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Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Fiscal Year Ended December 28, 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 0-21677
PROSOURCE, INC.
(Exact name of registrant as specified in its charter)
Delaware 65-0335019
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1500 San Remo Avenue
Coral Gables, Florida 33146
(Address of principal executive offices)
(305) 740-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Class A Common
Stock, par value $0.01 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part II of this Form 10-K or any amendment to this
Form 10-K. X
---
The aggregate market value of the voting stock held by non-affiliates of the
Registrant on February 28, 1997 was approximately $35,482,125. The market value
calculation was determined using the closing sale price of the Registrant's
Class A Common Stock on February 28, 1997, as reported on the Nasdaq National
Market.
At February 28, 1997, the registrant had outstanding 3,400,000 shares of Class A
Common Stock and 5,930,856 shares of Class B Common Stock.
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DOCUMENTS INCORPORATED BY REFERENCE
PART OF FORM 10-K DOCUMENTS FROM WHICH PORTIONS ARE INCORPORATED BY REFERENCE
- ----------------- -----------------------------------------------------------
Part II Portions of the Registrant's Annual Report to Stockholders
for the fiscal year ended December 28, 1996 are incorporated
by reference into Items 6, 7 and 8.
Part III Portions of the Registrant's Proxy Statement relating to the
Registrant's Annual Meeting of Stockholders to be held on
April 29, 1997 are incorporated by reference into Items 10,
11, 12 and 13.
Part IV Portions of the Registrant's Registration Statement on
Securities and Exchange Commission Form S-1 (registration
no. 333-11499) are incorporated by reference into Item 14.
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PART I
ITEM 1. BUSINESS.
ProSource, Inc. ("ProSource" or the "Company") is the nation's leading
independent foodservice distributor specializing in distribution to chain
restaurants and is one of the largest foodservice distributors in the United
States. The Company distributes a wide variety of items, including fresh and
frozen meat and poultry, seafood, frozen foods, canned and dry goods, fresh and
pre-processed produce, beverages, dairy products, paper goods and cleaning and
other supplies. The Company specializes in providing food and food-related
products to two segments of the restaurant industry -- quick service
restaurants, including Burger King, Long John Silver's, Sonic, Chick-fil-A, TCBY
and Wendy's, and casual dining restaurants, including Red Lobster, Olive Garden,
TGIFriday's and Chili's. ProSource is an indirect subsidiary of Onex
Corporation. See "Controlling Stockholder."
The Company was formed in 1992 to acquire Burger King Distribution Services
("BKDS"), the "in-house" distributor for Burger King Corporation ("BKC"), which
serviced approximately 4,150 Burger King restaurants. Since the acquisition,
ProSource has, through a combination of acquisitions and internal growth, become
a leading distributor to chain restaurants, servicing approximately 14,600
restaurants within 17 different restaurant chains as of December 28, 1996. In
March 1995, the Company entered the casual dining segment of the restaurant
industry and further expanded its quick service business with the acquisition of
substantially all of the assets and the assumption of certain liabilities of the
National Accounts Division ("NAD") of The Martin-Brower Company
("Martin-Brower"), which added a total of approximately 8,000 restaurants within
11 chains included in the Company's current customer base. The Company has also
been successful in expanding through internally generated sales. Since the
Company's formation in 1992, net sales have grown from $1.3 billion in 1993 (the
first full year of operations) to $4.1 billion in 1996.
Within the foodservice distribution industry, there are two primary types
of distributors: broadline distributors and specialist distributors. Broadline
foodservice distributors service a wide variety of customers including both
independent and chain restaurants, schools, cafeterias and hospitals. Broadline
distributors may purchase and inventory as many as 25,000 different food and
food-related items. Customers utilizing broadline foodservice distributors
typically purchase inventory from several distributors. Specialist foodservice
distributors may be segregated into three categories: (i) product specialists
which distribute only one or a limited number of products such as produce or
meat, (ii) market specialists which distribute to one type of restaurant such as
Mexican and (iii) "systems" specialists which focus on one type of customer such
as chain restaurants or health care facilities. Systems specialists typically
serve as a single source of supply for their customers. The Company is a systems
distributor specializing in distribution to chain restaurants.
The Company was incorporated in 1992 as a Delaware corporation. Its
principal executive offices are located at 1500 San Remo Avenue, Coral Gables,
Florida 33146, and the Company's telephone number is (305) 740-1000. The Company
operates under the name "ProSource Distribution Services."
OPERATIONS AND DISTRIBUTION
The Company's operations can generally be categorized into two business
processes: (i) product replenishment and (ii) order fulfillment. Product
replenishment involves the management of logistics from the vendor location
through the delivery of products to the Company's distribution centers. Order
fulfillment involves all activities from customer order placement through
delivery to the restaurant location.
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Supporting the Company's business processes are its network of 34 distribution
centers, its fleet of approximately 1,450 tractors and trailers and its
management information systems.
Product Replenishment. While the Company is responsible for purchasing
products to be delivered to its customers, each chain typically selects the
vendor and negotiates the price at which most products will be purchased. See
"Purchasing and Supply." The Company determines the distribution centers which
will warehouse products for each customer and the quantities in which such
products will be purchased. Order quantities for each product are systematically
determined for each distribution center, taking into account both recent sales
history and projected customer demand. The number of distribution centers used
to serve a customer is based on the number and location of the restaurants to be
serviced. Given the Company's experience in managing its product flow, losses
due to shrinkage, damage and product obsolescence represent less than 0.1% of
1996 net sales.
The Company works with its chain customers in order to optimize
transportation from vendor locations to distribution warehouses. By utilizing
the collective demand of its customers for in-bound transportation, its existing
fleet of trucks and its expertise in managing transportation, the Company can
offer its customers in-bound transportation (i.e. transportation of products
from the vendor to the distribution center), in many instances on a more
economical basis than that offered by the vendors that have traditionally
provided such services. The Company believes it can offer its customers lower
in-bound transportation costs through (i) use of the Company's delivery fleet to
backhaul products, (ii) consolidation of products from more than one vendor or
for use by more than one customer to increase truckloads and (iii) brokering the
freight to third party carriers with whom the Company has negotiated lower
transportation rates. In 1996, the Company managed approximately 40% of the
total freight tonnage to its distribution centers. The Company utilizes a number
of third party carriers to provide in-bound transportation services. None of
these carriers are material to the Company's operations.
The Company currently warehouses 5,500 types of products for its customers
at 34 facilities in 27 cities. This distribution network includes the Company's
preexisting distribution centers, as well as the distribution centers acquired
in the NAD transaction. Currently, no one distribution center maintains
inventories for all customers and, as a result, some customers are not serviced
by the distribution center closest to them. The Company has begun implementing a
new national network of distribution centers. Through this "network
optimization" program, which is expected to take 3-5 years to complete, the
Company intends to consolidate and integrate its existing distribution network
of 34 centers into 25 centers consisting of six large regional distribution
centers ("RDCs") and 19 local distribution centers ("LDCs"). In December 1996,
the Company leased its first new site under its network optimization program, a
92,000 square foot site located near Denver, Colorado. Under the new network,
high volume products will be shipped directly to both RDCs and LDCs, with low
volume products being shipped only to RDCs which will supply these products to
the LDCs. The Company expects its new distribution network to reduce costs by
enabling the Company to fully service more customers from a distribution center
closer to the customer, and thereby reduce transportation costs. In addition,
the new network should provide the Company with additional distribution center
capacity for continued growth. The consolidation of all customers into common
distribution facilities in conjunction with the development of the network
should optimize inbound transportation costs, outbound miles, inventory
investment and warehouse capacity.
Upon receipt of the product at the distribution centers, it is inspected
and stored in racks. Each distribution center contains ambient, refrigerated and
frozen space as well as offices for operating, sales and customer service
personnel and a computer networked with the Company's centralized computer
system. In conjunction with the network optimization and integration strategy,
the Company intends to modify the
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racking configurations of its distribution centers and install a new
distribution center management system that controls routing, shipping control,
trip management, invoicing, inventory control and communications.
Order Fulfillment. The Company places a significant emphasis on providing a
high service level in order fulfillment. For the year ended December 28, 1996,
the Company achieved order fill rates of 99.7% and on-time deliveries of 92%. By
providing a high level of service and reliability, the Company believes that it
can reduce the number of reorders and redeliveries, reducing costs for both the
Company and its customers. Each restaurant places product orders based on recent
usage, estimated sales and existing restaurant inventories. The Company has
developed pre-established routes and pre-arranged delivery times with each
customer. Product orders are placed with the Company one to three times a week
either through the Company's customer service representative or through
electronic transmission using the Company's proprietary software. Approximately
47% of the restaurants served by the Company transmit product orders
electronically. Orders are generally placed on a designated day in order to
coordinate with the Company's pre-established delivery schedules. Processing and
dispatch of each order is generally completed within 24 hours of receipt and the
Company's standards require each order to be delivered to the customer within
one hour of a pre-arranged delivery time.
Products are picked and labeled at each distribution center. The products
are placed on either a pallet or one of the Company's delivery carts for loading
of outbound trailers. See "-- Cart Delivery System." The Company utilizes radio
frequency and bar code scanning in two distribution centers, and intends to
implement this technology in its new distribution center management systems.
Delivery routes are scheduled to both fully utilize the trailer's load capacity
and minimize the number of miles driven. The Company transports approximately
2.34 million tons of product and its trucks travel in excess of 60 million miles
annually. The Company currently utilizes several unloading methods at the
restaurant including (i) gravity aided rollers, (ii) hand carts and ramps and
(iii) its new cart delivery system.
Cart Delivery System. The Company has recently introduced an innovative
value-added cart delivery system which the Company estimates should result in
restaurant deliveries which are considerably faster than methods currently used
in the industry. Under this system, at the distribution center, products are
loaded into carts which are then loaded directly onto delivery trucks. At the
delivery site, instead of unloading products by conveyor or handcart, the entire
cart is simply unloaded and rolled into the customer's storeroom. The cart
delivery system improves productivity of the Company's drivers, enhances
utilization of its tractors and trailers and improves employee safety. The
Company is currently using cart delivery for approximately 30% of its
restaurants.
The Company believes that the cart delivery system represents a major
innovation in foodservice distribution methods. The Company hopes to expand the
cart delivery system by leaving the carts at the customer's location until the
next delivery, allowing them to be used as shelving by the customer, and
developing new software which would manage the loading of the carts and
trailers, thereby maximizing cart utilization and ease of customer use.
Fleet. The Company's fleet, as of December 28, 1996, consisted of
approximately 1,450 vehicles, including approximately 600 tractors and 850
trailers. The Company leases approximately 450 of the tractors from Ryder
System, Inc. pursuant to full-service leases which include maintenance,
licensing and fuel tax reporting. The remaining tractors are leased under
similar full-service leases from a variety of truck leasing companies. The
Company leases approximately 390 trailers from GE Capital Services. The
remainder are either Company-owned or leased from various other companies. Lease
terms average six years for tractors and 7-10 years for trailers.
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Substantially all of the Company's vehicles contain on-board computers. The
computers assist in managing fleet operations and provide expense controls,
automated service level data collection and real-time driver feedback, thereby
enhancing the Company's service level to customers. Substantially all of the
Company's trailers contain three temperature-controlled compartments, which
allow the Company to simultaneously deliver frozen food, refrigerated food and
dry goods.
Management Information Systems. The Company currently has in place a
variety of information technology systems, including electronic ordering,
inventory management, financial and routing systems. These systems represent a
combination of systems that were installed in 1993 following formation of the
Company and systems that were acquired in connection with the acquisition of
NAD. The Company is in the process of integrating these systems and installing
new system technologies in the areas of electronic customer ordering, "order
optimization" to manage the Company's purchasing and inventory functions, and
freight management. In addition, in connection with its "network optimization"
program, the Company intends to put in place new customer ordering and warehouse
management systems. Management believes that these systems will allow the
Company to manage the complexity and diversity of its business at a lower cost
and with higher service levels.
CUSTOMERS
The Company's customers as of December 28, 1996 consisted of 2,960
franchisees and 14 franchisor owners of approximately 14,600 quick service and
casual dining chain restaurants representing 17 restaurant chains. The Company
is generally one of a limited number of suppliers to the chains it serves. The
largest chains served by the Company in 1996 were Burger King, Red Lobster and
Arby's, representing 41%, 14% and 10% of 1996 net sales, respectively. In
January 1997, the Company announced the termination, effective March 31, 1997,
of its distribution agreement with Arcop, the purchasing cooperative for Arby's.
Although the Arby's chain represented a significant portion of the Company's net
sales in 1996 and the loss of this business is expected to impact the Company's
growth rate in 1997, such loss should not have a material adverse impact on 1997
results. The Company's largest customer is Darden Restaurants, Inc. (owner of
all Olive Garden and Red Lobster restaurants), representing 20% of the Company's
1996 net sales. No other chain or single customer accounted for more than 10% of
the Company's net sales in 1996.
The Company has contracts with customers representing approximately 75% of
net sales, with terms ranging from 2-7 years and an average term of three years.
In connection with the acquisition of BKDS in 1992, the Company entered into an
exclusive distributor agreement and related distribution agreements with BKC,
pursuant to which, through 2002, (i) the Company is designated as the exclusive
distributor to BKC's company-owned and operated Burger King restaurants in the
United States (which accounted for 4.6% of 1996 net sales), (ii) the Company is
one of ten companies approved as regional distributors to franchised Burger King
restaurants in the United States, and (iii) the Company is the only company
approved by BKC to service Burger King restaurants on a national basis. BKC has
the right to terminate these contracts (i) upon a material failure to perform by
the Company and (ii) in the case of the exclusive distributor agreement, upon
the bankruptcy of the Company. In addition to the 517 BKC-owned restaurants, as
of December 28, 1996, the Company also serviced 4,288 Burger King restaurants
owned by franchisees. In the aggregate, this represents 69% of all Burger King
restaurants in the United States. The Company has also entered into distribution
agreements with Olive Garden and Red Lobster pursuant to which the Company is
the primary distributor to the restaurants owned by Olive Garden and Red Lobster
operating in the United States. All Olive Garden and Red Lobster restaurants are
currently company-owned. Olive Garden and Red Lobster have the right to
terminate their respective agreements upon (i) a material change in ownership of
the Company other than as a result of a public offering by the Company, (ii) a
material breach by the
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Company, (iii) the bankruptcy of the Company and (iv) a failure of the Company
to meet certain performance reliability standards. Both agreements terminate in
1998. The Company believes that from time to time it may not have been in strict
compliance with all of the performance reliability standards in such contracts.
However, it is not aware of any issues of non-compliance which could reasonably
be expected to result in early termination of such contracts.
PURCHASING AND SUPPLY
The Company purchases and distributes a wide variety of items, including
fresh and frozen meat and poultry, seafood, frozen foods, canned and dry goods,
fresh and pre-processed produce, beverages, dairy products, paper goods and
cleaning and other supplies. Due to the high volume of proprietary products
required by chain restaurants, the chain typically negotiates product sourcing
directly with vendors and then requires the distributor to use such vendors and
purchase at the negotiated price. Furthermore, customers within the same chain
often cooperate to utilize internal or third party purchasing organizations.
Because suppliers for proprietary products are generally designated by the
chain, the loss of any such supplier would likely result in the development of a
new source of supply by such chain. Substantially all types of nonproprietary
products distributed by the Company are available from a variety of suppliers,
some of which also supply the Company with proprietary products. Accordingly,
the Company does not believe that the loss of any supplier would have a material
adverse effect on the Company's operating results or its ability to serve its
customers.
The Company's emphasis on supply chain management has allowed the Company
to identify the purchasing of non-proprietary products as a value-added service
which it can provide to customers. The Company has formed a purchasing
subsidiary which pools the needs of its customers for non-proprietary products,
such as unlabeled paper products, cleaning supplies and produce, and uses the
resulting purchasing power to negotiate lower prices with vendors. The Company
and its customers share in the cost savings, improving margins for the Company
and reducing costs for its customers. The Company believes that expansion of its
purchasing services represents an important opportunity for growth.
MARKETING AND CUSTOMER SERVICE
The Company's senior management, together with a team of marketing, sales
and customer service personnel, are involved in maintaining relationships with
key customers and securing new accounts. The Company targets as potential new
customers restaurant chains offering menu categories not covered by the
Company's existing customers, chains operating in geographic areas in which the
Company could benefit from increased customer density, and growing regional
chains which could be added to the national chains which have traditionally been
the Company's focus. In seeking new customers, the Company attempts to
concentrate on growing chains served by broadline distributors which might
benefit from the industry focus that a systems distributor brings, as well as
chains which the Company believes would benefit from the quality of service and
attention to supply chain management that the Company provides to its customers.
The Company's customer service activities are highly customized to the
unique needs of the customer. Each customer has a dedicated account manager who
is responsible for overseeing all of its service needs and coordinating the
services provided through an account team of customer service professionals,
including a dedicated "logistics services manager." The logistics services
manager is responsible for coordinating day-to-day product flow for the
customer, as well as working closely with the customer's purchasing and
marketing organization.
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The Company rigorously monitors customer service levels. In order to manage
problem resolution, the Company is implementing professional help desk software
which tracks customer calls in order to ensure that appropriate action and
follow-up occurs. The Company utilizes frequent trips to the customer's site for
regularly scheduled reviews and key project meetings and telephone conferencing
in order to ensure close coordination between the Company and the customer. In
addition, the Company monitors customer perceptions through periodic surveys.
COMPETITION
The foodservice distribution industry is highly competitive. The Company
competes with other systems foodservice distribution companies focused on chain
restaurants and with broadline foodservice distributors. The Company's principal
national competitors are Sysco Corp., Alliant Foodservice Inc. (formerly Kraft
Distribution), MBM Corp., Ameriserve, Marriott Distribution Services Inc., King
Provision Corp. and Pepsi Foodservices, an in-house distributor for PepsiCo,
Inc. The Company also competes with regional distributors, principally for
business from franchisee-owned Burger King restaurants. The Company believes
that distributors in the foodservice industry compete on the basis of price and
the quality and reliability of service. Because a number of the Company's
customers prefer a distributor that is able to service their restaurants on a
nationwide basis, the Company believes that it is in a strong position to
compete for national chain accounts. The Company attributes its ability to
compete effectively against smaller regional and local distributors in part to
the cost advantages resulting from its size, centralized purchasing operations
and ability to offer broad market coverage through a wide network of
distribution centers. However, in light of the consolidation in the foodservice
distribution industry, the Company could face increased competition to the
extent that there is an increase in the number of foodservice distributors
specializing in distribution to chain restaurants on a nationwide basis.
In addition, distribution fees received from a number of the Company's
customers decreased significantly in 1993 and 1994 as a result of competitive
pricing pressures. While distribution fees stabilized in 1995 and 1996 and
management expects such stabilization to continue in 1997, there can be no
assurance that competitive pricing pressure will not recur in the future.
EMPLOYEES
As of December 28, 1996, the Company had approximately 3,850 full-time
employees, of whom approximately 410 were employed in corporate support
functions and approximately 3,440 were warehouse, driver and administrative
staff in the distribution centers. Approximately 575 of the Company's employees
were covered by eight collective bargaining contracts with six local unions, all
of which are associated with the International Brotherhood of Teamsters. One
contract, covering approximately 20 employees, expired at the end of 1996 and
the Company is in the process of negotiating a renewal of such contract. Three
contracts, covering approximately 195 employees, will expire during 1997. The
Company has not experienced any significant labor disputes or work stoppages.
The Company believes that its relationships with its employees are good.
REGULATORY MATTERS
The Company is subject to a number of federal, state and local laws,
regulations and codes, including those relating to the protection of human
health and the environment, compliance with which has required, and will
continue to require, capital and operating expenditures. The Company is not
aware of any violations of, or pending changes in, such laws, regulations and
codes that are likely to result in material penalties or material increases in
compliance costs. The Company, however, is not able to predict the
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impact of any changes in the requirements or mode of enforcement of these laws,
regulations and codes on its operating results.
The Company owns and leases distribution centers, at some of which on-site
vehicle fueling activities may have resulted in releases of diesel or other
petroleum products to the soil or groundwater. The Company may be subject to
liability for clean-up of contaminated soil or groundwater at these distribution
centers and is in the process of investigating or remediating the contamination.
Although there can be no assurances, the Company does not believe that the
estimated costs associated with any required investigation or remediation will
have a material adverse effect on the Company's financial condition, results of
operations or liquidity. The Company has engaged in a program to remove
underground fuel storage tanks located on its properties. As a result, with the
exception of one such tank, which is scheduled to be removed in the second
quarter of 1997, all underground fuel storage tanks have been removed from the
Company's properties. In addition, several of the Company's facilities are
located over areas of regional groundwater contamination or are near sites which
have contaminated soil or groundwater. The Company has not been named a
responsible party at, and does not anticipate any liability associated with, any
of these sites.
CONTROLLING STOCKHOLDER
The Company is controlled by Onex. Onex Corporation, based in Toronto,
Canada, is a publicly listed (on The Toronto Stock Exchange and The Montreal
Exchange) diversified company that operates through autonomous subsidiaries and
strategic partnerships. Onex had consolidated revenues of Cdn. $8.9 billion for
1996 and consolidated assets of Cdn. $3.8 billion at December 31, 1996. In
addition to its interests in ProSource, as of December 31, 1996, Onex had
investments in a broad range of companies, including Onex Food Services, Inc.
(which does business through its subsidiaries, Sky Chefs, Inc. and Caterair
International Inc.), Celestica International Holdings Inc., Dura Automotive
Systems, Inc., Tower Automotive, Inc., Phoenix Pictures Inc. and Vencap, Inc.
None of Onex's current businesses competes with or is a customer of the Company.
Onex currently owns 88.3% of the outstanding Class B Common Stock and 14.7% of
the outstanding Class A Common Stock, representing 84.3% of the combined voting
power of the outstanding Common Stock.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
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<S> <C> <C>
David R. Parker 53 Chairman of the Board of Directors
Thomas C. Highland 55 President, Chief Executive Officer and Director
Daniel J. Adzia 54 Vice-Chairman, Chief Marketing Officer and Director
William F. Evans 49 Executive Vice President, Chief Financial Officer
Paul A. Garcia de Quevedo 42 Vice President, Treasurer and Secretary
Maurice L. Ambler 49 Senior Vice President, Human Resources
Dennis T. Andruskiewicz 43 Senior Vice President, Operations Support
William G. Berryman 53 Senior Vice President, Chief Information Officer
Robert S. Donaldson 41 Senior Vice President, Field Operations
John E. Foley 47 Senior Vice President, Operations Development
John P. Gainor 39 Senior Vice President, Logistics and Purchasing
</TABLE>
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David R. Parker Mr. Parker has served as Chairman of the Board of Directors
since the formation of the Company in 1992. From July 1, 1991 to July 1, 1992,
Mr. Parker was an independent investor, working primarily on the formation of
the Company and the acquisition of BKDS from BKC. Prior to such time, he was
Senior Executive Vice President of Ryder System, Inc. and President of the
Vehicle Leasing and Services Division. Previously, he was Chief Operating
Officer of Ryder's Business Services Group which included the company's
worldwide aviation support businesses and its insurance management services
businesses. Before joining Ryder System in 1984, Mr. Parker was Executive Vice
President and Sector Executive of American Can Company (Primerica). Mr. Parker
serves on the Boards of Directors of Premark International, Inc., SunTrust Bank,
Miami, N.A. and Tupperware Corporation.
Thomas C. Highland Mr. Highland has served as President, Chief Executive
Officer and a Director of the Company since its formation in 1992. Before
serving in this capacity, Mr. Highland was President of BKDS from 1988 to 1992.
Prior thereto, he held various executive positions at Warner Lambert Company,
including Vice President, U.S. Distribution, Director, Distribution Operations,
Pharmaceutical Group and Director, Distribution Center Operations from 1963 to
1988.
Daniel J. Adzia Mr. Adzia has served as Vice-Chairman, Chief Marketing
Officer of the Company since the acquisition of NAD in March 1995 and a Director
of the Company since April 1995. From 1975 to 1995, Mr. Adzia served in various
executive capacities at Martin-Brower including President of NAD. Prior to
joining Martin-Brower, Mr. Adzia held various sales and sales management
positions with Oscar Mayer & Co.
William F. Evans Mr. Evans has served as Executive Vice President, Chief
Financial Officer of the Company since July 1995. Prior to joining the Company,
he was the Senior Vice President, Corporate Operations of H&R Block, Inc. from
August 1992 to June 1995. Prior to 1992, Mr. Evans served in executive
capacities at D&B Software Services, Inc. from 1990 to 1992, Management Science
America, Inc. from 1989 to 1990 and Electromagnetic Sciences, Inc. from 1985 to
1989. From June 1980 to November 1985, Mr. Evans served as a partner of KPMG
Peat Marwick LLP, the Company's independent auditors. Mr. Evans serves as a
Director of Interim Services, Inc. Mr. Evans is a certified public accountant.
Paul A. Garcia de Quevedo Mr. Garcia has served as Vice President,
Treasurer and Secretary of the Company since its formation in 1992. Prior to
such time, Mr. Garcia served as Vice President, Finance, for BKDS. Mr. Garcia
joined BKDS in January 1986. Mr. Garcia is a certified public accountant.
Maurice L. Ambler Mr. Ambler has served as Senior Vice President of Human
Resources of the Company since January 1997. From July 1992 to December 1996,
Mr. Ambler served as Vice President of Human Resources. Prior to such time, Mr.
Ambler was Senior Director of Human Resources of BKDS from April 1991 to June
1992, and Director of Human Resources for BKDS from July 1990 to April 1991.
Prior to joining BKDS, Mr. Ambler held various human resources positions at ITT
Sheraton, Pepsico Inc.'s Pizza Hut and Frito-Lay divisions and Miller Brewing
Company.
Dennis T. Andruskiewicz Mr. Andruskiewicz has served as Senior Vice
President, Operations Support of the Company since the acquisition of NAD in
March 1995. Before serving in such capacity, Mr. Andruskiewicz was the Vice
President of Distribution for Martin-Brower from 1990 to 1995 and the Director
of Distribution for the Planters Life Savers Division of RJR Nabisco from 1974
to 1990.
William G. Berryman Mr. Berryman has served as Senior Vice President, Chief
Information Officer of the Company since May 1996. Before serving in such
capacity, Mr. Berryman was Chief Information Officer, Vice President, MIS for
The Penn Traffic Company, a food, general merchandise and drug retailer
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and involved in the manufacture of various food products from May 1995 to April
1996, Vice President for Technology Solutions Co. from September 1994 to April
1995 and Vice President, MIS, for Dominick's Finer Foods from April 1989 to
December 1993.
Robert S. Donaldson Mr. Donaldson has served as Senior Vice President,
Field Operations of the Company since January 1995. From January 1993 to
December 1994, he served as Vice President of Business Development of the
Company. Prior to joining the Company, Mr. Donaldson was the President of
Institution Food House, Inc., a broadline foodservice distributor from 1986 to
1993 and Vice President of Sky Brothers, Inc., a foodservice distributor from
1973 to 1986.
John E. Foley Mr. Foley has served as Senior Vice President, Operations
Development of the Company since August 1995 and Senior Vice President, Finance
and Systems, Chief Financial Officer from April 1994 to July 1995. Prior to
joining the Company, Mr. Foley was the Senior Vice President, Grand Metropolitan
Computer Systems for Grand Metropolitan, PLC from 1992 to 1995 and Vice
President, MIS for BKC from 1990 to 1992.
John P. Gainor Mr. Gainor has served as Senior Vice President, Logistics
and Purchasing of the Company since November 1995, Vice President, Operations
Support from July 1992 to May 1993 and from November 1994 to November 1995 and
Eastern Region, Vice President from June 1993 to October 1994. Prior to joining
the Company in April 1992, he held various executive positions, including
Director, Transportation and Planning, Manager, Transportation, Manager, Private
Carriage Operations and Regional Transportation Manager, at Warner Lambert
Company since 1982.
There is no family relationship between any of the executive officers of
the Company. Each executive officer is elected annually by the Board of
Directors and holds office until the next annual meeting of the Board of
Directors and until his successor is elected and qualified, subject, in the case
of Messrs. Parker, Highland, Adzia, Garcia de Quevedo, Andruskiewicz and Foley,
to the employment agreement between such officer and the Company.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains certain forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934. Actual
results could differ materially from those projected in such forward-looking
statements. The forward-looking statements included in this Annual Report on
Form 10-K concerning, among other things, sources of growth, economic conditions
and trends in the quick service and casual dining segments of the restaurant
industry and plans and objectives of management for future operations (including
those concerning the Company's programs for a new distribution center network,
cart delivery and new information systems and upgrades) are projections and are
necessarily subject to various risks and uncertainties. Actual outcomes are
affected by economic trends in the quick service and casual dining segments of
the restaurant industry, competitive conditions in the foodservice industry,
adverse developments affecting the largest chains serviced by the Company or a
decision by a major customer to revoke its approval of the Company as a
distributor, developments such as unforeseen costs and expenses, inflation and
complications arising from the complexity of the new network, and the Company's
continued ability to make acquisitions of businesses on satisfactory terms.
ITEM 2. PROPERTIES.
In the fourth quarter of 1996, the Company substantially completed the
consolidation of its principal executive office and administrative facility into
a new principal executive office and corporate support
9
<PAGE> 12
center located in Coral Gables, Florida. This facility consists of approximately
83,000 square feet and is leased pursuant to a lease which expires September
2007.
The Company operates 34 distribution centers, of which 20 facilities
(representing an aggregate of approximately 832,830 square feet) are leased and
14 facilities (representing an aggregate of approximately 1,506,370 square feet)
are owned by the Company. In December 1996, the Company leased its first new
site under its network optimization program, a 92,000 square foot site located
near Denver.
The following table sets forth certain information with respect to the Company's
operating distribution centers:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FEET
-------- -----------
<S> <C>
Atlanta, Georgia(1) 217,670
Burlington, New Jersey 60,880
Chester, New York 131,400
Chicago, Illinois 67,457
Cleveland, Ohio 40,540
Columbus, Ohio 174,000
Dallas, Texas (1)(3) 176,400
Denver, Colorado(4) 57,608
Detroit, Michigan 34,897
Greensboro, North Carolina 41,000
Gridley, Illinois 151,000
Houston, Texas(1) 77,900
Kansas City, Kansas(2)(5) 216,450
Lakeland, Florida 31,806
Los Angeles, California(2) 245,540
Miami, Florida 31,225
New Orleans, Louisiana 36,180
New York, New York 35,000
Norman, Oklahoma (6) 52,000
Orlando, Florida 150,000
Oxford, Massachusetts 40,000
Phoenix, Arizona 38,200
Portland, Oregon 74,500
San Jose, California 31,500
Trenton, Ontario 20,000
Virginia Beach, Virginia 23,045
Washington, DC(7) 83,000
---------
Total: 2,339,198
=========
</TABLE>
- ----------
(1) Two facilities.
(2) Three facilities.
(3) Includes approximately 39,200 square feet of supplemental space in three
remote facilities.
(4) Includes approximately 38,610 square feet of supplemental space in two
remote facilities.
(5) Includes approximately 23,500 square feet of supplemental space in a remote
facility.
(6) Includes approximately 11,000 square feet of supplemental space in a remote
facility.
(7) Includes approximately 30,000 square feet of supplemental space in a remote
facility.
10
<PAGE> 13
fTEM 3. LEGAL PROCEEDINGS.
From time to time the Company is involved in litigation relating to claims
arising out of its normal business operations. The Company is not currently
engaged in any legal proceedings that are expected, individually or in the
aggregate, to have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the stockholders during the fourth
quarter ended December 28, 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
The Company's Class A Common Stock began trading on the Nasdaq National
Market under the symbol "PSDS" on November 12, 1996. The table below sets forth
the high and low sales prices per share for the Company's Class A Common Stock
as reported on the Nasdaq National Market for each fiscal quarter or portion
thereof subsequent to the commencement of trading.
<TABLE>
<CAPTION>
Fiscal Year
- -----------
Sale Prices
-----------
1996 High Low
- ---- ---- ---
<S> <C> <C>
Fourth Quarter (from November 12, 1996)............................. $14 1/8 $9 3/4
</TABLE>
As of February 28, 1997, the closing price for the Company's Class A Common
Stock on the Nasdaq National Market was $12.25, and the approximate number of
record owners of the Company's Class A Common Stock and Class B Common Stock was
35 and 66, respectively. At such date, the Company had approximately 1,600
beneficial owners of its Class A Common Stock and Class B Common Stock, in the
aggregate.
The Company has not paid any cash dividends on its common stock since
inception. The current policy of the Company's Board of Directors is to retain
all earnings to provide funds for the operation and expansion of the Company's
business. The Company does not anticipate declaring or paying cash dividends on
the common stock in the foreseeable future. Future cash dividends, if any, will
be at the discretion of the Board of Directors and will depend upon, among other
things, future earnings, capital requirements and surplus, the general financial
condition of the Company, restrictive covenants and agreements to which the
Company may be subject, and such other factors as the Board of Directors may
deem relevant. The terms of the Company's credit agreement prohibit it from
paying dividends to its stockholders without the approval of the lending group.
Holders of Class A Common Stock and Class B Common Stock share ratably in any
dividend declared by the Board of Directors, subject to the preferential rights
of any outstanding Preferred Stock.
Each share of Class A Common Stock is entitled to one vote and each share
of Class B Common Stock is entitled to ten votes. Except as otherwise required
by law, the Class A Common Stock and Class B Common Stock vote together on all
matters submitted to a vote of stockholders, including the election of
directors. Each share of Class B Common Stock is convertible at the option of
the holder thereof into one share of Class A Common Stock. Any shares of Class B
Common Stock transferred to a person other than
11
<PAGE> 14
an existing holder of Class B Common Stock or any affiliate thereof shall
automatically convert into shares of Class A Common Stock upon such disposition.
In addition, in the event that any employee of the Company holding Class B
Common Stock ceases to be an employee for any reason, the shares of Class B
Common Stock held by such employee shall automatically convert into shares of
Class A Common Stock, unless transferred to Onex or another employee
stockholder.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
The Company's 1996 Annual Report to Stockholders contains under the caption
"Selected Consolidated Financial Data" information required by Item 6 of Form
10-K and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Company's 1996 Annual Report to Stockholders contains under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" information required by Item 7 of Form 10-K and is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's 1996 Annual Report to Stockholders contains the following
financial statements required by Item 8 of Form 10-K and is incorporated herein
by reference:
Independent Auditors' Report
Consolidated Balance Sheets at December 28, 1996 and December 30,1995
Consolidated Statements of Operations for the fiscal years
ended December 28, 1996, December 30, 1995 and December 31, 1994
Consolidated Statements of Stockholders' Equity for the fiscal
years ended December 28, 1996, December 30, 1995 and December 31, 1994
Consolidated Statements of Cash Flows for the fiscal years ended
December 28, 1996, December 30, 1995 and December 31, 1994
Notes to Consolidated Financial Statements
The following Financial Statement Schedules are filed herewith:
Page of Form 10-K
-----------------
Independent Auditors' Report on Financial
Statement Schedules............................................... S-1
Schedule I - Condensed Financial Information of
the Company....................................................... S-2
Schedule II - Valuation and Qualifying Accounts.................... S-7
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
12
<PAGE> 15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Proxy Statement issued in connection with the annual stockholders
meeting to be held on April 29, 1997 contains under the caption "Election of
Directors" information required by Item 10 of Form 10-K and is incorporated
herein by reference. Pursuant to General Instruction G(3), certain information
concerning executive officers of the Company is included in Part I of this Form
10-K, under the caption "Executive Officers."
ITEM 11. EXECUTIVE COMPENSATION.
The Proxy Statement issued in connection with the annual stockholders
meeting to be held on April 29, 1997 contains under the caption "Executive
Compensation" information required by Item 11 of Form 10-K and is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Proxy Statement issued in connection with the annual stockholders
meeting to be held on April 29, 1997 contains under the captions "Security
Ownership" information required by Item 12 of Form 10-K and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Proxy Statement issued in connection with the annual stockholders
meeting to be held on April 29, 1997 contains under the caption "Certain
Transactions" information required by Item 13 of Form 10-K and is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. and 2. Financial Statements and Financial Statement Schedules
The financial statements set forth in Item 8 and in the Index to Financial
Statements in the Company's 1996 Annual Report to Stockholders incorporated by
reference into this Annual Report on Form 10-K.
3. See (c) below.
(b) Reports on Form 8-K
During the fourth quarter of 1996, the Company filed no reports on
Form 8-K.
(c) List of Exhibits
13
<PAGE> 16
Exhibit
No. Description of Document
- --- -----------------------
3.1 Restated Certificate of Incorporation of the Company
3.2 Amended and Restated By-Laws of the Company
4.1 Form of Certificate for Class A Common Stock(4)
10.1 Amended and Restated Management Shareholders Agreement among
ProSource, Inc., Onex DHC LLC and the individuals party thereto
from time to time
10.2 Amended and Restated Director Shareholders Agreement among
ProSource, Inc., Onex DHC LLC and the individuals party thereto
from time to time
10.3 Stock Subscription Warrant, dated March 31, 1995, issued by
ProSource, Inc. in favor of The Martin-Brower Company to
subscribe for 283,425 shares of Common Stock(1)
10.4 Agreement, dated November 10, 1994, for the Purchase and Sale of
the National Accounts Division of The Martin-Brower Company and
Martin-Brower of Canada, Ltd., among ProSource, Inc., The
Martin-Brower Company and Martin-Brower of Canada, Ltd.(1)
10.5 Purchase Agreement Amendment, dated February 24, 1995, among The
Martin-Brower Company, Martin-Brower of Canada, Ltd. and
ProSource, Inc.(1)
10.6 Second Purchase Agreement Amendment, dated February 28, 1995,
among The Martin- Brower Company, Martin-Brower of Canada, Ltd.
and ProSource, Inc.(1)
10.7 Third Purchase Agreement Amendment, dated March 31, 1995, among
The Martin-Brower Company, Martin-Brower of Canada, Ltd. and
ProSource, Inc.(1)
10.8 Loan and Security Agreement, dated as of March 31, 1995, among
ProSource Services Corporation, BroMar Services, Inc., ProSource
Distribution Services Limited, the Financial Institutions party
thereto and NationsBank of Georgia, N.A., The First National Bank
of Boston and Shawmut Capital Corporation, as Co-Agents, and
NationsBank of Georgia, N.A., as Administrative Agent(1)
10.9 Amendment No. 1, dated as of December 29, 1995, to Loan and
Security Agreement, among ProSource Services Corporation, BroMar
Services, Inc., ProSource Distribution Services Limited, the
Financial Institutions party thereto and NationsBank of Georgia,
N.A., The First National Bank of Boston and Shawmut Capital
Corporation, as Co-Agents, and NationsBank of Georgia, N.A., as
Administrative Agent(1)
10.10 Amendment No. 2 and Waiver, dated as of March 28, 1996, to Loan
and Security Agreement, among ProSource Services Corporation,
BroMar Services, Inc., ProSource Distribution Services Limited,
the Financial Institutions party thereto and NationsBank, N.A.
(South), The First National Bank of Boston and Fleet Capital
Corporation, as Co- Agents, and NationsBank, N.A. (South), as
Administrative Agent(1)
14
<PAGE> 17
10.11 Amendment No. 3 and Consent, dated as of September 6, 1996, to
Loan and Security Agreement, among ProSource Services
Corporation, BroMar Services, Inc., ProSource Distribution
Services Limited, the Financial Institutions party thereto and
NationsBank, N.A. (South), The First National Bank of Boston and
Fleet Capital Corporation, as Co- Agents, and NationsBank, N.A.
(South), as Administrative Agent(4)
10.12 Amendment No. 4 and Consent, dated as of September 26, 1996, to
Loan and Security Agreement, among ProSource Services
Corporation, BroMar Services, Inc., ProSource Distribution
Services Limited, the Financial Institutions party thereto and
NationsBank, N.A. (South), The First National Bank of Boston and
Fleet Capital Corporation, as Co- Agents, and NationsBank, N.A.
(South), as Administrative Agent(4)
10.13 Amendment No. 5 and Consent, dated as of December 27, 1996, to
Loan and Security Agreement, among ProSource Services
Corporation, BroMar Services, Inc., ProSource Distribution
Services Limited, the Financial Institutions party thereto and
NationsBank, N.A. (South), The First National Bank of Boston and
Fleet Capital Corporation, as Co- Agents, and NationsBank, N.A.
(South), as Administrative Agent
10.14 Amendment No. 6 and Consent, dated as of February 7, 1997, to
Loan and Security Agreement, among ProSource Services
Corporation, BroMar Services, Inc., ProSource Distribution
Services Limited, the Financial Institutions party thereto and
NationsBank, N.A. (South), The First National Bank of Boston and
Fleet Capital Corporation, as Co- Agents, and NationsBank, N.A.
(South), as Administrative Agent
10.15 Pledge Agreement, made as of March 31, 1995, by ProSource, Inc.
in favor of NationsBank of Georgia, N.A., as Administrative
Agent(1)
10.16 Pledge Agreement, made as of March 31, 1995, by ProSource
Services Corporation in favor of NationsBank of Georgia, N.A., as
Administrative Agent(1)
10.17 Subordination Agreement, dated as of March 31, 1995, made by
ProSource Services Corporation and Onex Corporation in favor of
NationsBank of Georgia, N.A., as Administrative Agent(1)
10.18 Unconditional Guaranty, made as of March 31, 1995, by ProSource,
Inc. in favor of NationsBank of Georgia, N.A., as Administrative
Agent(1)
10.19 Subordinated Note, dated March 31, 1995, executed by ProSource,
Inc. and payable to the order of The Martin-Brower Company in the
original principal amount of $10,000,000(1)
10.20 Subordinated Note, dated March 31, 1995, executed by ProSource
Services Corporation and payable to the order of Onex Ohio
Holdings, Inc. in the original principal amount of $15,000,000(1)
10.21 Credit Agreement, dated as of March 14, 1997, among ProSource
Services Corporation, various Financial Institutions and The Bank
of Nova Scotia, as Administrative Agent
15
<PAGE> 18
10.22 Revolving Note, dated March 14, 1997, executed by ProSource
Services Corporation and payable to the order of The Bank of Nova
Scotia in the original principal amount of $150,000,000
10.23 Borrower Pledge Agreement, made as of March 14, 1997, by
ProSource Services Corporation in favor of The Bank of Nova
Scotia, as Administrative Agent
10.24 Parent Pledge Agreement, made as of March 14, 1997, by ProSource,
Inc. in favor of The Bank of Nova Scotia, as Administrative Agent
10.25 Parent Guaranty, made as of March 14, 1997, by ProSource, Inc. in
favor of The Bank of Nova Scotia, as Administrative Agent
10.26 Subsidiary Guaranty, made as of March 14, 1997, by Bromar
Services, Inc. in favor of The Bank of Nova Scotia, as
Administrative Agent
10.27 Secured Credit Agreement, dated as of March 14, 1997, among
ProSource Receivables Corporation and ProSource Services
Corporation, as Servicer, and various Financial Institutions and
the Bank of Nova Scotia, as Issuer, as Swingline Bank and as
Administrative Agent
10.28 Purchase and Sale Agreement, dated as of March 14, 1997, between
ProSource Services Corporation and ProSource Receivables
Corporation
10.29 Note, dated March 14, 1997, executed by ProSource Receivables
Corporation and payable to the order of The Bank of Nova Scotia
in the original principal amount of $150,000,000
10.30 Swingline Note, dated March 14, 1997, executed by ProSource
Receivables Corporation and payable to the order of The Bank of
Nova Scotia in the original principal amount of $15,000,000
10.31 Form of Distribution Agreement, dated as of June 30, 1992,
between Burger King Corporation and ProSource Services
Corporation(1)
10.32 Form of Amendment Agreement, dated as of June 30, 1992, between
Burger King Corporation and ProSource Services Corporation(1)
10.33 Addendum to Forms of Distribution Agreement and Amendment
Agreement(1)
10.34 Amended and Restated Employment Agreement, dated as of November
15, 1996, between ProSource Services Corporation and David R.
Parker
10.35 Amended and Restated Employment Agreement, dated as of November
15, 1996, between ProSource Services Corporation and Thomas C.
Highland
10.36 Employment Agreement, dated as of April 1, 1995, between
ProSource Services Corporation and Daniel Adzia(1)
16
<PAGE> 19
10.37 Employment Agreement, dated July 1, 1992, between ProSource
Services Corporation and Paul A. Garcia de Quevedo(1)
10.38 Employment Agreement, dated as of July 1, 1995, between ProSource
Services Corporation and Dennis Andruskiewicz(1)
10.39 Employment Agreement, dated April 1, 1994, between ProSource
Services Corporation and John E. Foley(1)
10.40 Amended and Restated Management Option Plan (1995)(5)
10.41 1996 Stock Option Plan(5)
10.42 Truck Lease and Service Agreement, dated as of May 19, 1995,
between Ryder Truck Rental, Inc. and ProSource Services
Corporation (4)(6)
10.43 Lease Agreement, dated as of August 22, 1991, between Burger King
Corporation (subsequently assigned to ProSource Services
Corporation) and Gelco Corporation, doing business as GE Capital
Fleet Services(4)
10.44 Management Advisory Agreement, dated as of July 1, 1992, between
OMI Partnership Holdings Ltd., an affiliate of Onex Corporation,
and ProSource Services Corporation(4)
10.45 Termination Agreement, dated as of November 15, 1996, between OMI
Partnership Holdings Ltd., an affiliate of Onex Corporation, and
ProSource Services Corporation
13.1 Portions of 1996 Annual Report to Security Holders
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule
- -------------
(1) Incorporated by reference to the Registration Statement (Registration No.
333-11499) on Form S-1 of the Company.
(2) Incorporated by reference to Amendment No. 1 to the Registration Statement
(Registration No. 333-11499) on Form S-1 of the Company.
(3) Incorporated by reference to Amendment No. 2 to the Registration Statement
(Registration No. 333-11499) on Form S-1 of the Company.
(4) Incorporated by reference to Amendment No. 3 to the Registration Statement
(Registration No. 333-11499) on Form S-1 of the Company.
(5) Incorporated by reference to Amendment No. 4 to the Registration Statement
(Registration No. 333-11499) on Form S-1 of the Company.
(6) Confidential treatment has been requested for portions of this Exhibit.
17
<PAGE> 20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PROSOURCE, INC.
Date: March 24, 1997 By:/s/ David R. Parker
-------------------------
David R. Parker
Chairman of the Board of Directors
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ David R. Parker Chairman of the Board of Directors March 24, 1997
- ----------------------- (principal executive officer)
David R. Parker
/s/ Thomas C. Highland President, Chief Executive Officer March 24, 1997
- ----------------------- and Director
Thomas C. Highland
/s/ Daniel J. Adzia Vice-Chairman, Chief Marketing March 24, 1997
- ----------------------- Officer and Director
Daniel J. Adzia
/s/ William F. Evans Executive Vice President,
- ----------------------- Chief Financial Officer March 24, 1997
William F. Evans (principal financial officer)
/s/ Marcelino Iturrey Vice President, Controller March 24, 1997
- ----------------------- (principal accounting officer)
Marcelino Iturrey
/s/ Gerald W. Schwartz Director March 24, 1997
- -----------------------
Gerald W. Schwartz
/s/ Anthony R. Melman Director March 24, 1997
- -----------------------
Anthony R. Melman
/s/ Michael E. Treacy Director March 24, 1997
- -----------------------
Michael E. Treacy
18
<PAGE> 21
/s/ Michael Carpenter Director March 24, 1997
- -----------------------
Michael Carpenter
/s/ Anthony Munk Director March 24, 1997
- -----------------------
Anthony Munk
/s/ C. Lee Johnson Director March 24, 1997
- -----------------------
C. Lee Johnson
/s/R. Geoffrey P. Styles Director March 24, 1997
- -----------------------
R. Geoffrey P. Styles
19
<PAGE> 22
INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors and Stockholders
ProSource, Inc.:
Under date of February 12, 1997, we reported on the consolidated balance sheets
of ProSource, Inc. and subsidiaries as of December 28, 1996 and December 30,
1995, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 28, 1996, which are included in the Company's Annual Report on Form
10-K. In connection with our audits of the aforementioned consolidated financial
statements, we also audited the related financial statement schedules in the
Company's Annual Report on Form 10-K. These financial statement schedules are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Miami, Florida
February 12, 1997
S-1
<PAGE> 23
PROSOURCE, INC. (PARENT ONLY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS INFORMATION
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents ................................... $ 670 $ 939
Due from subsidiaries ....................................... 2,936 96
--------- ---------
Total current assets ................................ 3,606 1,035
Investment in subsidiaries .................................... 72,526 58,935
Deferred income taxes ......................................... 2,383 394
--------- ---------
Total assets ........................................ $ 78,515 $ 60,364
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued liabilities ......................................... $ -- $ 110
--------- ---------
Total current liabilities ................................ -- 110
Subordinated notes payable .................................... -- 9,418
Convertible subordinated notes payable ........................ -- 1,415
Total liabilities ................................... 10,943
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred Stock ............................................. -- --
Class A Common Stock ........................................ 34 --
Class B Common Stock ........................................ 60 52
Additional paid-in-capital .................................. 105,256 51,838
Accumulated deficit ......................................... (26,901) (2,540)
Accumulated foreign currency translation adjustments ........ 66 71
--------- ---------
Total stockholders' equity .......................... 78,515 49,421
--------- ---------
Total liabilities and stockholders' equity .......... $ 78,515 $ 60,364
========= =========
</TABLE>
See accompanying notes to condensed financial information.
S-2
<PAGE> 24
PROSOURCE, INC. (PARENT ONLY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) INFORMATION
FOR THE YEARS ENDED DECEMBER 28, 1996, DECEMBER 30, 1995 AND DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(52 WEEKS) (52 WEEKS) (53 WEEKS)
<S> <C> <C> <C>
REVENUES .................................................... $ -- $ -- $ --
OPERATING EXPENSES .......................................... -- (3) --
CONTRACT TERMINATION CHARGES ................................ (5,224) -- --
INTEREST EXPENSE ............................................ (748) (729) (571)
INTEREST INCOME ............................................. 33 53 55
EQUITY IN LOSSES OF SUBSIDIARIES ............................ (21,418) (1,294) (3,513)
-------- -------- --------
LOSS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM ........... (27,357) (1,973) (4,029)
INCOME TAX BENEFIT .......................................... 2,386 417 1,647
-------- -------- --------
LOSS BEFORE EXTRAORDINARY ITEM ............................. (24,971) (1,556) (2,382)
GAIN ON EARLY RETIREMENT OF DEBT NET OF TAX PROVISION OF $397 610 -- --
-------- -------- --------
NET LOSS .................................................. (24,361) (1,556) (2,382)
RETAINED EARNINGS (DEFICIT), BEGINNING OF YEAR .............. (2,540) (984) 1,398
-------- -------- --------
RETAINED EARNINGS (DEFICIT), END OF YEAR .................... $(26,901) $ (2,540) $ (984)
======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL INFORMATION.
S-3
<PAGE> 25
PROSOURCE, INC. (PARENT ONLY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOW INFORMATION
FOR THE YEARS ENDED DECEMBER 28, 1996, DECEMBER 30, 1995 AND DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(52 WEEKS) (52 WEEKS) (53 WEEKS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ........................................ $(24,361) $ (1,556) $ (2,382)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Undistributed losses of subsidiaries ......... 21,418 914 2,062
Contract termination charges ................. 5,224 -- --
Dividends received from subsidiaries ......... -- 7,208 561
Deferred income taxes ........................ (1,989) (103) (193)
Gain on early retirement of debt ............. (1,007) -- --
Amortization of note discount ................ 740 592 --
Changes in operating assets and liabilities:
Decrease (increase) in other current assets -- 58 (4)
(Decrease) increase in accrued liabilities . (110) 100 10
-------- -------- --------
Net cash provided by (used in) operating
activities ............................ (85) 7,213 54
-------- -------- --------
Cash flows from investing activities:
Capital contributions to subsidiaries ........... (31,807) (38,826) (2)
Advances to/from subsidiaries ................... (2,870) (7,170) 15
-------- -------- --------
Net cash (used in) provided by investing
activities ............................ (34,677) (45,996) 13
-------- -------- --------
Cash flows from financing activities:
Issuance of long-term debt ...................... -- 12,326 --
Repayments of long-term debt .................... (9,766) (2,085) --
Proceeds from issuance of common stock .......... 44,464 28,585 76
Payments to acquire and retire treasury stock ... (205) (222) (415)
-------- -------- --------
Net cash provided by (used in) financing
activities ............................ 34,493 38,604 (339)
-------- -------- --------
Net decrease in cash and cash equivalents (269) (179) (272)
Cash and cash equivalents, beginning of year ...... 939 1,118 1,390
-------- -------- --------
Cash and cash equivalents, end of year ............ $ 670 $ 939 $ 1,118
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest ................................... $ -- $ 41 $ --
======== ======== ========
Income taxes, net of refunds ............... $ -- $ 1 $ 4
======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL INFORMATION.
S-4
<PAGE> 26
PROSOURCE, INC. (PARENT ONLY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLARS IN THOUSANDS)
(1) BASIS OF PRESENTATION
The accompanying condensed financial information should be read in
conjunction with the ProSource, Inc. Consolidated Financial Statements.
Capitalized terms are as defined in the ProSource, Inc. Consolidated Financial
Statements.
(2) LONG-TERM DEBT
Total debt of the Registrant (Parent only) consisted of two agreements at
December 30, 1995 and none at December 28, 1996.
A $10 million subordinated note, with rates ranging from zero to 13%, was
payable to Martin-Brower at December 30, 1995. This note was discounted in 1995
to reflect a constant interest rate through its maturity on March 31, 2002. On
November 21, 1996, in connection with the Parent's initial public offering of
Class A Common Stock, the Company repaid this note to Martin-Brower. The gain on
the early retirement of this note, reflecting the difference between the
carrying value of the note and the repayment amount of $9.2 million, was
recorded as an extraordinary gain in the accompanying condensed financial
information of the Registrant.
A $3.5 million convertible subordinated note was payable to Onex, with
interest at prime rate (8.5 percent at December 30, 1995), compounded annually
and due, together with the principal, on April 1, 2005. During the year ended
December 30, 1995, the Parent paid $2.1 million of such note to Onex resulting
in an outstanding balance of $1.4 million at December 30, 1995. On February 1,
1996, Onex converted $0.8 million of the note into 80,000 shares of the Parent's
common stock and the remaining balance on the note of approximately $0.6 million
plus accrued interest was paid to Onex.
The subsidiaries' Loan and Security Agreements include certain restrictive
covenants which, among other things, limit the flow of funds to the Parent.
Substantially all of the subsidiaries' assets are pledged to secure the
revolving credit facility and term loans, as well as a pledge by the Parent of
all of the issued and outstanding common stock of the subsidiaries. In addition,
the Parent has guaranteed payment of all amounts due under the revolving credit
facility and term loan.
(3) STOCKHOLDERS' EQUITY
In November 1996, the Parent changed its capital structure to 10,000,000
authorized shares of $0.01 par value Preferred Stock, 50,000,000 authorized
shares of $0.01 par value Class A Common Stock and 10,000,000 authorized shares
of $0.01 par value Class B Common Stock. Each share of Class A Common Stock is
entitled to one vote per share and each share of Class B Common Stock is
entitled to ten votes. In addition, each share of Class B Common Stock is
convertible at the option of the holder thereof into one share of Class A Common
Stock.
In November 1996, the Parent's board of directors declared a 100-to-1 stock
split. The Parent's additional paid-in capital account and the Class B Common
Stock account have been restated to retroactively reflect the stock split.
On November 15, 1996, the Parent completed the issuance of 3,400,000 shares
of Class A Common Stock (at a price of $14 per share) through an initial public
offering, resulting in net proceeds of approximately $43.2 million, after
deducting underwriting discounts and commissions, and other offering costs of
approximately $4.4 million. The net proceeds of the offering were partially used
to pay the $10 million subordinated note discussed above and the remainder was
advanced, as a capital contribution to ProSource Services Corporation, a
wholly-owned subsidiary.
S-5
<PAGE> 27
(4) TERMINATION OF CONTRACT AGREEMENTS
In connection with the initial public offering, the Parent incurred a
noncash charge of $4 million resulting from the issuance to Onex of 285,714
shares of Class B Common Stock valued at the initial public offering price in
exchange for the agreement of Onex to relinquish its right to receive an annual
fee, previously paid in cash, for management services rendered to the Company.
In November 1996, the Parent amended the ProSource, Inc. Management Option
Plan (1995) to provide for unvested options to vest at a rate of 10% per year
through December 31, 1999, when all remaining options will vest. In connection
with this amendment, the Parent Company recorded a pre-tax charge of $1.2
million reflecting the difference between the market price of the Company's
Class A Common Stock on the date of amendment and the exercise price of such
options.
S-6
<PAGE> 28
PROSOURCE, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<S> <C>
BALANCE, December 25, 1993 .................................... $ 2,528
Additions charged to costs and expenses .................... 2,427
Recoveries ................................................. 190
Write-offs ................................................. (2,234)
-------
BALANCE, December 31, 1994 .................................... 2,911
Acquired allowance of NAD .................................. 1,893
Additions charged to costs and expenses .................... 1,845
Recoveries ................................................. 153
Write-offs ................................................. (4,217)
-------
BALANCE, December 30, 1995 .................................... $ 2,585
Additions charged to costs and expenses .................... 1,682
Recoveries ................................................. 709
Write-offs ................................................. (2,642)
-------
BLANCE, December 28, 1996 ................................. $ 2,334
=======
</TABLE>
S-7
<PAGE> 29
EXHIBIT INDEX
Exhibit
No. Description of Document
- --- -----------------------
3.1 Restated Certificate of Incorporation of the Company
3.2 Amended and Restated By-Laws of the Company
4.1 Form of Certificate for Class A Common Stock(4)
10.1 Amended and Restated Management Shareholders Agreement among
ProSource, Inc., Onex DHC LLC and the individuals party thereto
from time to time
10.2 Amended and Restated Director Shareholders Agreement among
ProSource, Inc., Onex DHC LLC and the individuals party thereto
from time to time
10.3 Stock Subscription Warrant, dated March 31, 1995, issued by
ProSource, Inc. in favor of The Martin-Brower Company to
subscribe for 283,425 shares of Common Stock(1)
10.4 Agreement, dated November 10, 1994, for the Purchase and Sale of
the National Accounts Division of The Martin-Brower Company and
Martin-Brower of Canada, Ltd., among ProSource, Inc., The
Martin-Brower Company and Martin-Brower of Canada, Ltd.(1)
10.5 Purchase Agreement Amendment, dated February 24, 1995, among The
Martin-Brower Company, Martin-Brower of Canada, Ltd. and
ProSource, Inc.(1)
10.6 Second Purchase Agreement Amendment, dated February 28, 1995,
among The Martin- Brower Company, Martin-Brower of Canada, Ltd.
and ProSource, Inc.(1)
10.7 Third Purchase Agreement Amendment, dated March 31, 1995, among
The Martin-Brower Company, Martin-Brower of Canada, Ltd. and
ProSource, Inc.(1)
10.8 Loan and Security Agreement, dated as of March 31, 1995, among
ProSource Services Corporation, BroMar Services, Inc., ProSource
Distribution Services Limited, the Financial Institutions party
thereto and NationsBank of Georgia, N.A., The First National Bank
of Boston and Shawmut Capital Corporation, as Co-Agents, and
NationsBank of Georgia, N.A., as Administrative Agent(1)
10.9 Amendment No. 1, dated as of December 29, 1995, to Loan and
Security Agreement, among ProSource Services Corporation, BroMar
Services, Inc., ProSource Distribution Services Limited, the
Financial Institutions party thereto and NationsBank of Georgia,
N.A., The First National Bank of Boston and Shawmut Capital
Corporation, as Co-Agents, and NationsBank of Georgia, N.A., as
Administrative Agent(1)
10.10 Amendment No. 2 and Waiver, dated as of March 28, 1996, to Loan
and Security Agreement, among ProSource Services Corporation,
BroMar Services, Inc., ProSource Distribution Services Limited,
the Financial Institutions party thereto and NationsBank, N.A.
(South), The First National Bank of Boston and Fleet Capital
Corporation, as Co- Agents, and NationsBank, N.A. (South), as
Administrative Agent(1)
<PAGE> 30
EXHIBIT INDEX
10.11 Amendment No. 3 and Consent, dated as of September 6, 1996, to
Loan and Security Agreement, among ProSource Services
Corporation, BroMar Services, Inc., ProSource Distribution
Services Limited, the Financial Institutions party thereto and
NationsBank, N.A. (South), The First National Bank of Boston and
Fleet Capital Corporation, as Co- Agents, and NationsBank, N.A.
(South), as Administrative Agent(4)
10.12 Amendment No. 4 and Consent, dated as of September 26, 1996, to
Loan and Security Agreement, among ProSource Services
Corporation, BroMar Services, Inc., ProSource Distribution
Services Limited, the Financial Institutions party thereto and
NationsBank, N.A. (South), The First National Bank of Boston and
Fleet Capital Corporation, as Co- Agents, and NationsBank, N.A.
(South), as Administrative Agent(4)
10.13 Amendment No. 5 and Consent, dated as of December 27, 1996, to
Loan and Security Agreement, among ProSource Services
Corporation, BroMar Services, Inc., ProSource Distribution
Services Limited, the Financial Institutions party thereto and
NationsBank, N.A. (South), The First National Bank of Boston and
Fleet Capital Corporation, as Co- Agents, and NationsBank, N.A.
(South), as Administrative Agent
10.14 Amendment No. 6 and Consent, dated as of February 7, 1997, to
Loan and Security Agreement, among ProSource Services
Corporation, BroMar Services, Inc., ProSource Distribution
Services Limited, the Financial Institutions party thereto and
NationsBank, N.A. (South), The First National Bank of Boston and
Fleet Capital Corporation, as Co- Agents, and NationsBank, N.A.
(South), as Administrative Agent
10.15 Pledge Agreement, made as of March 31, 1995, by ProSource, Inc.
in favor of NationsBank of Georgia, N.A., as Administrative
Agent(1)
10.16 Pledge Agreement, made as of March 31, 1995, by ProSource
Services Corporation in favor of NationsBank of Georgia, N.A., as
Administrative Agent(1)
10.17 Subordination Agreement, dated as of March 31, 1995, made by
ProSource Services Corporation and Onex Corporation in favor of
NationsBank of Georgia, N.A., as Administrative Agent(1)
10.18 Unconditional Guaranty, made as of March 31, 1995, by ProSource,
Inc. in favor of NationsBank of Georgia, N.A., as Administrative
Agent(1)
10.19 Subordinated Note, dated March 31, 1995, executed by ProSource,
Inc. and payable to the order of The Martin-Brower Company in the
original principal amount of $10,000,000(1)
10.20 Subordinated Note, dated March 31, 1995, executed by ProSource
Services Corporation and payable to the order of Onex Ohio
Holdings, Inc. in the original principal amount of $15,000,000(1)
10.21 Credit Agreement, dated as of March 14, 1997, among ProSource
Services Corporation, various Financial Institutions and The Bank
of Nova Scotia, as Administrative Agent
<PAGE> 31
EXHIBIT INDEX
10.22 Revolving Note, dated March 14, 1997, executed by ProSource
Services Corporation and payable to the order of The Bank of Nova
Scotia in the original principal amount of $150,000,000
10.23 Borrower Pledge Agreement, made as of March 14, 1997, by
ProSource Services Corporation in favor of The Bank of Nova
Scotia, as Administrative Agent
10.24 Parent Pledge Agreement, made as of March 14, 1997, by ProSource,
Inc. in favor of The Bank of Nova Scotia, as Administrative Agent
10.25 Parent Guaranty, made as of March 14, 1997, by ProSource, Inc. in
favor of The Bank of Nova Scotia, as Administrative Agent
10.26 Subsidiary Guaranty, made as of March 14, 1997, by Bromar
Services, Inc. in favor of The Bank of Nova Scotia, as
Administrative Agent
10.27 Secured Credit Agreement, dated as of March 14, 1997, among
ProSource Receivables Corporation and ProSource Services
Corporation, as Servicer, and various Financial Institutions and
the Bank of Nova Scotia, as Issuer, as Swingline Bank and as
Administrative Agent
10.28 Purchase and Sale Agreement, dated as of March 14, 1997, between
ProSource Services Corporation and ProSource Receivables
Corporation
10.29 Note, dated March 14, 1997, executed by ProSource Receivables
Corporation and payable to the order of The Bank of Nova Scotia
in the original principal amount of $150,000,000
10.30 Swingline Note, dated March 14, 1997, executed by ProSource
Receivables Corporation and payable to the order of The Bank of
Nova Scotia in the original principal amount of $15,000,000
10.31 Form of Distribution Agreement, dated as of June 30, 1992,
between Burger King Corporation and ProSource Services
Corporation(1)
10.32 Form of Amendment Agreement, dated as of June 30, 1992, between
Burger King Corporation and ProSource Services Corporation(1)
10.33 Addendum to Forms of Distribution Agreement and Amendment
Agreement(1)
10.34 Amended and Restated Employment Agreement, dated as of November
15, 1996, between ProSource Services Corporation and David R.
Parker
10.35 Amended and Restated Employment Agreement, dated as of November
15, 1996, between ProSource Services Corporation and Thomas C.
Highland
10.36 Employment Agreement, dated as of April 1, 1995, between
ProSource Services Corporation and Daniel Adzia(1)
<PAGE> 32
EXHIBIT INDEX
10.37 Employment Agreement, dated July 1, 1992, between ProSource
Services Corporation and Paul A. Garcia de Quevedo(1)
10.38 Employment Agreement, dated as of July 1, 1995, between ProSource
Services Corporation and Dennis Andruskiewicz(1)
10.39 Employment Agreement, dated April 1, 1994, between ProSource
Services Corporation and John E. Foley(1)
10.40 Amended and Restated Management Option Plan (1995)(5)
10.41 1996 Stock Option Plan(5)
10.42 Truck Lease and Service Agreement, dated as of May 19, 1995,
between Ryder Truck Rental, Inc. and ProSource Services
Corporation (4)(6)
10.43 Lease Agreement, dated as of August 22, 1991, between Burger King
Corporation (subsequently assigned to ProSource Services
Corporation) and Gelco Corporation, doing business as GE Capital
Fleet Services(4)
10.44 Management Advisory Agreement, dated as of July 1, 1992, between
OMI Partnership Holdings Ltd., an affiliate of Onex Corporation,
and ProSource Services Corporation(4)
10.45 Termination Agreement, dated as of November 15, 1996, between OMI
Partnership Holdings Ltd., an affiliate of Onex Corporation, and
ProSource Services Corporation
13.1 Portions of 1996 Annual Report to Security Holders
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule
- -------------
(1) Incorporated by reference to the Registration Statement (Registration No.
333-11499) on Form S-1 of the Company.
(2) Incorporated by reference to Amendment No. 1 to the Registration Statement
(Registration No. 333-11499) on Form S-1 of the Company.
(3) Incorporated by reference to Amendment No. 2 to the Registration Statement
(Registration No. 333-11499) on Form S-1 of the Company.
(4) Incorporated by reference to Amendment No. 3 to the Registration Statement
(Registration No. 333-11499) on Form S-1 of the Company.
(5) Incorporated by reference to Amendment No. 4 to the Registration Statement
(Registration No. 333-11499) on Form S-1 of the Company.
(6) Confidential treatment has been requested for portions of this Exhibit.
<PAGE> 1
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
PROSOURCE, INC.
ProSource, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
1. The name of the Corporation is ProSource, Inc. The
Corporation was originally incorporated under the name Onex Distribution, Inc.
The date of filing of its original Certificate of Incorporation with the
Secretary of State was May 13, 1992.
2. This Restated Certificate of Incorporation has been duly
adopted by unanimous written consent of the directors of the Corporation and
written consent of the stockholders of the Corporation in accordance with the
applicable provisions of Sections 141, 228, 242 and 245 of the General
Corporation Law of the State of Delaware, and, pursuant to Section 228(d),
notice has been provided to stockholders who have not consented in writing to
such action. This Restated Certificate of Incorporation restates and integrates
and further amends the provisions of the Certificate of Incorporation of the
Corporation, as previously amended.
FIRST: The name of the Corporation is ProSource, Inc.
SECOND: The address of the Corporation's registered office in
the State of Delaware is 1209 Orange Street, Wilmington, Delaware (New Castle
County). The name of its registered agent at such address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware, as amended from time to time (the
"GCL").
FOURTH:
SECTION 1. The aggregate number of shares of stock which the
Corporation shall have authority to issue is 70,000,000 shares, of which (i)
10,000,000 shares shall be preferred stock, par value $0.01 per share (the
"Preferred Stock"), (ii) 50,000,000 shares shall be Class A Common Stock, par
value $0.01 per share (the "Class A Common Stock"), and (iii) 10,000,000 shares
shall be Class B Common Stock, par value $0.01 per share (the "Class B Common
Stock"). The Class A Common Stock and the Class B Common Stock are collectively
referred to herein as the "Common Stock." All of such shares shall be issued as
fully paid and non-assessable shares, and the holder thereof shall not be liable
for any further payments in respect thereof.
<PAGE> 2
SECTION 2. The preferences, designations and relative rights
of the shares of each class and the qualifications, limitations or restrictions
thereof shall be as follows:
A. Preferred Stock.
1. The shares of Preferred Stock may be issued from time to
time in one or more series of any number of shares, provided that the aggregate
number of shares issued and not canceled of any and all such series shall not
exceed the total number of shares of Preferred Stock hereinabove authorized, and
with such powers, preferences, rights and qualifications, limitations or
restrictions thereof, and such distinctive serial designations, all as shall
hereafter be stated and expressed in the resolution or resolutions adopted by
the Board of Directors of the Corporation (the "Board of Directors") providing
for the issue of such shares of Preferred Stock from time to time pursuant to
authority to do so which is hereby vested in the Board of Directors.
2. Each series of shares of Preferred Stock (a) may have such
voting rights or powers, full or limited, or may be without voting rights or
powers; (b) may be subject to redemption at such time or times and at such
prices; (c) may be entitled to receive dividends (which may be cumulative or
non-cumulative) at such rate or rates, on such conditions and at such times, and
payable in preference to, or in such relation to, the dividends payable on any
other class or classes or series of stock; (d) may have such rights upon the
voluntary or involuntary liquidation, winding up or dissolution of, or upon any
distribution of the assets of, the Corporation; (e) may be made convertible into
or exchangeable for, shares of any other class or classes or of any other series
of the same or any other class or classes of stock of the Corporation at such
price or prices or at such rates of exchange and with such adjustments; (f) may
be entitled to the benefit of a sinking fund to be applied to the purchase or
redemption of shares of such series in such amount or amounts; (g) may be
entitled to the benefit of conditions and restrictions upon the creation of
indebtedness of the Corporation or any subsidiary, upon the issue of any
additional shares (including additional shares of such series or of any other
series) and upon the payment of dividends or the making of other distributions
on, and the purchase, redemption or other acquisition by the Corporation or any
subsidiary of, any outstanding shares of the Corporation and (h) may have such
other relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof; all as shall be stated in said resolution
or resolutions providing for the issue of such shares of Preferred Stock.
3. Any of the voting powers, designations, preferences, rights
and qualifications, limitations or restrictions of any such series of Preferred
Stock may be made dependent upon facts ascertainable outside of the resolution
or resolutions adopted by the Board of Directors providing for the issue of such
Preferred Stock pursuant to the authority vested in the Board of Directors by
this Section 2A of Article Fourth, provided that the manner in which such facts
shall operate upon the voting powers, designations, preferences, rights and
qualifications, limitations or restrictions of such series of Preferred Stock is
clearly and expressly set forth in the resolution or resolutions providing for
the issue of such Preferred Stock. The term "facts" as used in the preceding
sentence shall have the meaning given to it in Section 151(a) of the GCL.
2
<PAGE> 3
4. Shares of Preferred Stock of any series that have been
redeemed (whether through the operation of a sinking fund or otherwise) or that
if convertible or exchangeable have been converted into or exchanged for shares
of any other class or classes, shall have the status of authorized and unissued
shares of Preferred Stock undesignated as to series and may be reissued as a
part of the series of which they were originally a part or as part of a new
series of shares of Preferred Stock to be created by resolution or resolutions
of the Board of Directors or as part of any other series of shares of Preferred
Stock, all subject to any conditions or restrictions on issuance set forth in
the resolution or resolutions adopted by the Board of Directors providing for
the issue of any series of shares of Preferred Stock.
B. Common Stock.
Except as otherwise provided in this Section 2B of Article
Fourth or as otherwise required by applicable law, all shares of Class A Common
Stock and Class B Common Stock shall be identical in all respects and shall
entitle the holders thereof to the same rights and privileges, subject to the
same qualifications, limitations and restrictions.
1. Voting Rights. Except as otherwise provided in this Section
2B of Article Fourth or as otherwise required by applicable law, holders of
Class A Common Stock shall be entitled to one (1) vote per share on all matters
to be voted on by the stockholders of the Corporation, and the holders of Class
B Common Stock shall be entitled to ten (10) votes per share on all such
matters. Except as otherwise required by applicable law, the holders of Class A
Common Stock and Class B Common Stock shall vote together as a single class on
all matters to be voted on by the stockholders of the Corporation; provided,
that for any matter to be voted on by the stockholders which independently
affects only one class of Common Stock, without such an effect on the other
class, the affected class of Common Stock shall vote as a separate class on such
matters.
2. Dividends. Subject to the rights of any series of Preferred
Stock, dividends may be declared and paid or set apart for payment upon the
Common Stock out of any assets or funds of the Corporation legally available for
the payment of dividends, and the holders of Class A Common Stock and Class B
Common Stock shall be entitled to participate in such dividends ratably on a per
share basis; provided, that if dividends are declared which are payable in
shares of Class A Common Stock or Class B Common Stock, dividends shall be
declared which are payable at the same rate on both classes of Common Stock and
the dividends payable in shares of Class A Common Stock shall be payable to
holders of that class of stock and the dividends payable in shares of Class B
Common Stock shall be payable to holders of that class of stock.
3. Liquidation. Upon any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, and after either (i)
the holders of Preferred Stock shall have been paid in full the amounts to which
they shall be entitled in accordance with Section 2A of Article Fourth, the
terms of any outstanding series of Preferred Stock and applicable law, or (ii)
an amount sufficient to pay the aggregate amount to which the holders of the
Preferred Stock shall be entitled shall have been deposited with a bank or trust
company having capital, surplus and
3
<PAGE> 4
undivided profits of at least Twenty-Five Million Dollars ($25,000,000) as a
trust fund for the benefit of the holders of such Preferred Stock, then, the
remaining net assets of the Corporation shall be distributed to the holders of
Common Stock pro rata based on the number of shares held by the holders of the
Common Stock, to the exclusion of the holders of such Preferred Stock.
4. Conversion.
For purposes of this paragraph 4 of Article Fourth,
Section 2B, the following terms shall be defined as follows:
"Affiliate" shall mean (i) with respect to
any natural person, the parents, spouse, siblings, lineal descendants and
successors in interest upon death of such person, as well as any trust, all of
the beneficiaries of which consist of any of the foregoing, and (ii) with
respect to any Person other than a natural person, any other Person controlling,
controlled by or under common control with such Person.
"Conversion Event" shall mean (i) with
respect to Class B Common Stock held by any Person, any Transfer of such Class B
Common Stock to a Person who, immediately prior to such Transfer, is not a
holder of Class B Common Stock or an Affiliate of the Transferor or such holder,
other than the pledge by such holder of Class B Common Stock of such Class B
Common Stock as security for indebtedness incurred in connection with financing
the purchase of such Class B Common Stock and any pledge of such Class B Common
Stock in connection with any refinancing of such indebtedness; or (ii) with
respect to Class B Common Stock held by any employee of the Corporation or any
of its subsidiaries, such employee ceasing to be employed on a full-time basis
by the Corporation or such subsidiary (the date of cessation of employment
constituting the date of occurrence of the Conversion Event for purposes of this
paragraph 4 of Article Fourth, Section 2B), unless the Class B Common Stock held
by such employee is Transferred to Onex Corporation, an Affiliate thereof or any
other employee of the Corporation or any of its subsidiaries within 45 days
after such employee ceases to be so employed.
"Person" shall mean any natural person and
any corporation, partnership, limited liability company, joint venture, trust,
unincorporated organization and any other entity or organization;
"Transfer" shall mean (i) any sale,
exchange, assignment, conveyance, gift, disposition or other transfer, (ii) the
granting of any lien, security interest, pledge or other encumbrance, or (iii)
the entering into of any agreement to do any of the foregoing; but shall not
include the issue or sale of Common Stock by the Corporation.
4
<PAGE> 5
4A. Conversion of Class B Common Stock.
(a) Upon the occurrence of a Conversion Event, each share of
Class B Common Stock subject to such Conversion Event shall automatically
convert into one share of Class A Common Stock. Upon the occurrence of any
Conversion Event, the holder or holders of Class B Common Stock affected thereby
shall promptly comply with the procedures for conversion of Class B Common Stock
to Class A Common Stock as set forth in subsection 4B of this Article Fourth,
Section 2B.
(b) Each holder of Class B Common Stock shall be entitled at
any time to convert any or all of the shares of such holder's Class B Common
Stock into the same number of shares of Class A Common Stock by electing to do
so in accordance with the procedures set forth in subsection 4B of this Article
Fourth, Section 2B.
4B. Conversion Procedure.
(a) In connection with each conversion of shares of Class B
Common Stock into shares of Class A Common Stock, the certificate or
certificates representing the shares to be converted shall be surrendered at the
principal office of the Corporation at any time during normal business hours. In
the case of an elective conversion pursuant to subsection 4A(b) of this Article
Fourth, Section 2B, the surrender of the certificate or certificates
representing such Class B Common Stock shall be accompanied by a written notice
by the holder of such shares stating that the holder desires to convert the
shares, or a stated number of the shares, of such Class B Common Stock
represented by such certificate or certificates into shares of Class A Common
Stock.
Each conversion pursuant to a Conversion Event shall be deemed
to have been effected as of the date on which such Conversion Event occurred.
Each elective conversion pursuant to subsection 4A(b) shall be deemed to have
been effected as of the close of business on the date on which such certificate
or certificates have been surrendered and the corresponding notice has been
received. Immediately upon the conversion of Class B Common Stock into Class A
Common Stock, the rights of the holder of the converted Class B Common Stock
with respect to the shares so converted shall cease and the Person or Persons in
whose name or names the certificate or certificates for shares of Class A Common
Stock are to be issued upon such conversion shall be deemed to have become the
holder or holders of record of the shares of Class A Common Stock represented
thereby.
(b) For each conversion effected pursuant to a Conversion
Event, promptly after the surrender of certificates, the Corporation shall issue
and deliver the certificate or certificates for the Class A Common Stock
issuable upon such conversion. For each conversion effected pursuant to an
elective conversion under subsection 4A(b), promptly after the surrender of
certificates and the receipt of written notice, the Corporation shall issue and
deliver in accordance with the surrendering holder's instructions (i) the
certificate or certificates for the Class A Common Stock issuable upon such
conversion and (ii) a certificate representing any Class B Common Stock which
was
5
<PAGE> 6
represented by the certificate or certificates delivered to the Corporation in
connection with such conversion but which was not converted.
(c) The issuance of certificates for Class A Common Stock upon
conversion of Class B Common Stock will be made without charge to the holders of
such shares for any issuance tax in respect thereof or other cost incurred by
the Corporation in connection with such conversion and the related issuance of
Class A Common Stock.
(d) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Class A Common Stock,
solely for the purpose of issuance upon the conversion of the Class B Common
Stock, such number of shares of Class A Common Stock issuable upon the
conversion of all outstanding Class B Common Stock. All shares of Class A Common
Stock which are so issuable shall, when issued, be duly and validly issued,
fully paid and nonassessable and free from all taxes, liens and charges. The
Corporation shall take all such actions as may be necessary to assure that all
such shares of Class A Common Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of any domestic
securities exchange or automatic quotation system upon which shares of Class A
Common Stock may be listed or quoted (except for official notice of issuance
which will be immediately transmitted by the Corporation upon issuance).
(e) The Corporation shall not close its books against the
transfer of shares of Common Stock in any manner which would interfere with the
timely conversion of any shares of Class B Common Stock.
5. Stock Splits. If the Corporation in any manner subdivides
or combines the outstanding shares of one class of Common Stock, the outstanding
shares of the other class of Common Stock shall be proportionately subdivided or
combined in a similar manner.
6. Reorganization, Consolidation or Merger. In case of any
reorganization or consolidation of the Corporation with one or more other
corporations or a merger of the Corporation with another corporation, each
holder of a share of Class A Common Stock shall be entitled to receive with
respect to such share the same kind and amount of shares of stock and other
securities and property (including cash) receivable upon such reorganization,
consolidation or merger by a holder of a share of Class B Common Stock and each
holder of a share of Class B Common Stock shall be entitled to receive with
respect to such share the same kind and amount of shares of stock and other
securities and property (including cash) receivable upon such reorganization,
consolidation or merger by a holder of a share of Class A Common Stock.
C. General Provisions
1. Nonliquidating Events. A consolidation or merger of the
Corporation with or into another corporation or corporations or a sale, whether
for cash, shares of stock, securities or properties, or any combination thereof,
of all or substantially all of the assets of the Corporation shall
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not be deemed or construed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of this Article Fourth.
2. No Preemptive Rights. No holder of Preferred Stock or
Common Stock of the Corporation shall be entitled, as such, as a matter of
right, to subscribe for or purchase any part of any new or additional issue of
stock of any class or series whatsoever or of securities convertible into stock
of any class whatsoever, whether now or hereafter authorized and whether issued
for cash or other consideration, or by way of dividend.
FIFTH: The Board of Directors shall have the power to make,
alter or repeal the by-laws of the Corporation.
SIXTH: The election of the Board of Directors need not be by
written ballot.
SEVENTH: The Corporation shall indemnify to the fullest extent
permitted by Section 145 of the GCL each person who is or was a director or
officer of the Corporation and the heirs, executors and administrators of such a
person.
EIGHTH: No director shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director for any act or omission occurring subsequent to the date when
this provision becomes effective, except that he may be liable (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the GCL or
(iv) for any transaction from which the director derived an improper personal
benefit.
NINTH: The Corporation elects not to be governed by Section
203 of the GCL.
TENTH: No action required or permitted to be taken at any
meeting of stockholders may be taken by written consent without a meeting.
ELEVENTH: Special meetings of the stockholders may be called
by resolution of the Board of Directors and shall be called by the chairman of
the board, chief executive officer or secretary upon the written request
(stating the purpose or purposes of the meeting) of a majority of directors then
in office. Only business related to the purposes set forth in the notice of the
meeting may be transacted at a special meeting.
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IN WITNESS WHEREOF, this Restated Certificate of Incorporation
has been signed this 5th day of November, 1996.
PROSOURCE, INC.
By: /s/ Paul A. Garcia de Quevedo
-------------------------------------------
Paul A. Garcia de Quevedo
Vice President, Treasurer and Secretary
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Exhibit 3.2
AMENDED AND RESTATED
BY-LAWS
of
PROSOURCE, INC.
1. MEETINGS OF STOCKHOLDERS.
1.1 Annual Meeting. The annual meeting of stockholders shall
be held on or prior to the first Thursday in May of each year, or as soon
thereafter as practicable, and shall be held at a place and time determined by
the board of directors (the "Board").
1.2 Special Meetings. Special meetings of the stockholders may
be called by resolution of the Board and shall be called by the chairman of the
board, chief executive officer or secretary upon the written request (stating
the purpose or purposes of the meeting) of a majority of the directors then in
office. Only business related to the purposes set forth in the notice of the
meeting may be transacted at a special meeting.
1.3 Place and Time of Meetings. Meetings of the stockholders
may be held in or outside Delaware at the place and time specified by the Board
or the directors or stockholders requesting the meeting.
1.4 Notice of Meetings; Waiver of Notice. Written notice of
each meeting of stockholders shall be given to each stockholder entitled to vote
at the meeting, except that (a) it shall not be necessary to give notice to any
stockholder who submits a signed waiver of notice before or after the meeting,
and (b) no notice of an adjourned meeting need be given except when required
under Section 1.5 of these by-laws or by law. Each notice of a meeting shall be
given, personally or by mail, not less than 10 nor more than 60 days before the
meeting and shall state the time and place of the meeting, and unless it is the
annual meeting, shall state at whose direction or request the meeting is called
and the purposes for which it is called. If mailed, notice shall be considered
given when mailed to a stockholder at his address on the corporation's records.
The attendance of any stockholder at a meeting, without protesting at the
beginning of the meeting that the meeting is not lawfully called or convened,
shall constitute a waiver of notice by him.
1.5 Quorum. At any meeting of stockholders, the presence in
person or by proxy of the holders of a majority of the outstanding shares
entitled to vote shall constitute a quorum for the transaction of any business
except as otherwise provided by law or by the certificate of incorporation, as
amended from time to time (the "Certificate of Incorporation") of the
corporation. When a specified item of business requires a vote by a class or
series (if the
<PAGE> 2
corporation shall then have outstanding shares of more than one class or series)
voting as a class, the holders of a majority of the outstanding shares of such
class or series shall constitute a quorum (as to such class or series) for the
transaction of such item of business. In the absence of a quorum a majority in
voting interest of those present or, if no stockholders are present, any officer
entitled to preside at or to act as secretary of the meeting, may adjourn the
meeting until a quorum is present. At any adjourned meeting at which a quorum is
present any action may be taken which might have been taken at the meeting as
originally called. No notice of an adjourned meeting need be given if the time
and place are announced at the meeting at which the adjournment is taken except
that, if adjournment is for more than thirty days or if, after the adjournment,
a new record date is fixed for the meeting, notice of the adjourned meeting
shall be given pursuant to Section 1.4.
1.6 Voting; Proxies. Except as otherwise provided by law or by
the Certificate of Incorporation and subject to Section 5.3 hereof, every
stockholder shall at every meeting of the stockholders be entitled to one (1)
vote in person or by proxy for each share of the corporation's Class A Common
Stock, par value $0.01 per share, held by such stockholder. Except as otherwise
provided by the law or by the Certificate of Incorporation and subject to
Section 5.3, every stockholder shall at every meeting of the stockholders be
entitled to ten (10) votes in person or by proxy for each share of the
corporation's Class B Common Stock, par value $0.01 per share, held by such
stockholder. Corporate action to be taken by stockholder vote, other than the
election of directors, shall be authorized by a majority of the votes cast at a
meeting of stockholders, except as otherwise provided by law or by Section 1.8
of these by-laws. Directors shall be elected in the manner provided in Section
2.1 of these by-laws. Voting need not be by ballot unless requested by a
stockholder at the meeting or ordered by the chairman of the meeting; however,
all elections of directors shall be by written ballot, unless otherwise provided
in the Certificate of Incorporation. Each stockholder entitled to vote at any
meeting of stockholders or to express consent to or dissent from corporate
action in writing without a meeting may authorize another person to act for him
by proxy. Every proxy must be signed by the stockholder or his attorney-in-fact.
No proxy shall be valid after three years from its date unless it provides
otherwise.
1.7 List of Stockholders. Not less than 10 days prior to the
date of any meeting of stockholders, the secretary of the corporation shall
prepare a complete list of stockholders entitled to vote at the meeting,
arranged in alphabetical order and showing the address of each stockholder and
the number of shares registered in his name. For a period of not less than 10
days prior to the meeting, the list shall be available during ordinary business
hours for inspection by any stockholder for any purpose germane to the meeting.
During this period, the list shall be kept either (a) at a place within the city
where the meeting is to be held, if that place shall have been specified in the
notice of the meeting, or (b) if not so specified, at the place where the
meeting is to be held. The list shall also be available for inspection by
stockholders at the time and place of the meeting.
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1.8 Action by Consent Without a Meeting. No action required or
permitted to be taken at any meeting of stockholders may be taken by written
consent without a meeting.
2. BOARD OF DIRECTORS.
2.1 Number, Qualification, Election and Term of Directors. The
business of the corporation shall be managed by the Board, which shall consist
of four directors, or such other number of directors as may be fixed from time
to time by resolution of the Board or by the stockholders; provided that no
decrease may shorten the term of any incumbent director. Directors shall be
elected at each annual meeting of stockholders by a plurality of the votes cast
and shall hold office until the next annual meeting of stockholders and until
the election and qualification of their respective successors, subject to the
provisions of Section 2.9.
2.2 Quorum and Manner of Acting. A majority of the Board shall
constitute a quorum for the transaction of business at any meeting, except as
provided in Section 2.10 of these by-laws. Action of the Board shall be
authorized by the vote of a majority of the directors present at the time of the
vote if there is a quorum, unless otherwise provided by law or these by-laws. In
the absence of a quorum a majority of the directors present may adjourn any
meeting from time to time until a quorum is present.
2.3 Place of Meetings. Meetings of the Board may be held in or
outside Delaware.
2.4 Annual and Regular Meetings. Annual meetings of the Board,
for the election of officers and consideration of other matters, shall be held
either (a) without notice immediately after the annual meeting of stockholders
and at the same place or (b) as soon as practicable after the annual meeting of
stockholders, on notice as provided in Section 2.6 of these by-laws. Regular
meetings of the Board may be held without notice at such times and places as the
Board determines. If the day fixed for a regular meeting is a legal holiday, the
meeting shall be held on the next business day.
2.5 Special Meetings. Special meetings of the Board may be
called by the chairman of the board, the president or by a majority of the
directors. Only business related to the purposes set forth in the notice of
meeting may be transacted at a special meeting.
2.6 Notice of Meetings; Waiver of Notice. Notice of the time
and place of each special meeting of the Board, and of each annual meeting not
held immediately after the annual meeting of stockholders and at the same place,
shall be given to each director by mailing it to him at his residence or usual
place of business at least three days before the meeting, or by delivering or
telephoning or telecopying it to him at least two days before the meeting.
Notice of a special meeting shall also state the purpose or purposes for which
the meeting is called. Notice need not be given to any director who submits a
signed waiver of notice before or after the meeting or who attends the meeting
without protesting at the beginning of the meeting the trans-
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<PAGE> 4
action of any business because the meeting was not lawfully called or convened.
Notice of any adjourned meeting need not be given, other than by announcement at
the meeting at which the adjournment is taken.
2.7 Board or Committee Action Without a Meeting. Any action
required or permitted to be taken by the Board or by any committee of the Board
may be taken without a meeting if all of the members of the Board or of the
committee consent in writing to the adoption of a resolution authorizing the
action. The resolution and the written consents by the members of the Board or
the committee shall be filed with the minutes of the proceeding of the Board or
of the committee.
2.8 Participation in Board or Committee Meetings by Conference
Telephone. Any or all members of the Board or of any committee of the Board may
participate in a meeting of the Board or of the committee by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at the meeting.
2.9 Resignation and Removal of Directors. Any director may
resign at any time by delivering his resignation in writing to the president or
secretary of the corporation, to take effect at the time specified in the
resignation; the acceptance of a resignation, unless required by its terms,
shall not be necessary to make it effective. Any or all of the directors may be
removed at any time, either with or without cause, by vote of the stockholders.
2.10 Vacancies. Any vacancy in the Board, including one
created by an increase in the number of directors, may be filled for the
unexpired term by a majority vote of the remaining directors, though less than a
quorum.
2.11 Compensation. Directors shall receive such compensation
as the Board determines, together with reimbursement of their reasonable
expenses in connection with the performance of their duties. A director may also
be paid for serving the corporation, its affiliates or subsidiaries in other
capacities.
3. COMMITTEES.
3.1 Executive Committee. The Board, by resolution adopted by a
majority of the Board, may designate an Executive Committee of one or more
directors which shall have all the powers and authority of the Board, except as
otherwise provided in the resolution, Section 141(c) of the Delaware General
Corporation Law, or any other applicable law. The members of the Executive
Committee shall serve at the pleasure of the Board. All action of the Executive
Committee shall be reported to the Board at its next meeting.
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<PAGE> 5
3.2 Other Committees. The Board, by resolution adopted by a
majority of the Board, may designate other committees of directors of one or
more directors, which shall serve at the Board's pleasure and have such powers
and duties as the Board determines.
3.3 Rules Applicable to Committees. The Board may designate
one or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence or
disqualification of any member of a committee, the member or members present at
a meeting of the committee and not disqualified, whether or not a quorum, may
unanimously appoint another director to act at the meeting in place of the
absent or disqualified member. All action of a committee shall be reported to
the Board at its next meeting. Each committee shall adopt rules of procedure and
shall meet as provided by those rules or by resolutions of the Board.
4. OFFICERS.
4.1 Number; Security. The executive officers of the
corporation shall be the chairman of the board, the president and a secretary.
The Board may also elect one or more vice chairmen, vice presidents, a treasurer
and such other officers or assistant officers as the Board may from time to time
deem advisable. Any two or more offices may be held by the same person. Unless
otherwise required by law, the Board shall not be required to fill a vacancy in
an executive office. The Board may require any officer, agent or employee to
give security for the faithful performance of his duties.
4.2 Election; Term of Office. The executive officers of the
corporation shall be elected annually by the Board, and each such officer shall
hold office until the next annual meeting of the Board and until the election of
his successor, subject to the provisions of Section 4.4.
4.3 Subordinate Officers. The Board may appoint subordinate
officers (including assistant secretaries and assistant treasurers), agents or
employees, each of whom shall hold office for such period and have such powers
and duties as the Board determines. The Board may delegate to any executive
officer or to any committee the power to appoint and define the powers and
duties of any subordinate officers, agents or employees.
4.4 Resignation and Removal of Officers. Any officer may
resign at any time by delivering his resignation in writing to the president or
secretary of the corporation, to take effect at the time specified in the
resignation; the acceptance of a resignation, unless required by its terms,
shall not be necessary to make it effective. Any officer appointed by the Board
or appointed by an executive officer or by a committee may be removed by the
Board either with or without cause, and in the case of an officer appointed by
an executive officer or by a committee, by the officer or committee who
appointed him or by the president.
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4.5 Vacancies. A vacancy in any office may be filled for the
unexpired term in the manner prescribed in Sections 4.2 and 4.3 of these by-laws
for election or appointment to the office.
4.6 Chairman of the Board. The chairman of the board shall
preside at all meetings of the Board and of the stockholders and shall have such
powers and duties as the Board assigns to him.
4.7 The President. The president shall be the chief executive
officer and the chief operating officer of the corporation. Subject to the
control of the Board, he shall have general supervision over the business of the
corporation and shall have such other powers and duties as presidents of
corporations usually have or as the Board assigns to him.
4.8 Vice Presidents. The vice presidents, if any, shall have
such powers and duties as the Board or the president assigns to him.
4.9 The Treasurer. The treasurer, if any, shall be in charge
of the corporation's books and accounts. Subject to the control of the Board, he
shall have such other powers and duties as the Board or the president assigns to
him.
4.10 The Secretary. The secretary shall be the secretary of,
and keep the minutes of, all meetings of the Board and of the stockholders,
shall be responsible for giving notice of all meetings of stockholders and of
the Board, and shall keep the seal and, when authorized by the Board, apply it
to any instrument requiring it. Subject to the control of the Board, he shall
have such powers and duties as the Board or the president assigns to him. In the
absence of the secretary from any meeting, the minutes shall be kept by the
person appointed for that purpose by the presiding officer.
4.11 Salaries. The Board may fix the officers' salaries, if
any, or it may authorize the president to fix the salary of any other officer.
5. SHARES.
5.1 Certificates. The corporation's shares shall be
represented by certificates in the form approved by the Board. Each certificate
shall be signed by the chairman of the board, the president or a vice president
and by the secretary or an assistant secretary, or the treasurer or an assistant
treasurer, and shall be sealed with the corporation's seal or a facsimile of the
seal. Any or all of the signatures on the certificate may be a facsimile.
5.2 Transfers. Shares shall be transferable only on the
corporation's books, upon surrender of the certificate for the shares, properly
endorsed. The Board may require satisfactory surety before issuing a new
certificate to replace a certificate claimed to have been lost or destroyed.
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5.3 Determination of Stockholders of Record. The Board may
fix, in advance, a date as the record date for the determination of stockholders
entitled to notice of or to vote at any meeting of the stockholders, or to
express consent to or dissent from any proposal without a meeting, or to receive
payment of any dividend or the allotment of any rights, or for the purpose of
any other action. The record date may not be more than 60 or less than 10 days
before the date of the meeting or more than 60 days before any other action.
6. MISCELLANEOUS.
6.1 Seal. The Board shall adopt a corporate seal, which shall
be in the form of a circle and shall bear the corporation's name and the year
and state in which it was incorporated.
6.2 Fiscal Year. The Board may determine the corporation's
fiscal year from time to time. Until changed by the Board, the corporation's
fiscal year shall be the 52- or 53-week period ending on the last Saturday of
each calendar year.
6.3 Voting of Shares in Other Corporations. Shares in other
corporations which are held by the corporation may be represented and voted by
the chairman of the board, the president or a vice president of this corporation
or by proxy or proxies appointed by one of them. The Board may, however, appoint
some other person to vote the shares.
6.4 Amendments. By-laws may be amended, repealed or adopted by
the stockholders or by a majority of the Board, but any by-law adopted by the
Board may be amended or repealed by the stockholders.
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<PAGE> 1
Exhibit 10.1
AMENDED AND RESTATED
MANAGEMENT SHAREHOLDERS AGREEMENT
THIS AMENDED AND RESTATED MANAGEMENT SHAREHOLDERS AGREEMENT
dated as of November 15, 1996 amends and restates in its entirety the Amended
and Restated Management Shareholders Agreement dated May 31, 1995, as amended by
Amendment No. 1 thereto dated as of December 8, 1995 (as so amended, the
"Original Agreement"), among ProSource, Inc., formerly known as Onex
Distribution, Inc., a Delaware corporation (the "Corporation"), Onex DHC LLC, a
Wyoming limited liability company ("Onex"), as successor-in-interest (with
respect to the shares of the Common Stock of the Corporation) to Onex U.S.
Investments, Inc., and the individuals named from time to time on Schedule I to
this Agreement (each a "Management Holder" and collectively the "Management
Holders").
RECITALS
A. The parties desire to amend and restate the Original
Agreement in contemplation of the proposed initial public offering (the
"Offering") of shares of the Corporation's Class A Common Stock (as hereinafter
defined).
B. Prior to commencement of the Offering, (i) the Corporation
intends to file a restated certificate of incorporation (the "Restated
Certificate of Incorporation"), providing for, among other things, two classes
of authorized common stock, Class A Common Stock, par value $.01 per share
("Class A Common Stock"), and Class B Common Stock, par value $.01 per share
("Class B Common Stock"), and (ii) all of the Corporation's outstanding shares
of common stock, par value $.01 per share ("Common Stock"), will be converted
into shares of Class B Common Stock.
C. The powers, preferences, rights, limitations and
restrictions of the Class B Common Stock, including certain provisions with
respect to transfer thereof and conversion into shares of Class A Common Stock,
are set forth in the Restated Certificate of Incorporation.
D. Each of the Management Holders is an employee of the
Corporation or any direct or indirect subsidiary of the Corporation (each a
"Subsidiary", collectively, the "Subsidiaries") and purchased shares of Common
Stock from the Corporation prior to the date of this Agreement. As used herein,
the term "Shares" shall mean such shares of Common Stock, the shares of Class B
Common Stock issued or to be issued upon conversion of Common Stock, and any
shares of Class A Common Stock issued upon conversion of Class B Common Stock.
The parties hereby agree as follows:
<PAGE> 2
1. RESTRICTIONS ON TRANSFER OF SHARES
1.1 REPRESENTATION. Each of the Management Holders represents and
agrees that the Management Shares owned by him were acquired for his own account
and will not be transferred in violation of this Agreement, the securities laws
of the United States, or any other applicable law.
1.2 RESTRICTIONS. A Management Holder may transfer Management Shares as
a whole or in part only if such transfer is permitted by and made in accordance
with the terms of this Agreement. Any purported transfer in any manner contrary
to the terms of this Agreement shall be null and void. For purposes of this
Agreement, the term "transfer" shall mean any sale, exchange, assignment, gift,
bequest, pledge, creation of a lien or security interest or other disposition or
encumbrance of any kind, whether voluntary or involuntary or by operation of
law, affecting title to or possession of the Management Shares. The Corporation
may refuse to register any transfer of Shares that would violate this Agreement,
the securities laws of the United States, or any other applicable law, and may,
as a condition to registration of such transfer, require the transferor to
furnish to the Corporation an opinion of counsel reasonably acceptable to the
Corporation as to compliance with the foregoing.
1.3 PLEDGE OF SHARES AS SECURITY. Each of the Management Holders may
finance up to 66 2/3% of the purchase price of such Holder's Shares and may
pledge such Shares to the lender to secure the financing or to any affiliate of
the Corporation that guarantees repayment of any loan made to finance the
purchase of Shares if the lender or guarantor agrees in writing to be bound by
this Agreement.
1.4 SALES FREE OF ENCUMBRANCES. Upon the transfer of Management Shares
pursuant to this Agreement, the Management Holder shall discharge any
indebtedness permitted by Section 1.3 and deliver to the purchaser the share
certificates representing such Management Shares free and clear of any pledge,
lien, security interest or other encumbrance of any kind. If the Management
Holder fails to comply with the preceding sentence, the purchaser may withhold
from the purchase price an amount equal to the indebtedness secured by any such
pledge, lien, security interest or other encumbrance or, if the amount of such
indebtedness is not known by the purchaser, an amount equal to the purchaser's
good faith estimate thereof (no limitation of any other remedy available to the
purchaser being intended) and apply such withheld amount to extinguish such
debt. Any such payment of such withheld amount shall discharge the purchaser's
obligation to make payment for the purchased shares to the extent of such
withheld amount. If a selling Management Holder fails to deliver certificates
representing Management Shares being sold as required at the closing of such
sale, the purchaser may deposit the purchase price therefor with the Corporation
and, upon such deposit, those certificates shall be deemed cancelled and of no
effect (no limitation of any other remedy available to the purchaser being
intended).
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2. SALE OR TRANSFER OF MANAGEMENT SHARES
2.1 TRANSFER TO MANAGEMENT HOLDER'S FAMILY. A Management Holder may
transfer Management Shares to his parents, siblings, spouse, or issue or to a
trust or custodianship for the exclusive benefit of himself or any of them (each
a "Family Group Member"); provided that any such transferee agrees in writing to
be bound by the provisions of this Agreement that bind the transferor Management
Holder.
2.2 SALE TO MANAGEMENT HOLDERS OR OTHER MANAGEMENT EMPLOYEES. A
Management Holder may transfer Management Shares to either another Management
Holder or to a management employee of the Corporation or a Subsidiary who is
acceptable to the Board of Directors of the Corporation if (a) due to hardship
or unusual circumstances, such Management Holder determines that it is in his
best interest to effect a transfer of his Management Shares and (b) the
Corporation's Board of Directors approves the same. A Management Holder who
desires to transfer Management Shares in accordance with this Section 2.2 shall
give the Corporation notice thereof ("Notice"), attaching thereto a copy of a
bona fide written offer to purchase such Shares for cash ("Offer"). The
Corporation or a subsidiary designated by it shall have the option, exercisable
by notice to the Management Holder given within 30 days after the date of
receipt of the Notice by the Corporation, to purchase all or any portion of the
Management Shares proposed to be sold pursuant to the Offer for the same price
per share and on the same terms as the Offer. If the Corporation or its designee
does not exercise such option within such 30-day period and the Board of
Directors of the Corporation consents to the proposed sale, the Management
Holder shall have the right at any time within 60 days after the expiration of
the 30-day option period provided for in this Section, to sell the Management
Shares as to which the option was not exercised to the proposed offeree in
accordance with the terms of the Offer; any transferee shall, by its purchase of
such Shares and acceptance of the certificates therefor be deemed to agree to,
and shall agree in writing to be bound by, the provisions of this Agreement. If
the Management Shares as to which the option was not exercised remain unsold at
the end of such 60-day period, such Management Shares may not thereafter be
transferred unless the Management Holder complies with this Section 2.2 again.
2.3 SALE: CORPORATION IS A PUBLIC COMPANY. Notwithstanding Section 2.2,
if the Corporation is a Public Company, a Management Holder may sell during any
90-day period up to the greater of (a) five Shares (subject to adjustment to
reflect the effect of stock splits, combinations and the like effected after the
date of the Original Agreement) and (b) 5% of the sum of (i) the Management
Holder's Shares then held by him and (ii) the Management Holder's Shares
previously sold by him pursuant to this Section 2.3, except that no such sales
shall be made within 180 days after any offering of securities registered under
the 1933 Act that involves shares of the same class as Management Shares. Any
such sale or sales shall be through the facilities of any securities exchange on
which the Management Shares may then be listed and shall be made in a manner
that complies with applicable securities law and regulations. Such sales may not
be made, however, unless the Management Holder gives the Corporation written
notice of its intention to sell not less than five and not more than ten
business days before
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effecting any sale ("Market Sale Notice") and offers to sell to it all or any
part of that number of Management Shares (no partial purchase that would result
in the remaining Shares offered to be sold constituting an odd lot shall be
permitted) that it proposes to sell, at a price equal to the Market Price Per
Share (as defined in Section 11.4). The Corporation (or, at the Corporation's
option, a subsidiary of the Corporation) may accept such offer by giving notice
to the Management Holder within seven days after receipt of such Market Sale
Notice by the Corporation, which notice shall designate the number of Management
Shares to be purchased. The Management Holder shall thereupon be bound to sell
such Management Shares to the Corporation or a subsidiary of the Corporation, as
the case may be, and the Corporation or a subsidiary of the Corporation, as the
case may be, shall be obligated to buy such Management Shares. Notwithstanding
the foregoing, no Management Holder shall sell more than 50% of the sum of (x)
the Management Holder's Shares then held by him and (y) the Management Holder's
Shares previously sold by him pursuant to this Section 2.3 without the prior
approval of the Board of Directors of the Corporation.
2.4 SALE UPON TERMINATION OF EMPLOYMENT; CORPORATION IS NOT A PUBLIC
COMPANY. If a Management Holder ceases to be employed in a full-time capacity by
the Corporation or a Subsidiary at any time when the Corporation is not a Public
Company, the Management Shares owned by such Management Holder shall be
transferred as follows:
(a) Upon termination without cause or as a result of death,
retirement, or Disability, the Corporation shall purchase, and the Management
Holder shall sell, all of the Management Shares owned by such Management Holder
for a purchase price equal to Book Value Per Share multiplied by the number of
Management Shares owned by such Management Holder (the "Initial Section 2.4(a)
Payment"). However, if the Management Holder's employment is terminated by the
Corporation or a Subsidiary (i) other than for cause and (ii) as a result of the
planned restructuring or consolidation of the Corporation and its subsidiaries
and the Corporation has achieved its plan objectives through the date of
termination, the Initial Section 2.4(a) Payment shall equal the greater of
$1,000 per share or the then current Book Value Per Share. If the Corporation
effects any offering of securities registered under the 1933 Act that involves
an offering of shares of the same class as Management Shares within four months
after the termination of the Management Holder's employment, the purchase price
per Share shall be increased by an amount equal to the excess, if any, of the
public offering price per Share (after deduction of any applicable underwriter's
commissions or discounts) over the Book Value Per Share used in calculating the
original purchase price, less interest at the Prime Rate on the portion of the
purchase price previously paid in cash (the "Additional Section 2.4(a)
Payment"). Subject to the limitations set forth in Section 2.4(c), the Initial
Section 2.4(a) Payments shall be paid in cash at the closing of the purchase and
sale and Additional Section 2.4(a) Payments shall be paid in cash within 60 days
of the closing of the registered offering.
(b) Upon termination for any reason not described in Section 2.4(a)
(including without limitation, termination for cause or voluntary termination by
the Management Holder), the Corporation shall purchase, and the Management
Holder shall sell, all of the Management
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Shares owned by such Management Holder for a purchase price equal to 90% of Book
Value Per Share multiplied by the number of Management Shares owned by such
Management Holder. Subject to the limitations set forth in Section 2.4(c), 50%
of the purchase price for Management Shares purchased pursuant to this
subsection (b) shall be paid in cash (or, if greater, the amount required to pay
both the outstanding balance of any financing pursuant to Section 1.3 and the
amount of any federal income tax owed by the Management Holder for the year in
which the sale occurs in respect of the portion of the gain recognized by such
Management Holder with respect to the sale during such year) at the closing of
the purchase and sale (the "Initial Section 2.4(b) Payment") and the balance of
the purchase price shall be paid in approximately equal quarterly installments
over the two-year period following the sale, the last payment to be paid on the
second anniversary of the sale (the "Additional Section 2.4(b) Payment").
Interest on any unpaid portion of the Additional Section 2.4(b) Payment shall be
paid quarterly from the closing at Prime Rate. The payment of Initial Section
2.4(b) Payments and the Additional Section 2.4(b) Payments is subject to the
limitations set forth in Section 2.4(c).
(c) The amount of the purchase price payable by the Corporation to
any Management Holder pursuant to Section 2.4(a) and (b) shall be reduced by any
amount paid by the Corporation or any affiliate of the Corporation to NCNB
National Bank (or any successor bank) to discharge the principal portion of any
indebtedness incurred by such Management Shareholder to purchase the Management
Shares. If, as a result of restrictions in its loan agreement with NationsBank
of Georgia, N.A., ProSource Services Corporation ("PSC"), formerly known as BDKA
Corporation, is unable to pay sufficient dividends to the Corporation to enable
the Corporation to pay the amount of the purchase price required to be paid by
it in cash either at the closing of the sale or at any time thereafter in
accordance with the terms set forth in Sections 2.4(a) and 2.4(b) and to
cash-out Options pursuant to Section 6.4 of the Option Plans, the Corporation
shall be entitled to pay any unpaid portion of the payments required to be made
under Sections 2.4(a) and 2.4(b) and under Section 6.4 of the Option Plans,
together with interest thereon at the Prime Rate, at such time as it has
received from PSC sufficient dividends to enable it to do so. The Corporation
shall use available funds received from PSC first to pay all amounts due on
account of any Initial Section 2.4(a) Payments and Initial Section 2.4(b)
Payments, then to pay all amounts due on account of Additional Section 2.4(a)
Payments and Additional Section 2.4(b) Payments, and then to pay all amounts due
on account of the cash-out of Options pursuant to Section 6.4 of the Option
Plans.
2.5 SALE UPON TERMINATION OF EMPLOYMENT: CORPORATION IS A PUBLIC
COMPANY.
(a) If a Management Holder ceases to be employed in a full-time
capacity by the Corporation or a Subsidiary when the Corporation is a Public
Company, Onex or its designee shall have the option to purchase all or any
portion of the Management Shares owned by such Management Holder. The purchase
price for such Management Shares shall be equal to the number of such Shares to
be purchased multiplied by Market Price Per Share and shall be paid in cash at
the closing of the sale.
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(b) If Onex or its designee does not exercise such option within 30
days from the date of the termination of the Management Holder's employment, the
Management Holder shall be entitled to sell his Management Shares through the
facilities of any securities exchange on which the Shares may then be listed in
a manner that complies with applicable securities laws and regulations; provided
that the Management Holder shall not sell during the year following the
termination of the Management Holder's employment in the aggregate more than 50%
of the Management Shares owned by such Management Holder and his Family Group
Members unless such termination arises from (i) his death or Disability, in
which case the foregoing restriction shall not apply or (ii) his retirement, in
which case the Management Holder may sell during the year following the
termination of the Management Holder's employment in the aggregate up to 66-2/3%
of the Management Shares owned by such Management Holder and his Family Group
Members.
(c) The parties acknowledge that, pursuant to paragraph 4 of
Article Fourth, Section 2B of the Company's Restated Certificate of
Incorporation, Class B Common Stock automatically converts in accordance with
such paragraph of the Restated Certificate of Incorporation into Class A Common
Stock upon termination of the Management Holder's employment, unless transferred
to Onex (or an affiliate thereof) or another Management Holder.
2.6 SALE UPON DEFAULT ON INDEBTEDNESS. If a Management Holder defaults
on any indebtedness referred to in Section 1.3, the Corporation shall have the
option, exercisable upon notice to the Management Holder at any time following a
default, to purchase all or any portion of the Management Shares with respect to
which such debt was incurred at a purchase price equal to (i) 85% of Book Value
Per Share, if the Corporation is not a Public Company at the time of the closing
of the purchase or (ii) 85% of Market Price Per Share, if the Corporation is a
Public Company at the time of the closing of the purchase.
2.7 CLOSING OF SALE. The closing of any purchase and sale of Management
Shares pursuant to the exercise of a right under this Section 2 (other than
transfers or sales made pursuant to Sections 2.1 or 2.2 or through the
facilities of any securities exchange pursuant to Sections 2.3 and 5) shall be
held at the principal offices of the Corporation on a date designated by the
purchaser but in any event not later than the last day upon which a purchase is
permitted or required to be made. At the closing, the Management Holder selling
Shares shall deliver to the purchaser the stock certificates and other
instruments representing such Shares, together with stock powers and other
instruments transferring such Shares, duly endorsed for transfer and free and
clear of all claims, liens, encumbrances and security interests, and the
purchaser shall deliver to the Management Holder the consideration payable upon
closing.
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3. OPTIONS TO PURCHASE SHARES
3.1 Shares received by a Management Holder upon the exercise or
conversion of any options, warrants, rights to purchase shares or securities
convertible into Shares, including the Options, shall be subject to the terms
and conditions of this Agreement and may not be transferred except as permitted
by this Agreement.
4. SALE OF SHARES BY ONEX AND THE CORPORATION
4.1 TAG ALONG. (a) If at any time any member of the Onex Group proposes
to sell any Shares except for (i) sales to another member of the Onex Group that
becomes bound by the terms of this Agreement (an "Onex Group Member"), (ii)
sales to a Management Holder or other management employee or directors of the
Corporation or a Subsidiary, (iii) sales of the 500 Shares purchased by Onex on
June 30, 1992 for later disposition to persons providing services to the
Corporation or any of the Corporation's subsidiaries (the "500 Shares"), (iv)
sales effected on a national securities exchange in the regular way or in the
over-the-counter market, or (v) pursuant to an offering of securities registered
under the 1933 Act (a "Tag Along Disposition"), each of the Management Holders
shall have the right to sell to the proposed purchaser a number of his
Management Shares equal to the total number of his Management Shares multiplied
by a ratio, the numerator of which is the number of Shares to be sold by the
Onex Group Member to the proposed purchaser and the denominator of which is the
total number of Shares then owned by the Onex Group. Such ratio is referred to
herein as the "Share Ratio." A sale of Management Shares pursuant to this
Section shall be made at the same price, upon the same terms, and at the same
time as the sale by the Onex Group Member of its Shares.
(b) The Onex Group Member shall give notice (the "Tag Along Notice") to
each Management Holder of the proposed Tag Along Disposition at least 20 days
prior to the same. The Tag Along Notice shall be in writing and shall describe
the terms of the Tag Along Disposition in reasonable detail, the identity of the
proposed purchaser, the proposed date of sale, the purchase price per Share, and
the Share Ratio and shall state that (i) the Management Holder has the option to
sell to the proposed purchaser a number of Management Shares equal to the total
number of Management Shares then owned by such Holder multiplied by the Share
Ratio, (ii) the sale, if made, shall be made at the same price per share, upon
the same terms, and at the same time as the sale by the Onex Group Member of its
Shares to the proposed purchaser, and (iii) the sale by Management Holders will
be conditioned upon a sale of Shares by the Onex Group Member pursuant to this
Section.
(c) A Management Holder may exercise its sale option pursuant to
Section 4.1 by delivering to the Onex Group Member, within ten days after such
Management Holder receives the Tag Along Notice, written notice of his offer to
sell Management Shares pursuant to this Section and indicating the number of
Management Shares offered for sale. If a Management Holder gives notice of his
election to sell, he shall be obligated to do so, but the sale and his
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obligation to sell shall be conditioned upon the closing of the Tag Along
Disposition. If the purchaser specifies a limited number of Shares that it is
willing to purchase in the aggregate, each Management Holder and the Onex Group
Member shall have the right to sell its or his proportion of the number of
Shares that the purchaser is purchasing, i.e., the proportion that the number of
Shares owned by such Person bears to the aggregate number of Shares owned by the
shareholders who are selling Shares. If any Person does not elect to sell the
full number of Shares that he or it is entitled to sell, the balance shall be
available, in accordance with such procedures as the Onex Group Member may
designate, to the shareholder that has elected to sell the maximum number of
Shares initially available to it or him for such purpose. For purposes of this
Section 4.1, the number of Shares owned by any Onex Group Member shall not be
deemed to include any portion of the 500 Shares then owned by any Onex Group
Member.
(d) If a transferee of Onex Shares pursuant to this Section 4.1
acquires such Shares free of this Agreement, then such transferee shall also
take the Management Shares being sold by a Management Holder free of this
Agreement. If, however, any Onex Group Member is required to transfer any Onex
Shares subject to this Agreement, then the Management Holder shall also transfer
his Management Shares subject to this Agreement.
4.2 DRAG ALONG. Notwithstanding anything herein to the contrary, if any
Onex Group Member proposes to sell any Shares to any Person, except for (i)
sales of the 500 Shares, (ii) sales effected on a national securities exchange
in the regular way or in the over-the-counter market, and (iii) sales to any
other Onex Group Member (a "Drag Along Disposition"), it may, upon giving notice
to each Management Holder at least 20 days prior to the Drag Along Disposition
(the "Drag Along Notice") require the Management Holders to sell a number of
Management Shares equal to the total number of Management Shares then owned by
such Holder multiplied by the Share Ratio. The Drag Along Notice shall be in
writing and shall contain the same information as is required to be set forth in
the Tag Along Notice. A sale of Management Shares pursuant to this Section shall
be made at the same price, upon the same terms, and at the same time as the sale
by the Onex Group Member of its Shares pursuant to this Section. Any transferee
of Shares owned by any Onex Group Member or of the Management Holders pursuant
to this Section 4.2 shall acquire such Shares free of this Agreement, unless the
agreement between the Onex Group Member and such transferee provides otherwise.
4.3 REPRESENTATIONS AND WARRANTIES ON A DISPOSITION. In connection with
any transfer described in this Section 4 in which Management Shares are to be
sold by a Management Holder, Onex and the selling Onex Group Member may require
the Management Holder to enter into agreements with the purchaser representing
and warranting that, except as specifically disclosed to the purchaser in
writing, such Management Holder at the time of the closing of such transfer,
does not have actual knowledge that any representation or warranty made by the
Corporation or any other shareholder in connection with the disposition was
untrue in any material respect when made or is untrue in any material respect as
of the closing; the liability of the selling Management Holder under such
representation and warranty shall be limited to the amount which he receives
from the sale of his Management Shares in connection with such
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transfer and shall be pro rata in accordance with the number of Shares sold by
the Management Holder in relation to the Shares being sold by all holders.
4.4 PRE-EMPTIVE RIGHTS. If, prior to the time when the Corporation
becomes a Public Company, the Corporation intends to sell shares of its capital
stock or options, warrants, rights to purchase, or securities convertible into,
or exchangeable for, shares of its capital stock to any member of the Onex Group
for cash, the Corporation shall give notice thereof (the "Sale Notice") to each
of the Management Holders. The Sale Notice shall be in writing, shall describe
the securities to be offered, the price of such securities, and other terms of
the offer in reasonable detail. Each Management Holder shall have the right,
subject to applicable law and exercisable by notice to the Corporation within 45
days after his receipt of the Sale Notice, to purchase his Pro Rata Share (as
defined in this Section 4.4) of the securities offered for the same price per
unit and on the same terms as the securities are offered to Onex and as are
described in the Sale Notice. As used in this Section 4.4, the term "Pro Rata
Share" shall mean the product of (x) the total number of securities referred to
in the Sale Notice as proposed to be sold to members of the Onex Group and (y) a
fraction, the numerator of which is the number of Management Shares of all
classes held by the Management Holder on the date the Sale Notice is given and
the denominator of which is the sum of the number of Shares of all classes of
the Corporation's stock of the same class or classes as Management Shares
outstanding on such date (including the Management Shares). Any securities
acquired by a Management Holder pursuant to this Section 4.4 shall be subject to
the terms of this Agreement. The provisions of this Section 4.4 shall not apply
to the issuance of securities, with or without consideration, to officers and
employees of the Corporation and its subsidiaries or plans for the benefit of
such employees, by the Corporation from time to time and shall not require the
Corporation to offer securities under circumstances that could require
registration under the 1933 Act.
5. PIGGY-BACK REGISTRATION RIGHTS
5.1 If the Corporation proposes to effect a registration under the 1933
Act involving an offering of securities of the same class as the Management
Shares, it shall give written notice of its intention to do so (the "Public
Offering Notice") to each Management Holder.
5.2 Upon the written request of a Management Holder (the "Management
Holder's Request") delivered to the Corporation within ten days after such
Holder's receipt of the Public Offering Notice, the Corporation shall use its
best efforts to cause the registration under the 1933 Act of the number of
Management Shares stated in the Management Holder's Request for disposition in
accordance with the intended method of disposition as stated in the Management
Holder's Request; provided, that:
(a) if, the number of Management Shares stated in the Management
Holder's request represents a greater proportion of the total number of
Management Shares owned by such Management Holder than the number of Shares
proposed to be sold and distributed by the Onex Group pursuant to the public
offering bears to the total number of Shares owned by the Onex
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Group, the Corporation shall not be obligated to effect the registration of such
excess number of Management Shares;
(b) if, at any time after giving such written notice of its
intention to register any of its securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Corporation determines for any reason not to effect such registration or to
delay such registration, it may, at its election, give written notice of such
determination to each Management Holder and thereupon the Corporation (i) in the
case of a determination not to effect registration, shall be relieved of its
obligation to register any Management Shares in connection with such
registration or (ii) in the case of a determination to delay registration, shall
be entitled to delay the registration of the Management Shares for the same
period as the delay in the registration of its securities;
(c) if (i) the registration involves an underwritten offering of
the securities being registered (in which case the Management Holder shall be
required to make its offering through the underwriters selected by the
Corporation and to sign the same underwriting agreement), whether or not for
sale for the account of the Corporation and (ii) the managing underwriter of
such underwritten offering advises the Corporation that the number of Shares
that members of the Onex Group and the Management Holders wish to sell exceeds
the number thereof that, in the sole discretion of the underwriter, is the
maximum number thereof that may be included in the offering without adversely
affecting the offering, then the Corporation shall not be required to include in
the offering the excess number of Shares requested to be sold by the members of
the Onex Group and each Management Holder above such maximum number (the Shares
so included to be apportioned pro rata among the members of the Onex Group and
each Management Holder so that each member of the Onex Group and each Management
Holder shall be entitled to have included in the offering a number of Shares
that is proportionate to his or its respective ownership of Shares; if any
member of the Onex Group or any Management Holder is entitled to have included
in the offering more Shares than he wishes to sell, each remaining Management
Holder and members of the Onex Group shall be entitled to make up the difference
pro rata from its or his respective ownership of Shares); and
(d) the Corporation shall not be obligated to effect any
registration of Management Holder's Shares under this Section 5 incidental to
the registration of any of its securities in connection with mergers,
acquisitions, exchange offers, dividend reinvestment plans or stock options or
other employee benefit plans or incidental to the registration of any nonequity
securities not convertible into equity securities.
5.3 Except as otherwise prohibited by applicable law or regulations,
the Corporation shall pay all expenses incurred in connection with the
registration of Management Holder's Shares pursuant to this Section 5, including
all registration and filing fees, printing expenses, blue sky fees and expenses
and accountant expenses to the extent permitted by law, but not including
commissions and expenses payable to underwriters in respect of Management Shares
and the fees of any counsel or other advisers retained by Management Holders.
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6. LEGEND
All certificates representing Management Shares held by any Management
Holder (and held by a transferee of Management Shares, except (i) as set forth
in Section 4, (ii) with respect to Shares transferred to Onex, and (iii) with
respect to a transferee pursuant to Section 2.3 or 2.5 or pursuant to a
registration statement in accordance with Section 5) shall bear the following
legend:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933 and the
transfer and voting of such shares is subject to conditions
specified in the Amended and Restated Management Shareholders
Agreement, dated November 15, 1996, between the Corporation,
Onex DHC LLC and the holder hereof, among others, and no
transfer of such shares shall be valid or effective until such
conditions have been fulfilled with respect to such transfer.
A copy of such Agreement will be furnished by the Corporation
to the holder of this Certificate upon written request and
without charge."
7. INTENTIONALLY OMITTED
8. CERTAIN PROHIBITED TRANSACTIONS AND REQUIRED ACTIONS
The Corporation shall not merge, consolidate, or amalgamate with
another corporation, or sell all or substantially all of its assets to another
Person, if pursuant thereto any member of the Onex Group is to receive equity
securities as full or partial consideration for its Shares unless all Management
Holders have the right to receive the same securities in proportion to their
respective holdings of Shares.
9. MANAGEMENT REPRESENTATIVES
Each of the Management Holders hereby irrevocably constitutes and
appoints the Management Representatives (as defined in this Section 9) as his
representatives to take all actions on his behalf in connection with this
Agreement, in their sole and absolute discretion, including but not limited to,
executing any consents or waivers in connection with, or any amendments to, this
Agreement but not any decision to sell his Management Shares or any decision to
buy any securities of the Corporation pursuant to Section 4.4. The term
"Management Representative" shall mean, any two of the Chairman of the Board of
Directors of ProSource Services Corporation, a subsidiary of the Corporation
("PSC"), the President of PSC, and the Vice Chairman of the Board of Directors
of PSC.
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10. INTENTIONALLY OMITTED
11. CERTAIN DEFINITIONS
11.1 The term "BOOK VALUE PER SHARE" as of any date shall mean the
quotient obtained by dividing (X) consolidated stockholders' equity of the
Corporation and its subsidiaries as at the end of the fiscal quarter immediately
preceding the date of the event that required the purchase and sale pursuant to
Section 2.4 determined in accordance with generally accepted accounting
principles in effect in the United States on the date of this Agreement by (Y)
the number of shares of common stock of the Corporation outstanding on such
date; in making calculations for purposes of clauses (X) and (Y), (i) the number
of Shares into which the Subordinated Note are convertible shall be excluded and
(ii) it shall be assumed that all Options outstanding on the date as of which
the calculation is being made had been exercised to the extent that the exercise
price does not exceed Book Value Per Share (determined without regard to this
clause) and any purchase price for Shares payable upon such exercise had been
paid. The determination of Book Value Per Share shall be based upon the audited
(in the case of the end of the last quarter of a fiscal year) or unaudited (in
the case of the end of any of the first three quarters of a fiscal year) balance
sheet of the Corporation as at the end of the fiscal quarter in question.
Notwithstanding the foregoing, Book Value Per Share shall be equitably adjusted
by the Board of Directors of the Corporation if a stock dividend,
recapitalization or other material event occurs outside of the ordinary course
of business after the end of such fiscal quarter and before the closing of the
sale in respect of which the determination is being made.
11.2 The term "1933 ACT" shall mean the Securities Act of 1933, as in
force on the date in question, or any similar federal statute then in force.
11.3 The term "DISABILITY" shall mean the inability of a Management
Holder to perform his duties of employment for the Corporation or any of its
Subsidiaries or affiliates, including PSC, for an aggregate of 180 days or more
in any 365-day period, because of physical or mental disability.
11.4 The term "MANAGEMENT SHARES" shall mean the Shares owned at any
time by any Management Holder.
11.5 The term "MARKET PRICE PER SHARE" shall mean the average closing
price per Share on the principal securities exchange on which the Shares are
listed (or, if the Shares are not then listed on a securities exchange, the mean
between the closing bid and asked prices in the over-the-counter market) for the
ten trading days thereon immediately preceding the Market Sale Notice (in the
case of a sale pursuant to Section 2.3) or the closing of the sale (in the case
of a sale pursuant to Section 2.5).
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11.6 The term "ONEX GROUP" shall mean Onex Corporation, an Ontario
Corporation, and any Person controlled by, controlling or under common control
with, or a shareholder of, Onex Corporation. A Person ("Parent") controls
another Person if Persons controlled by it (within the meaning of this sentence)
own or have the right (by contract or otherwise) to vote or direct the vote of
securities or other interests having the power to elect a majority of that
Person's board of directors or similar governing body (other than securities or
interests having that power only upon the happening of a contingency that has
not occurred) or to otherwise direct the management of such Person.
11.7 The term "ONEX SHARES" shall mean the Shares owned at any time by
the Onex Group.
11.8 The term "OPTION PLANS" shall mean the Corporation's Amended and
Restated Management Option Plan (1995) and the Corporation's 1996 Stock Option
Plan, as each may be amended, restated or modified from time to time, except
that the term "Option Plan" as used in Section 2.4(c) shall exclude the
Corporation's 1996 Stock Option Plan.
11.9 The term "OPTION" shall mean Option as defined in the Option
Plans.
11.10 The term "PERSON" shall mean an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, and a
government or any department or agency thereof.
11.11 The term "PRIME RATE" shall mean the prime rate announced from
time to time by NationsBank of Georgia, N.A.
11.12 The Corporation is a "PUBLIC COMPANY" if shares of its capital
stock are registered under Section 12 or if the Corporation is subject to
reporting requirements under Section 15(d) of the Securities Exchange Act of
1934 or any similar federal statute in force.
11.13 The term "SUBORDINATED NOTE" shall mean the convertible
subordinated note, dated March 31, 1995, evidencing the Corporation's
indebtedness to Onex Ohio Holdings, Inc. in the principal amount of $3,500,000.
12. TERMINATION
This Agreement shall terminate when the Onex Group ceases to hold in
the aggregate 20% of the outstanding voting capital stock of the Corporation or
when another Person (as defined in Rule 144 of the 1933 Act) holds in the
aggregate a greater percentage of the outstanding voting capital stock of the
Corporation than the Onex Group (excluding the Corporation) owns, whichever is
earlier. This Agreement shall terminate as to any Person when that Person no
longer owns any Management Shares or Onex Shares, as the case may be.
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13. EFFECTIVE DATE
This Agreement shall become effective upon the consummation of the
Offering.
14. MISCELLANEOUS
14.1 NOTICES
All notices, consents and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given when (a)
delivered by hand, (b) sent by telex or telecopier (with receipt confirmed),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by Express Mail, Federal Express or
other express delivery service (receipt requested), in each case to the
appropriate addresses, telex numbers and telecopier numbers set forth below (or
to such other addresses, telex numbers and telecopier numbers as a party may
designate as to itself by notice to the other parties):
(a) if to the Corporation:
ProSource, Inc.
550 Biltmore Way, 10th Floor
Coral Gables, Florida 33134
Attention: President
Telecopy: (305) 529-2573
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Joel I. Greenberg, Esq.
Telecopy: (212) 836-7149
(b) if to Onex or any member of the Onex Group:
Onex Corporation
161 Bay Street, 49th Floor
P.O. Box 700
Toronto, Ontario
M5J 2S1
Canada
Attention: President and Chief Executive Officer
Telephone: (416) 362-7711
Telecopy: (416) 362-5765
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(c) if to any Management Holder, to him at his address as it appears on
Schedule I attached hereto or as shown on the records of the Corporation.
14.2 ASSIGNMENT
No party may assign any rights or delegate any of its duties under this
Agreement, but this Agreement shall be binding upon and inure to the benefit of
the successors to the business and assets of the Corporation, Onex and the
Management Holders.
14.3 NO WAIVER
The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term or
any other term of this Agreement. Any waiver must be in writing.
14.4 EXCLUSIVE AGREEMENT AND AMENDMENT
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter, is intended as a complete and exclusive statement
of the terms of the Agreement among the parties with respect thereto and cannot
be changed or terminated orally. This Agreement may only be amended or altered
by the mutual agreement of the parties hereto, such amendments or alterations to
become effective when reduced to writing and signed by Onex, the Corporation and
Management Representatives or by Onex, the Corporation and the holders of at
least 75% of the Management Shares.
14.5 GOVERNING LAW
This Agreement and all amendments hereof and waivers and consents
hereunder shall be governed by the internal law of the State of Delaware without
regard to the conflicts of law principles thereof.
14.6 CAPTIONS
The captions in this Agreement are for convenience of reference only
and shall not be given any effect in the interpretation of this Agreement.
14.7 JURISDICTION
Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State
15
<PAGE> 16
of Delaware, or, if it has or can acquire jurisdiction, in the United States
District Court for Delaware, and each of the parties hereby consents to the
exclusive jurisdiction of such courts (and of the appropriate appellate courts)
in any such action or proceeding, and waives any objection to venue laid
therein. Process in any such action or proceeding may be served anywhere in the
world, whether within or without the State of Delaware.
14.8 COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
considered an original, but all of which together shall constitute one and the
same instrument.
14.9 SEVERABILITY
The provisions of this Agreement are intended to be and shall be deemed
severable. The invalidity or unenforceability of any particular provision of
this Agreement shall not affect the other provisions hereof, and this Agreement
shall be construed in all respects as if such invalid or unenforceable provision
were omitted.
ONEX DHC LLC
By: /s/ Donald F. West
-----------------------------
Name: Donald F. West
Title: Representative
PROSOURCE, INC.
By: /s/ David R. Parker
-----------------------------
Name: David R. Parker
Title: Chairman of the Board
16
<PAGE> 17
MANAGEMENT REPRESENTATIVES
On behalf of the Management Holders listed
on Schedule I hereto pursuant to Section 9
of the Original Agreement
By: /s/ David R. Parker
-----------------------------
Name: David R. Parker
Title: Chairman of the Board
By: /s/ Thomas C. Highland
-----------------------------
Name: Thomas C. Highland
Title: President & CEO
17
<PAGE> 18
Schedule I
List of Management Holders
<TABLE>
<CAPTION>
Number of Shares
of Class B Common
Stock Owned Upon
Consummation
Name and Address of the Offering
- ---------------- ---------------
<S> <C>
Daniel J. Adzia 45,000
1975 Pleasant Hill Lane
Lisle, Illinois 60532
Yolanda D. Alvarez 5,000
8175 S.W. 170th Street
Miami, Florida 33157
Maurice L. Ambler 7,500
8245 SW 184 Lane
Miami, FL 33157
Brad Anderson 3,000
#5 Graystone Court
Bloomington, Illinois 61704
Dennis Andruskiewicz 13,000
9370 SW 93 Place
Miami, FL 33176
Suzanne Benn 6,000
9720 S.W. 119 Street
Miami, Florida 33176
Robert A. Boehm 3,600
623 Crossing Creek South
Gahanna, Ohio 43230
Mark Brigham 4,500
1 Fawnwood Lane
P.O. Box 433
Fort Montgomery, New York 10922
Lynn T. Cambest 3,000
4000 Towerside Terrace
Apt. 1704
Miami, Florida 33138
</TABLE>
I-1
<PAGE> 19
<TABLE>
<CAPTION>
Number of Shares
of Class B Common
Stock Owned Upon
Consummation
Name and Address of the Offering
- ---------------- ---------------
<S> <C>
Joyce Cameron 4,300
466 Curie Drive
San Jose, CA 95123
Mark A. Cartwright 4,500
304 Mallard Road
Weston, FL 33327
Stephen Chambers 7,000
8251 S.W. 171 Terrace
Miami, Florida 33157
Joshua M. Chaney 7,300
560 Ripplewater Drive
Marietta, GA 30064
Richard L. Christie 4,500
4030 La Playa Blvd.
Coconut Grove, FL 33133
George Clos 2,800
6297 Old Virginia Lane
Parma Heights, OH 44130
James M. Collins 9,000
285 7NE 59th Terrace
Gladstone, MO 64119
Paul Conway 9,700
6540 SW 144 Street
Miami, FL 33158
Dan Craig 2,400
113 Zinfandel Circle
Scotts Valley, CA 95066
Norman L. Dick 4,500
5 S 735 Park Meadow
Naperville, Illinois 60540
James Dimos 1,000
372 N. Walnut Lane
Schaumburg, IL 60194
</TABLE>
I-2
<PAGE> 20
<TABLE>
<CAPTION>
Number of Shares
of Class B Common
Stock Owned Upon
Consummation
Name and Address of the Offering
- ---------------- ---------------
<S> <C>
Robert Donaldson 20,400
1440 South Bayshore Drive, #301
Miami, FL 33131
Steve Edwards 2,000
6127 Sand Pines Estates Blvd.
Orlando, Florida 32819
Mark Eisenberg 4,500
50 Cedar Ridge Lane
Dix Hills, NY 11746
William F. Evans 45,000
3824 El Prado Blvd.
Coconut Grove, FL 33133
John E. Foley 30,000
6724 S.W. 139 Street
Miami, Florida 33158
John P. Gainor 15,000
10045 S.W. 124 Street
Miami, FL 33176
Timothy E. Hannon 5,800
5311 Sand Lily Drive
Naperville, Illinois 60564
Thomas C. Highland 75,000
7120 Lago Drive West
Coral Gables, FL 33143
Roger Hubbard 900
26651 SW 174 Place
Homestead, FL 33031
Marcelino Iturrey 4,500
9250 S.W. 70th Avenue
Miami, Florida 33156
Walter Jankowski 1,500
24322 Fairway Lane
Coto De Caza, CA 92679
</TABLE>
I-3
<PAGE> 21
<TABLE>
<CAPTION>
Number of Shares
of Class B Common
Stock Owned Upon
Consummation
Name and Address of the Offering
- ---------------- ---------------
<S> <C>
Edward M. Johnson 10,000
1801 W. Terra Mar Drive
Pompano Beach, FL 33062
Larry R. Johnson 1,000
203 Landings Boulevard
Weston, FL 33327
Joseph C. Johnston 18,100
1501 N. Madison
Raymore, MO 64083
William R. Jusko 4,300
3803 Marine Court
Arlington, TX 76016
Paul Lawrenz 3,000
339 Hiawatha
Wood Dale, Illinois 60191
Shirley A. Malone 3,000
2601 Chateau Drive
Norman, Oklahoma 73069
William G. Malone 3,000
2601 Chateau Drive
Norman, Oklahoma 73069
Anthony Marino 6,900
2966 Grandview Drive
Fairlawn, OH 44333
Merv McBride 1,800
12298 SE Imperial Crest
Clackamas, OR 97015
Richard W. McCollum 2,900
35991 Wyndemere Way
Avon, Ohio 44011
Diana M. McHugh 9,000
9145 S.W. 72 Avenue, Apt. V-1
Miami, Florida 33156
</TABLE>
I-4
<PAGE> 22
<TABLE>
<CAPTION>
Number of Shares
of Class B Common
Stock Owned Upon
Consummation
Name and Address of the Offering
- ---------------- ---------------
<S> <C>
Thomas McKinnon 5,000
865 N. LaSalle Boulevard
Chicago, Illinois 60610
James Mosier 2,800
1875 Water Ridge Court
Ft. Lauderdale, FL 33326
Michael A. Moskowits 1,500
16112 SW 74 Place
Miami, FL 33157
Craig Neeb 4,100
12224 SW 95 Street
Miami, FL 33186
Stan Nochowitz 10,000
3006 North Dryden Place
Arlington Heights, Illinois 60004
James P. Nolan 3,200
15548 Plum Tree Drive
Orland Park, Illinois 60462
Michael J. Nolan 500
67997 Dequindre Road
Oakland, MI 48363
Steven S. Obremski 3,700
One Kelly Street
Auburn, MA 01501
Cynthia Ormond 3,000
624 Fluvia Avenue
Coral Gables, FL 33134
Calvin Parker 3,600
22 S. Tallowberry Drive
The Woodlands, Texas 77381
David R. Parker 143,300
930 Castile Avenue
Coral Gables, FL 33134
</TABLE>
I-5
<PAGE> 23
<TABLE>
<CAPTION>
Number of Shares
of Class B Common
Stock Owned Upon
Consummation
Name and Address of the Offering
- ---------------- ---------------
<S> <C>
Paul A. Garcia de Quevedo 15,000
5810 S.W. 91st Street
Miami, FL 33173
Randall L. Ray 1,500
219 17th Street
Wilmette, IL 60091
Kenyard W. Rewerts 2,500
136 Brandywine Avenue
Elk Grove Village, Illinois 60007
Scott Richardson 3,000
231 Terrane Ridge
Peachtree City, Georgia 30269
Robert Selby 10,000
28956 Fall River
Westlake, OH 44145
James N. Slattery 3,000
221 Tiffany Lane
Roselle, Illinois 60172
Shane R. Stapleton 4,600
863 Verona Lake Drive
Ft. Lauderdale, FL 33326
James Stencel 5,500
10115 S.W. 13th Street #201
Pembroke Pines, FL 33025
Wayne H. Stephens 3,000
19208 Antenor Street
Mandeville, LA 70471
Charles M. Temple 9,000
7410 Chadwick
Prairie Village, KS 66208
Jay Trottier 500
5300 Great Oak Drive
Lakeland, FL 33809
</TABLE>
I-6
<PAGE> 24
<TABLE>
<CAPTION>
Number of Shares
of Class B Common
Stock Owned Upon
Consummation
Name and Address of the Offering
- ---------------- ---------------
<S> <C>
Robert H. Winstead 8,700
1541 Brickell Avenue, #3504
Miami, FL 33129
Thomas J. Wondolowski 7,200
566 McKendimen Road
Medord, NJ 08055
</TABLE>
I-7
<PAGE> 1
Exhibit 10.2
AMENDED AND RESTATED
DIRECTOR SHAREHOLDERS AGREEMENT
THIS DIRECTOR SHAREHOLDERS AGREEMENT dated as of November 15,
1996 amends and restates in its entirety the Director Shareholders Agreement
dated as of May 31, 1995 (the "Original Agreement"), among ProSource, Inc., a
Delaware corporation (the "Corporation"), Onex DHC LLC, a Wyoming limited
liability company ("Onex"), and the individuals named from time to time on
Schedule I to this Agreement (each a "Director Holder" and collectively the
"Director Holders").
RECITALS
A. The parties desire to amend and restate the Original
Agreement in contemplation of the proposed initial public offering (the
"Offering") of shares of the Corporation's Class A Common Stock (as hereinafter
defined).
B. Prior to commencement of the Offering, (i) the Corporation
intends to file a restated certificate of incorporation (the "Restated
Certificate of Incorporation"), providing for, among other things, two classes
of authorized common stock, Class A Common Stock, par value $.01 per share
("Class A Common Stock"), and Class B Common Stock, par value $.01 per share
("Class B Common Stock"), and (ii) all of the Corporation's outstanding shares
of common stock, par value $.01 per share ("Common Stock"), will be converted
into shares of Class B Common Stock.
C. The powers, preferences, rights, limitations and
restrictions of the Class B Common Stock, including certain provisions with
respect to transfer thereof and conversion into shares of Class A Common Stock,
are set forth in the Restated Certificate of Incorporation.
D. Each of the Director Holders is a member of the Board of
Directors of the Corporation and purchased shares of Common Stock from the
Corporation prior to the date of this Agreement. As used herein, the term
"Shares" shall mean such shares of Common Stock, the shares of Class B Common
Stock issued or to be issued upon conversion of Common Stock, and any shares of
Class A Common Stock issued upon conversion of Class B Common Stock.
The parties hereby agree as follows:
<PAGE> 2
1. RESTRICTIONS ON TRANSFER OF SHARES
1.1 REPRESENTATION. Each of the Director Holders represents and agrees
that the Director Shares owned by him were acquired for his own account and will
not be transferred in violation of this Agreement, the securities laws of the
United States, or any other applicable law.
1.2 RESTRICTIONS. A Director Holder may transfer Director Shares as a
whole or in part only if such transfer is permitted by and made in accordance
with the terms of this Agreement. Any purported transfer in any manner contrary
to the terms of this Agreement shall be null and void. For purposes of this
Agreement, the term "transfer" shall mean any sale, exchange, assignment, gift,
bequest, pledge, creation of a lien or security interest or other disposition or
encumbrance of any kind, whether voluntary or involuntary or by operation of
law, affecting title to or possession of the Director Shares. The Corporation
may refuse to register any transfer of Shares that would violate this Agreement,
the securities laws of the United States, or any other applicable law, and may,
as a condition to registration of such transfer, require the transferor to
furnish to the Corporation an opinion of counsel reasonably acceptable to the
Corporation as to compliance with the foregoing.
1.3 PLEDGE OF SHARES AS SECURITY. Each of the Director Holders may
finance up to 66 2/3% of the purchase price of such Director Holder's Shares and
may pledge such Shares to the lender to secure the financing or to any affiliate
of the Corporation that guarantees repayment of any loan made to finance the
purchase of Shares if the lender or guarantor agrees in writing to be bound by
this Agreement.
1.4 SALES FREE OF ENCUMBRANCES. Upon the transfer of Director Shares
pursuant to this Agreement, the Director Holder shall discharge any indebtedness
permitted by Section 1.3 and deliver to the purchaser the share certificates
representing such Director Shares free and clear of any pledge, lien, security
interest or other encumbrance of any kind. If the Director Holder fails to
comply with the preceding sentence, the purchaser may withhold from the purchase
price an amount equal to the indebtedness secured by any such pledge, lien,
security interest or other encumbrance or, if the amount of such indebtedness is
not known by the purchaser, an amount equal to the purchaser's good faith
estimate thereof (no limitation of any other remedy available to the purchaser
being intended) and apply such withheld amount to extinguish such debt. Any such
payment of such withheld amount shall discharge the purchaser's obligation to
make payment for the purchased shares to the extent of such withheld amount. If
a selling Director Holder fails to deliver certificates representing Director
Shares being sold as required at the closing of such sale, the purchaser may
deposit the purchase price therefor with the Corporation and, upon such deposit,
those certificates shall be deemed canceled and of no effect (no limitation of
any other remedy available to the purchaser being intended).
2
<PAGE> 3
2. SALE OR TRANSFER OF DIRECTOR SHARES
2.1 TRANSFER TO DIRECTOR HOLDER'S FAMILY. A Director Holder may
transfer Director Shares to his parents, siblings, spouse, or issue or to a
trust or custodianship for the exclusive benefit of himself or any of them (each
a "Family Group Member"); provided that any such transferee agrees in writing to
be bound by the provisions of this Agreement that bind the transferor Director
Holder.
2.2 SALE: CORPORATION IS A PUBLIC COMPANY. If the Corporation is a
Public Company, a Director Holder may sell any or all of his Shares through the
facilities of any securities exchange on which the Director Shares may then be
listed in a manner that complies with applicable securities law and regulations,
except that no such sales shall be made within 180 days after any offering of
securities registered under the 1933 Act that involves shares of the same class
as Director Shares.
2.3 SALE UPON CEASING TO BE A DIRECTOR; CORPORATION IS NOT A PUBLIC
COMPANY. (a) If a Director Holder ceases to be a member of the Board of
Directors of the Corporation at any time when the Corporation is not a Public
Company and elects, by notice to the Corporation within 10 days after ceasing to
be a member of the Board of Directors, to sell his Director Shares to the
Corporation, the Corporation shall purchase, and the Director Holder shall sell,
all of the Director Shares owned by such Director Holder for a purchase price
equal to Book Value Per Share multiplied by the number of Director Shares owned
by such Director Holder (the "Initial Section 2.3(a) Payment"). If the
Corporation purchased a Director Holder's Director Shares pursuant to the
preceding sentence and effects any offering of securities registered under the
1933 Act that involves an offering of shares of the same class as Director
Shares within four months after that Director Holder ceases to be a member of
the Board of Directors of the Corporation, the purchase price per Share shall be
increased by an amount equal to the excess, if any, of the public offering price
per Share (after deduction of any applicable underwriter's commissions or
discounts) over the Book Value Per Share used in calculating the original
purchase price, less interest at the Prime Rate on the portion of the purchase
price previously paid in cash (the "Additional Section 2.3(a) Payment"). Subject
to the limitations set forth in Section 2.3(b), the Initial Section 2.3(a)
Payments shall be paid in cash at the closing of the purchase and sale and
Additional Section 2.3(a) Payments shall be paid in cash within 60 days of the
closing of the registered offering.
(b) The amount of the purchase price payable by the
Corporation to any Director Holder pursuant to Section 2.3(a) shall be reduced
by any amount paid by the Corporation or any affiliate of the Corporation to
NCNB National Bank (or any successor bank) to discharge the principal portion of
any indebtedness incurred by such Director Shareholder to purchase the Director
Shares. If, as a result of restrictions in its loan agreement with NationsBank
of Georgia, N.A., ProSource Services Corporation ("PSC"), is unable to pay
sufficient dividends to the Corporation to enable the Corporation to pay the
amount of the purchase price required to be paid by it in cash either at the
closing of the sale or at any time thereafter in accordance with the terms set
forth in Sections 2.3(a), the Corporation shall be entitled to pay any unpaid
portion of the payments required to be made under Sections 2.3(a), together with
interest thereon at the Prime Rate, at such time as it has received from PSC
sufficient dividends to enable it to do so.
3
<PAGE> 4
2.4 SALE UPON DEFAULT ON INDEBTEDNESS. If a Director Holder defaults on
any indebtedness referred to in Section 1.3, the Corporation shall have the
option, exercisable upon notice to the Director Holder at any time following a
default, to purchase all or any portion of the Director Shares with respect to
which such debt was incurred at a purchase price equal to (i) 85% of Book Value
Per Share, if the Corporation is not a Public Company at the time of the closing
of the purchase or (ii) 85% of Market Price Per Share, if the Corporation is a
Public Company at the time of the closing of the purchase.
2.5 CLOSING OF SALE. The closing of any purchase and sale of Director
Shares pursuant to the exercise of a right under this Section 2 (other than
transfers made pursuant to Section 2.1 or sales made through the facilities of
any securities exchange pursuant to Sections 2.2 and 5) shall be held at the
principal offices of the Corporation on a date designated by the purchaser but
in any event not later than the last day upon which a purchase is permitted or
required to be made. At the closing, the Director Holder selling Shares shall
deliver to the purchaser the stock certificates and other instruments
representing such Shares, together with stock powers and other instruments
transferring such Shares, duly endorsed for transfer and free and clear of all
claims, liens, encumbrances and security interests, and the purchaser shall
deliver to the Director Holder the consideration payable upon closing.
3. OPTIONS TO PURCHASE SHARES
3.1 Shares received by a Director Holder upon the exercise or
conversion of any options, warrants, rights to purchase shares or securities
convertible into Shares, shall be subject to the terms and conditions of this
Agreement and may not be transferred except as permitted by this Agreement.
4. SALE OF SHARES BY ONEX AND THE CORPORATION
4.1 TAG ALONG. (a) If at any time any member of the Onex Group proposes
to sell any Shares except for (i) sales to another member of the Onex Group that
becomes bound by the terms of this Agreement (an "Onex Group Member"), (ii)
sales to a Director Holder or other management employee or director of the
Corporation or a subsidiary of the Corporation, (iii) sales of the 500 Shares
purchased by Onex on June 30, 1992 for later disposition to persons providing
services to the Corporation or any of the Corporation's subsidiaries (the "500
Shares"), (iv) sales effected on a national securities exchange in the regular
way or in the over-the-counter market, or (v) sales made pursuant to an offering
of securities registered under the 1933 Act (a "Tag Along Disposition"), each of
the Director Holders shall have the right to sell to the proposed purchaser a
number of his Director Shares equal to the total number of his Director Shares
multiplied by a ratio, the numerator of which is the number of Shares to be sold
by the Onex Group Member to the proposed purchaser and the denominator of which
is the total number of Shares then owned by the Onex Group. Such ratio is
referred to herein as the "Share Ratio." A sale of Director Shares pursuant to
this Section shall be made at the same price, upon the same terms, and at the
same time as the sale by the Onex Group Member of its Shares.
4
<PAGE> 5
(b) The Onex Group Member shall give notice (the "Tag Along
Notice") to each Director Holder of the proposed Tag Along Disposition at least
20 days prior to the same. The Tag Along Notice shall be in writing and shall
describe the terms of the Tag Along Disposition in reasonable detail, the
identity of the proposed purchaser, the proposed date of sale, the purchase
price per Share, and the Share Ratio and shall state that (i) the Director
Holder has the option to sell to the proposed purchaser a number of Director
Shares equal to the total number of Director Shares then owned by such Holder
multiplied by the Share Ratio, (ii) the sale, if made, shall be made at the same
price per share, upon the same terms, and at the same time as the sale by the
Onex Group Member of its Shares to the proposed purchaser, and (iii) the sale by
Director Holders will be conditioned upon a sale of Shares by the Onex Group
Member pursuant to this Section.
(c) A Director Holder may exercise his sale option pursuant to
Section 4.1 by delivering to the Onex Group Member, within ten days after such
Director Holder receives the Tag Along Notice, written notice of his offer to
sell Director Shares pursuant to this Section and indicating the number of
Director Shares offered for sale. If a Director Holder gives notice of his
election to sell, he shall be obligated to do so, but the sale and his
obligation to sell shall be conditioned upon the closing of the Tag Along
Disposition. If the purchaser specifies a limited number of Shares that it is
willing to purchase in the aggregate, each Director Holder and the Onex Group
Member shall have the right to sell its or his proportion of the number of
Shares that the purchaser is purchasing, i.e., the proportion that the number of
Shares owned by such Person bears to the aggregate number of Shares owned by the
shareholders who are selling Shares. For purposes of this Section 4.1, the
number of Shares owned by any Onex Group Member shall not be deemed to include
any portion of the 500 Shares then owned by any Onex Group Member.
(d) If a transferee of Onex Shares pursuant to this Section 4.1
acquires such Shares free of this Agreement, then such transferee shall also
take the Director Shares being sold by a Director Holder free of this Agreement.
If, however, any Onex Group Member is required to transfer any Onex Shares
subject to this Agreement, then the Director Holder shall also transfer his
Director Shares subject to this Agreement.
4.2 DRAG ALONG. Notwithstanding anything herein to the contrary, if any
Onex Group Member proposes to sell any Shares to any Person, except for (i)
sales of the 500 Shares, (ii) sales effected on a national securities exchange
in the regular way or in the over-the-counter market, and (iii) sales to any
other Onex Group Member (a "Drag Along Disposition"), it may, upon giving notice
to each Director Holder at least 20 days prior to the Drag Along Disposition
(the "Drag Along Notice") require the Director Holders to sell a number of
Director Shares equal to the total number of Director Shares then owned by such
Holder multiplied by the Share Ratio. The Drag Along Notice shall be in writing
and shall contain the same information as is required to be set forth in the Tag
Along Notice. A sale of Director Shares pursuant to this Section shall be made
at the same price, upon the same terms, and at the same time as the sale by the
Onex Group Member of its Shares pursuant to this Section. Any transferee of
Shares owned by any Onex Group Member or of the Director Holders pursuant to
this Section 4.2 shall acquire such Shares free of this Agreement, unless the
agreement between the Onex Group Member and such transferee provides otherwise.
5
<PAGE> 6
4.3 REPRESENTATIONS AND WARRANTIES ON A DISPOSITION. In connection with
any transfer described in this Section 4 in which Director Shares are to be sold
by a Director Holder, Onex and the selling Onex Group Member may require the
Director Holder to enter into agreements with the purchaser representing and
warranting that, except as specifically disclosed to the purchaser in writing,
such Director Holder at the time of the closing of such transfer, does not have
actual knowledge that any representation or warranty made by the Corporation or
any other shareholder in connection with the disposition was untrue in any
material respect when made or is untrue in any material respect as of the
closing; the liability of the selling Director Holder under such representation
and warranty shall be limited to the amount which he receives from the sale of
his Director Shares in connection with such transfer and shall be pro rata in
accordance with the number of Shares sold by the Director Holder in relation to
the Shares being sold by all holders.
4.4 PRE-EMPTIVE RIGHTS. If, prior to the time when the Corporation
becomes a Public Company, the Corporation intends to sell shares of its capital
stock or options, warrants, rights to purchase, or securities convertible into,
or exchangeable for, shares of its capital stock to any member of the Onex Group
for cash, the Corporation shall give notice thereof (the "Sale Notice") to each
of the Director Holders. The Sale Notice shall be in writing, shall describe the
securities to be offered, the price of such securities, and other terms of the
offer in reasonable detail. Each Director Holder shall have the right, subject
to applicable law and exercisable by notice to the Corporation within 45 days
after his receipt of the Sale Notice, to purchase his Pro Rata Share (as defined
in this Section 4.4) of the securities offered for the same price per unit and
on the same terms as the securities are offered to Onex and as are described in
the Sale Notice. As used in this Section 4.4, the term "Pro Rata Share" shall
mean the product of (x) the total number of securities referred to in the Sale
Notice as proposed to be sold to members of the Onex Group and (y) a fraction,
the numerator of which is the number of Director Shares of all classes held by
the Director Holder on the date the Sale Notice is given and the denominator of
which is the sum of the number of Shares of all classes of the Corporation's
stock of the same class or classes as Director Shares outstanding on such date
(including the Director Shares). Any securities acquired by a Director Holder
pursuant to this Section 4.4 shall be subject to the terms of this Agreement.
The provisions of this Section 4.4 shall not apply to the issuance of
securities, with or without consideration, to officers and employees of the
Corporation and its subsidiaries or plans for the benefit of such employees, by
the Corporation from time to time and shall not require the Corporation to offer
securities under circumstances that could require registration under the 1933
Act.
5. PIGGY-BACK REGISTRATION RIGHTS
5.1 If the Corporation proposes to effect a registration under the 1933
Act involving an offering of securities of the same class as the Director
Shares, it shall give written notice of its intention to do so (the "Public
Offering Notice") to each Director Holder.
5.2 Upon the written request of a Director Holder (the "Director
Holder's Request") delivered to the Corporation within ten days after such
Holder's receipt of the Public Offering Notice, the Corporation shall use its
best efforts to cause the registration under the 1933 Act of the
6
<PAGE> 7
number of Director Shares stated in the Director Holder's Request for
disposition in accordance with the intended method of disposition as stated in
the Director Holder's Request; provided, that:
(a) if, the number of Director Shares stated in the Director
Holder's request represents a greater proportion of the total number of Director
Shares owned by such Director Holder than the number of Shares proposed to be
sold and distributed by the Onex Group pursuant to the public offering bears to
the total number of Shares owned by the Onex Group, the Corporation shall not be
obligated to effect the registration of such excess number of Director Shares of
such Director Holder;
(b) if, at any time after giving such written notice of its
intention to register any of its securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Corporation determines for any reason not to effect such registration or to
delay such registration, it may, at its election, give written notice of such
determination to each Director Holder and thereupon the Corporation (i) in the
case of a determination not to effect registration, shall be relieved of its
obligation to register any Director Shares in connection with such registration
or (ii) in the case of a determination to delay registration, shall be entitled
to delay the registration of the Director Shares for the same period as the
delay in the registration of its securities;
(c) if (i) the registration involves an underwritten offering of
the securities being registered (in which case the Director Holder shall be
required to make its offering through the underwriters selected by the
Corporation and to sign the same underwriting agreement), whether or not for
sale for the account of the Corporation and (ii) the managing underwriter of
such underwritten offering advises the Corporation that the number of Shares
that members of the Onex Group, the Director Holders and other selling
stockholders wish to sell exceeds the number thereof that, in the sole
discretion of the underwriter, is the maximum number thereof that may be
included in the offering without adversely affecting the offering, then the
Corporation shall not be required to include in the offering the excess number
of Shares requested to be sold by the members of the Onex Group and each
Director Holder above such maximum number (the Shares so included to be
apportioned pro rata among the members of the Onex Group, each Director Holder
and other selling stockholders so that each member of the Onex Group, each
Director Holder and each other selling stockholder shall be entitled to have
included in the offering a number of Shares that is proportionate to his or its
respective ownership of Shares); and
(d) the Corporation shall not be obligated to effect any
registration of Director Holder's Shares under this Section 5 incidental to the
registration of any of its securities in connection with mergers, acquisitions,
exchange offers, dividend reinvestment plans or stock options or other employee
benefit plans or incidental to the registration of any nonequity securities not
convertible into equity securities.
5.3 Except as otherwise prohibited by applicable law or regulations,
the Corporation shall pay all expenses incurred in connection with the
registration of Director Holder's Shares pursuant to this Section 5, including
all registration and filing fees, printing expenses, blue sky fees and expenses
and accountant expenses to the extent permitted by law, but not including
commissions and
7
<PAGE> 8
expenses payable to underwriters in respect of Director Shares and the fees of
any counsel or other advisers retained by Director Holders.
6. LEGEND
All certificates representing Director Shares held by any Director
Holder (and held by a transferee of Director Shares, except (i) as set forth in
Section 4, (ii) with respect to Shares transferred to Onex, and (iii) with
respect to a transferee pursuant to Section 2.2 or pursuant to a registration
statement in accordance with Section 5) shall bear the following legend:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933 and the
transfer and voting of such shares is subject to conditions
specified in the Amended and Restated Director Shareholders
Agreement, dated as of November 15, 1996, between the
Corporation, Onex DHC LLC and the holder hereof, among others,
and no transfer of such shares shall be valid or effective
until such conditions have been fulfilled with respect to such
transfer. A copy of such Agreement will be furnished by the
Corporation to the holder of this Certificate upon written
request and without charge."
7. INTENTIONALLY OMITTED
8. CERTAIN PROHIBITED TRANSACTIONS AND REQUIRED ACTIONS
The Corporation shall not merge, consolidate, or amalgamate with
another corporation, or sell all or substantially all of its assets to another
Person, if pursuant thereto any member of the Onex Group is to receive equity
securities as full or partial consideration for its Shares unless all Director
Holders have the right to receive the same securities in proportion to their
respective holdings of Shares.
9. INTENTIONALLY OMITTED
10. CERTAIN DEFINITIONS
10.1 The term "BOOK VALUE PER SHARE" as of any date shall mean the
quotient obtained by dividing (X) consolidated stockholders' equity of the
Corporation and its subsidiaries as at the end of the fiscal quarter immediately
preceding the date of the event that entitled the Director Holder to require the
purchase and sale pursuant to Section 2.3 determined in accordance with
generally accepted accounting principles in effect in the United States on June
30, 1992 by (Y) the number of shares of common stock of the Corporation
outstanding on such date; in making calculations for purposes of clauses (X) and
(Y), (i) the number of Shares into which the Subordinated Note are convertible
shall be excluded and (ii) it shall be assumed that all Options (as defined in
this Section 10.1) outstanding on the date as of which the calculation is being
made had been exercised
8
<PAGE> 9
to the extent that the exercise price does not exceed Book Value Per Share
(determined without regard to this clause) and any purchase price for Shares
payable upon such exercise had been paid. The determination of Book Value Per
Share shall be based upon the audited (in the case of the end of the last
quarter of a fiscal year) or unaudited (in the case of the end of any of the
first three quarters of a fiscal year) balance sheet of the Corporation as at
the end of the fiscal quarter in question. Notwithstanding the foregoing, Book
Value Per Share shall be equitably adjusted by the Board of Directors of the
Corporation if a stock dividend, recapitalization or other material event occurs
outside of the ordinary course of business after the end of such fiscal quarter
and before the closing of the sale in respect of which the determination is
being made. As used in this Section 10.1, the term "Options" shall mean those
options that, in accordance with the terms of the Corporation's Option Plans,
have become exercisable as of the date of the closing of the sale.
10.2 The term "1933 ACT" shall mean the Securities Act of 1933, as in
force on the date in question, or any similar federal statute then in force.
10.3 The term "DIRECTOR SHARES" shall mean the Shares owned at any time
by any Director Holder.
10.4 The term "MARKET PRICE PER SHARE" shall mean the average closing
price per Share on the principal securities exchange on which the Shares are
listed (or, if the Shares are not then listed on a securities exchange, the mean
between the closing bid and asked prices in the over-the-counter market) for the
ten trading days thereon immediately preceding the closing of the sale pursuant
to Section 2.4.
10.5 The term "ONEX GROUP" shall mean Onex Corporation, an Ontario
Corporation, and any Person controlled by, controlling or under common control
with, or a shareholder of, Onex Corporation. A Person ("Parent") controls
another Person if Persons controlled by it (within the meaning of this sentence)
own or have the right (by contract or otherwise) to vote or direct the vote of
securities or other interests having the power to elect a majority of that
Person's board of directors or similar governing body (other than securities or
interests having that power only upon the happening of a contingency that has
not occurred) or to otherwise direct the management of such Person.
10.6 The term "ONEX SHARES" shall mean the Shares owned at any time by
the Onex Group.
10.7 The term "OPTION PLANS" shall mean the Corporation's Amended and
Restated Management Option Plan (1995) and the Corporation's 1996 Stock Option
Plan, as each may be amended, restated or modified from time to time.
10.8 The term "PERSON" shall mean an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an unincorporated
organization, and a government or any department or agency thereof.
9
<PAGE> 10
10.9 The term "PRIME RATE" shall mean the prime rate announced from
time to time by NationsBank of Georgia, N.A.
10.10 The Corporation is a "PUBLIC COMPANY" if shares of its capital
stock are registered under Section 12 or if the Corporation is subject to
reporting requirements under Section 15(d) of the Securities Exchange Act of
1934 or any similar federal statute in force.
10.11 The term "SUBORDINATED NOTE" shall mean the convertible
subordinated note, dated March 31, 1995, evidencing the Corporation's
indebtedness to Onex Ohio Holdings, Inc. in the principal amount of $3,500,000.
11. TERMINATION
This Agreement shall terminate when the Onex Group ceases to hold in
the aggregate 20% of the outstanding voting capital stock of the Corporation or
when another Person (as defined in Rule 144 of the 1933 Act) holds in the
aggregate a greater percentage of the outstanding voting capital stock of the
Corporation than the Onex Group (excluding the Corporation) owns, whichever is
earlier. This Agreement shall terminate as to any Director Holder when that
Director Holder no longer owns any Shares.
12. EFFECTIVE DATE
This Agreement shall become effective upon the consummation of the
Offering.
13. MISCELLANEOUS
13.1 NOTICES
All notices, consents and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given when (a)
delivered by hand, (b) sent by telex or telecopier (with receipt confirmed),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by Express Mail, Federal Express or
other express delivery service (receipt requested), in each case to the
appropriate addresses, telex numbers and telecopier numbers set forth below (or
to such other addresses, telex numbers and telecopier numbers as a party may
designate as to itself by notice to the other parties):
10
<PAGE> 11
1. if to the Corporation:
ProSource, Inc.
530 Biltmore Way, 10th Floor
Coral Gables, Florida 33134
Attention: President
Telecopy: (305) 529-2573
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Joel I. Greenberg, Esq.
Telecopy: (212) 836-7149
2. if to Onex or any member of the Onex Group:
Onex Corporation
161 Bay Street, 49th Floor
P.O. Box 700
Toronto, Ontario
M5J 2S1
Canada
Attention: President and
Chief Executive Officer
Telephone: (416) 362-7911
Telecopy: (416) 362-5765
3. if to any Director Holder, to him at his address as it
appears on Schedule I attached hereto or as shown on the records of the
Corporation.
13.2 ASSIGNMENT
No party may assign any rights or delegate any of its duties under this
Agreement, but this Agreement shall be binding upon and inure to the benefit of
the successors to the business and assets of the Corporation, Onex and the
Director Holders.
11
<PAGE> 12
13.3 NO WAIVER
The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term or
any other term of this Agreement. Any waiver must be in writing.
13.4 EXCLUSIVE AGREEMENT AND AMENDMENT
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter, is intended as a complete and exclusive statement
of the terms of the Agreement among the parties with respect thereto and cannot
be changed or terminated orally. This Agreement may only be amended or altered
by the mutual agreement of the parties hereto, such amendments or alterations to
become effective when reduced to writing and signed by Onex, the Corporation and
the holders of at least 75% of the Director Shares.
13.5 GOVERNING LAW
This Agreement and all amendments hereof and waivers and consents
hereunder shall be governed by the internal law of the State of Delaware without
regard to the conflicts of law principles thereof.
13.6 CAPTIONS
The captions in this Agreement are for convenience of reference only
and shall not be given any effect in the interpretation of this Agreement.
13.7 JURISDICTION
Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of Delaware, or, if it has or can acquire
jurisdiction, in the United States District Court for Delaware, and each of the
parties hereby consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding, and waives any
objection to venue laid therein. Process in any such action or proceeding may be
served anywhere in the world, whether within or without the State of Delaware.
13.8 COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
considered an original, but all of which together shall constitute one and the
same instrument.
12
<PAGE> 13
13.9 SEVERABILITY
The provisions of this Agreement are intended to be and shall be deemed
severable. The invalidity or unenforceability of any particular provision of
this Agreement shall not affect the other provisions hereof, and this Agreement
shall be construed in all respects as if such invalid or unenforceable provision
were omitted.
ONEX DHC LLC
By: /s/ Donald F. West
---------------------------------------
Name: Donald F. West
Title: Representative
PROSOURCE, INC.
By: /s/ David R. Parker
--------------------------------------
Name: David R. Parker
Title: Chairman of the Board
DIRECTOR HOLDERS
/s/ Michael Carpenter
-------------------------------------------
Michael Carpenter
/s/ C. Lee Johnson
-------------------------------------------
C. Lee Johnson
/s/ R. Geoffrey P. Styles
-------------------------------------------
R. Geoffrey P. Styles
/s/ Michael Treacy
-------------------------------------------
Michael Treacy
13
<PAGE> 14
Schedule I
List of Director Holders
<TABLE>
<CAPTION>
Name Addresses Shares
---- --------- ------
<S> <C> <C>
Michael Carpenter 134 Otter Rock Drive 18,200
Greenwich, CT 06830
Advest, Inc., Custodian f/b/o 7384 Brandshire Lane 4,500
C. Lee Johnson Dublin, Ohio 43017
R. Geoffrey P. Styles 8 York Ridge Road 7,300
Willowdale, Canada M2P IR7
Michael Treacy 3 West Cedar Street 30,000
Boston, MA 02108
</TABLE>
<PAGE> 1
Exhibit 10.13
AMENDMENT NO. 5 AND CONSENT
dated as of December 27, 1996
to
LOAN AND SECURITY AGREEMENT
dated as of March 31, 1995
THIS AMENDMENT NO. 5 AND CONSENT dated as of December , 1996 is made
between PROSOURCE SERVICES CORPORATION, a Delaware corporation (PROSOURCE),
BROMAR SERVICES, INC., a Delaware corporation (BROMAR), and PROSOURCE
DISTRIBUTION SERVICES LIMITED, a Canadian corporation (PROSOURCE CANADA and
together with ProSource and BroMar, the BORROWERS), the financial institutions
party from time to time to the Loan Agreement referred to below (the LENDERS),
NATIONSBANK, N.A. (SOUTH), a national banking association (NATIONSBANK), THE
FIRST NATIONAL BANK OF BOSTON, a national banking association (BANK OF BOSTON),
and FLEET CAPITAL CORPORATION, a Rhode Island corporation (FLEET), as co-agents
(each in that capacity a CO-AGENT and collectively the CO-AGENTS) and
NATIONSBANK, N.A. (SOUTH), as administrative agent for the Lenders (in that
capacity, together with any successors in that capacity, the ADMINISTRATIVE
AGENT).
Preliminary Statements
The Borrowers, the Lenders, the Co-Agents and the Administrative Agent are
parties to a Loan and Security Agreement dated as of March 31, 1995, as amended
by Amendment No. 1 dated as of December 29, 1995, Amendment No. 2 and Waiver
dated as of March 28, 1996, Amendment No. 3 and Consent dated as of September 6,
1996 and Amendment No. 4 and Consent dated as of September 26, 1996 (as so
amended and as otherwise heretofore amended, the LOAN AGREEMENT; terms defined
therein and not otherwise defined herein being used herein as therein defined).
The Borrowers have requested certain modifications to the provisions of the
Loan Agreement. The Lenders and the Administrative Agent have agreed to such
requests, upon and subject to all the terms, conditions and provisions of this
Amendment.
NOW, THEREFORE, in consideration of the Loan Agreement, the Loans made by
the Lenders and outstanding thereunder, the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Amendments to Loan Agreement. The Loan Agreement is hereby
amended, subject to the provisions of Section 3 hereof, by
(a) amending Section 1.1 Definitions thereof by
<PAGE> 2
(i) amending the definition NET INCOME by amending clause (g) thereof in
its entirety to read as follows:
(g) any other extraordinary item, including when applied to the Borrowers,
the Restructuring Charges, Asset Impairment Charges, Termination and Amendment
Charges and any gain realized on the subsequent sale of any asset by reason of
the fact that the value of such asset shall have been written down as
"impaired".
(ii) adding thereto in proper alphabetical order the following new
definition:
TERMINATION AND AMENDMENT CHARGES means income statement charges in an
aggregate amount not greater than $17,000,000 (before taking into account any
associated tax benefit, which tax benefit will be determined based on the
Borrowers' effective tax rate for the period in which such charges are recorded,
all in accordance with GAAP) recorded by the Borrowers in Fiscal Year 1996, in
connection with prepayment charges, the write-off of deferred financing costs
and other appropriate charges in connection with the termination and/or
amendment of various agreements as to Debt of ProSource and other matters.
(b) amending Section 11.1(e) in its entirety to read as follows:
(e) Asset Impairment Charges, Restructuring Charges and Termination and
Amendment Charges. Simultaneously with the delivery of the audited year-end
financial statements for Fiscal Year 1996 pursuant to CLAUSE (b) above, a
calculation of the amount of the Asset Impairment Charges, Restructuring Charges
and Termination and Amendment Charges, as determined in accordance with GAAP at
the Borrowers' fiscal year-end, taking into account any associated tax benefit.
(c) amending Section 12.1 Financial Ratios by amending subsection (a)
thereof in its entirety to read as follows:
SECTION 12.1. Financial Ratios. Permit:
(a) Consolidated Minimum Net Worth. Consolidated Net Worth (i) on and as of
the Effective Date to be less than $48,000,000, (ii) at any time during Fiscal
Year 1995 to be less than the greater of $43,000,000 or actual Consolidated Net
Worth as of the Effective Date minus $5,000,000, or (iii) at any time during any
Fiscal Year indicated below to be less than the actual Consolidated Net Worth as
of the last day of the preceding Fiscal Year minus the amount shown opposite
such Fiscal Year:
2
<PAGE> 3
Permitted
Fiscal Year Decrease
----------- --------
1996 The amount, not to exceed the sum of
$5,000,000 and up to $27,500,000, as
such amount may be adjusted pursuant to
Section 11.1(e) hereof (being the
after-tax impact of the sum of maximum
Restructuring Charges, Asset Impairment
Charges and Termination and Amendment
Charges, which tax impact will be
determined based on the Borrowers'
effective tax rate for the period in
which such charges are recorded or
reserves are established, all in
accordance with GAAP)
1997 and thereafter $4,000,000
PROVIDED, that as of the last day of Fiscal Year 1997 and of each succeeding
Fiscal Year, Consolidated Net Worth shall be at least $1.00 greater than
Consolidated Net Worth as of the last day of the immediately preceding Fiscal
Year.
Section 2. Consent and Waiver. The Lenders hereby (a) consent to the
Borrowers' recording Termination and Amendment Charges (as defined in the Loan
Agreement, as amended by this Amendment), of up to $17,000,000 in total in
Fiscal Year 1996 and to termination of the Interest Rate Protection Agreement(s)
entered into pursuant to Section 10.10 of the Loan Agreement, and (b) waive any
Default or Event of Default that would otherwise result from such recording or
termination, PROVIDED that on the date on which any action described in
foregoing clause (a) is taken, and after giving effect to this Amendment, no
Default or Event of Default shall have occurred and be continuing.
Section 3. Effectiveness of Amendment. Sections 1 and 2 of this Amendment
shall become effective as of December 31, 1995 upon receipt by the
Administrative Agent not later than December 27, 1996 or (a) at least ten copies
of this Amendment duly executed and delivered by each Borrower, the Co-Agents
and each Lender, and (b) a confirmation duly executed and delivered by the
Guarantor of its Unconditional Guaranty and the Pledge Agreement in the form
attached to this Amendment.
Section 4. Effect of Amendment. From and after the effectiveness of this
Amendment, all references in the Loan Agreement and in any other Loan Document
to "this Agreement," "the Loan Agreement," "hereunder," "hereof" and words of
like import referring to the Loan Agreement, shall mean and be references to the
Loan Agreement as amended by this Amendment. Except as expressly amended hereby,
the Loan Agreement and all terms, conditions and provisions thereof remain in
full force and effect and are hereby ratified and
3
<PAGE> 4
confirmed. The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any Lender or the Administrative Agent under any of the Loan
Documents, nor constitute a waiver of any provision of any of the Loan
Documents.
Section 5. Counterpart Execution; Governing Law.
(a) Execution in Counterparts. This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute but one and the same agreement.
(b) Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Georgia.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWERS:
PROSOURCE SERVICES
CORPORATION
[Corporate Seal]
Attest: By:/s/ William F. Evans
------------------------
William F. Evans
By:/s/ Paul A. Garcia de Quevedo Executive Vice President
------------------------------
Paul A. Garcia de Quevedo
Secretary
BROMAR SERVICES, INC.
[Corporate Seal]
Attest: By:/s/ William F. Evans
-------------------------
William F. Evans
By:/s/ Paul A. Garcia de Quevedo Executive Vice President
------------------------------
Paul A. Garcia de Quevedo
Secretary
PROSOURCE DISTRIBUTION
SERVICES LIMITED
[Corporate Seal]
Attest: By:/s/ William F. Evans
------------------------
William F. Evans
By:/s/ Paul A. Garcia de Quevedo Executive Vice President
------------------------------
Paul A. Garcia de Quevedo
Secretary
(Signatures continued on following three pages)
5
<PAGE> 6
ADMINISTRATIVE AGENT:
NATIONSBANK, N.A. (SOUTH)
By:/s/ Jeffrey L. Guldner
-------------------------
Jeffrey L. Guldner
Vice President
CO-AGENTS AND LENDERS:
NATIONSBANK, N.A. (SOUTH),
as a Lender and Co-Agent
By:/s/ Jeffrey L. Guldner
-------------------------
Jeffrey L. Guldner
Vice President
THE FIRST NATIONAL BANK OF BOSTON,
as a Lender and Co-Agent
By:/s/ Christian B. Colson
-------------------------
Name: Christian B. Colson
Title: Vice President
FLEET CAPITAL CORPORATION, as a
Lender and Co-Agent
By:/s/ John W. Getz
------------------------
Name: John W. Getz
Title: SVP
6
<PAGE> 7
THE BANK OF NOVA SCOTIA,
as a Lender
By:/s/ Frank F. Sandler
-----------------------
Name: Frank F. Sandler
Title: Relationship Manager
BANKAMERICA BUSINESS CREDIT, INC.,
as a Lender
By:/s/ M.E. Lambka
-----------------------
Name: M.E. Lambka
Title:V.P.
THE CIT GROUP/BUSINESS CREDIT, INC.,
as a Lender
By:/s/ Robert Bernier
-----------------------
Name: Robert Bernier
Title: VP
HELLER FINANCIAL, INC., as a Lender
By:/s/ Salvatore Salsillo
------------------------
Name: Salvatore Salsillo
Title: AVP
SANWA BUSINESS CREDIT CORPORATION,
as a Lender
By:/s/ Peter L. Skavla
-----------------------
Name: Peter L. Skavla
Title: Vice President
7
<PAGE> 8
NATIONAL CITY COMMERCIAL
FINANCE, INC.,
as a Lender
By:/s/ Lee K. Mosby
---------------------
Name: Lee K. Mosby
Title: Vice President
8
<PAGE> 9
CONSENT, RELEASE AND CONFIRMATION OF GUARANTOR
The undersigned Guarantor as defined in the Loan and Security Agreement
dated as of March 31, 1995 by and among ProSource Services Corporation, BroMar
Services, Inc. and ProSource Distribution Services Limited as the Borrowers, the
financial institutions party thereto as the Lenders, NationsBank, N.A. (South)
("NationsBank'), The First National Bank of Boston and Fleet Capital Corporation
as the Co-Agents, and NationsBank as the Administrative Agent for the Lenders,
as amended to date (the "Loan Agreement"; terms defined therein, unless
otherwise defined herein, being used herein as therein defined, hereby
acknowledged receipt of the foregoing Amendment No. 5 and Consent to the Loan
Agreement and confirms for the benefit of the Administrative Agent and the
Lenders, that the Unconditional Guaranty dated as of March 31, 1995, as amended,
executed and delivered by the undersigned continues in full force and effect as
a guaranty in accordance with its terms and continues to be secured by any
collateral therefor and that the undersigned hereby waives and releases any and
all claims it may have against the Administrative Agent or any Lender or any of
their respective shareholders, directors, employees or agents arising out of any
event or circumstance existing on or prior to the date hereof and arising under
the Loan Agreement, the Unconditional Guaranty or any related document or in
connection with the transactions contemplated thereby.
PROSOURCE, INC.
[Corporate Seal]
Attest: By:/s/ William F. Evans
-----------------------
William F. Evans Chairman
By:/s/ Paul A. Garcia de Quevedo
------------------------------
Paul A. Garcia de Quevedo
Secretary
9
<PAGE> 1
Exhibit 10.14
[Execution Copy]
AMENDMENT NO. 6 AND CONSENT
dated as of February 7, 1997
to
LOAN AND SECURITY AGREEMENT
dated as of March 31, 1995
THIS AMENDMENT NO. 6 AND CONSENT dated as of February 7, 1997 is made
between PROSOURCE SERVICES CORPORATION, a Delaware corporation (ProSource),
BROMAR SERVICES, INC., a Delaware corporation (BROMAR), and PROSOURCE
DISTRIBUTION SERVICES LIMITED, a Canadian corporation (PROSOURCE CANADA and
together with ProSource and BroMar, the BORROWERS), the financial institutions
party from time to time to the Loan Agreement referred to below (the LENDERS),
NATIONSBANK, N.A. (SOUTH), a national banking association (NATIONSBANK), THE
FIRST NATIONAL BANK OF BOSTON, a national banking association (BANK OF BOSTON),
and FLEET CAPITAL CORPORATION, a Rhode Island corporation (FLEET), as co-agents
(each in that capacity a COAGENT and collectively the CO-AGENTS) and
NATIONSBANK, N.A. (SOUTH), as administrative agent for the Lenders (in that
capacity, together with any successors in that capacity, the ADMINISTRATIVE
AGENT).
Preliminary Statements
The Borrowers, the Lenders, the Co-Agents and the Administrative Agent are
parties to a Loan and Security Agreement dated as of March 31, 1995, as amended
by Amendment No. 1 dated as of December 29, 1995, Amendment No. 2 and Waiver
dated as of March 28,1996, Amendment No. 3 and Consent dated as of September 6,
1996, Amendment No. 4 and Consent dated as of September 26, 1996 and Amendment
No. 5 and Consent dated as of December 27, 1996 (as so amended and as otherwise
heretofore amended the LOAN AGREEMENT; terms defined therein and not otherwise
defined herein being used herein as therein defined).
The Borrowers have requested certain modifications to the provisions of the
Loan Agreement. The Lenders and the Administrative Agent have agreed to such
requests, upon and subject to all the terms, conditions and provisions of this
Amendment.
NOW, THEREFORE, in consideration of the Loan Agreement, the Loans made by
the Lenders and outstanding thereunder, the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Amendments to Loan Agreement. The Loan Agreement is hereby
amended, subject to the provisions of Section 3 hereof, by
<PAGE> 2
(a) amending Section 1.1 Definitions thereof by amending the definition
TERMINATION AND AMENDMENT CHARGES in its entirety to read as follows:
TERMINATION AND AMENDMENT CHARGES means income statement charges in an
aggregate amount not greater than the sum of (a) $17,000,000 (before taking into
account any associated tax benefit, which tax benefit will be determined based
on the Borrowers' effective tax rate for the period in which such charges are
recorded, all in accordance with GAAP) recorded by the Borrowers in Fiscal Year
1996 or the first Fiscal Quarter of Fiscal Year 1997, in connection with
prepayment charges, the write-off of deferred financing costs and other
appropriate charges in connection with the termination and/or amendment of
various agreement as to Debt of ProSource and other matters and (b) $10,600,000
(before taking into account any associated tax benefit, which tax benefit will
be determined based on the Borrowers' effective tax rate for the period in which
such charges are recorded, all in accordance with GAAP) recorded by the
Borrowers in Fiscal Year 1996 or the first Fiscal Quarter of Fiscal Year 1997,
in connection with the termination of ProSource's agreement to provide
distribution services to Arby's restaurants.
(b) amending Section 11.3 Officer's Certificate by amending subsection (a)
thereof in its entirety to read as follows:
(a) setting forth as at the end of such Fiscal Quarter a
reasonably detailed schedule of charges to the Acquisition Reserve and
the Restructuring Reserve and of Termination and Amendment Charges
recorded during such Fiscal Quarter and the calculations required to
establish whether or not other Borrowers were in compliance with the
requirements of SECTIONS 12.1, 12.2, 12.5, 12.10, 12.11 AND 12.16;
(c) amending Section 12.17 Limitation on Restructuring Reserve by deleting
the figure "$2,700,000" appearing in clause (a) thereof and substituting
therefor the figure "$3,000,000."
Section 2. Consent and Waiver. The Lenders hereby (a) consent to the
Borrowers' recording in Fiscal Year 1996 and the first Fiscal Quarter of Fiscal
Year 1997, Termination and Amendment Charges, as defined in the Loan Agreement,
as amended by this Amendment and (b) waive any Default or Event of Default that
would otherwise result from such recording, PROVIDED that on the date on which
any action described in foregoing clause (a) is taken, and after giving effect
to this Amendment, no Default or Event of Default shall have occurred and be
continuing. The Lenders further waive compliance and the effects of
non-compliance by the Borrowers with the provisions of Section 11.1(d) of the
Loan Agreement, PROVIDED that the Borrowers' monthly operating budget for Fiscal
Year 1997 shall be delivered to the Lenders and the Administrative Agent not
later than March 15, 1997.
Section 3. Effectiveness of Amendment. Sections 1 and 2 of this Amendment
shall become effective as of October 1, 1996 upon receipt by the Administrative
Agent not later
2
<PAGE> 3
than February 12, 1997 of (a) at least ten copies of this Amendment duly
executed and delivered by each Borrower, the Co-Agents and each Lender, and (b)
a confirmation duly executed and delivered by the Guarantor of its Unconditional
Guaranty and the Pledge Agreement in the form attached to this Amendment.
Section 4. Effect of Amendment. From and after the effectiveness of this
Amendment, all references in the Loan Agreement and in any other Loan Document
to "this Agreement," "the Loan Agreement," "hereunder," "hereof" and words of
like import referring to the Loan Agreement, shall mean and be references to the
Loan Agreement as amended by this Amendment. Except as expressly amended hereby,
the Loan Agreement and all terms, conditions and provisions thereof remain in
full force and effect and are hereby ratified and confirmed. The execution,
delivery and effectiveness of this Amendment shall not, except as expressly
provided herein, operate as a waiver of any right, power or remedy or any Lender
or the Administrative Agent under any of the Loan Documents, nor constitute a
waiver of any provision of any of the Loan Documents.
Section 5. Counterpart Execution; Governing Law.
(a) Execution in Counterparts. This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute but one and the same agreement.
(b) Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Georgia.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWERS:
PROSOURCE SERVICES CORPORATION
[Corporate Seal]
Attest: By:/s/ William F. Evans
------------------------
William F. Evans
By:/s/ Paul A. Garcia de Quevedo Executive Vice President
------------------------------
Paul A. Garcia de Quevedo
Secretary
BROMAR SERVICES, INC.
[Corporate Seal]
Attest: By:/s/ William F. Evans
------------------------
William F. Evans
By:/s/ Paul A. Garcia de Quevedo Executive Vice President
------------------------------
Paul A. Garcia de Quevedo
Secretary
PROSOURCE DISTRIBUTION SERVICES
[Corporate Seal] LIMITED
Attest: By:/s/ William F. Evans
------------------------
William F. Evans
By:/s/ Paul A. Garcia de Quevedo Executive Vice President
------------------------------
Paul A. Garcia de Quevedo
Secretary
(Signatures continued on following three pages)
4
<PAGE> 5
ADMINISTRATIVE AGENT:
NATIONSBANK, N.A. (SOUTH)
By:/s/ Jeffrey L. Guldner
------------------------------
Jeffrey L. Guldner
Vice President
CO-AGENTS AND LENDERS:
NATIONSBANK, N.A. (SOUTH),
as a Lender and Co-Agent
By:/s/ Jeffrey L. Guldner
------------------------------
Jeffrey L. Guldner
Vice President
THE FIRST NATIONAL BANK OF BOSTON,
as a Lender and Co-Agent
By:/s/ Christian B. Colson
------------------------------
Name: Christian B. Colson
Title: Vice President
FLEET CAPITAL CORPORATION, as a Lender
and Co-Agent
By:/s/ John W. Getz
------------------------------
Name: John W. Getz
Title: Senior Vice President
5
<PAGE> 6
THE BANK OF NOVA SCOTIA, as a Lender
By:/s/ Frank F. Sandler
------------------------------
Frank F. Sandler
Relationship Manager
BANKAMERICA BUSINESS CREDIT, INC., as
a Lender
By:/s/ M.R. Williamson
------------------------------
Name: Michael R. Williamson
Title: Vice President
THE CIT GROUP/BUSINESS CREDIT, INC.,
as a Lender
By:/s/ Robert Berniez
------------------------------
Name: Robert Berniez
Title: Vice President
HELLER FINANCIAL, INC., as a Lender
By:/s/ Salvatore Salzillo
------------------------------
Name: Salvatore Salzillo
Title: Assistant Vice President
SANWA BUSINESS CREDIT CORPORATION,
as a Lender
By:/s/ Peter L. Skavla
------------------------------
Name: Peter L. Skavla
Title: Vice President
6
<PAGE> 7
NATIONAL CITY COMMERCIAL FINANCE,
INC., as a Lender
By:/s/ Joseph L. White
------------------------------
Name: Joseph L. White
Title: Vice President
7
<PAGE> 1
EXHIBIT 10.21
[EXECUTION FORM]
U.S. $75,000,000
CREDIT AGREEMENT,
dated as of
March 14, 1997
among
PROSOURCE SERVICES CORPORATION
as the Borrower,
VARIOUS FINANCIAL INSTITUTIONS,
as the Lenders,
and
THE BANK OF NOVA SCOTIA,
as the Administrative Agent
for the Lenders
<PAGE> 2
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms...........................................................2
1.2. Use of Defined Terms...................................................34
1.3. Cross-References.......................................................34
1.4. Accounting and Financial Determinations................................34
ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE
PROCEDURES, NOTES AND LETTERS OF CREDIT
2.1. Commitments............................................................35
2.1.1. Commitment of Each Lender............................................35
2.1.2. Letter of Credit Commitment..........................................35
2.1.3. Lenders Not Permitted or Required
to Make Loans..................................................35
2.1.4. Issuer Not Permitted or Required to Issue
Letters of Credit..............................................36
2.2. Reduction of the Commitment Amount.....................................36
2.3. Borrowing Procedures...................................................36
2.4. Continuation and Conversion Elections..................................37
2.5. Funding................................................................37
2.6. Issuance Procedures....................................................37
2.6.1. Other Lenders' Participation.........................................38
2.6.2. Disbursements........................................................38
2.6.3. Reimbursement........................................................39
2.6.4. Deemed Disbursements.................................................39
2.6.5. Nature of Reimbursement Obligations..................................40
2.7. Notes..................................................................41
2.8. Extension of Commitment Termination Date
and Maturity of Loans..............................................41
2.8.1. Request for Extension of Commitment
Termination Date and Maturity of Loans.........................41
2.8.2. Consent to Extension of Commitment
Termination Date and Maturity of Loans.........................41
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<PAGE> 3
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
3.1. Repayments and Prepayments.............................................42
3.2. Interest Provisions....................................................43
3.2.1. Rates................................................................43
3.2.2. Post-Maturity Rates..................................................44
3.2.3. Payment Dates........................................................44
3.3. Fees...................................................................45
3.3.1. Commitment Fee.......................................................45
3.3.2. Administrative Agent Fee.............................................45
3.3.3. Letter of Credit Fee.................................................45
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
4.1. LIBO Rate Lending Unlawful.............................................45
4.2. Deposits Unavailable...................................................46
4.3. Increased LIBO Rate Loan Costs, etc....................................46
4.4. Funding Losses.........................................................46
4.5. Increased Capital Costs................................................47
4.6. Taxes..................................................................48
4.7. Payments, Computations, etc............................................51
4.8. Sharing of Payments....................................................51
4.9. Setoff.................................................................52
4.10. Mitigation............................................................53
4.11. Replacement Lender....................................................53
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS
5.1. Initial Credit Extension...............................................54
5.1.1. Resolutions, etc.....................................................54
5.1.2. Delivery of Notes....................................................54
5.1.3. Payment of Outstanding Indebtedness, etc.............................54
5.1.4. Pledge Agreements....................................................55
5.1.5. Security Agreements..................................................56
5.1.6. Trademark Security Agreement.........................................57
5.1.7. Guarantees...........................................................57
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<PAGE> 4
Section Page
- ------- ----
5.1.8. Mortgage.............................................................57
5.1.9. Financial Information, etc...........................................58
5.1.10. Closing Date Certificate............................................58
5.1.11. Compliance Certificate..............................................58
5.1.12. Receivables Transaction Documentation...............................58
5.1.13. Material Adverse Change.............................................59
5.1.14. Insurance...........................................................59
5.1.15. Opinions of Counsel.................................................59
5.1.16. Closing Fees, Expenses, etc.........................................59
5.1.17. Borrowing Base Certificate..........................................59
5.2. All Credit Extensions..................................................59
5.2.1. Compliance with Warranties,
No Default, etc................................................60
5.2.2. Credit Extension Request, etc........................................60
5.2.3. Satisfactory Legal Form..............................................60
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Organization, etc......................................................61
6.2. Due Authorization, Non-Contravention, etc..............................61
6.3. Government Approval, Regulation, etc...................................62
6.4. Validity, etc..........................................................62
6.5. Financial Information..................................................62
6.6. No Material Adverse Effect.............................................63
6.7. Litigation, Labor Controversies, etc...................................63
6.8. Compliance with Laws...................................................63
6.9. Subsidiaries...........................................................63
6.10. Ownership of Properties...............................................63
6.11. Taxes.................................................................64
6.12. Pension and Welfare Plans.............................................64
6.13. Environmental Warranties..............................................64
6.14. Regulations G, U and X................................................65
6.15. Accuracy of Information...............................................66
ARTICLE VII
COVENANTS
7.1. Affirmative Covenants..................................................66
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<PAGE> 5
Section Page
- ------- ----
7.1.1. Financial Information, Reports,
Notices, etc...................................................66
7.1.2. Compliance with Laws, etc............................................68
7.1.3. Maintenance of Properties............................................69
7.1.4. Insurance............................................................69
7.1.5. Books and Records....................................................70
7.1.6. Environmental Covenant...............................................70
7.1.7. Future Subsidiaries..................................................71
7.1.8. Additional Collateral................................................71
7.1.9. Use of Proceeds......................................................72
7.2. Negative Covenants.....................................................72
7.2.1. Business Activities..................................................72
7.2.2. Indebtedness.........................................................72
7.2.3. Liens................................................................74
7.2.4. Financial Condition..................................................76
7.2.5. Investments..........................................................79
7.2.6. Restricted Payments, etc.............................................80
7.2.7. Subsidiaries.........................................................83
7.2.8. Certain Contracts....................................................83
7.2.9. Consolidation, Merger, etc...........................................83
7.2.10. Asset Dispositions, etc.............................................84
7.2.11. Modification of Certain Agreements..................................85
7.2.12. Transactions with Affiliates........................................85
7.2.13. Negative Pledges, Restrictive
Agreements, etc................................................85
7.2.14. Sale and Leaseback..................................................86
7.2.15. Limitations on Investments, etc.
in Designated Subsidiaries ....................................87
8.1. Listing of Events of Default...........................................87
8.1.1. Non-Payment of Obligations...........................................87
8.1.2. Breach of Warranty...................................................87
8.1.3. Non-Performance of Certain Covenants and
Obligations......................................................87
8.1.4. Non-Performance of Other Covenants and
Obligations....................................................88
8.1.5. Defaulted Debt.......................................................88
8.1.6. Judgments............................................................88
8.1.7. Pension Plans........................................................88
8.1.8. Control of the Borrower..............................................89
8.1.9. Bankruptcy, Insolvency, etc..........................................89
8.1.10. Impairment of Security, etc.........................................90
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<PAGE> 6
Section Page
- ------- ----
8.2. Action if Bankruptcy...................................................90
8.3. Action if Other Event of Default.......................................90
ARTICLE IX
THE ADMINISTRATIVE AGENT
9.1. Actions................................................................91
9.2. Funding Reliance, etc..................................................91
9.3. Exculpation............................................................92
9.4. Successor..............................................................92
9.5. Loans by Scotiabank....................................................93
9.6. Credit Decisions.......................................................93
9.7. Copies, etc............................................................94
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1. Waivers, Amendments, etc..............................................94
10.2. Notices...............................................................95
10.3. Payment of Costs and Expenses.........................................95
10.4. Indemnification.......................................................96
10.5. Survival..............................................................98
10.6. Severability..........................................................98
10.7. Headings..............................................................98
10.8. Execution in Counterparts, Effectiveness,
etc..............................................................98
10.9. Governing Law; Entire Agreement.......................................99
10.10. Successors and Assigns...............................................99
10.11. Sale and Transfer of Loans and Notes;
Participations in Loans and Notes.....................................99
10.11.1. Assignments........................................................99
10.11.2. Participations....................................................101
10.12. Other Transactions..................................................102
10.13. Execution on Behalf of Corporation..................................102
10.14. Forum Selection and Consent to
Jurisdiction..................................................103
10.15. Waiver of Jury Trial................................................103
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<PAGE> 7
SCHEDULE I - Disclosure Schedule
SCHEDULE II - SLB Properties
EXHIBIT A - Form of Note
EXHIBIT B-1 - Form of Borrowing Base Certificate
EXHIBIT B-2 - Form of Borrowing Request
EXHIBIT C - Form of Issuance Request
EXHIBIT D - Form of Continuation/Conversion Notice
EXHIBIT E - Form of Lender Assignment Agreement
EXHIBIT F-1 - Form of Parent Pledge Agreement
EXHIBIT F-2 - Form of Borrower Pledge Agreement
EXHIBIT F-3 - Form of Subsidiary Pledge Agreement
EXHIBIT G-1 - Form of Parent Security Agreement
EXHIBIT G-2 - Form of Borrower Security Agreement
EXHIBIT G-3 - Form of Subsidiary Security Agreement
EXHIBIT H-1 - Form of Parent Guaranty
EXHIBIT H-2 - Form of Subsidiary Guaranty
EXHIBIT I - Form of Closing Date Certificate
EXHIBIT J - Form of Compliance Certificate
EXHIBIT K - Form of Extension Request
EXHIBIT L - Form of Exemption Certificate
EXHIBIT M-1 - Form of Borrower Mortgage
EXHIBIT M-2 - Form of Subsidiary Mortgage
EXHIBIT N-1 - Form of Opinion of New York Counsel to
Obligors
EXHIBIT N-2 - Form of Opinion of Local Counsel to Obligors
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<PAGE> 8
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of March 14, 1997, is among PROSOURCE
SERVICES CORPORATION, a Delaware corporation (the "Borrower"), the various
financial institutions as are or may become parties hereto (collectively, the
"Lenders"), and THE BANK OF NOVA SCOTIA ("Scotiabank"), as administrative agent
for the Lenders (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower and its various Subsidiaries (such capitalized
term, and other terms used herein, to have the meanings provided in Section 1.1)
are engaged in the business of distributing, purchasing, warehousing,
transporting and selling food, paper, dairy, produce, uniforms, soft drink
syrups and other products used in casual dining and quick-service restaurants
and providing related logistics services;
WHEREAS, subject to the terms of this Agreement (including Article V),
the Borrower desires to obtain from the Lenders
(a) Commitments (to include availability for Letters of Credit)
pursuant to which Borrowings in a maximum aggregate principal amount
(together with all Letter of Credit Outstandings) not to exceed
$75,000,000 will be made to the Borrower from time to time prior to the
Commitment Termination Date; and
(b) a Letter of Credit sub-limit under the Lender's Commitments
pursuant to which each Issuer will issue Letters of Credit for the
account of the Borrower from time to time prior to the Commitment
Termination Date in a maximum aggregate Stated Amount at any one time
outstanding not to exceed $25,000,000 (provided that the aggregate
outstanding principal amount of Loans and Letter of Credit Outstandings
at any time shall not exceed the then existing Commitment Amount);
with all the proceeds of the Credit Extensions to be used for the
purposes specified in Section 7.1.10; and
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<PAGE> 9
WHEREAS, simultaneously with the occurrence of the Effective Date,
Receivables Co. shall enter into the Receivables Transaction Documents and
receive net proceeds of the sale of receivables thereunder in a maximum
aggregate amount of $150,000,000, such proceeds to be used for purposes
permitted under the Receivables Transaction Documents;
WHEREAS, the Lenders are willing, on the terms and subject to the
conditions hereinafter set forth (including Article V), to extend such
Commitments and make such Loans to the Borrower and issue (or participate in)
Letters of Credit for the account of the Borrower;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Account" means any account (as that term is defined in Section 9-106 of
the U.C.C.) of the Borrower or any of its wholly-owned U.S. Subsidiaries arising
from the sale or lease of goods or rendering of services.
"Adjusted Commitment Amount" means the difference of (a) the sum of (i)
the aggregate outstanding principal amount of all Loans plus (ii) the aggregate
amount of all Letter of Credit Outstandings minus (b) the excess of (x) the sum
of (i) the aggregate outstanding principal amount of all loans outstanding in
connection with the Canadian Indebtedness plus (ii) the aggregate outstanding
stated amount of all letters of credit in connection with the Canadian
Indebtedness plus (iii) the amount of Indebtedness of ProSource Canada incurred
pursuant to clause (d) of Section 7.2.2 over (y) the Letter of Credit
Outstandings incurred to provide credit support to such Indebtedness of
ProSource Canada.
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<PAGE> 10
"Administrative Agent" is defined in the preamble and includes each
other Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to Section 9.4.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" another
Person if such other Person possesses, directly or indirectly, power
(a) to vote 10% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or
managing general partners; or
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"Alternate Base Rate" means, on any date, a fluctuating rate
of interest per annum equal to the higher of
(a) the rate of interest most recently announced by the
Administrative Agent at its Domestic Office as its "prime" or
"reference" rate for United States loans made in the United States; and
(b) the Federal Funds Rate most recently determined by the
Administrative Agent plus 0.50%.
The Alternate Base Rate is not necessarily the lowest rate of interest
determined by the Administrative Agent in connection with extensions of credit.
Changes in the rate of interest on that portion of any Loans maintained as Base
Rate Loans will take effect simultaneously with each change in the Alternate
Base Rate. The Administrative Agent will give notice promptly to the Borrower
and the Lenders of changes in the Alternate Base Rate.
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<PAGE> 11
"Applicable Commitment Fee Margin" means at all times during the
applicable periods set forth below with respect to the fee payable to the
Lenders pursuant to Section 3.3.1, the applicable percentage set forth below
under the column entitled "Applicable Commitment Fee Margin":
Total Debt Applicable
to EBITDA Commitment
Ratio Fee Margin
------------------------------------ ---------------------
Less than 2.50:1.00 0.200%
Greater than or equal to
2.50:1.00 and less than
3.00:1.00 0.250%
Greater than or equal to
3.00:1.00 and less than
3.50:1.00 0.300%
Greater than or equal to
3.50:1.00 and less than
4.00:1.00 0.350%
Greater than or equal to
4.00:1.00 and less than
4.25:1.00 0.375%
Greater than or equal to 0.400%
4.25:1.00
Notwithstanding anything to the contrary set forth in this Agreement
(including the then effective Total Debt to EBITDA Ratio), the maximum
Applicable Commitment Fee Margin for the period from the Effective Date through
(and including) the one-year anniversary of the Effective Date shall be 0.300%.
The Applicable Commitment Fee Margin shall be subject to reduction (but not
increase) in the event that the Total Debt to EBITDA Ratio set forth in any
Compliance Certificate delivered by the Borrower to the Administrative Agent
during such period would result in a reduction (but not an increase) in the
Applicable Commitment Fee Margin, in which case the Applicable Commitment Fee
Margin shall be calculated by reference to the Total Debt to EBITDA Ratio set
forth in such Compliance Certificate. Except as
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<PAGE> 12
otherwise set forth in the preceding two sentences, the Total Debt to EBITDA
Ratio used to compute the Applicable Commitment Fee Margin following the
Effective Date shall be the Total Debt to EBITDA Ratio set forth in the
Compliance Certificate most recently delivered by the Borrower to the
Administrative Agent; changes in the Applicable Commitment Fee Margin resulting
from a change in the Total Debt to EBITDA Ratio shall become effective upon
delivery by the Borrower to the Administrative Agent of a new Compliance
Certificate pursuant to clause (c) of Section 7.1.1. If the Borrower shall fail
to deliver a Compliance Certificate within 45 days after the end of any Fiscal
Quarter (or within 90 days, in the case of the last Fiscal Quarter of the Fiscal
Year) as required pursuant to clause (c) of Section 7.1.1, the Applicable
Commitment Fee Margin from and including the 46th (or 91st, as the case may be)
day after the end of such Fiscal Quarter to but not including the date the
Borrower delivers to the Administrative Agent a Compliance Certificate shall
conclusively equal the highest Applicable Commitment Fee Margin set forth above.
"Applicable Margin" means at all times during the applicable
periods set forth below
(a) with respect to the unpaid principal amount of each Loan
maintained as a Base Rate Loan, the applicable percentage set forth
under the column entitled "Applicable Margin for Base Rate Loans"; and
(b) with respect to the unpaid principal amount of each Loan
maintained as a LIBO Rate Loan, the applicable percentage set forth
below under the column entitled "Applicable Margin for LIBO Rate Loans":
Total Debt Applicable Applicable
to EBITDA Margin for Margin for LIBO
Ratio Base Rate Loans Rate Loans
- --------------------------- ----------------------- -------------------
Less than 2.50:1.00 0.000% 0.750%
Greater than or equal to
2.50:1.00 and less than
3.00:1.00 0.000% 0.875%
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<PAGE> 13
Greater than or equal to
3.00:1.00 and less than
3.50:1.00 0.125% 1.125%
Greater than or equal to
3.50:1.00 and less than
4.00:1.00 0.500% 1.500%
Greater than or equal to
4.00:1.00 and less than
4.25:1.00 0.750% 1.750%
Greater than or equal to 1.000% 2.000%
4.25:1.00
Notwithstanding anything to the contrary set forth in this Agreement
(including the then effective Total Debt to EBITDA Ratio), the maximum
Applicable Margin for the period from the Effective Date through (and including)
the one-year anniversary of the Effective Date shall be 0.125% for Base Rate
Loans and 1.125% for LIBO Rate Loans. The Applicable Margin shall be subject to
reduction (but not increase) in the event that the Total Debt to EBITDA Ratio
set forth in any Compliance Certificate delivered by the Borrower to the
Administrative Agent during such period would result in a reduction (but not an
increase) in the Applicable Margin, in which case the Applicable Margin shall be
calculated by reference to the Total Debt to EBITDA Ratio set forth in such
Compliance Certificate. Except as otherwise set forth in the preceding two
sentences, the Total Debt to EBITDA Ratio used to compute the Applicable Margin
following the Effective Date shall be the Total Debt to EBITDA Ratio set forth
in the Compliance Certificate most recently delivered by the Borrower to the
Administrative Agent; changes in the Applicable Margin resulting from a change
in the Total Debt to EBITDA Ratio shall become effective upon delivery by the
Borrower to the Administrative Agent of a new Compliance Certificate pursuant to
clause (c) of Section 7.1.1. If the Borrower shall fail to deliver a Compliance
Certificate within 45 days after the end of any Fiscal Quarter (or within 90
days, in the case of the last Fiscal Quarter of the Fiscal Year) as required
pursuant to clause (c) of Section 7.1.1, the Applicable Margin from and
including the 46th (or 91st, as the case may be) day after the end of such
Fiscal Quarter to but not including the date the Borrower delivers to the
Administrative Agent a Compliance Certificate shall conclusively equal the
highest
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<PAGE> 14
Applicable Margin set forth above.
"Asset Impairment Charges" means income statement charges in an
aggregate amount not greater than $15,750,000 (before taking into account any
associated tax benefit, which tax benefit will be determined based on the
Borrower's effective tax rate for the period in which such charges are recorded,
all in accordance with GAAP), recorded by the Borrower in Fiscal Year 1996,
determined in accordance with Statement of Financial Accounting Standards No.
121 and resulting in reduction of the book value of certain fixed assets of the
Borrower.
"Assignee Lender" is defined in Section 10.11.1.
"Authorized Officer" means, relative to the Borrower and any other
Obligor, those of its employees, officers or managing members (in the case of a
limited liability company) whose signatures and incumbency shall have been
certified to the Administrative Agent and the Lenders pursuant to Section 5.1.1.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"Borrower" is defined in the preamble.
"Borrower Mortgage" means each Mortgage executed and delivered by the
Borrower pursuant to Section 5.1.8 or 7.1.8, as the case may be, substantially
in the form of Exhibit M-1 hereto, as amended, supplemented, amended and
restated or otherwise modified from time to time.
"Borrower Pledge Agreement" means the Pledge Agreement executed and
delivered by the Borrower pursuant to Section 5.1.4, substantially in the form
of Exhibit F-2 hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time.
"Borrower Security Agreement" means the Security Agreement executed and
delivered by the Borrower pursuant to Section 5.1.5, substantially in the form
of Exhibit G-2 hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time.
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<PAGE> 15
"Borrowing" means the Loans of the same type and, in the case of LIBO
Rate Loans, having the same Interest Period made by all Lenders on the same
Business Day and pursuant to the same Borrowing Request in accordance with
Section 2.1.
"Borrowing Base" means, as of any date of determination, an amount equal
to the sum of up to fifty percent (50%) of Eligible Inventory of the Borrower
and its U.S. Subsidiaries (other than Receivables Co.) at such time.
"Borrowing Base Certificate" means a certificate substantially in the
form attached hereto as Exhibit B-1 setting forth Eligible Inventory of the
Borrower and its U.S.
Subsidiaries (other than Receivables Co.).
"Borrowing Request" means a Loan request and certificate duly executed
by an Authorized Officer of the Borrower, substantially in the form of Exhibit
B-2 hereto.
"Business Day" means
(a) any day which is neither a Saturday or Sunday nor a legal
holiday on which banks are authorized or required to be closed in New
York, New York; and
(b) relative to the making, continuing, prepaying or repaying of
any LIBO Rate Loans, any day which is a Business Day described in clause
(a) above and which is also a day on which dealings in Dollars are
carried on in the interbank eurodollar market of the Administrative
Agent's LIBOR Office.
"Canadian Back-up Letter of Credit" means any standby letter of credit
issued for the account of the Borrower and for the benefit of the lenders in
connection with the Canadian Indebtedness.
"Canadian Dollars" and "Cdn$" mean the lawful currency of Canada.
"Canadian Indebtedness" means one or more credit facilities provided to
ProSource Canada in an aggregate amount not to exceed Cdn$20,000,000.
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<PAGE> 16
"Capital Expenditures" means, for any period, the aggregate amount of
all expenditures of the Borrower and its Subsidiaries for fixed or capital
assets made during such period which, in accordance with GAAP, would be
classified as capital expenditures.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's capital, whether now outstanding or
issued after the Effective Date.
"Capitalized Lease Liabilities" means all monetary obligations of the
Borrower or any of its Subsidiaries under any leasing or similar arrangement
which, in accordance with GAAP, would be classified as capitalized leases.
"Cash Equivalent Investment" means, at any time:
(a) any direct obligation of (or guaranteed by) the United States
Government (or any agency or instrumentality thereof) maturing not more
than one year after such time;
(b) commercial paper, maturing not more than one year from the
date of issue, which is issued by
(i) a corporation (other than an Affiliate of any Obligor)
organized under the laws of any state of the United States or of
the District of Columbia and rated A-1 by S&P or P-1 by Moody's,
or
(ii) any Lender (or its holding company);
(c) any certificate of deposit or bankers acceptance, maturing
not more than one year after such time, which is issued by either
(i) any bank organized under the laws of the United States
(or any State thereof or the District of Columbia or Canada) and
which has (x) a credit rating of Aa or better from Moody's or a
comparable rating from S&P and (y) a combined capital and surplus
greater than $100,000,000 (or the Dollar equivalent thereof),
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<PAGE> 17
or
(ii) any Lender; or
(d) any repurchase agreement entered into with any Lender or any
commercial banking institution of the stature referred to in clause
(c)(i) which
(i) is secured by a fully perfected security interest in
any obligation of the type described in clause (a), and
(ii) has a market value at the time such repurchase
agreement is entered into of not less than 100% of the repurchase
obligation of such commercial banking institution thereunder.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Change in Control" means
(a) the failure of Onex and Gerald W. Schwartz, individually or
collectively, at any time directly or indirectly to be the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) on a
fully diluted basis of shares of the Capital Stock of the Parent having
(x) at least 51% of the voting power of all issued and outstanding
shares of voting Capital Stock of the Parent or (y) the right to
exercise voting power for the election of at least a majority of the
board of directors of the Parent; or
(b) the failure of the Parent at any time to directly own
beneficially and of record on a fully diluted basis 100% of the issued
and outstanding shares of Capital Stock of the Borrower (whether voting
or non-voting), such shares to be held free and clear of all Liens
(other than Liens granted under a Loan Document in favor of the Secured
Parties and Liens permitted to exist under clause (e) or (h) of Section
7.2.3); or
(c) the failure of the Borrower at any time to
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<PAGE> 18
directly or indirectly own beneficially and of record on a fully diluted
basis 100% of the issued and outstanding Shares of Capital Stock of each
of its Subsidiaries (whether voting or non-voting), such shares to be
held free and clear of all Liens (other than Liens granted under a Loan
Document in favor of the Secured Parties and Liens permitted to exist
under clause (e) or (h) of Section 7.2.3).
"Closing Date Certificate" means the Closing Date Certificate executed
and delivered by the Borrower pursuant to Section 5.1.10, substantially in the
form of Exhibit I hereto.
"Code" means the Internal Revenue Code of 1986, and the regulations
thereunder, in each case as amended, reformed or otherwise modified from time to
time.
"Collateral" is used herein as defined in the Security
Agreements and the Pledge Agreements.
"Commitment" means, relative to any Lender, such Lender's obligation to
make Loans pursuant to Section 2.1.1.
"Commitment Amount" means $75,000,000, as such amount may be reduced
from time to time pursuant to Section 2.2.
"Commitment Termination Date" means the earliest of
(a) April 1, 1997 (if the initial Credit Extension has
not occurred on or prior to March 31, 1997);
(b) the five-year anniversary of the date of the
initial Credit Extension, as such date may be extended
pursuant to clause (c) of Section 2.8.2;
(c) the date on which the Commitment Amount is
terminated in full or reduced to zero pursuant to Section
2.2; and
(d) the date on which any Commitment Termination Event
occurs.
Upon the occurrence of any event described in the preceding
clause (c) or (d), the Commitment shall terminate automatically
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and without any further action.
"Commitment Termination Event" means
(a) the occurrence of any Event of Default described
in clauses (a) through (d) of Section 8.1.9; or
(b) the occurrence and continuance of any other Event
of Default and either
(i) the declaration of all or any portion of the
Loans to be due and payable pursuant to Section 8.3, or
(ii) the giving of notice by the Administrative Agent,
acting at the direction of the Required Lenders, to the Borrower
that the Commitments have been terminated.
"Compliance Certificate" means a certificate duly completed and executed
by an Authorized Officer of the Borrower, substantially in the form of Exhibit J
hereto, as amended, supplemented, amended and restated or otherwise modified
from time to time, together with such changes thereto as the Administrative
Agent may from time to time reasonably request for the purpose of monitoring the
Borrower's compliance with the financial covenants contained herein.
"Contingent Liability" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person
;provided, that the term "Contingent Liability" shall not include guarantees of
payment delivered by the Borrower in respect of loans or advances made to
employees of the Borrower or its Subsidiaries the proceeds of which are used to
purchase Capital Stock of the Parent where (x) the lender has recourse to such
Capital Stock and (y) the amount loaned is not in excess of 67% of the fair
market value of such
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Securities. The amount of any Person's obligation under any Contingent Liability
shall (subject to any limitation set forth therein) be deemed to be the
outstanding principal amount (or maximum principal amount, if larger) of the
debt, obligation or other liability guaranteed thereby.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of Exhibit D hereto.
"Contractual Obligation", as applied to any Person, means any provision
of any Securities issued by that Person or any indenture, mortgage, deed of
trust, security agreement, pledge agreement, guaranty, contract, undertaking,
agreement or instrument to which that Person is a party or by which it or any of
its properties is bound, or to which it or any of its properties is subject.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414(b) or 414(c) of the
Code or Section 4001 of ERISA.
"Covered Taxes" means any Taxes other than franchise or capital taxes,
branch profits taxes and taxes on or measured by net income or net receipts
imposed with respect to the Administrative Agent or any Lender by reason of a
connection between the Administrative Agent or such Lender and the relevant
taxing jurisdiction (other than a connection arising solely from such Person
having executed, delivered, performed its obligations or received any payment
under, or enforced any right in connection with, this Agreement or any Note).
Covered Taxes shall not include Taxes to which, and to the extent that, the
Administrative Agent or the relevant Lender, as the case may be, is subject
prior to entering into this Agreement, and which would imposed upon the
Administrative Agent or such Lender, as the case may be, as a result of a
connection between such Person and the relevant taxing authority (other than a
connection arising solely from such Person having executed, delivered, performed
its obligations or received any payment under, or enforced any right
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<PAGE> 21
in connection with, this Agreement or any Note).
"Credit Extension" means, as the context may require,
(a) the making of a Loan by a Lender; or
(b) the issuance of any Letter of Credit, or the extension of any
Stated Expiry Date of any existing Letter of Credit, by an Issuer.
"Credit Extension Request" means, as the context may require, any
Borrowing Request or Issuance Request.
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event of
Default.
"Defaulted Debt" means (x) any Indebtedness of the type listed under
clauses (a), (b), (c), (e) and (g) of the definition of "Indebtedness" (without
duplication, Contingent Liabilities in respect of such type of Indebtedness) and
(y) any Indebtedness, whether or not for borrowed money,
(i) represented by notes payable, and drafts
accepted, that represent extensions of credit,
(ii) constituting obligations evidenced by bonds,
debentures, notes or similar instruments, or
(iii) upon which interest charges are customarily paid or
that was issued or assumed as partial payment for property (other
than trade credit that is incurred in the ordinary course of
business).
"Designated Subsidiary" means any Person in which the Borrower or any of
its Subsidiaries has an Investment (as permitted by clause (i) of Section 7.2.5)
and which is bound by restrictions of the type described in clause (a) or (c) of
Section 7.2.13.
"Disbursement" is defined in Section 2.6.2.
"Disbursement Date" is defined in Section 2.6.2.
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<PAGE> 22
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented, amended and restated or
otherwise modified from time to time by the Borrower with the written consent of
the Required Lenders.
"Dollar" and the sign "$" mean lawful money of the United
States.
"Domestic Office" means, relative to any Lender, the office of such
Lender designated as such Lender's "Domestic Office" below its signature hereto
or in a Lender Assignment Agreement, or such other office of a Lender (or any
successor or assign of such Lender) within the United States as may be
designated from time to time by notice from such Lender, as the case may be, to
each other Person party hereto.
"EBITDA" means, for the Borrower and its Subsidiaries, for
any applicable period, the sum (without duplication) for such
period of
(a) Net Income,
plus
(b) the amount deducted by the Borrower and its
Subsidiaries in determining Net Income representing
amortization,
plus
(c) the amount deducted in determining Net Income of all federal,
state and local income taxes (whether paid in cash or deferred) of the
Borrower and its Subsidiaries,
plus
(d) the amount deducted in determining Net Income representing
Interest Expense of the Borrower and its Subsidiaries,
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plus
(e) the amount deducted in determining Net Income representing
depreciation of assets of the Borrower and its Subsidiaries,
plus
(f) the amount deducted in determining Net Income representing
Termination and Amendment Charges and Asset Impairment Charges,
plus
(g) the amount deducted in determining Net Income of all charges
resulting from the application of Financial Accounting Standards Board
Statement No. 121.
"Effective Date" means the date this Agreement becomes effective pursuant
to Section 10.8.
"Eligible Inventory" means with respect to Inventory of the Borrower and
its U.S. Subsidiaries (other than Receivables Co.), at any time of determination
thereof, any Inventory located in the United States (i) with respect to which
the Administrative Agent has a valid and perfected first priority Lien (subject
to Liens permitted to exist under Section 7.2.3), (ii) that consists of finished
goods (including expressly the "seafood stockpile" as defined in agreements with
Long John Silver's Restaurants, Inc. (or its Subsidiaries) in effect on the
Effective Date) and not supplies, (iii) that meets all standards imposed by any
governmental agency, or department or division thereof, having regulatory
authority over such goods, their use or sale, (iv) that is currently usable or
salable, at prices approximating at least cost, in the normal course of the
Borrower's business and is not slow moving or stale, (v) that is not obsolete or
returned or repossessed or used goods taken in trade and (vi) that is not
determined by the Administrative Agent in its reasonable discretion to be
ineligible based on customary credit and collateral criteria utilized by asset
based lenders. Eligible Inventory shall be valued at the lower of cost
determined on a weighted moving average accounting basis and fair market value,
net of any amount included therein for the value of
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<PAGE> 24
fuel and (without duplication) net of the Borrower's reserves for obsolescence.
No Inventory shall be Eligible Inventory unless (x) it is in the possession or
control of the Borrower or one of its Subsidiaries or (y) if it is located at
premises leased from a third party, either (1) it is subject to a written
consent from such third party in form and substance reasonably satisfactory to
the Administrative Agent that permits the Administrative Agent, on behalf of the
Lenders, to obtain possession of and to dispose of such Inventory, free and
clear of any lien in favor of the lessor and without any obligation to the
lessor other than to pay for the repair of physical damage to the leased
premises caused by the Administrative Agent's or any Lender's obtaining
possession or disposing of such Inventory and other than the payment of rent
during any period of up to 60 days that the Administrative Agent elects that the
Inventory remain on the leased premises after the receipt by the Administrative
Agent of written notice by the lessor directing removal thereof or (2) a reserve
against the Borrowing Base shall have been established in an amount equal to
twice the monthly rental payment with respect to such premises or (z) if it is
located at the premises of a third party bailee and a negotiable instrument has
not been issued with respect thereto, a UCC-1 financing statement covering the
Inventory which names the third party bailee as debtor/bailee, names the
Borrower or the relevant Subsidiary thereof as the secured party/bailor and
names the Administrative Agent as assignee of the secured party/bailor has been
filed in the appropriate filing office.
"Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to protection of the
environment.
"Equity Interests", with respect to any Person, means any Capital Stock
issued by such Person, regardless of class or designation, or any limited or
general partnership interest in such Person, regardless of designation, and all
warrants, options, purchase rights, conversion or exchange rights, voting
rights, calls or claims of any character with respect thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto of similar import, together with the
regulations thereunder, in each case as
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in effect from time to time. References to sections of ERISA
also refer to any successor sections thereto.
"Event of Default" is defined in Section 8.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Existing Credit Agreement" means the Loan and Security Agreement, dated
as of March 31, 1995, as amended or modified on or prior to the date hereof,
among the Borrower, ProSource Canada and BroMar Services, Inc., certain
financial institutions parties thereto, NationsBank of Georgia, N.A., The First
National Bank of Boston and Fleet Capital Corporation, as co-agents, and
NationsBank of Georgia, N.A., as administrative agent.
"Extension Request" means an Extension Request duly executed by an
Authorized Officer of the Borrower pursuant to Section 2.8, substantially in the
form of Exhibit K hereto.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or, if such day is not
a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by Scotiabank from three federal funds brokers of
recognized standing selected by it.
"Fee Letter" means that certain confidential letter, dated as of
December 28, 1996, from Scotiabank to the Borrower, as the same may be amended
or otherwise changed in accordance with the terms thereof.
"Fiscal Month" means the period of four or five consecutive weeks
beginning on the first day of a Fiscal Year of the Borrower and ending on the
last Saturday on or before the following
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January 31 and each period of four or five consecutive weeks beginning on the
Sunday following the end of the preceding Fiscal Month and ending on the last
Saturday on or before the last day of the next calendar month (or of the same
calendar month, if the first day of the Fiscal Month was also the first day of a
calendar month).
"Fiscal Quarter" means the period of three consecutive Fiscal Months
beginning on the first day of a Fiscal Year of the Borrower and each succeeding
consecutive period of three consecutive Fiscal Months.
"Fiscal Year" means each period of 52 or 53 consecutive weeks beginning
on the Sunday following the last Saturday in one calendar year and ending on the
last Saturday in the next calendar year; references to a Fiscal Year with a
number corresponding to any calendar year (e.g., the "1997 Fiscal Year") refer
to the Fiscal Year ending on the last Saturday in such calendar year.
"Fixed Charge Coverage Ratio" means, as of the close of any Fiscal
Quarter, the ratio computed for the period consisting of such Fiscal Quarter and
each of the three immediately prior Fiscal Quarters with respect to the Borrower
and its Subsidiaries on a consolidated basis of:
(a) EBITDA (for all such Fiscal Quarters);
to
(b) the sum (for all such Fiscal Quarters) of
(i) cash Interest Expense;
plus
(ii) all federal and state income taxes actually
paid in cash by the Borrower and its Subsidiaries;
plus
(iii) Capital Expenditures,
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plus
(iv) the aggregate consideration paid by the Borrower or
any of its Subsidiaries (or funds provided by the Borrower or any
of its Subsidiaries to the Parent) for the purchase or other
acquisition of Capital Stock of the Parent (net of any cash
repayments received by the Borrower or any of its Subsidiaries in
respect of loans or advances made to employees the proceeds of
which were used to purchase Capital Stock of the Parent).
"F.R.S. Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"GAAP" is defined in Section 1.4.
"Governmental Approval" means any action, authorization, consent,
approval, license, lease, ruling, permit, tariff, rate, certification,
exemption, filing, variance, order, judgment, decree, publication, notices to,
declarations of or with or registration by or with any Regulatory Authority.
"Governmental Rule" means any statute, law, regulation, ordinance, rule,
judgment, order, decree, permit, concession, grant, franchise, license,
agreement, directive, guideline, policy, requirement, or other governmental
authorization including any conditions thereof, restriction or any similar form
of published or otherwise known decision of or determination by, or any
interpretation or administration of any of the foregoing by, any Regulatory
Authority, whether now or hereafter in effect (including any Environmental Law).
"Guaranty" means, as the context may require, the Parent Guaranty and/or
the Subsidiary Guaranty and any other guaranty which guarantees any of the
Obligations and which is being entered into by one or more of the Obligors in
favor of the Administrative Agent.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
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(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended; or
(c) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance (including any petroleum product) within
the meaning of any other applicable federal, state or local law,
regulation, ordinance or requirement (including consent decrees and
administrative orders) relating to or imposing liability or standards of
conduct concerning any hazardous, toxic or dangerous waste, substance or
material, all as amended.
"Hedging Obligations" means, with respect to any Person, all liabilities
of such Person under currency exchange agreements, interest rate swap
agreements, interest rate cap agreements and interest rate collar agreements,
and all other agreements or arrangements designed to protect such Person against
fluctuations in interest rates or currency exchange rates.
"herein", "hereof", "hereto", "hereunder" and similar terms contained in
this Agreement or any other Loan Document refer to this Agreement or such other
Loan Document, as the case may be, as a whole and not to any particular Section,
paragraph or provision of this Agreement or such other Loan Document.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of the Borrower, any qualification or exception to such opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination
of matters relevant to such financial statement; or
(c) which relates to the treatment or classification of any item
in such financial statement and which, as a condition to its removal,
would require an adjustment to such item the effect of which would be to
cause the Borrower to be in default of any of its obligations under
Section 7.2.4.
"including" and "include" mean including without limiting
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<PAGE> 29
the generality of any description preceding such term, and, for purposes of this
Agreement and each other Loan Document, the parties hereto agree that the rule
of ejusdem generis shall not be applicable to limit a general statement, which
is followed by or referable to an enumeration of specific matters, to matters
similar to the matters specifically mentioned.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases which
have been or should be, in accordance with GAAP, recorded as Capitalized
Lease Liabilities;
(d) all other items which, in accordance with GAAP, would be
included as liabilities on the liability side of the balance sheet of
such Person as of the date at which Indebtedness is to be determined;
(e) net liabilities of such Person under all Hedging
Obligations;
(f) whether or not so included as liabilities in accordance with
GAAP, all obligations of such Person to pay the deferred purchase price
of property or services (excluding trade payables arising in the
ordinary course of business), and indebtedness (excluding prepaid
interest thereon) secured by a Lien on property owned or being purchased
by such Person (including indebtedness arising under conditional sales
or other title retention agreements), whether or not such indebtedness
shall have been assumed by such Person or is limited in recourse;
(g) all Receivables Facility Outstandings; and
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(h) all Contingent Liabilities of such Person in
respect of any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner except to the extent that such Indebtedness is by its terms
nonrecourse to such Person.
"Indebtedness to be Paid" is defined in Section 5.1.3.
"Indemnified Liabilities" is defined in Section 10.4.
"Indemnified Parties" is defined in Section 10.4.
"Interest Coverage Ratio" means, as of the close of any Fiscal Quarter,
the ratio computed for the period consisting of such Fiscal Quarter and each of
the three immediately prior Fiscal Quarters with respect to the Borrower and its
Subsidiaries on a consolidated basis of:
(a) EBITDA (for all such Fiscal Quarters);
to
(b) the sum (for all such Fiscal Quarters) of cash
Interest Expense.
"Interest Expense" means, for any Fiscal Quarter, the aggregate
consolidated interest expense of the Borrower and its Subsidiaries for such
Fiscal Quarter, as determined in accordance with GAAP, including (without
duplication) (i) the portion of any payments made in respect of Capitalized
Lease Liabilities allocable to interest expense and (ii) interest (or other fees
in the nature of interest or discount accrued for such Fiscal Quarter) in
respect of the Permitted Receivables Transaction.
"Interest Period" means, relative to any LIBO Rate Loan, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or 2.4
and shall end on (but exclude) the day which numerically corresponds to such
date one, two, three, six, nine or twelve months thereafter (or, if such
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month has no numerically corresponding day, on the last Business Day of such
month), as the Borrower may select in its relevant notice pursuant to Section
2.3 or 2.4; provided, however, that
(a) the Borrower shall not be permitted to select Interest
Periods to be in effect at any one time which have expiration dates
occurring on more than nine different dates;
(b) Interest Periods commencing on the same date for
Loans comprising part of the same Borrowing shall be of the
same duration;
(c) if such Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall end on the next following
Business Day (unless such next following Business Day is the first
Business Day of a calendar month, in which case such Interest Period
shall end on the Business Day next preceding such numerically
corresponding day); and
(d) no Interest Period for any Loan may end later than
the Stated Maturity Date.
"Investment" means, relative to any Person,
(a) any loan or advance made by such Person to any other Person
(excluding escrow and other deposits, prepaid expenses, and commission,
travel and similar advances to directors, officers and employees, in
each case made in the ordinary course of business);
(b) any Contingent Liability of such Person; and
(c) any ownership interest held by such Person in any
other Person.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property at the time of such Investment.
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"Inventory" means any "inventory" (as that term is defined
in Section 9-109(4) of the U.C.C.) of the Borrower.
"Issuance Request" means a Letter of Credit request and certificate duly
executed by an Authorized Officer of the Borrower, substantially in the form of
Exhibit C hereto.
"Issuer" means Scotiabank in its capacity as issuer of the Letters of
Credit. At the request of Scotiabank, another Lender or an Affiliate of
Scotiabank may issue one or more Letters of Credit hereunder.
"Law Change" is defined in clause (b) of Section 4.6.
"Lender Assignment Agreement" means a lender assignment agreement,
substantially in the form of Exhibit E hereto.
"Lenders" is defined in the preamble and, in addition, shall include any
commercial bank or other financial institution that becomes a Lender pursuant to
Section 10.11.1.
"Lender's Environmental Liability" means any and all losses,
liabilities, obligations, penalties, claims, demands, defenses, costs,
judgments, damages (including consequential damages), disbursements or expenses
of any kind or nature whatsoever (including reasonable attorneys' fees at trial
and appellate levels and reasonable experts' fees, disbursements and expenses
incurred in investigating, defending against or prosecuting any litigation,
claim or proceeding) which may at any time be imposed upon, incurred by or
asserted or awarded against any Lender or any of such Lender's parent and
subsidiary corporations, and their Affiliates, shareholders, directors,
officers, employees, and agents in connection with or arising from:
(a) any Hazardous Material on, in, under or affecting all or any
portion of any property of the Borrower or any of its Subsidiaries, the
groundwater thereunder, or any surrounding areas thereof to the extent
caused by Releases from the Borrower's or any of the Borrower's
Subsidiaries' or any of their respective predecessors' properties;
(b) any misrepresentation, inaccuracy or breach of any
warranty, contained or referred to in Section 6.13;
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(c) any violation or claim of violation by the
Borrower or any of its Subsidiaries of any Environmental
Laws; or
(d) the imposition of any lien for damages caused by or the
recovery of any costs for the cleanup, release or threatened release of
Hazardous Material by the Borrower or any of its Subsidiaries, or in
connection with any property owned or formerly owned by the Borrower or
any of its Subsidiaries.
"Letter of Credit" is defined in Section 2.1.2.
"Letter of Credit Commitment" means, with respect to an Issuer, such
Issuer's obligation to issue Letters of Credit pursuant to Section 2.1.2 and,
with respect to each of the other Lenders, the obligations of each such Lender
to participate in such Letters of Credit pursuant to Section 2.6.1.
"Letter of Credit Commitment Amount" means, on any date, a maximum
amount of $25,000,000, as such amount may be permanently reduced from time to
time pursuant to Section 2.2.
"Letter of Credit Outstandings" means, on any date, an
amount equal to the sum of
(a) the then aggregate amount which is undrawn and
available under all issued and outstanding Letters of
Credit,
plus
(b) the then aggregate amount of all unpaid and
outstanding Reimbursement Obligations.
"LIBO Rate" means, relative to any Interest Period for any LIBO Rate
Loan, the rate of interest equal to the average (rounded upwards, if necessary,
to the nearest 1/100 of 1%) of the rates per annum at which Dollar deposits in
immediately available funds are offered in the London interbank market as at or
about 11:00 a.m. London, England time two Business Days prior to the beginning
of such Interest Period for delivery on the first day of such Interest Period,
and in an amount approximately
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equal to the amount of such LIBO Rate Loan and for a period approximately equal
to such Interest Period.
"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any Interest
Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of
1%) determined pursuant to the following formula:
LIBO Rate = LIBO Rate
(Reserve Adjusted) -------------------------------
1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate
Loans will be determined by the Administrative Agent on the basis of the LIBOR
Reserve Percentage in effect on, and the applicable rates furnished to and
received by the Administrative Agent, two Business Days before the first day of
such Interest Period.
"LIBOR Office" means, relative to any Lender, the office of such Lender
designated as such Lender's "LIBOR Office" below its signature hereto or in a
Lender Assignment Agreement, or such other office of a Lender as designated from
time to time by notice from such Lender to the Borrower and the Administrative
Agent, whether or not outside the United States, which shall be making or
maintaining LIBO Rate Loans of such Lender hereunder.
"LIBOR Reserve Percentage" means, relative to any Interest Period, the
reserve percentage (expressed as a decimal) equal to the maximum aggregate
reserve requirements (including all basic, emergency, supplemental, marginal and
other reserves and taking into account any transitional adjustments or other
scheduled changes in reserve requirements as and when in effect) specified under
regulations issued from time to time by the F.R.S. Board and then applicable to
assets or liabilities consisting of or including "Eurocurrency Liabilities", as
currently defined in Regulation D of the F.R.S. Board, having a term
approximately equal or comparable to such Interest Period.
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"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property, or other priority or preferential
arrangement of any kind or nature whatsoever, to secure payment of a debt or
performance of an obligation.
"Loan" is defined in Section 2.1.1.
"Loan Documents" collectively means this Agreement, the Notes, the
Letters of Credit, each Rate Protection Agreement relating to Hedging
Obligations of the Borrower or any of its Subsidiaries, each Borrowing Request,
each Issuance Request, each Pledge Agreement, each Security Agreement, each
Trademark Security Agreement, each Guaranty, the Fee Letter, the Post-Closing
Events Letter and each other agreement, certificate, document or instrument
delivered in connection with this Agreement and such other agreements, whether
or not specifically mentioned herein or therein, but in any event excluding the
Receivables Transaction Documents.
"Material Adverse Effect" means a material adverse effect on (a) the
financial condition, operations, assets, business, properties or prospects of
(i) the Parent and its Subsidiaries, taken as a whole, (ii) the Borrower or
(iii) the Borrower and its Subsidiaries, taken as a whole, provided, however,
that no event, fact or circumstance occurring on or before or existing on the
date of and described in the Parent's registration statement on Form S-1 of the
SEC, dated November 7, 1996, shall constitute a "Material Adverse Effect" under
this clause (a), (b) the rights and remedies of the Administrative Agent or any
Secured Party under any Loan Document, (c) the enforceability of the Obligations
of any Obligor under any Loan Document or (d) the ability of the Borrower or any
other Obligor to perform its Obligations under any Loan Document to which it is
or becomes a party. The parties hereto understand and agree that the termination
of the Borrower's agreement to provide distribution services to Arby's
restaurants effective April 1, 1997 is not and shall not constitute an event
that has a Material Adverse Effect.
"Material Default" means any Default other than a Non-
Material Default.
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"Monthly Payment Date" means the last day of each calendar month or, if
such day is not a Business Day, the next succeeding Business Day.
"Moody's" means Moody's Investors Service, Inc.
"Mortgages" means the Borrower Mortgages and the Subsidiary
Mortgages.
"Net Disposition Proceeds" means, with respect to a
Permitted Disposition, the excess of
(a) the gross cash proceeds received by the Borrower or any of
its Subsidiaries from any Permitted Disposition and any cash payments
received in respect of promissory notes or other non-cash consideration
delivered to the Borrower or such Subsidiary in respect of any Permitted
Disposition,
less
(b) the sum of
(i) all reasonable fees and expenses with respect to
legal, investment banking, brokerage and accounting and other
professional fees, sales commissions and disbursements and all
other reasonable fees, expenses and charges, in each case
actually incurred in connection with such Permitted Disposition
which have not been paid to Affiliates of the Borrower,
(ii) all taxes and other governmental costs and expenses
actually paid or estimated by the Borrower (in good faith) to be
payable in connection with such Permitted Disposition,
(iii) payments made by the Borrower or any of its
Subsidiaries to retire Indebtedness (other than the Loans) of the
Borrower or any of its Subsidiaries secured by the assets that
are the subject of such Permitted Disposition, and
(iv) an amount of such proceeds, which, at the
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option of the Borrower and so long as no Default shall have
occurred and be continuing, the Borrower elects to use or causes
the applicable Subsidiary to use to purchase substantially
similar assets useful in the business of the Borrower or such
Subsidiary (with such assets or interests collectively referred
to as "Qualified Assets") within 365 days after the consummation
of such sale, conveyance or disposition, and in the event the
Borrower or such Subsidiary elects to exercise its right to
purchase Qualified Assets with the proceeds of such a Permitted
Disposition pursuant to this clause, the Borrower shall deliver a
certificate of an Authorized Officer to the Administrative Agent
within 30 days following the receipt of such proceeds setting
forth the amount of the such proceeds which the Borrower or such
Subsidiary expects to use to purchase Qualified Assets during
such 365-day period.
If and to the extent that the Borrower or such Subsidiary has elected to
reinvest proceeds from Permitted Dispositions as permitted above, then on the
date which is 365 days after the relevant sale, conveyance or disposition, the
Borrower shall deliver a certificate of an Authorized Officer to the
Administrative Agent certifying as to the amount and use of such proceeds of a
Permitted Disposition actually used to purchase Qualified Assets. Any proceeds
of a Permitted Disposition that are the subject of an election made by the
Borrower or a Subsidiary thereof pursuant to clause (iv) above shall be deemed
as Net Disposition Proceeds if and only to the extent that same are not
reinvested in Qualified Assets within the 365-day period referred to in said
clause (iv).
"Net Income" means, for any period, the aggregate of all amounts
(exclusive of all amounts in respect of any non-cash extraordinary gains and
extraordinary losses) which, in accordance with GAAP, would be included as net
income on the consolidated financial statements of the Borrower and its
Subsidiaries (other than a Designated Subsidiary) for such period.
"Net Worth" means, at any time, the sum of all amounts which, in
accordance with GAAP, would be included under
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shareholders' equity on the most recently available consolidated balance sheet
of the Borrower and its Subsidiaries.
"Non-Material Default" means a Default as to which the Administrative
Agent and the Required Lenders have elected not to take any action required to
be taken hereunder as a condition to such Default becoming an Event of Default.
"Note" means a promissory note of the Borrower payable to any Lender, in
the form of Exhibit A hereto (as such promissory note may be amended, endorsed
or otherwise modified from time to time), evidencing the aggregate Indebtedness
of the Borrower to such Lender resulting from outstanding Loans, and also means
all other promissory notes accepted from time to time in substitution therefor
or renewal thereof.
"Obligations" means all monetary obligations of the Borrower and each
other Obligor arising under or in connection with this Agreement, the Notes, the
Letters of Credit and each other Loan Document.
"Obligor" means, as the context may require, the Parent, the Borrower,
each Subsidiary Guarantor and any other Person (other than a Secured Party) to
the extent such Person is obligated under this Agreement or any other Loan
Document.
"Onex" means Onex Corporation, a corporation organized under the laws of
Ontario, Canada.
"Organic Document" means, relative to any Obligor, as applicable, its
certificate of incorporation, by-laws, certificate of partnership, partnership
agreement, certificate of formation, limited liability agreement and all
shareholder agreements, voting trusts and similar arrangements applicable to any
of such Obligor's partnership interests, limited liability company interests or
authorized shares of capital stock.
"Parent" means ProSource, Inc., a Delaware corporation.
"Parent Guaranty" means the Guaranty executed and delivered by the
Parent pursuant to Section 5.1.7, substantially in the form of Exhibit H-1
hereto as amended, supplemented, amended and restated or otherwise modified from
time to time.
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"Parent Pledge Agreement" means the Pledge Agreement executed and
delivered by the Parent pursuant to Section 5.1.4, substantially in the form of
Exhibit F-1 hereto, as amended, supplemented, amended and restated or otherwise
modified from time to time.
"Parent Security Agreement" means the Security Agreement executed and
delivered by the Parent pursuant to Section 5.1.5, substantially in the form of
Exhibit G-1 hereto, as amended, supplemented, amended and restated or otherwise
modified from time to time.
"Participant" is defined in Section 10.11.2.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the
Borrower or any corporation, trade or business that is, along with the Borrower,
a member of a Controlled Group, may have liability, including any liability by
reason of having been a substantial employer within the meaning of Section 4063
of ERISA at any time during the preceding five years, or by reason of being
deemed to be a contributing sponsor under Section 4069 of ERISA.
"Percentage" means, relative to any Lender, the percentage set forth
opposite its signature hereto or set forth in a Lender Assignment Agreement, as
such percentage may be adjusted from time to time pursuant to Lender Assignment
Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered
pursuant to Section 10.11.1.
"Permitted Acquisition" means an acquisition (whether pursuant to an
acquisition of stock, assets or otherwise) in a single or a series of related
transactions by the Borrower or any Subsidiary of a Person or from any Person of
a business or asset for which all of the following is satisfied:
(a) such business or asset is of the type described in the first
recital;
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(b) immediately before and after giving effect to such
acquisition no Default shall have occurred and be continuing or would
result therefrom; and
(c) upon making such acquisition, the provisions of Sections
7.1.7 and 7.1.8 are complied with.
"Permitted Disposition" means a sale, disposition or other conveyance of
assets by the Borrower or any of its Subsidiaries in accordance with the terms
of clause (b) (other than as permitted by clause (a) or (c)) of Section 7.2.11.
"Permitted Receivables Transaction" means any transaction or series of
related transactions providing for the sale or financing of Accounts; provided,
that any such transaction shall be consummated pursuant to the Receivables
Transaction Documents.
"Person" means any natural person, corporation, limited liability
company, partnership, joint venture, joint stock company, firm, association,
trust or unincorporated organization, government, governmental agency, court or
any other legal entity, whether acting in an individual, fiduciary or other
capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreement" means, as the context may require, the Parent Pledge
Agreement, the Borrower Pledge Agreement and/or any Subsidiary Pledge Agreement
and any other pledge agreement which secures any of the Obligations and which is
being entered into by one or more Obligors in favor of the Administrative Agent.
"Post-Closing Events Letter" means the letter agreement dated as of
March 14, 1997, between the Borrower and the Administrative Agent executed and
delivered on the date of the initial Credit Extension.
"Pro Forma Balance Sheet" is defined in clause (b) of Section 5.1.9.
"ProSource Canada" means ProSource Distribution Services Limited, a
Canadian corporation.
"Qualified Assets" is defined in the definition of "Net
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Disposition Proceeds".
"Quarterly Payment Date" means the last day of March, June, September
and December, or, if any such day is not a Business Day, the next succeeding
Business Day.
"Rate Protection Agreement" means, collectively, any interest rate swap,
cap, collar or similar agreement entered into by the Borrower pursuant to the
terms of this Agreement under which the counterparty to such agreement is (or at
the time such Rate Protection Agreement was entered into, was) a Lender or an
Affiliate of a Lender.
"Receivables Co." means collectively ProSource Receivables Corporation
and ProSource Investments, Inc., each a special purpose, bankruptcy-remote
wholly-owned Subsidiary of the Borrower.
"Receivables Facility Outstandings" means, at any date of determination,
with respect to the Permitted Receivables Transaction, the aggregate cash
proceeds received by the Borrower or any of its Subsidiaries from the sale or
financing of Accounts pursuant to the Permitted Receivables Transaction which
are outstanding on the date of determination.
"Receivables Note" means the subordinated promissory note issued by
Receivables Co. pursuant to the Receivables Transaction Documents.
"Receivables Proceeds" means, with respect to the Permitted Receivables
Transaction, the maximum amount of the commitment to purchase Accounts under the
Permitted Receivables Transaction.
"Receivables Transaction Documents" means the U.S. $150,000,000 Secured
Credit Agreement dated as of March 14, 1997 among Receivables Co., the Borrower,
various financial institutions named therein and The Bank of Nova Scotia as
administrative agent thereunder, and all other documentation relating to the
facility provided therein.
"Regulatory Authority" means, to the extent applicable to Parent, the
Borrower or its Subsidiaries, any national, state or local government, any
political subdivision or any governmental,
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quasi-governmental, judicial, public or statutory instrumentality, authority,
body or entity, other regulatory bureau, authority, body or entity, foreign or
domestic, including the Federal Deposit Insurance Corporation, the Comptroller
of the Currency, the F.R.S. Board, any central bank or any comparable authority.
"Reimbursement Obligation" is defined in Section 2.6.3.
"Release" means a "release", as such term is defined in CERCLA.
"Required Lenders" means, at any time, Lenders holding at least 51% of
the then aggregate outstanding principal amount of the Notes then held by the
Lenders, or, if no such principal amount is then outstanding, Lenders having at
least 51% of the Commitments.
"Resource Conservation and Recovery Act" means the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901, et seq., as amended.
"S&P" means Standard & Poor's Rating Services.
"Scotiabank" is defined in the preamble.
"SEC" means the Securities and Exchange Commission.
"Secured Parties" means, collectively, the Lenders, the Issuers, the
Administrative Agent, each counterparty to a Rate Protection Agreement that is
(or at the time such Rate Protection Agreement was entered into, was) a Lender
or an Affiliate thereof and (in each case), each of their respective successors,
transferees and assigns.
"Securities" means any limited, general or other partnership interest,
or any stock, shares, voting trust certificates, bonds, debentures, notes or
other Equity Interests or evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or any certificates of interest, shares,
or participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing, but shall not include
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any evidence of the Obligations.
"Security Agreement" means, as the context may require, the Parent
Security Agreement, the Borrower Security Agreement and/or a Subsidiary Security
Agreement and any other security agreement which secures any of the Obligations
and which is being entered into by one or more Obligors in favor of the
Administrative
Agent.
"SLB Properties" means those assets of the Borrower or any of its
Subsidiaries listed in Schedule II attached hereto.
"Stated Amount" of each Letter of Credit means the total amount
available to be drawn under such Letter of Credit upon the issuance thereof.
"Stated Expiry Date" is defined in Section 2.6.
"Stated Maturity Date" means March 14, 2002.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other business entity of which more than 50% of the outstanding
capital stock (or other ownership interest) having ordinary voting power to
elect a majority of the board of directors, managers or other voting members of
the governing body of such entity (irrespective of whether at the time capital
stock (or other ownership interest) of any other class or classes of such entity
shall or might have voting power upon the occurrence of any contingency) is at
the time directly or indirectly owned by such Person, by such Person and one or
more other Subsidiaries of such Person, or by one or more other Subsidiaries of
such Person. Unless the context otherwise specifically requires, the term
"Subsidiary" shall be a reference to a Subsidiary of the Borrower.
"Subsidiary Guarantor" means each U.S. Subsidiary that has executed and
delivered a Subsidiary Guaranty.
"Subsidiary Guaranty" means, as the context may require, the Guaranty
executed and delivered by each Subsidiary Guarantor pursuant to Section 5.1.7 or
any guaranty executed and delivered by a Subsidiary pursuant to clause (a) of
Section 7.1.7, in each case substantially in the form of Exhibit H-2 hereto, as
amended,
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supplemented, amended and restated or otherwise modified from time to time.
"Subsidiary Mortgage" means any mortgage executed and delivered by a
Subsidiary Guarantor pursuant to Section 5.1.8 or 7.1.8 as the case may be, in
each case substantially in the form of Exhibit M-2 hereto, as amended,
supplemented, amended and restated or otherwise modified from time to time.
"Subsidiary Pledge Agreement" means any Pledge Agreement executed and
delivered by a Subsidiary Guarantor pursuant to clause (a) of Section 7.1.7,
substantially in the form of Exhibit F-3 hereto, in each case as amended,
supplemented, amended and restated or otherwise modified from time to time.
"Subsidiary Security Agreement" means the Security Agreement executed
and delivered by a Subsidiary Guarantor pursuant to Section 5.1.5 or any
security agreement executed and delivered by a Subsidiary pursuant to clause (a)
of Section 7.1.7, in each case, substantially in the form of Exhibit G-2 hereto,
as amended, supplemented, amended and restated or otherwise modified from time
to time.
"Taxes" means any present or future income, excise, stamp or franchise
taxes and other taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing jurisdiction, and in each case any interest,
additions to tax, penalties or additional amounts payable with respect thereto.
"Termination and Amendment Charges" means income statement charges in an
aggregate amount not greater than the sum of (a) $17,000,000 (before taking into
account any associated tax benefit, which tax benefit will be determined based
on the Borrower's effective tax rate for the period in which such charges are
recorded, all in accordance with GAAP) recorded by the Borrower in Fiscal Year
1996 or the first Fiscal Quarter of Fiscal Year 1997, in connection with
prepayment charges, the writeoff of deferred financing costs and other
appropriate charges in connection with the termination and/or amendment of
various agreements as to Indebtedness of the Borrower and other matters and (b)
$10,600,000 (before taking into account any associated tax benefit, which tax
benefit will be determined based on the Borrower's effective tax rate for the
period in
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which such charges are recorded, all in accordance with GAAP) recorded by the
Borrower in Fiscal Year 1996 or the first Fiscal Quarter of Fiscal Year 1997, in
connection with the termination of the Borrower's agreement to provide
distribution services to Arby's restaurants.
"Total Debt" means, on any date, without duplication, an amount equal to
the sum of the daily average for the period then ending of (a) the principal
amount of all Indebtedness of the Borrower and its Subsidiaries of the type
referred to in clause (a) of the definition of "Indebtedness" plus (b) the
maximum aggregate amount of Indebtedness of the type referred to in clause (b)
of the definition of "Indebtedness" plus (c) the aggregate amount of
Indebtedness of the type referred to in clause (c) of the definition of
"Indebtedness" (exclusive of intercompany Indebtedness between the Borrower and
any of its Subsidiaries or between any Subsidiaries of the Borrower) plus (d)
any Contingent Liability with respect to any of the foregoing types of
Indebtedness.
"Total Debt to EBITDA Ratio" means, as of the last day of any Fiscal
Quarter, the ratio of
(a) Total Debt; provided, however, that solely for purposes of
the definitions of "Applicable Commitment Fee Margin" and "Applicable
Margin" the daily average amount of Total Debt used in the calculation
of the Total Debt to EBITDA Ratio for the fourth Fiscal Quarter of 1996
shall be deemed to be reduced by the net proceeds received by the
Borrower from the initial public offering of common stock of the
Borrower by the Parent in November, 1996 in an amount approximately
equal to $34,300,000 for the period commencing on September 29, 1996 and
ending on November 14, 1996,
to
(b) EBITDA computed for the period consisting of such Fiscal
Quarter and each of the three immediately preceding Fiscal Quarters.
"Trade Investments" means Investments of the Borrower or any of its
Subsidiaries in Securities of trade debtors or other Persons in consideration of
or as evidence of past-due or
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restructured accounts receivable.
"Trademark Security Agreement" means any trademark security agreement
executed and delivered by the Borrower or a Subsidiary Guarantor, as the case
may be, in each case substantially in the form of Exhibit B to a Security
Agreement, as amended, supplemented, amended and restated or otherwise modified
from time to time.
"type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"U.C.C." means the Uniform Commercial Code as from time to time in
effect in the State of New York.
"United States" or "U.S." means the United States of America, its fifty
states, Puerto Rico and the District of Columbia.
"U.S. Dollar Equivalent" of any amount of Canadian Dollars on any date
means the equivalent amount in U.S. Dollars, converted at the rate of exchange
quoted by Scotiabank at its New York office to prime banks in New York for the
spot purchase in the New York foreign exchange market of Canadian Dollars at
approximately 11:00 a.m. (New York time) on such date in accordance with its
normal practice.
"U.S. Person" means any Person that is a "United States person" within
the meaning of Section 7701(a)(30) of the Code (or any applicable successor
provision).
"U.S. Subsidiary" means any Subsidiary of the Borrower that is
incorporated or organized under the laws of the United States or a state
thereof.
"Welfare Plan" means a "welfare plan", as such term is defined in
section 3(1) of ERISA.
"wholly-owned" means, with respect to any direct or indirect Subsidiary,
any Subsidiary all of the outstanding common stock (or similar equity interest)
of which (other than any director's qualifying shares or investments by foreign
nationals mandated by applicable laws) is owned directly or indirectly by the
Borrower.
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SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in each other Loan Document, the
Disclosure Schedule, or any Borrowing Request, Issuance Request, Continuation/
Conversion Notice, Compliance Certificate, notice or other communications
delivered from time to time in connection with this Agreement or any other Loan
Document.
SECTION 1.3. Cross-References. Unless otherwise specified, references in
this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in any
Article, Section or definition to any clause are references to such clause of
such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations. Unless otherwise
specified, all accounting terms used herein or in any other Loan Document shall
be interpreted, and all accounting determinations and computations hereunder or
thereunder (including under Section 7.2.4) shall be made, in accordance with,
those generally accepted accounting principles ("GAAP") applied in the
preparation of the financial statements referred to in clause (a) of Section
5.1.9. Unless otherwise expressly provided, all financial covenants and defined
financial terms shall be computed on a consolidated basis for the Borrower and
its Subsidiaries, in each case without duplication. If any preparation in the
financial statements referred to in Section 7.1.1 hereafter occasioned by the
promulgation of rules, regulations, pronouncements and opinions by or required
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants (or successors thereto or agencies with similar
functions) result in a change in any results, amounts, calculations, ratios,
standards or terms found in this Agreement or any Loan Document from those which
would be derived or be applicable absent such changes, the Borrower may reflect
such changes in the financial statements and certificates required to be
delivered pursuant to Section 7.1.1, but computations made to determine
compliance with financial covenants, including Section 7.2.4, shall be made
without giving effect to any such changes.
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ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE
PROCEDURES, NOTES AND LETTERS OF CREDIT
SECTION 2.1. Commitments. On the terms and subject to the conditions of
this Agreement (including Sections 2.1.4, 2.1.5 and Article V),
(a) each Lender severally agrees to make Loans pursuant to the
Commitments described in this Section 2.1; and
(b) the Issuer severally agrees that it will issue Letters of
Credit pursuant to Section 2.1.2, and each other Lender that has a
Commitment severally agrees that it will purchase participation
interests in such Letters of Credit pursuant to Section 2.6.1.
SECTION 2.1.1. Commitment of Each Lender. From time to time on any
Business Day occurring prior to the Commitment Termination Date, each Lender
will make loans (relative to such Lender, its "Loans") to the Borrower equal to
such Lender's Percentage of the aggregate amount of each Borrowing requested by
the Borrower to be made on such day. The commitment of each such Lender
described in this Section 2.1.1 is herein referred to as its "Commitment". On
the terms and subject to the conditions hereof, the Borrower may from time to
time borrow, prepay and reborrow Loans.
SECTION 2.1.2. Letter of Credit Commitment. From time to time on any
Business Day occurring prior to the Commitment Termination Date, the Issuer will
(a) issue one or more standby or documentary letters of credit
(relative to such Issuer, its "Letter of Credit") for the account of the
Borrower in the Stated Amount requested by the Borrower on such day; or
(b) extend the Stated Expiry Date of an existing standby Letter
of Credit previously issued hereunder to a date not later than the
earlier of (i) the Commitment Termination Date and (ii) one year from
the date of such
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extension.
SECTION 2.1.3. Lenders Not Permitted or Required to Make Loans. No
Lender shall be permitted or required to make any Loan if, after giving effect
thereto,
(a) the Adjusted Commitment Amount would exceed the lesser of (i)
the then existing Revolving Loan Commitment Amount, (ii) the then
existing Borrowing Base and (iii) on or prior to the satisfaction in
full of the Borrower's obligations under the Post-Closing Events Letter,
$50,000,000; or
(b) such Lender's Percentage of the Adjusted Commitment Amount
would exceed such Lender's Percentage of the lesser of (i) the then
existing Revolving Loan Commitment Amount, (ii) the then existing
Borrowing Base and (iii) on or prior to the satisfaction in full of the
Borrower's obligations under the Post-Closing Events Letter,
$50,000,000.
SECTION 2.1.4. Issuer Not Permitted or Required to Issue Letters of
Credit. No Issuer shall be permitted or required to issue any Letter of Credit
if, after giving effect thereto,
(a) the aggregate amount of all Letter of Credit Outstandings
would exceed the Letter of Credit Commitment Amount; or
(b) the Adjusted Commitment Amount would exceed the lesser of
the then existing (i) Revolving Loan Commitment Amount and (ii)
Borrowing Base.
SECTION 2.2. Reduction of the Commitment Amount. The Borrower may, from
time to time on any Business Day occurring after the Effective Date, voluntarily
reduce the amount of the Commitment Amount or the Letter of Credit Commitment
Amount on the Business Day so specified by the Borrower; provided, however, that
all such reductions shall require at least three Business Days' prior notice to
the Administrative Agent and be permanent, and any partial reduction of any
Commitment Amount shall be in a minimum amount of $2,500,000 and in an integral
multiple of $100,000.
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SECTION 2.3. Borrowing Procedures. By delivering a Borrowing Request to
the Administrative Agent on or before 12:00 noon, New York City time, on a
Business Day, the Borrower may from time to time irrevocably request, in the
case of Base Rate Loans, or on not less than three Business Days' notice in the
case of LIBO Rate Loans, and in either case not more than five Business Days'
notice, that a Borrowing be made in a minimum amount of $1,000,000 and an
integral multiple of $100,000, or in the unused amount of the applicable
Commitment; provided, however, that all Loans made on the Effective Date (if
any) shall be made as Base Rate Loans. On the terms and subject to the
conditions of this Agreement, each Borrowing shall be comprised of the type of
Loans, and shall be made on the Business Day, specified in such Borrowing
Request. On or before 11:00 a.m. (New York City time) on such Business Day each
Lender shall deposit with the Administrative Agent same day funds in an amount
equal to such Lender's Percentage of the requested Borrowing. Such deposit will
be made to an account which the Administrative Agent shall specify from time to
time by notice to the Lenders. To the extent funds are received from the
Lenders, and subject to Section 9.2 to the extent funds are not received from
any Lender, the Administrative Agent shall make such funds available to the
Borrower by wire transfer to the accounts the Borrower shall have specified in
its Borrowing Request. No Lender's obligation to make any Loan shall be affected
by any other Lender's failure to make any Loan.
SECTION 2.4. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 12:00
noon, New York City time, on a Business Day, the Borrower may from time to time
irrevocably elect, on not less than three Business Days' notice nor more than
five Business Days' notice, that all, or any portion in an aggregate minimum
amount of $1,000,000 and an integral multiple of $100,000 of, Loans be, in the
case of Base Rate Loans, converted into LIBO Rate Loans or in the case of LIBO
Rate Loans, be converted into a Base Rate Loan or continued as a LIBO Rate Loan
(in the absence of delivery of a Continuation/ Conversion Notice with respect to
any LIBO Rate Loan at least three Business Days before the last day of the then
current Interest Period with respect thereto, such LIBO Rate Loan shall, on such
last day, automatically convert to a Base Rate Loan); provided, however, that
(i) each such conversion or continuation shall be pro rated among the
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applicable outstanding Loans of all Lenders, and (ii) no portion of the
outstanding principal amount of any Loans may be continued as, or be converted
into, LIBO Rate Loans when any Default has occurred and is continuing.
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBO Rate Loans hereunder by causing one
of its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBO Rate Loan; provided,
however, that such LIBO Rate Loan shall nonetheless be deemed to have been made
and to be held by such Lender, the Borrower shall not be responsible to
reimburse the Lender for any increased cost, tax or other amount incurred, paid
or payable, or any other loss realized as a result thereof, and the obligation
of the Borrower to repay such LIBO Rate Loan shall nevertheless be to such
Lender for the account of such foreign branch, Affiliate or international
banking facility. In addition, the Borrower hereby consents and agrees that, for
purposes of any determination to be made for purposes of Section 4.1, 4.2, 4.3
or 4.4, it shall be conclusively assumed that each Lender elected to fund all
LIBO Rate Loans by purchasing Dollar deposits in its LIBOR Office's interbank
eurodollar market.
SECTION 2.6. Issuance Procedures. By delivering to the Administrative
Agent an Issuance Request on or before 12:00 noon, New York City time, on a
Business Day, the Borrower may, from time to time irrevocably request, on not
less than three nor more than ten Business Days' notice, in the case of an
issuance of a Letter of Credit for the account of the Borrower, and not less
than three Business Days' prior notice, in the case of a request for the
extension of the Stated Expiry Date of a Letter of Credit, that the Issuer
issue, or extend the Stated Expiry Date of, as the case may be, an irrevocable
Letter of Credit in such form as may be requested by the Borrower and approved
by the Issuer, solely for the purposes described in Section 7.1.10. Each Letter
of Credit shall by its terms be stated to expire on a date (its "Stated Expiry
Date") no later than the earlier to occur of (i) the Commitment Termination Date
or (ii) one year from the date of its issuance. The Issuer will make available
to the beneficiary thereof the original of each Letter of Credit which it issues
hereunder.
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SECTION 2.6.1. Other Lenders' Participation. Upon the issuance of each
Letter of Credit issued by an Issuer pursuant hereto, and without further
action, each Lender (other than the Issuer) that has a Commitment shall be
deemed to have irrevocably purchased, to the extent of its Percentage, a
participation interest in such Letter of Credit (including the Contingent
Liability and any Reimbursement Obligation with respect thereto), and such
Lender shall, to the extent of its Percentage, be responsible for reimbursing
promptly (and in any event within one Business Day) the Issuer for Reimbursement
Obligations which have not been reimbursed by the Borrower in accordance with
Section 2.6.3. In addition, such Lender shall, to the extent of its Percentage,
be entitled to receive a ratable portion of the Letter of Credit fees payable
pursuant to Section 3.3.3 with respect to each Letter of Credit (other than the
issuance fees payable to the Issuer of such Letter of Credit pursuant to the
last sentence of Section 3.3.3) and of interest payable pursuant to Section 3.2
with respect to any Reimbursement Obligation. To the extent that any Lender has
reimbursed any Issuer for a Disbursement as required by this Section, such
Lender shall be entitled to receive its ratable portion of any amounts
subsequently received (from the Borrower or otherwise) in respect of such
Disbursement.
SECTION 2.6.2. Disbursements. The Issuer will notify the Borrower and
the Administrative Agent promptly of the presentment for payment of any Letter
of Credit issued by the Issuer, together with notice of the date (the
"Disbursement Date") such payment shall be made (each such payment, a
"Disbursement"). Subject to the terms and provisions of such Letter of Credit
and this Agreement, the Issuer shall make such payment to the beneficiary (or
its designee) of such Letter of Credit. Prior to 12:00 noon, New York City time,
on the first Business Day following the Disbursement Date, the Borrower will
reimburse the Administrative Agent, for the account of the Issuer, for all
amounts which the Issuer has disbursed under such Letter of Credit, together
with interest thereon at a rate per annum equal to the rate per annum then in
effect for Base Rate Loans (with the then Applicable Margin accruing on such
amount) pursuant to Section 3.2 for the period from the Disbursement Date
through the date of such reimbursement.
SECTION 2.6.3. Reimbursement. The obligation (a
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"Reimbursement Obligation") of the Borrower under Section 2.6.2 to reimburse the
Issuer with respect to each Disbursement (including interest thereon), and, upon
the failure of the Borrower to reimburse the Issuer, each Lender's obligation
under Section 2.6.1 to reimburse the Issuer, shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower or such Lender, as the case may be, may
have or have had against the Issuer or any such Lender, including any defense
based upon the failure of any Disbursement to conform to the terms of the
applicable Letter of Credit (if, in the Issuer's good faith opinion, such
Disbursement is determined to be appropriate) or any non-application or
misapplication by the beneficiary of the proceeds of such Letter of Credit;
provided, however, that after paying in full its Reimbursement Obligation
hereunder, nothing herein shall adversely affect the right of the Borrower or
such Lender, as the case may be, to commence any proceeding against the Issuer
for any wrongful Disbursement made by the Issuer under a Letter of Credit as a
result of acts or omissions constituting gross negligence or wilful misconduct
on the part of such Issuer.
SECTION 2.6.4. Deemed Disbursements. Upon the occurrence and during the
continuation of any Default of the type described in clauses (a), (b), (c) or
(d) of Section 8.1.9 or, upon written notice from the Administrative Agent given
at the direction of the Required Lenders, upon the occurrence and during the
continuation of any other Event of Default,
(a) an amount equal to that portion of all Letter of Credit
Outstandings attributable to the then aggregate amount which is undrawn
and available under all Letters of Credit issued and outstanding
hereunder shall, without demand upon or notice to the Borrower, be
deemed to have been paid or disbursed by the Issuer under such Letters
of Credit (notwithstanding that such amount may not in fact have been so
paid or disbursed); and
(b) upon notification by the Administrative Agent to the Borrower
of its obligations under this Section, the Borrower shall be immediately
obligated to reimburse the Issuer for the amount deemed to have been so
paid or disbursed by such Issuer.
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Any amounts so payable by the Borrower pursuant to this Section shall be
deposited in immediately available funds with the Administrative Agent or a
Lender and held in an interest bearing account as collateral security for the
Obligations in connection with the Letters of Credit issued by the Issuers. At
such time when the Defaults or Events of Default giving rise to the deemed
disbursements hereunder shall have been cured or waived, the Administrative
Agent shall return to the Borrower all amounts then on deposit with the
Administrative Agent or a Lender pursuant to this Section which have not been
applied to the partial satisfaction of such Obligations.
SECTION 2.6.5. Nature of Reimbursement Obligations. The Borrower and, to
the extent set forth in Section 2.6.1, each Lender shall assume all risks of the
acts, omissions or misuse of any Letter of Credit by the beneficiary thereof.
The Issuer (except to the extent of its own gross negligence or wilful
misconduct) shall not be responsible for:
(a) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any Letter of Credit or any document submitted by any
party in connection with the application for and issuance of a Letter of
Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any instrument transferring or assigning or purporting
to transfer or assign a Letter of Credit or the rights or benefits
thereunder or the proceeds thereof in whole or in part, which may prove
to be invalid or ineffective for any reason;
(c) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(d) errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or
otherwise; or
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a
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Disbursement under a Letter of Credit.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted to the Issuer or any Lender. In furtherance and
extension and not in limitation or derogation of any of the foregoing, any
action taken or omitted to be taken by an Issuer in good faith (and not
constituting gross negligence or willful misconduct) shall be binding upon the
Borrower and each such Lender, and shall not put such Issuer under any resulting
liability to the Borrower or any such Lender, as the case may be.
SECTION 2.7. Notes. Each Lender's Loans shall be evidenced by a Note
payable to the order of such Lender in a maximum principal amount equal to such
Lender's Percentage of the original Commitment Amount. The Borrower hereby
irrevocably authorizes each Lender to make (or cause to be made) appropriate
notations on the grid attached to such Lender's Note (or on any continuation of
such grid), which notations, if made, shall evidence, inter alia, the date of,
the outstanding principal of, and the interest rate and Interest Period
applicable to the Loans evidenced thereby. Such notations shall be conclusive
and binding on the Borrower absent manifest error; provided, however, that the
failure of any Lender to make any such notations shall not limit or otherwise
affect any Obligations of the Borrower or any other Obligor.
SECTION 2.8. Extension of Commitment Termination Date and Maturity of
Loans. Each of (i) the Commitment Termination Date and (ii) the obligation,
pursuant to Section 3.1, to make a mandatory repayment of the outstanding
principal amount of Loans on the Stated Maturity Date, shall be subject to
extension as set forth in this Section 2.8.
SECTION 2.8.1. Request for Extension of Commitment Termination Date and
Maturity of Loans. Any term or provision of this Agreement to the contrary
notwithstanding, no earlier than 70 days nor later than 45 days prior to the
one-year anniversary of the date of the initial Credit Extension, the Borrower
may, by delivery of a duly completed Extension Request to the Administrative
Agent, irrevocably request that each Lender extend for one additional 365-day
period (such period to commence on the day immediately following the then
existing Commitment
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Termination Date) the Commitment Termination Date relating to such Lender's
Commitment; provided, that the Commitment Termination Date shall not in any
event be extended beyond March 14, 2003 (or if such day is not a Business Day,
the next preceding Business Day). The failure of the Borrower to request such an
extension within the time set forth above shall automatically terminate the
Borrower's rights to request such extension.
SECTION 2.8.2. Consent to Extension of Commitment Termination Date and
Maturity of Loans. (a) The Administrative Agent shall, promptly after receipt of
any Extension Request pursuant to Section 2.8.1, notify each Lender thereof by
providing them a copy of such Extension Request.
(b) Each Lender shall within 20 Business Days of receipt of the notice
described in clause (a), notify the Administrative Agent whether or not it
consents to the request of the Borrower set forth in such Extension Request,
such consent to be in the sole discretion of each Lender. If any Lender does not
notify the Administrative Agent of its decision within such 20 Business Days
period, such Lender shall be deemed not to have consented to the Borrower's
request for an extension of the Commitment Termination Date.
(c) The Commitment Termination Date shall be extended for one additional
period of 365 days from the original Commitment Termination Date if all the
Lenders agree to such extension. The Administrative Agent shall promptly notify
the Borrower whether the Lenders have consented to an extension of the
Commitment Termination Date.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments. The Borrower shall repay in
full the unpaid principal amount of each Loan upon the Stated Maturity Date
therefor. Prior thereto, the Borrower
(a) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the
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outstanding principal amount of any Loans; provided, however, that
(i) any such prepayment shall be made pro rata among
Loans of the same type and, if applicable, having the same
Interest Period of all Lenders;
(ii) any LIBO Rate Loan that is repaid other than on the
last day of the Interest Period for such Loan shall be subject
to Section 4.4;
(iii) all such voluntary prepayments shall require
written notice to the Administrative Agent on or before 11:00
a.m., New York time, on the date of such prepayment; and
(iv) all such voluntary partial prepayments shall be in
an aggregate minimum amount of $1,000,000 and integral multiples
of $100,000;
(b) shall, on each date when the aggregate amount of Revolving
Loans and Letter of Credit Outstanding exceeds the least of (x) the
Adjusted Commitment Amount, (y) the Borrowing Base and (z) the Revolving
Loan Commitment, make a mandatory prepayment of all the Loans to be
applied as set forth below and, if necessary, give cash collateral to
the Administrative Agent or a Lender on terms reasonably satisfactory to
the Administrative Agent to be held in an interest bearing account to
collateralize Letter of Credit Outstandings, in an aggregate amount
equal to such excess;
(c) shall, no later than three Business Days following the
receipt of any Net Disposition Proceeds, deliver to the Administrative
Agent a calculation of the amount of such Net Disposition Proceeds and,
make a mandatory prepayment of the Loans in an amount equal to 100% of
such Net Disposition Proceeds; and
(d) shall, immediately upon any acceleration of the Stated
Maturity Date of any Obligations pursuant to Section 8.2 or Section 8.3,
repay all the Loans and if necessary, provide cash collateral to the
Administrative Agent to be held by the Administrative Agent in an
interest
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bearing account to collateralize Letter of Credit Outstandings, unless,
pursuant to Section 8.3, only a portion of all Obligations is so
accelerated (in which case the portion so accelerated shall be so
prepaid or cash collateralized).
Each prepayment of any Loans made pursuant to this Section shall be without
premium or penalty, except as may be required by Section 4.4. No prepayment of
principal of any Loans shall cause a reduction in the Commitment Amount. Each
prepayment or repayment of the principal of the Loans shall be applied, to the
extent of such prepayment or repayment, first, to the principal amount thereof
being maintained as Base Rate Loans, and second, to the principal amount thereof
being maintained as LIBO Rate Loans. Mandatory prepayments of LIBO Rate Loans
made pursuant to clause (b) above shall, at the Borrower's option, so long as no
Default has occurred and is continuing, either (i) be applied to LIBO Rate Loans
(subject to the provisions of Section 4.4), or (ii) after application to any
Base Rate Loans, be deposited with the Administrative Agent or a Lender in an
interest bearing account as cash collateral for such LIBO Rate Loans on terms
reasonably satisfactory to the Administrative Agent and shall thereafter be
applied in the order of the Interest Periods next ending most closely to the
date of receipt of the proceeds in respect of which such prepayment is required
to be made and on the last day of each such Interest Period (together with the
payment of all interest that is due on the last day of each such Interest Period
pursuant to clause (c) of Section 3.2.3).
SECTION 3.2. Interest Provisions. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with this Section 3.2.
SECTION 3.2.1. Rates. Pursuant to an appropriately delivered Borrowing
Request or Continuation/Conversion Notice, the Borrower may elect that Loans
comprising a Borrowing accrue interest at a rate per annum:
(a) on that portion maintained from time to time as a Base Rate
Loan, equal to the sum of the Alternate Base Rate from time to time in
effect plus the Applicable Margin; and
(b) on that portion maintained as a LIBO Rate Loan,
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during each Interest Period applicable thereto, equal to the sum of the
LIBO Rate (Reserve Adjusted) for such Interest Period plus the
Applicable Margin.
All LIBO Rate Loans shall bear interest from and including the first day
of the applicable Interest Period to (but not including) the last day of such
Interest Period at the interest rate determined as applicable to such LIBO Rate
Loan.
SECTION 3.2.2. Post-Maturity Rates. Unless otherwise approved by the
Required Lenders, after the date any principal amount of any Loan or
Reimbursement Obligation is due and payable (whether on the Stated Maturity
Date, upon acceleration or otherwise), or after any other Obligation of the
Borrower shall have become due and payable, the Borrower shall pay interest
(after as well as before judgment) on such amounts at a rate per annum equal to
the rate (including any Applicable Margin) applicable to such Loan or
Reimbursement Obligation from time to time in effect plus an additional margin
of 2%, or, in the case of any other Obligation, at a rate per annum equal to the
Alternate Base Rate plus a margin of 2%.
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) with respect to Base Rate Loans, on each Monthly Payment
Date occurring after the Effective Date;
(c) with respect to LIBO Rate Loans, on the last Business Day of
each applicable Interest Period (and, if such Interest Period shall
exceed three months, on the third-month anniversary of such Interest
Period); and
(d) on that portion of any Loans the Stated Maturity Date of
which is accelerated pursuant to Section 8.2 or Section 8.3, immediately
upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon
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demand.
SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in this
Section 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to the
Administrative Agent for the account of each Lender, for the period (including
any portion thereof when any of its Commitments are suspended by reason of the
Borrower's inability to satisfy any condition of Article V) commencing on the
Effective Date and continuing through the Commitment Termination Date, a
commitment fee at a rate per annum in an amount equal to the Applicable
Commitment Fee Margin, in each case on such Lender's Percentage of the sum of
the average daily unused portion of the Commitment Amount (net of Letter of
Credit Outstandings). All commitment fees payable pursuant to this Section shall
be calculated on a year comprised of 360 days and payable by the Borrower in
arrears on each Quarterly Payment Date, commencing with the first Quarterly
Payment Date following the Effective Date, and on the Commitment Termination
Date. The making of any loan or the issuance of any letter of credit in
connection with the Canadian Unsecured Indebtedness shall constitute usage of
the Commitment for purposes of calculating the commitment fee.
SECTION 3.3.2. Administrative Agent Fee. The Borrower agrees to pay to
the Administrative Agent, for its own account, the fees in the amounts and on
the dates set forth in the Fee Letter.
SECTION 3.3.3. Letter of Credit Fee. The Borrower agrees to pay to the
Administrative Agent, for the pro rata account of the Issuer and each other
Lender, a Letter of Credit fee at a rate per annum in an amount equal to the
then Applicable Margin for Loans maintained as LIBO Rate Loans, in each case on
such Lender's Percentage of the sum of the average daily amount of Letter of
Credit Outstandings, such fee being payable quarterly in arrears on each
Quarterly Payment Date. The Borrower further agrees to pay to the Issuer an
issuance fee in the amount and on the dates set forth in the Fee Letter.
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ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall determine
(which determination shall, upon notice thereof to the Borrower and the Lenders,
be conclusive and binding on the Borrower) that the introduction of or any
change in or in the interpretation of any law makes it unlawful, or any
Regulatory Authority asserts that it is unlawful, for such Lender to make,
continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan,
the obligations of such Lender to make, continue, maintain or convert any such
LIBO Rate Loan shall, upon such determination, forthwith be suspended until such
Lender shall notify the Administrative Agent that the circumstances causing such
suspension no longer exist, and all outstanding LIBO Rate Loans shall
automatically convert into Base Rate Loans at the end of the then current
Interest Periods with respect thereto, or sooner if required by such law or
assertion.
SECTION 4.2. Deposits Unavailable. If the Administrative Agent shall
have determined that
(a) with respect to any proposed LIBO Rate Loan, Dollar deposits
in the relevant amount and for the relevant Interest Period are not
available in the relevant market; or
(b) by reason of circumstances affecting the relevant market,
adequate means do not exist for ascertaining the interest rate
applicable hereunder to LIBO Rate Loans,
then, upon notice from the Administrative Agent to the Borrower and the Lenders,
the obligations of all Lenders under Section 2.3 and Section 2.4 to make or
continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall
forthwith be suspended until the Administrative Agent shall notify the Borrower
and the Lenders that the circumstances causing such suspension no longer exist.
SECTION 4.3. Increased LIBO Rate Loan Costs, etc. The Borrower agrees to
reimburse each Lender for any increase in the cost to such Lender of, or any
reduction in the amount of any sum receivable by such Lender in respect of,
making, continuing or
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maintaining (or of its obligation to make, continue or maintain) any Loans as,
or of converting (or of its obligation to convert) any Loans into, LIBO Rate
Loans. Such Lender shall promptly notify the Administrative Agent and the
Borrower in writing of the occurrence of any such event, such notice to state,
in reasonable detail, the reasons therefor and the additional amount required
fully to compensate such Lender for such increased cost or reduced amount. Such
additional amounts shall be payable by the Borrower directly to such Lender
within five days of its receipt of such notice, and such notice shall, in the
absence of manifest error, be conclusive and binding on the Borrower.
SECTION 4.4. Funding Losses. In the event any Lender shall incur any
loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue or maintain any portion of the principal amount of any Loan
as, or to convert any portion of the principal amount of any Loan into, a LIBO
Rate Loan) as a result of
(a) any conversion or repayment or prepayment of the principal
amount of any LIBO Rate Loans on a date other than the scheduled last
day of the Interest Period applicable thereto, whether pursuant to
Section 3.1 or otherwise;
(b) any Loans not being made as LIBO Rate Loans in accordance
with the Borrowing Request therefor; or
(c) any Loans not being continued as, or converted into, LIBO
Rate Loans in accordance with the Continuation/ Conversion Notice
therefor,
then, upon the written notice of such Lender to the Borrower (with a copy to the
Administrative Agent), the Borrower shall, within five days of its receipt
thereof, pay directly to such Lender such amount as will (in the reasonable
determination of such Lender) reimburse such Lender for such loss or expense.
Such written notice (which shall include calculations in reasonable detail)
shall, in the absence of manifest error, be conclusive and binding on the
Borrower.
SECTION 4.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation,
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reinterpretation or phase-in of, any law or regulation, directive, guideline,
decision or request (whether or not having the force of law) of any court or
Regulatory Authority, affects the amount of capital required or expected to be
maintained by any Lender or any Person controlling such Lender, and such Lender
determines (in good faith but in its sole and absolute discretion) that the rate
of return on its or such controlling Person's capital as a consequence of the
Commitments or the Loans made, or the Letters of Credit participated in, by such
Lender is reduced to a level below that which such Lender or such controlling
Person could have achieved but for the occurrence of any such circumstance,
then, in any such case upon notice from time to time by such Lender to the
Borrower, the Borrower shall promptly pay directly to such Lender additional
amounts sufficient to compensate such Lender or such controlling Person for such
reduction in rate of return. A statement of such Lender as to any such
additional amount or amounts (including calculations thereof in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
the Borrower. In determining such amount, such Lender may use any method of
averaging and attribution that it (in good faith but in its sole and absolute
discretion) shall deem applicable to its customers generally.
SECTION 4.6. Taxes. (a) All payments by the Borrower of principal of,
and interest on, or other amounts in respect of, the Loans and all other amounts
payable hereunder (including fees) and the Notes shall be made free and clear of
and without deduction for any Taxes, except to the extent that any such
withholdings or deductions are required by applicable law, rule or regulations.
In the event that any such withholdings or deductions are required by applicable
law, rule or regulations in respect of any Taxes (including Taxes on account of
any additional amount or amounts described in clause (a)(iii) below), then the
Borrower will
(i) pay directly to the relevant authority the full amount of
Taxes required to be so withheld or deducted;
(ii) promptly forward to the Administrative Agent an official
receipt or duly certified copy of such official receipt or such other
documentation satisfactory to the Administrative Agent evidencing such
payment to such
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authority; and
(iii) subject to paragraph (c) below, if such Taxes are Covered
Taxes, pay to the Administrative Agent for the account of the Lenders
such additional amount or amounts as is necessary to ensure that the net
amount actually received by each Lender will equal the full amount such
Lender would have received had no such withholding or deduction been
required.
In addition, subject to paragraph (c) below, if the Administrative Agent or any
Lender is required by law at any time to pay any Covered Taxes or to make any
payment on account of Covered Taxes on, in relation to or calculated by
reference to any sum received or receivable in connection with the Loans or any
Note or any other amount payable hereunder or under any Note, or any liability
for Covered Taxes in respect of any such sum is imposed, levied or assessed
against any Lender or the Administrative Agent, then the Borrower will indemnify
each such Lender and the Administrative Agent for the full amount of Covered
Taxes (including Covered Taxes attributable to any payment on account of such
indemnification and any interest, penalties and costs with respect to any such
Covered Taxes) actually (or, in the event such Covered Taxes are directly paid
by the Borrower, deemed) paid by such Lender or the Administrative Agent (as the
case may be), whether or not such Covered Taxes were correctly or legally
asserted. Such indemnification shall be made within 30 days of the demand of the
Lender or the Administrative Agent therefor. If the Borrower pays any Covered
Taxes as required by the first sentence of this paragraph, then the Borrower
will promptly forward to the Administrative Agent an official receipt or duly
certified copy of such official receipt or such other documentation satisfactory
to the Administrative Agent evidencing such payment of Covered Taxes to the
relevant taxing authority. In addition, if the Borrower fails to pay any Taxes
when due to the appropriate taxing authority or fails to remit to the
Administrative Agent, for the account of the respective Lenders, the required
receipts or other required documentary evidence of its payment of any Taxes, the
Borrower shall indemnify the Lenders for any incremental Taxes that may become
payable by any Lender as a result of any such failure. For purposes of this
Section 4.6, the transfer by the Administrative Agent or any Lender to or for
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the account of any Lender of any sum received from the Borrower on account of
amounts required to be paid by the Borrower hereunder in respect of Covered
Taxes imposed with respect to the recipient shall be deemed a payment by the
Borrower of such amounts.
(b) Each Lender that is an original signatory hereto and is not a U.S.
Person (and each Person that is not a U.S. Person which becomes a Lender by
assignment, transfer or participation pursuant to Section 10.11 hereof) and the
Administrative Agent (and each Person that is not a U.S. Person that becomes the
Administrative Agent by appointment pursuant to Section 9.4 hereof), agrees
severally (but not jointly) that, on or prior to the date of the initial Credit
Extension (or such assignment, transfer or appointment, as the case may be) it
will in each case deliver to the Borrower and the Administrative Agent either
(A) two duly completed copies of United States Internal Revenue Service Form
1001 or 4224 (or applicable successor form) certifying in each case that such
Person is entitled to receive payments under this Agreement and the Notes
payable to it without deduction or withholding of any United States federal
income taxes or (B) in the case of an assignee Lender that is not a "bank"
within the meaning of Section 881(c)(3)(A) of the Code and that does not comply
with clause (A) of this paragraph (b), a statement to the effect that such
assignee Lender is eligible to claim exemption from United States withholding
tax under Section 871(h) or Section 881(c) of the Code (including, without
limitation, statements that such assignee Lender is not a 10- percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the
Borrower and is not a controlled foreign corporation related to the Borrower
(within the meaning of Section 864(d)(4) of the Code)) and two duly completed
and signed original copies of Internal Revenue Service Form W-8. Each Lender
shall (if not otherwise required to do so pursuant to clause (B) of this
paragraph (b)) deliver to the Borrower two duly completed and signed original
copies of Internal Revenue Service Form W-8 or W-9 entitling such Lender to
receive a complete exemption from United States back-up withholding tax.
Each Person who delivers to the Borrower and the Administrative Agent a Form
W-8, W-9, 1001 or 4224, or applicable successor form, pursuant to this clause,
further undertakes to deliver to the Borrower and the Administrative Agent two
further copies of
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said Form W-8, W-9, 1001, 4224, or applicable successor form on or before the
date that any such form expires or becomes obsolete unless in any such case any
change in law, rule, regulation, treaty or directive, or in the interpretation
or application thereof (a "Law Change"), has occurred on or prior to the date on
which any such delivery would otherwise be required, which Law Change renders
any such form inapplicable or which would prevent such Person from duly
completing and delivering any such form with respect to it. If a Lender who
previously has delivered any Internal Revenue Service Forms referred to above
determines that it is unable subsequently to submit to the Borrower any such
Forms, or that it is required to withdraw or cancel any such Forms, then such
Lender shall promptly notify the Borrower of that fact.
(c) The Borrower shall not be obligated to make any payment or
indemnification pursuant to paragraph (a) above in respect of any U.S. Federal
withholding tax imposed in respect of a Non-U.S.
Lender to the extent that:
(i) the obligation to withhold U.S. Federal withholding tax with
respect to such Non-U.S. Lender existed on the date such Non-U.S. Lender became
a party to this Agreement; provided, however, that this clause (i) shall not
apply (x) to any such Non-U.S. Lender that becomes a Lender after the date
hereof following a request of the Borrower that the transferee of the Lender's
interest hereunder dispose of such interest or (y) to the extent that the
payment or indemnification to which such Non-U.S. Lender would be entitled
(without regard to this clause (i)) does not exceed the payment or
indemnification that the Person from whom such Non-U.S. Lender acquired its
interest would have been entitled to receive in the absence of such acquisition;
or
(ii) the obligation to make such payment or indemnification would
not have arisen but for a failure by such Non-U.S. Lender to comply with the
provisions of paragraph (b) above.
(d) If the Administrative Agent or any Lender determines in its sole
discretion (exercised in good faith) that it has received a refund in respect of
Taxes for which such Person has received a payment from the Borrower (or which
the Borrower paid directly to the relevant authority) pursuant to clause (a)
above,
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it shall promptly pay such refund to the Borrower; provided, however, that the
Borrower agrees to return such refund to the Administrative Agent or the
applicable Lender, as the case may be, promptly after it receives notice from
the applicable Lender that such Lender is required to return all or any portion
of such refund to the relevant taxing authority. Each Lender may, in its sole
discretion (exercised in good faith), determine the order of utilization of any
payments to any governmental authority in satisfaction of its liability for
Taxes. Nothing in this clause (d) shall be construed to require any Lender to
disclose any of its tax returns or other confidential or proprietary information
to the Borrower or to conduct its business or to arrange or to alter in any
respect its tax or financial affairs so that it is entitled to receive any
refund of any Taxes.
(e) The agreements in this Section shall survive the termination of this
Agreement and the payment of the Notes and all other amounts payable hereunder.
SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
provided, all payments by the Borrower pursuant to this Agreement, the Notes,
each Letter of Credit or any other Loan Document shall be made by the Borrower
to the Administrative Agent for the pro rata account of the Lenders entitled to
receive such payment. All such payments required to be made to the
Administrative Agent shall be made, without setoff, deduction or counterclaim,
not later than 11:00 a.m., New York City time, on the date due, in same day or
immediately available funds, to such account as the Administrative Agent shall
specify from time to time by written notice to the Borrower. Funds received
after that time shall be deemed to have been received by the Administrative
Agent on the next succeeding Business Day. The Administrative Agent shall
promptly remit in same day funds to each Lender its share, if any, of such
payments received by the Administrative Agent for the account of such Lender.
All interest (including interest on LIBO Rate Loans) and fees shall be computed
on the basis of the actual number of days (including the first day but excluding
the last day) occurring during the period for which such interest or fee is
payable over a year comprised of 360 days (or, in the case of interest on a Base
Rate Loan (calculated at other than the Federal Funds Rate), 365 days or, if
appropriate, 366 days). Whenever any payment to be made shall otherwise be due
on a day which is not a Business Day, such
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payment shall (except as otherwise required by clause (c) of the definition of
the term "Interest Period") be made on the next succeeding Business Day and such
extension of time shall be included in computing interest and fees, if any, in
connection with such payment.
SECTION 4.8. Sharing of Payments. If any Lender shall obtain any payment
or other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Loan or Reimbursement Obligation (other than
pursuant to the terms of Section 4.3, 4.4, 4.5 or 4.6) in excess of its pro rata
share of payments then or therewith obtained by all Lenders, such Lender shall
purchase from the other Lenders such participations in Credit Extensions made by
them as shall be necessary to cause such purchasing Lender to share the excess
payment or other recovery ratably with each of them; provided, however, that if
all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing Lender, the purchase shall be rescinded and each
Lender which has sold a participation to the purchasing Lender shall repay to
the purchasing Lender the purchase price to the ratable extent of such recovery
together with an amount equal to such selling Lender's ratable share (according
to the proportion of
(a) the amount of such selling Lender's required repayment to
the purchasing Lender
to
(b) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section may, to
the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to Section 4.9) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the amount of such
participation. If under any applicable bankruptcy, insolvency or other similar
law, any Lender receives a secured claim in lieu of a setoff to which this
Section applies, such Lender shall, to the extent practicable, exercise
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its rights in respect of such secured claim in a manner consistent with the
rights of the Lenders entitled under this Section to share in the benefits of
any recovery on such secured claim.
SECTION 4.9. Setoff. Each Lender shall, upon the occurrence and during
the continuance of any Default or Event of Default described in clauses (a)
through (d) of Section 8.1.9 or, with the consent of the Required Lenders, upon
the occurrence and during the continuance of any other Event of Default, have
the right to appropriate and apply to the payment of the Obligations owing to it
(whether or not then due), and (as security for such Obligations) the Borrower
hereby grants to each Lender a continuing security interest in, any and all
balances, credits, deposits, accounts or moneys of the Borrower then or
thereafter maintained with such Lender; provided, however, that any such
appropriation and application shall be subject to the provisions of Section 4.8.
Each Lender agrees promptly to notify the Borrower and the Administrative Agent
after any such setoff and application made by such Lender; provided, however,
that the failure to give such notice shall not affect the validity of such
setoff and application. The rights of each Lender under this Section are in
addition to other rights and remedies (including other rights of setoff under
applicable law or otherwise) which such Lender may have.
SECTION 4.10. Mitigation. Each Lender agrees that if it makes any demand
for payment under Sections 4.3, 4.4, 4.5, or 4.6, or if any adoption or change
of the type described in Section 4.1 shall occur with respect to it, it will use
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions and so long as such efforts would not be disadvantageous to it, as
determined in its sole discretion (exercised in good faith)) to designate a
different lending office if the making of such a designation would reduce or
obviate the need for the Borrower to make payments under Sections 4.3, 4.4, 4.5,
or 4.6, or would eliminate or reduce the effect of any adoption or change
described in Section 4.1.
SECTION 4.11. Replacement Lender. In the event that the Borrower becomes
obligated to pay any additional amounts to any Lender pursuant to Section 4.3 or
4.5 (which amounts are generally not due or payable to all Lenders generally
under such
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Sections) or such Lender is not able to make LIBO Rate Loans pursuant to Section
4.1, as a result of any event or condition described in any of such Sections,
then, unless such Lender has removed or cured the conditions creating the cause
of such obligation to pay such additional amounts, the Borrower may designate a
substitute lender (and such Lender agrees to be replaced by such substitute
Lender upon and in accordance with the terms set forth in this Section)
reasonably acceptable to the Administrative Agent (such lender herein called a
"Replacement Lender") to have assigned to it pursuant to Section 10.11.1, and to
purchase, such Lender's rights and obligations with respect to its entire Loans
and Commitment hereunder, without recourse to or warranty by, or expense to,
such Lender for a purchase price equal to the outstanding principal amount
payable to such Lender with respect to its Loans and Commitment hereunder, plus
any accrued and unpaid interest and accrued and unpaid fees owing to such Lender
in respect of such Lender's Loans and Commitment. Upon such assignment and
purchase by the Replacement Lender and payment of all other amounts owing to the
Lender being replaced hereunder, and the payment to the Administrative Agent of
the processing fee due to it under Section 10.11.1, such Lender shall no longer
be a party hereto or have any rights or obligations hereunder, and the
Replacement Lender shall succeed to the rights and obligations of such Lender
with respect to its Loans and Commitment hereunder; provided, that the rights of
such replaced Lender pursuant to Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and
the rights and obligations of such Lender pursuant to Article IX and Sections
10.3 and 10.4, shall survive any assignment described in this Section.
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS
SECTION 5.1. Initial Credit Extension. The obligations of the Lenders
and, if applicable, the Issuer to fund or make, as the case may be, the initial
Credit Extension shall be subject to the prior or concurrent satisfaction of
each of the conditions precedent set forth in this Section 5.1.
SECTION 5.1.1. Resolutions, etc. The Administrative Agent shall have
received from the Borrower and each other Obligor, as
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applicable, (i) a copy of a good standing certificate, dated a date reasonably
close to the Effective Date, for each such Person and (ii) a certificate, dated
the date of the initial Credit Extension and with counterparts for each Lender,
duly executed and delivered by such Person's Secretary or Assistant Secretary,
as to
(a) resolutions of each such Person's Board of Directors then in
full force and effect authorizing, to the extent relevant, the
execution, delivery and performance of this Agreement, the Notes, each
other Loan Document to be executed by such Person and the transactions
contemplated hereby and thereby;
(b) the incumbency and signatures of those of its officers
authorized to act with respect to this Agreement, the Notes and each
other Loan Document to be executed by such Person; and
(c) the full force and validity of each Organic Document of such
Person and copies thereof,
upon which certificates each Lender may conclusively rely until it shall have
received a further certificate of the Secretary, Assistant Secretary of any such
Person canceling or amending the prior certificate of such Person.
SECTION 5.1.2. Delivery of Notes. The Administrative Agent shall have
received, each Lender's Notes duly executed and delivered by an Authorized
Officer of the Borrower.
SECTION 5.1.3. Payment of Outstanding Indebtedness, etc. All
Indebtedness identified in Item 7.2.2(b) ("Indebtedness to be Paid") of the
Disclosure Schedule, together with all interest, all prepayment premiums and
other amounts due and payable with respect thereto, shall have been (or,
contemporaneously with the initial Credit Extension hereunder, will be) paid in
full from the proceeds of the Permitted Receivables Transaction and/or Loans and
the commitments in respect of such Indebtedness (including under the Existing
Credit Agreement) shall have been terminated, and all Liens securing payment of
any such Indebtedness (including under the Existing Credit Agreement) shall have
been released and the Administrative Agent shall have
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received all Uniform Commercial Code Form UCC-3 termination statements or other
instruments as may be suitable or appropriate in connection therewith. The
Administrative Agent shall have received executed copies of "pay-off" letters
with respect thereto (including as to the payment in full of all Indebtedness
under the Existing Credit Agreement) in form and substance satisfactory to the
Administrative Agent.
SECTION 5.1.4. Pledge Agreements. The Administrative Agent shall have
received executed counterparts of each of the Parent Pledge Agreement, the
Borrower Pledge Agreement and each Subsidiary Pledge Agreement, each dated as of
the date hereof, duly executed and delivered by an Authorized Officer of the
Parent, the Borrower and each Subsidiary Guarantor, as the case may be, together
with
(a) certificates evidencing all of the issued and outstanding
shares of Capital Stock pledged by any Obligor under any Pledge
Agreement, which certificates shall be accompanied by undated stock
powers duly executed in blank, or, if any securities pledged pursuant to
any Pledge Agreement are uncertificated securities, confirmation and
evidence satisfactory to the Administrative Agent that the security
interest in such uncertificated securities has been transferred to and
perfected by the Administrative Agent for the benefit of the Secured
Parties in accordance with Section 8-313 and Section 8-321 of the
U.C.C., and all laws otherwise applicable to the perfection of the
pledge of such shares; and
(b) all Pledged Notes (as defined in each Pledge Agreement), if
any, evidencing Indebtedness payable to the Borrower, duly endorsed to
the order of the Administrative Agent, together with Uniform Commercial
Code Financing Statements (or similar instruments) in respect of such
Pledged Notes executed by each payee of a Pledged Note to be filed in
such jurisdictions as the Administrative Agent may reasonably request.
The Administrative Agent and its counsel shall be satisfied that (a) the Lien
granted to the Administrative Agent, for the benefit of the Secured Parties, in
the collateral described above is a first priority perfected (or local
equivalent thereof) security
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interest; and (b) no Lien exists on any of the collateral described above other
than the Lien created in favor of the Administrative Agent, for the benefit of
the Secured Parties, pursuant to each Pledge Agreement and Liens permitted to
exist under clause (e) of Section 7.2.3.
SECTION 5.1.5. Security Agreements. The Administrative Agent shall have
received executed counterparts of each of the Parent Security Agreement, the
Borrower Security Agreement and the Subsidiary Security Agreement, each dated as
of the date hereof, duly executed by the Obligor party thereto, together with
(a) executed copies of Uniform Commercial Code financing
statements (Form UCC-1), naming the applicable Obligor as a debtor and
the Administrative Agent as the secured party, or other similar
instruments or documents, to be filed under the Uniform Commercial Code
of all jurisdictions as may be necessary or, in the reasonable opinion
of the Administrative Agent, desirable to perfect the security interests
of the Administrative Agent pursuant to such Security Agreement;
(b) executed copies of proper Uniform Commercial Code Form UCC-3
termination statements, if any, necessary to release all Liens (other
than Liens permitted to exist under Section 7.2.3)
(i) in any collateral described in such Security
Agreement previously granted by any Person, and
(ii) securing any of the Indebtedness to be Paid,
together with such other Uniform Commercial Code Form UCC-3 termination
statements as the Administrative Agent may request from such Obligors;
and
(c) certified copies of Uniform Commercial Code Requests for
Information or Copies (Form UCC-11), or a similar search report
certified by a party acceptable to the Administrative Agent, dated a
date reasonably near to the date of the initial Credit Extension,
listing all effective financing statements which name the applicable
Obligor (or any predecessor thereto), as the case may be (under its
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present name and any other names used within the previous six months),
as the debtor and which are filed in the jurisdictions in which filings
were made pursuant to clause (a) above, together with copies of such
financing statements (none of which (other than those described in
clause (a), if such Form UCC-11 or search report, as the case may be, is
current enough to list such financing statements described in clause
(a)) shall cover any collateral described in such Security Agreement.
SECTION 5.1.6. Trademark Security Agreement. The Administrative Agent
shall have received a Trademark Security Agreement dated as of the date of the
initial Credit Extension, duly executed and delivered by the applicable Obligor.
SECTION 5.1.7. Guarantees. The Administrative Agent shall have received
executed counterparts of each of the Parent Guaranty and each Subsidiary
Guaranty, each dated the date of the initial Credit Extension, duly executed and
delivered by an Authorized Officer of the Parent or each Subsidiary Guarantor,
as the case may be.
SECTION 5.1.8. Mortgage. The Administrative Agent shall have received
counterparts of each Mortgage, dated as of the date hereof, duly executed by the
Obligor party thereto
(a) evidence of the completion (or satisfactory arrangements for
the completion) of all recordings and filings of each Mortgage as may be
necessary or, in the reasonable opinion of the Administrative Agent,
desirable effectively to create a valid, perfected first priority Lien
against the properties purported to be covered thereby;
(b) mortgagee's title insurance policies in favor of the
Administrative Agent and the Lenders in amounts and in form and
substance and issued by insurers, reasonably satisfactory to the
Administrative Agent, with respect to the property purported to be
covered by each Mortgage, insuring that title to such property is
marketable and that the interests created by each Mortgage constitute
valid first Liens thereon free and clear of all defects and encumbrances
other than as approved by the Administrative Agent, and such policies
shall also include a survey
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reading, and, if required by the mortgagee and if available, revolving
credit endorsement, comprehensive endorsement, variable rate
endorsement, access and utilities endorsements, mechanic's lien
endorsement and such other endorsements as the Administrative Agent
shall reasonably request and shall be accompanied by evidence of the
payment in full of all premiums thereon; and
(c) such other approvals, opinions, or documents as the
Administrative Agent may reasonably request including, without
limitation, consents and estoppel agreements from landlords, a survey of
each property purported to be covered by a Mortgage in form and
substance satisfactory to the Administrative Agent and the title
insurer, and, if required by Regulatory Authority, a real estate
appraisal for each such property prepared in accordance with the
requirements of the Financial Institutions Reform Recovery and
Enforcement Act of 1989 and the regulations promulgated thereunder, and
otherwise in form and substance satisfactory to the Administrative
Agent.
SECTION 5.1.9. Financial Information, etc. The Administrative Agent
shall have received
(a) the audited consolidated financial statements of the Parent
and the Borrower and its Subsidiaries for the three fiscal year period
ended December 30, 1995; and
(b) a pro forma consolidated balance sheet of the Borrower and
its Subsidiaries, as of February 22, 1997, but giving effect to the
consummation of all the transactions contemplated by this Agreement and
reflecting the proposed capital structure of the Borrower (the "Pro
Forma Balance Sheet"), certified by the chief financial or accounting
Authorized Officer of the Borrower, which shall be reasonably
satisfactory to the Administrative Agent.
SECTION 5.1.10. Closing Date Certificate. The Administrative Agent shall
have received the Closing Date Certificate, dated the date of the initial Credit
Extension, duly executed and delivered by an Authorized Officer of the Borrower,
in which certificate the Borrower shall agree and acknowledge that the
statements made therein shall be deemed to be
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representations and warranties of the Borrower made as of such date that are
true and correct in all material respects and, at the time each such certificate
is delivered, such statements shall in fact be true and correct. All documents
and agreements required to be appended to the Closing Date Certificate shall be
in form and substance satisfactory to the Administrative Agent.
SECTION 5.1.11. Compliance Certificate. The Administrative Agent shall
have received an initial Compliance Certificate on a pro forma basis as if the
Effective Date had occurred as of December 28, 1996 and as to such items therein
as the Administrative Agent reasonably requests, dated the date of the initial
Credit Extension, duly executed (and with all schedules thereto duly completed)
and delivered by the chief executive, financial or accounting Authorized Officer
of the Borrower.
SECTION 5.1.12. Receivables Transaction Documentation. The
Administrative Agent shall have received (with copies for each Lender) a fully
executed copy of each Receivables Transaction Document certified as true,
correct and complete, and all other certificates, documents, agreements,
consents and opinions furnished pursuant or in connection therewith. The closing
and the initial purchase of receivables shall have occurred (or,
contemporaneously with the initial Credit Extension hereunder, will occur)
thereunder.
SECTION 5.1.13. Material Adverse Change. The Lenders shall be satisfied
that no event that has a Material Adverse Effect has occurred since June 29,
1996.
SECTION 5.1.14. Insurance. The Administrative Agent shall have received
certified copies of the insurance policies (or binders in respect thereof), from
one or more insurance companies reasonably satisfactory to the Administrative
Agent, evidencing coverage required to be maintained pursuant hereto and each
Loan Document.
SECTION 5.1.15. Opinions of Counsel. The Administrative Agent shall have
received opinions, dated the date of the initial Credit Extension and addressed
to the Administrative Agent and all Lenders, from
(a) Kaye, Scholer, Fierman, Hays & Handler, LLP,
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special New York counsel to the Borrower and each other Obligor,
substantially in the form of Exhibit N-1 hereto; and
(b) Holland & Knight, Hartzog Conger & Cason, Blackwell Sanders
Matheny Weary & Lombardi, Sonnenschein, Nath & Rosenthal, Hunton &
Williams, Miller, Canfield, Paddock & Stone, Squire, Sanders & Dempsey,
Stutzman & Bromberg, Thomas J. Colluci, Esq., local counsel to the
Obligors, substantially in the form of Exhibit N-2 hereto.
SECTION 5.1.16. Closing Fees, Expenses, etc. The Administrative Agent
shall have received for its own account, or for the account of each Lender, as
the case may be, all fees, costs and expenses due and payable pursuant to
Sections 3.3 and 10.3, if then invoiced.
SECTION 5.1.17. Borrowing Base Certificate. The Administrative Agent
shall have received, with counterparts for each Lender, an initial Borrowing
Base Certificate from the Borrower, dated the date of the initial Credit
Extension and calculated as of a recent date satisfactory to the Administrative
Agent, duly executed (and with all schedules thereto completed) and delivered by
an Authorized Officer of the Borrower.
SECTION 5.2. All Credit Extensions. The obligation of each Lender and
each Issuer to make any Credit Extension (including the initial Credit
Extension) shall be subject to Sections 2.1.4 and 2.1.5 and the satisfaction of
each of the conditions precedent set forth in this Section 5.2.
SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both before
and after giving effect to any Credit Extension (but, if any Default of the
nature referred to in Section 8.1.5 shall have occurred with respect to any
other Indebtedness, without giving effect to the application, directly or
indirectly, of the proceeds of such Credit Extension) the following statements
shall be true and correct:
(a) the representations and warranties set forth in Article VI
(excluding, however, those contained in Section 6.7) and in each other
Loan Document shall, in each case, be true and correct in all material
respects with the
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same effect as if then made (unless stated to relate solely to an
earlier date, in which case such representations and warranties shall be
true and correct in all material respects as of such earlier date);
(b) except as disclosed by the Borrower to the Administrative
Agent and the Lenders pursuant to Section 6.7,
(i) no labor controversy, litigation, arbitration or
governmental investigation or proceeding shall be pending or, to
the knowledge of the Borrower, threatened against Parent, the
Borrower or any of its Subsidiaries which could reasonably be
expected to have a Material Adverse Effect; and
(ii) no development shall have occurred in any labor
controversy, litigation, arbitration or governmental
investigation or proceeding disclosed pursuant to Section 6.7
which could reasonably be expected to have a Material Adverse
Effect; and
(c) no Default shall have then occurred and be continuing.
SECTION 5.2.2. Credit Extension Request, etc. The Administrative Agent
shall have received a Borrowing Request if Loans are being requested, or an
Issuance Request if a Letter of Credit is being requested or extended. Each of
the delivery of a Borrowing Request or Issuance Request and the acceptance by
the Borrower of the proceeds of such Credit Extension shall constitute a
representation and warranty by the Borrower that on the date of such Credit
Extension (both immediately before and after giving effect to such Credit
Extension and the application of the proceeds thereof) the statements made in
Section 5.2.1 are true and correct in all material respects.
SECTION 5.2.3. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower or any of its
Subsidiaries or any other Obligors shall be reasonably satisfactory in form and
substance to the Administrative Agent; the Administrative Agent shall have
received all information, approvals, opinions, documents or
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instruments as the Administrative Agent may reasonably request.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders, each Issuer and the Administrative Agent
to enter into this Agreement and to make Credit Extensions hereunder, the
Borrower represents and warrants to the Administrative Agent, each Issuer and
each Lender as set forth in this Article VI.
SECTION 6.1. Organization, etc. The Borrower and each of its
Subsidiaries is validly organized and existing and in good standing under the
laws of the state or jurisdiction of its organization, is duly qualified to do
business and is in good standing in each jurisdiction where the nature of its
business requires such qualification, and has full power and authority and holds
all requisite governmental licenses, permits and other approvals to enter into
and perform its Obligations under this Agreement, the Notes and each other Loan
Document to which it is a party and to own and hold under lease its property and
to conduct its business substantially as currently conducted by it, except in
each case to the extent the same could not reasonably be expected to have a
Material Adverse Effect.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Borrower of this Agreement, the Notes and each
other Loan Document executed or to be executed by it and the execution, delivery
and performance by each other Obligor of each Loan Document executed or to be
executed by it are in each case within each such Person's corporate, partnership
or other applicable powers, have been duly authorized by all necessary
corporate, partnership or other applicable action, and do not
(a) contravene any such Person's Organic Documents;
(b) contravene any Contractual Obligation binding on any such
Person;
(c) contravene any Governmental Approval or
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Governmental Rule binding on any such Person; or
(d) result in, or require the creation or imposition of, any Lien
on any of such Person's properties (except as expressly permitted by
this Agreement).
SECTION 6.3. Government Approval, Regulation, etc. Except as disclosed
in Item 6.3 ("Approvals") of the Disclosure Schedule and except for filings
contemplated under the Loan Documents, no authorization or approval or other
action by, and no notice to or filing with, any Regulatory Authority or other
Person (other than those that have been, or on the Effective Date will be, duly
obtained or made and which are, or on the Effective Date will be, in full force
and effect) is required for the due execution, delivery or performance by the
Borrower of this Agreement or the Notes or by the Borrower or any other Obligor
of any other Loan Document to which it is a party. Neither the Borrower nor any
of its Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
SECTION 6.4. Validity, etc. This Agreement constitutes, and the Notes
and each other Loan Document executed by the Borrower will, on the due execution
and delivery thereof, constitute, the legal, valid and binding obligations of
the Borrower, enforceable against the Borrower in accordance with their
respective terms; and each other Loan Document executed pursuant hereto by each
other Obligor will, on the due execution and delivery thereof by such Obligor,
constitute the legal, valid and binding obligation of such Obligor enforceable
against such Obligor in accordance with its terms except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting creditors'
rights and by equitable principles (regardless of whether enforcement is sought
in equity or at law).
SECTION 6.5. Financial Information. The financial statements of the
Borrower and its Subsidiaries furnished to the Administrative Agent and each
Lender pursuant to Section 5.1.9
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have been prepared in accordance with GAAP consistently applied, and present
fairly the consolidated financial condition of the corporations covered thereby
as at the dates thereof and the results of their operations for the periods then
ended. All balance sheets, all statements of operations, shareholders' equity
and cash flow and all other financial information of each of the Borrower and
its Subsidiaries furnished pursuant to Section 7.1.1 have been and will for
periods following the Effective Date be prepared in accordance with GAAP
consistently applied, and do or will present fairly the consolidated financial
condition of the corporations covered thereby as at the dates thereof and the
results of their operations for the periods then ended, except that quarterly
financial statements need not include footnote disclosure and may be subject to
ordinary year-end adjustment.
SECTION 6.6. No Material Adverse Effect. Since the date of the financial
statements described in Section 6.5, no event has occurred that has had a
Material Adverse Effect.
SECTION 6.7. Litigation, Labor Controversies, etc. Except as disclosed
in Item 6.7 ("Litigation") of the Disclosure Schedule, there is no pending or,
to the knowledge of the Borrower, threatened litigation, action, proceeding, or
labor controversy affecting the Borrower or any of its Subsidiaries, or any of
their respective properties, businesses, assets or revenues, which could
reasonably be expected (a) to have a Material Adverse Effect or (b) to adversely
affect the legality, validity or enforceability of this Agreement, the Notes or
any other Loan Document or Receivables Transaction Document.
SECTION 6.8. Compliance with Laws. The Borrower and its Subsidiaries
have complied in all material respects with all applicable Governmental
Approvals and Governmental Rules of any Regulatory Authority having jurisdiction
over the conduct of its businesses or the ownership or leasing of its properties
except in each case to the extent the same could not reasonably be expected to
have a Material Adverse Effect.
SECTION 6.9. Subsidiaries. The Borrower has no Subsidiaries, except
those Subsidiaries
(a) which are identified in Item 6.9 ("Existing
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Subsidiaries") of the Disclosure Schedule; or
(b) which are permitted to have been organized or acquired in
accordance with Section 7.2.5 or 7.2.10.
SECTION 6.10. Ownership of Properties. The Borrower and each of its
Subsidiaries owns (a) in the case of owned real property, good and marketable
fee title to, and (b) in the case of owned personal property, good and valid
title to, or, in the case of leased real or personal property, valid and
enforceable leasehold interests (as the case may be) in, all of its properties
and assets, real and personal, tangible and intangible, of any nature whatsoever
(including patents, trademarks, trade names, service marks and copyrights), free
and clear of all Liens, charges or claims (including infringement claims with
respect to patents, trademarks, copyrights and the like), except for Liens
permitted pursuant to Section 7.2.3.
SECTION 6.11. Taxes. The Borrower and each of its Subsidiaries has filed
all federal income tax returns and all other material tax returns and reports
required by law to have been filed by it and has paid all taxes and governmental
charges thereby shown to be due and owing, except any such taxes or charges
which are being diligently contested in good faith by appropriate proceedings
and for which adequate reserves in accordance with GAAP shall have been set
aside on its books.
SECTION 6.12. Pension and Welfare Plans. Except as disclosed in Item
6.12 ("Employee Benefit Plans") of the Disclosure Schedule, during the
twelve-consecutive-month period prior to the date of the execution and delivery
of this Agreement and prior to the date of any Credit Extension hereunder, no
steps have been taken to terminate any Pension Plan (other than a standard
termination under Section 4041(b) of ERISA), and no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which might result in the incurrence
by the Borrower or any member of the Controlled Group of any material liability,
fine or penalty. Except as disclosed in Item 6.12 of the Disclosure Schedule,
neither the Borrower nor any member of the Controlled Group has any contingent
liability with respect to any post retirement benefit under a Welfare Plan,
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other than liability for continuation coverage described in Part 6 of Title I of
ERISA.
SECTION 6.13. Environmental Warranties. Except as set forth in Item 6.13
("Environmental Matters") of the Disclosure Schedule:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Borrower or any of its Subsidiaries
have been since 1992, and continue to be, owned or leased by the
Borrower and its Subsidiaries in material compliance with all
Environmental Laws;
(b) there are no pending or threatened, except for matters not
likely to result in liability to a Borrower or Subsidiary greater than
$5,000:
(i) written claims, complaints, notices or requests for
information received by the Borrower or any of its Subsidiaries
from any Regulatory Authority with respect to any alleged
violation of any Environmental Law, or
(ii) written complaints, notices or inquiries to the
Borrower or any of its Subsidiaries from any Regulatory Authority
regarding potential liability under any Environmental Law;
(c) there have been no Releases of Hazardous Materials at, on or
under any property now or previously owned or leased by the Borrower or
any of its Subsidiaries that, singly or in the aggregate, have, or could
reasonably be expected to have, a Material Adverse Effect;
(d) the Borrower and its Subsidiaries have been issued and are in
material compliance with all material permits, certificates, approvals,
licenses and other authorizations relating to environmental matters and
necessary or desirable for their businesses or operations;
(e) no property now or previously owned or leased by the
Borrower or any of its Subsidiaries is listed or proposed for listing on
the National Priorities List
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pursuant to CERCLA, or on any similar state list of sites requiring
investigation or clean-up;
(f) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any property now or
previously owned or leased by the Borrower or any of its Subsidiaries
that, singly or in the aggregate, have, or could reasonably be expected
to have, a Material Adverse Effect;
(g) neither the Borrower nor any Subsidiary of the Borrower has
directly transported or directly arranged for the transportation of any
Hazardous Material to any location which is listed or proposed for
listing on the National Priorities List pursuant to CERCLA, or on any
similar state list or which to the knowledge is the subject of federal,
state or local enforcement actions or other investigations which could
reasonably be expected to lead to material claims against the Borrower
or such Subsidiary thereof for any remedial work, damage to natural
resources or personal injury, including claims under CERCLA; and
(h) there are no polychlorinated biphenyls or friable asbestos
present at any property now or previously owned or leased by the
Borrower or any Subsidiary of the Borrower that, singly or in the
aggregate, have, or could reasonably be expected to have, a Material
Adverse Effect.
SECTION 6.14. Regulations G, U and X. Neither the Borrower nor any of
its Subsidiaries is engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock, and no proceeds of any Credit Extensions
will be used to purchase or carry margin stock or otherwise for a purpose which
violates, or would be inconsistent with, F.R.S. Board Regulation G, U or X.
Terms for which meanings are provided in F.R.S. Board Regulation G, U or X or
any regulations substituted therefor, as from time to time in effect, are used
in this Section with such meanings.
SECTION 6.15. Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of the Borrower in
writing to the Administrative Agent, any Issuer or any Lender for purposes of or
in connection with
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this Agreement or any transaction contemplated hereby, taken as a whole is, and
all other such factual information hereafter furnished by or on behalf of the
Borrower to the Administrative Agent, any Issuer or any Lender will taken as a
whole be true and accurate in every material respect on the date as of which
such information is dated or certified and as of the date of execution and
delivery of this Agreement by the Administrative Agent, such Issuer and such
Lender, and such information is not, or shall not be, as the case may be,
incomplete by omitting to state any material fact necessary to make such
information not misleading.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. The Borrower agrees with the
Administrative Agent, each Issuer and each Lender that, until all Commitments
have terminated and all Obligations (other than indemnity, reimbursement and
similar obligations in respect of which no claim has been made and no amount
remains outstanding) have been paid in full, the Borrower will perform or cause
to be performed the obligations set forth in this Section 7.1.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. The
Borrower will furnish, or will cause to be furnished, to each Lender, each
Issuer and the Administrative Agent copies of the following financial
statements, reports, notices and information:
(a) as soon as available and in any event within 45 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year
of the Parent and the Borrower, a consolidated balance sheet of the
Parent and the Borrower and its Subsidiaries, in each case as of the end
of such Fiscal Quarter and consolidated statements of earnings and cash
flow of the Parent and the Borrower and its Subsidiaries, in each case
for such Fiscal Quarter and for the period commencing at the end of the
previous Fiscal Year and ending with the end of such Fiscal Quarter,
certified as complete and correct by a financial Authorized Officer of
the Parent and the Borrower, respectively;
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(b) as soon as available and in any event within 90 days after
the end of each Fiscal Year of the Parent and the Borrower, a copy of
the annual audited financial statements for such Fiscal Year for the
Parent and the Borrower and its consolidated Subsidiaries, including
therein a consolidated balance sheet of the Parent and the Borrower and
its Subsidiaries as of the end of such Fiscal Year and consolidated
statements of earnings and cash flow of the Parent and the Borrower and
its Subsidiaries for such Fiscal Year, in each case as audited (without
any Impermissible Qualification) by independent public accountants of
national standing acceptable to the Administrative Agent;
(c) as soon as available and in any event within 45 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year
of the Borrower and within 90 days after the end of the Fiscal Year of
the Borrower, a Compliance Certificate, executed by the chief executive,
financial or accounting Authorized Officer of the Borrower, showing (in
reasonable detail and with appropriate calculations and computations in
all respects reasonably satisfactory to the Administrative Agent)
compliance with the financial covenants set forth in Article VII;
(d) as soon as available and in any event within 60 days after
the first day of each Fiscal Year, copies of the Borrower's monthly
operating budget for such Fiscal Year (in reasonable detail and with
appropriate calculations and computations in all respects reasonably
satisfactory to the Administrative Agent);
(e) as soon as possible and in any event within five days after
the occurrence of each Default, a statement of an Authorized Officer of
the Borrower setting forth details of such Default and the action which
the Borrower has taken and proposes to take with respect thereto;
(f) as soon as possible and in any event within five days after
becoming aware of (x) the occurrence of any adverse development with
respect to any litigation, action, proceeding or labor controversy
described in Section 6.7, or (y) the commencement of any litigation,
action, proceeding
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or labor controversy described in Section 6.7, notice thereof and copies
of all documentation relating thereto;
(g) promptly after the sending or filing thereof, copies of all
reports which the Borrower sends to its securityholders generally, and
all reports and registration statements which the Borrower or any of its
Subsidiaries files with the SEC or any national securities exchange;
(h) immediately upon becoming aware of (i) the institution of
any steps by the Borrower or any other Person to terminate any Pension
Plan (other than in a standard termination under Section 4041(b) of
ERISA), (ii) the failure to make a required contribution to any Pension
Plan if such failure is sufficient to give rise to a Lien under Section
302(f) of ERISA, (iii) the taking of any action with respect to a
Pension Plan which could result in the requirement that the Borrower
furnish a bond or other security to the PBGC or such Pension Plan, or
(iv) the occurrence of any event with respect to any Pension Plan which
could result in the incurrence by the Borrower of any material
liability, fine or penalty, notice thereof and copies of all
documentation relating thereto;
(i) promptly upon receipt thereof, copies of all management
letters submitted to the Borrower by the independent public accountants
referred to in clause (b) in connection with each audit made by such
accountants of the books of the Borrower or any Subsidiary;
(j) as soon as practicable, and in any event within ten (10)
Business Days after the close of each month (and more often if
reasonably requested in writing by the Administrative Agent), the
Borrower shall provide the Administrative Agent and the Lenders with a
Borrowing Base Certificate, together with such supporting documents as
the Administrative Agent may reasonably request all certified as being
true and correct in all material aspects by such Borrower; and
(k) such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any of its
Subsidiaries as any Lender or any Issuer through the
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Administrative Agent may from time to time reasonably request (including
information and reports from the chief accounting, financial or
executive Authorized Officer of the Borrower, in such detail as the
Administrative Agent or any Lender or Issuer through the Administrative
Agent may reasonably request, with respect to the terms of and
information provided pursuant to the Compliance Certificate).
SECTION 7.1.2. Compliance with Laws, etc. The Borrower will, and will
cause each of its Subsidiaries to, comply in all respects with all applicable
Governmental Rules and Governmental Approvals of all Regulatory Authorities
except to the extent noncompliance therewith could not reasonably be expected to
have a Material Adverse Effect, such compliance to include:
(a) the maintenance and preservation of the Borrower's and its
Subsidiaries' corporate existence; and
(b) the payment, before the same become delinquent, of all
taxes, assessments and governmental charges imposed upon it or upon its
property except to the extent being diligently contested in good faith
by appropriate proceedings and for which adequate reserves, if any, in
accordance with GAAP shall have been set aside on its books.
SECTION 7.1.3. Maintenance of Properties. The Borrower will, and will
cause each of its Subsidiaries to, maintain, preserve, protect and keep its
properties in good repair, working order and condition (ordinary wear and tear
excepted), and make necessary and proper alterations, additions, repairs,
renewals and replacements, so that its business carried on in connection
therewith may be properly conducted at all times unless the Borrower determines
in good faith that the continued maintenance, repairs, etc. of any of its
properties is no longer economically desirable.
SECTION 7.1.4. Insurance. The Borrower shall maintain, and shall cause
each of its Subsidiaries to maintain:
(a) physical damage insurance on all real and personal property
on an all-risk basis (including, loss in transit, flood and earthquake
insurance) and public liability
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insurance against claims for personal injury, death or property damage
suffered by others upon, in or about any premises occupied by it or
occurring as a result of its ownership, maintenance or operation of any
automobiles, trucks or other vehicles or other facilities (including any
machinery used therein or thereupon) or as the result of the use of
products manufactured, constructed or sold by it or services rendered by
it in an amount as is usually carried by Persons of comparable size
engaged in the same or a similar business and similarly situated;
(b) such other types of insurance with respect to its business as
is usually carried by Persons of comparable size engaged in the same or
a similar business and similarly situated; and
(c) all worker's compensation or similar insurance as may be
required under the laws of any state or jurisdiction in which it may be
engaged in business.
All insurance shall be provided by insurers having an A.M. Best policyholders
rating of not less than A- (except with respect to insurers providing insurance
of the type described in clause (c), in which case such insurers shall have an
A.M. Best policyholders rating of not less than B+) or (iii) by such other
insurers as the Administrative Agent may approve in writing; provided, that if
the rating of any of such insurers is downgraded, the Borrower and each of its
Subsidiaries, as the case may be, shall only be required to obtain replacement
insurance with an insurer satisfying the requirements of this clause at the
stated expiration of the insurance policy maintained with the insurer whose
rating was so downgraded.
SECTION 7.1.5. Books and Records. The Borrower will, and will cause each
of its Subsidiaries to, keep books and records which accurately reflect all of
its business affairs and transactions and upon reasonable prior written notice
permit the Administrative Agent and each Lender or any of their respective
representatives, at reasonable times and intervals, to visit all of its offices,
to discuss its financial matters with its officers and, subject to reasonable
prior written notice having been given to the Borrower, its independent public
accountant (and the Borrower hereby authorizes such independent public
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accountant to discuss the Borrower's financial matters with each Lender or its
representatives whether or not any representative of the Borrower is present)
and to examine (and, at the expense of the Borrower, photocopy extracts from)
any of its books or other corporate records; provided, however, that the Lenders
shall to the extent reasonably practicable coordinate such examinations, visits,
discussions, etc. through the Administrative Agent so that all Lenders conduct
the same substantially simultaneously. The Borrower shall pay any fees of such
independent public accountant incurred in connection with the Administrative
Agent's or any Lender's exercise of its rights pursuant to this Section.
SECTION 7.1.6. Environmental Covenant. The Borrower will, and will cause
each of its Subsidiaries to,
(a) use and operate all of its facilities and properties in
material compliance with all Environmental Laws, keep all necessary and
material permits, approvals, certificates, licenses and other
authorizations relating to environmental matters in effect and remain in
material compliance therewith, and handle all Hazardous Materials in
material compliance with all applicable Environmental Laws;
(b) promptly notify the Administrative Agent and provide copies
upon receipt of all material written claims, complaints, notices or
inquiries of any Regulatory Authority relating to the condition of its
facilities and properties in respect of, or as to compliance with,
Environmental Laws, and shall keep its property free of any Lien imposed
by any Environmental Law; and
(c) provide such information and certifications which the
Administrative Agent may reasonably request from time to time to
evidence compliance with this Section 7.1.6.
SECTION 7.1.7. Future Subsidiaries. Upon any Person becoming, after the
Effective Date, a Subsidiary of the Borrower, or upon the Borrower directly or
indirectly acquiring additional Capital Stock of any existing Subsidiary, the
Borrower shall notify the Administrative Agent of such acquisition, and, unless
otherwise agreed to among the Borrower, the Administrative Agent and the
Required Lenders,
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(a) such Person shall execute and deliver to the Administrative
Agent (i) a Subsidiary Guaranty, (ii) the Subsidiary Security Agreement,
(iii) if requested by the Administrative Agent, Subsidiary Mortgages and
(iv) if such Person has a Subsidiary, a Subsidiary Pledge Agreement, in
each case in a manner reasonably satisfactory to the Administrative
Agent; and
(b) the Borrower or such Person, as the case may be, shall,
pursuant to a Pledge Agreement, pledge to the Administrative Agent for
its benefit and that of the Secured Parties (i) all of the outstanding
shares of Capital Stock of such Person, along with undated stock powers
for such certificates, executed in blank (or, if any such shares of
Capital Stock are uncertificated, confirmation and evidence satisfactory
to the Administrative Agent that the security interest in such
uncertificated securities has been transferred to and perfected by the
Administrative Agent, for the benefit of the Secured Parties, in
accordance with Section 8-313 and Section 8-321 of the U.C.C. or any
other similar or local or foreign law which may be applicable), and (ii)
all intercompany notes evidencing Indebtedness in favor of the Borrower
or such Person (which shall, unless the Administrative Agent shall
otherwise agree, be in form satisfactory to the Administrative Agent);
together, in each case, with such opinions of legal counsel for the Borrower
(which shall be from counsel reasonably satisfactory to the Administrative
Agent) relating thereto, which legal opinions shall be in form and substance
reasonably satisfactory to the Administrative Agent.
SECTION 7.1.8. Additional Collateral. The Borrower shall, and shall
cause each of its Subsidiaries to, cause the Administrative Agent to have at all
times a first priority perfected security interest (subject only to Liens and
encumbrances permitted under Section 7.2.3) in all of the property (real and
personal) owned from time to time by the Borrower or a Subsidiary to the extent
the same constitutes or would constitute "Collateral" under the Borrower
Security Agreement, each Subsidiary Security Agreement, a Pledge Agreement or a
Mortgage. Without limiting the generality of the foregoing, the Borrower shall,
and shall cause each of its Subsidiaries to,
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execute, deliver and/or file (as applicable) or cause to be executed, delivered
and/or filed (as applicable), the pledge agreement(s), mortgages, the security
agreement(s), Uniform Commercial Code (Form UCC-1) financing statements, Uniform
Commercial Code (Form UCC-3) termination statements, and other documentation
necessary to grant and perfect such security interest, in each case in form and
substance reasonably satisfactory to the Administrative Agent together, in each
case, with such opinions of legal counsel for the Borrower (which shall be from
counsel reasonably satisfactory to the Administrative Agent) relating thereto,
which legal opinions shall be in form and substance reasonably satisfactory to
the Administrative Agent.
SECTION 7.1.9. Use of Proceeds. The Borrower shall apply the proceeds of
the Credit Extensions solely
(a) for working capital and general corporate purposes of the
Borrower and the Subsidiary Guarantors, including Permitted Acquisitions
by such Persons;
(b) to pay the transaction costs and expenses incurred in
connection with the initial Credit Extension;
(c) to repay the Indebtedness to be Paid; and
(d) in the case of Letters of Credit, for issuing standby
Letters of Credit for the account of the Borrower.
SECTION 7.2. Negative Covenants. The Borrower agrees with the
Administrative Agent, each Issuer and each Lender that, until all Commitments
have terminated and all Obligations (other than indemnity, reimbursement and
similar obligations in respect of which no claim has been made and no amount
remains outstanding) have been paid in full, the Borrower will, and will cause
its Subsidiaries to, perform the obligations set forth in this Section 7.2.
SECTION 7.2.1. Business Activities. The Borrower will not, and will not
permit any of its Subsidiaries to, engage in any business activity, except those
described in the first recital and such activities as are reasonably incidental
or substantially similar thereto.
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SECTION 7.2.2. Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness, other than,
without duplication, the following:
(a) Indebtedness in respect of the Credit Extensions and other
Obligations (including Hedging Obligations in respect of such Credit
Extensions);
(b) until the date of the initial Credit Extension, the
Indebtedness to be Paid;
(c) Indebtedness existing as of the Effective Date which is
identified in Item 7.2.2(c) ("Ongoing Indebtedness") of the Disclosure
Schedule;
(d) Indebtedness of the Borrower or any of its Subsidiaries
incurred after the Effective Date in connection with the acquisition or
improvement of distribution, warehouse or transportation facilities in
an aggregate amount not to exceed the sum of (i) $20,000,000 outstanding
for the period from the Effective Date to the next succeeding
anniversary of the Effective Date, and (ii) thereafter an additional
Indebtedness of $10,000,000 outstanding increasing for each subsequent
12 month period following an anniversary date of the Effective Date;
provided, however, that the maximum aggregate amount of all Indebtedness
permitted under this clause (d) (i) shall not at any time exceed
$50,000,000 outstanding and (ii) of ProSource Canada and its
Subsidiaries together with all Indebtedness of ProSource Canada and its
Subsidiaries constituting Canadian Indebtedness shall not exceed
Cdn$20,000,000 at any time outstanding;
(e) principal amounts constituting Canadian Indebtedness which
together with Indebtedness of ProSource Canada and its Subsidiaries
permitted under clause (d) above does not exceed Cdn$20,000,000 at any
time outstanding;
(f) unsecured Indebtedness of the type set forth in clauses (d)
and (f) of the definitions of "Indebtedness" incurred in the ordinary
course of business of the Borrower and its Subsidiaries;
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(g) Indebtedness of the Borrower or any of its Subsidiaries in
respect of Capitalized Lease Liabilities to the extent permitted by
Section 7.2.7;
(h) intercompany Indebtedness of the Borrower that is
subordinated to the Obligations on terms satisfactory to the
Administrative Agent or of any Subsidiary Guarantor owing to the
Borrower or any other Subsidiary Guarantor, which Indebtedness
(i) shall be evidenced by one or more promissory notes
(such promissory note(s) (in the case of other than the
Receivables Note) to be, unless otherwise agreed to by the
Administrative Agent, in substantially the form of Exhibit A to
the Borrower Pledge Agreement) duly executed and delivered in
pledge pursuant to the Borrower Pledge Agreement to the
Administrative Agent; and
(ii) shall (in the case of Indebtedness other than that
evidenced by the Receivables Note) not be forgiven or otherwise
discharged for any consideration other than payment in full or in
part (provided that only the amount repaid in part shall be
discharged) in cash (unless otherwise agreed to by the
Administrative Agent);
(i) Indebtedness incurred in connection with the Permitted
Receivables Transaction in an aggregate principal amount at any time not
to exceed $150,000,000;
(j) Indebtedness incurred in connection with a Sale Leaseback
Transaction permitted under Section 7.2.14;
(k) Indebtedness of the Borrower incurred in connection with
guarantees of payment described in the proviso to the penultimate
sentence of the definition of "Contingent Liability" in an amount not to
exceed $3,200,000 at any time outstanding; and
(l) Intercompany Indebtedness of (i) the Borrower owed to
Receivables Co., (ii) Receivables Co. owed to the Borrower or to another
wholly-owned special purpose
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Subsidiary of the Borrower or (iii) such Subsidiary owed to Receivables
Co., in each case, incurred in connection with the Permitted Receivables
Transaction;
provided, however, that no new Indebtedness otherwise permitted by clause (d),
(g), (h), (j) and (k) shall be permitted to be incurred if a Default has
occurred and is continuing or would result therefrom.
SECTION 7.2.3. Liens. The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any
of its property, revenues or assets, whether now owned or hereafter acquired,
except:
(a) Liens securing payment of the Obligations, granted pursuant
to any Loan Document;
(b) until the date of the initial Credit Extension, Liens
securing payment of Indebtedness of the type permitted and described in
clause (b) of Section 7.2.2;
(c) Liens granted prior to the Effective Date to secure payment
of Indebtedness of the type permitted and described in clause (c) of
Section 7.2.2;
(d) Liens granted to secure payment of Indebtedness of the type
permitted and described in clause (d) of Section 7.2.2 and covering only
those assets acquired with the proceeds of such Indebtedness;
(e) Liens for taxes, assessments or other governmental charges
or levies not at the time delinquent or thereafter payable without
penalty or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves, if any, in accordance with
GAAP shall have been set aside on its books;
(f) Liens of carriers, warehousemen, mechanics, materialmen,
suppliers, vendors and landlords incurred in the ordinary course of
business for sums not overdue or being diligently contested in good
faith by appropriate proceedings and for which adequate reserves, if
any, in accordance with GAAP shall have been set aside on its books;
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(g) Liens incurred or deposits made in the ordinary course of
business in connection with workmen's compensation, unemployment
insurance or other forms of governmental insurance or benefits, or to
secure performance of tenders, statutory and regulatory obligations,
bids, leases and contracts or other similar obligations (other than for
borrowed money) entered into in the ordinary course of business or to
secure obligations on surety or appeal bonds;
(h) judgment Liens to the extent not resulting in an Event of
Default;
(i) easements, rights-of-way, municipal and zoning ordinances or
similar restrictions, minor defects or irregularities in title and other
similar charges or encumbrances not interfering in any material respect
with the ordinary conduct of the business of the Borrower or its
Subsidiaries or the value or utility of the property to which such Lien
is attached;
(j) Liens on Accounts of Receivables Co. created in connection
with the Permitted Receivables Transaction;
(k) Liens arising from precautionary U.C.C. financing statement
filings regarding operating leases, consignments and similar
arrangements entered into in the ordinary course of business;
(l) statutory and common law landlord's liens under Leases; and
(m) with respect to any real property that is subject to a
Mortgage, such exceptions to title as are set forth in the title
insurance policy delivered with respect thereto and are acceptable to
the Administrative Agent.
SECTION 7.2.4. Financial Condition.
(a) Net Worth. The Borrower will not permit Net Worth at any
time during any Fiscal Quarter of the Borrower, commencing with the
second Fiscal Quarter of Fiscal Year 1997, to be less than an amount
equal to the sum of (i)
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$70,000,000, plus (ii) an amount equal to 50% of the sum of the Net
Income for each Fiscal Quarter, commencing with the second Fiscal
Quarter of Fiscal Year 1997 and ending with the last full Fiscal Quarter
ending on or prior to any date of measurement, in which Net Income
exceeded $0 plus (iii) an amount equal to 50% of the aggregate value of
capital contributions made to the equity of the Borrower since the
Effective Date (excluding capital contributions made expressly and
solely for the purpose of curing an Event of Default);
(b) Total Debt to EBITDA Ratio. The Borrower will not permit the
Total Debt to EBITDA Ratio as of the end of any Fiscal Quarter occurring
during any period set forth below to be greater than the ratio set forth
opposite such period:
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Total Debt to EBITDA
Period Ratio
- -------------------------------------- ----------------------------------
Effective Date through
Third Fiscal Quarter of
1997 4.75:1
Fourth Fiscal Quarter
of 1997 through First
Fiscal Quarter of 1998 4.50:1
Second Fiscal Quarter
of 1998 4.25:1
Third Fiscal Quarter of
1998 through Fourth
Fiscal Quarter of 1998 4.00:1
First Fiscal Quarter of
1999 through Second
Fiscal Quarter of 1999 3.50:1
Third Fiscal Quarter of
1999 through First
Fiscal Quarter of 2000 2.75:1
Second Fiscal Quarter
of 2000 through Stated
Maturity Date 2.00:1
(c) Fixed Charge Coverage Ratio. The Borrower will not permit
the Fixed Charge Coverage Ratio as of the end of any Fiscal Quarter
occurring during any period set forth below (beginning with the First
Fiscal Quarter of 1997) to be less than the ratio set forth opposite
such period:
Fixed Charge Coverage
Period Ratio
- -------------------------------------- ---------------------------------------
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First Fiscal Quarter of
1997 through Third
Fiscal Quarter of 1997 .80:1
Fourth Fiscal Quarter
of 1997 through Second
Fiscal Quarter of 1998 .90:1
Third Fiscal Quarter of
1998 through Fourth
Fiscal Quarter of 1998 .95:1
First Fiscal Quarter of
1999 through Fourth
Fiscal Quarter of 1999 1.10:1
First Fiscal Quarter of
2000 through Fourth
Fiscal Quarter of 2000 1.25:1
First Fiscal Quarter of
2001 through Stated
Maturity Date 1.35:1
(d) Interest Coverage Ratio. The Borrower will not permit the
Interest Coverage Ratio as of the end of any Fiscal Quarter occurring
during any period set forth below (beginning with the First Fiscal
Quarter of 1997) to be less than the ratio set forth opposite such
period:
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Period Interest Coverage Ratio
- --------------------------------------- ---------------------------------------
First Fiscal Quarter of
1997 2.25:1
Second Fiscal Quarter of
1997 2.50:1
Third Fiscal Quarter of
1997 2.75:1
Fourth Fiscal Quarter of
1997 3.00:1
First Fiscal Quarter of
1998 through Fourth
Fiscal Quarter of 1998 3.25:1
First Fiscal Quarter of
1999 through Stated
Maturity Date 4.00:1
SECTION 7.2.5. Investments. The Borrower will not, and will not permit
any of its Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
(a) Investments (including any Trade Investments) existing on
the Effective Date and identified in Item 7.2.5(a) ("Ongoing
Investments") of the Disclosure Schedule (provided that any payments
received in respect of any such existing Trade Investments shall be
applied to permanently reduce the amount of such Trade Investments);
(b) Cash Equivalent Investments;
(c) without duplication, Investments permitted as Indebtedness
pursuant to Section 7.2.2;
(d) Investments by the Borrower in ProSource Canada by way of
contributions to capital not at any time to exceed
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$5,000,000;
(e) Investments in Subsidiaries (i) acquired or formed in
connection with a Permitted Acquisition, (ii) and (without duplication)
in Subsidiaries existing on the Effective Date and (iii) subject to
Section 7.2.15, which are Designated Subsidiaries;
(f) loans and advances to employees the proceeds of which are
immediately used to purchase equity Securities of the Parent and which
proceeds are immediately thereafter contributed by the Parent to the
Borrower as a capital contribution;
(g) Investments constituting Permitted Acquisitions (i) in an
aggregate amount having a value not to exceed $25,000,000 over the term
of this Agreement, (ii) in a single or a related series of transactions
having a value in excess of $25,000,000 individually but less than
$100,000,000, individually or in the aggregate, so long as the Borrower
shall have delivered to the Administrative Agent a Compliance
Certificate for the period of four full Fiscal Quarters immediately
preceding each such acquisition (prepared in good faith and in a manner
and using such methodology which if consistent with the most recent
financial statements delivered pursuant to Section 7.1.1) giving pro
forma effect to the consummation of such acquisition and evidencing
compliance with the covenants set forth in Section 7.2.4, and (iii) in a
single or a related series of transactions having a value in excess of
$100,000,000 with the prior written consent of the Required Lenders
(which consent may be withheld by the Required Lenders in their sole
discretion and for any reason);
(h) Trade Investments made after the Effective Date in an
aggregate outstanding amount not to exceed (i) $1,000,000 for the period
from the Effective Date to the first anniversary of the Effective Date
and (ii) an incremental $1,000,000 for each subsequent 12 month period;
provided, however, that the maximum aggregate amount outstanding of all
Trade Investments permitted under this clause (h) shall not at any time
exceed $3,000,000 and;
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(i) other Investments in an aggregate amount at any one time not
to exceed $500,000;
provided, however, that
(k) any Investment which when made complies with the requirements
of clause (a), (b) or (c) of the definition of the term "Cash Equivalent
Investment" may continue to be held notwithstanding that such Investment
if made thereafter would not comply with such requirements; and
(l) no new Investment otherwise permitted by clause (d), (e),
(f), (g), or (i) shall be permitted to be made if any Default has
occurred and is continuing or would result therefrom.
SECTION 7.2.6. Restricted Payments, etc. On and at all times after the
Effective Date:
(a) The Borrower will not declare, pay or make any dividend or
distribution (in cash, property or obligations) on any shares of any
class of Capital Stock (now or hereafter outstanding) of the Borrower or
on any other Equity Interests (now or hereafter outstanding) of the
Borrower (other than dividends or distributions payable in its common
stock or warrants to purchase its common stock or splitups or
reclassifications of its stock into additional or other shares of its
common stock) or apply, or permit any of its Subsidiaries to apply, any
of its funds, property or assets to the purchase, redemption, sinking
fund or other retirement of, or agree or permit any of its Subsidiaries
to purchase or redeem, any shares of any class of Capital Stock (now or
hereafter outstanding) of the Borrower, or other Equity Interests (now
or hereafter outstanding) of the Borrower except:
(i) the Borrower may make distributions to the Parent to
enable the Parent to redeem or otherwise acquire for value shares
of its Capital Stock of the Parent owned by employees, officers,
directors and any and all non-Affiliates, provided that (A) no
Default or Event of Default shall have occurred and be continuing
or a Default or Event of Default shall occur as a
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result of such acquisition or redemption; (B) the aggregate value
of such distributions shall not exceed (x) $5,000,000 (net of any
cash repayments made to the Borrower or any of its Subsidiaries
in respect of loans or advances that were made to employees the
proceeds of which were used to purchase equity Securities of the
Parent) for the period ending on the first anniversary of the
Effective Date and (y) $10,000,000 (net of any cash repayments
made to the Borrower or any of its Subsidiaries in respect of
loans or advances that were made to employees the proceeds of
which were used to purchase equity Securities of the Parent) over
the term of this Agreement; (C) the Borrower shall have delivered
the certificate required by clause (b) below; and (D) the
Borrower shall have delivered a certificate in form and substance
satisfactory to the Administrative Agent demonstrating (x) that
the Total Debt to EBITDA Ratio shall not exceed 3.00 to 1.00 and
(y) compliance with the Fixed Charge Coverage Ratio, in each
case, computed on a pro forma basis after giving effect to such
distribution; and
(ii) the Borrower may make distributions to the Parent to
enable it to redeem shares of its capital stock from members of
the Borrower's management whose employment with the Borrower has
terminated, provided that (A) the aggregate amount of such
distributions made during any Fiscal Year minus the amount of
additional cash equity contributions received by the Borrower
during such Fiscal Year that represents proceeds from the
issuance of capital stock in the Parent to a new member of the
Borrowers' management shall not exceed $500,000 (net of any cash
repayments made to the Borrower or any of its Subsidiaries in
respect of loans or advances that were made to employees the
proceeds of which were used to purchase equity Securities of the
Parent); or (B) no Material Default or Event of Default shall
have occurred and be continuing on the date of such payment or
shall occur as a result of such payment; or (C) average daily
availability under the Revolving Loan Commitment Amount shall not
have been less than $25,000,000 during the 45-day period ending
on the date of such payment and
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after giving effect to such payment, availability under the
Revolving Loan Commitment Amount shall not be less than
$25,000,000; and (D) the Borrower shall have delivered the
certificate required by clause (b) below.
(b) The Borrower may make distributions to the Parent in any
Fiscal Year in an amount not greater than the lesser of (i) the
consolidated (or, as applicable, combined) tax liability of the Parent
for a prior tax year that is attributable to the consolidated (or, as
applicable, combined) taxable income of the Borrower, and (ii) the total
consolidated (or, as applicable, combined) tax liability of the Parent
for such prior tax year.
(c) Not less than five Business Days prior to making any
distribution permitted pursuant to clause (a) above, and as a condition
precedent to making such payment, the Borrower shall deliver to the
Administrative Agent a certificate of the Authorized Officer of the
Borrower stating:
(i) that the Borrower is in compliance with all of the
terms and conditions of this Agreement and the other Loan
Documents to which it is a party;
(ii) that no Material Default or Event of Default is in
existence as of the date of the certificate or will be in
existence as of the date of such payment, both with and without
giving effect to the making of such payment; and
(iii) the amount of such payment; and
(d) the Borrower will not, and will not permit any Subsidiary to,
make any deposit for any of the foregoing purposes other than for
purposes of payments permitted under clause (a), (b) or (c).
SECTION 7.2.7. Subsidiaries. The Borrower will not permit any Subsidiary
to issue any Capital Stock (whether for value or otherwise) to any Person other
than the Borrower or another wholly-owned Subsidiary unless the percentage
ownership interest (direct or indirect) of the Borrower in such Subsidiary
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immediately after such issuance is increased or unchanged as a result thereof.
SECTION 7.2.8. Certain Contracts. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into or be a party to any arrangement
for the purchase of materials, supplies, other property or services if such
arrangement by its express terms requires that payment be made by the Borrower
or such Subsidiary regardless of whether such materials, supplies, other
property or services are delivered or furnished to it other than where the
Borrower or such Subsidiary determines not to accept such property or services.
SECTION 7.2.9. Consolidation, Merger, etc. The Borrower will not, and
will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate
with, or merge into or with, any other corporation, or purchase or otherwise
acquire all or substantially all of the assets of any Person (or of any division
thereof) except
(a) any Subsidiary (other than a Designated Subsidiary) may
liquidate or dissolve voluntarily into, and may merge with and into, the
Borrower or any other Subsidiary (other than a Designated Subsidiary),
and the assets or stock of any Subsidiary may be purchased or otherwise
acquired by the Borrower or any other Subsidiary (other than a
Designated Subsidiary); provided, however, that, subject to the
preceding provisions of this clause, in no event shall any Subsidiary
Guarantor merge with and into
(i) any Subsidiary other than another Subsidiary Guarantor
unless (A) the Required Lenders shall have given their prior
written consent thereto, or (B) after giving effect thereto, the
Administrative Agent shall have a perfected pledge of, and
security interest in and to, all of the issued and outstanding
shares of capital stock of the surviving Person in form and
substance satisfactory to the Administrative Agent and its
counsel, pursuant to such documentation and opinions as shall be
necessary and appropriate in the reasonable opinion of the
Administrative Agent and its counsel to create, perfect or
maintain the collateral position of the Administrative Agent and
the Lenders
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therein as contemplated by this Agreement; or
(ii) any other Subsidiary Guarantor if, after giving
effect to such merger, the Administrative Agent has less than
that percentage of the issued and outstanding Capital Stock of
the surviving Person pledged to it than it had pledged to it
immediately prior to such merger;
provided, that, notwithstanding the foregoing, in no event shall a Subsidiary
Guarantor merge with a Designated Subsidiary; and
(b) so long as no Default has occurred and is continuing or would
occur after giving effect thereto, the Borrower or any of its
Subsidiaries may (to the extent permitted by clause (f) of Section
7.2.5) purchase all or substantially all of the assets or stock of any
Person (or any division thereof), or acquire such Person by merger.
SECTION 7.2.10. Asset Dispositions, etc. The Borrower will not, and will
not permit any of its Subsidiaries to, sell, transfer, lease, contribute or
otherwise convey (including by way of merger), or grant options, warrants or
other rights with respect to, any of the Borrower's or such Subsidiaries' assets
(including accounts receivable or capital stock of Subsidiaries) to any Person,
unless
(a) such sale, transfer, lease, contribution or conveyance of
such assets is (i) in the ordinary course of its business (and does not
constitute a sale, transfer, lease, contribution or other conveyance of
all or a substantial part of the Borrower's or such Subsidiary's assets)
or is of obsolete or worn out property, (ii) permitted by Section 7.2.9,
(iii) between Subsidiary Guarantors (other than any Designated
Subsidiary) or from a Subsidiary Guarantor to the Borrower or from the
Borrower to a Subsidiary Guarantor (other than a Designated Subsidiary)
or (iv) of other assets of the Borrower or a Subsidiary having a value
(determined based on the higher of book and fair market value) not to
exceed $3,000,000 in any Fiscal Year;
(b) such sale, transfer, lease, contribution or
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conveyance of such assets (including the SLB Properties), has a value
(calculated at the higher of book value or fair market value) of less
than $15,000,000 in any Fiscal Year and the net proceeds of which the
Borrower or a Subsidiary thereof has elected to invest or cause to be
invested in Qualified Assets as provided for in the definition of "Net
Disposition Proceeds"; provided, however, that in each Fiscal Year in
which the value of such assets so sold, transferred, leased, contributed
or conveyed is less than $15,000,000 then the difference between such
value and $15,000,000 may be carried over to any succeeding Fiscal Year
so long as the aggregate value of assets so sold, transferred, leased,
contributed or conveyed in any Fiscal Year shall not exceed $25,000,000
in any Fiscal Year;
(c) such sale, transfer, lease, contribution or conveyance is of
Accounts pursuant to the Permitted Receivables Transaction; or
(d) such sale, transfer, lease, contribution or conveyance is
permitted by Section 7.2.5 or Section 7.2.12.
SECTION 7.2.11. Modification of Certain Agreements. The Borrower will
not, and will not permit any of its Subsidiaries to, consent to any amendment,
supplement, amendment and restatement, waiver or other modification of any of,
or enter into any forbearance from exercising any rights with respect to, the
terms or provisions contained in, or applicable to, any Receivables Transaction
Document, if the effect of such amendment, supplement or modification could
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
SECTION 7.2.12. Transactions with Affiliates. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into, or cause, suffer or
permit to exist any arrangement or contract with any of its other Affiliates
unless such arrangement or contract is on fair and reasonable terms and is an
arrangement or contract of the kind which would be entered into by a prudent
Person in the position of the Borrower or such Subsidiary with a Person which is
not one of its Affiliates.
SECTION 7.2.13. Negative Pledges, Restrictive Agreements,
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etc. The Borrower will not, and will not permit any of its Subsidiaries to,
enter into any agreement (excluding (i) this Agreement or any other Loan
Document, (ii) any Receivables Transaction Document, (iii) in the case of clause
(a) below, customary provisions restricting sublease or assignment of any lease,
license, franchise or other agreement entered into in the ordinary course of
business, (iv) in the case of clause (a) or (c) below, restrictions imposed by
any agreement to sell or otherwise dispose of any assets to any Person pending
the closing of such sale, (v) in the case of clauses (a) and (c) below,
restrictions imposed by a joint venture, shareholders or similar agreement
entered into by a Designated Subsidiary with respect to Investments permitted by
clause (i) of Section 7.2.5, and (vi) any agreement governing any Indebtedness
permitted by clause (b) of Section 7.2.2 as in effect on the Effective Date, by
clause (d) of Section 7.2.2 as to the assets financed with the proceeds of such
Indebtedness or by clause (e) of Section 7.2.2) prohibiting
(a) the creation or assumption of any Lien upon its properties,
revenues or assets, whether now owned or hereafter acquired;
(b) the ability of the Borrower or any other Obligor to amend or
otherwise modify this Agreement or any other Loan Document; or
(c) the ability of any Subsidiary to make any payments, directly
or indirectly, to the Borrower by way of dividends, advances, repayments
of loans or advances, reimbursements of management and other
intercompany charges, expenses and accruals or other returns on
investments, or any other agreement or arrangement which restricts the
ability of any such Subsidiary to make any payment, directly or
indirectly, to the Borrower.
SECTION 7.2.14. Sale and Leaseback. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any agreement or arrangement with
any other Person providing for the leasing by the Borrower or any of its
Subsidiaries of real or personal property which has been or is to be sold or
transferred by the Borrower or any of its Subsidiaries to such other Person or
to any other Person to whom funds have been or are to be
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advanced by such Person on the security of such property or rental obligations
of the Borrower or any of its Subsidiaries (a "Sale Leaseback Transaction");
provided, that the Borrower and its Subsidiaries may
(a) enter into a Sale Leaseback Transaction with respect to any
of the SLB Properties; and
(b) enter into a Sale Leaseback Transaction with respect to any
Investments or constituting Permitted Acquisitions,
provided, however, that (i) any such permitted Sale Leaseback Transaction in
excess of $500,000 is consummated for fair value as determined in good faith by
the Board of Directors of the Borrower and (ii) no new such Sale Leaseback
Transaction otherwise permitted by clause (a) or (b) shall be permitted if a
Default has occurred and is continuing or would result therefrom.
SECTION 7.2.15. Limitations on Investments, etc. in Designated
Subsidiaries. Notwithstanding any other provision or term to the contrary
contained in this Credit Agreement or any other Loan Document, in no event will
the sum of aggregate amount of loans or advances owing to the Borrower and its
Subsidiaries (other than Designated Subsidiaries) from Designated Subsidiaries,
Investments made by the Borrower and its Subsidiaries (other than Designated
Subsidiaries) in Designated Subsidiaries and the fair market value of assets
contributed by the Borrower and its Subsidiaries (other than Designated
Subsidiaries) to Designated Subsidiaries exceed $5,000,000 at any time
outstanding.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following events
or occurrences described in this Section 8.1
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shall constitute an "Event of Default".
SECTION 8.1.1. Non-Payment of Obligations. The Borrower shall default in
the payment or prepayment when due of
(a) any Reimbursement Obligation or any deposit of cash for
collateral purposes pursuant to Section 2.6.2 or Section 2.6.4, as the
case may be;
(b) any principal of or interest on any Loan; or
(c) any fee described in Article III or of any other Obligation
and such default shall continue unremedied for a period of five days.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty of the
Borrower or any other Obligor made or deemed to be made hereunder or in any
other Loan Document executed by it or any other writing or certificate furnished
by or on behalf of the Borrower or any other Obligor to the Administrative
Agent, any Issuer or any Lender for the purposes of or in connection with this
Agreement or any such other Loan Document (including any certificates delivered
pursuant to Article V), is or shall be incorrect when made or deemed to have
been made in any material respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations. The
Borrower shall default in the due performance and observance of any of its
obligations under Section 7.1.9 or Section 7.2.
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. The
Borrower or any other Obligor shall default in the due performance and
observance of any other agreement contained herein or in any other Loan Document
executed by it, and such default shall continue unremedied for a period of 30
days after notice thereof shall have been given to the Borrower by the
Administrative Agent or any Lender.
SECTION 8.1.5. Defaulted Debt. A default shall occur in the payment when
due (subject to any applicable grace or cure period), whether by acceleration or
otherwise, of any Defaulted Debt (other than Defaulted Debt described in Section
8.1.1) of
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the Borrower or any of its Subsidiaries having a principal amount, individually
or in the aggregate, in excess of $1,500,000, or a default shall occur in the
performance or observance of any obligation or condition with respect to such
Defaulted Debt (subject to any applicable grace or cure period) other than any
Hedging Obligation if the effect of such default is to accelerate the maturity
of any such Defaulted Debt or such default shall permit the holder or holders of
such Defaulted Debt, or any trustee or agent for such holders, to cause or
declare such Defaulted Debt to become due and payable or to require such
Defaulted Debt to be prepaid, redeemed, purchased or defeased, or to cause an
offer to purchase or defease such Defaulted Debt to be required to be made,
prior to its expressed maturity.
SECTION 8.1.6. Judgments. Any judgment or order for the payment of money
in excess of $1,500,000 (exclusive of any amounts to the extent covered by
insurance (less any applicable deductible) or indemnification and as to which
the insurer or the indemnifying party, as the case may be, has not denied
coverage in writing) shall be rendered against the Borrower or any Obligor and
either
(a) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order; or
(b) there shall be any period of 20 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect.
SECTION 8.1.7. Pension Plans. Any of the following events shall occur
with respect to any Pension Plan
(a) the institution of any steps by the Borrower, any member of
its Controlled Group or any other Person to terminate a Pension Plan if,
as a result of such termination, the Borrower or any such member would
reasonably expect to be required to make a contribution to such Pension
Plan, or would reasonably expect to incur a liability or obligation to
such Pension Plan, in excess of $1,000,000; or
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(b) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under section 302(f) of ERISA.
SECTION 8.1.8. Control of the Borrower. Any Change in Control shall
occur.
SECTION 8.1.9. Bankruptcy, Insolvency, etc. The Parent, the Borrower,
any of its Subsidiaries or any other Obligor shall
(a) become insolvent or generally fail to pay, or admit in
writing its inability or unwillingness generally to pay, debts as they
become due;
(b) apply for, consent to, or acquiesce in, the appointment of a
trustee, receiver, sequestrator or other custodian for the Parent, the
Borrower or any of its Subsidiaries or any other Obligor or any property
of any thereof, or make a general assignment for the benefit of
creditors;
(c) in the absence of such application, consent or acquiescence,
permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Parent, the Borrower or any of
its Subsidiaries or any other Obligor or for a substantial part of the
property of any thereof, and such trustee, receiver, sequestrator or
other custodian shall not be discharged within 60 days, provided that
the Parent, the Borrower, each Subsidiary and each other Obligor hereby
expressly authorizes the Administrative Agent and each Lender to appear
in any court conducting any relevant proceeding during such 60-day
period to preserve and defend their rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or
liquidation proceeding, in respect of the Parent, the Borrower or any of
its Subsidiaries or any other Obligor, and, if any such case or
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proceeding is not commenced by the Parent, the Borrower or such
Subsidiary or such other Obligor, such case or proceeding shall be
consented to or acquiesced in by the Parent, the Borrower or such
Subsidiary or such other Obligor or shall result in the entry of an
order for relief or shall remain for 60 days undismissed, provided that
the Parent, the Borrower, each Subsidiary and each other Obligor hereby
expressly authorizes the Administrative Agent and each Lender to appear
in any court conducting any relevant proceeding during such 60-day
period to preserve and defend their rights under the Loan Documents; or
(e) take any corporate action authorizing, or in furtherance of,
any of the foregoing.
SECTION 8.1.10. Impairment of Security, etc. Any Loan Document, or any
Lien granted thereunder, shall (except in accordance with its terms), in whole
or in part, terminate, cease to be effective or cease to be the legally valid,
binding and enforceable obligation of any Obligor party thereto with respect to
any portion of the Collateral having a value in excess of $1,500,000; the
Borrower, any other Obligor or any other party shall, directly or indirectly,
contest in any manner such effectiveness, validity, binding nature or
enforceability; or any Lien securing any Obligation shall, with respect to any
portion of the Collateral having a value in excess of $1,500,000, cease to be a
perfected first priority Lien (subject to Liens permitted to exist under Section
7.2.3).
SECTION 8.2. Action if Bankruptcy. If any Event of Default described in
clauses (a) through (d) of Section 8.1.9 shall occur, the Commitments (if not
theretofore terminated) shall automatically terminate and the outstanding
principal amount of all outstanding Loans and all other Obligations (including
Reimbursement Obligations) shall automatically be and become immediately due and
payable, without notice or demand and the Borrower shall automatically and
immediately be obligated to deposit with the Administrative Agent cash
collateral to be held in an interest-bearing account in an amount equal to all
Letter of Credit Outstandings.
SECTION 8.3. Action if Other Event of Default. If any Event of Default
(other than any Event of Default described in
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clauses (a) through (d) of Section 8.1.9) shall occur for any reason, whether
voluntary or involuntary, and be continuing, the Administrative Agent, upon the
direction of the Required Lenders, shall by notice to the Borrower declare all
or any portion of the outstanding principal amount of the Loans and other
Obligations (including Reimbursement Obligations) to be due and payable and/or
the Commitments (if not theretofore terminated) to be terminated, whereupon the
full unpaid amount of such Loans and other Obligations which shall be so
declared due and payable shall be and become immediately due and payable,
without further notice, demand or presentment, and/or, as the case may be, the
Commitments shall terminate and the Borrower shall automatically and immediately
be obligated to deposit with the Administrative Agent cash collateral to be held
in an interest-bearing account in an amount equal to all Letter of Credit
Outstandings.
ARTICLE IX
THE ADMINISTRATIVE AGENT
SECTION 9.1. Actions. Each Lender hereby appoints Scotiabank as its
Administrative Agent under and for purposes of this Agreement, the Notes and
each other Loan Document. Each Lender authorizes the Administrative Agent to act
on behalf of such Lender under this Agreement, the Notes and each other Loan
Document and, in the absence of other written instructions from the Required
Lenders received from time to time by the Administrative Agent (with respect to
which the Administrative Agent agrees that it will comply, except as otherwise
provided in this Section or as otherwise advised by counsel), to exercise such
powers hereunder and thereunder as are specifically delegated to or required of
the Administrative Agent by the terms hereof and thereof, together with such
powers as may be reasonably incidental thereto. Each Lender hereby indemnifies
(which indemnity shall survive any termination of this Agreement) the
Administrative Agent, pro rata according to such Lender's Percentage, from and
against any and all liabilities, obligations, losses, damages, claims, costs or
expenses of any kind or nature whatsoever which may at any time be imposed on,
incurred by, or asserted against, the Administrative Agent in any way relating
to or arising out of this Agreement, the Notes and any other Loan Document,
including reasonable attorneys' fees,
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and as to which the Administrative Agent is not reimbursed by the Borrower;
provided, however, that no Lender shall be liable for the payment of any portion
of such liabilities, obligations, losses, damages, claims, costs or expenses
which are determined by a court of competent jurisdiction in a final proceeding
to have resulted solely from the Administrative Agent's gross negligence or
wilful misconduct. The Administrative Agent shall be required to take any action
hereunder, under the Notes or under any other Loan Document, or to prosecute or
defend any suit in respect of this Agreement, the Notes or any other Loan
Document, unless it is indemnified hereunder to its satisfaction. If any
indemnity in favor of the Administrative Agent shall be or become, in the
Administrative Agent's determination, inadequate, the Administrative Agent may
call for additional indemnification from the Lenders and cease to do the acts
indemnified against hereunder until such additional indemnity is given.
SECTION 9.2. Funding Reliance, etc. Unless the Administrative Agent
shall have been notified by telephone, confirmed in writing, by any Lender by
5:00 p.m., New York City time, on the Business Day prior to a Borrowing that
such Lender will not make available the amount which would constitute its
Percentage of such Borrowing on the date specified therefor, the Administrative
Agent may assume that such Lender has made such amount available to the
Administrative Agent and, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If and to the extent that such Lender shall
not have made such amount available to the Administrative Agent, such Lender and
the Borrower severally agree to repay the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date the Administrative Agent made such amount available to the
Borrower to the date such amount is repaid to the Administrative Agent, at the
interest rate applicable at the time to Loans comprising such Borrowing (in the
case of the Borrower) and (in the case of a Lender), at the Federal Funds Rate
(for the first two Business Days after which such amount has not been repaid,
and thereafter at the interest rate applicable to Loans comprising such
Borrowing.
SECTION 9.3. Exculpation. Neither the Administrative Agent nor any of
their respective directors, officers, employees or agents shall be liable to any
Lender for any action taken or
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omitted to be taken by it under this Agreement or any other Loan Document, or in
connection herewith or therewith, except for its own wilful misconduct or gross
negligence, nor responsible for any recitals or warranties herein or therein,
nor for the effectiveness, enforceability, validity or due execution of this
Agreement or any other Loan Document, nor for the creation, perfection or
priority of any Liens purported to be created by any of the Loan Documents, or
the validity, genuineness, enforceability, existence, value or sufficiency of
any collateral security, nor to make any inquiry respecting the performance by
any Obligor of its obligations hereunder or under any other Loan Document. Any
such inquiry which may be made by the Administrative Agent shall not obligate it
to make any further inquiry or to take any action. The Administrative Agent
shall be entitled to rely upon advice of counsel concerning legal matters and
upon any notice, consent, certificate, statement or writing which the
Administrative Agent believes to be genuine and to have been presented by a
proper Person.
SECTION 9.4. Successor. The Administrative Agent may resign as such at
any time upon at least 30 days' prior notice to the Borrower and all Lenders. If
the Administrative Agent at any time shall resign, the Required Lenders may with
the consent of the Borrower (such consent not to be unreasonably withheld or
delayed) appoint another Lender as a successor Administrative Agent which shall
thereupon become the Administrative Agent hereunder. If no successor
Administrative Agent shall have been so appointed by the Required Lenders with
the consent of the Borrower (such consent not to be unreasonably withheld or
delayed), and shall have accepted such appointment, within 30 days after the
retiring Administrative Agent's giving notice of resignation, then the retiring
Administrative Agent may appoint a successor Administrative Agent, which shall
be one of the Lenders or a commercial banking institution organized under the
laws of the U.S. (or any State thereof) or a U.S. branch or agency of a
commercial banking institution, and having a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall be entitled to receive from the retiring
Administrative Agent such documents of transfer and assignment as such successor
Administrative Agent may reasonably request, and shall thereupon succeed to and
become vested with
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all rights, powers, privileges and duties of the retiring Administrative Agent,
and the retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Administrative Agent's
resignation hereunder as the Administrative Agent, the provisions of
(a) this Article IX shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Administrative Agent
under this Agreement; and
(b) Section 10.3 and Section 10.4 shall continue to inure to its
benefit.
SECTION 9.5. Loans by Scotiabank. Scotiabank shall have the same rights
and powers with respect to (x) the Credit Extensions made by it or any of its
Affiliates, and (y) the Notes held by it or any of its Affiliates as any other
Lender and may exercise the same as if it were not the Administrative Agent.
Scotiabank and its Affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with the Borrower or any Subsidiary or
Affiliate of the Borrower as if Scotiabank were not the Administrative Agent
hereunder.
SECTION 9.6. Credit Decisions. Each Lender acknowledges that it has,
independently of the Administrative Agent and each other Lender, and based on
such Lender's review of the financial information of the Borrower, this
Agreement, the other Loan Documents (the terms and provisions of which being
satisfactory to such Lender) and such other documents, information and
investigations as such Lender has deemed appropriate, made its own credit
decision to extend its Commitments. Each Lender also acknowledges that it will,
independently of the Administrative Agent and each other Lender, and based on
such other documents, information and investigations as it shall deem
appropriate at any time, continue to make its own credit decisions as to
exercising or not exercising from time to time any rights and privileges
available to it under this Agreement or any other Loan Document.
SECTION 9.7. Copies, etc. The Administrative Agent shall give prompt
notice to each Lender of each notice or request required or permitted to be
given to the Administrative Agent by the Borrower pursuant to the terms of this
Agreement (unless
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concurrently delivered to the Lenders by the Borrower). The Administrative Agent
will distribute to each Lender each document or instrument received for its
account and copies of all other communications received by the Administrative
Agent from the Borrower for distribution to the Lenders by the Administrative
Agent in accordance with the terms of this Agreement or any other Loan Document.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Waivers, Amendments, etc. The provisions of this Agreement
and of each other Loan Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and consented to
by the Borrower and the Required Lenders; provided, however, that no such
amendment, modification or waiver shall:
(a) modify any requirement hereunder that any particular action
be taken by all the Lenders or by the Required Lenders, extend any
Commitment Termination Date or modify this Section 10.1 without the
consent of all Lenders;
(b) increase the aggregate amount of any Lender's Percentage of
any Commitment Amount, increase the aggregate amount of any Loans
required to be made by a Lender pursuant to its Commitments or reduce or
delay the payment of any fees described in Article III payable to any
Lender without the consent of such Lender;
(c) extend the Stated Maturity Date, or reduce the principal
amount of or rate of interest on any Lender's Loan, or postpone the date
of payment of interest on any Lender's Loan, without the consent of such
Lender (it being understood and agreed, however, that any vote to
rescind any acceleration made pursuant to Section 8.2 and Section 8.3 of
amounts owing with respect to the Loans and other Obligations shall only
require the vote of the Required Lenders);
(d) change the definition of "Required Lenders" or any
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requirement hereunder that any particular action be taken by
all Lenders without the consent of all Lenders;
(e) modify Section 2.6 or increase the Stated Amount of any
Letter of Credit unless consented to by the Issuer of such Letter of
Credit;
(f) except as permitted by a Loan Document, release (i) any
Guarantor from its obligations under a Guaranty, or (ii) any of the
Pledged Shares (as such term is defined in any Pledge Agreement) or all
or substantially all of the collateral securing the Obligations, in
either case without the consent of all Lenders as expressly provided
herein or therein; or
(g) affect adversely the interests, rights or obligations of the
Administrative Agent qua the Administrative Agent, or any Issuer qua
Issuer, unless consented to by the Administrative Agent or such Issuer,
as the case may be.
No failure or delay on the part of the Administrative Agent, any Issuer or any
Lender in exercising any power or right under this Agreement or any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. No notice to or demand on
the Borrower in any case shall entitle it to any notice or demand in similar or
other circumstances. No waiver or approval by the Administrative Agent, any
Issuer or any Lender under this Agreement or any other Loan Document shall,
except as may be otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 10.2. Notices. All notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing or by facsimile and addressed, delivered or transmitted to such party at
its address or facsimile number set forth below its signature hereto or set
forth in the Lender Assignment Agreement or at such other address or facsimile
number as may be designated by such party in
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a notice to the other parties. Any notice, if mailed and properly addressed with
postage prepaid or if properly addressed and sent by pre-paid courier service,
shall be deemed given when received; any notice, if transmitted by facsimile,
shall be deemed given when the confirmation of transmission thereof is received
by the transmitter.
SECTION 10.3. Payment of Costs and Expenses. The Borrower agrees to pay
on demand all reasonable expenses of the Administrative Agent (including the
reasonable fees and out-of-pocket expenses of counsel to the Administrative
Agent and of local counsel, if any, who may be retained by counsel to the
Administrative Agent) in connection with
(a) the negotiation, preparation, execution and delivery of this
Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from
time to time hereafter be required, whether or not the transactions
contemplated hereby are consummated; and
(b) the filing, recording, refiling or rerecording of any Loan
Document and/or any Uniform Commercial Code financing statements
relating thereto and all amendments, supplements, amendments and
restatements and other modifications to any thereof and any and all
other documents or instruments of further assurance required to be filed
or recorded or refiled or rerecorded by the terms hereof or the terms of
any Loan Document; and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save the Administrative Agent, each
Issuer and the Lenders harmless from all liability for, any stamp or other taxes
(other than Taxes payable in accordance with Section 4.6) which may be payable
in connection with the execution or delivery of this Agreement, the Credit
Extensions hereunder, or the issuance of the Notes, Letters of Credit or any
other Loan Documents. The Borrower also agrees to reimburse the Administrative
Agent, each Issuer and
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each Lender upon demand for all reasonable out-of-pocket expenses (including
reasonable attorneys' fees and legal expenses of counsel to the Administrative
Agent, each Issuer and the Lenders) incurred by the Administrative Agent, each
Issuer or such Lenders in connection with (x) the negotiation of any
restructuring or "work-out" with the Borrower, whether or not consummated, of
any Obligations and (y) the enforcement of any Obligations.
SECTION 10.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitments,
the Borrower hereby indemnifies, exonerates and holds the Administrative Agent,
each Issuer and each Lender and each of their respective officers, directors,
employees and agents (collectively, the "Indemnified Parties") free and harmless
from and against any and all actions, causes of action, suits, losses, costs,
liabilities and damages, and expenses incurred in connection therewith
(irrespective of whether any such Indemnified Party is a party to the action for
which indemnification hereunder is sought), including reasonable attorneys' fees
and disbursements (collectively, the "Indemnified Liabilities"), incurred by the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Credit Extension,
including all Indemnified Liabilities arising in connection with the
transactions contemplated hereby;
(b) the entering into and performance of this Agreement and any
other Loan Document by any of the Indemnified Parties (including any
action brought by or on behalf of the Borrower as the result of any
determination by the Required Lenders pursuant to Article V not to fund
any Credit Extension);
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any portion of the stock or assets of any Person,
whether or not the Administrative Agent, any Issuer or any Lender is
party thereto;
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(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to the
Borrower, its Subsidiaries and their real properties and the protection
of the environment or the Release by the Borrower or any of its
Subsidiaries of any Hazardous Material;
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by the Borrower or any Subsidiary thereof of
any Hazardous Material (including any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any
Environmental Law), regardless of whether caused by, or within the
control of, the Borrower or such Subsidiary; or
(f) the Administrative Agent's and each Lender's Environmental
Liability except that the Borrower shall have no obligation to indemnify
any Indemnified Party with respect to conditions at real properties
owned or leased by Borrower or a Subsidiary thereof which are created
after the Administrative Agent or any Lender has taken ownership,
possession or control of such properties, unless created by the Borrower
or such Subsidiary (the indemnification herein shall survive repayment
of the Notes and any transfer of the property of the Borrower or any of
its Subsidiaries by foreclosure or by a deed in lieu of foreclosure for
the Administrative Agent's or any Lender's Environmental Liability,
regardless of whether caused by, or within the control of, the Borrower
or such Subsidiary);
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or wilful misconduct. The Borrower and its successors and assigns
hereby waive, release and agree not to make any claim or bring any cost recovery
action related to the real properties owned or leased by, or the operations of,
Borrower and its Subsidiaries and their successors and assigns, against, the
Administrative Agent, any Issuer or any Lender under CERCLA or any state
equivalent, or any similar law now existing or hereafter enacted; provided, that
this release shall not apply to claims related to conditions created after the
Administrative Agent or any Lender has taken
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ownership, possession or control of real properties owned or leased by the
Borrower or a Subsidiary thereof unless such condition was created by the
Borrower or such Subsidiary. It is expressly understood and agreed that to the
extent that any of such Persons is strictly liable under any Environmental Laws,
the Borrower's obligation to such Person under this indemnity shall likewise be
without regard to fault on the part of the Borrower with respect to the
violation or condition which results in liability of such Person. If and to the
extent that the foregoing undertaking may be unenforceable for any reason, the
Borrower hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
SECTION 10.5. Survival. The obligations of the Borrower under Sections
4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the Lenders under
Section 9.1, shall in each case survive any assignment from one Lender to
another (in the case of Sections 10.3 and 10.4) and any termination of this
Agreement, the payment in full of all the Obligations and the termination of all
the Commitments. The representations and warranties made by the Borrower and
each other Obligor in this Agreement and in each other Loan Document shall
survive the execution and delivery of this Agreement and each such other Loan
Document.
SECTION 10.6. Severability. Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall, as
to such provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
SECTION 10.7. Headings. The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.
SECTION 10.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be an original and all
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of which shall constitute together but one and the same agreement. This
Agreement shall become effective when counterparts hereof executed on behalf of
the Borrower, the Administrative Agent and each Lender (or notice thereof
satisfactory to the Administrative Agent) shall have been received by the
Administrative Agent and notice thereof shall have been given by the
Administrative Agent to the Borrower and each Lender.
SECTION 10.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE NOTES
AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH
PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE
OF NEW YORK), EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF A SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK. This Agreement, the Notes, the other Loan Documents and the Fee Letter
constitute the entire understanding among the parties hereto with respect to the
subject matter hereof and thereof and supersede any prior agreements, written or
oral, with respect thereto.
SECTION 10.10. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:
(a) the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of the
Administrative Agent and all Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders
are subject to Section 10.11.
SECTION 10.11. Sale and Transfer of Loans and Notes; Participations in
Loans and Notes. Each Lender may assign, or sell participations in, its Loans,
Letters of Credit and Commitments to one or more other Persons in accordance
with this Section 10.11.
SECTION 10.11.1. Assignments. Upon prior notice to the
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Borrower and the Administrative Agent, any Lender,
(a) with the consent of the Borrower and the Administrative Agent
(which consents shall not be unreasonably delayed or withheld) may at
any time assign and delegate to one or more commercial banks or other
financial institutions, and
(b) with notice to the Borrower and the Administrative Agent, but
without the consent of the Borrower or the Administrative Agent, may
assign and delegate to any of its Affiliates or to any other Lender
(each Person described in either of the foregoing clauses as being the Person to
whom such assignment and delegation is to be made, being hereinafter referred to
as an "Assignee Lender"), all or any fraction of such Lender's total Loans,
Letter of Credit Outstandings and Commitments in a minimum aggregate amount of
$5,000,000 (or, if less, the entire remaining amount of such Lender's Loans,
Letter of Credit Outstandings and Commitment); provided, however, that the
assigning Lender must assign a pro-rata portion of each of its Commitment, Loans
and interest in Letters of Credit Outstandings. The Borrower and each other
Obligor and the Administrative Agent shall be entitled to continue to deal
solely and directly with such Lender in connection with the interests so
assigned and delegated to an Assignee Lender until
(c) notice of such assignment and delegation, together with (i)
payment instructions, (ii) the Internal Revenue Service Forms or other
statements contemplated or required to be delivered pursuant to Section
4.6, if applicable, and (iii) addresses and related information with
respect to such Assignee Lender, shall have been delivered to the
Borrower and the Administrative Agent by such Lender and such Assignee
Lender;
(d) such Assignee Lender shall have executed and delivered to the
Borrower and the Administrative Agent a Lender Assignment Agreement,
accepted by the Administrative Agent; and
(e) the processing fees described below shall have
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been paid.
From and after the date that the Administrative Agent accepts such Lender
Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that rights and
obligations hereunder have been assigned and delegated to such Assignee Lender
in connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (y)
the assignor Lender, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Lender Assignment
Agreement, shall be released from its obligations hereunder and under the other
Loan Documents. Within five Business Days after its receipt of notice that the
Administrative Agent has received and accepted an executed Lender Assignment
Agreement, but subject to clause (d) above, the Borrower shall execute and
deliver to the Administrative Agent (for delivery to the relevant Assignee
Lender) a new Note evidencing such Assignee Lender's assigned Loans and
Commitments and, if the assignor Lender has retained Loans and Commitments
hereunder, a replacement Note in the principal amount of the Loans and
Commitments retained by the assignor Lender hereunder (such Note to be in
exchange for, but not in payment of, the Note then held by such assignor
Lender). Each such Note shall be dated the date of the predecessor Note. Accrued
interest on that part of each predecessor Note evidenced by a new Note, and
accrued fees, shall be paid as provided in the Lender Assignment Agreement.
Accrued interest on that part of each predecessor Note evidenced by a
replacement Note shall be paid to the assignor Lender. Accrued interest and
accrued fees shall be paid at the same time or times provided in the predecessor
Note and in this Agreement. Such assignor Lender or such Assignee Lender must
also pay a processing fee in the amount of $3,500 to the Administrative Agent
upon delivery of any Lender Assignment Agreement. Any attempted assignment and
delegation not made in accordance with this Section 10.11.1 shall be null and
void. Notwithstanding anything to the contrary set forth above, any Lender may
(without requesting the consent of the Borrower or the Administrative Agent)
pledge its Loans to a Federal Reserve Bank in support of borrowings made by such
Lender from such Federal Reserve Bank.
SECTION 10.11.2. Participations. Any Lender may at any
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time sell to one or more commercial banks or other Persons (each of such
commercial banks and other Persons being herein called a "Participant")
participating interests in any of the Loans, Commitments, or other interests of
such Lender hereunder; provided, however, that
(a) no participation contemplated in this Section 10.11 shall
relieve such Lender from its Commitments or its other obligations
hereunder or under any other Loan Document;
(b) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations;
(c) the Borrower and each other Obligor and the Administrative
Agent shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement and each of the other Loan Documents;
(d) no Participant, unless such Participant is an Affiliate of
such Lender or is itself a Lender, shall be entitled to require such
Lender to take or refrain from taking any action hereunder or under any
other Loan Document, except that such Lender may agree with any
Participant that such Lender will not, without such Participant's
consent, take any actions of the type described in clause (a), (b), (f)
or, to the extent requiring the consent of each Lender, clause (c) of
Section 10.1; and
(e) the Borrower shall not be required to pay any amount under
any provision of this Agreement that is greater than the amount which it
would have been required to pay had no participating interest been sold.
The Borrower acknowledges and agrees that each Participant, for purposes of
Sections 4.3, 4.4, 4.5, 4.6, 4.8 and 4.9 shall be considered a Lender and that
information delivered to a Lender pursuant to the terms of this Agreement may be
furnished to a Participant. Each Lender shall give notice to the Borrower of the
name of any Person to which such Lender has sold a
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participating interest under the provisions hereof. Each Participant shall only
be indemnified for increased costs pursuant to Section 4.3, 4.5 or 4.6 if and to
the extent that the Lender which sold such participating interest to such
Participant concurrently is entitled to make, and does make, a claim on the
Borrower for such increased costs. Any Lender that sells a participating
interest in any Loan, Commitment or other interest to a Participant under this
Section 10.11.2 shall indemnify and hold harmless the Borrower and the
Administrative Agent from and against any taxes, penalties, interest or other
costs or losses (including, without limitation, reasonable attorneys' fees and
expenses) incurred or payable by the Borrower or the Administrative Agent as a
result of the failure of the Borrower or the Administrative Agent to comply with
its obligations to deduct or withhold any Taxes from any payments made pursuant
to this Agreement to such Lender or the Administrative Agent, as the case may
be, which Taxes would not have been incurred or payable if such Participant had
been a Non-U.S. Lender that was entitled to deliver to the Borrower, the
Administrative Agent or such Lender, and did in fact so deliver, a duly
completed and valid Form 1001 or 4224 (or applicable successor form) entitling
such Participant to receive payments under this Agreement without deduction or
withholding of any United States federal taxes. Any attempted sale of a
participation interest not made in accordance with this Section 10.11.2 shall be
null and void.
SECTION 10.12. Other Transactions. Nothing contained herein shall
preclude the Administrative Agent, any Issuer or any other Lender from engaging
in any transaction, in addition to those contemplated by this Agreement or any
other Loan Document, with the Borrower or any of its Affiliates in which the
Borrower or such Affiliate is not restricted hereby from engaging with any other
Person.
SECTION 10.13. Execution on Behalf of Corporation. Any signature by any
Authorized Officer on this Agreement, any Loan Document and any other instrument
and certificate executed or to be executed pursuant to or in connection with
this Agreement or such other Loan Documents is provided only in such Authorized
Officer's capacity as a corporate officer, and not in any way in such Authorized
Officer's personal capacity.
SECTION 10.14. Forum Selection and Consent to Jurisdiction.
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ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE
AGENT, THE LENDERS, ANY ISSUER OR THE BORROWER IN CONNECTION HEREWITH OR
THEREWITH SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE
OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. SERVICE OF COPIES OF THE
SUMMONS AND COMPLAINT AND ANY OTHER PROCESS UPON THE BORROWER MAY BE MADE BY
MAILING OR DELIVERING A COPY OF SUCH PROCESS TO THE BORROWER IN CARE OF THE
PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND THE BORROWER HEREBY
IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON
ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, THE BORROWER FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK AT THE
ADDRESS FOR NOTICES SPECIFIED IN SECTION 10.2. THE BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE
BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES TO THE FULLEST
EXTENT PERMITTED BY LAW SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 10.15. Waiver of Jury Trial. THE ADMINISTRATIVE AGENT, THE
LENDERS, EACH ISSUER AND THE BORROWER HEREBY
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KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TO THE FULLEST EXTENT PERMITTED
BY LAW ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE LENDERS,
EACH ISSUER OR THE BORROWER IN CONNECTION HEREWITH OR THEREWITH. THE BORROWER
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION
FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO
WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
ADMINISTRATIVE AGENT, THE LENDERS AND EACH ISSUER ENTERING INTO THIS AGREEMENT
AND EACH SUCH OTHER LOAN DOCUMENT.
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<PAGE> 131
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
PROSOURCE SERVICES CORPORATION
By:/s/ Paul A. Garcia de Quevedo
--------------------------------
Title: Treasurer
Address: 1500 San Remo Avenue
Coral Gables, FL 33146
Facsimile No.: (305) 740-1394
Attention: Paul A. Garcia de Quevedo
THE BANK OF NOVA SCOTIA,
as the Administrative Agent
By:/s/ Frank F. Sandler
--------------------------------
Title: Relationship Manager
Address: Suite 2700
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Facsimile No.: (404) 888-8998
Attention: Frank Sandler
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<PAGE> 132
Lenders:
- --------
Commitment:
100%
THE BANK OF NOVA SCOTIA, as a
Lender
By:/s/ Frank F. Sandler
--------------------------------
Name: Frank F. Sandler
Title: Relationship Manager
Domestic Office:
----------------
Suite 2700
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Facsimile No.: (404) 888-8998
Attention: Frank Sandler
LIBOR Office:
-------------
Suite 2700
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Facsimile No.: (404) 888-8998
Attention: Frank Sandler
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<PAGE> 1
EXHIBIT 10.22
REVOLVING NOTE
$75,000,000 March 14, 1997
FOR VALUE RECEIVED, the undersigned, PROSOURCE SERVICES CORPORATION, a
Delaware corporation (the "Borrower"), promises to pay to THE BANK OF NOVA
SCOTIA (the "Lender") or its registered assigns on the Stated Maturity Date for
all Loans the principal sum of SEVENTY-FIVE MILLION DOLLARS ($75,000,000) or, if
less, the aggregate unpaid principal amount of all Loans made by the Lender
pursuant to that certain Credit Agreement, dated as of March 14, 1997 (as
amended, supplemented, amended and restated or otherwise modified from time to
time, the "Credit Agreement"), among the Borrower, the various financial
institutions (including the Lender) as are or may become parties thereto
(collectively, the "Lenders"), and The Bank of Nova Scotia ("Scotiabank"), as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"). Unless otherwise defined, terms used herein have the meanings provided
in the Credit Agreement.
The Borrower also promises to pay interest on the unpaid principal amount
hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money of
the United States of America in same day or immediately available funds to the
account designated by the Administrative Agent pursuant to the Credit Agreement.
This Note is one of the Notes referred to in, and evidences Indebtedness
incurred under, the Credit Agreement, to which reference is made for a
description of the security for this Note and for a statement of the terms and
conditions on which the Borrower is permitted and required to make prepayments
and repayments of principal of the Indebtedness evidenced by this Note and on
which such Indebtedness may be declared to be immediately due and payable.
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest and notice of dishonor.
1
<PAGE> 2
THIS NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL BE DEEMED TO
BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK).
PROSOURCE SERVICES CORPORATION
By /s/ Paul A. Garcia de Quevedo
-----------------------------
Name: Paul A. Garcia de Quevedo
Title: Vice President, Secretary
and Treasurer
2
<PAGE> 3
LOANS AND PRINCIPAL PAYMENTS
================================================================================
Amount of Unpaid
Amount of Principal Principal
Loan Made Repaid Balance Nota-
---------- --------- --------- tion
Base LIBO Interest Period Base LIBO Base LIBO Made
Date Rate Rate (if applicable) Rate Rate Rate Rate Total By
- ---- ---- ---- -------------- ---- ---- ---- ---- ----- -----
================================================================================
3
<PAGE> 1
EXHIBIT 10.23
BORROWER PLEDGE AGREEMENT
This BORROWER PLEDGE AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Pledge Agreement"),
dated as of March 14, 1997, is made by PROSOURCE SERVICES CORPORATION, a
Delaware corporation (the "Pledgor"), in favor of THE BANK OF NOVA SCOTIA, as
administrative agent (together with any successor(s) thereto in such capacity,
the "Administrative Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of March 14, 1997 (as
amended, supplemented, amended and restated or otherwise modified from time to
time, the "Credit Agreement"), among the Pledgor, the various financial
institutions as are, or may from time to time become, parties thereto (each,
individually, a "Lender", and collectively, the "Lenders") and the
Administrative Agent, the Lenders and the Issuer have extended Commitments to
make Credit Extensions to the Pledgor;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Pledgor
is required to execute and deliver this Pledge Agreement; and
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuer to make Credit Extensions (including the initial Credit
Extension) to the Pledgor pursuant to the Credit Agreement, the Pledgor agrees,
for the benefit of each Secured Party, as follows:
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<PAGE> 2
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Collateral" is defined in Section 2.1.
"Credit Agreement" is defined in the first recital.
"Distributions" means all stock dividends, liquidating dividends, shares
of stock resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
Capital Stock constituting Collateral, but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with respect to
any Pledged Shares or other Pledged Property made in the ordinary course of
business and not a liquidating dividend.
"Lender" and "Lenders" are defined in the first recital.
"Pledge Agreement" is defined in the preamble.
"Pledged Note Issuer" means each Person identified in Item A of Attachment
1 hereto as the issuer of the Pledged Note identified opposite the name of such
Person.
"Pledged Notes" means all promissory notes of any Pledged Note Issuer
substantially the form of Exhibit A hereto which are delivered or required to be
delivered by the Pledgor to the Administrative Agent as Pledged Property
hereunder, as such promissory notes, in accordance with Section 4.5, are
amended, modified or supplemented from time to time, together with any
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<PAGE> 3
promissory note of any Pledged Note Issuer taken in extension or renewal thereof
or substitution therefor.
"Pledged Property" means all Pledged Shares, all Pledged Notes, and all
other pledged shares of Capital Stock or promissory notes, all other securities,
all assignments of any amounts due or to become due, all other instruments which
are now being delivered by the Pledgor to the Administrative Agent or are from
time to time hereafter required to be delivered by the Pledgor to the
Administrative Agent for the purpose of pledge under this Pledge Agreement or
any other Loan Document, and all proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Item B of
Attachment 1 hereto as the issuer of the Pledged Shares identified opposite the
name of such Person.
"Pledged Shares" means all shares of Capital Stock of any Pledged Share
Issuer which are delivered or required to be delivered by the Pledgor to the
Administrative Agent as Pledged Property hereunder.
"Pledgor" is defined in the preamble.
"Securities Act" is defined in Section 6.2.
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or the
Credit Agreement or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Pledge Agreement, including its preamble
and recitals, with such meanings.
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<PAGE> 4
ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, collaterally assigns and mortgages in favor of the Administrative
Agent, for its benefit and the ratable benefit of each of the Secured Parties,
and hereby grants to the Administrative Agent, for its benefit and the ratable
benefit of the Secured Parties, a continuing security interest in, all of the
following property (the "Collateral"):
(a) all promissory notes of each Pledged Note Issuer identified in
Item A of Attachment 1 hereto;
(b) all other Pledged Notes issued from time to time;
(c) all issued and outstanding shares of Capital Stock of each
Pledged Share Issuer identified in Item B of Attachment 1 hereto;
(d) all other Pledged Shares issued from time to time;
(e) all other Pledged Property, whether now or hereafter delivered
to the Administrative Agent in connection with this Pledge Agreement;
(f) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property; and
(g) all proceeds of any of the foregoing.
SECTION 2.2. Security for Obligations. This Pledge Agreement secures the
payment in full of all Obligations of the Pledgor now or hereafter existing
under the Credit Agreement, the Notes and each other Loan Document to which the
Pledgor is or may become a party, whether for principal, interest, costs, fees,
expenses, or otherwise.
SECTION 2.3. Delivery of Pledged Property. All certificates or instruments
representing or evidencing any Collateral, including all Pledged Shares and all
Pledged Notes,
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<PAGE> 5
shall be delivered to and held by or on behalf of (and, in the case of the
Pledged Notes, endorsed to the order of) the Administrative Agent pursuant
hereto, shall be in suitable form for transfer by delivery, and shall be
accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION 2.4. Dividends on Pledged Shares and Payments on Pledged Notes. In
the event that any Dividend is permitted to be paid on any Pledged Share or any
payment of principal or interest is permitted to be made on any Pledged Note (in
accordance with Section 7.2.6 of the Credit Agreement), such Dividend or payment
may be paid to the Pledgor. If any such Dividend or payment is paid in
contravention of Section 7.2.6 of the Credit Agreement, the Pledgor shall hold
the same segregated and in trust for the Administrative Agent (in accordance
with Section 4.1.4 hereof) to be applied to the Obligations in accordance with
Section 6.4.
SECTION 2.5. Continuing Security Interest; Transfer of Note. This Pledge
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in
immediately available funds of all Obligations, the termination or
expiration of all Letters of Credit and the termination of all
Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the
Administrative Agent hereunder, to the benefit of the Administrative Agent
and each other Secured Party.
Without limiting the foregoing clause (c), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Pledge Agreement) or otherwise, subject, however,
to any contrary provisions in such assignment or transfer, and to the provisions
of Section 10.11 and Article IX of the Credit Agreement. Upon (i) the sale,
transfer or other
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<PAGE> 6
disposition of Collateral in accordance with the Credit Agreement or (ii) the
payment in full of all Obligations, the termination or expiration of all Letters
of Credit and the termination of all Commitments, the security interest granted
herein shall automatically terminate with respect to (x) such Collateral (in the
case of clause (i)) or (y) all Collateral (in the case of clause (ii)). Upon any
such termination, the Administrative Agent will, at the Pledgor's sole expense,
deliver to the Pledgor, without any representations, warranties or recourse of
any kind whatsoever, all certificates and instruments representing or evidencing
all Pledged Shares and all Pledged Notes, together with all other Collateral
held by the Administrative Agent hereunder, and execute and deliver to the
Pledgor such documents as the Pledgor shall reasonably request to evidence such
termination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties, etc. The Pledgor makes to
each Secured Party, as at the date of each pledge and delivery hereunder
(including each pledge and delivery of Pledged Shares and each pledge and
delivery of a Pledged Note) by the Pledgor to the Administrative Agent of any
Collateral, the representations and warranties set forth in this Article III.
SECTION 3.1.1. Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign) the Collateral, free and clear of all liens,
security interests, options, or other charges or encumbrances, except any lien
or security interest granted pursuant hereto in favor of the Administrative
Agent and Liens permitted to exist under Section 7.2.3 of the Credit Agreement.
SECTION 3.1.2. Valid Security Interest. The delivery of the Collateral to
the Administrative Agent is effective to create a valid, perfected, first
priority security interest (subject to Liens permitted to exist under Section
7.2.3 of the Credit Agreement) in such Collateral and all proceeds thereof,
securing the Obligations. Possession by the Administrative Agent of the
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Collateral is the only action necessary to perfect or protect such security
interest in the Collateral, subject to Section 9- 306 of the U.C.C.
SECTION 3.1.3. As to Pledged Shares. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly authorized and
validly issued, fully paid, and non-assessable, and constitute all of the issued
and outstanding shares of Capital Stock of each Pledged Share Issuer. The
Pledgor has no Subsidiaries other than the Pledged Share Issuers, except as set
forth in Item C of Attachment 1.
SECTION 3.1.4. As to Pledged Notes. In the case of each Pledged Note, all
of such Pledged Notes have been duly authorized, executed, endorsed, issued and
delivered, and are the legal, valid and binding obligation of the issuers
thereof, and are not in default.
SECTION 3.1.5. Authorization, Approval, etc. No authorization, approval,
or other action by, and no notice to or filing with, any governmental authority,
regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance (other
than filings required under Section 9-306 of the U.C.C. with respect to
proceeds (i) with respect to non-stock Distributions and (ii) of
Collateral) of this Pledge Agreement by the Pledgor, or
(b) for the exercise by the Administrative Agent of the voting or
other rights provided for in this Pledge Agreement, or, except with
respect to any Pledged Shares, as may be required in connection with a
disposition of such Pledged Shares by laws affecting the offering and sale
of securities generally, the remedies in respect of the Collateral
pursuant to this Pledge Agreement.
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<PAGE> 8
ARTICLE IV
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, etc. The Pledgor will
not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except for Liens permitted to exist under Section 7.2.3 of the
Credit Agreement). The Pledgor will warrant and defend the right and title
herein granted to the Administrative Agent in and to the Collateral (and all
right, title, and interest represented by the Collateral) against the claims and
demands of all Persons whomsoever (except those holders of Liens permitted to
exist under Section 7.2.3 of the Credit Agreement). The Pledgor agrees that at
any time, and from time to time, at the expense of the Pledgor, the Pledgor will
promptly execute and deliver all further instruments, and take all further
action, that may be necessary, or that the Administrative Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Administrative Agent to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
SECTION 4.2. Stock Powers, etc. The Pledgor agrees that all Pledged Shares
(and all other shares of Capital Stock constituting Collateral) delivered by the
Pledgor pursuant to this Pledge Agreement will be accompanied by duly executed
undated blank stock powers, or other equivalent instruments of transfer
acceptable to the Administrative Agent. The Pledgor will, from time to time upon
the request of the Administrative Agent, promptly deliver to the Administrative
Agent such stock powers, instruments, and similar documents, satisfactory in
form and substance to the Administrative Agent, with respect to the Collateral
as the Administrative Agent may reasonably request and will, from time to time
upon the request of the Administrative Agent upon the occurrence and during the
continuance of any Event of Default, promptly transfer any Pledged Shares or
other shares of common stock constituting Collateral into the name of any
nominee designated by the Administrative Agent.
SECTION 4.3. Continuous Pledge. The Pledgor will, subject to the terms
hereof, at all times keep pledged to the Administrative Agent pursuant hereto
all Pledged Shares and all
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other shares of Capital Stock constituting Collateral, all rights to Dividends
and Distributions with respect thereto, all Pledged Notes, all interest,
principal and other proceeds received by the Administrative Agent with respect
to the Pledged Notes, and all other Collateral and other securities,
instruments, proceeds, and rights from time to time received by or distributable
to the Pledgor in respect of any Collateral and will not permit any Pledged
Share Issuer to issue any Capital Stock which shall not have been immediately
duly pledged hereunder on a first priority perfected basis.
SECTION 4.4. Voting Rights; Dividends, etc. The Pledgor agrees:
(a) after any Event of Default shall have occurred and be
continuing, promptly upon receipt of notice thereof by the Pledgor and
without any request therefor by the Administrative Agent, to deliver
(properly endorsed where required hereby or requested by the
Administrative Agent) to the Administrative Agent all Dividends,
Distributions, all interest, all principal, all other cash payments, and
all proceeds of the Collateral, all of which shall be held by the
Administrative Agent as additional Collateral for use in accordance with
Section 6.4; and
(b) after any Event of Default shall have occurred and be continuing
and the Administrative Agent has notified the Pledgor in writing of its
intention to (i) exercise its remedies at the direction of the Required
Lenders under the Credit Agreement and (ii) to exercise its voting power
under this Section 4.4(b)
(i) the Administrative Agent may exercise (to the exclusion of
the Pledgor) the voting power and all other incidental rights of
ownership with respect to any Pledged Shares or other shares of
Capital Stock constituting Collateral and the Pledgor hereby grants
the Administrative Agent an irrevocable proxy, exercisable under
such circumstances, to vote the Pledged Shares and such other
Collateral; and
(ii) promptly to deliver to the Administrative Agent such
additional proxies and other documents as
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<PAGE> 10
may be necessary to allow the Administrative Agent to exercise such
voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Pledgor but which the
Pledgor is then obligated to deliver to the Administrative Agent, shall, until
delivery to the Administrative Agent, be held by the Pledgor separate and apart
from its other property in trust for the Administrative Agent. The
Administrative Agent agrees that unless an Event of Default shall have occurred
and be continuing and the Administrative Agent shall have given the notice
referred to in Section 4.4(b), the Pledgor shall have the exclusive voting power
with respect to any shares of Capital Stock (including any of the Pledged
Shares) constituting Collateral and the Administrative Agent shall, upon the
written request of the Pledgor, promptly deliver such proxies and other
documents, if any, as shall be reasonably requested by the Pledgor which are
necessary to allow the Pledgor to exercise voting power with respect to any such
share of Capital Stock (including any of the Pledged Shares) constituting
Collateral; provided, however, that no vote shall be cast, or consent, waiver,
or ratification given, or action taken by the Pledgor that would be inconsistent
with or violate any provision of the Credit Agreement or any other Loan Document
(including this Pledge Agreement).
SECTION 4.5. Additional Undertakings. The Pledgor will not, without the
prior written consent of the Administrative Agent:
(a) enter into any agreement amending, supplementing, or waiving any
provision of any Pledged Note (including any underlying instrument
pursuant to which such Pledged Note is issued) or compromising or
releasing or extending the time for payment of any obligation of the maker
thereof; or
(b) take or omit to take any action the taking or the omission of
which would result in any impairment or alteration of any obligation of
the maker of any Pledged Note under such Pledged Note.
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<PAGE> 11
ARTICLE V
THE ADMINISTRATIVE AGENT
SECTION 5.1. Administrative Agent Appointed Attorney-in-Fact. The Pledgor
hereby irrevocably appoints the Administrative Agent the Pledgor's
attorney-in-fact, with full authority in the place and stead of the Pledgor and
in the name of the Pledgor or otherwise, from time to time in the Administrative
Agent's discretion, to take any action and to execute any instrument which the
Administrative Agent may deem necessary or advisable to accomplish the purposes
of this Pledge Agreement, including upon the occurrence and continuance of an
Event of Default:
(a) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a)
above; and
(c) to file any claims or take any action or institute any
proceedings which the Administrative Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the
rights of the Administrative Agent with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Administrative Agent Has No Duty. The powers conferred on the
Administrative Agent hereunder are solely to protect its interest (on behalf of
the Secured Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or responsibility
for
-11-
<PAGE> 12
(a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to
any Pledged Property, whether or not the Administrative Agent has or is
deemed to have knowledge of such matters, or
(b) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.3. Reasonable Care. The Administrative Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, the Administrative Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
any of the Collateral, if it takes such action for that purpose as the Pledgor
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of Default, but failure of the
Administrative Agent to comply with any such request at any time shall not in
itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured
party on default under the U.C.C. (whether or not the U.C.C. applies to
the affected Collateral) and also may, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Administrative Agent's offices or
elsewhere, for cash, on credit or for future delivery, in each case upon
such terms as the Administrative Agent may deem commercially reasonable.
The Pledgor agrees that, to the extent notice of sale shall be required by
law, at least ten days' prior
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<PAGE> 13
notice to the Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Administrative Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. The
Administrative Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was
so adjourned.
(b) The Administrative Agent may, subject to the provisions of this
Agreement,
(i) transfer all or any part of the Collateral into the name
of the Administrative Agent or its nominee, with or without
disclosing that such Collateral is subject to the lien and security
interest hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Administrative Agent of any amount due or to
become due thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or
not longer than the original period) any obligations of any nature
of any party with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
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<PAGE> 14
SECTION 6.2. Securities Laws. If the Administrative Agent shall determine
to exercise its right to sell all or any of the Collateral pursuant to Section
6.1, the Pledgor agrees that, upon request of the Administrative Agent, the
Pledgor will, at its own expense:
(a) execute and deliver, and cause each issuer of the Collateral
contemplated to be sold and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be
done all such other acts and things, as may be necessary or, in the
opinion of the Administrative Agent, advisable to register such Collateral
under the provisions of the Securities Act of 1933, as from time to time
amended (the "Securities Act"), and to cause the registration statement
relating thereto to become effective and to remain effective for such
period as prospectuses are required by law to be furnished, and to make
all amendments and supplements thereto and to the related prospectus
which, in the opinion of the Administrative Agent, are necessary or
advisable, all in conformity with the requirements of the Securities Act
and the rules and regulations of the Securities and Exchange Commission
applicable thereto;
(b) use its best efforts to qualify the Collateral under the state
securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Collateral, as requested by the
Administrative Agent;
(c) cause each such issuer to make available to its security
holders, as soon as practicable, an earnings statement that will satisfy
the provisions of Section 11(a) of the Securities Act; and
(d) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Collateral or any part thereof valid
and binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Administrative Agent or the Secured
Parties by reason of the failure by the Pledgor to perform any of the covenants
contained
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<PAGE> 15
in this Section and, consequently, agrees that, if the Pledgor shall fail to
perform any of such covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value (as determined by the Administrative
Agent) of the Collateral on the date the Administrative Agent shall demand
compliance with this Section.
SECTION 6.3. Compliance with Restrictions. The Pledgor agrees that in any
sale of any of the Collateral whenever an Event of Default shall have occurred
and be continuing, the Administrative Agent is hereby authorized to comply with
any limitation or restriction in connection with such sale as it may be advised
by counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and the Pledgor further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall the Administrative Agent be liable nor accountable
to the Pledgor for any discount allowed by the reason of the fact that such
Collateral is sold in compliance with any such limitation or restriction.
SECTION 6.4. Application of Proceeds. All cash proceeds received by the
Administrative Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Administrative Agent, be held by the Administrative Agent in an interest
bearing account as additional collateral security for, or then or at any time
thereafter be applied (after payment of any amounts payable to the
Administrative Agent pursuant to Section 10.3 of the Credit Agreement and
Section 6.5) in whole or in part by the Administrative Agent against, all or any
part of the Obligations in such order as the Administrative Agent shall elect.
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<PAGE> 16
Any surplus of such cash or cash proceeds held by the Administrative Agent
and remaining after payment in full in cash of all the Obligations, the
termination or expiration of all Letters of Credit and the termination of all
Commitments, shall be paid over to the Pledgor or to whomsoever may be lawfully
entitled to receive such surplus.
SECTION 6.5. Indemnity and Expenses. The Pledgor hereby indemnifies and
holds harmless the Administrative Agent from and against any and all claims,
losses, and liabilities arising out of or resulting from this Pledge Agreement
(including enforcement of this Pledge Agreement), except claims, losses, or
liabilities resulting from the Administrative Agent's gross negligence or wilful
misconduct. Upon demand, the Pledgor will pay to the Administrative Agent the
amount of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the
Administrative Agent may incur in connection with:
(a) the administration of this Pledge Agreement;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the
Administrative Agent hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
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<PAGE> 17
SECTION 7.2. Amendments, etc. No amendment to or waiver of any provision
of this Pledge Agreement nor consent to any departure by the Pledgor herefrom
shall in any event be effective unless the same shall be in writing and signed
by the Administrative Agent (on behalf of the Lenders or the Required Lenders,
as the case may be) and the Pledgor, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it is given.
SECTION 7.3. Protection of Collateral. The Administrative Agent may from
time to time, at its option, perform any act which the Pledgor agrees hereunder
to perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Administrative Agent may from time to time take any other action which the
Administrative Agent reasonably deems necessary for the maintenance,
preservation or protection of any of the Collateral or of its security interest
therein.
SECTION 7.4. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telegraphic communication)
and mailed or telecopied or delivered to either party hereto, addressed to such
party at such party's address specified in the Credit Agreement. All such
notices and other communications, when mailed and properly addressed with
postage prepaid or if properly addressed and sent by pre-paid courier service,
shall be deemed given when received; any such notice or communication, if
transmitted by telecopier, shall be deemed given when transmitted and
electronically confirmed.
SECTION 7.5. Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.6. Severability. Wherever possible each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Pledge Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without
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<PAGE> 18
invalidating the remainder of such provision or the remaining provisions of this
Pledge Agreement.
SECTION 7.7. Counterparts. This Pledge Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.8. Governing Law, Entire Agreement, etc. THIS PLEDGE AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS PLEDGE AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
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<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
PROSOURCE SERVICES CORPORATION
By /s/ Paul A. Garcia de Quevedo
--------------------------------
Name: Paul A. Garcia de Quevedo
Title: Vice President, Secretary
Treasurer
THE BANK OF NOVA SCOTIA, as
Administrative Agent
By /s/ Frank F. Sandler
--------------------------------
Name: Frank A. Sandler
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<PAGE> 20
EXHIBIT A
to Borrower
Pledge Agreement
PROMISSORY NOTE
$___________________ ________________, 19__
FOR VALUE RECEIVED, the undersigned, [Name of Maker], a _______________
__________ (the "Maker"), promises to pay to the order of ProSource Services
Corporation, a Delaware corporation (the "Payee"), in equal ________
installments, commencing _________, 19__ to and including ___________, 19__,
the principal sum of __________ DOLLARS ($______), representing the aggregate
principal amount of an intercompany loan made by the Payee to the Maker.
The unpaid principal amount of this promissory note (this "Note") from
time to time outstanding shall bear interest at a rate of interest equal to
____________, which the Maker represents to be a lawful and commercially
reasonable rate, payable __________, and all payments of principal of and
interest on this Note shall be payable in lawful currency of the United States
of America. All such payments shall be made by the Maker to an account
established by the Payee at _______________ and shall be recorded on the grid
attached hereto by the holder hereof (including the Administrative Agent as
pledgee). Upon notice from the Administrative Agent (hereinafter defined) that
an Event of Default (as defined in the Credit Agreement) has occurred and is
continuing under the Credit Agreement, the Maker shall make such payments, in
same day funds, to such other account as the Administrative Agent shall direct
in such notice.
This Note is one of the Pledged Notes referred to in, and evidences
Indebtedness incurred pursuant to Section 7.2.2 of the Credit Agreement, dated
as of March [14], 1997 (as amended, supplemented, amended and restated or
otherwise modified from time to time, the "Credit Agreement"), among the Payee,
The Bank of Nova Scotia, as the administrative agent (the "Administrative
Agent"), and various financial institutions as are, or may from time to time
become, parties thereto. Upon the occurrence and continuance of an Event of
Default under the Credit Agreement,
<PAGE> 21
and notice thereof by the Administrative Agent to the Maker, the Administrative
Agent shall have all rights of the Payee to collect and accelerate, and enforce
all rights with respect to, the Indebtedness evidenced by this Note. Unless
otherwise defined herein or the context otherwise requires, terms used herein
have the meanings provided in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the Pledge
Agreement pursuant to which this Note has been pledged to the Administrative
Agent as security for the Obligations outstanding from time to time under the
Credit Agreement and each other Loan Document.
In addition to, but not in limitation of, the foregoing, the Maker further
agrees to pay all expenses, including reasonable attorneys' fees and legal
expenses, incurred by the holder (including the Administrative Agent as pledgee)
of this Note endeavoring to collect any amounts payable hereunder which are not
paid when due, whether by acceleration or otherwise.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS
NOTE. THE MAKER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PAYEE TO ACCEPT THIS NOTE.
[NAME OF MAKER]
By__________________________________
Name:
Title:
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<PAGE> 22
Pay to the order of THE BANK OF
NOVA SCOTIA, as Administrative
Agent
PROSOURCE SERVICES CORPORATION
By /s/ Paul A. Garcia de Quevedo
------------------------------
Name: Paul A. Garcia de Quevedo
Title: Vice President, Secretary
and Treasurer
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<PAGE> 23
GRID
Intercompany Loans made by [Name of Payee] to ProSource Services
Corporation and payments of principal of such Loans.
================================================================================
Amount of Amount of Outstanding
Intercompany Principal Principal Notation
Date Loan Payment Balance Made By
- ----------- ----------------- ----------------- ---------------- -----------
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================================================================================
<PAGE> 24
ATTACHMENT 1
to Borrower
Pledge Agreement
Item A. Pledged Notes
-------------
Pledged Note Issuer Description
- ------------------- -----------
Item B. Pledged Shares
--------------
Common Stock
---------------------------------------
Authorized Outstanding % of Shares
Pledged Share Issuer Shares Shares Pledged
- -------------------- ------ ------ -------
Item C. Additional Subsidiaries
-----------------------
<PAGE> 1
EXHIBIT 10.24
PARENT PLEDGE AGREEMENT
This PARENT PLEDGE AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Pledge Agreement"),
dated as of March 14, 1997, is made by PROSOURCE, INC., a Delaware corporation
(the "Pledgor"), in favor of THE BANK OF NOVA SCOTIA, as administrative agent
(together with any successor(s) thereto in such capacity, the "Administrative
Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of March 14, 1997 (as
amended, supplemented, amended and restated or otherwise modified from time to
time, the "Credit Agreement"), among ProSource Services Corporation, a Delaware
corporation (the "Borrower"), the various financial institutions as are, or may
from time to time become, parties thereto (each, individually, a "Lender", and
collectively, the "Lenders") and the Administrative Agent, the Lenders and the
Issuer have extended Commitments to make Credit Extensions to the Borrower;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Pledgor
is required to execute and deliver this Pledge Agreement;
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
WHEREAS, it is in the best interests of the Pledgor to execute this Pledge
Agreement inasmuch as the Pledgor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrower by
the Lenders and the Issuer pursuant to the Credit Agreement;
<PAGE> 2
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuer to make Credit Extensions (including the initial Credit
Extension) to the Borrower pursuant to the Credit Agreement, the Pledgor agrees,
for the benefit of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Borrower" is defined in the first recital.
"Collateral" is defined in Section 2.1.
"Credit Agreement" is defined in the first recital.
"Distributions" means all stock dividends, liquidating dividends, shares
of stock resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
Capital Stock constituting Collateral, but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with respect to
any Pledged Shares or other Pledged Property made in the ordinary course of
business and not a liquidating dividend.
"Lender" and "Lenders" are defined in the first recital.
"Pledge Agreement" is defined in the preamble.
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<PAGE> 3
"Pledged Property" means all Pledged Shares, and all other pledged shares
of Capital Stock or promissory notes, all other securities, all assignments of
any amounts due or to become due, all other instruments which are now being
delivered by the Pledgor to the Administrative Agent or are from time to time
hereafter required to be delivered by the Pledgor to the Administrative Agent
for the purpose of pledge under this Pledge Agreement or any other Loan
Document, and all proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Item B of
Attachment 1 hereto as the issuer of the Pledged Shares identified opposite the
name of such Person.
"Pledged Shares" means all shares of Capital Stock of any Pledged Share
Issuer which are delivered or required to be delivered by the Pledgor to the
Administrative Agent as Pledged Property hereunder.
"Pledgor" is defined in the preamble.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in Section 6.2.
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or in the
Credit Agreement or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Pledge Agreement, including its preamble
and recitals, with such meanings.
-3-
<PAGE> 4
ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, collaterally assigns, and mortgages in favor of the Administrative
Agent, for its benefit and the ratable benefit of each of the Secured Parties,
and hereby grants to the Administrative Agent, for its benefit and the ratable
benefit of the Secured Parties, a continuing security interest in, all of the
following property (the "Collateral"):
(a) all issued and outstanding shares of Capital Stock of each
Pledged Share Issuer identified in Item B of Attachment 1 hereto;
(b) all other Pledged Shares issued from time to time;
(c) all other Pledged Property, whether now or hereafter delivered
to the Administrative Agent in connection with this Pledge Agreement;
(d) all Dividends, Distributions, and other payments and rights with
respect to any Pledged Property; and
(e) all proceeds of any of the foregoing.
SECTION 2.2. Security for Obligations. This Pledge Agreement secures the
payment in full of all Obligations of the Borrower now or hereafter existing
under the Credit Agreement, the Notes and each other Loan Document to which the
Borrower is or may become a party, whether for principal, interest, costs, fees,
expenses, or otherwise, and all obligations of the Pledgor and each other
Obligor whether now or hereafter existing under this Pledge Agreement and each
other Loan Document to which the Pledgor or such other Obligor is or may become
a party (all such obligations of the Borrower, the Pledgor and such other
Obligor being the "Secured Obligations").
SECTION 2.3. Delivery of Pledged Property. All certificates or instruments
representing or evidencing any Collateral, including all Pledged Shares shall be
delivered to and held by or on behalf of the Administrative Agent pursuant
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<PAGE> 5
hereto, shall be in suitable form for transfer by delivery, and shall be
accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION 2.4. Dividends on Pledged Shares. In the event that any Dividend
or liquidating dividend is permitted to be paid (in accordance with Section
7.2.6 of the Credit Agreement) on any Pledged Share, such Dividend, liquidating
dividend or payment may be paid directly to the Pledgor. If any Dividend,
liquidating dividend or payment is paid in contravention of Section 7.2.6 of the
Credit Agreement, the Pledgor shall hold the same segregated and in trust for
the Administrative Agent (in accordance with Section 4.1.4 hereof) to be applied
to the Secured Obligations in accordance with Section 6.4.
SECTION 2.5. Continuing Security Interest; Transfer of Note. This Pledge
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in
immediately available funds of all Secured Obligations, the termination or
expiration of all Letters of Credit and the termination of all
Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the
Administrative Agent hereunder, to the benefit of the Administrative Agent
and each other Secured Party.
Without limiting the foregoing clause (c), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Pledge Agreement) or otherwise, subject, however,
to any contrary provisions in such assignment or transfer, and to the provisions
of Section 10.11 and Article IX of the Credit Agreement. Upon (i) the sale,
transfer or other disposition of Collateral in accordance with the Credit
Agreement or (ii) the payment in full of all Secured Obligations, the
termination or expiration of all Letters of Credit and the
-5-
<PAGE> 6
termination of all Commitments, the security interests granted herein shall
automatically terminate with respect to (x) such Collateral (in the case of
clause (i)) or (y) all Collateral (in the case of clause (ii)). Upon any such
sale, transfer, disposition or termination, the Administrative Agent will, at
the Pledgor's sole expense, deliver to the Pledgor, without any representations,
warranties or recourse of any kind whatsoever, all certificates and instruments
representing or evidencing all Pledged Shares, together with all other
Collateral held by the Administrative Agent hereunder, and execute and deliver
to the Pledgor such documents as the Pledgor shall reasonably request to
evidence such termination.
SECTION 2.6. Security Interest Absolute. All rights of the Administrative
Agent and the security interests granted to the Administrative Agent hereunder,
and all obligations of the Pledgor hereunder, shall be absolute and
unconditional, irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against the Borrower, any other Obligor or any other Person
under the provisions of the Credit Agreement, any Note, any other
Loan Document or otherwise, or
(ii) to exercise any right or remedy against any other
guarantor of, or collateral securing, any Secured Obligations,
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of waiver,
release, surrender,
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alteration or compromise, and shall not be subject to (and the Pledgor
hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other modification of,
or any consent to departure from, any of the terms of the Credit
Agreement, any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver
or release of or addition to or consent to departure from any guaranty,
for any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the Pledgor,
the Borrower, any other Obligor, any surety or any guarantor.
SECTION 2.7. Postponement of Subrogation, etc. The Pledgor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in immediately available funds, of all Secured
Obligations, the termination or expiration of all Letters of Credit and the
termination of all Commitments. Any amount paid to the Pledgor on account of any
payment made utilizing any Collateral or proceeds thereof prior to the payment
in full of all Secured Obligations shall be held in trust for the benefit of the
Secured Parties and each holder of a Note and shall immediately be paid to the
Administrative Agent and applied against the Secured Obligations, whether
matured or unmatured, in accordance with Section 6.4; provided, however, that if
(a) the Pledgor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Secured Obligations, and
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(b) all Secured Obligations have been paid in full, all Letters of
Credit have been terminated or expired and all Commitments have been
terminated,
each Secured Party and each holder of a Note agrees that, at the Pledgor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Pledgor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Pledgor of an interest in the Secured Obligations resulting from such
payment by the Pledgor. In furtherance of the foregoing, for so long as any
Secured Obligations, Letters of Credit or Commitments remain outstanding, the
Pledgor shall refrain from taking any action or commencing any proceeding
against the Borrower or any other Obligor (or its successors or assigns, whether
in connection with a bankruptcy proceeding or otherwise) to recover any amounts
in respect of payments made utilizing Collateral or any proceeds thereof to the
Administrative Agent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties, etc. The Pledgor represents
and warrants to each Secured Party, as at the date of each pledge and delivery
hereunder (including each pledge and delivery of Pledged Shares and each pledge
and delivery of a Pledged Note) by the Pledgor to the Administrative Agent of
any Collateral, that the representations and warranties contained in the Parent
Guaranty and in Article VI of the Credit Agreement insofar as the
representations and warranties contained therein are applicable to the Pledgor
and its properties are true and correct in all material respects, each such
representation and warranty set forth therein (insofar as applicable as
aforesaid) and all other terms of the Credit Agreement to which reference is
made therein, together with all related definitions and ancillary provisions,
being hereby incorporated into this Pledge Agreement by reference as though
specifically set forth in this Article III.
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SECTION 3.1.1. Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign) such Collateral, free and clear of all
liens, security interests, options, or other charges or encumbrances, except any
lien or security interest granted pursuant hereto in favor of the Administrative
Agent and Liens of the type permitted to exist under Section 7.2.3 of the Credit
Agreement.
SECTION 3.1.2. Valid Security Interest. The delivery of Collateral to the
Administrative Agent is effective to create a valid, perfected, first priority
security interest (subject to Liens permitted to exist under Section 7.2.3 of
the Credit Agreement) in such Collateral and all proceeds thereof, securing the
Secured Obligations. Possession by the Administrative Agent of the Collateral is
the only action necessary to perfect or protect such security interest in the
Collateral subject to Section 9-306 of the U.C.C.
SECTION 3.1.3. As to Pledged Shares. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly authorized and
validly issued, fully paid, and non-assessable, and constitute all of the issued
and outstanding shares of Capital Stock of each Pledged Share Issuer. The
Pledgor has no Subsidiaries other than the Pledged Share Issuers.
SECTION 3.1.4. Authorization, Approval, etc. No authorization, approval,
or other action by, and no notice to or filing with, any governmental authority,
regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance (other
than filings required (i) with respect to non-stock Distributions and (ii)
under Section 9-306 the U.C.C. with respect to proceeds of Collateral) of
this Pledge Agreement by the Pledgor, or
(b) for the exercise by the Administrative Agent of the voting or
other rights provided for in this Pledge Agreement, or, except with
respect to any Pledged Shares, as may be required in connection with a
disposition of such Pledged Shares by laws affecting the offering and sale
of
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securities generally, the remedies in respect of the Collateral pursuant
to this Pledge Agreement.
SECTION 3.1.5. Compliance with Laws. The Pledgor is in compliance with the
requirements of all applicable laws (including the provisions of the Fair Labor
Standards Act), rules, regulations and orders of every governmental authority,
the non-compliance with which could reasonably be expected to have a Material
Adverse Effect or which could reasonably be expected to materially adversely
affect the value of the Collateral or the worth of the Collateral as collateral
security.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. The Pledgor covenants and agrees that, so
long as any portion of the Secured Obligations shall remain unpaid, any Letters
of Credit shall be outstanding or any Secured Party shall have any outstanding
Commitment, the Pledgor will, unless the Required Lenders shall otherwise
consent in writing, perform, comply with and be bound by (a) all of the
agreements, covenants and obligations contained in the Parent Guaranty, each
such agreement, covenant and obligation contained in the Parent Guaranty and all
other terms of the Parent Guaranty to which reference is made herein, together
with all related definitions and ancillary provisions, being hereby incorporated
into this Pledge Agreement by reference as though specifically set forth in this
Section and (b) the obligations set forth in this Section.
SECTION 4.1.1. Protect Collateral; Further Assurances, etc. The Pledgor
will not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (other than Liens permitted to exist under Section 7.2.3 of the
Credit Agreement). The Pledgor will warrant and defend the right and title
herein granted to the Administrative Agent in and to the Collateral (and all
right, title, and interest represented by the Collateral) against the claims and
demands of all Persons whomsoever (other than holders of Liens permitted to
exist under Section 7.2.3 of the Credit Agreement). The Pledgor agrees that at
any time, and from time to time, at the expense of the Pledgor, the Pledgor will
promptly
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execute and deliver all further instruments, and take all further action, that
may be necessary or that the Administrative Agent may reasonably request, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Administrative Agent to exercise and enforce its
rights and remedies hereunder with respect to any Collateral.
SECTION 4.1.2. Stock Powers, etc. The Pledgor agrees that all Pledged
Shares (and all other shares of Capital Stock constituting Collateral) delivered
by the Pledgor pursuant to this Pledge Agreement will be accompanied by duly
executed undated blank stock powers, or other equivalent instruments of transfer
acceptable to the Administrative Agent. The Pledgor will, from time to time upon
the request of the Administrative Agent, promptly deliver to the Administrative
Agent such stock powers, instruments, and similar documents, satisfactory in
form and substance to the Administrative Agent, with respect to the Collateral
as the Administrative Agent may reasonably request and will, from time to time
upon the request of the Administrative Agent upon the occurrence and during the
continuance of any Event of Default, promptly transfer any Pledged Shares or
other shares of Capital Stock constituting Collateral into the name of any
nominee designated by the Administrative Agent.
SECTION 4.1.3. Continuous Pledge. The Pledgor will, subject to the terms
hereof, at all times keep pledged to the Administrative Agent pursuant hereto
all Pledged Shares and all other shares of Capital Stock constituting
Collateral, all rights to Dividends and Distributions with respect thereto, and
other proceeds received by the Administrative Agent, and all other Collateral
and other securities, instruments, proceeds, and rights from time to time
received by or distributable to the Pledgor in respect of any Collateral and
will not permit any Pledged Share Issuer to issue any Capital Stock which shall
not have been immediately duly pledged hereunder on a first priority perfected
basis.
SECTION 4.1.4. Voting Rights; Dividends, etc. The Pledgor agrees:
(a) after any Default of the nature referred to in Section 8.1.9 of
the Credit Agreement or any Event of Default shall have occurred and be
continuing, promptly upon
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receipt of notice thereof by the Pledgor and without any request therefor
by the Administrative Agent, to deliver (properly endorsed where required
hereby or requested by the Administrative Agent) to the Administrative
Agent all Dividends, Distributions, all other cash payments, and all
proceeds of the Collateral, all of which shall be held by the
Administrative Agent as additional Collateral for use in accordance with
Section 6.4; and
(b) after any Event of Default shall have occurred and be continuing
and the Administrative Agent shall have notified the Pledgor in writing of
its intention to (i) exercise its remedies at the direction of the
Required Lenders under the Credit Agreement and its intention to exercise
its voting power under this Section 4.1.4(b)
(i) the Administrative Agent may exercise (to the exclusion of
the Pledgor) the voting power and all other incidental rights of
ownership with respect to any Pledged Shares or other shares of
Capital Stock constituting Collateral and the Pledgor hereby grants
the Administrative Agent an irrevocable proxy, exercisable under
such circumstances, to vote the Pledged Shares and such other
Collateral; and
(ii) promptly to deliver to the Administrative Agent such
additional proxies and other documents as may be necessary to allow
the Administrative Agent to exercise such voting power.
All Dividends, Distributions, cash payments, and proceeds which may at any time
and from time to time be held by the Pledgor but which the Pledgor is then
obligated to deliver to the Administrative Agent, shall, until delivery to the
Administrative Agent, be held by the Pledgor separate and apart from its other
property in trust for the Administrative Agent. The Administrative Agent agrees
that unless an Event of Default shall have occurred and be continuing and the
Administrative Agent shall have given the notice referred to in Section
4.1.4(b), the Pledgor shall have the exclusive voting power with respect to any
shares of Capital Stock (including any of the Pledged Shares) constituting
Collateral and the Administrative Agent shall, upon the written request of the
Pledgor, promptly deliver such proxies
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and other documents, if any, as shall be reasonably requested by the Pledgor
which are necessary to allow the Pledgor to exercise voting power with respect
to any such share of Capital Stock (including any of the Pledged Shares)
constituting Collateral; provided, however, that no vote shall be cast, or
consent, waiver, or ratification given, or action taken by the Pledgor that
would be inconsistent with or violate any provision of the Credit Agreement or
any other Loan Document (including this Pledge Agreement).
ARTICLE V
THE ADMINISTRATIVE AGENT
SECTION 5.1. Administrative Agent Appointed Attorney-in-Fact. The Pledgor
hereby irrevocably appoints the Administrative Agent the Pledgor's
attorney-in-fact, with full authority in the place and stead of the Pledgor and
in the name of the Pledgor or otherwise, from time to time in the Administrative
Agent's discretion, to take any action and to execute any instrument which the
Administrative Agent may deem necessary or advisable to accomplish the purposes
of this Pledge Agreement, including upon the occurrence and during the
continuance of an Event of Default:
(a) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a)
above; and
(c) to file any claims or take any action or institute any
proceedings which the Administrative Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the
rights of the Administrative Agent with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
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SECTION 5.2. Administrative Agent Has No Duty. The powers conferred on the
Administrative Agent hereunder are solely to protect its interest (on behalf of
the Secured Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or responsibility
for
(a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to
any Pledged Property, whether or not the Administrative Agent has or is
deemed to have knowledge of such matters, or
(b) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.3. Reasonable Care. The Administrative Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, the Administrative Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
any of the Collateral, if it takes such action for that purpose as the Pledgor
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of Default, but failure of the
Administrative Agent to comply with any such request at any time shall not in
itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the
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rights and remedies of a secured party on default under the U.C.C.
(whether or not the U.C.C. applies to the affected Collateral) and also
may, without notice except as specified below, sell the Collateral or any
part thereof in one or more parcels at public or private sale, at any of
the Administrative Agent's offices or elsewhere, for cash, on credit or
for future delivery, in each case upon such terms as the Administrative
Agent may deem commercially reasonable. The Pledgor agrees that, to the
extent notice of sale shall be required by law, at least ten days' prior
notice to the Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Administrative Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. The
Administrative Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was
so adjourned.
(b) The Administrative Agent may, subject to the provisions of this
Agreement,
(i) transfer all or any part of the Collateral into the name
of the Administrative Agent or its nominee, with or without
disclosing that such Collateral is subject to the lien and security
interest hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Administrative Agent of any amount due or to
become due thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or
not longer than the original period) any obligations of any nature
of any party with respect thereto,
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(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2. Securities Laws. If the Administrative Agent shall determine
to exercise its right to sell all or any of the Collateral pursuant to Section
6.1, the Pledgor agrees that, upon request of the Administrative Agent, the
Pledgor will, at its own expense:
(a) execute and deliver, and cause each issuer of the Collateral
contemplated to be sold and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be
done all such other acts and things, as may be necessary or, in the
opinion of the Administrative Agent, advisable to register such Collateral
under the provisions of the Securities Act of 1933, as from time to time
amended (the "Securities Act"), and to cause the registration statement
relating thereto to become effective and to remain effective for such
period as prospectuses are required by law to be furnished, and to make
all amendments and supplements thereto and to the related prospectus
which, in the opinion of the Administrative Agent, are necessary or
advisable, all in conformity with the requirements of the Securities Act
and the rules and regulations of the Securities and Exchange Commission
applicable thereto;
(b) use its best efforts to qualify the Collateral under the state
securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Collateral, as requested by the
Administrative Agent;
(c) cause each such issuer to make available to its security
holders, as soon as practicable, an earnings
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statement that will satisfy the provisions of Section 11(a) of the
Securities Act; and
(d) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Collateral or any part thereof valid
and binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Administrative Agent or the Secured
Parties by reason of the failure by the Pledgor to perform any of the covenants
contained in this Section and, consequently, agrees that, if the Pledgor shall
fail to perform any of such covenants, it shall pay, as liquidated damages and
not as a penalty, an amount equal to the value (as determined by the
Administrative Agent) of the Collateral on the date the Administrative Agent
shall demand compliance with this Section.
SECTION 6.3. Compliance with Restrictions. The Pledgor agrees that in any
sale of any of the Collateral whenever an Event of Default shall have occurred
and be continuing, the Administrative Agent is hereby authorized to comply with
any limitation or restriction in connection with such sale as it may be advised
by counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and the Pledgor further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall the Administrative Agent be liable nor accountable
to the Pledgor for any discount allowed by the reason of the fact that such
Collateral is sold in compliance with any such limitation or restriction.
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SECTION 6.4. Application of Proceeds. All cash proceeds received by the
Administrative Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Administrative Agent, be held by the Administrative Agent in an interest
bearing account as additional collateral security for, or then or at any time
thereafter be applied (after payment of any amounts payable to the
Administrative Agent pursuant to Section 10.3 of the Credit Agreement and
Section 6.5) against, the Secured Obligations in such order as the
Administrative Agent shall elect.
Any surplus of such cash or cash proceeds held by the Administrative Agent
and remaining after payment in full of all the Secured Obligations, the
termination or expiration of all Letters of Credit and the termination of all
Commitments, shall be paid over to the Pledgor or to whomsoever may be lawfully
entitled to receive such surplus.
SECTION 6.5. Indemnity and Expenses. The Pledgor hereby agrees to
indemnify and hold harmless the Administrative Agent from and against any and
all claims, losses, and liabilities arising out of or resulting from this Pledge
Agreement (including enforcement of this Pledge Agreement), except claims,
losses, or liabilities resulting from the Administrative Agent's gross
negligence or wilful misconduct. Upon demand, the Pledgor will pay to the
Administrative Agent the amount of any and all reasonable expenses, including
the reasonable fees and disbursements of its counsel and of any experts and
agents, which the Administrative Agent may incur in connection with:
(a) the administration of this Pledge Agreement;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the
Administrative Agent hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
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ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. Amendments, etc. No amendment to or waiver of any provision
of this Pledge Agreement nor consent to any departure by the Pledgor herefrom
shall in any event be effective unless the same shall be in writing and signed
by the Administrative Agent (on behalf of the Lenders or the Required Lenders,
as the case may be) and the Pledgor, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it is given.
SECTION 7.3. Protection of Collateral. The Administrative Agent may from
time to time, at its option, perform any act which the Pledgor agrees hereunder
to perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Administrative Agent may from time to time take any other action which the
Administrative Agent reasonably deems necessary for the maintenance,
preservation or protection of any of the Collateral or of its security interest
therein.
SECTION 7.4. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telegraphic communication)
and, if to the Pledgor, mailed or telecopied or delivered to it, addressed to it
in care of the Borrower at the address of the Borrower specified in the Credit
Agreement, if to the Administrative Agent, mailed or telecopied or delivered to
it, addressed to it at the address of the Administrative Agent specified in the
Credit Agreement. All such notices and other communications, when mailed and
properly addressed with postage prepaid or if properly addressed and sent by
pre-paid courier service, shall be deemed given when received; any such notice
or communication, if transmitted by telecopier,
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shall be deemed given when transmitted and electronically confirmed.
SECTION 7.5. Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.6. Severability. Wherever possible each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Pledge Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Pledge Agreement.
SECTION 7.7. Governing Law, Entire Agreement, etc. THIS PLEDGE AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS PLEDGE AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.8. Counterparts. This Pledge Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
PROSOURCE, INC.
By /s/ Paul A. Garcia de Quevedo
-----------------------------
Name: Paul A. Garcia
Title: Vice President, Secretary
and Treasurer
THE BANK OF NOVA SCOTIA, as
Administrative Agent
By /s/ Frank F. Sandler
-----------------------------
Name: Frank F. Sandler
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ATTACHMENT 1
to Parent
Pledge Agreement
Item A. Pledged Shares
--------------
Common Stock
---------------------------------------
Authorized Outstanding % of Shares
Pledged Share Issuer Shares Shares Pledged
- -------------------- ------ ------ -------
Item B.
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<PAGE> 1
EXHIBIT 10.25
PARENT GUARANTY
This PARENT GUARANTY (as amended, supplemented, amended and restated or
otherwise modified from time to time, this "Guaranty"), dated as of March 14,
1997, is made by PROSOURCE, INC., a Delaware corporation (the "Guarantor"), in
favor of THE BANK OF NOVA SCOTIA, as administrative agent (the "Administrative
Agent") for each of the Secured Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of March 14, 1997 (as
amended, supplemented, amended and restated or otherwise modified from time to
time, the "Credit Agreement"), among ProSource Services Corporation, a Delaware
corporation (the "Borrower"), the various financial institutions as are, or may
from time to time become, parties thereto (each, individually, a "Lender", and
collectively, the "Lenders") and the Administrative Agent, the Lenders and the
Issuer have extended Commitments to make Credit Extensions to the Borrower;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the
Guarantor is required to execute and deliver this Guaranty;
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrower by
the Lenders and the Issuer pursuant to the Credit Agreement;
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lenders and the Issuer to make
Credit Extensions (including the initial Credit Extension) to the Borrower
pursuant to the Credit Agreement, the Guarantor agrees, for the benefit of each
Secured Party, as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Borrower" is defined in the first recital.
"Credit Agreement" is defined in the first recital.
"Guarantor" is defined in the preamble.
"Guaranty" is defined in the preamble.
"Lender" and "Lenders" are defined in the first recital.
"Secured Party" means, as the context may require, the Lenders, the Issuer,
the Administrative Agent, each counterparty to a Rate Protection Agreement that
is (or at the time such Rate Protection Agreement is entered into, was) a Lender
or an Affiliate thereof and (in each case), each of their respective successors,
permitted transferees and permitted assigns.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Guaranty, including its
preamble and recitals, have the meanings provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. The Guarantor hereby absolutely, unconditionally and
irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or otherwise, of all
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Obligations of the Borrower and each other Obligor now or hereafter
existing, whether for principal, interest, fees, expenses or otherwise
(including all such amounts which would become due but for the operation of
the automatic stay under Section 362(a) of the United States Bankruptcy
Code, 11 U.S.C. ss.362(a), and the operation of Sections 502(b) and 506(b)
of the United States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b)),
and
(b) indemnifies and holds harmless each Secured Party and each holder
of a Note for any and all reasonable costs and expenses (including
reasonable attorney's fees and expenses) incurred by such Secured Party or
such holder, as the case may be, in enforcing any rights under this
Guaranty.
This Guaranty constitutes a guaranty of payment when due and not of collection,
and the Guarantor specifically agrees that it shall not be necessary or required
that any Secured Party or any holder of any Note exercise any right, assert any
claim or demand or enforce any remedy whatsoever against the Borrower or any
other Obligor (or any other Person) before or as a condition to the obligations
of the Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. The Guarantor agrees that, in the
event of any Event of Default described in Section 8.1.9 of the Credit
Agreement, and if such event shall occur at a time when any of the Obligations
of the Borrower and each other Obligor may not then be due and payable, the
Guarantor agrees that it will pay to the Lenders forthwith the full amount which
would be payable hereunder by the Guarantor if all such Obligations were then
due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be
a continuing, absolute, unconditional and irrevocable guaranty of payment, and
shall remain in full force and effect until all Obligations of the Borrower and
each other Obligor have been paid in full in cash, all obligations of the
Guarantor hereunder shall have been paid in full in cash, all Letters of Credit
have been terminated or expired, all Rate Protection Agreements have been
terminated and all Commitments shall have terminated. The liability of the
Guarantor under this Guaranty shall be absolute, unconditional and irrevocable
irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note or any other Loan Document;
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against the Borrower, any other Obligor or any other Person
(including any other guarantor (including the Guarantor)) under the
provisions of the Credit Agreement, any Note, any other Loan Document
or otherwise, or
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(ii) to exercise any right or remedy against any other guarantor
(including the Guarantor) of, or collateral securing, any Obligations
of the Borrower or any other Obligor;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Borrower or any other
Obligor, or any other extension, compromise or renewal of any Obligation of
the Borrower or any other Obligor;
(d) any reduction, limitation, impairment or termination of any
Obligations of the Borrower or any other Obligor for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and the Guarantor hereby waives any right to or
claim of) any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Obligations of the Borrower, any other Obligor or
otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Secured Party or
any holder of any Note securing any of the Obligations of the Borrower or
any other Obligor; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, the Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. The Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must otherwise be restored by any Secured Party or any holder of any Note, upon
the insolvency, bankruptcy or reorganization of the Borrower, any other Obligor
or otherwise, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of the Borrower or any other Obligor and this Guaranty and any
requirement that the Administrative Agent, any other Secured Party or any holder
of any Note protect, secure, perfect or insure any security interest or Lien, or
any property subject thereto, or exhaust any right or take any action against
the Borrower, any other Obligor or any other Person (including any other
guarantor) or entity or any collateral securing the Obligations of the Borrower
or any other Obligor, as the case may be.
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SECTION 2.6. Postponement of Subrogation, etc. The Guarantor agrees that it
will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior payment in full in immediately available funds of all
Obligations of the Borrower and each other Obligor, the termination or
expiration of all Letters of Credit, and the termination of all Commitments. Any
amount paid to the Guarantor on account of any such subrogation rights prior to
the payment in full in immediately available funds Borrower and each other
Obligor shall be held in trust for the benefit of the Secured Parties and each
holder of a Note and shall immediately be paid to the Administrative Agent for
the benefit of the Secured Parties and each holder of a Note and credited and
applied against the Obligations, whether matured or unmatured, in accordance
with the terms of the Credit Agreement; provided, however, that if
(a) the Guarantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Obligations of the Borrower or
any other Obligor, and
(b) all Obligations of the Borrower and each other Obligor have been
paid in full in immediately available funds, all Letters of Credit have
been terminated or expired, and all Commitments have been permanently
terminated,
each Secured Party and each holder of a Note agrees that, at the Guarantor's
request, the Administrative Agent, on behalf of the Secured Parties and the
holders of the Notes, will execute and deliver to the Guarantor appropriate
documents (without recourse and without representation or warranty) necessary to
evidence the transfer by subrogation to the Guarantor of an interest in the
Obligations of the Borrower and each other Obligor resulting from such payment
by the Guarantor. In furtherance of the foregoing, for so long as any
Obligations or Commitments remain outstanding, the Guarantor shall refrain from
taking any action or commencing any proceeding against the Borrower or any other
Obligor (or its successors or assigns, whether in connection with a bankruptcy
proceeding or otherwise) to recover any amounts in the respect of payments made
under this Guaranty to any Secured Party or any holder of a Note.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc.
This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Administrative
Agent and each other Secured Party.
Without limiting the generality of the foregoing clause (b), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all rights and benefits in respect thereof granted
to such Lender under any Loan Document (including this Guaranty) or
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otherwise, subject, however, to any contrary provisions in such assignment or
transfer, and to the provisions of Section 10.11 and Article IX of the Credit
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders, the Issuer and the Administrative Agent to
enter into the Credit Agreement and make the Credit Extensions thereunder, and
the applicable Lender (or its Affiliate) to enter into Rate Protection
Agreements, the Guarantor represents and warrants to each of the Secured Parties
as set forth in this Article III.
SECTION 3.1. Organization, etc. The Guarantor is a corporation validly
organized and existing and in good standing under the laws of the state or
jurisdiction of its incorporation, is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the nature of
its business requires such qualification, and has full power and authority and
holds all requisite governmental licenses, permits and other approvals to enter
into and perform its Obligations under this Guaranty and each other Loan
Document to which it is a party and, to own and hold under lease its property
and to conduct its business substantially as currently conducted by it except to
the extent same could not reasonably be expected to have a Material Adverse
Effect.
SECTION 3.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Guarantor of this Guaranty and each other Loan
Document to which it is a party are within the Guarantor's corporate powers,
have been duly authorized by all necessary corporate action, and do not
(a) contravene the Guarantor's Organic Documents;
(b) contravene any Contractual Obligation binding on or affecting the
Guarantor;
(c) contravene any Governmental Approval or Governmental Rule binding
on or affecting the Guarantor; or
(d) result in, or require the creation or imposition of, any Lien on
any of the Guarantor's properties (except as permitted under the Credit
Agreement).
SECTION 3.3. Government Approval, Regulation, etc. The Guarantor is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
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SECTION 3.4. Validity, etc. This Guaranty constitutes, and each other Loan
Document executed by the Guarantor will, on the due execution and delivery
thereof, constitute, the legal, valid and binding obligations of the Guarantor,
enforceable against the Guarantor in accordance with their respective terms
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other similar
laws generally affecting creditors rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
SECTION 3.5. Litigation, Labor Controversies, etc. There is no pending or,
to the knowledge of the Guarantor, threatened litigation, action, proceeding, or
labor controversy affecting the Guarantor, or any of its properties, businesses,
assets or revenues, which could reasonably be expected to (a) have a Material
Adverse Effect or (b) legality, validity or enforceability of this Guaranty, the
Credit Agreement, the Notes, any other Loan Document or the Receivables
Transaction Documents.
SECTION 3.6. Subsidiaries. The Guarantor has no direct Subsidiaries, except
the Borrower.
SECTION 3.7. Taxes. The Guarantor has filed all tax returns and reports
required by law to have been filed by it and has paid all taxes and governmental
charges thereby shown to be due and owing, except any such taxes or charges
which are being diligently contested in good faith by appropriate proceedings
and for which adequate reserves in accordance with GAAP shall have been set
aside on its books.
SECTION 3.8. Other Representations and Warranties. In addition to the
foregoing representations and warranties, the Guarantor also represents and
warrants to each Secured Party that the representations and warranties contained
in Article VI of the Credit Agreement, insofar as the representations and
warranties contained therein are applicable to the Guarantor and its properties,
are true and correct in all material respects, each such representation and
warranty set forth in such Article (insofar as applicable as aforesaid) and all
other terms of the Credit Agreement to which reference is made therein, together
with all related definitions and ancillary provisions, being hereby incorporated
into this Guaranty by reference as though specifically set forth in this
Article.
ARTICLE IV
COVENANTS, ETC.
The Guarantor covenants and agrees that, so long as any portion of the
Obligations shall remain unpaid, any Letters of Credit shall be outstanding, or
any Lender shall have any outstanding Commitment, the Guarantor will, unless the
Required Lenders shall otherwise consent in writing, perform the obligations set
forth in this Article IV.
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SECTION 4.1. Compliance with Laws, etc. The Guarantor will, and will cause
each of its Subsidiaries to, comply in all material respects with all applicable
Governmental Rules and Governmental Approvals of all Regulatory Authorities
except to the extent noncompliance therewith could not reasonably be expected to
have a Material Adverse Effect, such compliance to include:
(a) the maintenance and preservation of its corporate existence; and
(b) the payment, before the same become delinquent, of all taxes,
assessments and governmental charges imposed upon it or upon its property
except to the extent being contested in good faith by appropriate
proceedings and for which adequate reserves, if any, in accordance with
GAAP shall have been set aside on its books.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including Article X thereof.
SECTION 5.2. Binding on Successors, Transferees and Assigns; Assignment. In
addition to, and not in limitation of, Section 2.7, this Guaranty shall be
binding upon the Guarantor and its successors, transferees and assigns and shall
inure to the benefit of and be enforceable by each Secured Party and each holder
of a Note and their respective successors, transferees and assigns (to the full
extent provided pursuant to Section 2.7); provided, however, that the Guarantor
may not assign any of its obligations hereunder without the prior written
consent of all Lenders.
SECTION 5.3. Amendments, etc. No amendment to or waiver of any provision of
this Guaranty, nor consent to any departure by the Guarantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Administrative Agent (on behalf of the Lenders or the Required Lenders, as the
case may be) and the Guarantor and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 5.4. Notices. All notices and other communications provided for
hereunder shall be in writing (including telegraphic communication) and, mailed
or telecopied or delivered to the Guarantor, in care of the Borrower at the
address of the Borrower specified in the Credit Agreement. All such notices and
other communications, when mailed and properly addressed with postage prepaid or
if properly addressed and sent by pre-paid courier service, shall be
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deemed given when received; any such notice or communication, if transmitted by
telecopier, shall be deemed given when transmitted and electronically confirmed.
SECTION 5.5. No Waiver; Remedies. In addition to, and not in limitation of,
Section 2.3 and Section 2.5, no failure on the part of any Secured Party or any
holder of a Note to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 5.6. Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 5.7. Setoff. In addition to, and not in limitation of, any rights
of any Secured Party or any holder of a Note under applicable law, each Secured
Party and each such holder shall, upon the occurrence and during the continuance
of any Default described in any of clauses (a) through (d) of Section 8.1.9 of
the Credit Agreement or with the consent of the Required Lenders, any Event of
Default, have the right to appropriate and apply to the payment of the
obligations of the Guarantor owing to it hereunder, whether or not then due, and
the Guarantor hereby grants to each Secured Party and each such holder a
continuing security interest in, any and all balances, credits, deposits,
accounts or moneys of the Guarantor then or thereafter maintained with such
Secured Party, or such holder or any agent or bailee for such Secured Party or
such holder; provided, however, that any such appropriation and application
shall be subject to the provisions of Section 4.8 of the Credit Agreement.
SECTION 5.8. Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 5.9. Governing Law, Entire Agreement, etc. THIS GUARANTY SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THIS GUARANTY AND THE OTHER
LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN
OR ORAL, WITH RESPECT THERETO.
SECTION 5.10. Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
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THIS GUARANTY OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE SECURED PARTIES
OR THE GUARANTOR SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF
THE STATE OF NEW YORK, NEW YORK COUNTY OR IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY MAY BE FOUND. THE
GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE GUARANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE
GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT THE GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE GUARANTOR
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
GUARANTY AND THE OTHER LOAN DOCUMENTS.
SECTION 5.11. Waiver of Jury Trial. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE SECURED PARTIES OR THE GUARANTOR. THE GUARANTOR ACKNOWLEDGES AND AGREES THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE CREDIT
AGREEMENT.
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SECTION 5.12. Counterparts. This Guaranty may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
PROSOURCE, INC.
By /s/ Paul A. Garcia de Quevedo
-----------------------------
Name: Paul A. Garcia de Quevedo
Title: Vice President, Secretary
and Treasurer
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<PAGE> 1
EXHIBIT 10.26
SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY (as amended, supplemented, amended and restated or
otherwise modified from time to time, this "Guaranty"), dated as of March 14,
1997, is made by each Subsidiary (as defined in the Credit Agreement referred to
below) a signatory hereto on the date hereof and each other Subsidiary that may
from time to time, become pursuant to the terms of the Credit Agreement, a party
hereto (individually, a "Guarantor" and collectively, the "Guarantors"), in
favor of THE BANK OF NOVA SCOTIA, as administrative agent (the "Administrative
Agent") for each of the Secured Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of March 14, 1997 (as
amended, supplemented, amended and restated or otherwise modified from time to
time, the "Credit Agreement"), among ProSource Services Corporation, a Delaware
corporation (the "Borrower"), the various financial institutions as are, or may
from time to time become, parties thereto (each, individually, a "Lender", and
collectively, the "Lenders") and the Administrative Agent, the Lenders and the
Issuer have extended Commitments to make Credit Extensions to the Borrower;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, each
Guarantor is required to execute and deliver this Guaranty;
WHEREAS, each Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of each Guarantor to execute this
Guaranty inasmuch as each Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrower by
the Lenders and the Issuer pursuant to the Credit Agreement;
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lenders and the Issuer to make
Credit Extensions (including the initial Credit Extension) to the Borrower
pursuant to the Credit Agreement, each Guarantor agrees, for the benefit of each
Secured Party, as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Borrower" is defined in the first recital.
"Credit Agreement" is defined in the first recital.
"Guarantor" is defined in the preamble.
"Guaranty" is defined in the preamble.
"Lender" and "Lenders" are defined in the first recital.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Guaranty, including its
preamble and recitals, have the meanings provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. Each Guarantor hereby absolutely, unconditionally
and irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or otherwise, of all Obligations of the Borrower and each other Obligor now
or hereafter existing, whether for principal, interest, fees, expenses or
otherwise (including all such amounts which would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of Sections 502(b)
and 506(b) of the United States Bankruptcy Code, 11 U.S.C. ss.502(b) and
ss.506(b)), and
(b) indemnifies and holds harmless each Secured Party and each holder
of a Note for any and all reasonable costs and expenses (including
reasonable attorney's fees and
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expenses) incurred by such Secured Party or such holder, as the case may
be, in enforcing any rights under this Guaranty;
provided, however, that each Guarantor shall be liable under this Guaranty for
the maximum amount of such liability that can be hereby incurred without
rendering this Guaranty, as it relates to each Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer, and not
for any greater amount. This Guaranty constitutes a guaranty of payment when due
and not of collection, and each Guarantor specifically agrees that it shall not
be necessary or required that any Secured Party or any holder of any Note
exercise any right, assert any claim or demand or enforce any remedy whatsoever
against the Borrower or any other Obligor (or any other Person) before or as a
condition to the obligations of each Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. Each Guarantor agrees that, in the
event of any Event Default described in Section 8.1.9 of the Credit Agreement
and if such event shall occur at a time when any of the Obligations of the
Borrower and each other Obligor may not then be due and payable, each Guarantor
jointly and severally agrees that it will pay to the Lenders forthwith the full
amount which would be payable hereunder by such Guarantor if all such
Obligations were then due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be
a continuing, absolute, unconditional and irrevocable guaranty of payment, and
shall remain in full force and effect until all Obligations of the Borrower and
each other Obligor (including each Guarantor) have been paid in full in
immediately available funds, all obligations of each Guarantor hereunder shall
have been paid in full in cash, all Letters of Credit have been terminated or
expired and all Commitments shall have terminated. The liability of each
Guarantor under this Guaranty shall be absolute, unconditional and irrevocable
irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note or any other Loan Document;
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against the Borrower, any other Obligor or any other Person
(including any other guarantor (including any Guarantor)) under the
provisions of the Credit Agreement, any Note, any other Loan Document
or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
(including any Guarantor) of, or collateral securing, any Obligations
of the Borrower or any other Obligor;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Borrower or any other
Obligor, or any other
3
<PAGE> 4
extension, compromise or renewal of any Obligation of the Borrower or any other
Obligor;
(d) any reduction, limitation, impairment or termination of any
Obligations of the Borrower or any other Obligor for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and each Guarantor hereby waives any right to or
claim of) any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Obligations of the Borrower, any other Obligor or
otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Secured Party or
any holder of any Note securing any of the Obligations of the Borrower or
any other Obligor; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, the Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. Each Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must otherwise be restored by any Secured Party or any holder of any Note, upon
the insolvency, bankruptcy or reorganization of the Borrower, any other Obligor
or otherwise, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. Each Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of the Borrower or any other Obligor and this Guaranty and any
requirement that the Administrative Agent, any other Secured Party or any holder
of any Note protect, secure, perfect or insure any security interest or Lien, or
any property subject thereto, or exhaust any right or take any action against
the Borrower, any other Obligor or any other Person (including any other
guarantor) or entity or any collateral securing the Obligations of the Borrower
or any other Obligor, as the case may be.
SECTION 2.6. Postponement of Subrogation, etc. Each Guarantor agrees that
it will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior payment in full in immediately available funds of all
Obligations of the Borrower and each other Obligor, the termination or
expiration of all Letters of Credit and the termination of all Commitments. Any
amount paid to
4
<PAGE> 5
such Guarantor on account of any such subrogation rights prior to the payment in
full in immediately available funds of all Obligations of the Borrower and each
other Obligor shall be held in trust for the benefit of the Secured Parties and
each holder of a Note and shall immediately be paid to the Administrative Agent
for the benefit of the Secured Parties and each holder of a Note and applied
against the Obligations, whether matured or unmatured, in accordance with the
terms of the Credit Agreement; provided, however, that if
(a) each Guarantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Obligations of the Borrower or
any other Obligor, and
(b) all Obligations of the Borrower and each other Obligor have been
paid in full in immediately available funds, all Letters of Credit have
been terminated or expired and all Commitments have been permanently
terminated,
each Secured Party and each holder of a Note agrees that, at each Guarantor's
request, the Administrative Agent, on behalf of the Secured Parties and the
holders of the Notes, will execute and deliver to each Guarantor appropriate
documents (without recourse and without representation or warranty) necessary to
evidence the transfer by subrogation to each Guarantor of an interest in the
Obligations of the Borrower and each other Obligor resulting from such payment
by each Guarantor. In furtherance of the foregoing, for so long as any
Obligations or Commitments remain outstanding, each Guarantor shall refrain from
taking any action or commencing any proceeding against the Borrower or any other
Obligor (or its successors or assigns, whether in connection with a bankruptcy
proceeding or otherwise) to recover any amounts in the respect of payments made
under this Guaranty to any Secured Party or any holder of a Note.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc.
This Guaranty shall:
(a) be binding upon each Guarantor, and its successors, transferees
and assigns; and
(b) inure to the benefit of and be enforceable by the Administrative
Agent and each other Secured Party.
Without limiting the generality of the foregoing clause (b), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all rights and benefits in respect thereof granted
to such Lender under any Loan Document (including this Guaranty) or otherwise,
subject, however, to any contrary provisions in such assignment or transfer, and
to the provisions of Section 10.11 and Article IX of the Credit Agreement.
5
<PAGE> 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. Each Guarantor hereby
represents and warrants to each Secured Party that the representations and
warranties contained in Article VI of the Credit Agreement, insofar as the
representations and warranties contained therein are applicable to it and its
properties, are true and correct in all material respects, each such
representation and warranty set forth in such Article (insofar as applicable as
aforesaid) and all other terms of the Credit Agreement to which reference is
made therein, together with all related definitions and ancillary provisions,
being hereby incorporated into this Guaranty by reference as though specifically
set forth in this Article.
ARTICLE IV
COVENANTS, ETC.
SECTION 4.1. Covenants. Each Guarantor covenants and agrees that, so long
as any portion of the Secured Obligations shall remain unpaid, any Letters of
Credit shall be outstanding, or any Lender shall have any outstanding
Commitment, it will, unless the Required Lenders shall otherwise consent in
writing, perform, comply with and be bound by all of the agreements, covenants
and obligations contained in Article VII of the Credit Agreement which are
applicable to such Guarantor or its properties, each such agreement, covenant
and obligation contained in such Article and all other terms of the Credit
Agreement to which reference is made herein, together with all related
definitions and ancillary provisions, being hereby incorporated into this
Guaranty by reference as though specifically set forth in this Article.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including Article X thereof.
SECTION 5.2. Binding on Successors, Transferees and Assigns; Assignment. In
addition to, and not in limitation of, Section 2.7, this Guaranty shall be
binding upon each Guarantor and its successors, transferees and assigns and
shall inure to the benefit of and be enforceable by each Secured Party and each
holder of a Note and their respective successors, transferees and assigns (to
the full extent provided pursuant to Section 2.7); provided, however,
6
<PAGE> 7
that such Guarantor may not assign any of its obligations hereunder without the
prior written consent of all Lenders.
SECTION 5.3. Amendments, etc. No amendment to or waiver of any provision of
this Guaranty, nor consent to any departure by any Guarantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Administrative Agent (on behalf of the Lenders or the Required Lenders, as the
case may be) and such Guarantor and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 5.4. Notices. All notices and other communications provided for
hereunder shall be in writing (including telegraphic communication) and, mailed
or telecopied or delivered to each Guarantor, in care of the Borrower at the
address of the Borrower specified in the Credit Agreement. All such notices and
other communications, when mailed and properly addressed with postage prepaid or
if properly addressed and sent by pre-paid courier service, shall be deemed
given when received; any such notice or communication, if transmitted by
telecopier, shall be deemed given when transmitted and electronically confirmed.
SECTION 5.5. No Waiver; Remedies. In addition to, and not in limitation of,
Section 2.3 and Section 2.5, no failure on the part of any Secured Party or any
holder of a Note to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 5.6. Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 5.7. Setoff. In addition to, and not in limitation of, any rights
of any Secured Party or any holder of a Note under applicable law, each Secured
Party and each such holder shall, upon the occurrence and during the continuance
of any Default described in any of clauses (a) through (d) of Section 8.1.9 of
the Credit Agreement or, with the consent of the Required Lenders, any Event of
Default, have the right to appropriate and apply to the payment of the
obligations of each Guarantor owing to it hereunder, whether or not then due,
and each Guarantor hereby grants to each Secured Party and each such holder a
continuing security interest in, any and all balances, credits, deposits,
accounts or moneys of such Guarantor then or thereafter maintained with such
Secured Party, or such holder or any agent or bailee for such Secured Party or
such holder; provided, however, that any such appropriation and application
shall be subject to the provisions of Section 4.8 of the Credit Agreement.
SECTION 5.8. Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be
7
<PAGE> 8
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Guaranty.
SECTION 5.9. Governing Law, Entire Agreement, etc. THIS GUARANTY SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THIS GUARANTY AND THE OTHER
LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN
OR ORAL, WITH RESPECT THERETO.
SECTION 5.10. Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS GUARANTY OR
ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE SECURED PARTIES OR EACH GUARANTOR
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW
YORK, NEW YORK COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT'S OPTION, IN
THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY MAY BE FOUND. EACH GUARANTOR
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK, NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS
SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH SUCH LITIGATION. EACH GUARANTOR FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH GUARANTOR HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY
SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT
THAT THE GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION
OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH
RESPECT TO ITSELF OR ITS PROPERTY,
8
<PAGE> 9
EACH GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS GUARANTY AND THE OTHER LOAN DOCUMENTS.
SECTION 5.11. Waiver of Jury Trial. EACH GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE SECURED PARTIES OR EACH GUARANTOR. EACH GUARANTOR ACKNOWLEDGES AND AGREES
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE
CREDIT AGREEMENT.
SECTION 5.12. Counterparts. This Guaranty may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
9
<PAGE> 10
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
BROMAR SERVICES, INC.
By /s/ Paul A. Garcia de Quevedo
---------------------------------
Name: Paul A. Garcia de Quevedo
Title: Vice President, Secretary
and Treasurer
10
<PAGE> 1
EXHIBIT 10.27
U.S. $150,000,000
SECURED CREDIT AGREEMENT,
dated as of March 14, 1997
among
PROSOURCE RECEIVABLES CORPORATION,
as Borrower,
and
PROSOURCE SERVICES CORPORATION,
as Servicer,
and
VARIOUS FINANCIAL INSTITUTIONS,
as Lenders,
and
THE BANK OF NOVA SCOTIA,
as Issuer, as Swingline Bank and
as Administrative Agent for the Lenders
<PAGE> 2
TABLE OF CONTENTS
Page
----
I DEFINITIONS AND ACCOUNTING TERMS................................. 2
1.1. Defined Terms.............................................. 2
1.2. Use of Defined Terms....................................... 26
1.3. Cross-References........................................... 26
1.4. Accounting and Financial Determinations.................... 26
II COMMITMENTS, BORROWING PROCEDURES AND NOTE....................... 27
2.1. Commitments................................................ 27
2.1.1. Conditions Precedent to Credit
Extensions......................................... 27
2.2. Reduction of Commitment Amounts............................ 28
2.3. Borrowing Procedure........................................ 28
2.4. Continuation and Conversion Elections...................... 29
2.5. Funding.................................................... 29
2.6. Note....................................................... 29
2.7. Swingline Loans............................................ 30
2.7.1. Borrowing Procedures for Swingline
Loans............................................... 30
2.7.2. Swingline Note...................................... 30
2.7.3. Repayment of Swingline Loans........................ 30
2.8. Letter of Credit Issuance Procedures....................... 31
2.8.1. Other Lenders' Participation........................ 32
2.8.2. Disbursements....................................... 32
2.8.3. Reimbursement....................................... 33
2.8.4. Deemed Disbursements................................ 33
2.8.5. Nature of Reimbursement Obligations................. 34
2.9. Extension of Scheduled Maturity Date....................... 35
2.9.1. Request for Extension of Scheduled
Maturity Date....................................... 35
2.9.2. Consent to Extension of Scheduled
Maturity............................................ 35
III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES....................... 36
3.1. Repayments and Prepayments................................. 36
3.2. Interest Provisions........................................ 37
3.2.1. Rates............................................... 37
<PAGE> 3
TABLE OF CONTENTS
(continued)
Page
----
3.2.2. Post-Maturity Rates................................. 37
3.2.3. Payment Dates....................................... 38
3.3. Fees....................................................... 38
3.3.1. Commitment Fee...................................... 38
3.3.2. Letter of Credit Fee................................ 39
IV CERTAIN LIBO RATE AND OTHER PROVISIONS........................... 39
4.1. LIBO Rate Lending Unlawful................................. 39
4.2. Deposits Unavailable....................................... 39
4.3. Increased LIBO Rate Loan Costs, etc........................ 40
4.4. Funding Losses............................................. 40
4.5. Increased Capital Costs.................................... 40
4.6. Taxes...................................................... 41
4.7. Payments, Computations, etc................................ 44
4.8. Sharing of Payments........................................ 45
4.9. Setoff..................................................... 45
4.10. Mitigation................................................ 46
4.11. Replacement Lender........................................ 46
4.12. Use of Proceeds........................................... 47
V CONDITIONS TO BORROWING AND ISSUANCE OF LETTERS OF
CREDIT........................................................... 47
5.1. Initial Borrowing.......................................... 47
5.1.1. No Material Adverse Change.......................... 47
5.1.2. Resolutions, etc.................................... 47
5.1.3. Delivery of Notes................................... 48
5.1.4. Security Agreement.................................. 48
5.1.5. Opinions of Counsel................................. 49
5.1.6. Closing Fees, Expenses, etc......................... 49
5.1.7. Organic Documents................................... 49
5.1.8. Purchase Agreement.................................. 49
5.1.9. Fee Letter.......................................... 49
5.1.10. Powers of Attorney................................. 49
5.1.11. Account Agreements................................. 49
5.1.12. Payment of Outstanding Indebtedness,
etc................................................ 50
5.1.13. Originator Credit Facility
Documentation...................................... 50
5.1.14. Borrowing Base Report and Settlement
Statement.......................................... 50
5.1.15. Other Documentation................................ 50
ii
<PAGE> 4
TABLE OF CONTENTS
(continued)
Page
----
5.2. All Credit Extensions...................................... 50
5.2.1. Compliance with Warranties, No
Default, etc........................................ 51
5.2.2. Credit Extension.................................... 51
VI REPRESENTATIONS AND WARRANTIES................................... 51
6.1. Representations and Warranties of Borrower................. 51
6.1.1. Organization, etc................................... 51
6.1.2. Due Authorization, Non-Contravention,
etc................................................. 52
6.1.3. Government Approval, Regulation, etc.
.................................................. 52
6.1.4. Validity, etc....................................... 52
6.1.5. Financial Information............................... 52
6.1.6. No Material Adverse Change.......................... 53
6.1.7. Litigation, Labor Controversies, etc.
.................................................. 53
6.1.8. Subsidiaries........................................ 53
6.1.9. Corporate Names..................................... 53
6.1.10. Taxes.............................................. 53
6.1.11. Pension and Welfare Plans.......................... 53
6.1.12. Capital Stock...................................... 54
6.1.13. Regulations G, T, U and X.......................... 54
6.1.14. Accuracy of Information............................ 54
6.1.15. Eligible Receivables............................... 54
6.1.16. Security Interest.................................. 54
6.1.17. Material Contracts................................. 55
6.1.18. Valid Transfer; Ownership of
Receivables........................................ 55
6.1.19. Principal Place of Business........................ 55
6.1.20. Lock-Box Banks and Lock-Box Accounts.
.................................................. 55
6.1.21. Proceeds........................................... 55
6.2. Representations and Warranties of Servicer................. 55
6.2.1. Organization, etc................................... 55
6.2.2. Due Authorization, Non-Contravention,
etc................................................. 56
6.2.3. Government Approval, Regulation, etc.
.................................................. 56
6.2.4. Validity, etc....................................... 56
6.2.5. Financial Information............................... 56
iii
<PAGE> 5
TABLE OF CONTENTS
(continued)
Page
----
6.2.6. No Material Adverse Change.......................... 57
6.2.7. Litigation, Labor Controversies, etc.
.................................................. 57
6.2.8. Accuracy of Information............................. 57
6.2.9. Eligible Receivables................................ 57
6.2.10. Credit and Collection Policy....................... 57
VII COVENANTS........................................................ 57
7.1. Affirmative Covenants of the Borrower...................... 57
7.1.1. Financial Information, Reports,
Notices, etc........................................ 58
7.1.2. Compliance with Laws, etc........................... 59
7.1.3. Offices, Name Changes, Etc.......................... 60
7.1.4. Collection, Liquidation and Lock-Box
Agreements.......................................... 60
7.1.5. Deposits to Lock-Box Accounts....................... 61
7.1.6. Security Interest, Etc.............................. 61
7.2. Negative Covenants of the Borrower......................... 61
7.2.1. Business Activities................................. 61
7.2.2. Indebtedness........................................ 61
7.2.3. Liens, Etc.......................................... 61
7.2.4. Extension or Amendment of Receivables
.................................................. 62
7.2.5. Financial Condition................................. 62
7.2.6. Restricted Payments, etc............................ 62
7.2.7. Modification of Credit and Collection
Policy.............................................. 63
7.2.8. Mergers, Acquisitions, Sales, etc................... 63
7.2.9. Amendments to Certain Documents..................... 64
7.2.10. Separate Corporate Existence....................... 64
7.3. Affirmative Covenants of the Servicer...................... 67
7.3.1. Compliance with Laws, etc........................... 67
7.3.2. Deposits to Lock-Box Accounts....................... 68
7.4. Negative Covenants of the Servicer......................... 68
7.4.1. Extension or Amendment of Receivables
.................................................. 68
7.4.2. Modification of Credit and Collection
Policy.............................................. 68
7.4.3. Amendments to Certain Documents..................... 68
VIII ADMINISTRATION AND COLLECTION.................................... 68
iv
<PAGE> 6
TABLE OF CONTENTS
(continued)
Page
----
8.1. Designation of the Servicer................................ 68
8.2. Duties of Servicer......................................... 69
8.3. Rights on Servicer Transfer Event.......................... 72
8.4. Responsibilities of the Borrower........................... 73
8.5. Audits..................................................... 73
8.6. Application of Collections................................. 74
8.7. Servicing Fee.............................................. 74
8.8. Servicer Indemnification................................... 74
IX EVENTS OF DEFAULT AND THEIR EFFECT............................... 75
9.1. Events of Default.......................................... 75
9.1.1. Non-Payment of Obligations.......................... 75
9.1.2. Non-Performance of Other Covenants and
Obligations......................................... 75
9.1.3. Breach of Representations and
Warranties.......................................... 75
9.1.4. Default on Originator Indebtedness.................. 75
9.1.5. Bankruptcy, Insolvency, etc......................... 76
9.1.6. Borrowing Base Deficiency........................... 76
9.1.7. Loss Reserve Ratio.................................. 76
9.1.8. Dilution Reserve Ratio.............................. 76
9.1.9. Collectability of Receivables....................... 76
9.1.10. IRS or PBGC Liens.................................. 76
9.1.11. Impairment of Security, etc........................ 76
9.1.12. Change in Control.................................. 76
9.1.13. Purchase and Sale Termination Event................ 76
9.2.1. Action if Bankruptcy................................ 77
9.2.2. Action if Other Event of Default.................... 77
X THE ADMINISTRATIVE AGENT......................................... 77
10.1. Actions................................................... 77
10.2. Funding Reliance, etc..................................... 78
10.3. Exculpation............................................... 78
10.4. Successor................................................. 79
10.5. Loans by Scotiabank....................................... 80
10.6. Credit Decisions.......................................... 80
10.7. Copies, etc............................................... 80
XI SETTLEMENT PROCEDURES............................................ 80
11.1. Settlement Procedures..................................... 80
11.2. Investments of Funds in Certain Accounts.................. 83
v
<PAGE> 7
TABLE OF CONTENTS
(continued)
Page
----
XII MISCELLANEOUS PROVISIONS........................................ 83
12.1. Waivers, Amendments, etc................................. 83
12.2. Notices.................................................. 85
12.3. Payment of Costs and Expenses............................ 85
12.4. Indemnification.......................................... 86
12.5. Survival................................................. 87
12.6. Severability............................................. 87
12.7. Headings................................................. 87
12.8. Execution in Counterparts, Effectiveness,
etc.......................................................87
12.9. Governing Law; Entire Agreement.......................... 87
12.10. Successors and Assigns................................... 88
12.11. Sale and Transfer of Loans and Notes;
Participations in Loans and Notes........................ 88
12.11.1. Assignments.............................................. 88
12.11.2. Participations........................................... 90
12.12. Other Transactions....................................... 91
12.13. Execution on Behalf of Corporation....................... 91
12.14. Forum Selection and Consent to Jurisdiction...............91
12.15. Waiver of Jury Trial..................................... 92
vi
<PAGE> 8
SCHEDULE I - Disclosure Schedule
SCHEDULE II - Credit and Collection Policies
SCHEDULE III - Addresses; Wire Instructions
EXHIBIT A-1 - Form of Note
EXHIBIT A-2 - Form of Swingline Note
EXHIBIT B-1 - Form Borrowing Base Report
EXHIBIT B-2 - Form of Settlement Statement
EXHIBIT C-1 - Form of Borrowing Request
EXHIBIT C-2 - Form of Letter of Credit Issuance Request
EXHIBIT D - Form of Continuation/Conversion Notice
EXHIBIT E - Form of Lender Assignment Agreement
EXHIBIT F - Forms of Opinions of Counsel to the Borrower
EXHIBIT G - Form of Purchase Agreement
EXHIBIT H - Franchisors
EXHIBIT I - Form of Security Agreement
EXHIBIT J - Form of Power of Attorney
EXHIBIT K - Extension Request
EXHIBIT L - [Reserved]
EXHIBIT M - Form of Collection Account Agreement
EXHIBIT N - Form of Liquidation Account Agreement
EXHIBIT O - Form of Lock-Box Agreement
EXHIBIT P - List of Lock-Box Accounts and Lock-Box Banks
EXHIBIT Q - Franchisor Concentration Limits
EXHIBIT R - Obligor Concentration Limits
EXHIBIT S - Form of Letter of Credit
EXHIBIT T - Corporate Names||
vii
<PAGE> 9
SECURED CREDIT AGREEMENT
THIS SECURED CREDIT AGREEMENT, dated as of March 14, 1997, is among
PROSOURCE RECEIVABLES CORPORATION, a Delaware corporation (the "Borrower"),
PROSOURCE SERVICES CORPORATION, a Delaware corporation ("ProSource"), as initial
Servicer (the "Servicer"), the various financial institutions as are or may
become parties hereto as Lenders (collectively, the "Lenders"), and THE BANK OF
NOVA SCOTIA ("Scotiabank"), as Lender and as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"), as issuer of letters of
credit hereunder (in such capacity, the "Issuer") and as the swingline bank (in
such capacity, the "Swingline Bank").
W I T N E S S E T H:
WHEREAS, the Borrower is a wholly-owned, special purpose subsidiary of
ProSource, formed for the purpose of purchasing all trade receivables originated
or acquired by ProSource;
WHEREAS, the Borrower desires to obtain:
(a) from the Lenders, a Commitment (to include availability for Revolving
Loans and participations in Letters of Credit) pursuant to which borrowings of
Revolving Loans, in a maximum aggregate principal amount (together with all
Swingline Loans and Letter of Credit Outstandings) not to exceed the then
existing Commitment Amount, will be made to the Borrower from time to time prior
to the Commitment Termination Date;
(b) from the Issuer (and participated in by the Lenders), a Commitment
pursuant to which the Issuer will issue Letters of Credit for the account of the
Borrower from time to time prior to the Commitment Termination Date in a maximum
aggregate Stated Amount at any one time outstanding not to exceed $30,000,000
(provided that the aggregate outstanding principal amount of Revolving Loans,
Swingline Loans and Letter of Credit Outstandings at any time shall not exceed
the then existing Commitment Amount); and
<PAGE> 10
(c) from the Swingline Bank, a Commitment pursuant to which borrowings of
Swingline Loans in an aggregate outstanding principal amount not to exceed
$15,000,000 will be made from time to time prior to the Commitment Termination
Date (provided that the aggregate outstanding principal amount of such Swingline
Loans, Revolving Loans and Letter of Credit Outstandings at any time shall not
exceed the then existing Commitment Amount).
WHEREAS, the Lenders, the Issuer and the Swingline Bank are willing, on
the terms and subject to the conditions hereinafter set forth, to extend such
Commitments, issue (or participate in) such Letters of Credit and make such
Loans to the Borrower; and
WHEREAS, the proceeds of such Loans will be used by Borrower
to purchase Receivables from ProSource;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms when used in this
Agreement, including the preamble and recitals, shall, except where the context
otherwise requires, have the following meanings:
"Administrative Agent" is defined in the preamble and includes each other
Person as shall have subsequently been appointed as the successor Administrative
Agent pursuant to Section 10.4.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power (i)
to vote 10% or more of the securities (on a fully diluted basis) having ordinary
voting power for the election of directors or managing general partners or (ii)
to direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.
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"Agent's Account" means the account from time to time designated in
writing by the Administrative Agent as the "Agent's Account."
"Aggregate Outstanding Amount" shall equal the sum of (i) the aggregate
principal balance of all Loans (including all Swingline Loans) and (ii) the
Letter of Credit Outstandings.
"Agreement" means, on any date, this Secured Credit Agreement as
originally in effect on the Effective Date and as thereafter from time to time
amended, supplemented, amended and restated, or otherwise modified and in effect
on such date.
"Alternate Base Rate" means, on any date, a fluctuating rate of interest
per annum equal to the higher of
(a) the rate of interest most recently announced by the
Administrative Agent at its Domestic Office as its "prime" or "reference"
rate for United States loans made in the United States; and
(b) the Federal Funds Rate most recently determined by the
Administrative Agent plus 0.50% per annum.
The Alternate Base Rate is not necessarily the lowest rate of interest
determined by the Administrative Agent in connection with extensions of credit.
Changes in the rate of interest on that portion of any Loans maintained as Base
Rate Loans will take effect simultaneously with each change in the Alternate
Base Rate. The Administrative Agent will give notice promptly to the Borrower
and the Lenders of changes in the Alternate Base Rate.
"Alternate Base Rate Cost Reserve" means the product as of the most recent
Month End Date of (i) the sum of (A) the product of (I) 1.3, multiplied by (II)
the Alternate Base Rate, plus (B) 2.00%, multiplied by (ii) a fraction the
numerator of which is 2 multiplied by the Days Sales Outstanding for the
preceding Fiscal Month and the denominator of which is 365 or, in the case of a
leap year, 366.
"Amortization Day" means any day on or after the Commitment Termination
Date.
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"Annual Transfer Agreement" means an annual transfer agreement between
Borrower and Newco conforming to the requirements therefor set forth in Section
7.2.8 hereof.
"Assignee Lender" is defined in Section 12.11.1.
"Authorized Officer" means, relative to the Borrower and ProSource, those
of its employees or officers whose signatures and incumbency shall have been
certified to the Administrative Agent and the Secured Parties pursuant to
Section 5.1.2.
"Available Commitment Amount" means (a) the Commitment Amount minus (b)
the sum of the Letter of Credit Outstandings and the outstanding principal
balance of all Loans (including all Swingline Loans).
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"Borrower" is defined in the preamble.
"Borrower Note" means the promissory note of the Borrower payable to the
Originator in connection with the purchase of Receivables under the Purchase
Agreement.
"Borrowing" means the Loans of the same Type and, in the case of LIBO Rate
Loans, having the same Interest Period made by all Lenders on the same Business
Day and pursuant to the same Borrowing Request in accordance with Section 2.3.
"Borrowing Base" on any day shall equal the product of (A) the Net
Receivables Pool Balance multiplied by (B) (100% - Total Reserve Percentage).
"Borrowing Request" means a loan request duly executed by an Authorized
Officer of the Borrower, substantially in the form of Exhibit C-1.
"Business Day" means (i) any day which is neither a Saturday or Sunday nor
a legal holiday on which banks are authorized or required to be closed in New
York, New York; and (ii) relative to any LIBO Rate Loans, any day which is a
Business Day described in
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<PAGE> 13
clause (i) above and which is also a day on which dealings in Dollars are
carried on in the London interbank market.
"Canadian Dollar FX Reserve Percentage" means, at any time, the product of
(a) the FX Factor and (b) a fraction (expressed as a percentage) having (i) a
numerator equal to the aggregate Outstanding Balance of all Eligible Receivables
which were payable in Canadian dollars as of the most recent Month End Date and
(ii) a denominator equal to the aggregate Outstanding Balance of all Eligible
Receivables as of the most recent Month End Date; provided, however, that if the
percentage equivalent of the fraction set forth in clause (b) is less than or
equal to 3.00%, the Canadian Dollar FX Reserve Percentage shall be 0%.
"Carrying Costs" is defined in Section 11.1(b)(i).
"Change in Control" means
(a) the failure of Onex Corporation, a corporation organized under
the laws of Ontario, Canada, and Gerald W. Schwartz, individually or
collectively, at any time directly or indirectly to be the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange
Act of 1934, as amended) on a fully diluted basis a sufficient number of
shares of the capital stock of ProSource, Inc., a Delaware corporation,
having (x) at least 51% of the voting power of all issued and outstanding
shares of voting capital stock of ProSource, Inc. or (y) the right to
exercise voting power for the election of at least a majority of the board
of directors of ProSource, Inc.; or
(b) the failure of the ProSource, Inc. at any time to directly own
beneficially and of record on a fully diluted basis 100% of the issued and
outstanding shares of capital stock of ProSource (whether voting or
non-voting); or
(c) the failure of ProSource at any time to directly or indirectly
own beneficially and of record on a fully diluted basis 100% of the issued
and outstanding shares of capital stock of the Borrower (whether voting or
non-voting).
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<PAGE> 14
"Code" means the Internal Revenue Code of 1986, and the regulations
thereunder, in each case as amended, reformed or otherwise modified from time to
time.
"Collateral" means, collectively, the "Collateral" as defined
in the Security Agreement.
"Collection Account" means that certain bank account numbered 558734
maintained at the First National Bank of Chicago which is in the Borrower's name
and governed by the Collection Account Agreement.
"Collection Account Agreement" means a letter agreement among the
Administrative Agent, the Borrower and the Collection Account Bank,
substantially in the form of Exhibit M, as amended, supplemented, restated or
otherwise modified from time to time.
"Collection Account Bank" means the bank holding the Collection Account.
"Collections" means all payments received (i) by the Borrower, the
Originator or the Servicer with respect to the Pool Receivables, including any
proceeds of the sale or other dispositions of any collateral securing any
thereof, and other payments otherwise applied in the ordinary course of business
to amounts owed under such Pool Receivables and (ii) by the Borrower from the
Originator under Section 3.4 of the Purchase Agreement.
"Commitment" means, as the context may require, (i) a Lender's obligation
(a) to participate in Letters of Credit and (b) to make Revolving Loans, (ii)
the Issuer's obligation to issue Letters of Credit and (iii) the Swingline
Bank's obligation to make Swingline Loans.
"Commitment Amount" means $150,000,000, as such amount may be reduced from
time to time pursuant to Section 2.2.
"Commitment Fee" is defined in Section 3.3.1.
"Commitment Termination Date" means the earliest of
(a) the Scheduled Maturity Date;
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<PAGE> 15
(b) the date on which the Commitment Amount is terminated in full
or reduced to zero pursuant to Section 2.2;
(c) the date on which any Event of Default of the type described in
Section 9.1.5 occurs; and
(d) the date designated by the Required Lenders in a writing
delivered to the Borrower following the occurrence of any Event of Default
other than the type described in Section 9.1.5.
"Contingent Liability" means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person;
provided, that the term "Contingent Liability" shall not include guarantees of
payment delivered by ProSource in respect of loans or advances made to employees
of ProSource or its Subsidiaries the proceeds of which are used to purchase
capital stock of ProSource, Inc. where (x) the lender has recourse to such
capital stock and (y) the amount loaned is not in excess of 67% of the fair
market value of such capital stock. The amount of any Person's obligation under
any Contingent Liability shall (subject to any limitation set forth therein) be
deemed to be the outstanding principal amount (or maximum principal amount, if
larger) of the debt, obligation or other liability guaranteed thereby.
"Continuation/Conversion Notice" means a notice of continuation or
conversion duly executed by an Authorized Officer of the Borrower, substantially
in the form of Exhibit D.
"Contract" means, with respect to any Receivable, any and all contracts,
understandings, instruments, agreements, invoices, notes, or other writings
pursuant to which such Receivable arises or which evidences such Receivable or
under which an Obligor
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<PAGE> 16
becomes or is obligated to make payment in respect of such Receivable.
"Controlled Group" means all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or
ProSource, are treated as a single employer under Section 414(b) or 414(c) of
the Code or Section 4001 of ERISA.
"Covered Taxes" means any Taxes other than franchise or capital taxes,
branch profits taxes and taxes on or measured by net income or net receipts
imposed with respect to any Secured Party by reason of a connection between such
Secured Party and the relevant taxing jurisdiction (other than a connection
arising solely from such Person having executed, delivered or performed its
obligations or received any payment under, or enforced any right in connection
with, this Agreement, a Letter of Credit, the Swingline Note or any Note).
Covered Taxes shall not include Taxes to which, and to the extent that, the
Administrative Agent or the relevant Secured Party, as the case may be, is
subject prior to entering into this Agreement, and which would be imposed upon
the Administrative Agent or such Secured Party, as the case may be, as a result
of a connection between such Person and the relevant taxing authority (other
than a connection arising solely from such Person having executed, delivered,
performed its obligations or received any payment under, or enforced any right
in connection with, this Agreement, a Letter of Credit, the Swingline Note or
any Note).
"Credit Extension" means, as the context may require,
(a) the making of a Revolving Loan by a Lender;
(b) the making of a Swingline Loan by the Swingline Bank; or
(c) the issuance of any Letter of Credit, or the extension of any
Stated Expiry Date of any existing Letter of Credit, by the Issuer.
"Credit and Collection Policy" means those credit and collection policies
and practices relating to the Receivables
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<PAGE> 17
described in Schedule II, as modified in accordance with Section 7.2.7.
"Days Sales Outstanding" for any Fiscal Month equals the product of (a)
the aggregate Outstanding Balance of all Pool Receivables as of the related
Month End Date divided by the Monthly Sales for such Fiscal Month, multiplied by
(b) 30 days.
"Default" means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Default Ratio" means, at any time, a fraction (expressed as a percentage)
having (a) a numerator that is the sum of (i) the aggregate Outstanding Balance
of Pool Receivables that remained outstanding 61 to 90 days after their
respective invoice dates, as determined as of the most recent Month End Date,
plus (ii) the aggregate Outstanding Balance of Pool Receivables that were
written off as uncollectible during the most recently ended Fiscal Month and (b)
a denominator that is the Monthly Sales for the Fiscal Month that occurred two
Fiscal Months prior to the most recently ended Fiscal Month.
"Defaulted Receivable" means a Receivable:
(i) as to which any payment, or part thereof, remains unpaid
for more than 60 days past invoice date;
(ii) as to which an Event of Bankruptcy has occurred with
respect to the Obligor thereof or any other Person obligated thereon
or owning any Related Security in respect thereof; or
(iii) which, consistent with the Credit and Collection Policy,
should be written off the Borrower's books as uncollectible.
"Dilution" means, for any period, the aggregate net reduction in the
aggregate Outstanding Balance of all Receivables during such period as a result
of discounts, incorrect billings, setoffs, offsets, credits, rebates,
cooperative advertising expenses, allowances, chargebacks, returned, rejected,
defective or
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<PAGE> 18
repossessed goods, allowances for early payments and any other deductions
unrelated to the inability of the Obligors to pay such Receivables.
"Dilution Horizon Variable" means, at any time, the product of (i) .56
multiplied by (ii) a fraction having (a) a numerator equal to the sum of the
Monthly Sales for the preceding Fiscal Month and (b) a denominator equal to the
Net Receivables Pool Balance as of the most recent Month End Date; provided,
however, that the decimal used in clause (i) above shall be revised following
the recalculation in the accountant's report delivered pursuant to Section
8.2(k) to equal the fraction having (a) a numerator equal to 12 plus the Sample
Dilution Horizon and (b) a denominator equal to 30 days.
"Dilution Ratio" means, at any time, a fraction (expressed as a
percentage) having (a) a numerator equal to the aggregate amount of Dilution on
the Pool Receivables occurring during the most recent Fiscal Month, and (b) a
denominator equal to the Monthly Sales for the preceding Fiscal Month.
"Dilution Reserve Percentage" means, at any time, the greater of (a) 3% or
(b) the Dilution Reserve Ratio.
"Dilution Reserve Ratio" means, at any time, the result (expressed as a
percentage) calculated in accordance with the following formula:
{(2.00 x ADR) + [(HDR-ADR) x (HDR/ADR)]} x DHV
where:
ADR = the average of the Dilution Ratios for the 12
preceding Fiscal Months;
DHV = the Dilution Horizon Variable; and
HDR = the highest Dilution Ratio for any Fiscal Month
within the 12 preceding Fiscal Months.
"Disbursement" is defined in Section 2.8.2.
"Disbursement Date" is defined in Section 2.8.2.
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"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower or ProSource with the written consent of the Required
Lenders.
"Dollar" and the sign "$" mean lawful money of the United States.
"Domestic Office" means, relative to any Lender, the office of such Lender
designated as such below its name on Schedule III or designated in the Lender
Assignment Agreement or such other office of a Lender (or any successor or
assign of such Lender) within the United States as may be designated from time
to time by notice from such Lender to each other Person party hereto.
"Due Date Defaulted Receivable" means a Receivable:
(i) as to which any payment, or part thereof, remains unpaid
for at least 31 days from the original due date for such payment;
(ii) as to which an Event of Bankruptcy has occurred with
respect to the Obligor thereof or any other Person obligated thereon
or owning any Related Security in respect thereof; or
(iii) which, consistent with the Credit and Collection Policy,
should be written off the Borrower's books as uncollectible.
"Effective Date" means March 14, 1997.
"Eligible Receivable" means, at any time, a Pool Receivable:
(a) the Obligor of which is a resident of the United States or a
resident of a province in Canada that has adopted the PPSA; provided,
however, that a Receivable the Obligor of which is a resident of a country
other than the United States or a province of Canada that has adopted the
PPSA shall be permitted provided that each Receivable is supported by a
letter of credit, in a face amount at least equal to the Outstanding
Balance of such Receivable issued (i) in favor of
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<PAGE> 20
the Borrower, (ii) in a form reasonably acceptable to the Administrative
Agent and (iii) by a financial institution reasonably acceptable to the
Administrative Agent with a short-term unsecured credit rating of at least
"A-1" by S&P and "P-1" by Moody's, provided that all action reasonably
required by the Administrative Agent has been taken (including delivery of
the original of each letter of credit to the Administrative Agent) to give
the Administrative Agent for the benefit of the Secured Parties a
perfected security interest in such letter of credit and the proceeds
thereof.
(b) the Obligor of which is not an Affiliate of the Originator;
(c) the Obligor of which is not a government or governmental
subdivision or agency unless such Obligor and the related Receivable are
in compliance with the Assignment of Claims Act of 1940 and any similar
state or Canadian statutes;
(d) the Obligor of which is not the Obligor of Due Date Defaulted
Receivables in excess of 50% of the aggregate Outstanding Balance of all
Pool Receivables of such Obligor;
(e) which is not a Defaulted Receivable;
(f) as to which the related Contract requires payment (A) within 30
days of the invoice date or (B) later than 30 days but within 45 days of
the invoice date therefor, but only if the Outstanding Balance of such
Receivable, when taken together with the Outstanding Balance of all other
Pool Receivables having similar payment terms, does not exceed 30% of the
aggregate Outstanding Balance of all Eligible Receivables;
(g) which constitutes an "account" as defined in the U.C.C.;
(h) which is denominated and payable only in Dollars in the United
States or, if the Obligor thereof is a Canadian resident, denominated and
payable in Canadian dollars in Canada or the United States;
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(i) which is not subject to any dispute, offset, counterclaim,
defense or Lien (other than Permitted Liens); provided, however, that the
portion of such Receivable that is not subject to any such dispute,
offset, counterclaim or defense shall constitute an Eligible Receivable;
(j) which arises under a Contract which does not require
the consent of the related Obligor to be sold or assigned;
(k) with respect to which the Administrative Agent has not notified
the Borrower that such Receivable is not acceptable as an Eligible
Receivable hereunder or the related Obligor is not acceptable; provided,
however, that such notice shall be based on the reasonable discretion of
the Administrative Agent based on customary credit criteria for
securitization transactions;
(l) which was generated by the Originator in the ordinary course of
business and was sold to the Borrower pursuant to the Purchase Agreement
or which was generated by ProSource Distribution Services Limited in the
ordinary course of business, sold to the Originator pursuant to a purchase
agreement (which agreement, together with such related documents,
certificates and opinions reasonably requested by the Administrative
Agent, is in form and substance reasonably satisfactory to the
Administrative Agent) and sold to the Borrower pursuant to the Purchase
Agreement (including any Receivable which has been sold subsequently by
the Borrower to Newco pursuant to an Annual Transfer Agreement or which
has been sold subsequently to the Borrower from Newco pursuant to an
Annual Transfer Agreement);
(m) which satisfies all applicable requirements of the Credit and
Collection Policy;
(n) which arises under a Contract that, together with such
Receivable, is in full force and effect and constitutes the legal, valid
and binding obligation of the Obligor of such Receivable enforceable
against such Obligor in accordance with its terms;
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(o) which is not subject to any contingent performance requirements
of the Originator or ProSource Distribution Services Limited and which is
not subject to any "bill and hold" arrangements;
(p) which has not been modified or restructured since its creation,
except to the extent permitted by Section 8.2(c);
(q) with regard to which the representations and warranties of the
Borrower in Section 6.1.18 are true and correct; and
(r) as to which the Administrative Agent, for the benefit of the
Secured Parties, has a valid and enforceable first priority perfected
security interest in the Receivable, the Related Security with respect
thereto and the Collections with respect thereto, in each case free and
clear of any Lien (other than Permitted Liens).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
"Existing Credit Agreement" means the Loan and Security Agreement, dated
as of March 31, 1995, as amended or modified on or prior to the date hereof,
among ProSource, ProSource Canada and BroMar Services, Inc., certain financial
institutions parties thereto, NationsBank of Georgia, N.A., The First National
Bank of Boston and Fleet Capital Corporation, as co-agents, and NationsBank of
Georgia, N.A., as administrative agent.
"Extension Request" means an Extension Request duly executed by an
Authorized Officer of the Borrower pursuant to Section 2.9, substantially in the
form of Exhibit K.
"Event of Bankruptcy" shall be deemed to have occurred with respect to a
Person if either:
(a) a case or other proceeding shall be commenced, without the
application or consent of such Person, in any
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court seeking the liquidation, reorganization, debt arrangement,
dissolution, winding up, or composition or readjustment of debts of such
Person, the appointment of a trustee, receiver, custodian, liquidator,
assignee, sequestrator or the like for such Person or all or substantially
all of its assets, or any similar action with respect to such Person under
any law relating to bankruptcy, insolvency, reorganization, winding up or
composition or adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a period of 60
consecutive days; or an order for relief in respect of such Person shall
be entered in an involuntary case under the federal bankruptcy laws or
other similar laws now or hereafter in effect; or
(b) such Person shall commence a voluntary case or other proceeding
under any applicable bankruptcy, insolvency, reorganization, debt
arrangement, dissolution or other similar law now or hereafter in effect,
or shall consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) for such Person or for any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or shall
fail to, or admit in writing its inability to, pay its debts generally as
they become due; or
(c) if a corporation or similar entity, its board of directors shall
vote to implement any of the foregoing.
"Event of Default" is defined in Section 9.1.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to:
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York; or
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<PAGE> 24
(b) if such rate is not so published for any day which is a Business
Day, the average of the quotations for such day on such transactions
received by the Administrative Agent from three federal funds brokers of
recognized standing selected by it.
"Fiscal Month" means the period of four or five consecutive weeks
beginning on the first day of a Fiscal Year of the Borrower and ending on the
last Saturday on or before the following January 31 and each period of four or
five consecutive weeks beginning on the Sunday following the end of the
preceding Fiscal Month and ending on the last Saturday on or before the last day
of the next calendar month (or of the same calendar month, if the first day of
the Fiscal Month was also the first day of a calendar month).
"Fiscal Quarter" means the period of three consecutive Fiscal Months
beginning on the first day of a Fiscal Year of the Borrower and each succeeding
consecutive period of three consecutive Fiscal Months.
"Fiscal Year" means each period of 52 or 53 consecutive weeks beginning on
the Sunday following the last Saturday in one calendar year and ending on the
last Saturday in the next calendar year; references to a Fiscal Year with a
number corresponding to any calendar year (e.g., the "1997 Fiscal Year") refer
to the Fiscal Year ending on the last Saturday in such calendar year.
"Franchisor" each franchise/concept listed on Exhibit H, as such Exhibit H
is updated from time to time by the Borrower.
"Franchisor Concentration Limit" for any Franchisor means the percentage
set forth opposite such Franchisor's rating on Exhibit Q.
"F.R.S. Board" means the Board of Governors of the Federal Reserve System
or any successor thereto.
"FX Factor" means 0.47.
"GAAP" is defined in Section 1.4.
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<PAGE> 25
"Hedging Obligations" means, with respect to any Person, all liabilities
of such Person under currency exchange agreements, interest rate swap
agreements, interest rate cap agreements and interest rate collar agreements,
and all other agreements or arrangements designed to protect such Person against
fluctuations in interest rates or currency exchange rates.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases which have
been or should be, in accordance with GAAP, recorded as capitalized lease
liabilities;
(d) all other items which, in accordance with GAAP, would be
included as liabilities on the liability side of the balance sheet of such
Person as of the date at which Indebtedness is to be determined;
(e) net liabilities of such Person under all Hedging Obligations;
(f) whether or not so included as liabilities in accordance with
GAAP, all obligations of such Person to pay the deferred purchase price of
property or services (excluding trade payables arising in the ordinary
course of business), and indebtedness (excluding prepaid interest thereon)
secured by a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or other title
retention agreements), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse; and
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<PAGE> 26
(g) all Contingent Liabilities of such Person in respect of any of
the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner, except, with respect to any Person other than the Borrower, to
the extent said Indebtedness is by its terms nonrecourse to said Person.
"Indebtedness to be Paid" is defined in Section 5.1.12.
"Indemnified Liabilities" is defined in Section 12.4.
"Indemnified Parties" is defined in Section 12.4.
"Independent Director" is defined in Section 7.2.10(b).
"Interest Period" means, relative to any LIBO Rate Loan, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or 2.4
and shall end on (but exclude) the day which numerically corresponds to such
date one or two months thereafter (or, if such month has no numerically
corresponding day, on the last Business Day of such month), in either case as
the Borrower may select in its relevant notice pursuant to Section 2.3 or 2.4;
provided, however, that
(a) the Borrower shall not be permitted to select Interest Periods
to be in effect at any one time which have expiration dates occurring on
more than nine different dates;
(b) Interest Periods commencing on the same date for Loans
comprising part of the same Borrowing shall be of the same duration;
(c) if such Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall end on the next following
Business Day (unless such next following Business Day is the first
Business Day of a calendar month, in which case such Interest Period shall
end on the Business Day next preceding such numerically corresponding
day); and
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(d) no Interest Period may end later than the Scheduled Maturity
Date.
"IRS" means the Internal Revenue Service of the United States.
"Issuer" means ScotiaBank in its capacity as issuer of the
Letters of Credit.
"Law Change" is defined in Section 4.6(b).
"Lender Assignment Agreement" means a Lender Assignment Agreement
substantially in the form of Exhibit E hereto.
"Lenders" is defined in the preamble.
"Letter of Credit" is defined in Section 2.1.
"Letter of Credit Fee" is defined in Section 3.3.2.
"Letter of Credit Commitment Subamount" means, on any date, $30,000,000,
as such amount may be reduced from time to time pursuant to Section 2.2.
"Letter of Credit Issuance Request" means a letter of credit request
executed by an Authorized Officer of the Borrower, substantially in the form of
Exhibit C-2.
"Letter of Credit Outstandings" means, on any date, an amount equal to the
sum of (a) the then aggregate amount which is undrawn and available under all
issued and outstanding Letters of Credit, plus (b) the then aggregate amount of
all unpaid and outstanding Reimbursement Obligations.
"LIBO Rate" means, relative to any Interest Period for any LIBO Rate Loan,
the rate of interest equal to the average (rounded upwards, if necessary, to the
nearest 1/100 of 1%) of the rates per annum at which Dollar deposits in
immediately available funds are offered in the London interbank market as at or
about 11:00 a.m., London, England time, two Business Days prior to the beginning
of such Interest Period for delivery on the first day of such Interest Period,
and in an amount approximately equal to the amount of such
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LIBO Rate Loan and for a period approximately equal to such Interest Period.
"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any Interest
Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of
1%) determined pursuant to the following formula:
LIBO Rate = LIBO Rate
(Reserve Adjusted) -------------------------------
1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans
will be determined by the Administrative Agent on the basis of the LIBOR Reserve
Percentage in effect on, and the applicable rates furnished to and received by
the Administrative Agent two Business Days before, the first day of such
Interest Period.
"LIBOR Cost Reserve" at any time means (a) if the product of 2 multiplied
by the Days Sales Outstanding for the preceding Fiscal Month is greater than 60
days, the product as of the most recent Month End Date of (i) the sum of (A) the
product of (I) 1.5 multiplied by (II) the LIBO Rate (Reserve Adjusted) for a
two-month Interest Period, plus (B) 2.55%, multiplied by (ii) a fraction, the
numerator of which is the product of 2 multiplied by the Days Sales Outstanding
for the preceding Fiscal Month and the denominator of which is 365, or in the
case of a leap year, 366 or (b) in all other cases, the product of (i) the LIBO
Rate (Reserve Adjusted) for a two-month Interest Period, plus 2.55%, multiplied
by (ii) a fraction, the numerator of which is 60 and the denominator of which is
365, or in the case of a leap year, 366.
"LIBOR Office" means, relative to any Lender, the office of such Lender
designated as such below its name on Schedule III or designated in the Lender
Assignment Agreement or such other office of a Lender as designated from time to
time by notice from such
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<PAGE> 29
Lender to the Borrower and the Administrative Agent, whether or not outside the
United States, which shall be making or maintaining LIBO Rate Loans of such
Lender hereunder.
"LIBOR Reserve Percentage" means, relative to any Interest Period, the
reserve percentage (expressed as a decimal) equal to the maximum aggregate
reserve requirements (including all basic, emergency, supplemental, marginal and
other reserves and taking into account any transitional adjustments or other
scheduled changes in reserve requirements as and when in effect) specified under
regulations issued from time to time by the F.R.S. Board and then applicable to
assets or liabilities consisting of and including "Eurocurrency Liabilities", as
currently defined in Regulation D of the F.R.S. Board, having a term
approximately equal or comparable to such Interest Period.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property, or other priority or preferential
arrangement of any kind or nature whatsoever, to secure payment of a debt or
performance of an obligation.
"Liquidation Account" means that certain bank account numbered 5587352
maintained at The First National Bank of Chicago in the Borrower's name and
governed by the Liquidation Account Agreement.
"Liquidation Account Agreement" means a letter agreement among the
Administrative Agent, the Borrower and the Liquidation Account Bank,
substantially in the form of Exhibit N, as amended, supplemented, restated or
otherwise modified from time to time.
"Liquidation Account Bank" means the bank holding the Liquidation Account.
"Loan" means any loan made or deemed made by a Lender hereunder and any
Swingline Loan made by the Swingline Bank hereunder.
"Loan Document" means this Agreement, the Notes, the Swingline Note, the
Security Agreement, the Purchase Agreement, the Fee Letter, the Collection
Account Agreement, the Liquidation Account
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Agreement, the Lock-Box Agreements and each other document or instrument
executed in connection with any of the foregoing, but in any event excluding the
Originator Credit Facility and all documentation relating to the facility
provided therein.
"LOC Collateralization Account" means an interest-bearing account
established and maintained by the Administrative Agent for the deposit of funds
to collateralize Letter of Credit Outstandings.
"Lock-Box Account" means an account maintained at a bank or other
financial institution for the purpose of receiving Collections as listed on
Exhibit P.
"Lock-Box Agreement" means an agreement, in substantially the form of
Exhibit O, between the Borrower, the Administrative Agent and each Lock-Box
Bank.
"Lock-Box Bank" means any of the banks or other financial institutions
holding one or more Lock-Box Accounts.
"Loss Reserve Percentage" means, on any date, the greater of (i) the Loss
Reserve Ratio and (ii) 12%.
"Loss Reserve Ratio" means, at any time, the product (expressed as a
percentage) of (i) 2.00 multiplied by (ii) the highest three-month rolling
average of the Default Ratio for the preceding 12 Fiscal Months multiplied by
(iii) a fraction having (A) a numerator equal to the sum of (I) the Monthly
Sales for the two preceding Fiscal Months and (II) the product of the Monthly
Sales for the third preceding Fiscal Month and a fraction, the numerator of
which is 12 and the denominator of which is 30, and (B) a denominator equal to
the Net Receivables Pool Balance as of the most recent Month End Date.
"Material Adverse Effect" means, with respect to any event or
circumstance, a material adverse effect on:
(i) the business, assets, financial condition, operations,
properties or prospects of any of the Borrower or ProSource and its
Subsidiaries taken as whole;
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<PAGE> 31
(ii) the ability of any of the Borrower or ProSource to perform its
obligations under this Agreement or any other Loan Document to which it is
or becomes a party;
(iii) the enforceability of the Obligations of any of the Borrower
or ProSource under any Loan Document to which it is or becomes a party; or
(iv) the rights and remedies of the Administrative Agent or any
Secured Party under any Loan Document.
The parties hereto understand and agree that the termination of
ProSource's agreement to provide distribution services to Arby's restaurants
effective April 1, 1997 is not and shall not constitute an event that has a
Material Adverse Effect.
"Month End Date" means the last day of any Fiscal Month of the Borrower.
"Monthly Payment Date" means the 20th day of each Fiscal Month or, if any
such day is not a Business Day, the next succeeding Business Day.
"Monthly Sales" means, for any Fiscal Month, the product of (i) the
aggregate amount payable pursuant to invoices giving rise to Pool Receivables
that were generated during such Fiscal Month and (ii) if there are four weeks in
such Fiscal Month, a fraction, the numerator of which is 30 and the denominator
of which is 28 and if there are five weeks in such Fiscal Month, a fraction, the
numerator of which is 30 and the denominator of which is 35.
"Moody's" means Moody's Investors Service, Inc.
"Net Receivables Pool Balance" means at any time an amount equal to the
aggregate Outstanding Balances of all Eligible Receivables, minus the sum of (a)
the aggregate amount by which the aggregate Outstanding Balances of the Eligible
Receivables of each Obligor exceeds the product of (i) the Obligor Concentration
Limit for such Obligor multiplied by (ii) the aggregate Outstanding Balances of
the Eligible Receivables, plus (b) the aggregate amount by which the aggregate
Outstanding Balances of all Eligible Receivables of each Franchisor exceeds the
product of (i) the
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Franchisor Concentration Limit for such Franchisor multiplied by (ii) the
aggregate Outstanding Balances of all Eligible Receivables, plus (c) the
aggregate amount by which the aggregate Outstanding Balances of all Eligible
Receivables payable in Canadian dollars exceeds the product of (i) 10%
multiplied by (ii) the aggregate Outstanding Balances of all Eligible
Receivables; provided, however, that the sum of amounts set forth in clauses (a)
- - (c) shall be calculated by the Servicer in such order as will minimize
duplication.
"Net Worth" means, for any Person at any time, the sum of all amounts
which, in accordance with GAAP, would be included under shareholders' equity on
the most recently available consolidated balance sheet of such Person and its
Subsidiaries.
"Newco" is defined in Section 7.2.8.
"Non-U.S. Person" means any Person that is not a U.S. Person.
"Note" means a promissory note of the Borrower payable to any Lender, in
the form of Exhibit A hereto (as such promissory note may be amended, endorsed
or otherwise modified from time to time), evidencing the aggregate Indebtedness
of the Borrower to such Lender resulting from outstanding Loans, and also means
all other promissory notes accepted from time to time in substitution therefor
or renewal thereof.
"Obligations" means all monetary obligations of the Borrower arising under
or in connection with this Agreement, the Notes, the Swingline Note and each
other Loan Document.
"Obligor" means each Person obligated to make payments with respect to any
Receivable, including any guarantor thereof.
"Obligor Concentration Limit" for any Obligor means the percentage set
forth opposite such Obligor's rating on Exhibit R.
"Organic Document" means, relative to any Person, as applicable, its
certificate of incorporation, by-laws, certificate of partnership, partnership
agreement, certificate of formation, limited liability agreement and all
shareholder agreements, voting trusts and similar arrangements applicable to any
of such Person's
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partnership interests, limited liability company interests or authorized shares
of capital stock.
"Originator" means ProSource, in its capacity as an originator and
seller/contributor of the Pool Receivables.
"Originator Credit Facility" means the Credit Agreement, dated as of March
14, 1997, among the Originator, certain financial institutions parties thereto
and The Bank of Nova Scotia, as administrative agent.
"Outstanding Balance" means, with respect to any Receivable, the then
unpaid principal balance thereof; provided, however, that if such Receivable is
denominated in Canadian dollars, the Outstanding Balance thereof shall be the
foregoing amount, converted to U.S. Dollars using the applicable exchange rate
published in The Wall Street Journal, Eastern Edition under the column entitled
"Key Currency Cross Rates," on the Business Day prior to the date of
determination.
"Parent Group" is defined in Section 7.2.10(b).
"Participant" is defined in Section 12.11.2.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer
plan as defined in section 4001(a)(3) of ERISA), and to which ProSource or any
corporation, trade or business that is, along with ProSource, a member of a
Controlled Group, may have liability, including any liability by reason of
having been a substantial employer within the meaning of section 4063 of ERISA
at any time during the preceding five years, or by reason of being deemed to be
a contributing sponsor under section 4069 of ERISA.
"Percentage" means, relative to any Lender, the percentage set forth
opposite its name on Schedule III hereto or set forth in the Lender Assignment
Agreement, as such percentage may be adjusted from time to time pursuant to
Lender Assignment Agreement(s)
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executed by such Lender and its Assignee Lender(s) and delivered pursuant to
Section 12.11.
"Permitted Investment" means, at any time:
(a) any direct obligation of (or guaranteed by) the United States
Government (or any agency or instrumentality thereof) maturing not more
than one week after such time;
(b) commercial paper, maturing not more than one week from the date
of issue, which is issued by any Lender or a corporation (other than an
Affiliate of any Obligor) organized under the laws of any state of the
United States or the District of Columbia, in each case rated A-1 by S&P
or P-1 by Moody's;
(c) any certificate of deposit or bankers acceptance, maturing not
more than one week after such time, which is issued by any bank organized
under the laws of the United States (or any State thereof or the District
of Columbia or Canada) which has (x) a credit rating of Aa or better from
Moody's or a comparable rating from S&P and (y) a combined capital and
surplus greater than $100,000,000 (or the Dollar equivalent thereto); or
(d) any repurchase agreement entered into with any Lender or
commercial banking institution of the stature referred to in clause (c)
which
(i) is secured by a fully perfected security interest in any
obligation of the type described in clause (a), and
(ii) has a market value at the time such repurchase agreement
is entered into of not less than 100% of the repurchase obligation
of such commercial banking institution thereunder.
"Permitted Liens" means (i) Liens for taxes, assessments or other
governmental charges or levies not at any time delinquent or thereafter payable
without penalty or being diligently contested in good faith by appropriate
proceedings and for which adequate
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reserves, if any, in accordance with GAAP shall have been set aside on the
applicable Person's books (ii) Liens arising under the Perishable Agricultural
Commodities Act, 1930, as amended, provided no claim or notice has been filed
under such Act with respect to
such Lien.
"Person" means any natural person, corporation, partnership, firm,
association, limited liability company, limited liability partnership, trust,
government, governmental agency or any other entity, whether acting in an
individual, fiduciary or other capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Pool Receivable" means a Receivable acquired by the Borrower from the
Originator pursuant to the Purchase Agreement.
"PPSA" means (a) the personal property security legislation, as amended,
supplemented or replaced from time to time, as in effect in each Province of
Canada (other than Quebec, Newfoundland, Prince Edward Island and Nova Scotia),
(b) the Quebec Civil Code, as amended, supplemented or replaced from time to
time, as in effect in Quebec, and (c) the Assignment of Book Debts Act, as
amended, supplemented or replaced from time to time, as in effect in each of
Newfoundland, Prince Edward Island and Nova Scotia.
"ProSource" is defined in the preamble.
"Purchase Agreement" means the Purchase and Sale Agreement, dated as of
March 14, 1997, between the Borrower and the Originator, in substantially the
form of Exhibit G hereto, and any other Purchase and Sale Agreement subsequently
executed and delivered by the Borrower and the Originator, in substantially the
same form as Exhibit G hereto, as such agreements may be amended, supplemented
or otherwise modified from time to time.
"Quarterly Payment Date" means the last day of March, June, September and
December, or, if such day is not a Business Day, the next succeeding Business
Day.
"Receivable" means any right to payment from any Person, whether
constituting an account, chattel paper, an instrument or a
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<PAGE> 36
general intangible (including any right to payment converted to a note),
originated by the Originator or acquired by the Originator from ProSource
Distribution Services Limited, arising from the sale of goods and services by
the Originator (or ProSource Distribution Services Limited), including the right
to payment of any interest or finance charges and other obligations of such
Person with respect thereto.
"Reimbursement Obligation" is defined in Section 2.8.3.
"Related Security" means, with respect to any Receivable: (a) all right,
title and interest in and to all Contracts that relate to such Receivable; (b)
all security interests or liens and property subject thereto from time to time
purporting to secure payment of such Receivable, whether pursuant to the
Contract related to such Receivable or otherwise; (c) all U.C.C. and PPSA
financing statements covering any collateral securing payment of such
Receivable; (d) all books and records relating to such Receivable; (e) all
guarantees and other agreements or arrangements of whatever character from time
to time supporting or securing payment of such Receivable whether pursuant to
the Contract related to such Receivable or otherwise; and (f) all rights and
claims of the Borrower with respect to such Receivable pursuant to the Purchase
Agreement.
"Required Lenders" means, at any time, Lenders holding at least 51% of the
then aggregate outstanding principal amount of the Loans (it being understood
that if any Swingline Loan is outstanding, each Lender shall be deemed to hold
its Percentage thereof), or, if no such principal amount is then outstanding,
Lenders having at least 51% of the Commitments of the Lenders.
"Restricted Payment" is defined in Section 7.2.6.
"Revolving Loans" mean all Loans other than Swingline Loans.
"Sample Dilution Horizon" is defined in Section 8.2(k).
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
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"Scheduled Maturity Date" means March 14, 2002, as such date may be
extended pursuant to Section 2.9.
"Secured Parties" means the Lenders, the Swingline Bank, the Issuer and
the Administrative Agent.
"Security Agreement" means the Security Agreement executed and delivered
by the Borrower substantially in the form of Exhibit I hereto, as amended,
supplemented, restated or otherwise modified from time to time.
"Servicer" is defined in Section 8.1.
"Servicer Indemnified Liabilities" is defined in Section 8.8.
"Servicer Indemnified Parties" is defined in Section 8.8.
"Servicer Transfer Event" is defined in Section 8.1(b).
"Servicing Fee" is defined in Section 8.7.
"Servicing Fee Reserve Percentage" at any time means the product
(expressed as a percentage) of (i) a fraction, the numerator of which is the
Outstanding Balance of all Pool Receivables as of the most recent Month End Date
and the denominator of which is the Net Receivables Pool Balance as of the most
recent Month End Date, multiplied by (ii) 1.00%, multiplied by (iii) a fraction,
the numerator of which is 60 and the denominator of which is 365 or, in the case
of a leap year, 366.
"Specified Net Worth Level" shall mean, for any date, the greater of: (a)
the level set forth with respect to such date in Section 7.2.4 of the Originator
Credit Facility and (b) at any time during any Fiscal Quarter of ProSource,
commencing with the second Fiscal Quarter of Fiscal Year 1997, an amount equal
to the sum of (i) $70,000,000, plus (ii) an amount equal to 50% of the sum of
the Net Income (as defined in the Originator Credit Facility on the Effective
Date) for each Fiscal Quarter, commencing with the second Fiscal Quarter of
Fiscal Year 1997 and ending with the last full Fiscal Quarter ending on or prior
to any date of measurement, in which Net Income (as defined in the Originator
Credit Facility on the Effective Date) exceeded $0 plus (iii) an amount equal to
50%
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of the aggregate value of capital contributions made to the equity of ProSource
since the Effective Date (excluding capital contributions made expressly and
solely for the purpose of curing an Event of Default under the Originator Credit
Facility).
"Stated Amount" of each Letter of Credit means the total amount available
to be drawn under such Letter of Credit.
"Stated Expiry Date" is defined in Section 2.8.
"Subsidiary" means, with respect to any Person, any corporation of which
more than 50% of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such Person, by such
Person and one or more other Subsidiaries of such Person, or by one or more
other Subsidiaries of such Person.
"Successor Notice" is defined in Section 8.1(b).
"Swingline Bank" means Scotiabank in its capacity as swingline
lender hereunder.
"Swingline Commitment Subamount" means, on any date, $15,000,000, as such
amount may be reduced from time to time pursuant to Section 2.2.
"Swingline Loan" means a Loan made available to the Borrower by the
Swingline Bank pursuant to Section 2.7 hereof.
"Swingline Note" means a promissory note, in substantially the form of
Exhibit A-2, duly executed by the Borrower and payable to the order of the
Swingline Bank in the amount of the Swingline Commitment Subamount, including
any amendment, modification, renewal or replacement of such note.
"Taxes" means any present or future income, excise, stamp or franchise
taxes and other taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing
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jurisdiction, and in each case any interest, additions to tax, penalties or
additional amounts payable with respect thereto.
"Total Reserve Percentage" at any time equals the sum of (i) the Loss
Reserve Percentage, (ii) Dilution Reserve Percentage, (iii) the Servicing Fee
Reserve Percentage, (iv) the Yield Reserve Percentage and (v) the Canadian
Dollar FX Reserve Percentage.
"Type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"U.C.C." means the Uniform Commercial Code as from time to time in effect
in the State of New York.
"United States" or "U.S." means the United States of America, its fifty
states, Puerto Rico and the District of Columbia.
"U.S. Person" means any Person that is a "United States person" within the
meaning of Section 7701(a)(30) of the Code (or any applicable successor
provision).
"Welfare Plan" means a "welfare plan", as such term is defined in section
3(1) of ERISA.
"Yield Reserve Percentage" at any time means the product (expressed as a
percentage) of (i) a fraction, the numerator of which is the Commitment Amount
and the denominator of which is the Net Receivables Pool Balance as of the most
recent Month End Date, multiplied by (ii) the greater at such time of (A) the
LIBOR Cost Reserve and (B) the Alternate Base Rate Cost Reserve.
SECTION 1.2. Use of Defined Terms. With respect to all terms used in this
Agreement, the singular includes the plural and the plural includes the
singular, words importing one gender include the other gender, references to
"writing" include printing, typing, lithography and other means of reproducing
words in a visible form, references to agreements and other contractual
instruments include all subsequent amendments thereto or changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement, references to Persons include their permitted successors and assigns,
and the terms "include" or "including" mean "include without limitation" or
"including without limitation."
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Unless otherwise defined or the context otherwise requires, terms for which
meanings are provided in this Agreement shall have such meanings when used in
any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified, references in
this Agreement and in each other Loan Document to any Article, Section or
Exhibit are references to such Article, Section or Exhibit of this Agreement or
such other Loan Document, as the case may be, and, unless otherwise specified,
references in any Article, Section, Exhibit or definition to any clause are
references to such clause of such Article, Section, Exhibit or definition.
SECTION 1.4. Accounting and Financial Determinations. Unless otherwise
specified, all accounting terms used herein or in any other Loan Document shall
be interpreted, all accounting determinations and computations hereunder or
thereunder shall be made in accordance with those generally accepted accounting
principles ("GAAP") applied in the preparation of the financial statements
referred to in Section 6.2.5. Unless otherwise expressly provided, all financial
covenants and defined financial terms shall be computed on a consolidated basis
for the Borrower and its Subsidiaries, in each case without duplication. If any
preparation in the financial statements referred to in Section 7.1.1 hereafter
occasioned by the promulgation of rules, regulations, pronouncements and
opinions by or required by the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants (or successors thereto or
agencies with similar functions) result in a change in any results, amounts,
calculations, ratios, standards or terms found in this Agreement or any Loan
Document from those which would be derived or be applicable absent such changes,
the Borrower may reflect such changes in the financial statements and
certificates required to be delivered pursuant to Section 7.1.1, but
computations made to determine compliance with financial covenants, including
Section 7.2.5, shall be made without giving effect to any such changes.
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ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTE
SECTION 2.1. Commitments. On the terms and subject to the conditions of
this Agreement from time to time on any Business Day occurring prior to the
Commitment Termination Date: (i) each Lender severally agrees to make Revolving
Loans to the Borrower equal to such Lender's Percentage of the aggregate amount
of the Borrowing requested by the Borrower to be made on such day pursuant to
Section 2.3; (ii) the Swingline Bank agrees to make Swingline Loans in
accordance with Section 2.7 and (iii) the Issuer agrees to issue, and each
Lender agrees to participate in, all letters of credit requested by the Borrower
to be issued on such day by the Issuer (the "Letters of Credit") pursuant to
Section 2.8 . The commitment of each Person described in this Section 2.1 is
herein referred to as its "Commitment". On the terms and subject to the
conditions hereof, the Borrower may from time to time borrow, prepay and
reborrow Loans in whole or in part and/or have the Issuer issue Letters of
Credit, have such Letters of Credit expire or otherwise terminate without having
been drawn upon or, if drawn upon, reimburse the Issuer for each such drawing
and have the Issuer issue new Letters of Credit, all in accordance with the
terms and conditions of this Agreement.
SECTION 2.1.1. Conditions Precedent to Credit Extensions. The Issuer shall
not be required to issue any Letters of Credit, the Swingline Bank shall not be
required to make any Swingline Loan and no Lender shall be required to make any
Revolving Loan, if after giving effect thereto:
(i) the Aggregate Outstanding Amount would exceed the lesser of (A)
the Commitment Amount and (B) the sum of the Borrowing Base and the amount
on deposit in the Liquidation Account (other than amounts on deposit
therein allocated to Carrying Costs) at such time;
(ii) such Lender's Percentage of the Aggregate Outstanding Amount
would exceed such Lender's Percentage of the lesser of (A) the Commitment
Amount and (B) the sum of the Borrowing Base and the amount on deposit in
the Liquidation
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<PAGE> 42
Account (other than amounts on deposit therein allocated to Carrying
Costs) at such time;
(iii) the Letter of Credit Outstandings would exceed the Letter of
Credit Commitment Subamount; or
(iv) the aggregate outstanding principal amount of all Swingline
Loans would exceed the Swingline Commitment Subamount.
SECTION 2.2. Reduction of Commitment Amounts. The Borrower may, from time
to time, on thirty Business Days' prior written notice to the Administrative
Agent voluntarily reduce the Commitment Amount; provided, however, that (a) all
such reductions shall be permanent, any partial reduction of the Commitment
Amount shall be in a minimum amount of $2,500,000 and in an integral multiple of
$100,000 and after giving effect to any partial reduction the remaining
Commitment Amount will not be less than $50,000,000 and (b) in no event shall
the Commitment Amount be reduced below the Aggregate Outstanding Amount. Any
reduction in the Commitment Amount shall result in a corresponding pro-rata
reduction in the Letter of Credit Commitment Subamount and the Swingline
Commitment Subamount.
SECTION 2.3. Borrowing Procedure. The Borrower may from time to time
irrevocably request, by delivering a Borrowing Request to the Administrative
Agent (i) on or before 12:00 noon, New York time, on a Business Day that is not
less than three, nor more than five, Business Days prior to the requested
Borrowing, in the case of LIBO Rate Loans, and (ii) on or before 12:00 noon, New
York time, on a Business Day that is not less than one, nor more than five,
Business Days prior to the requested Borrowing, in the case of Base Rate Loans,
that a Borrowing is to be made in a minimum amount of $1,000,000 and an integral
multiple of $100,000, or in the Available Commitment Amount. On the terms and
subject to the conditions of this Agreement, each Borrowing shall be comprised
of the Type of Loans, and shall be made on the Business Day specified in such
Borrowing Request. On or before 11:00 a.m., New York time, on such Business Day,
each Lender shall deposit with the Administrative Agent immediately available
funds in an amount equal to such Lender's Percentage of the requested Borrowing.
Such deposit will be made to an account which the Administrative Agent
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shall specify from time to time by notice to the Lenders. To the extent such
funds are received from any Lender, and subject to Section 10.2 to the extent
funds are not received from the Lenders, the Administrative Agent shall make
such funds available to the Borrower by wire transfer on the same day to the
accounts the Borrower shall have specified in its Borrowing Request. No Lender's
obligation to make any Loan shall be affected by any other Lender's failure to
make any Loan.
SECTION 2.4. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 12:00
noon, New York time, on a Business Day, the Borrower may from time to time
irrevocably elect, on not less than three, nor more than five, Business Days'
notice that all, or any portion in an aggregate minimum amount of $1,000,000 and
an integral multiple of $100,000 of, Loans be, in the case of Base Rate Loans,
converted into LIBO Rate Loans or, in the case of LIBO Rate Loans, be converted
into a Base Rate Loan or continued as a LIBO Rate Loan (in the absence of
delivery of a Continuation/ Conversion Notice with respect to any LIBO Rate Loan
at least three Business Days before the last day of the then current Interest
Period with respect thereto, such LIBO Rate Loan shall, on such last day,
automatically convert to a Base Rate Loan); provided, however, that (i) each
such conversion or continuation shall be pro rata among the applicable
outstanding Loans of all Lenders, and (ii) no portion of the outstanding
principal amount of any Loans may be continued as, or be converted into, LIBO
Rate Loans when any Default has occurred and is continuing.
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBO Rate Loans hereunder by causing one
of its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBO Rate Loan; provided,
however, that such LIBO Rate Loan shall nonetheless be deemed to have been made
and to be held by such Lender, the Borrower shall not be responsible to
reimburse the Lender for any increased cost, tax or other amount incurred, paid
or payable, or any other loss realized as a result thereof and the obligation of
the Borrower to repay such LIBO Rate Loan shall nevertheless be to such Lender
for the account of such foreign branch, Affiliate or international banking
facility. In addition, the Borrower hereby consents and agrees that, for
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purposes of any determination to be made for purposes of Sections 4.1, 4.2, 4.3
or 4.4, it shall be conclusively assumed that each Lender elected to fund all
LIBO Rate Loans by purchasing Dollar deposits in its LIBOR Office's interbank
eurodollar market.
SECTION 2.6. Notes. Each Lender's Revolving Loans shall be evidenced by a
Note payable to the order of such Lender, in a maximum principal amount equal to
such Lender's Percentage of the Commitment Amount. The Borrower hereby
irrevocably authorizes each Lender to make (or cause to be made) appropriate
notations on the grid attached to each Lender's Note (or on any continuation of
such grid), which notations, if made, shall evidence, inter alia, the date of,
the outstanding principal of, and the interest rate and Interest Period
applicable to the Loans evidenced thereby. Such notations shall be conclusive
and binding on the Borrower absent manifest error; provided, however, that the
failure of any Lender to make any such notations shall not limit or otherwise
affect any Obligations of the Borrower.
SECTION 2.7. Swingline Loans. Subject to the terms and conditions of the
Agreement, the Swingline Bank agrees to make the Swingline Loans to the Borrower
in accordance with this Section 2.7 up to the amount of the Swingline Commitment
Subamount. Amounts borrowed under this Section 2.7 may be borrowed, repaid and
reborrowed to, but not including, the Commitment Termination Date. All Swingline
Loans shall be made and maintained as Base Rate Loans.
SECTION 2.7.1. Borrowing Procedures for Swingline Loans. The Borrower may
request a Swingline Loan from the Swingline Bank on any Business Day before the
Commitment Termination Date by giving the Swingline Bank written or telephonic
notice by 12:00 noon, New York time, (or such later time as the Borrower and the
Swingline Bank may agree) on the Business Day the proposed Swingline Loan is to
be made, promptly followed (within one Business Day) by the delivery of a
conforming Borrowing Request. Each such notice shall be effective upon receipt
by the Swingline Bank and shall specify the date and amount of borrowing. All
Swingline Loans shall be made as Base Rate Loans and shall not be entitled to be
converted into LIBO Rate Loans. The Swingline Bank shall pay over the requested
amount to the Borrower by no later than its close of business on the requested
date of borrowing. Each Swingline Loan
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shall be made on a Business Day and shall be in the amount of at least $500,000
and in an integral multiple of $100,000. The Swingline Bank shall promptly
notify the Administrative Agent of the making and amount of each Swingline Loan.
The Administrative Agent shall promptly notify each Lender of such request.
SECTION 2.7.2. Swingline Note. The Swingline Loans shall be evidenced by
the Swingline Note payable to the order of the Swingline Bank, in a maximum
principal amount equal to the Swingline Commitment Subamount. The Borrower
hereby irrevocably authorizes the Swingline Bank to make (or cause to be made)
appropriate notations on the grid attached to the Swingline Note (or on any
continuation of such grid), which notations, if made, shall evidence, inter
alia, the date of, the outstanding principal of, and the interest rate
applicable to the Swingline Loans evidenced thereby. Such notations shall be
conclusive and binding on the Borrower absent manifest error; provided, however,
that the failure of the Swingline Bank to make any such notations shall not
limit or otherwise affect any Obligations of the Borrower.
SECTION 2.7.3. Repayment of Swingline Loans. If (i) any Swingline Loan
shall be outstanding for more than seven Business Days, (ii) the aggregate
principal balance of outstanding Swingline Loans equals or exceeds $1,000,000,
(iii) any Swingline Loan is or will be outstanding on a date when the Borrower
requests a Revolving Loan, (iv) any Default shall occur and be continuing, or
(v) the Swingline Bank provides notice to the Administrative Agent and the
Lenders, in its discretion, each Lender (including the Swingline Bank in its
capacity as a Lender) irrevocably and unconditionally agrees that it will at the
request of the Swingline Bank make a Revolving Loan (which shall initially be
funded as a Base Rate Loan) in an amount equal to such Lender's Percentage of
the aggregate principal amount of all such Swingline Loans then outstanding on
such date for the purpose of repaying such Swingline Loans. The Lenders shall
deliver the proceeds of such Revolving Loan to the Administrative Agent in
immediately available funds by 11:00 a.m., New York time, on the first Business
Day following receipt of such request for payment to the Swingline Bank in
respect of such Swingline Loan. Upon the making of such payment by a Lender,the
amount so funded by such Lender shall become outstanding under such Lender's
Note and shall no longer be owed under the Swingline Note. Each Lender's
obligation to make
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available its Percentage of the Swingline Loans to be repaid shall be absolute
and unconditional and shall not be affected by any circumstance, including (i)
any set-off, counterclaim, recoupment, defense or other right which such Lender
may have against the Swingline Bank, or anyone else, (ii) the occurrence or
continuance of a Default or the lack of satisfaction of any condition set forth
in Section 5.2, (iii) any adverse change in the condition (financial or
otherwise) of the Borrower or (iv) any other circumstance, happening or event
whatsoever. If for any reason a Lender does not make available its Percentage of
the foregoing Swingline Loan then being repaid, such Lender shall be deemed to
have unconditionally and irrevocably purchased from the Swingline Bank, without
recourse or warranty, an undivided interest and participation in such Swingline
Loan then being repaid, equal to its Percentage of such Swingline Loan.
SECTION 2.8. Letter of Credit Issuance Procedures. By delivering to the
Administrative Agent a Letter of Credit Issuance Request on or before 12:00
noon, New York time, on a Business Day, the Borrower may, from time to time
irrevocably request, on not less than three nor more than ten Business Days'
notice, in the case of an issuance of a Letter of Credit, and not less than
three Business Days' prior notice, in the case of a request for the extension of
the Stated Expiry Date of a Letter of Credit, that the Issuer issue, or extend
the Stated Expiry Date of, as the case may be, an irrevocable Letter of Credit
in such form as may be requested by the Borrower and approved by the Issuer.
Each Letter of Credit shall by its terms be stated to expire on a date (its
"Stated Expiry Date") no later than the earlier to occur of (i) the Scheduled
Maturity Date or (ii) one year from the date of its issuance. The Issuer shall
make available to the beneficiary thereof the original of each Letter of Credit
which it issues hereunder. Notwithstanding any other provision to the contrary,
it is a condition precedent to the issuance of any Letter of Credit by the
Issuer that, as of the date of issuance, no order, judgment or decree of any
court, arbitrator or governmental authority shall purport by its terms to enjoin
or restrain the Issuer from issuing the Letter of Credit and no law, rule or
regulation applicable to the Issuer and no request or directive (whether or not
having the force of law) from any governmental authority with jurisdiction over
the Issuer shall prohibit or request that the Issuer refrain
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from the issuance of letters of credit generally or the issuance of such Letter
of Credit.
SECTION 2.8.1. Other Lenders' Participation. Upon the issuance of each
Letter of Credit issued by the Issuer pursuant hereto, and without further
action, each Lender (other than the Issuer) that has a Commitment shall be
deemed to have irrevocably purchased, to the extent of its Percentage, a
participation interest in such Letter of Credit (including any Contingent
Liability and any Reimbursement Obligation with respect thereto), and such
Lender shall, to the extent of its Percentage, be responsible for reimbursing
the Issuer in accordance with Section 2.8.2 for Reimbursement Obligations which
have not been reimbursed by the Borrower prior to 12:00 noon on the Business Day
following the Disbursement Date. In addition, such Lender shall, to the extent
of its Percentage, be entitled to receive a ratable portion of the Letter of
Credit Fees payable pursuant to Section 3.3.2 with respect to each Letter of
Credit and of interest payable pursuant to Section 3.2 with respect to any
Reimbursement Obligation. To the extent that any Lender has reimbursed the
Issuer for a Disbursement as required by this Section, such Lender shall be
entitled to receive its ratable portion of any amounts subsequently received
(from the Borrower or otherwise) in respect of such Disbursement.
SECTION 2.8.2. Disbursements. The Issuer will notify the Borrower, the
Administrative Agent and each Lender promptly of the presentment for payment of
any Letter of Credit issued by the Issuer, together with notice of the date (the
"Disbursement Date") such payment shall be made (each such payment, a
"Disbursement"). Subject to the terms and provisions of such Letter of Credit
and this Agreement, the Issuer shall make such payment to the beneficiary (or
its designee) of such Letter of Credit. Prior to 12:00 noon, New York time, on
the first Business Day following the Disbursement Date, the Borrower will
reimburse the Administrative Agent, for the account of the Issuer, for all
amounts which the Issuer has disbursed under such Letter of Credit, together
with interest thereon at a rate per annum equal to the rate per annum then in
effect for Base Rate Loans pursuant to Section 3.2 for the period from the
Disbursement Date through the date of such reimbursement. Without limiting in
any way the foregoing and notwithstanding anything to the contrary contained
herein or in any
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separate application for any Letter of Credit, the Borrower hereby acknowledges
and agrees that it shall be obligated to reimburse the Issuer upon each
Disbursement of a Letter of Credit, and it shall be deemed to be the obligor for
purposes of each such Letter of Credit issued hereunder. If the Borrower has not
reimbursed the Issuer for a Disbursement by 12:00 noon, New York time, on the
first Business Day following the Disbursement Date, each Lender shall deposit
with the Administrative Agent, for the account of the Issuer, immediately
available funds in an amount equal to such Lender's Percentage of such
unreimbursed Disbursement on or before 11:00 a.m., New York time, on the second
Business Day following the Disbursement Date. Upon the making of such payment by
a Lender to the Issuer, the amount so paid by such Lender shall become
outstanding under such Lender's Note as a Revolving Loan (and initially treated
as an Base Rate Loan) and shall no longer constitute a Reimbursement Obligation.
SECTION 2.8.3. Reimbursement. The obligation (a "Reimbursement
Obligation") of the Borrower under Section 2.8.2 to reimburse the Issuer with
respect to each Disbursement (including interest thereon), and, upon the failure
of the Borrower to reimburse the Issuer, each Lender's obligation to reimburse
the Issuer, shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment which the
Borrower or such Lender, as the case may be, may have or have had against the
Issuer or any such Lender, including any defense based upon the failure of any
Disbursement to conform to the terms of the applicable Letter of Credit (if, in
the Issuer's good faith opinion, such Disbursement is determined to be
appropriate) or any non-application or misapplication by the beneficiary of the
proceeds of such Letter of Credit; provided, however, that after paying in full
its Reimbursement Obligation hereunder, nothing herein shall adversely affect
the right of the Borrower or such Lender, as the case may be, to commence any
proceeding against the Issuer for any wrongful Disbursement made by the Issuer
under a Letter of Credit as a result of acts or omissions constituting gross
negligence or wilful misconduct on the part of such Issuer.
SECTION 2.8.4. Deemed Disbursements. Upon the occurrence and during the
continuation of any Default of the type described in Section 9.1.5 or, upon
written notice from the Administrative Agent
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given at the direction of the Required Lenders, upon the occurrence and during
the continuation of any other Event of Default,
(a) an amount equal to that portion of all Letter of Credit
Outstandings attributable to the then aggregate amount which is undrawn
and available under all Letters of Credit issued and outstanding hereunder
shall, without demand upon or notice to the Borrower, be deemed to have
been paid or disbursed by the Issuer under such Letters of Credit
(notwithstanding that such amount may not in fact have been so paid or
disbursed); and
(b) upon notification by the Administrative Agent to the Borrower of
its obligations under this Section, the Borrower shall be immediately
obligated to reimburse the Issuer for the amount deemed to have been so
paid or disbursed by such Issuer.
Any amounts so payable by the Borrower pursuant to this Section shall be
deposited in immediately available funds with the Administrative Agent and held
in the LOC Collateralization Account as collateral security for the Obligations
in connection with the Letters of Credit issued by the Issuer. At such time when
the Defaults or Events of Default giving rise to the deemed disbursements
hereunder shall have been cured or waived, the Administrative Agent shall return
to the Borrower all amounts then on deposit with the Administrative Agent
pursuant to this Section which have not been applied to the partial satisfaction
of such Obligations.
SECTION 2.8.5. Nature of Reimbursement Obligations. The Borrower and, to
the extent set forth in Section 2.8.1, each Lender shall assume all risks of the
acts, omissions or misuse of any Letter of Credit by the beneficiary thereof.
The Issuer (except to the extent of its own gross negligence or wilful
misconduct) shall not be responsible for:
(a) the form, validity, sufficiency, accuracy, genuineness or legal
effect of any Letter of Credit or any document submitted by any party in
connection with the application for and issuance of a Letter of Credit,
even if it
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should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy, genuineness or legal
effect of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder
or the proceeds thereof in whole or in part, which may prove to be invalid
or ineffective for any reason;
(c) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(d) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise;
or
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Disbursement under a Letter
of Credit.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted to the Issuer or any Lender. In furtherance and
extension and not in limitation or derogation of any of the foregoing, any
action taken or omitted to be taken by an Issuer in good faith (and not
constituting gross negligence or willful misconduct) shall be binding upon the
Borrower and each such Lender, and shall not put such Issuer under any resulting
liability to the Borrower or any such Lender, as the case may be.
SECTION 2.9. Extension of Scheduled Maturity Date. The Scheduled Maturity
Date shall be subject to extension as set forth in this Section 2.9.
SECTION 2.9.1. Request for Extension of Scheduled Maturity Date. Any term
or provision of this Agreement to the contrary notwithstanding, no earlier than
70 days nor later than 45 days prior to the one-year anniversary of the date of
the Effective Date, the Borrower may, by delivery of a duly completed Extension
Request to the Administrative Agent, irrevocably request that each Lender, the
Issuer and the Swingline Bank extend for one additional
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365-day period (such period to commence on the day immediately following the
then existing Scheduled Maturity Date) the Scheduled Maturity Date relating to
such Person's Commitment; provided, that the Scheduled Maturity Date shall not
in any event be extended beyond March 14, 2003 (or if such day is not a Business
Day, the next preceding Business Day). The failure of the Borrower to request
such an extension within the time set forth above shall automatically terminate
the Borrower's rights to request such extension.
SECTION 2.9.2. Consent to Extension of Scheduled Maturity. (a) The
Administrative Agent shall, promptly after receipt of an Extension Request
pursuant to Section 2.9.1, notify each Lender, the Issuer and the Swingline Bank
thereof by providing them a copy of such Extension Request.
(b) Each Lender, the Issuer and the Swingline Bank shall within 20
Business Days of receipt of the notice described in clause (a), notify the
Administrative Agent whether or not it consents to the request of the Borrower
set forth in such Extension Request, such consent to be in the sole discretion
of each Lender, the Issuer and the Swingline Bank. If such Person does not
notify the Administrative Agent of its decision within such 20 Business Days
period, such Person shall be deemed not to have consented to the Borrower's
request for an extension of the Scheduled Maturity Date.
(c) The Scheduled Maturity Date shall be extended for one additional
period of 365 days from the one-year anniversary of the date of the Effective
Date if all the Lenders, the Issuer and the Swingline Bank agree to such
extension. The Administrative Agent shall promptly notify the Borrower whether
the Lenders, the Issuer and the Swingline Bank have consented to an extension of
the Scheduled Maturity Date.
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ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments. The Borrower shall
repay in full the unpaid principal amount of each Loan upon the
Scheduled Maturity Date. Prior thereto, the Borrower
(a) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount of
any Loans; provided, however, that
(i) any such prepayment shall be made pro rata among the Loans
of the same Type and, if applicable, having the same Interest Period
for all Lenders;
(ii) any LIBO Rate Loan that is repaid other than on the last
day of the Interest Period for such Loan shall be subject to Section
4.4;
(iii) all such voluntary prepayments shall require written
notice to the Administrative Agent on or before 11:00 a.m., New York
Time, on the date of such prepayment; and
(iv) all such voluntary partial prepayments shall be in an
aggregate minimum amount of $1,000,000 and an integral multiple of
$100,000;
(b) shall, on each date when the Aggregate Outstanding Amount
exceeds the then Borrowing Base and in accordance with Section
11.1(b)(ii), make a mandatory prepayment of all Loans, up to the amount of
such excess, on such date, in the case of Base Rate Loans, or on the end
of the next Interest Period (or Interest Periods in the case where the
amount of the prepayment exceeds the amount of the next maturing LIBO Rate
Loan), in the case of LIBO Rate Loans; provided, that if after the
prepayment of all Loans any such excess remains, the Borrower shall pay an
amount equal to any such remaining excess to the Administrative Agent to
be held by the Administrative Agent in the LOC Collateralization Account
to collateralize Letter of Credit Outstandings; and
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(c) shall, immediately upon any acceleration of the Loans and other
Obligations pursuant to Section 9.2, repay all Loans and, if necessary,
provide immediately available funds collateral to the Administrative Agent
to be held by the Administrative Agent in the LOC Collateralization
Account to collateralize Letter of Credit Outstandings, unless, pursuant
to Section 9.2.2, only a portion of all Loans or other Obligations is so
accelerated (in which case the portion so accelerated shall be so prepaid
or cash collateralized).
Each prepayment of any Loans made pursuant to this Section shall be without
premium or penalty, except as may be required by Section 4.4. No prepayment of
principal of any Loans shall cause a reduction in the Commitment Amount.
Although payment of Obligations by the Borrower hereunder may be made out of
funds in the Collection Account and the Liquidation Account in accordance with
Article XI, all Obligations of the Borrower shall be full recourse obligations,
payable out of any of the assets of the Borrower.
SECTION 3.2. Interest Provisions. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with this Section 3.2.
SECTION 3.2.1. Rates. Pursuant to an appropriately delivered Borrowing
Request or Continuation/Conversion Notice, the Borrower may elect that Loans
comprising a Borrowing accrue interest at a rate per annum:
(a) on that portion maintained from time to time as a Base Rate Loan
(including all Swingline Loans), equal to the Alternate Base Rate from
time to time in effect; and
(b) on that portion maintained as a LIBO Rate Loan, during each
Interest Period applicable thereto, equal to the sum of the LIBO Rate
(Reserve Adjusted) for such Interest Period plus a margin of .55% per
annum.
All LIBO Rate Loans shall bear interest from and including the first day
of the applicable Interest Period to (but not including) the last day of such
Interest Period at the interest rate determined as applicable to such LIBO Rate
Loan. Each Swingline Loan
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shall bear interest on the outstanding principal amount thereof, from and
including the date such Swingline Loan is made to but excluding the date it is
repaid, at a rate per annum equal to the Alternate Base Rate for each such day.
SECTION 3.2.2. Post-Maturity Rates. Unless otherwise approved by the
Required Lenders, after the date any principal amount of any Loan or
Reimbursement Obligation is due and payable (whether on the Scheduled Maturity
Date, upon acceleration or otherwise), or after any other Obligation of the
Borrower shall have become due and payable, the Borrower shall pay interest
(after as well as before judgment) on such amounts at a rate per annum equal to
the rate applicable to such Loan or Reimbursement Obligation from time to time
in effect plus a margin of 2% or, in the case of any other Obligations of
Borrower, at a rate per annum equal to the Alternate Base Rate plus a margin of
2%.
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Scheduled Maturity Date;
(b) on the date of any payment or prepayment, in whole or in part,
of the principal outstanding on such Loan (excluding upon the repayment of
a Swingline Loan with the proceeds of a Revolving Loan pursuant to Section
2.7.3);
(c) with respect to Base Rate Loans (including with respect to any
Swingline Loans repaid with the proceeds of a Revolving Loan), on each
Monthly Payment Date occurring after the Effective Date;
(d) with respect to LIBO Rate Loans, the last day of each applicable
Interest Period; and
(e) on that portion of any Loans accelerated pursuant to Section
9.2, immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations of the Borrower arising
under this Agreement or any other Loan Document after the date such amount is
due and payable (whether on the Scheduled Maturity Date, upon acceleration or
otherwise) shall be
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payable upon demand. Interest payable on Swingline Loans shall be distributed by
the Administrative Agent to the Swingline Bank and interest payable on Revolving
Loans shall be distributed by the Administrative Agent to the applicable Lenders
in accordance with their Percentages.
SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in this
Section 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to the
Administrative Agent, for the account of each Lender, for the period (including
any portion thereof when any of its Commitments are suspended by reason of the
Borrower's inability to satisfy any condition of Article V) commencing on the
Effective Date and continuing through the Commitment Termination Date, a
commitment fee (the "Commitment Fee") at the rate of 1/4 of 1% per annum on such
Lender's Percentage of the average daily excess of (i) the Commitment Amount
over (ii) the Aggregate Outstanding Amount (other than the principal balance of
Swingline Loans). Such commitment fees shall be payable by the Borrower in
arrears on each Quarterly Payment Date, commencing with the first such day
following the Effective Date, and on the Commitment Termination Date.
SECTION 3.3.2. Letter of Credit Fee. The Borrower agrees to pay to the
Administrative Agent, for the account of each Lender, a facility fee (the
"Letter of Credit Fee") in an amount equal to .55% per annum on such Lender's
Percentage of the Letter of Credit Outstandings, payable in arrears on each
Quarterly Payment Date; provided, however, if any Loans or other Obligations
shall become due and payable under Section 9.2, the Letter of Credit Fee shall
equal 2.55% per annum. The Borrower further agrees to pay to the Issuer an
issuance fee in the amount and on the dates set forth in the Fee Letter.
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall determine
(which determination shall, upon written notice thereof to the Borrower, the
Administrative Agent and the other Lenders, be
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conclusive and binding on the Borrower) that the introduction of or any change
in or in the interpretation of any law makes it unlawful, or any central bank or
other governmental authority asserts that it is unlawful, for such Lender to
make, continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate
Loan, the obligations of such Lender to make, continue, maintain or convert any
such LIBO Rate Loan shall, upon such determination, forthwith be suspended until
such Lender shall notify the Administrative Agent that the circumstances causing
such suspension no longer exist, and all outstanding LIBO Rate Loans shall
automatically convert into Base Rate Loans at the end of the then current
Interest Periods with respect thereto, or sooner if required by such law or
assertion.
SECTION 4.2. Deposits Unavailable. If the Administrative Agent shall have
determined that
(a) with respect to any proposed LIBO Rate Loan, Dollar deposits in
the relevant amount and for the relevant Interest Period are not available
in the relevant market; or
(b) by reason of circumstances affecting the relevant market,
adequate means do not exist for ascertaining the interest rate applicable
hereunder to LIBO Rate Loans,
then, upon notice from the Administrative Agent to the Borrower and the Lenders,
the obligations of all Lenders under Section 2.3 and Section 2.4 to make or
continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall
forthwith be suspended until the Administrative Agent shall notify the Borrower
and the Lenders that the circumstances causing such suspension no longer exist.
SECTION 4.3. Increased LIBO Rate Loan Costs, etc. The Borrower agrees to
reimburse each Lender for any increase in the cost to such Lender of, or any
reduction in the amount of any sum receivable by such Lender in respect of,
making, continuing or maintaining (or of its obligation to make, continue or
maintain) any Loans as, or of converting (or of its obligation to convert) any
Loans into, LIBO Rate Loans. Such Lender shall promptly notify the
Administrative Agent and the Borrower in writing of the occurrence of any such
event, such notice to state, in reasonable detail, the reasons therefor and the
additional amount required
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fully to compensate such Lender for such increased cost or reduced amount. Such
additional amounts shall be payable by the Borrower directly to such Lender
within five days of its receipt of such notice, and such notice shall, in the
absence of manifest error, be conclusive and binding on the Borrower.
SECTION 4.4. Funding Losses. In the event any Lender shall incur any loss
or expense (including any loss or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such Lender to make,
continue or maintain any portion of the principal amount of any Loan as, or to
convert any portion of the principal amount of any Loan into, a LIBO Rate Loan)
as a result of
(a) any conversion or repayment or prepayment of the principal
amount of any LIBO Rate Loans on a date other than the scheduled last day
of the Interest Period applicable thereto, whether pursuant to Section 3.1
or otherwise;
(b) any Loans not being made as LIBO Rate Loans in accordance with
the Borrowing Request therefor; or
(c) any Loans not being continued as, or converted into, LIBO Rate
Loans in accordance with the Continuation/Conversion Notice therefor,
then, upon the written notice of such Lender to the Borrower (with a copy to the
Administrative Agent), the Borrower shall, within five days of its receipt
thereof, pay directly to such Lender such amount as will (in the reasonable
determination of such Lender) reimburse such Lender for such loss or expense.
Such written notice (which shall include calculations in reasonable detail)
shall, in the absence of manifest error, be conclusive and binding on the
Borrower.
SECTION 4.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects the amount of capital required or
expected to be maintained by any Lender, the Issuer, the Swingline Bank or any
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Person controlling such Person, and such Person determines (in good faith but in
its sole and absolute discretion) that the rate of return on its or such
controlling Person's capital as a consequence of its Commitments or the Loans
made, or Letters of Credit issued or participated in) by such Lender, the Issuer
or the Swingline Bank is reduced to a level below that which it or such
controlling Person could have achieved but for the occurrence of any such
circumstance, then, in any such case upon notice from time to time by such
Person to the Borrower and the Administrative Agent, the Borrower shall promptly
pay directly to such Person or the Administrative Agent additional amounts
sufficient to compensate such Lender, the Issuer, the Swingline Bank or such
controlling Person for such reduction in rate of return. A statement of such
Lender, the Issuer or the Swingline Bank as to any such additional amount or
amounts (including calculations thereof in reasonable detail) shall, in the
absence of manifest error, be conclusive and binding on the Borrower. In
determining such amount, such Lender, the Issuer or the Swingline Bank may use
any method of averaging and attribution that it (in good faith but in its sole
and absolute discretion) shall deem applicable to its customers generally.
SECTION 4.6. Taxes. (a) All payments by the Borrower of principal of, and
interest on, or other amounts in respect of, the Loans and all other amounts
payable hereunder (including fees) and the Notes, the Letters of Credit and the
Swingline Note shall be made free and clear of and without deduction for any
Taxes, except to the extent that any such withholdings or deductions are
required by applicable law, rule or regulations. In the event that any such
withholdings or deductions are required by applicable law, rule or regulations
in respect of any Taxes (including Taxes on account of any additional amount or
amounts described in clause (a)(iii) below), then the Borrower will
(i) pay directly to the relevant authority the full amount of Taxes
required to be so withheld or deducted;
(ii) promptly forward to the Administrative Agent an official
receipt or other documentation satisfactory to the Administrative Agent
evidencing such payment to such authority; and
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(iii) subject to paragraph (c) below, if such Taxes are Covered
Taxes, pay to the Administrative Agent for the account of the applicable
Secured Party such additional amount or amounts as is necessary to ensure
that the net amount actually received by each Secured Party will equal the
full amount such Secured Party would have received had no such withholding
or deduction been required.
In addition, subject to paragraph (c) below, if any Secured Party is required by
law at any time to pay any Covered Taxes or to make any payment on account of
Covered Taxes on, in relation to or calculated by reference to any sum received
or receivable in connection with the Loans, any Swingline Note or any Note or
any other amount payable hereunder or under any Swingline Note or any Note, or
any liability for Covered Taxes in respect of any sum is imposed, levied or
assessed against any Secured Party, then the Borrower will indemnify each such
Secured Party for the full amount of Covered Taxes (including Covered Taxes
attributable to pay payment on account of such indemnification and any interest,
penalties and costs with respect to any such Covered Taxes) actually (or, in the
event such Covered Taxes are directly paid by the Borrower, deemed) paid by such
Secured Party, whether or not such Covered Taxes were correctly or legally
asserted. Such indemnification shall be made within 30 days of the demand of the
Secured Party therefor. If the Borrower pays any Covered Taxes as required by
the first sentence of this paragraph, then the Borrower will promptly forward to
the Administrative Agent an official receipt or duly certified copy of such
official receipt or such other documentation satisfactory to the Administrative
Agent evidencing such payment of Covered Taxes to the relevant taxing authority.
In addition, if the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Administrative Agent, for the account
of the respective Secured Party, the required receipts or other required
documentary evidence of its payment of any Taxes, the Borrower shall indemnify
the Secured Parties for any incremental Taxes that may become payable by any
Secured Party as a result of any such failure. For purposes of this Section 4.6,
the transfer by any Secured Party to or for the account of any Secured Party of
any sum received from the Borrower on account of amounts required to be paid by
the Borrower hereunder in respect of Covered Taxes imposed with respect to the
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recipient shall be deemed a payment by the Borrower of such amounts.
(b) Each Secured Party that is an original signatory hereto (and each
Person which becomes a Lender by assignment, transfer or participation pursuant
to Section 12.11 hereof or becomes the Administrative Agent by appointment
pursuant to Section 10.4 hereof) that is a Non-U.S. Person agrees severally (but
not jointly) that, on or prior to the date of the initial Credit Extension (or
such assignment, transfer or appointment, as the case may be) it will in each
case deliver to the Borrower and the Administrative Agent either (A) two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224 (or
applicable successor form) certifying in each case that such Person is entitled
to receive payments under this Agreement and the Notes, Letters of Credit and/or
Swingline Note, as applicable, payable to it without deduction or withholding of
any United States federal income taxes and two duly completed copies of United
States Internal Revenue Service Form W-8 or Form W-9 (or applicable successor
form) or (B) in the case of an assignee Secured Party that is not a "bank"
within the meaning of Section 881(c)(3)(A) of the Code and that does not comply
with the requirements of clause (A) of this paragraph, a statement to the effect
that such assignee Secured Party is eligible for a complete exemption from
withholding of United States withholding tax under Section 871(h) or Section
881(c) of the Code (including, without limitation, statements that such assignee
Secured Party is not a 10-percent shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of the Borrower and is not a controlled foreign
corporation related to the Borrower (within the meaning of Section 864(d)(4) of
the Code)) and two duly completed and signed original copies of Internal Revenue
Service Form W-8. Each Secured Party shall (if not otherwise required to do so
pursuant to clause (B) of this paragraph (b)) deliver to the Borrower two duly
completed and signed original copies of Internal Revenue Service Form W-8 or W-9
entitling such Secured Party to receive a complete exemption from United States
back-up withholding tax.
Each Person who delivers to the Borrower and the Administrative Agent a Form
W-8, W-9, 1001 or 4224, or applicable successor form, pursuant to this clause,
further undertakes to deliver to the Borrower and the Administrative Agent two
further copies of said
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Form W-8, W-9, 1001, 4224, or applicable successor form, or other manner of
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete, unless in any such case any change in law, rule,
regulation, treaty or directive, or in the interpretation or application thereof
(a "Law Change") has occurred prior to the date on which any such delivery would
otherwise be required, which Law Change renders any such form inapplicable or
which would prevent such Person from duly completing and delivering any such
form with respect to it. If a Secured Party who previously has delivered any
Internal Revenue Service Forms referred to above determines that it is unable
subsequently to submit to the Borrower any such Forms, or that it is required to
withdraw or cancel any such Forms, then such Secured Party shall promptly notify
the Borrower of that fact.
(c) The Borrower shall not be obligated to make any payment or
indemnification pursuant to paragraph (a) above in respect of any U.S. Federal
withholding tax imposed in respect of a Non-U.S. Person to the extent that:
(i) the obligation to withhold U.S. Federal withholding tax with
respect to such Non-U.S. Person existed on the date such Non-U.S. Person
became a party to this Agreement; provided, however, that this clause (i)
shall not apply (x) to any such Non-U.S. Person that becomes a Secured
Party after the date hereof following a request of the Borrower that the
transferee of the Secured Party's interest hereunder dispose of such
interest or (y) to the extent that the payment or indemnification to which
such Non-U.S. Person would be entitled (without regard to this clause (i))
does not exceed the payment or indemnification that the Person from whom
such Non-U.S. Person acquired its interest would have been entitled to
receive in the absence of such acquisition; or
(ii) the obligation to make such payment or indemnification would
not have arisen but for a failure by such Non-U.S. Person to comply with
the provisions of paragraph (b) above.
(d) If the Administrative Agent or any Secured Party determines in its
sole discretion (exercised in good faith) that it has received a refund in
respect of Taxes for which such Person has
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received a payment from the Borrower (or which the Borrower paid directly to the
relevant authority) pursuant to clause (a) above, it shall promptly pay such
refund to the Borrower; provided, however, that the Borrower agrees to return
such refund to the Administrative Agent or the applicable Secured Party, as the
case may be, promptly after it receives notice from the applicable Secured Party
that such Secured Party is required to return all or any portion of such refund
to the relevant taxing authority. Each Secured Party may, in its sole discretion
(exercised in good faith), determine the order of utilization of any payments to
any governmental authority in satisfaction of its liability for Taxes. Nothing
in this paragraph (d) shall be construed to require any Secured Party to
disclose any of its tax returns or other confidential or proprietary information
to the Borrower or to conduct its business or to arrange or to alter in any
respect its tax or financial affairs so that it is entitled to receive any
refund of any Taxes.
(e) The agreements in this Section shall survive the termination of this
Agreement and the payment of the Notes, the Swingline Note and all other amounts
payable hereunder.
SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
provided herein, all payments by the Borrower pursuant to this Agreement, the
Notes, each Letter of Credit or any other Loan Document shall be made by the
Borrower to the Administrative Agent for the pro rata account of the Lenders
entitled to receive such payment. All such payments required to be made to the
Administrative Agent shall be made, without setoff, deduction or counterclaim,
not later than 11:00 a.m., New York time, on the date due, in same day or
immediately available funds, to such account as the Administrative Agent shall
specify from time to time by written notice to the Borrower. Funds received
after that time shall be deemed to have been received by the Administrative
Agent on the next succeeding Business Day. The Administrative Agent shall
promptly remit in same day funds to each Lender its share, if any, of such
payments received by the Administrative Agent for the account of such Lender.
All interest (including interest on LIBO Rate Loans) and fees shall be computed
on the basis of the actual number of days (including the first day but excluding
the last day) occurring during the period for which such interest or fee is
payable over a year comprised of 360 days (or, in the case of
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interest on a Base Rate Loan, 365 days or, if appropriate, 366 days). Whenever
any payment to be made shall otherwise be due on a day which is not a Business
Day, such payment shall (except as otherwise required by clause (c) of the
definition of the term "Interest Period") be made on the next succeeding
Business Day and such extension of time shall be included in computing interest
and fees, if any, in connection with such payment.
SECTION 4.8. Sharing of Payments. If any Lender shall obtain any payment
or other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Loan or Reimbursement Obligations (other than
pursuant to the terms of Sections 4.3, 4.4, 4.5 or 4.6 and other than payments
on account of any Swingline Loan) in excess of its pro rata share of payments
then or therewith obtained by all Lenders, such Lender shall notify the
Administrative Agent and purchase from the other Lenders such participations in
Loans made by them as shall be necessary to cause such purchasing Lender to
share the excess payment or other recovery ratably with each of them; provided,
however, that if all or any portion of the excess payment or other recovery is
thereafter recovered from such purchasing Credit Extensions the purchase shall
be rescinded and each Lender which has sold a participation to the purchasing
Lender shall repay to the purchasing Lender the purchase price to the ratable
extent of such recovery together with an amount equal to such selling Lender's
ratable share (according to the proportion of (a) the amount of such selling
Lender's required repayment to the purchasing Lender to (b) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 4.8 may, to the fullest extent permitted by law,
exercise all its rights of payment (including pursuant to Section 4.9) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation. If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this Section applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such secured
claim in a manner consistent with the rights of the Lenders entitled under this
Section to share in the benefits of any recovery on such secured claim.
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SECTION 4.9. Setoff. Each Secured Party shall, upon the occurrence and
during the continuance of any Event of Default described in Section 9.1.5 or,
with the consent of the Required Lenders, upon the occurrence and during the
continuance of any other Event of Default, have the right to appropriate and
apply to the payment of the Obligations owing to it (whether or not then due),
and (as security for such Obligations) the Borrower hereby grants to each
Secured Party a continuing security interest in, any and all balances, credits,
deposits, accounts or moneys of the Borrower then or thereafter maintained with
such Secured Party; provided, however, that any such appropriation and
application shall be subject to the provisions of Section 4.8. Each Secured
Party agrees promptly to notify the Borrower and the Administrative Agent after
any such setoff and application made by such Secured Party; provided, however,
that the failure to give such notice shall not affect the validity of such
setoff and application. The rights of each Secured Party under this Section are
in addition to other rights and remedies (including other rights of setoff under
applicable law or otherwise) which such Lender may have.
SECTION 4.10. Mitigation. Each Secured Party agrees that if it makes any
demand for payment under Sections 4.3, 4.4, 4.5, or 4.6, or if any adoption or
change of the type described in Section 4.1 shall occur with respect to it, it
will use reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions and so long as such efforts would not be disadvantageous
to it, as determined in its sole discretion (exercised in good faith)) to
designate a different lending office if the making of such a designation would
reduce or obviate the need for the Borrower to make payments under Sections 4.3,
4.4, 4.5, or 4.6, or would eliminate or reduce the effect of any adoption or
change described in Section 4.1.
SECTION 4.11. Replacement Lender. In the event that the Borrower becomes
obligated to pay any additional material amounts to any Lender pursuant to
Section 4.3 or 4.5 (which amounts are generally not due or payable to all
Lenders generally under such Sections) or such Lender is not able to make LIBO
Rate Loans pursuant to Section 4.1, as a result of any event or condition
described in any of such Sections, then, unless such Lender has removed or cured
the conditions creating the cause of such obligation to pay such additional
amounts, the Borrower may
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designate a substitute lender (and such Lender agrees to be replaced by such
substitute Lender upon and in accordance with the terms set forth in this
Section) reasonably acceptable to the Administrative Agent (such lender herein
called a "Replacement Lender") to have assigned to it pursuant to Section
12.11.1, and to purchase, such Lender's rights and obligations with respect to
its entire Loans and Commitment hereunder, without recourse to or warranty by,
or expense to, such Lender for a purchase price equal to the outstanding
principal amount payable to such Lender with respect to its Loans and Commitment
hereunder, plus any accrued and unpaid interest and accrued and unpaid fees
owing to such Lender in respect of such Lender's Loans and Commitment. Upon such
assignment and purchase by the Replacement Lender and payment of all other
amounts owing to the Lender being replaced hereunder, and the payment to the
Administrative Agent of the processing fee due to it under Section 12.11.1, such
Lender shall no longer be a party hereto or have any rights or obligations
hereunder, and the Replacement Lender shall succeed to the rights and
obligations of such Lender with respect to its Loans and Commitment hereunder;
provided, that the rights of such replaced Lender pursuant to Sections 4.3, 4.4,
4.5, 4.6, 12.3 and 12.4, and the rights and obligations of such Lender pursuant
to Article X and Sections 12.3 and 12.4, shall survive any assignment described
in this Section.
SECTION 4.12 Use of Proceeds. The Borrower shall apply the proceeds of
each Borrowing to pay in part the purchase price of the Pool Receivables
pursuant to the Purchase Agreement.
ARTICLE V
CONDITIONS TO BORROWING AND ISSUANCE OF LETTERS OF CREDIT
SECTION 5.1. Initial Borrowing or Initial Issuance of a Letter of Credit.
The obligations of the Lenders to fund the initial Borrowing, the obligation of
the Issuer to issue the initial Letter of Credit and the obligation of the
Swingline Bank to fund the initial Swingline Loan shall be subject to the prior
or concurrent satisfaction of each of the conditions precedent set forth in this
Section 5.1.
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SECTION 5.1.1. No Material Adverse Change. No material adverse change in
ProSource's business or financial condition has occurred since June 29, 1996;
provided, however, that no events, facts or circumstances described in
ProSource, Inc.'s filing on the Form S-1 registration statement filed as of
November 7, 1996, shall be considered to be such a material adverse change.
SECTION 5.1.2. Resolutions, etc. The Administrative Agent shall have
received from each of the Borrower and ProSource a certificate, dated the
Effective Date, of its Secretary or Assistant Secretary as to
(a) resolutions of its Board of Directors then in full force and
effect authorizing the execution, delivery and performance of this
Agreement, the Notes, the Swingline Note and each other Loan Document to
be executed by it; and
(b) the incumbency and signatures of those of its officers
authorized to act with respect to each Loan Document executed by it,
upon which certificate each Secured Party may conclusively rely until it shall
have received a further certificate of the Secretary of the Borrower or
ProSource, as the case may be, canceling or amending such prior certificate.
SECTION 5.1.3. Delivery of Notes. Each Lender shall have received its Note
duly executed and delivered by the Borrower and the Swingline Bank shall have
received the Swingline Note duly executed and delivered by the Borrower.
SECTION 5.1.4. Security Agreement. The Administrative Agent shall have
received executed counterparts of the Security Agreement, dated as of the date
hereof, duly executed by the Borrower, together with
(a) acknowledgment copies of properly filed U.C.C. financing
statements (Form UCC-1), or such other evidence of filing as may be
acceptable to the Administrative Agent, naming the Originator as the
debtor, the Borrower as the secured party and the Administrative Agent as
the assignee of the secured party for the benefit of the Secured Parties,
or
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other similar instruments or documents, filed under the Uniform Commercial
Code of all jurisdictions as may be necessary or, in the opinion of the
Administrative Agent, desirable to perfect the security interest of the
Borrower;
(b) acknowledgment copies of properly filed U.C.C. financing
statements (Form UCC-1), or such other evidence of filing as may be
acceptable to the Administrative Agent, naming the Borrower as the debtor
and the Administrative Agent as the secured party for the benefit of the
Secured Parties, or other similar instruments or documents, filed under
the U.C.C. of all jurisdictions as may be necessary or, in the opinion of
the Administrative Agent, desirable to perfect the security interest of
the Administrative Agent, for the benefit of the Secured Parties, pursuant
to the Security Agreement;
(c) executed copies of proper U.C.C. Form UCC-3 termination
statements, if any, necessary to release all Liens and other rights of any
Person in any collateral described in the Security Agreement previously
granted by any Person; and
(d) certified copies of Uniform Commercial Code Requests for
Information or Copies (Form UCC-11), or a similar search report certified
by a party acceptable to the Administrative Agent, listing all effective
financing statements which name the Borrower or ProSource (under its
present name and any previous names) as the debtor and which are filed in
the jurisdictions in which filings were made pursuant to clauses (a) and
(b) above, together with copies of such financing statements (none of
which (other than those described in clauses (a) and (b)) shall cover any
Collateral).
SECTION 5.1.5. Opinions of Counsel. The Administrative Agent shall have
received opinions, dated the Effective Date and addressed to the Administrative
Agent and all Lenders, from counsel to the Borrower and ProSource substantially
in the forms of Exhibit F and addressing true sale and substantive consolidation
issues, corporate organization and authority, enforceability, no conflict and
the perfection of ownership and security interests in the Collateral.
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SECTION 5.1.6. Closing Fees, Expenses, etc. The Administrative Agent shall
have received for its own account, or for the account of each Lender, as the
case may be, all fees, costs and expenses due and payable pursuant to Sections
3.3 and 12.3, if then invoiced.
SECTION 5.1.7. Organic Documents. The Administrative Agent shall have
received (a) each of the Borrower's and ProSource's certificate of
incorporation, certified by the Secretary of State of the State of such Person's
incorporation, (b) each of the Borrower's and ProSource's by-laws, certified by
its Secretary or Assistant Secretary and (c) good standing certificates or
certificates of corporate existence for each of the Borrower and ProSource from
the State of such Person's incorporation, the State of such Person's principal
place of business and each State where such Person has significant operations.
The Borrower shall have been organized and capitalized in a manner reasonably
satisfactory to the Administrative Agent.
SECTION 5.1.8. Purchase Agreement. The Administrative Agent shall have
received the Purchase Agreement duly executed by the Borrower and ProSource,
together with evidence that all of the conditions precedent to the first
purchase thereunder shall have been satisfied.
SECTION 5.1.9. Fee Letter. The Fee Letter between ProSource and Scotiabank
shall have been duly executed.
SECTION 5.1.10. Powers of Attorney. The Administrative Agent shall have
received powers of attorney, substantially in the form of Exhibit J hereto, duly
executed by each of the Borrower and ProSource.
SECTION 5.1.11. Account Agreements. The Administrative Agent shall have
received copies of the executed (i) Lock-Box Agreements, (ii) Collections
Account Agreement, and (iii) Liquidation Account Agreement.
SECTION 5.1.12. Payment of Outstanding Indebtedness, etc. All Indebtedness
of the Originator identified in Item 5.1.12 ("Indebtedness to be Paid") of the
Disclosure Schedule, together with all interest, all prepayment premiums and
other amounts due
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and payable with respect thereto, shall have been (or, contemporaneously with
the initial Credit Extension hereunder, will be) paid in full by the Originator
from the proceeds of the Originator Credit Facility and/or Loans and the
commitments in respect of such Indebtedness (including under the Existing Credit
Agreement) shall have been terminated, and all Liens securing payment of any
such Indebtedness (including under the Existing Credit Agreement) shall have
been released and the Administrative Agent shall have received all Uniform
Commercial Code Form UCC-3 termination statements or other instruments as may be
suitable or appropriate in connection therewith. The Administrative Agent shall
have received executed copies of "pay-off" letters with respect thereto
(including as to the payment in full of all Indebtedness under the Existing
Credit Agreement) in form and substance satisfactory to the Administrative
Agent.
SECTION 5.1.13. Originator Credit Facility Documentation. The
Administrative Agent shall have received (with copies for each Lender) a fully
executed copy of the documentation evidencing the Originator Credit Facility
certified as true, correct and complete, and all other certificates, documents,
agreements, consents and opinions furnished pursuant or in connection therewith.
SECTION 5.1.14. Borrowing Base Report and Settlement Statement. The
Administrative Agent shall have received, with counterparts for each Lender, an
initial Borrowing Base Report and Settlement Statement from the Borrower, dated
as of a recent date satisfactory to the Administrative Agent, duly executed (and
with all schedules thereto completed) and delivered by an Authorized Officer of
the Borrower.
SECTION 5.1.15. Other Documentation. Such other approvals, opinions or
documents (in form and substance reasonably satisfactory to the Administrative
Agent) as the Administrative Agent may reasonably request (including a letter
from KPMG Peat Marwick acceptable to the Administrative Agent regarding the
performance of agreed upon procedures for the Pool Receivables portfolio).
SECTION 5.2. All Credit Extensions. The obligation of the Issuer to issue
any Letter of Credit, the obligation of the Swingline Bank to fund any Swingline
Loan, and the obligation of
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each Lender to fund any Revolving Loan shall be subject to the satisfaction of
each of the conditions precedent set forth in this Section 5.2.
SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both before
and after giving effect to any Credit Extension the following statements shall
be true and correct:
(a) the representations and warranties set forth in Article VI shall
be true and correct in all material respects with the same effect as if
then made (unless stated to relate solely to an early date, in which case
such representations and warranties shall be true and correct in all
material respects as of such earlier date);
(b) such Credit Extension is permitted by Section 2.1.1; and
(c) no Default shall have then occurred and be continu ing.
SECTION 5.2.2. Credit Extension Request. The Administrative Agent shall
have received a Borrowing Request for such Borrowing, the Issuer shall have a
Letter of Credit Issuance Request for such Letter of Credit, or the Swingline
Bank shall have received a request for a Swingline Loan, as applicable. Each of
(i) the delivery of a Borrowing Request and the acceptance by the Borrower of
the proceeds of such Borrowing, (ii) the delivery of the Letter of Credit
Issuance Request and the issuance of the Letter of Credit, or (iii) the delivery
of a request for a Swingline Loan and the acceptance by the Borrower of the
proceeds of such Swingline Loan, as applicable, shall constitute a
representation and warranty by the Borrower that on such date (both immediately
before and after giving effect to such Borrowing and the application of the
proceeds thereof or issuance of such Letter of Credit) the statements made in
Section 5.2.1 are true and correct.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1. Representations and Warranties of Borrower. In order to
induce the Lenders, the Issuer, the Swingline Bank and the Administrative Agent
to enter into this Agreement, to issue Letters of Credit hereunder and to make
Loans (including Swingline Loans) hereunder, Borrower represents and warrants to
the Administrative Agent, the Issuer, the Swingline Bank and each Lender as set
forth in this Section 6.1.
SECTION 6.1.1. Organization, etc. The Borrower is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of its incorporation, is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction where the nature of its business
requires such qualification, and has full power and authority and holds all
requisite governmental licenses, permits and other approvals to enter into and
perform its Obligations under this Agreement, each Note, the Swingline Note and
each other Loan Document to which it is a party, to own its property, including
the Pool Receivables, and to conduct its business substantially as currently
conducted by it, except in each case to the extent same could not reasonably be
expected to have a Material Adverse Effect or cause a Default of the type
described in Section 9.1.9 or Section 9.1.11.
SECTION 6.1.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Borrower of this Agreement and each other Loan
Document executed or to be executed by it, are within such Person's powers, have
been duly authorized by all necessary action, and do not (a) contravene such
Person's Organic Documents; (b) contravene or result in a default under any
material contractual restriction, law, rule or governmental regulation or court
decree or order binding on or affecting such Person or its property; or (c)
result in, or require the creation or imposition of, any Lien on any of such
Person's properties, except Liens in favor of the Administrative Agent under the
Security Agreement.
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SECTION 6.1.3. Government Approval, Regulation, etc. Except for filings
contemplated under the Loan Documents, no authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body or other Person is required for the due execution, delivery or
performance by the Borrower of this Agreement or any other Loan Document to
which it is a party other than those previously obtained or filed. The Borrower
is not an "investment company" within the meaning of the Investment Company Act
of 1940, as amended, or a "holding company," a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended. No transaction contemplated hereby
requires compliance with any bulk sales act or similar law.
SECTION 6.1.4. Validity, etc. Each Loan Document executed by the Borrower
will, on the due execution and delivery thereof, constitute the legal, valid and
binding obligation of such Person enforceable in accordance with its respective
terms except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
SECTION 6.1.5. Financial Information. The balance sheets of ProSource and
each of its Subsidiaries as of December 30, 1995, and the related statements of
earnings and cash flow of ProSource and each of its Subsidiaries, copies of
which have been furnished to the Administrative Agent, the Issuer, the Swingline
Bank and each Lender, have been prepared in accordance with GAAP consistently
applied, and present fairly the consolidated financial condition of the
corporations covered thereby as at the dates thereof and the results of their
operations for the periods then ended.
SECTION 6.1.6. No Material Adverse Change. Since the date of the financial
statements described in Section 6.1.5, no event has occurred that has had a
Material Adverse Effect.
SECTION 6.1.7. Litigation, Labor Controversies, etc. There is no pending
or, to the knowledge of the Borrower, threatened litigation, action, proceeding,
or labor controversy affecting any
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of the Borrower or the Originator or any of their respective Subsidiaries, or
involving any of their respective properties, businesses, assets or revenues,
which could reasonably be expected to have a Material Adverse Effect or cause a
Default of the type described in Section 9.1.9 or Section 9.1.11, except as
disclosed in Item 6.1.7 ("Litigation") of the Disclosure Schedule.
SECTION 6.1.8. Subsidiaries. The Borrower has no Subsidiaries other than
Newco.
SECTION 6.1.9. Corporate Names. The Borrower's complete corporate name is
set forth in the preamble, and the Borrower does not use and has not during the
last four months used any corporate name, trade name, doing-business name or
fictitious name, except as set forth on Exhibit T and except for names first
used after the date of the Agreement and set forth in a notice delivered to the
Administrative Agent.
SECTION 6.1.10. Taxes. The Borrower has filed all federal income tax
returns and all other material and reports required by law to have been filed by
it and has paid all taxes and governmental charges thereby shown to be owing,
except any such taxes or charges which are being diligently contested in good
faith by appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books.
SECTION 6.1.11. Pension and Welfare Plans. Except as disclosed in Item
6.1.11 ("Employee Benefit Plans") of the Disclosure Schedule, during the
twelve-consecutive-month period prior to the date of the execution and delivery
of this Agreement and prior to the date of any Credit Extension hereunder, no
steps have been taken to terminate any Pension Plan (other than a standard
termination under Section 4041(b) of ERISA), and no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which might result in the incurrence
by the Borrower or any member of the Controlled Group of any material liability,
fine or penalty. Except as disclosed in Item 6.1.11 of the Disclosure Schedule,
none of the Borrower, ProSource or any member of the Controlled Group has any
contingent liability with respect to any post-retirement benefit under a Welfare
Plan, other
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than liability for continuation coverage described in Part 6 of Title I of
ERISA.
SECTION 6.1.12. Capital Stock. The authorized capital stock of the
Borrower consists of one thousand (1000) shares of common stock, without par
value, one thousand (1000) shares of which are currently issued and outstanding.
All of such outstanding shares are validly issued, fully paid and nonassessable
and are owned (beneficially and of record) by ProSource.
SECTION 6.1.13. Regulations G, T, U and X. The Borrower is not engaged in
the business of extending credit for the purpose of purchasing or carrying
margin stock, and no proceeds of any Loans will be used for a purpose which
violates, or would be inconsistent with, F.R.S. Board Regulation G, T, U or X.
Terms for which meanings are provided in F.R.S. Board Regulation G, T, U or X or
any regulations substituted therefor, as from time to time in effect, are used
in this Section with such meanings.
SECTION 6.1.14. Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of the Borrower in
writing to the Administrative Agent, the Issuer, the Swingline Bank or any
Lender for purposes of or in connection with this Agreement or any transaction
contemplated hereby taken as a whole is, and all other such factual information
hereafter furnished by or on behalf of the Borrower to the Administrative Agent,
the Issuer, any Swingline Bank or any Lender will taken as a whole be, true and
accurate in every material respect on the date as of which such information is
dated or certified and as of the date of execution and delivery of this
Agreement by the Administrative Agent, the Issuer, any Swingline Bank and such
Lender, and such information is not, or shall not be, as the case may be,
incomplete by omitting to state any material fact necessary to make such
information not misleading.
SECTION 6.1.15. Eligible Receivables. Each Receivable included in the
calculation of the Borrowing Base is, at the time of such calculation, an
Eligible Receivable.
SECTION 6.1.16. Security Interest. Upon the filing by the Administrative
Agent of U.C.C. financing statements in the appropriate jurisdictions, showing
the Borrower, as debtor, and the
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Administrative Agent, as secured party, the Administrative Agent, for the
benefit of the Secured Parties, shall have a first priority, perfected security
interest in all of the Collateral free and clear of all other Liens other than
Permitted Liens. No other financing statements covering the Collateral or any
portion thereof is on file in any recording office.
SECTION 6.1.17. Material Contracts. The Borrower is in compliance in all
material respects with all contracts, instruments, orders, laws, rules and
regulations applicable to it or its property, except in each case to the extent
same could not reasonably be expected to have a Material Adverse Effect or cause
a Default of the type described in Section 9.1.9 or Section 9.1.11. The Borrower
has complied in all material respects with the Credit and Collection Policy with
regard to each Pool Receivable.
SECTION 6.1.18. Valid Transfer; Ownership of Receivables. Upon the
assignment of each Pool Receivable to the Borrower pursuant to the Purchase
Agreement and the Annual Transfer Agreement, such Pool Receivable and the
Related Security therefor and the Collections related thereto, will be owned by
the Borrower, free and clear of any Lien, other than the Lien created hereby and
Permitted Liens. Each such Pool Receivable is freely assignable by the Borrower.
SECTION 6.1.19. Principal Place of Business. The chief executive office
(as such term is used in Section 9-103 of the U.C.C.) of each of the Borrower
and the Originator, and the office where the Borrower and the Originator store
the files, records and contracts relating to the Pool Receivables is located at
the address set forth in Item 6.1.19 of the Disclosure Schedule.
SECTION 6.1.20. Lock-Box Banks and Lock-Box Accounts. The names and
addresses of all the Lock-Box Banks, together with the account numbers of the
Lock-Box Accounts of the Borrower at such Lock-Box Banks, are specified in
Exhibit P (or at such other Lock-Box Banks and/or with such other Lock-Box
Accounts as have been notified to the Administrative Agent in accordance
herewith) and all Lock-Box Accounts are subject to Lock-Box Agreements. All
Obligors have been directed to make all payments with respect to each Contract
to a Lock-Box Account.
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SECTION 6.1.21. Proceeds. No proceeds of any Loan will be used for any
purpose that violates any applicable law, rule or regulation.
SECTION 6.2. Representations and Warranties of Servicer. The Servicer
represents and warrants to the Administrative Agent, the Issuer, the Swingline
Bank and each Lender as set forth in this Section 6.2.
SECTION 6.2.1. Organization, etc. The Servicer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of its incorporation, is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction where the nature of its business
requires such qualification, and has full power and authority and holds all
requisite governmental licenses, permits and other approvals to enter into and
perform its obligations under this Agreement and each other Loan Document to
which it is a party, to own its property and to conduct its business
substantially as currently conducted by it, except in each case to the extent
same could not reasonably be expected to have a Material Adverse Effect or cause
a Default of the type described in Section 9.1.9 or Section 9.1.11.
SECTION 6.2.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Servicer of this Agreement and each other Loan
Document executed or to be executed by it, are within the Servicer's powers,
have been duly authorized by all necessary action, and do not (a) contravene the
Servicer's Organic Documents; (b) contravene or result in a default under any
contractual restriction, law, rule or governmental regulation or court decree or
order binding on or affecting the Servicer or its property; or (c) result in, or
require the creation or imposition of, any Lien on any of the Servicer's
properties.
SECTION 6.2.3. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for the due execution,
delivery or performance by the Servicer of this Agreement or any other Loan
Document to which it is a party other than those previously obtained or filed.
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SECTION 6.2.4. Validity, etc. Each Loan Document executed by the Servicer
will, on the due execution and delivery thereof, constitute the legal, valid and
binding obligation of the Servicer enforceable in accordance with its respective
terms except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
SECTION 6.2.5. Financial Information. The balance sheets of the Servicer
and each of its Subsidiaries as of December 30, 1995, and the related statements
of earnings and cash flow of the Servicer and each of its Subsidiaries, copies
of which have been furnished to the Administrative Agent, the Issuer, the
Swingline Bank and each Lender, have been prepared in accordance with GAAP
consistently applied, and present fairly the consolidated financial condition of
the corporations covered thereby as at the dates thereof and the results of
their operations for the periods then ended.
SECTION 6.2.6. No Material Adverse Change. Since the date of the financial
statements described in Section 6.2.5, no event has occurred that has had a
Material Adverse Effect.
SECTION 6.2.7. Litigation, Labor Controversies, etc. There is no pending
or, to the knowledge of the Servicer, threatened litigation, action, proceeding,
or labor controversy affecting the Servicer, or involving any of its properties,
businesses, assets or revenues, which could reasonably be expected to have a
Material Adverse Effect or cause a Default of the type described in Section
9.1.9 or Section 9.1.11, except as disclosed in Item 6.2.7 ("Litigation") of the
Disclosure Schedule.
SECTION 6.2.8. Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of the Servicer in
writing to the Administrative Agent, the Issuer, the Swingline Bank or any
Lender for purposes of or in connection with this Agreement or any transaction
contemplated hereby taken as a whole is, and all other such factual information
hereafter furnished by or on behalf of the Servicer to the Administrative Agent,
the Issuer, the Swingline Bank or any Lender will taken as
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a whole be, true and accurate in every material respect on the date as of which
such information is dated or certified and as of the date of execution and
delivery of this Agreement by the Administrative Agent, the Issuer, the
Swingline Bank and such Lender, and such information is not, or shall not be, as
the case may be, incomplete by omitting to state any material fact necessary to
make such information not misleading.
SECTION 6.2.9. Eligible Receivables. Each Pool Receivable included in the
calculation of the Borrowing Base is, at the time of such calculation, an
Eligible Receivable.
SECTION 6.2.10. Credit and Collection Policy. The Servicer
has complied in all material respects with the Credit and
Collection Policy with regard to each Pool Receivable.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants of the Borrower. Until all Commitments
have terminated and all Obligations (other than indemnity, reimbursement and
similar obligations in respect of which no claim has been made and no amount
remains outstanding) have been paid in full and no Letter of Credit Outstandings
remain outstanding, the Borrower will perform the obligations set forth in this
Section 7.1.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. The Borrower
will furnish, or will cause to be furnished, to each Lender, the Issuer, the
Swingline Bank and the Administrative Agent copies of the following financial
statements, reports, notices and information:
(a) as soon as available and in any event within 45 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year of
ProSource, consolidated balance sheets of ProSource and its Subsidiaries
(including the Borrower) as of the end of such Fiscal Quarter and
consolidated statements of earnings and cash flow of ProSource and its
Subsidiaries (including the Borrower) for such Fiscal Quarter and for the
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period commencing at the end of the previous Fiscal Year and ending with
the end of such Fiscal Quarter, certified by an Authorized Officer of
ProSource;
(b) as soon as available and in any event within 90 days after the
end of each Fiscal Year of ProSource, a copy of the annual audited
financial statements for such Fiscal Year for ProSource and its
Subsidiaries (including the Borrower), including therein consolidated
balance sheets of ProSource and its Subsidiaries (including the Borrower)
as of the end of such Fiscal Year and consolidated statements of earnings
and cash flow of ProSource and its Subsidiaries (including the Borrower)
for such Fiscal Year, in each case certified in a manner acceptable to the
Administrative Agent by independent public accountants acceptable to the
Administrative Agent;
(c) as soon as possible and in any event within five days after the
occurrence of a Default, a statement of an Authorized Officer of the
Borrower setting forth details of such Default and the action which has
been taken and is proposed to be taken with respect thereto;
(d) as soon as possible and in any event within five days after the
Borrower obtains knowledge thereof, notice of (w) any litigation,
investigation or proceeding which may exist at any time between the
Servicer or ProSource, on the one hand, and any other Person which, if not
cured or if adversely determined, as the case may be, would have a
Material Adverse Effect or cause a Default hereunder, (x) any litigation
or proceeding to which the Borrower is a party, (y) any litigation or
proceeding relating to any Loan Document, or (z) the occurrence of any
material adverse development with respect to any such litigation,
investigation or proceeding described above;
(e) immediately upon becoming aware of the institution of any steps
by any of ProSource or any other Person to terminate any Pension Plan
(other than a standard termination under Section 4041(b) of ERISA), or the
failure to make a required contribution to any Pension Plan, if such
failure is sufficient to give rise to a Lien under section 302(f) of
ERISA, or the taking of any action with respect to a Pension
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Plan which could result in the requirement that any of the Borrower or
ProSource furnish a bond or other security to the PBGC or such Pension
Plan, or the occurrence of any event with respect to any Pension Plan
which could result in the incurrence by any of the Borrower or ProSource
of any material liability, fine or penalty, or any material increase in
the contingent liability of any of the Borrower or ProSource with respect
to any post-retirement Welfare Plan benefit, notice thereof and copies of
all documentation relating thereto;
(f) on the fourth Business Day after the end of each calendar week,
a Borrowing Base Report, substantially in the form of Exhibit B-1,
executed by an Authorized Officer of the Servicer; provided, however, that
such Borrowing Base Report shall be delivered daily if required to be so
delivered by the Servicer in accordance with Section 8.2(h);
(g) on or prior to the 20th day of each Fiscal Month, a Settlement
Statement substantially in the form of Exhibit B-2, executed by an
Authorized Officer of the Servicer;
(h) at least sixty days prior to any change in the Borrower's or
ProSource's name or any other change requiring the amendment of U.C.C.
financing statements, a notice setting forth such changes and the
effective date thereof;
(i) promptly after becoming aware of the occurrence thereof, notice
of any Material Adverse Effect;
(j) such other information respecting the Pool Receivables, the
condition or operations, financial or otherwise, of the Borrower,
ProSource or any of its Subsidiaries as the Administrative Agent, the
Issuer, the Swingline Bank or any Lender (through the Administrative
Agent) may from time to time reasonably request; and
(k) on or prior to the time set forth in Section 8.2(k) the
accountant's report described therein.
SECTION 7.1.2. Compliance with Laws, etc. The Borrower shall perform all
of its material obligations, if any, under the Contracts and shall comply in all
respects with all applicable
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laws, rules, regulations and orders, except to the extent noncompliance
therewith could not reasonably be expected to have a Material Adverse Effect or
cause a Default of the type described in Section 9.1.9 or Section 9.1.11, such
compliance to include:
(a) the maintenance and preservation of its corporate existence and
qualifications as a foreign corporation; and
(b) the payment, before the same become delinquent, of all taxes,
assessments and governmental charges imposed upon it or upon its property
except to the extent being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books.
SECTION 7.1.3. Offices, Name Changes, Etc. The Borrower (i) shall keep its
chief executive office (as such term is used in Section 9-103 of the U.C.C.) and
the office where it keeps its records concerning the Pool Receivables at the
address set forth on Item 6.1.19 of the Disclosure Schedule or, upon at least 30
days' prior written notice of a proposed change to the Administrative Agent, at
any other location in any jurisdiction where all actions reasonably requested by
the Administrative Agent to protect and perfect the security interest of the
Administrative Agent for the benefit of the Secured Parties in the Collateral
have been taken and completed and (ii) shall provide the Administrative Agent
with at least 30 days' written notice prior to making any change in the
Borrower's name or making any other change in the Borrower's identity or
corporate structure (including a merger) which could render any U.C.C. financing
statement filed in connection with this Agreement "seriously misleading" as such
term is used in the U.C.C.; each notice to the Administrative Agent pursuant to
this sentence shall set forth the applicable change and the effective date
thereof. The Borrower (or the Servicer on its behalf) shall maintain and
implement administrative and operating procedures (including an ability to
recreate records evidencing Pool Receivables and related Contracts in the event
of the destruction of the originals thereof) and keep and maintain all
documents, books, records, computer tapes and disks and other information
reasonably necessary or advisable for the collection of all Pool Receivables.
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SECTION 7.1.4. Collection, Liquidation and Lock-Box Agreements. The
Borrower shall not add or terminate any bank as a Collection Account Bank, a
Liquidation Account Bank, a Lock-Box Bank or any account as a Lock-Box Account
from those listed in Exhibit P, or make any change in its instructions to
Obligors regarding payments to be made to the Borrower or ProSource or payments
to be made to any Lock-Box Account (or related post office box), unless the
Administrative Agent shall have consented (which consent shall not be
unreasonably withheld) thereto in writing and the Administrative Agent shall
have received copies of all agreements and documents (including Lock-Box
Agreements) that it may request in connection therewith.
SECTION 7.1.5. Deposits to Lock-Box Accounts. The Borrower shall, or shall
cause the Servicer to, (i) instruct all Obligors to make payments of all Pool
Receivables to one or more Lock-Box Accounts or to post office boxes to which
only Lock-Box Banks have access (and shall instruct the Lock-Box Banks to cause
all items and amounts relating to such Pool Receivables received in such post
office boxes to be removed and deposited into a Lock-Box Account on a daily
basis), and (ii) deposit, or cause to be deposited, any Collections of Pool
Receivables received by it or the Servicer into Lock-Box Accounts not later than
one Business Day after receipt thereof. The Borrower shall not deposit or
otherwise credit, or cause or permit to be so deposited or credited, to any
Lock-Box Account cash or cash proceeds other than Collections of Pool
Receivables.
SECTION 7.1.6. Security Interest, Etc. The Borrower shall, at its expense,
take all action necessary to establish and maintain a valid and enforceable
security interest in the Collateral in favor of the Administrative Agent for the
benefit of the Secured Parties, in each case free and clear of any Lien other
than Permitted Liens.
SECTION 7.2. Negative Covenants of the Borrower. Until all Commitments
have terminated and all Obligations (other than indemnity, reimbursement and
similar obligations in respect of which no claim has been made and no amount
remains outstanding) have been paid in full and no Letter of Credit Outstandings
remain outstanding, the Borrower shall perform the obligations applicable to it
set forth in this Section 7.2.
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SECTION 7.2.1. Business Activities. The Borrower shall not engage in any
business activity, except those described in the first recital and such
activities as may be incidental or related thereto.
SECTION 7.2.2. Indebtedness. The Borrower shall not create, incur, assume
or suffer to exist, or otherwise become or be liable in respect of any
Indebtedness, other than (a) Indebtedness in respect of the Loans and other
Obligations and (b) Indebtedness under the Borrower Note.
SECTION 7.2.3. Liens, Etc. Except in connection with the Annual Transfer
Agreement, the Borrower shall not sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any Lien (other
than a Lien in favor of the Administrative Agent for the benefit of the Secured
Parties under the Security Agreement and Permitted Liens) upon or with respect
to, any or all of its right, title or interest in, to or under any item of
Collateral, including any Pool Receivable, any Related Security with respect
thereto, or any Collections with respect thereto, or upon or with respect to any
account to which any Collections are sent.
SECTION 7.2.4. Extension or Amendment of Receivables. The Borrower shall
not extend the maturity or adjust the Outstanding Balance of Eligible
Receivables or otherwise modify the terms of any Eligible Receivable, or amend,
modify or waive any term or condition of any related Contract; provided,
however, that the Servicer shall be permitted to service the Pool Receivables in
accordance with Section 8.2(c).
SECTION 7.2.5. Financial Condition. The Borrower shall not permit its Net
Worth to be less than $10,000,000.
SECTION 7.2.6. Restricted Payments, etc.
(i) General Restriction. Except in accordance with this Section
7.2.6, the Borrower shall not (A) purchase or redeem any shares of its
capital stock, (B) declare or pay any dividend or set aside any funds for
any such purpose, (C) prepay, purchase or redeem any subordinated
Indebtedness of the Borrower, (D) lend or advance any funds to any Person
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or (E) repay any loans or advances to, for or from the Originator. Actions
of the type described in this clause (i) are herein collectively called
"Restricted Payments".
(ii) Types of Permitted Payments. Subject to the limitations set
forth in clause (iii) below, the Borrower may make Restricted Payments so
long as such Restricted Payments are made only to the Originator and only
in one or more of the following ways:
(A) Borrower may make cash payments (including prepayments) on
the Borrower Note in accordance with its terms; and
(B) if no amounts are then outstanding under the Borrower
Note, the Borrower may declare and pay dividends.
(iii) Specific Restrictions. The Borrower may make Restricted
Payments only out of Collections paid or released to the Borrower pursuant
to Article XI. Furthermore, the Borrower shall not pay, make or declare
(A) any dividend if, after giving effect thereto, Borrower's
Net Worth would be less than $10,000,000; or
(B) any Restricted Payment (including any dividend) if, after
giving effect thereto, any Default shall have occurred and be
continuing.
SECTION 7.2.7. Modification of Credit and Collection Policy. The Borrower
shall not materially supplement, change or otherwise modify the Credit and
Collection Policy without the prior written consent of the Administrative Agent.
SECTION 7.2.8. Mergers, Acquisitions, Sales, etc. The Borrower shall not
(i) be a party to any merger or consolidation, or directly or
indirectly purchase or otherwise acquire, whether in one or a series of
transactions, all or substantially all of the assets or any stock of any
class of, or any partnership
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or joint venture interest in, any other Person, or sell, transfer, assign,
convey or lease any of its property or assets other than pursuant to this
Agreement;
(ii) make, incur or suffer to exist an investment in, equity
contribution to, loan, credit or advance to, or payment obligation in
respect of the deferred purchase price of property from, any other Person,
except for obligations incurred pursuant to the Loan Documents and de
minimis payables incurred in connection with the operation of the
Borrower's business in the ordinary course; or
(iii) create any direct or indirect Subsidiary or otherwise acquire
direct or indirect ownership of any equity interests in any other Person
other than Newco;
provided, however, so long as the State of Florida maintains an annual tax on
intangibles under Section 199.032 of the Florida Statutes, the Borrower shall be
permitted to sell its property and assets provided such sale, transfer or
conveyance is made on, and is subject to, the following terms and conditions:
(1) such transfer is to a special purpose wholly-owned bankruptcy
remote corporation ("Newco");
(2) the organizational documents of Newco shall contain provisions
reasonably satisfactory to the Administrative Agent to ensure
that such entity is, and continues to be, a bankruptcy-
remote, special purpose entity;
(3) such transfer is pursuant to an Annual Transfer Agreement
between (i) Newco and (ii) the Borrower, which shall be in
form and substance reasonably acceptable to the Administrative
Agent and shall provide, among other things that upon the
transfer of the Intangibles to Newco, Newco shall issue a
promissory note to the Borrower, in a principal amount equal
to the principal amount of the Intangibles transferred to
Newco from such Person, and Newco shall pledge such
Intangibles (pursuant to a security agreement, in form and
substance
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satisfactory to the Administrative Agent) to the Borrower, to
secure such note;
(4) such transfer shall only occur at the close of business on
December 31 of each year, and such assets shall be reconveyed
to the Borrower, by Newco at the open of business on the first
Business Day after January 1 of the next year in exchange for
the return of the applicable promissory note (and the
extinguishment of the indebtedness evidenced thereby); and
(5) the Administrative Agent has received an opinion or opinions
of counsel, in form and substance satisfactory to the
Administrative Agent and its counsel, to the effect that such
Annual Transfer Agreement, promissory note and security
agreement referred to in (3) above are the legal, valid and
binding obligations of Newco.
SECTION 7.2.9. Amendments to Certain Documents.
(i) The Borrower shall not amend, supplement, amend and restate, or
otherwise modify the Purchase Agreement, the Borrower Note, any other
document executed pursuant to the Purchase Agreement, the Collection
Account Agreement, the Lock-Box Agreements, the Liquidation Account
Agreement or the Borrower's certificate of incorporation or by-laws,
except (A) in accordance with the terms of such document, instrument or
agreement and (B) with the prior written consent of the Administrative
Agent.
(ii) The Borrower shall not enter into or otherwise become bound by
any agreement, instrument, document or other arrangement that restricts
its right to amend, supplement, amend and restate or otherwise modify, or
to extend or renew, or to waive any right under, this Agreement or any
other Loan Document.
SECTION 7.2.10. Separate Corporate Existence. The Borrower hereby
acknowledges that the Administrative Agent, the Issuer, the Swingline Bank and
each Lender are entering into the transactions
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contemplated by this Agreement and the other Loan Documents in reliance upon the
Borrower's identity as a legal entity separate from ProSource and its other
Affiliates. Therefore, from and after the date hereof, the Borrower shall take
all steps specifically required by this Agreement or reasonably required by the
Administrative Agent to continue the Borrower's identity as a separate legal
entity and to make it apparent to third Persons that the Borrower is an entity
with assets and liabilities distinct from those of the Servicer, ProSource and
any other Person, and is not a division of the Servicer, ProSource or any other
Person. Without limiting the generality of the foregoing and in addition to and
consistent with the other covenants set forth herein, the Borrower shall take
such actions as shall be required in order that:
(a) The Borrower shall be a limited purpose corporation whose
primary activities are restricted in its certificate of incorporation to
purchasing or otherwise acquiring from ProSource, owning, holding,
granting security interests, or selling interests, in the Pool Receivables
and Related Security, entering into agreements for the servicing and
financing of the Pool Receivables, and conducting such other activities as
it deems necessary or appropriate to carry out its primary activities
including, without limitation, its duties and obligations under the Annual
Transfer Agreement;
(b) Not less than one member of the Borrower's Board of Directors
(an "Independent Director") shall be an individual familiar with
securitization and bankruptcy-remote structures who is not a direct,
indirect or beneficial stockholder, officer, director, employee,
affiliate, associate, customer or supplier of ProSource, any subsidiary of
ProSource other than the Borrower, any parent corporation of which
ProSource is a subsidiary or any Affiliate of ProSource (collectively, the
"Parent Group"). The Borrower's Organic Documents shall provide that its
Board of Directors shall not take any action to cause the commencement of
a voluntary case or other proceeding with respect to the Borrower under
any applicable bankruptcy, insolvency, reorganization, debt arrangement,
dissolution or other similar law, or the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, or
other similar official for the Borrower, unless in each case the
Independent Directors shall
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approve the taking of such action in writing prior to the taking of such
action. In the event an Independent Director resigns or otherwise ceases
to be a director of the Borrower, there shall be selected a replacement
Independent Director who shall not be an individual within the
proscriptions of the first sentence of this clause (b);
(c) The Borrower's Organic Documents shall provide that no
Independent Director shall at any time serve as a trustee in bankruptcy
for the Borrower, ProSource or any Affiliate thereof. Each Independent
Director shall be paid a reasonable director's fee;
(d) Any employee, consultant or agent of the Borrower will be
compensated from the Borrower's funds for services provided to the
Borrower. The Borrower will engage no agents other than its attorneys,
auditors and other professionals, and a servicer for the Pool Receivables,
which servicer will be fully compensated for its services to the Borrower
by payment of the Servicer's Fee;
(e) The Borrower shall contract with the Servicer to perform for the
Borrower all operations required on a daily basis to service the Pool
Receivables. The Borrower will not incur any material indirect or overhead
expenses for items shared between the Borrower and any member of the
Parent Group. To the extent, if any, that the Borrower and any member of
the Parent Group share items of expenses not reflected in the Servicer's
Fee, such as legal, auditing and other professional services, such
expenses shall be allocated to the extent practical on the basis of actual
use or the value of services rendered, and otherwise on a basis reasonably
related to the actual use or the value of services rendered, it being
understood that ProSource shall pay all expenses relating to the
preparation, negotiation, execution and delivery of the Loan Documents,
including legal, agency and other fees. Any officer or director of a
member of the Parent Group may be compensated by the Borrower in an amount
determined to reflect the services rendered to the Borrower;
(f) The Borrower's operating expenses will not be paid by any member
of the Parent Group, nor shall the Borrower pay
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any operating expenses of the Parent Group except as described above in
clause (e);
(g) The Borrower shall have its own separate mailing address and
stationery;
(h) The Borrower's books and records shall be maintained separately
from those of any member of the Parent Group;
(i) All financial statements of the Parent Group that are
consolidated to include the Borrower shall contain detailed notes clearly
stating that the Borrower is a separate corporate entity with creditors
who have received security interests in the Borrower's assets and shall be
entitled to be satisfied out of the Borrower's assets prior to equity
holders;
(j) The Borrower's assets shall be maintained in a manner that
facilitates their identification and segregation from those of each member
of the Parent Group;
(k) The Borrower shall strictly observe corporate formalities in its
dealings with each member of the Parent Group, and funds or other assets
of the Borrower will not be commingled with those of any member of the
Parent Group, other than Collections received by ProSource in its capacity
as Servicer. The Borrower shall not maintain joint bank accounts or other
depository accounts to which any member of the Parent Group (other than
ProSource in its capacity as Servicer) has independent access. No funds of
the Borrower shall at any time be pooled with any funds of other members
of the Parent Group;
(l) The Borrower shall pay to ProSource the marginal increase, if
any, of the premium payable with respect to any insurance policy that
covers the Borrower and any member of the Parent Group, but the Borrower
shall not, directly or indirectly, be named or enter into an agreement to
be named as a direct or contingent beneficiary or loss payee under any
such insurance policy covering the property of any member of the Parent
Group; and
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(m) The Borrower shall maintain arm's-length relationships with the
members of the Parent Group. Any Person that renders or otherwise
furnishes services to the Borrower will be compensated by the Borrower at
market rates for such services it renders or otherwise furnishes to the
Borrower. Except as contemplated in the Loan Documents, the Borrower shall
not hold itself out to be responsible for the debts of any member of the
Parent Group or the decisions or actions respecting the daily business and
affairs of any member of the Parent Group.
SECTION 7.3. Affirmative Covenants of the Servicer. Until all Commitments
have terminated and all Obligations (other than indemnity, reimbursement and
similar obligations in respect of which no claim has been made and no amount
remains outstanding) have been paid in full and no Letter of Credit Outstandings
remain outstanding, the Servicer will perform the obligations set forth in this
Section 7.3.
SECTION 7.3.1. Compliance with Laws, etc. The Servicer shall comply in all
respects with all applicable laws, rules, regulations and orders except to the
extent noncompliance therewith could not reasonably be expected to have a
Material Adverse Effect or cause a Default of the type described in Section
9.1.9 or Section 9.1.11, such compliance to include:
(a) the maintenance and preservation of its corporate existence and
qualifications as a foreign corporation; and
(b) the payment, before the same become delinquent, of all taxes,
assessments and governmental charges imposed upon it or upon its property
except to the extent being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books.
SECTION 7.3.2. Deposits to Lock-Box Accounts. The Servicer shall not
deposit or otherwise credit, or cause or permit to be so deposited or credited,
to any Lock-Box Account cash or cash proceeds other than Collections of Pool
Receivables. All funds in the Lock-Box Accounts shall be deposited into the
Collection Account within one Business Day.
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SECTION 7.4. Negative Covenants of the Servicer. Until all Commitments
have terminated and all Obligations (other than indemnity, reimbursement and
similar obligations in respect of which no claim has been made and no amount
remains outstanding) have been paid in full and no Letter of Credit Outstandings
remain outstanding, the Servicer shall perform the obligations applicable to it
set forth in this Section 7.4.
SECTION 7.4.1. Extension or Amendment of Receivables. Except as otherwise
provided in Section 8.2(c), the Servicer shall not extend the maturity or adjust
the Outstanding Balance or otherwise modify the terms of any Pool Receivable, or
amend, modify or waive any term or condition of any related Contract.
SECTION 7.4.2. Modification of Credit and Collection Policy. The Servicer
shall not materially supplement, change or otherwise modify the Credit and
Collection Policy without the prior written consent of the Administrative Agent.
SECTION 7.4.3. Amendments to Certain Documents. Other than the Originator
Credit Facility, the Servicer shall not enter into or otherwise become bound by
any agreement, instrument, document or other arrangement that restricts its
right to amend, supplement, amend and restate or otherwise modify, or to extend
or renew, or to waive any right under, this Agreement or any other Loan
Document.
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.1. Designation of the Servicer.
(a) ProSource as Initial Servicer. The servicing, administering and
collection of the Pool Receivables shall be conducted by the Person
designated as the Servicer hereunder (the "Servicer") from time to time in
accordance with this Section 8.1. Until the Administrative Agent or the
Required Lenders give to ProSource a Successor Notice (as defined in
Section 8.1(b)), ProSource is hereby designated as, and hereby agrees to
perform the duties and obligations of, Servicer pursuant to the terms
hereof.
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(b) Successor Notice; Servicer Transfer Events. Upon the Servicer's
receipt of a notice from the Administrative Agent (at the direction of the
Required Lenders) of the designation of a new Servicer (a "Successor
Notice"), the Servicer agrees that it will terminate its activities as
Servicer hereunder in a manner that the Administrative Agent believes will
facilitate the transition of the performance of such activities to the new
Servicer, and the successor Servicer (which may be the Administrative
Agent (or its designee)) shall assume each and all of the Servicer's
obligations to service and administer such Pool Receivables, on the terms
and subject to the conditions herein set forth, and the Servicer shall use
its best efforts to assist the successor Servicer in assuming such
obligations, including by allowing the Administrative Agent (or its
designee) or such successor Servicer access to, and the use by the
Administrative Agent and the successor Servicer of, all licenses, hardware
and software used by the Servicer to service the Pool Receivables. The
Administrative Agent and the Lenders agree not to, and shall not be
entitled to, give ProSource, as initial Servicer, a Successor Notice (i)
unless the Net Worth of ProSource, as initial Servicer, falls below the
Specified Net Worth Level or (ii) until after the occurrence and only
during the continuance of any Event of Default (any occurrence of the
types described in clauses (i) or (ii) being herein called a "Servicer
Transfer Event"), in which case such Successor Notice may be given at any
time in the Administrative Agent's (at the direction of the Required
Lenders) or the Required Lenders' discretion.
(c) Subcontracts. Servicer may, with the prior consent of the
Administrative Agent, which consent shall not be unreasonably withheld,
subcontract with any other Person for servicing, administering or
collecting the Pool Receivables, provided that Servicer shall remain
liable for the performance of the duties and obligations of Servicer
pursuant to the terms hereof.
SECTION 8.2. Duties of Servicer.
(a) Appointment; Duties in General. The Borrower hereby appoints as
its agent the Servicer, as from time to time
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designated pursuant to Section 8.1, to enforce its rights and interests in
and under the Pool Receivables, the Related Security and the related
Contracts. Servicer shall take or cause to be taken all such actions as
may be necessary or advisable to collect each Pool Receivable from time to
time, all in accordance with applicable laws, rules and regulations, with
reasonable care and diligence and in accordance with the Credit and
Collection Policy.
(b) Collections; Segregation. The Servicer shall deposit all
Collections received by it into a Lock-Box Account within one Business Day
of receipt. All funds in the Lock-Box Accounts shall be transferred to the
Collection Account within one Business Day of their deposit in such
Lock-Box Account.
(c) Modification of Receivables. The Servicer, may, in accordance
with the Credit and Collection Policy, extend the maturity of, or
otherwise modify or amend, any Pool Receivable as the Servicer may
determine to be appropriate to maximize Collections thereof; provided,
however, that no such extension, modification or amendment shall be
permitted if the Aggregate Outstanding Amount exceeds, or such action
would cause the Aggregate Outstanding Amount to exceed, the sum of the
Borrowing Base and the amount on deposit in the Liquidation Account (other
than amounts on deposit therein allocated to Carrying Costs) and no such
extension, modification or amendment shall alter the aging of such
Receivable in connection with this Agreement (including the status of such
Pool Receivable as a Defaulted Receivable or a Due Date Defaulted
Receivable or the original invoice date for such Receivable).
(d) Documents and Records. The Borrower shall deliver, or cause to
be delivered, to the Servicer, and the Servicer shall hold for the sole
benefit of the Agent for the benefit of the Secured Parties, all
documents, instruments and records (including, without limitation,
computer tapes or disks) that evidence or relate to Pool Receivables.
(e) Certain Duties to the Borrower. Servicer, if other than
ProSource, shall, as soon as practicable upon demand of the Borrower,
deliver to the Borrower copies of all documents,
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instruments and records in its possession that evidence or relate to Pool
Receivables, the Collections thereon, the Lock-Box Accounts, the
Collection Account and the Liquidation Account.
(f) Termination. The Servicer's authorization under this Agreement
shall terminate upon the date after the Commitment Termination Date when
all Obligations have been paid in full and no Letter of Credit
Outstandings exist.
(g) Power of Attorney. The Borrower hereby grants to the Servicer an
irrevocable power of attorney, with full power of substitution, coupled
with an interest, to take in the name of the Borrower all steps which are
necessary or advisable to endorse, negotiate or otherwise realize on any
writing or other right of any kind held or transmitted by the Borrower in
connection with any Pool Receivable.
(h) Borrowing Base Report. On the fourth Business Day next
succeeding the end of each calendar week, the Servicer shall deliver to
the Administrative Agent a Borrowing Base Report, substantially in the
form of Exhibit B-1, executed by an Authorized Officer of the Servicer
containing such compliance calculations and other information as set forth
therein; provided, however, that if ProSource is the Servicer and (i)
ProSource fails to maintain a Net Worth of at least the Specified Net
Worth Level or (ii) a default shall occur in connection with any
outstanding Indebtedness of ProSource in excess of $1,000,000 in the
aggregate, then the Servicer shall be required to deliver the Borrowing
Base Report to the Administrative Agent on each Business Day.
(i) Settlement Statement. On or prior to the 20th day of each Fiscal
Month, the Servicer shall deliver to the Administrative Agent a Settlement
Statement, substantially in the form of Exhibit B-2, containing such
compliance calculations and other information as set forth therein.
(j) Lock-Boxes. Subject to the provisions of Section 8.3 below, the
Servicer shall direct all Obligors to make all payments directly to the
Lock-Boxes (including by
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electronic payments directly to the Lock-Box Accounts or the Collection
Account).
(k) Annual Independent Accountants' Report. The Servicer shall cause
KPMG Peat Marwick or another firm of nationally-recognized independent
certified public accountants, who may also render other services to the
Servicer, to deliver to the Servicer on or before April 30 (or 120 days
after the end of the Servicer's fiscal year, if other than December 31) of
each year, beginning on April 30, 1998, with respect to the twelve months
ended immediately preceding December 31 (or other applicable date) (or
such other period as shall have elapsed from the Effective Date to the
date of such certificate), a statement addressed to the Servicer and the
Administrative Agent, to the effect that such firm has performed certain
agreed upon procedures acceptable to the Administrative Agent (i)
confirming the accuracy of the Settlement Statements and the Borrowing
Base Reports, (ii) calculation of the dollar weighted average of the time
between the invoice date and the date of issuance of the related credit
memo for a sample of Pool Receivables of sufficient size and over a time
period reasonably acceptable to the Administrative Agent (the "Sample
Dilution Horizon") and (iii) certain agreed upon procedures confirming the
Borrower's Net Worth. The Servicer shall deliver a copy of such report,
within 15 days of receipt, to the Administrative Agent and each Lender.
SECTION 8.3. Rights on Servicer Transfer Event. At any time following a
Servicer Transfer Event:
(a) The Administrative Agent may direct the Obligors of Pool
Receivables, or any of them, to pay all amounts payable under any
Pool Receivable directly to the Administrative Agent, for the
benefit of the Secured Parties.
(b) The Servicer shall, at the Administrative Agent's request
and at the Servicer's expense, give notice of the Administrative
Agent's security interest to each said Obligor and direct that
payments be made directly to the Administrative Agent.
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(c) The Servicer shall, at the Administrative Agent's request,
assemble all of the documents, instruments and other records
(including computer programs, tapes and disks) which evidence the
Pool Receivables, and the related Contracts and Related Security, or
which are otherwise necessary to collect such Pool Receivables, and
make the same available to the Administrative Agent at a place
selected by the Administrative Agent.
(d) Each of ProSource and the Borrower hereby authorizes the
Administrative Agent, and grants to the Administrative Agent an
irrevocable power of attorney, pursuant to the Power of Attorney, in
the forms of Exhibit J-1 and J-2, to take any and all steps in the
Borrower's or ProSource's name and on behalf of the Borrower and
ProSource, which are necessary or desirable, in the determination of
the Administrative Agent, to collect all amounts due under any and
all Pool Receivables, including endorsing the Borrower's or
ProSource's name on checks and other instruments representing
Collections and enforcing such Pool Receivables and the related
Contracts. The Administration Agent agrees not to exercise such
powers of attorney prior to a Servicer Transfer Event and agrees to
return the powers of attorney to the applicable parties promptly
following the date on which all Commitments have terminated and all
Obligations (other than indemnity, reimbursement and similar
obligations in respect of which no claim has been made and no amount
remains outstanding) have been paid in full and no Letter of Credit
Outstandings remain outstanding. In the event the Administrative
Agent fails to return the applicable foregoing powers of attorney,
the Administrative Agent shall promptly furnish to the Servicer or
the Borrower, as applicable, a loss affidavit and an indemnity in
form and substance reasonably satisfactory to the Servicer or the
Borrower, as the case may be.
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SECTION 8.4. Responsibilities of the Borrower. Anything herein to the
contrary notwithstanding:
(a) Contracts. The Borrower, pursuant to the Purchase Agreement,
shall cause ProSource to perform all of its obligations under the
Contracts related to the Pool Receivables and under the other agreements
related thereto to the same extent as if a security interest had not been
granted to the Administrative Agent under the Security Agreement and the
exercise by the Administrative Agent or its designee of its rights
hereunder or thereunder shall not relieve the Borrower or ProSource from
such obligations.
(b) Limitation of Liability. None of the Administrative Agent, the
Issuer, the Swingline Bank or any Lender shall have any obligation or
liability with respect to any Pool Receivables, the Contracts related
thereto or any other agreements related thereto, nor shall any of them be
obligated to perform any of the obligations of the Borrower or ProSource
thereunder.
SECTION 8.5. Audits. (i) Each of the Borrower and the Servicer shall, from
time to time during regular business hours as requested by the Administrative
Agent upon reasonable prior written notice, permit the Administrative Agent, or
its agents or representatives, (A) to examine and make copies of and abstracts
from all books, records and documents (including computer tapes and disks) in
the possession or under the control of the Borrower or the Servicer relating to
Pool Receivables and the Related Security, including the related Contracts, and
(B) to visit the offices and properties of the Borrower and the Servicer for the
purpose of examining such materials described in clause (A) above, and to
discuss matters relating to Pool Receivables and the Related Security or the
Borrower's or the Servicer's performance hereunder or under the Contracts with
any of the officers or employees of the Borrower or the Servicer having
knowledge of such matters, and (ii) without limiting the foregoing clause (i)
above, from time to time upon reasonable prior written notice, permit certified
public accountants or other auditors acceptable to the Administrative Agent to
conduct, at the Servicer's expense to be paid out of the Servicing Fee, a review
of the books and records relating to the Pool Receivables and Related Security;
provided, however, that
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prior to a Default, the Administrative Agent may and, upon the request of the
Required Lenders shall, conduct not more than one such review per year; provided
further, however, that after the occurrence and during the continuation of a
Default, there shall be no limitation on the number of such reviews that may be
requested and conducted, such reviews to be at the expense of the Servicer to be
paid out of the Servicing Fee.
SECTION 8.6. Application of Collections. Except as otherwise specified by
such Obligor, required by an existing contract (including any Contract) or
required by law, any payment by an Obligor in respect of any indebtedness owed
by it to the Borrower shall be applied, first, as a Collection of any Pool
Receivable then outstanding of such Obligor in the order of the age of such Pool
Receivables, starting with the oldest of such Pool Receivable, and second, only
after full repayment of any Pool Receivables, to any other indebtedness of such
Obligor.
SECTION 8.7. Servicing Fee. The Borrower shall pay to Servicer a fee (the
"Servicing Fee"), for each month equal to (i) 1% times (ii) the aggregate
Outstanding Balance of the Pool Receivables as of the most recent Month End Date
times (iii) one-twelfth; provided, however, that if neither ProSource nor any
Affiliate of ProSource is the Servicer, the monthly Servicing Fee may be
increased to an alternative amount specified by the Administrative Agent and
such Servicer not to exceed 110% of (x) the aggregate reasonable costs and
expenses incurred by such Servicer during such month in connection with the
performance of its obligations hereunder and (y) the other costs and expenses to
be paid out of the Servicing Fee (including the cost of any reviews pursuant to
Section 8.5). Such Servicing Fee shall be paid in arrears on each Monthly
Payment Date.
SECTION 8.8. Servicer Indemnification. The Servicer hereby indemnifies,
exonerates and holds each Secured Party and each of their respective officers,
directors, employees, stockholders and agents (collectively, the "Servicer
Indemnified Parties") free and harmless from and against any and all actions,
causes of action, suits, losses, costs, liabilities and damages, and reasonable
expenses incurred in connection therewith (irrespective of whether any such
Servicer Indemnified Party is a party to the action for which indemnification
hereunder is sought), including reasonable
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attorneys' fees and disbursements (collectively, the "Servicer Indemnified
Liabilities"), incurred by the Servicer Indemnified Parties or any of them as a
result of, or arising out of, or relating to any inaccurate representation or
warranty of the Servicer (including with respect to the accuracy of information
contained in the Borrowing Base Reports and Settlement Statements), or the
breach by the Servicer of its obligations under any Loan Document, except for
any such Servicer Indemnified Liabilities arising by reason of the relevant
Servicer Indemnified Party's gross negligence or wilful misconduct. If and to
the extent that the foregoing undertaking may be unenforceable for any reason,
the Servicer hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Servicer Indemnified Liabilities which is
permissible under applicable law.
ARTICLE IX
EVENTS OF DEFAULT AND THEIR EFFECT
SECTION 9.1. Events of Default. Each of the following events or
occurrences described in this Section 9.1 shall constitute an "Event of
Default".
SECTION 9.1.1. Non-Payment of Obligations. The Borrower shall (i) default
in the payment or prepayment when due of any principal of or interest on any
Loan or the payment of any other amount payable by Borrower hereunder (including
any Reimbursement Obligation or any other obligations to deposit immediately
available funds to collateralize Letter of Credit Outstandings) or (ii) fail to
make any deposit required to be made by the Borrower hereunder when due. The
Servicer shall fail (and such failure shall continue unremedied for a period of
three Business Days) to make payments or deposits when due or required by the
Loan Documents.
SECTION 9.1.2. Non-Performance of Other Covenants and Obligations. The
Borrower, the Servicer or the Originator shall default in the due performance
and observance of any other covenant, term or agreement contained herein or in
any other Loan Document executed by it, and such default shall continue
unremedied for a period of 30 days after the earlier to occur of (i) discovery
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of such default by the Borrower, the Servicer or the Originator, as applicable,
and (ii) notice thereof shall have been given to the Borrower, the Servicer or
the Originator, as applicable, by the Administrative Agent, the Issuer, the
Swingline Bank or any Lender.
SECTION 9.1.3. Breach of Representations and Warranties. Any
representation or warranty of the Borrower, the Servicer or the Originator made
hereunder or in any other Loan Document executed by it or any other writing or
certificate furnished by or on behalf of the Borrower, the Servicer or the
Originator to the Administrative Agent, the Issuer, the Swingline Bank or any
Lender for the purposes of or in connection with this Agreement or any such
other Loan Document (including any certificates delivered pursuant to Article V)
is or shall be incorrect when made or deemed made in any material respect.
SECTION 9.1.4. Default on Originator Indebtedness. A default shall occur
in the payment when due (subject to any applicable grace or cure period),
whether by acceleration or otherwise, of any Indebtedness of the Originator
having a principal amount, individually or in the aggregate, in excess of
$1,500,000.
SECTION 9.1.5. Bankruptcy, Insolvency, etc. Any of the Borrower, the
Servicer or the Originator shall become subject to an Event of Bankruptcy.
SECTION 9.1.6. Borrowing Base Deficiency. The Aggregate Outstanding Amount
shall exceed the sum of the Borrowing Base and the amount on deposit in the
Liquidation Account (other than amounts on deposit therein allocated to Carrying
Costs), and such condition shall continue unremedied for one Business Day after
the earlier to occur of (i) discovery of such condition by an Authorized Officer
of the Borrower, and (ii) notice thereof shall have been given to the Borrower
by the Administrative Agent, the Issuer, the Swingline Bank or any Lender.
SECTION 9.1.7. Loss Reserve Ratio. The Loss Reserve Ratio shall exceed
16%.
SECTION 9.1.8. Dilution Reserve Ratio. The Dilution Reserve Ratio shall
exceed 6%.
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SECTION 9.1.9. Collectability of Receivables. Any event or circumstance
occurs which has a material adverse effect on the collectability or
enforceability of a material portion of the Pool Receivables.
SECTION 9.1.10. IRS or PBGC Liens. The IRS or PBGC shall file a notice of
a Lien with respect to the receivables of the Originator or the assets of the
Borrower.
SECTION 9.1.11. Impairment of Security, etc. Any Loan Document, or any
Lien granted thereunder, shall (except in accordance with its terms), in whole
or in part, terminate, cease to be effective or cease to be the legally valid,
binding and enforceable obligation of the Borrower or ProSource with respect to
any portion of the Collateral having a value in excess of $500,000; the Borrower
or ProSource shall, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability; or any Lien securing
any Obligation (including the Lien on the Collateral) shall, with respect to any
portion of the Collateral having a value in excess of $500,000, cease to be a
perfected first priority Lien (other than with respect to Permitted Liens).
SECTION 9.1.12. Change in Control. Any Change in Control shall occur.
SECTION 9.1.13. Purchase and Sale Termination Event. A Purchase and Sale
Termination Event shall have occurred and be continuing under the Purchase
Agreement.
SECTION 9.2. Effects of Events of Default.
SECTION 9.2.1. Action if Bankruptcy. If any Event of Default described in
Section 9.1.5 shall occur, the Commitments (if not theretofore terminated) shall
automatically terminate and the outstanding principal amount of all outstanding
Loans and all other Obligations (including Reimbursement Obligations) of the
Borrower shall automatically be and become immediately due and payable, without
notice or demand and the Borrower shall automatically and immediately be
obligated to deposit with the Administrative Agent in immediately available
funds to be held in the LOC
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Collateralization Account in an amount equal to all Letter of Credit
Outstandings.
SECTION 9.2.2. Action if Other Event of Default. If any Event of Default
(other than any Event of Default described in Section 9.1.5) shall occur for any
reason, whether voluntary or involuntary, and be continuing, the Administrative
Agent, upon the direction of the Required Lenders, shall by written notice to
the Borrower declare all or any portion of the outstanding principal amount of
the Loans and other Obligations (including Reimbursement Obligations) of the
Borrower to be due and payable and/or the Commitments (if not theretofore
terminated) to be terminated, whereupon the full unpaid amount of such Loans and
other Obligations of the Borrower which shall be so declared due and payable
shall be and become immediately due and payable, without further notice, demand
or presentment, and/or, as the case may be, the Commitments shall terminate and
the Borrower shall automatically and immediately be obligated to deposit with
the Administrative Agent in immediately available funds to be held in the LOC
Collateralization Account in an amount equal to all Letter of Credit
Outstandings.
ARTICLE X
THE ADMINISTRATIVE AGENT
SECTION 10.1. Actions. Each Lender hereby appoints Scotiabank as its
Administrative Agent under and for purposes of this Agreement, the Notes and
each other Loan Document. Each Lender authorizes the Administrative Agent to act
on behalf of such Lender under this Agreement, the Notes, the Security Agreement
and each other Loan Document and, in the absence of other written instructions
from the Required Lenders received from time to time by the Administrative Agent
(with respect to which the Administrative Agent agrees that it will comply,
except as otherwise provided in this Section or as otherwise advised by
counsel), to exercise such powers hereunder and thereunder as are specifically
delegated to or required of the Administrative Agent by the terms hereof and
thereof, together with such powers as may be reasonably incidental thereto,
including the enforcement of any remedies under the Security Agreement. Each
Lender hereby
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indemnifies (which indemnity shall survive any termination of this Agreement)
the Administrative Agent, pro rata according to such Lender's Percentage, from
and against any and all liabilities, obligations, losses, damages, claims, costs
or expenses of any kind or nature whatsoever which may at any time be imposed
on, incurred by, or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement, the Notes and any other Loan
Document, including reasonable attorneys' fees, and as to which the
Administrative Agent is not reimbursed by the Borrower; provided, however, that
no Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, claims, costs or expenses which are determined by
a court of competent jurisdiction in a final proceeding to have resulted solely
from the Administrative Agent's gross negligence or wilful misconduct. The
Administrative Agent shall not be required to take any action hereunder, under
the Notes or under any other Loan Document, or to prosecute or defend any suit
in respect of this Agreement, the Notes or any other Loan Document, unless it is
indemnified hereunder to its satisfaction. If any indemnity in favor of the
Administrative Agent shall be or become, in the Administrative Agent's
determination, inadequate, the Administrative Agent may call for additional
indemnification from the Lenders and cease to do the acts indemnified against
hereunder until such additional indemnity is given.
SECTION 10.2. Funding Reliance, etc. Unless the Administrative Agent shall
have been notified by telephone, confirmed in writing, by any Lender by 5:00
p.m., New York time, on the Business Day prior to a Borrowing that such Lender
will not make available the amount which would constitute its Percentage of such
Borrowing on the date specified therefor, the Administrative Agent may assume
that such Lender has made such amount available to the Administrative Agent and,
in reliance upon such assumption, make available to the Borrower a corresponding
amount. If and to the extent that such Lender shall not have made such amount
available to the Administrative Agent, such Lender and the Borrower severally
agree to repay the Administrative Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date the
Administrative Agent made such amount available to the Borrower to the date such
amount is repaid to the Administrative Agent, at the interest rate applicable at
the time to Loans comprising such Borrowing (in the case of the
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Borrower) and (in the case of a Lender) at the Federal Funds Rate (for the first
two Business Days after which such amount has not been repaid, and thereafter at
the interest rate applicable to Loans comprising such Borrowing).
SECTION 10.3. Exculpation. Neither the Administrative Agent nor any of its
directors, officers, employees or agents shall be liable to any Lender for any
action taken or omitted to be taken by it under this Agreement or any other Loan
Document, or in connection herewith or therewith, except for its own wilful
misconduct or gross negligence, nor responsible for any recitals or warranties
herein or therein, nor for the effectiveness, enforceability, validity or due
execution of this Agreement or any other Loan Document, nor for the creation,
perfection or priority of any Liens purported to be created by any of the Loan
Documents, or the validity, genuineness, enforceability, existence, value or
sufficiency of any collateral security, nor to make any inquiry respecting the
performance by the Borrower or the Servicer of its obligations hereunder or
under any other Loan Document. Any such inquiry which may be made by the
Administrative Agent shall not obligate it to make any further inquiry or to
take any action. The Administrative Agent shall be entitled to rely upon advice
of counsel concerning legal matters and upon any notice, consent, certificate,
statement or writing which the Administrative Agent believes to be genuine and
to have been presented by a proper Person.
SECTION 10.4. Successor. The Administrative Agent may resign as such at
any time upon at least 30 days' prior notice to the Borrower and all Lenders. If
the Administrative Agent at any time shall resign, the Required Lenders may with
the consent of the Borrower (such consent not to be unreasonably withheld or
delayed) appoint another Lender as a successor Administrative Agent which shall
thereupon become the Administrative Agent hereunder. If no successor
Administrative Agent shall have been so appointed by the Required Lenders with
the consent of the Borrower and shall have accepted such appointment within 30
days after the retiring Administrative Agent's giving notice of resignation,
then the retiring Administrative Agent may with the consent of the Borrower
(such consent not to be unreasonably withheld or delayed) appoint a successor
Administrative Agent, which shall be one of the Lenders or a commercial banking
institution organized under the laws of the
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U.S. (or any State thereof) or a U.S. branch or agency of a commercial banking
institution, and having a combined capital and surplus of at least $500,000,000.
Upon the acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent, such successor Administrative Agent shall be
entitled to receive from the retiring Administrative Agent such documents of
transfer and assignment as such successor Administrative Agent may reasonably
request, and shall thereupon succeed to and become vested with all rights,
powers, privileges and duties of the retiring Administrative Agent, and the
retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Administrative Agent's
resignation hereunder as the Administrative Agent, the provisions of (i) this
Article X shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was the Administrative Agent under this Agreement and (ii)
Section 12.3 and Section 12.4 shall continue to inure to its benefit.
SECTION 10.5. Loans by Scotiabank. Scotiabank shall have the same rights
and powers with respect to (x) the Credit Extensions made by it or any of its
Affiliates, and (y) the Notes held by it or any of its Affiliates as any other
Lender and may exercise the same as if it were not the Administrative Agent.
Scotiabank and its Affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with the Borrower or any Subsidiary or
Affiliate of the Borrower as if Scotiabank were not the Administrative Agent
hereunder.
SECTION 10.6. Credit Decisions. Each Lender acknowledges that it has,
independently of the Administrative Agent and each other Lender, and based on
such Lender's review of the financial information of the Borrower, this
Agreement, the other Loan Documents (the terms and provisions of which being
satisfactory to such Lender) and such other documents, information and
investigations as such Lender has deemed appropriate, made its own credit
decision to extend its Commitments. Each Lender also acknowledges that it will,
independently of the Administrative Agent and each other Lender, and based on
such other documents, information and investigations as it shall deem
appropriate at any time, continue to make its own credit decisions as to
exercising or
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not exercising from time to time any rights and privileges available to it under
this Agreement or any other Loan Document.
SECTION 10.7. Copies, etc. The Administrative Agent shall give prompt
notice to each Lender of each notice or request required or permitted to be
given to the Administrative Agent by the Borrower pursuant to the terms of this
Agreement (unless concurrently delivered to the Lenders by the Borrower). The
Administrative Agent will distribute to each Lender each document or instrument
received for its account and copies of all other communications received by the
Administrative Agent from the Borrower for distribution to the Lenders by the
Administrative Agent in accordance with the terms of this Agreement.
ARTICLE XI
SETTLEMENT PROCEDURES
SECTION 11.1. Settlement Procedures. (a) Collection of the Pool
Receivables shall be administered by the Servicer in accordance with the terms
of this Agreement. The Borrower shall provide to the Servicer on a timely basis
all information needed for such administration.
(b) The Servicer shall, on each day on which Collections of Pool
Receivables are received by the Borrower or the Servicer, transfer such
Collections from the Lock-Box Accounts and deposit such Collections into the
Collection Account. With respect to such Collections on such day, the Servicer
shall to the extent permitted by the applicable agreement:
(i) transfer from the Collection Account to the Liquidation Account,
out of such Collections, first, an amount equal to the interest accrued
through such day for each Loan and not previously deposited therein and
second, an amount equal to the Servicing Fee, the Commitment Fee, the
Letter of Credit Fees and any costs or expenses set forth in Section 4.3,
4.4, 4.5 or 4.6, in each case accrued through such day and not previously
deposited therein (collectively, the amounts described in clause first and
second are referred to herein as, the "Carrying Costs"); and
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(ii) if such day is not a Amortization Day, remit to the Borrower
the remainder of such Collections for application in accordance with
Section 11.1(h); provided, however, that if on such day the Aggregate
Outstanding Amount exceeds the Borrowing Base (such excess being referred
to herein as a "Borrowing Base Deficiency"), then such remainder of
Collections shall be transferred from the Collection Account to the
Liquidation Account until the sum of the Borrowing Base plus the amount on
deposit in the Liquidation Account (other than amounts on deposit therein
in respect of the Carrying Costs pursuant to clause 11.1(b)(i) above) at
least equals the Aggregate Outstanding Amount; provided, further, that if
on any day (other than an Amortization Day) such Borrowing Base Deficiency
shall no longer exist, the Servicer shall remit to the Borrower any
amounts remaining on deposit in the Liquidation Account that were
deposited therein pursuant to the preceding proviso, which amounts shall
be applied by the Borrower in accordance with Section 11.1(h); and
(iii) if such day is an Amortization Day, transfer to the
Liquidation Account the entire remainder of such Collections.
(c) On each day that any Carrying Costs (other than Servicing Fees) are
payable by the Borrower in accordance with this Agreement, the Servicer shall
transfer from the Liquidation Account to the Agent's Account, out of Collections
deposited in the Liquidation Account in respect of such Carrying Costs pursuant
to Section 11.1(b)(i), the amount of such Carrying Costs that are due and
payable on such day.
(d) On each day that the Borrower is required to repay the Loans in
accordance with Section 3.1 or pay amounts to the Administrative Agent in
connection with Letters of Credit pursuant to the proviso to Section 3.1(b) or
(c) or Section 2.8.4, the Servicer shall transfer from the Liquidation Account
to the Agent's Account, out of Collections deposited in the Liquidation Account
pursuant to Section 11.1(b)(ii) and (b)(iii), the principal amount of the Loans
required to be repaid and the payments to be made to the Agent pursuant to
Section 3.1 (including pursuant to Section 3.1(b) or (c) thereof) and Section
2.8.4.
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(e) On each Amortization Day occurring after the Loans and all Carrying
Costs payable to the Secured Parties have been paid in full, the Servicer shall
transfer to the Agent's Account all amounts in the Liquidation Account, which
remaining amounts shall be held by the Agent for application in accordance with
clauses fourth, fifth and sixth of Section 11.1(g)(ii).
(f) On each day that any Servicing Fees are payable by the Borrower in
accordance with this Agreement, the Servicer shall deposit to its own account
from Collections held on deposit in the Liquidation Account pursuant to Section
11.1(b)(i) in respect of the accrued Servicing Fee, an amount equal to such
accrued Servicing Fee; provided, however, that if an Event of Default has
occurred and is continuing and ProSource or any Affiliate thereof is the
Servicer, the Servicer shall not withdraw any amounts from the Liquidation
Account with respect to accrued Servicing Fees.
(g) Upon receipt of funds deposited in the Agent's Account pursuant to
Sections 11.1(c), 11.1(d), 11.1(e) or 11.1(h) the Administrative Agent shall
cause such funds to be distributed as follows:
(i) if such distribution occurs on a day that is not an Amortization
Day, first, to the Secured Parties in payment in full of all accrued
interest on the Loans, second, to the Secured Parties in payment of
accrued and unpaid Letter of Credit Fees and Commitment Fees and to cover
all other Carrying Costs payable to the Secured Parties, and third, to the
Secured Parties in payment of the outstanding principal amount of the
Loans; and
(ii) if such distribution occurs on an Amortization Day, first, to
the Secured Parties in payment in full of all accrued interest on the
Loans, second, to the Secured Parties in payment of accrued and unpaid
Letter of Credit Fees, Commitment Fees, and all other Carrying Costs
payable to the Secured Parties, third, to the Secured Parties in payment
the outstanding principal amount of the Loans, fourth, after the
outstanding principal amount of the Loans, accrued interest thereon and
other Carrying Costs payable to the Secured Parties have been paid in
full, remaining amounts, to the extent of the Letter of Credit
Outstandings, shall be
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deposited into the LOC Collateralization Account to collateralize Letter
of Credit Outstandings, fifth, to the Secured Parties for the payment of
all other Obligations of the Borrower hereunder, and sixth, to the
Servicer (if the Servicer is ProSource or any Affiliate thereof) all
accrued and unpaid Servicing Fees and to the Borrower all remaining
amounts.
(h) Borrower shall apply all Collections distributed to it pursuant to
Sections 11.1(b)(ii) and 11.1(g)(ii) in the following order of priority: first,
if Borrower elects, to any voluntary prepayment of the outstanding principal
amount of the Loans pursuant to Section 3.1(a) and the payment of interest
thereon; second, the payment of its expenses (including the Obligations when due
and payable to the Secured Parties); third, to the payment of accrued and unpaid
interest on the Borrower Note; fourth, to the payment of the purchase price of
any Receivables under the Purchase Agreement and the payment of the outstanding
principal amount of the Borrower Note; and fifth, other legal and valid
corporate purposes.
SECTION 11.2. Investments of Funds in Certain Accounts.
(a) Any amounts in the Liquidation Account or the Collection
Account, as the case may be, may be invested by the Liquidation Account
Bank or Collection Account Bank, respectively, at Servicer's direction so
as to insure sufficient availability of funds, in Permitted Investments,
so long as Administrative Agent's interest for the benefit of the Lenders
in such Permitted Investments is perfected and such Permitted Investments
are subject to no Liens other than Permitted Liens and the Lien under the
Loan Documents. Permitted Investments shall be made in the name of the
Borrower. All income received from investments of funds in the Liquidation
Account or the Collection Account shall be treated as Collections and
distributed in accordance with Section 11.1.
(b) Any interest earned on amounts deposited by the Agent in the LOC
Collateralization Account to cash collateralize Letter of Credit
Outstandings shall be used to pay the Letter of Credit Fee when due and
payable.
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ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1. Waivers, Amendments, etc. The provisions of this Agreement
and of each other Loan Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and consented to
by the Borrower and the Required Lenders; provided, however, that no such
amendment, modification or waiver shall:
(a) modify any requirement hereunder that any particular action be
taken by all the Lenders or by the Required Lenders without the consent of
all Lenders;
(b) modify this Section 12.1, change the definition of "Required
Lenders", release any Collateral (except as otherwise specifically
provided in any Loan Document), change the amount or the date of payment
of the Commitment Fee or the Letter of Credit Fee or extend the Commitment
Termination Date without the consent of all Lenders;
(c) extend the Scheduled Maturity Date (or reduce the principal
amount of or rate of interest on any Loan or Reimbursement Obligation, or
postpone the date of payment of interest on any Loan or Reimbursement
Obligation) without the consent of the Lender making such Loan (it being
understood and agreed, however, that any vote to rescind any acceleration
made pursuant to Section 9.2.2 of amounts owing with respect to the Loans
and other Obligations shall only require the vote of the Required Lenders
and any vote to rescind any acceleration made pursuant to Section 9.2.1 of
amounts owing with respect to the Loans and other Obligations shall
require the consent of all Lenders);
(d) increase the aggregate amount of any Lender's Percentage of any
Commitment Amount, increase the aggregate amount of any Loans required to
be made by a Lender pursuant to its Commitments or reduce any fees
described in Article III payable to any Lender without the consent of such
Lender;
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(e) affect adversely the interests, rights or obligations of the
Administrative Agent in its capacity as the Administrative Agent without
consent of the Administrative Agent;
(f) affect adversely the interests, rights or obligations of the
Swingline Bank in its capacity as Swingline Bank without the consent of
the Swingline Bank; or
(g) affect adversely the interests, rights or obligations of the
Issuer in its capacity as Issuer without the consent of the Issuer.
No failure or delay on the part of the Administrative Agent, the Swingline Bank,
the Issuer or any Lender in exercising any power or right under this Agreement
or any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right. No notice
to or demand on the Borrower in any case shall entitle it to any notice or
demand in similar or other circumstances. No waiver or approval by the
Administrative Agent, the Swingline Bank, the Issuer or any Lender under this
Agreement or any other Loan Document shall, except as may be otherwise stated in
such waiver or approval, be applicable to subsequent transactions. No waiver or
approval hereunder shall require any similar or dissimilar waiver or approval
thereafter to be granted hereunder.
SECTION 12.2. Notices. All notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing or by facsimile and addressed, delivered or transmitted to such party at
its address or facsimile number set forth below its name on Schedule III hereto
or set forth in the Lender Assignment Agreement or at such other address or
facsimile number as may be designated by such party in a notice to the other
parties. Any notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed given
when received. Any notice transmitted by facsimile shall be deemed given when
the confirmation of transmission thereof.
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SECTION 12.3. Payment of Costs and Expenses. The Borrower agrees to pay on
demand all reasonable expenses of the Administrative Agent (including the
reasonable fees and out-of-pocket expenses of counsel to the Administrative
Agent and of local counsel, if any, who may be retained by counsel to the
Administrative Agent) in connection with
(a) the negotiation, preparation, execution and delivery of this
Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from
time to time hereafter be required, whether or not the transactions
contemplated hereby are consummated;
(b) the filing, recording, refiling or rerecording of any Loan
Document and/or any Uniform Commercial Code financing statements relating
thereto and all amendments, supplements, amendments and restatements and
other modifications to any thereof and any and all other documents or
instruments of further assurance required to be filed or recorded or
refiled or rerecorded by the terms hereof or the terms of any other Loan
Document; and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save the Administrative Agent, the
Issuer, the Swingline Bank and the Lenders harmless from all liability for, any
stamp or other taxes (other than Taxes payable in accordance with Section 4.6)
which may be payable in connection with the execution or delivery of this
Agreement, the Credit Extensions hereunder, or the issuance of the Notes, the
Letters of Credit, the Swingline Note or any other Loan Documents. The Borrower
also agrees to reimburse the Administrative Agent, the Issuer, the Swingline
Bank and each Lender upon demand for all reasonable out-of-pocket expenses
(including reasonable attorneys' fees and legal expenses of counsel to the
Administrative Agent, the Issuer, the Swingline Bank and the Lenders) incurred
by the Administrative Agent, the Issuer, the Swingline Bank or such Lenders in
connection with (x) the negotiation of any restructuring
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or "work-out" with the Borrower, whether or not consummated, of any Obligations
and (y) the enforcement of any Obligations.
SECTION 12.4. Indemnification. In consideration of the execution and
delivery of this Agreement and the extension of the Commitments, the Borrower
hereby indemnifies, exonerates and holds the Administrative Agent, the Issuer,
the Swingline Bank and each Lender and each of their respective officers,
directors, employees and agents (collectively, the "Indemnified Parties") free
and harmless from and against any and all actions, causes of action, suits,
losses, costs, liabilities and damages, and reasonable expenses incurred in
connection therewith (irrespective of whether any such Indemnified Party is a
party to the action for which indemnification hereunder is sought), including
reasonable attorneys' fees and disbursements (collectively, the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them as a result
of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Credit Extension,
including all Indemnified Liabilities arising in connection with the
transactions contemplated by the Loan Documents;
(b) the entering into and performance of this Agreement and any
other Loan Document by any of the Indemnified Parties;
(c) any Receivable or Contract;
(d) any inaccurate representation of any of the Borrower, or the
breach by any of the Borrower of its obligations under any Loan Document;
or
(e) false information conveyed to the Secured Parties by the
Servicer (other than the Administrative Agent and any Servicer appointed
by the Administrative Agent) or ProSource; failure by the Servicer (other
than the Administrative Agent and any Servicer appointed by the
Administrative Agent) to comply with any law; any dispute, claim or offset
of any Obligor; or any product liability or damage suit associated with a
Receivable.
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except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or wilful misconduct or to the extent said indemnification shall
constitute credit recourse for the failure of an Obligor to make payments on a
Receivable. If and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
SECTION 12.5. Survival. The obligations of the Borrower under Sections
4.3, 4.4, 4.5, 4.6, 12.3 and 12.4, and the obligations of the Lenders under
Section 10.1, shall in each case survive any assignment from one Lender to
another (in the case of Sections 12.3 and 12.4) and any termination of this
Agreement, the payment in full of all the Obligations and the termination of all
the Commitments. The representations and warranties made by each of the Borrower
and the Servicer in this Agreement and in each other Loan Document shall survive
the execution and delivery of this Agreement and each such other Loan Document.
SECTION 12.6. Severability. Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall, as
to such provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
SECTION 12.7. Headings. The various headings of this Agreement and of each
other Loan Document are inserted for convenience only and shall not affect the
meaning or interpretation of this Agreement or such other Loan Document or any
provisions hereof or thereof.
SECTION 12.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be an original and all of which shall constitute together but one
and the same agreement. This Agreement shall become effective when counterparts
hereof executed on behalf of the Borrower, the Administrative Agent, the Issuer,
the Swingline Bank and each Lender (or notice thereof satisfactory
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to the Administrative Agent) shall have been received by the Administrative
Agent and notice thereof shall have been given by the Administrative Agent to
the Borrower and each Lender.
SECTION 12.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE NOTES,
THE SWINGLINE NOTE AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF A SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. This Agreement, the Notes, the
Swingline Note and the other Loan Documents constitute the entire understanding
among the parties hereto with respect to the subject matter hereof and thereof
and supersede any prior agreements, written or oral, with respect thereto.
SECTION 12.10. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:
(a) neither the Borrower nor the Servicer may assign or transfer its
rights or obligations hereunder without the prior written consent of the
Administrative Agent and all Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders are
subject to Section 12.11.
SECTION 12.11. Sale and Transfer of Loans and Notes; Participations in
Loans and Notes. Each Lender may assign, or sell participations in, its
participations in the Letters of Credit, Loans and Commitments to one or more
other Persons in accordance with this Section 12.11.
SECTION 12.11.1. Assignments. Upon prior notice to the Borrower and the
Administrative Agent, any Lender,
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(a) with the consent of the Borrower and the Administrative Agent
(which consents shall not be unreasonably delayed or withheld) may at any
time assign and delegate to one or more commercial banks or other
financial institutions, and
(b) with notice to the Borrower and the Administrative Agent, but
without the consent of the Borrower or the Administrative Agent, may
assign and delegate to any of its Affiliates or to any other Lender
(each Person described in either of the foregoing clauses as being the Person to
whom such assignment and delegation is to be made, being hereinafter referred to
as an "Assignee Lender"), all or any fraction of such Lender's total Loans,
interest in Letter of Credit Outstandings and Commitments in a minimum aggregate
amount of $10,000,000 (or, if less, the entire remaining amount of such Lender's
Loans, interest in Letter of Credit Outstandings and Commitment); provided,
however, that the assigning Lender must assign a pro-rata portion of each of its
Commitment, Loans and interest in Letters of Credit Outstandings. The Borrower
and the Administrative Agent shall be entitled to continue to deal solely and
directly with such Lender in connection with the interests so assigned and
delegated to an Assignee Lender until
(c) notice of such assignment and delegation, together with (i)
payment instructions, (ii) the Internal Revenue Service Forms or other
statements contemplated or required to be delivered pursuant to Section
4.6, if applicable, and (iii) addresses and related information with
respect to such Assignee Lender, shall have been delivered to the Borrower
and the Administrative Agent by such Lender and such Assignee Lender;
(d) such Assignee Lender shall have executed and delivered to the
Borrower and the Administrative Agent a Lender Assignment Agreement,
accepted by the Administrative Agent; and
(e) the processing fees described below shall have been paid.
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<PAGE> 117
From and after the date that the Administrative Agent accepts such Lender
Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that rights and
obligations hereunder have been assigned and delegated to such Assignee Lender
in connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (y)
the assignor Lender, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Lender Assignment
Agreement, shall be released from its obligations hereunder and under the other
Loan Documents. Within five Business Days after its receipt of notice that the
Administrative Agent has received and accepted an executed Lender Assignment
Agreement, but subject to clause (d) above, the Borrower shall execute and
deliver to the Administrative Agent (for delivery to the relevant Assignee
Lender) a new Note evidencing such Assignee Lender's assigned Loans and
Commitments and, if the assignor Lender has retained Loans and Commitments
hereunder, a replacement Note in the principal amount of the Loans and
Commitments retained by the assignor Lender hereunder (such Note to be in
exchange for, but not in payment of, the Note then held by such assignor
Lender). Each such Note shall be dated the date of the predecessor Note. Accrued
interest on that part of each predecessor Note evidenced by a new Note, and
accrued fees, shall be paid as provided in the Lender Assignment Agreement.
Accrued interest on that part of each predecessor Note evidenced by a
replacement Note shall be paid to the assignor Lender. Accrued interest and
accrued fees shall be paid at the same time or times provided in the predecessor
Note and in this Agreement. Such assignor Lender or such Assignee Lender must
also pay a processing fee to the Administrative Agent upon delivery of any
Lender Assignment Agreement in the amount of $3,500. Any attempted assignment
and delegation not made in accordance with this Section 12.11.1 shall be null
and void. Notwithstanding anything to the contrary set forth above, any Lender
may (without requesting the consent of the Borrower or the Administrative Agent)
pledge its Loans to a Federal Reserve Bank in support of borrowings made by such
Lender from such Federal Reserve Bank.
SECTION 12.11.2. Participations. Any Lender may at any time sell to one or
more commercial banks or other Persons (each of such commercial banks and other
Persons being herein called a
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"Participant") participating interests in any of the participations in Letters
of Credit, Loans, Commitments, or other interests of such Lender hereunder;
provided, however, that
(a) no participation contemplated in this Section 12.11 shall
relieve such Lender from its Commitments or its other obligations
hereunder or under any other Loan Document;
(b) such Lender shall remain solely responsible for the performance
of its Commitments and such other obligations;
(c) the Borrower and the Administrative Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and each of the other Loan
Documents;
(d) no Participant, unless such Participant is an Affiliate of such
Lender or is itself a Lender, shall be entitled to require such Lender to
take or refrain from taking any action hereunder or under any other Loan
Document, except that such Lender may agree with any Participant that such
Lender will not, without such Participant's consent, take any actions of
the type described in clause (a), (b), (d) or, to the extent requiring the
consent of such Lender, clause (c) of Section 12.1, and
(e) the Borrower shall not be required to pay any amount under any
provision of this Agreement that is greater than the amount which it would
have been required to pay had no participating interest been sold.
The Borrower acknowledges and agrees that each Participant, for purposes of
Sections 4.3, 4.4, 4.5, 4.6, 4.8 and 4.9, shall be considered a Lender and that
information delivered to a Lender pursuant to the terms of this Agreement may be
furnished to a Participant. Each Lender shall give notice to the Borrower of the
name of any Person to which such Lender has sold a participating interest under
the provisions hereof. Each Participant shall only be indemnified for increased
costs pursuant to Section 4.3, 4.5 or 4.6 if and to the extent that the Lender
which sold such participating interest to such Participant concurrently is
entitled to make, and does make, a claim on the Borrower for such increased
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costs. Any Lender that sells a participating interest in any Loan, Commitment or
other interest to a Participant under this Section 12.11.2 shall indemnify and
hold harmless the Borrower and the Administrative Agent from and against any
taxes, penalties, interest or other costs or losses (including reasonable
attorneys' fees and expenses) incurred or payable by the Borrower or the
Administrative Agent as a result of the failure of the Borrower or the
Administrative Agent to comply with its obligations to deduct or withhold any
Taxes from any payments made pursuant to this Agreement to such Lender or the
Administrative Agent, as the case may be, which Taxes would not have been
incurred or payable if such Participant had been a Non-U.S. Person that was
entitled to deliver to the Borrower, the Administrative Agent or such Lender,
and did in fact so deliver, a duly completed and valid Form 1001 or 4224 (or
applicable successor form) entitling such Participant to receive payments under
this Agreement without deduction or withholding of any United States federal
taxes. Any attempted sale of a participation interest not made in accordance
with this Section 12.11.2 shall be null and void.
SECTION 12.12. Other Transactions. Nothing contained herein shall preclude
the Administrative Agent, the Issuer, the Swingline Bank or any Lender from
engaging in any transaction, in addition to those contemplated by this Agreement
or any other Loan Document, with the Borrower or any of its Affiliates in which
the Borrower or such Affiliate is not restricted hereby from engaging with any
other Person.
SECTION 12.13. Execution on Behalf of Corporation. Any signature by any
Authorized Officer on this Agreement, any Loan Document and any other instrument
and certificate executed or to be executed pursuant to or in connection with
this Agreement or such other Loan Documents is provided only in such Authorized
Officer's capacity as a corporate officer, and not in any way in such Authorized
Officer's personal capacity.
SECTION 12.14. Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE LENDERS,
THE ISSUER, THE SWINGLINE BANK, THE SERVICER OR THE BORROWER IN
111
<PAGE> 120
CONNECTION HEREWITH OR THEREWITH SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN
THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH OF THE BORROWER AND THE SERVICER
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH SUCH LITIGATION. SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT
AND ANY OTHER PROCESS UPON THE BORROWER MAY BE MADE BY MAILING OR DELIVERING A
COPY OF SUCH PROCESS TO THE BORROWER IN CARE OF THE PROCESS AGENT AT THE PROCESS
AGENT'S ABOVE ADDRESS, AND THE BORROWER HEREBY IRREVOCABLY AUTHORIZES AND
DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON ITS BEHALF. EACH OF THE
BORROWER AND THE SERVICER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT
THE STATE OF NEW YORK AT THE RESPECTIVE ADDRESSES FOR NOTICES HEREUNDER. EACH OF
THE BORROWER AND THE SERVICER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER
MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT ANY OF THE BORROWER AND THE SERVICER HAS
OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, SUCH PERSON HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED
BY LAW SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
SECTION 12.15. Waiver of Jury Trial. THE ADMINISTRATIVE AGENT, THE
LENDERS, THE ISSUER, THE SWINGLINE BANK, THE SERVICER AND THE BORROWER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TO THE FULLEST EXTENT PERMITTED
BY LAW ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
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<PAGE> 121
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE
AGENT, THE LENDERS, THE ISSUER, THE SWINGLINE BANK OR THE BORROWER IN CONNECTION
HEREWITH OR THEREWITH. EACH OF THE BORROWER AND THE SERVICER ACKNOWLEDGES AND
AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION
(AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY)
AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT,
THE ISSUER, THE SWINGLINE BANK AND THE LENDERS ENTERING INTO THIS AGREEMENT AND
EACH SUCH OTHER LOAN DOCUMENT.
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<PAGE> 122
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
PROSOURCE RECEIVABLES CORPORATION
By: /s/ Paul A. Garcia de Quevedo
--------------------------------
Name: Paul A. Garcia de Quevedo
Title: Vice President, Secretary &
Treasurer
PROSOURCE SERVICES CORPORATION
By: /s/ Paul A. Garcia de Quevedo
--------------------------------
Name: Paul A. Garcia de Quevedo
Title: Vice President, Secretary &
Treasurer
THE BANK OF NOVA SCOTIA, as
Administrative Agent, as Issuer
and as Swingline Bank
By: /s/ Frank F. Sandler
--------------------------------
Name: Frank F. Sandler
Title: Relationship Manager
S-1 SECURED CREDIT AGREEMENT
<PAGE> 123
LENDERS
THE BANK OF NOVA SCOTIA, as Lender
By: /s/ Frank F. Sandler
--------------------------------
Name: Frank F. Sandler
Title: Relationship Manager
Percentage: 100%
Commitment Amount: $150,000,000.00
<PAGE> 1
EXHIBIT 10.28
PURCHASE AND SALE AGREEMENT
Dated as of March 14, 1997
between
PROSOURCE SERVICES CORPORATION
and
PROSOURCE RECEIVABLES CORPORATION
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
ARTICLE I
AGREEMENT TO PURCHASE AND SELL; LETTERS OF CREDIT
1.1. Facility................................................... 2
1.2. Making of Purchases........................................ 2
1.3. Consideration for Purchases................................ 2
1.4. Purchase and Sale Termination Date......................... 2
1.5. Intention of the Parties................................... 3
1.6. Letters of Credit.......................................... 3
ARTICLE II
CALCULATION OF PURCHASE PRICE
2.1. Calculation of Purchase Price.............................. 4
ARTICLE III
CONTRIBUTION OF RECEIVABLES;
PAYMENT OF PURCHASE PRICE
3.1. Contribution of Receivables................................ 5
3.2. Initial Purchase Price Payment............................. 6
3.3. Subsequent Purchase Price Payments......................... 6
3.4. Settlement as to Specific Receivables...................... 7
3.5. Expired Letters of Credit.................................. 8
ARTICLE IV
CONDITIONS OF PURCHASES
4.1. Conditions Precedent to Initial Purchase................... 8
4.2. Certification as to Representations
and Warranties........................................... 9
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<PAGE> 3
TABLE OF CONTENTS
(continued)
PAGE
----
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ORIGINATOR
5.1. Organization and Good Standing............................. 10
5.2. Due Qualification.......................................... 10
5.3. Power and Authority; Due Authorization..................... 10
5.4. Valid Sale or Contribution;
Binding Obligations...................................... 10
5.5. No Violation............................................... 11
5.6. Proceedings................................................ 11
5.7. Bulk Sales Act............................................. 11
5.8. Government Approvals....................................... 11
5.9. Financial Condition........................................ 11
5.10. Margin Regulations........................................ 12
5.11. Quality of Title.......................................... 12
5.12. Accuracy of Information................................... 12
5.13. Offices................................................... 13
5.14. Trade Names............................................... 13
5.15. Taxes..................................................... 13
5.16. Licenses and Labor Controversies.......................... 13
5.17. Compliance with Applicable Laws........................... 13
5.18. Reliance on Separate Legal Identity....................... 14
5.19. Purchase Price............................................ 14
5.20. Eligibility of Receivables................................ 14
5.21. Marking of Records........................................ 14
5.22. Certain Definitions....................................... 14
ARTICLE VI
COVENANTS OF ORIGINATOR
6.1. Affirmative Covenants...................................... 15
6.2. Reporting Requirements..................................... 17
6.3. Negative Covenants......................................... 17
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<PAGE> 4
TABLE OF CONTENTS
(continued)
PAGE
----
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE RECEIVABLES
7.1. Rights of the Company...................................... 19
7.2. Responsibilities of Originator............................. 19
7.3. Further Action Evidencing Purchases........................ 19
7.4. Application of Collections................................. 20
ARTICLE VIII
PURCHASE AND SALE TERMINATION EVENTS
8.1. Purchase and Sale Termination Events....................... 20
8.2. Remedies................................................... 21
ARTICLE IX
INDEMNIFICATION
9.1. Indemnities by Originator.................................. 22
ARTICLE X
MISCELLANEOUS
10.1. Amendments, etc........................................... 24
10.2. Notices, etc.............................................. 25
10.3. No Waiver; Cumulative Remedies............................ 25
10.4. Binding Effect; Assignability............................. 25
10.5. Governing Law............................................. 25
10.6. Costs, Expenses, and Taxes................................ 26
10.7. Submission to Jurisdiction................................ 26
10.8. Waiver of Jury Trial...................................... 26
10.9. Captions and Cross References;
Incorporation by Reference.............................. 27
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<PAGE> 5
TABLE OF CONTENTS
(continued)
PAGE
----
10.10. Execution in Counterparts................................ 27
10.11. Acknowledgment and Agreement............................. 27
SCHEDULES
SCHEDULE 4.1 Foreign Qualifications
SCHEDULE 5.13 Office Locations
SCHEDULE 5.14 Trade Names
EXHIBITS
EXHIBIT A Form of Purchase Report
EXHIBIT B Form of Borrower Note
EXHIBIT C Form of Opinion of Originator's Counsel
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<PAGE> 6
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (as amended, supplemented or modified
from time to time, this "Agreement"), dated as of March 14, 1997, is between
PROSOURCE SERVICES CORPORATION, a Delaware corporation ("Originator"), as seller
and contributor, and PROSOURCE RECEIVABLES CORPORATION, a Delaware corporation
(the "Company"), as purchaser and contributee.
Definitions
Unless otherwise indicated, certain terms that are capitalized and used
throughout this Agreement are defined in Section 1.1 to the Secured Credit
Agreement of even date herewith (as amended, supplemented or otherwise modified
from time to time, the "Secured Credit Agreement"), among the Company, as the
Borrower, the Originator, as the initial Servicer, certain commercial lending
institutions from time to time party thereto as Lenders (the "Lenders"), and THE
BANK OF NOVA SCOTIA, as the issuer of letters of credit (in such capacity, the
"Issuer"), as the swingline bank (in such capacity, the "Swingline Bank"), and
as the administrative agent for the Lenders (the "Administrative Agent").
Background
1. The Company is a special purpose corporation, all of the capital stock
of which is wholly-owned by Originator.
2. On the Effective Date, Originator is transferring certain Receivables
and Related Security to the capital of the Company as a contribution to the
Company. Originator may also contribute additional Receivables and Related
Security to the capital of the Company after the Effective Date.
3. Originator wishes to sell certain Receivables and Related Security from
time to time to the Company, and the Company is willing, on the terms and
subject to the conditions set forth
<PAGE> 7
herein, to purchase such Receivables and Related Security from Originator.
4. The Company has obtained Commitments from the Lenders and the other
Secured Parties secured by the Receivables and Related Security pursuant to the
Secured Credit Agreement in order to finance its purchases of certain
Receivables and Related Security hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
AGREEMENT TO PURCHASE AND SELL; LETTERS OF CREDIT
1.1. Facility. On the terms and subject to the conditions herein set forth
and without recourse to Originator (except to the extent as is specifically
provided herein), Originator shall sell or contribute to the Company all
Receivables and Related Security with respect thereto originated by it from time
to time and the Company shall purchase (each a "Purchase") or accept as a
contribution from Originator all Receivables and Related Security with respect
thereto of Originator from time to time, in each case during the period
commencing until the Purchase and Sale Termination Date (as hereinafter
defined).
1.2. Making of Purchases. (a) All purchases. On the Effective Date and on
each Business Day following the Effective Date on which a Receivable is
originated and/or acquired (each, a "Payment Date"), Originator shall sell to
the Company and the Company shall purchase from Originator all Receivables
originated and/or acquired by Originator which have not previously been sold or
contributed to the Company; provided, however, that Originator may, at its
option on any Payment Date, contribute all or any of such Receivables to the
Company pursuant to Section 3.1(b), instead of selling such Receivables to the
Company pursuant to this Section 1.2.
(b) Ownership of Receivables and Related Security. On each Payment Date,
after giving effect to each Purchase and each contribution of Receivables on
such date, the Company shall own all
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<PAGE> 8
Receivables originated and/or acquired by Originator as of such date (including
Receivables which have been previously sold or contributed to the Company
hereunder). The Purchase or contribution of any Receivable shall include all
Related Security with respect to such Receivable.
1.3. Consideration for Purchases. On the terms and subject to the
conditions set forth in this Agreement, the Company agrees to make all Purchase
Price payments to Originator, and to reflect all contributions, in accordance
with Article III.
1.4. Purchase and Sale Termination Date. The "Purchase and Sale
Termination Date" shall be the earlier to occur of (a) the date of the
termination of this Agreement pursuant to Section 8.2 and (b) the Payment Date
immediately following the day on which Originator shall have given notice to the
Company that Originator desires to terminate this Agreement.
1.5. Intention of the Parties. It is the express intent of the parties
hereto that the transfers of the Receivables (other than Contributed Receivables
(as hereinafter defined)) and Related Security by the Originator to the Company,
as contemplated by this Agreement, be, and be treated as, sales and not as
secured loans secured by the Receivables and Related Security. If, however,
notwithstanding the intent of the parties, such transactions are deemed to be
loans, the Originator hereby grants to the Company a security interest in all of
the Originator's right, title and interest in and to the Receivables and the
Related Security now existing and hereafter created, all monies due or to become
due and all amounts received with respect thereto, and all proceeds thereof, to
secure all of the Originator's obligations hereunder. It is also the express
intention of the parties hereto that the transfers of Contributed Receivables by
Originator to the Company be treated as contributions to the capital of the
Company.
1.6. Letters of Credit.
(a) Company Agreement to Procure Letters of Credit. On the terms and
subject to the conditions set forth in this Agreement, the Company agrees that,
upon the request of the Originator, the Company shall cause the Issuer to issue
Letters of Credit for the Company's account (to the extent permitted under, and
subject to the terms of,
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<PAGE> 9
the Secured Credit Agreement) in such stated amounts as the Originator may from
time to time request; provided, however, that the aggregate Stated Amount of all
Letters of Credit issued on any day shall not exceed the purchase price of
Receivables to be sold on such day hereunder. The Originator shall deliver all
requests for Letter of Credit issuances to the Company before the time at which
the Company must deliver such requests to the Administrative Agent under the
Secured Credit Agreement. The Originator shall assist the Company in preparing
any Letter of Credit applications and other documents required to be submitted
to the Issuer in connection with each such Letter of Credit issuance.
(b) Amendments to Letters of Credit. The Originator, from time to time,
may request the Company to request the Issuer, on the terms and subject to the
conditions set forth in the Secured Credit Agreement, (a) to revise the
documentation requirements for any outstanding Letter of Credit, (b) to extend
the expiry date (for a period of one year or less) of any outstanding Letter of
Credit, (c) to increase the stated amount of any outstanding Letter of Credit or
(d) to decrease the stated amount of any outstanding Letter of Credit.
(c) Letter of Credit Cancellations. The Originator shall be entitled to
request the Company to request the Issuer to cancel any Letter of Credit upon
the Issuer's receipt of (i) the original of such Letter of Credit and (ii) the
written consent of such Letter of Credit's beneficiary to such cancellation.
ARTICLE II
CALCULATION OF PURCHASE PRICE
2.1. Calculation of Purchase Price. On the 20th day of each Fiscal Month,
the Servicer shall deliver to the Company, the Administrative Agent and the
Originator (if the Servicer is other than the Originator) a report in
substantially the form of Exhibit A (each such report being herein called a
"Purchase Report") with respect to the matters set forth therein and the
Company's purchases of Receivables from Originator
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<PAGE> 10
(a) that are to be made on the Effective Date (in the case of the
Purchase Report to be delivered on the Effective Date), or
(b) that were made during the period commencing on the date of
delivery of the preceding Purchase Report to (but not including) the date
of delivery of the current Purchase Report (in the case of subsequent
Purchase Reports); provided, however, that so long as the Originator or
any Affiliate thereof is the Servicer, the Originator (or such Affiliate)
may, in its discretion, provide the information that would otherwise be
included in the Purchase Report in the Settlement Statement.
The "Purchase Price" (to be paid to Originator in accordance with the terms of
Article III) for the Receivables and the Related Security that are purchased
hereunder shall be determined in accordance with the following formula:
PP = OB X FMVD
where:
PP = Purchase Price for each Receivable as calculated on the
relevant Payment Date.
OB = the Outstanding Balance of such Receivable.
FMVD = Fair Market Value Discount, as measured on such Payment Date,
which is equal to the quotient (expressed as percentage) of
(a) one divided by (b) the sum of (i) one, plus (ii) the
product of (A) the Prime Rate on such Payment Date plus 2.00%,
and (B) a fraction, the numerator of which is the Average
Maturity (calculated as of the last day of the Fiscal Month
next preceding such Payment Date) and the denominator of which
is 365 or, in the case of a leap year, 366, plus (iii) in the
event that the three month rolling average of the Charge Off
Ratio (as calculated the last day of the Fiscal Month next
preceding such Payment Date) exceeds .20%, an amount equal to
such excess.
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<PAGE> 11
"Average Maturity" means, at any time, that period of days equal to the
Days Sale Outstanding calculated by the Servicer in the most recent Settlement
Statement.
"Charge Off Ratio" means the ratio (expressed as a percentage) computed as
of the last day of each Fiscal Month by dividing (i) the aggregate Outstanding
Balance of all Receivables originated by Originator that were charged-off as
uncollectible during the most recent Fiscal Month then ended by (ii) the
aggregate Collections (other than deemed Collections) received by the Company or
the Originator during such Fiscal Month.
"Prime Rate" means a per annum rate equal to the rate of interest most
recently announced by the Administrative Agent as its "prime" or "reference"
rate for United States loans made in the United States.
ARTICLE III
CONTRIBUTION OF RECEIVABLES;
PAYMENT OF PURCHASE PRICE
3.1. Contribution of Receivables.
(a) On the Effective Date, Originator shall, and hereby does, contribute
to the capital of the Company, Receivables and Related Security with respect
thereto consisting of Receivables of Originator that existed and were owing to
Originator on the Effective Date, beginning with the oldest of such Receivables
and continuing chronologically thereafter, and all or an undivided interest in
the most recent of such Contributed Receivables such that the aggregate
Outstanding Balance of all such Contributed Receivables shall be equal to
[$______________].
(b) Originator may at its option from time to time after the Effective
Date, by notice to the Company on or prior to the date of the proposed
contribution, identify additional Receivables which it proposes to contribute to
the Company as a capital contribution. On the date of each such contribution and
after giving effect thereto, the Company shall own in the Receivables so
identified and
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<PAGE> 12
contributed (collectively, the "Contributed Receivables") and all Related
Security with respect thereto.
3.2. Initial Purchase Price Payment. On the terms and subject to the
conditions set forth in this Agreement, the Company agrees to pay to Originator
the Purchase Price for the purchase of Receivables to be made on the Effective
Date, partially in cash from funds borrowed under the Secured Credit Agreement,
partially by issuing Letters of Credit pursuant to Section 1.6 and partially by
issuing a promissory note in the form of Exhibit B to Originator with an initial
principal balance equal to the remaining Purchase Price (as such promissory note
may be amended, supplemented, indorsed or otherwise modified from time to time,
together with all promissory notes issued from time to time in substitution
therefor or renewal thereof in accordance with the Loan Documents, being herein
called the "Borrower Note").
3.3. Subsequent Purchase Price Payments. On each Payment Date falling
after the Effective Date and on or prior to the Purchase and Sale Termination
Date, on the terms and subject to the conditions set forth in this Agreement,
the Company shall pay to Originator the Purchase Price for the Receivables sold
by Originator to the Company on such Business Day, partially in cash, to the
extent of any funds made available to the Company under the Secured Credit
Agreement, and to the extent any of such Purchase Price remains unpaid, such
remaining portion of such Purchase Price shall be paid, at the option of
Originator, by causing the Company to cause the issuer to issue Letters of
Credit as contemplated under Section 1.6 and/or by means of an automatic
increase to the outstanding principal amount of the Borrower Note; provided,
however, the outstanding principal balance of the Borrower Note may not at any
time exceed 15% of the Outstanding Balance of all Receivables owned by the
Company and no increase shall be made in the outstanding principal amount of the
Borrower Note such that the outstanding principal amount of the Borrower Note
exceeds 15% of the Outstanding Balance of all Receivables.
Servicer shall make all appropriate record keeping entries with respect to
the Borrower Note or otherwise to reflect the foregoing payments and adjustments
pursuant to Section 3.4, and Servicer's books and records shall constitute
rebuttable presumptive evidence of the principal amount of and accrued interest
on the Borrower Note
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at any time. Furthermore, Servicer shall hold the Borrower Note for the benefit
of Originator, and all payments under the Borrower Note shall be made to the
Servicer for the account of the applicable payee thereof. Originator hereby
irrevocably authorizes Servicer to mark the Borrower Note "CANCELLED" and to
return the Borrower Note to the Company upon the final payment thereof after the
occurrence of the Purchase and Sale Termination Date.
3.4. Settlement as to Specific Receivables and Dilution.
(a) If on the day of purchase or contribution of any Receivable from
Originator hereunder any of the representations or warranties set forth in
Sections 5.4, 5.11 or 5.20 is not true with respect to such Receivable or, as a
result of any action or inaction of Originator, on any day any of the
representations or warranties set forth in Sections 5.4, 5.11 or 5.20 is no
longer true with respect to such a Receivable, then the Purchase Price (or in
the case of a Contributed Receivable, the Outstanding Balance of such Receivable
(the "Contributed Value")) with respect to such Receivables shall be reduced by
an amount equal to the Outstanding Balance of such Receivable (each such
adjustment, a "Noncomplying Receivables Adjustment") and shall be accounted to
Originator as provided in Section 3.4(c); provided, however, that if the Company
thereafter receives payment on account of Collections due with respect to such
Receivable, the Company promptly shall deliver such funds to Originator.
(b) If, on any day, the Outstanding Balance of any Receivable (including
any Contributed Receivable) purchased (or contributed) hereunder is reduced or
adjusted as a result of any Dilution, then the Purchase Price or the Contributed
Value, as the case may be, with respect to such Receivable shall be reduced by
the amount of such net reduction (a "Dilution Adjustment") and shall be
accounted to Originator as provided in Section 3.4(c).
(c) Any reduction in the Purchase Price (or Contributed Value) of any
Receivable pursuant to Section 3.4(a) or (b) shall be applied as a credit for
the account of the Company against the Purchase Price of Receivables
subsequently purchased by the Company from the Originator hereunder; provided,
however if there have been no purchases of Receivables (or insufficiently large
purchases of
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Receivables) to create a Purchase Price sufficient to so apply such credit
against, the amount of such credit
(i) shall be paid in cash to the Company by the Originator, or
(ii) shall be deemed to be a payment under, and shall be deducted
from the principal amount outstanding under, the Borrower Note;
provided, further, however, that at any time (y) when a Default exists or (z) on
or after the Purchase and Sale Termination Date, the amount of any such credit
shall be paid by Originator to the Company by deposit in immediately available
funds into the Collection Account for application by Servicer to the same extent
as if Collections of the applicable Receivable in such amount had actually been
received on such date.
(d) Each Purchase Report (other than the Purchase Report delivered on the
Effective Date) shall include, in respect of the Receivables previously
generated by Originator (including the Contributed Receivables), a calculation
of the aggregate reductions described in Section 3.4(a) or (b) relating to such
Receivables since the last Purchase Report delivered hereunder, as indicated on
the books of the Company (or, for such period prior to the Effective Date, the
books of Originator).
3.5. Expired Letters of Credit. In the event that any Letter of Credit
issued in partial payment of any Purchase Price hereunder (i) expires or is
cancelled or otherwise terminated with all or any portion of its stated Amount
undrawn, (ii) has its Stated Amount decreased or (iii) the Company's
Reimbursement Obligation in respect thereof is reduced for any reason other than
by virtue of a payment made in respect of a drawing thereunder, then an amount
equal to such undrawn amount or such reduction, as the case may be, shall be
paid in cash to Originator on the next occurring Business Day.
ARTICLE IV
CONDITIONS OF PURCHASES
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4.1. Conditions Precedent to Initial Purchase. The initial purchase
hereunder is subject to the condition precedent that the Company shall have
received, on or before the Effective Date, the following, each (unless otherwise
indicated) dated the Effective Date, and each in form, substance and date
satisfactory to the Company:
(a) A copy of the resolutions of the Board of Directors of Originator
approving the Loan Documents to be delivered by it and the transactions
contemplated hereby and thereby, certified by the Secretary or Assistant
Secretary of Originator;
(b) Status certificates for Originator issued as of a recent date by the
Secretary of State of each of the states listed on Schedule 4.1.
(c) A certificate of the Secretary or Assistant Secretary of Originator
certifying the names and true signatures of the officers authorized on
Originator's behalf to sign the Loan Documents to be delivered by it (on which
certificate the Company and Servicer (if other than Originator) may conclusively
rely until such time as the Company and the Servicer shall receive from
Originator a revised certificate meeting the requirements of this Section
4.1(c));
(d) The articles of incorporation of Originator, duly certified by the
Secretary of State of Delaware as of a recent date, together with a copy of the
by-laws of Originator, each duly certified by the Secretary or an Assistant
Secretary of Originator;
(e) Copies of the proper financing statements (Form UCC-1) that have been
duly executed and name Originator as the seller/assignor and the Company as the
purchaser/assignee (and the Administrative Agent for the benefit of the Secured
Parties as assignee of the Company) of the Receivables and Related Security or
other similar instruments or documents, as may be necessary or, in Servicer's or
the Administrative Agent's reasonable opinion, desirable under the UCC of all
appropriate jurisdictions or any comparable law of all appropriate jurisdictions
to perfect the Company's ownership interest in all Receivables and Related
Security in which an ownership interest may be assigned to it hereunder;
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(f) Copies of the proper financing statements (Form UCC-3), if any,
necessary to release all security interests and other rights of any person in
any Receivable or any Related Security previously granted by Originator;
(g) A written search report from a Person satisfactory to Servicer and the
Administrative Agent listing all effective financing statements that name
Originator as debtor or assignor and that are filed in the jurisdictions in
which filings are to be made pursuant to the Section 4.1(e) above, together with
copies of such financing statements (none of which shall cover any Receivable or
any Related Security except as shall be released pursuant to Section 4.1(f)
above), and tax and judgment lien search reports from a Person satisfactory to
Servicer and the Administrative Agent;
(h) Favorable opinions of Kaye, Scholer, Fierman, Hays & Handler, LLP,
special counsel to Originator, in the forms of Exhibit C; and
(i) Evidence (i) of the execution and delivery by each of the parties
thereto of each of the other Loan Documents to be executed and delivered in
connection herewith and (ii) that each of the conditions precedent to the
execution, delivery and effectiveness of such other Loan Documents has been
satisfied to the Company's satisfaction.
4.2. Certification as to Representations and Warranties. Originator, by
accepting the Purchase Price related to each purchase of Receivables (and
Related Security) shall be deemed to have certified that the representations and
warranties contained in Article V are true and correct on and as of such day,
with the same effect as though made on and as of such day.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ORIGINATOR
In order to induce the Company to enter into this Agreement and to make
purchases and accept contributions hereunder, Originator, in its capacity as
seller and/or contributor under this Agreement,
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hereby makes the representations and warranties set forth in this Article V.
5.1. Organization and Good Standing. Originator has been duly organized
and is validly existing as a corporation in good standing under the laws of the
state of its incorporation, with power and authority to own its properties and
to conduct its business as such properties are presently owned and such business
is presently conducted.
5.2. Due Qualification. Originator is duly licensed or qualified to do
business as a foreign corporation in good standing in the jurisdiction where its
chief executive office and principal place of business are located and in all
other jurisdictions in which the ownership or lease of its property or the
conduct of its business requires such licensing or qualification, except to the
extent same could not reasonably be expected to have a Material Adverse Effect
or cause a Default of the type described in Section 9.1.9 or Section 9.1.11 of
the Secured Credit Agreement.
5.3. Power and Authority; Due Authorization. Originator has (a) all
necessary corporate power, authority and legal right (i) to execute and deliver,
and perform its obligations under, each Loan Document to which it is a party,
and (ii) to generate, own, sell, contribute and assign Receivables and Related
Security on the terms and subject to the conditions herein and therein provided;
and (b) duly authorized such execution and delivery and such sale, contribution
and assignment and the performance of such obligations by all necessary
corporate action.
5.4. Valid Sale or Contribution; Binding Obligations. Each sale or
contribution, as the case may be, of Receivables and Related Security made by
Originator pursuant to this Agreement shall constitute a valid sale or
contribution, as the case may be, transfer, and assignment thereof to the
Company, enforceable against creditors of, and purchasers from, Originator; and
this Agreement constitutes, and each other Loan Document to be signed by
Originator, when duly executed and delivered, will constitute, a legal, valid,
and binding obligation of Originator, enforceable in accordance with its terms;
except in each case as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of creditors'
rights
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generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
5.5. No Violation. The consummation of the transactions contemplated by
this Agreement and the other Loan Documents to which Originator is a party, and
the fulfillment of the terms hereof or thereof will not (a) conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time or both) a default under (i) Originator's
certificate of incorporation or by-laws, or (ii) any indenture, loan agreement,
mortgage, deed of trust, or other agreement or instrument to which it is a party
or by which it is bound, (b) result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture, loan
agreement, mortgage, deed of trust, or other agreement or instrument, other than
under the Loan Documents, or (c) violate any law or any order, rule, or
regulation applicable to it of any court or of any federal, state or foreign
regulatory body, administrative agency, or other governmental instrumentality
having jurisdiction over it or any of its properties.
5.6. Proceedings. There is no litigation or, to Originator's knowledge,
any proceeding or investigation pending before any court, regulatory body,
arbitrator, administrative agency, or other tribunal or governmental
instrumentality (a) asserting the invalidity of any Loan Document to which
Originator is a party, (b) seeking to prevent the sale or contribution of
Receivables and Related Security to the Company or the consummation of any of
the other transactions contemplated by any Loan Document to which Originator is
a party, or (c) seeking any determination or ruling that could reasonably be
expected to have a Material Adverse Effect or cause a Default of the type
described in Section 9.1.9 or Section 9.1.11 of the Secured Credit Agreement.
5.7. Bulk Sales Act. No transaction contemplated hereby requires
compliance with any bulk sales act or similar law.
5.8. Government Approvals. Except for the filing of the UCC financing
statements referred to in Article IV, all of which, at the time required in
Article IV, shall have been duly made and shall be in full force and effect, no
authorization or approval or other
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action by, and no notice to or filing with, any governmental authority or
regulatory body is required for Originator's due execution, delivery and
performance of any Loan Document to which it is a party.
5.9. Financial Condition.
(a) On the date hereof, and on the date of each sale of Receivables by
Originator to the Company (both before and after giving effect to such sale),
Originator shall be Solvent.
(b) The consolidated balance sheets of Originator and its consolidated
subsidiaries as of December 30, 1995, and the related statements of earnings and
cash flows of Originator and its consolidated subsidiaries for the fiscal year
then ended certified by Originator's independent accountants, copies of which
have been furnished to the Company, present fairly the consolidated financial
position of Originator and its consolidated subsidiaries for the period ended on
such date, all in accordance with GAAP consistently applied; and since such date
no event has occurred that has had a Material Adverse Effect.
5.10. Margin Regulations. No use of any funds acquired by Originator under
this Agreement will conflict with or contravene any of Regulations G, T, U and X
promulgated by the Board of Governors of the Federal Reserve System from time to
time.
5.11. Quality of Title.
(a) Each Receivable (together with the Related Security) which is to be
sold or contributed to the Company hereunder is or shall be owned by Originator,
free and clear of any Lien, other than any Lien arising solely as a result of
any action taken by the Company or other Permitted Lien. Whenever the Company
makes a purchase, or accepts a contribution, hereunder, it shall have acquired a
valid and perfected ownership interest (free and clear of any Lien) in all
Receivables generated by Originator and all Collections related thereto, and in
Originator's entire right, title and interest in and to the other Related
Security with respect thereto.
(b) No effective financing statement or other instrument similar in effect
covering any Receivable generated by Originator or
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any right related to any such Receivable is on file in any recording office
except such as may be filed in favor of the Company or Originator, as the case
may be, in accordance with this Agreement or in favor of the Administrative
Agent for the benefit of the secured parties in accordance with the Secured
Credit Agreement.
5.12. Accuracy of Information. No factual written information furnished or
to be furnished in writing by Originator to the Company or any Secured Party for
purposes of or in connection with any Loan Document or any transaction
contemplated hereby or thereby taken as a whole is, and no other such factual
written information hereafter furnished (and prepared) by Originator to the
Company or any Secured Party pursuant to or in connection with any Loan Document
will taken as a whole be inaccurate in any material respect as of the date it
was furnished or (except as otherwise disclosed to the Company and such Secured
Party at or prior to such time) as of the date as of which such information is
dated or certified, or shall contain any material misstatement of fact or
omitted or will omit to state any material fact necessary to make such
information, in the light of the circumstances under which any statement therein
was made, not materially misleading on the date as of which such information is
dated or certified.
5.13. Offices. Originator's chief executive office (as such term is used
in Section 9-103 of the UCC) is located at the address set forth under
Originator's signature hereto, and the offices where Originator keeps all its
books, records and documents evidencing the Receivables, the related Contracts
and all other agreements related to such Receivables are located at the
addresses specified on Schedule 5.13 (or at such other locations, notified to
Servicer (if other than Originator) and the Administrative Agent in accordance
with Section 6.1(f), in jurisdictions where all action required by Section 7.3
has been taken and completed).
5.14. Trade Names. Except as disclosed on Schedule 5.14, Originator does
not use any trade name other than its actual corporate name. From and after the
date that fell four (4) months before the date hereof, Originator has not been
known by any legal name other than its corporate name as of the date hereof, nor
has Originator been the subject of any merger or other corporate reorganization
except as disclosed on Schedule 5.14.
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5.15. Taxes. Originator has filed all tax returns and reports required by
law to have been filed by it and has paid all taxes and governmental charges
thereby shown to be owing, except any such taxes which are not yet delinquent or
are being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with generally accepted accounting
principles shall have been set aside on its books.
5.16. Licenses and Labor Controversies.
(a) Originator has not failed to obtain any licenses, permits, franchises
or other governmental authorizations necessary to the ownership of its
properties or to the conduct of its business, which violation or failure to
obtain could be reasonably likely to have a Material Adverse Effect or cause a
Default of the type described in Section 9.1.9 or Section 9.1.11 of the Secured
Credit Agreement; and
(b) There are no labor controversies pending against Originator that have
had (or could reasonably be expected to have) a Material Adverse Effect or that
have caused (or could reasonably be expected to cause) a Default of the type
described in Section 9.1.9 or Section 9.1.11 of the Secured Credit Agreement.
5.17. Compliance with Applicable Laws. Originator is in compliance, in all
material respects, with the requirements of (i) all applicable laws, rules,
regulations, and orders of all governmental authorities (including, without
limitation, Regulation Z, laws, rules and regulations relating to usury, truth
in lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy and all other consumer
laws applicable to the Receivables and related Contracts) (excluding with
respect to environmental matters which are covered by clause (ii)), and (ii) to
the best of its knowledge, all applicable environmental laws, rules, regulations
and orders of all governmental authorities, except, in each case, to the extent
same could not reasonably be expected to have a Material Adverse Effect or cause
a Default of the type described in Section 9.1.9 or Section 9.1.11 of the
Secured Credit Agreement.
5.18. Reliance on Separate Legal Identity. Originator is aware that the
Secured Parties are entering into the Loan Documents
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to which they are parties in reliance upon the Company's identity as a legal
entity separate from Originator.
5.19. Purchase Price. The Purchase Price payable by the Company to the
Originator hereunder is intended by the Originator and Company to be consistent
with the terms that would be obtained in an arm's length sale. The Servicer's
Fee payable to the Originator is intended to be consistent with terms that would
be obtained in an arm's length servicing arrangement.
5.20. Eligibility of Receivables. Unless otherwise identified to the
Company on the date of the purchase or contribution hereunder, each Receivable
purchased or contributed hereunder is on the date of purchase or contribution an
Eligible Receivable and, so long as the Originator is the Servicer, each
Receivable included as an Eligible Receivable in the calculation of Net
Receivables Pool Balance is an Eligible Receivable as of the date of such
calculation.
5.21. Marking of Records. Originator has marked its master data processing
records with a legend, acceptable to the Company and the Administrative Agent,
stating that such Receivables and the Related Security with respect thereto,
have been sold or contributed in accordance with this Agreement.
5.22. Certain Definitions. With respect to this Agreement, the term
"Solvent" is defined as follows:
"Solvent" means, with respect to any Person at any time, a condition
under which:
(i) the fair value of such Person's assets at a fair valuation, on
the date of determination, exceeds such Person's debts and liabilities
subordinated, contingent or otherwise, at such time;
(ii) the present fair saleable value of such Person's property, on
the date of determination, is greater than the amount that will be
required to pay the liabilities of such Person on its debts and other
liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured;
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(iii) such Person is and will be able to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and
(iv) such Person does not have unreasonably small capital with which
to conduct the business in which such Person is engaged as such business
is conducted on the date of determination and is proposed to be conducted
thereafter.
ARTICLE VI
COVENANTS OF ORIGINATOR
6.1. Affirmative Covenants. From the date hereof until all Commitments
have been terminated and all Obligations (other than indemnity, reinvestment and
similar obligations in respect of which no claim has been made and no amount
remains outstanding) have been paid in full under the Secured Credit Agreement
and no Commitments or Letter of Credit Outstandings remain outstanding,
Originator will, unless the Company and the Administrative Agent shall otherwise
consent in writing:
(a) Compliance with Laws, Etc. Comply in all respects with all applicable
laws, rules, regulations and orders except to the extent noncompliance therewith
could not reasonably be expected to have a Material Adverse Effect or cause a
Default of the type described in Section 9.1.9 or Section 9.1.11 of the Secured
Credit Agreement, including those with respect to the Receivables generated by
it and the related Contracts and other agreements related thereto.
(b) Preservation of Corporate Existence. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction where the failure to preserve and
maintain such existence, rights, franchises, privileges and qualification could
reasonably be expected to have a Material Adverse Effect or cause a Default of
the type described in Section 9.1.9 or Section 9.1.11 of the Secured Credit
Agreement.
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(c) [Intentionally Omitted].
(d) Keeping of Records and Books of Account. Maintain an ability to
recreate records evidencing the Receivables in the event of the destruction of
the originals thereof.
(e) Performance and Compliance with Receivables and Contracts. At its
expense timely and fully perform and comply with all provisions, covenants and
other promises required to be observed by it under the related Contracts and all
other agreements related to the Receivables and Related Security.
(f) Location of Records. Keep its chief executive office, (as such term is
used in Section 9-103 of the UCC), and the offices where it keeps its records
concerning or related to Receivables and Related Security, at the address(es)
referred to in Schedule 5.13 or, upon 30 days' prior written notice to the
Company and the Administrative Agent, at such other locations in jurisdictions
where all action required by Section 7.3 shall have been taken and completed.
(g) Credit and Collection Policies. Comply in all material respects with
its Credit and Collection Policy in connection with the Receivables and the
related Contracts.
(h) Separate Corporate Existence of the Company. Take such actions as
shall be required in order that:
(i) the Company's operating expenses (other than certain
organization expenses and expenses incurred in connection with the
preparation, negotiation and delivery of the Loan Documents) will not be
paid by Originator;
(ii) the Company's books and records will be maintained separately
from those of Originator;
(iii) all financial statements of Originator that are consolidated
to include the Company will contain detailed notes clearly stating that
the Company is a separate corporate entity with creditors who have
received security interests in the Company's assets and shall be entitled
to be satisfied out of the Company's assets prior to equity holders;
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(iv) Originator will strictly observe corporate formalities in its
dealing with the Company;
(v) Originator shall not commingle its funds with any funds of the
Company;
(vi) Originator will maintain arm's length relationships with the
Company, and Originator will be compensated at market rates for any
services it renders or otherwise furnishes to the Company; and
(vii) Originator will not be, and will not hold itself out to be,
responsible for the debts of the Company or the decisions or actions in
respect of the daily business and affairs of the Company (other than with
respect to such decisions or actions of the Originator in its capacity as
Servicer).
(i) Receipt of Collections. Originator shall promptly remit to the
applicable post office box related to the Lock-Box Accounts (or cause to be
deposited directly to such Lock-Box Accounts) all Collections received by
Originator.
6.2. Reporting Requirements. From the date hereof until the first day
following the Purchase and Sale Termination Date, Originator shall, unless the
Administrative Agent and the Company shall otherwise consent in writing, furnish
to the Company and the Administrative Agent:
(a) Proceedings. As soon as possible and in any event within five days
after Originator has knowledge thereof, written notice to the Company and the
Administrative Agent of (i) all pending proceedings and investigations of the
type described in Section 5.6 not previously disclosed to the Company and/or the
Administrative Agent and (ii) all material adverse developments that have
occurred with respect to any previously disclosed proceedings and
investigations;
(b) Other. Promptly, from time to time, such other information, documents,
records or reports respecting the Receivables, the Related Security or
Originator's performance hereunder that the Company or the Administrative Agent
may from time to time
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reasonably request in order to protect the interests of the Company, the Secured
Parties or the Administrative Agent.
6.3. Negative Covenants. From the date hereof until all Commitments have
been terminated and all Obligations (other than indemnity, reimbursement and
similar obligations in respect of which no claim has been made and no amount
remains outstanding) have been paid in full under the Secured Credit Agreement
and no Commitments or Letter of Credit Outstandings remain outstanding, unless
the Administrative Agent and the Company shall otherwise consent in writing, it
shall not:
(a) Sales, Liens, Etc. Except as otherwise permitted herein, in any other
Loan Document or in the Originator Credit Facility or any document delivered in
connection therewith, (i) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or create or suffer to exist any Lien upon or with respect
to, any Receivable or related Contract, Collections or Related Security, or any
interest therein, or assign any right to receive income in respect thereof, or
(ii) create or suffer to exist any Lien upon or with respect to any proceeds of
its inventory.
(b) Extension or Amendment of Receivables. Except as otherwise permitted
in the Secured Credit Agreement, extend, amend or otherwise modify the terms of
any Receivable in any material respect, or amend, modify or waive, in any
material respect, any term or condition of any Contract related thereto (which
term or condition relates to payments under, or the enforcement of, such
Contract).
(c) Change in Business or Credit and Collection Policy. Subject to the
provisions of the Secured Credit Agreement, make any change in the character of
its business or materially alter its Credit and Collection Policy, which change
would, in either case, adversely affect the collectibility of the Receivables
generated by it or the enforceability of any Contract.
(d) Receivables Not to be Evidenced by Promissory Notes or Chattel Paper.
Take any action to cause or permit any Receivable generated by it to become
evidenced by any "instrument" or "chattel paper" (as defined in the applicable
UCC) unless such "instrument" or "chattel paper" shall be delivered to the
Company (which in turn
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shall deliver the same to the Administrative Agent for the benefit of the
Secured Parties upon the request of the Administrative Agent).
(e) Mergers, Acquisitions, Sales, etc. Merge or consolidate with another
Person (except pursuant to a merger or consolidation involving Originator where
Originator is the surviving corporation), or convey, transfer, lease or
otherwise dispose of (whether in one or in a series of transactions), all or
substantially all of its assets (whether now owned or hereafter acquired), other
than pursuant to this Agreement.
(f) Lock-Box Banks. Make any changes in its instructions to Obligors
regarding Collections or add or terminate any Lock-Box Bank.
(g) Accounting for Purchases. Account for or treat (whether in financial
statements or otherwise) the transactions contemplated hereby in any manner
other than as sales and/or contributions of the Receivables and Related Security
by Originator to the Company.
(h) Loan Documents. Enter into, execute, deliver or otherwise become bound
by any agreement, instrument, document or other arrangement that restricts the
right of Originator to amend, supplement, amend and restate or otherwise modify,
or to extend or renew, or to waive any right under, this Agreement or any other
Loan Documents, other than the Originator Credit Facility.
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE RECEIVABLES
7.1. Rights of the Company. Originator hereby authorizes the Company and
the Servicer (if other than Originator) or their respective designees to take
any and all steps in Originator's name necessary or desirable, in their
respective determination, to collect all amounts due under any and all
Receivables and Related Security, including, without limitation, endorsing
Originator's name on checks and other instruments representing Collections and
enforcing such Receivables and the provisions of the related
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Contracts that concern payment and/or enforcement of rights to payment.
7.2. Responsibilities of Originator. Anything herein to the contrary
notwithstanding:
(a) Originator agrees to direct, and hereby grants to each of the Company
and the Administrative Agent the authority to direct, all Obligors to make
payments of Receivables directly to a Lock-Box Account at a Lock-Box Bank.
Originator further agrees to transfer any Collections that it receives directly
to Servicer (for deposit to such a Lock-Box Account) within one Business Day of
receipt thereof, and agrees that all such Collections shall be deemed to be
received in trust for the Company.
(b) Originator shall perform its obligations hereunder, and the exercise
by the Company or its designee of its rights hereunder shall not relieve
Originator from such obligations.
(c) None of the Company, Servicer (if other than the Originator) or any
Secured Party shall have any obligation or liability to any Obligor or any other
third Person with respect to any Receivables, any Contracts related thereto or
any other related agreements, nor shall the Company, Servicer (if other than the
Originator) or any Secured Party be obligated to perform any of the obligations
of Originator thereunder.
(d) Originator hereby grants to Servicer (if other than Originator) an
irrevocable power of attorney, with full power of substitution, coupled with an
interest, to take in the name of Originator all steps necessary or advisable to
indorse, negotiate or otherwise realize on any writing or other right of any
kind held or transmitted by Originator or transmitted or received by the Company
(whether or not from Originator) in connection with any Receivable or Related
Security.
7.3. Further Action Evidencing Purchases. Originator agrees that from time
to time, at its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action that the Company or
Servicer (if other than Originator or an Affiliate thereof) may reasonably
request in order to perfect, protect or more fully evidence the Receivables (and
the Related
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<PAGE> 29
Security) purchased by, or contributed to, the Company hereunder, or to enable
the Company to exercise or enforce any of its rights hereunder or under any
other Loan Document. Without limiting the generality of the foregoing, upon the
request of the Company, Originator will:
(a) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as may be necessary or appropriate; and
(b) make a notation in its books and records, including its computer
files, to indicate that the Receivables have been sold or contributed to the
Company.
Originator hereby authorizes the Company or its designee to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relative to all or any of the Receivables (and the Related Security)
now existing or hereafter generated by Originator. If Originator fails to
perform any of its agreements or obligations under this Agreement, the Company
or its designee may (but shall not be required to) itself perform, or cause
performance of, such agreement or obligation, and the expenses of the Company or
its designee incurred in connection therewith shall be payable by Originator as
provided in Section 10.6.
7.4. Application of Collections. Any payment by an Obligor in respect of
any indebtedness owed by it to Originator shall, except as otherwise specified
by such Obligor or otherwise required by contract or law and unless otherwise
instructed by the Company or the Administrative Agent, be applied first, as a
Collection of any Receivables of such Obligor, in the order of the age of such
Receivables, starting with the oldest of such Receivables, and second, to any
other indebtedness of such Obligor.
ARTICLE VIII
PURCHASE AND SALE TERMINATION EVENTS
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<PAGE> 30
8.1. Purchase and Sale Termination Events. Each of the following events or
occurrences described in this Section 8.1 shall constitute a "Purchase and Sale
Termination Event":
(a) The Commitment Termination Date shall have occurred; or
(b) Originator shall fail to make any payment or deposit to be made by it
hereunder when due and such failure shall remain unremedied for three Business
Days after the earlier to occur of (i) discovery thereof by an Authorized
Officer of Originator or (ii) notice thereof shall have been given by Servicer,
the Administrative Agent or the Company to Originator; or
(c) Any representation or warranty made or deemed to be made by Originator
(or any of its officers) under or in connection with this Agreement, any other
Loan Document or any other information or report delivered pursuant hereto or
thereto shall prove to have been false or incorrect in any material respect when
made or deemed made; or
(d) Originator shall fail to perform or observe in any
material respect any agreement contained in any of Sections 6.1(h)
or 6.3; or
(e) Originator shall fail to perform or observe any other term, covenant
or agreement contained in this Agreement on its part to be performed or observed
and such failure shall remain unremedied for thirty (30) days after the earlier
to occur of (i) discovery thereof by an Authorized Officer of Originator or (ii)
notice thereof shall have been given by Servicer, the Administrative Agent or
the Company to Originator; or
(f) An Event of Bankruptcy shall have occurred with respect to Originator;
or
(g) A contribution failure shall occur with respect to any benefit plans
sufficient to give rise to a Lien under Section 302(f) of ERISA. The IRS or PBGC
shall file a notice of a Lien with respect to the assets of Originator.
8.2. Remedies.
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<PAGE> 31
(i) Automatic Termination. The agreement of the Originator to sell
Receivables hereunder, and the agreement of the Company to purchase Receivables
from the Originator hereunder, shall terminate automatically (and the Purchase
and Sale Termination Date shall be deemed to have occurred) on the occurrence of
a Purchase and Sale Termination Event of the type described in Section 8.1(f).
(ii) Optional Termination. Upon the occurrence of a Purchase and Sale
Termination Event other than by reason of a Purchase and Sale Termination Event
of the type described in Section 8.1(f), the Company shall have the option by
notice to Originator (with a copy to the Administrative Agent) to declare the
Purchase and Sale Termination Date to have occurred.
(iii) Remedies Cumulative. Upon the occurrence of the Purchase and Sale
Termination Date to this Section 8.2, the Company shall have, in addition to all
other rights and remedies under this Agreement or otherwise, all other rights
and remedies provided under the UCC of each applicable jurisdiction and other
applicable laws, which rights shall be cumulative. Without limiting the
foregoing, the occurrence of the Purchase and Sale Termination Date shall not
deny the Company any remedy in addition to the declaration/occurrence of the
Purchase and Sale Termination Date to which the Company may be otherwise
appropriately entitled, whether at law or equity.
ARTICLE IX
INDEMNIFICATION
9.1. Indemnities by Originator. Without limiting any other rights which
the Company may have hereunder or under applicable law, Originator hereby agrees
to indemnify the Company and each of its assigns, officers, directors, employees
and agents (each of the foregoing Persons being individually called a "Purchase
and Sale Indemnified Party"), forthwith on demand, from and against any and all
damages, losses, claims, judgments, liabilities and related costs and expenses,
including reasonable attorneys' fees and disbursements (all of the foregoing
being collectively called "Purchase and Sale Indemnified Amounts") awarded
against or incurred by any of them arising out of or as a result of the
following:
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<PAGE> 32
(a) the transfer by Originator of an interest in any Receivable or Related
Security to any Person other than the Company;
(b) the breach of any representation or warranty made by Originator under
or in connection with this Agreement or any other Loan Document;
(c) the failure by Originator to comply with any applicable law, rule or
regulation with respect to any Receivable or the related Contract, or the
nonconformity of any Receivable or the related Contract with any such applicable
law, rule or regulation;
(d) the failure to vest and maintain vested in the Company an ownership
interest in the Receivables generated by Originator and Related Security free
and clear of any Lien, other than an Lien arising solely as a result of an act
of the Company or other Permitted Liens, whether existing at the time of the
purchase or contribution of such Receivables or at any time thereafter;
(e) any dispute, claim, offset or defense (other than discharge in
bankruptcy) of the Obligor to the payment of any Receivable (including, without
limitation, a defense based on such Receivables or the related Contracts not
being a legal, valid and binding obligation of such Obligor enforceable against
it in accordance with its terms), or any other claim resulting from the goods or
services related to any such Receivable or the furnishing of or failure to
furnish such goods or services, except to the extent that such dispute, claim,
offset or defense results solely from actions or failures to act of the Company
or its assigns;
(f) any product liability claim arising out of or in connection with goods
or services that are the subject of any Receivable;
(g) any litigation, proceeding or investigation against Originator;
(h) any tax or governmental fee or charge (other than any tax excluded
pursuant to the proviso below), all interest and penalties thereon or with
respect thereto, and all out-of-pocket costs and expenses, including the
reasonable fees and expenses of counsel in defending against the same, which may
arise by reason of the
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<PAGE> 33
purchase, contribution or ownership of the Receivables or any Related Security
connected with any such Receivables; and
(i) any failure of Originator, individually or as Servicer, to perform its
duties or obligations in accordance with the provisions of this Agreement or any
other Loan Document;
excluding, however, (i) Purchase and Sale Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part of a Purchase
and Sale Indemnified Party, (ii) any indemnification which has the effect of
recourse for non-payment of the Receivables due to credit reasons to Originator
(except as otherwise specifically provided under this Section 9.1) and (iii) any
tax based upon or measured by net income or gross receipts.
If for any reason the indemnification provided above in this Section 9.1
is unavailable to a Purchase and Sale Indemnified Party or is insufficient to
hold such Purchase and Sale Indemnified Party harmless, then Originator shall
contribute to the amount paid or payable by such Purchase and Sale Indemnified
Party as a result of such loss, claim, damage or liability to the maximum extent
permitted under applicable law. Promptly after receipt by a Purchase and Sale
Indemnified Party under this Article IX of notice of any claim or the
commencement of any action arising out of or as a result of any of paragraphs
(a) through (j) above, the Purchase and Sale Indemnified Party shall, if a claim
in respect thereof is to be made against the Originator under this Article IX,
notify the Originator in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the Originator shall not
relieve it from any liability which it may have under this Article IX except to
the extent it has been materially prejudiced by such failure and, provided,
further, that the failure to notify the Originator shall not relieve it from any
liability which it may have to a Purchase and Sale Indemnified Party otherwise
than under this Article IX. If any such claim or action shall be brought against
a Purchase and Sale Indemnified Party, the Originator shall be entitled to
participate therein and, to the extent that it wishes, to assume the defense
thereof with counsel satisfactory to the Purchase and Sale Indemnified Party.
After notice from the Originator to the Purchase and Sale Indemnified Party of
its election to assume the defense of such claim or action, the Originator shall
not be liable to the Purchase and Sale Indemnified
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<PAGE> 34
Party under this Article IX for any legal or other expenses subsequently
incurred by Purchase and Sale Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation. The Originator shall not
(i) without the prior written consent of the relevant Purchase and Sale
Indemnified Party or Parties (which consent shall not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
Purchase and Sale Indemnified Party or Parties are actual or potential parties
to such claim or action) unless such settlement, compromise or consent includes
an unconditional release of each Purchase and Sale Indemnified Party from all
liability arising out of such claim, action, suit or proceeding or (ii) be
liable for any settlement of any such action affected without its written
consent (which consent shall not be unreasonably withheld), but if settled with
its written consent or if there be a final judgment of the plaintiff in any such
action, the Originator agrees to indemnify and hold harmless any indemnified
party from and against any Purchase and Sale Indemnified Amounts relating
thereto.
ARTICLE X
MISCELLANEOUS
10.1. Amendments, etc.
(a) The provisions of this Agreement may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by Originator, the Company, the Servicer (if other than Originator)
and the Administrative Agent.
(b) No failure or delay on the part of the Company, Servicer, Originator
or any third party beneficiary in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power or right preclude any other or further exercise thereof or the
exercise of any other power or right. No notice to or demand on the Company,
Servicer, or Originator in any case shall entitle it to any notice or demand in
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<PAGE> 35
similar or other circumstances. No waiver or approval by the Company or Servicer
under this Agreement shall, except as may otherwise be stated in such waiver or
approval, be applicable to subsequent transactions. No waiver or approval under
this Agreement shall require any similar or dissimilar waiver or approval
thereafter to be granted hereunder.
10.2. Notices, etc. All notices and other communications provided for
hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and shall be personally delivered or sent by express
mail or courier or by certified mail, postage-prepaid, or by facsimile, to the
intended party at the address or facsimile number of such party set forth under
its name on the signature pages hereof or at such other address or facsimile
number as shall be designated by such party in a written notice to the other
parties hereto. All such notices and communications shall be effective, (i) if
personally delivered or sent by express mail or courier or if sent by certified
mail, when received, and (ii) if transmitted by facsimile, when sent, receipt
confirmed by telephone or electronic means.
10.3. No Waiver; Cumulative Remedies. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
10.4. Binding Effect; Assignability. This Agreement shall be binding upon
and inure to the benefit of the Company, Originator and their respective
successors and permitted assigns. Originator may not assign its rights hereunder
or any interest herein without the prior consent of the Company and the
Administrative Agent. This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall remain
in full force and effect until the date after the Purchase and Sale Termination
Date on which Originator has received payment in full for all Receivables and
Related Security purchased pursuant to Section 1.1 hereof. The rights and
remedies with respect to any breach of any representation and warranty made by
Originator pursuant to Article V and the indemnification and payment provisions
of Section 3.4, Article IX and Section 10.6 shall be continuing and shall
survive any termination of this Agreement.
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<PAGE> 36
10.5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF NEW YORK (INCLUDING FOR SUCH
PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE
OF NEW YORK), EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
INTERESTS OF COMPANY IN THE RECEIVABLES, OR REMEDIES HEREUNDER IN RESPECT
THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW
YORK.
10.6. Costs, Expenses, and Taxes. In addition to the obligations of
Originator under Article IX, Originator agrees to pay on demand (without
duplication of amounts paid by the Company under Section 12.3 of the Secured
Credit Agreement):
(a) all reasonable out-of-pocket expenses of the Administrative Agent
(including reasonable fees and disbursements of counsel) incurred in the
accompaniment and documentation of the transactions contemplated by the Loan
Documents and all reasonable costs and expenses in connection with the
enforcement of this Agreement and the other Loan Documents; and
(b) all stamp and other similar taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing and recording of this
Agreement or the other Loan Documents, and agrees to indemnity each Purchase and
Sale Indemnified Party against any liabilities with respect to or resulting from
any delay in paying or omission to pay such taxes and fees.
10.7. Submission to Jurisdiction. EACH PARTY HERETO HEREBY IRREVOCABLY (a)
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OF NEW YORK OR UNITED
STATES FEDERAL COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, OVER ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT; (b) AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
SUCH STATE OR UNITED STATES FEDERAL COURT; (c) WAIVES, TO THE FULLEST EXTENT IT
MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM
TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING; (d) CONSENTS TO THE SERVICE OF
ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF
SUCH PROCESS TO SUCH PERSON AT ITS ADDRESS SPECIFIED IN SECTION 10.2; AND (e) TO
THE EXTENT ALLOWED BY LAW, AGREES THAT A NONAPPEALABLE FINAL JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND
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<PAGE> 37
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. NOTHING IN THIS SECTION 10.7 SHALL AFFECT THE COMPANY'S
RIGHT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING
ANY ACTION OR PROCEEDING AGAINST ORIGINATOR OR ITS PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTIONS.
10.8. Waiver of Jury Trial. EACH PARTY HERETO EXPRESSLY WAIVES ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR UNDER ANY AMENDMENT,
INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
10.9. Captions and Cross References; Incorporation by Reference. The
various captions (including, without limitation, the table of contents) in this
Agreement are included for convenience only and shall not affect the meaning or
interpretation of any provision of this Agreement. References in this Agreement
to any underscored Section or Exhibit are to such Section or Exhibit of this
Agreement, as the case may be. The Exhibits hereto are hereby incorporated by
reference into and made a part of this Agreement.
10.10. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which when taken together shall constitute one and the same Agreement.
10.11. Acknowledgment and Agreement. By execution below, Originator
expressly acknowledges and agrees that all of the Company's rights, title, and
interests in, to, and under this Agreement shall be assigned by the Company to
the Administrative Agent for the benefit of the Secured Parties and Originator
consents to such assignment. Each of the parties hereto acknowledges and agrees
that the Administrative Agent and the other Secured Parties are third party
beneficiaries of the rights of the Company arising hereunder and under the other
Loan Documents to which Originator is a party.
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<PAGE> 38
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
PROSOURCE RECEIVABLES CORPORATION
By: /s/ Paul A. Garcia de Quevedo
--------------------------------
Name: Paul A. Garcia de Quevedo
Title: Vice President, Secretary &
Treasurer
1500 San Remo Avenue
3rd Floor
Coral Gables, Florida 33146
Attention: Paul A. Garcia de Quevedo
Vice President, Secretary &
Treasurer
Telephone: (305) 740-1000
Facsimile: (305) 740-1394
PROSOURCE SERVICES CORPORATION
By: /s/ Paul A. Garcia de Quevedo
--------------------------------
Name: Paul A. Garcia de Quevedo
Title: Vice President, Secretary &
Treasurer
1500 San Remo Avenue
Coral Gables, Florida 33146
Attention: Paul A. Garcia de Quevedo
Vice President, Secretary &
Treasurer
Telephone: (305) 740-1000
Facsimile: (305) 740-1394
<PAGE> 39
Acknowledged and consented by:
PROSOURCE SERVICES CORPORATION, as Servicer
By: /s/ Paul A. Garcia de Quevedo
--------------------------------
Name: Paul A. Garcia de Quevedo
Title: Vice President, Secretary & Treasurer
1500 San Remo Avenue
Coral Gables, Florida 33146
Attention: Paul A. Garcia de Quevedo
Vice President, Secretary & Treasurer
Telephone: (305) 740-1000
Facsimile: (305) 740-1394
<PAGE> 1
EXHIBIT 10.29
NOTE
$150,000,000 March 14, 1997
FOR VALUE RECEIVED, the undersigned, PROSOURCE RECEIVABLES CORPORATION, a
Delaware corporation (the "Borrower"), promises to pay to the order of THE BANK
OF NOVA SCOTIA (the "Lender"), on March 14, 1997 the principal sum of ONE
HUNDRED FIFTY MILLION DOLLARS ($150,000,000) or, if less, the aggregate unpaid
principal amount of all Loans made by such Lender pursuant to that certain
Secured Credit Agreement, dated as of March 14, 1997 (together with all
amendments and other modifications, if any, from time to time thereafter made
thereto, the "Secured Credit Agreement"), among the Borrower, ProSource Services
Corporation, The Bank of Nova Scotia, as the Administrative Agent, as Issuer and
as Swingline Bank, and the various financial institutions as are, or may from
time to time become, parties thereto as Lenders.
The Borrower also promises to pay interest on the unpaid principal amount
hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Secured Credit Agreement.
Payments of both principal and interest are to be made in lawful money of
the United States of America in same day or immediately available funds to the
account designated by the Administrative Agent pursuant to the Secured Credit
Agreement.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with the usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.
This Note is a Note referred to in, and evidences Indebtedness incurred
under, the Secured Credit Agreement, to which reference is made for a
description of the security for this Note and for a statement of the terms and
conditions on which the Borrower is permitted and required to make prepayments
and repayments of principal of the Indebtedness evidenced by this Note and on
which such Indebtedness may be declared to be immediately due and payable.
Unless otherwise defined, terms used herein have the meanings provided in the
Secured Credit Agreement.
<PAGE> 2
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest and notice of dishonor.
THIS NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL
BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
PROSOURCE RECEIVABLES CORPORATION
By: /s/ Paul A. Garcia de Quevedo
--------------------------------
Name: Paul A. Garcia de Quevedo
Title: Vice President, Secretary
and Treasurer
<PAGE> 3
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF PROSOURCE RECEIVABLES CORPORATION
DATED ___________, 1997
Principal
Amount Maturity Principal Unpaid
Date of Loan Date Amount Paid Balance
---- ------- ---- ----------- -------
<PAGE> 1
EXHIBIT 10.30
SWINGLINE NOTE
$15,000,000 March 14, 1997
FOR VALUE RECEIVED, the undersigned, PROSOURCE RECEIVABLES CORPORATION, a
Delaware corporation (the "Borrower"), promises to pay to the order of THE BANK
OF NOVA SCOTIA (the "Swingline Bank") the principal sum of FIFTEEN MILLION
DOLLARS ($15,000,000) or, if less, the aggregate unpaid principal amount of all
Swingline Loans made by the Swingline Bank to the Borrower pursuant to that
certain Secured Credit Agreement, dated as of March 14, 1997 (together with all
amendments and other modifications, if any, from time to time thereafter made
thereto, the "Secured Credit Agreement"), among the Borrower, ProSource Services
Corporation, the Swingline Bank, The Bank of Nova Scotia, as Issuer and as
Administrative Agent, and the various financial institutions as are, or may from
time to time become, parties thereto as Lenders.
The Borrower also promises to pay interest on the unpaid principal amount
hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Secured Credit Agreement.
Payments of both principal and interest are to be made in lawful money of
the United States of America in same day or immediately available funds to the
account designated by the Swingline Bank pursuant to the Secured Credit
Agreement.
The Swingline Bank shall, and is hereby authorized to, record on the
schedule attached hereto, or to otherwise record in accordance with the usual
practice, the date and amount of each Swingline Loan and the date and amount of
each principal payment hereunder.
This Swingline Note is the Swingline Note referred to in, and evidences
Indebtedness incurred under, the Secured Credit Agreement, to which reference is
made for a description of the security for this Swingline Note and for a
statement of the terms and conditions on which the Borrower is permitted and
required to make prepayments and repayments of principal of the Indebtedness
evidenced by this Swingline Note and on which such Indebtedness may be declared
to be immediately due and payable. Unless
<PAGE> 2
otherwise defined, terms used herein have the meanings provided in the Secured
Credit Agreement.
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest and notice of dishonor.
THIS NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL
BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
PROSOURCE RECEIVABLES CORPORATION
By: /s/ Paul A. Garcia de Quevedo
-------------------------------
Name: Paul A. Garcia de Quevedo
Title: Vice President, Secretary
and Treasurer
<PAGE> 3
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
SWINGLINE NOTE OF PROSOURCE SERVICES CORPORATION
DATED ___________, 1997
Principal
Amount Maturity Principal Unpaid
Date of Loan Date Amount Paid Balance
---- ------- ---- ----------- -------
<PAGE> 1
Exhibit 10.34
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this
"Agreement"), dated as of November 15, 1996, by and between ProSource Services
Corporation (the "Company"), and David R. Parker (the "Employee").
RECITALS
WHEREAS, the Company (f/k/a BKDA Corporation) and the Employee
are parties to an Employment Agreement, dated July 1, 1992 (the "Original
Agreement").
WHEREAS, the Employee and Onex Management U.S. Inc. ("Onex")
are parties to a letter agreement, dated July 21, 1992 (the "Onex Consulting
Agreement").
WHEREAS, the Company and the Employee desire to amend and
restate in its entirety the Original Agreement as hereinafter provided.
WHEREAS, Onex and the Employee desire to terminate the Onex
Consulting Agreement.
NOW, THEREFORE, the parties agree as follows:
1. EFFECTIVENESS AND EMPLOYMENT. The Company shall employ the
Employee and the Employee shall be employed by the Company as of the date of
this Agreement (the "Commencement Date").
2. TERM. The term of this Agreement and the employment of the
Employee hereunder shall commence as of the Commencement Date, continue until
July 1, 1997, and automatically shall be extended for an unlimited number of
successive one-year periods unless terminated (a) by the Company or the Employee
effective as of July 1, 1997 or any subsequent
<PAGE> 2
anniversary thereof upon the giving of written notice of such party's intention
to terminate on or before January 1 of the year in which such employment is to
terminate, or (b) as provided in Section 5.
3. POSITIONS AND DUTIES; PLACE OF PERFORMANCE.
(a) POSITIONS AND DUTIES. The Employee shall be employed as
Chairman of the Board of the Company and shall have the duties, responsibilities
and authority as may from time to time be assigned to him by the Company's Board
of Directors (the "Board") that are consistent with and normally associated with
such position and, without additional compensation, shall serve as a member of
the Board and as chairman of the Board of Directors of ProSource Inc. (f/k/a
Onex Distribution, Inc.) ("ProSource") and shall hold such offices at ProSource
and its subsidiaries, as ProSource's board of directors determines. The Employee
shall devote substantially all of his business time, effort, and energies
exclusively to the business of the Company, ProSource and its other
subsidiaries, and shall not serve as an active principal or a director or
officer of any other company or entity without the prior written consent of the
Board, except that the Employee may serve, without such consent, as a director
or officer of any company on the board of which he is currently serving and of
any trade association, civic, educational or charitable organization unless the
Board determines that such service interferes with the performance of Employee's
duties hereunder.
(b) PLACE OF PERFORMANCE. The Employee shall be based in
the Miami, Florida metropolitan area, except for required travel on the
Company's business.
2
<PAGE> 3
4. COMPENSATION AND BENEFITS.
(a) BASE SALARY. Effective as of the Commencement Date, the
Company shall pay the Employee a base salary at the rate of $425,000 per year
through December 31, 1996 and thereafter at the rate of $450,000 per year (the
"Base Salary"), payable in accordance with the Company's normal payroll
practices for senior executives. The Board shall review the Base Salary
annually; the Employee shall be entitled to such increases in his Base Salary as
may be determined from time to time by the Board or pursuant to its delegation.
If the Base Salary is increased, the new salary shall thereafter constitute the
"Base Salary" for purposes of this Agreement.
(b) BONUSES. In addition to Base Salary, the Employee may
receive a cash bonus. The bonus shall be determined in accordance with any
applicable executive management bonus or incentive compensation plan in effect
at the date of determination or, if no such plan is in effect, by the Board or
the appropriate committee thereof, in its sole discretion.
(c) OTHER BENEFIT PLANS AND FRINGE BENEFITS. The Employee
shall be eligible to (i) participate in ProSource's Amended and Restated
Management Option Plan (1995) and 1996 Stock Option Plan, (ii) participate in
all employee benefit plans maintained by the Company for its senior management
executives during the employment term, (iii) receive all fringe benefits for
which his status and level of employment qualify him in accordance with the
Company's usual plans, policies, and arrangements, and (iv) be reimbursed for up
to $6,000 for actual expenses incurred for, among other things, financial
consulting and tax planning and preparation and legal advice.
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<PAGE> 4
(d) VACATION. Employee shall be entitled to four weeks of
paid vacation annually. Employee shall determine, in his reasonable discretion,
the timing of such vacation.
(e) AUTOMOBILE. During the term of his employment, the
Company shall pay to Employee on a monthly basis an amount equal to $1,500 to
cover the monthly cost of an automobile of his choice and related expenses,
including insurance on, maintenance of, and fuel for, the automobile.
(f) INITIATION FEES/CLUB DUES. The Employee shall receive
$7,000 each year for club memberships, including country clubs, luncheon clubs,
health clubs, and airline travel clubs.
5. TERMINATION.
(a) COMPENSATION AND BENEFITS. Except as otherwise provided
in this Section or Section 7, upon termination of the Employee's employment
hereunder, his right to compensation hereunder shall cease except that the
Employee shall be entitled to receive his Base Salary and benefits up to the
Date of Termination (as defined in Section 5(e)) or for the period required by
law, except that any bonus payable pursuant to Section 4(b) shall be prorated to
the Date of Termination.
(b) DEATH AND DISABILITY. The Employee's employment
hereunder shall terminate upon his death and may be terminated by the Company
due to Employee's Disability. For purposes of this Agreement, "Disability" shall
mean the determination by the Board that the Employee is physically or mentally
incapacitated and has been unable for a period of six consecutive months, or for
shorter periods aggregating six months in any period of 12
4
<PAGE> 5
consecutive months, to perform the duties for which he was responsible
immediately before the onset of his incapacity. To assist the Board in making
such a determination, the Employee shall, as reasonably requested by the Board,
(i) make himself available for medical examinations, without cost to Employee,
by a physician chosen by the Board and approved by the Employee, whose approval
shall not unreasonably be withheld, and (ii) grant the Board and any such
physician access to all relevant medical information concerning him, arrange to
furnish copies of medical records to such physician, and use his best efforts to
cause his own physicians to be available to discuss his health with such
physician. The determination of the physician chosen in accordance with the
preceding sentence shall be final and binding on the Company and the Employee.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Employee's
employment hereunder may be terminated by the Company for Cause. For purposes of
this Agreement, the term "Cause" shall mean (i) the Employee's conviction of a
crime involving actual dishonesty against the Company or any of its affiliates,
(ii) gross negligence or gross misconduct by the Employee against the Company or
another employee, or in carrying out his duties and responsibilities, or (iii) a
breach of the provisions of Section 6(a) or (b) hereof, that is harmful to the
Company or any of its affiliates. In any case described in this Section 5(c),
the Board shall give the Employee written notice, in accordance with Section
5(e), that the Company intends to terminate his employment for Cause (the
"Preliminary Cause Notice"). The Preliminary Cause Notice shall specify the
particular act or acts or failure to act that is or are the basis for the
decision to so terminate the Employee's employment for Cause. The Board shall
give the Employee an opportunity to meet with the Board to defend such act or
acts or failure to
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<PAGE> 6
act within 30 calendar days of Employee's receipt of such notice and to correct
such act or failure to act within 30 business days following such meeting. If
the Employee fails to correct such act or failure to act within the 30 business
days following the meeting, the Employee's employment by the Company shall be
terminated under this Section 5(c) for Cause as of the Date of Termination.
(d) COMPENSATION UPON TERMINATION WITHOUT CAUSE OR FOR
DISABILITY.
(i) If the Company terminates the Employee's employment
hereunder without Cause or for disability in accordance with Section 5(b):
(A) In addition to the amounts paid to the Employee
pursuant to Section 5(a), in lieu of any further salary payments to the Employee
for any period subsequent to the Date of Termination, the Company shall pay to
the Employee, during the one-year period commencing on the Date of Termination,
an amount equal to (1) the Employee's annual Base Salary in effect as of the
Date of Termination plus (2) a cash bonus in an amount equal to the pro rata
portion of the actual incentive payment that Employee would have received under
the management incentive plan for the year in which the Date of Termination
occurs but for Employee's termination. Except as provided in Section 7, the
amount described in clause (1) of this Paragraph (A) shall be paid in
substantially equal monthly payments during the 12-month period following the
Date of Termination, except that the Company may determine, in its sole
discretion, to pay such amount (or any portion remaining during such period if
periodic payments have commenced) in a single lump sum in cash or, if so
requested by the Employee, in two lump sums. The amount described in clause (2)
of this Paragraph (A) shall be paid at the same time as
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<PAGE> 7
payments are or would have been made under the incentive plan in effect on the
Date of Termination.
(B) For the one-year period following the Date of
Termination, the Company shall continue to provide the Employee (and his
eligible dependents, if any) with (1) group health and life insurance benefits
and long-term disability insurance coverage (or the economic equivalent thereof)
at the level in effect on the Date of Termination, (2) the perquisite allowance
referred to in Section 4(c)(iv), and (3) the benefits referred to in Sections
4(e) and 4(f); provided that if the Employee is employed by another employer
within such one-year period such benefits and insurance coverage shall cease
except for insurance coverage for conditions existing on the date of employment
by an employer other than the Company, and further provided that, at the
expiration of the extended period of insurance coverage provided under this
clause (i)(B), the Employee (and his eligible dependents, if any) shall be
entitled to the full period of coverage provided him under Section 4980B of the
Internal Revenue Code of 1986, as amended, unless other employment has been
obtained.
(C) The Company shall reimburse Employee for actual costs
incurred in seeking reemployment, including costs of outplacement services up to
a maximum of $25,000.
(e) NOTICE OF TERMINATION; DATE OF TERMINATION. Any
termination of the Employee's employment, other than by reason of his death,
shall be communicated by the terminating party by a written notice of
termination (the "Notice of Termination"). The Notice of Termination shall (i)
indicate the specific termination provision in this Agreement upon which the
termination is based, (ii) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated,
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<PAGE> 8
and (iii) specify the Date of Termination. For purposes of this Agreement, "Date
of Termination" shall mean (i) if the Employee's employment is terminated by his
death, the date of his death, and (ii) in all other cases, the later of the date
of actual receipt of the Notice of Termination and the date specified in such
notice. The Date of Termination shall not occur prior to the completion of the
cure period described in Section 5(c) if termination is for Cause.
(f) NO MITIGATION; NO OFFSET. In the event of any
termination of the Employee's employment under this Section 5, the Employee
shall be under no obligation to seek other employment and there shall be no
offset against any amounts due the Employee under this Agreement on account of
any remuneration that the Employee may obtain from any subsequent employment.
Any amounts due under this Section 5 are in the nature of liquidated damages and
not in the nature of a penalty.
6. COVENANTS.
(a) CONFIDENTIALITY. The Employee acknowledges that he has
acquired and will acquire confidential information respecting the business of
the Company. Accordingly, the Employee agrees that he will not willfully
disclose, at any time (during the employment term or thereafter), any such
confidential information to any unauthorized third party without the consent of
the Company as authorized by the Board. For this purpose, information shall be
considered confidential only if such information is proprietary to the Company
and has not been made publicly available prior to its disclosure by the
Employee. There shall be no breach of this Section 6(a) if the disclosure does
not have an adverse effect on the Company's business or operations, or otherwise
harm or damage the Company.
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<PAGE> 9
(b) COMPETITIVE ACTIVITY. (i) If Employee's employment
hereunder is terminated, Employee shall not, without the written consent of the
Board, during the twelve-month period following the Date of Termination,
directly, individually or as an employee, agent, partner, shareholder,
consultant or in any other capacity, participate in, engage in or have a
financial interest or management position or other interest in any business
operation or any enterprise that is in direct competition with the Company. The
ownership of an interest constituting not more than 1% of the outstanding debt
or equity in a corporation the shares of which are traded on a recognized stock
exchange or trade in the over-the-counter market, even though that corporation
may be a competitor of the Company or any of its subsidiaries, shall not be
deemed financial participation in a competitor.
(ii) The Employee shall not, without the written consent of the Board,
during the employment term and through the first anniversary of his Date of
Termination, directly or indirectly, either for his own benefit or for the
benefit of any other person, solicit to take away, or take away any customers
doing business with the Company on the Date of Termination or who were being
solicited to become customers as of the Date of Termination or recruit, induce,
or encourage any employee of the Company or any affiliate of the Company to
terminate such employee's employment with the Company or such affiliate, except
that nothing herein shall prohibit the Employee from giving a reference or a
recommendation to any third party with respect to any such employee.
(c) REMEDY FOR BREACH AND MODIFICATION. The Employee
acknowledges that the provisions of this Section 6 are reasonable and necessary
for the protection of the Company and that the Company will be irrevocably
damaged if such provisions
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<PAGE> 10
are not specifically enforced. Accordingly, the Employee agrees that, in
addition to any other relief or remedies available to the Company, the Company
shall be entitled to seek and obtain an appropriate injunction or other
equitable remedy from a court with proper jurisdiction for the purposes of
restraining the Employee from any actual or threatened breach of such
provisions, and no bond or security will be required in connection therewith. If
any provision of this Section 6 is deemed invalid or unenforceable, such
provision shall be deemed modified and limited to the extent necessary to make
it valid and enforceable.
7. SECTION 280G PAYMENTS. If the aggregate present value of
the Employee's payments under this Agreement, and any plan, program, or
arrangement maintained by the Company constitutes an "excess parachute payment"
(within the meaning of Section 280G(b)(1) of the Internal Revenue Code of 1986,
as amended (the "Code")) and the excise tax on such payment would cause the net
parachute payments (after taking into account federal, state and local income
and excise taxes) to which the Employee otherwise would be entitled to be less
than what the Employee would have netted (after taking into account federal,
state and local taxes) had the present value of his total parachute payments
equaled $1.00 less than three times his "base amount" (within the meaning of
Code Section 280(G)(b)(3)(A)), the Employee's total "parachute payments" (within
the meaning of Code Section 280G(b)(2)(A)) shall be reduced (by the minimum
possible amount) so that their aggregate present value equals $1.00 less than
three times such base amount. For purposes of this calculation, it shall be
assumed that the Employee's tax rate will be the maximum marginal federal, state
and local income tax rate on earned income, with such maximum federal rate to be
computed with regard to Code Section 1(g), if applicable. If the Employee and
the Company are unable to agree as to
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<PAGE> 11
the amount of the reduction described above, if any, the Employee shall select a
law firm or accounting firm from among those regularly consulted (during the
twelve-month period immediately prior to the change in control that resulted in
the characterization of the payments as parachute payments) by the Company
regarding federal income tax or employee benefit matters and such law firm or
accounting firm shall determine the amount of such reduction and such
determination shall be final and binding upon the Employee and the Company.
8. INDEMNIFICATION. The Company shall indemnify, defend, and
hold the Employee harmless, to the maximum extent permitted by law, from any and
all claims, litigation, or suits arising out of the activities of the Employee
reasonably taken in the performance of his duties hereunder, including all
reasonable expenses and professional fees that may relate thereto. The Company
shall obtain a directors and officers liability insurance policy covering the
Employee in a sufficient amount to provide such indemnification if such coverage
is available on commercially reasonable terms, and shall maintain such policy
during the employment term (and for so long thereafter as is practicable in the
circumstances taking into account the availability of such insurance).
9. TERMINATION OF ONEX CONSULTING AGREEMENT. Onex and the
Employee agree that the Onex Consulting Agreement is hereby terminated.
10. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida applicable to
agreements made and to be performed in that State.
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<PAGE> 12
(b) NOTICE. Any notice, consent, request or other
communication made or given in connection with this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or mailed by
registered or certified mail, return receipt requested, to those listed below at
their following respective addresses or at such other address as each may
specify by notice to the others:
To the Employee, to his attention at:
930 Castile Avenue
Coral Gables, Florida 33134
Telephone: (305) 443-2702
Telecopy: (305) 444-6753
To the Company:
ProSource Services Corporation
550 Biltmore Way, 10th Floor
Coral Gables, Florida 33134
Attention: President
Telephone: (305) 529-2500
Telecopy: (305) 529-2573
To Onex:
Onex Management U.S. Inc.
161 Bay Street
49th Floor
P.O. Box 700
Toronto, Ontario
M5J 2S1
Canada
Attention: Anthony R. Melman
Vice President
Telephone: (416) 362-7711
Telecopy: (416) 362-5765
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With copies (in the case of notices to
the Employee or the Company) to:
Anthony R. Melman
Vice President
Onex Corporation
161 Bay Street
49th Floor
P.O. Box 700
Toronto, Ontario
M5J 2S1
Canada
Telephone: (416) 362-7711
Telecopy: (416) 362-5765
Joel I. Greenberg, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Telephone: (212) 836-8201
Telecopy: (212) 836-8689
(c) ENTIRE AGREEMENT; AMENDMENT. This Agreement shall
supersede any and all existing agreements between the Employee and the Company
or any of its affiliates and the Employee and Onex or any of its affiliates
relating to the terms of the Employee's employment during the employment term.
It may not be amended except by a written agreement signed by both parties.
(d) WAIVER. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver thereof or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(e) ASSIGNMENT. Except as otherwise provided in this
Section 9(e), this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their
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<PAGE> 14
respective heirs, representatives, successors and assigns. This Agreement shall
not be assignable by the Employee and shall be assignable by the Company only to
any corporation or other entity resulting from the reorganization, merger, or
consolidation of the Company with any other corporation or entity or any
corporation or entity to or with which the Company's business or substantially
all of its business or assets may be sold, exchanged, or transferred, and it
must be so assigned by the Company to, and accepted as binding upon it by, such
other corporation or entity in connection with any such reorganization, merger,
consolidation, sale, exchange, or transfer (the provisions of this sentence also
being applicable to any such successive transaction).
(f) HEADINGS. Section headings are used herein for
convenience of reference only and shall not affect the meaning of any provision
of this Agreement.
(g) RULES OF CONSTRUCTION. Whenever the context so
requires, the use of the masculine gender shall be deemed to include the
feminine and vice versa, and the use of the singular shall be deemed to include
the plural and vice versa.
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
By and on behalf of
PROSOURCE SERVICES CORPORATION
By: /s/ Thomas C. Highland
------------------------------
Thomas C. Highland
President
DAVID R. PARKER
/s/ David R. Parker
------------------------------------
For purposes of Section 9 only:
ONEX MANAGEMENT U.S. INC.
By: /s/ Ewout R. Heersink
------------------------------
Name: Ewout R. Heersink
Title:
15
<PAGE> 1
Exhibit 10.35
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this
"Agreement"), dated as of November 15, 1996, by and between ProSource Services
Corporation (the "Company"), and Thomas C. Highland (the "Employee").
RECITALS
WHEREAS, the Company (f/k/a BKDA Corporation) and the Employee
are parties to an Employment Agreement, dated July 1, 1992 (the "Original
Agreement").
WHEREAS, the Employee has received consulting fees from Onex
Management U.S. Inc. ("Onex") pursuant to an informal agreement between the
Employee and Onex (the "Onex Consulting Arrangement").
WHEREAS, the Company and the Employee desire to amend and
restate in its entirety the Original Agreement as hereinafter provided.
WHEREAS, Onex and the Employee desire to terminate the Onex
Consulting Arrangement.
NOW, THEREFORE, the parties agree as follows:
1. EFFECTIVENESS AND EMPLOYMENT. The Company shall employ the
Employee and the Employee shall be employed by the Company as of the date of
this Agreement (the "Commencement Date").
2. TERM. The term of this Agreement and the employment of the
Employee hereunder shall commence as of the Commencement Date, continue until
July 1, 1997, and automatically shall be extended for an unlimited number of
successive one-year periods unless terminated (a) by the Company or the Employee
effective as of July 1, 1997 or any subsequent
<PAGE> 2
anniversary thereof upon the giving of written notice of such party's intention
to terminate on or before January 1 of the year in which such employment is to
terminate, or (b) as provided in Section 5.
3. POSITIONS AND DUTIES; PLACE OF PERFORMANCE.
(a) POSITIONS AND DUTIES. The Employee shall be employed as
President of the Company and shall have the duties, responsibilities and
authority as may from time to time be assigned to him by the Company's Board Of
Directors (the "Board") that are consistent with and normally associated with
such position and, without additional compensation, shall serve as a member of
the Board and a member of the board of directors of ProSource, Inc. (f/k/a Onex
Distribution, Inc.) ("ProSource") and shall hold such offices at ProSource and
its subsidiaries as ProSource's board of directors determines. The Employee
shall devote substantially all of his business time, effort, and energies
exclusively to the business of the Company, ProSource and its other
subsidiaries, and shall not serve as an active principal or a director or
officer of any other company or entity without the prior written consent of the
Board, except that the Employee may serve, without such consent, as a director
or officer of any company on the board of which he is currently serving and of
any trade association, civic, educational or charitable organization unless the
Board determines that such service interferes with the performance of Employee's
duties hereunder.
(b) PLACE OF PERFORMANCE. The Employee shall be based in
the Miami, Florida metropolitan area, except for required travel on the
Company's business.
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<PAGE> 3
4. COMPENSATION AND BENEFITS.
(a) BASE SALARY. Effective as of the Commencement Date, the
Company shall pay the Employee a base salary at the rate of $425,000 per year
through December 31, 1996 and thereafter at the rate of $450,000 per year (the
"Base Salary"), payable in accordance with the Company's normal payroll
practices for senior executives. The Board shall review the Base Salary
annually; Employee shall be entitled to such increases in his Base Salary as may
be determined from time to time by the Board or pursuant to its delegation. If
the Base Salary is increased, the new salary shall thereafter constitute the
"Base Salary" for purposes of this Agreement.
(b) BONUSES. In addition to Base Salary, the Employee may
receive a cash bonus. The bonus shall be determined in accordance with any
applicable executive management bonus or incentive compensation plan in effect
at the date of determination or, if no such plan is in effect, by the Board or
the appropriate committee thereof, in its sole discretion.
(c) OTHER BENEFIT PLANS AND FRINGE BENEFITS. The Employee
shall be eligible to (i) participate in ProSource's Amended and Restated
Management Option Plan (1995) and 1996 Stock Option Plan, (ii) participate in
all employee benefit plans maintained by the Company for its senior management
executives during the employment term, (iii) receive all fringe benefits for
which his status and level of employment qualify him in accordance with the
Company's usual plans, policies, and arrangements, and (iv) be reimbursed for up
to $6,000 for actual expenses incurred for, among other things, financial
consulting and tax planning and preparation services and legal advice.
3
<PAGE> 4
(d) VACATION. Employee shall be entitled to four weeks of
paid vacation annually. Employee shall determine, in his reasonable discretion,
the timing of such vacation.
(e) AUTOMOBILE. During the term of his employment, the
Company shall pay to Employee on a monthly basis an amount equal to $1,500 to
cover the monthly cost of an automobile of his choice and related expenses,
including insurance on, maintenance of, and fuel for, the automobile.
(f) INITIATION FEES/CLUB DUES. The Employee shall receive
$7,000 each year for club memberships, including country clubs, luncheon clubs,
health clubs, and airline travel clubs.
5. TERMINATION.
(a) COMPENSATION AND BENEFITS. Except as otherwise provided
in this Section or Section 7, upon termination of the Employee's employment
hereunder, his right to compensation hereunder shall cease except that the
Employee shall be entitled to receive his Base Salary and benefits up to the
Date of Termination (as defined in Section 5(e)) or for the period required by
law, except that any bonus payable pursuant to Section 4(b) shall be prorated to
the Date of Termination.
(b) DEATH AND DISABILITY. The Employee's employment
hereunder shall terminate upon his death and may be terminated by the Company
due to Employee's Disability. For purposes of this Agreement, "Disability" shall
mean the determination by the Board that the Employee is physically or mentally
incapacitated and has been unable for a period of six consecutive months, or for
shorter periods aggregating six months in any period of 12
4
<PAGE> 5
consecutive months, to perform the duties for which he was responsible
immediately before the onset of his incapacity. To assist the Board in making
such a determination, the Employee shall, as reasonably requested by the Board,
(i) make himself available for medical examinations, without cost to the
Employee, by a physician chosen by the Board and approved by the Employee, whose
approval shall not unreasonably be withheld, and (ii) grant the Board and any
such physician access to all relevant medical information concerning him,
arrange to furnish copies of medical records to such physician, and use his best
efforts to cause his own physicians to be available to discuss his health with
such physician. The determination of the physician chosen in accordance with the
preceding sentence shall be final and binding on the Company and the Employee.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Employee's
employment hereunder may be terminated by the Company for Cause. For purposes of
this Agreement, the term "Cause" shall mean (i) the Employee's conviction of a
crime involving actual dishonesty against the Company or any of its affiliates,
(ii) gross negligence or gross misconduct by the Employee against the Company or
another employee, or in carrying out his duties and responsibilities, or (iii) a
breach of the provisions of Section 6(a) or (b) hereof that is harmful to the
Company or any of its affiliates. In any case described in this Section 5(c),
the Board shall give the Employee written notice, in accordance with Section
5(e), that the Company intends to terminate his employment for Cause (the
"Preliminary Cause Notice"). The Preliminary Cause Notice shall specify the
particular act or acts or failure to act that is or are the basis for the
decision to so terminate the Employee's employment for Cause. The Board shall
give the Employee an opportunity to meet with the Board to defend such act or
acts or failure to
5
<PAGE> 6
act within 30 calendar days of Employee's receipt of such notice and to correct
such act or failure to act within 30 business days following such meeting. If
the Employee fails to correct such act or failure to act within the 30 business
days following the meeting, the Employee's employment by the Company shall be
terminated under this Section 5(c) for Cause as of the Date of Termination.
(d) COMPENSATION UPON TERMINATION WITHOUT CAUSE OR FOR
DISABILITY.
(i) If the Company terminates the Employee's employment
hereunder without Cause or for disability in accordance with Section
5(b):
(A) In addition to the amounts paid to the Employee
pursuant to Section 5(a), in lieu of any further salary payments to
the Employee for any period subsequent to the Date of Termination, the
Company shall pay to the Employee, during the eighteen-month period
commencing on the Date of Termination, an amount equal to 150% of the
sum of (1) of Employee's annual Base Salary in effect as of the Date of
Termination plus (2) a cash bonus in an amount equal to the pro rata
portion of the actual incentive payment that Employee would have
received under the management incentive plan for the year in which the
Date of Termination occurs but for Employee's termination. Except as
provided in Section 7, the amount described in clause (1) of this
Paragraph (A) shall be paid in substantially equal monthly payments
during the 18-month period following the Date of Termination, except
that the Company may determine, in its sole discretion, to pay such
amount (or any portion remaining during such period if periodic
payments have commenced) in a single lump sum in cash or, if so
requested by the
6
<PAGE> 7
Employee, in two lump sums. The amount described in clause (2) of this
Paragraph (A) shall be paid at the same time as payments are or would
have been made under the incentive plan in effect on the Date of
Termination.
(B) For the 18 months following the Date of Termination,
the Company shall continue to provide the Employee (and his eligible
dependents, if any) with (1) group health and life insurance benefits
and long-term disability insurance coverage (or the economic equivalent
thereof) at the level in effect on the Date of Termination, (2) the
perquisite allowance referred to in Section 4(c)(iv), and (3) the
benefits referred to in Sections 4(e) and 4(f); provided that if the
Employee is employed by another employer within such 18-month period
such benefits and insurance coverage shall cease except for insurance
coverage for conditions existing on the date of employment by an
employer other than the Company, and further provided that, at the
expiration of the extended period of insurance coverage provided under
this clause (i)(B), the Employee (and his eligible dependents, if any)
shall be entitled to the full period of coverage provided him under
Section 4980B of the Internal Revenue Code of 1986, as amended, unless
other employment has been obtained.
(C) The Company shall reimburse Employee for actual costs
incurred in seeking reemployment, including costs of outplacement
services up to a maximum of $25,000.
(D) Unless Employee has in fact vested under any retirement
plan then in effect, Employee shall be deemed to have been employed by
the Company for the minimum number of years required to vest under such
plans.
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<PAGE> 8
(e) NOTICE OF TERMINATION; DATE OF TERMINATION. Any
termination of the Employee's employment, other than by reason of his death,
shall be communicated by the terminating party by a written notice of
termination (the "Notice of Termination"). The Notice of Termination shall (i)
indicate the specific termination provision in this Agreement upon which the
termination is based, (ii) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated, and (iii) specify the Date of
Termination. For purposes of this Agreement, "Date of Termination" shall mean
(i) if the Employee's employment is terminated by his death, the date of his
death, and (ii) in all other cases, the later of the date of actual receipt of
the Notice of Termination and the date specified in such notice. The Date of
Termination shall not occur prior to the completion of the cure period described
in Section 5(c) if termination is for Cause.
6. COVENANTS.
(a) CONFIDENTIALITY. The Employee acknowledges that he has
acquired and will acquire confidential information respecting the business of
the Company. Accordingly, the Employee agrees that he will not willfully
disclose, at any time (during the employment term or thereafter), any such
confidential information to any unauthorized third party without the consent of
the Company as authorized by the Board. For this purpose, information shall be
considered confidential only if such information is proprietary to the Company
and has not been made publicly available prior to its disclosure by the
Employee. There shall be no breach of this Section 6(a) if the disclosure does
not have an adverse effect on the Company's business or operations, or otherwise
harm or damage the Company.
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<PAGE> 9
(b) COMPETITIVE ACTIVITY. (i) If Employee's employment
hereunder is terminated, Employee shall not, without the written consent of the
Board, during the eighteen month period following the Date of Termination,
directly, individually or as an employee, agent, partner, shareholder,
consultant or in any other capacity, participate in, engage in or have a
financial interest or management position or other interest in any business
operation or any enterprise that is in direct competition with the Company. The
ownership of an interest constituting not more than 1% of the outstanding debt
or equity in a corporation the shares of which are traded on a recognized stock
exchange or trade in the over-the-counter market, even though that corporation
may be a competitor of the Company or any of its subsidiaries, shall not be
deemed financial participation in a competitor.
(ii) The Employee shall not, without the written consent of the Board,
during the employment term and for eighteen months following the Date of
Termination, directly or indirectly, either for his own benefit or for the
benefit of any other person, solicit to take away, or take away any customers
doing business with the Company on the Date of Termination or who were being
solicited to become customers as of the Date of Termination or recruit, induce,
or encourage any employee of the Company or any affiliate of the Company to
terminate such employee's employment with the Company or such affiliate, except
that nothing herein shall prohibit the Employee from giving a reference or a
recommendation to any third party with respect to any such employee.
(c) REMEDY FOR BREACH AND MODIFICATION. The Employee
acknowledges that the provisions of this Section 6 are reasonable and necessary
for the protection of the Company and that the Company will be irrevocably
damaged if such provisions are not specific-
9
<PAGE> 10
ally enforced. Accordingly, the Employee agrees that, in addition to any other
relief or remedies available to the Company, the Company shall be entitled to
seek and obtain an appropriate injunction or other equitable remedy from a court
with proper jurisdiction for the purposes of restraining the Employee from any
actual or threatened breach of such provisions, and no bond or security will be
required in connection therewith. If any provision of this Section 6 is deemed
invalid or unenforceable, such provision shall be deemed modified and limited to
the extent necessary to make it valid and enforceable.
7. SECTION 280G PAYMENTS. If the aggregate present value of
the Employee's payments under this Agreement, and any plan, program, or
arrangement maintained by the Company constitutes an "excess parachute payment"
(within the meaning of Section 280G(b)(1) of the Internal Revenue Code of 1986,
as amended (the "Code")) and the excise tax on such payment would cause the net
parachute payments (after taking into account federal, state and local income
and excise taxes) to which the Employee otherwise would be entitled to be less
than what the Employee would have netted (after taking into account federal,
state and local income taxes) had the present value of his total parachute
payments equaled $1.00 less than three times his "base amount" (within the
meaning of Code Section 280(G)(b)(3)(A)), the Employee's total "parachute
payments" (within the meaning of Code Section 280G(b)(2)(A)) shall be reduced
(by the minimum possible amount) so that their aggregate present value equals
$1.00 less than three times such base amount. For purposes of this calculation,
it shall be assumed that the Employee's tax rate will be the maximum marginal
federal, state and local income tax rate on earned income, with such maximum
federal rate to be computed with regard to Code Section 1(g), if applicable. If
the Employee and the Company are unable to agree as to the amount of the
10
<PAGE> 11
reduction described above, if any, the Employee shall select a law firm or
accounting firm from among those regularly consulted (during the twelve-month
period immediately prior to the change in control that resulted in the
characterization of the payments as parachute payments) by the Company regarding
federal income tax or employee benefit matters and such law firm or accounting
firm shall determine the amount of such reduction and such determination shall
be final and binding upon the Employee and the Company.
8. INDEMNIFICATION. The Company shall indemnify, defend, and
hold the Employee harmless, to the maximum extent permitted by law, from any and
all claims, litigation, or suits arising out of the activities of the Employee
reasonably taken in the performance of his duties hereunder, including all
reasonable expenses and professional fees that may relate thereto. The Company
shall obtain a directors and officers liability insurance policy covering the
Employee in a sufficient amount to provide such indemnification if such coverage
is available on commercially reasonable terms and shall maintain such policy
during the employment term (and for so long thereafter as is practicable in the
circumstances taking into account the availability of such insurance).
9. TERMINATION OF ONEX CONSULTING ARRANGEMENT. Onex and the
Employee agree that the Onex Consulting Arrangement is hereby terminated.
11
<PAGE> 12
10. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida applicable to
agreements made and to be performed in that State.
(b) NOTICE. Any notice, consent, request or other
communication made or given in connection with this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or mailed by
registered or certified mail, return receipt requested, to those listed below at
their following respective addresses or at such other address as each may
specify by notice to the others:
To the Employee, to his attention at:
7120 Lago Drive West
Coral Gables, Florida 33134
Telephone: (305) 667-6740
Telecopy: (305) 669-0671
To the Company:
ProSource Services Corporation
550 Biltmore Way, 10th Floor
Coral Gables, Florida 33134
Attention: Chairman of the Board
Telephone: (305) 529-2500
Telecopy: (305) 529-2573
12
<PAGE> 13
To Onex:
Onex Management U.S. Inc.
161 Bay Street
49th Floor
P.O. Box 700
Toronto, Ontario
M5J 2S1
Canada
Attention: Anthony R. Melman
Vice President
Telephone: (416) 362-7711
Telecopy: (416) 362-5765
With copies (in the case of notices to
the Employee or the Company) to:
Anthony R. Melman
Vice President
Onex Corporation
161 Bay Street
49th Floor
P.O. Box 700
Toronto, Ontario
M5J 2S1
Canada
Telephone: (416) 362-7711
Telecopy: (416) 362-5765
Joel I. Greenberg, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Telephone: (212) 836-8201
Telecopy: (212) 836-8689
(c) ENTIRE AGREEMENT; AMENDMENT. This Agreement shall
supersede any and all existing agreements between the Employee and the Company
or any of its affiliates and the Employee and Onex or any of its affiliates
relating to the terms of the
13
<PAGE> 14
Employee's employment during the employment term. It may not be amended except
by a written agreement signed by both parties.
(d) WAIVER. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver thereof or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(e) ASSIGNMENT. Except as otherwise provided in this
Section 9(e), this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, representatives, successors and
assigns. This Agreement shall not be assignable by the Employee and shall be
assignable by the Company only to any corporation or other entity resulting from
the reorganization, merger, or consolidation of the Company with any other
corporation or entity or any corporation or entity to or with which the
Company's business or substantially all of its business or assets may be sold,
exchanged, or transferred, and it must be so assigned by the Company to, and
accepted as binding upon it by, such other corporation or entity in connection
with any such reorganization, merger, consolidation, sale, exchange, or transfer
(the provisions of this sentence also being applicable to any successive such
transaction).
(f) HEADINGS. Section headings are used herein for
convenience of reference only and shall not affect the meaning of any provision
of this Agreement.
(g) RULES OF CONSTRUCTION. Whenever the context so
requires, the use of the masculine gender shall be deemed to include the
feminine and vice versa, and the use of the singular shall be deemed to include
the plural and vice versa.
14
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
By and on behalf of
PROSOURCE SERVICES CORPORATION
By: /s/ David R. Parker
-------------------------------------
David R. Parker
Chairman of the Board
THOMAS C. HIGHLAND
/s/ Thomas C. Highland
-------------------------------------------
For Purposes of Section 9 only:
ONEX MANAGEMENT U.S. INC.
By: /s/ Ewout R. Heersink
-------------------------------------
Name: Ewout R. Heersink
Title:
15
<PAGE> 1
Exhibit 10.45
TERMINATION AGREEMENT
Termination Agreement, dated as of November 15, 1996, between
OMI Partnership Holdings Ltd., a corporation organized under the laws of the
province of Ontario, Canada ("OMI"), and ProSource Services Corporation (f/k/a
BKDA Corporation), a Delaware corporation ("ProSource").
WHEREAS, OMI and ProSource wish to terminate the Management
Advisory Agreement, dated as of July 1, 1992, between OMI and ProSource (the
"Management Advisory Agreement").
The parties, intending to be legally bound, hereby agree as
follows:
1. The Management Advisory Agreement is hereby
terminated.
2. In consideration for OMI's relinquishment of its
right to receive certain fees under the Management
Advisory Agreement, ProSource shall pay to OMI
$4,000,000 payable in Class B Common Stock, $0.01 par
value per share, of ProSource, Inc. valued at the
initial public offering price of the Class A Common
Stock, $0.01 par value per share, of ProSource, Inc.
3. This Termination Agreement shall be governed by and
construed in accordance with the laws of the province
of Ontario, Canada applicable to contracts under and
to be performed entirely within such province.
4. This Agreement may be executed in any number of
counterparts and by different parties hereto in
separate counterparts, each of which when so executed
and delivered shall be deemed to be an original and
all of which taken together shall constitute one and
the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a
manually executed signature page hereto.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this
Termination Agreement to be duly executed by their respective officers as of the
date and year first written.
OMI PARTNERSHIP HOLDINGS LTD.
By: /s/ Ewout R. Heersink
--------------------------------
Name: Ewout R. Heersink
Title: Vice President
By: /s/ Anthony R. Melman
--------------------------------
Name: Anthony R. Melman
Title: Vice President
PROSOURCE SERVICES CORPORATION
By: /s/ David R. Parker
--------------------------------
Name: David R. Parker
Title: Chairman of the Board
2
<PAGE> 1
Exhibit 13.1
PORTIONS OF 1996 ANNUAL REPORT TO STOCKHOLDERS
PROSOURCE, INC. (In millions, except per share and certain other data)
Selected Consolidated
Financial Data
<TABLE>
<CAPTION>
Fiscal Years Ended Six Months
-------------------------------------------------------------- Ended
DECEMBER 28, December 30, December 31, December 25, December 31,
1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
(52 WEEKS) (52 Weeks) (53 Weeks) (52 Weeks) (26 Weeks)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales $ 4,125.0 $ 3,461.8 $ 1,598.1 $ 1,329.3 $ 618.4
Cost of sales 3,806.8 3,193.3 1,464.5 1,210.9 560.0
----------------------------------------------------------------------------
Gross profit 318.2 268.5 133.6 118.4 58.4
Operating expenses 301.3 255.2 131.0 114.2 51.7
Loss on impairment of
long-lived assets 15.7 -- -- -- --
Restructuring and contract
termination charges 28.5 0.7 -- -- --
----------------------------------------------------------------------------
(Loss) earnings from operations (27.3) 12.6 2.6 4.2 6.7
Interest expense, net 13.1 13.3 6.6 5.5 3.0
----------------------------------------------------------------------------
(Loss) earnings before income
taxes and extraordinary items (40.4) (0.7) (4.0) (1.3) 3.7
Income tax benefit (provision) 15.4 (0.1) 1.6 0.5 (1.5)
----------------------------------------------------------------------------
(Loss) earnings before
extraordinary items (25.0) (0.8) (2.4) (0.8) 2.2
Extraordinary gain (loss), net 0.6 (0.8) -- -- --
----------------------------------------------------------------------------
Net (loss) earnings $ (24.4) $ (1.6) $ (2.4) $ (0.8) $ 2.2
============================================================================
Per Share Data:
(Loss) earnings before extraordinary
items per share $ (4.29) $ (0.17) $ (0.99) $ (0.34) $ 0.97
Net (loss) earnings per share $ (4.19) $ (0.35) $ (0.99) $ (0.34) $ 0.97
Average outstanding shares used in
calculation (in thousands) 5,821 4,482 2,402 2,398 2,302
Balance Sheet Data (at end of period):
Working capital $ 85.5 $ 115.9 $ 41.6 $ 42.7 $ 39.5
Total assets 506.7 489.2 218.3 200.0 158.1
Total debt 113.1 163.2 65.6 68.5 61.1
Stockholders' equity 78.5 49.4 22.5 25.3 24.7
Other Data:
Net asset turnover 20.1X 18.3x 16.5x 13.6x 11.0x
Depreciation and amortization $ 10.9 $ 12.7 $ 8.0 $ 7.9 $ 3.4
Capital expenditures $ 20.0 $ 5.7 $ 1.4 $ 3.5 $ 1.9
Number of restaurants served
(at end of period) 14,641 14,562 6,752 5,113 4,184
</TABLE>
8
<PAGE> 2
PROSOURCE, INC.
Management's
Discussion and
Analysis of Financial
Condition and Results
of Operations
GENERAL
The Company began operations in July 1992 following the acquisition of certain
assets and the assumption of certain liabilities of Burger King Distribution
Services ("BKDS"), the "in-house" distributor for Burger King Corporation, which
serviced 4,150 Burger King restaurants. In the four and one-half years since the
acquisition, ProSource has, through a combination of acquisitions and internal
growth, become a leading distributor to chain restaurants, servicing
approximately 14,600 restaurants within 17 different restaurant chains. The
Company's acquisitions consisted of:
The acquisition in February 1993 of certain operating assets of McCabe's
Quality Foods, California, Inc., a regional systems distributor based in
California.
The acquisition in March 1993 of certain assets and the assumption of
certain liabilities of Valley Food Services, Inc., a regional systems
distributor based in Missouri.
The acquisition in October 1994 of certain assets and the assumption of
certain liabilities of Malone Products, Inc. ("Malone"), a regional systems
distributor based in Oklahoma.
The acquisition in March 1995 of substantially all assets and the
assumption of certain liabilities of the National Accounting Division of
The Martin-Brower Company headquartered in Chicago, Illinois, a national
systems distributor operating eleven distribution centers located
throughout the United States and one center in Canada.
Primarily as a result of these acquisitions, the Company's net sales increased
from $1.3 billion in 1993 to $4.1 billion in 1996. All of the Company's
acquisitions were accounted for as purchases and are included in the Company's
consolidated financial statements from their respective dates of acquisition.
The Company derives its revenues primarily from the distribution of a wide
variety of items to chain restaurants, including fresh and frozen meat and
poultry, seafood, frozen foods, canned and dry goods, fresh and pre-processed
produce, beverages, dairy products, paper goods and cleaning and other supplies.
The foodservice distribution industry in general, and the chain restaurant
segment of the industry in which the Company operates in particular, is
characterized by high asset turnover and low profit margins. As a "systems"
distributor specializing in distribution to chain restaurants, the Company
generally generates higher volume, lower gross margin sales requiring fewer but
larger deliveries than a broadline distributor which distributes to a wide
variety of customers, such as independent and chain restaurants, schools,
cafeterias and hospitals. In addition, systems distribution allows for more
efficient use of vehicles, facilities and personnel, resulting in lower
operating expenses as a percentage of net sales when compared to broadline
distribution.
A majority of the restaurants served by the Company purchase products from the
Company based on product cost plus a negotiated fixed dollar amount per unit of
measure. As a result, the Company's gross margin percentage may be positively or
negatively impacted as the product cost per unit of measure decreases or
increases, respectively. The Company's product mix changed substantially in 1995
as a result of the NAD acquisition because casual dining chain restaurants,
particularly those which serve seafood, have a higher average product cost per
unit of measure than quick service chain restaurants, thereby reducing gross
margin as a percentage of sales. Similarly, periods of inflation in food and
other product prices result in higher sales values and product costs per unit of
measure. While such increases do not affect the Company's gross profit, they do
result in a lower gross profit percentage. However, inflation in operating
expenses without corresponding productivity improvements can have a negative
effect on the Company's operating results as operating expenses increase while
gross profit remains constant. Conversely, periods of deflation can have a
positive effect on the Company's results.
The principal components of the Company's expenses include (i) cost of sales,
which represents the net amount paid to product vendors plus amounts paid for
in-bound freight, and (ii) operating expenses which include primarily labor and
equipment charges related to warehousing and delivery. Because warehousing and
delivery expenses can be relatively fixed in the short term, unexpected changes
in the Company's net sales, such as those resulting from adverse weather or
other events, can have a significant short-term impact on operating income.
The Company's fiscal year ends on the last Saturday in December. Consequently,
the Company will periodically have a 53 week fiscal year. 1995 and 1996 each
consisted of 52 weeks, while 1994 consisted of 53 weeks.
9
<PAGE> 3
PROSOURCE, INC.
Management's
Discussion and
Analysis of Financial
Condition and Results
of Operations
RESULTS OF OPERATIONS
The following sets forth, for the periods indicated, the components of the
Company's consolidated statements of operations expressed as percentage of net
sales:
<TABLE>
<CAPTION>
Fiscal Years Ended
-----------------------------------------------------
DECEMBER 28, December 30, December 31,
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.00% 100.00% 100.00%
Cost of sales 92.29 92.24 91.64
-----------------------------------------------------
Gross profit 7.71 7.76 8.36
Operating expenses 7.30 7.37 8.20
Loss on impairment of long-lived assets 0.38 -- --
Restructuring and contract termination charges 0.69 0.02 --
-----------------------------------------------------
(Loss) earnings from operations (0.66) 0.37 0.16
Interest expense, net (0.32) (0.39) (0.41)
-----------------------------------------------------
Loss before income taxes and extraordinary items (0.98) (0.02) (0.25)
Income tax benefit 0.37 -- 0.10
-----------------------------------------------------
Loss before extraordinary items (0.61) (0.02) (0.15)
Extraordinary gain (loss), net 0.01 (0.02) --
-----------------------------------------------------
Net loss (0.60)% (0.04)% (0.15)%
=====================================================
</TABLE>
YEAR ENDED DECEMBER 28, 1996 COMPARED TO YEAR ENDED DECEMBER 30, 1995
Net sales increased 19.2% to $4,125.0 million in 1996 from $3,461.8 million in
1995. The increase in net sales is primarily attributable to the acquisition of
NAD on March 31, 1995. Net sales, excluding the effect of the NAD acquisition,
increased to $1,916.1 million in 1996 from $1,791.2 million in 1995, a $124.9
million or 7.0% increase when compared to 1995. This increase in net sales is
primarily due to increased sales to existing accounts as a result of the
addition of new restaurants and increased sales volume at existing restaurants.
Gross profit increased 18.5% to $318.2 million in 1996 compared to $268.5
million in 1995 primarily due to the increase in net sales. The gross profit
percentage decreased to 7.7% in 1996 from 7.8% in 1995 due primarily to the
inclusion for the entire year in 1996 of NAD sales which have a higher product
cost than other Company sales.
Operating expenses increased 18.1% to $301.3 million in 1996 from $255.2 million
in 1995 primarily due to the increase in net sales. As a percentage of net
sales, operating expenses declined to 7.3% in 1996 from 7.4% in 1995 due
primarily to the impact of the higher product cost per unit sold by NAD.
Losses from operations in 1996 were $27.3 million (as compared to earnings from
operations of $12.6 million in 1995), as a result of restructuring charges of
$10.9 million, contract termination charges of $17.6 million, and a loss on
impairment in value of long-lived assets of $15.7 million. The restructuring
charges and impairment losses are related to a plan to consolidate and integrate
the Company's corporate and network operations. Of the restructuring charges,
approximately $7.9 million relates to the termination of existing facility
leases, $1.2 million represents costs to be incurred after cessation of
operations in the closed facilities and $1.8 million represents all other costs.
The contract termination charges consist of $10.6 million of costs associated
with terminating the distribution agreement with ARCOP, the purchasing
cooperative for Arby's, and $7.0 million in costs associated with the
termination of various agreements in connection with the Company's initial
public offering in November 1996. The application of Statement of Financial
Accounting Standards No.121, which became effective on January 1, 1996 and
requires that long-lived assets be reviewed for impairment (measured based on
the fair value of the assets), required the Company to recognize a loss of
approximately $7.3 million on land and owned buildings and $4.3 million on
furniture and equipment and leasehold improvements it intends to hold and use
through the completion of the plan and $4.1 million of capitalized software
costs which do not meet the long-term information technology strategy of the
Company. Earnings from operations excluding restructuring and contract
termination charges and impairment losses were $16.9 million in 1996 compared to
$13.3 million in 1995.
Net interest expense decreased to $13.1 million in 1996 from $13.3 million in
1995. Net interest expense as a percentage of net sales decreased 17.9%, from
.39% to .32% as a result of lower interest rates and improved net asset
turnover.
The income tax benefit in 1996 was $15.4 million compared to an income tax
provision of $0.1 million in 1995. The change in the tax benefit was
attributable to the Company's greater pre-tax loss in 1996. The 1995 provision
resulted from a pre-tax loss which, due to permanent differences arising from
the NAD acquisition, translated into a relatively small amount of taxable
income.
10
<PAGE> 4
PROSOURCE, INC.
Management's
Discussion and
Analysis of Financial
Condition and Results
of Operations
The extraordinary items in both 1996 and 1995 relate to the early retirement of
debt. In 1996, the pay-off of subordinated debt with the proceeds from the
initial public offering resulted in a gain of $1.0 million, net of the related
tax provision of $0.4 million. In 1995, the debt refinancing associated with the
NAD acquisition resulted in the write-off of unamortized deferred debt issuance
costs of $1.3 million, net of the related tax benefit of $0.5 million.
YEAR ENDED DECEMBER 30, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net sales increased 116.6% to $3,461.8 million in 1995 from $1,598.1 million in
1994. The increase in net sales was primarily attributable to the acquisition of
NAD on March 31, 1995 and the full year effect of the Malone acquisition on
October 31, 1994. Net sales excluding the effect of the NAD and Malone
acquisitions in 1995 increased by $95.8 million or 6.1% when compared to 1994
net sales. The increase in net sales is primarily due to increased sales to
existing accounts as a result of the addition of new restaurants and increased
sales volume at existing restaurants, offset, in part, by an additional week of
net sales in 1994.
Gross profit increased 101.0% to $268.5 million in 1995 from $133.6 million in
1994. The gross profit percentage decreased to 7.8% in 1995 compared to 8.4% in
1994. The gross profit percentage decrease is primarily attributable to the
higher cost of the product mix purchased by customers added through the NAD
acquisition. Gross profit excluding the effect of the NAD and Malone
acquisitions increased to 8.7% of sales in 1995 compared to 8.4% in 1994. The
increase is primarily a result of the renegotiation of a contract with one of
the Company's largest customers and the growth of a new account added in
mid-1994, for which the Company records a distribution fee without any related
product cost.
Operating expenses increased 94.8% to $255.2 million in 1995 from $131.0 million
in 1994. As a percentage of net sales, operating expenses declined to 7.4% in
1995 from 8.2% in 1994. This decrease is a result of the acquisition of NAD
which has a product mix with a higher unit sales value. Operating expenses as a
percentage of net sales, excluding the NAD acquisition, increased to 8.4% in
1995 from 8.2% in 1994, primarily attributable to increased personnel due to
growth of the business, the payment of management incentives which vested due to
achievement of business plan objectives, and higher workers' compensation and
vehicular insurance costs.
Earnings from operations increased to $12.6 million in 1995 from $2.6 million in
1994. The 1995 earnings were reduced by $0.7 million in restructuring charges
related to the consolidation and integration of the corporate support functions
following the NAD acquisition.
Net interest expense increased 102.2% to $13.3 million in 1995 from $6.6 million
in 1994, primarily attributable to the additional borrowings associated with the
acquisition of NAD. However, net interest expense as a percentage of net sales
decreased 4.9% from 0.41% to 0.39% as a result of lower interest rates and
higher net asset turnover.
The income tax provision in 1995 was $0.1 million compared to an income tax
benefit of $1.6 million in 1994. The 1995 provision resulted from a lower
pre-tax loss in 1995 which, because of permanent differences resulting from the
NAD acquisition, translated into a relatively small amount of taxable income.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has financed its operations and growth primarily with
cash flow from operations, borrowings under its credit facilities, operating
leases and normal vendor trade credit terms. The Company's cash flow from
operations was $21.3 million in 1996, compared to $50.0 million in 1995 and $0.9
million in 1994. The significant cash flow in 1995 was attributable to the
one-time benefit of acquiring assets without assuming certain corresponding
operating liabilities in connection with the acquisition of NAD.
Cash used for capital expenditures was $20.0 million in 1996, primarily for
equipment for the Company's cart delivery program ($6.6 million) and computer
systems upgrades ($9.5 million). The Company anticipates capital expenditures of
$20 to $30 million in 1997 in connection with the implementation of its new
distribution network, including the expansion of warehousing facilities to
accommodate expected growth, and for continued investment in computer systems.
The Company intends to finance such capital expenditures with cash provided from
operations, borrowings under its credit facilities and through operating leases.
Cash used in investing activities was $175.6 million in 1995, primarily to fund
the NAD acquisition for $170.3 million and capital expenditures of $5.7 million
(primarily for cart delivery equipment and computer systems upgrades). In 1994
net cash provided by investing activities was $1.9 million. Proceeds from the
settlement of certain purchase price provisions relating to the BKDS acquisition
were $6.6 million, offset by $3.8 million used in the Malone acquisition and
$1.4 million for capital expenditures, primarily related to computer systems
upgrades.
11
<PAGE> 5
PROSOURCE, INC.
Management's
Discussion and
Analysis of Financial
Condition and Results
of Operations
On November 15, 1996 the Company completed an initial public offering of
3,400,000 shares of its Class A Common Stock. The net proceeds of the offering
of $43.2 million were primarily used to prepay $25.3 million in outstanding
indebtedness under subordinated notes payable and repay $16.6 million of
outstanding indebtedness under the Company's revolving credit facility. The
reduction of outstanding indebtedness with the proceeds of the offering will
result in a reduction of future interest expense.
On December 28, 1996, the Company obtained a commitment from a large financial
institution to refinance its existing credit facility with a $150 million
accounts receivable securitization facility and a $75 million inventory
revolving-credit facility. Both new credit facilities have five year terms. The
refinancing was completed in the first quarter of 1997. The interest rate on the
accounts receivable securitization facility will be at LIBOR plus 0.55 percent.
The interest rate on the inventory facility will be at LIBOR plus a range of
0.875 percent to 2 percent depending on certain financial ratio requirements.
The credit facilities are secured by liens on substantially all of the Company's
assets and contain various restrictions on, among other things, the Company's
ability to pay dividends and dispose of assets. The Company will record a pretax
extraordinary charge of approximately $10.0 million in the first quarter of 1997
to reflect prepayment penalties of approximately $3.0 million, write-off of
deferred financing costs of approximately $6.0 million and approximately $1.0
million in costs associated with termination of interest-rate protection
agreements.
The Company believes that the combination of proceeds received from the initial
public offering, cash flow generated from operations and borrowings available
under its credit facilities are sufficient to satisfy its anticipated working
capital needs for at least 12 months. Management may determine that it is
necessary or desirable to obtain financing for growth through additional bank
borrowings or the issuance of new debt or equity securities.
The Company is a holding company with no independent operations or assets other
than an investment in its operating subsidiaries and, as such, is dependent on
its operating subsidiaries to obtain cash flow. The Company's loan agreement
includes certain restrictive covenants which limit the flow of funds from the
Company's subsidiaries to the parent company. Such covenants are not expected to
have a material effect on the ability of the parent to meet its cash
obligations.
QUARTERLY RESULTS AND SEASONALITY
Set forth is summary information with respect to the Company's operations for
the most recent eight fiscal quarters. Historically, the restaurant and
foodservice business is seasonal with lower sales in the first calendar quarter.
Furthermore, the Company may experience quarterly fluctuations in net sales
depending on the timing of any acquisitions. Management believes the Company's
quarterly results will continue to be impacted by the seasonality of the
restaurant business and the timing of any future acquisitions.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 1996
-----------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
- ---------------------------------------------------------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
NET SALES $ 968.7 $1,045.4 $1,053.5 $1,057.4
GROSS PROFIT 73.2 81.9 80.8 82.3
EARNINGS (LOSS) FROM OPERATIONS (26.9) 5.6 5.8 (11.8)
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEMS (19.2) 1.2 1.4 (8.4)
NET EARNINGS (LOSS) (19.2) 1.2 1.4 (7.8)
<CAPTION>
FISCAL YEAR ENDED 1995
-----------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER(a) QUARTER QUARTER
- ---------------------------------------------------------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales $ 411.4 $1,036.4 $1,008.1 $1,005.9
Gross profit 35.4 79.5 78.3 75.3
Earnings (loss) from operations (0.5) 4.6 3.1 5.4
Earnings (loss) before extraordinary items (1.3) 0.1 (0.7) 1.1
Net earnings (loss) (2.1) 0.1 (0.7) 1.1
</TABLE>
(a) Includes the acquisition of substantially all of assets and the assumption
of certain liabilities of NAD on March 31, 1995.
12
<PAGE> 6
December 28, 1996 and December 30, 1995 PROSOURCE, INC.
(Dollars in thousands except per share and share amounts) Consolidated Balance
Sheets
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,763 $ 2,325
Accounts receivable, net of allowance for doubtful accounts of
$2,334 and $2,585 in 1996 and 1995, respectively 219,340 230,089
Inventories 144,040 140,432
Deferred income taxes, net 10,914 4,298
Prepaid expenses and other current assets 10,320 10,736
---------------------------
Total current assets 387,377 387,880
Property and equipment, net 49,637 52,507
Intangible assets, net 42,135 36,450
Deferred income taxes, net 16,100 3,901
Other assets 11,422 8,435
---------------------------
Total assets $ 506,671 $ 489,173
===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 257,854 $ 242,645
Accrued liabilities 42,475 27,819
Current portion of long-term senior debt 1,500 1,500
---------------------------
Total current liabilities 301,829 271,964
Long-term senior debt, less current portion 111,084 132,011
Subordinated notes payable to Onex -- 19,791
Other subordinated notes payable 500 9,918
Other noncurrent liabilities 14,743 6,068
---------------------------
Total liabilities 428,156 439,752
---------------------------
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $.01 par value. Authorized 10,000,000 shares; issued and
outstanding no shares in 1996 and 1995 -- --
Class A Common Stock,
$.01 par value. Authorized 50,000,000 shares;
issued and outstanding 3,400,000 shares in 1996 and no shares in 1995 34 --
Class B Common Stock,
$.01 par value. Authorized 10,000,000 shares;
issued and outstanding 5,963,856 shares in 1996 and 5,177,400 shares in 1995 60 52
Additional paid-in capital 105,256 51,838
Accumulated deficit (26,901) (2,540)
Accumulated foreign-currency translation adjustments 66 71
---------------------------
Total stockholders' equity 78,515 49,421
---------------------------
Total liabilities and stockholders' equity $ 506,671 $ 489,173
===========================
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE> 7
PROSOURCE, INC. For the years ended December 28, 1996,
Consolidated Statements of December 30, 1995 and December 31, 1994
Operations (Dollars in thousands except per share
and share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
(52 WEEKS) (52 weeks) (53 weeks)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 4,125,054 $ 3,461,837 $ 1,598,136
Cost of sales 3,806,811 3,193,270 1,464,545
-----------------------------------------------
Gross profit 318,243 268,567 133,591
Operating expenses, including management fees to Onex of $729,
$808 and $781 in fiscal years 1996, 1995 and 1994, respectively 301,295 255,216 131,023
Loss on impairment of long-lived assets 15,733 -- --
Restructuring and contract termination charges 28,466 711 --
-----------------------------------------------
(Loss) earnings from operations (27,251) 12,640 2,568
Interest expense, including interest to Onex of $1,888, $1,738 and
$255 in fiscal years 1996, 1995 and 1994, respectively (14,824) (14,678) (6,868)
Interest income 1,694 1,339 271
-----------------------------------------------
Loss before income taxes and extraordinary items (40,381) (699) (4,029)
Income tax benefit (provision) 15,410 (85) 1,647
-----------------------------------------------
Loss before extraordinary items (24,971) (784) (2,382)
Extraordinary items: Gain (loss) on early retirement of debt,
net of income tax (provision) benefit of $(397) and $502,
in fiscal years 1996 and 1995, respectively 610 (772) --
Net loss $ (24,361) $ (1,556) $ (2,382)
===============================================
Net loss per share:
Loss before extraordinary items $ (4.29) $ (0.17) $ (0.99)
===============================================
Net loss $ (4.19) $ (0.35) $ (0.99)
===============================================
Average outstanding shares used in calculation (in thousands) 5,821 4,482 2,402
===============================================
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE> 8
For the years ended December 28, 1996, PROSOURCE, INC.
December 30, 1995 and December 31, 1994 Consolidated
(Dollars in thousands except share amounts) Statements of
Stockholders' Equity
<TABLE>
<CAPTION>
Accumulated
foreign
Common Stock Additional Accumulated currency
------------------- paid-in earnings translation
Class A Class B capital (deficit) adjustments Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 25, 1993 $ -- $ 23 $ 23,843 $ 1,398 $ -- $ 25,264
Issuance of 6,900 Class B shares -- -- 76 -- -- 76
Acquisition and retirement of 39,200 Class B shares -- -- (415) -- -- (415)
Net loss -- -- -- (2,382) -- (2,382)
------------------------------------------------------------------------
Balance, December 31, 1994 -- 23 23,504 (984) -- 22,543
Issuance of 2,858,500 Class B shares -- 29 28,556 -- -- 28,585
Acquisition and retirement of 23,000 Class B shares -- -- (222) -- -- (222)
Foreign-currency translation adjustments -- -- -- -- 71 71
Net loss -- -- -- (1,556) -- (1,556)
------------------------------------------------------------------------
Balance, December 30, 1995 -- 52 51,838 (2,540) 71 49,421
Issuance of 3,400,000 Class A shares, net 34 -- 43,193 -- -- 43,227
Amendment to 1995 Option Plan -- -- 1,224 -- -- 1,224
Issuance of 285,714 Class B shares to Onex -- 3 3,997 -- -- 4,000
Conversion of subordinated notes payable
to Onex into 459,242 Class B shares -- 5 4,594 -- -- 4,599
Issuance of 61,500 Class B shares -- -- 615 -- -- 615
Acquisition and retirement of 20,000
Class B shares -- -- (205) -- -- (205)
Foreign-currency translation adjustments -- -- -- -- (5) (5)
Net loss -- -- -- (24,361) -- (24,361)
------------------------------------------------------------------------
Balance, December 28, 1996 $ 34 $ 60 $ 105,256 $ (26,901) $ 66 $ 78,515
========================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
15
<PAGE> 9
PROSOURCE, INC. For the years ended
Consolidated December 28, 1996,
Statements of December 30, 1995 and December 31, 1994
Cash Flows (Dollars in thousands except share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
(52 WEEKS) (52 weeks) (53 weeks)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (24,361) $ (1,556) $ (2,382)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization of property and equipment 7,124 9,163 4,868
Amortization of intangible assets and deferred debt issuance costs 3,813 3,530 3,103
Bad debt expense 1,682 1,845 2,427
(Gain) loss on early retirement of debt (1,007) 1,274 --
Loss on impairment of long-lived assets 15,733 -- --
Deferred income taxes (benefit) (14,085) (1,749) (1,391)
Gain on sale of property and equipment (154) (184) (325)
Noncash contract termination charges 5,224 -- --
Changes in operating assets and liabilities, net of effects of companies
purchased:
Decrease (increase) in accounts receivable 9,067 (13,441) (25,150)
(Increase) decrease in inventories (3,608) 7,706 865
(Increase) decrease in prepaid expenses and other current assets (2,334) (4,321) 2,723
(Increase) decrease in other assets (14,467) 1,208 (802)
Increase in accounts payable 15,209 45,423 18,450
Increase (decrease) in accrued liabilities 14,775 2,997 (104)
(Increase) decrease in other noncurrent liabilities 8,675 (1,898) (1,365)
----------------------------------------
Net cash provided by operating activities 21,286 49,997 917
----------------------------------------
Cash flows from investing activities:
Capital expenditures (19,987) (5,683) (1,376)
Proceeds from sale of property and equipment 154 362 445
Payment for purchase of net assets acquired -- (170,279) (3,792)
Proceeds from settlement of purchase-price provisions -- -- 6,600
----------------------------------------
Net cash (used in) provided by investing activities (19,833) (175,600) 1,877
----------------------------------------
Cash flows from financing activities:
Repayments of long-term debt to Onex (15,000) (2,085) --
Repayments of long-term debt to others (30,269) (78,938) (32,247)
Borrowings on long-term debt to Onex -- 18,750 255
Borrowings on long-term debt to others -- 160,616 29,124
Proceeds from issuance of common stock to Onex 7,000 26,500 --
Proceeds from issuance of common stock to others 37,464 2,085 76
Payments to acquire and retire treasury stock (205) (222) (415)
----------------------------------------
Net cash provided by (used in) financing activities (1,010) 126,706 (3,207)
Effect of exchange-rate changes on cash (5) 71 --
Net increase (decrease) in cash and cash equivalents 438 1,174 (413)
Cash and cash equivalents at beginning of year 2,325 1,151 1,564
----------------------------------------
Cash and cash equivalents at end of year $ 2,763 $ 2,325 $ 1,151
========================================
Supplemental disclosures of cash paid during the year for:
Interest to Onex $ 2,927 $ 41 $ --
========================================
Interest to others $ 16,435 $ 12,291 $ 6,264
========================================
Income taxes, net of refunds $ -- $ 993 $ 279
========================================
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE> 10
PROSOURCE, INC.
Notes to Consolidated
Financial Statements
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ProSource, Inc. (the "Parent") is engaged in the food service distribution
business, specializing in quick-service and casual-dining restaurants, primarily
operating in the United States. ProSource, Inc. and subsidiaries (the "Company")
distribute to approximately 14,600 restaurants in such chains as Burger King,
Red Lobster, Olive Garden, Long John Silver's, TGI Friday's, Chick-Fil-A,
Chili's and Sonic.
The Parent operates through three subsidiaries, ProSource Services Corporation
("PSC"), ProSource Distribution Services Limited ("ProSource Canada") and BroMar
Services, Inc. ("BroMar"). PSC commenced operations in July 1992. The
consolidated financial statements include the results of the operations of PSC
from its inception and the results of operations of ProSource Canada and BroMar,
both of which were acquired by the Company as part of the acquisition of the
National Accounts Division ("NAD") of The Martin-Brower Company
("Martin-Brower"), since the date of acquisition. The Company is a subsidiary of
Onex Corporation (collectively with its affiliates, "Onex"), a company traded on
the Toronto and Montreal stock exchanges.
The Company operates on a 52- to 53-week accounting year, ending on the last
Saturday of each calendar year.
The following is a summary of the Company's significant accounting policies:
(A) BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Operations of the companies and businesses acquired have been
included in the accompanying consolidated financial statements from their
respective dates of acquisition. All significant intercompany accounts and
transactions have been eliminated in consolidation.
(B) ACCOUNTING ESTIMATES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
(C) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include commercial paper with original maturities of
three months or less, and cash on hand and on deposit at various financial
institutions.
(D) INVENTORIES
Inventories, consisting primarily of food items, are stated at the lower of cost
or net realizable value. Cost is determined using the weighted-average-cost
method and the first-in, first-out method. Cost of inventory using the
weighted-average-cost method represents 32 percent, 32 percent and 100 percent
of inventories in 1996, 1995 and 1994, respectively.
(E) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Leasehold improvements are amortized
using the straight-line method over the lesser of asset life or lease term.
Depreciation is provided using the straight-line method, based upon the
following estimated useful lives:
<TABLE>
<CAPTION>
<S> <C>
Buildings and improvements 15 to 40 years
Warehouse and transportation equipment 3 to 10 years
Computer software 1 1/2 to 5 years
Leasehold improvements 3 to 7 years
Office equipment 3 to 7 years
</TABLE>
Costs of normal maintenance and repairs are charged to expense when incurred.
Replacements or betterments of properties are capitalized. When assets are
retired or otherwise disposed of, their cost and the applicable accumulated
depreciation and amortization are removed from the accounts, and the resulting
gain or loss is reflected in the consolidated statements of operations.
(F) INTANGIBLE ASSETS
Intangible assets are amortized using the straight-line method over the
following periods:
<TABLE>
<CAPTION>
<S> <C>
Goodwill 40 years
Distribution contracts 3 to 7 years
Noncompete agreements 5 to 7 years
Customer lists 12 years
</TABLE>
17
<PAGE> 11
PROSOURCE, INC.
Notes to Consolidated
Financial Statements
Goodwill results from business acquisitions and principally consists of the
excess of the acquisition cost over the fair value of the net assets of
businesses acquired. At each balance sheet date, the Company evaluates the
realizability of goodwill based upon expectations of operating income for each
subsidiary having a material goodwill balance. The Company believes that no
material impairment of goodwill exists at December 28, 1996 and December 30,
1995.
(G) DEFERRED DEBT ISSUANCE COSTS
Included in other assets are deferred debt issuance costs which are amortized
over the term of the related debt.
(H) SELF-INSURANCE
The Company self-insures for certain levels under its workers' compensation,
auto liability and medical and dental insurance programs. Costs in excess of
retention limits are insured under various contracts with insurance carriers.
Estimated costs for workers' compensation claims for which the Company is
responsible are determined based on historical claims experience, adjusted for
current trends. The liability related to workers' compensation is discounted to
net present value using a risk-free treasury rate for maturities that matches
the expected settlement periods. At December 28, 1996 and December 30, 1995, the
estimated accrued liabilities related to workers' compensation were
approximately $5.9 million and $4.1 million, respectively, net of a discount of
approximately $1.6 million and $1.2 million, respectively. Effective October 15,
1996, the Company purchased primary coverage for its workers' compensation
insurance.
(I) NET LOSS PER COMMON AND COMMON-EQUIVALENT SHARE
Earnings-per-share has been computed using the weighted average number of common
and common equivalent shares outstanding during the period. Common-equivalent
shares (consisting of options and warrants) are excluded during periods of net
loss since they would be antidilutive. Shares and options issued within one year
prior to the filing of the Registration Statement relating to the initial public
offering (see note 10) have been treated as outstanding for all periods
presented, even where the impact of the incremental shares is antidilutive.
(J) INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
(K) INTEREST RATE PROTECTION AGREEMENTS
The differential to be paid or received under interest-rate swap agreements are
accrued with the resulting net interest income or expense recorded as an
adjustment to interest expense on the underlying debt. Premiums paid for
interest-rate collars are amortized to interest expense over the terms of the
agreement.
(L) TRANSLATION OF FOREIGN CURRENCY
The translation of the accounts of ProSource Canada into U.S. dollars is
performed for balance sheet accounts using current exchange rates in effect at
the date of the balance sheet and for revenue and expense accounts using an
average exchange rate during the period. Translation adjustments arising from
differences in exchange rates from period to period are included in accumulated
foreign-currency translation adjustments as a component of stockholders' equity.
(M) RECENT ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards No. 121 ("SFAS
121"), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", which became effective on January 1, 1996, and
requires long-lived assets be reviewed for impairment (measured based on the
fair value of assets).
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation," establishes a fair-value-based method of
accounting for compensation costs related to stock-option plans and other forms
of stock-based compensation plans as an alternative to the intrinsic value-based
method of accounting defined under Accounting Principles Board ("APB") Opinion
No. 25. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the disclosure provisions of SFAS 123.
(N) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the consolidated balance sheets for cash and
cash equivalents, accounts receivable, accounts payable and accrued liabilities
approximate fair value because of their short-term maturities. The carrying
amounts reported for long-term senior debt approximate fair value because it is
a variable-rate instrument that reprices monthly.
18
<PAGE> 12
PROSOURCE, INC.
Notes to Consolidated
Financial Statements
(O) RECLASSIFICATIONS
Certain amounts in the 1994 and 1995 consolidated financial statements have been
reclassified to conform to the 1996 consolidated financial statements
presentation.
(2) BUSINESS COMBINATIONS
(A) NAD
On March 31, 1995, the Company completed the acquisition of substantially all
assets and the assumption of certain liabilities of NAD. The total cost of the
acquisition of $170 million was funded through a borrowing of $116 million under
the Company's revolving credit facility, a $9 million note payable to
Martin-Brower (net of a discount to reflect a constant interest rate), $18.5
million in notes payable to Onex, and the issuance of 26,500 shares of the
Company's common stock, valued at approximately $26.5 million. The acquisition
has been accounted for under the purchase method of accounting. The accompanying
consolidated financial statements include the assets acquired of approximately
$232 million, consisting primarily of accounts receivable and inventories, and
liabilities assumed of approximately $87 million, consisting primarily of trade
accounts payable, based on their estimated fair values at the acquisition date.
As a result of this transaction, the Company recorded total costs in excess of
fair value of net assets acquired of approximately $25 million. In addition, the
Company incurred an extraordinary charge relating to the write-off of
approximately $0.8 million of unamortized deferred-debt issuance costs on debt
repaid at the acquisition date.
On March 30, 1996, the Company revised its estimates of certain costs related to
the acquisition by $12 million. The effect of the revision increased
acquisition-related liabilities by $12 million, deferred tax assets by
approximately $4.4 million and goodwill by approximately $7.6 million.
(B) MALONE PRODUCTS, INC.
On October 31, 1994, the Company acquired certain assets and assumed certain
liabilities of Malone Products, Inc. ("Malone"). The total cost of the
acquisition of $3.8 million was funded through a borrowing of $3.3 million under
the Company's revolving-credit facility and $0.5 million of convertible
subordinated debt issued to Malone. The acquisition of Malone resulted in the
recognition of $3.4 million of costs in excess of fair value of net assets
acquired. The acquisition has been accounted for under the purchase method of
accounting. The accompanying consolidated financial statements include the
assets acquired of approximately $7 million, consisting primarily of accounts
receivable and inventories, and liabilities assumed of approximately $6.6
million, consisting primarily of trade accounts payable, based on their
estimated fair values at the acquisition date.
(C) BURGER KING DISTRIBUTION SERVICES
On June 30, 1992, the Company completed the acquisition of certain assets and
the assumption of certain liabilities of Burger King Distribution Services
("BKDS"), a division of Burger King Corporation ("BKC"). In 1994, the Company
and BKC settled certain purchase-price provisions by BKC paying $6.6 million to
the Company. The payment has been accounted for as an adjustment of the original
purchase price by decreasing net deferred tax assets by $1.3 million,
acquisition-related distribution contracts by $3.2 million and goodwill by $2.1
million.
(3) RESTRUCTURING CHARGES AND IMPAIRMENT OF LONG-LIVED ASSETS
In conjunction with the NAD acquisition, the Company incurred restructuring
costs of approximately $0.7 million in 1995 primarily relating to costs incurred
to consolidate and integrate certain functions and operations. In 1996, as a
result of a study to analyze, among other things, ways to integrate the NAD
operations, improve customer service, reduce operating costs and increase
existing warehouse capacity, the Company adopted a plan to consolidate and
integrate its corporate and network operations. Through this plan, which was
approved by its board of directors, the Company specifically identified all
significant actions, consisting of the closing of 19 distribution facilities
currently leased and 11 distribution facilities currently owned. The Company has
begun activities to integrate these facilities, including communications to its
employees and its customers, and expects to complete the plan in stages through
the year 2000. As a result, in the first quarter of 1996, the Company accrued
restructuring charges of $10.9 million. The restructuring charges consist
approximately of $7.9 million in costs related to the termination of the
existing facility leases, $1.2 million in costs to be incurred after operations
cease in the closed facilities, and $1.8 million in other costs. During 1996,
the Company paid and charged $1.3 million in costs related to termination of
existing facilities and $1.5 million of other costs. As of December 28, 1996,
the Company had approximately $8.1 million of accrued unpaid restructuring
charges.
The significant change brought about by the plan to integrate and consolidate
the existing distribution network impaired the value of long-lived assets to be
held and used until the plan is completed. As a result, in conjunction with the
recording of the restructuring reserves in the first quarter of 1996, the
Company recognized a loss on impairment in value of long-lived assets. The loss
consists of $7.3 million of land and owned buildings, $4.3 million of furniture
and equipment and leasehold improvements management plans to hold and use
through the completion of the plan, and
19
<PAGE> 13
PROSOURCE, INC.
Notes to Consolidated
Financial Statements
$4.1 million of capitalized software costs which do not meet the long-term
information-technology strategy of the Company. The Company measured the amount
of the loss by comparing fair value of the land and the owned building
(determined by independent appraisals and updated with current comparisons to
similar assets) to capitalized cost. The carrying value of furniture and
equipment and capitalized software costs was written down to net realizable
value since it is being replaced.
(4) PROPERTY AND EQUIPMENT
Property and equipment at December 28, 1996 and December 30, 1995 consisted of
the following (amounts in thousands):
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 3,636 $ 4,746
Buildings and improvements 16,104 20,428
Warehouse and transportation equipment 26,286 20,309
Computer software 19,062 14,815
Leasehold improvements 3,565 6,672
Office equipment 8,478 6,046
---------------------------
77,131 73,016
Less accumulated depreciation and amortization 27,494 20,509
---------------------------
$ 49,637 $ 52,507
===========================
</TABLE>
(5) INTANGIBLE ASSETS
Intangible assets at December 28, 1996 and December 30, 1995 consisted of the
following (amounts in thousands):
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Identifiable intangibles $ 10,785 $ 10,785
Goodwill 41,298 33,664
---------------------------
52,083 44,449
Less accumulated amortization 9,948 7,999
---------------------------
$ 42,135 $ 36,450
===========================
</TABLE>
(6) LONG-TERM DEBT
(A) LONG-TERM SENIOR DEBT
Long-term senior debt at December 28, 1996 and December 30, 1995 consisted of
the following loan agreements with banks (amounts in thousands):
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$210 million revolving credit facility, due March 31, 2000 $ 84,834 $104,636
$15 million term-loan facility, payable in quarterly installments each of
$0.38 million commencing on July 1, 1995 and through March 31, 2000 12,750 13,875
$15 million term-loan facility, due March 31, 2000 15,000 15,000
---------------------------
Total long-term senior debt 112,584 133,511
Less current portion 1,500 1,500
---------------------------
Long-term senior debt, less current portion $111,084 $132,011
===========================
</TABLE>
On March 31, 1995, in conjunction with the acquisition of NAD, the Company
entered into a $240 million Loan and Security Agreement (the "Loan Agreement")
with a group of banks that extends through March 31, 2000. Such agreement
provides for a revolving credit facility of up to $210 million and term loans
aggregating $30 million. The interest rate on the Company's long-term senior
debt is reset every month to reflect current market rates. The effective rate
during 1996 and 1995 was 8.7 percent. This rate reflects the effect of
interest-rate protection agreements.
The Loan Agreement requires PSC, ProSource Canada and BroMar (the "Borrowers"),
to meet specific affirmative and negative covenants which include, among other
requirements, limitations on the acquisition and disposition of assets,
prohibition of borrowings other than under the Loan Agreement, restrictions on
dividend payments and compliance with certain financial covenants. The Loan
Agreement is collateralized by substantially all of the Borrowers' assets, the
pledge by the Parent of all of the issued and outstanding stock of the Borrowers
and other collateral rights. In addition, the Parent has guaranteed payment of
all amounts due under the Loan Agreement.
20
<PAGE> 14
PROSOURCE, INC.
Notes to Consolidated
Financial Statements
Borrowings under the Loan Agreement are limited to a borrowing base as defined
in the agreement. At December 28, 1996, the Company had approximately $90.3
million available under the revolving-credit facility. The Loan Agreement also
provides for a commitment fee of 0.5 percent per annum of the daily unused
revolving-credit facility, as defined in the agreement.
Borrowings under the Loan Agreement at December 28, 1996, are due as follows
(amounts in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 $ 1,500
1998 1,500
1999 1,500
2000 108,084
2001 --
--------
$112,584
========
</TABLE>
In 1994, PSC entered into two interest-rate swap agreements, having notional
principal amounts of approximately $10.7 million and $20 million, that mature in
1997 and 1999, respectively. Under these agreements, PSC made fixed-rate
payments and received floating rate payments in return. In 1995, PSC entered
into two interest-rate collar transactions having notional principal amounts of
approximately $25 million and $20 million, maturing in 1998. The counterparties
to these agreements were large financial institutions. These interest-rate
protection agreements were entered into to reduce the Company's exposure to
interest-rate volatility and were not used for trading purposes.
On December 28, 1996, the Company obtained a commitment from a large financial
institution to refinance its existing credit facility with a $150 million
accounts receivable securitization facility and a $75 million inventory
revolving-credit facility. Both new credit facilities have five year terms. The
refinancing is expected to be completed in the first quarter of 1997. The
interest rate on the accounts receivable securitization facility will be at
LIBOR plus .55 percent. The interest rate on the inventory facility will be at
LIBOR plus a range of .875 percent to 2 percent depending on certain financial
ratio requirements. The credit facilities are secured by liens on substantially
all of the Company's assets and contain various restrictions on, among other
things, the Company's ability to pay dividends and dispose of assets. The
Company will record a pretax extraordinary charge of approximately $10.0 million
in the first quarter of 1997 to reflect prepayment penalties of approximately
$3.0 million, write-off of deferred financing costs of approximately $6.0
million and approximately $1.0 million in costs associated with termination of
interest-rate protection agreements.
(B) SUBORDINATED NOTES PAYABLE TO ONEX
Subordinated notes payable to Onex consisted of three agreements at December 30,
1995. All three agreements were canceled during 1996 as described in the
following paragraphs:
A $15 million, 12 percent, subordinated note payable to Onex, with interest
payable annually beginning March 31, 1996 and the principal payable in full on
April 1, 2005, was prepaid on November 15, 1996 with proceeds from the Company's
initial public offering of Class A Common Stock. The Company paid to Onex $16.1
million including accrued interest of $1.1 million.
A $2.5 million convertible subordinated note, plus accrued interest of $0.9
million at December 30, 1995, payable to Onex, with interest at 10 percent
compounded annually and due, together with the principal, on July 1, 2002, was
canceled on November 15, 1996. In connection with the Company's initial public
offering of Class A Common Stock, Onex converted this note including accrued
interest of $1.3 million into 379,242 shares of Class B Common Stock.
A $3.5 million convertible subordinated note was issued in 1995 to Onex with
interest at prime rate, compounded annually and due, together with the
principal, on April 1, 2005. During the year ended December 30, 1995, the
Company paid $2.1 million of such note to Onex resulting in an outstanding
balance of $1.4 million at December 30, 1995. On February 1, 1996, Onex
converted $0.8 million of the note into 80,000 shares of the Company's Class B
Common Stock and the remaining balance on the note of approximately $0.6 million
plus accrued interest was paid to Onex.
(C) OTHER SUBORDINATED NOTES PAYABLE
Other subordinated notes payable consisted of one agreement at December 28, 1996
and two agreements at December 30, 1995. A $10 million subordinated note, with
rates ranging from zero to 13 percent, was payable to Martin-Brower at December
30, 1995. This note had been discounted in 1995 to reflect a constant interest
rate through its maturity on March 31, 2002. On November 21, 1996, in connection
with the Company's initial public offering of Class A Common Stock, the Company
repaid this note to Martin-Bower. The $1.0 million gain on the early retirement
of this note, reflecting the difference between the carrying value of the note
and the repayment amount of $9.2 million, was recorded as an extraordinary item
in the accompanying consolidated financial statements.
21
<PAGE> 15
PROSOURCE, INC.
Notes to Consolidated
Financial Statements
A $0.5 million convertible unsecured 8 percent subordinated note is payable to
Malone Products, Inc. on November 1, 1999. The holders may convert the principal
into shares of the Company's Class A Common Stock at any time prior to maturity
at a conversion price of $20 per share.
The carrying value of long-term debt approximates fair value at December 28,
1996 and December 30, 1995.
(7) LEASES
The Company leases facilities, vehicles and other equipment under long-term
operating leases with varying terms, the majority of which contain renewal
and/or purchase options. Certain transportation equipment leases call for
contingent rental payments based upon total miles. At December 28, 1996,
aggregate future minimum lease payments under noncancellable operating leases
were as follows (amounts in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 $ 28,665
1998 25,681
1999 20,690
2000 15,069
2001 11,383
All years thereafter 26,046
--------
Total future minimum lease payments $127,534
========
</TABLE>
Rent expense, including contingent rental expense, was approximately $39.3
million, $30.6 million and $13.4 million during the years ended December 28,
1996, December 30, 1995 and December 31, 1994, respectively.
(8) INCOME TAXES
The income tax benefit (provision) before extraordinary items for the years
ended December 28, 1996, December 30, 1995 and December 31, 1994, respectively,
consisted of the following (amounts in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current taxes:
Federal $ 937 $ (1,236) $ 256
State (9) (408) --
---------------------------------------------
Total current taxes 928 (1,644) 256
---------------------------------------------
Deferred taxes, excluding other components:
Federal 11,449 1,126 582
State 3,217 264 236
---------------------------------------------
Total deferred taxes, excluding other components 14,666 1,390 818
---------------------------------------------
Other:
Alternative minimum tax-credit carryforwards (184) 666 64
Utilization of operating-loss carryforwards -- (497) 509
---------------------------------------------
Total other (184) 169 573
---------------------------------------------
$ 15,410 $ (85) $ 1,647
=============================================
</TABLE>
The following table accounts for the difference between the actual tax benefit
(provision) and the amounts obtained by applying the statutory U.S. federal
income tax rate of 34 percent to the loss before income taxes and extraordinary
items for the years ended December 28, 1996, December 30, 1995 and December 31,
1994 (amounts in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax benefit computed at statutory rate $ 13,730 $ 237 $ 1,370
Increases (decreases) in tax benefit due to:
State income tax benefit (net of federal taxes) 2,117 (118) 198
Goodwill amortization
(136) (76) (61)
Miscellaneous (301) (128) 140
---------------------------------------------
Actual tax benefit (provision) before extraordinary items $ 15,410 $ (85) $ 1,647
=============================================
</TABLE>
Except for the effects of the reversal of net deductible temporary differences,
as well as permanent differences described above, the Company is not aware of
any factors which would cause any significant differences between taxable income
and pretax book income in future years.
22
<PAGE> 16
PROSOURCE, INC.
Notes to Consolidated
Financial Statements
The tax effects of temporary differences that give rise to significant portions
of deferred tax assets and deferred tax liabilities at December 28, 1996 and
December 30, 1995 are presented below (amounts in thousands):
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Acquisition-related expenses $ 3,567 $ 2,873
Accounts receivable, principally due to allowance for doubtful accounts 1,222 1,046
Property, plant and equipment, principally due to differences in depreciation 1,935 831
Self-insurance reserves 3,493 2,609
Impairment of long-lived assets 4,036 --
Restructuring and contract-termination charges 8,121 --
Benefit of federal and state net operating-loss carryforwards 5,797 --
Other 2,025 2,782
---------------------------
Total deferred tax assets 30,196 10,141
Less valuation allowance -- --
---------------------------
Total deferred tax assets, net $ 30,196 $ 10,141
===========================
Deferred tax liabilities:
Computer software $ (1,811) $ (842)
Acquisition-related liabilities (803) (771)
Other (568) (329)
---------------------------
Total deferred tax liabilities (3,182) (1,942)
---------------------------
Net deferred tax assets $ 27,014 $ 8,199
===========================
</TABLE>
The net change in deferred tax assets for the year ended December 28, 1996
included $4.7 million recorded as a result of the increase in the acquisition
reserves established in connection with the acquisition of NAD.
In order to fully realize the net deferred tax assets at December 28, 1996, the
Company will need to generate future taxable income of approximately $79
million. Management believes that it is more likely than not that the existing
net deductible temporary differences will reverse during periods in which the
Company will generate such taxable income. The Company anticipates that
increases in taxable income will result primarily from (i) future projected
revenue growth through the addition of new restaurant chains and the expansion
of existing restaurant chains, (ii) a reduction in interest expense due to a
reduction in its indebtedness and planned debt refinancing, (iii) cost savings
through its corporate and network consolidation plan and (iv) other
cost-reduction initiatives. At December 28, 1996, the deferred tax assets
include net operating loss carryforward ("NOL") of approximately $13 million.
Management believes that it is more likely than not that the Company will
realize the benefit of the NOL's existing at December 28, 1996 before they begin
to expire in 2009.
At December 28, 1996 and December 30, 1995, other current assets included income
taxes receivable of approximately $1.5 million and $1.4 million, respectively,
which consisted primarily of overpayments of tax liabilities and pending
carryback refund claims. United States income tax returns for fiscal years 1992
and 1993 are currently under examination by the Internal Revenue Service.
Assessments, if any, are not expected to have a material adverse effect on the
consolidated financial position or results of operations of the Company as of
December 28, 1996.
(9) EMPLOYEE BENEFIT PLANS
(A) DEFINED-CONTRIBUTION PLANS
The Company sponsors a defined-contribution plan ("Associates' Savings Plan")
which covers substantially all employees. Eligible employees may contribute up
to 15 percent of base compensation, and the Company matches 50 percent of the
first 4 percent of eligible compensation. The Company also has a Money Purchase
Plan which covered those former NAD salaried employees not covered by a
defined-benefit plan. Under this plan, the Company contributed 10 percent of
eligible salary. The amount of contribution expenses incurred by the Company for
these plans were approximately $2.7 million, $2.2 million and $0.7 million for
the years ended December 28, 1996, December 30, 1995 and December 31, 1994,
respectively.
On January 1, 1997, the Associates' Savings Plan was renamed the ProSource
Retirement Advantage Plan and the benefits were changed to the following: (i)
Company contributions of 2 percent, (ii) additional Company matching of 50
percent of the first 6 percent contributed by the employee and (iii) vesting of
Company contributions after four years of service. The Money Purchase Plan was
terminated effective December 1996.
23
<PAGE> 17
PROSOURCE, INC.
Notes to Consolidated
Financial Statements
(B) DEFINED-BENEFIT PENSION PLANS
In conjunction with the changes to the Associates' Savings Plan, effective
February 15, 1997 the Company terminated all three noncontributory
defined-benefit pension plans covering substantially all employees except those
covered by multiemployer pension plans under collective-bargaining agreements.
No further benefits will be accrued for these plans after 1996. The Company will
settle all pension obligations related to these terminated plans in 1997 through
(a) the purchase of annuities, (b) lump-sum payments, or (c) the transfer of
plan benefits into the ProSource Retirement Advantage Plan, at the participant's
discretion. The financial effects of this curtailment and settlement are not
expected to have a material adverse effect on the Company's financial condition.
The accrued liability as of December 28, 1996 is adequate to cover the unfunded
termination liability of these three pension plans.
Pension costs of approximately $1.1 million, $0.9 million and $0.9 million
reflected in the consolidated statements of operations for the years ended
December 28, 1996, December 30, 1995 and December 31, 1994, respectively, were
determined based on actuarial studies. The Company's pension expense for
contributions to the various multiemployer pension plans under
collective-bargaining agreements was approximately $1.2 million, $0.9 million
and $0.1 million for the years ended December 28, 1996, December 30, 1995 and
December 31, 1994, respectively.
(10) STOCKHOLDERS' EQUITY
Under the ProSource, Inc. Employee Stock Purchase Plan (the "Stock Plan"),
officers and key employees of the Company ("Management Employees") purchased a
total of 408,100 shares of common stock at $10 per share in 1992, 132,500 shares
of common stock at $11 per share in 1993 and 1994, and 270,000 shares of common
stock at $10 per share in 1995 and 1996. In connection with the purchases of
common stock, each Management Employee entered into a Management Shareholders
Agreement with the Company and Onex.
The ProSource, Inc. Management Option Plan (1995) (the "1995 Option Plan") was
amended in November 1996 to provide for unvested options to vest at a rate of 10
percent per year through December 31, 1999, when all remaining options will
vest. The 1995 Option Plan provided certain Management Employees with options to
purchase one-half the number of shares of Class B Common Stock purchased under
the Employee Stock Purchase Plan at the same price per share paid by such
stockholder (either $10 or $11). Options granted under the 1995 Option Plan
shall remain exercisable until December 31, 2000. No additional options will be
granted under the 1995 Option Plan. The Company recorded a pretax charge in 1996
of $1.2 million reflecting the difference between the market price of the
Company's Class A common stock on the date of amendment and the exercise price
of such options.
Under the 1996 Stock Option Plan (the "1996 Option Plan"), the Company may grant
options to its employees for up to 550,000 shares of Class B common stock. In
November 1996, the Company granted options to purchase 358,000 shares of Class B
common stock at $14 per share which was the market value of the Company's Class
A common stock on the date of grant. Options under the 1996 Option Plan vest
ratably over four years from the date of grant. However, not withstanding such
vesting, no option will become exercisable until the earlier of (i) the date on
which the market value of the Class B common stock is at least 25% greater than
the exercise price of such option and (ii) the eighth anniversary of the date of
grant. Subject to the provisions of the 1996 Option Plan, vested options may be
exercised for a period of up to 10 years from the date of grant.
A summary of the status of the Company's two option plans for the years ended
December 28, 1996, December 30, 1995 and December 31, 1994 is as follows:
<TABLE>
<CAPTION>
WEIGHTED Weighted Weighted
AVERAGE Average Average
1996 EXERCISE 1995 Exercise 1994 Exercise
SHARES PRICE Shares Price Shares Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding- beginning 327,700 $ 10.16 237,450 $ 10.22 253,650 $ 10.00
Options granted 388,750 13.69 101,750 10.00 3,450 11.00
Options exercised (125) 10.00 -- -- -- --
Options canceled (9,875) 10.00 (11,500) 10.00 (19,650) 10.11
-----------------------------------------------------------------------------------------
Options outstanding - ending 706,450 $ 12.10 327,700 $ 10.16 237,450 $ 10.22
=========================================================================================
Options exercisable - year-end 78,401 $ 10.13 41,500 $ 10.12 9,300 $ 10.00
=========================================================================================
</TABLE>
24
<PAGE> 18
PROSOURCE, INC.
Notes to Consolidated
Financial Statements
The following table summarizes information about stock options outstanding at
December 28, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ------------------------------------------------------------------------------- --------------------------------
Weighted Avg.
Exercise Number Remaining Weighted Avg. Number Weighted Avg.
Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- ------------------------------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
$ 10.00 296,950 4 years $ 10.00 68,101 $ 10.00
11.00 51,500 4 years 11.00 10,300 11.00
14.00 358,000 10 years 14.00 - 14.00
- ------------------------------------------------------------------------------- --------------------------------
Totals 706,450 7 years $ 12.10 78,401 $ 10.13
=============================================================================== ================================
</TABLE>
In connection with the disclosure requirements under FASB Statement No. 123, the
Company estimated the fair value of each option granted during 1996 and 1995 at
$7.34 and $8.27, respectively using the Black-Scholes option-pricing model. The
following weighted-average assumptions were used for grants in 1996 and 1995,
respectively: no expected dividend yield for both years (as the Company has not
paid any cash dividends since its inception and does not anticipate paying
dividends in the foreseeable future); expected volatility of 33 percent for both
years; risk-free interest rates of 6.2% and 6.3%; and expected lives of seven
and eight years.
The impact on the Company's net loss and loss per share for 1996 and 1995 of
applying the fair-value-based method of accounting in accordance with FASB
Statement No. 123 is not material to the consolidated financial statements of
the Company.
In conjunction with the acquisition of NAD, the Company issued warrants to
Martin-Brower. At December 28, 1996 and December 30, 1995, the warrants were
exercisable for 283,425 shares of Class B Common Stock at $12.35 per share
during the period commencing on April 1, 1997 and through March 31, 2000, and
upon consummation of certain transactions.
In November 1996, the Company changed its capital structure to 10,000,000
authorized shares of $0.01 par-value Preferred Stock, 50,000,000 authorized
shares of $0.01 par-value Class A Common Stock and 10,000,000 authorized shares
of $0.01 par-value Class B Common Stock. Each share of Class A Common Stock is
entitled to one vote per share and each share of Class B Common Stock is
entitled to ten votes. In addition, each share of Class B Common Stock is
convertible at the option of the holder thereof and automatically upon certain
events into one share of Class A Common Stock.
In November 1996, the Company's board of directors declared a 100-to-1 stock
split. The Company's additional paid-in capital account and the Class B Common
Stock account have been restated to retroactively reflect the stock split.
On November 15, 1996, the Company completed the issuance of 3,400,000 shares of
Class A Common Stock (at a price of $14 per share) through an initial public
offering, resulting in net proceeds to the Company of approximately $43.2
million, after deducting underwriting discounts and commissions, and other
offering costs of approximately $4.4 million. The net proceeds of the offering
were used: (i) to prepay $15 million in outstanding principal and $1.1 million
in accrued interest under the subordinated note payable to Onex; (ii) to prepay,
at a discount, $10 million in outstanding principal and $0.1 million in accrued
interest under the subordinated note payable to Martin-Brower for a total
payment of $9.2 million and (iii) to repay $16.6 million of outstanding
indebtedness under the Company's revolving-credit facility, after deducting a
$1.3 million payment concurrent with the offering for the termination of a
consulting agreement between the Company and certain former owners of an
acquired company. Also in connection with the initial public offering, the
Company incurred a noncash charge of $4 million resulting from the issuance to
Onex of 285,714 shares of Class B Common Stock valued at the initial
public-offering price in exchange for the agreement of Onex to relinquish its
rights to receive an annual fee, previously paid in cash, for management
services rendered to the Company.
(11) CONTINGENCIES AND GUARANTEES
The Company has guaranteed the principal due on certain loans obtained by its
officers and employees in connection with the purchase of common stock under the
Stock Plan. At December 28, 1996, such guarantees amounted to approximately $3.3
million. At December 28, 1996, the Company was also obligated for $17.6 million
in letters of credit issued on behalf of the Company primarily as a guarantee of
payment for obligations arising from workers' compensation claims. At December
28, 1996, the Company had $7.4 million available in unused letters of credit.
The Company and its subsidiaries are parties to various legal actions arising in
the ordinary course of business. Management believes that the outcome of such
cases will not have a material adverse effect on the consolidated results of
operations or the financial position of the Company.
25
<PAGE> 19
PROSOURCE, INC.
Notes to Consolidated
Financial Statements
(12) CONCENTRATIONS OF CREDIT RISK
The Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. BKC-owned and
franchisee-owned Burger King restaurants collectively accounted for 41 percent ,
45 percent and 90 percent of the Company's sales in fiscal years 1996, 1995 and
1994, respectively. Sales to BKC-owned restaurants represented approximately 5
percent, 5 percent and 13 percent of sales for each of the aforementioned years.
Amounts due from BKC at December 28, 1996 and December 30, 1995 were $5.5
million and $4.7 million, respectively.
In addition, sales to Darden Restaurants, Inc. (owner of Red Lobster and Olive
Garden restaurants) accounted for 20 percent and 18 percent of the Company's
sales in fiscal year 1996 and fiscal year 1995, respectively. Amounts due from
Darden Restaurants, Inc. at December 28, 1996 and December 30, 1995, were
approximately $41.1 million and $51.8 million, respectively. Sales to
franchisor-owned and franchisee-owned Arby's restaurants accounted for 10
percent of Company sales in fiscal year 1996 and fiscal year 1995.
The Company will discontinue its distribution services to Arby's restaurants
effective April 1, 1997. In connection therewith, as of December 28, 1996, the
Company accrued approximately $10.6 million of costs associated with terminating
this agreement, including anticipated costs for severance and termination of
leases.
26
<PAGE> 20
PROSOURCE, INC.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
ProSource, Inc.:
We have audited the accompanying consolidated balance sheets of
ProSource, Inc. and subsidiaries as of December 28, 1996 and December 30, 1995,
and the related consolidated statements of operations, stockholders' equity,
and cash flows for each of the years in the three-year period ended December
28,1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. an audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ProSource,
Inc. and subsidiaries as of December 28, 1996 and December 30, 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 28, 1996, in conformity with generally
accepted accounting principles.
As discussed in note 1(m) to the consolidated financial statements, the
company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
in fiscal 1996.
KPMG PEAT MARWICK LLP
Miami, Florida
February 12, 1997
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the Company
<TABLE>
<CAPTION>
State or Other Name(s) Under
Jurisdiction Which Subsidiary
Subsidiary of Incorporation Does Business
- ---------- ---------------- ----------------
<S> <C> <C>
ProSource Services Corporation Delaware ProSource Distribution Services
ProSource Distribution Services Limited Canada None
BroMar Services, Inc. Delaware None
ProSource Receivables Corporation Delaware None
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF PROSOURCE, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMETS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-28-1996 DEC-30-1995
<PERIOD-END> DEC-28-1996 DEC-30-1995
<CASH> 2,763,00 2,325,000
<SECURITIES> 0 0
<RECEIVABLES> 219,340,000 230,089,000
<ALLOWANCES> 2,334,000 2,585,000
<INVENTORY> 144,040,000 140,432,000
<CURRENT-ASSETS> 387,377,000 387,880,000
<PP&E> 77,131,000 73,016,000
<DEPRECIATION> 27,494,000 20,509,000
<TOTAL-ASSETS> 506,671,000 489,173,000
<CURRENT-LIABILITIES> 301,829,000 271,964,000
<BONDS> 111,584,000 161,720,000
0 0
0 0
<COMMON> 94,000 52,000
<OTHER-SE> 78,421,000 49,369,000
<TOTAL-LIABILITY-AND-EQUITY> 506,671,000 489,173,000
<SALES> 4,125,054,000 3,461,837,000
<TOTAL-REVENUES> 4,125,054,000 3,461,837,000
<CGS> 3,806,811,000 3,193,270,000
<TOTAL-COSTS> 3,806,811,000 3,193,270,000
<OTHER-EXPENSES> 345,494,000 255,927,000
<LOSS-PROVISION> 1,682,000 1,845,000
<INTEREST-EXPENSE> 14,824,000 14,678,000
<INCOME-PRETAX> (40,381,000) (699,000)
<INCOME-TAX> 15,410,000 (85,000)
<INCOME-CONTINUING> (24,971,000) (784,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 610,000 (772,000)
<CHANGES> 0 0
<NET-INCOME> (24,361,000) (1,556,000)
<EPS-PRIMARY> (4.19) (0.35)
<EPS-DILUTED> (4.19) (0.35)
</TABLE>
