Dated as of January 16,
2006
ADVANCED ENVIRONMENTAL RECYCLING
TECHNOLOGIES, INC.
THIS LOAN
AGREEMENT (the “ Agreement ”), dated as of
January 16, 2006, is between ADVANCED ENVIRONMENTAL RECYCLING
TECHNOLOGIES, INC., a Delaware corporation (the “
Borrower ”), and LIBERTY BANK OF ARKANSAS, an Arkansas
state chartered bank (the “ Lender
”).
The Borrower has
requested that the Lender extend credit to the Borrower as
described in this Agreement. The Lender is willing to make such
credit available to the Borrower upon and subject to the
provisions, terms and conditions hereinafter set forth.
NOW THEREFORE, in
consideration of the premises and the mutual covenants herein
contained, the parties hereto agree as follows:
1.1
Definitions . As used in this Agreement, all exhibits,
appendices and schedules hereto and in any note, certificate,
report or other Loan Documents made or delivered pursuant to this
Agreement, the following terms will have the meanings given such
terms in this Section 1 or in the provision, section or
recital referred to below:
(a)
“AAA” has the meaning for such term set forth in
Section 11.20 of the Agreement.
(b)
“Adjusted EBITDA” means an amount equal to
(i) EBITDA less (ii) taxes minus the sum of
distributions, dividends and maintenance capital
expenditures.
(c)
“Advance” means an advance by the Lender to the
Borrower pursuant to Article II.
(d)
“Advance Request Form” means a certificate, in a form
approved by the Lender, properly completed and signed by the
Borrower requesting a Revolving Credit Advance.
(e)
“Affiliate” means, as to any Person, any other Person
(i) that directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common
control with, such Person; (ii) that directly or indirectly
beneficially owns or holds five percent (5%) or more of any class
of voting stock of such Person; or (iii) five percent (5%) or
more of the voting stock of which is directly or indirectly
beneficially owned or held by the Person in question. The term
“control” means the possession, directly or indirectly,
of the power to direct or cause direction of the management and
policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise; provided, however, in no
event shall the Lender be deemed an Affiliate of the
Borrower.
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(f)
“Agreement” has the meaning set forth in the
Introductory Paragraph hereto, as the same may, from time to time,
be amended, modified, restated, renewed, waived, supplemented, or
otherwise changed, and includes all schedules, exhibits and
appendices attached or otherwise identified therewith.
(g)
“Borrowing Base” means, at any time, an amount equal to
the sum of (i) eighty-five percent (85%) of the value of
Eligible Accounts of which Weyerhaeuser Company (“
Weyerhaeuser ”) is the account debtor,
(ii) eighty-five percent (85%) of the value of Eligible
Accounts of which Therma-Tru Corporation (“Therma-Tru”)
is the account debtor, (iii) seventy-five percent (75%) of all
other Eligible Accounts, (iv) seventy-five percent (75%) of
the value of Eligible Inventory that constitutes finished goods,
including Eligible Inventory that is finished goods held in a
Therma-Tru warehouse, and (v) fifty percent (50%) of all other
Eligible Inventory.
(h)
“Borrowing Base Report” means, as of any date of
preparation, a certificate setting forth the Borrowing Base (in a
form acceptable to the Lender in substantially the form of
Exhibit A attached hereto) prepared by and certified
by the chief financial officer of the Borrower.
(i)
“Borrower” means the Person identified as such in the
Introductory Paragraph hereof, and its successors and
assigns.
(j)
“Business Day” has the meaning assigned to it in the
Note.
(k)
“Capital Expenditure” shall mean any expenditure by a
Person for (i) an asset which will be used in a year or years
subsequent to the year in which the expenditure is made and which
asset is properly classified in relevant financial statements of
such Person as equipment, real property, a fixed asset or a similar
type of capitalized asset in accordance with GAAP or (ii) an
asset relating to or acquired in connection with an acquired
business, and any and all acquisition costs related to (i) or
(ii) above.
(l)
“Capitalized Lease Obligation” shall mean the amount of
Debt under a lease of Property by a Person that would be shown as a
liability on a balance sheet of such Person prepared for financial
reporting purposes in accordance with GAAP.
(m)
“Code” means the Internal Revenue Code of 1986, as
amended, and the regulations promulgated and rulings issued
thereunder.
(n)
“Collateral” has the meaning for such term set forth in
Section 4.1 of this Agreement.
(o)
“Commitment” means the obligation of the Lender to make
Revolving Credit Advances pursuant to Section 2.1 in an
aggregate principal amount at any time outstanding up to but not
exceeding Fifteen Million and no/100 Dollars ($15,000,000.00),
subject, however, to termination pursuant to
Section 10.2.
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(p)
“Compliance Certificate” means a certificate,
substantially in the form of Exhibit B attached
hereto, prepared by and executed by the chief financial officer of
the Borrower.
(q)
“Constituent Documents” means Borrower’s articles
or certificate of incorporation and bylaws.
(r)
“Consultant” means a firm or firms designated in a
certificate of the Borrower which is not, and no member,
stockholder, director, officer, trustee or employee of which is, an
officer, director, trustee or employee of the Borrower, and which
is a professional management consultant of national repute for
having the skill and experience necessary to render the particular
report required by the Section 9.1 herein.
(s)
“Current Maturities of Long-Term Indebtedness” shall
mean, in respect of a Person and as of any applicable date of
determination thereof, that portion of Long-Term Indebtedness that
should be classified as current in accordance with GAAP.
(t)
“Current Ratio” means the ratio of current assets to
current liabilities. For purposes of calculating the Current Ratio,
Borrower may include as a current asset that certain Two Million
and No/100 Dollars ($2,000,000.00) debt service reserve fund
created in connection with Borrower’s bond indebtedness with
Allstate Insurance Company.
(u)
“Debt” means as to any Person at any time (without
duplication): (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by bonds,
notes, debentures, or other similar instruments, (iii) all
obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable of such Person
arising in the ordinary course of business that are not past due by
more than ninety (90) days, (iv) all Capital Lease
Obligations of such Person, (v) all Debt or other obligations
of others Guaranteed by such Person, (vi) all obligations
secured by a Lien existing on property owned by such Person,
whether or not the obligations secured thereby have been assumed by
such Person or are non-recourse to the credit of such Person,
(vii) any other obligation for borrowed money or other
financial accommodations which in accordance with GAAP would be
shown as a liability on the balance sheet of such Person,
(viii) any repurchase obligation or liability of a Person with
respect to accounts, chattel paper or notes receivable sold by such
Person, (ix) any liability under a sale and leaseback
transaction that is not a Capital Lease Obligation, (x) any
obligation under any so called “synthetic leases”,
(xi) any obligation arising with respect to any other
transaction that is the functional equivalent of borrowing but
which does not constitute a liability on the balance sheets of a
Person, (xii) all reimbursement obligations of such Person
(whether contingent or otherwise) in respect of letters of credit,
bankers’ acceptances, surety or other bonds and similar
instruments, and (xiii) all liabilities of such Person in
respect of unfunded vested benefits under any Plan.
(v)
“Debt Service Coverage Ratio” shall mean, in respect of
a Person and for any period of determination, the ratio, computed
on a rolling four quarter basis, of (i) Adjusted EBITDA to
(ii) Current Maturities of Long-Term Indebtedness plus interest
expense.
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(w)
“Default” means an Event of Default or the occurrence
of an event or condition which with notice or lapse of time or both
would become an Event of Default.
(x)
“Default Interest Rate” has the meaning assigned to it
in the Notes.
(y)
“Dispute” means any action, dispute, claim or
controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising
under or in connection with, or in any way pertaining to, this
Agreement and each other document, contract and instrument required
hereby or now or hereafter delivered to Lender in connection
herewith, or any past, present or future extensions of credit and
other activities, transactions or obligations of any kind related
directly or indirectly to any of the foregoing documents, including
without limitation, any of the foregoing arising in connection with
the exercise of any self-help, ancillary or other remedies pursuant
to any of the foregoing documents.
(z)
“Disclosure Schedule” means the schedule of the same
name attached hereto.
(aa)
“Dollars” and “$” mean lawful money of the
United States of America.
(bb)
“EBITDA” means an amount equal to net income plus the
sum of interest, taxes, depreciation and amortization.
(cc)
“Eligible Accounts” means, at any time, all accounts
receivable of the Borrower created in the ordinary course of
business that are acceptable to the Lender and satisfy the
following conditions:
(i) The
account complies with all applicable laws, rules, and regulations,
including, without limitation, usury laws, the Federal Truth in
Lending Act, and Regulation Z of the Board of Governors of the
Federal Reserve System;
(ii) The
account has not been outstanding for more than the lesser of
(1) sixty (60) days past the date the invoice was issued
or the underlying obligation was incurred and (2) thirty
(30) days past the first date the account was due;
(iii) The
account does not represent a commission and the account was created
in connection with (i) the sale of goods by the Borrower in
the ordinary course of business and such sale has been consummated
and such goods have been shipped and delivered and received by the
account debtor (except for goods that are normally and ordinarily
shipped by rail, and which are freight-on-board shipping point), or
(ii) the performance of services by the Borrower in the
ordinary course of business and such services have been completed
and accepted by the account debtor;
(iv) The
account arises from an enforceable contract, the performance of
which has been completed by the Borrower;
(v) The
account does not arise from the sale of any good that is on a
guaranteed sale, sale-or-return, sale on approval, consignment, or
any other repurchase or return basis;
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(vi) The
Borrower has good and indefeasible title to the account and the
account is not subject to any Lien except Liens in favor of the
Lender (except for any permitted liens identified on the Disclosure
Schedule);
(vii) The
account does not arise out of a contract with or order from, an
account debtor that, by its terms, prohibits or makes void or
unenforceable the grant of a security interest by the Borrower to
the Lender in and to such account;
(viii) The
account is not subject to any setoff, counterclaim, defense,
dispute, recoupment, or adjustment other than normal discounts for
prompt payment;
(ix) The
account debtor is not insolvent or the subject of any bankruptcy or
insolvency proceeding and has not made an assignment for the
benefit of creditors, suspended normal business operations,
dissolved, liquidated, terminated its existence, ceased to pay its
debts as they become due, or suffered a receiver or trustee to be
appointed for any of its assets or affairs;
(x) The
account is not evidenced by chattel paper or an
instrument;
(xi) No
default exists under the account by any party thereto;
(xii) The
account debtor has not returned or refused to retain, or otherwise
notified the Borrower of any dispute concerning, or claimed
nonconformity of, any of the goods from the sale of which the
account arose;
(xiii) The
account is not owed by an Affiliate, employee, officer, director or
shareholder of the Borrower;
(xiv) The
account is payable in Dollars by the account debtor;
(xv) The
account is not owed by an account debtor whose accounts the Lender
in its sole discretion has chosen to exclude from Eligible
Accounts;
(xvi) The
account shall be ineligible if the account debtor is domiciled in
any country other than the United States of America, Mexico, or
Canada;
(xvii) The
account shall be ineligible if the account debtor is the United
States of America or any department, agency, or instrumentality
thereof, and the Federal Assignment of Claims Act of 1940, as
amended, shall not have been complied with; and
(xviii) The
Account is otherwise acceptable in the sole good faith discretion
of the Lender; provided that the Lender shall have the right to
create and adjust eligibility standards and related reserves from
time to time in its good faith credit judgment.
The amount of the
Eligible Accounts owed by an account debtor to the Borrower shall
be reduced by the amount of all “contra accounts” and
other obligations owed by the Borrower to such account
debtor.
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(dd)
“Eligible Inventory” means, at any time, or unless
otherwise stated in this Agreement, all inventory of raw materials,
work in process and finished goods then owned by (and in the
possession or under the control of) the Borrower and held for sale
or disposition in the ordinary course of the Borrower’s
business, in which the Lender has a perfected, first priority
security interest, valued at the lower of actual cost or fair
market value. Except as otherwise provided in this Agreement,
Eligible Inventory shall not include (i) inventory that has
been shipped or delivered to a customer on consignment, a
sale-or-return basis, or on the basis of any similar understanding,
(ii) inventory with respect to which a claim exists disputing
the Borrower’s title to or right to possession of such
inventory, (iii) inventory that is not in good condition or
does not comply with any applicable law, rule, or regulation or any
standard imposed by any Governmental Authority with respect to its
manufacture, use, or sale, (iv) inventory that is damaged,
obsolete or otherwise not readily saleable, (v) inventory
covered by negotiable warehouse or other document of title (unless
the same is in the possession of the Lender); (vi) inventory
held for rental or lease, (vii) inventory that the Lender, in
its sole discretion, has determined to be unmarketable,
(viii) inventory subject to third-party intellectual property
agreements and (ix) inventory that requires consent of a
third-party for manufacture or sale.
(ee)
“Environmental Laws” means any and all federal, state,
and local laws, regulations, judicial decisions, orders, decrees,
plans, rules, permits, licenses, and other governmental
restrictions and requirements pertaining to health, safety, or the
environment, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. § 9601 et seq., the Resource Conservation and Recovery
Act of 1976, 42 U.S.C. § 6901 et seq., the Occupational Safety
and Health Act, 29 U.S.C. § 651 et seq., the Clean Air Act, 42
U.S.C. § 7401 et seq., the Clean Water Act, 33 U.S.C. §
1251 et seq., and the Toxic Substances Control Act, 15 U.S.C.
§ 2601 et seq., as the same may be amended or supplemented
from time to time.
(ff)
“Environmental Liabilities” means, as to any Person,
all liabilities, obligations, responsibilities, Remedial Actions,
losses, damages, punitive damages, consequential damages, treble
damages, costs, and expenses, (including, without limitation, all
reasonable fees, disbursements and expenses of counsel, expert and
consulting fees and costs of investigation and feasibility
studies), fines, penalties, sanctions, and interest incurred as a
result of any claim or demand, by any Person, whether based in
contract, tort, implied or express warranty, strict liability,
criminal or civil statute, including any Environmental Law, permit,
order or agreement with any Governmental Authority or other Person,
arising from environmental, health or safety conditions or the
Release or threatened Release of a Hazardous Material into the
environment, resulting from the past, present, or future operations
of such Person or its Affiliates.
(gg)
“ERISA” means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations and
published interpretations thereunder.
(hh)
“ERISA Affiliate” means any corporation or trade or
business which is a member of the same controlled group of
corporations (within the meaning of Section 414(b) of the Code) as
the Borrower or is under common control (within the meaning of
Section 414(c) of the Code) with the Borrower.
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(ii)
“Event of Default” has the meaning specified in
Section 10.1.
(jj)
“Funded Debt” means Debt described in clauses (i),
(ii), (iv), (vii), (ix), (x) and (xi) of the definition of
“Debt.”
(kk)
“GAAP” means generally accepted accounting principles,
applied on a consistent basis, as set forth in Opinions of the
Accounting Principles Board of the American Institute of Certified
Public Accountants and/or in statements of the Financial Accounting
Standards Board and/or their respective successors and which are
applicable in the circumstances as of the date in question.
Accounting principles are applied on a “consistent
basis” when the accounting principles applied in a current
period are comparable in all material respects to those accounting
principles applied in a preceding period.
(ll)
“Governmental Authority” means any nation or
government, any state or political subdivision thereof and any
entity exercising executive, legislative, judicial, regulatory, or
administrative functions of or pertaining to government.
(mm)
“Guarantee” by any Person means any obligation,
contingent or otherwise, of such Person directly or indirectly
guaranteeing any Debt or other obligation of any other Person as
well as any obligation or liability, direct or indirect, contingent
or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt
or other obligation or liability (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to operate Property, to
take-or-pay, or to maintain net worth or working capital or other
financial statement conditions or otherwise) or (ii) entered
into for the purpose of indemnifying or assuring in any other
manner the obligee of such Debt or other obligation or liability of
the payment thereof or to protect the obligee against loss in
respect thereof (in whole or in part), provided that the term
Guarantee shall not include endorsements for collection or deposit
in the ordinary course of business. The term
“Guarantee” used as a verb has a corresponding
meaning.
(nn)
“Guarantor” means any Person who from time to time
guarantees all or any part of the Obligations, including Marjorie
S. Brooks.
(oo)
“Guaranty” means a written guaranty of each Guarantor
in favor of the Lender, in form and substance satisfactory to
Lender, as the same may be amended, modified, restated, renewed,
replaced, extended, supplemented or otherwise changed from time to
time.
(pp)
“Hazardous Material” means any substance, product,
waste, pollutant, material, chemical, contaminant, constituent, or
other material which is or becomes listed, regulated, or addressed
under any Environmental Law, including, without limitation,
asbestos, petroleum, and polychlorinated biphenyls.
(qq)
“Leverage Ratio” means, at any particular time, the
ratio of Consolidated Liabilities to Consolidated Tangible Net
Worth.
(rr)
“Liabilities” means, at any particular time, all
amounts which, in conformity with GAAP, would be included as
liabilities on a balance sheet of a Person.
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(ss)
“Lien” means any lien, mortgage, security interest, tax
lien, pledge, charge, hypothecation, assignment, preference,
priority, or other encumbrance of any kind or nature whatsoever
(including, without limitation, any conditional sale or title
retention agreement), whether arising by contract, operation of
law, or otherwise.
(tt)
“Loan Documents” means this Agreement and all
promissory notes, security agreements, deeds of trust, assignments,
letters of credit, guaranties, and other instruments, documents,
and agreements executed and delivered pursuant to or in connection
with this Agreement, as such instruments, documents, and agreements
may be amended, modified, renewed, restated, extended,
supplemented, replaced, consolidated, substituted, or otherwise
changed from time to time.
(uu)
“Long-Term Indebtedness” shall mean, in respect of a
Person and as of any applicable date of determination thereof, all
Debt (other than the aggregate outstanding principal balance of the
Revolving Credit Note) which should be classified as “funded
indebtedness” or “long term indebtedness” on a
balance sheet of such Person as of such date in accordance with
GAAP and Long-Term Indebtedness includes Capital Lease
Obligations.
(vv)
“Maximum Lawful Rate” means, at any time, the maximum
rate of interest which may be charged, contracted for, taken,
received or reserved by the Lender in accordance with applicable
Arkansas law (or applicable United States federal law to the extent
that such law permits Lender to charge, contract for, receive or
reserve a greater amount of interest than under Arkansas law). The
Maximum Lawful Rate shall be calculated in a manner that takes into
account any and all fees, payments, and other charges in respect of
the Loan Documents that constitute interest under applicable law.
Each change in any interest rate provided for herein based upon the
Maximum Lawful Rate resulting from a change in the Maximum Lawful
Rate shall take effect without notice to the Borrower at the time
of such change in the Maximum Lawful Rate.
(ww)
“Multiemployer Plan” means a multiemployer plan defined
as such in Section 3(37) of ERISA to which contributions have
been made by the Borrower or any ERISA Affiliate and which is
covered by Title IV of ERISA.
(xx)
“Note” means any promissory note executed at any time
by the Borrower and payable to the order of the Lender, as amended,
renewed, replaced, extended, supplemented, consolidated, restated,
modified, otherwise changed and/or increased from time to
time.
(yy)
“Obligated Party” means the Guarantor or any other
Person who is or becomes party to any agreement that guarantees or
secures payment and performance of the Obligations or any part
thereof.
(zz)
“Obligations” means all obligations, indebtedness, and
liabilities of the Borrower, each Guarantor and any other Obligated
Party to the Lender or Affiliates of the Lender, or both, now
existing or hereafter arising, whether direct, indirect, related,
unrelated, fixed, contingent, liquidated, unliquidated, joint,
several, or joint and several, including, without limitation, the
obligations, indebtedness, and liabilities under this Agreement,
any Swap Contract, the other Loan Documents, any cash management or
treasury services agreements and
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all interest
accruing thereon (whether a claim for post-filing or post-petition
interest is allowed in any insolvency, reorganization or similar
proceeding) and all attorneys’ fees and other expenses
incurred in the enforcement or collection thereof.
(aaa)
“Operating Lease” means any lease (other than a lease
constituting a Capital Lease Obligation) of real or personal
Property.
(bbb)
“PBGC” means the Pension Benefit Guaranty Corporation
or any entity succeeding to all or any of its functions under
ERISA.
(ccc)
“Person” means any individual, corporation, limited
liability company, business trust, association, company,
partnership, joint venture, Governmental Authority, or other
entity, and shall include such Person’s heirs,
administrators, personal representatives, executors, successors and
assigns.
(ddd)
“Plan” means any employee benefit or other plan
established or maintained by the Borrower or any ERISA Affiliate
and which is covered by Title IV of ERISA.
(eee)
“Principal Office” means the principal office of the
Lender, presently located at 4706 South Thompson, Suite 101,
Springdale, Arkansas 72764.
(fff)
“Prohibited Transaction” means any transaction set
forth in Section 406 of ERISA or Section 4975 of the
Code.
(ggg)
“Property” of a Person means any and all property,
whether real, personal, tangible, intangible or mixed, of such
Person, or any other assets owned, operated or leased by such
Person.
(hhh)
“Related Indebtedness” has the meaning set forth in
Section 11.21 of this Agreement.
(iii)
“Release” means, as to any Person, any release, spill,
emission, leaking, pumping, injection, deposit, disposal,
disbursement, leaching, or migration of Hazardous Materials into
the indoor or outdoor environment or into or out of property owned
by such Person, including, without limitation, the movement of
Hazardous Materials through or in the air, soil, surface water,
ground water, or property.
(jjj)
“Remedial Action” means all actions required to
(i) clean up, remove, treat, or otherwise address Hazardous
Materials in the indoor or outdoor environment, (ii) prevent
the Release or threat of Release or minimize the further Release of
Hazardous Materials so that they do not migrate or endanger or
threaten to endanger public health or welfare or the indoor or
outdoor environment, or (iii) perform pre-remedial studies and
investigations and post-remedial monitoring and care.
(kkk)
“Reportable Event” means any of the events set forth in
Section 4043 of ERISA.
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(lll)
“Revolving Credit Advance” means any Advance made by
the Lender to the Borrower pursuant to Section 2.1(a) of this
Agreement.
(mmm)
“Revolving Credit Note” means the promissory note of
the Borrower payable to the order of the Lender, in substantially
the form of Exhibit C hereto, and all amendments, extensions,
renewals, replacements, and modifications thereof.
(nnn)
“Security Agreement” means the Security Agreement of
the Borrower in favor of the Lender, in form and substance
satisfactory to the Lender, as the same may be amended, restated,
supplemented, modified, or changed from time to time.
(ooo)
“Security Documents” means each and every Security
Agreement, Guaranty, pledge, mortgage, deed of trust or other
collateral security agreement required by or delivered to the
Lender from time to time to secure the Obligations or any portion
thereof.
(ppp)
“Senior Funded Debt” means Funded Debt minus
Subordinated Debt.
(qqq)
“Subordinated Debt” means any Debt of the Borrower
(other than the Obligations) that has been subordinated to the
Obligations by written agreement, in form and content satisfactory
to the Lender.
(rrr)
“Subsidiary” means (i) any corporation of which at
least a majority of the outstanding shares of stock having by the
terms thereof ordinary voting power to elect a majority of the
board of directors of such corporation (irrespective of whether or
not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly
owned or controlled by the Borrower or one or more of the
Subsidiaries or by the Borrower and one or more of the
Subsidiaries; and (ii) any other entity (1) of which at
least a majority of the ownership, equity or voting interest is at
the time directly or indirectly owned or controlled by one or more
of the Borrower and the Subsidiaries and (2) which is treated
as a subsidiary in accordance with GAAP.
(sss)
“Swap Contract” means any agreement (including related
confirmations and schedules) between the Borrower and the Lender or
any Affiliate of the Lender now existing or hereafter entered into
which is, or relates to, a rate swap, basis swap, forward rate
transaction, cap transaction, floor transaction, collar transaction
or any other similar transactions (including any option with
respect to any of these transactions) or any combination
thereof.
(ttt)
“Tangible Net Worth” means, at any particular time, all
amounts which, in conformity with GAAP, would be included as
stockholders’ equity on a balance sheet of a Person;
provided, however, there shall be excluded therefrom: (i) any
amount at which the equity of such Person appears as an asset on
such Person’s balance sheet, (ii) goodwill, including
any amounts, however designated, that represent the excess of the
purchase price paid for assets or stock over the value assigned
thereto, (iii) patents, trademarks, trade names, and
copyrights, (iv) deferred expenses, (v) loans and
advances to any stockholder, director, officer, or employee of the
Person or any Affiliate of Person, Borrower, and (vi) all
other assets which are properly classified as intangible
assets.
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(uuu)
“Termination Date” means 11:00 A.M. Springdale,
Arkansas time on January 16, 2007, or such earlier date on
which the Commitment terminates as provided in this
Agreement.
(vvv)
“UCC” means the Uniform Commerce Code as enacted in any
State or jurisdiction which may govern the liens and security
interests granted to Lender, as amended from time to
time.
(www)
“Working Capital” means, at any particular time, the
amount by which Current Assets exceed Current
Liabilities.
1.2 Accounting
Matters . Any accounting term used in this Agreement or the
other Loan Documents shall have, unless otherwise specifically
provided therein, the meaning customarily given such term in
accordance with GAAP, and all financial computations thereunder
shall be computed, unless otherwise specifically provided therein,
in accordance with GAAP consistently applied; provided, that all
financial covenants and calculations in the Loan Documents shall be
made in accordance with GAAP as in effect on the date of this
Agreement unless the Borrower and the Lender shall otherwise
specifically agree in writing. That certain items or computations
are explicitly modified by the phrase “in accordance with
GAAP” shall in no way be construed to limit the
foregoing.
1.3 Other
Definitional Provisions . All definitions contained in this
Agreement are equally applicable to the singular and plural forms
of the terms defined. The words “hereof”,
“herein”, and “hereunder” and words of
similar import referring to this Agreement refer to this Agreement
as a whole and not to any particular provision of this Agreement.
Unless otherwise specified, all Article and Section references
pertain to this Agreement. Terms used herein that are defined in
the UCC, unless otherwise defined herein, shall have the meanings
specified in the UCC.
2.1 Revolving
Credit Advances . Subject to the terms and conditions of this
Agreement, the Lender agrees to make one or more Revolving Credit
Advances to the Borrower from time to time from the date hereof to
and including the Termination Date in an aggregate principal amount
at any time outstanding up to but not exceeding the amount of the
Commitment, provided that the aggregate amount of all Revolving
Credit Advances at any time outstanding shall not exceed the lesser
of (i) the amount of the Commitment or (ii) the Borrowing
Base. Subject to the foregoing limitations, and the other terms and
provisions of this Agreement, the Borrower may borrow, repay, and
reborrow hereunder.
(a)
The Revolving Credit Note . The obligation of the Borrower
to repay the Revolving Credit Advances and interest thereon shall
be evidenced by the Revolving Credit Note executed by the Borrower,
payable to the order of the Lender, in the principal amount of the
Commitment as originally in effect, and dated the date
hereof.
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(b)
Repayment of Revolving Credit Advances . The Borrower shall
repay the unpaid principal amount of all Advances on the
Termination Date, unless sooner due by reason of acceleration by
the Lender as provided in this Agreement.
(c)
Interest . The unpaid principal amount of the Revolving
Credit Note shall, subject to the following sentence, bear interest
as provided in the Revolving Credit Note. If at any time the rate
of interest specified in the Revolving Credit Note would exceed the
Maximum Lawful Rate but for the provisions thereof limiting
interest to the Maximum Lawful Rate, then any subsequent reduction
shall not reduce the rate of interest on the Revolving Credit
Advances below the Maximum Lawful Rate until the aggregate amount
of interest accrued on the Revolving Credit Advances equals the
aggregate amount of interest which would have accrued on the
Revolving Credit Advances if the interest rate had not been limited
by the Maximum Lawful Rate. Accrued and unpaid interest on the
Revolving Credit Advances shall be payable as provided in the
Revolving Credit Note and on the Termination Date.
(d)
Borrowing Procedure . The Borrower shall give the Lender
notice of each Revolving Credit Advance by means of an Advance
Request Form containing the information required therein and
delivered (by hand or by mechanically confirmed facsimile) to the
Lender no later than 1:00 p.m. (Springdale, Arkansas time) on the
day on which the Revolving Credit Advance is desired to be funded.
There shall not be a minimum amount for any advance hereunder. The
Lender at its option may accept telephonic requests for such
Advances, provided that such acceptance shall not constitute a
waiver of the Lender’s right to require delivery of an
Advance Request Form in connection with subsequent Advances. Any
telephonic request for a Revolving Credit Advance by the Borrower
shall be promptly confirmed by submission of a properly completed
Advance Request Form to the Lender, but failure to deliver an
Advance Request Form shall not be a defense to payment of the
Advance. The Lender shall have no liability to the Borrower for any
loss or damage suffered by the Borrower as a result of the
Lender’s honoring of any requests, execution of any
instructions, authorizations or agreements or reliance on any
reports communicated to it telephonically, by facsimile or
electronically and purporting to have been sent to the Lender by
the Borrower and the Lender shall have no duty to verify the origin
of any such communication or the identity or authority of the
Person sending it. Subject to the terms and conditions of this
Agreement, each Revolving Credit Advance shall be made available to
the Borrower by depositing the same, in immediately available
funds, in an account of the Borrower designated by an agent or
representative of Borrower (such agent or representative being Bob
Thayer, Steve Brooks, Doug Brooks, or Joe Brooks) maintained with
the Lender at the Principal Office.
2.2 General
Provisions Regarding Interest; Etc .
(a) Any
outstanding principal of any Advance and (to the fullest extent
permitted by law) any other amount payable by the Borrower under
this Agreement or any other Loan Document that is not paid in full
when due (whether at stated maturity, by acceleration, or
otherwise) shall bear interest at the Default Interest Rate for the
period from and including the due date thereof to but excluding the
date the same is paid in full. Additionally, upon the occurrence of
an Event of Default (and from the date of such occurrence) all
outstanding and unpaid principal amounts of all of the Obligations
shall, to the extent permitted by law, bear interest at the Default
Interest Rate until such time as the Lender shall waive in writing
the
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application of
the Default Interest Rate to such Event of Default situation.
Interest payable at the Default Interest Rate shall be payable from
time to time on demand.
(b) Interest
on the Advances and all other amounts payable by the Borrower
hereunder shall be computed on the basis of a year of 360 days
and the actual number of days elapsed (including the first day but
excluding the last day) unless such calculation would result in a
usurious rate, in which case interest shall be calculated on the
basis of a year of 365 or 366 days, as the case may
be.
2.3 Unused
Facility Fee . [Intentionally omitted.]
2.4 Use of
Proceeds . The proceeds of the Revolving Credit Advances shall
be used by the Borrower for working capital in the ordinary course
of business.
3.1 Method of
Payment . All payments of principal, interest, and other
amounts to be made by the Borrower under this Agreement and the
other Loan Documents shall be made to the Lender at the Principal
Office in Dollars and immediately available funds, without setoff,
deduction, or counterclaim, and free and clear of all taxes at the
time and in the manner provided in the Notes.
(a)
Voluntary Prepayments . The Borrower may prepay all or any
portion of the Revolving Credit Note to the extent and in the
manner provided for therein.
(b)
Mandatory Prepayment . The Borrower must pay on DEMAND the
amount by which at any time the unpaid principal balance of the
Revolving Credit Note exceeds the Borrowing Base.
3.3 Lockbox and
Account Collections . The Borrower will maintain under such
written agreements as the Lender requires, as security for the
Obligations, a lockbox (“ Lockbox ”) and
depository account in the name of the Lender (“ Depository
Account ”). All payments from account debtors of the
Borrower will be deposited directly into the Depository Accounts,
and the Lender is authorized to transfer to the Depository Account
any funds which are account debtor payments but which have been
deposited into any other depository account of the Borrower at the
Lender. The Borrower agrees that the Lender will have all right,
title and interest in and to all items and funds from time to time
in the Depository Account. Checks received into the Depository
Account will not be considered good funds until the Lender’s
depository bank has effected final settlement with respect thereto
by irrevocable credit to the Lender. The Lender is authorized to
apply any and all funds in the Depository Account at any time, and
from time to time, to the Obligations in any order the Lender may
elect.
Upon written
notice to the Borrower from the Lender, the Borrower will advise
all of its Account debtors to direct their payments to the Lockbox,
at the address established by the
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Lockbox
arrangements. All payments received into the Lockbox will be
deposited into the Depository Account for disposition as set forth
above in this section.
4.1
Collateral . To secure full and complete payment and
performance of the Obligations, the Borrower shall execute and
deliver or cause to be executed and delivered all of the Security
Documents required by the Lender covering the Property and
collateral described in such Security Documents (which, together
with any other Property and collateral described in the Security
Agreement, and any other property which may now or hereafter secure
the Obligations or any part thereof, is sometimes herein called the
“ Collateral ”). The Borrower shall execute and
cause to be executed (or, to the extent applicable, hereby
authorizes Lender to execute and/or file) such further documents
and instruments, including without limitation, Uniform Commercial
Code financing statements, as the Lender, in its sole discretion,
deems necessary or desirable to create, evidence, preserve, and
perfect its liens and security interests in the
Collateral.
4.2 Setoff
. If an Event of Default shall have occurred and be continuing, the
Lender shall have the right to set off and apply against the
Obligations in such manner as the Lender may determine, at any time
and without notice to the Borrower, any and all deposits (general
or special, time or demand, provisional or final) or other sums at
any time credited by or owing from the Lender to the Borrower
whether or not the Obligations are then due. As further security
for the Obligations, the Borrower hereby grants to the Lender a
security interest in all money, instruments, and other property of
the Borrower now or hereafter held by the Lender, including,
without limitation, property held in safekeeping. In addition to
the Lender’s right of setoff and as further security for the
Obligations, the Borrower hereby grants to the Lender a security
interest in all deposits (general or special, time or demand,
provisional or final) and other accounts of the Borrower now or
hereafter on deposit with or held by the Lender and all other sums
at any time credited by or owing from the Lender to the Borrower.
The rights and remedies of the Lender hereunder are in addition to
other rights and remedies (including, without limitation, other
rights of setoff) which the Lender may have.
ARTICLE V
CONDITIONS PRECEDENT
5.1 Initial
Extension of Credit . The obligation of the Lender to make the
initial Advance under the Revolving Credit Note is subject to the
condition precedent that the Lender shall have received on or
before the day of such Advance all of the following, each dated
(unless otherwise indicated) the date hereof, in form and substance
satisfactory to the Lender:
(a)
Resolutions . Resolutions of the Board of Directors (or
other governing body) of the Borrower certified by the Secretary or
an Assistant Secretary (or other custodian of records) of the
Borrower which authorize the execution, delivery, and performance
by the Borrower of this Agreement and the other Loan Documents to
which the Borrower is or is to be a party;
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(b)
Incumbency Certificate . A certificate of incumbency
certified by an authorized officer or representative certifying the
names of the individuals or other Persons authorized to sign this
Agreement and each of the other Loan Documents to which the
Borrower is or is to be a party (including the certificates
contemplated herein) on behalf of the Borrower together with
specimen signatures of such Persons;
(c)
Constituent Documents . The Constituent Documents for the
Borrower as of a date acceptable to the Lender;
(d)
Governmental Certificates . Certificates of the appropriate
government officials of the state of incorporation or organization
of the Borrower as to the existence and good standing of the
Borrower, each dated within ten (10) days prior to the date of
the initial Advance;
(e)
Revolving Credit Note . The Revolving Credit Note executed
by the Borrower;
(f)
Security Documents . The Security Documents executed by the
Borrower and other Obligated Parties;
(g)
Financing Statements . Uniform Commercial Code financing
statements covering such Collateral as the Lender may
request;
(h)
Guaranty . The Guaranty executed by the
Guarantor;
(i)
Landlord Waivers . Landlord waivers executed by any landlord
of Borrower identified by Lender in its sole and reasonable
discretion; provided, however, pending receipt by Lender of all
such waiver and/or subordination agreements and provided that all
other conditions herein have been satisfied, Lender may make
Advances hereunder based on a Borrowing Base composed only of
Eligible Accounts;
(j)
Insurance Matters . Copies of insurance certificates
describing all insurance policies required by Section 7.5,
together with loss payable and lender endorsements in favor of the
Lender with respect to all insurance policies covering
Collateral;
(k)
UCC Search . The results of a Uniform Commercial Code search
showing all financing statements and other documents or instruments
on file against the Borrower in the office of the Secretaries of
State of Delaware, Arkansas, and any other jurisdiction deemed
necessary in the discretion of Lender, such search to be as of a
date no more than ten (10) days prior to the date of the
initial Advance;
(l)
Opinion of Counsel . A favorable opinion of Hahn, Smith,
Walsh & Mancuso, P.C., legal counsel to the Borrower and the
Guarantor, as to such other matters as the Lender may reasonably
request;
(m)
Attorneys’ Fees and Expenses . Evidence that the costs
and expenses (including reasonable attorneys’ fees) referred
to in Section 11.1, to the extent incurred, shall have been
paid in full by the Borrower; and
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(n)
Additional Items . The additional items, if any, set forth
on Schedule 5.1(n).
5.2 All
Extensions of Credit . The obligation of the Lender to make any
Advance (including the initial Advance) is subject to the following
additional conditions precedent:
(a)
Request for Advance . The Lender shall have received in
accordance with this Agreement, as the case may be, an Advance
Request Form pursuant to the Lender’s requirements dated the
date of such Advance and executed by an authorized officer of the
Borrower;
(b)
No Default, Etc . No Default or material adverse change or
effect shall have occurred and be continuing, or would result from
or after giving effect to such Advance or Letter of
Credit;
(c)
Representations and Warranties . All of the representations
and warranties contained in Article VI hereof and in the other
Loan Documents shall be true and correct on and as of the date of
such Advance with the same force and effect as if such
representations and warranties had been made on and as of such
date; and
(d)
Additional Documentation . The Lender shall have received
such additional approvals, opinions, or documents as the Lender or
its legal counsel may reasonably request.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
To induce the
Lender to enter into this Agreement, and except as set forth on the
Disclosure Schedule, the Borrower represents and warrants to the
Lender that:
6.1 Corporate
Existence . The Borrower (a) is a corporation duly
organized, validly existing, and in good standing under the laws of
the jurisdiction of its incorporation or formation; (b) has
all requisite power and authority to own its assets and carry on
its business as now being or as proposed to be conducted; and
(c) is qualified to do business in all jurisdictions in which
the nature of its business makes such qualification necessary and
where failure to so qualify would have a material adverse effect on
its business, condition (financial or otherwise), operations,
prospects, or properties. The Borrower has the power and authority
to execute, deliver, and perform its obligations under this
Agreement and the other Loan Documents to which it is or may become
a party.
6.2 Financial
Statements; Etc . The Borrower has delivered to the Lender
audited financial statements of the Borrower as at and for the
fiscal year ended December 31, 2004 and such other unaudited
financial statements of the Borrower requested by Lender. Such
financial statements are true and correct, have been prepared in
accordance with GAAP, and fairly and accurately present the
financial condition of the Borrower and its Subsidiaries as of the
respective dates indicated therein and the results of operations
for the respective periods indicated therein. The Borrower does not
have any material contingent liabilities, liabilities
for
16
taxes, unusual
forward or long-term commitments, or unrealized or anticipated
losses from any unfavorable commitments except as referred to or
reflected in such financial statements. There has been no material
adverse change in the business, condition (financial or otherwise),
operations, prospects, or properties of the Borrower since the
effective date of the most recent financial statements referred to
in this Section. All projections delivered by the Borrower to the
Lender have been prepared in good faith, with care and diligence
and use assumptions that are reasonable under the circumstances at
the time such projections were prepared and delivered to the Lender
and all such assumptions are disclosed in the
projections.
6.3 Action; No
Breach . The execution, delivery, and performance by the
Borrower of this Agreement and the other Loan Documents to which
the Borrower is or may become a party and compliance with the terms
and provisions hereof and thereof have been duly authorized by all
requisite action on the part of the Borrower and do not and will
not (a) violate or conflict with, or result in a breach of, or
require any consent under (i) Constituent Documents of the
Borrower, (ii) any applicable law, rule, or regulation or any
order, writ, injunction, or decree of any Governmental Authority or
arbitrator, or (iii) any agreement or instrument to which the
Borrower is a party or by which any of them or any of their
Properties is bound or subject, or (b) constitute a default
under any such agreement or instrument, or result in the creation
or imposition of any Lien upon any of the revenues or assets of the
Borrower.
6.4 Operation
of Business . The Borrower possess all licenses, permits,
franchises, patents, copyrights, trademarks, and tradenames, or
rights thereto, necessary to conduct its business substantially as
now conducted and as presently proposed to be conducted, and the
Borrower is not in violation of any valid rights of others with
respect to any of the foregoing.
6.5 Litigation
and Judgments . There is no action, suit, investigation, or
proceeding before or by any Governmental Authority or arbitrator
pending, or to the knowledge of the Borrower, threatened against or
affecting the Borrower, that would, if adversely determined, have a
material adverse effect on the business, condition (financial or
otherwise), operations, prospects, or properties of the Borrower or
the ability of the Borrower to pay and perform the Obligations.
There are no outstanding judgments against the Borrower of the
Borrower.
6.6 Rights in
Properties; Liens . The Borrower has good and indefeasible
title to or valid leasehold interests in their respective
Properties, including the Properties reflected in the financial
statements described in Section 6.2, and none of the
Properties of the Borrower or any Subsidiary is subject to any
Lien, except as permitted by Section 8.2.
6.7
Enforceability . This Agreement constitutes, and the other
Loan Documents to which the Borrower is party, when delivered,
shall constitute legal, valid, and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their
respective terms, except as limited by bankruptcy, insolvency, or
other laws of general application relating to the enforcement of
creditors’ rights.
6.8
Approvals . No authorization, approval, or consent of, and
no filing or registration with, any Governmental Authority or third
party is or will be necessary for the execution, delivery, or
performance by the Borrower of this Agreement and the other Loan
Documents to which the Borrower is or may become a party or the
validity or enforceability thereof.
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6.9 Debt .
Except as identified on Schedule 6.9.1, the Borrower has no
Debt.
6.10 Taxes
. The Borrower has filed all tax returns (federal, state, and
local) required to be filed, including all income, franchise,
employment, property, and sales tax returns, and has paid all of
its respective liabilities for taxes, assessments, governmental
charges, and other levies that are due and payable. The Borrower
knows of no pending investigation of the Borrower by any taxing
authority or of any pending but unassessed tax liability of the
Borrower.
6.11 Use of
Proceeds; Margin Securities . The Borrower is not engaged
principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations G, T, U, or X of
the Board of Governors of the Federal Reserve System), and no part
of the proceeds of any Advance will be used to purchase or carry
any margin stock or to extend credit to others for the purpose of
purchasing or carrying margin stock.
6.12 ERISA
. The Borrower is in compliance in all material respects with all
applicable provisions of ERISA. Neither a Reportable Event nor a
Prohibited Transaction has occurred and is continuing with respect
to any Plan. No notice of intent to terminate a Plan has been
filed, nor has any Plan been terminated. No circumstances exist
which constitute grounds entitling the PBGC to institute
proceedings to terminate, or appoint a trustee to administer, a
Plan, nor has the PBGC instituted any such proceedings. Neither the
Borrower nor any ERISA Affiliate has completely or
partia
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