approximately 33%
and 61% of Morgan's net sales during the six months ended June 30, 1996 and
1995, respectively, and 12% and 29% of consolidated net sales, respectively.
ENVIRONMENTAL MATTERS. Morgan has been named as a potentially
responsible party ("PRP") with respect to its alleged disposal of certain
solvents at the Industrial Solvents and Chemical Co. state hazardous waste site
in Newberry Township, Pennsylvania ("ISCC site") and at the Berks Associates
Waste Recovery Superfund Site near Douglasville, Pennsylvania ("Berks site").
Morgan has also been requested to furnish information to the Environmental
Protection Agency concerning Morgan's alleged shipment during the 1980s of used
batteries to a battery refurbishment business that is now the Lancaster Battery
Superfund Site near Lancaster, Pennsylvania and concerning Morgan's alleged
disposal of certain paint cans and solid material at the Welsh Road Superfund
Site (Barkman Landfill) near Honey Brook, Pennsylvania. Morgan has not been
named as a potentially responsible party with respect to these sites. Under
the Comprehensive Environmental Response Compensation and Liability Act of 1980
and the Pennsylvania Hazardous Sites Clean- Up Act, past and present site
owners and operators, transporters and waste generators are all potentially
jointly and severally responsible for clean up costs. However, typically, the
generator portion of the costs are allocated among generators, with each
generator bearing costs proportionate to the volume and nature of the wastes it
disposed of at the site. With respect to the ISCC site, Morgan has joined a
group of PRPs and is a party to certain consent agreements with Pennsylvania
and other PRP group members. These consent agreements require Pennsylvania to
offer a settlement for potential future costs, including ground water
remediation costs, upon completion of the interim remedial actions. With
respect to the Berks site, Morgan has agreed to a settlement of its share of
liability with the Environmental Protection Agency and is one of a group of
PRP's negotiating with Pennsylvania for settlement of alleged natural resource
damages. Although a precise estimate of liability cannot currently be made
with respect to these sites, based upon information known to Morgan, the
agreements Morgan is party to, the size of the waste sites, their years of
operation, the large number of past users and potentially responsible parties
of some of the sites, the alleged waste contribution by Morgan at some of these
sites and the nature of the substances alleged to be present at the waste
sites, the Company currently believes that Morgan's proportionate share, if
any, of the ultimate costs related to any necessary investigation and remedial
work at those sites will not have a material adverse effect on the Company.
In 1989, NSSC was listed as a potentially responsible party at the
Wichita Brass Co., Inc. National Priority List site at 29th & Mead in Wichita,
Kansas. Although the extent of NSSC's liability, if any, is not known at this
time, management currently believes that NSSC's allocated share of the ultimate
costs related to any necessary investigation and remedial work at this site
will not have a material adverse effect on the Company. The Company is not
aware of any other significant pending environmental claims pertaining to NSSC.
Certain of the Company's operations utilize paints and solvents in their
businesses. Also, raw materials used by EFP contain pentane, which is a
volatile organic compound subject to regulation under the Clean Air Act. Based
on current and proposed regulations, EFP estimates that it will have to
purchase additional equipment for environmental compliance in the future, and
the amount of such expenditure is not known at this time. Although the Company
believes that it has made sufficient capital expenditures to
-8-
<PAGE> 9
maintain compliance with existing laws and regulations, future expenditures may
be necessary if and when compliance standards and technology change.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company operates in industries that are dependent on various factors
reflecting general economic conditions, including corporate profitability,
consumer spending patterns, sales of truck chassis and new pickup trucks, new
and remodeling construction activity and levels of oil and gas exploration
activity.
The Company acquired three new pickup cap manufacturing and light truck
accessory businesses at the end of June, 1995. The acquired businesses operate
within the Truck Accessories Group which consists of two operating divisions:
TAG Manufacturing Division and TAG Distribution Division.
RESULTS OF OPERATIONS
CONSOLIDATED OPERATING RESULTS
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net sales decreased 7% to $221.0 million for the six months ended June
30, 1996 compared to $236.6 million during 1995. The decrease was due
primarily to a cyclical downturn at Morgan whose sales decreased 32% or $35.6
million which was partially offset by sales at TAG which increased 37% or $22.3
million, of which $24.0 million was attributable to operations acquired during
June 1995.
Cost of sales decreased 8% to $173.7 million for the six months ended
June 30, 1996 compared to $188.4 million during 1995. Gross profit declined 2%
to $47.4 million (21% of net sales) for the first six months of 1996 compared
to $48.1 million (20% of net sales) for 1995. The increase in gross profit as
a percentage of net sales was due to an increase in the relative contribution
of higher margin business by the TAG group.
Selling, general and administrative expense increased 11% to $42.3
million (19% of net sales) for the six months ended June 30, 1996 compared to
$38.3 million (16% of net sales) during 1995. The increase was due primarily
to increased costs associated with the businesses acquired by TAG during June
1995.
Operating income decreased 51% to $5.1 million (2% of net sales) for the
six months ended June 30, 1996 compared to an income of $9.8 million (4% of net
sales) in 1995. The reduction was due primarily to the decline in sales at
Morgan and increased operating losses at the Leer Manufacturing division of
TAG, compared to the first six months of 1995.
-9-
<PAGE> 10
Interest expense increased 7% to $8.1 million during the six months
ended June 30, 1996 compared to $7.6 million during 1995. Total overall
borrowing increased approximately 9% during the same period.
The income tax benefit of $0.9 million for the first six months of 1996
compared to an expense of $1.3 million for 1995.
SECOND QUARTER 1996 COMPARED TO SECOND QUARTER 1995
Net sales for the quarter ended June 30, 1996 decreased 3% to $122.1
million compared to $125.4 million for the same period in 1995. The decrease
was due to a 25% or $14.9 million decrease in sales at Morgan which was only
partially offset by a 42% or $13.4 million increase in sales at TAG. Of the
$13.4 million increase at TAG, $13.1 million was attributable to the
acquisitions made in June 1995.
Cost of sales decreased 5% to $94.3 million during the quarter ended
June 30, 1996 compared to $99.1 million for the same period in 1995. Gross
profits increased $1.5 million to $27.8 million during the quarter ended June
30, 1996 compared to $26.3 million during the prior year. Gross profits as a
percentage of net sales increased to 23% during the current quarter compared to
21% during 1995, primarily due to improvements at Morgan and TAG.
Selling, general and administrative expense increased $2.0 million or
10% to $21.6 million during the quarter ended June 30, 1996 compared to $19.6
million for the same period in the prior year. Primarily as a result of the
reduction in net sales at Morgan, selling, general and administrative expense
as a percent of sales rose from 16% in second quarter 1995 to 17% in the
quarter just ended.
Operating income decreased 5% to $6.3 million (5% of net sales) for the
second quarter of 1996 compared to $6.7 million (5% of net sales) in 1995, due
primarily to decreases in sales at Morgan.
MORGAN
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net sales decreased 32% to $77.3 million for the first six months of
1996 compared to record sales of $112.9 million for the first six months of
1995 as demand for Morgan's commercial van bodies decreased consistent with the
cyclical downturn in truck sales overall. Shipments decreased 32% during the
1996 period compared to 1995 including a 54% decrease in consumer rental
product shipments which resulted in a decline in consumer rental revenue of
60%. Backlog decreased to $33.2 million at June 30, 1996, compared to $39.4
million at December 31, 1995.
Cost of sales decreased 31% to $67.1 million for the first six months of
1996 compared to $97.0 million for the same period in 1995 in line with the
reduction in sales. Gross profit decreased 36% to $10.2 million (13% of net
sales) during 1996 compared to $15.9 million (14% of net sales) during 1995.
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<PAGE> 11
Selling, general and administrative expense decreased 13% to $6.7
million (9% of net sales) for the first six months of 1996 compared to $7.7
million (7% of net sales) for the same period of 1995. Morgan's selling,
general and administrative expense increase to 9% of net sales in 1996 from 7%
in 1995 was because certain fixed costs did not decrease in proportion to the
reduction in net sales.
Morgan's operating income decreased $4.6 million to $3.5 million during
the first six months of 1996 compared to $8.1 million for the first six months
of 1995 due to the reduction in sales described above.
SECOND QUARTER 1996 COMPARED TO SECOND QUARTER 1995
Net sales decreased 25% to $44.9 million for the second quarter of 1996
compared to $59.8 million for the second quarter of 1995, as demand for
commercial van bodies decreased with the cyclical downturn in truck sales. The
number of units shipped decreased 20% during the 1996 period compared to the
1995 period primarily due to a reduction in orders for consumer rental units.
Cost of sales decreased 26% to $37.7 million for the second quarter of
1996 compared to $51.1 million for the same period in 1995. Gross profit
decreased 7% to $7.2 million (16% of net sales) during 1996 compared to $8.7
million (15% of net sales) during 1995. The improvement in gross profit as a
percent of sales was primarily due to product price increases effected late in
1995 as well as reductions in raw material costs as a percentage of sales.
Selling, general and administrative expense decreased 12% to $3.4
million (8% of net sales) for the second quarter of 1996 compared to $3.9
million (6% of net sales) for the same period of 1995. Morgan's selling,
general and administrative expense as a percent of sales increased as certain
fixed costs did not decrease in proportion to sales decreases.
Morgan's operating income decreased 12% to $3.8 million during the
second quarter of 1996 compared to $4.9 million for the second quarter of 1995.
The decrease in operating income was due primarily to lower sales and lower
overhead absorption during the 1996 period.
TRUCK ACCESSORIES GROUP (TAG)
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
TAG consists of two operating divisions which comprise four units: TAG
Manufacturing Division is comprised of Leer Manufacturing, the manufacturing
operations of Century Fiberglass and Raider Industries acquired June 1995 and
the Gem-Top manufacturing operations acquired in March of 1993. TAG
Distribution Division is comprised of Leer Retail and National Truck
Accessories (NTA) which is a wholesale distributor of light truck and sport
utility vehicle accessories. The following operating results for each division
exclude intercompany sales. As used below, "retail sales" refers to sales by
TAG's company-owned stores.
-11-
<PAGE> 12
Net sales increased $22.3 million or 37% to $82.4 million for the first
six months of 1996 compared to $60.0 million for the same period in 1995.
Excluding operations acquired in June of 1995, sales decreased by $1.7 million
or 2%. Revenues in the manufacturing division were $46.2 million for the six
months ended June 30, 1996, an increase of $14.3 million or 45%. Approximately
$18.7 million of TAG Manufacturing revenues is attributable Century and Raider,
both acquired in late June of 1995. Net sales at TAG Distribution increased by
29% to $36.2 million from $28.2 million for the first six months in 1995.
Retail sales increased 13% to $22.1 million and NTA revenues were $14.1
million, an increase of $5.5 million or 63% over the same period last year.
Approximately $5.3 million of TAG Distribution revenues is attributable to
Century Distribution, acquired in late June 1995.
Gross profit during the first six months of 1996 increased $4.9 million
or 30% to $21.3 million (26% of net sales). TAG Manufacturing Division
accounted for $2.7 million or 56% of that increase while TAG Distributions's
gross profit rose 24% or $2.2 million over last year's first half to $11.2
million (29% of net sales). Gross profit attributable to operations acquired
by TAG in June of 1995 was approximately $5.7 million.
Selling, general and administrative expense increased 33% to $23.2
million (or 28% of net sales) for the first six months of 1996 compared to
$17.4 million (or 29% of net sales) for the first six months of 1995.
Excluding operations acquired during June 1995, selling, general and
administrative expense increased $0.8 million.
TAG's operating loss increased $0.9 million to an operating loss of $1.9
million for the first six months of 1996 compared to an operating loss of $1.0
million for the first six months of 1995. Compared to the last six months of
1995, TAG's operating loss improved $9.2 million from a loss of $11.1 million
for the six months ended December 31,1995. Operating losses at Leer
Manufacturing improved approximately $7.0 million on flat revenues compared to
the last six months of 1995. The Company continues to implement improvement
measures at the TAG companies. Steps taken by management to address the
manufacturing problems include among others, redesigning certain products and
implementing additional quality control procedures.
SECOND QUARTER 1996 COMPARED TO SECOND QUARTER 1995
Net sales increased 42% to $45.1 million for the second quarter of 1996
compared to $31.7 million for the second quarter of 1995. The June 1995
acquisitions accounted for $13.2 million of the increased net sales. TAG
Distribution Division increased 30% to $20.1 million during 1996 compared to
$15.5 million during 1995. Sales by the TAG Manufacturing Division increased
54% to $25.0 million compared to $16.2 million during 1995.
Gross profit increased 34% to $12.1 million (27% of net sales) for the
second quarter of 1996 compared to $9.0 million (28% of net sales) for the 1995
period. Excluding operations acquired in June 1995 gross profit declined $0.2
million to $8.8 million (28% of net sales).
Selling, general and administrative expense increased 30% to $11.9
million (or 26% of net sales) for the second quarter of 1996 compared to $9.2
million (or 29% of net sales) for the second quarter of
-12-
<PAGE> 13
1995. Excluding operations acquired in June 1995, selling, general and
administrative expense remained approximately $9.2 million (29% of net sales).
The Truck Accessories Group's operating results improved $0.4 million
from an operating loss of $0.2 million for the second quarter of 1995 to an
operating income of $0.2 million for the same period in 1996. Excluding
operations acquired in June 1995, the TAG operating loss was $0.4 million.
Compared to the first quarter of 1996 the operating loss improved $2.3 million
from a loss of $2.1 million as management continues to address the
manufacturing problems at Leer Manufacturing.
LOWY
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net sales decreased 9% to $34.4 million for the first six months of 1996
compared to $38.0 million for the first six months of 1995. The decrease in
sales was due to continued consolidation in the industry, direct selling by
manufacturers to home centers and overall market sluggishness.
Cost of sales decreased 9% to $24.8 million for the first six months of
1996 compared to $27.4 million for the same period in 1995. Gross profit
decreased 10% to $9.6 million (28% of net sales) for the first six months of
1996 compared to $10.6 million (28% of net sales) for the 1995 period.
Selling, general and administrative expense decreased 5% to $8.0 million
(23% of net sales) for the first six months of 1996 compared to $8.4 million
(22% of net sales) for the first six months of 1995, due primarily to reduced
sales and reduced costs associated with a reduction in sales personnel.
Lowy Group's operating income decreased $0.6 million to $1.6 million for
the first six months of 1996 compared to $2.2 million for the first six months
of 1995 as a result of lower sales.
SECOND QUARTER 1996 COMPARED TO SECOND QUARTER 1995
Net sales decreased 10% to $18.4 million for the second quarter of 1996
compared to $20.5 million for the second quarter of 1995. The decrease in
sales resulted primarily from lower residential construction activity in Lowy's
trade area and a decrease in activity by a single, large commercial customer.
Cost of sales decreased 13% to $12.9 million for the second quarter of
1996 compared to $14.8 million in the second quarter of 1995. Gross profit
decreased 3% to $5.5 million (30% of net sales) for the second quarter of 1995
compared to $5.7 million (28% of net sales) for the second quarter of 1995.
The increase in gross profit as a percent of net sales was primarily due to
decreased material costs at Blue Ridge.
-13-
<PAGE> 14
Selling, general and administrative expense during the second quarter of
1996 remained flat at $4.1 million.
Lowy Group's operating income decreased $0.1 million to $1.5 million for
the second quarter of 1996 compared to $1.6 million for the first six months of
1995, primarily as a result of the decrease in sales.
EFP
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net sales decreased 11% to $14.4 million for the first six months of
1996 compared to $16.1 million for the comparable period of 1995. The loss of
sales volume from the company's beverage cooler product line which was sold in
third quarter 1995 and the significant reduction in Styro-Cast sales which took
place in second quarter 1995 was only partially offset by an increase of $1.7
million in all other product lines.
Cost of sales decreased 12% to $11.9 million during the 1996 period
compared to $13.6 million during 1995. Gross profit decreased slightly to $2.4
million (17% of net sales) for the first six months of 1996 compared to $2.5
million (16% of net sales) for the first six months of 1995. The increase in
gross profit as a percentage of sales was due to lower raw material and labor
costs.
Selling, general and administrative expenses decreased 17% to $1.7
million (12% of net sales) for the first six months of 1996 compared to $2.0
million (12% of net sales) during the comparable period of 1995. The decrease
was primarily due to a significant reduction in personnel during the second
quarter of 1995.
EFP's operating income increased to $0.9 million for the first six
months of 1996 compared to $0.5 million for the first six months of 1995, due
primarily to reduction in selling, general and administrative expenses.
SECOND QUARTER 1996 COMPARED TO SECOND QUARTER 1995
Net sales decreased 8% to $7.4 million for the second quarter of 1996
compared to $8.0 million for the comparable period of 1995. Increases in all
other lines did not overcome the loss of the revenue associated with Styro-Cast
products and the sale of the beverage cooler line by the Company in the third
quarter of 1995.
Cost of sales decreased 7% to $6.3 million during the 1996 period
compared to $6.8 million during 1995 primarily as a result of lower sales.
Gross profit decreased $0.1 million to $1.1 million (15% of net sales) for the
second quarter of 1996 compared to $1.2 million (15% of net sales) for the
second quarter of 1995.
-14-
<PAGE> 15
Selling, general and administrative expense decreased 16% to $.8 million
(12% of net sales) for the second quarter of 1996 compared to $1.0 million (13%
of net sales) during the comparable period of 1995, primarily due to personnel
reductions.
EFP's operating income was $0.3 million for the second quarter of 1996,
equal to operating income of the same period of 1995.
-15-
<PAGE> 16
MAGNETIC INSTRUMENTS
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net sales increased 33% to $12.6 million for the first six months of
1996 compared to $9.5 million during the comparable period in 1995 as a result
of strong demand for oil field service related products.
Cost of sales increased 32% to $8.9 million for the first six months of
1996 compared to $6.7 million for the first six months of 1995.
Selling, general and administrative expenses increased to $1.4 million
(11% of net sales) for the first six months of 1996 compared to $1.2 million
(13% of net sales) for the comparable period in 1995.
Operating income increased by $0.7 to $2.3 million for the first six
months of 1996 compared to $1.6 million for the first six months of 1995.
SECOND QUARTER 1996 COMPARED TO SECOND QUARTER 1995
Net sales increased 17% to $6.3 million for the second quarter of 1996
compared to $5.4 million during the comparable period in 1995. This increase
in net sales was due to increased demand from energy service companies,
Magnetic Instument's primary market.
Cost of sales increased 17% to $4.6 million for the second quarter of
1996 compared to $3.8 million for the second quarter of 1995. Gross profit
increased 16% to $1.9 million or 30% of net sales.
Selling, general and administrative expense was flat at $0.7 million for
the second quarter of 1996 compared to the second quarter of 1995. Selling,
general and administrative expense as a percent of net sales declined from 13%
to 12% as a result of the increase in sales volume.
Operating income increased to $1.2 million for the second quarter of
1996 compared to $0.9 million for the second quarter of 1995, primarily due to
the increased net sales and resultant gross profit.
LIQUIDITY AND CAPITAL RESOURCES
Effective June 28, 1996 the Company successfully completed a refinancing
of its revolving credit facility. The new Revolving Loan Agreement provides
for borrowing up to $50.0 million, based on eligible collateral and contains no
financial performance covenants. Proceeds of $24.3 million were used to repay
all indebtedness under the previous facility.
The ability to borrow under the Revolving Loan Agreement depends on the
amount of eligible collateral which depends on certain advance rates applied to
the value of accounts receivables and inventory. At June 30, 1996 the Company
had total borrowing capacity of $49.7 million under the new agreement, of which
$5.1 million was used to secure letters of credit and finance trade
transactions. Additionally, $25.2 million was borrowed to pay off indebtedness
under the previous Revolving Credit Agreement and to fund operations resulting
in unused available borrowing capacity of $19.4
-16-
<PAGE> 17
million. At August 9, 1996 the Company had available borrowing capacity of
approximately $16.5 million under the terms of the Revolving Loan Agreement.
Working capital remained approximately $29.4 million at June 30, 1996
compared to December 31, 1995. The working capital ratio declined to 1.4 at
June 30, 1996 compared to 1.5 at December 31, 1995. Accounts receivable
increased approximately $5.0 million (15%) and inventory increased
approximately $4.0 million (8%) in response to the seasonal increase in
operating activity. These increases were financed primarily by an increase in
accounts payable of approximately $11.0 million (80%).
Operating activities during the six months ended June 30,1996 generated
cash of $5.6 million compared to using cash of $11.7 million during same period
in 1995. During 1995 record levels of activity and an aggressive policy of
maximizing discounts on purchases at Morgan increased working capital
requirements.
Capital expenditures of $3.4 million and $6.5 million during the six
months ended June 30, 1996 and 1995, respectively, consisted primarily of
expenditures to maintain existing capacity.
The Company believes that it has adequate resources to meet its working
capital and capital expenditure requirements consistent with past trends and
practices. Management believes that its cash balances and the borrowing
availability under the Revolving Loan Agreement will satisfy the Company's cash
requirements for the foreseeable future given its anticipated additional
capital expenditure, working capital requirements and its known obligations.
The Company is in compliance with the terms the Revolving Loan Agreement.
ITEM 5. OTHER INFORMATION
MANAGEMENT CHANGES
Effective July 1, 1996 the Company appointed Mike Manor president of TAG
Distribution Division, responsible for the operations of Leer Retail and
National Truck Accessories. Effective July 15, 1996 the Company appointed
Kevin Nameth president of TAG Manufacturing Division. Effective July 31, 1996
the president of Leer Retail resigned.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Loan and Security Agreement by and among Congress Financial
Corporation and J.B. Poindexter & Co., Inc., dated June 28, 1996.
27.1 Financial Data Schedule.
-17-
<PAGE> 18
(b) Reports on Form 8-K
None.
-18-
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
J.B. POINDEXTER & CO., INC.
(Registrant)
Date: August 13, 1996 By: S. Magee
-----------------------------------------------
S. Magee, Chief Financial Officer and Treasurer
By R.S. Whatley
-----------------------------------------------
R.S. Whatley, Chief Accounting Officer
-19-
<PAGE> 20
EXHIBIT INDEX
10.1 - Loan and Security Agreement by and among Congress Financial
Corporation and J.B. Poindexter & Co., Inc., dated
June 28, 1996.
27 - Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
[Execution Copy]
Loan and Security Agreement
by and among
CONGRESS FINANCIAL CORPORATION
as Lender
and
J.B. POINDEXTER & CO., INC.
as Borrower
EFP CORPORATION
LOWY GROUP, INC.
MAGNETIC INSTRUMENTS CORP.
MORGAN TRAILER MFG. CO.
TRUCK ACCESSORIES GROUP, INC.
RAIDER INDUSTRIES INC.
as Guarantors
Dated: June 28, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS
SECTION 2. CREDIT FACILITIES
2.1 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.2 Letter of Credit Accommodations . . . . . . . . . . . . . . 18
2.3 Availability Reserves . . . . . . . . . . . . . . . . . . . 20
2.4 Use of Proceeds; Intercompany Loans . . . . . . . . . . . . 21
SECTION 3. INTEREST AND FEES
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.2 Closing Fee . . . . . . . . . . . . . . . . . . . . . . . . 23
3.3 Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . 23
3.4 Unused Line Fee . . . . . . . . . . . . . . . . . . . . . . 24
3.5 Changes in Laws and Increased Costs of Loans . . . . . . . 24
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of
Credit Accommodations . . . . . . . . . . . . . . . . . 25
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5. GRANT OF SECURITY INTEREST . . . . . . . . . . . . . . . . . 27
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account(s) . . . . . . . . . . . . . . . . 29
6.2 Statements . . . . . . . . . . . . . . . . . . . . . . . . 29
6.3 Collection of Accounts . . . . . . . . . . . . . . . . . . . 30
6.4 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.5 Authorization to Make Loans . . . . . . . . . . . . . . . . 31
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting . . . . . . . . . . . . . . . . . . . 32
7.2 Accounts Covenants . . . . . . . . . . . . . . . . . . . . 33
7.3 Inventory Covenants . . . . . . . . . . . . . . . . . . . . 34
7.4 Equipment Covenants . . . . . . . . . . . . . . . . . . . . 35
7.5 Power of Attorney . . . . . . . . . . . . . . . . . . . . . 35
7.6 Right to Cure . . . . . . . . . . . . . . . . . . . . . . . 36
7.7 Access to Premises . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
SECTION 8. REPRESENTATIONS AND WARRANTIES
8.1 Corporate Existence, Power and Authority; Subsidiaries . . 37
8.2 Financial Statements; No Material Adverse Change. . . . . 37
8.3 Chief Executive Office; Collateral Locations. . . . . . . 37
8.4 Priority of Liens; Title to Properties . . . . . . . . . . 38
8.5 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . 38
8.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 38
8.7 Compliance with Other Agreements and Applicable Laws . . . 38
8.8 Environmental Compliance . . . . . . . . . . . . . . . . . 39
8.9 Employee Benefits . . . . . . . . . . . . . . . . . . . . 40
8.10 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . 40
8.11 Capitalization, Interrelated Businesses . . . . . . . . . 40
8.12 Accuracy and Completeness of Information. . . . . . . . . 41
8.13 Survival of Warranties; Cumulative . . . . . . . . . . . . 41
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence . . . . . . . . . . . . . . . . . 41
9.2 New Collateral Locations . . . . . . . . . . . . . . . . . 41
9.3 Compliance with Laws, Regulations, Etc . . . . . . . . . . 42
9.4 Payment of Taxes and Claims . . . . . . . . . . . . . . . 43
9.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 43
9.6 Financial Statements and Other Information . . . . . . . . 44
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. . 45
9.8 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . 51
9.9 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 53
9.10 Loans, Investments, Guarantees, Etc . . . . . . . . . . . 59
9.11 Dividends and Redemptions . . . . . . . . . . . . . . . . 62
9.12 Transactions with Affiliates . . . . . . . . . . . . . . . 63
9.13 Limitations Concerning Distributions and Transfers by
Guarantors to Borrower . . . . . . . . . . . . . . . . . 64
9.14 Acquisitions of Assets and Capital Stock from Third
Parties . . . . . . . . . . . . . . . . . . . . . . . . 64
9.15 Compliance with ERISA . . . . . . . . . . . . . . . . . . 66
9.16 Additional Bank Accounts . . . . . . . . . . . . . . . . . 67
9.17 Financing Acquisitions. . . . . . . . . . . . . . . . . . 67
9.18 Covenants Applicable to Canada . . . . . . . . . . . . . . 67
9.19 Costs and Expenses . . . . . . . . . . . . . . . . . . . . 68
9.20 Further Assurances . . . . . . . . . . . . . . . . . . . . 69
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default . . . . . . . . . . . . . . . . . . . . 69
10.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver . . . . . . . . . . . . . . . . . . . . 72
11.2 Waiver of Notices . . . . . . . . . . . . . . . . . . . . . 73
11.3 Amendments and Waivers . . . . . . . . . . . . . . . . . . 73
11.4 Waiver of Counterclaims . . . . . . . . . . . . . . . . . . 74
11.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 75
12.3 Partial Invalidity . . . . . . . . . . . . . . . . . . . . 75
12.4 Successors . . . . . . . . . . . . . . . . . . . . . . . . 76
12.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 76
12.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 76
</TABLE>
(iii)
<PAGE> 5
INDEX TO
EXHIBITS AND SCHEDULES
<TABLE>
<S> <C>
Exhibit A Form of Borrowing Base Certificate
Exhibit B Information Certificates
Schedule 1.20 Credit Card Agreements
Schedule 1.35 Existing Letters of Credit
Schedule 1.48 Intercompany Security Agreements
Schedule 6.3 List of Bank Accounts
Schedule 8.1 Subsidiaries
Schedule 8.4 Existing Liens
Schedule 8.8 Environmental Compliance
Schedule 8.9 Multiemployer Benefit Plans
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Existing Loans, Investments,
Guarantees
</TABLE>
<PAGE> 6
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated June 28, 1996 is entered into by
and among Congress Financial Corporation, a California corporation ("Lender")
and J.B. Poindexter & Co., Inc., a Delaware corporation ("Borrower"), EFP
Corporation, a Delaware corporation ("EFP"), Lowy Group, Inc., a Delaware
corporation ("Lowy"), Magnetic Instruments Corp., a Delaware corporation
("MIC"), Morgan Trailer Mfg. Co., a New Jersey corporation ("Morgan"), Truck
Accessories Group, Inc., a Delaware corporation ("TAG"), and Raider Industries
Inc., a Saskatchewan corporation ("Raider"; and together with EFP, Lowy, MIC,
Morgan and TAG, each individually a "Guarantor" and collectively,
"Guarantors").
W I T N E S S E T H:
WHEREAS, Borrower and Guarantors have requested that Lender enter into
certain financing arrangements with Borrower pursuant to which Lender may make
loans and provide other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement. All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural. All
references to Guarantors pursuant to the definitions set forth in the recitals
hereto, unless the context otherwise requires, shall mean each and all of them
and their respective successors and assigns, individually and collectively,
jointly and severally. All references to Borrower and Lender pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not any
particular provision of this Agreement and as this Agreement now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced. An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3. Any
accounting term used herein unless otherwise defined in this Agreement shall
have the meanings customarily given to such term in accordance with GAAP. For
purposes of this Agreement, the following terms shall have the respective
meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower
and each Guarantor to payment for goods sold or leased or for services
rendered, which are not evidenced by instruments or chattel paper, and whether
or not earned by performance, provided, that, the term Accounts shall not
include Credit Card Receivables.
<PAGE> 7
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b)
a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For
purposes hereof, "Reserve Percentage" shall mean the reserve percentage,
expressed as a decimal, prescribed by any United States or foreign banking
authority for determining the reserve requirement which is or would be
applicable to deposits of United States dollars in a non-United States or an
international banking office of Reference Bank used to fund a Eurodollar Rate
Loan or any Eurodollar Rate Loan made with the proceeds of such deposit,
whether or not the Reference Bank actually holds or has made any such deposits
or loans. The Adjusted Eurodollar Rate shall be adjusted on and as of the
effective day of any change in the Reserve Percentage.
1.3 "Affiliate" shall mean, with respect to a specified person, any
other person (a) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
such specified person, (b) which beneficially owns or holds five (5%) percent
or more of any class of the voting stock or other equity interest of such
specified person, or (c) of which five (5%) percent or more of the voting stock
or other equity interest is beneficially owned or held by such specified person
or a Subsidiary of such specified person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with") when used with respect to any
specified person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
person, whether through the ownership of voting stock, by agreement or
otherwise.
1.4 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time establish and
revise in good faith reducing the amount of Loans and Letter of Credit
Accommodations that would otherwise be available to Borrower under the lending
formula(s) provided for herein: (a) to reflect events, conditions,
contingencies or risks that, as determined by Lender in good faith, do or may
affect either (i) the Collateral or any other property which is security for
the Obligations or its value, (ii) the assets, business or prospects of
Borrower or any Obligor or (iii) the security interests and other rights of
Lender in the Collateral or any other property which is security for the
Obligations (including the enforceability, perfection and priority thereof), or
(b) to reflect Lender's good faith belief that any collateral report or
financial information furnished by or on behalf of Borrower or any Obligor to
Lender is or may have been incomplete, inaccurate or misleading in any material
respect, or (c) in connection with outstanding Letter of Credit Accommodations
in accordance with Section 2.2(c) hereof, or (d) in respect of any state of
facts which Lender determines in good faith constitutes an Event of Default or
may with notice or passage of time or both, constitute an Event of Default.
1.5 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.6 "Borrowing Base Certificate" shall mean a certificate
substantially in the form of Exhibit A hereto, as such form may from time to
time be modified by Lender in any reasonable manner upon notice to Borrower,
which is duly completed (including all schedules thereto) and executed by the
chief financial officer or other appropriate financial officer of Borrower
acceptable to Lender and delivered to Lender.
1.7 "Business Day" shall mean any day other than a Saturday, Sunday,
or other day on which commercial banks are authorized or required to close
under the laws of the State of New York or the Commonwealth of Pennsylvania,
and a day on which the Reference Bank and Lender are open for the
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transaction of business, except that if a determination of a Business Day shall
relate to any Eurodollar Rate Loans, the term Business Day shall also exclude
any day on which banks are closed for dealings in dollar deposits in the London
interbank market or other applicable Eurodollar Rate market.
1.8 "Canadian Dollars" shall mean legal tender according to the laws
of Canada.
1.9 "Capital Lease" shall mean any lease of property which, in
accordance with GAAP, should be capitalized on the lessee's balance sheet.
1.10 "Capital Lease Obligation" shall mean, as to any Person, the
obligation to pay rent or other payment amounts under a lease of (or other
Indebtedness arrangements conveying the right to use) real or personal property
of such Person which is required to be classified and accounted for as a
capital lease or a liability on the face of a balance sheet of such Person in
accordance with GAAP. The stated maturity of such obligation shall be the date
of the last payment of rent or other amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without
payment of a penalty.
1.11 "Capital Stock" shall mean any and all shares, interests,
participations, or other equivalents (however designated) of corporate stock or
partnership interests and any options or warrants with respect to any of the
foregoing.
1.12 "Cash Equivalents" shall mean (a) marketable direct obligations
issued or unconditionally guaranteed by the United States government and backed
by the full faith and credit of the United States Government, in each case
maturing within one (1) year after the date of acquisition thereof; (b)
marketable direct obligations issued by any State of the United States of
America or any political subdivision of any such State or any public
instrumentality thereof maturing within one hundred eighty (180) days after the
date of acquisition thereof and, at the time of such acquisition, having the
highest credit ratings from Standard & Poor's Corporation or Moody's Investors
Service, Inc.; (c) commercial paper of United States and foreign banks and bank
holding companies and their subsidiaries and United States and foreign finance,
commercial, industrial or utility companies which, at the time of acquisition,
are rated A-1 (or better) by Standard & Poor's Corporation or P-1 (or better)
by Moody's Investors Service, Inc., provided, that, the maturities of such
commercial paper do not exceed one hundred eight (180) days; and (d) domestic
and Eurodollar certificates of deposit and time deposits, bankers' acceptances
and floating rate certificates of deposits issued by any commercial bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia having combined capital and surplus of not less
than $250,000,000, which at the time of acquisition, are rated A-1 (or better)
by Standard & Poor's Corporation or P-1 (or better) by Moody's Investors
Service, Inc.
1.13 "Change of Control" shall mean the occurrence of any of the
following: (a) any Person or Persons (other than a Permitted Holder) acting
together which would constitute a "group" (a "Group") for purposes of Section
13(d)(3) of the Securities Exchange Act, together with any Affiliates thereof,
shall beneficially own (as defined in Rule 13d-3 of the Securities Exchange Act
at least fifty (50%) percent of the aggregate voting power of all classes of
Capital Stock of Borrower entitled to vote generally in the election of
directors of Borrower or (b) any Person or Group (other than a Permitted
Holder), together with any Affiliates thereof, shall succeed in having
sufficient of its or their nominees elected to the Board of Directors of
Borrower so that such nominees, when added to any existing directors remaining
on the Board of Directors of Borrower after such election who is an Affiliate
of such Person or Group, shall constitute a majority of the Board of Directors
of Borrower.
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1.14 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.15 "Collateral" shall have the meaning set forth in Section 5
hereof.
1.16 "Consolidated Net Income" shall mean, with respect to Borrower
for any period, the aggregate of the net income (loss) of such Person and its
Subsidiaries, on a consolidated basis, for such period (excluding to the extent
included therein any extraordinary gains and extraordinary non-cash losses)
after deducting all charges which should be deducted before arriving at the net
income (loss) for such period and after deducting the Provision for Taxes for
such period, all as determined in accordance with GAAP; provided, that, (a) the
net income of any Person that is not a wholly-owned Subsidiary or that is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions paid or payable to Borrower
or a wholly-owned Subsidiary of such person; (b) except to the extent included
pursuant to the foregoing clause, the net income of any Person accrued prior to
the date it becomes a wholly-owned Subsidiary of such Person or is merged into
or consolidated with such Person or any of its wholly-owned Subsidiaries or
that Person's assets are acquired by such Person or by any of its wholly-owned
Subsidiaries shall be excluded; (c) the effect of any change in accounting
principles adopted by such Person or its Subsidiaries after the date hereof
shall be excluded; (d) net income shall exclude interest accruing, but not paid
on Indebtedness owing to a Subsidiary or parent corporation of Borrower, which
is subordinated in right of payment to the payment in full of the Obligations,
on terms and conditions acceptable to Lender; and (e) the net income (if
positive) of any wholly-owned Subsidiary to the extent that the declaration or
payment of dividends or similar distributions by such wholly-owned Subsidiary
to Borrower or to any other wholly-owned Subsidiary of Borrower is not at the
time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such wholly-owned Subsidiary shall be excluded. For the purposes
of this definition, (i) net income excludes any gain and non-cash loss (but not
any cash loss) together with any related Provision for Taxes for such gain and
non-cash loss (but not any cash loss) realized upon the sale or other
disposition of any assets that are not sold in the ordinary course of business
(including, without limitation, dispositions pursuant to sale and leaseback
transactions) or of any Capital Stock of such Person or a Subsidiary of such
Person and any net income realized as a result of changes in accounting
principles or the application thereof to such Person, and (ii) the term
"Provision for Taxes" shall mean an amount equal to all taxes imposed on or
measured by net income, whether Federal, State, Provincial, county or local,
and whether foreign or domestic, that are paid or payable by any Person in
respect of any period in accordance with GAAP.
1.17 "Consolidated Pre-Tax Net Income" shall mean, with respect to
Borrower for any period, the aggregate of the net income (loss) of such Person
and its Subsidiaries, on a consolidated basis, for such period (excluding to
the extent included therein any extraordinary gains and extraordinary non-cash
losses) after deducting all charges which should be deducted before arriving at
the net income (loss) for such period and before deducting the Provision for
Taxes for such period, all as determined in accordance with GAAP; provided,
that, (a) the net income of any Person that is not a wholly-owned Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid or payable to
Borrower or a wholly-owned Subsidiary of such person; (b) except to the extent
included pursuant to the foregoing clause, the net income of any Person accrued
prior to the date it becomes a wholly-owned Subsidiary of such Person or is
merged into or consolidated with such Person or any of its wholly-owned
Subsidiaries or that Person's assets are acquired by such Person or by any of
its wholly-owned Subsidiaries shall be excluded; (c) the
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effect of any change in accounting principles adopted by such Person or its
Subsidiaries after the date hereof shall be excluded; (d) net income shall
exclude interest accruing, but not paid on Indebtedness owing to a Subsidiary
or parent corporation of Borrower, which is subordinated in right of payment to
the payment in full of the Obligations, on terms and conditions acceptable to
Lender; and (e) the net income (if positive) of any wholly-owned Subsidiary to
the extent that the declaration or payment of dividends or similar
distributions by such wholly-owned Subsidiary to Borrower or to any other
wholly-owned Subsidiary of Borrower is not at the time permitted by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to such wholly-
owned Subsidiary shall be excluded. For the purposes of this definition, (i)
net income excludes any gain and non-cash loss (but not any cash loss) together
with any related Provision for Taxes for such gain and non-cash loss (but not
any cash loss) realized upon the sale or other disposition of any assets that
are not sold in the ordinary course of business (including, without limitation,
dispositions pursuant to sale and leaseback transactions) or of any Capital
Stock of such Person or a Subsidiary of such Person and any net income realized
as a result of changes in accounting principles or the application thereof to
such Person, and (ii) the term "Provision for Taxes" shall mean an amount equal
to all taxes imposed on or measured by net income, whether Federal, State,
Provincial, county or local, and whether foreign or domestic, that are paid or
payable by any Person in respect of any period in accordance with GAAP.
1.18 "Consolidated Tangible Assets" shall mean, as to any Person, the
sum of the Tangible Assets of such Person after eliminating intercompany items,
determined on a consolidated basis in accordance with GAAP, including
appropriate deductions for any minority interest in Tangible Assets of such
Person's Subsidiaries; provided, that, with respect to Borrower and its
Subsidiaries, adjustments following May 23, 1994, to the accounting books and
records of the Borrower and its Subsidiaries in accordance with Accounting
Principles Board Opinions Nos. 16 and 17 (or successor opinions thereto) or
otherwise resulting from the acquisition of control of Borrower by another
Person shall not be given effect. For purposes of this definition, the term
"Tangible Assets" shall mean, at any date, the gross book value as shown by the
accounting books and records of such Person of all its property both real and
personal, less (a) the net book value of all its licenses, patents, patent
applications, copyrights, trademarks, trade names, goodwill, non-compete
agreements or organizational expenses and other like intangibles, (b)
unamortized Indebtedness discount and expense, (c) all reserves for
depreciation, obsolescence, depletion and amortization of its properties and
(d) all other proper reserves which in accordance with GAAP should be provided
in connection with the business conducted by such Person; provided, that, with
respect to Borrower and its Subsidiaries, adjustments following May 23, 1994 to
the accounting books and records of Borrower and its Subsidiaries in accordance
with Accounting Principles Board Opinions Nos. 16 and 17 (or successor opinions
thereto) or otherwise resulting from the acquisition of control of Borrower by
another Person shall not be given effect.
1.19 "Credit Card Acknowledgments" shall mean, individually and
collectively, the agreements by Credit Card Issuers or Credit Card Processors
who are parties to Credit Card Agreements in favor of Lender acknowledging
Lender's first priority security interest in the monies due and to become due
to Guarantors (including, without limitation, credits and reserves) under the
Credit Card Agreements, and agreeing to transfer all such amounts to the
Blocked Accounts, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.20 "Credit Card Agreements" shall mean all agreements now or
hereafter entered into by the Leer Retail Division of TAG with any Credit Card
Issuer or any Credit Card Processor, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced,
including, but not limited to, the agreements listed on Schedule 1.20 hereto.
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1.21 "Credit Card Issuer" shall mean any Person (other than Borrower
or Guarantors) who issues or whose members issue credit cards, including,
without limitation, MasterCard or VISA bank credit or debit cards or other bank
credit or debit cards issued through MasterCard International, Inc., Visa,
U.S.A., Inc. or Visa International, and American Express, Discover, Diners
Club, Carte Blanche and other non-bank credit or debit cards, including,
without limitation, American Express Travel Related Services Company, Inc. and
Novus Services, Inc.
1.22 "Credit Card Processor" shall mean any servicing or processing
agent or any factor or financial intermediary who facilitates, services,
processes or manages the credit authorization, billing transfer and/or payment
procedures with respect to sales transactions of Borrower or any Guarantor
involving credit card or debit card purchases by customers using credit cards
or debit cards issued by any Credit Card Issuer (including, but not limited to,
National Data Payment Systems, Inc.).
1.23 "Credit Card Receivables" shall mean, collectively, (a) all
present and future rights to payment of Borrower and Guarantors arising
pursuant to the sale of Inventory to customers who have purchased such goods
using a credit card or a debit card and (b) all present and future rights of
Borrower and Guarantors to payment in connection with the sale or transfer of
amounts owing to Borrower or any Guarantor arising pursuant to transactions of
the types described in the preceding subsection (a) of this definition,
including, but not limited to, all amounts at any time due or to become due
from any Credit Card Issuer or Credit Card Processor under the Credit Card
Agreements or otherwise.
1.24 "Eligible Accounts" shall mean Accounts created by Guarantors
which are and continue to be acceptable to Lender in good faith based on the
criteria set forth below. Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale
and delivery of goods by such Guarantor in the ordinary course of its business
which transactions are completed in accordance with the terms and provisions
contained in any documents related thereto;
(b) such Accounts are not unpaid after the later of: (i) the
date which is sixty (60) days after the original due date for them or (ii) the
date which is ninety (90) days after the date of the original invoice for them;
(c) such Accounts comply with the terms and conditions
contained in Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval (except for the right of
return given to retail customers in the ordinary course of the business of the
Leer Retail Division of TAG in accordance with the then current return policy
of the Leer Retail Division of TAG, so long as such policy is no more favorable
to the retail customer in any material respect than the policy in effect on the
date hereof), or other terms under which payment by the account debtor may be
conditional or contingent;
(e) the chief executive office of the account debtor with
respect to such Accounts is located in the United States of America or Canada;
provided, that, (i) with respect to such Accounts where the chief executive
office of the account debtor is located in Canada, at any time, promptly upon
Lender's request, the Guarantor to whom such Accounts are payable shall execute
and deliver, or cause to be executed and delivered, such other agreements,
documents and instruments as may be required by Lender to perfect the security
interests of Lender in the Accounts owing by an account debtor with its
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chief executive office in Canada in accordance with the applicable laws of the
Province of Canada in which such chief executive office is located and take or
cause to be taken such other and further actions as Lender may request to
enable Lender as secured party with respect thereto to collect such Accounts
under the applicable laws of the Province of Canada or (ii) at Lender's option,
if the chief executive office of the account debtor with respect to such
Accounts is located other than in the United States of America or Canada, then
Lender may deem such Accounts to be Eligible Accounts if: (A) such Account is
payable only in the United States of America and in U.S. Dollars and (B) either
(1) the account debtor has delivered to such Guarantor an irrevocable letter of
credit issued or confirmed by a bank satisfactory to Lender, sufficient to
cover such Account, in form and substance satisfactory to Lender and, if
required by Lender, the original of such letter of credit has been delivered to
Lender or Lender's agent and the issuer thereof notified of the pledge or
assignment of the proceeds of such letter of credit to Lender, or (2) such
Account is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender, or (3) such Account is
otherwise acceptable in all respects to Lender (subject to such lending formula
with respect thereto as Lender may determine);
(f) such Accounts do not consist of progress billings, bill
and hold invoices or retainage invoices, except as to bill and hold invoices
representing Accounts which otherwise constitute Eligible Accounts, if Lender
shall have received an agreement in writing from the account debtor, in form
and substance satisfactory to Lender, confirming the unconditional obligation
of the account debtor to take the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff against such
Accounts, including, without limitation, as to Lowy, any setoffs arising
pursuant to the customer trip deposit program of Lowy (but the portion of the
Accounts of such account debtor in excess of the amount at any time and from
time to time owed by such Guarantor or its Affiliates to such account debtor or
claim owed by such account debtor which otherwise constitute Eligible Accounts
shall be deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would
impair the validity, enforceability or collectability of such Accounts or
reduce the amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid
and perfected security interest of Lender and any goods giving rise thereto are
not, and were not at the time of the sale thereof, subject to any Liens except
the Permitted Liens;
(j) neither the account debtor nor any officer or employee of
the account debtor with respect to such Accounts is an officer, employee, agent
or other Affiliate of Borrower, Guarantors or their Subsidiaries;
(k) the account debtors with respect to such Accounts are not
Canada, any Province of Canada, any other foreign government, the United States
of America, any State, or any political subdivision, department, agency or
instrumentality of any of the foregoing, except (i) if the account debtor is
the United States of America, or any State, political subdivision, department,
agency or instrumentality thereof, at any time promptly upon Lender's request,
such Guarantor shall comply in all respects with the United States Assignment
of Claims Act of 1940, as amended, or any similar State or local law, if
applicable, in a manner satisfactory to Lender and (ii) if the account debtor
is Canada or any Province thereof, at any time promptly upon Lender's request,
such Guarantor shall comply in all
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respects with the Federal Administration Act (Canada), as amended, or any
similar Provincial or local law, if applicable, in a manner satisfactory to
Lender;
(l) there are no proceedings or actions which are threatened
or pending against the account debtors with respect to such Accounts which
could reasonably be expected to result in any material adverse change in any
such account debtor's financial condition;
(m) such Accounts of any Guarantor owing by a single account
debtor or its Affiliates to such Guarantor do not constitute more than fifteen
(15%) percent of all otherwise Eligible Accounts of all Guarantors (but the
portion of the Accounts not in excess of such percentage which otherwise
constitute Eligible Accounts shall be deemed Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has
Accounts unpaid after the later of the date which is sixty (60) days after the
original due date for them or the date which is ninety (90) days after the
original invoice date for them, which constitute more than fifty (50%) percent
of the total Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose total
indebtedness to Guarantors and their Subsidiaries do not exceed the credit
limit with respect to such account debtors as determined by such Guarantor from
time to time in the ordinary course of business, to the extent such credit
limits are satisfactory to Lender (but the portion of the Accounts not in
excess of such credit limit which is satisfactory to Lender which otherwise
constitute Eligible Accounts shall be deemed Eligible Accounts);
(p) such Accounts are not Accounts of the Leer Retail
Division of TAG, provided, that, such Accounts which are otherwise Eligible
Accounts pursuant to the other criteria set forth herein may after the date
hereof be considered Eligible Accounts by Lender at such time as the books and
records of such Divisions, and the dilution and other systems and procedures of
TAG with respect thereto are satisfactory to Lender, and Lender has otherwise
determined to consider such Accounts as Eligible Accounts; and
(q) such Accounts are owed by account debtors deemed
creditworthy at all times by Lender, as determined in good faith by Lender.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.25 "Eligible Inventory" shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of any Guarantor
(other than MIC) and raw materials of such Guarantor for such finished goods
which are acceptable to Lender based on the criteria set forth below. Eligible
Inventory shall not include: (a) work-in-process (other than Inventory of
Morgan characterized as work-in-process consisting of truck bodies made for
chassis which have not yet been delivered); (b) components which are not part
of finished goods; (c) spare parts for equipment not held for resale in the
ordinary course of business; (d) packaging and shipping materials; (e) supplies
used or consumed in the business of such Guarantor; (f) Inventory at premises
other than those owned and controlled by Borrower or any Guarantor, except (i)
as to Inventory at retail store locations of the Leer Retail Division of TAG
which are leased by it if either (A) Lender shall have received a Landlord
Agreement duly authorized, executed and delivered by the owner and lessor of
such premises or (B) if Lender has not received such Landlord Agreement, then
Lender shall have established an Availability Reserve in respect of amounts
which may at any time be payable by such Guarantor to the owner and lessor of
such retail store location (without limiting any other rights and remedies of
Lender under this Agreement or under the other
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Financing Agreements with respect to the establishment of Availability Reserves
or otherwise); provided, that, Borrower and each Guarantor shall use its best
efforts to obtain the Landlord Agreement with respect to each of such locations
and (ii) as to Inventory at other locations of Guarantors which are leased by
any of them, if Lender shall have received a Landlord Agreement duly
authorized, executed and delivered by the owner and lessor of such premises;
(g) Inventory subject to a Lien in favor of any person other than Lender except
for the Permitted Liens; (h) bill and hold goods; (i) unserviceable, obsolete,
unsalable or slow moving Inventory; (j) Inventory which is not subject to the
first priority, valid and perfected security interests of Lender; (k) returned,
damaged and/or defective Inventory; (l) Inventory to be returned to vendors;
and (m) Inventory purchased or sold on consignment. General criteria for
Eligible Inventory may be established and revised from time to time by Lender
in good faith. Any Inventory which is not Eligible Inventory shall
nevertheless be part of the Collateral.
1.26 "Environmental Laws" shall mean all Federal, State, Provincial,
county, district, local and foreign laws, rules, regulations, ordinances, and
consent decrees relating to workplace health and safety, hazardous substances,
pollution and environmental matters, as now or at any time hereafter in effect,
applicable to the businesses of Borrower, Guarantors and their Subsidiaries and
facilities (whether or not owned by any of them), including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contamination, chemicals, or hazardous, toxic or dangerous substances,
materials or wastes into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata) or
otherwise relating to the generation, manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals, or hazardous, toxic or dangerous substances, materials
or wastes.
1.27 "Equipment" shall mean all of Borrower's and each Guarantor's now
owned and hereafter acquired equipment, machinery, computers and computer
hardware, and including any software incorporated into or made a part of such
hardware (whether owned or leased), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used
in connection therewith, and substitutions and replacements thereof, wherever
located.
1.28 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.29 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or Guarantors or any of their Subsidiaries under Sections 414(b)
and 414(c) of the Code (and Sections 414(m) or 414(o) of the Code for purposes
of provisions relating to Section 412 of the Code).
1.30 "Eurodollar Rate" shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States Dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to Borrower in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrower.
1.31 "Eurodollar Rate Loans" shall mean any Loans or portion thereof
on which interest is payable based on the Adjusted Eurodollar Rate in
accordance with the terms hereof.
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1.32 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.33 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of (i) amount of the
Loans available to Borrower as of such time based on the applicable lending
formula set forth in Section 2.1(a) hereof, subject to any then applicable
Availability Reserves and sublimits and (ii) the Maximum Credit, minus (b) the
sum of (i) the amount of all then outstanding and unpaid Obligations plus (ii)
the aggregate amount of all outstanding and unpaid trade payables owed by
Borrower and any Obligor which are more than sixty (60) days past due as of
such time, provided, that, this Section 1.33(b)(ii) shall not apply other than
for purposes of determining Excess Availability under Section 4.1 as of the
date hereof and for purposes of Sections 9.7, 9.10, 9.11 and 9.14 hereof.
1.34 "Existing Lenders" shall mean, collectively, (a) Meridian Bank,
as agent for the financial institutions who are parties to the Loan and Agency
Agreement, dated as of May 23, 1994, by and among Borrower, such financial
institutions and Meridian Bank as agent, and (b) the financial institutions who
are parties to such Loan and Agency Agreement which consist of Meridian Bank,
in its individual capacity, Merita Bank and BOT Financial Corporation.
1.35 "Existing Letters of Credit" shall mean the letters of credit
issued by for the account of Borrower pursuant to the financing arrangements of
Borrower with the Existing Lenders set forth on Schedule 1.35 hereto.
1.36 "Factor" shall mean NationsBanc Commercial Corporation, a Georgia
corporation, and its successors and assigns.
1.37 "Factoring Agreement" shall mean the Factoring Agreement, dated
August 30, 1991, between Lowy and Factor, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.38 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by
Borrower or any Obligor in connection with this Agreement, as the same now
exist or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.39 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied.
1.40 "Governmental Authority" shall mean the United States of America,
any State of the United States of America, Canada, any Province of Canada, any
other foreign government, or a district, county or municipality or other
political subdivision, or any body, department, authority, agency, public
corporation or instrumentality, of any of the foregoing.
1.41 "Guarantor Availability" shall mean, as to any Guarantor, at any
time, the amount equal to: (a) the applicable percentage for such Guarantor
set forth in Section 2.1(a) multiplied by the Net Amount
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of Eligible Accounts of such Guarantor, plus (b) the applicable percentage for
such Guarantor set forth in Section 2.1(a) multiplied by the Value of the
Eligible Inventory of such Guarantor, minus (c) the Availability Reserves
allocated by Lender to such Guarantor.
1.42 "Hazardous Materials" shall mean any hazardous or toxic
substances, materials and wastes, including, without limitation, petroleum,
flammable explosives, asbestos, radioactive materials, biological substances,
polychlorinated biphenyls, pesticides, herbicides, industrial slag, solvents
and/or any other substances, materials or wastes that are or become regulated
as hazardous or toxic under any Environmental Law.
1.43 "Incentive Arrangement" shall mean any earn-out agreement, stock
appreciation rights, "phantom stock plans", employment agreements,
non-competition agreements, subscription and stockholders agreements and other
incentive and bonus plans and similar arrangements made in connection with
acquisitions of Persons or businesses by Borrower or its Subsidiaries, or the
retention of directors, officers or employees by Borrower or its Subsidiaries,
other than any such agreement or arrangement with John B. Poindexter or any
Person directly or indirectly under his control (other than Borrower or its
Subsidiaries).
1.44 "Indebtedness" shall mean with respect to any Person any
liability (a) in respect of borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof) or evidenced by bonds, notes, indentures or similar instruments; (b)
representing the balance deferred and unpaid of the purchase price of any
property or services (except any such balance that constitutes an account
payable to a trade creditor (whether or not an Affiliate) created, incurred,
assumed or guaranteed by such Person in the ordinary course of business of such
Person in connection with obtaining goods, materials or services); (c) all
Capital Lease Obligations; (d) any contractual obligations, contingent or
otherwise, of such Person to pay or be liable for the payment of any
indebtedness described in this Section 1.44 of another Person, including,
without limitation, any such indebtedness, directly or indirectly guaranteed,
endorsed (other than for collection or deposit in the ordinary course of
business), co-made or discounted or sold with recourse by such Person, or in
respect of which such Person is otherwise directly or indirectly liable,
including contractual obligations (contingent or otherwise) arising through any
agreement to purchase, repurchase, or otherwise acquire such indebtedness,
obligation or liability or any security therefor, or to provide funds for the
payment or discharge thereof (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain solvency,
assets, level of income, or other financial condition, or to make payment other
than for value received; (e) all obligations with respect to redeemable stock
and redemption or repurchase obligations under any Capital Stock or other
equity securities issued by such Person; (f) all reimbursement obligations and
other liabilities, contingent or otherwise, of such Person with respect to
letters of credit, banker's acceptances or similar documents or instruments
issued for such Person's account; (g) all indebtedness of such Person in
respect of indebtedness of another Person for borrowed money or indebtedness of
another Person otherwise described in this Section 1.44 which is secured by any
Lien upon the interest in any asset of such Person, whether or not such
obligations, liabilities or indebtedness are assumed by or are a personal
liability of such Person, all as of such time; and (h) all obligations,
liabilities and indebtedness of such Person (marked to market) in respect of
interest rate exchange contracts, foreign currency exchange agreements and
similar arrangements.
1.45 "Information Certificate" shall mean the Information Certificates
with respect to Borrower and Guarantors constituting Exhibit B hereto
containing material information with respect to Borrower and each Guarantor,
its business and assets provided by or on behalf of such Borrower to Lender in
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connection with the preparation of this Agreement and the other Financing
Agreements and the financing arrangements provided for herein.
1.46 "Intercompany Loan Documents" shall mean the Intercompany Notes,
the Intercompany Security Agreements and other agreements, documents and
instruments at any time executed and/or delivered by Borrower or any Guarantor
in connection therewith, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.47 "Intercompany Notes" shall mean, collectively, the following (as
the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced): (a) the promissory note, dated of
even date herewith, issued by EFP payable to Borrower; (b) the promissory note,
dated of even date herewith, issued by Lowy payable to Borrower; (c) the
promissory note, dated of even date herewith, issued by MIC payable to
Borrower; (d) the promissory note, dated of even date herewith, issued by
Morgan payable to Borrower; (e) the promissory note, dated of even date
herewith, issued by TAG payable to Borrower; and (f) the promissory note, dated
of even date herewith, issued by Raider payable to Borrower.
1.48 "Intercompany Security Agreements" shall mean, collectively, the
agreements set forth on Schedule 1.48 hereto, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.49 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as
Borrower may elect, the exact duration to be determined in accordance with the
customary practice in the applicable Eurodollar Rate market; provided, that,
Borrower may not elect an Interest Period which will end after the last day of
the then-current term of this Agreement.
1.50 "Interest Rate" shall mean, as to Prime Rate Loans, a rate of
one-quarter of one (1/4%) percent per annum in excess of the Prime Rate and, as
to Eurodollar Rate Loans, a rate of two and one-half (2 1/2%) percent per annum
in excess of the Adjusted Eurodollar Rate (based on the Eurodollar Rate
applicable for the Interest Period selected by a Borrower as in effect three
(3) Business Days after the date of receipt by Lender of the request of
Borrower for such Eurodollar Rate Loans in accordance with the terms hereof,
whether such rate is higher or lower than any rate previously quoted to
Borrower); provided, that:
(a) such rate shall be reduced to (i) the Prime Rate per
annum as to Prime Rate Loans and (ii) two and one-quarter (2 1/4%) percent per
annum in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans in
each case, effective on the first day of the month after each of the following
conditions is satisfied as determined by Lender: (A) the Consolidated Pre-Tax
Net Income of Borrower for the immediately preceding fiscal year of Borrower
(commencing with the fiscal year of Borrower ending on December 31, 1996) as
set forth in the audited financial statements of Borrower for such fiscal year
delivered to Lender, together with the unqualified opinion of the independent
certified public accountants, in accordance with Section 9.6 hereof shall equal
or exceed $1.00 and (B) no Event of Default shall exist or have occurred, and
(b) notwithstanding anything to the contrary set forth above,
the Interest Rate shall mean the rate equal to two (2%) percent per annum in
excess of the interest rate otherwise then payable by Borrower on Prime Rate
Loans as to all Loans, at Lender's option, without notice, (i) for the period
on and after the date of termination or non-renewal hereof, or the date of the
occurrence of any Event of
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Default and for so long as such Event of Default is continuing as determined by
Lender and (ii) on the Loans at any time outstanding to the extent in excess of
the amounts available to Borrower under Section 2 hereof (whether or not such
excess(es), arise or are made with or without Lender's knowledge or consent and
whether made before or after an Event of Default).
1.51 "Inventory" shall mean all of Borrower's and each Guarantor's now
owned and hereafter existing or acquired raw materials, work in process,
finished goods and all other inventory of whatsoever kind or nature, wherever
located.
1.52 "Landlord Agreement" shall mean an agreement in writing, in form
and substance satisfactory to Lender, from the owner and lessor of any premises
leased by such owner and lessor to Borrower or any Guarantor acknowledging
Lender's first priority security interest in the Inventory, waiving security
interests and claims by such person against the Inventory and permitting Lender
access to, and the right to remain on, the premises so as to exercise Lender's
rights and remedies and otherwise deal with the Collateral or other property
which is security for the Obligations, as duly authorized, executed and
delivered by such owner and lessor.
1.53 "Letter of Credit Accommodations" shall mean the letters of
credit, and acceptances with respect to drafts issued under such letters of
credit, and merchandise purchase or other guaranties, in each case which are
from time to time either (a) issued or opened by Lender for the account of
Borrower for the benefit of, or in connection with the business of, any
Guarantor or (b) with respect to which Lender has agreed to indemnify the
issuer thereof or with respect to which Lender has guaranteed to such issuer
the performance by Borrower or any Guarantor of its obligations to such issuer
(including, without limitation, the Existing Letters of Credit).
1.54 "Lien" shall mean any mortgage, deed of trust, deed to secure
debt, pledge, charge, hypothecation, assignment, deposit arrangement, security
interest, encumbrance (including, but not limited to, easements, rights of way
and the like), lien (statutory or other), security agreement or transfer
intended as security, including without limitation, any conditional sale or
other title retention agreement, the interest of a lessor under a capital lease
or any financing lease having substantially the same economic effect as any of
the foregoing.
1.55 "Loans" shall mean the loans now or hereafter made by Lender to
or for the benefit of Borrower on a revolving basis (involving advances,
repayments and readvances) as set forth in Section 2.1 hereof.
1.56 "Management Services Agreement" shall mean the Management
Services Agreement, dated May 23, 1994, between Borrower and Southwestern
Holdings, Inc., a Texas corporation, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.57 "Maximum Credit" shall mean the amount of $50,000,000.
1.58 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the
amount thereof and (b) returns, discounts, claims, credits and allowances of
any nature at any time issued, owing, granted, outstanding, available or
claimed with respect thereto.
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1.59 "Net Available Proceeds" shall mean cash or readily marketable
Cash Equivalents received (including by way of sale or discounting of a note,
installment receivable or other receivable, but excluding any other
consideration received in the form of assumption by the acquiror of
Indebtedness) therefrom by any Person, from a sale or other disposition of any
assets or Capital Stock, net of (a) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred and all Federal,
State, Provincial, foreign and local taxes required to be accrued as a
liability as a consequence of such sale or other disposition, (b) all payments
made by such Person or its Subsidiaries on any Indebtedness which is secured by
such assets in accordance with the terms of any Lien upon or with respect to
such assets or which must by the terms of such Lien, or in order to obtain a
necessary consent to such sale or other disposition by applicable law, be
repaid out of the proceeds from such sale or other disposition, and (c) all
distributions and other payments made to minority interest holders in
Subsidiaries of such Person or joint ventures as a result of such sale or other
disposition.
1.60 "Obligations" shall mean any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and Indebtedness of every
kind, nature and description owing by Borrower, Guarantors and their
Subsidiaries to Lender and/or its affiliates, including principal, interest,
charges, fees, costs and expenses, however evidenced, whether as principal,
surety, endorser, guarantor or otherwise, arising under this Agreement, the
other Financing Agreements or in connection with the transactions contemplated
by this Agreement or the other Financing Agreements, whether now existing or
hereafter arising, whether arising before, during or after the initial or any
renewal term of this Agreement or after the commencement of any case with
respect to Borrower, any Guarantor or their Subsidiaries under the United
States Bankruptcy Code or any similar statute (including, without limitation,
the payment of interest and other amounts which would accrue and become due but
for the commencement of such case), whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, and secured or unsecured.
1.61 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner
of any property which is security for the Obligations (including, without
limitation, Guarantors), other than Borrower.
1.62 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.63 "Permitted Holder" shall mean John B. Poindexter, his executors,
administrators or similar legal representatives, or any Person which is
controlled, directly or indirectly by any of the foregoing.
1.64 "Permitted Liens" shall mean the Liens granted to Lender and such
others as are permitted under Section 9.8 hereof.
1.65 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including, without limitation, any
corporation which elects subchapter S status under the Code), limited liability
company, limited liability partnership, business trust, unincorporated
association, joint stock corporation, trust, joint venture or other entity or
any government or any agency or instrumentality or political subdivision
thereof.
1.66 "Plan" shall mean any employee benefit plan within the meaning of
Section 3(2) of ERISA that is subject to Title IV of ERISA maintained by
Borrower, any Guarantor or any ERISA Affiliate.
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1.67 "PPSA" shall mean the Personal Property Security Act as in effect
in the applicable Province of Canada, as the same now exists or may from time
to time be amended, modified, recodified or supplemented.
1.68 "Prime Rate" shall mean the rate from time to time publicly
announced by CoreStates Bank, N.A., or its successors, at its office in
Philadelphia, Pennsylvania, as its prime rate, whether or not such announced
rate is the best rate available at such bank.
1.69 "Prime Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.70 "Qualified Public Offering" shall mean any bona fide, firm
commitment, underwritten offering to the public by Borrower of its Capital
Stock pursuant to an effective registration statement under the Securities Act,
as then in effect, or any comparable statement under any similar federal
statute then in force.
1.71 "Real Property" shall mean all now owned and hereafter acquired
real property of Borrower or Obligors, including leasehold interests, together
with all buildings, structures and other improvements located thereon, and all
licenses, easements and appurtenances relating thereto.
1.72 "Receivables" shall mean, collectively, all present and future:
(a) Accounts; (b) rights of Borrower and Guarantors to payments for goods sold
or leased or for services rendered which are evidenced by instruments or
chattel paper and whether or not earned by performance; (c) Credit Card
Receivables, (d) rights of Borrower and Guarantors to payment under, in
connection with, or arising out of, Borrower's or any Guarantor's factoring
arrangements or other arrangements for the sale or transfer of any Accounts,
including, without limitation, the Factoring Agreement and (e) all present and
future rights of Borrower to payment arising from loans, advances or other
financial accommodations made or provided by Borrower to or for the benefit of
any of its Affiliates with the proceeds of the Loans or in connection with the
Letter of Credit Accommodations.
1.73 "Records" shall mean all of Borrower's and each Guarantor's
present and future books of account of every kind or nature, purchase and sale
agreements, invoices, ledger cards, bills of lading and other shipping
evidence, statements, correspondence, memoranda, credit files and other data
relating to the Collateral or any account debtor, together with the tapes,
disks, diskettes and other data and software storage media and devices, file
cabinets or containers in or on which the foregoing are stored (including any
rights of Borrower or any Guarantor with respect to the foregoing maintained
with or by any other person).
1.74 "Reference Bank" shall mean CoreStates Bank, N.A., or such other
bank as Lender may from time to time designate.
1.75 "Refinancing Indebtedness" shall have the meaning set forth in
Section 9.9 hereof.
1.76 "Securities Act" shall mean the Securities Act of 1933, as the
same now exists or may hereafter from time to time be amended, modified,
recodified or supplemented, together with all rules, regulations and
interpretations thereunder or related thereto.
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1.77 "Securities Exchange Act" shall mean the Securities Exchange Act
of 1934, as the same now exists or may hereafter from time to time be amended,
modified, recodified or supplemented, together with all rules, regulations and
interpretations thereunder or related thereto.
1.78 "Senior Note Indenture" shall mean the Indenture, dated as of May
23, 1994, by and among Borrower, as issuer, United States Trust Company, as
trustee, and Guarantors, as guarantors, with respect to the Senior Notes, as
amended and supplemented pursuant to the First Supplemental Indenture dated as
of May 11, 1995 and the Second Supplemental Indenture dated as of June 26,
1995, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.79 "Senior Notes" shall mean, collectively, the 12 1/2% Senior Notes
due 2004 issued by Borrower in the aggregate principal amount of $100,000,000,
pursuant to the terms of the Senior Note Indenture, as the same now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
1.80 "Subsidiary" shall mean any corporation of which fifty (50%)
percent or more of the outstanding securities of any class or classes thereof,
as to which the holders thereof are ordinarily, in the absence of
contingencies, entitled to elect a majority of the directors (or Persons
performing similar functions) of such corporation, is now or hereafter directly
or indirectly (through one or more intermediaries) owned by any Borrower or
Guarantor and/or any one or more of its Subsidiaries.
1.81 "U.S. Dollar Equivalent" shall mean the number of U.S. Dollars
which Lender can purchase with the amount of available currency, including,
without limitation, Canadian Dollars, at any time or from time to time in order
to perform any provision of this Agreement or the other Financing Agreements,
provided, that, such determination shall be at the buying rate of exchange
available to Lender on such date, at such time, at any branch in New York, New
York, or Philadelphia, Pennsylvania of any bank chartered, incorporated or
qualified to do banking business under the laws of the United States of
America, the State of New York or the Commonwealth of Pennsylvania, as may be
selected by Lender, in its discretion. In determining the Net Amount of
Eligible Accounts, any such Accounts payable in Canadian Dollars shall be
converted to their U.S. Dollar Equivalent.
1.82 "U.S. Dollars" shall mean legal tender according to the laws of
the United States of America.
1.83 "Value" shall mean, as determined by Lender in good faith, with
respect to inventory, the lower of (a) cost computed on a first-in-first-out
basis in accordance with GAAP or (b) market value.
1.84 "Weighted Average Life to Maturity" shall mean, when applied to
any Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding principal amount of such Indebtedness into (b) the total of
the product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment.
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SECTION 2. CREDIT FACILITIES
2.1 Loans.
(a) Subject to, and upon the terms and conditions contained
herein, Lender agrees to make Loans to Borrower from time to time in amounts
requested by Borrower up to an amount equal to:
(i) eighty-five (85%) percent of the Net Amount of
Eligible Accounts of Morgan, plus
(ii) eighty (80%) percent of the Net Amount of Eligible
Accounts of TAG, plus
(iii) seventy-five (75%) percent of the Net Amount of
Eligible Accounts of the Leer Manufacturing Division
of TAG, provided, that, Lender may, at any time after
the date hereof upon written notice to Borrower
increase such percentage to eighty (80%) percent of
the Net Amount of Eligible Accounts of the Leer
Manufacturing Division of TAG, plus
(iv) eighty (80%) percent of the Net Amount of Eligible
Accounts of Lowy, plus
(v) eighty-five (85%) percent of the Net Amount of
Eligible Accounts of EFP, plus
(vi) eighty-five (85%) percent of the Net Amount of
Eligible Accounts of MIC, plus
(vii) sixty (60%) percent of the Value of the Eligible
Inventory of EFP, Lowy, MIC (other than finished
goods of MIC), Morgan and TAG (other than the
Inventory of the Leer Retail Division of TAG), plus
(viii) forty (40%) percent of the Value of the Eligible
Inventory of the Leer Retail Division of TAG,
provided, that, Lender may at any time after the date
hereof upon written notice to Borrower increase such
percentage to sixty (60%) percent of the Value of
such Eligible Inventory, minus
(ix) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon
not less than five (5) days prior notice to Borrower, (i) reduce any of the
lending formulas with respect to Eligible Accounts to the extent that Lender
determines in good faith that: (A) the dilution with respect to the Accounts
for any period (based on the ratio of (1) the aggregate amount of reductions in
Accounts other than as a result of payments in cash to (2) the aggregate amount
of total sales) has increased or may be reasonably anticipated to increase
above historical levels, or (B) the general creditworthiness of account debtors
has declined in any material respect or (ii) reduce any of the lending
formula(s) with respect to Eligible Inventory to the extent that Lender
determines in good faith that: (A) the number of days of the turnover of the
Inventory for any period has changed in any material respect or (B) the
liquidation value of the Eligible Inventory, or any category thereof, has
decreased or (C) the nature, quality or mix of the Inventory has deteriorated
which adversely affects the value of the Inventory or the ability of Lender to
realize thereon. In determining whether to reduce the lending formula(s),
Lender may consider events,
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conditions, contingencies or risks which are considered in determining Eligible
Accounts, Eligible Inventory or in establishing Availability Reserves.
(c) Notwithstanding anything to the contrary herein, the
aggregate amount of the Loans based on Eligible Inventory outstanding at any
time shall not exceed $25,000,000.
(d) Except in Lender's discretion, the aggregate amount of
the Loans and the Letter of Credit Accommodations outstanding at any time shall
not exceed the Maximum Credit. In the event that the outstanding amount of any
component of the Loans, or the aggregate amount of the outstanding Loans and
Letter of Credit Accommodations, exceed the amounts available under the lending
formulas, the sublimits for Letter of Credit Accommodations set forth in
Section 2.2(d) or the Maximum Credit, as applicable, such event shall not
limit, waive or otherwise affect any rights of Lender in that circumstance or
on any future occasions. Borrower shall, upon demand by Lender, which may be
made at any time or from time to time, immediately repay to Lender the entire
amount of any such excess(es) for which payment is demanded.
(e) For purposes only of applying the sublimit on Loans based
on Eligible Inventory pursuant to Section 2.1(c), Lender may treat the then
undrawn amounts of outstanding Letter of Credit Accommodations for the purpose
of purchasing Eligible Inventory as Loans to the extent Lender is in effect
relying on the Eligible Inventory being purchased with such Letter of Credit
Accommodations. In determining the actual amounts of such Letter of Credit
Accommodations to be so treated for purposes of the sublimit, the outstanding
Loans and Availability Reserves shall be attributed first to any components of
the lending formulas in Section 2.1(a) that are not subject to such sublimit,
before being attributed to the components of the lending formulas subject to
such sublimit.
2.2 Letter of Credit Accommodations.
(a) Subject to, and upon the terms and conditions contained
herein, at the request of Borrower, Lender agrees to provide or arrange for
Letter of Credit Accommodations for the account of Borrower containing terms
and conditions acceptable to Lender and the issuer thereof. Any payments made
by Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Loans to Borrower
pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by
any bank or issuer in connection with the Letter of Credit Accommodations,
Borrower and Guarantors shall pay to Lender a letter of credit fee at a rate
equal to one and three-quarters (1 3/4%) percent per annum on the daily
outstanding balance of the Letter of Credit Accommodations (other than
acceptances with respect to letters of credit) for the immediately preceding
month (or part thereof), and an acceptance fee at a rate equal to two and
one-half (2 1/2%) percent per annum on the daily outstanding balance of the
Letter of Credit Accommodations constituting acceptances with respect to
letters of credit (provided, that, subject to the exception in this Section
2.2(b) set forth below, such acceptance fee shall be reduced to two and
one-quarter (2 1/4%) percent per annum if the conditions set forth in Section
1.50(a) for the reduction of the Interest Rate are satisfied), payable in
arrears as of the first day of each succeeding month, except that Borrower
shall pay to Lender such letter of credit fee, at Lender's option, without
notice, at a rate equal to three and three-quarters (3 3/4%) percent per annum
on such daily outstanding balance and such acceptance fee, at Lender's option,
without notice, at a rate equal to four and one-half (4 1/2%) percent per annum
on such daily outstanding balance for: (i) the period from and after the date
of termination or non-renewal hereof until Lender has received full and final
payment of all Obligations (notwithstanding entry of a judgment against
Borrower) and (ii) the period from and after the date of the occurrence of an
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<PAGE> 24
Event of Default for so long as such Event of Default is continuing as
determined by Lender. Such letter of credit fee and acceptance fee shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed and the obligation of Borrower and Guarantors to pay such fee shall
survive the termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available
unless on the date of the proposed issuance of any Letter of Credit
Accommodations, the Loans available to Borrower (subject to the Maximum Credit
and any Availability Reserves) are equal to or greater than: (i) if the
proposed Letter of Credit Accommodation is for the purpose of purchasing
Eligible Inventory or indemnifying the issuer of a letter of credit for the
account of Borrower for the purpose of purchasing Eligible Inventory, the sum
of (A) one hundred (100%) percent of the face amount thereof, minus the amount
calculated pursuant to the lending formula applicable to the Eligible Inventory
which is the subject thereof pursuant to Section 2.1 hereof, plus (B) freight,
taxes, duty and other amounts which Lender estimates must be paid in connection
with such Inventory upon arrival and for delivery to one of the locations of
Guarantors for Eligible Inventory within the United States of America and (ii)
if the proposed Letter of Credit Accommodation is for any other purpose, an
amount equal to one hundred (100%) percent of the face amount thereof and all
other commitments and obligations made or incurred by Lender with respect
thereto. Effective on the issuance of each Letter of Credit Accommodation, an
Availability Reserve shall be established in the applicable amount set forth in
this Section 2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, the amount of all
outstanding Letter of Credit Accommodations and all other commitments and
obligations made or incurred by Lender in connection therewith, shall not at
any time exceed $15,000,000. At any time an Event of Default exists or has
occurred and is continuing, upon Lender's request, Borrower and Guarantors will
either furnish cash collateral to secure the reimbursement obligations to the
issuer in connection with any Letter of Credit Accommodations or furnish cash
collateral to Lender for the Letter of Credit Accommodations, and in either
case, the Loans otherwise available to Borrower shall not be reduced as
provided in Section 2.2(c) to the extent of such cash collateral.
(e) Borrower and each Guarantor shall indemnify and hold
Lender harmless from and against any and all losses, claims, damages,
liabilities, costs and expenses which Lender may suffer or incur in connection
with any Letter of Credit Accommodations and any documents, drafts or
acceptances relating thereto, including, but not limited to, any losses,
claims, damages, liabilities, costs and expenses due to any action taken by any
issuer or correspondent with respect to any Letter of Credit Accommodation,
except as a result of the gross negligence or willful misconduct of Lender as
determined pursuant to a final non-appealable order of a court of competent
jurisdiction. Borrower and each Guarantor assumes all risks with respect to
the acts or omissions of the drawer under or beneficiary of any Letter of
Credit Accommodation and for such purposes the drawer or beneficiary shall be
deemed Borrower's or such Guarantor's agent. Borrower and each Guarantor
assumes all risks for, and agrees to pay, all foreign, Federal, State,
Provincial and local taxes, duties and levies relating to any goods subject to
any Letter of Credit Accommodations or any documents, drafts or acceptances
thereunder. Borrower and each Guarantor hereby releases and holds Lender
harmless from and against any acts, waivers, errors, delays or omissions,
whether caused by Borrower or Guarantor, or by any issuer or correspondent with
respect to or relating to any Letter of Credit Accommodation. The foregoing
shall not be construed to constitute a release by Borrower or Guarantors of any
claims against any issuer or correspondent with respect to or relating to any
Letter of Credit Accommodation. The provisions of this Section 2.2(e) shall
survive the payment of Obligations and the termination or non-renewal of this
Agreement.
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(f) Nothing contained herein shall be deemed or construed to
grant Borrower or any Guarantor any right or authority to pledge the credit of
Lender in any manner. Lender shall have no liability of any kind with respect
to any Letter of Credit Accommodation provided by an issuer other than Lender
unless Lender has duly executed and delivered to such issuer the application or
a guarantee or indemnification in writing with respect to such Letter of Credit
Accommodation. Borrower and Guarantors shall be bound by any interpretation
made in good faith by Lender, or any other issuer or correspondent under or in
connection with any Letter of Credit Accommodation or any documents, drafts or
acceptances thereunder, notwithstanding that such interpretation may be
inconsistent with any instructions of Borrower or any Guarantor. Lender shall
have the sole and exclusive right and authority to, and Borrower and Guarantors
shall not: (i) at any time an Event of Default exists or has occurred, (A)
approve or resolve any questions of non-compliance of documents, (B) give any
instructions as to acceptance or rejection of any documents or goods or (C)
execute any and all applications for steamship or airway guaranties,
indemnities or delivery orders, and (ii) at all times, (A) grant any extensions
of the maturity of, time of payment for, or time of presentation of, any
drafts, acceptances, or documents, and (B) agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letter of Credit Accommodations, or
documents, drafts or acceptances thereunder or any letters of credit included
in the Collateral. Lender may take such actions contemplated under the
preceding sentence either in its own name or in Borrower's or any Guarantor's
name.
(g) Any rights, remedies, duties or obligations granted or
undertaken by Borrower or any Guarantor to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement in
favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been granted or undertaken by Borrower
or such Guarantor to Lender. Any duties or obligations undertaken by Lender to
any issuer or correspondent in any application for any Letter of Credit
Accommodation, or any other agreement by Lender in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed
to have been undertaken by Borrower and Guarantors to Lender and to apply in
all respects to Borrower and Guarantors.
2.3 Availability Reserves. All Loans otherwise available to Borrower
pursuant to the lending formulas set forth in Section 2.1 and subject to the
Maximum Credit and other applicable limits hereunder shall be subject to
Lender's continuing right to establish and revise Availability Reserves.
Without limiting any other rights or remedies of Lender under this Agreement or
any of the other Financing Agreements with respect to the establishment of
Availability Reserves or otherwise, Lender may establish and revise
Availability Reserves to reflect liabilities of Borrower or any Obligor (if
any) which receive the benefit of a trust under applicable law or a security
interest, lien or charge ranking or capable of ranking senior to or pari passu
with security interests, liens or charges securing the Obligations on any of
the Collateral or other property which is security for the Obligations under
Federal, Provincial, State, county, municipal or local law including, but not
limited to, claims for unremitted and/or accelerated rents, taxes, wages,
employee withholdings or deductions and vacation pay, workers' compensation
obligations, government royalties or pension fund obligations, together with
the aggregate value, determined in accordance with GAAP, of all Eligible
Inventory which Lender considers may be or may become subject to a right of a
supplier to recover possession thereof under any Federal or Provincial law,
where such supplier's right may have priority over the security interests,
liens or charges securing the Obligations, including, without limitations,
Eligible Inventory subject to a right of a supplier to repossess goods pursuant
to Section 81.1 of the Insolvency Act (Canada).
2.4 Use of Proceeds; Intercompany Loans.
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(a) Borrower shall use the initial proceeds of the Loans made
by Lender to Borrower hereunder on the day such Loans are made only for: (i)
loans by Borrower to each Guarantor in an amount equal to the then outstanding
amount of the Indebtedness of such Guarantor to Borrower arising from loans
made by Borrower to such Guarantor pursuant to the Intercompany Loan Documents
prior to the date of the initial Loans hereunder, provided, that, (A) each
Guarantor shall use the proceeds of the loans received by such Guarantor from
Borrower (which loans were made by Borrower to such Guarantor with the proceeds
of the Loans by Lender to Borrower) to repay all Indebtedness of such Guarantor
to Borrower outstanding immediately prior to the loans by Borrower to such
Guarantor using the proceeds of the Loans made to Borrower hereunder and (B)
Borrower shall use the proceeds of all such repayments from Guarantors of the
loans previously made by Borrower to Guarantors to repay all of the
Indebtedness of Borrower to the Existing Lenders and (ii) costs, expenses and
fees in connection with the preparation, negotiation, execution and delivery of
this Agreement and the other Financing Agreements.
(b) Borrower shall only use the proceeds of all Loans to make
a loan to a Guarantor on the same day and all Letter of Credit Accommodations
shall only be used for the benefit of, or in connection with the business of, a
Guarantor, in each case pursuant to and in accordance with the Intercompany
Loan Documents as in effect on the date hereof, provided, that, (i) in no event
shall the aggregate amount of such loans by Borrower to any Guarantor plus the
Letter of Credit Accommodations established for the benefit of, or in
connection with the business of, such Guarantor exceed the Guarantor
Availability of such Guarantor, (ii) the Indebtedness of such Guarantor to
Borrower arising in connection with such loan by Borrower to Guarantor shall be
evidenced by a single original Intercompany Note issued by such Guarantor to
Borrower, which shall evidence a valid and legally enforceable Indebtedness of
such Guarantor to Borrower (and to Lender as assignee of Borrower)
unconditionally owing to Borrower, without offset, defense or counterclaim of
any kind, nature or description whatsoever and (iii) the original of the
Intercompany Note issued by such Guarantor to Borrower shall be duly and
validly endorsed and assigned by Borrower payable to the order of Lender, in a
manner satisfactory to Lender and as so endorsed shall be delivered to, and
held by, Lender as part of the Collateral. Notwithstanding anything to the
contrary contained herein or in the Intercompany Loan Documents or otherwise,
except in Lender's discretion, in the event that the aggregate amount of the
loans by Borrower to any Guarantor outstanding at any time exceeds the
Guarantor Availability of such Guarantor, such event shall not limit, waive or
otherwise affect the rights of Borrower (or Lender as assignee of Borrower with
respect thereto) in that circumstance or on any future occasions and such
Guarantor shall, upon demand by Borrower or Lender, which may be made at any
time or from time to time, immediately repay to Lender as assignee of Borrower
the entire amount of any such excess(es) for which payment is demanded.
(c) All loans made by Borrower to any Guarantor or Letter of
Credit Accommodations provided by Lender for the benefit of, or in connection
with the business of, any Guarantor pursuant to the provisions hereof shall
only be used by such Guarantor for (i) general operating, working capital and
other proper corporate purposes of such Guarantor not otherwise prohibited by
the terms hereof and (ii) interest, costs, expenses, fees and other Obligations
owed to Lender in connection with this Agreement and the transactions
contemplated in connection herewith.
(d) None of the proceeds of the Loans or the Letter of Credit
Accommodations or the loans by Borrower to any Guarantor pursuant to the
Intercompany Loan Documents shall be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any Indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause any of
the Loans or such intercompany loans to be
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considered a "purpose credit" within the meaning of Regulation G of the Board
of Governors of the Federal Reserve System, as amended.
(e) All proceeds of Loans shall be disbursed by Lender to one
of the depository accounts of Guarantors listed on Schedule 6.3 hereto which
Borrower shall designate to Lender at such time as Borrower requests such Loan
and an intercompany loan by Borrower to such Guarantor pursuant to the
Intercompany Loan Documents of Borrower with such Guarantor shall have been
deemed made upon such disbursement of the proceeds of the Loan to such
Guarantor; provided, that, except as Lender may elect, Lender shall not
disburse proceeds of Loans to or for the benefit of any Guarantor if, after
giving effect thereto, the aggregate amount of the then outstanding
intercompany loans made to such Guarantor, plus the then outstanding Letter of
Credit Accommodations established for the benefit of, or in connection with the
business of, such Guarantor, shall exceed the amount equal to the Guarantor
Availability of such Guarantor or any of the other conditions set forth in
Section 2.4(b) above are not satisfied.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the Loans at the Interest Rate. All interest accruing
hereunder on and after the date of any Event of Default or termination or non-
renewal hereof shall be payable on demand.
(b) Borrower may from time to time request that any Prime
Rate Loans be converted to Eurodollar Rate Loans or that any existing
Eurodollar Rate Loans continue for an additional Interest Period. Such request
from Borrower shall specify the amount of the Prime Rate Loans which will
constitute Eurodollar Rate Loans (subject to the limits set forth below) and
the Interest Period to be applicable to such Eurodollar Rate Loans. Subject to
the terms and conditions contained herein, three (3) Business Days after
receipt by Lender of such a request from Borrower, such Prime Rate Loans shall
be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall
continue, as the case may be, provided, that, (i) no Event of Default, or act,
condition or event which with notice or passage of time or both would
constitute an Event of Default exists or has occurred and is continuing, (ii)
no party hereto shall have sent any notice of termination or non-renewal of
this Agreement, (iii) Borrower shall have complied with such customary
procedures as are established by Lender and specified by Lender to Borrower
from time to time for requests by Borrower for Eurodollar Rate Loans, (iv) no
more than four (4) Interest Periods may be in effect at any one time, (v) the
aggregate amount of the Eurodollar Rate Loans must be in an amount not less
than $5,000,000 or an integral multiple of $1,000,000 in excess thereof, (vi)
the maximum amount of the Eurodollar Rate Loans at any time requested by
Borrower shall not exceed the amount equal to eighty-five (85%) percent of the
lowest principal amount of the Loans which in Borrower's reasonable judgment it
is anticipated will be outstanding during the applicable Interest Period as
determined by Lender (but with no obligation of Lender to make such Loans) and
(vii) Lender shall have determined that the Interest Period or Adjusted
Eurodollar Rate is available to Lender through the Reference Bank and can be
readily determined as of the date of the request for such Eurodollar Rate Loan
by Borrower. Any request by Borrower to convert Prime Rate Loans to Eurodollar
Rate Loans or to continue any existing Eurodollar Rate Loans shall be
irrevocable. Notwithstanding anything to the contrary contained herein, Lender
and Reference Bank shall not be required to purchase U.S. Dollar deposits in
the London interbank market or other applicable Eurodollar Rate market to fund
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any Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply
as if Lender and Reference Bank had purchased such deposits to fund the
Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest Period, unless
Lender has received and approved in accordance with the terms hereof a request
to continue such Eurodollar Rate Loan at least three (3) Business Days prior to
such last day in accordance with the terms hereof. Any Eurodollar Rate Loans
shall, at Lender's option, upon notice by Lender to Borrower, convert to Prime
Rate Loans in the event that (i) an Event of Default shall exist or have
occurred and be continuing or (ii) this Agreement shall terminate or not be
renewed. Borrower shall pay to Lender, upon demand by Lender (or Lender may,
at its option, charge any loan account of Borrower) any amounts required to
compensate Lender, the Reference Bank or any participant with Lender for any
loss (including loss of anticipated profits), cost or expense incurred by such
person as a result of the foregoing. A certificate of Lender setting forth in
reasonable detail the basis for the determination of such amount necessary to
compensate Lender, the Reference Bank or any participant as aforesaid shall be
delivered to Borrower and shall be conclusive, absent manifest error.
(d) Interest shall be payable by Borrower to Lender monthly
in arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on Loans (other than Eurodollar Rate Loans) shall
increase or decrease by an amount equal to each increase or decrease in the
Prime Rate effective on the first day of the month after any change in such
Prime Rate is announced based on the Prime Rate in effect on the last day of
the month in which any such change occurs. In no event shall charges
constituting interest payable by Borrower to Lender exceed the maximum amount
or the rate permitted under any applicable law or regulation, and if any such
part or provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform thereto.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee the
amount of $375,000, which shall be fully earned as of the date hereof and
$125,000 of which shall be payable on the date hereof, $125,000 of which shall
be payable on the first anniversary of the date hereof, and $125,000 of which
shall be payable on the second anniversary of the date hereof, provided, that,
such amount shall become immediately due and payable, without notice or demand,
at Lender's option, upon the occurrence of an Event of Default or upon the
termination or non-renewal hereof.
3.3 Servicing Fee. Borrower shall pay to Lender monthly a servicing
fee in an amount equal to $6,500 for each month (or part thereof), while this
Agreement is in effect and for so long thereafter as any of the Obligations are
outstanding, which fee shall be payable in advance on the date hereof for the
month ending July 31, 1996 and on the first day of each month thereafter,
commencing on August 1, 1996.
3.4 Unused Line Fee. Borrower shall pay to Lender monthly an unused
line fee at a rate equal to one-half of one (1/2 of 1%) percent per annum
calculated upon the amount by which (a) $45,000,000 exceeds (b) the average
monthly principal balance of the outstanding Loans and Letter of Credit
Accommodations during the immediately preceding month (or part thereof), which
fee shall be calculated on the basis of a three hundred sixty (360) day year
and the actual number of days elapsed and shall be payable on the first day of
each month in arrears.
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3.5 Changes in Laws and Increased Costs of Loans.
(a) Notwithstanding anything to the contrary contained
herein, all Eurodollar Rate Loans shall, upon written notice by Lender to
Borrower, convert to Prime Rate Loans in the event that (i) any change in
applicable law or regulation (or the interpretation or administration thereof)
shall either (A) make it unlawful for Lender, Reference Bank or any participant
to make or maintain Eurodollar Rate Loans or to comply with the terms hereof in
connection with the Eurodollar Rate Loans, or (B) shall result in the increase
in the costs to Lender, Reference Bank or any participant of making or
maintaining any Eurodollar Rate Loans by an amount deemed by Lender to be
material, or (C) reduce the amounts received or receivable by Lender, Reference
Bank or any participant in respect thereof, by an amount deemed by Lender to be
material or (ii) the cost (other than reserve requirements taken into account
in the calculation of the applicable Adjusted Eurodollar Rate) to Lender,
Reference Bank or any participant of making or maintaining any Eurodollar Rate
Loans shall otherwise increase by an amount deemed by Lender to be material.
Borrower shall pay to Lender upon demand by Lender (or Lender may, at its
option, charge any loan account of Borrower) any amounts required to compensate
Lender, the Reference Bank or any participant with Lender for any loss
(including loss of anticipated profits), cost (other than reserve requirements
taken into account in the calculation of the applicable Adjusted Eurodollar
Rate) or expense actually incurred by such Person as a result of the foregoing,
including, without limitation, any such loss, cost or expense actually incurred
by reason of the liquidation or reemployment of deposits or other funds
acquired by such person to make or maintain the Eurodollar Rate Loans or any
portion thereof. A certificate of Lender setting forth in reasonable detail
the basis for the determination of such amount necessary to compensate Lender,
Reference Bank or any participant as aforesaid shall be delivered to Borrower
and shall be conclusive, absent manifest error. In the event that Lender,
Reference Bank or any participant shall purchase U.S. Dollar deposits in the
London interbank market or other applicable Eurodollar Rate market to fund any
Eurodollar Rate Loans, Lender shall request that Reference Bank and such
participant use its reasonable efforts (consistent with its internal policies
and legal and regulatory restrictions) to select a jurisdiction for its branch
or office in which such deposits are held, or change such branch or office, so
as to avoid the payment by Borrower and Guarantors of any additional amounts
under this Section 3.5(a).
(b) If any payments or prepayments in respect of the
Eurodollar Rate Loans are received by Lender other than on the last day of the
applicable Interest Period (whether pursuant to acceleration, upon maturity or
otherwise), including any payments pursuant to the application of collections
under Section 6.3 or any other payments made with the proceeds of Collateral,
Borrower shall pay to Lender upon demand by Lender (or Lender may, at its
option, charge any loan account of Borrower) any amounts required to compensate
Lender, the Reference Bank or any participant with Lender for any additional
loss (including loss of anticipated profits), cost or expense actually incurred
by such person as a result of such prepayment or payment, including, without
limitation, any loss, cost or expense actually incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such person
to make or maintain such Eurodollar Rate Loans or any portion thereof. For
purposes of this Section 3.5(b), the outstanding amount of the Loans as of any
date shall be calculated after giving effect to any Loans made as of such date.
A certificate of Lender setting forth in reasonable detail the basis for the
determination of such amount necessary to compensate Lender, Reference Bank or
any participant as aforesaid shall be delivered to Borrower and shall be
conclusive, absent manifest error.
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SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance
satisfactory to Lender, all releases, terminations and other documents as
Lender may request to evidence and effectuate the termination by the Existing
Lenders of their respective financing arrangements with Borrower and Guarantors
and the termination and release by them of any interest in and to any assets
and properties of Borrower, Guarantors and any other Obligor, duly authorized,
executed and delivered by each of them, including, but not limited to, (i) UCC
termination statements for all UCC financing statements previously filed by any
of them or their predecessors, as secured party, and Borrower, any Guarantor or
other Obligor, as debtor, (ii) UCC assignments from the Existing Lenders to
Borrower with respect to all UCC financing statements between Borrower, as
secured party, and any Guarantor, as debtor, which were previously assigned by
Borrower to the Existing Lenders, and (iii) termination of all assignments by
Borrower, any Guarantor or other Obligor to the Existing Lenders of any rights
of Borrower, such Guarantor or other Obligor to trademarks, patents or
copyrights, in form acceptable for recording in the appropriate government
office;
(b) Lender shall have received evidence, in form and
substance satisfactory to Lender, that Lender has valid perfected and first
priority security interests in and liens upon the Collateral and any other
property which is intended to be security for the Obligations, subject only to
the Permitted Liens;
(c) all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received
all information and copies of all documents, including, without limitation,
records of requisite corporate action and proceedings which Lender may have
requested in connection therewith, such documents where requested by Lender or
its counsel to be certified by appropriate corporate officers or governmental
authorities;
(d) no material adverse change shall have occurred in the
assets or business since the date of Lender's latest field examination and no
change or event shall have occurred which would impair the ability of Borrower
or any Obligor to perform its obligations hereunder or under any of the other
Financing Agreements to which it is a party or of Lender to enforce the
Obligations or realize upon the Collateral;
(e) Lender shall have completed a field review of the Records
and such other information with respect to the Collateral as Lender may require
to determine the amount of Loans available to Borrower, the results of which
shall be satisfactory to Lender, not more than three (3) Business Days prior to
the date hereof;
(f) Lender shall have received a Borrowing Base Certificate
setting forth the Loans available to Borrower as of the date hereof, as
completed in a manner satisfactory to Lender and duly authorized, executed and
delivered on behalf of Borrower;
(g) Lender shall have received, in form and substance
satisfactory to Lender, the collateral assignment by Borrower to Lender of all
right, title and interest of Borrower under or pursuant
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to the Intercompany Loan Documents and granting Lender such other rights with
respect thereto as Lender may require, duly authorized, executed and delivered
by Borrower and acknowledged and agreed to by each Guarantor (including as to
each Guarantor any waiver of defenses as against Lender as assignee of
Borrower);
(h) Borrower shall have established the Blocked Accounts and
Lender shall have received, in form and substance satisfactory to Lender, all
agreements with the depository banks and Borrower with respect to such Blocked
Accounts as Lender may require pursuant to Section 6.3 hereof, duly authorized,
executed and delivered by such depository banks and Borrower;
(i) Lender shall have received evidence, in form and
substance satisfactory to Lender, that the Leer Retail Division of TAG has
directed the depository banks at which it maintains deposit accounts for each
of the retail store locations operated by it to remit all immediately available
funds deposited with such depository banks to the Blocked Accounts as required
pursuant to Section 6.3 hereof, unless otherwise directed by Lender, duly
authorized, executed and delivered by it;
(j) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement
and the other Financing Agreements, including, without limitation,
acknowledgements by lessors, mortgagees and warehousemen of Lender's security
interests in the Collateral, waivers by such persons of any Liens or other
claims by such persons to the Collateral and agreements permitting Lender
access to, and the right to remain on, the premises to exercise its rights and
remedies and otherwise deal with the Collateral;
(k) Lender shall have received Credit Card Acknowledgements
in each case, duly authorized, executed and delivered by the Credit Card
Issuers and Credit Card Processors;
(l) the Excess Availability as determined by Lender, as of
the date hereof, shall not be less than $3,500,000 after giving effect to the
initial Loans made or to be made and Letter of Credit Accommodations issued or
to be issued in connection with the initial transactions hereunder;
(m) Lender shall have received evidence of insurance and loss
payee endorsements with respect to the Collateral required hereunder and under
the other Financing Agreements, in form and substance reasonably satisfactory
to Lender, and certificates of insurance policies and/or endorsements naming
Lender as loss payee with respect to the Collateral;
(n) Lender shall have received, in form and substance
reasonably satisfactory to Lender, the opinion letter of counsel(s) to Borrower
with respect to the Financing Agreements, the Intercompany Loan Documents and
the security interests and liens of Lender with respect to the Collateral and
such other matters as Lender may reasonably request; and
(o) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance reasonably satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit
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Accommodations to Borrower, including the initial Loans and Letter of Credit
Accommodations and any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and
in the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto,
except to the extent that such representation and warranties expressly relate
solely to an earlier date (in which case such representations and warranties
shall have been true and accurate on and as of such earlier date);
(b) no law, regulation, order, judgment or decree of any
Governmental Authority shall have been issued, and Lender shall not have
received any notice that any action, suit, investigation, litigation or
proceeding is pending or threatened in any court or before any arbitrator or
other Governmental Authority which (i) purports to enjoin, prohibit, restrain
or otherwise affect (A) the making of the Loans or (B) the consummation of the
transactions contemplated pursuant to the terms hereof and of the Financing
Agreements or (ii) has or would have a material adverse effect on the assets or
business of Borrower or any Obligor or the legality, validity, enforceability,
perfection or priority of the Liens of Lender upon the Collateral or the rights
of Lender hereunder and under the other Financing Agreements or the ability of
Borrower or any Obligor to perform its obligations hereunder or under the other
Financing Agreements; and
(c) no Event of Default and no act, condition or event which,
with notice or passage of time or both, would constitute an Event of Default,
shall exist or have occurred and be continuing on and as of the date of the
making of such Loan or providing each such Letter of Credit Accommodation and
after giving effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
5.1 To secure payment and performance of all Obligations, Borrower
and each Guarantor hereby grants to Lender a continuing security interest in, a
lien upon, and a right of set off against, and hereby assigns to Lender as
security, the following property and interests in property, whether now owned
or hereafter acquired or existing, and wherever located (collectively, the
"Collateral"):
(a) Receivables;
(b) all present and future contract rights and other general
intangibles, including, but not limited to, tax and duty refunds, registered
and unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee, and also
including, but not limited to, choses in action and other claims in connection
with or related to the Receivables or any of the other Collateral;
(c) all present and future chattel paper, documents and
instruments (i) which evidence or relate to Receivables or Inventory and
including all documents of title or (ii) which evidence or relate to
indebtedness arising pursuant to Receivables or any of the other Collateral
(including, without limitation, (A) the Intercompany Notes or any promissory
notes or instruments which at any time evidence indebtedness of any Affiliate
of Borrower arising from loans, advances or other financial accommodations made
or provided by Borrower to or for the benefit of such Affiliate with proceeds
of
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the Loans or in connection with the Letter of Credit Accommodations and (B)
promissory notes or other instruments which evidence indebtedness of any
account debtor or other obligor in respect of any Receivables);
(d) (i) all present and future monies, securities, credit
balances, deposits, deposit accounts, documents, instruments and other property
of Borrower and Guarantors now or hereafter held or received by or in transit
to Lender or its affiliates, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, (ii) all present and future monies,
securities, credit balances and deposits at any bank or other financial
institution (A) constituting proceeds of Receivables or any of the other
Collateral or (B) constituting proceeds of loans, advances or other financial
accommodations made or provided by Lender or its Affiliates to or for the
benefit of Borrower or its Affiliates or (C) constituting proceeds of loans,
advances or other financial accommodations made or provided by Borrower to or
for the benefit of any Affiliate with proceeds of the Loans or in connection
with the Letter of Credit Accommodations or (D) held or deposited in or
delivered to any deposit account or other account used in connection with the
collection of Receivables or any of the other Collateral, or containing
proceeds of the Receivables or any of the other Collateral, or containing
proceeds of Loans or Letter of Credit Accommodations made or provided by Lender
or its Affiliates to or for the benefit of Borrower or its Affiliates, or
proceeds of loans, advances or other financial accommodations made or provided
by Borrower to or for the benefit of any Affiliate with proceeds of the Loans
or in connection with the Letter of Credit Accommodations, and (iii) all right,
title and interest of Borrower and Guarantors in or to any deposit account or
other account maintained at any bank or other financial institution used in
connection with the collection of the Receivables or any of the other
Collateral, or containing proceeds of the Receivables or any of the other
Collateral, or containing proceeds of Loans or Letter of Credit Accommodations
made or provided by Lender or its Affiliates to or for the benefit of Borrower
or its Affiliates, or proceeds of loans, advances or other financial
accommodations made or provided by Borrower to or for the benefit of any
Affiliate with proceeds of the Loans or in connection with the Letter of Credit
Accommodations;
(e) all present and future liens, security interests, rights,
remedies, title and interest in, to and in respect of Receivables or any of the
other Collateral, including, without limitation, (i) rights and remedies under
or relating to guaranties, contracts of suretyship, letters of credit and
credit and other insurance related to the Receivables or any of the other
Collateral, (ii) rights of stoppage in transit, replevin, repossession,
reclamation and other rights and remedies of an unpaid vendor, lienor or
secured party, (iii) goods described in invoices, documents, contracts or
instruments, credit card sales drafts, credit card sales slips or charge slips
or receipts and other forms of daily store receipts with respect to, or
otherwise representing or evidencing Receivables or other Collateral,
including, without limitation, returned, repossessed and reclaimed goods, (iv)
deposits by and property of account debtors or other persons securing the
obligations of account debtors, and (v) security interests granted by
Affiliates of Borrower to Borrower to secure Indebtedness arising from loans,
advances or other financial accommodations made or provided by Borrower to or
for the benefit of such Affiliate or otherwise, including, without limitation,
security interests granted to Borrower pursuant to the Intercompany Loan
Documents;
(f) Inventory;
(g) all leases and rental agreements for personal property
between Borrower or any Guarantor as lessor (whether by origination or
derivation) and any and all persons or parties as lessee(s), and all rentals,
purchase option amounts, and other sums due thereunder; and all inventory,
goods and
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property subject to such leases and rental agreements and all accessions, parts
and tools attached thereto or used therewith and all of the residual or
reversionary rights of Borrower or any Guarantor therein;
(h) Records; and
(i) all products and proceeds of the foregoing, in any form,
including, without limitation, insurance proceeds and all claims against third
parties for loss or damage to or destruction of any or all of the foregoing.
5.2 Notwithstanding anything to the contrary contained in Section
5.1 above, the types or items of Collateral shall not include any rights or
interests in any contract, lease, permit, license, charter or license agreement
covering personal property, as such, if under the terms of such contract,
lease, permit, license, charter or license agreement, or applicable law with
respect thereto, the valid grant of a security interest or lien therein to
Lender is prohibited and such prohibition has not been or is not waived or the
consent of the other party to such contract, lease, permit, license, charter or
license agreement has not been or is not otherwise obtained or under applicable
law such prohibition cannot be waived; provided, that, the foregoing exclusion
shall in no way be construed (a) to apply if such prohibition is unenforceable
under Section 9-318 of the UCC or other applicable law or (b) so as to limit,
impair or otherwise affect Lender's unconditional continuing security interests
in and liens upon any rights or interests of Borrower or any Guarantor in or to
monies due or to become due under any such contract, lease, permit, license,
charter or license agreement (including, without limitation, any Accounts or
other Receivables).
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account(s). Lender shall maintain one or more
loan account(s) on its books in which shall be recorded (a) all Loans, Letter
of Credit Accommodations and other Obligations and the Collateral, (b) all
payments made by or on behalf of Borrower and (c) all other appropriate debits
and credits as provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and interest. All entries in the loan account(s)
shall be made in accordance with Lender's customary practices as in effect from
time to time.
6.2 Statements. Lender shall render to Borrower each month a
statement setting forth the balance in Borrower's loan account(s) maintained by
Lender for Borrower pursuant to the provisions of this Agreement, including
principal, interest, fees, costs and expenses. Each such statement shall be
subject to subsequent adjustment by Lender but shall, absent manifest errors or
omissions, be considered correct and deemed accepted by Borrower and
conclusively binding upon Borrower and any Obligor as an account stated except
to the extent that Lender receives a written notice from Borrower of any
specific exceptions of Borrower thereto within thirty (30) days after the date
such statement has been mailed by Lender. Until such time as Lender shall have
rendered to Borrower a written statement as provided above, the balance in the
loan account(s) of a Borrower shall be presumptive evidence of the amounts due
and owing to Lender by Borrower.
6.3 Collection of Accounts.
(a) Borrower and Guarantors shall establish and maintain, at
their expense, deposit account arrangements and merchant payment arrangements
with the banks set forth on Schedule 6.3 hereto and after prior written notice
to Lender, such other banks as Borrower or Guarantors may
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hereafter select as are acceptable to Lender. The banks set forth on Schedule
6.3 constitute all of the banks with whom Borrower and Obligors have deposit
account arrangements and merchant payment arrangements as of the date hereof.
(b) Borrower and Guarantors shall have established and shall
maintain, at their expense, blocked accounts or lockboxes and related blocked
accounts (in either case, "Blocked Accounts") as Lender may specify into which
Borrower and Guarantors shall promptly (i) cause all amounts on deposit in the
deposit accounts of the Leer Retail Division of TAG used by each retail store
location of the Division to be sent and (ii) deposit and direct, or cause to be
deposited, all payments on all Receivables and all other payments arising from
the sale of, or otherwise constituting proceeds of, Inventory or other
Collateral. The banks at which the Blocked Accounts are established shall have
entered into an agreement, in form and substance satisfactory to Lender,
providing that all items received or deposited in the Blocked Accounts are the
property of Lender, that the depository bank has no lien upon, or right of
setoff against, the Blocked Accounts, the items received for deposit therein,
or the funds from time to time on deposit therein and that the depository bank
will wire, or otherwise transfer, in immediately available funds, on a daily
basis, all funds received or deposited into the Blocked Accounts to such bank
account of Lender as Lender may from time to time designate for such purpose
("Payment Account"). Borrower and Guarantors agree that all amounts deposited
in such Blocked Accounts or other funds received and collected by Lender,
whether as proceeds of Inventory or other Collateral or otherwise shall be the
property of Lender.
(c) For purposes of calculating interest on the Obligations,
such payments or other funds received will be applied (conditional upon final
collection) to the Obligations one (1) Business Day following the date of
receipt of immediately available funds by Lender in the Payment Account. For
purposes of calculating the amount of the Loans available to each Borrower such
payments will be applied (conditional upon final collection) to the Obligations
on the Business Day of receipt by Lender in the Payment Account, if such
payments are received within sufficient time (in accordance with Lender's usual
and customary practices as in effect from time to time) to credit such
Borrower's loan account on such day, and if not, then on the next Business Day.
(d) Borrower and Guarantors and all of their subsidiaries,
employees, agents and other Affiliates shall, acting as trustee for Lender,
receive, as the property of Lender, any monies, checks, notes, drafts or any
other payment relating to and/or proceeds of Accounts or other Collateral which
come into their possession or under their control and immediately upon receipt
thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to
Lender. In no event shall the same be commingled with Borrower's, any
Guarantor's or its Subsidiary's own funds. Borrower and Guarantors agree to
reimburse Lender on demand for any amounts owed or paid to any bank at which a
Blocked Account is established or any other bank or person involved in the
transfer of funds to or from the Blocked Accounts arising out of Lender's
payments to or indemnification of such bank or person. The obligation of
Borrower and Guarantors to reimburse Lender for such amounts pursuant to this
Section 6.3 shall survive the termination or non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment
Account as provided in Section 6.3 or such other place as Lender may designate
in writing from time to time. Lender may apply payments received or collected
from Borrower or Guarantors or for the account of Borrower or Guarantors
(including, without limitation, the monetary proceeds of collections or of
realization upon any Collateral or any other property which is security for the
Obligations) to such of the Obligations, whether or not then due, in such order
and manner as Lender determines. At Lender's option, all
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principal, interest, fees, costs, expenses and other charges provided for in
this Agreement or the other Financing Agreements may be charged directly to the
loan account(s) of Borrower. Borrower and Guarantors shall make all payments
to Lender on the Obligations free and clear of, and without deduction or
withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Lender is
required to surrender or return such payment or proceeds to any Person for any
reason, then the Obligations intended to be satisfied by such payment or
proceeds shall be reinstated and continue and this Agreement shall continue in
full force and effect as if such payment or proceeds had not been received by
Lender. Borrower and Guarantors shall be liable to pay to Lender, and do
hereby indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the
Loans to or for the benefit of Borrower and Guarantors, or otherwise in
accordance with the terms hereof or of any of the other Financing Agreements,
and provide the Letter of Credit Accommodations for the benefit of Borrower and
Guarantors based upon telephonic or other instructions received from anyone
purporting to be an authorized officer of Borrower or any Guarantor or other
authorized person or, at the discretion of Lender, if such Loans are necessary
to satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations hereunder shall specify the date on which the requested Loan is
to be made or Letter of Credit Accommodations established (which day shall be a
Business Day), the amount of the requested Loan or the Letter of Credit
Accommodations (together with such other information as Lender may require in
connection therewith in the case of Letter of Credit Accommodations) and the
Guarantor's deposit account set forth on Schedule 6.3 hereto to which the
proceeds of such Loan should be disbursed. Except in Lender's discretion, all
Loans requested by Borrower or any Guarantor (other than the initial Loans
hereunder) shall only be disbursed to a deposit account of such Guarantor set
forth on Schedule 6.3 hereto designated in the request (such Loans being for
the account of Borrower). Requests received after 11:00 a.m. New York City
time on any day shall be deemed to have been made as of the opening of business
on the immediately following Business Day. All Loans and Letter of Credit
Accommodations under this Agreement shall be conclusively presumed to have been
made to, and at the request of and for the benefit of, Borrower or any
Guarantor when deposited to the credit of Borrower or otherwise disbursed or
established in accordance with the instructions of Borrower or in accordance
with the terms and conditions of this Agreement.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting.
(a) Borrower shall provide Lender with the following
documents in a form satisfactory to Lender:
(i) on a weekly basis or more frequently at
Borrower's option or more frequently beginning five (5) days after Lender's
request, a Borrowing Base Certificate setting forth Borrower's calculation of
the Loans and Letter of Credit Accommodations available to Borrower pursuant to
the terms and conditions contained herein as of the last business day of the
immediately preceding week as to the Accounts and as of the last day of the
preceding month as to Inventory, duly completed and
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executed by the chief financial officer or other appropriate financial officer
of Borrower acceptable to Lender, together with all schedules required pursuant
to the terms of the Borrowing Base Certificate duly completed (including,
without limitation, the amount of all Accounts of each Guarantor created,
collections received by such Guarantor and credit memos issued by such
Guarantor during the immediately preceding week); provided, that, without
limiting any other rights of Lender, upon Lender's request, Borrower shall
provide Lender on a daily basis with a schedule of Accounts for each Guarantor,
and collections received and credits issued by such Guarantor and with such
frequency as Lender shall specify an inventory report as to each Guarantor in
the event that at any time either: (A) an Event of Default or (B) Borrower
shall have failed to deliver any Borrowing Base Certificate in accordance with
the terms hereof, or (C) upon Lender's good faith belief, any information
contained in any Borrowing Base Certificate is incomplete, inaccurate or
misleading, or (D) Excess Availability shall be less than $5,000,000;
(ii) on a monthly basis or more frequently beginning
five (5) days after Lender's request, (A) perpetual inventory reports for each
Guarantor or such other reports with respect to inventory as are acceptable to
Lender, (B) inventory reports by category for each Guarantor and (C) agings of
accounts payable for each Guarantor;
(iii) upon Lender's request, (A) copies of customer
statements and credit memos, remittances advices and reports, and copies of
deposit slips and bank statements, (B) copies of shipping and delivery
documents, and (C) copies of purchase orders, invoices and delivery of
documents for Inventory acquired by Borrower or Guarantors;
(iv) agings of accounts receivable for each
Guarantor on a monthly basis or more frequently as Lender may request; and
(v) such other reports as to the Collateral as
Lender shall request from time to time.
(b) Nothing contained in any Borrowing Base Certificate shall
be deemed to limit, impair or otherwise affect the rights of Lender contained
herein and in the event of any conflict or inconsistency between the
calculation of the Loans and Letter of Credit Accommodations available to
Borrower as set forth in any Borrowing Base Certificate and as determined by
Lender, the determination of Lender shall govern and be conclusive and binding
upon Borrower and Guarantors. Without limiting the foregoing, Borrower and
Guarantors shall furnish to Lender any information which Lender may reasonably
request regarding the determination and calculation of any of the amounts set
forth in the Borrowing Base Certificate. If any of the records or reports of
Borrower or any Guarantor with respect to the Collateral or other property
which is security for the Obligations are prepared or maintained by an
accounting service, contractor, shipper or other agent, Borrower and each
Guarantor hereby irrevocably authorizes such service, contractor, shipper or
agent to deliver such records, reports and related documents to Lender and to
follow Lender's instructions with respect to further services at any time that
an Event of Default exists or has occurred.
7.2 Accounts Covenants.
(a) Borrower shall notify Lender promptly of: (i) any delay
in performance by any Guarantor of its obligations to any material account
debtor or the assertion of any material claims, offsets, defenses or
counterclaims by any account debtor, Credit Card Issuer or Credit Card
Processor, or any disputes with any of such persons or any settlement,
adjustment or compromise thereof and (ii) all
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material adverse information relating to the financial condition of any account
debtor, Credit Card Issuer or Credit Card Processor. No credit, discount,
allowance or extension or agreement for any of the foregoing shall be granted
to any account debtor, Credit Card Issuer or Credit Card Processor, except in
the ordinary course of such Guarantor's business in accordance with its then
current practices and policies (so long as such practices and policies are no
more favorable to such account debtor or other person in any material respect
than those in effect on the date hereof). So long as no Event of Default
exists or has occurred and is continuing, each Guarantor shall settle, adjust
or compromise any claim, offset, counterclaim or dispute with any account
debtor, Credit Card Issuer or Credit Card Processor. At any time that an
Event of Default exists or has occurred and is continuing, Lender shall, at its
option, have the exclusive right to settle, adjust or compromise any claim,
offset, counterclaim or dispute with account debtors, Credit Card Issuers or
Credit Card Processors or grant any credits, discounts or allowances.
(b) In addition to the documents and information to be
provided by Borrower to Lender pursuant to Section 7.1(a) above, Borrower and
each Guarantor shall promptly report to Lender any return of Inventory by an
account debtor having a value in excess of $50,000, other than returns from
retail customers in the ordinary course of the business of the Leer Retail
Division of TAG in accordance with the then current return policy of the Leer
Retail Division, of TAG (provided that such return policy shall be no more
favorable to the retail customer in any material respect than the policy in
effect as of the date hereof). At any time that Inventory is returned,
reclaimed or repossessed, the related Account shall not be deemed an Eligible
Account to the extent of such returned, reclaimed or repossessed Inventory. In
the event any such account debtor returns Inventory when an Event of Default
exists or has occurred and is continuing, such Guarantor shall, upon Lender's
request, (i) hold the returned Inventory in trust for Lender, (ii) segregate
all returned Inventory from all of its other property, (iii) dispose of the
returned Inventory solely according to Lender's instructions, and (iv) not
issue any credits, discounts or allowances with respect thereto without
Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on
any invoice delivered to Lender or schedule thereof delivered to Lender shall
be true and complete, (ii) no payments shall be made thereon except payments
delivered to Lender pursuant to the terms of this Agreement, (iii) no credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor, Credit Card Issuer or Credit Card Processor,
except as reported to Lender in accordance with this Agreement and except for
credits, discounts, allowances or extensions made or given in the ordinary
course of the business of the Guarantor to whom such Account is owed in
accordance with the then current practices and policies of such Guarantor (so
long as such practices and policies are no more favorable to the account debtor
or other person in any material respect than those in effect on the date
hereof), (iv) there shall be no setoffs, deductions, contras, defenses,
counterclaims or disputes existing or asserted with respect thereto except as
reported to Lender in accordance with the terms of this Agreement, (v) none of
the transactions giving rise thereto will violate any applicable Federal or
State laws or regulations, all documentation relating thereto will be legally
sufficient under such laws and regulations and all such documentation will be
legally enforceable in accordance with its terms.
(d) Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Account or other Collateral by mail,
telephone, facsimile transmission or otherwise.
(e) Borrower and each Guarantor shall deliver or cause to be
delivered to Lender, with appropriate endorsement and assignment, with full
recourse to Borrower or such Guarantor, all chattel paper and instruments
constituting part of the Collateral which Borrower or such Guarantor now owns
or
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may at any time acquire immediately upon Borrower's or such Guarantor's receipt
thereof, except as Lender may otherwise agree.
(f) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account
debtors, Credit Card Issuers or Credit Card Processors that the Receivables and
other obligations included in the Collateral have been assigned to Lender and
that Lender has a security interest therein and Lender may direct any or all
account debtors, Credit Card Issuers and Credit Card Processors to make
payments of Receivables and other obligations included in the Collateral
directly to Lender, (ii) extend the time of payment of, compromise, settle or
adjust for cash, credit, return of merchandise or otherwise, and upon any terms
or conditions, any and all or other obligations included in the Collateral and
thereby discharge or release the account debtor or any other party or parties
in any way liable for payment thereof without affecting any of the Obligations,
(iii) demand, collect or enforce payment of any Receivables or such other
obligations, but without any duty to do so, and Lender shall not be liable for
its failure to collect or enforce the payment thereof not for the negligence of
its agents or attorneys with respect thereto and (iv) take whatever other
action Lender may deem necessary or desirable for the protection of its
interests. At any time that an Event of Default exists or has occurred and is
continuing, at Lender's request, all invoices and statements sent to any
account debtor, Credit Card Issuer, Credit Card Processor, or other obligor
shall state that the Receivables and such other obligations due from such
account debtor, Credit Card Issuer, Credit Card Processor, or other obligor
have been assigned to Lender and are payable directly and only to Lender and
Borrower and each Guarantor shall, and shall cause its Subsidiaries to, deliver
to Lender such originals of documents evidencing the sale and delivery of goods
or the performance of services giving rise to any Receivables and other
obligations included in the Collateral as Lender may require.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower
and each Guarantor shall at all times maintain inventory records reasonably
satisfactory to Lender, keeping correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, the cost therefor
and daily withdrawals therefrom and additions thereto; (b) Borrower and each
Guarantor shall conduct a physical count of the Inventory at least once each
year, but at any time or times as Lender may request on or after an Event of
Default has occurred, and promptly following such physical inventory shall
supply Lender with a report in the form and with such specificity as may be
reasonably satisfactory to Lender concerning such physical count; (c) Borrower
and each Guarantor shall not remove any Inventory from the locations set forth
or permitted herein, without the prior written consent of Lender, except (i)
for sales of Inventory in the ordinary course of the business of Borrower or
such Guarantor, (ii) for Inventory purchased by Borrower or such Guarantor from
a third party which is in transit to a location set forth or permitted herein
and is identified to Lender as Inventory in transit, (iii) to move Inventory
from time to time in the ordinary course of business to third party processors
or outside contractors in order for such third party or outside contractor to
process or otherwise work with such Inventory; provided, that, all such
Inventory is reported to Lender as Inventory at such third party locations, and
(iv) to move Inventory directly from one location set forth or permitted herein
to another such location; (d) upon Lender's request, Borrower and each
Guarantor shall, at its expense, no more than once in any twelve (12) month
period, but at any time or times as Lender may request on or after an Event of
Default has occurred, deliver or cause to be delivered to Lender written
reports or appraisals as to the Inventory in form, scope and methodology
acceptable to Lender and by an appraiser acceptable to Lender, upon which
Lender is expressly permitted to rely; (e) Borrower and each Guarantor shall,
and shall cause its Subsidiaries to, produce, use, store and maintain the
Inventory, with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with applicable laws
(including, but not limited to, the requirements of the Federal Fair Labor
Standards Act of 1938, as amended and all rules, regulations and orders related
thereto); (f) as between Borrower, each Guarantor
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and its Subsidiaries and Lender, Borrower, each Guarantor and its Subsidiaries
assumes all responsibility and liability arising from or relating to the
production, use, sale or other disposition of the Inventory; (g) Borrower and
each Guarantor shall not, and shall cause its Subsidiaries not to, sell
Inventory to any customer on approval, or any other basis which entitles the
customer to return or may obligate Borrower, such Guarantor or Subsidiary to
repurchase such Inventory, except for the right of return given to retail
customers in the ordinary course of the business of the Leer Retail Division of
TAG in accordance with the then current return policy of the Leer Retail
Division of TAG (so long as such policy shall be no more favorable to the
retail customer in any material respect than the policy in effect on the date
hereof); (h) Borrower and each Guarantor shall, and shall cause its
Subsidiaries to, keep the Inventory in good and marketable condition; and (i)
Borrower and each Guarantor shall not, without prior written notice to Lender,
acquire or accept any Inventory on consignment or approval. The foregoing
shall not be construed to limit the existing customary practice of any
Guarantor to accept returns from time to time from customers in the ordinary
course of the business of such Guarantor.
7.4 Equipment Covenants. With respect to the Equipment: (a) Borrower
and each Guarantor shall keep the Equipment necessary to operate the businesses
of Borrower and Guarantors in good order, repair, running and marketable
condition (ordinary wear and tear excepted); (b) Borrower and each Guarantor
shall use the Equipment with all reasonable care and caution and in accordance
with applicable standards of any insurance and in conformity with all
applicable laws; and (c) as between Borrower, each Guarantor and its
Subsidiaries and Lender, Borrower, each Guarantor and its Subsidiaries assumes
all responsibility and liability arising from the use of the Equipment.
7.5 Power of Attorney. Borrower and each Guarantor hereby
irrevocably designates and appoints Lender (and all persons designated by
Lender) as Borrower's and such Guarantor's true and lawful attorney-in-fact,
and authorizes Lender, in Borrower's, such Guarantor's or Lender's name, to:
(a) at any time an Event of Default exists or has occurred and is continuing,
(i) demand payment on Receivables or other proceeds of Inventory or other
Collateral, (ii) enforce payment of Receivables or other Collateral by legal
proceedings or otherwise, (iii) exercise all of Borrower's or such Guarantor's
rights and remedies to collect any Receivables or other Collateral, (iv) sell
or assign any Receivable upon such terms, for such amount and at such time or
times as the Lender deems advisable, (v) settle, adjust, compromise, extend or
renew a Receivable, (vi) discharge and release any Receivable, (vii) prepare,
file and sign Borrower's or such Guarantor's name on any proof of claim in
bankruptcy or other similar document against an account debtor, (viii) notify
the post office authorities to change the address for delivery of such
Guarantor's mail (and Borrower's mail, but only if Borrower has any material
Receivables) to an address designated by Lender, and open and dispose of all
mail addressed to such Guarantor (and Borrower, but only if Borrower has any
material Receivables), provided, that, Lender shall use all reasonable efforts
to only open and dispose of mail which it receives pursuant to the exercise by
Lender of its rights set forth in this Section 7.5 from account debtors or
other persons indebted to Borrower or any Obligor, or which might relate to the
Collateral or proceeds thereof, or from suppliers, vendors or other trade
creditors of Borrower or any Obligor, and (ix) do all other acts and things
which are necessary, in Lender's good faith determination, to fulfill
Borrower's or such Guarantor's obligations under this Agreement and the other
Financing Agreements and (b) at any time to (i) take control in any manner of
any item of payment or proceeds of any Collateral or other item or proceeds
received in the Blocked Accounts or otherwise remitted to Lender, (ii) have
access to any lockbox or postal box into which Borrower's or such Guarantor's
mail is deposited, (iii) endorse Borrower's or such Guarantor's name upon any
items of payment or proceeds of any Collateral or other item or proceed
received in the Blocked Accounts or otherwise remitted to Lender, and deposit
the same in the Lender's account for application to the Obligations, (iv)
endorse Borrower's or such Guarantor's name upon any chattel paper, document,
instrument, invoice, or similar document or agreement relating to any
Receivables or any
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goods pertaining thereto or any other Collateral, (v) sign Borrower's or such
Guarantor's name on any verification of Receivables and notices thereof to
account debtors or obligors with respect thereto and (vi) execute in Borrower's
or such Guarantor's name and file any UCC financing statements or amendments
thereto with respect to the Collateral, in each case to the extent not
otherwise prohibited by applicable law and in accordance with the other terms
of this Agreement and the other Financing Agreements. Borrower and each
Guarantor hereby releases Lender and its officers, employees and designees from
any liabilities arising from any act or acts under this power of attorney and
in furtherance thereof, whether of omission or commission, except as a result
of the gross negligence or wilful misconduct of Lender as determined pursuant
to a final non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, (a) upon notice to
Borrower, cure any default by Borrower under any material agreement with a
third party which affects the Collateral, its value or the ability of Lender to
collect, sell or otherwise dispose of the Collateral or the rights and remedies
of Lender therein or the ability of Borrower or Guarantors to perform their
respective obligations under the other Financing Agreements; (b) pay or bond on
appeal any judgment entered against Borrower or any Guarantor; (c) discharge
taxes, liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral; and (d) pay any amount, incur any
expense or perform any act which, in Lender's good faith judgment, is necessary
or appropriate to preserve, protect, insure or maintain the Collateral and the
rights of Lender with respect thereto. Lender may add any amounts so expended
to the Loans and charge Borrower's account therefor, such amounts to be
repayable by Borrower and Guarantors on demand. Lender shall be under no
obligation to effect such cure, payment or bonding and shall not, by doing so,
be deemed to have assumed any obligation or liability of Borrower or
Guarantors. Any payment made or other action taken by Lender under this
Section shall be without prejudice to any right to assert an Event of Default
hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as requested in good faith
by Lender, at the cost and expense of Borrower and Guarantors, (a) Lender or
its designee shall have complete access to all premises of Borrower and
Obligors during normal business hours and after notice to Borrower, or at any
time and without notice to Borrower if an Event of Default exists or has
occurred, for the purposes of inspecting, verifying and auditing the Collateral
and all other property which is security for the Obligations and all of the
books and records of Borrower or such Obligor, including, without limitation,
the Records; (b) Borrower and each Obligor shall promptly furnish to Lender
such copies of such books and records or extracts therefrom as Lender may
request; and (c) use during normal business hours such of the personnel,
equipment, supplies and premises of Borrower and each Obligor as may be
reasonably necessary for the foregoing and if an Event of Default exists or has
occurred and is continuing, for the collection of Receivables and realization
of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower and Guarantors hereby jointly and severally represent and
warrant to Lender the following (which shall survive the execution and delivery
of this Agreement), the truth and accuracy of which are a continuing condition
of the making of Loans and providing Letter of Credit Accommodations by Lender
to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower
and each Guarantor is a corporation duly organized and in good standing under
the laws of its state of incorporation and is duly qualified as a foreign
corporation and in good standing in all states or other jurisdictions where the
nature
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and extent of the business transacted by it or the ownership of assets makes
such qualification necessary, except for those jurisdictions in which the
failure to so qualify would not have a material adverse effect on the financial
condition, results of operation or business of Borrower or any Guarantor or the
rights of Lender hereunder or under any of the other Financing Agreements. The
execution, delivery and performance of this Agreement, the other Financing
Agreements and the transactions contemplated hereunder and thereunder are all
within Borrower's and each Guarantor's corporate powers, have been duly
authorized and are not in contravention of (a) any applicable law or the terms
of Borrower's or such Guarantor's certificate of incorporation, by-laws, or
other organizational documentation, or (b) any indenture, or any material
agreement or undertaking to which Borrower or such Guarantor is a party or by
which Borrower or such Guarantor or its property are bound. This Agreement and
the other Financing Agreements constitute legal, valid and binding obligations
of Borrower and Guarantors enforceable in accordance with their respective
terms. Borrower and Guarantors do not have any Subsidiaries except as set
forth in Schedule 8.1 hereto, subject to the right of Borrowers and Guarantors
to form a new Subsidiary in accordance with Section 9.7 below or acquire a new
Subsidiary in accordance with Section 9.14.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower, Guarantors and their Subsidiaries which have
been or may hereafter be delivered by or on behalf of Borrower or Guarantors to
Lender have been prepared in accordance with GAAP and fairly present the
financial condition and the results of operation of Borrower, Guarantors and
their Subsidiaries as at the dates and for the periods set forth therein.
Except as disclosed in any interim financial statements furnished by or on
behalf of Borrower or Guarantors to Lender prior to the date of this Agreement,
there has been no material adverse change in the assets, liabilities,
properties and condition, financial or otherwise, of Borrower and Guarantors
since the date of the most recent audited financial statements furnished by or
on behalf of Borrower or Guarantors to Lender prior to the date of this
Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief
executive office of Borrower and each Guarantor are located only at the address
set forth below, and the Records of Borrower and each Guarantor concerning
Receivables and Inventory are located only at the address set forth below and
any other address specified in the Information Certificate, and its only other
places of business and the only other locations of Collateral or other property
which is security for the Obligations, if any, are the addresses set forth in
the Information Certificate, subject to the right of Borrower and each
Guarantor to establish new locations in accordance with Section 9.2 below. The
Information Certificate correctly identifies any of such locations which are
not owned by Borrower or Guarantors and sets forth the owners and/or operators
thereof.
8.4 Priority of Liens; Title to Properties. The security interests
and liens granted to Lender under this Agreement and the other Financing
Agreements constitute valid and perfected first priority liens and security
interests in and upon the Collateral. Borrower and each Guarantor has good and
marketable title to all of its properties and assets subject to no Liens,
except the Permitted Liens.
8.5 Tax Returns. Borrower and each Guarantor has filed, or caused to
be filed, in a timely manner all tax returns, extensions, reports and
declarations which are required to be filed by it. All information in such tax
returns, reports and declarations is complete and accurate in all material
respects. Borrower and each Guarantor has paid or caused to be paid all taxes
due and payable or claimed due and payable in any assessment received by it,
and has collected, deposited and remitted all sales and/or use taxes applicable
to the conduct of its business and has withheld, collected and remitted all
employee liabilities and contributions for income tax, Canadian pension plan,
unemployment insurance and other
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similar liabilities arising under Canadian Federal, State, Provincial or local
law, except, in each case, taxes the validity of which are being contested in
good faith by appropriate proceedings diligently pursued and available to
Borrower or such Guarantor and with respect to which adequate reserves have
been set aside on its books. Adequate provision has been made for the payment
of all accrued and unpaid Federal, State, Provincial, county, local, foreign
and other taxes whether or not yet due and payable and whether or not disputed.
Borrower and each Guarantor has collected and deposited in a separate bank
account or remitted to the appropriate tax authority all sales and/or use taxes
applicable to its business required to be collected under the laws of the
United States and each possession or territory thereof, and each State or
political subdivision thereof, including any State or political subdivision
thereof in which Borrower or such Guarantor owns any Inventory or owns or
leases any other property, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower or such Guarantor with respect to which adequate reserves
have been set aside on its books.
8.6 Litigation. Except as set forth on the Information Certificate,
there is no present investigation by any Governmental Authority pending, or to
the best of the knowledge of Borrower and Guarantors, threatened, against or
affecting Borrower, Guarantors or their Subsidiaries or its or their assets or
businesses and there is no action, suit, proceeding or claim by any Person
pending, or to the best of the knowledge of Borrower and Guarantors,
threatened, against Borrower, Guarantors or any of their Subsidiaries or its or
their assets or goodwill, or against or affecting any transactions contemplated
by this Agreement, which if adversely determined against such person or persons
would result in any material adverse change in the assets or business of
Borrower or any Guarantor or would impair the ability of Borrower or any
Guarantor to perform its obligations hereunder or under any of the other
Financing Agreements to which it is a party or of Lender to enforce any
Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws.
(a) Borrower and each Obligor is not in default in any
material respect under, or in violation in any respect of any of the terms of,
any material agreement, contract, instrument, lease or other commitment to
which it is a party or by which it or any of its assets are bound. Borrower,
each Guarantor and its Subsidiaries is in compliance in all respects with the
requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority relating to its business, including, without limitation,
those set forth in or promulgated pursuant to the Fair Labor Standards Act of
1938, as amended, the Occupational Safety and Health Act of 1970, as amended,
the Code, the Securities Act, the Securities Exchange Act, ERISA and all
Environmental Laws.
(b) Except as set forth in Section 8.8 hereof, Borrower and
each Obligor has obtained all material permits, licenses, approvals, consents,
certificates, orders or authorizations of any Governmental Authority required
for the lawful conduct of its business (the "Permits") and is in material
compliance in all respects with the requirements of all applicable laws, rules,
regulations and orders of any Governmental Authority (including, but not
limited to, the Department of State, the Department of Commerce, and the Bureau
of Alcohol, Tobacco and Firearms) relating to its business. The Permits
constitute all permits, licenses, approvals, consents, certificates, orders or
authorizations necessary for Borrower and each Obligor to own and operate its
business as presently conducted or proposed to be conducted. All of the
Permits are valid and subsisting and in full force and effect. There are no
actions, claims or proceedings pending, or to the best of the knowledge of
Borrower and Guarantors, threatened that seek the revocation, cancellation,
suspension or modification of any of the Permits except for any such actions,
claims or proceedings disclosed in the Information Certificate or arising after
the date
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hereof, in each case, which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower or such Guarantor, so
long as such Permit remains in effect during the pendency of such action, claim
or proceeding.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 hereto, (i) Borrower,
Guarantors and any of their Subsidiaries have not generated, used, stored,
treated, transported, manufactured, handled, produced or disposed of any
Hazardous Materials, on or off its premises (whether or not owned by it) in any
manner which violates any applicable Environmental Law or any license, permit,
certificate, approval or similar authorization thereunder in any material
respect and (ii) the operations of Borrower, each Guarantor and its
Subsidiaries comply in all material respects with all Environmental Laws and
all licenses, permits, certificates, approvals and similar authorizations
thereunder.
(b) Except as set forth on Schedule 8.8 hereto, there has
been no investigation, proceeding, complaint, order, directive, claim, citation
or notice of violation by any Governmental Authority or any other third party
nor is any pending or to the best of the knowledge of Borrower and Guarantors
threatened, with respect to any material non-compliance with or material
violation of the requirements of any Environmental Law by Borrower, any
Guarantor or its Subsidiaries or with respect to the release, spill or
discharge, threatened or actual, of any Hazardous Material or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials by Borrower, any Guarantor or its
Subsidiaries.
(c) Except as set forth on Schedule 8.8 hereto, Borrower,
Guarantors and any of their Subsidiaries have no material liability (contingent
or otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
(d) Borrower, each Guarantor and its Subsidiaries has all
licenses, permits, certificates, approvals or similar authorizations required
to be obtained or filed in connection with the operations of any Borrower,
Guarantor or its Subsidiaries under any Environmental Law.
8.9 Employee Benefits.
(a) Borrower and each Guarantor has not engaged in any
transaction in connection with which Borrower or such Guarantor or any ERISA
Affiliate could reasonably be expected to be subject to either a civil penalty
assessed pursuant to ERISA or a tax imposed pursuant to the Code with respect
to a Plan in excess of $100,000.
(b) No liability to the Pension Benefit Guaranty Corporation
has been or is expected by Borrower or any Guarantor to be incurred with
respect to any Plan. There has been no reportable event (within the meaning of
ERISA) or any other event or condition with respect to any Plan which presents
a material risk of termination of any such plan by the Pension Benefit Guaranty
Corporation.
(c) Full payment has been made of all amounts which Borrower,
any Guarantor or any ERISA Affiliate is required under ERISA and the Code to
have paid under the terms of each Plan as contributions to such Plan as of the
last day of the most recent fiscal year of such plan ended prior to the date
hereof, and no accumulated funding deficiency (as defined in ERISA and the
Code), whether or not waived, exists with respect to any Plan.
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(d) The current value of all vested accrued benefits under
the Plans does not exceed the current value of the assets of such plans
allocable to such vested accrued benefits by more than $350,000 as to any one
Plan and $650,000 in the aggregate as to all Plans. The terms "current value"
and "accrued benefit" have the meanings specified in ERISA.
(e) Neither Borrower nor any Guarantor nor any ERISA
Affiliate has any liability or potential liability with respect to any
"multiemployer plan" (as such term is defined in ERISA) that is subject to
Title IV of ERISA (other than any liability arising in the ordinary course of
the business of Borrower, any Guarantor or ERISA Affiliate for contributions to
such plan in accordance with the collective bargaining agreement of Borrower),
except as set forth in Schedule 8.9 hereto.
8.10 Bank Accounts. All of the deposit accounts, investment accounts
or other accounts in the name of or used by Borrower and each Obligor
maintained at any bank or other financial institution are set forth on Schedule
6.3 hereto, subject to the right of Borrower and Obligors to establish new
accounts in accordance with Section 9.16 below.
8.11 Capitalization, Interrelated Businesses.
(a) All of the issued and outstanding shares of Capital Stock
of Borrower are directly and beneficially owned and held by John B. Poindexter
and all of such shares have been duly authorized and are fully paid and
non-assessable, free and clear of all claims, liens, pledges and encumbrances
of any kind, except as disclosed in writing to Lender. All of the issued and
outstanding shares of Capital Stock of Guarantors (other than Raider) are
directly and beneficially owned and held by Borrower and all of such shares
have been duly authorized and are fully paid and non-assessable, free and clear
of all claims, liens, pledges and encumbrances of any kind, except as disclosed
in writing to Lender. All of the issued and outstanding shares of Capital
Stock of Raider are directly and beneficially owned and held by TAG, free and
clear of all claims, liens, pledges and encumbrances of any kind, except as
disclosed in writing to Lender.
(b) After the creation of the Obligations, the security
interests of Lender and the other transactions contemplated hereunder, Borrower
and Guarantors on a consolidated basis shall continue to be able to pay their
respective debts as they mature and have (and have reason to believe they will
continue to have) sufficient capital (and not unreasonably small capital) to
carry on their businesses and all businesses in which they are about to engage.
The assets and properties of Borrower and Guarantors on a consolidated basis at
a fair valuation and at their present fair salable value are, and will be,
greater than the Indebtedness and other liabilities of Borrower and such
Guarantor, and including subordinated and contingent liabilities computed at
the amount which, to the best of Borrower's and such Guarantor's knowledge,
represents an amount which can reasonably be expected to become an actual or
matured liability.
8.12 Accuracy and Completeness of Information. All information
furnished by or on behalf of Borrower and Guarantors in writing to Lender in
connection with this Agreement or any of the other Financing Agreements or any
transaction contemplated hereby or thereby, including, without limitation, all
information on the Information Certificate is true and correct in all material
respects on the date as of which such information is dated or certified and
does not omit any material fact necessary in order to make such information not
misleading. No event or circumstance has occurred which would have a material
adverse effect on the business or assets of Borrower or any Obligor, which has
not been fully and accurately disclosed to Lender in writing.
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8.13 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower or Obligors shall now or hereafter give, or cause to be given, to
Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Borrower and each Guarantor shall, and
shall cause its Subsidiaries to, at all times preserve, renew and keep in full,
force and effect its corporate existence and rights and franchises with respect
thereto and maintain in full force and effect all permits, licenses,
trademarks, tradenames, approvals, authorizations, leases and contracts
necessary to carry on the business as presently or proposed to be conducted,
provided, that, any Subsidiary of Borrower (other than any Obligor) may wind
up, liquidate or dissolve to the extent permitted in Section 9.7 and any
Subsidiary of Borrower may merge with and into or consolidate with any Borrower
or any Obligor to the extent permitted in Section 9.7. Borrower and each
Guarantor shall, and shall cause its Subsidiaries to, give Lender thirty (30)
days prior written notice of any proposed change in its corporate name, which
notice shall set forth the new name and it shall deliver to Lender a copy of
the amendment to its Certificate of Incorporation providing for the name change
certified by the Secretary of State of its jurisdiction of incorporation as
soon as it is available.
9.2 New Collateral Locations. Borrower and Obligors may open any new
location within the continental United States or Canada provided it (a) gives
Lender thirty (30) days prior written notice of the intended opening of any
such new location and (b) executes and delivers, or causes to be executed and
delivered, to Lender such agreements, documents, and instruments as Lender may
deem necessary or desirable to protect its interests in the Collateral or other
property which is security for the Obligations at such location, including,
without limitation, PPSA financing statements, UCC financing statements or
similar documents. For purposes of this Section 9.2, a new location of
Borrower or any Obligor shall not be deemed to include locations owned and
operated by third party processors or outside contractors at which goods of any
Obligor may be kept on consignment or for processing, servicing or to be
otherwise worked on by such third party processor or outside contractor, so
long as Borrower and Guarantors shall identify Inventory at such locations in
the reports to be provided by Borrower to Lender under Section 7.1(a) hereof
and shall promptly notify Lender of any such new location.
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrower and each Guarantor shall, and shall cause its
Subsidiaries to, at all times comply in all material respects with all
applicable provisions of laws, rules, regulations, licenses, permits, approvals
and orders applicable to it and duly observe all requirements of any foreign,
Federal, State, Provincial, county, local or other Governmental Authority,
including, without limitation, the Occupational Safety and Health Act of 1970,
as amended, the Fair Labor Standards Act of 1938, as amended, the Securities
Act, the Securities Exchange Act, the Code and all Environmental Laws.
(b) Borrower and each Guarantor shall, and shall cause its
Subsidiaries to, establish and maintain, at its expense, reasonable procedures
to assure and monitor its continued compliance with all
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Environmental Laws in all of its operations. Copies of all environmental
surveys, audits, assessments, feasibility studies and results of remedial
investigations disclosing material environmental conditions obtained by
Borrower, Guarantors or their Subsidiaries shall be promptly furnished, or
caused to be furnished, by Borrower, such Guarantor or Subsidiary to Lender.
(c) Borrower and each Guarantor shall, and shall cause its
Subsidiaries to, give both oral and written notice to Lender promptly upon the
receipt by such Borrower, Guarantor or Subsidiary of any written notice of, or
its otherwise obtaining reliable knowledge of, (i) the occurrence of any event
involving the release, spill or discharge, threatened or actual, of any
Hazardous Material which results in any material non-compliance with or
material violation of applicable Environmental Laws or which has a reasonable
likelihood of resulting in any material liability to any third party, or (ii)
any third party investigation, proceeding, complaint, order, directive, claims,
citation or notice of violation involving actual or potential material
liability with respect to: (A) any material non-compliance with or material
violation of any Environmental Law by Borrower, such Guarantor or Subsidiary
or (B) the release, spill or discharge, threatened or actual, of any Hazardous
Material or (C) the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or (D)
any other environmental, health or safety matter, which affects Borrower, such
Guarantor or Subsidiary or its business, operations or assets or any properties
at which it transported, stored or disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing,
whenever Lender reasonably determines that there is any occurrence, event or
condition which has a reasonable likelihood of resulting in any material
non-compliance with any Environmental Law, or any occurrence, event or
condition which requires any action by or on behalf of any Borrower or
Guarantor, or its Subsidiary, in order to avoid the reasonable likelihood of
any material non-compliance with any Environmental Law, Borrower and each
Guarantor shall, and shall cause its Subsidiaries to, at Lender's request and
the expense of Borrower, such Guarantor or Subsidiary: (i) to prepare and
deliver to Lender a report as to such occurrence, event or condition setting
forth the results of its review, a proposed plan for responding to such
occurrence, event or condition and an estimate of the costs thereof and (ii)
provide to Lender a supplemental report whenever the scope of such occurrence,
event or condition, or the response of Borrower, such Guarantor or Subsidiary
thereto or the estimated costs thereof shall change in any material respect.
At any time after the receipt by Lender of such report or reports (so long as
it is prepared and delivered to Lender in a timely manner, otherwise at any
time), upon Lender's reasonable request, at the expense of Borrower, such
Guarantor or Subsidiary, Borrower shall cause an independent environmental
engineer to prepare and deliver a report, in form and scope acceptable to
Lender, as to such occurrence, event or condition reviewing the proposed plan
for responding thereto and the estimated costs thereof. Borrower shall have
the right to review, comment on and approve all such reports, which review,
comment and approval shall not be unreasonably withheld, conditioned or
delayed, provided, that, such review, comment and approval shall not in any
manner delay the receipt by Lender of such reports.
(e) Borrower and Guarantors shall indemnify and hold harmless
Lender, its directors, officers, employees, agents, representatives, successors
and assigns from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including attorneys' fees and legal expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material in connection with the business,
operations, assets or properties of Borrower, Guarantors or their Subsidiaries,
including, without limitation, the costs of any required or necessary repair,
cleanup or other remedial work with respect to any property of Borrower,
Guarantors or their Subsidiaries and the preparation and
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implementation of any closure, remedial or other required plans. All
representations, warranties, covenants and indemnifications in this Section 9.3
shall survive the payment of the Obligations and the termination or non-renewal
of this Agreement.
9.4 Payment of Taxes and Claims. Borrower and each Guarantor shall,
and shall cause its Subsidiaries to, duly pay and discharge all taxes,
assessments, contributions and governmental charges upon or against it or its
properties or assets, except for taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower, such Guarantor or Subsidiary and with respect to which
adequate reserves have been set aside on its books. Borrower and Guarantors
shall be liable for any tax or penalties imposed on Lender as a result of the
financing arrangements provided for herein and Borrower and Guarantors agree to
indemnify and hold Lender harmless with respect to the foregoing, and to repay
to Lender on demand the amount thereof, and until paid by Borrower and
Guarantors such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require Borrower and
Guarantors to pay any income or franchise taxes attributable to the income of
Lender from any amounts charged or paid hereunder to Lender. The foregoing
indemnity shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
9.5 Insurance. Borrower and each Obligor shall at all times maintain
with financially sound and reputable insurers insurance with respect to the
Collateral and any other property which is security for the Obligations against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established
reputation engaged in the same or similar businesses and similarly situated.
Said policies of insurance shall be satisfactory to Lender as to form, amount
and insurer. Borrower and each Obligor shall furnish certificates, policies or
endorsements to Lender as Lender shall require as proof of such insurance, and,
if Borrower or such Obligor fails to do so, Lender is authorized, but not
required, to obtain such insurance at the expense of Borrower and Guarantors.
All policies with respect to Collateral and business interruption coverage
shall provide for at least thirty (30) days prior written notice to Lender of
any cancellation or reduction of coverage and that Lender may act as attorney
for Borrower or any Obligor in obtaining, and at any time an Event of Default
exists or has occurred, adjusting, settling, amending and canceling such
insurance. Borrower and each Obligor shall cause Lender to be named as a loss
payee and an additional insured (but without any liability for any premiums)
under such insurance policies and Borrower and each Obligor shall obtain
non-contributory lender's loss payable endorsements with respect to the
Collateral to all insurance policies in form and substance satisfactory to
Lender. Such lender's loss payable endorsements shall specify that the
proceeds of such insurance shall be payable to Lender as its interests may
appear and further specify that Lender shall be paid regardless of any act or
omission by Borrower or any Obligor.
9.6 Financial Statements and Other Information.
(a) Each Borrower and Obligor shall keep proper books and
records in which true and complete entries shall be made of all dealings or
transactions of or in relation to the Collateral and the business of Borrower
and Obligors in accordance with GAAP and Borrower shall furnish or cause to be
furnished to Lender: (i) within thirty (30) days after the end of each fiscal
month (other than December of any year) and within forty-five (45) days after
the end of December of each year, monthly unaudited consolidated financial
statements and unaudited consolidating financial statements of Borrower,
Guarantors and their Subsidiaries (including in each case, balance sheets,
statements of income and loss and statements of cash flow) all in reasonable
detail, fairly presenting the financial position and the results of the
operations of Borrower, Guarantors and their Subsidiaries as of the end of and
through such fiscal month and (ii) within ninety (90) days after the end of
each fiscal year, audited consolidated and
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unaudited consolidating financial statements of Borrower, Guarantors and their
Subsidiaries (including in each case balance sheets, statements of income and
loss, statements of cash flow and statements of shareholders' equity), and the
accompanying notes thereto, all in reasonable detail, fairly presenting the
financial position and the results of the operations of Borrower, Guarantors and
their Subsidiaries as of the end of and for such fiscal year, together with the
opinion of independent certified public accountants, which accountants shall be
an independent accounting firm selected by Borrower and reasonably acceptable to
Lender, that such consolidated financial statements have been prepared in
accordance with GAAP, and present fairly the results of operations and financial
condition of Borrower, Guarantors and their Subsidiaries as of the end of and
for the fiscal year then ended.
(b) Borrower shall promptly notify Lender in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for
the Obligations or which would result in any material adverse change in the
business, properties, assets, goodwill or condition, financial or otherwise, of
Borrower or any Guarantor and (ii) the occurrence of any Event of Default, or
act, condition or event which, with the passage of time or giving of notice or
both, would constitute an Event of Default.
(c) Borrower shall promptly notify Lender in writing in the
event that at any time: (i) the Excess Availability shall be less than
$5,000,000 or (ii) the amount of Loans and Letter of Credit Accommodations
available to Borrower pursuant to the terms and conditions contained herein
(calculated as if the then outstanding Loans and Letter of Credit
Accommodations were zero) shall be fifteen (15%) percent less than the amount
of Loans and Letter of Credit Accommodations available to Borrower pursuant to
the terms and conditions contained herein (calculated in the same manner)
reflected in the most recent Borrowing Base Certificate previously delivered by
Borrower to Lender pursuant to Section 7.1 hereof.
(d) Borrower and Guarantors shall within five (5) days after
the sending or filing thereof furnish or cause to be furnished to Lender copies
of all public reports which Borrower or any Guarantor sends to its stockholders
generally and copies of all reports and registration statements which Borrower
or any Guarantor files with the Securities and Exchange Commission, any
national securities exchange or the National Association of Securities Dealers,
Inc.
(e) Borrower and Guarantors shall furnish or cause to be
furnished to Lender such budgets, forecasts, projections and other information
respecting the Collateral and other property which is security for the
Obligations and the business of Borrower, Guarantors and their Subsidiaries as
Lender may, from time to time, reasonably request. Lender is hereby authorized
to deliver a copy of any financial statement or any other information relating
to the business of Borrower, Guarantors and their Subsidiaries to any court or
other Government Authority or to any participant or assignee or prospective
participant or assignee. Borrower and each Guarantor hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Lender, at
Borrower's expense, copies of the financial statements of Borrower, Guarantors
and their Subsidiaries and any reports or management letters prepared by such
accountants or auditors on behalf of Borrower, Guarantors and their
Subsidiaries and to disclose to Lender such information as they may have
regarding the business of Borrower, Guarantors and their Subsidiaries. Any
documents, schedules, invoices or other papers delivered to Lender may be
destroyed or otherwise disposed of by Lender one (1) year after the same are
delivered to Lender, except as otherwise designated by Borrower to Lender in
writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.
Borrower and each Guarantor shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly:
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(a) merge into or with or consolidate with any other Person
or permit any other Person to merge into or with or consolidate with it,
except, that:
(i) Borrower or any Obligor may merge with and into
or consolidate with Borrower or any other Obligor, provided, that, each of the
following conditions is satisfied as determined by Lender: (A) Lender shall
have received not less than ten (10) Business Days prior written notice of the
intention of Borrower or any Obligor to so merge or consolidate and such
information with respect thereto as Lender may request, (B) as of the effective
date of the merger or consolidation and after giving effect thereto, no Event
of Default or act, condition or event which with notice or passage of time or
both would constitute an Event of Default, shall exist or have occurred, (C)
Lender shall have received true, correct and complete copies of all agreements,
documents and instruments relating to such merger or consolidation, including
but not limited to, the certificate or certificates of merger or consolidation
as filed with each appropriate Secretary of State, (D) the surviving entity
shall immediately upon the effectiveness of the merger or consolidation
expressly confirm in writing pursuant to an agreement, in form and substance
satisfactory to Lender, its continuing liability in respect of the Obligations
and Financing Agreements and execute and deliver such other agreements,
documents and instruments as Lender may request in connection therewith, (E)
each Guarantor and other Obligor shall ratify and confirm that their respective
guarantees of the Obligations shall apply to the Obligations as assumed by such
surviving entity, (F) the surviving entity shall, immediately before and
immediately after giving effect to such transaction or series of transactions
have a net worth (including, without limitation, any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such transaction
or series of transactions) equal to or greater than the net worth it had
immediately prior to such transaction or series of transactions, and (G)
Borrower or such Obligor shall not become obligated with respect to any
Indebtedness, nor any of their property become subject to any Lien, pursuant to
such merger or consolidation unless Borrower and such Obligor could incur such
Indebtedness or create such Lien hereunder or under the other Financing
Agreements,
(ii) Borrower or any Obligor may merge with and into
or consolidate with any other Person to the extent permitted in Section 9.14
below,
(iii) Borrower or any Obligor may merge with and
into or consolidate with any other Person who is not an Obligor but is a
Subsidiary of Borrower as of the date hereof, provided, that, (A) Lender shall
have received not less than thirty (30) days prior written notice of the
intention of Borrower or such Obligor, as the case may be, to merge or
consolidate, which notice shall set forth in reasonable detail satisfactory to
Lender, the parties to such merger or consolidation, the consideration to be
paid in connection with such merger or consolidation, the terms and manner of
payment of such consideration, the liabilities being assumed pursuant to such
merger or consolidation and such other information with respect thereto as
Lender may request, (B) as of the date of such merger or consolidation, and
after giving effect thereto, no Event of Default, or act, condition or event
which with notice or passage of time or both would constitute an Event of
Default, shall exist or have occurred, (C) such merger or consolidation shall
be permitted under the terms of the Senior Note Indenture as in effect on the
date hereof (without regard to any amendments or waivers with respect thereto),
(D) any consideration or other costs paid or payable in connection with such
merger or consolidation shall be commercially reasonable and no less favorable
to Borrower or any Obligor than it would obtain in a comparable arm's length
transaction with a Person other than an Affiliate, (E) there shall be no
restrictions applicable to Borrower, any Obligor and their respective assets
included in the agreements, documents and instruments relating to such merger
or consolidation, (F) Borrower or such Obligor shall, immediately before and
immediately after giving effect to such transaction or series of transactions,
have a net worth (including, without limitation, any Indebtedness incurred or
anticipated to be incurred in
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connection with or in respect of such transaction or series of transactions)
equal to or greater than the net worth it had immediately prior to such
transaction or series of transactions, (G) Borrower or such Obligor shall not
become obligated with respect to any Indebtedness, or any of its property
become subject to any Lien pursuant to such merger or consolidation unless
Borrower and such Obligor could incur such Indebtedness or create such Lien
hereunder or under the other Financing Agreements, (H) Borrower or such Obligor
may pay any consideration in respect of such merger or consolidation so long as
the daily average of the Excess Availability for the immediately preceding
thirty (30) day period prior to the date of any such payment shall be not less
than $3,500,000, and as of the date of such payment and after giving effect
thereto, Excess Availability shall not be less than $3,500,000, (I) Lender
shall have received true, correct and complete copies of all agreements,
documents and instruments relating to such merger or consolidation, including
but not limited to, the certificate or certificates of merger or consolidation
as filed with each appropriate Secretary of State, (J) Borrower or such Obligor
shall be the surviving entity, (K) the surviving entity shall immediately upon
the effectiveness of the merger or consolidation, expressly confirm in writing
pursuant to an agreement, in form and substance satisfactory to Lender, its
continuing liability in respect of the Obligations and Financing Agreements and
execute and deliver such other agreements, documents and instruments as Lender
may request in connection therewith, (L) each Guarantor and other Obligor
shall ratify and confirm that their respective guarantees of the Obligations
shall apply to the Obligations as assumed by such surviving entity, (M) Lender
shall have received evidence, in form and substance satisfactory to Lender,
that Lender has valid and perfected security interests in and liens upon the
assets acquired pursuant to such merger or consolidation consisting of the
types and categories of assets which constitute Collateral hereunder, (N)
Lender shall have received, in form and substance satisfactory to Lender, all
consents, waivers, acknowledgments and other agreements from third persons
which Lender may deem necessary or desirable in order to permit, protect and
perfect its security interests in and liens upon the assets acquired by
Borrower or such Obligor pursuant to such merger or consolidation, (O) no
Accounts or Inventory acquired by Borrower or such Obligor in connection with
such merger or consolidation shall be Eligible Accounts or Eligible Inventory,
except as Lender may otherwise specifically agree and (P) Lender shall have
received such other agreements, documents and instruments as Lender may request
in connection therewith,
(iv) any Subsidiary of Borrower which is not an
Obligor may merge into or with or consolidate with and into another Person
which is not an Obligor, provided, that, no Event of Default or act, condition
or event which with notice or passage of time or both, would constitute an
Event of Default shall occur as a result of, and after giving effect to, such
merger or consolidation; or
(b) sell, assign, lease, transfer, abandon or otherwise
dispose of any Capital Stock or Indebtedness to any other Person or any of its
assets to any other Person, except for:
(i) sales of Inventory in the ordinary course of
business,
(ii) the disposition of worn-out or obsolete
Equipment, or Equipment or Real Property no longer used in the business of
Borrower or any Obligor so long as at any time that the outstanding Loans
exceed the amount of the Loans available to Borrower based on the lending
formulas set forth in Section 2.1 hereof, subject to any then applicable
Availability Reserves, sublimits and the Maximum Credit, or the intercompany
loans by Borrower to any Guarantor pursuant to the Intercompany Loan Documents
exceeds the Guarantor Availability of such Guarantor, the Net Available
Proceeds from such disposition equal to such Loans which exceed the amounts
available to Borrower or such Guarantor shall be paid directly to Lender for
application to the Obligations in such order and manner as Lender shall
determine,
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(iii) transfers of cash or other immediately
available funds by Borrower to Guarantors, and by any Subsidiary of Borrower to
Borrower in connection with the intercompany loans permitted under Section 9.10
hereof,
(iv) the issuance and sale of shares of Capital
Stock of Borrower or Guarantors to a current officer, director or employee of
Borrower or such Guarantor, as the case may be, pursuant to the Incentive
Arrangement with such officer, director or employee; provided, that, (A) as of
the date of such issuance and sale, and after giving effect thereto, no Event
of Default, or act, condition or event which with notice or passage of time or
both would constitute an Event of Default, shall exist or have occurred and (B)
in no event shall Borrower or such Guarantor, as the case may be, be required
to pay any dividends or redeem or repurchase or make any other payments in
respect of such shares except to the extent permitted under Section 9.11 below,
(v) the issuance of shares of Capital Stock by
Guarantors to Borrower,
(vi) sales by the Blue Ridge Division and Courier
Division of Lowy of its Accounts to the Factor pursuant to and in accordance
with the terms of the Factoring Agreement (as in effect on the date hereof);
provided, that, (A) all amounts payable to Lowy or any of its Affiliates from
the Factor or otherwise in connection therewith, shall be sent by wire transfer
to a Blocked Account as provided in Section 6.3 hereof, (B) Lowy shall not,
directly or indirectly, amend, modify, alter or change any of the terms of the
Factoring Agreement, (C) Lender shall have received a true, correct and
complete copy of the Factoring Agreement, and (D) Borrower and Guarantors shall
furnish to Lender all notices or demands in connection with such arrangements
either received by Lowy or any of its Affiliates or on its or their behalf,
promptly after the receipt thereof, or sent by Lowy or any of its Affiliates or
on its or their behalf concurrently with the sending thereof, as the case may
be,
(vii) sales by Borrower or any Obligor of all or
substantially all of the Capital Stock of any Subsidiary of Borrower (other
than Morgan), or the sale by any Obligor (other than Morgan) of all or
substantially all of its assets, provided, that, as to each and all such sales,
each of the following conditions is satisfied as determined by Lender: (A) the
consideration received in connection with any such sale shall be at least equal
to the fair market value of such Capital Stock or assets (as the case may be),
(B) such sale shall be on commercially reasonable prices and terms in a bona
fide arm's length transaction, (C) subject to Section 9.7(b)(vii)(D) below, not
less than seventy-five (75%) percent of the consideration received by Borrower
or such Subsidiary for such sale shall be in cash or Cash Equivalents or the
unconditional assumption by the purchaser of such assets or Capital Stock of
Indebtedness of Borrower or such Subsidiary secured by the assets sold or the
assets of the person whose Capital Stock is sold (so long as Borrower or such
Subsidiary is unconditionally released from all liability in connection with
such Indebtedness), (D) in the event of the sale of the Capital Stock of any
Subsidiary of Borrower which is an Obligor, or in the event of the sale by any
Obligor of its assets as provided above, the Lender shall have received Net
Available Proceeds from the sale of such Capital Stock or assets in cash or
other immediately available funds in an amount not less than the book value of
the Receivables and Inventory of the Subsidiary whose Capital Stock or assets
are sold (which, for purposes of this Section, shall include any assets of any
Subsidiary of the type constituting Receivables or Inventory, as well as the
Receivables and Inventory of Borrower and Guarantors), (E) Lender shall have
received not less than ten (10) Business Days prior written notice of any such
sale of assets or Capital Stock, which notice shall set forth in reasonable
detail satisfactory to Lender, the parties to such sale, the consideration to
be paid for the sale of such assets or Capital Stock, the terms and manner of
the payment of such consideration, the assets or Capital Stock to be sold, the
liabilities being assumed by the purchaser pursuant to such sale, and such
other information with respect thereto as Lender may request,
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and (F) as of the date of such sale and after giving effect thereto, no Event
of Default, or act, condition or event which with notice or passage of time
would constitute an Event of Default, shall exist or have occurred,
(viii) sales by Borrower or any Obligor (other than
Morgan) of less than all or substantially all of its assets (other than Capital
Stock), provided, that, as to each and all such sales, each of the following
conditions is satisfied as determined by Lender: (A) the consideration
received in connection with any such sale shall be at least equal to the fair
market value of such assets, (B) such sale shall be on commercially reasonable
prices and terms in a bona fide arm's length transaction, (C) subject to
Section 9.7(b)(viii)(D) below, not less than seventy-five (75%) percent of the
consideration received by Borrower or such Obligor for such sale shall be in
cash or Cash Equivalents or the unconditional assumption by the purchaser of
such assets of Indebtedness of Borrower or such Obligor secured by the assets
sold (so long as Borrower or such Subsidiary is unconditionally released from
all liability in connection with such Indebtedness), (D) if the assets sold
include any Receivables or Inventory (which, for purposes of this Section,
shall include any assets of any Subsidiary of the type constituting Receivables
or Inventory, as well as the Receivables and Inventory of Borrower and
Guarantors), Lender shall have received Net Available Proceeds from the sale of
such assets in cash or other immediately available funds in an amount not less
than the book value of the Receivables and Inventory of Borrower or such
Obligor, (E) Lender shall have received not less than ten (10) Business Days
prior written notice of any such sale of assets, which notice shall set forth
in reasonable detail satisfactory to Lender, the parties to such sale, the
consideration to be paid for the sale of such assets, the terms and manner of
the payment of such consideration, the assets to be sold, the liabilities being
assumed by the purchaser pursuant to such sale, and such other information with
respect thereto as Lender may request, and (F) as of the date of such sale and
after giving effect thereto, no Event of Default or act, condition or event
which with notice or passage of time would constitute an Event of Default shall
exist or have occurred,
(ix) sales by Borrower or any Obligor of less than
all or substantially all of its Capital Stock (other than with respect to the
Capital Stock of Morgan), provided, that, as to each and all such sales, each
of the following conditions is satisfied as determined by Lender: (A) the
consideration received in connection with any such sale shall be at least equal
to the fair market value of such Capital Stock, (B) such sale shall be on
commercially reasonable prices and terms in a bona fide arm's length
transaction, (C) subject to Section 9.7(b)(ix)(D) below, not less than
seventy-five (75%) percent of the consideration received by Borrower or such
Obligor selling such Capital Stock for such sale shall be in cash or Cash
Equivalents or the unconditional assumption by the purchaser of such Capital
Stock of Indebtedness of Borrower or such Obligor secured by the assets of the
person whose Capital Stock is sold (so long as Borrower or such Subsidiary is
unconditionally released from all liability in connection with such
Indebtedness), (D) Lender shall have received Net Available Proceeds from the
sale of such Capital Stock in cash or other immediately available funds in an
amount not less than the book value of the Receivables and Inventory of the
person whose Capital Stock is sold (which, for purposes of this Section, shall
include any assets of any Subsidiary of the type constituting Receivables or
Inventory, as well as the Receivables and Inventory of Borrower and
Guarantors), (E) Lender shall have received not less than ten (10) Business
Days prior written notice of any such sale of Capital Stock, which notice shall
set forth in reasonable detail satisfactory to Lender, the parties to such
sale, the consideration to be paid for the sale of such Capital Stock, the
terms and manner of the payment of such consideration, the Capital Stock to be
sold, the liabilities being assumed by the purchaser pursuant to such sale, and
such other information with respect thereto as Lender may request, (F) as of
the date of such sale and after giving effect thereto, no Event of Default or
act, condition or event which with notice or passage of time would constitute
an Event of Default shall exist or have occurred, (G) the issuance and sale of
such Capital Stock shall not result in any Person other than Borrower or such
Obligor having unconditional
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and direct control of the Person whose Capital Stock is sold (and for purposes
hereof, the term "control" shall mean the power to direct the management and
policies of such person) and including, without limitation, the right to elect
a majority of the Board of Directors of such person or such greater percentage
of the Board of Directors as may be required for such Person to take any
action, (H) Borrower shall not be required to pay any dividends or repurchase
or redeem such Capital Stock or make any other payments in respect thereof at
any time prior to the end of the then current term of this Agreement, (I) the
terms of such Capital Stock and the terms of the purchase and sale thereof
shall not include terms and conditions which in any manner adversely affect
Lender or any rights of Lender as determined in good faith by Lender and
confirmed by Lender to Borrower in writing or which are more restrictive or
burdensome to Borrower or any Obligor than any existing class of Capital Stock
as in effect on the date hereof or which are less favorable to Borrower or any
Obligor than the terms of such classes of Capital Stock as in effect on the
date hereof,
(x) the sale, assignment, lease, transfer,
abandonment or other disposition of any Capital Stock or Indebtedness by any
Subsidiary of Borrower which is not an Obligor to any other Person or any of
its assets to any other Person by any Subsidiary of Borrower which is not an
Obligor, provided, that, (A) Lender shall have received not less than ten (10)
Business Days prior written notice of any such sale or other transaction, which
notice shall set forth in reasonable detail satisfactory to Lender, the parties
to such sale or other transaction, the consideration to be paid for the sale or
other transaction with respect thereto, the terms and manner and payment of
such consideration, the assets or Capital Stock to be sold or otherwise
disposed of, the liabilities to be assumed by the purchaser, assignee or
transferee pursuant to such sale or other transaction and such other
information with respect thereto as Lender may request and (B) no Event of
Default, or act, condition or event which with notice or passage of time would
constitute an Event of Default shall exist or occur as a result of, and after
giving effect to, such transaction,
(xi) sales or other transfers of Capital Stock of
any Obligor by Borrower or by any other Obligor to any other Obligor (other
than with respect to the Capital Stock of Morgan); provided, that, (A) Lender
shall have received not less than ten (10) Business Days prior written notice
of any such sale or other transfer of Capital Stock, which notice shall set
forth in reasonable detail satisfactory to Lender, the parties to such sale or
other transfer, the consideration to be paid for the sale or other transfer of
such Capital Stock, the terms and manner of the payment of such consideration,
the assets or Capital Stock to be sold, the liabilities being assumed by the
purchaser or transferee pursuant to such sale or other transfer, and such
other information with respect thereto as Lender may request, and (B) as of the
date of such sale or other transfer and after giving effect thereto, no Event
of Default or act, condition or event which with notice or passage of time
would constitute an Event of Default shall exist or have occurred,
(xii) sales or other transfers of assets (other than
Cash or Cash Equivalents) by Subsidiaries of Borrower to Borrower (in addition
to such sales or other transfers otherwise permitted in this Section 9.7(b)),
provided, that, Lender shall have received not less than ten (10) Business Days
prior written notice of any such sale or other transfer, which notice shall set
forth in reasonable detail satisfactory to Lender, the parties to such sale or
other transfer, the consideration to be paid for the sale or other transfer of
such assets, the terms and manner of the payment of such consideration, the
assets to be sold or transferred, the liabilities being assumed by the
purchaser or transferee pursuant to such sale or other transfer, and such other
information with respect thereto as Lender may request,
(xiii) after written notice to Lender, the
disposition through the abandonment, cancellation or other failure to maintain
any trademark or other intellectual property (A) which is no
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longer used or useful in the business of Borrower, Guarantors and their
Subsidiaries, has not been used in the business of Borrower, Guarantors or
their Subsidiaries for a period of not less than six (6) months, is not
otherwise material to the business of Borrower, Guarantors or their
Subsidiaries in any respect and has little or no value or (B) which pursuant to
applicable law may not be renewed or extended;
(c) form or acquire any Subsidiaries, except, that, (i)
Borrower, Guarantors and their Subsidiaries may acquire Subsidiaries after the
date hereof to the extent permitted in Section 9.14 below, (ii) Borrower,
Guarantors and their Subsidiaries may form Subsidiaries after the date hereof
solely for the purpose of purchasing assets or Capital Stock of another Person
to the extent permitted under Section 9.14 below and (iii) any Subsidiary of
Borrower or Guarantors which is not an Obligor may form or acquire any
Subsidiaries after the date hereof, provided, that, no Event of Default, or
act, condition or event which with notice or passage of time would constitute
an Event of Default shall exist or occur as a result of, and after giving
effect to, such transaction; or
(d) wind up, liquidate or dissolve, except (i) in connection
with any merger or consolidation to the extent permitted under Section 9.7(a)
hereof and (ii) any Subsidiary of Borrower which is not an Obligor may wind up,
liquidate or dissolve so long as (A) such winding up, liquidation or
dissolution shall not result in or give rise to any obligation, liability or
Indebtedness of Borrower or any Obligor and (B) no Event of Default, or act,
condition or event which with notice or passage of time or both would
constitute an Event of Default, shall exist or occur as a result of, and after
giving effect to, such transaction;
(e) agree to do any of the foregoing.
9.8 Encumbrances. Borrower and each Guarantor shall not, and shall
not permit any of its Subsidiaries to, create, incur, assume or suffer to exist
any Lien, of any nature whatsoever on any of its assets or properties,
including, without limitation, the Collateral or any other property which is
security for the Obligations, except:
(a) Liens of Lender;
(b) Liens securing the payment of taxes, assessments and
governmental charges or levies, either not yet overdue or the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to Borrower, such Guarantor or its Subsidiary as the case may be
and with respect to which adequate reserves have been set aside on its books;
(c) non-consensual statutory Liens (other than Liens securing
the payment of taxes, assessments and governmental charges or levies) arising
in the ordinary course of the business of Borrower, such Guarantor or its
Subsidiary to the extent: (i) such Liens secure obligations which is not
overdue or (ii) such Liens secure obligations relating to claims or liabilities
which are fully insured and being defended at the sole cost and expense and at
the sole risk of the insurer or being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower, such Guarantor or its
Subsidiary, in each case prior to the commencement of foreclosure or other
similar proceedings and with respect to which adequate reserves have been set
aside on its books;
(d) zoning restrictions, easements, right-of-way, servitudes,
licenses, covenants and other restrictions affecting the use of Real Property
which do not interfere in any material respect with the use of such Real
Property or ordinary conduct of the business of Borrower or Guarantors as
presently conducted thereon or materially impair the value of the Real Property
which may be subject thereto;
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(e) purchase money security interests in Equipment or
purchase money mortgages on Real Property arising after the date hereof
(including Capital Leases) to secure Indebtedness permitted under Section
9.9(f), so long as such security interests and mortgages do not apply to any
property of Borrower, Guarantors or their Subsidiaries other than the Equipment
or Real Property so acquired, and the Indebtedness secured thereby does not
exceed the cost of the Equipment or Real Property so acquired, as the case may
be;
(f) Liens of Borrower on the assets of Guarantors pursuant to
the Intercompany Loan Documents (as in effect on the date hereof), provided,
that, (i) such Liens only secure Indebtedness permitted under Section 9.9(b)
below and (ii) such Liens have been validly assigned by Borrower to Lender as
part of the Collateral;
(g) Liens on Equipment or Real Property arising after the
date hereof to secure Indebtedness permitted under Section 9.9(g) below;
(h) Liens incurred or deposits made by Borrower or any
Guarantor in the ordinary course of the business of Borrower or such Guarantor
in connection with worker's compensation, unemployment insurance or other types
of social security benefits consistent with the current practices of Borrower
and such Guarantor as of the date hereof, or to secure the performance of bids,
tenders, sales, contracts (other than for the repayment of Indebtedness),
surety, appeal, customs and performance bonds consistent with the current
practices of Borrower and such Guarantor as of the date hereof; provided, that,
such Liens or deposits shall not interfere in any material respect with the use
of any property or the ordinary conduct of the business of Borrower or such
Guarantor or impair the value of the assets and properties of Borrower or such
Guarantor in any material respect;
(i) security interests of the Factor in Accounts of Lowy sold
by Lowy to the Factor pursuant to the Factoring Agreement as in effect on the
date hereof;
(j) encumbrances constituting the filing of notice financing
statements of a lessor's rights in and to personal property leased to Borrower
or any Guarantor in the ordinary course of the business of Borrower or such
Guarantor;
(k) non-consensual statutory or common law Liens on, or
rights of setoff against, cash of Borrower or Guarantors on deposit with any
depositary bank listed on Schedule 6.3 hereto, or any other banks with whom
Borrower or any Guarantor maintains deposit accounts to the extent permitted
under Section 6.3 hereof, in favor of the banks in possession of such cash
(other than the banks at which the Blocked Accounts are maintained as to cash
in the Blocked Accounts); provided, that, (i) such liens shall not secure any
Indebtedness and (ii) there shall not be any restrictions on the ability or
right of Borrower or such Guarantor to withdraw or use any such cash;
(l) Liens to secure any Refinancing Indebtedness to the
extent permitted under Section 9.9(q) below;
(m) Liens on, or rights of setoff against, cash of Borrower
or Guarantors constituting deposits of cash made by Borrower or any Guarantor
in the ordinary course of business and within the general parameters customary
in the industry, to secure Indebtedness under interest rate swaps, caps,
collars and similar arrangements hedging Indebtedness that is permitted under
Section 9.9(i) hereof or to secure Indebtedness under foreign exchange
contracts, currency exchange contracts or other similar
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contractual arrangements protecting Borrower or such Guarantor against
fluctuations in the exchange rate of different currencies that is permitted
under Section 9.9(j) hereof;
(n) encumbrances arising out of consignment or similar
arrangements for the sale of goods entered into by Borrower, Guarantors or
their Subsidiaries in the ordinary course of business;
(o) security interests of a financial institution acceptable
to Lender providing loans or other financial accommodations to Borrower to
finance its insurance premiums arising after the date hereof on the insurance
policies maintained by Borrower and the amounts payable to Borrower pursuant to
claims thereunder to secure the Indebtedness of Borrower to such financial
institution permitted under Section 9.9(k) hereof, provided, that, such
security interests shall not apply to any of the Collateral or any claims or
potential claims related thereto and such security interests or any other
rights or claims of such financial institution shall not in any manner affect
the ability of Lender to obtain or receive payment of proceeds of insurance
with respect to any of the Collateral;
(p) Liens on assets of Borrower or any Obligor other than on
the Collateral, Equipment or Real Property to secure Indebtedness permitted
under Section 9.9(m) below;
(q) Liens on assets of any Subsidiary which is not an Obligor
to secure Indebtedness permitted under Section 9.9(n) below;
(r) the Liens set forth on Schedule 8.4 hereto.
9.9 Indebtedness. Each Borrower and Guarantor shall not, and shall
not permit any of it Subsidiaries to, incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any Indebtedness,
except
(a) the Obligations;
(b) secured Indebtedness of Guarantors to Borrower arising
pursuant to the loans by Borrower to Guarantors under the Intercompany Loan
Documents (as in effect on the date hereof) to the extent permitted under
Section 9.10 below;
(c) unsecured Indebtedness of Guarantors to Borrower arising
pursuant to the loans by Borrower to Guarantors other than under the
Intercompany Loan Documents (as in effect on the date hereof) to the extent
permitted under Section 9.10 below;
(d) unsecured Indebtedness of any Guarantor to another
Guarantor to the extent permitted under Section 9.10 below;
(e) unsecured Indebtedness of Borrower to Guarantors arising
pursuant to the loans by Guarantors to Borrower to the extent permitted under
Section 9.10 below;
(f) Indebtedness arising after the date hereof (including
Capital Leases) secured by purchase money security interests in Equipment or
purchase money mortgages on Real Property permitted under Section 9.8(e) above;
(g) Indebtedness of Borrower or any Obligor arising after the
date hereof secured by Liens on Equipment or Real Property permitted under
Section 9.8(g) above, other than Indebtedness
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permitted under Section 9.9(f) above, provided, that, as to any such
Indebtedness, each of the following conditions is satisfied as determined by
Lender, (i) Lender shall have received not less than ten (10) Business Days
prior written notice of the intention to incur such Indebtedness, which notice
shall set forth in reasonable detail satisfactory to Lender, the amount of such
Indebtedness, the person to whom such Indebtedness will be owed, the interest
rate and fees, the schedule of repayments and maturity date with respect
thereto and such other information with respect thereto as Lender may request,
(ii) Lender shall have received true, correct and complete copies of all
agreements, documents and instruments evidencing or otherwise related to such
Indebtedness, as duly authorized, executed and delivered by the parties
thereto, (iii) Lender shall have received an agreement from the person to whom
such Indebtedness is owed, in form and substance satisfactory to Lender,
providing for, inter alia, the waiver by such person of any security interest,
lien or other claims by such person to the Collateral and the agreement of such
person to permit Lender access to, and the right to remain on and use, the
Equipment or Real Property which is collateral for such Indebtedness to
complete Inventory and otherwise exercise the rights and remedies of Lender and
otherwise deal with the Collateral, (iv) such Indebtedness shall be incurred by
Borrower or such Obligor at commercially reasonable rates and terms in a bona
fide arm's length transaction, (v) the agreements, documents or instruments
evidencing or otherwise related to such Indebtedness shall not include any
terms and conditions which are more restrictive or burdensome to Borrower, any
Obligor or their respective assets in any material respect than the terms and
conditions contained in any agreements, documents and instruments evidencing or
otherwise related to material Indebtedness of Borrower or any Obligor as in
effect on the date hereof (other than this Agreement and the other Financing
Agreements); provided, that, such terms and conditions may be more restrictive
or burdensome solely as to the assets constituting collateral for such
Indebtedness, (vi) such Indebtedness shall not be owed to any shareholder,
officer, director, agent, employee or other Affiliate of Borrower or any
Obligor, unless such Indebtedness is subordinated in right of payment to the
indefeasible payment and satisfaction in full of the Obligations and Lender
shall have received a subordination agreement, in form and substance
satisfactory to Lender, providing for such subordination and related matters,
duly authorized, executed and delivered by the person to whom such Indebtedness
is owed, Borrower and Obligors, (vii) at any time that the outstanding Loans
exceed the amount of the Loans available to Borrower based on the lending
formulas set forth in Section 2.1 hereof, subject to any then applicable
Availability Reserves, sublimits and the Maximum Credit, or the loans by
Borrower to any Guarantor with the proceeds of Loans or in connection with
Letter of Credit Accommodations shall exceed the Guarantor Availability of such
Guarantor, Borrower or such Obligor shall cause the person to whom such
Indebtedness is owed to remit the initial proceeds of the loans giving rise to
such Indebtedness in an amount equal to such Loans which exceed the amounts
available to Borrower or in an amount equal to such loans by Borrower to any
such Guarantor which exceed the Guarantor Availability (as the case may be)
directly to Lender for application to the Obligations in such order and manner
as Lender shall determine, (viii) as of the date of incurring such
Indebtedness, and after giving effect thereto, no Event of Default, or act,
condition or event which with notice or passage of time or both would
constitute an Event of Default, shall exist or have occurred, (ix) Borrower or
such Obligor may only make regularly scheduled payments of principal and
interest in respect of such Indebtedness (except as otherwise permitted below),
(x) Borrower or such Obligor shall not, directly or indirectly, (A) amend,
modify, alter or change the material terms of the agreements with respect to
such Indebtedness or (B) redeem, retire, defease, purchase or otherwise acquire
such Indebtedness, or set aside or otherwise deposit or invest any sums for
such purposes, except, that, Borrower or such Obligor may prepay or redeem any
of such Indebtedness with the proceeds of Refinancing Indebtedness to the
extent permitted under Section 9.9(q) below, and (xi) Borrower and such Obligor
shall furnish to Lender all notices or demands in connection with such
Indebtedness (other than routine and recurring notices sent or received in the
ordinary course, except as Lender shall otherwise specifically request) either
received by Borrower or such Obligor or on
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its or their behalf promptly after the receipt thereof, or sent by Borrower or
such Obligors or on its or their behalf, concurrently with the sending thereof,
as the case may be;
(h) unsecured Indebtedness of Borrower or any Obligor arising
after the date hereof owing to any Person (other than Borrower or any other
Obligor), provided, that, as to any such Indebtedness, each of the following
conditions is satisfied as determined by Lender: (i) Lender shall have
received not less than ten (10) Business Days prior written notice of the
intention to incur such Indebtedness, which notice shall set forth in
reasonable detail satisfactory to Lender, the amount of such Indebtedness, the
person to whom such Indebtedness will be owed, the interest rate and fees, the
schedule of repayments and maturity date with respect thereto and such other
information with respect thereto as Lender may request, (ii) Lender shall have
received true, correct and complete copies of all agreements, documents and
instruments evidencing or otherwise related to such Indebtedness, as duly
authorized, executed and delivered by the parties thereto, (iii) such
Indebtedness shall be incurred by Borrower or such Obligor at commercially
reasonable rates and terms in a bona fide arm's length transaction, (iv) the
agreements, documents or instruments evidencing or otherwise related to such
Indebtedness shall not include any terms and conditions which are more
restrictive or burdensome to Borrower, any Obligor or their respective assets
in any material respect than the terms and conditions contained in any
agreements, documents and instruments evidencing or otherwise related to any
material Indebtedness of Borrower or any Obligor as in effect on the date
hereof (other than this Agreement and the other Financing Agreements), (v) such
Indebtedness shall not be owed to any shareholder, officer, director, agent,
employee or other Affiliate of Borrower or any Obligor, unless such
Indebtedness is subordinated in right of payment to the indefeasible payment
and satisfaction in full of the Obligations and Lender shall have received a
subordination agreement, in form and substance satisfactory to Lender,
providing for such subordination and related matters, duly authorized, executed
and delivered by the person to whom such Indebtedness is owed, Borrower and
Obligors, (vi) at any time that the outstanding Loans exceed the amount of the
Loans available to Borrower based on the lending formulas set forth in Section
2.1 hereof, subject to any then applicable Availability Reserves, sublimits and
the Maximum Credit, or the loans by Borrower to any Guarantor with the proceeds
of Loans or in connection with Letter of Credit Accommodations shall exceed the
Guarantor Availability of such Guarantor, Borrower or such Obligor shall cause
the person to whom such Indebtedness is owed to remit the initial proceeds of
the loans giving rise to such Indebtedness in an amount equal to such Loans
which exceed the amounts available to Borrower or in an amount equal to such
loans by Borrower to any such Guarantor which exceed the Guarantor Availability
(as the case may be) directly to Lender for application to the Obligations in
such order and manner as Lender shall determine, (vii) as of the date of
incurring such Indebtedness, and after giving effect thereto, no Event of
Default or act, condition or event which with notice or passage of time or both
would constitute an Event of Default, shall exist or have occurred, (viii)
Borrower or such Obligor may only make regularly scheduled payments of
principal and interest in respect of such Indebtedness (except as otherwise
permitted below), (ix) Borrower or such Obligor shall not, directly or
indirectly, (A) amend, modify, alter or change the material terms of the
agreements with respect to such Indebtedness, or (B) redeem, retire, defease,
purchase or otherwise acquire such Indebtedness, or set aside or otherwise
deposit or invest any sums for such purpose, except, that, Borrower or such
Obligor may prepay or redeem any of such Indebtedness with the proceeds of
Refinancing Indebtedness to the extent permitted under Section 9.9(q) below and
(x) Borrower and such Obligor shall furnish to Lender all notices or demands in
connection with such Indebtedness (other than routine and recurring notices
sent or received in the ordinary course, except as Lender shall otherwise
specifically request) either received by Borrower or such Obligor or on its
behalf promptly after the receipt thereof, or sent by Borrower and such Obligor
or on its behalf, concurrently with the sending thereof, as the case may be;
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(i) unsecured Indebtedness of Borrower not to exceed the
principal amount of $100,000,000 evidenced by the Senior Notes, less the
aggregate amount of all repayments or repurchases, optional or mandatory, of
principal in respect thereof, plus interest thereon at the rate provided for in
the Senior Notes, as in effect on the date hereof; provided, that: (i)
Borrower shall only make regularly scheduled payments of principal and interest
in respect of such Indebtedness in accordance with the terms of the Senior
Notes and the Senior Note Indenture, as each is in effect on the date hereof
(except as otherwise permitted below), (ii) Borrower shall not, directly or
indirectly, (A) amend, modify, alter or change any of the material terms of the
Senior Note Indenture, the Senior Notes or any agreements, documents or
instruments executed and/or delivered in connection therewith, provided, that,
the foregoing shall not be deemed to prohibit supplemental indentures pursuant
to Sections 801, 802 and 1305 of the Senior Note Indenture (as in effect on the
date hereof), or (B) redeem, retire, defease, purchase or otherwise acquire
such Indebtedness, or set aside or otherwise deposit or invest any sums for
such purpose, except, that, Borrower may prepay or redeem any of such
Indebtedness with the proceeds of Refinancing Indebtedness to the extent
permitted under Section 9.9(q) below and (iii) Borrower shall furnish to Lender
all notices or demands in connection with such Indebtedness (other than routine
and recurring notices sent or received in the ordinary course, except as Lender
shall otherwise specifically request) either received from any of the holders
of the Senior Notes, or from the trustee or other representative or agent of
the holders of the Senior Notes or on their behalf promptly after receipt
thereof, or sent by Borrower, or on its behalf, to any of the holders of the
Senior Notes or the trustee or other representative or agent of the holders of
the Senior Notes, concurrently with the sending thereof, as the case may be;
(j) Indebtedness of Borrower or any Obligor under foreign
exchange contracts, currency exchange contracts, or other similar contractual
arrangement protecting a Person against fluctuation in the exchange rate of
different currencies; provided, that, such arrangements are with banks or other
financial institutions which have combined capital and surplus and undivided
profits of not less than $100,000,000;
(k) Indebtedness of Borrower or any Obligor to a financial
institution acceptable to Lender providing loans or other financial
accommodations to Borrower or such Obligor to finance its insurance premiums
arising after the date hereof payable on certain insurance policies maintained
by Borrower or such Obligor, provided, that, (i) in no event shall the total
amount of such Indebtedness in any fiscal year of Borrower exceed $2,000,000
less the amount of all premiums paid by Borrower or such Obligor to such
financial institution in such fiscal year, (ii) Borrower or such Obligor shall
only make the regularly scheduled monthly payments in accordance with the
payment schedule included in the agreements with respect to such Indebtedness,
(A) Lender shall have received not less than ten (10) Business Days prior
written notice of the intention to incur such Indebtedness, which notice shall
set forth in reasonable detail satisfactory to Lender, the amount of such
Indebtedness, the person to whom such Indebtedness will be owed, the interest
rate, the schedule of repayments and maturity date with respect thereto and
such other information with respect thereto as Lender may reasonably request,
(iii) promptly, upon Lender's request, Lender shall have received true, correct
and complete copies of all agreements, documents and instruments evidencing or
otherwise related to such Indebtedness, as duly authorized, executed and
delivered by the parties thereto, (iv) Borrower or such Obligor shall not,
directly or indirectly, (A) amend, modify, alter or change the material terms
of the agreements with respect to such Indebtedness, or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose and (v) Borrower shall
furnish to Lender all notices or demands in connection with such Indebtedness
(other than routine and recurring notices sent or received in the ordinary
course, except as Lender shall otherwise
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specifically request) either received by Borrower or on its behalf after the
receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be;
(l) interest rate swaps, caps, collars and similar
arrangements hedging Indebtedness permitted hereunder and having a notional
amount not to exceed the principal amount of the Indebtedness being hedged;
provided, that, such arrangements are accomplished with banks or other
financial institutions which have combined capital and surplus and undivided
profits of not less than $100,000,000;
(m) Indebtedness of Borrower or any Obligor arising after the
date hereof secured by Liens on assets of Borrower or such Obligor other than
Collateral, Equipment or Real Property to secure Indebtedness permitted under
Section 9.8(p) above, provided, that, as to any such Indebtedness, each of the
following conditions is satisfied as determined by Lender, (i) Lender shall
have received not less than ten (10) Business Days prior written notice of the
intention to incur such Indebtedness, which notice shall set forth in
reasonable detail satisfactory to Lender, the amount of such Indebtedness, the
person to whom such Indebtedness will be owed, the interest rate and fees, the
schedule of repayments and maturity date with respect thereto and such other
information with respect thereto as Lender may request, (ii) Lender shall have
received true, correct and complete copies of all agreements, documents and
instruments evidencing or otherwise related to such Indebtedness, as duly
authorized, executed and delivered by the parties thereto, (iii) Lender shall
have received an agreement from the person to whom such Indebtedness is owed,
in form and substance satisfactory to Lender, providing for, inter alia, the
waiver by such person of any security interest, lien or other claims by such
person to the Collateral, (iv) such Indebtedness shall be incurred by Borrower
or such Obligor at commercially reasonable rates and terms in a bona fide arm's
length transaction, (v) the agreements, documents or instruments evidencing or
otherwise related to such Indebtedness shall not include any terms and
conditions which are more restrictive or burdensome to Borrower, any Obligor or
their respective assets in any material respect than the terms and conditions
contained in any agreements, documents and instruments evidencing or otherwise
related to material Indebtedness of Borrower or any Obligor as in effect on the
date hereof (other than this Agreement and the other Financing Agreements);
provided, that, such terms and conditions may be more restrictive or burdensome
solely as to the assets constituting collateral for such Indebtedness, (vi)
such Indebtedness shall not be owed to any shareholder, officer, director,
agent, employee or other Affiliate of Borrower or any Obligor, unless such
Indebtedness is subordinated in right of payment to the indefeasible payment
and satisfaction in full of the Obligations and Lender shall have received a
subordination agreement, in form and substance satisfactory to Lender,
providing for such subordination and related matters, duly authorized, executed
and delivered by the person to whom such Indebtedness is owed, Borrower and
Obligors, (vii) at any time that the outstanding Loans exceed the amount of the
Loans available to Borrower based on the lending formulas set forth in Section
2.1 hereof, subject to any then applicable Availability Reserves, sublimits and
the Maximum Credit, or the loans by Borrower to any Guarantor with the proceeds
of Loans or in connection with Letter of Credit Accommodations shall exceed the
Guarantor Availability of such Guarantor, Borrower or such Obligor shall cause
the person to whom such Indebtedness is owed to remit the initial proceeds of
the loans giving rise to such Indebtedness in an amount equal to such Loans
which exceed the amounts available to Borrower or in an amount equal to such
loans by Borrower to such Guarantor which exceed the Guarantor Availability (as
the case may be) directly to Lender for application to the Obligations in such
order and manner as Lender shall determine, (viii) in no event shall the
aggregate amount of such Indebtedness incurred exceed $2,000,000, (ix) as of
the date of incurring such Indebtedness, and after giving effect thereto, no
Event of Default, or act, condition or event which with notice or passage of
time or both would constitute an Event of Default, shall exist or have
occurred, (x) Borrower or such Obligor may only make regularly scheduled
payments of principal and interest in respect of such Indebtedness
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(except as otherwise permitted below), (xi) Borrower or such Obligor shall not,
directly or indirectly, (A) amend, modify, alter or change the material terms
of the agreements with respect to such Indebtedness or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness, or set aside or
otherwise deposit or invest any sums for such purposes, except, that, Borrower
or such Obligor may prepay or redeem any of such Indebtedness with the proceeds
of Refinancing Indebtedness to the extent permitted under Section 9.9(q) below,
and (xii) Borrower and such Obligor shall furnish to Lender all notices or
demands in connection with such Indebtedness (other than routine and recurring
notices sent or received in the ordinary course, except as Lender shall
otherwise specifically request) either received by Borrower or such Obligor or
on its or their behalf promptly after the receipt thereof, or sent by Borrower
or such Obligors or on its or their behalf, concurrently with the sending
thereof, as the case may be;
(n) Indebtedness of any Subsidiary of Borrower which is not
an Obligor, provided, that, Borrower and Obligors shall not have any liability,
direct or indirect, in respect of or otherwise in connection with such
Indebtedness;
(o) Indebtedness of Borrower to Meridian Bank in respect of
the Existing Letters of Credit issued by Meridian Bank and fees and expenses
relating thereto arising pursuant to the reimbursement agreement (as in effect
on the date hereof), provided, that, (i) Borrower shall not, directly or
indirectly, amend, modify, alter or change the terms of such Indebtedness or
the reimbursement agreement related thereto, any of such Existing Letters of
Credit or any agreement, document or instrument related thereto, as in effect
on the date hereof, (ii) Borrower shall furnish to Lender all notices or
demands in connection with such Indebtedness, either received by Borrower or on
its behalf, promptly after the receipt thereof, or sent by Borrower or on its
behalf, concurrently with the sending thereof, as the case may be and (iii)
Borrower shall, upon Lender's request, in the event of a draw under such
Existing Letters of Credit, deliver to Lender the applicable beneficiary's
statement, certificate and/or draft pertaining to such Existing Letters of
Credit and all documents and instruments related thereto;
(p) Indebtedness of Borrower, any Guarantor, or its
Subsidiary set forth on Schedule 9.9 hereto; provided, that, (i) Borrower, such
Guarantor or Subsidiary may only make regularly scheduled payments of principal
and interest in respect of such Indebtedness in accordance with the terms of
the agreement or instrument evidencing or giving rise to such Indebtedness as
in effect on the date hereof, (ii) Borrower, such Guarantor or Subsidiary shall
not, directly or indirectly, (A) amend, modify, alter or change the material
terms of such Indebtedness or any agreement, document or instrument related
thereto as in effect on the date hereof, or (B) redeem, retire, defease,
purchase or otherwise acquire such Indebtedness, or set aside or otherwise
deposit or invest any sums for such purpose, except, that, Borrower or such
Guarantor or Subsidiary may prepay or redeem any of such Indebtedness with
proceeds of Refinancing Indebtedness to the extent permitted under Section
9.9(q) below, and (iii) Borrower, such Guarantor or Subsidiary shall furnish to
Lender all notices or demands in connection with such Indebtedness (other than
routine and recurring notices sent or received in the ordinary course, except
as Lender shall otherwise specifically request) either received by Borrower,
such Guarantor or Subsidiary or on its behalf, promptly after the receipt
thereof, or sent by Borrower, such Guarantor or Subsidiary or on its behalf,
concurrently with the sending thereof, as the case may be;
(q) Indebtedness issued in exchange for, or the proceeds of
which are used to extend, refinance, renew, replace, substitute or refund
Indebtedness referred to in Sections 9.9(f), 9.9(g), 9.9(h), 9.9(i), 9.9(k),
9.9(m) and 9.9(p) hereof (the "Refinancing Indebtedness"); provided, that, as
to any such Indebtedness, each of the following conditions is satisfied, as
determined by Lender: (i) the principal amount of such Refinancing
Indebtedness shall not exceed the principal amount of the Indebtedness so
extended, refinanced, renewed, replaced, substituted or refunded (plus the
amount of reasonable
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refinancing fees and expenses incurred in connection therewith), except if the
Refinancing Indebtedness is secured by Real Property, (ii) the Refinancing
Indebtedness shall have a Weighted Average Life to Maturity and a final
maturity equal to or greater than the Weighted Average Life to Maturity and the
final maturity, respectively, of the Indebtedness being extended, refinanced,
renewed, replaced, substituted or refunded, (iii) the Refinancing Indebtedness
shall rank in right of payment no more senior than, and be at least as
subordinated (if subordinated) to, the Obligations as the Indebtedness being
extended, refinanced, renewed, replaced, substituted or refunded, (iv) if the
Indenture so extended, refinanced, renewed, replaced, substituted or refunded
is secured by any assets of Borrower or any Obligor, the Refinancing
Indebtedness shall only be secured by the same assets, (v) the Refinancing
Indebtedness shall not include terms and conditions with respect to Borrower or
any Obligor which are more burdensome or restrictive in any material respect
than those included in the Indebtedness so extended, refinanced, renewed,
replaced, substituted or refunded, (vi) Lender shall have received not less
than ten (10) Business Days prior written notice of the intention to incur such
Indebtedness, which notice shall set forth in reasonable detail satisfactory to
Lender, the amount of such Indebtedness, the person to whom such Indebtedness
will be owed, the interest rate and fees, the schedule of repayments and
maturity date with respect thereto and such other information with respect
thereto as Lender may request, (vii) promptly upon Lender's request, Lender
shall have received true, correct and complete copies of all agreements,
documents and instruments evidencing or otherwise related to such Indebtedness,
as duly authorized, executed and delivered by the parties thereto, (viii) such
Indebtedness shall not be owed to any shareholder, officer, director, agent,
employee or other Affiliate of Borrower or Guarantors, (ix) as of the date of
incurring such Indebtedness, and after giving effect thereto, no Event of
Default or act, condition or event which with notice or passage of time or both
would constitute an Event of Default, shall exist or have occurred, (x)
Borrower or such Obligor may only make regularly scheduled payments or
principal and interest in respect of such Indebtedness (except as otherwise
permitted below), (xi) Borrower or such Obligor shall not, directly or
indirectly, (A) amend, modify, alter or change the material terms of the
agreements with respect to such Indebtedness, or (B) redeem, retire, defease,
purchase or otherwise acquire such Indebtedness, or set aside or otherwise
deposit or invest any sums for such purpose, except, that, Borrower or such
Obligor may prepay, redeem or repurchase any of such Indebtedness with the
proceeds of other Refinancing Indebtedness (to the extent permitted herein) and
(xii) Borrower or such Obligor shall furnish to Lender all notices or demands
in connection with such Indebtedness (other than routine and recurring notices
sent or received in the ordinary course, except as Lender shall otherwise
specifically request) either received by Borrower or such Obligor or on its
behalf promptly after the receipt thereof, or sent by Borrower or such Obligor
or on its behalf, concurrently with the sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. Borrower and each
Guarantor shall not, and shall not permit its Subsidiaries to, directly or
indirectly, make any loans or advance money or property to any Person, or
invest in (by capital contribution, dividend or otherwise) or purchase or
repurchase the Capital Stock or Indebtedness or all or a substantial part of
the assets or property of any Person, or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the Indebtedness,
performance, obligations or dividends of any Person or agree to do any of the
foregoing, except:
(a) the endorsement of instruments for collection or deposit
in the ordinary course of business;
(b) investments in cash and Cash Equivalents; provided, that,
to the extent constituting Collateral or proceeds of Collateral, unless waived
in writing by Lender, Borrower and each Guarantor shall, and shall cause its
Subsidiaries to, take such actions as are deemed necessary by Lender to perfect
the security interest of Lender in such investments;
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(c) the existing investments as of the date hereof of
Borrower in the Capital Stock of Guarantors (other than Raider), the existing
investment as of the date hereof of Lowy in the Capital Stock of Tile by
Design, Inc., the existing investment as of the date hereof of TAG in the
Capital Stock of Raider and Leer Acquisition Company, the existing investment
of Borrower and Morgan as of the date hereof in the Capital Stock of Acero-Tec,
S.A. de C.V., and the existing investment as of the date hereof of Leer
Acquisition Company in the Capital Stock of Radco Industries, Inc.; provided,
that, Borrower and Guarantors shall not have any obligation to make any further
payments in respect of such investments;
(d) loans or advances by Borrower or any Obligor to, or
investments by Borrower or any Obligor in (by capital contribution, dividend or
otherwise), any wholly-owned Subsidiary of Borrower which is not an Obligor (in
addition to such loans, advances and investments permitted under Section 9.14
below), provided, that, as to each such loan or advance or investment (by
capital contribution, dividend or otherwise), each of the following conditions
is satisfied as determined by Lender: (i) in no event shall the aggregate
amount of such loans, advances or contributions exceed ten (10%) percent of the
Consolidated Tangible Assets of Borrower, (ii) with respect to such Subsidiary
which is not an Obligor, Borrower and Obligors shall not (A) provide credit
support for or guarantee any Indebtedness of such Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness) or (B) be
directly or indirectly liable for any Indebtedness of such Subsidiary or any
Subsidiary of such Subsidiary, and (C) no default with respect to any
Indebtedness of such Subsidiary or any Subsidiary of such Subsidiary (including
any right which the holders thereof may have to take enforcement action against
such Subsidiary) would permit (upon notice or passage of time or both) any
holder of any other Indebtedness of Borrower or any Obligor to declare a
default on such other Indebtedness or cause the payment of such Indebtedness of
Borrower or any Obligor to be accelerated or payable prior to its final
scheduled maturity except if the Subsidiary receiving such loans, advances or
investments is a "Restricted Subsidiary" as such term is defined in the Senior
Note Indenture (as in effect on the date hereof), (iii) as of the date of any
such loan, advance or investment, the daily average of the Excess Availability
for the immediately preceding thirty (30) consecutive day period shall be not
less than $3,500,000 and as of the date of making any such capital
contribution, and after giving effect thereto, the Excess Availability shall be
not less than $3,500,000, (iv) Lender shall have received not less than ten
(10) Business Days prior written notice of the intention to make such loan,
advance or investment, which notice shall set forth in reasonable detail
satisfactory to Lender, the amount of such loan, advance or investment, the
person to whom such loan, advance or investment is being made, the interest
rate and fees, the schedule of repayments and maturity date with respect
thereto and such other information with respect thereto as Lender may request,
and (v) at the time of any such loans or advances or investments (by capital
contribution, dividend or otherwise) and after giving effect thereto, no Event
of Default or act, condition or event which with notice or passage of time or
both would constitute an Event of Default, shall exist or have occurred;
(e) investments by Borrower or any Obligor in (by capital
contribution, dividend or otherwise), any Subsidiary which is an Obligor,
provided, that, such investments shall not be made with the proceeds of any
Loans or Letter of Credit Accommodations, or with proceeds of any loans,
advances or other financial accommodations made or provided by Borrower to or
for the benefit of any Obligor with proceeds of Loans or in connection with
Letter of Credit Accommodations or with the proceeds of any Collateral;
(f) the purchase or other acquisition by Borrower or any
Obligor of all or substantially all of the Capital Stock of any Person or of
all or substantially all of the assets of any Person to the extent permitted
under Section 9.14 below;
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(g) purchases by Borrower or any Obligor of Capital Stock of
Borrower or any other Obligor (other than Morgan) to the extent sales and other
transfers of such Capital Stock between Borrower and Obligors are permitted
under Section 9.7(b)(xi) hereof;
(h) the guarantees by Guarantors in favor of Lender;
(i) the guarantees by Guarantors of the Indebtedness of
Borrower evidenced by the Senior Notes (as such guarantees are in effect on the
date hereof) and any guarantees issued after the date hereof by any other
Obligor of the Indebtedness of Borrower evidenced by the Senior Notes to the
extent such guarantees are required under the terms of the Senior Note
Indenture (as in effect on the date hereof), so long as such guarantees issued
after the date hereof are in the same form as the guarantees by Guarantors as
in effect on the date hereof;
(j) guarantees by Borrower or any Obligor to the extent such
guarantees constitute Indebtedness of Borrower or such Obligor permitted under
Section 9.9 hereof;
(k) the obligations of Guarantors to reimburse Borrower for
Indebtedness of Borrower to Lender arising pursuant to the Letter of Credit
Accommodations provided for the benefit of, or in connection with the business
of, such Guarantor;
(l) loans or advances by any Subsidiary of Borrower after the
date hereof, provided, that, such loans or advances shall not be made with the
proceeds of any Collateral or proceeds of any loans, advances or other
financial accommodations made or provided by Borrower to any Guarantor or its
Subsidiaries with proceeds of Loans or in connection with Letter of Credit
Accommodations;
(m) loans or advances by Borrower to Guarantors using
proceeds of the Loans as required hereunder pursuant to and in accordance with
the Intercompany Loan Documents (as in effect on the date hereof); provided,
that, (i) all right, title and interest of Borrower in, to and under the
Intercompany Loan Documents shall be validly assigned and transferred to
Lender, (ii) the Indebtedness of each Guarantor arising in connection with such
loans by Borrower to such Guarantor outstanding at any time shall not exceed
the amount of the Guarantor Availability of such Guarantor, (iii) the
Indebtedness of each Guarantor to Borrower arising pursuant to such loans shall
be evidenced by a single original Intercompany Note issued by such Guarantor
payable to the order of Borrower, constituting valid and legally enforceable
Indebtedness of such Guarantor to Borrower (and to Lender as assignee of
Borrower), without offset, defense or counterclaim of any kind, nature or
description whatsoever and (iv) the original of the Intercompany Note issued by
such Guarantor to Borrower shall be duly and validly endorsed and assigned by
Borrower payable to the order of Lender, in a manner satisfactory to Lender and
as so endorsed shall be delivered to, and held by, Lender as part of the
Collateral;
(n) loans or advances by Borrower to Guarantors other than
pursuant to and in accordance with the Intercompany Loan Documents; provided,
that, such loans or advances shall not be made with proceeds of the Loans or
Letter of Credit Accommodations or any proceeds of the Collateral;
(o) loans or advances by any Guarantor to any other
Guarantor, provided, that, such loans shall not be made with the proceeds of
the Senior Notes (and not with proceeds of the loans or advances by Borrower to
such Guarantor with proceeds of Loans or Letter of Credit Accommodations or
otherwise pursuant to the Intercompany Loans Documents or proceeds of any
Collateral);
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(p) loans and advances by Borrower, any Guarantor or their
Subsidiaries to employees of Borrower, such Guarantor or Subsidiary after the
date hereof not to exceed the principal amount of $1,000,000 in the aggregate
at any time outstanding for reasonable and necessary work-related travel or
other ordinary business expenses to be incurred by such employees in connection
with their work for Borrower, any Guarantor or their Subsidiaries, or for the
relocation of such employees in connection with their work for Borrower, any
Guarantor or their Subsidiaries;
(q) investments consisting of Accounts and other Receivables
arising in the ordinary course of the business of Borrower, Guarantors and
their Subsidiaries;
(r) loans or advances or investments (by capital
contribution, dividend or otherwise) or purchase or repurchase of Capital Stock
or Indebtedness or of all or a substantial part of the assets or property of
any Person by any Subsidiary of Borrower which is not an Obligor, or
guarantees, assumptions, endorsements or otherwise becoming responsible for
(directly or indirectly) the Indebtedness, performance, obligations or
dividends of any Person or agreement to do any of the following, by any
Subsidiary of Borrower which is not an Obligor;
(s) the purchase of Capital Stock or assets of any Person to
the extent permitted under Section 9.14 below;
(t) the existing loans, advances and guarantees by Borrower
and Obligors outstanding as of the date hereof as set forth on Schedule 9.10
hereto; provided, that, as to such loans, advances and guarantees, (i) Borrower
or such Obligor shall not, directly or indirectly, (A) amend, modify, alter or
change the terms of such loans, advances or guarantees or any agreement,
document or instrument related thereto (except to extend the terms of payment
thereof or to cancel or forgive such loans, advances or guarantees or to reduce
the liability of Borrower, such Obligor or their Subsidiaries thereunder), or
(B) as to such guarantees, redeem, retire, defease, purchase or otherwise
acquire such guarantee or set aside or otherwise deposit or invest any sums for
such purpose and (ii) Borrower or such Obligor shall furnish to Lender all
notices, demands or other materials in connection with such loans, advances or
guarantees (other than routine and recurring notices sent or received in the
ordinary course, except as Lender shall otherwise specifically request) either
received by Borrower or such Obligor or on its behalf, promptly after the
receipt thereof, or sent by Borrower or such Obligor or on its behalf,
concurrently with the sending thereof, as the case may be.
9.11 Dividends and Redemptions. Borrower and each Guarantor shall
not, and shall not permit any of its Subsidiaries to, directly or indirectly,
declare or pay any dividends on account of shares of any class of its Capital
Stock now or hereafter outstanding, or set aside or otherwise deposit or invest
any sums for such purpose, or redeem, retire, defease, purchase or otherwise
acquire any shares of any class of Capital Stock (or set aside or otherwise
deposit or invest any sums for such purpose) for any consideration other than
common stock or apply or set apart any sum, or make any other distribution (by
reduction of capital or otherwise) in respect of any such shares or agree to do
any of the foregoing, except, that,
(a) any Subsidiary of Borrower may pay dividends or make any
other distribution on account of shares of any class of Capital Stock to
Borrower or Obligors;
(b) any Subsidiary of Borrower which is not an Obligor may
pay dividends or make any other distribution on account of shares of any class
of Capital Stock to any other Subsidiary of Borrower which is not an Obligor;
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(c) Borrower may repurchase, redeem or otherwise acquire for
value from officers, directors and employees in connection with their
retirement, disability or termination and from former officers, directors or
employees (or their estates or beneficiaries of their estates) of Borrower or
any Subsidiary of Borrower, other than John B. Poindexter, the Capital Stock of
Borrower owned and held by such officer, director or employee (or estate or
beneficiary thereof); provided, that, in no event shall the aggregate amount
paid by Borrower to repurchase, redeem or otherwise acquire such shares of
Capital Stock exceed $500,000 in any twelve (12) month period;
(d) Borrower may pay dividends in respect of the shares of
Capital Stock of Borrower issued and sold by Borrower pursuant to a Qualified
Public Offering, at a rate equal to six (6%) percent per annum on the amount of
the net cash proceeds received by Borrower from the issuance and sale of such
Capital Stock;
(e) Borrower may pay dividends or make other distributions in
respect of its Capital Stock to its shareholders, provided, that, as to each
payment of dividends or other distributions, each of the following conditions
is satisfied as determined by Lender: (i) Lender shall have received not less
than ten (10) Business Days prior written notice of the intention of Borrower
to pay such dividend or other distribution, (ii) as of the date of such payment
and after giving effect thereto, no Event of Default, or act, condition or
event which with notice or passage of time or both would constitute an Event of
Default, shall exist or have occurred, (iii) any dividends or other
distributions shall be out of funds legally available therefor, (iv) as of the
date of such payment and after giving effect thereto, the aggregate amount of
all such payments made and such obligations incurred in any fiscal year of
Borrower shall not exceed the amount equal to the sum of: (A) fifty (50%)
percent of the positive cumulative Consolidated Net Income of Borrower and its
Subsidiaries (or in the case Consolidated Net Income of Borrower and its
Subsidiaries shall be negative, less one hundred (100%) percent of such
deficit) for the period (taken as one accounting period) from the beginning of
the first quarter commencing July 1, 1994 and ended as of Borrower's most
recently ended fiscal quarter at the time of such payment, plus (B) one hundred
(100%) percent of the aggregate net proceeds of any Qualified Public Offerings,
plus (C) $5,000,000 and (v) as of the date of such payment, the daily average
of the Excess Availability for the immediately preceding thirty (30)
consecutive day period shall be not less than $5,000,000 and as of the date of
such payment, and after giving effect thereto, the Excess Availability shall be
not less than $5,000,000;
(f) pay any dividend within sixty (60) days after the
declaration thereof if, at the declaration date, such payment would have
complied with the foregoing provisions;
(g) Borrower may repurchase, redeem or otherwise acquire for
value shares of Capital Stock of Borrower using only the proceeds of any policy
of insurance maintained exclusively to provide funds for such purpose pursuant
to an existing agreement of Borrower with the holder of such shares of Capital
Stock in effect on the date hereof; and
(h) Borrower and any Guarantor may acquire any shares of any
class of Capital Stock of any other Person to the extent permitted under
Section 9.14 hereof.
9.12 Transactions with Affiliates. Borrower and each Guarantor shall
not, and shall not permit any of its Subsidiaries to, directly or indirectly,
(a) purchase, acquire or lease any property from, or sell, transfer or lease
any property to, any officer, employee, shareholder, director, agent or any
other Affiliate of Borrower or Guarantors, except in the ordinary course of and
pursuant to the reasonable requirement of its business and upon fair and
reasonable terms no less favorable to it than it would obtain in a
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comparable arm's length transaction with a person other than an Affiliate or as
otherwise expressly permitted herein or (b) make any payments of management,
consulting or other fees for management or similar services, or of any
Indebtedness owing to any officer, employee, shareholder, director or other
Affiliate of Borrower or Guarantors, except (i) reasonable compensation to
officers, employees and directors for services rendered to Borrower, Guarantors
or their Subsidiaries in the ordinary course of business, (ii) to the extent
permitted in Sections 9.7, 9.8, 9.9, 9.10, 9.11 and 9.14 hereof, provided,
that, any transaction permitted under such Sections with any Affiliate which is
not an Obligor shall only be upon fair and reasonable terms no less favorable
to Borrower or any Obligor than it would obtain in a comparable arm's length
transaction with a person other than an Affiliate, (iii) payments for
management fees and reimbursements for costs, charges or expenses by Borrower
or any Obligor to Southwestern Holdings, Inc. in accordance with the terms of
the Management Services Agreement (as in effect on the date hereof), (iv)
payments of management fees and reimbursement for costs, charges or expenses by
any Subsidiary of Borrower which is not an Obligor to Southwestern Holdings,
Inc. and (v) payments by Subsidiaries of Borrower to Borrower pursuant to the
tax sharing arrangements between Borrower, Guarantors and their Subsidiaries
(as in effect on the date hereof); provided, that, (A) such Subsidiary is
included in the consolidated federal income tax return filed by Borrower as to
which such Subsidiary are making such payments, (B) the payments in any year
shall not exceed the federal income tax liability that such Subsidiary would
have been liable for if such Subsidiary had filed its tax returns on a
stand-alone basis, (C) such payments shall be made by such Subsidiary no
earlier than five (5) days prior to the date on which Borrower would be
required to make its payments to the Internal Revenue Service, and (D) in the
event that such Subsidiary also joins with Borrower in filing any combined or
consolidated (or similar) state or local income tax returns, then the making of
payments to Borrower shall be allowed in a manner as similar as possible to
that provided herein with respect to federal income taxes.
9.13 Limitations Concerning Distributions and Transfers by Guarantors
to Borrower. Borrower shall not, and shall cause each Subsidiary of Borrower
which is an Obligor to not, directly or indirectly, suffer or exist any
consensual encumbrance or restriction on the ability of any Obligor to pay,
directly or indirectly, dividends or make any other distributions in respect of
its Capital Stock or pay any Indebtedness or other obligation owed to Borrower
or any other Obligor.
9.14 Acquisitions of Assets and Capital Stock from Third Parties.
(a) Borrower and each Obligor shall not purchase or otherwise
acquire in any transaction or series of related transactions the Capital Stock
or all or a substantial part of the assets or property of any Person (other
than as is permitted in Section 9.7(a) with respect to mergers or
consolidations with any Subsidiary of Borrower and other than as is permitted
in Section 9.7(b) with respect to transfers of the Capital Stock or assets of
any Subsidiary of Borrower), except, that, Borrower or any Obligor may purchase
the Capital Stock of any Person (other than any Subsidiary of Borrower) or all
or a substantial part of the assets or property of any Person or all or a
substantial part of the assets of property of any operating division or
business of any Person (other than any Subsidiary of Borrower), if as to each
such purchase each of the following conditions is satisfied as determined by
Lender:
(i) Lender shall have received not less than thirty
(30) days prior written notice of the intention of Borrower or such Obligor, as
the case may be, to make such purchase, which notice shall set forth in
reasonable detail satisfactory to Lender, the parties to such purchase, the
consideration to be paid for the purchase of such Capital Stock or assets, the
terms and manner of payment of such consideration, the Capital Stock or assets
to be purchased, the liabilities being assumed pursuant to such purchase and
such other information with respect thereto as Lender may request,
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(ii) as of the date of such purchase, and after
giving effect thereto, no Event of Default, or act, condition or event which
with notice or passage of time or both would constitute an Event of Default,
shall exist or have occurred,
(iii) such purchase shall be permitted under the
terms of the Senior Note Indenture as in effect on the date hereof (without
regard to any amendments or waivers with respect thereto);
(iv) such purchase shall be on commercially
reasonable prices and terms and in a bona fide arms length transaction,
(v) Lender shall have received true, correct and
complete copies of all agreements, documents and instruments relating to such
acquisition, as duly authorized, executed and delivered by the parties thereto,
(vi) the restrictions applicable to Borrower, any
Obligor and their respective assets included in the agreements, documents and
instruments relating to such purchase shall be acceptable in good faith to
Lender,
(vii) Borrower or such Obligor shall, immediately
before and immediately after giving effect to such transaction or series of
transactions have a net worth (including, without limitation, any Indebtedness
incurred or anticipated to be incurred in connection with or in respect of such
transaction or series of transactions) equal to or greater than the net worth
it had immediately prior to such transaction or series of transactions,
(viii) Borrower or such Obligor shall not become
obligated with respect to any Indebtedness, nor any of their property become
subject to any Lien pursuant to such acquisition unless Borrower and such
Obligor could incur such Indebtedness or create such Lien hereunder or under
the other Financing Agreements,
(ix) in the case of the purchase of any Capital
Stock of any Person, Borrower or such Obligor may pay the purchase price for
the purchase of the Capital Stock (whether pursuant to a capital contribution
or loan or advance to a Subsidiary formed solely to purchase or otherwise
acquire such Capital Stock (and which is the purchaser of such Capital Stock)
or to the person whose Capital Stock has been acquired or as consideration
pursuant to a merger or consolidation with the person whose Capital Stock has
been acquired) so long as (A) the Capital Stock purchased by Borrower or such
Obligor shall give Borrower or such Obligor unconditional and direct control of
the Person whose Capital Stock is acquired (and for purposes hereof, the term
"control" shall mean the power to direct the management and policies of such
person) and including, without limitation, the right to elect a majority of the
Board of Directors of such Person or such greater percentage of the Board of
Directors as may be required for such Person to take any action, and (B) the
daily average of Excess Availability for the immediately preceding thirty (30)
day period prior to the date of any such payment shall be not less than
$3,500,000, and as of the date of such payment after giving effect thereto,
Excess Availability shall be not less than $3,500,000 and (C) unless Borrower
elects to comply with Section 9.14(b), Borrower and Obligors shall not (1)
provide credit support for, or guarantee any Indebtedness of such Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness) or (2) be directly or indirectly liable for any Indebtedness of
such Subsidiary or any Subsidiary of such Subsidiary, and (3) no default with
respect to any Indebtedness of such Subsidiary or any Subsidiary of such
Subsidiary (including any right which the holders thereof may have to take
enforcement action against such
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Subsidiary) would permit (upon notice or passage of time or both) any holder of
any other Indebtedness of Borrower or any Obligor to declare a default on such
other Indebtedness or cause the payment of such Indebtedness of Borrower or any
Obligor to be accelerated or payable prior to its final scheduled maturity,
except if such Subsidiary is a "Restricted Subsidiary" as such term is defined
in the Senior Note Indenture (as in effect on the date hereof), and
(x) in the case of the purchase of all or
substantially all of the assets of any Person or all or substantially all of
any operating division or business of any Person, (A) Borrower or such Obligor
may make payments in consideration of the purchase price in connection with
such acquisition so long as the daily average of the Excess Availability for
the immediately preceding thirty (30) consecutive day period prior to the date
of such payment shall be not less than $3,500,000, and as of the date of such
payment and after giving effect thereto, Excess Availability shall be not less
than $3,500,000, (B) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid and perfected security interests
in and liens upon the assets purchased consisting of the types and categories
of assets which constitute Collateral hereunder, (C) Lender shall have
received, in form and substance satisfactory to Lender, all consents, waivers,
acknowledgments and other agreements from third persons which Lender may deem
necessary or desirable in order to permit, protect and perfect its security
interests in and liens upon the assets purchased, (D) no Accounts or Inventory
acquired by Borrower or any Obligor in connection with such purchase shall be
Eligible Accounts or Eligible Inventory, except as Lender may otherwise
specifically agree, (E) Lender shall have received, in form and substance
satisfactory to Lender, the agreement of the seller consenting to the
collateral assignment by Borrower or such Obligor of all rights and remedies
and claims for damages of Borrower or such Obligor relating to the Collateral
(including, without limitation, any bulk sales indemnification) under the
agreements, documents and instruments relating to such acquisition and (F)
Lender shall have received such other agreements, documents and instruments as
Lender may request in connection therewith.
(b) In the event that pursuant to Section 9.14(a)(ix) above
Borrower elects to cause the person whose Capital Stock has been acquired to
guarantee the Obligations, (i) promptly upon the acquisition of the Capital
Stock of such person, Borrower or the Obligor which purchases such Capital
Stock, as the case may be, shall cause the person whose Capital Stock has been
acquired to execute and deliver to Lender, in form and substance satisfactory
to Lender: (A) an absolute and unconditional guarantee of payment of all of the
Obligations, (B) a security agreement granting to Lender a first priority
security interest in and lien upon the same types and categories of the assets
and property of such Subsidiary as constitute Collateral hereunder, subject
only the Liens otherwise permitted hereunder (C) related Uniform Commercial
Code financing statements, and (D) such other agreements, documents and
instruments as Lender may require, (ii) Lender shall have received, in form and
substance satisfactory to Lender, the agreement of the seller consenting to the
collateral assignment by Borrower or such Obligor of all rights and remedies
and claims for damages of Borrower or such Obligor relating to the assets
subject to the security interests and liens of Lender under the agreements,
documents and instruments relating to such acquisition, (iii) Lender shall have
received evidence, in form and substance satisfactory to Lender, that Lender
has valid and perfected first priority security interests in and liens upon the
assets of the person whose Capital Stock is purchased as described above, (iv)
Lender shall have received, in form and substance satisfactory to Lender, all
consents, waivers, acknowledgments and other agreements from third persons
which Lender may deem necessary or desirable in order to permit, protect and
perfect its security interests in and liens upon the assets of the person whose
Capital Stock is purchased, (v) Lender shall have received such other
agreements, documents and instruments as Lender may request in connection
therewith.
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9.15 Compliance with ERISA. Borrower and each Guarantor shall not,
and shall not permit any of its Subsidiaries with respect to any Plans to: (a)
terminate any of such Plans so as to incur any liability to the Pension Benefit
Guaranty Corporation under Section 4041(c) of ERISA; (b) allow or suffer to
exist any non-exempt prohibited transaction involving any of such Plans or any
trust created thereunder which would subject Borrower, any Guarantor or such
ERISA Affiliate to a tax or penalty or other material liability on prohibited
transactions imposed under Section 4975 of the Code or under ERISA; (c) fail to
pay to any such Plan any contribution which it is obligated to pay under ERISA,
the Code or the terms of such Plan; (d) allow or suffer to exist any
accumulated funding deficiency, whether or not waived, with respect to any such
Plan; (e) allow or suffer to exist any occurrence of a reportable event or any
other event or condition which presents a material risk of termination by the
Pension Benefit Guaranty Corporation of any such Plan under Section 4042 of
ERISA or (f) incur any withdrawal liability with respect to any multiemployer
pension plan in excess of $500,000.
9.16 Additional Bank Accounts. Borrower and each Guarantor shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly, open,
establish or maintain any deposit account, investment account or any other
account with any bank or other financial institution, other than the Blocked
Accounts and the accounts set forth in Schedule 6.3 hereto, except: (a) as to
any new or additional Blocked Accounts and other such new or additional
accounts which contain or will contain any Collateral or proceeds thereof, with
the prior written consent of Lender and subject to such conditions thereto as
Lender may reasonably establish and (b) as to any accounts used by Borrower,
such Guarantor or Subsidiary to make payments of payroll, taxes or other
obligations to third parties, after prior written notice to Lender and (c) any
Subsidiary of Borrower which is not Obligor may open, establish and maintain
any such deposit account, investment account or other account as it may
determine.
9.17 Financing Acquisitions. Borrower shall provide Lender with
notice in advance of other lenders of any potential acquisition by Borrower or
any Subsidiary of Borrower of all or substantially all of the business, assets
or Capital Stock of any person, for which acquisition financing will be needed.
Borrower shall provide Lender a thirty (30) day period to prepare a written
proposal of financing terms for such acquisition and, if Lender's proposal is
at least equal to the proposals of other potential lenders, Borrower will use
commercially reasonable efforts to negotiate with Lender in order to consummate
the proposed financing for such acquisition. Nothing herein shall be construed
to prohibit Borrower from soliciting financing proposals for such acquisition
from other potential lenders.
9.18 Covenants Applicable to Canada. For the purposes of the
application and interpretation of the provisions of this Agreement or the other
Financing Agreements to the operations of Borrower or any Guarantor in Canada
and to any of the Collateral which may at any time or from time to time be
located in Canada:
(a) all payments of principal, interest, fees and other
amounts to be paid pursuant to this Agreement and the other Financing
Agreements in respect of all or any part of the Obligations shall be made free
and clear and without deduction for any and all present and future taxes,
withholdings, levies, duties, any charges of any Governmental Authority and all
liabilities with respect thereto (except for any income or franchise taxes
under the laws of the United States of America or any State thereof or
subdivision thereof attributable to the income of Lender from any amounts
charged or paid hereunder or under the other Financing Agreements to Lender),
and without setoff, withholding or deduction of any kind whatsoever and, if
with regard to any payment to be made by Borrower or any Guarantor to Lender
pursuant to this Agreement, the other Financing Agreements or otherwise, any
deduction for any and all such present and future taxes, withholding, levies,
duties, charges of a Governmental Authority or any
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liability with respect thereto is required to be made by Borrower or any
Guarantor, Borrower or such Guarantor, as the case may be, shall pay such
additional amounts to Lender as may be necessary in order that the net amount
received by Lender after such deduction shall equal such payment which would
have been received by Lender in the absence of such deduction; and
(b) Borrower shall make all payments in respect of the
Obligations in U.S. Dollars, and any payment on account of the Obligations made
in a currency other than U.S. Dollars, whether pursuant to a judgment or order
of a court or a Governmental Authority or otherwise, shall constitute a
discharge of the Obligations only to the extent of the U.S. Dollar Equivalent
which Lender is able to purchase and, if the number of U.S. Dollars which
Lender is so able to purchase is less than the number of U.S. Dollars
originally due to it, Borrower and Guarantors shall indemnify and save Lender
harmless from and against any loss or damage arising as a result of such
deficiency, and this indemnity shall:
(i) constitute an obligation separate and
independent from the Obligations,
(ii) give rise to a separate and independent cause
of action,
(iii) apply irrespective of any indulgence granted
by Lender from time to time,
(iv) be secured by the assignment, charges and
security interests created in respect of the Collateral by this Agreement or
the other Financing Agreements, and
(v) the indemnity on the currency differential shall
continue in full force and effect, notwithstanding any judgment or order for a
liquidated sum in respect of an amount due under this Agreement or the other
Financing Agreements or any judgment or order or any payment made under any
judgment or order or the termination or non-renewal of this Agreement and the
other Financing Agreements.
(c) For purposes of the Interest Act of Canada only, the
effective rate of any rate of interest stipulated to be payable under this
Agreement or the other Financing Agreements may be calculated from time to time
by multiplying (i) the amount of the stipulated rate of interest by (ii) 365 or
366, depending on the number of days in the calendar year in which the
calculation is being made, and dividing the product of such multiplication by
(iii) 360.
9.19 Costs and Expenses. Borrower and Guarantors shall pay to Lender
on demand all costs, expenses, filing fees and taxes paid or payable in
connection with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, Lender's rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including, but not limited to: (a) all costs and expenses of filing or
recording (including Uniform Commercial Code financing statement filing taxes
and fees, PPSA financing statement filing fees, documentary taxes, intangibles
taxes and mortgage recording taxes and fees, if applicable); (b) all insurance
premiums, appraisal fees and search fees; (c) costs and expenses of remitting
loan proceeds, collecting checks and other items of payment, and establishing
and maintaining the Blocked Accounts, together with Lender's customary charges
and fees with respect thereto; (d) charges, fees or expenses charged by any
bank or issuer in connection with the Letter of Credit Accommodations; (e)
costs and expenses of preserving and protecting the Collateral; (f) costs and
expenses paid or incurred in connection with obtaining payment of the
Obligations, enforcing the security interests and liens of
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Lender, selling or otherwise realizing upon the Collateral, and otherwise
enforcing the provisions of this Agreement and the other Financing Agreements
or defending any claims made or threatened against Lender arising out of the
transactions contemplated hereby and thereby (including, without limitation,
preparations for and consultations concerning any such matters); (g) all
out-of-pocket expenses and costs heretofore and from time to time hereafter
incurred by Lender during the course of periodic field examinations of the
Collateral and the operations of Borrower and Guarantors; and (h) the
reasonable fees and disbursements of counsel (including legal assistants) to
Lender in connection with any of the foregoing.
9.20 Further Assurances. At the request of Lender at any time and
from time to time, Borrower and each Guarantor shall, and shall cause each of
its Subsidiaries to, at its expense, duly execute and deliver, or cause to be
duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary
or proper to evidence, perfect, maintain and enforce the security interests and
the priority thereof in the Collateral and to otherwise effectuate the
provisions or purposes of this Agreement or any of the other Financing
Agreements. Lender may at any time and from time to time request a certificate
from an officer of Borrower representing that all conditions precedent to the
making of Loans and providing Letter of Credit Accommodations contained herein
are satisfied. In the event of such request by Lender, Lender may, at its
option, cease to make any further Loans or provide any further Letter of Credit
Accommodations until Lender has received such certificate and, in addition,
Lender has determined that such conditions are satisfied. Where permitted by
law, Borrower and each Guarantor hereby authorizes Lender to execute and file
one or more UCC financing statements or PPSA financing statements signed only
by Lender with respect to the Collateral.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or
more of the following events are referred to herein individually as an "Event
of Default", and collectively as "Events of Default":
(a) (i) Borrower or any Obligor fails to pay when due any of
the Obligations or (ii) Borrower or any Obligor fails to perform any of
covenants contained in Sections 9.1, 9.2, 9.3, 9.4, 9.6, 9.15 and 9.18 hereof,
and such failure shall continue for ten (10) days, provided, that, such ten
(10) day period shall not apply in the case of: (A) any failure to observe any
such covenant or agreement which is not capable of being cured at all or within
such ten (10) day period or which has been the subject of a prior failure
within the immediately preceding six (6) months or (B) an intentional breach by
Borrower or any Obligor of any such covenant or agreement or (iii) Borrower or
any Obligor fails to perform any of the terms, covenants, conditions or
provisions contained in this Agreement or any of the other Financing Agreements
to which it is a party other than those described in Sections 10.1(a)(i) or
10.1(a)(ii);
(b) any representation, warranty or statement of fact made by
either or both of Borrower or any Obligor to Lender in this Agreement, the
other Financing Agreements or any other agreement, schedule, confirmatory
assignment or otherwise shall when made or deemed made be false or misleading
in any material respect;
(c) any Obligor revokes, terminates or fails to perform any
of the terms, covenants, conditions or provisions of any guarantee, endorsement
or other agreement of such party in favor of Lender;
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(d) any judgment for the payment of money is rendered against
Borrower or any Obligor (other than a judgment for which Borrower or such
Obligor is fully insured and for which the insurer has acknowledged its
liability therefor in writing) in excess of $500,000 in any one case or in
excess of $1,000,000 in the aggregate and shall remain undischarged or
unvacated (or a bond shall not be provided for such discharge for the full
amount of such judgment and related fees and penalties) within thirty (30) days
or execution shall at any time not be effectively stayed, or any judgment other
than for the payment of money, or injunction, attachment, garnishment or
execution is rendered against Borrower or any Obligor or any of its or their
assets;
(e) Borrower or any Obligor dissolves or suspends or
discontinues doing business (except as a result of a merger or consolidation of
Borrower or any Obligor to the extent permitted in Section 9.7 hereof);
(f) Borrower or any Obligor becomes insolvent, makes an
assignment for the benefit of creditors, shall generally not pay its debts as
such debts become due or shall admit in writing its inability to pay its debts
generally as they come due, makes or sends notice of a bulk transfer or calls a
meeting of its principal creditors in connection with any deferral or
moratorium with respect to payments on, or compromise of, or settlement or
reduction in Indebtedness owing to such creditors;
(g) a case or proceeding under the bankruptcy laws of the
United States of America or Canada now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity) is filed against Borrower or any Obligor or all
or any part of its properties and such petition or application is not dismissed
within forty-five (45) days after the date of its filing or Borrower or any
Obligor shall file any answer admitting or not contesting such petition or
application or indicates its consent to, acquiescence in or approval of, any
such action or proceeding or the relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the
United States of America or Canada now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at a law or equity) is filed by Borrower or any Obligor or for all or
any part of its property; or
(i) any default by Borrower or any Obligor under any
agreement, document or instrument relating to any Indebtedness (other than the
Obligations), in any case in an amount in excess of $500,000, which default
continues for more than the applicable cure period, if any, with respect
thereto, or any default by Borrower or any Obligor under any material contract,
lease, license or other obligation to any person other than Lender, which
default continues for more than the applicable cure period, if any, with
respect thereto, the foregoing including, without limitation, any "Event of
Default" as such term is defined in the Senior Note Indenture or any default or
event of default under any of the Intercompany Loan Documents;
(j) a Change of Control shall occur;
(k) the indictment or threatened indictment of Borrower or
any Obligor (as Lender may reasonably and in good faith determine) under any
criminal statute, or commencement or threatened commencement of criminal or
civil proceedings against Borrower or any Obligor, pursuant to which statute or
proceedings the penalties or remedies sought or available include forfeiture of
any material portion of the property of Borrower or such Obligor;
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(l) after the date hereof any act, condition or event shall
exist or have occurred which has a material adverse affect upon the assets of
Borrower or any Obligor, or the Collateral or the value thereof, or the ability
of Lender to realize thereon, or the rights and remedies of Lender under this
Agreement or the other Financing Agreements or the ability of Borrower or any
Obligor to repay the Obligations or of Borrower or any Obligor to perform its
obligations under this Agreement or any of the other Financing Agreements; or
(m) there shall have occurred and be continuing an event of
default under any of the other Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred
and is continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and
other applicable law, all of which rights and remedies may be exercised without
notice to or consent by Borrower or any Obligor, except as such notice or
consent is expressly provided for hereunder or required by applicable law. All
rights, remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower or any
Obligor of this Agreement or any of the other Financing Agreements. Lender
may, at any time or times, proceed directly against Borrower or any Obligor to
collect the Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation, (i) accelerate the payment of all Obligations and
demand immediate payment thereof to Lender (provided, that, upon the occurrence
of any Event of Default described in Sections 10.1(g) and 10.1(h), all
Obligations shall automatically become immediately due and payable), (ii) with
or without judicial process or the aid or assistance of others, enter upon any
premises on or in which any of the Collateral may be located and take
possession of the Collateral or complete processing, manufacturing and repair
of all or any portion of the Collateral, (iii) require Borrower and Guarantors,
at the expense of Borrower and Guarantors, to assemble and make available to
Lender any part or all of the Collateral at any place and time designated by
Lender, (iv) collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral, (v) remove any or all of the Collateral from any
premises on or in which the same may be located for the purpose of effecting
the sale, foreclosure or other disposition thereof or for any other purpose,
(vi) sell, lease, transfer, assign, deliver or otherwise dispose of any and all
Collateral (including, without limitation, entering into contracts with respect
thereto, public or private sales at any exchange, broker's board, at any office
of Lender or elsewhere) at such prices or terms as Lender may deem reasonable,
for cash, upon credit or for future delivery, with the Lender having the right
to purchase the whole or any part of the Collateral at any such public sale,
all of the foregoing being free from any right or equity of redemption of
Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrower and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future
delivery, the Obligations shall not be reduced as a result thereof until
payment therefor is finally collected by Lender. If notice of disposition of
Collateral is required by law, ten (10) days prior notice by Lender to Borrower
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall
be deemed to be reasonable notice thereof and Borrower and each Guarantor
waives any other notice. In the event
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Lender institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrower and each Guarantor waives the
posting of any bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of
the Collateral to payment of the Obligations, in whole or in part and in such
order as Lender may elect, whether or not then due. Borrower and each
Guarantor shall remain liable to Lender for the payment of any deficiency with
interest at the highest rate provided for herein and all costs and expenses of
collection or enforcement, including reasonable attorneys' fees and legal
expenses.
(d) Without limiting the foregoing, upon the occurrence of an
Event of Default or an act, condition or event which with notice or passage of
time or both would constitute an Event of Default, and for so long as the same
is continuing, Lender may, at its option, without notice, (i) cease making
Loans or arranging for Letter of Credit Accommodations or reduce the lending
formulas or amounts of Loans and Letter of Credit Accommodations available to
Borrower and/or (ii) terminate any provision of this Agreement providing for
any future Loans or Letter of Credit Accommodations to be made by Lender to
Borrower.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York
(without giving effect to principles of conflicts of law).
(b) Borrower, Guarantors and Lender irrevocably consent and
submit to the non-exclusive jurisdiction of the Supreme Court of the State of
New York in New York County and the United States District Court for the
Southern District of New York and waive any objection based on venue or forum
non conveniens with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Lender shall have the right to bring any action or
proceeding against Borrower or any Guarantor or its property in the courts of
any appropriate jurisdiction which Lender deems necessary or appropriate in
order to realize on the Collateral or to otherwise enforce its rights against
Borrower or any Guarantor or its property).
(c) Borrower and each Guarantor hereby waives personal
service of any and all process upon it and consents that all such service of
process may be made by certified mail (return receipt requested) directed to
its address set forth on the signature pages hereof (or to such other address
of Borrower or such Guarantor as it may designate by written notice to Lender
in accordance with Section 12.2 hereof) and service so made shall be deemed to
be completed ten (10) days after the same shall have been so deposited in the
U.S. mails, or, at Lender's option, by service upon Borrower or any Guarantors
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in any other manner provided under the rules of any such courts. Within thirty
(30) days after such service, Borrower or such Guarantor shall appear in answer
to such process, failing which Borrower or such Guarantor shall be deemed in
default and judgment may be entered by Lender against Borrower or such
Guarantor for the amount of the claim and other relief requested.
(d) BORROWER, GUARANTORS AND LENDER EACH HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OF
THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT
OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR
THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN
CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER, GUARANTORS AND LENDER EACH
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER,
GUARANTORS OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower or
Guarantors (whether in tort, contract, equity or otherwise) for losses suffered
by Borrower or Guarantors in connection with, arising out of, or in any way
related to the transactions or relationships contemplated by this Agreement, or
any act, omission or event occurring in connection herewith, unless it is
determined by a final and non-appealable judgment or court order binding on
Lender, that the losses were the result of acts or omissions constituting gross
negligence or willful misconduct. In any such litigation, Lender shall be
entitled to the benefit of the rebuttable presumption that it acted in good
faith and with the exercise of ordinary care in the performance by it of the
terms of this Agreement.
11.2 Waiver of Notices. Borrower and each Guarantor hereby expressly
waives demand, presentment, protest and notice of protest and notice of
dishonor with respect to any and all instruments and commercial paper, included
in or evidencing any of the Obligations or the Collateral, and any and all
other demands and notices of any kind or nature whatsoever with respect to the
Obligations, the Collateral and this Agreement, except such as are expressly
provided for herein. No notice to or demand on Borrower or any Guarantor which
Lender may elect to give shall entitle Borrower or Guarantors to any other or
further notice or demand in the same, similar or other circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any
provision hereof shall be amended, modified, waived or discharged orally or by
course of conduct, but only by a written agreement signed by an authorized
officer of Lender and as to amendments, by Borrower. Lender shall not, by any
act, delay, omission or otherwise be deemed to have expressly or impliedly
waived any of its rights, powers and/or remedies unless such waiver shall be in
writing and signed by an authorized officer of Lender. Any such waiver shall
be enforceable only to the extent specifically set forth therein. A waiver by
Lender of any right, power and/or remedy on any one occasion shall not be
construed as a bar to or waiver of any such right, power and/or remedy which
Lender would otherwise have on any future occasion, whether similar in kind or
otherwise.
11.4 Waiver of Counterclaims. Borrower and each Guarantor waives all
rights to interpose any claims, deductions, setoffs or counterclaims of any
nature (other then compulsory counterclaims) in any
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action or proceeding with respect to this Agreement, the Obligations, the
Collateral or any matter arising therefrom or relating hereto or thereto.
11.5 Indemnification. Borrower and Guarantors shall indemnify and
hold Lender, and its directors, agents, employees and counsel, harmless from
and against any and all losses, claims, damages, liabilities, costs or expenses
imposed on, incurred by or asserted against any of them in connection with any
litigation, investigation, claim or proceeding commenced or threatened related
to the negotiation, preparation, execution, delivery, enforcement, performance
or administration of this Agreement, any of the other Financing Agreements, or
any undertaking or proceeding related to any of the transactions contemplated
hereby or any act, omission, event or transaction related or attendant thereto,
including, without limitation, any and all losses, claims, damages,
liabilities, costs or expenses caused by the negligence (but not the gross
negligence or wilful misconduct) of Lender and Lender's directors, agents,
employees and counsel, and further including, without limitation, amounts paid
in settlement, court costs, and the fees and expenses of counsel. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in
this Section may be unenforceable because it violates any law or public policy,
Borrower and Guarantors shall pay the maximum portion which it is permitted to
pay under applicable law to Lender in satisfaction of indemnified matters under
this Section. The foregoing indemnity shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date three (3) years
from the date hereof (the "Renewal Date"), and from year to year thereafter,
unless sooner terminated pursuant to the terms hereof; provided, that, Lender
may, at its option, extend the Renewal Date to the date four (4) years from the
date hereof by giving Borrower written notice at least sixty (60) days prior to
the third (3rd) anniversary of the date hereof. Lender or Borrower may
terminate this Agreement and the other Financing Agreements effective on the
Renewal Date or on the anniversary of the Renewal Date in any year by giving to
the other party at least sixty (60) days prior written notice; provided, that,
this Agreement and all other Financing Agreements must be terminated
simultaneously. Upon the effective date of termination or non-renewal of the
Financing Agreements, Borrower shall pay to Lender, in full, all outstanding
and unpaid Obligations and shall furnish cash collateral to Lender in such
amounts as Lender determines are necessary to secure Lender from loss, cost,
damage or expense, including reasonable attorneys' fees and legal expenses, in
connection with any contingent Obligations, including issued and outstanding
Letter of Credit Accommodations and checks or other payments provisionally
credited to the Obligations and/or as to which Lender has not yet received
final and indefeasible payment. Such payments and cash collateral shall be
remitted by wire transfer in Federal funds to such bank account of Lender, as
Lender may, in its discretion, designate in writing to Borrower for such
purpose. Interest shall be due until and including the next business day, if
the amounts so paid by Borrower to the bank account designated by Lender are
received in such bank account later than 12:00 noon, New York City time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower, any Guarantor or it
Subsidiaries of its respective duties, obligations and covenants under this
Agreement or the other Financing Agreements until all Obligations have been
fully and finally discharged and paid, and Lender's continuing security
interest in the Collateral and the rights and
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remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid and Lender shall have received cash
collateral in such amounts and on such terms as Lender shall deem reasonably
acceptable. Upon the receipt by Lender of payment in full in cash or other
immediately available funds of all of the outstanding and unpaid Obligations
and cash collateral as provided for in Section 12.1(a), upon Borrower's request
and at Borrower's expense, except as otherwise required by applicable law,
Lender shall execute and deliver to Borrower UCC-3 termination statements and
such other release documents with respect to the Collateral as may be
reasonably requested by Borrower, in form and substance satisfactory to Lender,
to effectuate the termination of the security interests granted by Borrower or
any Obligor to Lender herein and in the other Financing Agreements.
(c) If for any reason this Agreement is terminated prior to
the end of the then current term or renewal term of this Agreement at the
request of Borrower or by Lender as the result of an Event of Default, in view
of the impracticality and extreme difficulty of ascertaining actual damages and
by mutual agreement of the parties as to a reasonable calculation of Lender's
lost profits as a result thereof, Borrower agree to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
<TABLE>
<CAPTION>
Amount Period
------ ------
<S> <C> <C>
(i) Two (2%) percent of From the date hereof to and
the Maximum Credit including June 28, 1997
(ii) One (1%) of the From June 29, 1997 through and
Maximum Credit including June 27, 1998
</TABLE>
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower and each
Guarantor agrees that it is reasonable under the circumstances currently
existing. The early termination fee provided for in this Section 12.1 shall be
deemed included in the Obligations.
12.2 Notices. All notices, requests and demands hereunder shall be
in writing and (a) made to Lender at its address set forth below and to
Borrower and Guarantors at their chief executive office set forth below, or to
such other address as either party may designate by written notice to the other
in accordance with this provision, and (b) deemed to have been given or made:
if delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt; and if by nationally recognized overnight courier service with
instructions to deliver the next Business Day, one (1) Business Day after
sending.
12.3 Partial Invalidity. If any provision of this Agreement is held
to be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and
any other document referred to herein or therein shall be binding upon and
inure to the benefit of and be enforceable by Lender, Borrower, Guarantors and
their respective successors and assigns, except that Borrower and
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Guarantors may not assign their rights under this Agreement, the other
Financing Agreements and any other document referred to herein or therein
without the prior written consent of Lender. Lender may, after notice to
either Borrower, assign its rights and delegate its obligations under this
Agreement and the other Financing Agreements and Lender may, after notice to
Borrower, sell participations in, all or any part of the Loans, or any other
interest herein to another financial institution or other person.
12.5 Confidentiality.
(a) Lender shall use all reasonable efforts to keep
confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by Borrower pursuant to this Agreement which is
clearly and conspicuously marked as confidential at the time such information
is furnished by Borrower to Lender, provided, that, nothing contained herein
shall limit the disclosure of any such information: (i) to the extent required
by statute, rule, regulation, subpoena or court order, (ii) to bank examiners
and other regulators, auditors and/or accountants, (iii) in connection with any
litigation to which Lender is a party, (iv) to any assignee or participant (or
prospective assignee or participant) so long as such assignee or participant
(or prospective assignee or participant) shall have first agreed in writing to
treat such information as confidential in accordance with this Section 12.5, or
(v) to counsel for Lender or any participant or assignee (or prospective
participant or assignee).
(b) In no event shall this Section 12.5 or any other
provision of this Agreement or applicable law be deemed: (i) to apply to or
restrict disclosure of information that has been or is made public by Borrower
or any third party without breach of this Section 12.5 or otherwise become
generally available to the public other than as a result of a disclosure in
violation hereof, (ii) to apply to or restrict disclosure of information that
was or becomes available to Lender on a non-confidential basis from a person
other than Borrower, (iii) require Lender to return any materials furnished by
Borrower to Lender or (iv) prevent Lender from responding to routine
informational requests in accordance with the Code of Ethics for the Exchange
of Credit Information promulgated by The Robert Morris Associates or other
applicable industry standards relating to the exchange of credit information.
The obligations of Lender under this Section 12.5 shall supersede and replace
the obligations of Lender under any confidentiality letter signed prior to the
date hereof.
12.6 Entire Agreement. This Agreement, the other Financing
Agreements, any supplements hereto or thereto, and any instruments or documents
delivered or to be delivered in connection herewith or therewith represents the
entire agreement and understanding concerning the subject matter hereof and
thereof between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
75
<PAGE> 81
IN WITNESS WHEREOF, Lender and Borrower and Guarantors have caused
these presents to be duly executed as an instrument as of the day and year
first above written.
LENDER BORROWER
- ------ --------
CONGRESS FINANCIAL CORPORATION J.B. POINDEXTER & CO., INC.
By: By:
------------------------------ ------------------------------
Title: Title:
--------------------------- ---------------------------
Address: Chief Executive Office:
- -------- ----------------------
1133 Avenue of the Americas 1100 Louisiana Street
New York, New York 10036 Suite 5400
Houston, Texas 77002
GUARANTORS LOWY GROUP, INC.
- ----------
By:
EFP CORPORATION ------------------------------
By: Title:
------------------------------ ---------------------------
Title: Chief Executive Office:
--------------------------- ----------------------
Chief Executive Office: 4001 North Kingshighway
- ---------------------- St. Louis, Missouri 63115
223 Middleton Run Road
Elkhart, Indiana 46515
TRUCK ACCESSORIES GROUP, INC. MAGNETIC INSTRUMENTS CORP.
By: By:
------------------------------ ------------------------------
Title: Title:
--------------------------- ---------------------------
Chief Executive Office: Chief Executive Office:
- ---------------------- ----------------------
28858 Ventura Drive 1801 Industrial Boulevard
Elkhart, Indiana 46517 Brenham, Texas 77834
76
<PAGE> 82
RAIDER INDUSTRIES INC. MORGAN TRAILER MFG. CO.
By: By:
------------------------------ ------------------------------
Title: Title:
--------------------------- ---------------------------
Chief Executive Office: Chief Executive Office:
- ---------------------- ----------------------
Highway No. 39 East One Morgan Way
P.O. Box 63 Morgantown, Pennsylvania 19543
Drinkwater, Saskatchewan
Canada SOH 1G0
77
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1996 2ND
QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,981
<SECURITIES> 0
<RECEIVABLES> 41,379
<ALLOWANCES> 2,577
<INVENTORY> 55,885
<CURRENT-ASSETS> 103,526
<PP&E> 51,157
<DEPRECIATION> 0
<TOTAL-ASSETS> 188,455
<CURRENT-LIABILITIES> 74,187
<BONDS> 103,866
<COMMON> 16,486
0
0
<OTHER-SE> (9,290)
<TOTAL-LIABILITY-AND-EQUITY> 188,455
<SALES> 221,034
<TOTAL-REVENUES> 221,357
<CGS> 173,676
<TOTAL-COSTS> 173,676
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,055
<INCOME-PRETAX> (2,908)
<INCOME-TAX> (906)
<INCOME-CONTINUING> (2,002)
<DISCONTINUED> 0
<EXTRAORDINARY> 260
<CHANGES> 0
<NET-INCOME> (2,262)
<EPS-PRIMARY> (0.739)
<EPS-DILUTED> (0.739)
</TABLE>
