Exhibit 10.1






















CREDIT AND SECURITY AGREEMENT


 


 


Dated as of February 19, 2014





among



 KATY INDUSTRIES, INC., A DELAWARE CORPORATION







CONTINENTAL COMMERCIAL PRODUCTS, LLC, A DELAWARE LIMITED LIABILITY COMPANY







2155735 ONTARIO INC., AN ONTARIO CORPORATION,







AND







CCP CANADA INC., AN ONTARIO CORPORATION


as Borrowers







and



BMO HARRIS BANK N.A.,

 as Lender






















TABLE OF CONTENTS








	
 

	
 

	
Page


	
 

	
 

	
 


	
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS

	
1


	
1.01

	
Defined Terms

	
1


	
1.02

	
Other Interpretive Provisions

	
39


	
1.03

	
Accounting Terms

	
39


	
1.04

	
Uniform Commercial Code

	
40


	
1.05

	
Rounding

	
40


	
1.06

	
Times of Day

	
40


	
1.07

	
Letter of Credit Amounts

	
41


	 		
	
ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS

	
41


	
2.01

	
Loan Commitments

	
41


	
2.02

	
Borrowings, Conversions and Continuations of Loans

	
41


	
2.03

	
Letters of Credit

	
42


	
2.04

	
Repayment of Loans

	
46


	
2.05

	
Prepayments

	
46


	
2.06

	
Termination or Reduction of Revolving Loan Commitment

	
48


	
2.07

	
Interest

	
48


	
2.08

	
Fees

	
49


	
2.09

	
Computation of Interest and Fees

	
50


	
2.10

	
Evidence of Debt

	
50


	
2.11

	
Payments Generally

	
50


	
2.12

	
Nature and Extent of Each Borrower’s Liability

	
50


	
2.13

	
Cash Collateral

	
53


	 		
	
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY

	
54


	
3.01

	
Taxes

	
54


	
3.02

	
Illegality

	
57


	
3.03

	
Inability to Determine Rates

	
57


	
3.04

	
Increased Costs; Reserves on Eurodollar Rate Loans

	
58


	
3.05

	
Compensation for Losses

	
59


	
3.06

	
Mitigation Obligations; Designation of a Different Lending Office

	
59


	
3.07

	
Certificate of Lender

	
60


	
3.08

	
Survival

	
60


	 		
	
ARTICLE IV SECURITY AND ADMINISTRATION OF COLLATERAL

	
60


	
4.01

	
Security Interest in Collateral

	
60


	
4.02

	
Other Collateral

	
61


	
4.03

	
Collateral Administration

	
64


	
4.04

	
Further Assurances

	
66


	
4.05

	
Cash Management

	
66


	
4.06

	
Information Regarding Collateral

	
68


	 		
	
ARTICLE V CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

	
69


	
5.01

	
Conditions of Initial Credit Extension

	
69


	
5.02

	
Conditions to all Credit Extensions

	
71








i







TABLE OF CONTENTS


(continued)








	
 

	
 

	
Page


	
 

	
 

	
 


	
ARTICLE VI REPRESENTATIONS AND WARRANTIES

	
71


	
6.01

	
Existence, Qualification and Power

	
72


	
6.02

	
Authorization; No Contravention

	
72


	
6.03

	
Governmental Authorization; Other Consents

	
72


	
6.04

	
Binding Effect

	
72


	
6.05

	
Financial Statements; No Material Adverse Effect

	
72


	
6.06

	
Litigation

	
73


	
6.07

	
No Default

	
73


	
6.08

	
Ownership of Property; Liens

	
73


	
6.09

	
Environmental Compliance

	
74


	
6.10

	
Insurance

	
74


	
6.11

	
Taxes

	
75


	
6.12

	
ERISA Compliance

	
75


	
6.13

	
Subsidiaries; Equity Interests

	
76


	
6.14

	
Margin Regulations; Investment Company Act

	
76


	
6.15

	
Disclosure

	
77


	
6.16

	
Compliance with Laws

	
77


	
6.17

	
Intellectual Property; Licenses, Etc

	
77


	
6.18

	
Labor Matters

	
77


	
6.19

	
Deposit Accounts and Securities Accounts

	
78


	
6.20

	
Accounts; Equipment; Inventory

	
78


	
6.21

	
Anti-Terrorism Laws and Foreign Asset Control Regulations

	
79


	
6.22

	
Brokers

	
79


	
6.23

	
Customer and Trade Relations

	
79


	
6.24

	
Material Contracts

	
79


	
6.25

	
Casualty

	
80


	
6.26

	
Senior Indebtedness

	
80


	 		
	
ARTICLE VII AFFIRMATIVE COVENANTS

	
80


	
7.01

	
Financial Statements

	
80


	
7.02

	
Borrowing Base Certificate; Other Information

	
81


	
7.03

	
Notices

	
82


	
7.04

	
Payment of Obligations

	
83


	
7.05

	
Preservation of Existence, Etc

	
83


	
7.06

	
Maintenance of Properties

	
84


	
7.07

	
Maintenance of Insurance

	
84


	
7.08

	
Utilization of Net Proceeds

	
86


	
7.09

	
Compliance with Laws

	
87


	
7.10

	
Books and Records

	
87


	
7.11

	
Inspection Rights and Appraisals; Meetings with the Lender

	
87


	
7.12

	
Use of Proceeds

	
87


	
7.13

	
New Domestic Subsidiaries

	
88


	
7.14

	
New Foreign Subsidiaries

	
88


	
7.15

	
Compliance with ERISA

	
88


	
7.16

	
Further Assurances

	
89


	
7.17

	
Licenses

	
89


	
7.18

	
Environmental Laws

	
89








ii







TABLE OF CONTENTS


(continued)








	
 

	
 

	
Page


	
 

	
 

	
 


	
7.19

	
Landlord and Storage Agreements

	
89


	
7.20

	
Material Contracts

	
89


	
7.21

	
Treasury Management Services

	
90


	 		
	
ARTICLE VIII NEGATIVE COVENANTS

	
90


	
8.01

	
Liens

	
90


	
8.02

	
Indebtedness

	
92


	
8.03

	
Investments

	
94


	
8.04

	
Fundamental Changes

	
95


	
8.05

	
Dispositions

	
95


	
8.06

	
Restricted Payments

	
96


	
8.07

	
Change in Nature of Business

	
96


	
8.08

	
Transactions with Affiliates

	
96


	
8.09

	
Burdensome Agreements

	
97


	
8.10

	
Use of Proceeds

	
97


	
8.11

	
Prepayment of Indebtedness; Amendment to Material Agreements

	
97


	
8.12

	
Financial Covenants

	
98


	
8.13

	
Creation of New Subsidiaries

	
98


	
8.14

	
Securities of Subsidiaries

	
98


	
8.15

	
Sale and Leaseback

	
98


	
8.16

	
Acquisitions

	
98


	
8.17

	
Inactive

	
98


	
8.18

	
Management Fees

	
99


	 		
	
ARTICLE IX EVENTS OF DEFAULT AND REMEDIES

	
99


	
9.01

	
Events of Default

	
99


	
9.02

	
Remedies Upon Event of Default

	
102


	
9.03

	
License

	
102


	
9.04

	
Limitation of Remedies

	
103


	 		
	
ARTICLE X MISCELLANEOUS

	
104


	
10.01

	
Amendments, Etc

	
104


	
10.02

	
Notices; Effectiveness; Electronic Communication

	
104


	
10.03

	
No Waiver; Cumulative Remedies

	
105


	
10.04

	
Expenses; Indemnity; Damage Waiver

	
106


	
10.05

	
Marshalling; Payments Set Aside

	
107


	
10.06

	
Successors and Assigns

	
107


	
10.07

	
Treatment of Certain Information; Confidentiality

	
108


	
10.08

	
Right of Setoff

	
109


	
10.09

	
Interest Rate Limitation

	
109


	
10.10

	
Counterparts; Integration; Effectiveness

	
109


	
10.11

	
Survival

	
109


	
10.12

	
Severability

	
110


	
10.13

	
Governing Law; Jurisdiction; Etc

	
110


	
10.14

	
Waiver of Jury Trial

	
111


	
10.15

	
Electronic Execution of Assignments and Certain Other Documents

	
111


	
10.16

	
USA PATRIOT Act Notice

	
111








iii







TABLE OF CONTENTS


(continued)








	 		Page
	 		
	
10.17

	
No Advisory or Fiduciary Responsibility

	
111


	
10.18

	
Attachments

	
112













iv








	
SCHEDULES

	
 


	
1.01

	
Existing Letters of Credit


	
1.01A

	
Fiscal Periods


	
1.01B

	
Lender’s Office


	
1.01C

	
Mortgaged Property


	
4.01

	
Commercial Tort Claims


	
4.02

	
Pledged Interests


	
4.06

	
Information Regarding Collateral; Chief Executive Office; Etc.


	
5.01

	
Good Standing and Foreign Qualification Jurisdictions


	
6.06

	
Litigation


	
6.08(b)(1)

	
Owned Real Estate


	
6.08(b)(2)

	
Leased Real Estate


	
6.09

	
Environmental Matters


	
6.10

	
Insurance


	
6.12(d)

	
Pension Plans


	
6.13

	
Subsidiaries; Other Equity Investments


	
6.18

	
Labor Matters


	
6.19

	
Deposit Accounts and Securities Accounts


	
6.24

	
Material Contracts


	
7.02

	
Borrower Website Address


	
8.01

	
Existing Liens


	
8.02

	
Existing Indebtedness


	
8.03

	
Existing Investments


	
 

	
 


	
EXHIBITS

	
Form of


	
A

	
Revolving Loan Note


	
B

	
Borrowing Base Certificate


	
C

	
Compliance Certificate


	
D

	
Committed Loan Notice


	
E-1

	
Form of US Tax Compliance Certificate


	
E-2

	
Form of US Tax Compliance Certificate


	
E-3

	
Form of US Tax Compliance Certificate


	
E-4

	
Form of US Tax Compliance Certificate













v







CREDIT AND SECURITY AGREEMENT







This CREDIT AND SECURITY AGREEMENT (this “Agreement”) is entered into as of February 19, 2014, among Katy Industries, Inc., a Delaware corporation (the “Company;”), Continental Commercial Products, LLC, a Delaware limited liability company, 2155735 Ontario Inc., an Ontario corporation, and CCP Canada Inc., an Ontario corporation (each of the foregoing, together with each other Person that joins this Agreement as a “Borrower”, individually and collectively, “Borrower” or “Borrowers”), and BMO Harris Bank N.A., as lender (the “Lender”).







Preliminary Statements







A.           The Borrowers have requested that the Lender provide a credit facility to the Borrowers to finance their mutual and collective business enterprise.







B.            The Lender is willing to provide the credit facility on the terms and conditions set forth in this Agreement.







In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:







ARTICLE I




DEFINITIONS AND ACCOUNTING TERMS







1.01           Defined Terms.  As used in this Agreement, the following terms shall have the meanings set forth below:







“Account Debtor” means any Person who is or may become obligated under or on account of any Account, contract right, Chattel Paper or General Intangible.







“ACH” means automated clearing house transfers.







“Acquisition” means the acquisition of (a) a controlling equity or other ownership interest in another Person, whether by purchase of such equity or other ownership interest or upon exercise of an option or warrant for, or conversion of securities into, such equity or other ownership interest, or (b) assets of another Person which constitute all or substantially all of the assets of such Person or of a line or lines of business conducted by such Person.







“Adjustment Date” means the first day of each Fiscal Quarter, commencing with the first day after the Fiscal Quarter ending June 27, 2014.







“Agreement” means this Credit and Security Agreement, as amended, restated, extended, renewed or otherwise modified from time to time.







“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.







“ALTA Survey” means a survey reasonably satisfactory to the Lender prepared in accordance with the standards adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 2011, known as the “Minimum Standard Detail Requirements of Land Title Surveys” and in sufficient form to satisfy the requirements of any applicable title insurance company to



 







provide extended coverage over survey defects and shall also show the location of all easements, utilities, and covenants of record, dimensions of all improvements, encroachments from any adjoining property, and certify as to the location of any flood plain area affecting the subject real estate.


 


“Applicable Margin” means with respect to any Type of Loan, the percentages per annum set forth below, as based upon the Average Availability for the immediately preceding Fiscal Quarter:


 



	
Level

	
Average Availability

	
Eurodollar Rate Revolving Loans

	
Base Rate Margin

	
Unused Line Fee


	
I

	
Greater than or equal to $8,000,000

	
1.50%

	
0.50%

	
0.25%


	
II

	
Less than $8,000,000 but greater than or equal to $3,000,000

	
1.75%

	
0.75%

	
0.25%


	
III

	
Less than $3,000,000

	
2.00%

	
1.00%

	
0.25%












From the Closing Date until the first Adjustment Date, margins shall be determined as if Level II were applicable.  Thereafter, any increase or decrease in the Applicable Margin resulting from a change in Average Availability shall become effective as of each Adjustment Date based upon Average Availability for the immediately preceding Fiscal Quarter.  Average Availability shall be calculated by the Lender based on the Borrowing Base Certificates delivered from time to time pursuant to Section 7.02(a) (as the same may be adjusted as set forth therein).  If any Borrowing Base Certificate (including any required financial information in support thereof) of the Borrowers is not received by the Lender by the date required pursuant to Section 7.02(a), then the Applicable Margin shall be determined as if the Average Availability for the immediately preceding Fiscal Quarter is at Level III until such time as such Borrowing Base Certificate and supporting information are received.


 


“Appraised Value” means, with respect to the Borrowers’ Eligible Real Estate, the fair market value of such Eligible Real Estate as set forth in the most recent appraisal of such Eligible Real Estate conducted by an independent appraiser engaged by the Lender, which appraisal shall be in form and substance reasonably acceptable to the Lender, shall assume, among other things, a marketing time of not greater than twelve (12) months or less than three (3) months or such other time period agreed to by the Lender in its reasonable discretion exercised in good faith.


 


“Assumed Indebtedness” means Indebtedness of a Person which is (a) in existence at the time such Person becomes a Subsidiary of the Company or (b) is assumed in connection with an Investment in or Acquisition of such Person, and, in each case, has not been incurred or created by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Subsidiary of the Company.


 


“Attributable Indebtedness” means, on any date, (a) in respect of any Capital Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease.


 


“Audited Financial Statements” means the audited consolidated balance sheet of the Company and its Subsidiaries for the Fiscal Year ended December 31, 2012, and the related consolidated statements of income or operations, retained earnings and cash flows for such Fiscal Year of the Company and its Subsidiaries, including the notes thereto.



2







 


“Auditor” has the meaning specified in Section 7.01(a).


 


“Auto-Extension Letter of Credit” has the meaning specified in Section 2.03(b)(ii).


 


“Availability” means the lesser of:


 


(a)           the Revolving Credit Commitment Amount minus the Reserves minus Total Revolving Credit Outstandings; and


 



		(b)	the Borrowing Base minus Total Revolving Credit Outstandings.





 


In calculating Availability at any time and for any purpose under this Agreement, the Borrower Agent, on behalf of the Borrowers, shall certify to the Lender that all accounts payable and Taxes are being paid on a timely basis and consistent with past practices (absent which the Lender may establish a Reserve therefor).


 


“Availability Period” means the period from the Closing Date to the Revolving Credit Termination Date.


 


“Availability Reserves” means, without duplication of any other Reserves or items that are otherwise addressed or excluded through eligibility criteria, such reserves as the Lender from time to time determines in its discretion exercised in its Credit Judgment as being appropriate (a) to reflect the impediments to the Lender’s ability to realize upon the Collateral consisting of Eligible Accounts or Eligible Inventory included in the Borrowing Base, (b) to reflect sums that any Loan Party may be required to pay under any Section of this Agreement or any other Loan Document (including taxes, assessments, insurance premiums, or, in the case of leased assets, rents or other amounts payable under such leases) and has failed to pay, (c) to reflect amounts for which claims may be reasonably expected to be asserted against the Collateral or the Lender or (d) to reflect criteria, events, conditions, contingencies or risks which adversely affect any component of the Borrowing Base, or the assets, business, financial performance or financial condition of any Loan Party.  Without limiting the generality of the foregoing, Availability Reserves may include (but are not limited to) reserves, without duplication, based on:  (i) Rent and Charge Reserves; (ii) customs duties, and other costs to release Inventory which is being imported into the United States; (iii) outstanding Taxes and other governmental charges, including, without limitation, ad valorem, real estate, personal property, sales, and other Taxes which might have priority over the interests of the Lender in the Collateral; (iv) salaries, wages and benefits due to employees of any Loan Party, whether in the United States of America, Canada or elsewhere (including amounts for employee wage claims for earned wages, vacation pay, health care reimbursements and other amounts due under Wisconsin wage lien law, Wis. Stat 109.01, et seq.); (v) any liabilities that are or may become secured by Liens on the Collateral (including Permitted Liens) which might have priority over the Liens or interests of the Lender in the Collateral; (vi) Credit Product Reserves; (vii) Realty Reserves; (viii) payables to vendors entitled to the benefits of PACA or PASA, or any similar statute or regulation; (ix) salability of Eligible Inventory or which reflect such other factors as affect the market value of the Eligible Inventory, including obsolescence, seasonality, Shrink, vendor chargebacks, imbalance, change in Inventory character, composition or mix, markdowns and out of date and/or expired Inventory; and (x) due but unpaid premiums or any other amounts that could be offset against any and all unearned premiums, dividends, or other proceeds due under any insurance premium financing arrangement.


 


“Average Availability” means, for any period, the average daily amount of Availability during such period.


 


“Bankruptcy Code” means Title 11 of the United States Code.



3












“Base Rate” means, for any day, a fluctuating rate per annum equal to the highest of (a) the rate of interest announced by the Lender from time to time as its prime rate for such day (with any change in such rate announced by the Lender taking effect at the opening of business on the day specified in the public announcement of such change), and (b) the Federal Funds Rate for such day, plus 0.50% and (c) Eurodollar Rate for one month Interest Periods plus 1.50%.


 


“Base Rate Loan” means a Loan that bears interest based on the Base Rate.


 


“Base Rate Revolving Loan” means a Revolving Loan that is a Base Rate Loan.


 


“Borrower Agent” has the meaning specified in Section 2.12(g).


 


“Borrower’s Deposit Account” has the meaning specified in Section 7.08(b).


 


“Borrowers” has the meaning specified in the introductory paragraph hereto.


 


“Borrowing” means a Revolving Borrowing.


 


“Borrowing Base” means, at any time of calculation, an amount equal to:


 


(a)          the Value of Eligible Accounts (less all cash received but not yet applied in respect of such Eligible Accounts) multiplied by eighty-five percent (85%); plus


 


(b)          the lesser of (i) the NOLV multiplied by Eligible Inventory multiplied by ninety (90%) or (ii) the Cost of Eligible Inventory multiplied by seventy percent (70%); plus


 


(c)          the lesser of (I) $1,250,000 and (II) the lesser of (y) the NOLV multiplied by Eligible In-Transit Inventory multiplied by ninety (90%) or (z) the Cost of Eligible In-Transit Inventory multiplied by seventy percent (70%); plus


 


(d)          the lesser of (I) $7,000,000 and (II) the sum of (A) (1) the Appraised Value of Eligible Real Estate multiplied by seventy five percent (75%) minus (2) the Monthly Real Estate Amortization Amount, plus (B) (1) the NOLV multiplied by Eligible Equipment multiplied by eighty five percent (85%) minus (2) the Monthly Equipment Amortization Amount; minus


 


(e)           the amount of all Reserves.


 


The term “Borrowing Base” and the calculation thereof shall not include any assets or property acquired in an Acquisition unless the Lender has conducted Field Exams and appraisals reasonably required by it (with results reasonably satisfactory to the Lender) and the Person owning such assets or property shall be a (directly or indirectly) wholly-owned Domestic Subsidiary of the Company and shall have become a Borrower hereunder.  With respect to the Closing Date Acquisition, the Lender acknowledges that it has conducted Field Exams and appraisals of the Target and those conducted prior to the date hereof are satisfactory to the Lender.


 


“Borrowing Base Certificate” means a certificate, in the form of Exhibit B hereto and otherwise in form satisfactory to the Lender, by which Borrowers certify calculation of the Borrowing Base.


 


“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Lender’s Office is located and, if such day relates to any interest rate settings as to a Eurodollar Rate Loan, any



4












fundings, disbursements, settlements and payments in respect of any such Eurodollar Rate Loan, or any other dealings to be carried out pursuant to this Agreement in respect of any such Eurodollar Rate Loan, means any such day that is also a London Banking Day.


 


“Canadian Dollar” and/or “CAD” means the lawful currency of Canada.


 


“Capital Leases” means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases.


 


“Cash Collateralize” means to pledge and deposit with or deliver to the Lender, (a) for the benefit of the Lender, as collateral for L/C Obligations, cash or deposit account balances or, if the Lender shall agree in its sole discretion, other credit support, in each case pursuant to documentation in form and substance reasonably satisfactory to the Lender or (b) for the benefit of the Credit Parties during the continuance of an Event of Default or in connection with the Payment in Full of the Obligations, as collateral for any Obligations that are due or may become due, cash or deposit account balances or, if the Lender shall agree in its sole discretion, other credit support, in each case pursuant to documentation in form and substance reasonably satisfactory to the Lender.  “Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.


 


“Cash Equivalents” means any of the following types of property, to the extent owned by any Borrower free and clear of all Liens (other than Liens created under the Security Instruments):


 


(a)           cash, denominated in Dollars or Canadian Dollars;


 


(b)          readily marketable direct obligations of the government of the United States or any agency or instrumentality thereof, or obligations the timely payment of principal and interest on which are fully and unconditionally guaranteed by the government of the United States or any state or municipality thereof, in each case so long as such obligation has an investment grade rating by S&P and Moody’s;


 


(c)          commercial paper rated at least P-1 (or the then equivalent grade) by Moody’s and A-1 (or the then equivalent grade) by S&P, or carrying an equivalent rating by a nationally recognized rating agency if at any time neither Moody’s nor S&P shall be rating such obligations;


 


(d)           insured certificates of deposit or bankers’ acceptances of, or time deposits with any Lender or with any commercial bank that (i) is a member of the Federal Reserve System, (ii) issues (or the parent of which issues) commercial paper rated as described in the first portion of clause (c) above (without regard to the proviso), (iii) is organized under the laws of the United States or of any state thereof and (iv) has combined capital and surplus of at least $500,000,000;


 


(e)          readily marketable general obligations of any corporation organized under the laws of any state of the United States of America, payable in the United States of America, expressed to mature not later than twelve months following the date of issuance thereof and rated A or better by S&P or A2 or better by Moody’s; and


 


(f)           readily marketable shares of investment companies or money market funds that, in each case, invest solely in the foregoing Investments described in clauses (a) through (e) above; and


 


“Casualty” means any act or occurrence of any kind or nature that results in any loss, destruction, or damage to any asset or property.



5







 


“CCP” means Continental Commercial Products, LLC, a Delaware limited liability company.


 


“Change in Law” means the occurrence, after the date of this Agreement, of any of the following:  (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.


 


“Change of Control” means an event or series of events by which:


 


(a)          The Equity Investor shall cease to own and control, beneficially and of record both assuming all of the preferred stock owned by the Equity Investor is converted to common stock (i) in excess of 51% of the issued and outstanding Equity Interests of the Company, and (ii) a sufficient percentage of the issued and outstanding Equity Interests of the Company to control its board of directors;


 


(b)          Other than the Equity Investor, any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of the Company or its Subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire (such right, an “option right”), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 51% or more of the Equity Interests of the Company on a fully-diluted basis (and taking into account all such Equity Interests that such person or group has the right to acquire pursuant to any option right);


 


(c)           during any period of 24 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Company cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors); or


 


(d)          The Company shall fail to own and control, beneficially and of record (directly or indirectly), 100% of the issued and outstanding Equity Interests of each of its Subsidiaries, except where such failure is the result of a transaction permitted under the Loan Documents.



6












“Closing Date” means the first date all the conditions precedent in Section 5.01 are satisfied or waived in accordance with this Agreement (or, in the case of Section 5.01(b), waived by the Person entitled to receive the applicable payment).


 


“Closing Date Acquisition” means the Acquisition provided for in the Purchase Agreement.


 


“Closing Date Acquisition Documents” means the Purchase Agreement and all other material documents executed between or among any of the Loan Parties and the Seller in connection with the Closing Date Acquisition.


 


“Code” means the Internal Revenue Code of 1986, as amended, and the regulations and official guidance thereunder.


 


“Collateral” means, collectively, certain personal property of the Borrowers or any other Person in which the Lender or any Secured Party is granted a Lien under any Security Instrument as security for all or any portion of the Obligations or any other obligation arising under any Loan Document, but expressly excluding, for the avoidance of doubt, the Excluded Assets and the Excluded Deposit Accounts.


 


“Commitment” means the Revolving Credit Commitment.


 


“Committed Loan Notice” means a notice of (a) a Borrowing, (b) a conversion of Loans from one Type to the other, or (c) a continuation of Eurodollar Rate Loans, which, if in writing, shall be substantially in the form of Exhibit D.


 


“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. §1 et seq.), as amended from time to time, and any successor statute.


 


“Company” means Katy Industries, Inc., a Delaware corporation.


 


“Compliance Certificate” means a certificate substantially in the form of Exhibit C.


 


“Concentration Account” has the meaning specified in Section 4.05(b).


 


“Condemnation” means any seizure or taking of title to, use of, or any other interest in any asset or property, or confiscation of such asset or property or the requisition of the use of such asset or property, under the exercise of the power of condemnation or eminent domain, whether temporarily or permanently, by any Governmental Authority or by any other Person acting under or for the benefit of a Governmental Authority.


 


“Condemnation Awards” means any and all judgments, awards of damages (including severance and consequential damages), payments, proceeds, settlements, amounts paid for a taking in lieu of Condemnation, or other compensation whenever made, including interest thereon, and the right to receive the same, as a result of, or in connection with, any Condemnation or threatened Condemnation.


 


“Consolidated” or “consolidated” means the consolidation, in accordance with GAAP, of the financial condition or operating results of such Person and its Subsidiaries excluding from Consolidated EBITDA the Inactive Subsidiaries.





 


“Consolidated Capital Expenditures” means, with respect to the Company and its Subsidiaries on a Consolidated basis, for any period the sum of (without duplication) all expenditures (whether paid in cash or accrued as liabilities) by the Company or any Subsidiary during such period for items that would



7







be classified as “property, plant or equipment” or comparable items on the Consolidated balance sheet of the Company and its Subsidiaries, including without limitation all transactional costs incurred in connection with such expenditures provided the same have been capitalized; provided, that Consolidated Capital Expenditures shall exclude any Financed Capital Expenditures and any expenditures for equipment or other property purchased simultaneously or substantially concurrently with the trade-in of existing equipment or property owned by any Borrower or any of its Subsidiaries except to the extent such expenditures exceeds the amount of credit received for such trade-in.


 


“Consolidated EBITDA” means, for any period, Consolidated Net Income for such period; plus, to the extent deducted in determining such Consolidated Net Income, without duplication, (a) Consolidated Interest Charges (net of interest income for such period of the Company and its Subsidiaries) for such period, plus (b) federal, state, local and foreign income tax expense for such period, net of income tax credits, plus (c) depreciation and amortization for such period, plus (d) non-cash compensation expense, or other non-cash expenses or charges, for such period arising from the granting of stock options, stock appreciation rights or similar equity arrangements, plus (e) if agreed upon in writing by the Lender, non-cash expenses or losses and other non-cash charges incurred (excluding any non-cash charges representing an accrual of, or reserve for, cash charges to be paid within the next twelve months); plus (f) LIFO reserves established during such period, plus (g) bonuses and expenses of up to $1,000,000 in the aggregate incurred in connection with the Transactions paid within 180 days of Closing Date, plus (h) plus Management Fees which have been expensed in such period, minus (i) non-cash income, gains or profits or LIFO reserves terminated during such period, in each case as determined for the Company and its Subsidiaries on a Consolidated basis; provided that, for any period that includes a material Disposition or Closing Date Acquisition, the calculation of Consolidated EBITDA shall be subject to the adjustments set forth in Sections 1.03(c) and 1.03(d).


 


“Consolidated Fixed Charge Coverage Ratio” means the ratio, determined on a Consolidated basis for the Company and its Subsidiaries for the most recent Measurement Period, of (a) Consolidated EBITDA minus Financed Capital Expenditures to (b) Consolidated Fixed Charges.


 


“Consolidated Fixed Charges” means, for any period, for the Company and its Subsidiaries on a Consolidated basis, the sum of, without duplication, (a) Consolidated Interest Charges paid or required to be paid in cash during such period, (b) all principal repayments made or required to be made of Consolidated Funded Indebtedness during such period, but excluding any repayments of principal of any Revolving Loans and further excluding any such payments to the extent constituting a refinancing of such Consolidated Funded Indebtedness through the incurrence of additional Indebtedness otherwise expressly permitted under Section 8.02, (c) all Restricted Payments made in cash during such period, (d) the aggregate amount of Federal, state, local and foreign income taxes paid in cash, in each case, of or by the Company and its Subsidiaries, during such period, (e) cash contributions made to any Pension Plan or any Foreign Plan (to the extent not deducted in the calculation of the Consolidated Net Income) during such period, (f) the Monthly Equipment Amortization Amount during such period, (g) the Monthly Real Estate Amortization Amount during such period, and (h) plus Management Fees paid in cash in such period.


 


“Consolidated Funded Indebtedness” means, as of any date of determination, for the Company and its Subsidiaries on a Consolidated basis, the sum of (a) the outstanding principal amount of all obligations, whether current or long-term, for borrowed money (including Obligations hereunder) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, (b) all purchase money Indebtedness, (c) all direct obligations arising under standby and commercial letters of credit (excluding the undrawn amount thereof), bankers’ acceptances, bank guaranties (excluding the amounts available thereunder as to which demand for payment has not yet been made), surety bonds (excluding the amounts available thereunder as to which demand for payment has not yet been made) and similar instruments, (d) all obligations in respect of the deferred purchase price of property or services



8







(other than trade accounts payable in the Ordinary Course of Business), (e) Attributable Indebtedness in respect of Capital Leases and Synthetic Lease Obligations, (f) without duplication, all Guarantees with respect to outstanding Indebtedness of the types specified in clauses (a) through (e) above of Persons other than the Company or any Subsidiary, (g) all Subordinated Indebtedness, and (h) all Indebtedness of the types referred to in clauses (a) through (f) above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which the Company or a Subsidiary is a general partner or joint venturer, to the extent such Indebtedness is recourse to the Company or such Subsidiary.


 


“Consolidated Interest Charges” means, with respect to the Company and its Subsidiaries for any period ending on the date of computation thereof, the gross interest expense of the Company and its Subsidiaries, including without limitation (a) the current amortized portion of all fees (including fees payable in respect of any Swap Contract in the nature of an interest rate hedge and all fees payable in respect of any Letter of Credit) payable in connection with the incurrence of Indebtedness to the extent included in gross interest expense and (b) the portion of any payments made in connection with Capital Leases allocable to interest expense, all determined on a Consolidated basis; provided, however, that Consolidated Interest Charges shall include the amount of payments in respect of Synthetic Lease Obligations that are in the nature of interest.


 


“Consolidated Net Income” means, for any period, for the Company and its Subsidiaries on a Consolidated basis, the net income after taxation of the Company and its Subsidiaries for that period excluding (a) net losses or gains realized in connection with (i) any sale, lease, conveyance or other disposition of any asset (other than in the Ordinary Course of Business), or (ii) repayment, repurchase or redemption of Indebtedness, and (b) extraordinary or nonrecurring gain or income (or expense), including, any compensation charge incurred in connection with the Transactions; provided that there shall be excluded from Consolidated Net Income, without duplication, (x) the net income or loss of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting to the extent of the amount of dividends or distributions are not actually paid to the Company or a Subsidiary in cash, (y) net income or loss of any Person in which any other Person (other than the Company or a Subsidiary) has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid in cash to the Company or a Subsidiary by such Person during such period and (z) any Person the ability of which to make Restricted Payments is restricted by any Restrictive Agreement, except to the extent of the amount of dividends or other distributions actually paid in cash to the Company or a Subsidiary by such Person during such period.


 


“Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.


 


“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have meanings correlative thereto.  Without limiting the generality of the foregoing, a Person shall be deemed to be Controlled by another Person if such other Person possesses, directly or indirectly, power to vote 10% or more of the securities having ordinary voting power for the election of directors, managing general partners or the equivalent.


 


“Control Agreement” means, with respect to any Deposit Account, any Securities Account, commodity account, securities entitlement or commodity contract, an agreement, in form and substance reasonably satisfactory to the Lender, among the Lender, the financial institution or other Person at which such account is maintained or with which such entitlement or contract is carried and the Borrower



9







maintaining such account, effective to grant “control” (as defined under the applicable UCC or the Securities Transfer Act, 2006, (Ontario)) over such account to the Lender.


 


“Controlled Account Bank” means each bank with whom Deposit Accounts are maintained in which any funds of any of the Borrowers are concentrated and with whom a Control Agreement has been, or is required to be, executed in accordance with the terms hereof.


 


“Controlled Deposit Account” means each Deposit Account (including all funds on deposit therein) that is the subject of an effective Control Agreement and that is maintained by any Borrower with a financial institution approved by the Lender.


 


“Controlled Investment Affiliates” means, with respect to the Equity Investor, any fund or investment vehicle that is both (i) organized by the Equity Investor or an Affiliate of the Equity Investor for the purpose of making equity or debt investments in one or more companies and (ii) controlled by or under common control with the Equity Investor.  For purposes of this definition “control” means the power to direct or cause the direction of management and policies of a Person, whether by contract or otherwise.


 


“Controlled Securities Account” means each securities account or commodity account (including all financial assets held therein and all certificates and instruments, if any, representing or evidencing such financial assets) that is the subject of an effective Control Agreement and that is maintained by any Borrower with a securities intermediary or commodity intermediary approved by the Lender.


 


“Core Business” means any material line of business conducted by the Company and its Subsidiaries as of the Closing Date and any business directly related thereto.


 


“Cost” means (a) with respect to Inventory, the lower of (i) cost (as reflected in the general ledger of such Person) determined in accordance with GAAP calculated on a first-in, first-out basis and in accordance with the Borrowers’ accounting practices as in effect on the Closing Date and (ii) market value and (b) with respect to Equipment, Real Estate and other property, the lower of (i) cost (as reflected in the general ledger of such Person) and (ii) market value, in each case, determined in accordance with GAAP.


 


“Credit Extension” means each of the following:  (a) a Borrowing and (b) an L/C Credit Extension.


 


“Credit Judgment” means the Lender’s judgment exercised in good faith, based upon its consideration of any factor that it believes (a) could adversely affect the quantity, quality, mix or value of Collateral (including any applicable Laws that may inhibit collection of an Account), the enforceability or priority of the Lender’s Liens, or the amount that the Lender could receive in liquidation of any Collateral; (b) suggests that any collateral report or financial information delivered by the Borrower Agent or any Borrower is incomplete, inaccurate or misleading in any material respect; (c) materially increases the likelihood of any proceeding under any Debtor Relief Law involving a Borrower; or (d) creates or could result in a Default.  In exercising such judgment, the Lender may consider any factors that could increase the credit risk of lending to Borrowers on the security of the Collateral.


 


“Credit Parties” means Lender, and with respect to Credit Product Obligations, Affiliates of Lender.


 


“Credit Party” means (a) the Lender, (b) each Credit Product Provider to the extent it holds secured Credit Product Obligations and was a Lender or an Affiliate of the Lender when such Person



10







provided Credit Product Arrangements to the Borrowers, (c) each Related Party entitled to indemnification under Section 10.04(b) hereof, and (d) the successors and assigns of each of the foregoing.


 


“Credit Product Arrangements” means, collectively, Swap Contracts between a Loan Party and the Lender or Affiliate of the Lender and Treasury Management and Other Services.


 


“Credit Product Obligations” means Indebtedness and other obligations of any Loan Party arising under Credit Product Arrangements and owing to any Credit Product Provider; provided that Credit Product Obligations shall not include Excluded Swap Obligations.


 


“Credit Product Provider” means the Lender or any of its Affiliates.


 


“Credit Product Reserve” means the reserves established by the Lender from time to time in its reasonable judgment in respect of secured Credit Product Obligations in an amount equal to the maximum amount owing thereunder as specified by the Credit Product Provider in writing to the Lender.  It is understood that the amounts so provided by the applicable Credit Product Provider with respect to Swap Credit Product Obligations may include a commercially reasonable level of “cushion” to account for normal short-term market fluctuations.


 


“Customs Broker Agreement” means an agreement, reasonably acceptable in form and substance to the Lender, among a Borrower, a customs broker or other carrier, and the Lender, in which the customs broker or other carrier acknowledges that it has control over and holds the documents evidencing ownership of the subject Inventory for the benefit of the Lender and agrees, upon notice from the Lender, to hold and dispose of the subject Inventory solely as directed by the Lender.


 


“Debtor Relief Laws” means the Bankruptcy Code of the United States, the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada), the Winding-Up and Restructuring Act (Canada) and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or Canada or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.


 


“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would unless cured or waived be an Event of Default.


 


“Default Rate” means an interest rate equal to (a) the Base Rate plus (b) the Applicable Margin with respect to Base Rate Loans plus (c) 2% per annum; provided, however, that (i) with respect to a Eurodollar Rate Loan, until the end of the Interest Period during which the Default Rate is first applicable, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Margin) otherwise applicable to such Eurodollar Rate Loan plus 2% per annum, and thereafter as set forth in the portion of this sentence preceding this proviso, and (ii) with respect to Letter of Credit Fees, the Default Rate shall equal the Letter of Credit Fee, then in effect plus 2% per annum, in each case to the fullest extent permitted by applicable Laws.


 


“Dilution Percent” means the percent, determined for the most recent Measurement Period, equal to (a) bad debt write-downs or write-offs, discounts, returns, promotions, credits, credit memos and other dilutive items with respect to Accounts, divided by (b) gross sales.


 


“Dilution Reserve” means, at any date of determination, (a) the percentage amount by which the Dilution Percent exceeds five percent (5%) times (b) the amount of Eligible Accounts of the Borrowers.



11












“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property (including any Equity Interest), or part thereof, by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith, or any Event of Loss with respect to such asset or property.


 


“Disqualified Equity Interest” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, (a) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 180 days after the Revolving Credit Maturity Date, (b) is convertible into or exchangeable for debt securities (unless only occurring at the sole option of the issuer thereof), (c) (i) contains any repurchase obligation that may come into effect prior to, (ii) requires cash dividend payments (other than taxes) prior to, or (iii) provides the holders thereof with any rights to receive any cash upon the occurrence of a change of control or sale of assets prior to, in each case, the date that is 180 days after the Revolving Credit Maturity Date; provided, however, that (i) with respect to any Equity Interests issued to any employee or to any plan for the benefit of employees of the Company or its Subsidiaries or by any such plan to such employees, such Equity Interest shall not constitute Disqualified Equity Interests solely because it may be required to be repurchased by the Company or one of its Subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, resignation, death or disability and (ii) any class of Equity Interest of such Person that by its terms authorizes such Person to satisfy its obligations thereunder by delivery of an Equity Interest that is not a Disqualified Equity Interest, such Equity Interests shall not be deemed to be Disqualified Equity Interests and (iii) only the portion of such Equity Interests which so matures or is so mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such date shall be deemed to be Disqualified Equity Interests.


 


“Dollar” and “$” mean lawful money of the United States.


 


“Domestic Borrower” means the Company and each Borrower that is a Domestic Subsidiary of the Company.


 


“Domestic Subsidiary” means any Subsidiary that is organized under the laws of any political subdivision of the United States (but excluding any territory or possession thereof).


 


“Dominion Account” means a special account established by Borrowers at the Lender or another bank acceptable to the Lender, over which the Lender has exclusive control for withdrawal purposes.


 


“Eligible Account” means Accounts due to a Borrower that are determined by the Lender, in its Credit Judgment to be Eligible Accounts.  Except as otherwise agreed by the Lender, none of the following shall be deemed to be Eligible Accounts:


 


(a)           Accounts that are not fully earned by performance (or otherwise represent a progress billing or pre-billing) or not evidenced by an invoice which has been delivered to the applicable Account Debtor;


 


(b)           Accounts that have been outstanding for more than ninety (90) days from the invoice date or more than sixty (60) days past the due date whichever comes first; provided, however, that subject to due diligence by such Borrower reasonably acceptable to the Lender, certain Account Debtors and the Referenced Customers may be allowed up to one hundred twenty (120) days after the respective



12







dates of the invoices to pay and such Accounts shall not be deemed ineligible pursuant to the forgoing provided that the aggregate amount of all such Accounts for all Borrowers shall not exceed $250,000;


 


(c)           Accounts due from any Account Debtor, fifty percent (50%) of whose Accounts are otherwise ineligible under the terms of clause (b) above;


 


(d)           Accounts with respect to which (i) any representation or warranty set forth in any Loan Document with respect thereto is not true and correct in all material respects or (ii) a Borrower does not have good, valid and marketable title thereto, free and clear of any Lien (other than Permitted Liens which do not have priority over the Lien in favor of the Lender);


 


(e)           Accounts with respect to which Lender does not have a first priority perfected Lien;


 


(f)           Accounts which are disputed or with respect to which a claim, counterclaim, offset or chargeback has been asserted, but only to the extent of such dispute, counterclaim, offset or chargeback;


 


(g)           Accounts which (i) do not arise out of a sale of goods or rendition of services in the ordinary course of business, (ii)  do not arise upon credit terms usual to the business of the Borrowers or (iii) are not payable in Dollars or Canadian Dollars;


 


(h)           Accounts (i) upon which the Borrower’s right to receive payment is not absolute or is contingent upon the fulfillment of any condition whatsoever or (ii) as to which a Borrower is not able to bring suit or otherwise enforce its remedies against the Account Debtor through judicial process;


 


(i)           Accounts which are owed by (i) any other Borrower or (ii) any Affiliate which is not a Borrower;


 


(j)           Accounts for which all material consents, approvals or authorizations of, or registrations or declarations with any Governmental Authority required to be obtained, effected or given in connection with the performance of such Account by the Account Debtor or in connection with the enforcement of such Account by the Lender have not been duly obtained, effected or given or are not in full force and effect;


 


(k)           Accounts due from an Account Debtor which is the subject of any bankruptcy or insolvency proceeding, has had a trustee or receiver appointed for all or a substantial part of its property, has made an assignment for the benefit of creditors or has suspended its business;


 


(l)           Accounts due from any Governmental Authority, except to the extent that the subject Account Debtor is the federal government of the United States of America and has complied with the Federal Assignment of Claims Act of 1940 and any similar state legislation; provided that up to $250,000 in the aggregate of all such Accounts may be included in the determination of Eligible Accounts, and the Borrower shall not be required to comply with the Federal Assignment of Claims Act of 1940 and any similar state legislation applicable thereto, unless and until an Event of Default has occurred and is then continuing (at which point the Lender, in its sole discretion, may require the Borrowers do so comply in order for such Accounts to be included in the determination of Eligible Accounts thereafter);


 


(m)          Accounts (i) owing from any Account Debtor that is also a supplier to or creditor of a Borrower unless such Person has waived any right of setoff in a manner reasonably acceptable to the 



13







Lender, but only to the extent of the aggregate amount of such Borrower’s liability to such Account Debtor, (ii) to the extent representing any manufacturer’s or supplier’s allowances, credits, discounts, incentive plans or similar arrangements entitling such Borrower to discounts on future purchase therefrom, (iii) to the extent constituting amounts owed with respect to loans or advances, or (iv) to the extent relating to payment of interest, fees or late charges;


 


(n)           the goods giving rise to such Account have not been delivered to (other than Accounts in an aggregate amount not to exceed $500,000 to the extent Lender has received a bill and hold agreement executed and delivered by the Account Debtor which is a domestic Account Debtor thereof in form and substance acceptable to Lender) and accepted by the Account Debtor or the services giving rise to such Account have not been performed by the applicable Borrower and accepted by the Account Debtor or the Account otherwise does not represent a final sale, provided that the Borrower shall have ninety (90) days after the Closing Date to deliver the bill and hold agreements referenced above before such Accounts (in an aggregate amount not to exceed $500,000) are deemed not to constitute Eligible Accounts, and all Accounts owing from foreign Account Debtors arising out of sales on bill-and-hold;


 


(o)           Accounts arising out of guaranteed sale, sale‐or‐return, sale on approval or consignment basis or subject to any right of return, or arising from deposits;


 


(p)          Accounts arising out of sales to Account Debtors outside the United States or Canada in excess of $250,000 in the aggregate unless either (i) such Accounts are fully backed by an irrevocable letter of credit on terms, and issued by a financial institution, reasonably acceptable to the Lender and such irrevocable letter of credit is in the possession of the Lender, or (ii) such Accounts are supported by credit insurance reasonably acceptable to the Lender, naming the Lender as an additional insured;


 


(q)           Accounts that are evidenced by a judgment, Instrument or Chattel Paper;


 


(r)           Accounts due from an Account Debtor and its Affiliates, the aggregate of which Accounts due from such Account Debtor represents more than twenty-five percent (25%) of all then outstanding Accounts owed to the Borrowers, provided that in each case the portion of the Accounts of any Account Debtor not in excess of the applicable percentage for such Account Debtor that otherwise satisfy the criteria set forth herein will be deemed Eligible Accounts;


 


(s)           Accounts constituting Permitted Investments made in accordance with Section 8.03(b);


 


(t)           ccounts that remain open after the applicable Account Debtor has made a partial payment in respect of the applicable invoice (whether or not the applicable Account Debtor has provided an explanation for such partial payment);


 


(u)          Accounts where the applicable Account Debtor tendered a check or other item of payment in full or partial satisfaction and such check or other item of payment has been returned by the financial institution on which it is drawn; or


 


(v)          Accounts for which payment has been received by the applicable Borrower but such payment has not been applied to the applicable Account.


 


“Eligible Equipment” means all Equipment that is determined by the Lender, in its Credit Judgment to be Eligible Equipment.  Except as otherwise agreed by the Lender, none of the following shall be deemed to be Eligible Equipment:



14







 


(a)           Equipment that is not owned by a Borrower;


 


(b)           Equipment that is subject to any Lien other than Permitted Liens which do not have priority over the Lien in favor of the Lender;


 


(c)           Equipment with respect to which Lender does not have a first priority perfected Lien;


 


(d)           Equipment that does not comply with each of the representations and warranties or covenants respecting Equipment made by the Borrowers in the Loan Documents;


 


(e)           Equipment that is not installed and located in a facility owned by a Borrower or leased by a Borrower (and if leased subject at all times to a Lien Waiver), provided that Borrowers shall have ninety (90) days after the Closing Date to deliver a Lien Waiver in respect to any such leased location before such Equipment is deemed not to constitute Eligible Equipment;


 


(f)           Equipment that is not in good operating condition (ordinary wear and tear excepted);


 


(g)           Equipment that is not located within the continental United States (excluding Alaska);


 


(h)           Equipment that is obsolete or surplus Equipment or not otherwise used by Borrower in its operations on a regular basis; and


 


(i)            Equipment that is not included in the equipment appraisal most-recently obtained and approved by the Lender prior to the Closing Date.


 


“Eligible Inventory” means Inventory of the Borrowers that is determined by the Lender, in its Credit Judgment, to be Eligible Inventory.  Except as otherwise agreed by the Lender, the following items of Inventory shall not be included in Eligible Inventory:


 


(a)           Inventory that is not solely owned by a Borrower or a Borrower does not have good and valid title thereto;


 


(b)           Inventory that (i) does not consist of finished goods or raw materials or (ii) is not readily saleable in the Ordinary Course of Business;


 


(c)           Inventory that does not comply with each of the representations and warranties or covenants respecting Inventory made by the Borrowers in the Loan Documents;


 


(d)           Inventory that is leased by or is on consignment to a Borrower;


 


(e)           Inventory that is not located (i) in the United States of America or Canada (excluding territories or possessions of the United States or Canada) and (ii) at a location that is owned or leased by a Borrower, except (in the case of this clause (ii)) to the extent that such Borrower has furnished to the Lender (A) any UCC or PPSA financing statements or other documents that the Lender may reasonably determine to be necessary to perfect its security interest in such Inventory at such location, and (B) a Lien Waiver or agreement to repurchase such Inventory executed by the Person owning any such location on terms reasonably acceptable to the Lender or the Lender has established a Rent and Charges Reserve with respect to such location as required pursuant to Section 4.03(c), provided that Borrowers 



15







shall have ninety (90) days after the Closing Date to deliver a Lien Waiver before such Inventory is deemed not to constitute Eligible Inventory and before a Rent and Charges Reserve is established;




 


(f)           Inventory that is the subject of a consignment by a Borrower as consignor;


 


(g)           Inventory that is in transit including Eligible In-Transit Inventory, except between locations of Borrowers (or between locations of Borrowers and processors or vendors in the Ordinary Course of Business);


 


(h)           Inventory that is comprised of goods which (i) are damaged, defective, “seconds,” or otherwise unmerchantable, (ii) have been returned or are to be returned to the vendor, (iii) are obsolete or slow moving, (iv) are work-in-process (unless work-in-progress approved by the Lender and included in the most-recent inventory appraisal approved by the Lender), (v) that constitute spare parts, discontinued products, promotional, marketing, packaging and shipping materials or supplies used or consumed in the Borrowers’ business and other similar non-merchandise categories; (vi) are not in compliance with all standards imposed by any Governmental Authority having regulatory authority over such Inventory, its use or sale;  (vii) are bill and hold goods; (viii) are subject to any warehouse receipt, bill of lading or negotiable Document; (ix) are in excess of $25,000 in the aggregate and are located on leased premises or in the possession of a warehouseman, bailee, processor, repairman, mechanic, shipper, freight forwarder or other Person, unless the lessor or such Person has delivered a Lien Waiver to Lender, provided that Borrowers shall have ninety (90) days after the Closing Date to deliver a Lien Waiver in respect to any such location before such Inventory is deemed not to constitute Eligible Inventory, or an appropriate Rent and Charges Reserve has been established as required pursuant to Section 4.03(c); or (x) constitute Hazardous Materials;


 


(i)           Inventory that is not subject to a perfected first priority Lien in favor of the Lender (subject only to Permitted Liens set forth in clauses (c), (d) or (l) of Section 8.01 hereof) or which do not have priority over the Lien in favor of the Lender;


 


(j)           Inventory that is not insured in compliance with the provisions of this Agreement and the other Loan Documents;


 


(k)           Inventory not on a perpetual schedule;


 


(l)           Inventory that has been sold but not yet delivered; or


 


(m)           Inventory that is subject to any License or other arrangement that restricts such Borrower’s or the Lender’s right to dispose of such Inventory, unless (i) the Lender has received an appropriate Lien Waiver, and (ii) such Borrower has not received notice of a dispute in respect of any such License or other arrangement.


 


“Eligible In-Transit Inventory” means, as of any date of determination thereof, without duplication of other Eligible Inventory, Inventory:


 



(a)           which has been shipped from within the continental United States or Canada for receipt by a Borrower within fifteen (15) days of the date of determination, but which has not yet been delivered to a Borrower;


 


(b)           for which the purchase order is in the name of a Borrower and title has passed to such Borrower;




 



16







 


(c)           for which the document of title reflects a Borrower as consignee or, if requested by the Lender after the occurrence of an Event of Default, names the Lender as consignee, and in each case as to which the Lender has control over the documents of title which evidence ownership of the subject Inventory (such as, if applicable and if requested by the Lender, by the delivery of a Customs Broker Agreement);


 


(d)           which is insured to the reasonable satisfaction of the Lender; and


 


(e)           which otherwise would constitute Eligible Inventory.


 


“Eligible Real Estate” means Real Estate of the Borrowers that is determined by the Lender in its Credit Judgment to be Eligible Real Estate, except as otherwise agreed by the Lender in good faith, Real Estate shall be Eligible Real Estate if it satisfies all of the following conditions:


 


(a)           a Borrower owns fee title;


 


(b)           the applicable Borrower has executed and delivered to the Lender such Mortgages and other documents as the Lender may reasonably request;


 


(c)           the applicable Borrower shall have delivered to the Lender with respect to each parcel of Eligible Real Estate all Mortgage Related Documents and other real estate items as required by FIRREA and reasonably satisfactory to the Lender;


 


(d)           the Lender has a perfected first priority Lien in such Real Estate (subject only to Permitted Liens set forth in clauses (c), (d) and (g) of Section 8.01);


 


(e)           such parcel of Real Estate has been appraised by a third party appraiser  engaged by the Lender or otherwise acceptable to the Lender in good faith;


 


(f)           as to any particular property, the Borrower is in compliance with the representations, warranties and covenants set forth in Sections 6.09 and 7.18 hereof and in the Mortgage relating to such Real Estate, unless the Lender, in its discretion, otherwise waives such requirement in the determination of Eligible Real Estate; and


 


(g)           such Real Estate is not deemed by the Lender in its Credit Judgment to be ineligible for inclusion in the calculation of the Borrowing Base.


 


“Environmental Laws” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.


 


“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of a Loan Party or any of its Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.



17







“Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.


 


“Equity Investor” means Kohlberg & Company, L.L.C. and its Controlled Investment Affiliates.


 


“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations and official guidance thereunder.


 


“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).


 


“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) the withdrawal of the Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which such entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, or the treatment of a Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA; (e) the institution by the PBGC of proceedings to terminate a Pension Plan; (f) any event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (g) the determination that any Pension Plan is considered an at-risk plan or a plan in endangered or critical status within the meaning of Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; or (h) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate.


 


“Eurocurrency Liabilities” has the meaning specified in Section 3.04(e).


 


“Eurodollar Rate” means with respect to a Eurodollar Rate Loan, a rate per annum determined by the Lender pursuant to the following formula:


 



	
Eurodollar Rate  =

	
Eurodollar Base Rate


	
1.00 – Eurodollar Reserve Percentage







 



Where,


 


“Eurodollar Base Rate” means, for an Interest Period, the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Lender from time to time) at approximately 11:00 a.m., London time, two London Banking Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period.  If such rate is not available at such time for any reason, then the “Eurodollar Base Rate” for such Interest Period shall be the rate per annum determined by the Lender to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day





18







 


 funds in the approximate amount of the Eurodollar Rate Loan being made, and with a term equivalent to such Interest Period would be offered by such other authoritative source (as is selected by the Lender in its sole reasonable discretion)  to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two London Banking Days prior to the commencement of such Interest Period.


 


“Eurodollar Rate Loan” means a Loan that bears interest at the “Eurodollar Rate.”


 


“Eurodollar Reserve Percentage” means, for any day during any Interest Period, the reserve percentage (expressed as a decimal, carried out to five decimal places) in effect on such day, whether or not applicable to any Lender, under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as “Eurocurrency liabilities”).  The Eurodollar Rate for each outstanding Eurodollar Rate Loan shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage.


 


“Event of Default” has the meaning specified in Section 9.01.


 


“Event of Loss” means, with respect to any asset or property (including Inventory, Equipment or Real Estate), any Casualty to or Condemnation of such asset or property or any portion thereof.


 


“Exchange Act” means the Securities Exchange Act of 1934 and the regulations promulgated thereunder.


 


“Excluded Assets” means (a) all assets or property (other than Inventory or Accounts) of the Borrowers that would otherwise be included as Collateral but for the express terms of (i) any permit, lease, license, contract or other agreement or instrument constituting or applicable to such asset or (ii) applicable Law (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9‐406, 9‐407, 9‐408 or 9‐409 of the UCC (or any successor provision or provisions) of any relevant jurisdiction or any other applicable law or principles of equity) that, in each case, prohibits the grant to the Lender of a security interest in and to such asset or property or under which the grant to the Lender of a security interest in and to such asset or property may impair the validity or enforceability of such asset or property (including any United States intent‐to‐use trademark applications); provided, however, that such assets or Property shall constitute “Excluded Assets” only to the extent and for so long as such permit, lease, license, contract or other agreement or applicable law validly prohibits the creation of a Lien on such property in favor of the Lender (as opposed to restricting any exercise of remedies hereunder or requiring the consent of any Person (other than a Borrower) or Governmental Authority for any exercise of remedies hereunder (which exercise of remedies shall be subject to Section 9.04, but such provision shall not limit the creation, attachment or perfection of the Lien in favor of the Lender hereunder)) and, upon the termination of such prohibition (by written consent or in any other manner), such property shall cease to constitute “Excluded Assets;” (b) voting Equity Interests of any first‐tier Foreign Subsidiary in excess of 65% of the aggregate voting Equity Interests of such first‐tier Foreign Subsidiary, (c) to the extent that applicable law requires that a Subsidiary of any Borrower issue nominee or directors qualifying shares, such nominee or qualifying shares, (d) unless otherwise requested by the Lender, any motor vehicle covered by a certificate of title or other evidence of ownership to the extent that a security interest in such asset cannot be perfected by the filing of a financing statement under the UCC, and (e) other assets to the extent the Lender determines in its Credit Judgment that the cost of obtaining such pledge or security interest is excess in relation to the benefit thereof; provided, however, that Excluded Assets shall not include any Proceeds of property described in clauses (a) through (c) above (unless such Proceeds are also described in such clauses).



19







 


“Excluded Deposit Account” (a) Deposit Accounts the balance of which consists exclusively of (i) withheld income taxes and federal, provincial, state or local employment taxes required to be paid to the Internal Revenue Service or state or local government agencies with respect to employees of any Borrower or (ii) amounts required to be paid over to an employee benefit plan pursuant to DOL Reg. Sec. 2510.3 102 on behalf of or for the benefit of employees of any Borrower, (b) all segregated Deposit Accounts constituting (and the balance of which consists solely of funds set aside in connection with) payroll accounts, trust accounts, and accounts dedicated to the payment of accrued employee benefits, medical, dental and employee benefits claims to employees of any Borrower, (c) zero balance disbursement accounts, and (d) other Deposit Accounts maintained in the Ordinary Course of Business containing cash amounts that do not exceed at any time $10,000 for any such account and $25,000 in the aggregate for all such accounts under this clause (d).


 


“Excluded Perfection Actions” means the following actions, unless otherwise requested by the Lender at any time in its sole discretion in the case of clauses (i) through (iv) below or during the continuance of a Default in the case of clauses (i) through (v) below:  the giving of notice or taking other actions (other than the filing of UCC financing statements) in respect of any (i) Chattel Paper (to the extent the value thereof does not exceed $50,000 in the aggregate), (ii) negotiable Documents (to the extent the value of all Goods covered thereby do not exceed $50,000) unless relating to Eligible Inventory, (iii) promissory notes and other Instruments (other than checks) (to the extent the principal amount thereof does not exceed $50,000 in the aggregate), (iv) Letter-of-Credit Rights (to the extent the value thereof does not exceed $50,000 in the aggregate), but not to exceed at any time $100,000 in the aggregate for clauses (i)-(iv) and (v) Intellectual Property in any jurisdiction other than the United States, Canada or any state, province, territory or other political division thereof.


 


“Excluded Swap Obligation” means, with respect to any Loan Party, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Loan Party of, or the grant by such Loan Party of a Lien to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Loan Party’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guarantee of such Loan Party or the grant of such Lien becomes effective with respect to such  Swap Obligation.  If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee or Lien is or becomes illegal.


 


“Excluded Taxes” with respect to the Lender or any other recipient of a payment to be made by or on account of any Revolving Loan:  (a) taxes (i) that are (A) imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes) by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of the Lender, in which its applicable lending office is located; or (B) branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which the Borrower is located; or (ii) that are Other Connection Taxes, (b) in the case of withholding Taxes imposed on amounts payable to or for the account of such Lender or other recipient pursuant to a law in effect on the date on which (i) such Lender or other recipient acquires such interest in the Revolving Loan or (ii) such Lender or other recipient changes its lending office, except in each case to the extent that, pursuant to Section 3.01, amounts with respect to such Taxes were payable either to Lender’s assignor immediately before Lender became a party hereto or to Lender immediately before it changed its lending office, (c) Taxes attributable to such Lender’s or other recipient’s failure to comply with Section 3.01(e); and (d) any U.S. federal withholding taxes imposed pursuant to FATCA.



20







“Existing Agreement” means that certain Loan and Security Agreement dated as of September 30, 2011, by and among Continental Commercial Products, LLC, Glit/Gemtex, Ltd., and 3254018 Nova Scotia Limited, as borrower, and The PrivateBank and Trust Company, as lender, as amended through the Closing Date.


 


“Existing Letters of Credit” means the letters of credit listed on Schedule 1.01 attached hereto.


 


“Extraordinary Expenses” means all costs, expenses, liabilities or advances that Lender may incur or make during a Default, or during the pendency of any proceeding of any Loan Party under any Debtor Relief Laws, including those relating to (a) any audit, inspection, repossession, storage, repair, appraisal, insurance, manufacture, preparation or advertising for sale, sale, collection, or other preservation of or realization upon any Collateral; (b) any action, arbitration or other proceeding (whether instituted by or against the Lender, any Loan Party, any representative of creditors of a Loan Party or any other Person) in any way relating to any Collateral (including the validity, perfection, priority or avoidability of the Lender’s Liens with respect to any Collateral), Loan Documents, Letters of Credit or Obligations, including any lender liability or other claims; (c) the exercise, protection or enforcement of any rights or remedies of the Lender in, or the monitoring of, any proceeding applicable to any Loan Party under any Debtor Relief Laws; (d) settlement or satisfaction of any taxes, charges or Liens with respect to any Collateral; (e) any enforcement action; (f) negotiation and documentation of any modification, waiver, workout, restructuring or forbearance with respect to any Loan Documents or Obligations; and (g) fees, expenses, costs incurred by the Lender and Loans made by the Lender to protect the Collateral or otherwise preserve, reserve or protect its rights and remedies under this Agreement and the Loan Documents.  Such costs, expenses and advances include transfer fees, Other Taxes, storage fees, insurance costs, permit fees, utility reservation and standby fees, legal fees, appraisal fees, brokers’ fees and commissions, auctioneers’ fees and commissions, accountants’ fees, environmental study fees, wages and salaries paid to employees of any Loan Party or independent contractors in liquidating any Collateral, and travel expenses.


 


“FASB ASC” means the Accounting Standards Codification of the Financial Accounting Standards Board.


 


“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations or official interpretations thereof.


 


“Facility” means the Revolving Credit Facility.


 


“Facility Termination Date” means the date as of which Payment in Full of all Obligations has occurred.


 


“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to the Lender on such day on such transactions as determined by the Lender.



21







 


“Fee Letter” means the letter agreement, dated as of even date herewith, between the Borrowers and the Lender.


 


“Field Exam” means any visit and inspection of the properties, assets and records of any Loan Party during the term of this Agreement, which shall include access to such properties, assets and records sufficient to permit the Lender or its representatives to examine, audit and make extracts from any Loan Party’s books and records, make examinations and audits of any Loan Party’s other financial matters and Collateral as the Lender deems appropriate in its Credit Judgment, and discussions with its officers, employees, agents, advisors and independent accountants regarding such Loan Party’s business, financial condition, assets, prospects and results of operations.


 


“Financed Capital Expenditures” means Consolidated Capital Expenditures that are:  (a) financed by interest bearing Indebtedness (excluding the Loans); (b) made with (i) Net Cash Proceeds from any Disposition described in clauses (b) and (d) of Section 8.05 or (ii) Insurance Proceeds or Condemnation Awards arising from any Event of Loss with respect to any property or asset, in each case, or the extent such proceeds are reinvested within one hundred eighty (180) days of receipt thereof; and (c) constituting any portion of the purchase price of the Closing Date Acquisition which is accounted for as a Consolidated Capital Expenditure.


 


“FIRREA” means The Financial Institutions Reform, Recovery and Enforcement Act of 1989.


 


“Fiscal Month” means a fiscal month of a Fiscal Year as shown on Schedule 1.01A.


 


“Fiscal Quarter” means a fiscal quarter of a Fiscal Year as shown on Schedule 1.01A.


 


“Fiscal Year” means a fiscal year of the Company and its Subsidiaries, which period shall be the 12-month period ending on the date specified in Schedule 1.01A attached hereto of each calendar year.  References to a Fiscal Year with a number corresponding to any calendar year (e.g., “Fiscal Year 2014” or “2014 Fiscal Year”) refer to the Fiscal Year beginning in the calendar year of such Fiscal Year as set forth in Schedule 1.101A (e.g., “Fiscal Year 2014” began in calendar year 2014 and ends in calendar year 2014).


 


“Foreign Borrower” means 2155735 Ontario Inc., an Ontario corporation, CCP Canada Inc., an Ontario corporation, and each other Borrower from time to time party hereto which is not a Domestic Subsidiary.


 


“Foreign Government Scheme or Arrangement” has the meaning specified in Section 6.12(e).


 


“Foreign Lender” means (a) if the Borrower is a U.S. Person, a Lender that is not a U.S. Person, and (b) if the Borrower is not a U.S. Person, a Lender that is resident or organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.


 


“Foreign Plan” has the meaning specified in Section 6.12(e).


 



“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.


 


“FRB” means the Board of Governors of the Federal Reserve System of the United States.


 


“GAAP” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.





22







 


“Governmental Authority” means the government of the United States of America, Canada or any other nation, or of any political subdivision thereof, whether state, provincial or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).


 


“Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien).  The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith.  The term “Guarantee” as a verb has a corresponding meaning.


 


“Guarantor” means each Person who executes this Agreement as a “Guarantor.”


 


“Guarantor Payment” has the meaning specified in Section 2.12(c).


 


“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.


 


“Honor Date” has the meaning specified in Section 2.03(c).


 


“Inactive Subsidiaries” means collectively, each Subsidiary that is a dormant Subsidiary and (a) does not own any assets other than those owned at Closing, (b) is not obligated for or in respect of any indebtedness, liabilities or any other obligations (other than certain obligations and liabilities with respect to (i) environmental matters not exceeding $1,200,000 in the aggregate for all Inactive Subsidiaries (less any increase in amounts under clause (ii) below as described in the parenthetical in such clause (ii)) and (ii) legal fees, testing, employees and insurance not exceeding $300,000 during any calendar year in theaggregate (increased to the extent of any settlement of any liability referred to in the foregoing clause (i), provided that the aggregate amount of such increase shall not exceed the amount of any such settled liability and may be spread over multiple calendar years, and provided further that the aggregate amount of liabilities in clause (i) above is reduced by at least a corresponding amount) for all Inactive Subsidiaries), and (c) does not employ any Persons except consistent with practices and to the same extent as of the Closing or conduct any business or operations.  Notwithstanding the foregoing, to the extent that the amounts in the parenthetical in clause (b) above are increased due to new environmental



23







 matters asserted against an Inactive Subsidiary after the Closing Date then any such entity shall continue to be an “Inactive Subsidiary.”


 


“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:


 


(a)           all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;


 


(b)           all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;


 


(c)           net obligations of such Person under any Swap Contract;


 


(d)           all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the Ordinary Course of Business) and any accrued and unpaid obligations with respect to any earnout payments or similar payments under acquisition documents;


 


(e)           indebtedness 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;


 


(f)           obligations under Capital Leases and Synthetic Lease Obligations of such Person;


 


(g)           all obligations of such Person with respect to the redemption, repayment or other repurchase or payment in respect of any Disqualified Equity Interest; and


 


(h)           all Guarantees of such Person in respect of any of the foregoing.


 


For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, to the extent such Indebtedness is recourse to such Person.  The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date.  The amount of any Capital Lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date.


 


“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in clause (a), Other Taxes.


 


“Indemnitees” has the meaning specified in Section 10.04(b).


 



“Information” has the meaning specified in Section 10.07.


 


“Insurance Proceeds” means (i) with respect to an Event of Loss relating to any asset or property, the insurance claims under and the proceeds of any and all policies of insurance covering such asset or property or any part thereof, including all returned and unearned premiums with respect to any insurance 





24












relating to such asset or property, and (ii) any payments or proceeds under or with respect to any business interruption insurance policy.


 


“Intellectual Property” means all past, present and future:  trade secrets, know-how and other proprietary information; trademarks, uniform resource locations (URLs), internet domain names, service marks, sound marks, trade dress, trade names, business names, designs, logos, slogans (and all translations, adaptations, derivations and combinations of the foregoing) indicia and other source and/or business identifiers, and the goodwill of the business relating thereto and all registrations or applications for registrations which have heretofore been or may hereafter be issued thereon throughout the world; copyrights (including copyrights for computer programs) and copyright registrations or applications for registrations which have heretofore been or may hereafter be issued throughout the world and all tangible property embodying the copyrights, unpatented inventions (whether or not patentable); patent applications and patents; industrial design applications and registered industrial designs; license agreements related to any of the foregoing and income therefrom; books, records, writings, computer tapes or disks, flow diagrams, specification sheets, computer software, source codes, object codes, executable code, data, databases and other physical manifestations, embodiments or incorporations of any of the foregoing; the right to sue for all past, present and future infringements of any of the foregoing; all other intellectual property; and all common law and other rights throughout the world in and to all of the foregoing.


 


“Intercreditor Agreement” means an intercreditor or subordination agreement among the Lender, one or more of the Subordinated Lenders or Specified Subordinated Lenders, as applicable, and the Borrowers, entered into from time to time and in form and substance acceptable to the Lender.


 


“Interest Payment Date” means, (a) as to any Eurodollar Rate Loan, (i) the last day of each Interest Period applicable to such Eurodollar Rate Loan; provided that if any Interest Period for a Eurodollar Loan is greater than three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates, (ii) any date that such Loan is prepaid or converted, in whole or in part, and (iii) the Maturity Date with respect to such Loan; and (b) as to any Base Rate Loan, (i) the first day of each month with respect to interest accrued through the last day of each month ending immediately prior to such date, (ii) any date that such Loan is prepaid or converted, in whole or in part, and (iii) the Maturity Date with respect to such Loan; provided, further, that interest accruing at the Default Rate shall be payable from time to time upon demand of the Lender.


 


“Interest Period” means, as to each Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan and ending, in each case, on the date one, two, three or six months thereafter, as selected by the Borrower Agent in its Committed Loan Notice; provided that:


 


(i)           any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;


 


(ii)           any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and



 


(iii)           no Interest Period shall extend beyond the Revolving Credit Maturity Date.





25







 


“Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests of another Person (including through the purchase of an option, warrant or convertible or similar type security), (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor Guarantees Indebtedness of such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit.  For purposes of compliance with Section 8.03, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment, less all returns of principal or equity thereon (and without adjustment by reason of the financial condition of such other Person) 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 transfer or exchange.


 


“IP Rights” rights of any Person to use any Intellectual Property.


 


“IRS” means the United States Internal Revenue Service.


 


“ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance).


 


“Issuer Documents” means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by the Lender and any Borrower (or any Subsidiary) or in favor the Lender and relating to any such Letter of Credit.


 


“Joinder Agreement” means that certain Joinder Agreement by and among Lender, the Borrower and Target dated as of the Closing Date.


 


“Joinder Documents” means collectively, the Joinder Agreement, each other Security Instrument, and such other documents, agreements and certificates executed by the Target from time to time.


 


“Laws” means, collectively, all international, foreign, Federal, state, provincial and local statutes, treaties, rules, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.


 


“L/C Borrowings” means any Revolving Loans the proceeds of which are used to repay Unreimbursed Amounts.


 


“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the renewal or increase of the amount thereof.


 


“L/C Obligations” means, as at any date of determination, (a) the aggregate undrawn amount of all outstanding Letters of Credit, plus (b) the aggregate of all Unreimbursed Amounts, including all L/C Borrowings, plus (c) the aggregate amount of all accrued and unpaid Letter of Credit Fees.  For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.07.  For all purposes of this Agreement, if on any



26












date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.


 


“Lender’s Office” means, with respect to any currency, the Lender’s address and, as appropriate, account as set forth on Schedule 1.01B with respect to such currency, or such other address or account with respect to such currency as the Lender may from time to time notify to the Borrower Agent.


 


“Letter of Credit” means any standby or documentary letter of credit issued by the Lender for the account of a Borrower, or any indemnity, guarantee, exposure transmittal memorandum or similar form of credit support issued by the Lender for the benefit of a Borrower.


 


“Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the Lender.


 


“Letter of Credit Expiration Date” means the day that is thirty (30) days prior to the Revolving Credit Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business Day).


 


“Letter of Credit Fees” means, collectively or individually as the context may indicate, the fees with respect to Letters of Credit described in Section 2.08(b).


 


“Letter of Credit Sublimit” means an amount equal to the lesser of (a) $3,000,000 and (b) the Revolving Credit Commitment Amount.  The Letter of Credit Sublimit is part of, and not in addition to, the Revolving Credit Commitment Amount.


 


“License” means any license or agreement under which a Loan Party is granted IP Rights in connection with any manufacture, marketing, distribution or disposition of Collateral, any use of assets or property or any other conduct of its business.


 


“Licensor” means any Person from whom a Loan Party obtains IP Rights.


 


“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest, or any preference, priority or other security agreement or preferential arrangement in the nature of a security agreement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).


 


“Lien Waiver” means an agreement, in form and substance reasonably satisfactory to the Lender, by which (a) for any Collateral including any Eligible Inventory or Eligible Equipment located on leased premises, the lessor waives or subordinates any Lien it may have on the Collateral, and agrees to permit the Lender to enter upon the premises and remove the Collateral or to use the premises to store or dispose of the Collateral; (b) for any Collateral including any Eligible Inventory or Eligible Equipment held by a warehouseman, processor, shipper, customs broker or freight forwarder, such Person waives or subordinates any Lien it may have on the Collateral, agrees to hold any Documents in its possession relating to the Collateral as agent for the Lender, and agrees to deliver the Collateral to the Lender upon request; (c) for any Collateral held by a repairman, mechanic or bailee, such Person acknowledges the Lender’s Lien, waives or subordinates any Lien it may have on the Collateral, and agrees to deliver the Collateral to the Lender upon request; and (d) for any Collateral subject to a Licensor’s IP Rights, the Licensor grants to the Lender the right, vis-à-vis such Licensor, to enforce the Lender’s Liens with respect 



27












to the Collateral, including the right to dispose of it with the benefit of the Intellectual Property, whether or not a default exists under any applicable License.


 


“Line Reserve” means the sum of (a) the Rent and Charges Reserve; (b) the Credit Product Reserve; (c) the aggregate amount of liabilities at any time secured by Liens upon Collateral that are senior to the Lender’s Liens; (d) sums that any Loan Party may be required to pay under any Section of this Agreement or any other Loan Document (including taxes, assessments, insurance premiums, or, in the case of leased assets, rents or other amounts payable under such leases) and has failed to pay; and (e) amounts for which claims may be reasonably expected to be asserted against the Collateral and/or the Lender.


 


“Loan” means an extension of credit under Article II in the form of a Revolving Loan.


 


“Loan Account” has the meaning assigned to such term in Section 2.10.


 


“Loan Documents” means this Agreement, each Note, each Security Instrument, each Committed Loan Notice, each Issuer Document, each Borrowing Base Certificate, each Compliance Certificate, the Intercreditor Agreement, all Joinder Documents, any agreement creating or perfecting rights in Cash Collateral securing any Obligation hereunder and all other instruments and documents heretofore or hereafter executed or delivered to or in favor of the Lender in connection with the Loans made and transactions contemplated by this Agreement.


 


“Loan Obligations” means all Obligations other than amounts (including fees) owing by any Loan Party pursuant to any Credit Product Arrangements.


 


“Loan Parties” means the Borrowers (including, without limitation, the Company), and each direct or indirect Subsidiary of the Company but excluding any Subsidiary so long as such Subsidiary is an Inactive Subsidiary.


 


“London Banking Day” means any day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.


 


“Management Agreement” shall mean that certain Management Agreement dated as of June 18, 2001 between Kohlberg & Company, L.L.C. and the Company, as amended, modified, supplemented or restated prior to the Closing Date, as in effect on the Closing Date, as extended.


 


“Management Fees” shall mean those certain fees payable by the Company pursuant to the Management Agreement, as in effect on the date hereof, in accordance with the terms of this Agreement.


 


“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect on, the operations, business, assets, properties, liabilities (actual or contingent), or financial condition of either (i) the Borrowers, taken as a whole or (ii) the Company and its Subsidiaries, taken as a whole; (b) a material impairment of the ability of any Loan Party to perform its obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party or on the ability of the Lender to collect any Obligation or realize upon any material portion of the Collateral.


 


“Material Contract” means any agreement or arrangement to which a Loan Party or Subsidiary is party (other than the Loan Documents) (a) that is deemed to be a material contract under any securities law applicable to such Loan Party, including the Securities Act of 1933; (b) for which breach, 


 



28












termination, nonperformance or failure to renew could reasonably be expected to have a Material Adverse Effect; or (c) that relates to Indebtedness in an aggregate amount of $250,000 or more.


 


“Material License” has the meaning assigned to such term in Section 7.17.


 


“Maturity Date” means the Revolving Credit Maturity Date.


 


“Measurement Period” means, at any date of determination, the most recently completed twelve (12) consecutive Fiscal Months of the Company and its Subsidiaries for which financial statements have or should have been delivered in accordance with Section 7.01(a), 7.01(b) or 7.01(c).


 


“Minimum Collateral Amount” means, at any time, (a) with respect to Cash Collateral consisting of cash or Deposit Account balances provided in accordance with the provisions of this Agreement, an amount equal to 105% of the Outstanding Amount of all L/C Obligations, and (b) otherwise, an amount determined by the Lender in its sole discretion.


 


“Monthly Equipment Amortization Amount” means $36,504.


 


“Monthly Real Estate Amortization Amount” means $22,500.


 


“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.


 


“Mortgage Related Documents” means, with respect to any Real Estate subject to a Mortgage, the following, in form and substance reasonably satisfactory to the Lender and with respect to Real Estate acquired after the date hereof received by the Lender for review at least 15 days prior to the effective date of the Mortgage:  (a) a mortgagee title policy (or binder therefor) covering the Lender’s interest under the Mortgage, in a form and amount and by an insurer reasonably acceptable to the Lender, which must be fully paid on such effective date; (b) such assignments of leases, estoppel letters, attornment agreements, consents, waivers and releases as the Lender may reasonably require with respect to other Persons having an interest in the real estate; (c) a ALTA Survey by a licensed surveyor reasonably acceptable to the Lender; (d) a life-of-loan flood hazard determination and, if the real estate is located in a flood plain, an acknowledged notice to borrower and flood insurance in an amount, with endorsements and by an insurer reasonably acceptable to the Lender; (e) a current appraisal of the real estate, prepared by an appraiser acceptable to the Lender, and in form and substance reasonably satisfactory to the Lender; (f) an environmental assessment, prepared by environmental engineers reasonably acceptable to the Lender, and accompanied by such reports, certificates, studies or data as the Lender may reasonably require, which shall all be in form and substance satisfactory to the Lender; and (g) an environmental indemnity agreement and such other documents, instruments or agreements as the Lender may reasonably require with respect to any environmental risks regarding the real estate.


 


“Mortgaged Property” means the Real Estate of the Loan Parties listed on Schedule 1.01C hereto and such other Real Estate required from time to time to be subject to a Mortgage pursuant to the terms of the Loan Documents.


 


“Mortgages” means the mortgages, leasehold mortgages, deeds of trust, leasehold deeds of trust or deeds to secure debt executed by an Loan Party on or about the Closing Date, or from time to time thereafter as may be required under the Loan Documents, in favor of the Lender, for the benefit of the Credit Parties, by which such Loan Party has granted to the Lender, as security for the Obligations, a Lien upon the Real Estate described therein, together with all mortgages, deeds of trust and comparable documents now or at any time hereafter securing the whole or any part of the Obligations.



29







 


“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.


 


“Multiple Employer Plan” means a Plan which has two or more contributing sponsors (including any Loan Party or any ERISA Affiliate) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.


 


“Net Cash Proceeds” means:


 


(1)           with respect to the sale of any asset by any Loan Party or any Subsidiary, the excess, if any, of (a) the sum of the cash and cash equivalents received in connection with such sale (including any cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) over (b) the sum of (i) the principal amount of any Indebtedness that is secured by such asset and that is required to be repaid in connection with the sale thereof (other than Indebtedness under the Loan Documents and Indebtedness owing to the Company or any Subsidiary), (ii) the out‐of‐pocket expenses incurred by such Loan Party or any Subsidiary in connection with such sale, including any brokerage commissions, underwriting fees and discount, legal fees, finder’s fees and other similar fees and commissions, (iii) taxes paid or reasonably estimated to be payable by the Loan Party or any Subsidiary in connection with the relevant asset sale, (iv) the amount of any reasonable reserve required to be established in accordance with GAAP against liabilities (other than taxes deducted pursuant to clause (iii) above) to the extent such reserves are (x) associated with the assets that are the object of such sale and (y) retained by such Loan Party or applicable Subsidiary, and (v) the amount of any reasonable reserve for purchase price adjustments and retained fixed liabilities reasonably expected to be payable by such Loan Party or applicable Subsidiary in connection therewith to the extent such reserves are (1) associated with the assets that are the object of such sale and (2) retained by such Loan Party or applicable Subsidiary; provided that the amount of any subsequent reduction of any reserve provided for in clause (iii) or (iv) above (other than in connection with a payment in respect of such liability) shall (X) be deemed to be Net Cash Proceeds of such asset sale occurring on the date of such reduction, and (Y) immediately be applied to the prepayment of Loans in accordance with Section 2.05(b)(vi) or reinvested as permitted under Section 2.05(b)(i) within one hundred eighty (180) days after the reduction in the reserve.


 


(2)           with respect to any Event of Loss by any Loan Party or any Subsidiary, all Insurance Proceeds and Condemnation Awards arising therefrom, net of reasonable direct costs incurred in connection with the collection of such proceeds, awards or other payments; and


 


(3)           with respect to any offering of equity securities of a Loan Party or any Subsidiary or the issuance of any Indebtedness by a Person,  cash and cash equivalent proceeds received by or for such Person’s account, net of reasonable legal, underwriting, and other fees and expenses incurred as a direct result thereof.


 


“NOLV” means a fraction, expressed as a percentage, (a) the numerator of which is the net orderly liquidation value of the Borrower’s Inventory or Equipment that might be realized at an orderly, negotiated sale held within a reasonable period of time, net of all liquidation expenses, as determined from time to time by reference to the most recent appraisal received by the Lender conducted by an independent appraiser engaged by the Lender, and (b) the denominator of which is the Cost of such Inventory or Equipment such to such appraisal.



 


“Non-Extension Notice Date” has the meaning specified in Section 2.03(b)(ii).




 



30







 


“Note” means the Revolving Loan Note.


 


“Obligations” means (a) all amounts owing by any Loan Party to the Lender or any other Credit Party pursuant to or in connection with this Agreement or any other Loan Document or otherwise with respect to any Loan or Letter of Credit, including without limitation, all principal, interest (including any interest accruing after the filing of any petition in bankruptcy or the commencement of any proceeding under any Debtor Relief Law relating to any Loan Party or would accrue but for such filing or commencement, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), all reimbursement obligations, fees, expenses, indemnification and reimbursement payments, costs and expenses (including all out-of-pocket reasonable fees and expenses of counsel to the Lender incurred pursuant to this Agreement or any other Loan Document), whether direct or indirect, absolute or contingent, liquidated or unliquidated, now existing or hereafter arising hereunder or thereunder, together with all renewals, extensions, modifications or refinancings thereof and (b) all Credit Product Obligations; provided that the Obligations of any Loan Party shall not include its Excluded Swap Obligations.


 


“Ordinary Course of Business” means the ordinary course of business of the Company and its Subsidiaries, consistent with past practices and undertaken in good faith.


 


“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.


 


“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).


 


“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.


 


“Outstanding Amount” means (a) with respect to Revolving Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any Borrowings and any prepayments or repayments of Revolving Loans occurring on such date; and (b) with respect to any L/C Obligations on any date, the aggregate outstanding amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements of amounts paid under outstanding unpaid drawings under any Letters of Credit or any reductions in the maximum amount available for drawing under Letters of Credit taking effect on such date.



31







 


“Overadvance” has the meaning given to such term in Section 2.01(b).


 


“PACA” means the Perishable Agriculture Commodities Act, 1930 and all regulations promulgated thereunder, as amended from time to time.


 


“Participant” has the meaning assigned to such term in clause  Section 10.06(b).


 


“PASA” means the Packers and Stockyard Act, 1921 and all regulations promulgated thereunder, as amended from time to time.


 


“Patent Security Agreement” means any patent security agreement pursuant to which a Loan Party grants to the Lender a security interest in such Person’s interests in its patents, as security for the Obligations.


 


“Payment in Full” or “Paid in Full” means (a) the indefeasible payment in full in cash of all Obligations, together with all accrued and unpaid interest and fees thereon, other than L/C Obligations that have been fully Cash Collateralized in an amount equal to 105% of the amount thereof or as to which other arrangements with respect thereto satisfactory to the Lender shall have been made, (b) the Commitments shall have terminated or expired, (c) the obligations and liabilities of each other Borrower under all Credit Product Arrangements (other than with respect to Treasury Management and Other Services) shall have been fully, finally and irrevocably paid and satisfied in full and such Credit Product Arrangements (other than Treasury Management and Other Services) shall have expired or been terminated, or other arrangements satisfactory to the counterparties shall have been made with respect thereto, and (d) all claims of the Loan Parties against any Secured Party arising on or before the payment date shall have been released on terms acceptable to the Lender; provided that notwithstanding full payment or Cash Collateralization of the Obligations as provided herein, the Lender shall not be required to terminate its Liens in any Collateral unless, with respect to any damages the Lender may incur as a result of the dishonor or return of Payment Items applied to Obligations, the Lender receives (a) a written agreement, executed by Borrowers and any Person whose advances are used in whole or in part to satisfy the Obligations, indemnifying the Lender from any such damages; or (b) such Cash Collateral as the Lender, in its discretion, deems reasonably necessary to protect against any such damages.


 


“Payment Item” means each check, draft or other item of payment payable to a Borrower, including those constituting proceeds of any Collateral.


 


“Payments” has the meaning specified in Section 4.02(f).


 


“PBGC” means the Pension Benefit Guaranty Corporation.


 


“Pension Act” means the Pension Protection Act of 2006.


 


“Pension Funding Rules” means the rules of the Code and ERISA regarding minimum required contributions (including any installment payment thereof) to Pension Plans and Multiemployer Plans and set forth in, with respect to plan years ending prior to the effective date of the Pension Act, Section 412 of the Code and Section 302 of ERISA, each as in effect prior to the Pension Act and, thereafter, Section 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.


 



“Pension Plan” means any employee pension benefit plan (including a Multiple Employer Plan or a Multiemployer Plan) that is maintained or is contributed to by the Company and any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code.


 





32







 


“Permitted Liens” has the meaning specified in Section 8.01.


 


“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.


 


“Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA (including a Pension Plan), maintained for employees of the Company, any Loan Party, or any ERISA Affiliate or any such plan to which the Company, any Loan Party, or any ERISA Affiliate is required to contribute on behalf of any of its employees.


 


“Pledged Interests” means any Instrument, Investment Property or other Equity Interests constituting Collateral (other than Excluded Assets) hereunder, including the Pledged Interests as of the Closing Date which are set forth on Schedule 4.02 hereto.


 


“PPSA” means the Personal Property Security Act (Ontario); provided, that if the attachment, perfection or priority of the security interests granted to the Lender pursuant to any applicable Loan Document are governed by the personal property security laws of any jurisdiction in Canada other than Ontario, PPSA shall mean those personal property security laws in such other jurisdiction in Canada for the purpose of the provisions of any applicable Loan Document and any financing statement relating to such attachment, perfection or priority.


 


“Prepayment” has the meaning set forth in Section 8.11(a).


 


“Properly Contested” means with respect to any obligation of a Loan Party, (a) the obligation is subject to a bona fide dispute regarding amount of such Loan Party’s liability to pay; (b) the obligation is being properly contested in good faith by appropriate proceedings promptly instituted and diligently pursued; (c) appropriate reserves have been established in accordance with GAAP; (d) non-payment could not have a Material Adverse Effect, nor result in forfeiture or sale of any assets of a Loan Party; (e) no Lien is imposed on assets of a Loan Party, unless bonded and stayed to the satisfaction of the Lender; and (f) if the obligation results from entry of a judgment or other order, such judgment or order is stayed pending appeal or other judicial review.


 


“Purchase Agreement” means that certain Stock Purchase Agreement dated as of January 24, 2014, by and among the Company, Continental Commercial Products, LLC, the Sellers, and the Targets pursuant to which the Continental Commercial Products, LLC will acquire all of the Equity Interests of FTW Holdings, Inc., a Delaware corporation.


 


“Qualified ECP” means any Loan Party with total assets exceeding $10,000,000, or that constitutes an “eligible contract participant” under the Commodity Exchange Act and can cause another Person to qualify as an “eligible contract participant” under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.


 


“Real Estate” means all land, together with the buildings, structures, parking areas, and other improvements thereon, now or hereafter owned by any Loan Party, including all easements, rights-of-way, and similar rights appurtenant thereto and all leases, tenancies, and occupancies thereof.


 


“Realty Reserves” means such reserves as the Lender from time to time determines in good faith as being appropriate to reflect the impediments to the Lender’s ability to realize upon any Eligible Real Estate.  Without limiting the generality of the foregoing, Realty Reserves may include (but are not limited to) (i) reserves for compliance with any Environmental Laws at the Fort Wayne Indiana location in the amount of $220,000 and such other additional reserves for compliance with Environmental Laws as



33












determined by the Lender in good faith as being appropriate, (ii) reserves for (A) municipal taxes and assessments, (B) repairs and (C) remediation of title defects, and (iii) reserves for Indebtedness secured by Liens having priority over the Lien of the Lender.


 


“Recipient” means (a) the Lender or (b) any other recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder, as applicable.


 


“Referenced Customers” means any of the following: Lowe's, Tractor Supply, CML, Staples, Bunzl, Orgill, Direct Supply, Academy, Grainger, and Distribution America.


 


“Registered Public Accounting Firm” has the meaning specified in the Securities Laws and shall be independent of the Company as prescribed in the Securities Laws.


 


“Reinvestment Amount” has the meaning given such term in Section 2.05(b)(i).


 


“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.


 


“Rent and Charges Reserve” means the aggregate of (a) all past due rent and other amounts owing by a Borrower to any landlord, warehouseman, processor, repairman, mechanic, shipper, freight forwarder, broker or other Person who possesses any Collateral or could assert a Lien on any Collateral; and (b) a reserve at least equal to three months’ rent and other charges that could be payable to any such Person, unless it has executed a Lien Waiver.


 


“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period referred to in Section 4043(c) of ERISA has been waived.


“Request for Credit Extension” means (a) with respect to a Borrowing, conversion or continuation of Loans, a Committed Loan Notice and (b) with respect to an L/C Credit Extension, a Letter of Cred


it Application.


 


“Reserve” means any reserve constituting all or any portion of the Dilution Reserve, the Availability Reserve or the Line Reserve.


 


“Responsible Officer” means, with respect to each Loan Party, the chief executive officer, president, chief financial officer, treasurer, controller or assistant treasurer or any vice president of such Loan Party.  Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.


 


“Restricted Payment” means (i) any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of the Company or any Subsidiary, (ii) any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such capital stock or other Equity Interest of the Company, or on account of any return of capital to the Company’s stockholders, partners or members (or the equivalent Person thereof) or (iii) any distribution, advance or repayment of Indebtedness to or for the account of a holder of Equity Interests of the Company.



34







 


“Revolving Borrowing” means a borrowing consisting of simultaneous Revolving Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period, made by the Lender pursuant to Section 2.01(a).


 


“Revolving Credit Commitment” means the Lender’s obligation to make Revolving Loans to the Borrowers pursuant to Section 2.01(a).


 


“Revolving Credit Commitment Amount” means $27,000,000, as adjusted from time to time pursuant to the terms of this Agreement.


 


“Revolving Credit Facility” means the facility described in Section 2.01(a) or 2.03 providing for Revolving Loans and Letters of Credit Loans to or for the benefit of the Borrowers by the Lender, in the maximum aggregate principal amount at any time outstanding up to the Revolving Credit Commitment Amount.


 


“Revolving Credit Maturity Date” means February 17, 2017.


 


“Revolving Credit Termination Date” means the earliest of (a) the Revolving Credit Maturity Date, (b) the date of termination of the Revolving Credit Commitment pursuant to Section 2.06, and (c) the date of termination of the commitment of Lender to make Loans and of the obligation of the Lender to make L/C Credit Extensions pursuant to Section 9.02.


 


“Revolving Loan” means a Base Rate Loan or a Eurodollar Rate Loan made to the Borrowers pursuant to Section 2.01(a).


 


“Revolving Loan Note” means a promissory note made by the Borrowers in favor of the Lender evidencing Revolving Loans made by the Lender, substantially in the form of Exhibit A.


 


“Royalties” means all royalties, fees, expense reimbursement and other amounts payable by a Loan Party under a License.


 


“S&P” means Standard & Poor’s Financial Services LL/C, a subsidiary of The McGraw‐Hill Companies, Inc. and any successor thereto.


 


“Same Day Funds” means immediately available funds.


 


“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.


 


“Securities Laws” means the Securities Act of 1933, the Exchange Act, Sarbanes-Oxley Act of 2002 and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the Public Company Accounting Oversight Board, as each of the foregoing may be amended and in effect on any applicable date hereunder.


 


“Security Instruments” means, collectively or individually as the context may indicate, the Security Agreement, the Control Account Agreements, the Mortgages, the Mortgage Related Documents, the Patent Security Agreements, the Trademark Security Agreements, each Lien Waiver and all other agreements (including securities account control agreements), instruments and other documents, whether now existing or hereafter in effect, pursuant to which any Loan Party or other Person shall grant or convey to the Lender a Lien in property as security for all or any portion of the Obligations.



35







 


“Seller” means the “Shareholders” as defined in the Purchase Agreement.


 


“Seller Undertakings” means, collectively, all representations, warranties, covenants and agreements made by Seller in favor of any Borrower or any other Loan Party, and all indemnifications by a seller for the benefit of any Grantor relating thereto, pursuant to the Closing Date Acquisition Documents.


 


“Shrink” means Inventory which has been lost, misplaced, stolen, or is otherwise unaccounted for.


 


“Solvent” means, as to any Person, such Person (a) owns property or assets whose fair salable value is greater than the amount required to pay all of its debts (including contingent, subordinated, unmatured and unliquidated liabilities); (b) owns property or assets whose present fair salable value (as defined below) is greater than the probable total liabilities (including contingent, subordinated, unmatured and unliquidated liabilities) of such Person as they become absolute and matured; (c) is able to pay all of its debts as they mature; (d) has capital that is not unreasonably small for its business and is sufficient to carry on its business and transactions and all business and transactions in which it is about to engage; (e) is not “insolvent” within the meaning of Section 101(32) of the Bankruptcy Code; and (f) has not incurred (by way of assumption or otherwise) any obligations or liabilities (contingent or otherwise) under any Loan Documents, or made any conveyance in connection therewith, with actual intent to hinder, delay or defraud either present or future creditors of such Person or any of its Affiliates.  “Fair salable value” means the amount that could be obtained for assets within a reasonable time, either through collection or through sale under ordinary selling conditions by a capable and diligent seller to an interested buyer who is willing (but under no compulsion) to purchase.  For purposes hereof, the amount of all contingent liabilities at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, can reasonably be expected to become an actual or matured liability.


 


“Specified Loan Party” means a Loan Party that is not then an “eligible contract participant” under the Commodity Exchange Act (determined prior to giving effect to Section 2.12(c)).


 


“Specified Subordinated Indebtedness” means Indebtedness in the aggregate original principal amount not to exceed $1,000,000 issued by the Company in favor of the Specified Subordinated Lenders which is expressly subordinated in right of payment to the prior payment in full of the Obligations and which is in form and on terms approved in writing by the Lender and is at all times subject to an Intercreditor Agreement.


 


“Specified Subordinated Indebtedness Documents” means all notes, documents and agreements executed or delivered in connection with the Specified Subordinated Indebtedness from time to time.


 


“Specified Subordinated Lenders” means Kohlberg Investors IV, L.P., Kohlberg TE Investors IV, L.P., Kohlberg Offshore Investors IV, L.P., Kohlberg Partners IV, L.P., Daniel B. Carroll and Wallace E. Carroll, Jr.


 


“Subordinated Indebtedness” means the Specified Subordinated Indebtedness and all other Indebtedness payable by a Borrower or any of its Subsidiaries to a Person other than another Borrower which is expressly subordinated in right of payment to the prior payment in full of the Obligations and which is in form and on terms approved in writing by the Lender and is at all times subject to an Intercreditor Agreement.



36







 


“Subordinated Indebtedness Documents” means the Specified Subordinated Indebtedness Documents and all notes, documents and agreements executed or delivered in connection with the Subordinated Indebtedness from time to time.


 


“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity (but not a representative office of such Person) of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Company.


 


“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.


 


“Swap Obligation” means, with respect to any Loan Party, any obligation to perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.


 


“Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include the Lender or any Affiliate of the Lender).


 


“Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so‐called synthetic, off‐balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).


 


“Target” means collectively, FTW Holdings, Inc., a Delaware corporation, and Fort Wayne Plastics, Inc., an Indiana corporation.



37












“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.


 


“Total Facility Amount” means the sum of the maximum aggregate principal amount of the Revolving Credit Facility.


 


 “Total Revolving Credit Outstandings” means, without duplication, the aggregate Outstanding Amount of all Revolving Loans and L/C Obligations at such time.


 


“Trademark Security Agreement” means any trademark security agreement pursuant to which any Loan Party grants to the Lender a security interest in such Person’s interest in its trademarks as security for the Obligations.


 


“Transaction” means, individually or collectively, (a) the Closing Date Acquisition and (b) the entering by the Borrowers of the Loan Documents to which they are a party and the funding of the Revolving Credit Facility.


 


“Treasury Management and Other Services” means (a) all arrangements for the delivery of treasury management services, (b) all commercial credit card and merchant card services; and (c) all other banking products or services, other than Letters of Credit, in each case, to or for the benefit of any Borrower which are entered into or maintained with the Lender or Affiliate of the Lender and which are not prohibited by the express terms of the Loan Documents.


 


“Type” means, with respect to a Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan.


 


“UCC” means the Uniform Commercial Code as in effect from time to time in the State of Illinois; provided that if, with respect to any financing statement or by reason of any mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interests granted to the Lender pursuant to any applicable Loan Document is governed by the Uniform Commercial Code as in effect in a jurisdiction of the United States other than Illinois, the term “UCC” shall also include the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions of this Agreement, each Loan Document and any financing statement relating to such perfection or effect of perfection or non-perfection.


 


“United States” and “U.S.” mean the United States of America.


 


“Unreimbursed Amount” means, at any time, any amounts drawn or paid under any Letter of Credit not reimbursed to Lender in cash.


 


“Unused Fee” has the meaning specified in Section 2.08(a).


 


“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.


 


“Value” means, for an Eligible Account, the face amount of such Eligible Account, net of any returns, rebates, discounts (calculated on the shortest terms), deposits, credits, allowances or Taxes (including sales, excise or other taxes) that have been or could reasonably be expected to be claimed by the Account Debtor or any other Person against the Eligible Account.



38












1.02            Other Interpretive Provisions.  With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:


 


(a)              The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”  The word “will” shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), including any such amendments, supplements or modifications in connection with this Agreement of documents entered into in connection with the Existing Agreement, (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.


 


(b)           In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”


 


(c)           Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.


 



		1.03	Accounting Terms.





 


(a)           Generally.  All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.


 


(b)           Changes in GAAP.  If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower Agent or the Lender shall so request, the Lender and the Borrower Agent shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Lender); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower Agent shall provide to the Lender and the Lender financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a



39












reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.





 


(c)           Acquisitions and Dispositions.  All defined terms used in the calculation of Consolidated Fixed Charge Coverage Ratio hereof shall be calculated on a historical pro forma basis giving effect (by inclusion or exclusion, as applicable), during any Measurement Period that includes the Closing Date Acquisition or any Disposition permitted by Sections 8.05(b), 8.05(c), or 8.05(d), to the actual historical results of the Person or line of business so acquired or asset so Disposed and which amounts shall include only adjustments as are otherwise reasonably satisfactory to the Lender.





 


(d)           Other Pro Forma Calculations.  Any pro forma calculation of the Consolidated Fixed Charge Coverage Ratio shall be made (i) as if all Indebtedness incurred or Investments or Disposition made at the time of such measurement had been incurred or made, as applicable, on the first day of the Measurement Period most recently ended for which the Borrower Agent has delivered (or was required to deliver) financial statements pursuant to Sections 7.01(a), 7.01(b) or 7.01(c), (ii) as if all Indebtedness repaid at the time of such measurement had been paid on the last day of the Measurement Period most recently ended for which the Borrower Agent has delivered (or was required to deliver) financial statements pursuant to Sections 7.01(a), 7.01(b) or 7.01(c), and (iii) pro forma for any other element of the relevant transaction that would affect the calculation of Consolidated Fixed Charge Coverage Ratio.


 


(e)           Consolidation of Variable Interest Entities.  Except as expressly provided otherwise herein, all references herein to consolidated financial statements of the Company and its Subsidiaries or to the determination of any amount for the Company and its Subsidiaries on a consolidated basis or any similar reference shall, in each case, be deemed to include each variable interest entity that the Company is required to consolidate pursuant to FASB ASC 810 as if such variable interest entity were a Subsidiary as defined herein.


 


(f)           In computing financial ratios and other financial calculations of the Company and its Subsidiaries required to be submitted pursuant to this Agreement, all Indebtedness of the Company and its Subsidiaries shall be calculated at par value irrespective if the Company has elected the fair value option pursuant to FASB Interpretation No. 159 – The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115 (February 2007).





 


1.04        Uniform Commercial Code.  As used herein, the following terms are defined in accordance with the UCC in effect in the State of Illinois from time to time:  “Account,” “Certificated Security,” “Chattel Paper,” “Deposit Account,” “Equipment,” “Financial Asset,” “Document,” “Electronic Chattel Paper,” Financial Asset,” “Fixture,” “General Intangibles,” Goods,” “Health‐Care‐Insurance Receivables,” “Instruments,” “Inventory,” “Investment Property,” “Letter of Credit Rights,” “Payment Intangibles,” “Proceeds,” “Record,” “Security,” “Security Entitlement,” “Software,” “Supporting Obligations,” “Tangible Chattel Paper” and “Uncertificated Security.”





 


1.05        Rounding.  Any financial ratios required to be maintained by the Borrowers pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).





 


1.06        Times of Day.  Unless otherwise specified, all references herein to times of day shall be references to Central time (daylight or standard, as applicable).



40












1.07        Letter of Credit Amounts.  Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.


 


1.08        Disclosure Schedules.  Each of the Schedule attached to this Agreement shall reflect the Closing Date Acquisition as if it had closed immediately prior to the effectiveness of this Agreement instead of immediately after the effectiveness of this Agreement; provided, however, that any representations and warranties relating to the Target or the business, assets or properties of the Target in any respect shall not be applicable until the consummation of the Closing (as defined in the Purchase Agreement).


 


ARTICLE II



THE COMMITMENTS AND CREDIT EXTENSIONS





2.01        Loan Commitments.





 


(a)           Revolving Credit Commitment.  Subject to the terms and conditions set forth herein, the Lender agrees to make Revolving Loans to the Borrowers from time to time during the Availability Period for the Revolving Credit Facility, in an aggregate amount not to exceed at any time outstanding the lesser of (x) the Revolving Credit Commitment Amount, or (y) the Borrowing Base; subject in each case to the following limitations:


 


(i)           after giving effect to any Revolving Borrowing, the Total Revolving Credit Outstandings shall not exceed the lesser of (A) the Revolving Credit Commitment Amount minus the Reserves and (B) the Borrowing Base, and


 


(ii)           the Outstanding Amount of all L/C Obligations shall not at any time exceed the Letter of Credit Sublimit.


Within the limits of the Revolving Credit Commitment, and subject to the other terms and conditions hereof, the Borrowers may borrow under this Section 2.01(a), prepay under the terms of this Agreement, and reborrow under this Section 2.01(a).





 


(b)          Overadvances.  If the aggregate Outstanding Amount of Revolving Loans exceeds the Borrowing Base (“Overadvance”) at any time, the excess amount shall be payable by Borrowers on demand by the Lender, but all such Revolving Loans shall nevertheless constitute Obligations secured by the Collateral and entitled to all benefits of the Loan Documents.  Any funding or sufferance of an Overadvance shall not constitute a waiver of the Event of Default caused thereby.





 


2.02        Borrowings, Conversions and Continuations of Loans.





 


(a)           Each Borrowing, each conversion of Loans from one Type to the other, and each continuation of Eurodollar Rate Loans shall be made upon the Borrower’s irrevocable notice to the Lender, which may be given by telephone or other electronic method satisfactory to Lender.  Each such notice must be received by the Lender not later than 11:00 a.m. (i) three Business Days prior to the requested date of any Borrowing of, conversion to or continuation of Eurodollar Rate Loans or of any conversion of Eurodollar Rate Loans to Base Rate Loans, and (ii) on the requested date of any Borrowing



41












of Base Rate Loans.  Each telephonic notice by the Borrowers pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Lender of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower Agent.  Each Borrowing of, conversion to or continuation of Eurodollar Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $250,000 in excess thereof.  Each Committed Loan Notice (whether telephonic or written) shall specify (i)  the principal amount of Loans to be borrowed, converted or continued, (ii) the Type of Loans to be borrowed or to which existing Loans are to be converted, (iii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day) and (iv) if applicable, the duration of the Interest Period with respect thereto.  If the Borrowers fail to specify a Type of Loan in a Committed Loan Notice or if the Borrowers fail to give a timely notice requesting a conversion or continuation, then the applicable Loans shall be made as, or converted to, Base Rate Loans.  Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans.  If the Borrowers request a Borrowing of, conversion to, or continuation of Eurodollar Rate Loans in any such Loan Notice, but fail to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.


 


(b)          Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurodollar Rate Loan.  During the existence of a Default, no Loans may be requested as, converted to or continued as Eurodollar Rate Loans without the consent of the Lender.


 


(c)          The Lender shall promptly notify the Borrower Agent of the interest rate applicable to any Interest Period for Eurodollar Rate Loans upon determination of such interest rate.  At any time that Base Rate Loans are outstanding, the Lender shall notify the Borrower Agent of any change in the Lender’s prime rate used in determining the Base Rate promptly following the public announcement of such change.


 


(d)           fter giving effect to all conversions of Loans from one Type to the other, and all continuations of Loans as the same Type, there shall not be more than six (6) Interest Periods in effect in respect of the Facilities.





 


(e)          Borrowers hereby irrevocably authorize the Lender, in the Lender’s sole discretion, to advance to Borrowers, and/or to pay and charge to Borrowers’ Loan Account hereunder, all sums necessary to pay (i) any interest accrued on the Obligations when due and to pay all fees, costs and expenses and other Obligations at any time owed by any Loan Party to the Lender hereunder and (ii) any service charge or Credit Party Expenses when due.  The Lender shall advise the Borrower Agent of any such advance or charge promptly after the making thereof.  Such action on the part of the Lender shall not constitute a waiver of the Lender’s rights and the Borrowers’ obligations under Section 2.05(b)(v).  Any amount which is added to the principal balance of the Loan Account as provided in this Section 2.02(e) shall constitute Revolving Loans (notwithstanding the failure of the Borrowers to satisfy any of the conditions to Credit Extensions in Section 5.02) and Obligations hereunder and shall bear interest at the interest rate then and thereafter applicable hereunder to Base Rate Loans.





 


2.03        Letters of Credit.


 


(a)           The Letter of Credit Commitment.


 


(i)           Subject to the terms and conditions set forth herein, the Lender agrees, (1) from time to time on any Business Day during the period from the Closing Date until the earlier to occur of the Letter of Credit Expiration Date or the termination of the AvailabilityP eriod, to issue Letters of Credit at the request of the Borrower Agent for the account of the 



42












Borrowers, and to amend Letters of Credit previously issued by it, in accordance with subsection (b) below, and (2) to honor drafts under the Letters of Credit; provided that the Lender shall not be obligated to make any L/C Credit Extension with respect to any Letter of Credit, if as of the date of such L/C Credit Extension, (A) the Total Revolving Credit Outstandings would exceed the Borrowing Base, (B) the aggregate Total Revolving Credit Outstandings of the Lender would exceed the Revolving Credit Commitment Amount, minus the Reserves or (C) the Outstanding Amount of the L/C Obligations would exceed the Letter of Credit Sublimit.  Each request by the Borrower Agent for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Borrower Agent that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence.  Within the foregoing limits, and subject to the terms and conditions hereof, the Borrowers’ ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrowers may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.


 


(ii)           The Lender shall not issue any Letter of Credit, if:


 


(A)          subject to Section 2.03(b), the expiry date of such requested Letter of Credit would occur (i) as to standby Letters of Credit, more than twelve months after the date of issuance or last renewal, and (ii) as to commercial Letters of Credit, later than the earlier of (1) 270 days after the date of issuance thereof and (2) the Letter of Credit Expiration Date, unless in each case the Lender has approved such expiry date; or


 


(B)           the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless the Lender has approved such expiry date;


 


(iii)          The Lender shall not be under any obligation to issue any Letter of Credit if:


 


(A)          any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Lender from issuing such Letter of Credit or any Law applicable to the Lender or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Lender shall prohibit, or request that the Lender refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Lender with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Lender is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the Lender any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the Lender in good faith deems material to it; or


 


(B)           the issuance of such Letter of Credit would violate one or more policies of the Lender; or


 


(C)           such Letter of Credit is in an initial amount less than $10,000.


 


(iv)         The Lender shall not amend any Letter of Credit if the Lender would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof.



43












(v)           The Lender shall be under no obligation to amend any Letter of Credit if (A) the Lender would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.





 


(b)           Procedures for Issuance and Amendment of Letters of Credit; Auto‐Extension Letters of Credit.


 


(i)           Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower Agent delivered to the Lender in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Borrower Agent and, if applicable, of the applicable Borrower.  Such Letter of Credit Application must be received by the Lender not later than 11:00 a.m. at least two Business Days (or such later date and time as the Lender may agree in a particular instance in its sole discretion) prior to the proposed issuance date or date of amendment, as the case may be.  In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the Lender:  (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing or presentation thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing or presentation thereunder; and (G) such other matters as the Lender may reasonably require.  In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the Lender (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the Lender may reasonably require.  Additionally, the Borrower Agent shall furnish to the Lender such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the Lender may require.





 


(ii)           If the Borrower Agent so requests in any applicable Letter of Credit Application, the Lender may, in its sole and absolute discretion, agree to issue a Letter of Credit other than a commercial Letter of Credit that has automatic extension provisions (each, an “Auto‐Extension Letter of Credit”); provided that any such Auto‐Extension Letter of Credit must permit the Lender to prevent any such extension at least once in each twelve‐month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued.  Unless otherwise directed by the Lender, the Borrower Agent shall not be required to make a specific request to the Lender for any such extension.





 


(iii)           Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the Lender will also deliver to the Borrower Agent a true and complete copy of such Letter of Credit or amendment.





 


(c)           Drawings and Reimbursements.  Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing or presentation of documents under such Letter of Credit, the Lender shall notify the Borrower Agent thereof.  Not later than 1:00 p.m. on the date of any payment by the Lender under a Letter of Credit (each such date, an “Honor Date”), any Borrower shall reimburse the Lender in Dollars and in an amount equal to the amount of such drawing.  In such event, the Borrower



44












Agent shall be deemed to have requested a Revolving Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Revolving Credit Commitment and the conditions set forth in Section 5.02 (other than the delivery of a Committed Loan Notice).  Lender is irrevocably authorized at any time to make a Revolving Loan to fund an L/C Borrowing.


 


(d)          Obligations Absolute.  The obligation of the Borrowers to reimburse the Lender for each drawing under each Letter of Credit, and to repay each L/C Borrowing shall be joint and several and absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:


 


(i)           any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other agreement or instrument relating thereto;


 


(ii)          the existence of any claim, counterclaim, set-off, defense or other right that any Borrower or any Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the Lender or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;


 


(iii)          any draft, demand, certificate or other document or endorsement  presented under or in connection with such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;


 


(iv)          any payment by the Lender under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit, or any payment made by the Lender under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or


 


(v)           any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Borrower or any Subsidiary.


 


(e)           Role of the Lender as Issuer of Letter of Credit.  The Lender and the Borrowers agree that, in paying any drawing under a Letter of Credit, the Lender shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document.  Each Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit.  The Lender may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the Lender shall not be responsible for the validity or sufficiency of any instrument endorsing, transferring or assigning or purporting to endorse, transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.



45












(f)           Applicability of ISP and UCP.  Unless otherwise expressly agreed by the Lender and the Borrower Agent, when a Letter of Credit is issued, (i) the rules of the ISP shall apply to each standby Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce at the time of issuance shall apply to each commercial Letter of Credit.


 


(g)          Fronting Fee and Documentary and Processing Charges Payable to the Lender.  The Borrowers shall pay directly to the Lender for its own account a fronting fee with respect to each Letter of Credit, at a rate equal to one-eighth of one percent (0.125%), computed on the amount of such Letter of Credit (a “Fronting Fee”), and payable upon the issuance or renewal (automatic or otherwise)  thereof or upon any amendment increasing the amount thereof.  In addition, the Borrowers shall pay directly to the Lender for its own account, in Dollars, the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the Lender relating to letters of credit issued by it as from time to time in effect.  Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.


 


(h)           Conflict with Issuer Documents.  In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.


 


(i)           Letters of Credit Issued for Subsidiaries.  Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Subsidiary or any other Borrower, each Borrower shall be obligated to reimburse the Lender hereunder for any and all drawings under such Letter of Credit.  Each Borrower hereby acknowledges that the issuance of Letters of Credit for the account of Subsidiaries or any other Borrower inures to the benefit of such Borrower, and that such Borrower’s business derives substantial benefits from the businesses of such Subsidiaries or other Borrower.





 


2.04        Repayment of Loans.  The Borrowers shall repay to the Lender on the Revolving Credit Maturity Date the aggregate principal amount of all Revolving Loans outstanding on such date plus any interest then due and all other Obligations (other than contingent indemnification obligations for which no claim has then been made).





 


2.05        Prepayments.





 


(a)           Optional. The Borrowers may, upon notice to the Lender from the Borrower, at any time or from time to time voluntarily prepay Revolving Loans in whole or in part without premium or penalty; provided that: (A) such notice must be received by the Lender not later than 11:00 a.m. (1) three Business Days prior to any date of prepayment of Eurodollar Rate Loans and (2) on the date of prepayment of Base Rate Loans; and (B) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $250,000 in excess thereof or, if less, the entire principal amount thereof then outstanding.  Each such notice shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid and, if Eurodollar Rate Loans are to be prepaid, the Interest Period(s) of such Loans.  If such notice is given by the Borrower Agent, the Borrowers shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.  Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05.





 


(b)           Mandatory.





 


(i)           Asset Dispositions.  If any Loan Party or any of its Subsidiaries Disposes of any property (other than any Disposition of any property permitted by Sections 8.05(f) and



46












8.05(g), or a Disposition arising from an Event of Loss with respect to any Real Estate (which is governed by Section 7.08) which results in the realization by such Person of Net Cash Proceeds, the Borrowers shall prepay an aggregate principal amount of Loans equal to 100% of such Net Cash Proceeds within three (3) Business Days after receipt thereof by such Person; provided, however, that with respect to any Net Cash Proceeds realized under a Disposition of any asset or property (other than any Disposition of any property permitted by Section 8.05(f) and 8.05(g), or a Disposition with respect to any Real Estate) described in this Section 2.05(b)(i), at the election of the Borrowers (as notified by the Borrower Agent to the Lender on or prior to the date of such Disposition), and so long as no Default shall have occurred and be continuing, such Loan Party or such Subsidiary may reinvest all or any portion of such Net Cash Proceeds in operating assets (the amount of such Net Cash Proceeds to be reinvested, the “Reinvestment Amount”) so long as: (A) the Borrower’s purchase of such replacement operating assets is consummated within 180 days after the receipt of such Net Cash Proceeds (as certified by the Borrower Agent in writing to the Lender); (B) such replacement operating assets are free and clear of Liens other than Permitted Liens; and (C) any Net Cash Proceeds not so reinvested shall be immediately applied to the prepayment of the Loans as set forth in Section 2.05(b)(i).





 


(ii)           Equity Issuance.  Upon the sale or issuance by any Loan Party or any of its Subsidiaries of any of its Equity Interests (other than Excluded Issuances and any sales or issuances of Equity Interests to another Loan Party), the Borrowers shall prepay an aggregate principal amount of Loans equal to 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof by such Loan Party or such Subsidiary.





 


(iii)           Debt Incurrence.  Upon the incurrence or issuance by any Loan Party or any of its Subsidiaries of any Indebtedness (other than Indebtedness expressly permitted to be incurred or issued pursuant to Section 8.02), the Borrowers shall prepay an aggregate principal amount of Loans equal to 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof by such Loan Party or such Subsidiary.





 


(iv)           Extraordinary Receipts.  Upon receipt of any cash or cash equivalents by (or paid to or for the account of) any Loan Party not in the ordinary course of business, including tax refunds, pension plan reversions, Insurance Proceeds (including business interruption insurance), judgments, settlements or other payments in connection with any other Event of Loss, indemnity payments and any purchase price adjustments, and not otherwise included in clause (i), (ii) or (iii) of this Section 2.05(b) or described in Section 7.08, the Borrowers shall prepay an aggregate principal amount of Loans equal to 100% of all Net Cash Proceeds therefrom immediately upon receipt; provided, however, that with respect to any Insurance Proceeds, Condemnation Awards or similar payments (or payments in lieu thereof) or indemnity payments, at the election of the Borrowers (as notified by the Borrower Agent to the Lender on or prior to the date of receipt of such Insurance Proceeds, Condemnation Awards or indemnity payments), and so long as no Default shall have occurred and be continuing, such Loan Party or such Subsidiary may apply within 180 days after the receipt of such cash proceeds to replace or repair the equipment, fixed assets or real property in respect of which such Net Cash Proceeds were received; and provided, further, however, that any Net Cash Proceeds not so applied shall be immediately applied to the prepayment of the Loans as set forth in this Section 2.05(b)(iv).





 


(v)           Overadvances.  If for any reason the Total Revolving Credit Outstandings at any time exceed the Borrowing Base at such time, the Borrowers shall upon demand prepay Revolving Loans and L/C Borrowings and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess; provided, however, that the Borrowers shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.05(b)(v)



47












unless, after the prepayment of the Revolving Loans, the Total Revolving Credit Outstandings exceed the Revolving Credit Commitment Amount at such time.





 


(vi)          Application of Mandatory Prepayments.


 


(A)          Each prepayment of Loans pursuant to the foregoing provisions of this Section 2.05(b) shall be applied to the Revolving Credit Facility.  All such prepayments of the Revolving Credit Facility shall be in the manner set forth in clause (B) of this Section 2.05(b)(vi).  No prepayment of the Loans pursuant to the foregoing provisions of Section 2.05(b) shall be a permanent reduction of the Revolving Credit Commitment or the Letter of Credit Sublimit.


 


(B)           Except as otherwise provided in this Agreement, prepayments of the Revolving Credit Facility made pursuant to this Section 2.05(b), first, shall be applied ratably to the L/C Borrowings, second, shall be applied ratably to the outstanding Revolving Loans, third, shall be used to Cash Collateralize the remaining L/C Obligations in the Minimum Collateral Amount and, fourth, the amount remaining, if any, after the prepayment in full of all L/C Borrowings and Revolving Loans outstanding at such time and the Cash Collateralization of the remaining L/C Obligations in the Minimum Collateral Amount may be retained by the Borrowers for use in the ordinary course of Borrowers’ business.  Upon the drawing of any Letter of Credit that has been Cash Collateralized, the funds held as Cash Collateral shall be applied (without any further action by or notice to or from the Borrowers or any other Loan Party) to reimburse the Lender.





 


2.06        Termination or Reduction of Revolving Loan Commitment.  The Borrowers may, upon notice to the Lender from the Borrower Agent, terminate the Revolving Credit Commitment or the Letter of Credit Sublimit, or from time to time permanently reduce the Revolving Credit Commitment or the Letter of Credit Sublimit; provided that (i) any such notice shall be received by the Lender not later than 11:00 a.m. five Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $1,000,000 or any whole multiple of $500,000 in excess thereof, (iii) the Borrowers shall not terminate or reduce (A) the Revolving Credit Commitment if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Revolving Credit Outstandings would exceed the Revolving Credit Commitment or (B) the Letter of Credit Sublimit if, after giving effect thereto, the Outstanding Amount of L/C Obligations not fully Cash Collateralized hereunder would exceed the Letter of Credit Sublimit and (iv) if, after giving effect to any reduction or termination of the Revolving Credit Commitment or the Letter of Credit Sublimit exceeds the amount of the Revolving Credit Commitment such Sublimit shall be automatically reduced by the amount of such excess.  All fees accrued until the effective date of any termination of the Revolving Credit Commitment shall be paid on the effective date of such termination.





 


2.07         Interest.


 


 


(a)           Subject to the provisions of subsection (b) below:  (i) each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Margin; and (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Margin.





 


(b)          (i)           If any amount payable by the Borrowers under any Loan Document is not paid when due (after giving effect to any applicable grace periods), whether at stated maturity, by



48












acceleration or otherwise, then such amount shall thereafter (from the time not paid or, if applicable, following the expiration of any applicable grace period) at the discretion of the Lender bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.


 


(i)           If any other Event of Default exists, then the Lender may require (and notify the Borrowers thereof) that all outstanding Loan Obligations shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate.


 


(ii)           Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.


 


(c)           Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.





 


2.08         Fees.





 


(a)           Unused Fee.  The Borrowers shall pay to the Lender a fee (the “Unused Fee”) equal to the Applicable Margin times the actual daily amount by which the Revolving Credit Commitment Amount exceeds the sum of (i) the Outstanding Amount of Revolving Loans and (ii) the Outstanding Amount of L/C Obligations.  The Unused Fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Article V is not met, and shall be due and payable quarterly in arrears on the first Business Day of each April, July, October and January, commencing with the first such date to occur after the Closing Date, and on the last day of the Availability Period.  If there is any change in the Applicable Margin during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Margin separately for each period during such quarter that such Applicable Margin was in effect.





 


(b)           Letter of Credit Fees.  Subject to the provisions of the last sentence of this subsection (b), the Borrowers shall pay to the Lender in Dollars, (i) a Letter of Credit fee  (“Letter of Credit Fee”) for each Letter of Credit equal to the Applicable Margin for Eurodollar Rate Loans times the daily maximum amount available to be drawn under such Letter of Credit (whether or not such maximum amount is then in effect under such Letter of Credit).  For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.07.  The Letter of Credit Fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Article V is not met, and shall be due and payable quarterly in arrears on the first Business Day of each April, July, October and January, commencing with the first such date to occur after the Closing Date, and on the last day of the Availability Period.  If there is any change in the Applicable Margin for Eurodollar Rate Loans during any quarter, the daily maximum amount of each Letter of Credit shall be computed and multiplied by the Applicable Margin for Eurodollar Rate Loans separately for each period during such quarter that such Applicable Margin was in effect.  At all times that the Default Rate shall be applicable to any Loans pursuant to Section 2.07(b), the Letter of Credit Fees payable under this subsection (b) shall accrue and be payable at the Default Rate.


 


(c)           Closing Fee.  The Borrowers agree to pay to the Lender, for its own account, the fees payable in the amounts and at the times set forth in the Fee Letter.



49












(d)          Generally.  All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Lender.  Fees paid shall not be refundable under any circumstances.





 


2.09         Computation of Interest and Fees.  All computations of interest for Base Rate Loans (including Base Rate Loans determined by reference to the Eurodollar Rate) and the Unused Line Fee shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed.  All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year).  Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.11, bear interest for one day.  Each determination by the Lender of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.





 


2.10         Evidence of Debt.  The Credit Extensions made by the Lender shall be evidenced by one or more accounts or records maintained by the Lender (the “Loan Account”) in the ordinary course of business.  The accounts or records maintained by the Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lender to the Borrowers and the interest and payments thereon.  Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrowers hereunder to pay any amount owing with respect to the Obligations.  Upon the request of the Lender, the Borrowers shall execute and deliver to the Lender a Note, which shall evidence the Lender’s Loans in addition to such accounts or records.  The Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto.





 


2.11         Payments Generally.  All payments to be made by the Borrowers shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff.  Except as otherwise expressly provided herein, all payments by the Borrowers hereunder shall be made to the Lender at the Lender’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein.  All payments received by the Lender after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.  If any payment to be made by the Borrowers shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected on computing interest or fees, as the case may be.





 


2.12         Nature and Extent of Each Borrower’s Liability.


 


(a)           Joint and Several Liability.  Each Borrower agrees that it is jointly and severally liable for all Obligations except Excluded Swap Obligations and all agreements under the Loan Documents.  Each Borrower agrees that its guaranty obligations hereunder constitute a continuing guaranty of payment and not of collection, that such obligations shall not be discharged until the Facility Termination Date, and that such obligations are absolute and unconditional, irrespective of (i) the genuineness, validity, regularity, enforceability, subordination or any future modification of, or change in, any Obligations or Loan Document, or any other document, instrument or agreement to which any Borrower is or may become a party or be bound; (ii) the absence of any action to enforce this Agreement (including this Section) or any other Loan Document, or any waiver, consent or indulgence of any kind by the Lender with respect thereto; (iii) the existence, value or condition of, or failure to perfect a Lien or to preserve rights against, any security or guaranty for the Obligations or any action, or the absence of any action, by the Lender in respect thereof (including the release of any security or guaranty); (iv) the insolvency of any Borrower; (v) any election by the Lender in proceeding under Debtor Relief Laws for the application of Section 1111(b)(2) of the Bankruptcy Code; (vi) any borrowing or grant of a Lien by



50












any other Borrower, as debtor-in-possession under Section 364 of the Bankruptcy Code or otherwise; (vii) the disallowance of any claims of the Lender against any Borrower for the repayment of any Obligations under Section 502 of the Bankruptcy Code or otherwise; or (viii) any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, except full payment in cash or Cash Collateralization of all Obligations on the Facility Termination Date.


 


(b)           Waivers.


 


(i)           Each Borrower expressly waives all rights that it may have now or in the future under any statute, at common law, in equity or otherwise, to compel the Lender to marshal assets or to proceed against any Borrower, other Person or security for the payment or performance of any Obligations before, or as a condition to, proceeding against such Borrower.  Each Borrower waives all defenses available to a surety, guarantor or accommodation co-obligor other than full payment of all Obligations.  It is agreed among each Borrower, the Lender that the provisions of this Section 2.12 are of the essence of the transaction contemplated by the Loan Documents and that, but for such provisions, the Lender would decline to make Loans and issue Letters of Credit.  Each Borrower acknowledges that its guaranty pursuant to this Section is necessary to the conduct and promotion of its business, and can be expected to benefit such business.


 


(ii)           The Lender may, in its discretion, pursue such rights and remedies as they deem appropriate, including realization upon Collateral by judicial foreclosure or nonjudicial sale or enforcement, without affecting any rights and remedies under this Section 2.12.  If, in taking any action in connection with the exercise of any rights or remedies, the Lender shall forfeit any other rights or remedies, including the right to enter a deficiency judgment against any Borrower or other Person, whether because of any Applicable Laws pertaining to “election of remedies” or otherwise, each Borrower consents to such action and waives any claim based upon it, even if the action may result in loss of any rights of subrogation that such Borrower might otherwise have had.  Any election of remedies that results in denial or impairment of the right of the Lender to seek a deficiency judgment against any Borrower shall not impair any other Borrower’s obligation to pay the full amount of the Obligations.  Each Borrower waives all rights and defenses arising out of an election of remedies, such as nonjudicial foreclosure with respect to any security for the Obligations, even though that election of remedies destroys such Borrower’s rights of subrogation against any other Person.  The Lender may bid all or a portion of the Obligations at any foreclosure or trustee’s sale or at any private sale, and the amount of such bid need not be paid by the Lender but shall be credited against the Obligations.  The amount of the successful bid at any such sale, whether the Lender or any other Person is the successful bidder, shall be conclusively deemed to be the fair market value of the Collateral, and the difference between such bid amount and the remaining balance of the Obligations shall be conclusively deemed to be the amount of the Obligations guaranteed under this Section 2.12, notwithstanding that any present or future law or court decision may have the effect of reducing the amount of any deficiency claim to which the Lender might otherwise be entitled but for such bidding at any such sale.





 


(c)           Extent of Liability; Contribution.


 


 


(i)           Notwithstanding anything herein to the contrary, each Borrower’s liability under this Section 2.12 shall be limited to the greater of (i) all amounts for which such Borrower is primarily liable, as described below, and (ii) such Borrower’s Allocable Amount.



51












(ii)          If any Borrower makes a payment under this Section 2.12 of any Obligations (other than amounts for which such Borrower is primarily liable) (a “Guarantor Payment”) that, taking into account all other Guarantor Payments previously or concurrently made by any other Borrower, exceeds the amount that such Borrower would otherwise have paid if each Borrower had paid the aggregate Obligations satisfied by such Guarantor Payments in the same proportion that such Borrower’s Allocable Amount bore to the total Allocable Amounts of all Borrowers, then such Borrower shall be entitled to receive contribution and indemnification payments from, and to be reimbursed by, each other Borrower for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment.  The “Allocable Amount” for any Borrower shall be the maximum amount that could then be recovered from such Borrower under this Section 2.12 without rendering such payment voidable under Section 548 of the Bankruptcy Code or under any applicable state fraudulent transfer or conveyance act, or similar statute or common law.


 


(iii)          Each Loan Party that is a Qualified ECP when its guaranty of or grant of a Lien as security for a Swap Obligation becomes effective hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support to each Specified Loan Party with respect to such Swap Obligation as may be needed by such Specified Loan Party from time to time to honor all of its obligations under the Loan Documents in respect of such Swap Obligation (but, in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering such Qualified ECP’s obligations and undertakings under this Section 2.12 voidable under any applicable fraudulent transfer or conveyance act).  The obligations and undertakings of each Qualified ECP under this Section shall remain in full force and effect until Payment in Full of the Obligations.  Each Loan Party intends this Section to constitute, and this Section shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support or other agreement” for the benefit of, each Loan Party for all purposes of the Commodity Exchange Act.


 


(d)          Direct Liability; Separate Borrowing Availability.  Nothing contained in this Section 2.12 shall limit the liability of any Borrower to pay Loans made directly or indirectly to that Borrower (including Loans advanced to any other Borrower and then re-loaned or otherwise transferred to, or for the benefit of, such Borrower), L/C Obligations relating to Letters of Credit issued to support such Borrower’s business, and all accrued interest, fees, expenses and other related Obligations with respect thereto, for which such Borrower shall be primarily liable for all purposes hereunder.


 


(e)           Joint Enterprise.  Each Borrower has requested that the Lender make this credit facility available to Borrowers on a combined basis, in order to finance Borrowers’ business most efficiently and economically.  The Borrowers’ business is a mutual and collective enterprise, and the successful operation of each Borrower is dependent upon the successful performance of the integrated group.  The Borrowers believe that consolidation of their credit facility will enhance the borrowing power of each Borrower and ease administration of the facility, all to their mutual advantage.  The Borrowers acknowledge that the Lender’s willingness to extend credit and to administer the Collateral on a combined basis hereunder is done solely as an accommodation to Borrowers and at Borrowers’ request.


 


(f)           Subordination.  Each Loan Party hereby subordinates any claims, including any rights at law or in equity to payment, subrogation, reimbursement, exoneration, contribution, indemnification or set off, that it may have at any time against any other Loan Party, howsoever arising, to the full payment in cash or Cash Collateralization of all Obligations on the Facility Termination Date.



52












(g)           Borrower Agent.


 


(i)           Each Borrower hereby irrevocably appoints and designates CCP (“Borrower Agent”) as its representative and agent and attorney-in-fact for all purposes under the Loan Documents, including requests for Credit Extensions, designation of interest rates, delivery or receipt of communications, preparation and delivery of Borrowing Base and financial reports, receipt and payment of Obligations, requests for waivers, amendments or other accommodations, actions under the Loan Documents (including in respect of compliance with covenants), and all other dealings with the Lender.


 


(ii)           Each other Loan Party hereby irrevocably appoints and designates the Borrower Agent as its agent and attorney-in-fact to receive statements on account and all other notices from the Lender with respect to the Obligations or otherwise under or in connection with this Agreement and the other Loan Documents.


 


(iii)          Any notice, election, representation, warranty, agreement or undertaking by or on behalf of any Loan Party by the Borrower Agent shall be deemed for all purposes to have been made by such Loan Party and shall be binding upon and enforceable against such Loan Party to the same extent as if made directly by such Loan Party.


 


(iv)          The Borrower Agent hereby accepts the appointment by each Loan Party hereunder to act as its agent and attorney-in-fact.


 


(v)          The Lender shall be entitled to rely upon, and shall be fully protected in relying upon, any notice or communication (including any notice of borrowing) delivered by Borrower Agent on behalf of any Borrower or other Loan Party.  The Lender may give any notice to or communication with a Borrower or other Loan Party hereunder to Borrower Agent on behalf of such Borrower or Loan Party.  The Lender shall have the right, in its discretion, to deal exclusively with Borrower Agent for any or all purposes under the Loan Documents.  Each Borrower and each other Loan Party agrees that any notice, election, communication, representation, agreement or undertaking made on its behalf by Borrower Agent shall be binding upon and enforceable against it.





 


2.13        Cash Collateral.





 


(a)           Certain Credit Support Events.  If (i) as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, or (ii) the Borrowers shall be required to provide Cash Collateral pursuant to this Agreement, the Borrowers shall within one Business Day following any request by the Lender, provide Cash Collateral in an amount not less than the Minimum Collateral Amount.


 


(b)           Grant of Security Interest.  The Borrowers hereby grant to (and subjects to the control of) the Lender and agree to maintain, a first priority security interest in all such cash, deposit accounts and all balances therein, and all other property so provided as collateral pursuant hereto, and in all proceeds of the foregoing, all as security for the obligations to which such Cash Collateral may be applied pursuant to Section 2.13(c).  If at any time the Lender determines that Cash Collateral is less than the Minimum Collateral Amount, the Borrowers will, promptly upon demand by the Lender, pay or provide to the Lender additional Cash Collateral in an amount sufficient to eliminate such deficiency.  All Cash Collateral (other than credit support not constituting funds subject to deposit) shall be maintained in one or more blocked, non-interest bearing deposit accounts at the Lender.



53












(c)           Application.  Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided in respect of Letters of Credit, shall be held and applied to the satisfaction of the specific L/C Obligations and other obligations for which the Cash Collateral was so provided, prior to any other application of such property as may be provided for herein.


 


ARTICLE III



TAXES, YIELD PROTECTION AND ILLEGALITY





3.01        Taxes.


 


(a)           Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes.


 


(i)          Any and all payments by or on account of any obligation of the Loan Parties hereunder or under any other Loan Document shall to the extent permitted by applicable Laws be made free and clear of and without reduction or withholding for any Taxes.  If, however, applicable Laws require the Loan Parties to withhold or deduct any Tax, such Tax shall be withheld or deducted in accordance with such Laws as determined by the Borrower Agent or the Lender, as the case may be, upon the basis of the information and documentation to be delivered pursuant to subsection (d) below.


 


(ii)          If any Loan Party shall be required by the Code or other applicable Laws to withhold or deduct any Taxes, including both United States Federal backup withholding and withholding taxes, from any payment, then (A) the Borrowers shall withhold or make such deductions as are determined by the Lender to be required based upon the information and documentation it has received pursuant to subsection (d) below, (B) the Borrowers shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with the Code or other applicable Laws, as the case may be, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes or Other Taxes, the sum payable by the Loan Parties shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section) the Lender receives an amount equal to the sum it would have received had no such withholding or deduction been made.


 


(b)          Payment of Other Taxes by the Borrowers.  Without limiting the provisions of subsection (a) above, the Loan Parties shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable Law.


 


(c)          Tax Indemnification by the Borrowers.  Without limiting the provisions of subsection (a) or (b) above, each Loan Party shall, and does hereby, indemnify the Lender ,and shall make payment in respect thereof within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) withheld or deducted by the Loan Parties or the Lender or paid by the Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.


 


(d)          Evidence of Payments.  Upon request by the Borrower Agent or the Lender, as the case may be, after any payment of Taxes by the Loan Parties or by the Lender to a Governmental Authority as provided in this Section 3.01, the Borrower Agent shall deliver to the Lender or the Lender shall deliver to the Borrower Agent, as the case may be, the original or a certified copy of a receipt issued



54












by such Governmental Authority evidencing such payment, a copy of any return required by Laws to report such payment or other evidence of such payment reasonably satisfactory to the Borrower Agent or the Lender, as the case may be.





 


(e)           Status of Lenders.  (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Borrower Agent, at the time or times reasonably requested by the Borrower or the Borrower Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Borrower Agent as will permit such payments to be made without withholding or at a reduced rate of withholding.  In addition, any Lender, if reasonably requested by the Borrower or the Borrower Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Borrower Agent as will enable the Borrower or the Borrower Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.  Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 3.01(e)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.


 


(ii)           Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Borrower,


 


(A)           any Lender that is a U.S. Person shall deliver to the Borrower and the Borrower Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Borrower Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;


 


(B)           any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Borrower Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Borrower Agent), whichever of the following is applicable:


 


(I)           in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W‐8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W‐8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;


 


(II)           executed originals of IRS Form W‐8ECI;


 


(III)           in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit E‐1 to the effect that such Foreign



55












Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed originals of IRS Form W‐8BEN; or


 


(IV)           to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W‐8IMY, accompanied by IRS Form W‐8ECI, IRS Form W‐8BEN, a U.S. Tax Compliance Certificate substantially in the form of Exhibit E‐2 or Exhibit E‐3, IRS Form W‐9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit E‐4 on behalf of each such direct and indirect partner;


 


(C)           any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Borrower Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Borrower Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Borrower Agent to determine the withholding or deduction required to be made; and


 


(D)           if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable) such Lender shall deliver to the Borrower and the Borrower Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Borrower Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) any such additional documentation reasonably requested by the Borrower or the Borrower Agent as may be necessary for the Borrower and the Borrower Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for the purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.


 


(f)           Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Borrower Agent in writing of its legal inability to do so.





 


(g)           Treatment of Certain Refunds.  If the Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by any Loan Party or with respect to which any Loan Party has paid additional amounts pursuant to this Section, it shall pay to such Loan Party an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by any Loan Party under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses incurred by the



56












Lender, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that each Loan Party, upon the request of the Lender, agrees to repay the amount paid over to any Loan Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Lender in the event the Lender is required to repay such refund to such Governmental Authority.  This subsection shall not be construed to require the Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Loan Party or any other Person.





 


3.02         Illegality.  If the Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for the Lender or its applicable Lending Office to make, maintain or fund Loans whose interest is determined by reference to the Eurodollar Rate, or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the authority of the Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by the Lender to the Borrower Agent, (i) any obligation of the Lender to make or continue Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended, and (ii) if such notice asserts the illegality of the Lender making or maintaining Base Rate Loans the interest rate on which is determined by reference to the Eurodollar Rate component of the Base Rate, the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Lender without reference to the Eurodollar Rate component of the Base Rate, in each case until the Lender notifies the Borrower Agent that the circumstances giving rise to such determination no longer exist.  Upon receipt of such notice, (x) the Loan Parties shall, upon demand from the Lender, prepay or, if applicable, convert all Eurodollar Rate Loans of the Lender to Base Rate Loans (the interest rate on which Base Rate Loans of the Lender shall, if necessary to avoid such illegality, be determined by the Lender without reference to the Eurodollar Rate component of the Base Rate), either on the last day of the Interest Period therefor, if the Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if the Lender may not lawfully continue to maintain such Eurodollar Rate Loans and (y) if such notice asserts the illegality of the Lender determining or charging interest rates based upon the Eurodollar Rate, the Lender shall during the period of such suspension compute the Base Rate applicable to such Lender without reference to the Eurodollar Rate component thereof until it is no longer illegal for the Lender to determine or charge interest rates based upon the Eurodollar Rate.  Upon any such prepayment or conversion, the Loan Parties shall also pay accrued interest on the amount so prepaid or converted.





 


3.03        Inability to Determine Rates.  If the Lender determines that for any reason in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Loan, (b) adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan or in connection with an existing or proposed Base Rate Loan, or (c) the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan does not adequately and fairly reflect the cost to the Lender of funding such Loan, the Lender will promptly so notify the Borrower Agent.  Thereafter, (x) the obligation of the Lender to make or maintain Eurodollar Rate Loans shall be suspended, and (y) in the event of a determination described in the preceding sentence with respect to the Eurodollar Rate component of the Base Rate, the utilization of the Eurodollar Rate component in determining the Base Rate shall be suspended, in each case until the Lender revokes such notice.  Upon receipt of such notice, the Borrower Agent may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein.



57












3.04         Increased Costs; Reserves on Eurodollar Rate Loans.


 


(a)           Increased Costs Generally.  If any Change in Law shall:


 


(i)            impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, the Lender (except any reserve requirement contemplated by Section 3.04(e));


 


(ii)           subject the Lender to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit, or any Eurodollar Rate Loan made by it, or change the basis of taxation of payments to the Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of, or any change in the rate of, any Excluded Tax payable by the Lender); or


 


(iii)           impose on the Lender or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Loans made by the Lender or any Letter of Credit or participation therein;


 


and the result of any of the foregoing shall be to increase the cost to the Lender of making or maintaining any Loan the interest on which is determined by reference to the Eurodollar Rate (or of maintaining its obligation to make any such Loan), or to increase the cost to the Lender of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by the Lender hereunder (whether of principal, interest or any other amount) then, upon request of the Lender, the Loan Parties will pay to the Lender, as the case may be, such additional amount or amounts as will compensate the Lender, as the case may be, for such additional costs incurred or reduction suffered.


 


(b)          Capital Requirements.  If the Lender determines that any Change in Law affecting the Lender or any Lending Office of the Lender or the Lender’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on the Lender’s capital or on the capital of the Lender’s holding company, if any, as a consequence of this Agreement, the Revolving Credit Commitment of the Lender or the Loans made by, or participations in Letters of Credit held by, the Lender, or the Letters of Credit issued by the Lender, to a level below that which the Lender or the Lender’s holding company could have achieved but for such Change in Law (taking into consideration the Lender’s policies and the policies of the Lender’s holding company with respect to capital adequacy), then from time to time pursuant to subsection (c) below the Loan Parties will pay to the Lender such additional amount or amounts as will compensate the Lender or the Lender’s holding company for any such reduction suffered.


 


(c)          Certificates for Reimbursement.  A certificate of the Lender setting forth the amount or amounts necessary to compensate the Lender or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section 3.04 and delivered to the Borrower Agent shall be conclusive absent manifest error.  The Loan Parties shall pay the Lender the amount shown as due on any such certificate within 10 Business Days after receipt thereof.


 


(d)          Delay in Requests.  Failure or delay on the part of the Lender to demand compensation pursuant to the foregoing provisions of this Section 3.04 shall not constitute a waiver of the Lender’s right to demand such compensation, provided that the Loan Parties shall not be required to compensate the Lender pursuant to the foregoing provisions of this Section 3.04 for any increased costs incurred or reductions suffered more than nine months prior to the date that Lender notifies the Loan



58












Parties of the Change in Law giving rise to such increased costs or reductions and of the Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine‐month period referred to above shall be extended to include the period of retroactive effect thereof).





 


(e)           Reserves on Eurodollar Rate Loans.  The Borrowers shall pay to the Lender, as long as the Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency Liabilities”), additional interest on the unpaid principal amount of each Eurodollar Rate Loan equal to the actual costs of such reserves allocated to such Loan by the Lender (as determined by the Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower Agent shall have received at least 10 days’ prior notice of such additional interest from the Lender.  If the Lender fails to give notice 10 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10 days from receipt of such notice.





 


3.05           Compensation for Losses.  Upon demand of the Lender, the Borrowers shall promptly compensate the Lender for and hold the Lender harmless from any loss, cost or expense incurred by it as a result of:


 


(a)           any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);


 


(b)           any failure by Borrowers (for a reason other than the failure of the Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower Agent; or


 


(c)           any pre-payment for any reason of a Eurodollar Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower Agent, including any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained.  The Borrowers shall also pay any customary administrative fees charged by the Lender in connection with the foregoing.


For purposes of calculating amounts payable by the Borrowers to the Lender under this Section 3.05, the Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded.





 


3.06         Mitigation Obligations; Designation of a Different Lending Office.  If the Lender requests compensation under Section 3.04, or the Borrowers are required to pay any additional amount to the Lender or any Governmental Authority for the account of the Lender pursuant to Section 3.01, then the Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of the Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, as applicable, and (ii) in each case, would not subject the Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to the Lender.  The Borrowers hereby agree to pay all reasonable costs and expenses incurred by the Lender in connection with any such designation or assignment.



59












3.07        Certificate of Lender.  If the Lender claims reimbursement or compensation pursuant to this Article III, the Lender shall deliver to the Borrower a certificate setting forth in reasonable detail the amount payable to the Lender hereunder and the basis therefor.





 


3.08        Survival.  All of the Borrowers’ obligations under this Article III shall survive the occurrence of the Facility Termination Date.


 


ARTICLE IV



 SECURITY AND ADMINISTRATION OF COLLATERAL





 


4.01         Security Interest in Collateral.  To secure the prompt payment and performance to the Lender of the Obligations, each Loan Party hereby grants to the Lender (and its Affiliates with respect to Credit Product Obligations) a continuing Lien upon all of such Loan Party’s assets, including all of the following property and interests in property of such Loan Party (but, for the avoidance of doubt, expressly excluding the Excluded Assets and the Excluded Deposit Accounts), whether now owned or existing or hereafter created, acquired or arising and wheresoever located:


 


(a)           all Accounts;


 


(b)           all Goods, including, without limitation, all Equipment (including Rolling Stock), Fixtures and Inventory;


 


(c)           all Chattel Paper (whether tangible or electronic);


 


(d)           the Commercial Tort Claims specified on Schedule 4.01;


 


(e)           all Deposit Accounts, all cash, and all other property from time to time deposited therein or otherwise credited thereto and the monies and property in the possession or under the control of the Lender or any affiliate, representative, agent or correspondent of the Lender;


 


(f)           all Documents


 


(g)           all General Intangibles (including, without limitation, all Payment Intangibles, Intellectual Property and Licenses);


 


(h)           all Instruments (including, without limitation, Promissory Notes);


 


(i)           all Investment Property;


 


(j)           all Letter‐of‐Credit Rights;


 


(k)           all Pledged Interests;


 


(l)           all Supporting Obligations;


 


(m)           the Closing Date Acquisition Documents, Seller Undertakings and Payments;


 


(n)           all refunds for Taxes,


 


(o)           all other tangible and intangible personal property of such Loan Party (whether or not subject to the UCC or PPSA), including, without limitation, all bank and other accounts and all cash



60












and all investments therein, all proceeds, products, offspring, accessions, rents, profits, income, benefits, substitutions and replacements of and to any of the property of such Loan Party described in the preceding clauses of this Section 4.01 hereof (including, without limitation, any Insurance Proceeds thereon and all causes of action, claims and warranties now or hereafter held by such Loan Party in respect of any of the items listed above), and all books, correspondence, files and other Records including, without limitation, all tapes, disks, cards, Software, data and computer programs in the possession or under the control of such Loan Party or any other Person from time to time acting for such Loan Party that at any time evidence or contain information relating to any of the property described in the preceding clauses of this Section 4.01 hereof or are otherwise necessary or helpful in the collection or realization thereof; and


 


(p)           all Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of any and all of the foregoing Collateral;


 


(I)           in each case howsoever such Loan Party’s interest therein may arise or appear (whether by ownership, security interest, claim or otherwise).


 


(II)           Notwithstanding anything herein to the contrary, for the avoidance of doubt, the term “Collateral” shall not include, and no Loan Party is pledging, nor granting a security interest hereunder in, any Excluded Assets and the Excluded Deposit Accounts.





 


4.02         Other Collateral.


 


(a)          Commercial Tort Claims.  The Loan Parties shall promptly notify the Lender in writing upon any Loan Party incurring or otherwise obtaining a Commercial Tort Claim after the Closing Date against any third party and, upon request of the Lender, promptly enter into an amendment to this Agreement and do such other acts or things deemed appropriate by the Lender to give the Lender a security interest in any such Commercial Tort Claim.  The Loan Parties represent and warrant that as of the date of this Agreement, to their knowledge, no Loan Party possesses any Commercial Tort Claims, except as disclosed on Schedule 4.01.


 


(b)          Other Collateral.  The Loan Parties shall promptly notify the Lender in writing upon acquiring or otherwise obtaining any Collateral after the date hereof consisting of Deposit Accounts (other than Excluded Deposit Accounts), Investment Property, Letter of Credit Rights or Electronic Chattel Paper and, upon the request of the Lender, promptly execute such other documents, and do such other acts or things deemed appropriate by the Lender to deliver to the Lender control with respect to such Collateral; promptly notify the Lender in writing upon acquiring or otherwise obtaining any Collateral after the date hereof consisting of Documents or Instruments and, upon the request of the Lender, will promptly execute such other documents, and do such other acts or things deemed appropriate by the Lender to deliver to the Lender possession of such Documents (to the extent negotiable) and Instruments, and with respect to non‐negotiable Documents, to have such non‐negotiable Documents issued in the name of the Lender; and with respect to Collateral in the possession of a third party, other than Certificated Securities and Goods covered by a Document, obtain an acknowledgment from the third party that it is holding the Collateral for the benefit of the Lender.


 


(c)          Lien Perfection; Further Assurances.  The Loan Parties shall execute such UCC‐1 or PPSA financing statements as are required by the UCC or the PPSA, as applicable and such other instruments, assignments or documents as are necessary to perfect the Lender’s Lien upon any of the Collateral and shall take such other action as may be required to perfect or to continue the perfection of the Lender’s Lien upon the Collateral, other than, in each case, Excluded Perfection Actions.  Unless prohibited by applicable law, each Loan Party hereby authorizes the Lender to execute and file any such



61












financing statement, including financing statements that indicate the Collateral (a) as all assets of such Loan Party or words of similar effect, or (b) as being of an equal or lesser scope, or with greater or lesser detail, than as set forth in Section 4.01 on such Loan Party’s behalf.  Each Loan Party also hereby ratifies its authorization for the Lender to have filed in any jurisdiction any like financing statements or amendments thereto if filed prior to the date hereof.  At the Lender’s request, each Loan Party shall also promptly execute or cause to be executed and shall deliver to the Lender any and all documents, instruments and agreements deemed necessary by the Lender, to give effect to or carry out the terms or intent of the Loan Documents, provided that no Loan Party shall be required to take any Excluded Perfection Action.


 


(d)           Investment Property and other Equity Interests.


 


(i)           Form of Pledged Interests.  At no time shall any Pledged Interests: (a) be held or maintained in the form of a security entitlement or credited to any securities account other than security entitlements credited to a securities account that is listed on Schedule 6.19 (as supplemented from time to time) and that is subject to the control of the Lender pursuant to Section 4.05; and (b) which constitute a “security” under Article 8 of any applicable UCC (or if applicable, the PPSA) be maintained in the form of uncertificated securities.  With respect to any Pledged Interests that are “securities” under Article 8 of the applicable UCC (or if applicable the PPSA), such Pledged Interests are, and shall at all times be, represented by the share certificates listed on Schedule 4.02 hereto (as supplemented from time to time), and such share certificates, with stock powers duly executed in blank by the applicable Loan Party, shall have been delivered to the Lender.


 


(ii)           Delivery of Certificates.  All certificates or instruments representing or evidencing any Pledged Interests shall be delivered to and held by or on behalf of the Lender pursuant hereto, shall be in suitable form for further transfer by delivery, and shall be accompanied by all necessary instruments of transfer or assignment, duly executed in blank.  The Pledged Interests consisting of Equity Interests pledged hereunder have been duly authorized and validly issued and are fully paid and non-assessable


 


(iii)           Issuer Agreements. Upon request of the Lender, each Loan Party that is the issuer of any Pledged Interests shall and shall cause each other Person that is the issuer of any Pledged Interests to (a) acknowledge in writing the security interest and Lien of the Lender in such Collateral granted by the Loan Party owning such Pledged Interests, (b) agree in writing that, with respect to any such Pledged Interests, it will comply with the instructions originated by the Lender without further consent of any other Loan Party and (c) confirm and agree in writing that, with respect to any such Pledged Interests, it has not received notice of any other continuing Lien therein (other than the Lien in favor of the Lender hereunder) and will not comply with the instructions originated by any Person (other than the Lender) without further consent of the Lender.


 


(iv)           Distributions on Investment Property and other Equity Interests.  In the event that any cash dividend or cash distribution (a “Dividend”) is paid on any Pledged Interests of any Loan Party at a time when no Event of Default has occurred and is continuing, such Dividend may be paid directly to the applicable Loan Party.  If an Event of Default has occurred and is continuing, then, any such Dividend or payment shall be paid directly to the Lender for the benefit of the Credit Parties.





 


(v)           Voting Rights with respect to Equity Interests.  So long as no Event of Default has occurred and is continuing, Loan Parties shall be entitled to exercise any and all



62












voting and other consensual rights pertaining to any of the Pledged Interests or any part thereof for any purpose not prohibited by the terms of this Agreement.  If an Event of Default shall have occurred and be continuing,  all rights of Loan Parties to exercise the voting and other consensual rights that it would otherwise be entitled to exercise shall, at the Lender’s option, be suspended, and all such rights shall, at the Lender’s option, thereupon become vested in the Lender for the benefit of the Credit Parties during the continuation of such Event of Default, and the Lender shall, at its option, thereupon have the sole right to exercise such voting and other consensual rights and during the continuation of such Event of Default and the Lender shall have the right to act with respect thereto as though it were the outright owner thereof.  After all Events of Default have been waived in accordance with the provisions hereof, and so long as the Obligations shall not have been accelerated, each Loan Party shall have the right to exercise the voting and other consensual rights and powers that it would have otherwise been entitled to pursuant to this Section 4.02(d)(v).


 


(vi)           Securities Accounts.  No Loan Party shall maintain any securities accounts with any securities intermediary that are not identified on Schedule 6.19 (as supplemented from time to time) and as to which such securities intermediary and such Loan Party have entered into a control agreement with the Lender in which such Loan Party irrevocably authorizes and directs such securities intermediary to dispose of such Collateral at the direction of the Lender and to comply with the instructions originated by the Lender without further consent of such Loan Party.  The Lender agrees with the Loan Parties that such instruction shall not be given by the Lender unless an Event of Default has occurred and is continuing.


 


(vii)           Organizational Documents.  With respect to each issuer of any Pledged Interests of each Loan Party, such Loan Party shall promptly deliver to the Lender (a) copies of the organizational documents of such issuer, together with all amendments thereto and any shareholder or similar agreement in respect of such Pledged Interests to which such Loan Party is a party and (b) at the request of the Lender, the consent of each other party to any such document or agreement to the pledge by such Loan Party of such Pledged Interests hereunder and to the transfer of such Pledged Interests to the Lender or its nominee at any time after the occurrence and during the continuance of an Event of Default.


 


(e)           Lien on Realty.  The due and punctual payment and performance of the Loan Parties shall also be secured by the Lien created by the Mortgages upon all property of the Loan Parties described therein.  If any Loan Party shall acquire at any time or times hereafter any fee simple interest in other real property, such Loan Party agrees promptly at Lender’s option to execute and deliver to the Lender, as additional security and Collateral for the Obligations, Mortgages covering such real property.  The Mortgages shall be duly recorded (at Loan Parties’ expense) in each office where such recording is required to constitute a valid Lien on the real property covered thereby.  In respect of any Mortgage, Loan Parties shall deliver to the Lender, at Loan Parties’ expense, all Mortgage Related Documents as the Lender and its counsel may request relating to the real property subject to the Mortgages.





 


(f)           Closing Date Acquisition Documents.  Each Borrower hereby irrevocably authorizes and empowers the Lender or its agents, in their sole discretion, to assert, either directly or on behalf of any Borrower and each other Loan Party, at any time after the occurrence of an Event of Default and during the continuance thereof, any claims any Borrower may from time to time have against any person or entity or any of their affiliates with respect to any and all of the Contract Rights or with respect to any and all payments or other obligations due from the Sellers or any of their affiliates to the Borrowers or any other Loan Party under or pursuant to the Closing Date Acquisition Documents (“Payments”), and to receive and collect any damages, awards and other monies resulting therefrom and to apply the same on account of the Obligations.  After the occurrence of any Event of Default and during



63












the continuance thereof, the Lender may provide notice to the Sellers or any of their affiliates under Closing Date Acquisition Documents that all Payments shall be made to or at the direction of the Lender for so long as such Event of Default shall be continuing.  Following the delivery of any such notice, the Lender shall promptly notify the Sellers and their affiliates, as the case may be, under the Closing Date Acquisition Documents upon the termination or waiver of any such Event of Default.  After the occurrence of any Event of Default and during the continuance thereof, each Borrower hereby irrevocably makes, constitutes and appoints the Lender (and all officers, employees, or agents designated by the Lender ) as such Borrower’s true and lawful attorney (and agent-in-fact) for the purpose of enabling the Lender or its agents to assert and collect such claims and to apply such monies in the manner set forth hereinabove, which appointment, being coupled with an interest, is irrevocable.  Each Borrower shall keep the Lender informed of all circumstances bearing upon any potential material claim under or with respect to the Closing Date Acquisition Documents and the Seller Undertakings and such Borrower shall not, without the prior written consent of the Lender, (i) waive any of its rights or remedies under any Closing Date Acquisition Document with respect to any of the Seller Undertakings in excess of $250,000.00 in the aggregate during any Fiscal Year, (ii) settle, compromise or offset any amount payable by the sellers to such Borrower under any Closing Date Acquisition Document in excess of $250,000.00 in the aggregate during any Fiscal Year, or (iii) amend or otherwise modify any Closing Date Acquisition Document in any manner which is materially adverse to the interests of the Lender.  Each Borrower shall and shall cause each other Loan Party to perform and observe all the material terms and conditions of each Closing Date Acquisition Document to be performed by it, maintain each Closing Date Acquisition Document in full force and effect, enforce each Closing Date Acquisition Document in accordance with its terms and take all such action to such end as may from time to time be reasonably requested by the Borrower.  Anything herein to the contrary notwithstanding, (i) each applicable Borrower and other Loan Party shall remain liable under each Closing Date Acquisition Document to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by the Lender of any of its rights hereunder shall not release any Borrower or any other Loan Party from any of its duties or obligations under any Closing Date Acquisition Document and (iii) the Lender shall not have any obligation or liability under any Closing Date Acquisition Document by reason of this Agreement, nor shall the Lender be obligated to perform any of the obligations or duties of any Borrower or other Loan Party thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. Each Borrower hereby irrevocably authorizes and empowers the Lender, in the Lender’s sole discretion, at any time after the occurrence and during the continuance of an Event of Default, to assert, either directly or on behalf of such Borrower or any other Loan Party, any claim such Borrower or other Loan Party may from time to time have against the Sellers under or with respect to the Closing Date Acquisition Documents and to receive and collect any and all damages, awards and other monies resulting therefrom and to apply the same to the Obligations.  Each Borrower hereby irrevocably makes, constitutes and appoints Lender as its true and lawful attorney in fact for the purpose of enabling the Lender to assert and collect such claims and to apply such monies in the manner set forth above, which appointment, being coupled with an interest, is irrevocable





 


4.03         Collateral Administration.


 


(a)           Administration of Accounts.


 


(i)           Records and Schedules of Accounts.  Each Borrower shall keep accurate and complete records of its Accounts, including all payments and collections thereon.  If during any calendar week Accounts constituting Eligible Accounts in an aggregate face amount of $100,000 or more cease to be Eligible Accounts for any reason other than payment in full, Borrower Agent shall notify the Lender of such occurrence promptly (and in any event within one Business Day) after Borrower Agent has knowledge thereof.



64












(ii)           Taxes.  If an Account of any Borrower includes a charge for any Taxes, the Lender is authorized, in its discretion after the occurrence of an Event of Default and during the continuation thereof, to pay the amount thereof to the proper taxing authority for the account of such Borrower and to charge Borrowers therefor; provided, however, that the Lender shall not be liable for any Taxes that may be due from Borrowers or with respect to any Collateral.


 


(iii)          Account Verification.  Whether or not a Default exists, the Lender shall have the right at any time, in the name of the Lender, any designee of the Lender or (during the continuance of any Event of Default) any Borrower, to verify the validity, amount or any other matter relating to any Accounts of Borrowers by mail, telephone or otherwise.  Borrowers shall cooperate fully with the Lender in an effort to facilitate and promptly conclude any such verification process.


 


(iv)          Proceeds of Collateral.  Borrowers shall request in writing and otherwise take all necessary steps to ensure that all payments on Accounts or otherwise relating to Collateral are made directly to the Concentration Account (or a lockbox relating to the Concentration Account).  If any Borrower or Subsidiary receives cash or Payment Items with respect to any Collateral, it shall hold same in trust for the Lender and promptly (not later than the next Business Day) deposit same into the Concentration Account.  Notwithstanding the foregoing, subject to Section 4.05(a), Accounts for which the Account Debtor is a Canadian entity shall be made directly to a Controlled Deposit Account or to the Concentration Account (or a lockbox relating to the Concentration Account).


 


(b)           Administration of Inventory.


 


(i)           Records and Reports of Inventory.  Each Borrower shall keep accurate and complete records of its Inventory, including costs and daily withdrawals and additions.  Each Borrower shall conduct a physical inventory at least once per calendar year (and on a more frequent basis if requested by the Lender when an Event of Default is continuing) and periodic cycle counts consistent with historical practices, and shall provide to the Lender a report based on each such inventory and count promptly upon completion thereof, together with such supporting information as the Lender may request.


The Lender, in its reasonable discretion, if any Event of Default is continuing, may cause additional inventories (including physical counts) to be taken as the Lender determines (each, at the expense of the Loan Parties).  The Lender may participate in and observe each physical count.


 


(ii)           Returns of Inventory.  No Borrower shall return any Inventory to a supplier, vendor or other Person, whether for cash, credit or otherwise, unless (a) such return is in the Ordinary Course of Business; (b) no Default, Event of Default or Overadvance exists or would result therefrom; (c) the Lender is promptly notified if the aggregate value of all Inventory returned in a particular calendar month exceeds $150,000; and (d) any payment received by a Borrower for a return is promptly remitted to the Lender for application to the Obligations.


 


(iii)         Acquisition, Sale and Maintenance.  No Borrower shall report any Inventory acquired or accepted on consignment or approval as Eligible Inventory.  Each Borrower shall keep all such Inventory segregated and clearly and conspicuously identified as being acquired or accepted on consignment or approval.  Each Borrower shall take all steps to assure that all Inventory is produced in accordance with applicable Law, including the FLSA.  No Borrower shall sell any Inventory on consignment or approval or any other basis under which the customer may return or require a Borrower to repurchase such Inventory.  The Borrowers shall



65












use, store and maintain all Inventory with reasonable care and caution, in accordance with applicable standards of any insurance and in conformity with all applicable Laws, and shall make current rent payments (within applicable grace periods provided for in leases) at all locations where any Collateral is located.





 


(c)           Landlord, Processor and Storage Agreements.  Each Loan Party shall provide the Lender, upon request with copies of all agreements between any Loan Party or any of its Subsidiaries and any landlord, warehouseman, processor, bailee, distributor or consignee which owns or is the lessee of any premises at which any Collateral may, from time to time, be kept.  With respect to any lease (other than leases for sales offices), bailment, warehousing agreement, any processing agreement or similar agreement in any case entered into after the Closing Date, each Loan Party shall use commercially reasonable efforts to provide the Lender with a Lien Waiver with respect to such premises.  In the event Loan Parties do not provide the Lender with any such Lien Waiver with respect to any such premises within 30 days after Inventory is at such location or 90 days after the Closing Date, whichever is later, Loan Parties acknowledge that, in the Lender’s Credit Judgment, Inventory at such location shall not be Eligible Inventory or the Lender shall establish a Rent and Charges Reserve for such location.





 


4.04           Further Assurances.


 


(a)           New Deposit Accounts and Securities Accounts.  Concurrently with or prior to the opening of a Deposit Account, Securities Account, commodities account, securities entitlement or commodity contract by any Loan Party, other than any Excluded Deposit Account, such Loan Party shall deliver to the Lender a Control Agreement covering such Deposit Account, Securities Account, securities entitlement or commodity contract, duly executed by such Loan Party, the Lender and the applicable Controlled Account Bank, securities intermediary or financial institution at which such account is maintained or with which such entitlement or contract is carried, as the case may be.





 


(b)           UCC and PPSA Authorization.  The Lender is hereby irrevocably authorized to execute (if necessary) and file or cause to be filed, with or if permitted by applicable law without the signature of any Borrower appearing thereon, all UCC and PPSA financing statements reflecting any Borrower as “debtor” and the Lender as “secured party,” and continuations thereof and amendments thereto, as the Lender reasonably deems necessary or advisable to give effect to the transactions contemplated hereby and by the other Loan Documents.





 


4.05          Cash Management.





 


(a)           Controlled Deposit Account.  On or prior to the Closing Date, the relevant Borrower shall enter into a Control Agreement with the Lender and the relevant Controlled Account Bank with respect to each Deposit Account listed on Schedule 6.19 (other than Excluded Deposit Accounts), which shall include all lockboxes and related lockbox accounts used for the collection of Accounts; provided, however, that with respect to any Deposit Account maintained in Canada and any Deposit Account maintained by the Target as of the Acquisition Closing Date, the Borrowers shall have forty-five (45) (or such longer period as may be permitted by Lender in its Credit Judgment) days after the Closing Date to deliver to the Lender a Control Agreement with respect thereto duly executed by the respective Borrower and the relevant Controlled Account Bank.  Each Loan Party agrees that all invoices rendered and other requests made by any Loan Party for payment in respect of Accounts shall contain a written statement directing payment in respect of such Accounts to be paid to a Controlled Deposit Account in its name.  The Borrower Agent shall cause bank statements and/or other reports to be delivered to the Lender not less often than monthly, accurately setting forth all amounts deposited in each Deposit Account to ensure the proper transfer of funds as set forth above.  All remittances received by any Loan Party on account of Accounts, together with the proceeds of any other Collateral, shall be held as the Lender’s 



66







property, for its benefit and the benefit of the Lender, by such Loan Party as trustee of an express trust for the Lender’s benefit and such Loan Party shall immediately deposit same in kind in a Controlled Deposit Account.  The Lender retains the right at all times after the occurrence and during the continuance of an Event of Default to notify Account Debtors that a Loan Party’s Accounts have been assigned to the Lender and to collect such Loan Party’s  Accounts directly in its own name, or in the name of the Lender’s agent, and to charge the collection costs and expenses, including reasonable attorneys’ fees, to the Loan Account.





 


(b)           Concentration Account.  Each Control Agreement with respect to a Controlled Deposit Account shall require that at all times the Controlled Account Bank transfer all cash receipts and other collections by ACH or wire transfer no less frequently than daily (and whether or not there are then any outstanding Obligations) to the concentration account maintained by the Lender at the Lender (the “Concentration Account”); provided, however, that the Lender shall not require a Controlled Account Bank with respect to a Controlled Deposit Account maintained in Canada to transfer cash receipts and other collections by ACH or wire transfer unless (1) the aggregate balance in all Controlled Deposit Accounts maintained in Canada is in excess of $500,000 (the aggregate amount in such Controlled Deposit Accounts not in excess of $500,000, the “Peg Balance”) or (2) an Event of Default has occurred and is then continuing.  The Concentration Account shall at all times be under the sole dominion and control of the Lender.  The Loan Parties hereby acknowledge and agree that (i) the Loan Parties have no right of withdrawal from the Concentration Account, (ii) the funds on deposit in the Concentration Account shall at all times be collateral security for all of the Obligations and (iii) the funds on deposit in the Concentration Account shall be applied as provided in Section 4.05(c) below.  In the event that, notwithstanding the provisions of this Section 4.05, any Loan Party receives or otherwise has dominion and control of any such proceeds or collections described above, such proceeds and collections shall be held in trust by such Loan Party for the Lender, shall not be commingled with any of such Loan Party’s other funds or deposited in any account of such Loan Party and shall, not later than the Business Day after receipt thereof, be deposited into the Concentration Account or dealt with in such other fashion as such Loan Party may be instructed by the Lender; provided, however, that the requirements of this sentence shall not apply to the Peg Balance so long as no Event of Default has occurred and is then continuing.





 


(c)           Application of Funds in the Concentration Account.  All funds received in the Concentration Account in immediately available funds shall be applied on a daily basis first, to the L/C Borrowings and second, to the outstanding Revolving Loans.  All funds received in the Concentration Account that are not immediately available funds (checks, drafts and similar forms of payment) shall be deemed applied by the Lender on account of the Obligations (subject to final payment of such items) in accordance with the foregoing sentence on the first Business Day after receipt by the Lender of such items in the Lender’s account located in Chicago, Illinois. If as the result of such application of funds a credit balance exists in the Loan Account, such credit balance shall not accrue interest in favor of Borrowers but shall, so long as no Default then exists, be disbursed to Borrowers or otherwise at Borrower Agent’s direction, upon Borrower Agent’s request.  Upon and during the continuance of any Event of Default, the Lender may, at its option, offset such credit balance against any of the Obligations or hold such credit balance as Collateral for the Obligations.


 


 


(d)           Any Loan Party may establish one or more Deposit Accounts with the Lender and under Lender’s sole dominion and control into which any Loan Party shall deposit Reinvestment Amounts (each such Deposit Account, a Specified Deposit Account”).  Unless an Event of Default has occurred and is continuing, the Lender shall not cause the funds and proceeds in any Specified Deposit Account to be transferred to the Concentration Account.  Each Borrower grants to Lender a security interest in the Borrower’s Specified Deposit Account and all funds hereafter deposited to such deposit account, and any proceeds thereof, as security for the Obligations.  Such security interest shall be 



67







governed by the UCC, and the Lender shall have available to it all of the rights and remedies available to a secured party thereunder.





 


4.06        Information Regarding Collateral.  Each Borrower represents, warrants and covenants that (a) the chief executive office of each Loan Party on the Closing Date is located at the address or addresses specified on Schedule 4.06, and (b) Schedule 4.06 contains a true and complete list of (i) the exact legal name, jurisdiction of formation, and address within the United States or Canada of each Loan Party and of each other Person that has effected any merger or consolidation with a Loan Party or contributed or transferred to a Loan Party any property constituting Collateral at any time since January 1, 2008, (excluding Persons making sales in the ordinary course of their businesses to a Loan Party of property constituting Inventory in the hands of such seller), (ii) the exact legal name, jurisdiction of formation, jurisdiction identification number, and each location of the chief executive office of each Loan Party at any time since January 1, 2008, (iii) each location within the United States or Canada in which material goods constituting Collateral are located as of the Closing Date (together with the name of each owner of the property located at such address if not the applicable Loan Party, a summary description of the relationship between the applicable Loan Party and such Person and the maximum approximate book or market value of the Collateral held or to be held at such location).  The Company shall not change, and shall not permit any other Loan Party to change, its name, jurisdiction of formation (whether by reincorporation, merger or otherwise), the location of its chief executive office or any location specified in clause (b)(iii) of the immediately preceding sentence, or use or permit any other Loan Party to use, any additional trade name, trademark or other trade style, except upon giving not less than thirty (30) days’ prior written notice to the Lender and taking or causing to be taken all such action at Borrowers’ or such other Loan Parties’ expense as may be reasonably requested by the Lender to perfect or maintain the perfection and priority of the Lien of the Lender in Collateral.


 


4.07         Releases.


 


(a)           The Lender shall, at the written request of the Borrower Agent and sole expense of the Loan Parties, release the following:


 


(i)           Any Collateral sold, transferred or otherwise disposed of in a Disposition permitted by this Agreement and the other Loan Documents (including pursuant to a waiver or consent), and Lender shall, within a reasonable period of time, execute and deliver to the Borrower Agent or the relevant Loan Party all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Collateral; and


 


(ii)           A Borrower (other than the Company and CCP) from its Obligations if all of the Equity Interests of such Borrower are sold, transferred or otherwise disposed of in a Disposition permitted by this Agreement and the other Loan Documents (including pursuant to a waiver or consent); provided that the Borrower Agent shall have delivered to the Lender a written request at least ten (10) Business Days prior to the date for release, identifying the relevant Borrower and the terms of the sale or other disposition in reasonable detail, including the price thereof and any material expenses in connection therewith, together with a certification by the Borrower Agent stating that such transaction is in compliance with this Agreement and the other Loan Documents.


 


(b)          Upon Payment in Full on the Facility Termination Date, the Collateral shall be released from the Liens created hereby, and all rights to the Collateral shall revert to the Borrowers.  At the request and sole expense of the Borrower Agent following Payment in Full, the Lender shall deliver to the Borrower Agent any Collateral held by the Lender hereunder, and execute and deliver to the Borrower Agent such documents as the Borrower



68







 


Agent shall reasonably request in writing to evidence such termination and release of the Liens created hereby.


 


ARTICLE V



 CONDITIONS PRECEDENT TO CREDIT EXTENSIONS





 


5.01         Conditions of Initial Credit Extension.  The obligation of the Lender to make any initial Credit Extension hereunder is subject to satisfaction of the following conditions precedent:





 


(a)           The Lender’s receipt of the following items, each properly executed by a Responsible Officer of the signing Loan Party, each dated as of the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Lender and its legal counsel:


 


(i)            executed counterparts of this Agreement and each of the Security Instruments;


 


(ii)           A Note executed by the Borrowers in favor of the Lender if the Lender requests a Note;


 


(iii)          such certificates of resolutions or other action, incumbency certificates (including specimen signatures), and/or other certificates of Responsible Officers or the Secretary or Assistant Secretary of each Loan Party as the Lender may reasonably require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party;


 


(iv)          such documents and certifications as the Lender may reasonably require to evidence that each Loan Party is duly organized or formed, and that each Borrower is validly existing, in good standing and qualified to engage in business in its jurisdiction of organization and in any other jurisdiction in which the failure to be so qualified could reasonably be expected to have a Material Adverse Effect, including certified copies of each Loan Party’s Organization Documents, shareholders’ agreements, certificates of good standing and/or qualification to engage in business from each jurisdiction identified on Schedule 5.01 hereto;


 


(v)          favorable opinions of DLA Piper LLP (US), Barnes & Thornburg LLP and McMillan LLP, counsel to the Loan Parties, each addressed to the Lender and its successors and assigns and as to the matters concerning the Loan Parties and the Loan Documents as the Lender may reasonably request;


 


(vi)          certificates of Responsible Officers of the Borrower Agent or the applicable Loan Parties either (A) identifying all consents, licenses and approvals required in connection with the execution, delivery and performance by each Borrower and the validity against each such Loan Party of the Loan Documents to which it is a party, and stating that such consents, licenses and approvals shall be in full force and effect, and attaching true and correct copies thereof or (B) stating that no such consents, licenses or approvals are so required;


 


(vii)          a certificate signed by a Responsible Officer of the Borrower Agent certifying (A) that the conditions specified in Sections 5.02(a) and 5.02(b) have been satisfied and (B) as to the matters described in Section 5.01(d);


 



69







(viii)       (A) audited financial statements of the Company and its Subsidiaries for each of the three Fiscal Years immediately preceding the Closing Date,  (B) unaudited interim financial statements for the Company and its Subsidiaries as of December 31, 2013, and (C) financial projections of the Company and its Subsidiaries for the next Fiscal Year;


 


(ix)          a certificate signed by the Chief Financial Officer or the Chief Accounting Officer of the Borrower Agent certifying that, after giving effect to the entering into of the Loan Documents and the consummation of all of the Transactions, the Borrowers, measured on a consolidated basis, are Solvent;


 


(x)           evidence that all insurance required to be maintained pursuant to the Loan Documents has been obtained and is in effect;


 


(xi)           an initial Borrowing Base Certificate, which shall include in the calculation of the Borrowing Base the assets and property of the Target on a pro forma basis;


 


(xii)          initial Committed Loan Notice;


 


(xiii)        delivery of Uniform Commercial Code and/or PPSA financing statements, suitable in form and substance for filing in all places required by applicable law to perfect the Liens of the Lender under the Security Instruments as a first priority Lien as to items of Collateral in which a security interest may be perfected by the filing of financing statements, and such other documents and/or evidence of other actions (other than Excluded Perfection Actions) as may be reasonably necessary under applicable law to perfect the Liens of the Lender under such Security Instruments as a first priority Lien in and to such other Collateral as the Lender may require;


 


(xiv)        Uniform Commercial Code search results showing only those Liens as are acceptable to the Lender;


 


(xv)        evidence satisfactory to the Lender that the consummation (in compliance with all applicable laws and regulations, with the receipt of all material governmental, shareholder and third party consents and approvals relating thereto) of the Closing Date Acquisition shall occur on the Closing Date and the issuance of the Subordinated Indebtedness in an amount not greater than $1,000,000;


 


(xvi)        copies of (A) the Closing Date Acquisition Documents and (B) Subordinated Indebtedness Documents, all certified as true and correct by the Borrower Agent;


 


(xvii)       evidence of the payment in full and cancellation of the Existing Agreement, including terminations of Uniform Commercial Code, PPSA and other financing statements filed in connection with the Existing Agreement (or reasonable assurance thereof) and other evidence of Lien releases and other related matters on terms acceptable to the Lender (or reasonable assurance thereof); and


 


(xviii)      The items listed on the most recent Documents and Requirements list delivered to the Borrower Agent prior to the Closing Date.





 


(b)           Any fees required to be paid on or before the Closing Date shall have been paid.


 



70







(c)           Unless waived by the Lender, the Borrowers shall have paid all reasonable fees, charges and disbursements of counsel to the Lender to the extent invoiced prior to or on the Closing Date, plus such additional amounts of such reasonable fees, charges and disbursements as shall constitute its reasonable estimate of such reasonable fees, charges and disbursements incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrowers and the Lender).





 


(d)           The Lender shall be satisfied that after giving effect to (i) the initial Credit Extension hereunder, (ii) consummation of the Transactions and payment of all fees and expenses in connection therewith and (iii) any payables stretched beyond their customary payment practices, Availability shall be at least $1,500,000.





 


5.02           Conditions to all Credit Extensions.  The obligation of the Lender to honor any Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Loans to the other Type or a continuation of Eurodollar Rate Loans) or make the initial Credit Extension hereunder is subject to the following conditions precedent:





 


(a)           The representations and warranties of the Loan Parties contained in Article VI or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects (without duplication of any materiality qualifier contained therein) on and as of the date of such Credit Extension, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects (without duplication of any materiality qualifier contained therein) as of such earlier date, and except that for purposes of this Section 5.02(a), the representations and warranties contained in subsections (a) and (b) of Section 6.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 7.01.





 


(b)           No Default shall have occurred and be continuing, or would result from such proposed Credit Extension or from the application of the proceeds thereof.


 


(c)           The Lender shall have received a Request for Credit Extension in accordance with the requirements hereof.





 


(d)          After giving effect to each Credit Extension, Total Revolving Credit Outstandings do not exceed the lesser of (i) the Revolving Credit Commitment Amount minus the Reserves and (ii) the Borrowing Base.


 


Each Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Loans to the other Type or a continuation of Eurodollar Rate Loans) submitted by the Borrower Agent shall be deemed to be a representation and warranty that the conditions specified in Sections 5.02(a), 5.02(b) and 5.02(d) have been satisfied on and as of the date of the applicable Credit Extension.


 


ARTICLE VI



 REPRESENTATIONS AND WARRANTIES


 


To induce the Credit Parties to enter into this Agreement and to make Loans and to issue Letters of Credit hereunder, each Loan Party represents and warrants to the Lender, subject to the limitation set forth in Section 5.02(a), that:






71







6.01         Existence, Qualification and Power.  Each Loan Party and each Subsidiary (a) is a corporation, partnership or limited liability company duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation, organization or formation, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or lease its assets and carry on its business as is now being conducted and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party and to consummate the Transactions to which it is a party, and (c) is duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clause (b)(i), or (c), to the extent that failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.





 


6.02         Authorization; No Contravention.  The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is party, and the consummation of the Transactions, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of the Organization Documents of any such Person; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under (i) any Contractual Obligation to which such Person is a party or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Law.





 


6.03         Governmental Authorization; Other Consents.  No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with (a) the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document or the consummation of the Transactions, (b) the grant by any Loan Party of the Liens granted by it pursuant to the Security Instruments, (c) the perfection or maintenance of the Liens created under the Security Instruments (including the first priority nature thereof) or (d) the exercise by the Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Security Instruments.





 


6.04         Binding Effect.  This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto.  This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, except (a) as rights to indemnification hereunder may be limited by applicable Law and (b) as the enforcement hereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws relating to or affecting the rights and remedies of creditors or by general equitable principles.





 


6.05         Financial Statements; No Material Adverse Effect.


 


(a)          The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Company and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (iii) show all material Indebtedness and other liabilities, direct or contingent, of the Company and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.


 


(b)          The unaudited consolidated and consolidating balance sheet of the Company and its Subsidiaries dated as of December 31, 2013, and the related consolidated and consolidating statements 


 



72







of income or operations, shareholders’ equity and cash flows for the month then ended (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present the financial condition of the Company and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments.


 


(c)          Since the date of the Audited Financial Statements there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.


 


(d)          The Loan Parties, on a Consolidated basis, are Solvent.  No transfer of property has been or will be made by any Loan Party and no obligation has been or will be incurred by any Loan Party in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of any Loan Party.





 


6.06         Litigation.  There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of any Loan Party after due investigation, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against any Loan Party or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document or any of the Transactions or (b) except as specifically disclosed in Schedule 6.06, either individually or in the aggregate, if determined adversely, could reasonably be expected to have a Material Adverse Effect, and there has been no adverse change in the status, or financial effect on any Loan Party or any Subsidiary thereof, of the matters described on Schedule 6.06.





 


6.07         No Default.  No Loan Party nor any Subsidiary is in default under or with respect to any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  No Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.





 


6.08         Ownership of Property; Liens.


 


(a)           Each Loan Party and each of its Subsidiaries has good record and marketable title in fee simple to or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  Each Loan Party and each of its Subsidiaries has good and marketable title to, valid leasehold interests in, or valid licenses to use all personal property and assets material to the ordinary conduct of its business.





 


(b)          Schedule 6.08(b)(1) sets forth the address (including street address, county and state) of all Real Estate that is owned by the Loan Parties as of the Closing Date.  Each Loan Party and each of its Subsidiaries has good, marketable and insurable fee simple title to the real property owned by such Loan Party or such Subsidiary, free and clear of all Liens, other than Permitted Liens.  Schedule 6.08(b)(2) sets forth the address (including street address, county and state) of all material operating leases of the Loan Parties, together with a list of the lessor and its contact information with respect to each such lease as of the Closing Date.  Each of such leases is in full force and effect and the Loan Parties are not in default of any material terms thereof.


 


(c)           Schedule 8.01 sets forth a complete and accurate list of all Liens on the property or assets of each Loan Party and each of its Subsidiaries, showing as of the date hereof the lienholder thereof, the principal amount of the obligations secured thereby and the property or assets of such Loan 


 



73







Party or such Subsidiary subject thereto.  The property of each Loan Party and each of its Subsidiaries is subject to no Liens, other than Liens set forth on Schedule 8.01, and Permitted Liens.





 


6.09         Environmental Compliance.


 


(a)           Except as disclosed in Schedule 6.09, no Loan Party or any Subsidiary thereof (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law with respect to the Loan Party or any Subsidiary’s operations, (ii) has become subject to a pending claim with respect to any Environmental Liability or (iii) has received written notice of any claim with respect to any Environmental Liability except, in each case, as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.


 


(b)           Except as otherwise set forth in Schedule 6.09 or as would not individually or in the aggregate reasonably be expected to result in a Material Adverse Effect, (i) none of the properties currently owned or operated by any Loan Party or any Subsidiary thereof is listed or, to the knowledge of the Loan Parties, proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or is adjacent to any such property; (ii) there are no and, to the knowledge of the Loan Parties, never have been any underground or above-ground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed on any property currently owned or operated by any Loan Party or any Subsidiary thereof; (iii) to the knowledge of the Loan Parties, there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party or Subsidiary thereof; and (iv) Hazardous Materials have not been released, discharged or disposed of by any Loan Party or Subsidiary in violation of Environmental Laws or, to the knowledge of the Loan Parties, by any other Person in violation of Environmental Laws on any property currently owned or operated by any Loan Party or any Subsidiary thereof, which could reasonably be expected to result in a Material Adverse Effect.


 


(c)           Except as otherwise set forth on Schedule 6.09 or as would not individually or in the aggregate reasonably be expected to result in a Material Adverse Effect, no Loan Party or any Subsidiary thereof is undertaking, and no Loan Party or any Subsidiary thereof has completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law; and all Hazardous Materials generated, used, treated, handled or stored by any Loan Party or any Subsidiary at, or transported to or from by or on behalf of any Loan Party or any Subsidiary, any property currently owned or operated by any Loan Party or any Subsidiary thereof have, to the knowledge of the Loan Parties, been disposed of in a manner not reasonably expected to result in material liability to any Loan Party or any Subsidiary thereof.


 


(d)           Each Loan Party conducts in the Ordinary Course of Business a review of the effect of existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law on their respective businesses, operations and properties, and as a result thereof each Loan Party has reasonably concluded that, except as set forth on Schedule 6.09, such Environmental Laws and claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.





 


6.10         Insurance.  The properties of the Loan Parties and their Subsidiaries are insured with financially sound and reputable insurance companies which are not Affiliates of the Loan Parties, in such amounts, with such deductibles and covering such risks (including, without limitation, workmen’s 


 



74







compensation, public liability, business interruption and property damage insurance) as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Loan Parties or the applicable Subsidiary operates.  Schedule 6.10 sets forth a description of all insurance maintained by or on behalf of the Loan Parties as of the Closing Date.  Each insurance policy listed on Schedule 6.10 is in full force and effect and all premiums in respect thereof that are due and payable have been paid.





 


6.11         Taxes.  Each Loan Party and its Subsidiaries have filed all Federal, state and other material tax returns and reports required to be filed, and have paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being Properly Contested and except where the failure to file such returns or reports could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  There is no proposed tax assessment against the Company or any Subsidiary that would, if made, have a Material Adverse Effect.  Neither the Company nor any Subsidiary thereof is party to any tax sharing agreement other than the Tax Sharing Agreement.





 


6.12         ERISA Compliance.


 


(a)           Each Plan is in compliance with the applicable provisions of ERISA, the Code and other Federal or state Laws, except for any noncompliance that would not reasonably be expected to have a Material Adverse Effect.  Each Plan that is intended to be a qualified plan under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service to the effect that the form of such Plan is qualified under Section 401(a) of the Code and the trust related thereto has been determined by the Internal Revenue Service to be exempt from federal income tax under Section 501(a) of the Code, or an application for such a letter is currently being processed by the Internal Revenue Service, or the Plan is covered by an opinion or advisory letter issued by the Internal Revenue Service.  To the best knowledge of each Loan Party, nothing has occurred that would prevent or cause the loss of such tax-qualified status.


 


(b)           There are no pending or, to the knowledge of any Loan Party, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect.  There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.


 


(c)           Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (i) no ERISA Event has occurred, and no Loan Party nor any ERISA Affiliate is aware of any fact, event or circumstance that could reasonably be expected to constitute or result in an ERISA Event with respect to any Pension Plan; (ii) each Loan Party and each ERISA Affiliate has met all applicable requirements under the Pension Funding Rules in respect of each Pension Plan, and no waiver of the minimum funding standards under the Pension Funding Rules has been applied for or obtained; (iii) as of the most recent valuation date for any Pension Plan, the funding target attainment percentage (as defined in Section 430(d)(2) of the Code) is 60% or higher and no Loan Party nor any ERISA Affiliate knows of any facts or circumstances that could reasonably be expected to cause the funding target attainment percentage for any such plan to drop below 60% as of the most recent valuation date; (iv) no Loan Party has incurred any liability to the PBGC other than for the payment of premiums, and there are no premium payments which have become due that are unpaid; (v) no Loan Party has engaged in a transaction that could be subject to Section 4069 or Section 4212(c) of ERISA; and (vi) no Pension Plan has been terminated by the plan administrator thereof nor by the PBGC, and no event or circumstance has occurred or exists that could reasonably be expected to cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Pension Plan.






75







(d)           No Loan Party maintains or contributes to, or has any unsatisfied obligation to contribute to, or liability under, any active or terminated Pension Plan other than (A) on the Closing Date, those listed on Schedule 6.12(d) hereto and (B) thereafter, Pension Plans not otherwise prohibited by this Agreement.





 


(e)           With respect to each scheme or arrangement mandated by a government other than the United States (a “Foreign Government Scheme or Arrangement”) and with respect to each employee benefit plan maintained or contributed to by any Loan Party or any Subsidiary of any Loan Party that is not subject to United States law (a “Foreign Plan”), except as would not reasonably be expected to have a Material Adverse Effect:


 


(i)           any employer and employee contributions required by law or by the terms of any Foreign Government Scheme or Arrangement or any Foreign Plan have been made, or, if applicable, accrued, in accordance with normal accounting practices;


 


(ii)           the fair market value of the assets of each funded Foreign Plan, the liability of each insurer for any Foreign Plan funded through insurance or the book reserve established for any Foreign Plan, together with any accrued contributions, is sufficient to procure or provide for the accrued benefit obligations, as of the Closing Date, with respect to all current and former participants in such Foreign Plan according to the actuarial assumptions and valuations most recently used to account for such obligations in accordance with applicable generally accepted accounting principles;


 


(iii)           each Foreign Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities; and


 


(iv)           no Borrower or other Loan Party currently contributes to or is obligated to contribute to a Foreign Plan.





 


6.13         Subsidiaries; Equity Interests.  No Loan Party (a) has any Subsidiaries other than those specifically disclosed in part (a) of Schedule 6.13 (which Schedule sets forth the legal name, jurisdiction of incorporation or formation and authorized Equity Interests of each such Subsidiary) or created or acquired in compliance with Section 7.13 and (b) has any equity investments in any other corporation or entity other than those specifically disclosed on part (b) of Schedule 6.13 or made after the Closing Date in compliance with this Agreement and the other Loan Documents.  Each Inactive Subsidiary is designated as such on Schedule 6.13. All of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid and non-assessable and are owned by a Loan Party (or a Subsidiary of a Loan Party) in the amounts specified on Part (a) of Schedule 6.13 free and clear of all Liens except for those created under the Security Instruments or other Liens in favor or the Lender.  All of the outstanding Equity Interests in the Loan Parties have been validly issued, and are fully paid and non-assessable and are owned in the amounts specified on part (c) of Schedule 6.13 free and clear of all Liens except for those created under the Security Instruments.





 


6.14         Margin Regulations; Investment Company Act.  No Loan Party is engaged nor will engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock.  None of the Loan Parties, any Person Controlling any Loan Party, nor any Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940.






76







6.15         Disclosure.  Each Loan Party has disclosed or caused the Borrower Agent to disclose to the Lender all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.  No report, financial statement, certificate (including the Borrowing Base Certificates) or other information furnished (whether in writing or orally) by or on behalf of any Loan Party or any Subsidiary to the Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case, as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, each Loan Party represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time (it being acknowledged and agreed by the Lender that projections as to future events are not to be viewed as facts and are not guarantees of financial performance and that the actual results during the period or periods covered by such projections may differ from the projected results and such differences may be material).





 


6.16         Compliance with Laws.  Each Loan Party and each Subsidiary is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.





 


6.17         Intellectual Property; Licenses, Etc.  Each Loan Party and its Subsidiaries own, or possess the right to use, all of the Intellectual Property (including IP Rights) that are reasonably necessary for the operation of their respective businesses, without known conflict with the IP Rights of any other Person, except to the extent any failure so to own or possess the right to use could not reasonably be expected to have a Material Adverse Effect.  To the knowledge of each Loan Party, the operation by each Loan Party and its Subsidiaries of their respective businesses does not infringe upon any IP Rights held by any other Person.





 


6.18         Labor Matters.  Except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect or as set forth on Schedule 6.18, there are no strikes, lockouts, slowdowns or other material labor disputes against any Loan Party or any Subsidiary thereof pending or, to the knowledge of any Loan Party, threatened.  The hours worked by and payments made to employees of the Loan Parties comply with the Fair Labor Standards Act and any other applicable federal, state, local or foreign Law dealing with such matters in all material respects.  No Loan Party or any of its Subsidiaries has incurred any liability or obligation under the Worker Adjustment and Retraining Act or similar state Law.  All payments due from any Loan Party and its Subsidiaries, or for which any claim may be made against any Loan Party, on account of wages and employee health and welfare insurance and other benefits, have been paid or properly accrued in all material respects in accordance with GAAP as a liability on the books of such Loan Party.  Except as set forth on Schedule 6.18 or otherwise disclosed to the Lender in writing from time to time, no Loan Party or any Subsidiary is a party to or bound by any collective bargaining agreement, management agreement, employment agreement with a senior executive in excess of $200,000 in aggregate annual compensation, or bonus arrangement with a senior executive in excess of $200,000 in the aggregate, and, as of the Closing Date, no Loan Party or any Subsidiary is a party to or bound by any restricted stock, stock option, or stock appreciation plan or agreement or any similar plan, agreement or arrangement.  There are no representation proceedings pending or, to any Loan Party’s knowledge, threatened to be filed with the National Labor Relations Board, and no labor organization or group of employees of any Loan Party or any Subsidiary has made a pending demand for recognition, except as could not reasonably be expected to result in a Material 


 



77







Adverse Effect.  There are no complaints, unfair labor practice charges, grievances, arbitrations, unfair employment practices charges or any other claims or complaints against any Loan Party or any Subsidiary pending or, to the knowledge of any Loan Party, threatened to be filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment of any employee of any Loan Party or any of its Subsidiaries, except as could not reasonably be expected to result in a Material Adverse Effect.  The consummation of the transactions contemplated by the Loan Documents will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which any Loan Party or any of its Subsidiaries is bound.





 


6.19         Deposit Accounts and Securities Accounts.


 


(a)          Part (a) of Schedule 6.19 sets forth a list of all Deposit Accounts maintained by the Loan Parties as of the Closing Date, which Schedule includes, with respect to each Deposit Account (i) the name and address of the depository; (ii) the account number(s) maintained with such depository; and (iii) a contact person at such depository.


 


(b)          Part (b) of Schedule 6.19 sets forth a list of all Securities Accounts or securities entitlement or commodity contracts maintained by the Loan Parties as of the Closing Date, which Schedule includes (i) the name and address of the securities intermediary or institution holding such account or party to such contract; (ii) the account number(s) maintained with such securities intermediary or institution; and (iii) a contact person at such securities intermediary or institution.





 


6.20         Accounts; Equipment; Inventory.  The Lender may rely, in determining which Accounts are Eligible Accounts, on all statements and representations made by the Loan Parties with respect thereto.  Each Borrower warrants, with respect to each Account at the time it is shown as an Eligible Account in a Borrowing Base Certificate, that:


 


(a)           it is genuine and in all respects what it purports to be, and is not evidenced by a judgment;


 


(b)           it arises out of a completed, bona fide sale and delivery of goods in the Ordinary Course of Business, and substantially in accordance with any purchase order, contract or other document relating thereto;


 


(c)           it is for a sum certain, maturing as stated in the invoice covering such sale, a copy of which has been furnished or is available to the Lender on request;


 


(d)          it is not subject to any offset, Lien (other than the Lender’s Lien), deduction, defense, dispute, counterclaim or other adverse condition except as arising in the Ordinary Course of Business and disclosed to the Lender; and it is absolutely owing by the Account Debtor, without contingency in any respect;


 


(e)          no purchase order, agreement, document or applicable Laws restricts assignment of the Account to the Lender (regardless of whether, under the UCC, the restriction is ineffective), and the applicable Borrower is the sole payee or remittance party shown on the invoice;


 


(f)           no extension, compromise, settlement, modification, credit, deduction or return has been authorized with respect to the Account, except discounts or allowances granted in the Ordinary Course of Business for prompt payment that are reflected on the face of the invoice related thereto and in the reports submitted to the Lender hereunder; and


 



78







(g)          to each Borrower’s knowledge, (i) there are no facts or circumstances that are reasonably likely to impair the enforceability or collectability of such Account; (ii) the Account Debtor had the capacity to contract when the Account arose, continues to meet the applicable Borrower’s customary credit standards, is Solvent, is not contemplating or subject to any proceeding under any Debtor Relief Laws, and has not failed, or suspended or ceased doing business; and (iii) there are no proceedings or actions threatened or pending against any Account Debtor that could reasonably be expected to have a material adverse effect on the Account Debtor’s financial condition.


 


(h)          each Account, item of Inventory or item of Equipment which Borrowers shall, expressly or by implication, request Lender to classify as an Eligible Account, as Eligible Inventory or Eligible Equipment, respectively, shall, as of the time when such request is made, conform in all respects to the requirements of such classification as set forth in the respective definitions of Eligible Account, and Eligible Inventory and Eligible Equipment as set forth herein and as otherwise established by the Lender in its Credit Judgment from time to time.





 


6.21         Anti-Terrorism Laws and Foreign Asset Control Regulations.  Each Loan Party and its Subsidiaries is in compliance in all material respects with, and the advances of the Loans and use of the proceeds thereof will not violate, (a) the Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the “Trading With the Enemy Act”) or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the “Foreign Assets Control Regulations”) and any other enabling legislation or executive order relating thereto, thereto (which for the avoidance of doubt shall include, but shall not be limited to Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”)) and/or (b) the Uniting And Strengthening America by Providing Appropriate Tools Required To Intercept And Obstruct Terrorism (USA Patriot Act of 2001).  Furthermore, none of the Borrowers or their Affiliates (a) is or will become a “blocked person” as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations or (b) knowingly engages or will engage in any dealings or transactions, or be otherwise associated, with any such “blocked person” or in any manner violative of any such order.  No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977.





 


6.22         Brokers.  No broker or finder brought about the obtaining, making or closing of the Loans or transactions contemplated by the Loan Documents (except as disclosed in the Purchase Agreement and solely with respect to the Closing Date Acquisition), and no Loan Party or Affiliate thereof has any obligation to any Person in respect of any finder’s or brokerage fees in connection therewith (except as disclosed in the Purchase Agreement and solely with respect to the Closing Date Acquisition).





 


6.23         Customer and Trade Relations.  There exists no actual or, to the knowledge of any Loan Party, threatened, termination or cancellation of, or any modification or change in the business relationship of any Loan Party with any customers or suppliers which are, individually or in the aggregate, material to its operations, to the extent that such cancellation, modification or change could reasonably be expected to result in a Material Adverse Effect.





 


6.24         Material Contracts.  Schedule 6.24 sets forth all Material Contracts to which any Loan Party is a party or is bound as of the Closing Date.  The Loan Parties have delivered true, correct and complete copies of such Material Contracts to the Lender on or before the date hereof.






79







6.25         Casualty.  Neither the businesses nor the properties of any Loan Party or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other Casualty (whether or not covered by insurance) that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.





 


6.26         Senior Indebtedness.  All Obligations including those to pay principal of and interest (including post-petition interest, whether or not allowed as a claim under bankruptcy or similar laws) on the Loans and other Obligations, and fees and expenses in connection therewith, constitute “Senior Indebtedness” or similar term relating to the Obligations and all such Obligations are entitled to the benefits of the subordination created by the Intercreditor Agreement or any other applicable Subordinated Indebtedness Document, as applicable.  Each Loan Party acknowledges that the Lender is entering into this Agreement and is extending its Commitments in reliance upon the subordination provisions of the Intercreditor Agreement.


 


6.27         Closing Date Acquisition.  As of the Closing Date, (i) each of the representations and warranties made by the Loan Parties in the Closing Date Acquisition Documents is true and correct in all material respects, except to the extent that such representation and warranty relates to a specific date, in which case such representation shall be true and correct as of such earlier date, and (ii) to the knowledge of the Loan Parties, each of the representations and warranties made by a party, other than a Loan Party, to the Closing Date Acquisition Documents is true and correct in all material respects, expect to the extent that such representation and warranty relates to a specific date, in which case such representation shall be true and correct as of such earlier date.  At the close of business on the Closing Date, the Closing Date Acquisition shall have been consummated and completed in accordance with all applicable Laws.


 


6.28         Inactive Subsidiaries.  Each Subsidiary of the Company which is not a Loan Party is an Inactive Subsidiary.


 


ARTICLE VII



 AFFIRMATIVE COVENANTS


 


So long as the Lender shall have any Commitment hereunder or any Loan Obligation hereunder shall remain unpaid or unsatisfied, each Loan Party shall, and shall cause each Subsidiary to:





 


7.01         Financial Statements.  Deliver to the Lender:





 


(a)          as soon as available, but in any event within 90 days after the end of each Fiscal Year of the Company or, if earlier, 15 days after the date required to be filed with the SEC (without giving effect to any extension permitted by the SEC), a consolidated balance sheet of the Company and its Subsidiaries as at the end of such Fiscal Year, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by a report and opinion of a Registered Public Accounting Firm of nationally-recognized standing reasonably acceptable to the Lender (and Lender acknowledges that UHY LLP is an acceptable firm) (the “Auditor”), which report and opinion shall be prepared in accordance with audit standards of the Public Company Accounting Oversight Board and applicable Securities Laws and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit and shall include a certificate of the Auditor stating that in making the examination necessary with respect to such audit it has not become aware of any Default  in respect of any term, covenant, condition of Section 8.10 or, if any such Default shall exist, stating the nature and status of such event; provided that 


 



80







the Borrower shall only be required to use reasonable efforts exercised in good faith to obtain such certificate;





 


(b)         Quarterly, as soon as available, but in any event within 45 days after the end of each Fiscal Quarter, unaudited consolidated balance sheets of the Company and its Subsidiaries as of the end of such quarter and the related statements of income and cash flow for such quarter and for the portion of the Fiscal Year then elapsed, on a consolidated basis for the Company and its Subsidiaries, setting forth in comparative form corresponding figures for the preceding Fiscal Year and certified by the chief financial officer of Borrower Agent as prepared in accordance with GAAP and fairly presenting the financial condition, results of operations, shareholders equity and cash flows for such month and period, subject to normal year-end adjustments consistent with historical practices and the absence of footnotes;





 


(c)          Monthly, as soon as available, but in any event within 30 days after the end of each Fiscal Month (other than for the months of March, June, September and December which shall be delivered in accordance with Section 7.01(b), unaudited consolidated balance sheets of the Company and its Subsidiaries as of the end of such month and the related statements of income and cash flow for such month and for the portion of the Fiscal Year then elapsed, on a consolidated basis for the Company and its Subsidiaries, setting forth in comparative form corresponding figures for the preceding Fiscal Year and certified by the chief financial officer of Borrower Agent as prepared in accordance with GAAP and fairly presenting the financial condition, results of operations, shareholders equity and cash flows for such month and period, subject to normal year-end adjustments consistent with historical practices and the absence of footnotes;





 


(d)          as soon as available but not later than 30 days after the end of each Fiscal Year, annual financial projections of the Company and its Subsidiaries on a consolidated basis, in form reasonably satisfactory to the Lender, of (i) monthly consolidated balance sheets and statements of income or operations and cash flows and (ii) monthly Availability for Borrowers for the immediately following Fiscal Year.





 


7.02         Borrowing Base Certificate; Other Information.  Deliver to the Lender, in form and detail reasonably satisfactory to the Lender:





 


(a)          On or before the Wednesday of each week from and after the date hereof, Borrower Agent shall deliver to the Lender, in form acceptable to the Lender, a Borrowing Base Certificate as of the last day of the immediately preceding week, with such supporting materials as the Lender shall reasonably request (including weekly reporting of rolling forward accounts receivable data by reporting weekly sales, cash collections and credits and monthly reporting of gross inventory, inventory ineligibles and accounts receivable ineligibles).  All calculations of Availability in any Borrowing Base Certificate shall originally be made by the Borrower Agent and certified by a Responsible Officer of the Borrower Agent, provided that the Lender may from time to time review and adjust any such calculation (a) to reflect its reasonable estimate of declines in value of any Collateral, due to collections received in the Concentration Account or otherwise; (b) to adjust advance rates to reflect changes in dilution, quality, mix and other factors affecting Collateral; and (c) to the extent the calculation is not made in accordance with this Agreement or does not accurately reflect the Reserves or the Borrowing Base.





 


(b)          On or before the 20th day of each calendar month from and after the date hereof (or while a Default exists, more frequently upon the request of the Lender), Borrower Agent shall deliver to the Lender, in the form reasonably acceptable to the Lender, (i) reconciliations of all Borrowers’ Accounts as shown on the month end Borrowing Base Certificate for the immediately preceding month to Borrowers’ accounts receivable agings, to Borrowers’ general ledger and to Borrowers’ most recent 


 



81







financial statements, (ii) accounts payable agings, (iii) accounts receivable agings, (iv) reconciliations of Borrowers’ Inventory as shown on Borrowers’ perpetual inventory, to Borrowers’ general ledger and to Borrowers’ financial statements and (v) Inventory status reports, all with supporting materials as the Lender shall reasonably request;





 


(c)          a Compliance Certificate executed by the chief financial officer of Borrower Agent which certifies compliance with Section 8.12 and provides a reasonably detailed calculation of the Fixed Charge Coverage Ratio delivered (i) concurrently with delivery of financial statements under Sections 7.01(a), 7.01(b) and 7.01(c) above;





 


(d)          promptly after the same are available, copies of each annual report, proxy or financial statement sent to the stockholders of the Company, and copies of all annual, regular, periodic and special reports and registration statements which the Company may file or be required to file with the SEC under Section 13 or 15(d) of the Exchange Act, and not otherwise required to be delivered to the Lender pursuant hereto;


 


(e)           at the Lender’s request (but not more frequently than monthly unless a Default has occurred and is continuing), a listing of each Borrower’s trade payables, specifying the trade creditor and balance due, all in form reasonably satisfactory to the Lender; and


 


(f)           promptly, such additional information regarding the business, financial or corporate affairs of any Loan Party or any Subsidiary, or compliance with the terms of the Loan Documents, as the Lender may from time to time reasonably request.





 


7.03         Notices.  Promptly notify the Lender:





 


(a)           of the occurrence of any Default;


 


(b)          of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of any Loan Party or any Subsidiary or, to the knowledge of any Borrower, to the extent that any Responsible Officer is aware of such breach, non-performance or default, a breach or non-performance of, or default under, a Contractual Obligation to which any Loan Party or any Subsidiary is a party by the other party thereto; (ii) any dispute, litigation, investigation, proceeding or suspension between any Loan Party or any Subsidiary and any Governmental Authority; (iii) the commencement of, or any material development in, any litigation or proceeding affecting any Loan Party or any Subsidiary, including pursuant to any applicable Environmental Laws; (iv) the violation or receipt by any Loan Party or any Subsidiary of written assertion, to the extent a Responsible Officer is aware of such assertion, of violation of any applicable Law;


 


(c)           of the occurrence of any ERISA Event that could reasonably be expected to result in liability to any Loan Party of $250,000 or more;


 


(d)           the creation or acquisition of any Subsidiary;


 


(e)           of any material change in accounting policies or financial reporting practices by any Loan Party or any Subsidiary thereof;


 


(f)           of any change in any Loan Party’s chief executive officer, president or chief financial officer;


 



82







(g)           of the discharge by any Loan Party of its present Auditors or any withdrawal or resignation by such Auditors;


 


(h)          of any collective bargaining agreement or other labor contract to which a Loan Party becomes a party, or the application for the certification of a collective bargaining agent;


 


(i)           of the filing of any Lien for unpaid Taxes against any Loan Party in excess of $25,000;


 


(j)           the receipt of any notice from a supplier, seller, or agent pursuant to either PACA or PASA with respect to any aggregate liability of $25,000 or more;


 


(k)           of any Event of Loss with respect to any material portion of the Collateral;


 


(l)           any facts or circumstances that could reasonably likely give rise to a Change of Control;


 


(m)          within two Business Days of receipt or sending, as applicable, copies of any notices (including notices of default or acceleration) received from any Subordinated Lender or given by any Loan Party to any Subordinated Lender;


 


(n)           within five Business Days following the date that any Inactive Subsidiary is no longer an Inactive Subsidiary;


 


(o)          within two Business Days of becoming aware thereof, notify Lender if any Inventory or Equipment identified by Borrowers to Lender as Eligible Inventory or Eligible Equipment becomes ineligible for any reason; and


 


(p)          of any failure by any Loan Party to pay rent at any of such Loan Party’s locations if such failure continues for more than fifteen (15) days following the day on which such rent first came due.


 


Each notice pursuant to this Section 7.03 shall be accompanied by a statement of a Responsible Officer of the Borrower Agent setting forth details of the occurrence referred to therein and stating what action the Borrowers have taken and proposes to take with respect thereto.  Each notice pursuant to Section 7.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.





 


7.04         Payment of Obligations.  Pay and discharge as the same shall become due and payable (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being Properly Contested; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property, except to the extent that any such Lien would otherwise be permitted by Section 8.01 or the same are being Properly Contested; and (c) all Indebtedness having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $250,000 as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness.





 


7.05         Preservation of Existence, Etc.  (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization or formation except in a transaction permitted by Section 8.04; (b) take all reasonable action to maintain all rights,


 



83







privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its registered Intellectual Property, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.





 


7.06         Maintenance of Properties.  (a) Maintain, preserve and protect all of its properties (other than insignificant properties) and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) use the standard of care typical in the industry in the operation and maintenance of its facilities.





 


7.07         Maintenance of Insurance.


 


(a)          Except as provided in clause (b) below, maintain with (i) companies having an A.M. Best Rating of at least “A-” or (ii) financially sound and reputable insurance companies reasonably acceptable to the Lender and not Affiliates of the Loan Parties, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business and operating in the same or similar locations or as is required by applicable Law (including, without limitation, workmen’s compensation, public liability, business interruption and property damage insurance), of such types and in such amounts as are customarily carried under similar circumstances by such other Persons and as are reasonably acceptable to the Lender.





 


(b)          Maintain insurance against Casualty to the Real Estate under a policy or policies covering such risks as are presently included in “special form” (also known as “all risk”) coverage, including such risks as are ordinarily insured against by similar businesses, but in any event including fire, lightning, windstorm, hail, explosion, riot, riot attending a strike, civil commotion, damage from aircraft, smoke, vandalism, and malicious mischief.  Unless otherwise agreed in writing by the Lender, such insurance shall be for the full insurable value of the Real Estate on a replacement cost basis, with a deductible amount, if any, reasonably satisfactory to the Lender.  The term “full insurable value” means one hundred percent (100%) of the actual replacement cost of the Real Estate, including tenant improvements (excluding excavation costs and costs of underground flues, pipes, drains and other uninsurable items).


 


(c)          Cause all Casualty policies, including fire and extended coverage policies, maintained with respect to any Collateral (including the Real Estate) to be endorsed or otherwise amended to include (i) a non-contributing mortgagee clause (regarding improvements to real property) and lenders’ loss payable clause (regarding personal property), in form and substance reasonably satisfactory to the Lender, which endorsements or amendments shall provide that the insurer shall pay all proceeds otherwise payable to the Loan Parties under the policies directly to the Lender, (ii) a provision to the effect that none of the Loan Parties, Credit Parties or any other Person shall be a co-insurer and (iii) such other provisions as the Lender may reasonably require from time to time to protect the interests of the Credit Parties.


 


(d)          Cause commercial general liability policies to be endorsed to name the Lender as an additional insured; and cause business interruption policies to name the Lender as a loss payee and to be endorsed or amended to include (i) a provision that, from and after the Closing Date, the insurer shall pay all proceeds otherwise payable to the Loan Parties under the policies directly to the Lender, (ii) a provision to the effect that none of the Loan Parties, the Lender or any other party shall be a co‐insurer 



84







and (iii) such other provisions as the Lender may reasonably require from time to time to protect the interests of the Credit Parties.


 


(e)           Cause each such policy referred to in this Section 7.07 to also provide that it shall not be canceled, or not renewed (i) by reason of nonpayment of premium except upon not less than ten (10) days’ prior written notice thereof by the insurer to the Lender (giving the Lender the right to cure defaults in the payment of premiums) or (ii) for any other reason except upon not less than thirty (30) days’ prior written notice thereof by the insurer to the Lender.


 


(f)           Deliver to the Lender, prior to the cancellation, or non‐renewal of any such policy of insurance, a copy of a renewal or replacement policy or insurance certificate (or other evidence of renewal of a policy previously delivered to the Lender, including an insurance binder) together with evidence reasonably satisfactory to the Lender of payment of the premium then due therefor.


 


(g)          Permit any representatives that are designated by the Lender to inspect the insurance policies maintained by or on behalf of the Loan Parties and to inspect books and records related thereto and any properties covered thereby.  The Loan Parties shall pay the reasonable and documented, out-of-pocket fees and expenses of any representatives retained by the Lender to conduct any such inspection; provide that the Borrowers shall only be obligated to pay such fees and expenses for one (1) such inspection during any twelve (12) month period (unless an Event of Default has occurred and is continuing).


 


(h)          None of the Credit Parties, or their agents or employees shall be liable for any loss or damage insured by the insurance policies required to be maintained under this Section 7.07.  Each Loan Party shall look solely to its insurance companies or any other parties other than the Credit Parties for the recovery of such loss or damage and such insurance companies shall have no rights of subrogation against any Credit Party or its agents or employees.  If, however, the insurance policies do not provide waiver of subrogation rights against such parties, as required above, then the Loan Parties hereby agree, to the extent permitted by law, to waive their right of recovery, if any, against the Credit Parties and their agents and employees.  The designation of any form, type or amount of insurance coverage by the any Credit Party under this Section 7.07 shall in no event be deemed a representation, warranty or advice by such Credit Party that such insurance is adequate for the purposes of the business of the Loan Parties or the protection of their properties.


 


(i)           The Lender is authorized, at its sole and absolute option, to commence, appear in and prosecute, in its own or any Borrower’s name, any action or proceeding relating to any Event of Loss, and to make proof of loss for and to settle or compromise any claim in connection therewith.  In such case, the Lender shall have the right to receive all Condemnation Awards and Insurance Proceeds, and may deduct therefrom any and all of its expenses incurred at any time incurred in connection therewith.  However, so long as no Event of Default has occurred and is continuing and the Borrowers are diligently pursuing their rights and remedies with respect to any claim arising from such Event of Loss, the Lender will obtain the Borrower Agent’s written consent (which consent shall not be unreasonably withheld or delayed) before making proof of loss for or settling or compromising such claim.  Each Borrower agrees to diligently assert its rights and remedies with respect to each such claim and to promptly pursue the settlement and compromise of each such claim subject to the Lender’s approval, which approval shall not be unreasonably withheld or delayed.  If, prior to the receipt by the Lender of any Condemnation Award or Insurance Proceeds, any Real Estate shall have been sold pursuant to the provisions of a Mortgage, the Lender shall have the right to receive such funds.  If any Condemnation Awards or Insurance Proceeds are paid to a Borrower, that Borrower shall receive the same in trust for the Lender.  Within five (5) days after Borrower’s receipt of any Condemnation Awards or Insurance Proceeds, such Borrower shall deliver such awards or proceeds to the Lender in the form in which they were received, together with any 



85







endorsements or documents that may be necessary to effectively negotiate or transfer the same to the Lender.  Each Borrower agrees to execute and deliver from time to time, upon the request of the Lender, such further instruments or documents as may be requested by the Lender to confirm the grant and assignment to Lender of any Condemnation Awards or Insurance Proceeds.





 


7.08         Utilization of Net Proceeds.


 


(a)          Net Cash Proceeds arising from any Event of Loss with respect to any Real Estate must be utilized either for payment of the Obligations or for the restoration of such Real Estate.  Net Cash Proceeds may be utilized for the restoration of such Real Estate only if no Default shall exist and only if in the reasonable judgment of the Lender (i) there has been no material adverse change in the financial viability of the improvements on such Real Estate, (ii) the Net Cash Proceeds, together with other funds deposited with the Lender for that purpose, are sufficient to pay the cost of the restoration pursuant to a budget and plans and specifications approved by the Lender, (iii) the restoration can be completed prior to the Maturity Date and prior to the date required by any purchase and sale agreement or by any Lease, and (iv) following restoration, such Real Estate will have a fair market value at least equal to its fair market value immediately prior to the Event of Loss.  Otherwise, Net Cash Proceeds shall be utilized for payment of the Obligations in such order and in such proportions as determined by the Lender in its sole discretion.





 


(b)          If Net Cash Proceeds are to be utilized for the restoration of such Real Estate, (i) the Borrowers shall, at their sole cost and expense, promptly commence and diligently and continuously perform to completion the restoration in a good and workmanlike manner and in compliance with all Laws and the requirements of the Permitted Liens, whether or not the Borrowers shall have satisfied the requirements of this Section 7.08(b) in order to cause the Net Cash Proceeds to be made available for such restoration and whether or not such insurance proceeds on account of the Casualty shall be sufficient for such purpose, and (ii) the Net Cash Proceeds, together with any other funds deposited with the Lender for that purpose, must be deposited in a an account maintained by the Lender solely for the purposes described in this Section 7.08 (“Borrower’s Deposit Account”), which shall be a non-interest-bearing account.  Subject to the terms of this Section 7.08, the Lender shall have the exclusive right to manage and control all funds in the Borrower’s Deposit Account, but the Lender shall have no fiduciary duty with respect to such funds.  Prior to the advance by the Lender of any funds so deposited and the commencement of such restoration, the Borrowers shall take all steps necessary to avoid the imposition of any mechanics’ liens on the Real Estate or the improvements thereon.  Thereafter, the Lender will advance the deposited funds from time to time to the Borrowers for the payment of costs of restoration of the Real Estate upon presentation of evidence by the Borrowers acceptable to the Lender that such portion of the restoration has been completed satisfactorily and Lien-free.  If at any time the Lender reasonably determines that there is a deficiency in the funds available in the Borrower’s Deposit Account to complete the restoration as contemplated, then the Borrowers shall promptly deposit in the Borrower’s Deposit Account additional funds equal to the amount of the deficiency.  Any account fees and charges may be deducted from the balance, if any, in the Borrower’s Deposit Account.





 


(c)           Each Borrower grants to Lender a security interest in the Borrower’s Deposit Account and all funds hereafter deposited to such deposit account, and any proceeds thereof, as security for the Obligations.  Such security interest shall be governed by the UCC, and the Lender shall have available to it all of the rights and remedies available to a secured party thereunder.  The Borrower’s Deposit Account may be established and held in such name or names as the Lender shall deem appropriate, including in the name of the Lender.  Each Borrower hereby constitutes and appoints the Lender and any officer or agent of the Lender its true and lawful attorneys-in-fact with full power of substitution to open the Borrower’s Deposit Account and to do any and every act that Borrower might do on its own behalf to fulfill the terms of this Section, provided, however, the Lender shall not exercise such 



86







power (other than the power to open the Borrower’s Deposit Account) unless an Event of Default has occurred and is continuing.  To the extent permitted by Law, each Borrower hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof.  It is understood and agreed that this power of attorney, which shall be deemed to be a power coupled with an interest, cannot be revoked.





 


7.09         Compliance with Laws.  Comply in all material respects with the requirements of all Laws (including without limitation all applicable Environmental Laws) and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being Properly Contested; or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.





 


7.10         Books and Records.  (a)  Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP (subject to normal year-end adjustments consistent with historical practices) consistently applied shall be made of all financial transactions and matters involving the assets and business of the Loan Parties or such Subsidiary, as the case may be; and (b) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over any Loan Party or such Subsidiary, as the case may be.





 


7.11          Inspection Rights and Appraisals; Meetings with the Lender.


 


(a)           Permit the Lender or its designees or representatives from time to time, subject to reasonable notice and normal business hours (except, in each case, when a Default exists), to conduct Field Exams and/or appraisals of Inventory and to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its officers and Auditors; provided that representatives of the Borrower Agent shall be given the opportunity to participate in any discussions with the Auditors.  The Lender shall not have any duty to any Loan Party to share any results of any Field Exam with any Loan Party.  Appraisals may be shared with the Borrower Agent upon request.  The Loan Parties acknowledge that all Field Exams, appraisals and reports are prepared by or for the Lender for its purposes, and Loan Parties shall not be entitled to rely upon them.





 


(b)           Reimburse the Lender for all reasonable and documented out-of-pocket charges, costs and expenses of the Lender in connection with up to two Field Exams during any twelve (12) month period; provided, however, that if a Field Exam is initiated during a Default, all charges, costs and expenses therefor shall be reimbursed by the Loan Parties without regard to such limits.





 


(c)           Reimburse the Lender for all reasonable and documented out-of-pocket charges, costs and expenses of the Lender in connection with up to one Inventory appraisal during any twelve (12) month period; provided, however, that if an Inventory appraisal is initiated during a Default, all charges, costs and expenses therefor shall be reimbursed by the Loan Parties without regard to such limits.





 


(d)           Reimburse the Lender for all reasonable and documented out-of-pocket charges, costs and expenses of the Lender in connection with Real Estate and Equipment appraisals initiated by the Lender during a Default.


 


(e)           Without limiting the foregoing, the Loan Parties will participate and will cause their key management personnel to participate in meetings with the Lender periodically during each year, which meetings shall be held at such times and such places as may be reasonably requested by the Lender.





 


7.12         Use of Proceeds.  Use the proceeds of the Credit Extensions (i) to refinance certain Indebtedness under the Existing Agreement, (ii)  to finance the Closing Date Acquisition, (iii) to pay fees



87







and expenses in connection with the Transactions, and (iv) for working capital, capital expenditures, and other general corporate purposes not in contravention of any Law or of any Loan Document.





 


7.13         New Domestic Subsidiaries.  As soon as practicable but in any event within 3 Business Days following the acquisition or creation of any Domestic Subsidiary cause to be delivered to the Lender each of the following, as applicable:


 


(a)          a joinder agreement acceptable to the Lender duly executed by such Domestic Subsidiary, together with executed counterparts of each other Loan Document reasonably requested by the Lender, including all Security Instruments and other documents reasonably requested to establish and preserve the Lien of the Lender in all Collateral of such Domestic Subsidiary;


 


(b)           (i) Uniform Commercial Code financing statements naming such Person as “Debtor” and naming the Lender for the benefit of the Credit Parties as “Secured Party,” in form, substance and number sufficient in the reasonable opinion of the Lender and its special counsel to be filed in all Uniform Commercial Code filing offices and in all jurisdictions in which filing is necessary to perfect in favor of the Lender for the benefit of the Credit Parties the Lien on the Collateral conferred under such Security Instrument to the extent such Lien may be perfected by a Uniform Commercial Code or PPSA filing, and (ii) pledge agreements, control agreements, Documents and original collateral (including pledged Equity Interests, Securities and Instruments) and such other documents and agreements as may be reasonably required by the Lender, all as necessary to establish and maintain a valid, perfected security interest in all Collateral in which such Domestic Subsidiary has an interest consistent with the terms of the Loan Documents, provided that notwithstanding anything to the contrary in this Section 7.13, no Loan Party shall be required to take any Excluded Perfection Action or deliver any documents or agreements with respect to an Excluded Perfection Action;


 


(c)          upon the request of the Lender, an opinion of counsel to each such Domestic Subsidiary and addressed to the Lender, in form and substance reasonably acceptable to the Lender, each of which opinions may be in form and substance, including assumptions and qualifications contained therein, substantially similar to those opinions of counsel delivered pursuant to Section 5.01(a); and


 


(d)          current copies of the Organization Documents of each such Domestic Subsidiary, minutes of duly called and conducted meetings (or duly effected consent actions) of the Board of Directors, partners, or appropriate committees or governing bodies thereof (and, if required by such Organization Documents or applicable law, of the shareholders, members or partners) of such Person authorizing the actions and the execution and delivery of documents described in this Section 7.13, all certified by the applicable Governmental Authority or appropriate officer as the Lender may elect.





 


7.14         New Foreign Subsidiaries.  As soon as practicable but in any event within 3 Business Days following the acquisition or creation of any Foreign Subsidiary cause to be delivered to the Lender a pledge of 65% of the Equity Interests of each such Foreign Subsidiary, provided that notwithstanding anything to the contrary in this Section 7.14, no Loan Party shall be required to take any Excluded Perfection Action or deliver any documents or agreements with respect to an Excluded Perfection Action.





 


7.15        Compliance with ERISA.  Do, and cause the Loan Parties and each ERISA Affiliate to do, each of the following, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect:  (a) maintain each Plan and each Foreign Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other applicable Laws; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; (c) cause each Plan and each Foreign Plan to maintain any required approvals by any Governmental Authority regulating 



88







such Plan, (d) make all required contributions to any Plan subject to the Pension Funding Rules, and (e) make all required contributions and payments to any Foreign Plans.





 


7.16         Further Assurances.  At the Borrowers’ cost and expense, upon request of the Lender, duly execute and deliver or cause to be duly executed and delivered, to the Lender such further instruments, documents, certificates, financing and continuation statements, and do and cause to be done such further acts that may be reasonably necessary or advisable in the reasonable opinion of the Lender to carry out more effectively the provisions and purposes of this Agreement, the Security Instruments and the other Loan Document, provided, however, unless an Event of Default has occurred no Lien on the Equity Interests or assets of an Inactive Subsidiary shall be required to be granted to Lender; and provided further, however, if an Event of Default has occurred then at any time thereafter within five days of the Lender’s request the Company shall cause a Lien on the Equity Interests and assets of each Inactive Subsidiary to be granted in favor of Lender.





 


7.17         Licenses.  (a)  Keep in full force and effect each License (i) the expiration or termination of which could reasonably be expected to materially adversely affect the realizable value in the use or sale of a material amount of Inventory or (ii) the expiration or termination of which could reasonably be expected to have a Material Adverse Effect (each a “Material License”); (b) promptly notify the Lender of (i) any material modification to any such Material License that could reasonably be expected to result in a Material Adverse Effect and (ii) entering into any new Material License, provided that the failure to deliver any new Material License shall not result in a Default or Event of Default; (c) pay all Royalties (other than immaterial Royalties or Royalties being Properly Contested) arising under such Material Licenses when due (subject to any cure or grace period applicable thereto); and (d) notify the Lender of any material default or material breach asserted in writing by any Person to have occurred under any such Material License.





 


7.18         Environmental Laws.  Conduct its operations and keep and maintain its Real Estate in material compliance with all Environmental Laws, other than any such non-compliance which would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect; (b) obtain and renew all environmental permits necessary for its operations and properties, other than any environmental permits the failure of which to obtain would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect; and (c) implement any and all investigation, remediation, removal and response actions that are required to comply with Environmental Laws pertaining to the presence, generation, treatment, storage, use, disposal, transportation or release of any Hazardous Materials on, at, in, under or about any of its Real Estate other than any such non-compliance which would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect.





 


7.19         Landlord and Storage Agreements.  Except as otherwise expressly permitted hereunder, make all payments and otherwise perform all obligations in respect of all Leases of real property to which any Loan Party or any of its Subsidiaries is a party and not allow such Leases to lapse or be terminated by the applicable Loan Party or Subsidiary or any rights to renew such leases to be forfeited or cancelled by the applicable Loan Party or Subsidiary, notify the Lender of any default by the applicable Loan Party or Subsidiary with respect to such Leases and cooperate with the Lender in all respects to cure any such default by the applicable Loan Party or Subsidiary, and cause each of its Subsidiaries to do so, except, in any case, where the failure to do any of the foregoing, either individually or in the aggregate, could not be reasonably likely to have a Material Adverse Effect.





 


7.20        Material Contracts.  Perform and observe all the payment terms and other material terms and provisions of each Material Contract to be performed or observed by it, maintain each such Material Contract in full force and effect, enforce each such Material Contract in accordance with its 



89







terms, take all such action to such end as may be from time to time reasonably requested by the Lender and, upon reasonable request of the Lender, make to each other party to each such Material Contract such demands and requests for information and reports or for action as any Loan Party or any of its Subsidiaries is entitled to make under such Material Contract, and cause each of its Subsidiaries to do so, except, in any case, where the failure to do any of the foregoing, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.





 


7.21        Treasury Management Services.  Commencing with the date which is ninety (90) days after the Closing Date, and at all times thereafter, each Borrower shall maintain its lockbox deposit accounts exclusively with the Lender or Bank of Montreal (as directed by the Lender) and shall utilize the Lender or Bank of Montreal for its primary disbursement account and other Treasury Management and Other Services, except for the accounts set forth on Part (a) of Schedule 6.19 that are maintained with Royal Bank of Canada as of the Closing Date and Excluded Deposit Account maintained under clause (d) of the definition of “Excluded Deposit Accounts”.


 


7.22        Tracing of Proceeds of Loans.  Each Borrower shall maintain and cause each other Loan Party to maintain, detailed and accurate accounting and records of proceeds of the Loans and transfers of proceeds of the Loans (i) received by it from Lender, (ii) transferred from it to any other Loan Party, and (iii) received by it from another Borrower.  Each Borrower acknowledges that its ability to obtain the Loans hereunder is made possible by the fact that the Borrowers are co-borrowers under this Agreement and the other Loan Documents, and are operated as one enterprise.  Each Borrower agrees that (i) the business operations of each Borrower and each other Loan Party are interrelated and complement one another, and such entities have a common business purpose and common management, and (ii) the proceeds of Loans hereunder will benefit each Borrower and each other Loan Party, severally and jointly, regardless of which Borrower or other Loan Party requests or receives part or all of any Loans.  Not in any way in limitation of any other provisions set forth herein, such books and records may be reviewed and copied by the Lender at Borrower’s expense at reasonable intervals and upon reasonable notice given by the Lender to Borrower Agent.


 


ARTICLE VIII



 NEGATIVE COVENANTS


 


So long as the Lender shall have any Commitment hereunder or any Loan Obligation hereunder shall remain unpaid or unsatisfied, no Loan Party shall, nor shall it permit any Subsidiary to, directly or indirectly:





 


8.01         Liens.  Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following (“Permitted Liens”):





 


(a)           Liens in favor of the Lender pursuant to any Loan Document;





 


(b)           Liens existing on the date hereof and listed on Schedule 8.01 and any renewals or extensions thereof, provided that (i) the property covered thereby is not changed, (ii) the amount secured or benefited thereby is not increased from the amount outstanding on the date of renewal or extension, (iii) the direct or any contingent obligor with respect thereto is not changed, and (iv) any renewal or extension of the obligations secured or benefited thereby is otherwise permitted under Section 8.02(b);





 


(c)           Liens for taxes, assessments or other governmental charges, not yet due or which are being Properly Contested;


 



90







(d)          Liens of carriers, warehousemen, mechanics, materialmen, repairmen, landlords or other like Liens imposed by Law or arising in the Ordinary Course of Business which are not overdue for a period of more than 45 days or which are being Properly Contested;





 


(e)          Liens, pledges or deposits in the Ordinary Course of Business in connection with workers’ compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA;


 


 


(f)           Liens on deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety bonds (other than bonds related to judgments or litigation), performance bonds and other obligations of a like nature incurred in the Ordinary Course of Business;





 


(g)           (i) “Permitted Encumbrances” as defined in the Mortgages on the Mortgaged Properties, and (ii) Liens with respect to minor imperfections of title and easements, rights-of-way, covenants, consents, reservations, encroachments, variations and zoning and other similar restrictions, charges, encumbrances or title defects affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person and do not materially detract from the value of or materially impair the use by the Loan Parties in the ordinary course of its business of the property subject to or to be subject to such encumbrance;


 


(h)          Liens securing judgments for the payment of money not constituting an Event of Default under Section 9.01 or securing appeal or other surety bonds related to such judgments;





 


(i)          Liens securing Indebtedness permitted under Section 8.02(e); provided that (i) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (ii) the Indebtedness secured thereby does not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition;





 


(j)          Liens securing Assumed Indebtedness of the Loan Parties permitted pursuant to Section 8.02(f); provided that (i) such Liens do not at any time encumber any property other than property of the Subsidiary acquired, or the property acquired, and proceeds thereof in connection with such Assumed Indebtedness and shall not attach to any assets of the Loan Parties theretofore existing or (except for any such proceeds) which arise after the date thereof and (ii) the Assumed Indebtedness and other secured Indebtedness of the Loan Parties secured by any such Lien does not exceed the fair market value of the property being acquired in connection with such Assumed Indebtedness;


 


(k)           operating leases or subleases granted by the Loan Parties to any other Person in the Ordinary Course of Business;


 


(l)           non-exclusive licenses and sublicenses of intellectual property granted by a Loan Party or any Subsidiary of a Loan Party in the Ordinary Course of Business on an arm’s-length basis;


 


(m)          Liens arising from the filing of precautionary UCC or PPSA financing statements with respect to any operating lease;


 


(n)           involuntary Liens securing amounts less than $50,000 in the aggregate outstanding at any one time and which are being Properly Contested;


 



91







(o)           Liens on cash securing reimbursement obligations with respect to the Existing Letters of Credit and other contingent obligations as set forth in that certain letter from The PrivateBank and Trust Company to CCP and others dated on or about the date hereof;


 


(p)           Liens in favor of collecting banks arising by operation of law under Section 4-210 of the UCC or, with respect to collecting banks, under Section 4‐208 of the UCC;


 


(q)           Liens (including the right of set-off) in favor of a bank or other depository institution arising as a matter of law encumbering deposits;


 


(r)           Liens in favor of customs and revenue authorities imposed by Law to secure payment of customs duties in connection with the importation of goods and arising in the Ordinary Course of Business which are not overdue for a period of more than 30 days or which are being Properly Contested; and


 


(s)         Liens on insurance policies, the proceeds thereof and deposits made in the Ordinary Course of Business to secure Indebtedness owing to insurance carriers for Indebtedness permitted in Section 8.02(m).


 


Notwithstanding the foregoing, no Inactive Subsidiary shall grant or have any of its assets subject to a Lien other than Liens permitted under clause (c), (e) or (g) of Section 8.01.





 


8.02         Indebtedness.  Create, incur, assume or suffer to exist any Indebtedness or issue any Disqualified Equity Interest, except:





 


(a)           Indebtedness under the Loan Documents;





 


(b)           Indebtedness outstanding on the date hereof and listed on Schedule 8.02 and any refinancings, refundings, renewals or extensions thereof; provided that (i) the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder, (ii) the average life to maturity of any refinancing, refunding, renewal or extension of such Indebtedness permitted hereby is not less than the then average life to maturity of the Indebtedness so refinanced or replaced, (iii)  the direct or contingent obligors with respect to such Indebtedness are not changed as a result of or in connection with such refinancing, refunding, renewal or extension, (iv) any refinancing, refunding, renewal or extension of Indebtedness that is Subordinated Indebtedness shall not be permitted, (v) the interest rate applicable to any such refinancing, refunding, renewing or extending Indebtedness does not exceed the greater of the (A) interest rate for the Indebtedness being refinanced, refunded, renewed, or extended and (B) the otherwise market rate of interest for such Indebtedness, and (vi) such refinancing, renewal, or extension does not impair or restrict, in any material respect greater than as contained in the Indebtedness being refinanced, refunded, renewed or extended, the ability of the Loan Parties to make Distributions or transfer money and other property to or otherwise enter into transactions among the other Loan Parties.





 


(c)          Guarantees of any Borrower in respect of Indebtedness otherwise permitted hereunder of any other Borrower; provided that no Loan Party or any other Subsidiary of the Company shall Guarantee the Subordinated Indebtedness unless such Guarantee shall be subordinated to the Obligations on substantially the same terms as such Subordinated Indebtedness;


 



92







(d)          obligations (contingent or otherwise) of the Borrowers existing or arising under any Swap Contract, provided that (i) such obligations are (or were) entered into by such Person in the Ordinary Course of Business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, cash flows or property held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person, and not for purposes of speculation or taking a “market view;” and (ii) such Swap Contract does not contain any provision exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party;





 


(e)          Indebtedness in respect of Capital Leases, Synthetic Lease Obligations and purchase money obligations for real property and fixed or capital assets within the limitations set forth in Section 8.01(i); provided, however, that the aggregate amount of all such Indebtedness at any one time outstanding shall not exceed $750,000;





 


(f)           Assumed Indebtedness of the Borrowers in an aggregate principal amount not to exceed $750,000 at any time outstanding;


 


(g)           the endorsement of negotiable instruments for deposit or collection or similar transactions in the Ordinary Course of Business;





 


(h)          unsecured Indebtedness of (A) any Borrower owing to any other Borrower, (B) any Subsidiary that is not a Loan Party owing to any other Subsidiary that is not a Loan Party, (C) any Loan Party to any Subsidiary not a Loan Party, and (D) any Subsidiary that is not a Loan Party owing to any Loan Party;


 


(i)           surety bonds permitted under Section 8.01;


 


(j)           unsecured Subordinated Indebtedness, other than the Specified Subordinated Indebtedness, if the Subordinated Indebtedness is unsecured and is at all times subject to an Intercreditor Agreement;


 


(k)           unsecured Specified Subordinated Indebtedness if the Specified Subordinated Indebtedness is unsecured, does not exceed an aggregate principal amount of $1,000,000 and is at all times subject to an Intercreditor Agreement;


 


(l)            reimbursement obligations with respect to the Existing Letters of Credit;





 


(m)          Indebtedness arising from the financing of insurance premiums in the Ordinary Course of Business;


 


(n)          unsecured Indebtedness representing deferred compensation to employees for actual services rendered of the Borrower and its Subsidiaries incurred in the Ordinary Course of Business and for which adequate reserves in accordance with GAAP are being maintained by such Persons;


 


(o)          unsecured cash management obligations and other Indebtedness in respect of netting services, automatic clearinghouse arrangements, overdraft protection, and other cash management and similar arrangements, in each case, in the Ordinary Course of Business and not relating to amounts past due for more than three (3) Business Days; and


 


(p)          unsecured Indebtedness owing to banks or other financial institutions under company credit cards issued to officers and employees for business-related expenses in the Ordinary 



93







Course of Business; provided that such Indebtedness is extinguished within ninety (90) days after its incurrence.


 


Notwithstanding the foregoing, no Inactive Subsidiary shall incur or be obligated on any Indebtedness except as permitted by Section 8.16 and Section 8.02(h).





 


8.03         Investments.  Make any Investments, except:


 


(a)          Investments held by the Loan Parties in the form of Cash Equivalents that are subject to the Lender’s Lien and control, pursuant to documentation in form and substance satisfactory to the Lender;





 


(b)          loans and advances to officers, directors and employees of the Loan Parties and Subsidiaries made in the Ordinary Course of Business in an aggregate amount at any one time outstanding not to exceed $100,000;





 


(c)           Investments by the Loan Parties and their Subsidiaries in their respective Subsidiaries outstanding on the date hereof;





 


(d)          Investments by the Loan Parties and their Subsidiaries in their respective Subsidiaries that are Inactive Subsidiaries that are used to immediately fund obligations and liabilities for environmental matters and related expenses which the Inactive Subsidiaries are permitted under this Agreement to incur or make;


 


(e)          Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the Ordinary Course of Business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;





 


(f)           Guarantees permitted by Section 8.02;





 


(g)          Investments existing as of the date hereof (including those set forth on Schedule 6.13(a) and (b)) and those as set forth in Schedule 8.03 (which Schedule 8.03 shall show, as of the date hereof, the amount, obligor or issuer and maturity, if any, of any listed Investment) and extensions or renewals thereof, provided that no such extension or renewal shall be permitted if it would (i) increase the amount of such Investment at the time of such extension or renewal or (ii) result in a Default hereunder;





 


(h)          any unsecured Indebtedness permitted under Section 8.02(h) which is an Investment;





 


(i)           Investments acquired in connection with the settlement of delinquent Accounts in the Ordinary Course of Business or in connection with the bankruptcy or reorganization of suppliers or customers;


 


(j)           endorsements for collection or deposit in the Ordinary Course of Business consistent with past practice; and


 


(k)           the Closing Date Acquisition.


 


Notwithstanding the foregoing, no Inactive Subsidiary shall incur or make any Investment, other than as permitted under clauses (d), (g) or (h) in this Section 8.03.






94







8.04         Fundamental Changes.  Merge, dissolve, liquidate, consolidate with or into another Person, except that, so long as no Default exists or would result therefrom:





 


(a)           any Subsidiary of the Company may merge or consolidate with or liquidate or dissolve into a Loan Party; provided, that, the Loan Party shall be the continuing or surviving Person;


 


(b)          any Subsidiary that is not a Loan Party may merge into any other Subsidiary that is not a Loan Party; provided, that, when any wholly-owned Subsidiary is merging with another Subsidiary that is not wholly-owned, the wholly-owned Subsidiary shall be the continuing or surviving Person; and


 


(c)           any Inactive Subsidiary may dissolve, liquidate or wind-down in accordance with all applicable Laws.





 


8.05         Dispositions.  Make any Disposition or enter into any agreement to make any Disposition, except:





 


(a)           Dispositions of Inventory in the Ordinary Course of Business;





 


(b)          Dispositions in the Ordinary Course of Business of Equipment or fixed assets that are obsolete, worn out or no longer useful to the Core Business for so long as (i) no Event of Default has occurred and is continuing at the time of such Disposition, (ii) the aggregate fair market value or a book value, whichever is more, of such Equipment and fixed assets does not exceed $400,000 in any twelve-month period and (iii) all proceeds thereof are (A) remitted to the Lender for application to the Obligations in accordance with Section 2.05(b) or (B) applied to the replacement of such Equipment or fixed assets with Equipment or other fixed assets of like kind, function and value within 180 days after any such Disposition and the replacement Equipment or other fixed assets shall be free and clear of Liens other than Permitted Liens;





 


(c)          Dispositions that constitute (i) an Investment permitted under Section 8.03, (ii) a Lien permitted under Section 8.01, (iii) a merger, dissolution, consolidation or liquidation permitted under Section 8.04(a), or (iv) a Distribution permitted under Section 8.06;





 


(d)          Dispositions of assets or property that result from an Event of Loss in respect of such asset or property that do not otherwise constitute an Event of Default; provided, however, that the foregoing shall not constitute an Event of Default so long as (i) Borrower is in compliance with Section 7.08 if such Disposition is of Mortgaged Property, or (ii) Borrower is in compliance with Section 2.05(b)(i) if such Disposition is not of Mortgaged Property;


 


 


(e)          Dispositions that consist of the sale or discount in the Ordinary Course of Business of overdue accounts receivable that are not Eligible Accounts, in an aggregate original amount for all such Accounts in any Fiscal Year of up to $100,000, but only in connection with the compromise or collection thereof, provided that the Net Cash Proceeds from such Disposition shall be deposited in the Concentration Account;





 


(f)           Dispositions among the Loan Parties or by any Subsidiary to a Loan Party;





 


(g)           Dispositions by any Subsidiary which is not a Loan Party to another Subsidiary that is not a Loan Party;


 



95







(h)          the lapse or abandonment in the Ordinary Course of Business of any registrations or applications for registration of any Intellectual Property which is not material to any Loan Party’s business;


 


(i)          Dispositions of Equipment to the extent such equipment is exchanged for credit against the purchase price of similar replacement equipment in the Ordinary Course of Business and is otherwise done in compliance with this Agreement; and


 


(j)           Dispositions of assets or property by any Inactive Subsidiary, provided that, at the time of such Disposition, no Event of Default has occurred and is then continuing, and the Borrowers, within one (1) Business Day of the consummation of such Disposition, pay to the Lender an amount equal to 100% of the Net Cash Proceeds arising from such Disposition.





 


8.06         Restricted Payments.  Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that, in each case (except Section 8.06(a)) so long as no Default shall have occurred and be continuing (both before or as a result of the making of such Restricted Payment):





 


(a)           each Subsidiary may make Restricted Payments to any Borrower;


 


(b)           the Company and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other common Equity Interests of such Person;


 


(c)           the Company may make Restricted Payments to the holder the Specified Subordinated Indebtedness if permitted by the applicable Intercreditor Agreement; and


 


(d)          the Company and each Subsidiary may make Restricted Payments to redeem, purchase or acquire from officers, directors, members and employees Equity Interests of such Person provided the aggregate amount of all such Restricted Payments permitted shall not exceed, during the term of this Agreement, $100,000.





 


8.07         Change in Nature of Business.  Engage in any material line of business substantially different from those lines of business conducted by the Borrowers and their Subsidiaries on the date hereof or any business substantially related or incidental thereto.





 


8.08         Transactions with Affiliates.  Enter into any transaction of any kind with any Affiliate of any Loan Party, whether or not in the Ordinary Course of Business, other than transactions on fair and reasonable terms substantially as favorable to such Borrower or such Subsidiary as would be obtainable by such Borrower or such Subsidiary at the time in a comparable arm’s length transaction with a Person other than an Affiliate, provided that the foregoing restriction shall not apply to (i) transactions between or among the Loan Parties, (ii) transactions solely between Subsidiaries that are not Loan Parties and (iii) the transactions contemplated under the Management Agreement including amendments to the Management Agreement that do not increase the amount of fees, expenses and indemnities payable thereunder in excess of the amounts payable thereunder on the Closing Date and which are not materially adverse to the interests of the Lender, and provided, further, that the following transactions shall be permitted:  (a) if no Event of Default has occurred and is then continuing, the Company may pay or reimburse Equity Investor or one or more Controlled Investment Affiliates, in the Ordinary Course of Business, for reasonable out-of-pocket costs and expenses, as or after the incurrence thereof by the Equity Investor or one of its Controlled Investment Affiliates, pursuant to its management of the Company’s business, (b) the Specified Subordinated Indebtedness transaction and, if no Default has occurred and is then continuing, the payment thereof to the extent permitted pursuant to the terms of this Agreement and 



96







the Intercreditor Agreement, (c) intercompany loans among Loan Parties and other intercompany loans, if no Default has occurred and is then continuing, to the extent permitted under Section 8.02, (d) any Investment permitted under Sections 8.03(b), (c), (d), (g), (h) and (i), and (e) any issuance of Equity Interest of the Company or other payments, grants or awards in cash, securities or otherwise pursuant to, or the fund of, any employment agreements, compensation plans, employee incentive plans, agreements or arrangements, stock option or stock appreciation plans or agreements, or similar plans, agreements or arrangements of the Company.





 


8.09         Burdensome Agreements.  Enter into any Contractual Obligation (other than this Agreement or any other Loan Document) that:


 


(a)           requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation of such Person; or


 


(b)          limits the ability (i) of any Subsidiary to make Restricted Payments to the Company or any Borrower or to otherwise transfer property to the Company or any Borrower, (ii) of any Subsidiary to Guarantee the Indebtedness of the Borrowers or become a direct Borrower hereunder, or (iii) of any Borrower or any Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person; provided, however, that this clause (iii) shall not prohibit any negative pledge incurred or provided in favor of any holder of Indebtedness permitted under Section 8.02(e) solely to the extent any such negative pledge relates to the property financed by or the subject of such Indebtedness.





 


8.10         Use of Proceeds.  Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, in any manner that might cause the Credit Extension or the application of such proceeds to violate Regulations T, U or X of the FRB, in each case as in effect on the date or dates of such Credit Extension and such use of proceeds.





 


8.11          Prepayment of Indebtedness; Amendment to Material Agreements.





 


(a)          Prepay, redeem, purchase, repurchase, defease or otherwise satisfy prior to the scheduled maturity thereof any Indebtedness, or make any payment in violation of any subordination terms thereof, including in each case pursuant to any change of control, sale of assets, issuance of any equity or otherwise as may be set forth in the terms thereof or available to the Borrowers at its option, except, so long as no Default shall exist prior to or immediately thereafter, prepayments, redemptions, purchases, repurchases, defeasances or other satisfaction (collectively, a “Prepayment”) of Indebtedness other than the Subordinated Indebtedness made with the proceeds of other Indebtedness permitted to be incurred pursuant to Section 8.02 and containing terms and conditions (including terms of subordination, security and maturity) no less favorable in any material respect to the Lender than the Indebtedness subject to such Prepayment, provided, however, at no time may any of the Subordinated Indebtedness, including the Specified Subordinated Indebtedness, be prepaid prior to its stated maturity unless expressly permitted by the applicable Intercreditor Agreement.


 


(b)          Amend, modify or change in any manner any term or condition of any Indebtedness with a stated maturity date outside the Revolving Credit Maturity Date, in each case so that the terms and conditions thereof are less favorable in any material respect to the Lender than the terms of such Indebtedness as of the Closing Date, but in no event shall terms of recourse, guarantees or credit support be any less favorable to the Lender than the terms of such Indebtedness as of the Closing Date.


 


(c)           Amend, modify or change any Organizational Document of any Loan Party in a manner adverse to the Lender.



97







(d)           Change the state or jurisdiction of formation of any Loan Party whether by merger, reincorporation or otherwise.





 


8.12         Financial Covenants.





 


(a)           Consolidated Fixed Charge Coverage Ratio.  Permit the Consolidated Fixed Charge Coverage Ratio as of the last day of the Measurement Period most recently ended to be less than the ratio set forth below opposite such Fiscal Quarter, provided, however, that for (i) the June 30, 2014 calculation, such ratio shall be calculated only for such Fiscal Quarter ending on or closest to such date, (ii) the September 30, 2014 calculation, such ratio shall be calculated only for the two most recent Fiscal Quarters ended, and (iii) the December 31, 2014 calculation, such ratio shall be calculated only for the three most recent Fiscal Quarters ended (for avoidance of doubt, the Consolidated EBITDA of the Target for the Fiscal Quarter ending on or closest to March 31, 2014 shall be included on a pro forma basis in the calculation of Consolidated EBITDA of the Company):


 



	
Twelve Fiscal Months Ending on or Closest To

	
Minimum Consolidated Fixed Charge Coverage Ratio


	
June 30, 2014, and each September 30, December 31, March 30 and June 30 thereafter

	
1.10 to 1.00












(b)           Consolidated Capital Expenditures.  Permit the aggregate amount of Consolidated Capital Expenditures made by the Loan Parties in any Fiscal Year to exceed $2,000,000.


 


(c)           Minimum Consolidated EBITDA.  Permit Consolidated EBITDA for the Fiscal Quarter ended on or closest to March 31, 2014 to be less than $0.00.


 


(d)           Minimum Availability.  Permit Availability to be less than $500,000 at any time prior to the delivery of the Compliance Certificate for the Fiscal Quarter ended on or closest to June 30, 2014 has been delivered to the Lender pursuant to Section 7.02(c).





 


8.13         Creation of New Subsidiaries.  Create or acquire any new Subsidiary after the Closing Date other than Domestic Subsidiaries created or acquired in accordance with Section 7.13.





 


8.14         Securities of Subsidiaries.  Permit any Subsidiary to issue any Equity Interests (whether for value or otherwise) to any Person other than a Loan Party.





 


8.15         Sale and Leaseback.  Enter into, or permit any Subsidiary to, enter into any agreement or arrangement with any other Person providing for the leasing by any Loan Party or any of the Subsidiaries of real or personal property which has been or is to be sold or transferred by any Loan Party or any of the Subsidiaries to such other Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of a Loan Party or any of the Subsidiaries.





 


8.16         Acquisitions.  Enter into, or permit any Subsidiary to, enter into any Acquisition other than the Closing Date Acquisition.





 


8.17         Inactive Subsidiaries.  Notwithstanding anything to the contrary set forth herein, (A) no Inactive Subsidiary shall, and no Loan Party shall permit, or permit any of such Loan Party’s Subsidiaries 



98







to permit, any Inactive Subsidiary to (w)  own or acquire any assets other than those owned at Closing, (x) assume or incur any indebtedness, liabilities or any other obligations (other than certain obligations and liabilities with respect to (i) environmental matters not exceeding $1,200,000 in the aggregate for all Inactive Subsidiaries (less any increase in amounts under clause (ii) below as described in the parenthetical in such clause (ii)) and (ii) legal fees, testing, employees and insurance not exceeding $300,000 during any calendar year in the aggregate (increased to the extent of any settlement of any liability referred to in the foregoing clause (i), provided that the aggregate amount of such increase shall not exceed the amount of any such settled liability and may be spread over multiple calendar years, and provided further that the aggregate amount of liabilities in clause (i) above is reduced by at least a corresponding amount) for all Inactive Subsidiaries), (y) employ any Persons except consistent with practices and to the same extent as of the Closing or conduct any business or operations, or (z) make any loans to or investments in any Person except as permitted under this Agreement, and (B) no Loan Party shall make, or permit any of such Loan Party’s Subsidiaries to make, any investment in or loan to or otherwise enter into any contractual arrangement with any Inactive Subsidiary except as permitted under this Agreement.  Notwithstanding the foregoing, to the extent that the amounts in the parenthetical in clause (x) above are increased due to new environmental matters asserted against an Inactive Subsidiary after the Closing Date then any such entity shall continue to be an “Inactive Subsidiary.”





 


8.18         Management Fees.  Borrowers shall not, and shall not permit any other Loan Party, to pay any management fees to any Persons including, without limitation, the Equity Investor and its Controlled Investment Affiliates, and whether arising under the Management Agreement or otherwise, except that, if no Event of Default is then continuing, the Company may pay or reimburse the Equity Investor or one of its Controlled Investment Affiliates for reasonable out-of-pocket costs and expenses as and when incurred by the Equity Investor or one of its Controlled Investment Affiliates in the ordinary course of business pursuant to its management of Borrowers’ business.


 


ARTICLE IX



 EVENTS OF DEFAULT AND REMEDIES





 


9.01         Events of Default.  Any of the following shall constitute an Event of Default:


 


(a)           Non-Payment.  Any Borrower fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan or any L/C Obligation, or any interest on any Loan or on any L/C Obligation, or any commitment or other fee due hereunder, or (ii) within five days after the same becomes due, any other amount payable hereunder or under any other Loan Document; or


 


(b)           Specific Covenants.  Any Loan Party fails to perform or observe any term, covenant or agreement contained (i) in any of Sections 2.05(b), 7.01(a), 7.01(b), 7.01(c),  7.02(a), 7.02(b), 7.02(c), 7.03, 7.05, 7.07, 7.08, 7.11, 7.12, 7.13, 7.16 (last proviso thereof), or Article VIII, or (ii) in any of Sections 4.04, 7.02(a), 7.02(b) or 7.02(c) and such failure continues for three (3) or more Business Days; or


 


(c)           Other Defaults.  Any Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days after the earlier of (i) receipt of notice of such default by a Responsible Officer of the Borrower Agent from the Lender, or (ii) any Responsible Officer of any Loan Party becomes aware of such default; or


 


(d)           Representations and Warranties.  Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of any Loan Party or its Subsidiaries herein, in 



99







any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading when made or deemed made in any material respect; or


 


(e)          Cross-Default.  (i) Any Loan Party or its Subsidiaries (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise, and after passage of any grace period) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder and Indebtedness under Swap Contracts) having an aggregate principal amount (including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $250,000, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, and such default continues for more than the grace period, if any, therein specified, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which any Loan Party or any Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which any Loan Party or any Subsidiary is an Affected Party (as so defined) and, in either event, the Swap Termination Value owed by a Loan Party or any Subsidiary as a result thereof is greater than $250,000.  Any breach or default with respect to the Subordinated Indebtedness or under the Subordinated Indebtedness Documents, or the acceleration or attempted acceleration of the Subordinated Indebtedness, or the exercise of any right remedy against any Loan Party or any of their respective assets by any Subordinated Lender;


 


(f)           Insolvency Proceedings, Etc.  Any Loan Party  institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or


 


(g)          Inability to Pay Debts; Attachment.  (i) Any Loan Party becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any Loan Party and is not released, vacated or fully bonded within 30 days after its issue or levy; (iii) any Loan Party is enjoined, restrained or in any way prevented by any Governmental Authority from conducting any material part of its business; (iv) any Loan Party suffers the loss, revocation or termination of any material license, permit, lease or agreement necessary to its business; (v) there is a cessation of any material part of any Loan Party’s business for a material period of time; or (vi) any material Collateral or property or assets of a Loan Party is taken or impaired through Condemnation; or


 


(h)          Judgments.  There is entered against any Loan Party (i) one or more final judgments or orders for the payment of money in an aggregate amount exceeding $500,000 (to the extent not covered by insurance as to which the insurer does not dispute coverage other than by virtue of a 



100







customary reservation of rights letter), or (ii) any one or more non-monetary final judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case of clause (i) or (ii) above, such judgment or order remains unvacated and unpaid and either (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 30 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or


 


(i)           ERISA.  (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of any Loan Party under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $250,000, (ii) a Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan resulting in liability of any Loan Party in an aggregate amount in excess of $250,000, or (iii) any violation of Law relating to a Foreign Plan which has resulted or could reasonably be expected to result in liability of any Loan Party in an aggregate amount in excess of $250,000; or


 


(j)           Invalidity of Loan Documents.  Any Loan Document, or any Lien granted thereunder, at any time after its execution and delivery and for any reason, other than as expressly permitted hereunder or upon Payment in Full, ceases to be in full force and effect (except with respect to immaterial assets); or any Borrower or any other Person contests in any manner the validity or enforceability of any Loan Document or any Lien granted to the Lender pursuant to the Security Instruments; or any Borrower denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document; or


 


(k)          Breach of Contractual Obligation.  Any Loan Party or any Subsidiary thereof fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any contract to which it is party or fails to observe or perform any other agreement or condition relating to any such contract to which it is party or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the counterparty to such contract to terminate such contract, in each case which would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; or


 


(l)           Indictment.  (i) Any Loan Party is (A) criminally indicted or convicted of a felony for fraud or dishonesty in connection with the Loan Parties’ business, or (B) charged by a Governmental Authority under any law that would reasonably be expected to lead to forfeiture of any material portion of Collateral, or (ii) any director or senior officer of any Loan Party is (A) criminally indicted or convicted of a felony for fraud or dishonesty in connection with the Loan Parties’ business, unless such director or senior officer promptly resigns or is removed or replaced or (B) charged by a Governmental Authority under any law that would reasonably be expected to lead to forfeiture of any material portion of Collateral; or


 


(m)          Uninsured Loss.  A loss, theft, damage or destruction occurs with respect to any Collateral if the amount not covered by insurance exceeds $250,000; or


 


(n)          Closing Date Acquisition; Joinder Documents.  The failure for any reason of the Closing Date Acquisition not to be consummated and completed in accordance with all applicable Laws on the Closing Date. The failure for any reason of any Borrower or any Target to not execute and deliver the Joinder Documents to Lender on the Closing Date; or



101







(o)          Material Leases.  Any Loan Party fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any real property lease, operating lease, or capital lease that provides for annual rent in excess of $250,000 and to which it is party, or fails to observe or perform any other agreement or condition relating to any such property lease, operating lease, or capital lease (after the expiration of any applicable grace period); or


 


(p)          Change of Control.  There occurs any Change of Control; or


 


(q)          Subordinated Indebtedness.  The subordination provisions, including, without limitation, those contained in any Intercreditor Agreement, relating to any Subordinated Indebtedness (the “Subordination Provisions”) shall fail to be enforceable by the Lender (which have not effectively waived the benefits thereof) in accordance with the terms thereof, or the principal or interest on any Loan, any L/C Obligation or other Obligations shall fail to constitute “designated senior debt” (or any other similar term) under any document, instrument or agreement evidencing such Subordinated Indebtedness; or any Subordinated Lender, Loan Party or any of its Subsidiaries shall, directly or indirectly, disavow or contest in any manner (i) the effectiveness, validity or enforceability of any of the Subordination Provisions, or (ii) that any of such Subordination Provisions exist for the benefit of the Lender.





 


9.02         Remedies Upon Event of Default.  If any Event of Default occurs and is continuing, the Lender may take any or all of the following actions:


 


(a)          declare the commitment of the Lender to make Loans and any obligation of the Lender to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated;


 


(b)          declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrowers;


 


(c)           require that the Borrowers Cash Collateralize the L/C Obligations (in an amount equal to the then Outstanding Amount thereof) or any other Obligations that are contingent or not yet due and payable in amount determined by the Lender in accordance with this Agreement; and


 


(d)           exercise on behalf of itself and the Lender all rights and remedies available to it and the Lender under the Loan Documents or applicable Law; provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to any Borrower under the Bankruptcy Code of the United States, the obligation of the Lender to make Loans and any obligation of the Lender to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrowers to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Lender.







No remedy herein is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of Law.





 


9.03           License.  The Lender is hereby granted an irrevocable, non‐exclusive license or other right to use, license of sub‐license (without payment of royalty or other compensation to any Person) any 



102







or all Intellectual Property of Loan Parties, computer hardware and software, trade secrets, brochures, customer lists, promotional and advertising materials, labels, packaging materials and other property or asset, in advertising for sale, marketing, selling, collecting, completing manufacture of, or otherwise exercising any rights or remedies with respect to, any Collateral provided that the Lender shall not exercise any such right unless an Event of Default has occurred and is continuing.  Each Loan Party’s rights and interests under Intellectual Property shall inure to the Lender’s benefit.





 


9.04           Limitation of Remedies.  Notwithstanding anything to the contrary contained in this Agreement, if any enforceable term of any promissory note, contract, agreement, permit, lease, license (including any licenses of any Intellectual Property) or other General Intangible included as a part of the Collateral, other than Accounts, requires the consent of the Person obligated on such promissory note or any Person (other than the applicable obligor) obligated on such lease, contract or agreement, or which has issued such permit or license or other General Intangible, other than Accounts, for the assignment or transfer thereof or the enforcement of such Lien not to give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination or other material remedy thereunder, then the receipt of any such necessary consent shall be a condition to any exercise of remedies against such Collateral under this Section 9.04 (but not to the creation, attachment or perfection of the Lien of the Lender for the benefit of the Credit Parties as provided herein).


 


9.05           Joint and Several.  Each obligation and liability of each Borrower to Lender, including, without limitation, the Obligations, are the joint and several obligations of each Borrower, and Lender may proceed directly against any Borrower, or all Borrowers, or any Guarantor, or any Collateral, or all of the foregoing, or any one of the foregoing or any combination of the foregoing, without first proceeding against Borrower or any Collateral, or without joining all Persons liable or potentially liable for any portion of the Obligations in one action.  Each Borrower shall be jointly and severally liable as primary obligor and not merely as surety for repayment of all Obligations arising under the Loan Documents.  Such joint and several liability shall apply to each Borrower regardless of whether any Loan was only requested by or on behalf of or made to any other Borrower or the proceeds of any Loan were used only by or on behalf of any other Borrower or any indemnification obligation or any other obligation arose only as a result of the action of any other Borrower.  If any Borrower makes a payment in respect of the Obligations hereunder and under the other Loan Documents, it shall have the rights of contribution described in this Section below and under applicable common law against the other Borrower or Borrowers; provided that such Borrower shall not exercise its right of contribution until all of the Obligations are Paid in Full; provided, however, that Lender is hereby granted a Lien in such right of contribution and may enforce such right upon the occurrence and during the continuance of Event of Default.  It is the intent of each Borrower and Lender that each Borrower’s maximum obligation to repay the Obligations hereunder and under the other Loan Documents (the “Loan Obligation Limit”) shall not exceed the greater of (i) the amount actually borrowed or received directly or indirectly by such Borrower with respect thereto and (ii) the amount which is $1.00 less than the amount which, if recorded by such Borrower as a liability, would render such Borrower not Solvent.  To the extent that any Borrower makes a payment on any of the Obligations (a “Loan Obligation Payment”), such Borrower (the “Entitled Borrower”) is entitled to contribution and indemnification from, and reimbursement by, each other Borrower (a “Contributing Borrower”) in the amount of the Contribution Obligation of such Contributing Borrower hereunder.  The “Contribution Obligation” of a Contributing Borrower with respect to the Loan Obligation Payment of an Entitled Borrower is an amount equal to the greater of (1) the lesser of (x) such Contributing Borrower’s Loan Obligation Limit at the time the Loan Obligation Payment is made and (y) such Contributing Borrower’s Allocable Share of the Loan Obligation Payment, and (2) the amount of all proceeds from the Loan Obligations actually received by such Contributing Borrower or applied by the recipient thereof directly or indirectly for the benefit of such Contributing Borrower, less the sum of any repayments thereof and any Loan Obligation Payments made by such Contributing Borrower prior to the time the applicable Loan Obligation Payment is made.  The “Allocable Share” of a Contributing 



103







Borrower is a fraction, the numerator of which is such Contributing Borrower’s Loan Obligation Limit at the time the applicable Loan Obligation Payment is made and the denominator of which is the sum of the Loan Obligation Limits of all of the Contributing Borrowers (plus a similarly computed amount for any Guarantor which has a similar obligation to make a contribution) as of such time.


 


ARTICLE X



 MISCELLANEOUS





10.01       Amendments, Etc.  No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrowers or any other Borrower therefrom, shall be effective unless in writing signed by the Lender and the Borrowers or the applicable Borrower, as the case may be.  Each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.





 


10.02       Notices; Effectiveness; Electronic Communication.


 


(a)          Notices Generally.  Except in the case of notices and other communications expressly permitted to be given by telephone or in the case of notices otherwise expressly provided herein (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:


 


i.           If to a Loan Party or the Lender, to the address, telecopier number, electronic mail address or telephone number specified for such Person below, as changed pursuant to subsection (c) below:








		(x)  If to the Lender:	BMO Harris Bank N.A.





111 West Monroe, Floor 20 East


Chicago, Illinois  60603


Attention:  ABL


Facsimile No.:  312-765-1641








		With a copy to:	Lewis, Rice & Fingersh, L.C.





600 Washington Ave., Suite 2500


St. Louis, Missouri  63101


Attention: Steven Drapekin


Facsimile No.: 314-612-7692








		(y)  If to a Loan Party:	Katy Industries, Inc.





305 Rock Industrial Park Dr.


Bridgeton, Missouri 63044


Attention: James W. Shaffer,


                   Vice President, Treasurer,


                   Chief Financial Officer and Secretary


Facsimile No.: 314-770-9938








104








		With a copy to:	DLA Piper LLP (US)





One Atlanta Center


1201 West Peachtree Street,


Suite 2800


Atlanta, Georgia 30309-3450


Attention:  Joseph B. Alexander, Jr., 


                    Esquire


Facsimile No.:  404-682-7990







ii.           Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient).  Notices delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).


 


(b)          Electronic Communications.  Notices and other communications to the Lender hereunder may be delivered or furnished by electronic communication (including e mail and Internet or intranet websites) pursuant to procedures approved by the Lender.  The Lender or the Borrowers may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.


 


Unless the Lender otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.


 


(c)          Change of Address, Etc.  Each of the Borrowers and the Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto.


 


(d)          Reliance by the Lender.  The Lender shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices) purportedly given by or on behalf of the Borrowers even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof.  The Borrowers shall indemnify the Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrowers.  All telephonic notices to and other telephonic communications with the Lender may be recorded by the Lender, and each of the parties hereto hereby consents to such recording.





 


10.03       No Waiver; Cumulative Remedies.  No failure by the Lender to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or 



105







privilege.  The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.





 


10.04       Expenses; Indemnity; Damage Waiver.


 


(a)          Costs and Expenses.  The Borrowers shall pay all reasonable out-of-pocket expenses  (including any Extraordinary Expenses) incurred by the Lender and its respective Affiliates, (A) in connection with this Agreement and the other Loan Documents, including without limitation the reasonable fees, charges and disbursements of (1) counsel for the Lender, (2) outside consultants for the Lender, (3) appraisers for appraisals performed in accordance with this Agreement and subject to the limitations in Sections 7.11(c), (4) Field Exams performed in accordance with this Agreement subject to the limitations in Section 7.11(b), (5) all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of the Obligations, and (6) environmental site assessments, (B) in connection with (1) the syndication of the credit facilities provided for herein, (2) the preparation, negotiation, administration, management, execution and delivery of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (3) the enforcement or protection of their rights in connection with this Agreement or the Loan Documents or efforts to preserve, protect, collect, or enforce the Collateral, or (4) any workout, restructuring or negotiations in respect of any Obligations.





 


(b)          Indemnification by the Loan Parties.  Each Loan Party shall indemnify the Lender (and any agent thereof), each other Credit Party and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold harmless each Indemnitee from, any and all losses, claims, damages, liabilities and related expenses (including the reasonable out-of-pocket fees, charges and disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrowers or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder, the consummation of the transactions contemplated hereby or thereby or, in the case of the Lender (and any agent thereof) and its Related Parties only, the administration of this Agreement and the other Loan Documents, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the Lender to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by any Loan Party or any of its Subsidiaries, or any Environmental Liability related in any way to any Loan Party or any of its Subsidiaries, (iv) any claims of, or amounts paid by any Credit Party to, a Controlled Account Bank or other Person which has entered into a control agreement with any Credit Party hereunder or (v) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrowers or any other Loan Party, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrowers or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if such Borrower or such other Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.



106







(c)          Waiver of Consequential Damages, Etc.  To the fullest extent permitted by applicable law, the Loan Parties shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof.  No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.


 


(d)          Payments.  All amounts due under this Section shall be payable not later than ten Business Days after demand therefor.


 


(e)          Survival.  The agreements in this Section shall survive the occurrence of the Facility Termination Date.





 


10.05       Marshalling; Payments Set Aside.  The Lender shall not be under any obligation to marshal any assets in favor of any Loan Party or against any Obligations.  To the extent that any payment by or on behalf of any Loan Party is made to a Credit Party, or a Credit Party exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Credit Party in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred.





 


10.06       Successors and Assigns.


 


(a)          Successors and Assigns Generally.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Loan Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Lender.  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (c) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Credit Parties) any legal or equitable right, remedy or claim under or by reason of this Agreement.





 


(b)          Participations.  The Lender may at any time, without the consent of, or notice to, any Borrower (each, a “Participant”) in all or a portion of the Lender’s rights and/or obligations under this Agreement (including all or a portion of its Credit Commitment and/or the Loans (including the Lender’s participations in L/C Obligations) owing to it); provided that (i) the Lender’s obligations under this Agreement shall remain unchanged, (ii) the Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Borrowers shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and (iv) no Participant shall be granted any right to consent to any amendment, except to the extent any of the same pertain to (1) reducing the aggregate principal amount of, or interest rate on, or fees applicable to, any Loan or (2) extending the final stated maturity of any Loan or the stated maturity of any portion of any payment of principal of, or interest of fees applicable to, any of the Loans; provided that the rights described in this subclause (2) shall not be deemed to include the right to consent to any amendment with 



107







respect to or which has the effect of requiring any mandatory prepayment of any portion of any Loan or any amendment or waiver of any Default.


 


Any agreement or instrument pursuant to which the Lender sells such a participation shall provide that the Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement.  Subject to subsection (c) of this Section, the Borrowers agree that each Participant shall be entitled to the benefits of Sections 3.01, and 3.04 to the same extent as if it were the Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section.  To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were the Lender.


 


(c)          Limitations upon Participant Rights.  A Participant shall not be entitled to receive any greater payment under Sections 3.01, 3.04 or 3.05 than the Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower Agent’s prior written consent.  A Participant that would be a Foreign Lender if it were the Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower Agent is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrowers, to comply with Section 3.01(g) as though it were the Lender.





 


10.07       Treatment of Certain Information; Confidentiality.  Each of the Credit Parties agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective partners, directors, trustees, officers, employees, agents, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrowers and their obligations, (g) with the consent of the Borrower Agent or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Credit Parties or any of their respective Affiliates on a nonconfidential basis from a source other than the Loan Parties.


 


For purposes of this Section, “Information” means all information received from any Loan Party or any Subsidiary relating to a Loan Party or any Subsidiary or any of their respective businesses, other than any such information that is available to any Credit Party on a nonconfidential basis prior to disclosure by a Loan Party or any Subsidiary, provided that, in the case of information received from a Loan Party or any Subsidiary after the date hereof, any information not marked “PUBLIC” at the time of delivery will be deemed to be confidential; provided, that any information marked “PUBLIC may also be marked “Confidential”.  Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.


 


Each of the Credit Parties acknowledges that (a) the Information may include material non-public information concerning a Loan Party or a Subsidiary, as the case may be, (b) it has developed compliance 



108







procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including Federal and state securities Laws.


 


Each of the Loan Parties hereby authorize the Lender to publish the name of any Loan Party and the amount of the credit facility provided hereunder in any “tombstone” or comparable advertisement which the Lender elects to publish.  The Lender reserves the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements.





 


10.08       Right of Setoff.  At any time during an Event of Default, the Lender and its Affiliates are authorized, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by the Lender or such Affiliate to or for the credit or the account of a Loan Party against any Obligations, irrespective of whether or not the Lender of such Affiliate shall have made any demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured or are owed to a branch or office of the Lender or such Affiliate different from the branch or office holding such deposit or obligated on such indebtedness.  The rights of the Lender and each such Affiliate under this Section are in addition to other rights and remedies (including other rights of setoff) that such Person may have.





 


10.09       Interest Rate Limitation.  Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”).  If the Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrowers.  In determining whether the interest contracted for, charged, or received by the Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.





 


10.10       Counterparts; Integration; Effectiveness.  This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.  Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.





 


10.11       Survival.  All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof.  Such representations and warranties have been or will be relied upon by the Credit Parties, regardless of any investigation made by any Credit Party or on their behalf and notwithstanding that any Credit Party may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.


 


Further, the provisions of Sections 3.01, 3.04, 3.05 and Article X shall survive and remain in full force and effect regardless of the repayment of the Obligations, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.  In connection with the termination of this Agreement and the release and termination of the security interests 



109







in the Collateral, the Lender may require such indemnities and collateral security as they shall reasonably deem necessary or appropriate to protect the Credit Parties against (x) loss on account of credits previously applied to the Obligations that may subsequently be reversed or revoked, and (y) any obligations that may thereafter arise with respect to secured Credit Product Obligations.





 


10.12       Severability.  If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.





 


10.13       Governing Law; Jurisdiction; Etc.


 


(a)           GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS.


 


(b)          SUBMISSION TO JURISDICTION.  EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS SITTING IN COOK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE NORTHERN DISTRICT OF ILLINOIS, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH ILLINOIS STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWERS OR THEIR PROPERTIES IN THE COURTS OF ANY JURISDICTION.


 


(c)          WAIVER OF VENUE.  EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.


 


(d)         SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.



110







10.14       Waiver of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.





 


10.15      Electronic Execution of Assignments and Certain Other Documents.  The words “execution,” “signed,” “signature,” and words of like import in any amendment or other modification hereof (including waivers and consents) shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.





 


10.16       USA PATRIOT Act Notice.  The Lender hereby notifies the Borrowers that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrowers, which information includes the name and address of the Borrowers and other information that will allow the Lender to identify the Borrowers in accordance with the Act.





 


10.17       No Advisory or Fiduciary Responsibility.  In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), each Loan Party acknowledges and agrees, and acknowledges its Affiliates’ understanding, that:  (i) (A) the arranging and other services regarding this Agreement provided by the Credit Parties are arm’s-length commercial transactions between each Loan Party, on the one hand, and the Credit Parties, on the other hand, (B) each Loan Party has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) each Loan Party is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (ii) (A) each Credit Party is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for any Loan Party or any of its Affiliates or any other Person and (B) no Credit Party has any obligation to any Loan Party or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents, (iii) the Credit Parties may be engaged in a board range of transactions that involve interests that differ from those of the Loan Parties and their Affiliates, and no Credit Party has any obligation to disclose any of such interests to any Loan Party or its Affiliates and (iv) the Credit Parties have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and each of the Loan Parties has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate.  To the fullest extent permitted by law, each Loan Party hereby waives and releases any claims that it may have against any Credit Party with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.



111







10.18       Attachments.  The exhibits, schedules and annexes attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein; except, that, in the event of any conflict between any of the provisions of such exhibits and the provisions of this Agreement, the provisions of this Agreement shall prevail.


 


10.19       ORAL AGREEMENTS.  ORAL OR UNEXECUTED AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE, REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS BASED THAT IS IN ANY WAY RELATED TO THE CREDIT AGREEMENT. TO PROTECT YOU (BORROWER(S)) AND US (LENDER) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THE CREDIT AGREEMENT, THE LOAN DOCUMENTS AND THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.


 


Each Borrower acknowledges that there are no other agreements among the Lender and any Borrower, oral or written, concerning the subject matter of the Loan Documents, and that all prior agreements concerning the same subject matter, including any proposal or commitment letter, are merged into the Loan Documents and thereby extinguished.







[Remainder of page is intentionally left blank; signature page(s) follows.]



112







 


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.


 



	
 

	
BORROWERS:


	
 

	
 

	
 


	
 

	
Katy Industries, Inc.,


	
 

	
a Delaware corporation


	
 

	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	
James W. Shaffer


	
 

	
 

	
Chief Financial Officer


	
 

	
 

	
 


	
 

	
Continental Commercial Products, LLC,


	
 

	
a Delaware limited liability company


	
 

	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	
James W. Shaffer


	
 

	
 

	
Chief Financial Officer


	
 

	
 

	
 


	
 

	
 

	
 


	
 

	
2155735 Ontario Inc.,


	
 

	
an Ontario corporation


	
 

	
 

	
 


	
 

	
By:

	



	
 

	
 

	
James W. Shaffer


	
 

	
 

	
Chief Financial Officer


	
 

	
 

	
 


	
 

	
 

	
 


	
 

	
CCP Canada Inc.,


	
 

	
an Ontario corporation


	
 

	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	
James W. Shaffer


	
 

	
 

	
Chief Financial Officer


	
 

	
 

	
 


	
 

	
LENDER:


 


	
 

	
BMO Harris Bank N.A.


	
 

	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	
Jason Hoefler


	
 

	
 

	
Director







 


 


Signature Page to the Credit Security Agreement


 


 


113