AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

TABLE OF CONTENTS

 

SECTION 1. DEFINITIONS		1
SECTION 2. CREDIT FACILITIES		34
2.1	Loans	34
2.2	Letter of Credit Accommodations	35
2.3	Commitments	39
2.4	Optional Reduction in Maximum Credit	39
SECTION 3. INTEREST AND FEES		39
3.1	Interest	39
3.2	Fees	40
3.3	Changes in Laws and Increased Costs of Loans	41
SECTION 4. CONDITIONS PRECEDENT		44
4.1	Conditions Precedent to Amendment and Restatement	44
4.2	Conditions Precedent to All Loans and Letter of Credit Accommodations	46
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST		46
5.1	Grant of Security Interest	46
5.2	Excluded Property	47
5.3	Release of Capital Stock of Foreign Subsidiaries	48
5.4	Perfection of Security Interests	49
5.5	Dutch Collateral	54
SECTION 6. COLLECTION AND ADMINISTRATION		54
6.1	Borrower’s Loan Accounts	54
6.2	Statements	54
6.3	Collection of Accounts	54
6.4	Payments	56
6.5	Taxes	57
6.6	Authorization to Make Loans	59
6.7	Use of Proceeds	59
6.8	Pro Rata Treatment	60
6.9	Sharing of Payments, Etc.	60
6.10	Settlement Procedures	61
6.11	Obligations Several; Independent Nature of Lenders’ Rights	64
SECTION 7. COLLATERAL REPORTING AND COVENANTS		64
7.1	Collateral Reporting	64
7.2	Accounts Covenants	65
7.3	Inventory Covenants	66
7.4	Equipment and Real Property Covenants	67
7.5	Power of Attorney	67

 

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7.6	Right to Cure	68
7.7	Access to Premises	68
SECTION 8. REPRESENTATIONS AND WARRANTIES		69
8.1	Corporate Existence, Power and Authority	69
8.2	Name; State of Organization; Chief Executive Office; Collateral Locations	69
8.3	Financial Statements; No Material Adverse Change	70
8.4	Priority of Liens; Title to Properties	70
8.5	Tax Returns	70
8.6	Litigation	71
8.7	Compliance with Other Agreements and Applicable Laws	71
8.8	Environmental Compliance	71
8.9	Employee Benefits	72
8.10	Bank Accounts	73
8.11	Intellectual Property	73
8.12	Subsidiaries; Affiliates; Capitalization; Solvency	73
8.13	Labor Disputes	74
8.14	Restrictions on Subsidiaries	74
8.15	Material Contracts	74
8.16	Payable Practices	74
8.17	Accuracy and Completeness of Information	75
8.18	Survival of Warranties; Cumulative	75
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS		75
9.1	Maintenance of Existence	75
9.2	New Locations	75
9.3	Compliance with Laws, Regulations, Etc.	76
9.4	Payment of Taxes and Claims	77
9.5	Insurance	77
9.6	Financial Statements and Other Information	79
9.7	Sale of Assets, Consolidation, Merger, Dissolution, Etc.	80
9.8	Encumbrances	85
9.9	Indebtedness	87
9.10	Loans, Investments, Etc.	95
9.11	Dividends and Redemptions	102
9.12	Transactions with Affiliates	103
9.13	Compliance with ERISA	104
9.14	End of Fiscal Years; Fiscal Quarters	104
9.15	Change in Business	104
9.16	Limitation of Restrictions Affecting Subsidiaries	104
9.17	Financial Covenants	105
9.18	License Agreements	105
9.19	Costs and Expenses	106
9.20	Further Assurances	107
9.21	Capital Expenditures	107

 

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SECTION 10. EVENTS OF DEFAULT AND REMEDIES		107
10.1	Events of Default	107
10.2	Remedies	109
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS		113
11.1	Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver	113
11.2	Waiver of Notices	114
11.3	Amendments and Waivers	114
11.4	Waiver of Counterclaims	116
11.5	Indemnification	116
SECTION 12. THE AGENT		117
12.1	Appointment, Powers and Immunities	117
12.2	Reliance by Agent	117
12.3	Events of Default	117
12.4	Wachovia in its Individual Capacity	118
12.5	Indemnification	118
12.6	Non-Reliance on Agent and Other Lenders	118
12.7	Failure to Act	119
12.8	Additional Loans	119
12.9	Concerning the Collateral and the Related Financing Agreements	120
12.10	Field Audit, Examination Reports and other Information; Disclaimer by Lenders	120
12.11	Collateral Matters	120
12.12	Agency for Perfection	122
12.13	Successor Agent	122
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS		123
13.1	Term	123
13.2	Interpretative Provisions	124
13.3	Notices	125
13.4	Partial Invalidity	126
13.5	Confidentiality	126
13.6	Successors	127
13.7	Assignments; Participations	127
13.8	Entire Agreement	130
13.9	Counterparts, Etc.	130

 

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INDEX
TO
EXHIBITS AND SCHEDULES

 

Exhibit A	Form of Assignment and Acceptance
Exhibit B	Information Certificate
Exhibit C	Form of Compliance Certificate
Exhibit D	Senior Note Description of Notes
Exhibit E	Form of Legal Opinion
Exhibit F	Form of Borrowing Base Certificate
Schedule 1.32	Commitment
Schedule 1.98	Permitted Holders
Schedule 6.6	Authorized Persons
Schedule 9.7(b)	Real Property Minimum Sales Prices

 

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LOAN AND SECURITY AGREEMENT

 

This Amended and Restated Loan and Security Agreement (this “Agreement”) dated October 30, 2008 is entered into by and among AEP Industries, Inc., a Delaware corporation (“Borrower”), the financial institutions from time to time parties hereto as lenders, whether by execution of this Agreement or an Assignment and Acceptance (each individually, a “Lender” and collectively, “Lenders”), Wachovia Bank, National Association, a national banking association, as successor by merger to Congress Financial Corporation, in its capacity as agent for Lenders (in such capacity, “Agent”), and General Electric Capital Corporation and Bank of America, N.A., each a Co-Collateral Agent and Co-Documentation Agent (each individually, a “Co-Collateral Agent” and a “Co-Documentation Agent” and collectively, “Co-Collateral Agents” and “Co-Documentation Agents”).

 

W I T N E S S E T H :

 

WHEREAS, Borrower, Agent and Lenders are parties to the Loan and Security Agreement, dated November 20, 2001, by and among them, as heretofore amended (the “Existing Agreement”), and together with all agreements, documents and instruments at any time executed and/or delivered in connection therewith or related thereto, as heretofore amended, modified or supplemented, collectively, the “Existing Financing Agreements”, pursuant to which Agent and Lenders have made loans and provided other financial accommodations to Borrower;

 

WHEREAS, Borrower has requested that Agent and Lenders amend and restate the Existing Agreement pursuant to and in accordance with the terms and conditions set forth herein; and

 

WHEREAS, each Lender is willing to agree (severally and not jointly) to amend and restate the Existing Agreement and to continue to make loans and provide such financial accommodations to Borrower on a pro rata basis according to its Commitment (as defined below) on the terms and conditions set forth herein and Agent is willing to continue to act as agent for Lenders on the terms and conditions set forth herein and the other Financing Agreements;

 

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

SECTION 1.         DEFINITIONS

 

For purposes of this Agreement, the following terms shall have the respective meanings given to them below:

 

1.1            “Accounts” shall mean all present and future rights of Borrower to payment of a monetary obligation, whether or not earned by performance, which is not evidenced by chattel paper or an instrument, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a secondary

 

 

obligation incurred or to be incurred, or (d) arising out of the use of a credit or charge card or information contained on or for use with the card.

 

1.2            “Adjusted Eurodollar Rate” shall mean, with respect to each Interest Period for any Eurodollar Rate Loan, the rate per annum determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof, “Reserve Percentage” shall mean the reserve percentage, expressed as a decimal, prescribed by any United States or foreign banking authority for determining the reserve requirement which is or would be applicable to deposits of United States dollars in a non-United States or an international banking office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with the proceeds of such deposit, whether or not the Reference Bank actually holds or has made any such deposits or loans. The Adjusted Eurodollar Rate shall be adjusted on and as of the effective day of any change in the Reserve Percentage.

 

1.3            “AEP Belgium” shall mean AEP Belgium S.A., a company incorporated under the laws of Belgium, and its successors and assigns.

 

1.4            “AEP Italy” shall mean AEP Italia SpA., a company incorporated under the laws of Italy, and its successors and assigns.

 

1.5            “Affiliate” shall mean, with respect to a specified Person, any other Person which directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such Person, and without limiting the generality of the foregoing, includes (a) any Person which beneficially owns or holds ten (10%) percent or more of any class of Voting Stock of such Person or other equity interests in such Person, (b) any Person of which such Person beneficially owns or holds ten (10%) percent or more of any class of Voting Stock or in which such Person beneficially owns or holds ten (10%) percent or more of the equity interests and (c) any director or executive officer of such Person. For the purposes of this definition, the term “control” (including with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by agreement or otherwise.

 

1.6            “Agent” shall mean Wachovia Bank, National Association, as successor by merger to Congress Financial Corporation, in its capacity as agent on behalf of Lenders pursuant to the terms hereof and any replacement or successor agent hereunder.

 

1.7            “Agent Payment Account” shall mean account no. 5000013742664 of Agent at Wachovia Bank, National Association or such other account of Agent as Agent may from time to time designate to Borrower as the Agent Payment Account for purposes of this Agreement and the other Financing Agreements.

 

1.8            “Applicable Margin” shall mean, at any time, as to the Interest Rate for Prime Rate Loans and the Interest Rate for Eurodollar Rate Loans, the applicable percentage (on a per

 

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annum basis) set forth below if the Quarterly Average Excess Availability for the immediately preceding fiscal quarter is at or within the amounts indicated for such percentage:

 

Tier		Quarterly Excess Average Availability		Applicable Prime Rate Margin		Applicable Eurodollar Rate Margin
1		$60,000,000 or more		0	%	2.25	%
2		Greater than or equal to $30,000,000 and less than $60,000,000		0	%	2.50	%
3		Less than $30,000,000		.25	%	2.75	%

 

provided , that , (i) the Applicable Margin shall be calculated and established on the date hereof and once each fiscal quarter hereafter and shall remain in effect until such date thereafter as it may be adjusted in accordance with Sections 1.74(b) or 1.74(c) hereof and (ii) the Applicable Margin from and including the date hereof through November 30, 2008 shall be the amount for Tier 2 set forth above.

 

1.9            “Assignment and Acceptance” shall mean an Assignment and Acceptance substantially in the form of Exhibit A attached hereof (with blanks appropriately completed) delivered to Agent in connection with an assignment of a Lender’s interest hereunder in accordance with the provisions of Section 13.7 hereof.

 

1.10          “Atlantis Plastic” shall mean collectively, Atlantis Plastics, Inc., a Delaware corporation, Atlantis Plastics Films, Inc., a Delaware corporation, and Linear Films, Inc., an Ontario, Canada corporation.

 

1.11          “Atlantis Plastic Assets” shall mean the assets and properties of Atlantis Plastic to be acquired by Borrower pursuant to the Atlantis Purchase Agreement.

 

1.12          “Atlantis Purchase Agreement” shall mean the Asset Purchase Agreement, dated August 9, 2008 (as amended, amended and restated, supplemented or otherwise modified from time to time), by and among Borrower and Atlantis Plastic.

 

1.13          “Atlantis Plastic Closing” shall mean the date on which the transactions contemplated by the Atlantis Purchase Agreement are consummated.

 

1.14          “Atlantis Real Property” shall mean the real property included in the Atlantis Plastic Assets located at each of (i) 101 Etter Drive, Nicholasville, Kentucky, (ii) 6940 West 76 ^th Street South, Tulsa, Oklahoma, and  (iii) 2111 Third Avenue, Mankato, Minnesota.

 

1.15          “Banker’s Acceptance” shall refer to a time draft that is an order written by the beneficiary of a letter of credit as the drawer of the time draft instructing the issuer of the letter of credit as the drawee to pay the amount specified in the time draft that has been accepted by a bank.

 

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1.16          “Bankruptcy Court” shall mean the United States Bankruptcy Court for the Northern District of Georgia.

 

1.17          “Blocked Accounts” shall have the meaning set forth in Section 6.3 hereof.

 

1.18          “Board” shall mean the Board of Governors of the Federal Reserve System of the United States.

 

1.19          “Borrowing Base” shall mean, at any time, the amount equal to:

 

(a)            (i) the amount equal to:

 

(A)           eighty-five (85%) percent of the Net Amount of the Eligible Accounts, plus

 

(B)            the lesser of (1) the Inventory Loan Limit or (2) the lesser of (x) eighty-five percent (85%) multiplied by the Net Orderly Liquidation Value percentage identified in the most recent inventory appraisal multiplied by the Value of the applicable Eligible Inventory or (y) sixty-five (65%) percent multiplied by the Value of the Eligible Inventory, plus

 

(C)            the Equipment Availability, plus

 

(D)           the New Equipment Availability, plus

 

(E)            the Real Property Availability, minus

 

(b)            Reserves.

 

For purposes only of applying the Inventory Loan Limit, Agent may treat the then undrawn amounts of outstanding Letter of Credit Accommodations for the purpose of purchasing Eligible Inventory as Loans to the extent Agent is in effect basing the issuance of the Letter of Credit Accommodations on the Value of the Eligible Inventory being purchased with such Letter of Credit Accommodations. In determining the actual amounts of such Letter of Credit Accommodations to be so treated for purposes of the sublimit, the outstanding Loans and Reserves shall be attributed first to any components of the lending formulas set forth above that are not subject to such sublimit, before being attributed to the components of the lending formulas subject to sublimit. The amounts of Eligible Inventory of Borrower shall, at Agent’s option, exercised in good faith, be determined based on the lesser of the amount of Inventory set forth in the general ledger of Borrower or the perpetual inventory record maintained by Borrower.

 

1.20          “Borrowing Base Certificate” shall mean a certificate substantially in the form of Exhibit F hereof, as such form may from time to time be modified by Agent, which is duly completed (including all schedules thereto) and executed by the vice-president-finance, chief financial officer, treasurer, assistant treasurer, controller or other financial or senior officer of Borrower and delivered to Agent.

 

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1.21          “Business Day” shall mean any day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required to close under the laws of the State of New York, or the State of North Carolina, and a day on which Agent is open for the transaction of business, except that if a determination of a Business Day shall relate to any Eurodollar Rate Loans, the term Business Day shall also exclude any day on which banks are closed for dealings in dollar deposits in the London interbank market or other applicable Eurodollar Rate market.

 

1.22          “Capital Expenditures” shall mean all expenditures for or contracts for any fixed or capital assets or improvements, or for replacements, substitutions or additions thereto, which have a useful life of more than one (1) year, including, but not limited to, the direct or indirect acquisition of such assets by way of offset items or otherwise and shall include the principal amount of capitalized lease payments.

 

1.23          “Capital Leases” shall mean, as applied to any Person, any lease of (or any agreement conveying the right to use) any property (whether real, personal or mixed) by such Person as lessee which in accordance with GAAP, is required to be reflected as a liability on the balance sheet of such Person.

 

1.24          “Capital Stock” shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person’s capital stock or partnership, joint venture, limited liability company or other equity interests at any time outstanding, and any and all rights, warrants or options exchangeable for or convertible into such capital stock or other interests (but excluding any debt security that is exchangeable for or convertible into such capital stock).

 

1.25          “Cash Equivalents” shall mean, at any time, (a) any evidence of Indebtedness with a maturity date of one hundred eighty (180) days or less issued or directly and fully guaranteed or insured by the United States of any agency or instrumentality thereof; provided , that , the full faith and credit of the United States is pledged in support thereof; (b) certificates of deposit or bankers’ acceptances with a maturity of one hundred eighty (180) days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $250,000,000; (c) commercial paper (including variable rate demand notes) with a maturity of one hundred eighty (180) days or less issued by a corporation (except an Affiliate of Borrower ) organized under the laws of any State of the United States or the District of Columbia and rated at least A-1 by Standard & Poor’s Ratings Service, a division of The McGraw-Hill Companies, Inc. or at least P-1 by Moody’s Investors Service, Inc.; (d) repurchase obligations with a term of not more than thirty (30) days for underlying securities of the types described in clause (a) above entered into with any financial institution having combined capital and surplus and undivided profits of not less than $250,000,000; (e) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States or issued by any governmental agency thereof and backed by the full faith and credit of the United States, in each case maturing within one hundred eighty (180) days or less from the date of acquisition; provided , that , the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985; and (f) investments in money market

 

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funds and mutual funds which invest substantially all of their assets in securities of the types described in clauses (a) through (e) above.

 

1.26          “Change of Control” shall mean (a) the transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Borrower to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act); (b) the liquidation or dissolution of Borrower or the adoption of a plan by the stockholders of Borrower relating to the dissolution or liquidation of Borrower; (c) the acquisition by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), except for one or more Permitted Holders, of beneficial ownership, directly or indirectly, of a majority of the voting power of the total outstanding Voting Stock of Borrower; or (d) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of Borrower (together with any new directors who have been appointed by any Permitted Holder, or whose nomination for election by the stockholders of Borrower, as the case may be, was approved by a vote of at least sixty-six and two-thirds (66 2/3%) percent of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of Borrower then still in office

 

1.27          “Code” shall mean the Internal Revenue Code of 1986, as the same now exists or may from time to time hereafter be amended, modified, recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto.

 

1.28          “Co-Collateral Agent” shall have the meaning set forth in the preamble hereto.

 

1.29          “Co-Documentation Agent” shall have the meaning set forth in the preamble hereto.

 

1.30          “Collateral” shall have the meaning set forth in Section 5 hereof (and shall include the shares of Capital Stock of AEP Industries (Australia) Pty Ltd).

 

1.31          “Collateral Access Agreement” shall mean an agreement in writing, in form and substance satisfactory to Agent, from any lessor of premises to Borrower, or any other person to whom any Collateral is consigned or who has custody, control or possession of any such Collateral or is otherwise the owner or operator of any premises on which any of such Collateral is located, pursuant to which such lessor, consignee or other person, inter alia, acknowledges the first priority security interest of Agent, for itself and the benefit of Lenders, in such Collateral, agrees to waive any and all claims such lessor, consignee or other person may, at any time, have against such Collateral, whether for processing, storage or otherwise, and agrees to permit Agent access to, and the right to remain on, the premises of such lessor, consignee or other person so as to exercise Agent’s rights and remedies and otherwise deal with such Collateral and in the case of any consignee or other person who at any time has custody, control or possession of any Collateral, acknowledges that it holds and will hold possession of the Collateral for the benefit of Agent and Lenders and agrees to follow all instructions of Agent with respect thereto. The form Collateral Access Agreements provided by Agent to Borrower prior to the date hereof are in form and substance satisfactory to Agent, provided , that , as to the Collateral Access Agreement with any lessor or other person as to a specific location, Agent may require such changes to the

 

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form as it may in good faith deem appropriate or desirable under the circumstances at the time or as to the applicable location.

 

1.32          “Commitment” shall mean, at any time, as to each Lender, the principal amount set forth opposite such Lender’s name on Schedule 1.30 hereto designated as the Commitment or on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 13.7 hereof, as the same may be adjusted from time to time in accordance with the terms hereof; sometimes being collectively referred to herein as “Commitments”. Notwithstanding anything to the contrary set forth in this Agreement on and as of the date hereof, the Commitments of the Lenders parties to this Agreement shall be as set forth on Schedule 1.32 hereto. Each Lender by its signature below confirms that its Commitment is as set forth on Schedule 1.32.

 

1.33          “Consolidated Net Income” shall mean, with respect to any Person for any period, the aggregate of the net income (loss) of such Person and its Subsidiaries, on a consolidated basis, for such period (excluding to the extent included therein (i) any extraordinary and/or one time or unusual and non-recurring gains and (ii) any extraordinary and/or one time or unusual and non-recurring losses) after deducting all charges which should be deducted before arriving at the net income (loss) for such period and, without duplication, after deducting the Provision for Taxes for such period, all as determined in accordance with GAAP; provided , that , the net income of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid or payable to such Person or a Subsidiary of such Person;

 

(a)            except to the extent included pursuant to the foregoing clause, the net income of any Person accrued prior to the date it becomes a Subsidiary of such Person or is merged into or consolidated with such Person or any of its Subsidiaries or that Person’s assets are acquired by such Person or by its Subsidiaries shall be excluded;

 

(b)            the non-cash expenses relating to the post-retirement plans sponsored by Borrower as of the date hereof shall be excluded;

 

(c)            the non-cash expenses relating to the employee stock option plan of Borrower as in effect on the date hereof shall be excluded;

 

(d)            the non-cash expenses consisting of imputed interest shall be excluded;

 

(e)            the non-cash expenses consisting of deferred compensation shall be excluded (without duplication of any other non-cash expenses excluded pursuant to the terms hereof);

 

(f)             (i) the non-cash expenses consisting of an increase in the LIFO reserve shall be excluded and (ii) the non-cash gains consisting of a decrease in the LIFO reserve shall be excluded;

 

(g)            such other non-cash expenses as are not specified above as Agent may at its option determine shall be excluded;

 

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(h)            for the purposes of this definition, net income excludes any gain or non-cash loss, together with any related Provision for Taxes for such gain or non-cash loss, realized upon the sale or other disposition of any assets that are not sold in the ordinary course of business (including, without limitation, dispositions pursuant to sale and leaseback transactions) or of any Capital Stock of such Person or a Subsidiary of such Person and any net income realized or loss incurred as a result of changes in accounting principles or the application thereof to such Person; immediately at the end thereof; and

 

(i)             non-cash gains and losses due solely to fluctuations in currency value shall be excluded.

 

1.34          “Credit Facility” shall mean the Loans and Letter of Credit Accommodations provided to or for the benefit of Borrower pursuant to Sections 2.1 and 2.2 hereof.

 

1.35          “Default” shall mean an act, condition or event which with notice or passage of time or both would constitute an Event of Default.

 

1.36          “Defaulting Lender” shall have the meaning set forth in Section 6.10 hereof.

 

1.37          “Deposit Account Control Agreement” shall mean an agreement in writing, in form and substance satisfactory to Agent, with respect to a deposit account at any bank by and among Agent, Borrower and the bank at which such deposit account is at any time maintained which provides that such bank will comply with instructions originated by Agent directing disposition of the funds in the deposit account without further consent by Borrower and such other terms and conditions as Agent may require, including as to any such agreement with respect to any Blocked Account, providing that all items received or deposited in the Blocked Accounts are the property of Agent, that the bank has no lien upon, or right to setoff against, the Blocked Accounts (other than in respect of the bank’s customary fees and expenses for routine maintenance and operation thereof, including overdraft fees and amounts advanced to settle authorized transactions), the items received for deposit therein, or the funds from time to time on deposit therein and that the bank will wire, or otherwise transfer, in immediately available funds, on a daily basis to the Agent Payment Account all funds received or deposited into the Blocked Accounts. The form of Deposit Account Control Agreement provided by Agent to Borrower prior to the date hereof is in form and substance satisfactory to Agent, provided , that , as to a Deposit Account Control Agreement with any specific bank, Agent may require such changes to the form as it may in good faith deem appropriate or desirable under the circumstances at the time.

 

1.38          “Domestic Subsidiary” shall mean any Subsidiary of Borrower, other than a Foreign Subsidiary.

 

1.39          “EBITDA” shall mean, as to any Person, with respect to any period, an amount equal to: (a) the Consolidated Net Income of such Person for such period, plus (b) depreciation and amortization for such period (to the extent deducted in the computation of Consolidated Net Income of such Person), all in accordance with GAAP, plus (c) Interest Expense for such period (to the extent deducted in the computation of Consolidated Net Income of such Person), plus (d) 

 

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the Provision of Taxes for such period (to the extent deducted in the computation of Consolidated Net Income of such Person).

 

1.40          “Eligible Accounts” shall mean Accounts created by Borrower which are and continue to be acceptable to Agent in good faith based on the criteria set forth below. In general, Accounts shall be Eligible Accounts if:

 

(a)            such Accounts arise from the actual and bona fide sale and delivery of goods by Borrower or rendition of services by Borrower in the ordinary course of its business which transactions are completed in accordance with the terms and provisions contained in any documents related thereto;

 

(b)            such Accounts are not unpaid more than the earlier of sixty (60) days after the original due date for them or one hundred twenty (120) days after the date of the original invoice for them;

 

(c)            such Accounts comply with the terms and conditions contained in Section 7.2(b) of this Agreement;

 

(d)            such Accounts do not arise from sales on consignment, guaranteed sale, sale and return, sale on approval, or other terms under which payment by the account debtor may be conditional or contingent;

 

(e)            the chief executive office of the account debtor with respect to such Accounts is located in the United States or Canada other than the provinces of Newfoundland and Quebec, the Northwest Territories and the Territory of Nunavit ( provided , that , at any time promptly upon Agent’s request, Borrower shall execute and deliver, or cause to be executed and delivered, such other agreements, documents and instruments as may be required by Agent to perfect the security interests of Agent in those Accounts of an account debtor with its chief executive office or principal place of business in Canada in accordance with the applicable laws of the Province of Canada in which such chief executive office or principal place of business is located and take or cause to be taken such other and further actions as Agent may request to enable Agent as secured party with respect thereto to collect such Accounts under the applicable Federal or Provincial laws of Canada) or, at Agent’s option, if the chief executive office and principal place of business of the account debtor with respect to such Accounts is located other than in the United States or Canada, then if either:  (i) the account debtor has delivered to Borrower an irrevocable letter of credit issued or confirmed by a bank satisfactory to Agent and payable only in the United States and in US Dollars, sufficient to cover such Account, in form and substance satisfactory to Agent and if required by Agent, the original of such letter of credit has been delivered to Agent or Agent’s agent, and Borrower has complied with the terms of Section 5.4(f) hereof with respect to the assignment of the proceeds of such letter of credit to Agent or naming Agent as transferee beneficiary thereunder, as Agent may specify, or (ii) such Account is subject to credit insurance payable to Agent issued by an insurer and on terms and in an amount acceptable to Agent, or (iii) such Account is otherwise acceptable in all respects to Agent (subject to such lending formula with respect thereto as Agent may determine);

 

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(f)             such Accounts do not consist of progress billings (such that the obligation of the account debtors with respect to such Accounts is conditioned upon Borrower’s satisfactory completion of any further performance under the agreement giving rise thereto), bill and hold invoices or retainage invoices, except as to bill and hold invoices, if Agent shall have received an agreement in writing from the account debtor, in form and substance satisfactory to Agent, confirming the unconditional obligation of the account debtor to take the goods related thereto and pay such invoice;

 

(g)            the account debtor with respect to such Accounts has not asserted a counterclaim, defense or dispute and does not have, and does not engage in transactions which may give rise to any right of setoff or recoupment against such Accounts (but the portion of the Accounts of such account debtor in excess of the amount at any time and from time to time owed by Borrower to such account debtor or claimed owed by such account debtor may be deemed Eligible Accounts),

 

(h)            there are no facts, events or occurrences which would impair the validity, enforceability or collectability of such Accounts or reduce the amount payable or delay payment thereunder;

 

(i)             such Accounts are subject to the first priority, valid and perfected security interest of Agent, for itself and the benefit of Lenders, and any goods giving rise thereto are not, and were not at the time of the sale thereof, subject to any liens except those permitted in this Agreement;

 

(j)             neither the account debtor nor any officer or employee of the account debtor with respect to such Accounts is an officer, employee, agent or other Affiliate of Borrower;

 

(k)            the account debtors with respect to such Accounts are not any foreign government, the United States, any State, political subdivision, department, agency or instrumentality thereof, unless, if the account debtor is the United States, any State, political subdivision, department, agency or instrumentality thereof, upon Agent’s request, the Federal Assignment of Claims Act of 1940, as amended or any similar State or local law, if applicable, has been complied with in a manner satisfactory to Agent;

 

(l)             there is no proceeding or action known to Borrower or Agent which is threatened or pending against the account debtors with respect to such Accounts which is reasonably likely result in any material adverse change in any such account debtor’s financial condition (including, without limitation, any bankruptcy, dissolution, liquidation, reorganization or similar proceeding);

 

(m)           such Accounts are not evidenced by or arising under any instrument or chattel paper;

 

(n)            the aggregate amount of such Accounts owing by a single account debtor (other than the subsidiaries of Royal Ahold B.V.) do not constitute more than ten (10%) percent of the aggregate amount of all otherwise Eligible Accounts and the aggregate amount of such

 

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Accounts owing by the subsidiaries of Royal Ahold B.V. do not constitute more than fifteen (15%) percent of the aggregate amount of all otherwise Eligible Accounts;

 

(o)            such Accounts are not owed by an account debtor who has Accounts unpaid more than the earlier of sixty (60) days after the original due date for them or one hundred twenty (120) days after the original invoice date for them which constitute more than fifty (50%) percent of the total Accounts of such account debtor;

 

(p)            the account debtor is not located in a state requiring the filing of a Notice of Business Activities Report or similar report in order to permit Borrower to seek judicial enforcement in such State of payment of such Account, unless Borrower has qualified to do business in such state or has filed a Notice of Business Activities Report or equivalent report for the then current year or such failure to file and inability to seek judicial enforcement is capable of being remedied without any material delay or material cost;

 

(q)            such Accounts are owed by account debtors whose total indebtedness to Borrower does not exceed the credit limit with respect to such account debtors as is deemed acceptable to Agent in good faith (but the portion of the Accounts not in excess of such credit limit may be deemed Eligible Accounts); and

 

(r)             such Accounts are owed by account debtors deemed creditworthy at all times by Agent in good faith.

 

The criteria for Eligible Accounts set forth above may only be changed and any new criteria for Eligible Accounts may only be established by Agent in good faith based on either:  (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Agent has no written notice thereof from a Borrower prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Accounts in the good faith determination of Agent. Any Accounts which are not Eligible Accounts shall nevertheless be part of the Collateral.

 

1.41          “Eligible Equipment” shall mean Equipment owned by Borrower as of the Initial Closing Date and included in the appraisal of the Equipment by Hilco Industrial, LLC received by Agent on or before Initial Closing Date and which is addressed to Agent and upon which Agent is expressly permitted to rely, which Equipment is in good order, repair, running and marketable condition, and acceptable to Agent in good faith all respects. In general, Eligible Equipment shall not include:  (a) Equipment at premises other than those owned or leased and controlled by Borrower, except as to premises that are leased by Borrower, only if Agent shall have received a Collateral Access Agreement from the owner and lessor of such premises in form and substance satisfactory to Agent; (b) Equipment subject to a security interest or lien in favor of any Person other than Agent, for itself and the benefit of Lenders, except those permitted in this Agreement (but without limiting the right of Agent to establish any Reserves with respect to amounts secured by such security interest or lien in favor of any Person even if permitted herein); (c) Equipment which is not located in the continental United States; (d) Equipment which is not subject to the first priority, valid and perfected security interest of Agent, for itself and the benefit of Lenders; (e) worn-out obsolete, damaged or defective

 

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Equipment or Equipment not used or usable in the ordinary course of Borrower’s business as presently conducted; (f) computer hardware; (g) fixtures; (h) Equipment which is leased; or (i) tooling. Any Equipment which is not Eligible Equipment shall nevertheless be part of the Collateral.

 

1.42          “Eligible Inventory” shall mean Inventory of Borrower consisting of finished goods held for resale in the ordinary course of the business of Borrower and raw materials for such finished goods, in each case which are acceptable to Agent in good faith based on the criteria set forth below. In general, Eligible Inventory shall not include (a) work-in-process; (b) spare parts for equipment; (c) packaging and shipping materials; (d) supplies used or consumed in Borrower’s business; (e) Inventory at premises other than those owned and controlled by Borrower, except any Inventory which would otherwise be deemed Eligible Inventory that is not located at premises owned and operated by Borrower may nevertheless be considered Eligible Inventory: (i) as to locations which are leased by a Borrower, if Agent shall have received a Collateral Access Agreement from the owner and lessor of such location, duly authorized, executed and delivered by such owner and lessor, or if Agent shall not have received such Collateral Access Agreement (or Agent shall determine to accept a Collateral Access Agreement which does not include all required provisions or provisions in the form otherwise required by Agent), Agent may, at its option, nevertheless consider Inventory at such location to be Eligible Inventory to the extent Agent shall have established such Reserves in respect of amounts at any time payable by Borrower to the owner and lessor thereof as Agent shall determine in good faith, and (ii) as to locations owned and operated by a third person, if Agent shall have received a Collateral Access Agreement from such owner and operator with respect to such location, duly authorized, executed and delivered by such owner and operator or if Agent shall not have received such Collateral Access Agreement (or Agent shall determine to accept a Collateral Access Agreement which does not include all required provisions or provisions in the form otherwise required by Agent), Agent may, at its option, nevertheless consider Inventory at such location to be Eligible Inventory to the extent Agent shall have established such Reserves in respect of amounts at any time payable by Borrower to the owner and operator thereof as Agent shall determine in good faith, and, in addition, if required by Agent:  (A) UCC financing statements between the owner and operator, as consignee or bailee and Borrower, as consignor or bailor, in form and substance satisfactory to Agent, which are duly assigned to Agent and (B) a written notice to any lender to the owner and operator of the first priority security interest in such Inventory of Agent, for itself and the benefit of Lenders; (f) Inventory subject to a security interest or lien in favor of any Person other than Agent, for itself and the benefit of Lenders, except those permitted in this Agreement (but without limiting the right of Agent to establish any Reserves with respect to amounts secured by such security interest or lien in favor of any Person even if permitted herein); (g) bill and hold goods; (h) obsolete or slow moving Inventory; (i) Inventory which is not subject to the first priority, valid and perfected security interest of Agent, for itself and the benefit of Lenders; (j) returned, damaged and/or defective Inventory; (k) Inventory purchased or sold on consignment and (l) Inventory located outside the United States. The criteria for Eligible Inventory set forth above may only be changed and any new criteria for Eligible Inventory may only be established by Agent in good faith based on either:  (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Agent has no written notice thereof from Borrower prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Inventory in the good faith determination of

 

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Agent. Any Inventory which is not Eligible Inventory shall nevertheless be part of the Collateral.

 

1.43          “Eligible New Equipment” shall mean, Equipment owned by Borrower and acquired after the Initial Closing Date and which is not included in the appraisal referred to in Section 1.41 above, which would otherwise constitute Eligible Equipment pursuant to the criteria set forth in Section 1.41 above. Any Equipment which is not Eligible New Equipment shall nevertheless be part of the Collateral.

 

1.44          “Eligible Transferee” shall mean (a) any Lender; (b) the parent company of any Lender and/or any Affiliate of such Lender which is at least fifty (50%) percent owned by such Lender or its parent company; (c) any person (whether a corporation, partnership, trust or otherwise) that is engaged in the business of making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor, that represents to Agent that it has a tangible net worth calculated in accordance with the applicable generally accepted accounting principles consistently applied (or the equivalent thereof in the case of an investment partnership, managed account, limited liability company or similar entity) of not less than $250,000,000 and in each case is approved by Agent and (d) any other commercial bank or financial institution, and in each case approved by Agent; provided , that , (i) neither Borrower nor any Obligor or any Affiliate of Borrower or any Obligor shall qualify as an Eligible Transferee and (ii) no Person to whom any Indebtedness which is in any way subordinated in right of payment to the Obligations shall qualify as an Eligible Transferee, except as Agent may otherwise specifically agree.

 

1.45          “Environmental Laws” shall mean all foreign, Federal, State and local laws (including common law), legislation, rules, codes, licenses, permits (including any conditions imposed therein), authorizations, judicial or administrative decisions, injunctions or agreements between Borrower and any Governmental Authority, (a) relating to pollution and the protection, preservation or restoration of the environment (including air, water vapor, surface water, ground water, drinking water, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety, (b) relating to the exposure to, or the use, storage, recycling, treatment, generation, manufacture, processing, distribution, transportation, handling, labeling, production, release or disposal, or threatened release, of Hazardous Materials, or (c) relating to all laws with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials. The term “Environmental Laws” includes (i) the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii) applicable state counterparts to such laws and (iii) any common law or equitable doctrine that may impose

 

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liability or obligations for injuries or damages due to, or threatened as a result of, the presence of or exposure to any Hazardous Materials.

 

1.46          “Equipment” shall mean all of Borrower’s now owned and hereafter acquired equipment, wherever located, including machinery, data processing and computer equipment (whether owned or licensed and including embedded software), vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located.

 

1.47          “Equipment Availability” shall mean $6,800,000; as reduced effective as of the first day of each month commencing November 1, 2008 by an amount equal to $200,000.

 

1.48          “ERISA” shall mean the United States Employee Retirement Income Security Act of 1974, together with all rules, regulations and interpretations thereunder or related thereto.

 

1.49          “ERISA Affiliate” shall mean any person required to be aggregated with Borrower, or any of its Subsidiaries under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.

 

1.50          “ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a Plan (for which reporting has not been waived); (b) the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section 412 of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (e) the occurrence of a “prohibited transaction” with respect to which Borrower or any of its respective Subsidiaries (other than any Foreign Subsidiary) is a “disqualified person” (within the meaning of Section 4975 of the Code) or with respect to which Borrower or any of its Subsidiaries (other than any Foreign Subsidiary) could otherwise be liable; (f) a complete or partial withdrawal by Borrower or any ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is treated as such a withdrawal or notification that a Multiemployer Plan is in reorganization; (g) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the Pension Benefit Guaranty Corporation to terminate a Plan; (h) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (i) the imposition of any liability under Title IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon Borrower or any ERISA Affiliate in excess of $250,000 and (j) any other event or condition with respect to a Plan including any Plan subject to Title IV of ERISA maintained, or contributed to, by any ERISA Affiliate that could reasonably be expected to result in liability of Borrower in excess of $250,000.

 

1.51          “Eurodollar Rate” shall mean with respect to the Interest Period for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic average of the rates of interest per annum at which Reference Bank is offered deposits of United States dollars in the London

 

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interbank market (or other Eurodollar Rate market selected by Borrower and approved by Agent) on or about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement of such Interest Period in amounts substantially equal to the principal amount of the Eurodollar Rate Loans requested by and available to Borrower in accordance with this Agreement, with a maturity of comparable duration to the Interest Period selected by or on behalf of Borrower.

 

1.52          “Eurodollar Rate Loans” shall mean any Loans or portion thereof on which interest is payable based on the Adjusted Eurodollar Rate in accordance with the terms hereof.

 

1.53          “Event of Default” shall mean the occurrence or existence of any event or condition described in Section 10.1 hereof.

 

1.54          “Excess Availability” shall mean the amount, as determined by Agent in good faith, calculated at any date, equal to:  (a) the lesser of:  (i) the Borrowing Base (but without regard to Reserves established in respect of Letter of Credit Accommodations to the extent such Letter of Credit Accommodations are included in the Obligations for purposes of clause (b)(i) of this definition) and (ii) the Maximum Credit, minus (b) the sum of:  (i) the amount of all then outstanding and unpaid Obligations (after giving effect to the repayments received by Agent in respect of the Obligations in accordance with Section 6.3(b) hereof), plus (ii) the aggregate amount of all then outstanding and unpaid trade payables and other obligations of Borrower which are outstanding more than sixty (60) days past due as of such time (other than trade payables or other obligations being contested or disputed by Borrower in good faith), plus (iii) without duplication, the amount of checks issued by Borrower to pay trade payables and other obligations which are more than sixty (60) days past due as of such time (other than trade payables or other obligations being contested or disputed by Borrower in good faith), but not yet sent, plus (c) the aggregate amount of cash and Cash Equivalents held by Borrower at (i) the Agent or (ii) any Lender that is subject to a Deposit Account Control Agreement or a Investment Property Control Agreement, as applicable, in favor of Agent, for the benefit of Lenders, in form and substance satisfactory to Agent, to the extent such amount does not exceed the sum determined pursuant to the immediately preceding clause (b).

 

1.55          “Exchange Act” shall mean the Securities Exchange Act of 1934, together with all rules, regulations and interpretations thereunder or related thereto.

 

1.56          “Federal Funds Rate” shall mean, for any period, a fluctuating interest rate per annum equal, for each day during such period, to the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal Funds brokers of recognized standing selected by it.

 

1.57          “Finance Co.” shall mean AEP Industries Finance Inc., a Delaware corporation and wholly-owned Subsidiary of Borrower.

 

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1.58          “Finance Co. Investment” shall mean any loan or advance to, or other investment in (by capital contribution, dividend or otherwise), Finance Co. by Borrower; provided , that , as to any such loan, advance or other investment, each of the following conditions is satisfied:  (a) as of the date of any such loan, advance or other investment and after giving effect thereto, no Default or Event of Default shall exist or have occurred, (b) as of the date of any such loan, advance or other investment, and after giving effect thereto, if there are any Loans or Letter of Credit Accommodations outstanding as of such date and after giving effect to any such loan, advance or investment, (i) as of the date of any such payment, and after giving effect thereto, Excess Availability shall be not less than $25,000,000 and (ii) as of the date of any such payment and after giving effect thereto, the aggregate amount of all payments in respect of Permitted Transactions shall not exceed $50,000,000 in any fiscal year thereafter, and (c) all of the proceeds of any such loan, advance or other investment shall be used by Finance Co. to make a substantially contemporaneous payment to redeem, retire, defease, purchase or otherwise acquire any shares of any class of Capital Stock of Borrower permitted under Section 9.11(c) hereof.

 

1.59          “Financing Agreements” shall mean, collectively, this Agreement and all notes, guarantees, security agreements and other agreements, documents and instruments now or at any time hereafter executed and/or delivered by Borrower or any Obligor in connection with this Agreement.

 

1.60          “Fixed Charge Coverage Ratio” shall mean, as to Borrower on a consolidated basis, with respect to any period, the ratio of (a) the amount equal to the sum of EBITDA of Borrower for such period minus unfinanced Capital Expenditures of Borrower for such period (it being understood and agreed that (i) Capital Expenditures may be financed pursuant to the incurrence of debt, issuance of Capital Stock, seller financing or otherwise, as may be permitted hereunder, and (ii) with respect to determinations for the periods ending on or about each October 31, 2008, January 31, 2009, April 30, 2009 and July 31, 2009, unfinanced Capital Expenditures shall exclude $9,000,000 of Capital Expenditures which were made during the twelve (12) month period of Borrower ended October 31, 2008), to (b) the Fixed Charges for such period.

 

1.61          “Fixed Charges” shall mean, as to any Person and its Subsidiaries with respect to any period, the sum of, without duplication, of (a) all cash Interest Expense during such period, (b) all regularly scheduled (as determined at the beginning of the respective period) principal payments of Indebtedness incurred or assumed for borrowed money and Indebtedness with respect to Capital Leases, (c) dividends on shares of the Capital Stock of Borrower (other than dividends payable in shares of the Capital Stock of Borrower) plus (d) cash Taxes (and without duplicating items in (a) and (b) of this definition, the interest component with respect to Indebtedness under Capital Leases) during such period.

 

1.62          “Foreign Subsidiaries” shall mean the Subsidiaries of Borrower organized or incorporated under the laws of any jurisdiction outside the United States and which have substantially all of their respective assets outside the United States; sometimes being referred to herein individually as a “Foreign Subsidiary”.

 

1.63          “Funded Debt” shall mean, with respect to any person, any Indebtedness of such person and its Subsidiaries consisting of any liability (a) in respect of borrowed money (whether

 

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or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes, debentures or similar instruments; (b) representing the balance deferred and unpaid of the purchase price of any property or services (except any such balance that constitutes an account payable to a trade creditor (whether or not an Affiliate) created, incurred, assumed or guaranteed by such Person in the ordinary course of business of such Person in connection with obtaining goods, materials or services that is not overdue by more than ninety (90) days, unless the trade payable is being contested in good faith); and (c) all obligations as lessee under leases which have been, or should be, in accordance with GAAP recorded as Capital Leases.

 

1.64          “GAAP” shall mean generally accepted accounting principles in the United States as in effect from time to time as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board which are applicable to the circumstances as of the date of determination consistently applied, except that, for purposes of Section 9.17 hereof, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements delivered to Agent prior to the date hereof.

 

1.65          “Governmental Authority” shall mean any nation or government, any state, province, or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

 

1.66          “Hard Costs” shall mean, with respect to the purchase by Borrower of an item of Eligible New Equipment, the net cash amount actually paid to acquire title to such item, net of all incentives, trade-in allowances, discounts and rebates, and exclusive of freight, delivery charges, installation costs and charges, software costs, charges and fees, warranty costs, taxes, insurance and other incidental costs or expenses and all indirect costs or expenses of any kind.

 

1.67          “Hazardous Materials” shall mean any hazardous, toxic or dangerous substances, materials and wastes, including hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including materials which include hazardous constituents), sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes and including any other substances, materials or wastes that are or become regulated under any Environmental Law (including any that are or become classified as hazardous or toxic under any Environmental Law).

 

1.68          “Indebtedness” shall mean, with respect to any Person, any liability, whether or not contingent, (a) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes, debentures or similar instruments; (b) representing the balance deferred and unpaid of the purchase price of any property or services (except any such balance that constitutes an account payable to a trade creditor (whether or not an Affiliate) created, incurred, assumed or guaranteed

 

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by such Person in the ordinary course of business of such Person in connection with obtaining goods, materials or services that is not overdue by more than ninety (90) days, unless the trade payable is being contested in good faith); (c) all obligations as lessee under leases which have been, or should be, in accordance with GAAP recorded as Capital Leases; (d) any contractual obligation, contingent or otherwise, of such Person to pay or be liable for the payment of any indebtedness described in this definition of another Person, including, without limitation, any such indebtedness, directly or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise acquire such indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof, or to maintain solvency, assets, level of income, or other financial condition; (e) all obligations with respect to redeemable stock and redemption or repurchase obligations under any Capital Stock or other equity securities issued by such Person; (f) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker’s acceptances, drafts or similar documents or instruments issued for such Person’s account; (g) all indebtedness of such Person in respect of indebtedness of another Person for borrowed money or indebtedness of another Person otherwise described in this definition which is secured by any consensual lien, security interest, collateral assignment, conditional sale, mortgage, deed of trust, or other encumbrance on any asset of such Person, whether or not such obligations, liabilities or indebtedness are assumed by or are a personal liability of such Person, all as of such time; (h) all obligations, liabilities and indebtedness of such Person (marked to market) arising under swap agreements, cap agreements and collar agreements and other agreements or arrangements designed to protect such person against fluctuations in interest rates or currency or commodity values; and (i) all obligations owed by such Person under License Agreements with respect to non-refundable, advance or minimum guarantee royalty payments.

 

1.69          “Initial Closing Date” shall mean November 20, 2001.

 

1.70          “Information Certificate” shall mean the Information Certificates of Borrower constituting Exhibit B hereof containing material information with respect to Borrower, its respective businesses and assets provided by or on behalf of Borrower to Agent in connection with the preparation of this Agreement and the other Financing Agreements and the financing arrangements provided for herein.

 

1.71          “Intellectual Property” shall mean all of Borrower’s now owned and hereafter arising or acquired:  patents, patent rights, patent applications, copyrights, works which are the subject matter of copyrights, copyright registrations, trademarks, trade names, trade styles, trademark and service mark applications, and licenses and rights to use any of the foregoing; all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing; all rights to sue for past, present and future infringement of any of the foregoing; inventions, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating standards; goodwill (including any goodwill associated with any trademark or the license of any trademark); customer and other lists in whatever form maintained; trade secret rights, copyright rights, rights in works of authorship, domain names and domain name registration; software and contract rights relating to computer software programs, in whatever form created or maintained.

 

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1.72          “Interest Expense” shall mean, for any period, as to any Person, as determined in accordance with GAAP, the total interest expense of such Person, whether paid or accrued during such period (including the interest component of Capital Leases for such period), including, without limitation, discounts in connection with the sale of any Accounts and bank fees, commissions, discounts and other fees and charges owed with respect to letters of credit, banker’s acceptances or similar instruments, but excluding interest paid in property other than cash and any other interest expense not payable in cash.

 

1.73          “Interest Period” shall mean for any Eurodollar Rate Loan, a period of approximately one (1), two (2), three (3) months or six (6) months duration as Borrower may elect, the exact duration to be determined in accordance with the customary practice in the applicable Eurodollar Rate market; provided , that , Borrower may not elect an Interest Period which will end after the last day of the then-current term of this Agreement.

 

1.74          “Interest Rate” shall mean,

 

(a)            Subject to clauses (b) and (c) of this definition below:

 

(i)             as to Prime Rate Loans, a rate equal to the Prime Rate,

 

(ii)            as to Eurodollar Rate Loans, a rate equal to two and one-half (2 1/2%) percent per annum in excess of the Adjusted Eurodollar Rate (in each case, based on the Eurodollar Rate applicable for the Interest Period selected by Borrower as in effect two (2) Business Days prior to the commencement of such Interest Period, whether such rate is higher or lower than any rate previously quoted to Borrower).

 

(b)            Subject to clause (c) of this definition below, the Interest Rate payable by Borrower shall be, or shall be increased or decreased, as the case may be, (i) as to Prime Rate Loans, to the rate equal to the Applicable Margin on a per annum basis in excess of the Prime Rate, and (ii) as to Eurodollar Rate Loans, to the rate equal to the Applicable Margin on a per annum basis in excess of the Adjusted Eurodollar Rate.

 

(c)            Notwithstanding anything to the contrary contained in clauses (a) and (b) of this definition, the Applicable Margin otherwise used to calculate the Interest Rate for Prime Rate Loans and Eurodollar Rate Loans shall be the highest percentage set forth in the definition of the term Applicable Margin for each category of Loans (without regard to the amount of Quarterly Average Excess Availability) plus two (2%) percent per annum, at Agent’s option,  (i) for the period (A) from and after the effective date of termination or non-renewal hereof until Agent and Lenders have received full and final payment of all outstanding and unpaid Obligations which are not contingent and cash collateral or letter of credit, as Agent may specify, in the amounts and on the terms required under Section 13.1 hereof for contingent Obligations (notwithstanding entry of a judgment against Borrower) and (B) from and after the date of the occurrence of an Event of Default and for so long as such Event of Default is continuing and (ii) on Loans to Borrower at any time outstanding in excess of the Borrowing Base or the Maximum Credit (whether or not such excess(es) arise or are made with or without the knowledge or consent of Agent or any Lender and whether made before or after an Event of Default).

 

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1.75          “Inventory” shall mean all of Borrower’s now owned and hereafter existing or acquired goods, wherever located, which (a) are leased by Borrower as lessor; (b) are held by Borrower for sale or lease or to be furnished under a contract of service; (c) are furnished by Borrower under a contract of service; or (d) consist of raw materials, work in process, finished goods or materials used or consumed in its business.

 

1.76          “Inventory Loan Limit” shall mean $70,000,000.

 

1.77          “Investment Property Control Agreement” shall mean an agreement in writing, in form and substance satisfactory to Agent, by and among Agent, Borrower and any securities intermediary, commodity intermediary or other person who has custody, control or possession of any investment property of Borrower acknowledging that such securities intermediary, commodity intermediary or other person has custody, control or possession of such investment property on behalf of Agent, that it will comply with entitlement orders originated by Agent after the occurrence and during the continuation of an Event of Default with respect to such investment property, or other instructions of Agent, or (as the case may be)  apply any value distributed on account of any commodity contract as directed by Agent, in each case, without the further consent of Borrower and including such other terms and conditions as Agent may require.

 

1.78          “Lenders” shall mean the financial institutions who are signatories hereto as Lenders and other persons made a party to this Agreement as a Lender in accordance with Section 13.7 hereof, and their respective successors and assigns; each sometimes being referred to herein individually as a “Lender”.

 

1.79          “Letter of Credit Accommodations” shall mean, collectively, letters of credit (whether documentary or standby) and banker’s acceptances issued with respect to drafts presented under letters of credit for the purchase of merchandise, and merchandise purchase or other guaranties which are from time to time either (a) issued or opened by Agent or any Lender for the account of Borrower or any Obligor or (b) with respect to which Agent or Lenders have agreed to indemnify the issuer or guaranteed to the issuer the performance by Borrower or any Obligor of its obligations to such issuer; sometimes being referred to herein individually as “Letter of Credit Accommodation”.

 

1.80          “Leverage Ratio” shall mean, at any time, as to any Person, the ratio of:  (a) the Funded Debt of such Person as of such time (and as to Borrower including for this purpose, (i) the Indebtedness of Borrower evidenced by or arising under the Wrightsville Bond Agreements, (ii) all Funded Debt of any Subsidiary of Borrower, (iii) the Indebtedness of Borrower evidenced by or arising under the Senior Notes and (iv) the Obligations) to (b) the EBITDA of such Person for the four (4) immediately preceding fiscal quarters of such Person (treated as a single accounting period).

 

1.81          “License Agreements” shall have the meaning set forth in Section 8.11 hereof.

 

1.82          “Loans” shall mean the loans now or hereafter made by or on behalf of any Lender or by Agent on a revolving basis (involving advances, repayments and readvances) as set forth in Section 2.1 hereof.

 

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1.83          “Material Adverse Effect” shall mean the occurrence of any one or more of the following events: (i) in any calendar year Borrower shall lose a customer the sales to whom for the immediately preceding calendar year accounted for forty (40%) percent or more of Borrower’s total sales volume for such immediately preceding year; (ii) Borrower is at any time required to purchase forty (40%) percent or more of its raw materials on a cash on delivery or cash in advance basis as the result of one or more vendor’s unwillingness to extend credit to Borrower; (iii) any of the President, Chief Executive Officer, Chief Financial Officer or Chief Operating Officer of Borrower is convicted of a felony criminal offense; (iv) the loss of production of Borrower of twenty (40%) percent or more of Inventory (measured in tons) from the average weekly amounts produced based on the immediately preceding four (4) weeks for a period of greater than five (5) consecutive days due to either or both of equipment failure or labor strike, stoppage, walkout or other labor related reason; or (v) a “force majeure event” occurs which results in Borrower’s revenues being forty (40%) percent or more less than Borrower’s revenues in the immediately preceding fiscal month, which is not fully covered by insurance.”

 

1.84          “Material Contract” shall mean (a) any contract or other agreement (other than the Financing Agreements) of Borrower that, by its terms, cannot be completed within one (1) year and involving monetary liability of or to any Person in an amount in excess of $7,500,000 in any fiscal year and (b) any other contract or other agreement (other than the Financing Agreements) to which Borrower is a party and as to which the breach, nonperformance, cancellation or failure to renew by any party thereto would have a Material Adverse Effect.

 

1.85          “Maturity Date” shall the meaning set forth in Section 13.1 hereof.

 

1.86          “Maximum Credit” shall mean the amount of $150,000,000.

 

1.87          “Mortgages” shall mean, individually and collectively, each of the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced):  (a) the Deed of Trust, Security Agreement and Fixture Filing, dated as of the Initial Closing Date, by Borrower in favor of Agent with respect to the Real Property and related assets of Borrower located in Matthew, North Carolina; (b) the Deed of Trust, Assignment of Rents and Fixture Filing, dated as of the Initial Closing Date, by Borrower in favor of Agent with respect to the Real Property and related assets of Borrower located in Chino, California; (c) the Deed of Trust and Security Agreement, dated as of the Initial Closing Date, by Borrower in favor of Agent with respect to the Real Property and related assets of Borrower located in Waxahachie, Texas; (d) the Mortgage, Security Agreement and Fixture Filing, dated as of the Initial Closing Date, by Borrower in favor of Agent with respect to the Real Property and related assets of Borrower located in Alsip, Illinois; and (e) the Deed to Secure Debt and Security Agreement, dated as of the Initial Closing Date, by Borrower in favor of Agent with respect to the Real Property and related assets of Borrower located in Griffin, Georgia.

 

1.88          “Multiemployer Plan” shall mean a “multi-employer plan” as defined in Section 4001(a)(3) of ERISA which is or was at any time during the current year or the immediately preceding six (6) years contributed to by Borrower or any ERISA Affiliate.

 

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1.89          “Net Amount of Eligible Accounts” shall mean, the gross amount of the Eligible Accounts of Borrower less (a) sales, excise or similar taxes included in the amount thereof and (b) returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed with respect thereto.

 

1.90          “Net Orderly Liquidation Value” shall mean with regard to any Inventory, the net proceeds that could be expected from an orderly liquidation sale of such Inventory, after all expenses, professionally managed, with the seller obligated to sell over a defined period not to exceed one hundred twenty (120) days from the commencement of such sale, assuming that (a) the Borrower’s facilities are in limited operation, utilizing select current employees of the Borrower, for the purposes of liquidating the Inventory, (b) the Inventory would be disposed of on a piecemeal basis or through appropriate groupings, under a scenario whereby the purchasers are buying “as is, where is” for cash or cash equivalent, (c) the terms are sold on a Free on Board (“FOB”) warehouse basis, and (d) taking into consideration current economic trends, condition, location and marketability.

 

1.91          “Net Proceeds” shall mean the aggregate cash proceeds payable to Borrower or any of its Subsidiaries in respect of any sale or other disposition of any assets or properties, net of the direct costs relating to such sale or other disposition (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), and amounts applied to the repayment of indebtedness secured by lien on the asset or assets that are the subject of such sale or other disposition required to be repaid in connection with such transaction. Net Proceeds shall exclude any non-cash proceeds received from any sale or other disposition, but shall include such proceeds when and as converted by Borrower or Subsidiary of Borrower to cash or other immediately available funds.

 

1.92          “New Equipment Availability” shall mean, from time to time after the Initial Closing Date, subject to the terms and conditions set forth herein, the amount equal to seventy-five  (75%) percent of the Hard Costs of Eligible New Equipment purchased by Borrower after the Initial Closing Date or at Agent’s option, the amount equal to eighty-five (85%) percent of the orderly liquidation value of Eligible New Equipment purchased by Borrower after the Initial Closing Date (net of operating expenses, liquidation expenses and commissions), with such orderly liquidation value calculated based on an appraisal as provided below, provided , that ,

 

(a)            as of the Initial Closing Date, the New Equipment Availability was zero;

 

(b)            the initial New Equipment Availability and each increase thereto shall arise in increments of not less than $1,000,000 (each such increment, including the initial New Equipment Availability, being referred to herein as a “tranche”) pursuant to a separate written request therefor received by Agent from Borrower as provided below, provided , that , in no event shall the aggregate amount of all tranches of New Equipment Availability in any twelve (12) consecutive month period commencing on the Initial Closing Date exceed $15,000,000 and in no event shall the aggregate amount of all tranches of New Equipment Availability exceed $25,000,000 for the term of this Agreement;

 

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(c)            each tranche of New Equipment Availability (including the initial tranche), shall be subject to the satisfaction of each of the following conditions precedent (in addition to the conditions precedent otherwise provided for herein) as determined in good faith by Agent:

 

(i)             Agent shall have received a written request from Borrower for the applicable tranche of New Equipment Availability not less than fifteen (15) Business Days prior to the effectiveness of such tranche of New Equipment Availability and not more than thirty (30) days prior to the effectiveness thereof, and together with such written request for such tranche, Agent shall have received from Borrower the following with respect to the Eligible New Equipment that is to be the basis for such tranche of New Equipment Availability:  (A) the date of the purchase of such Eligible New Equipment and the seller thereof, (B) a list and description of such Eligible New Equipment (by model, make, manufacturer, serial no. and/or such other identifying information as may be appropriate, as determined in good faith by Agent), (C) the Hard Costs and the total purchase price for the Eligible New Equipment that is to be the basis for such tranche of New Equipment Availability (and the terms of the payment of such purchase price), and (D) such other information and documents as Agent may from time to time reasonably require thereto with respect thereto,

 

(ii)            Agent shall have a valid and perfected first security interest in and lien upon the Eligible New Equipment, for itself and the benefit of Lenders, which is to be the basis for such tranche of New Equipment Availability and such Eligible New Equipment shall be free and clear of all other liens, security interests, claims or other encumbrances, and Agent shall have received such evidence thereof, as Agent may from time to time require,

 

(iii)           Agent shall have received copies, or upon Agent’s request, the originals, of all agreements, documents and instruments relating to the purchase by Borrower of the Eligible New Equipment which is to be the basis for such tranche of New Equipment Availability, including, without limitation, any purchase orders, invoices, bills of sale or similar documents, and

 

(iv)           at Agent’s option, Agent shall have received an appraisal of the Eligible New Equipment which is the basis for such tranche of New Equipment Availability pursuant to its rights under clause (d) of this definition below, which appraisal shall be as of a date no more than thirty (30) days prior to the date of the effectiveness of such tranche of New Equipment Availability;

 

(d)            Agent may at any time and from time to time obtain an appraisal with respect to any Eligible New Equipment which has not been previously subject to an appraisal within the same twelve (12) month period (without limiting any other rights of Agent to obtain appraisals of Equipment hereunder) by an independent appraiser acceptable to Agent and in form, scope and methodology reasonably acceptable to Agent addressed to Agent and upon which Agent and Lenders are expressly permitted to rely;

 

(e)            in no event shall the amount equal to sixty (60%) percent of the Hard Costs of the Eligible New Equipment which is the basis for a request by Borrower for a tranche of New Equipment Availability or any increase thereto (or at Agent’s option, eighty (80%)

 

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percent of the orderly liquidation value of such Eligible New Equipment (net of operating expenses, liquidation expenses and commissions) calculated based on an appraisal as provided above), be less than $1,000,000;

 

(f)             the amount of each tranche of New Equipment Availability shall be determined by Agent and Co-Collateral Agents in accordance herewith and shall be reduced effective as of the first day of each month after date of the effectiveness thereof by an amount equal to: (i) the amount of such tranche of New Equipment Availability divided by (ii) seventy two (72);

 

(g)            at Agent’s option, at any time and from time to time, the New Equipment Availability may be reduced to the amount equal to eighty (80%) percent of the orderly liquidation value of all Eligible New Equipment (net of operating expenses, liquidation expenses and commissions) calculated based on an appraisal as provided above, if such amount is less than the New Equipment Availability as otherwise then in effect.

 

1.93          “Obligations” shall mean (a) any and all Loans, Letter of Credit Accommodations and all other obligations, liabilities and indebtedness of every kind, nature and description owing by Borrower to Agent or any Lender and/or any of their Affiliates, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under this Agreement or any of the other Financing Agreements whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any case with respect to Borrower under the United States Bankruptcy Code or any similar statute (including the payment of interest and other amounts which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated or secured or unsecured and (b) for purposes only of Section 5.1 hereof, with the consent of Agent, any and all obligations, liabilities and indebtedness of any kind, nature and description owing by Borrower to any Lender, any Affiliate of any Lender (including Wachovia) or any other Person, in each case acceptable to Agent, arising under or in connection with interest rate swap agreements between Borrower and such Lender, Affiliate or other Person, provided , that , (i) in no event shall the amount of such obligations, liabilities and indebtedness secured by the Collateral pursuant hereto or any of the other Financing Agreements in the aggregate outstanding at any time exceed the amount of the Reserve established with respect thereto as in effect at such time, and (ii) Agent shall have entered into an agreement, in form and substance satisfactory to Agent, with such Lender, Affiliate or other Person that is a counterparty to such interest rate swap agreement, as acknowledged and agreed to by Borrower, providing for the delivery to Agent by such counterparty of information with respect to the amount of such indebtedness, obligations and liabilities and providing for the other rights of Agent and such Lender, Affiliate or other Person, as the case may be, in connection with such arrangements. Without limiting the foregoing, the term “Obligations” shall include, without limitation, all obligations, liabilities and indebtedness of every kind, nature and description owing by Borrower to Agent or any Affiliate of Agent arising under or in connection with cash management or related services provided by Agent or such Affiliate to Borrower or any swap agreement or similar agreements for the purposes of protecting against or managing exposure to fluctuations in interest or exchange rates or currency

 

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valuations. Agent may establish Reserves in respect of such Obligations to the extent that Agent or such Affiliate, as the case may be, agree with Borrower that such Obligations will be paid other than after all of the other Obligations under Section 6.4(a) hereof. For purposes of Section 5.1 hereof, the term Lenders shall be deemed to include any Affiliates of Agent providing such services or entering into such agreements.

 

1.94          “Obligor” shall mean any guarantor, endorser, acceptor, surety or other person liable on or with respect to the Obligations or who is the owner of any property which is security for the Obligations, other than Borrower.

 

1.95          “Other Taxes” shall mean any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any of the other Financing Agreements.

 

1.96          “Participant” shall mean any financial institution that acquires and holds a participation in the interest of any Lender in any of the Loans and Letter of Credit Accommodations in conformity with the provisions of Section 13.7 of this Agreement governing participations.

 

1.97          “Permitted Atlantis Plastics Acquisition” shall mean the acquisition by Borrower of the Atlantis Plastic Assets; provided , that , each of the following conditions shall have been satisfied satisfactory to Agent:

 

(a)            the transaction is completed on or before December 1, 2008;

 

(b)            Agent shall have received evidence, in form and substance satisfactory to Agent, that Borrower has obtained all necessary consents and approvals to the execution, delivery and performance to the purchase of the Atlantis Plastic Assets in accordance with the Sale Order;

 

(c)            all conditions precedent to the obligations of Borrower under the purchase agreement evidencing the acquisition of the Atlantis Plastic Assets (“Atlantis Purchase Agreement”) and the Sale Order have been fulfilled (and not merely waived, except if approved in writing by Agent), at or before the Atlantis Plastic Closing;

 

(d)            at or before the Atlantis Plastic Closing, all actions and proceedings required by the Atlantis Purchase Agreement, applicable law or regulation and the transactions contemplated thereby shall have been duly and validly taken in accordance with the terms thereof, and all required consents thereto under any agreement, document or instrument to which any of Borrower or Atlantis Plastic is a party or by which any of its or their properties are bound, and all applicable consents or approvals of Governmental Authorities, shall have been obtained, except to the extent the failure to obtain any such consent or approval could not reasonably be expected to have a Material Adverse Effect;

 

(e)            as of the Atlantis Plastic Closing, (i) no court of competent jurisdiction shall have issued any injunction, restraining order or other order then subsisting which prohibits consummation of the transactions described in the Atlantis Purchase Agreement, and no

 

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governmental or other action or proceeding shall have been threatened or commenced seeking any injunction, restraining order or other order which seeks to void or otherwise modify the transactions described in or contemplated by the Atlantis Purchase Agreement and (ii) the Sale Order shall have been entered and shall remain valid and in full force and effect;

 

(f)             after giving effect to each of the consents and amendments set forth herein, no Event of Default shall exist or have occurred;

 

(g)            Agent shall have received true, correct and complete copies of such opinion letters of counsel to Atlantis Plastic with respect to the Atlantis Purchase Agreement and the transactions contemplated thereby as Borrower may have obtained in connection therewith;

 

(h)            Agent shall have received evidence that the Atlantis Purchase Agreement has been duly authorized, executed and delivered by and to the appropriate parties thereto and that the transactions contemplated under the terms and conditions of the Atlantis Purchase Agreement have been consummated in accordance with the terms thereof;

 

(i)             Agent shall have received a true, complete and correct copy of the Atlantis Purchase Agreement;

 

(j)             Borrower has acquired all of Atlantis Plastic’s rights, title and interest in and to the Atlantis Plastic Assets, in accordance with the Atlantis Purchase Agreement;

 

(k)            to the extent that Borrower wishes to have the Atlantis Plastic Assets included in the Borrowing Base, if Agent so elects, Agent shall have completed a field examination with respect to the business and assets of Atlantis Plastic in accordance with Agent’s customary procedures and practices and as otherwise required by the nature and circumstances of the business of the Acquired Business, the scope and results of which shall be reasonably satisfactory to Agent and any accounts and inventory of Atlantis Plastic shall only be Eligible Accounts and Eligible Inventory, respectively, to the extent Borrower desires to include Atlantis Plastic Assets in the Borrowing Base, Agent has completed such field examination with respect thereto and the criteria for Eligible Accounts and Eligible Inventory set forth herein are satisfied with respect thereto in accordance with this Agreement (or such other or additional criteria as Agent may, at its option, establish with respect thereto in accordance with this Agreement and subject to such Reserves as Agent may establish in connection with the acquisition of Atlantis Plastic’s assets);

 

(l)             Borrower agrees that Agent may, at its option, require Borrower to deliver to Agent any written appraisal, upon which Agent is expressly permitted to rely, with respect to the value of the Atlantis Plastic Assets. The preparation and delivery of that appraisal shall be in addition to, and not in limitation of any requirement to prepare and deliver any other appraisal that may or is otherwise required by this Agreement and the other Financing Agreements;

 

(m)           Borrower shall have provided Agent with an amended and restated Information Certificate in form and substance reasonably acceptable to Agent;

 

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(n)            Excess Availability shall have been not less than $30,000,000 immediately prior to and after giving effect thereto, including all payments required to be made by Borrower in connection with such acquisition;

 

(o)            all consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or reasonably desirable in order to permit, protect and perfect its security interests in and liens upon the Collateral of Atlantis Plastic or to effectuate the provisions of this Agreement and the other Financing Agreements; and

 

(p)            Agent shall have received evidence in form and substance satisfactory to Agent, that Agent, for itself and the benefit of Lenders, has a valid and perfected first priority security interest in and lien upon all Atlantis Plastic Assets (other than the Atlantis Real Property, motor vehicles and assets of the type described in Section 5.2 hereof), subject to the security interests and liens permitted by Section 9.8 hereof.

 

1.98          “Permitted Holders” shall mean the persons listed on Schedule 1.98 hereto and their respective successors and assigns.

 

1.99          “Permitted Transactions” shall mean any one or more of the following after the date hereof: (a) the payment by Borrower of any dividend in respect of its Capital Stock consisting of common stock, or any repurchase or redemption by Borrower of such common stock; (b) the redemption, repurchase or repayment of the principal of any Indebtedness of Borrower evidenced by or arising under the Senior Notes; (c) the redemption, repurchase or repayment of the principal of any Indebtedness of Borrower evidenced by or arising under the Wrightsville Notes or the Post-Wrightsville Loan Documents; (d) any payments by Borrower in respect of loans or investments provided for in Section 9.10(h) hereof; (e) any payment by any Subsidiary of Borrower in respect of the repurchase or redemption of the Capital Stock of Borrower; and (f) any Finance Co. Investment (without duplication of any amounts paid to redeem, retire, defease, purchase or otherwise acquire any shares of any class of Capital Stock of Borrower permitted under Section 9.11(c) using the proceeds of such Finance Co. Investment that constitutes a Permitted Transaction).

 

1.100        “Person” or “person” shall mean any individual, sole proprietorship, partnership, corporation (including any corporation which elects subchapter S status under the Code), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality or political subdivision thereof.

 

1.101        “Plan” shall mean an employee benefit plan (as defined in Section 3(3) of ERISA) which Borrower sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a Multiemployer Plan has made contributions at any time during the immediately preceding six (6) plan years.

 

1.102        “Prime Rate” shall mean, on any date, the greater of (a) the rate from time to time publicly announced by Wachovia, or its successors, as its prime rate, whether or not such announced rate is the best rate available at such bank or (b) the Federal Funds Rate in effect on such day plus one-half (1/2%) percent.

 

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1.103        “Prime Rate Loans” shall mean any Loans or portion thereof on which interest is payable based on the Prime Rate in accordance with the terms thereof.

 

1.104        “Pro Rata Share” shall mean as to any Lender, the fraction (expressed as a percentage) the numerator of which is such Lender’s Commitment and the denominator of which is the aggregate amount of all of the Commitments of Lenders, as adjusted from time to time in accordance with the provisions of Section 13.7 hereof; provided , that , if the Commitments have been terminated, the numerator shall be the unpaid amount of such Lender’s Loans and its interest in the Letter of Credit Accommodations and the denominator shall be the aggregate amount of all unpaid Loans and Letter of Credit Accommodations.

 

1.105        “Provision for Taxes” shall mean an amount equal to all taxes imposed on or measured by net income, whether Federal, State, Provincial, county or local, and whether foreign or domestic, that are paid or payable by any Person in respect of any period in accordance with GAAP.

 

1.106        “Quarterly Average Excess Availability” shall mean, at any time, the daily average of the Excess Availability for the immediately preceding fiscal quarter as calculated by Agent in good faith.

 

1.107        “Real Property” shall mean all now owned and hereafter acquired real property of Borrower, including leasehold interests, together with all buildings, structures, and other improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located, including the real property and related assets more particularly described in the Mortgages.

 

1.108        “Real Property Availability” shall mean $7,283,500 as reduced effective as of the first day of each month commencing November 1, 2008 by an amount equal to $154,500.

 

1.109        “Receivables” shall mean all of the following now owned or hereafter arising or acquired property of Borrower: (a) all Accounts; (b) all interest, fees, late charges, penalties, collection fees and other amounts due or to become due or otherwise payable in connection with any Account; (c) all payment intangibles; (d)  letters of credit, indemnities, guarantees, security or other deposits and proceeds thereof issued and payable to Borrower or otherwise in favor of or delivered to Borrower in connection with any Account; or (e) all other accounts, contract rights, chattel paper, instruments, notes, general intangibles and other forms of obligations owing to Borrower, whether from the sale and lease of goods or other property, licensing of any property (including Intellectual Property or other general intangibles), rendition of services or from loans or advances by Borrower or to or for the benefit of any third person (including loans or advances to any Affiliates or Subsidiaries of Borrower) or otherwise associated with any Accounts, Inventory or general intangibles of Borrower (including, without limitation, choses in action, causes of action, tax refunds, tax refund claims, any funds which may become payable to Borrower in connection with the termination of any Plan or other employee benefit plan and any other amounts payable to Borrower from any Plan or other employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, casualty or any similar types of insurance and any proceeds thereof and proceeds of insurance covering the lives of employees on which Borrower is a beneficiary).

 

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1.110        “Records” shall mean all of Borrower’s present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of Borrower with respect to the foregoing maintained with or by any other person).

 

1.111        “Reference Bank” shall mean Wachovia Bank, National Association, or such other bank as Agent may from time to time designate to be used for similar purposes as provided for herein generally for borrowers from Wachovia or only for new borrowers from Wachovia.

 

1.112        “Refinancing Indebtedness” shall have meaning set forth in Section 9.9 hereof.

 

1.113        “Register” shall have the meaning set forth in Section 13.7 hereof.

 

1.114        “Required Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares aggregate sixty-six and two-thirds (66 2/3%) percent or more of the aggregate of the Commitments of all Lenders (other than Commitments held by a Defaulting Lender), or if the Commitments shall have been terminated, Lenders to whom at least sixty-six and two-thirds (66 2/3%) percent of the then outstanding Obligations are owing.

 

1.115        “Reserves” shall mean as of any date of determination, such amounts as Agent may from time to time establish in good faith and revise in good faith reducing the amount of Loans and Letter of Credit Accommodations which would otherwise be available to Borrower under the lending formula(s) provided for herein:  (a) to reflect events, conditions, contingencies or risks which, as determined by Agent in good faith, adversely affect, or would have a reasonable likelihood of adversely affecting, either (1) the Collateral or any other property which is security for the Obligations or its value or (2) the assets or business of Borrower or any Obligor or (3) the security interests and other rights of Agent or any Lender in the Collateral (including the enforceability, perfection and priority thereof) or (b) to reflect Agent’s good faith belief that any collateral report or financial information furnished by or on behalf of Borrower or any Obligor to Agent is or may have been incomplete, inaccurate or misleading in any material respect or (c) to reflect outstanding Letter of Credit Accommodations as provided in Section 2.2 hereof or (d)  in respect of the obligations, liabilities or indebtedness of Borrower of any kind, nature or description owing by Borrower to any Lender, any Affiliate of any Lender (including Wachovia) or any other Person arising under or in connection with any interest rate swap agreement of Borrower with such Lender, Affiliate or other Person to the extent that any of such obligations, liabilities or indebtedness constitute Obligations as such term is defined herein or otherwise receive the benefit of the security interest of Agent in any Collateral or (e) in respect of any state of facts which Agent determines in good faith constitutes a Default or an Event of Default. Without limiting the generality of the foregoing, Reserves may be established to reflect that dilution with respect to the Accounts of Borrower (based on the ratio of the aggregate amount of non-cash reductions in Accounts of Borrower for any period to the aggregate dollar amount of the sales of Borrower for such period) as calculated by Agent for any period is or is reasonably anticipated to be greater than five (5%) percent or to reflect that the orderly liquidation value of the Equipment as set forth in the most recent acceptable appraisal received

 

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by Agent with respect thereto has declined so that the Equipment Availability is more than eighty-five (85%) percent of such appraised value. To the extent Agent may revise the lending formulas used to determine the Borrowing Base or establish new criteria or revise existing criteria for Eligible Accounts or Eligible Inventory so as to address any circumstances, condition, event or contingency in a manner satisfactory to Agent, Agent shall not establish a Reserve for the same purpose. The amount of any Reserve established by Agent shall have a reasonable relationship to the event, condition or other matter which is the basis for such reserve as determined by Agent in good faith.

 

1.116        “Sale Order” shall mean the Order of the Bankruptcy Court and any supplemental orders issued in connection therewith approving the purchase by Borrower of the Atlantis Plastic Assets pursuant to and in accordance with the terms of the Atlantis Purchase Agreement.

 

1.117        “Senior Note Description of Notes” shall mean the description of the Senior Notes attached as Exhibit D hereto.

 

1.118        “Senior Notes” shall mean, collectively, the Senior Notes in the original aggregate principal amount of $175,000,000, issued by Borrower pursuant to the Senior Note Indenture, the terms of which are described in the Senior Note Description of Notes, as the same may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.119        “Senior Note Indenture” shall mean the Indenture pursuant to which the Senior Notes are issues, as the same exists and may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.120        “Solvent” shall mean, at any time with respect to any Person, that at such time such Person (a) is able to pay its debts as they mature and has (and has a reasonable basis to believe it will continue to have) sufficient capital (and not unreasonably small capital) to carry on its business consistent with its practices as of the date hereof, and (b) the assets and properties of such Person at a fair valuation (and including as assets for this purpose at a fair valuation all rights of subrogation, contribution or indemnification arising pursuant to any guarantees given by such Person) are greater than the Indebtedness of such Person, and including subordinated and contingent liabilities computed at the amount which, such person has a reasonable basis to believe, represents an amount which can reasonably be expected to become an actual or matured liability (and including as to contingent liabilities arising pursuant to any guarantee the face amount of such liability as reduced to reflect the probability of it becoming a matured liability).

 

1.121        “Special Agent Advances” shall have the meaning set forth in Section 12.11 hereof.

 

1.122        “Subsidiary” or “subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, limited liability partnership or other limited or general partnership, trust, association or other business entity of which an aggregate of at least a majority of the outstanding Capital Stock or other interests entitled to vote in the election of the board of directors of such corporation (irrespective of whether, at the time, Capital Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency), managers, trustees or other controlling persons, or an equivalent

 

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controlling interest therein, of such Person is, at the time, directly or indirectly, owned by such Person and/or one or more subsidiaries of such Person.

 

1.123        “Supermajority Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares aggregate eighty (80%) percent or more of the aggregate Commitments of all Lenders (other than Commitments held by a Defaulting Lender), or if the Commitments shall have been terminated, Lenders to whom at least eighty (80%) percent of the then outstanding Obligations are owing.

 

1.124        “Taxes” shall mean any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of any Lender, such taxes (including income taxes, franchise taxes or capital taxes) as are imposed on or measured by such Lender’s net income or capital by any jurisdiction (or any political subdivision thereof).

 

1.125        “UCC” shall mean the Uniform Commercial Code as in effect in the State of New York, and any successor statute, as in effect from time to time (except that terms used herein which are defined in the Uniform Commercial Code as in effect in the State of New York on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute).

 

1.126        “United States” shall mean the United States of America and its territories and possessions and including the Commonwealth of Puerto Rico.

 

1.127        “US Dollar Equivalent” shall mean at any time (a) as to any amount denominated in US Dollars, the amount thereof at such time, and (b) as to any amount denominated in any other currency, the equivalent amount in US Dollars calculated by Agent at such time using the Exchange Rate in effect on the Business Day of determination. For purposes hereof, the term “Exchange Rate” shall mean shall mean the prevailing spot rate of exchange of such bank as Agent may reasonably select for the purpose of conversion of one currency to another, at or around 11:00 a.m. New York City time, on the date on which any such conversion of currency is to be made under this Agreement.

 

1.128        “US Dollars”, “US$” and “$” shall mean the lawful currency of the United States.

 

1.129        “Value” shall mean, as determined by Agent, with respect to Inventory, the lower of (i) cost computed on a first-in first-out basis in accordance with GAAP or (ii) market value, provided , that , for purposes of the calculation of the Borrowing Base, (1) the Value of the Inventory shall not include:  (a) the portion of the value of Inventory equal to the profit earned by any Affiliate on the sale thereof to Borrower or (b)  write-ups or write-downs in value with respect to currency exchange rates and (2) notwithstanding anything to the contrary contained herein, the cost of the Inventory shall be computed in the same manner and consistent with the most recent appraisal of the Inventory received and accepted by Agent prior to the date hereof, if any.

 

1.130        “Voting Stock” shall mean with respect to any Person, (a) one (1) or more classes of Capital Stock of such Person having general voting powers to elect at least a majority of the board of directors, managers or trustees of such Person, irrespective of whether at the time

 

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Capital Stock of any other class or classes have or might have voting power by reason of the happening of any contingency, and (b) any Capital Stock of such Person convertible or exchangeable without restriction at the option of the holder thereof into Capital Stock of such Person described in clause (a) of this definition.

 

1.131        “Wachovia” shall mean Wachovia Bank, National Association, a national banking association, in its individual capacity, and its successors and assigns.

 

1.132        “Weighted Average Life to Maturity” shall mean, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding principal amount of such Indebtedness into (b) the total of the product obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment.

 

1.133        “Wrightsville Authority” shall mean, collectively, the following (together with their respective successors and assigns):(a) the Pennsylvania Department of Commerce, by and through its successor, the Pennsylvania Department of Community and Economic Development, and (b) the Pennsylvania Industrial Development Authority and (c) the Pennsylvania Department of Community and Economic Development.

 

1.134        “Wrightsville Deed” shall mean (a)  the Deed, dated June 13, 1996, and (b) the Deed, dated September 25, 2006, in each case between Borrower and the Greater Wilkes-Barre Industrial Fund, Inc. pursuant to which the land located at 20 Elmwood Avenue, Crestwood Industrial Park, Mountaintop, Pennsylvania was conveyed by Borrower to the Greater Wilkes-Barre Industrial Fund, Inc.

 

1.135        “Wrightsville Installment Sale Agreement” shall mean the Installment Sale Agreement, dated June 20, 1996, by and between the Greater Wilkes-Barre Industrial Fund, Inc. and Borrower pursuant to which the Greater Wilkes-Barre Industrial Fund, Inc. sold the land located at 20 Elmwood Avenue, Crestwood Industrial Park, Mountaintop, Pennsylvania with all improvements now and then located thereon to Borrower, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.136        “Wrightsville Loan Agreements” shall mean, collectively, the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced):

 

(a)            (i) the Wrightsville Deed, (ii) the Loan Agreement, dated June 20, 1996, by and between the Greater Wilkes-Barre Industrial Fund, Inc. and the Commonwealth of Pennsylvania, acting by and through the Pennsylvania Department of Commerce, by and through its successor, the Pennsylvania Department of Community and Economic Development, (iii) the Open End Mortgage, dated June 20, 1996, between the Greater Wilkes-Barre Industrial Fund, Inc. and the Commonwealth of Pennsylvania, acting by and through the Pennsylvania Department of Commerce, by and through its successor, the Pennsylvania Department of Community and Economic Development, (iv)the Wrightsville Installment Sale Agreement, and

 

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(v) the Assignment of the Wrightsville Installment Sale Agreement, dated June 20, 1996, by and among the Greater Wilkes-Barre Industrial Fund, Inc., Borrower and the Pennsylvania Department of Commerce, by and through its successor, the Pennsylvania Department of Community and Economic Development;

 

(b)            (i) the Loan Agreement, effective as of July 2, 1996, by and between the Greater Wilkes-Barre Industrial Fund, Inc. and the Pennsylvania Industrial Development Authority, (ii) the Open End Mortgage, effective as of July 2, 1996, between the Greater Wilkes-Barre Industrial Fund, Inc. and the Pennsylvania Industrial Development Authority, and (iii) the Assignment of the Wrightsville Installment Sale Agreement, effective as of July 2, 1996, by and among the Greater Wilkes-Barre Industrial Fund, Inc. and the Pennsylvania Industrial Development Authority;

 

(c)            (i) the Loan Agreement, dated June 20, 1996, by and between Borrower and the Commonwealth of Pennsylvania acting by and through the Department of Commerce, and (ii) the Security Agreement, dated June 20, 1996, by and between the Pennsylvania Department of Commerce and Borrower;

 

(d)            (i) the Loan Agreement, dated October 21, 2008, by and between Borrower, the Greater Wilkes-Barre Industrial Fund, Inc. and the Pennsylvania Industrial Development Authority, (ii) the Open-Ended Mortgage, effective as of October 21, 2008, between the Greater Wilkes-Barre Industrial Fund, Inc. and the Pennsylvania Industrial Development Authority, and (iii) the Amended and Restated Mortgage Subordination Agreement effective as of October 21, 2008, by and among the Greater Wilkes-Barre Industrial Fund, Inc., Borrower, the Pennsylvania Industrial Development Authority and the Commonwealth of Pennsylvania, acting by and through its Department of Community and Economic Development;

 

(e)            (i) the Loan Agreement, dated October 21, 2008, by and between Borrower and the Commonwealth of Pennsylvania, acting by and through its Department of Community and Economic Development, and (ii) the Security Agreement, dated October 21, 2008, by and between Borrower and the Commonwealth of Pennsylvania, acting by and through its Department of Community and Economic Development; and

 

(f)             the Wrightsville Notes.

 

1.137        “Wrightsville Fixed Assets” shall mean the Real Property owned by Borrower as of the date hereof located at 20 Elmwood Avenue, Crestwood Industrial Park, Mountaintop, Pennsylvania and the Equipment owned by Borrower located at such Real Property as of the date hereof, in each case as to such Real Property and Equipment to the extent subject to the mortgage and security interest of the Wrightsville Authority pursuant to the Wrightsville Loan Agreements as in effect on the date hereof.

 

1.138        “Wrightsville Notes” shall mean, collectively, the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): (a) the Note, dated June 20, 1996, of the Greater Wilkes-Barre Industrial Fund, Inc. in the amount of $3,300,000 payable to the Commonwealth of Pennsylvania and assumed by Borrower pursuant to the Consent, Subordination and Assumption Agreement, dated June 20,

 

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1996, by Borrower and the Greater Wilkes-Barre Industrial Fund, Inc. in favor of the Commonwealth of Pennsylvania; (b) the Note, dated July 2, 1996, of the Greater Wilkes-Barre Industrial Fund, Inc. in the amount of $2,000,000 payable to the order of the Pennsylvania Industrial Development Authority and assumed by Borrower pursuant to the Consent, Subordination and Assumption Agreement, effective as of July 2, 1996, by Borrower and the Greater Wilkes-Barre Industrial Fund, Inc. in favor of the Pennsylvania Industrial Development Authority; (c) the Note, dated June 20, 1996, of Borrower in the amount of $400,000 payable to the order of the Commonwealth of Pennsylvania, acting by and through the Pennsylvania Department of Commerce; (d) the Note, dated October 21, 2008, made by the Greater Wilkes-Barre Industrial Fund, Inc. and Borrower, in the amount of $1,405,831 or 40% of “Cost” (as defined therein) payable to the order of the Pennsylvania Industrial Development Authority; and (e) the Note, dated October 21, 2008, of Borrower in the amount of $1,000,000 payable to the order of the Commonwealth of Pennsylvania, acting by and through its Department of Community and Economic Development.

 

SECTION 2. CREDIT FACILITIES

 

2.1            Loans .

 

(a)            Subject to and upon the terms and conditions contained herein, each Lender severally (and not jointly) agrees to fund its Pro Rata Share of Loans to Borrower from time to time in amounts requested by Borrower up to the amount outstanding at any time equal to the lesser of: (i) the Borrowing Base at such time or (ii) the Maximum Credit.

 

(b)            Agent may, in its good faith discretion, from time to time, upon not less than ten (10) days prior notice to Borrower, reduce the lending formula(s) with respect to Eligible Inventory to the extent that Agent determines in good faith that: (i) the number of days of the turnover of the Inventory for any period has adversely changed in any material respect or (ii) the value of the Eligible Inventory, or any category thereof, has decreased in any material respect, including any decrease attributable to a change in the nature, quality or mix of the Inventory or a decline in resin prices. The amount of any decrease in the lending formulas shall have a reasonable relationship to the event, condition or circumstance which is the basis for such decrease as determined by Agent in good faith. In determining whether to reduce the lending formula(s), Agent may consider events, conditions, contingencies or risks which are also considered in determining Eligible Accounts, Eligible Inventory or in establishing Reserves.

 

(c)            Except in Agent’s discretion, with the consent of all Lenders, or as otherwise provided herein, (i)  the aggregate principal amount of the Loans and the Letter of Credit Accommodations outstanding at any time shall not exceed the Maximum Credit, and (ii) the aggregate principal amount of the Loans and Letter of Credit Accommodations outstanding at any time to Borrower based on the Eligible Inventory shall not exceed the Inventory Loan Limit.

 

(d)            In the event that the aggregate principal amount of the Loans and Letter of Credit Accommodations outstanding to Borrower exceed the Borrowing Base, or the aggregate principal amount of Loans and Letter of Credit Accommodations outstanding based on the Eligible Inventory exceed the Inventory Loan Limit, or the aggregate amount of the outstanding

 

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Letter of Credit Accommodations exceed the sublimit for Letter of Credit Accommodations set forth in Section 2.2(e), or the aggregate amount of the Loans and Letter of Credit Accommodations outstanding exceed the Maximum Credit, such event shall not limit, waive or otherwise affect any rights of Agent or Lenders in such circumstances or on any future occasions and Borrower shall, within two (2) Business Days after written demand by Agent, which may be made at any time or from time to time, immediately repay to Agent the entire amount of any such excess(es) for which payment is demanded.

 

2.2            Letter of Credit Accommodations .

 

(a)            Subject to and upon the terms and conditions contained herein, at the request of Borrower, Agent agrees, for the ratable risk of each Lender according to its Pro Rata Share, to provide or arrange for Letter of Credit Accommodations for the account of Borrower containing terms and conditions acceptable to Agent and the issuer thereof. Any payments made by or on behalf of Agent or any Lender to any issuer thereof and/or related parties in connection with the Letter of Credit Accommodations provided to or for the benefit of Borrower shall constitute additional Loans to Borrower pursuant to this Section 2.

 

(b)            In addition to any charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations, Borrower shall pay to Agent, for the benefit of Lenders, (i) in the case of standby letters of credit, Borrower shall pay to Agent, for the account of Lenders, a fee at a rate equal to two and one quarter (2 ¼ %) percent per annum and in the case of documentary letters of credit, Borrower shall pay to Agent, for the account of Lenders, a fee at a rate equal to two (2%) percent per annum, on the daily outstanding balance of the Letter of Credit Accommodations, other than banker’s acceptances, for the immediately preceding month (or part thereof), (ii) an acceptance fee at a rate equal to two (2%) percent per annum on the daily outstanding balance of Letter of Credit Accommodations consisting of banker’s acceptances for the immediately preceding month (or part thereof), in each case, payable in arrears as of the first day of each succeeding month except that Agent may, and upon the written direction of Required Lenders shall, require Borrower to pay to Agent for the ratable benefit of Lenders such letter of credit fee under clause (i), at a rate of three and one-half (3 ½ %) percent per annum, and such acceptance fee under clause (ii) at a rate equal to five (5%) percent per annum in each case on the applicable daily outstanding balance for: (1) the period from and after the date of termination hereof until Agent and Lenders have received full and final payment of all Obligations (notwithstanding entry of a judgment against Borrower) and (2) the period from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing as determined by Agent in good faith. Such letter of credit fee and acceptance fees shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed and the obligation of Borrower to pay such fee shall survive the termination of this Agreement.

 

(c)            Borrower shall give Agent two (2) Business Days’ prior written of Borrower’s request for the issuance of a Letter of Credit Accommodation. Such notice shall be irrevocable and shall specify the original face amount of the Letter of Credit Accommodation requested, the effective date (which date shall be a Business Day) of issuance of such requested Letter of Credit Accommodation, whether such Letter of Credit Accommodations may be drawn in a single or in partial draws, the date on which such requested Letter of Credit Accommodation

 

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is to expire (which date shall be a Business Day), the purpose for which such Letter of Credit Accommodation is to be issued, and the beneficiary of the requested Letter of Credit Accommodation. Borrower shall attach to such notice the proposed form of the Letter of Credit Accommodation.

 

(d)            In addition to being subject to the satisfaction of the applicable conditions precedent contained in Section 4 hereof and the other terms and conditions contained herein, no Letter of Credit Accommodations shall be available unless each of the following conditions precedent have been satisfied in a manner satisfactory to Agent in good faith: (i) Borrower shall have delivered to the proposed issuer of such Letter of Credit Accommodation at such times and in such manner as such proposed issuer may require, an application, in form and substance satisfactory to such proposed issuer and Agent, for the issuance of the Letter of Credit Accommodation and such other documents as may be required pursuant to the terms thereof, and the form and terms of the proposed Letter of Credit Accommodation shall be satisfactory to Agent and such proposed issuer, (ii) as of the date of issuance, no order of any court, arbitrator or other Governmental Authority shall purport by its terms to enjoin or restrain money center banks generally from issuing letters of credit of the type and in the amount of the proposed Letter of Credit Accommodation, and no law, rule or regulation applicable to money center banks generally and no request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over money center banks generally shall prohibit, or request that the proposed issuer of such Letter of Credit Accommodation refrain from, the issuance of letters of credit generally or the issuance of such Letters of Credit Accommodation; and (iii) the Excess Availability, prior to giving effect to any Reserves with respect to such Letter of Credit Accommodations, on the date of the proposed issuance of any Letter of Credit Accommodations, shall be equal to or greater than: (A) if the proposed Letter of Credit Accommodation is for the purpose of purchasing Eligible Inventory and the documents of title with respect thereto are consigned to the issuer, the sum of (1) the percentage equal to one hundred (100%) percent minus the then applicable percentage with respect to Eligible Inventory set forth in the definition of the term Borrowing Base multiplied by the Value of such Eligible Inventory, plus (2) freight, taxes, duty and other amounts which Agent estimates must be paid in connection with such Inventory upon arrival and for delivery to one of Borrower’s locations for Eligible Inventory within the United States and (B) if the proposed Letter of Credit Accommodation is for any other purpose or the documents of title are not consigned to the issuer in connection with a Letter of Credit Accommodation for the purpose of purchasing Inventory, an amount equal to one hundred (100%) percent of the face amount thereof and all other commitments and obligations made or incurred by Agent with respect thereto. Effective on the issuance of each Letter of Credit Accommodation, a Reserve shall be established in the applicable amount set forth in Section 2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).

 

(e)            Except in Agent’s discretion, with the consent of all Lenders, the amount of all outstanding Letter of Credit Accommodations and all other commitments and obligations made or incurred by Agent or any Lender in connection therewith shall not at any time exceed $20,000,000; provided , that , the amount of all outstanding Letter of Credit Accommodations consisting of banker’s acceptances and all other commitments and obligations made or incurred in connection therewith shall not at any time exceed $5,000,000.

 

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(f)             Borrower shall indemnify and hold Agent and Lenders harmless from and against any and all losses, claims, damages, liabilities, costs and expenses which Agent or any Lender may suffer or incur in connection with any Letter of Credit Accommodations and any documents, drafts or acceptances relating thereto, including any losses, claims, damages, liabilities, costs and expenses due to any action taken by any issuer or correspondent with respect to any Letter of Credit Accommodation, except for such losses, claims, damages, liabilities, costs or expenses that are a direct result of the gross negligence or wilful misconduct of Agent or any Lender as determined pursuant to a final non-appealable order of a court of competent jurisdiction. Borrower assumes all risks with respect to the acts or omissions of the drawer under or beneficiary of any Letter of Credit Accommodation and for such purposes the drawer or beneficiary shall be deemed Borrower’s agent. Borrower assumes all risks for, and agrees to pay, all foreign, Federal, State and local taxes, duties and levies relating to any goods subject to any Letter of Credit Accommodations or any documents, drafts or acceptances thereunder. Borrower hereby releases and holds Agent and Lenders harmless from and against any acts, waivers, errors, delays or omissions, whether caused by Borrower, by any issuer or correspondent or otherwise with respect to or relating to any Letter of Credit Accommodation, except for the gross negligence or wilful misconduct of Agent or any Lender as determined pursuant to a final, non-appealable order of a court of competent jurisdiction. The provisions of this Section 2.2(f) shall survive the payment of Obligations and the termination  of this Agreement. In no event shall the foregoing be construed to waive or otherwise affect any rights of Borrower against the issuer or any correspondent as a result of the failure of such issuer or correspondent to pay the beneficiary under a Letter of Credit Accommodation upon a draw by such beneficiary in accordance with the terms of such Letter of Credit Accommodation.

 

(g)            In connection with Inventory purchased pursuant to Letter of Credit Accommodations, Borrower shall, at Agent’s request, instruct all suppliers, carriers, forwarders, customs brokers, warehouses or others receiving or holding cash, checks, Inventory, documents or instruments in which Agent holds a security interest to deliver them to Agent and/or subject to Agent’s order, and if they shall come into Borrower’s possession, to deliver them, upon Agent’s request, to Agent in their original form. Borrower shall also, at Agent’s request, designate Agent as the consignee on all bills of lading and other negotiable and non-negotiable documents.

 

(h)            Borrower hereby irrevocably authorizes and directs any issuer of a Letter of Credit Accommodation to name Borrower as the account party therein and to deliver to Agent all instruments, documents and other writings and property received by issuer pursuant to the Letter of Credit Accommodations and to accept and rely upon Agent’s instructions and agreements with respect to all matters arising in connection with the Letter of Credit Accommodations or the applications therefor. Nothing contained herein shall be deemed or construed to grant Borrower any right or authority to pledge the credit of Agent or any Lender in any manner. Agent and Lenders shall have no liability of any kind with respect to any Letter of Credit Accommodation provided by an issuer other than Agent or any Lender unless Agent has duly executed and delivered to such issuer the application or a guarantee or indemnification in writing with respect to such Letter of Credit Accommodation. Borrower shall be bound by any reasonable interpretation made in good faith by Agent, or any other issuer or correspondent under or in connection with any Letter of Credit Accommodation or any documents, drafts or acceptances thereunder, notwithstanding that such interpretation may be inconsistent with any instructions of Borrower. Agent shall have the sole and exclusive right and authority to, and

 

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Borrower shall not: (i) at any time an Event of Default exists or has occurred and is continuing, (A) approve or resolve any questions of non-compliance of documents, (B) give any instructions as to acceptance or rejection of any documents or goods or (C) execute any and all applications for steamship or airway guaranties, indemnities or delivery orders, and (ii) at all times ( provided , that , no Event of Default exists or has occurred and is continuing, Agent shall not exercise any of the following unless agreed to by or on behalf of Borrower), (A) grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents, and (B) agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letter of Credit Accommodations, or documents, drafts or acceptances thereunder or any letters of credit included in the Collateral. Agent may take such actions either in its own name or in Borrower’s name.

 

(i)             Any rights, remedies, duties or obligations granted or undertaken by Borrower to any issuer or correspondent in any application for any Letter of Credit Accommodation, or any other agreement in favor of any issuer or correspondent relating to any Letter of Credit Accommodation, shall be deemed to have been granted or undertaken by Borrower to Agent for the ratable benefit of Lenders. Any duties or obligations undertaken by Agent to any issuer or correspondent in any application for any Letter of Credit Accommodation, or any other agreement by Agent in favor of any issuer or correspondent to the extent relating to any Letter of Credit Accommodation, shall be deemed to have been undertaken by Borrower to Agent for the ratable benefit of Lenders and to apply in all respects to Borrower.

 

(j)             Immediately upon the issuance or amendment of any Letter of Credit Accommodation, each Lender shall be deemed to have irrevocably and unconditionally purchased and received, without recourse or warranty, an undivided interest and participation to the extent of such Lender’s Pro Rata Share of the liability with respect to such Letter of Credit Accommodation (including, without limitation, all Obligations with respect thereto).

 

(k)            Borrower is irrevocably and unconditionally obligated, without presentment, demand or protest, to pay to Agent any amounts paid by an issuer of a Letter of Credit Accommodation with respect to such Letter of Credit Accommodation (whether through the borrowing of Loans in accordance with Section 2.2(a) or otherwise). In the event that Borrower fails to pay Agent on the date of any payment under a Letter of Credit Accommodation in an amount equal to the amount of such payment, Agent (to the extent it has actual notice thereof) shall promptly notify each Lender of the unreimbursed amount of such payment and each Lender agrees, upon one (1) Business Day’s notice, to fund to Agent the purchase of its participation in such Letter of Credit Accommodation in an amount equal to its Pro Rata Share of the unpaid amount. The obligation of each Lender to deliver to Agent an amount equal to its respective participation pursuant to the foregoing sentence is absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuance of any Event of Default, the failure to satisfy any other condition set forth in Section 4 or any other event or circumstance. If such amount is not made available by a Lender when due, Agent shall be entitled to recover such amount on demand from such Lender with interest thereon, for each day from the date such amount was due until the date such amount is paid to Agent at the interest rate then payable by Borrower in respect of Loans that are Prime Rate Loans as set forth in Section 3.1(a) hereof.

 

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2.3            Commitments . The aggregate amount of each Lender’s Pro Rata Share of the Loans and Letter of Credit Accommodations shall not exceed the amount of such Lender’s Commitment, as the same may from time to time be amended in accordance with the provisions hereof.

 

2.4            Optional Reduction in Maximum Credit . At any time and from time to time after the first anniversary of the date hereof, subject to the terms and conditions contained herein, upon not less than ten (10) days’ prior written notice to Agent (which notice shall be irrevocable), Borrower may at its option reduce the amount of the Maximum Credit to an amount not less than $50,000,000; provided , that , as to any and all such reductions, each of the following conditions is satisfied: (a) in no event shall the Maximum Credit be reduced to an amount less than the sum of the then outstanding amount of the Loans and the Letter of Credit Accommodations after giving effect to any payment received on the date of such reduction; (b) any reduction shall be in an amount not less than $5,000,000 or an integral multiple thereof; (c) Borrower may only so reduce the Maximum Credit two (2) times; (d) as of the date of any such reduction and after giving effect thereto, there shall be Excess Availability; and (e) the reduction shall be effective on the date specified in the notice from Borrower to Agent of Borrower’s intention to exercise its rights under this Section, which date shall be no more than thirty (30) days after the date of the receipt by Agent of such notice.

 

SECTION 3.          INTEREST AND FEES

 

3.1            Interest .

 

(a)            Borrower shall pay to Agent, for the benefit of Lenders, interest on the outstanding principal amount of the Loans at the Interest Rate. All interest accruing hereunder on and after the date of any Event of Default or termination  hereof shall be payable on demand.

 

(b)            Borrower may from time to time request Eurodollar Rate Loans or may request that Prime Rate Loans be converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans continue for an additional Interest Period. Such request from Borrower shall specify the amount of the Eurodollar Rate Loans or the amount of the Prime Rate Loans to be converted to Eurodollar Rate Loans or the amount of the Eurodollar Rate Loans to be continued (subject to the limits set forth below) and the Interest Period to be applicable to such Eurodollar Rate Loans. Subject to the terms and conditions contained herein, two (2) Business Days after receipt by Agent of such a request from Borrower, such Eurodollar Rate Loans shall be made or such Prime Rate Loans shall be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case may be, provided , that , (i) no Default or Event of Default shall exist or have occurred and be continuing, (ii) no party hereto shall have sent any notice of termination  of this Agreement, (iii) Borrower shall have complied with such customary procedures as are established by Agent and specified by Agent to Borrower from time to time for requests by Borrower for Eurodollar Rate Loans, (iv) no more than four (4) Interest Periods may be in effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans must be in an amount not less than $1,000,000 or an integral multiple of $500,000 in excess thereof, and (vi) Agent and each Lender shall have determined that the Interest Period or Adjusted Eurodollar Rate is available to Agent and such Lender and can be readily determined as of the date of the request for such Eurodollar Rate Loan by Borrower. Any request by or on behalf of Borrower

 

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for Eurodollar Rate Loans or to convert Prime Rate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be irrevocable. Notwithstanding anything to the contrary contained herein, Agent and Lenders shall not be required to purchase United States Dollar deposits in the London interbank market or other applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if Agent and Lenders had purchased such deposits to fund the Eurodollar Rate Loans.

 

(c)            Any Eurodollar Rate Loans shall automatically convert to Prime Rate Loans upon the last day of the applicable Interest Period, unless Agent has received and approved a request to continue such Eurodollar Rate Loan at least two (2) Business Days prior to such last day in accordance with the terms hereof. Any Eurodollar Rate Loans shall, at Agent’s option, upon notice by Agent to Borrower, be subsequently converted to Prime Rate Loans in the event that this Agreement shall terminate or not be renewed. Borrower shall pay to Agent, for the benefit of Lenders, upon demand by Agent (or Agent may, at its option, charge any loan account of Borrower) any amounts required to compensate any Lender or Participant for any loss (including loss of anticipated profits), cost or expense incurred by such person, as a result of the conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing. A certificate of Agent or the applicable Lender or Participant setting forth the basis for the determination of such amount necessary to compensate such Lender or Participant as aforesaid shall be delivered to Borrower and shall be presumptive evidence of such amount.

 

(d)            Interest shall be payable by Borrower to Agent, for the account of Lenders, monthly in arrears (or earlier as otherwise provided herein) not later than the first day of each calendar month and shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed. The interest rate on non-contingent Obligations (other than Eurodollar Rate Loans) shall increase or decrease by an amount equal to each increase or decrease in the Prime Rate effective on the first day of the month after any change in such Prime Rate is announced based on the Prime Rate in effect on the last day of the month in which any such change occurs. In no event shall charges constituting interest payable by Borrower to Agent and Lenders exceed the maximum amount or the rate permitted under any applicable law or regulation, and if any such part or provision of this Agreement is in contravention of any such law or regulation, such part or provision shall be deemed amended to conform thereto.

 

3.2            Fees .

 

(a)            Borrower shall pay to Agent for the account of Lenders monthly an unused line fee at a rate equal to the percentage (on a per annum basis) set forth below calculated upon the amount by which $125,000,000 exceeds the average daily principal balance of the outstanding Loans and Letter of Credit Accommodations during the immediately preceding month (or part thereof) while this Agreement is in effect and for so long thereafter as any Lender (or Agent on behalf of such Lender or itself) may continue to make any Loans or any Letter of Credit Accommodations are outstanding (and including any payments by any Lender or on its behalf for the collection and enforcement of the Obligations and for the protection, preservation, maintenance or sale, disposition or other realization upon any of the Collateral and including any Special Agent Advances). Such fee shall be payable on the first day of each month in arrears. Effective as of the date hereof and as of the first (1st) day of the second month of each fiscal quarter hereof (commencing with the fiscal quarter ending on or about January 31, 2009), the

 

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percentage used for determining the unused line fee shall be as set forth below if either the Quarterly Average Excess Availability for the immediately preceding fiscal quarter is at or within the amounts indicated for such percentage or the Leverage Ratio as of the last day of the immediately preceding fiscal quarter (which ratio for this purpose shall be calculated based on the four (4) immediately preceding fiscal quarters) is at or within the levels indicated for such percentage:

 

Excess Availability			Leverage Ratio		Unused Line Fee Percentage
(i)	$50,000,000 or more		Less than 2.00 to 1.00		3/8	%
(ii)	Greater than or equal to $25,000,000 and less than $50,000,000		Greater than 2.00 to 1.00 but equal to or less than 3.00 to 1.00		1/2	%
(iii)	Greater than or equal to $10,000,000 and less than $25,000,000		Greater than 3.00 to 1.00 but equal to or less than 4.00 to 1.00		1/2	%
(iv)	Less than $10,000,000		Greater than 4.00 to 1.00		1/2	%

 

provided , that , (A) the unused line fee percentage shall be calculated and established once each fiscal quarter (B) the unused line fee percentage shall be the lower percentage set forth above based on the Quarterly Average Excess Availability or the Leverage Ratio and (C) Borrower shall not be obligated to pay the portion of any unused line fee attributable to amounts not funded by a Defaulting Letter in accordance herewith during the period of time that such Lender is a Defaulting Lender, as determined by Agent.

 

(b)            Borrower shall pay to Agent, for the ratable benefit of Lenders party hereto on the date hereof, the amount of $875,000 as a closing fee, which fee is fully earned as of the date hereof.

 

(c)            Borrower shall pay to Agent, for its own account, monthly a servicing fee in an amount equal to $5,000 in respect of the services of Agent for each month (or part thereof) while the Loan Agreement remains in effect and for so long thereafter as any Lender (or Agent on behalf of any Lender or itself) may continue to make any Loans or any Letter of Credit Accommodations are outstanding  (and including any payments by any Lender or on its behalf for the collection and enforcement of the Obligations and for the protection, preservation, maintenance or sale, disposition or other realization upon any of the Collateral and including any Special Agent Advances). Such fee shall be fully earned as of and payable in advance on the date hereof and on the first day of each month hereafter.

 

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3.3            Changes in Laws and Increased Costs of Loans .

 

(a)            If after the date hereof, either (i) any change in, or in the interpretation of, any law or regulation is introduced, including, without limitation, with respect to reserve requirements, applicable to any Lender or any banking or financial institution from whom any  Lender borrows funds or obtains credit (a “Funding Bank”), or (ii) a Funding Bank or any Lender complies with any future guideline or request from any central bank or other Governmental Authority or (iii) a Funding Bank or any Lender determines that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof has or would have the effect described below, or a Funding Bank or any Lender complies with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, and in the case of any event set forth in this clause (iii), such adoption, change or compliance has or would have the direct or indirect effect of reducing the rate of return on any Lender’s capital as a consequence of its obligations hereunder to a level below that which such Lender could have achieved but for such adoption, change or compliance (taking into consideration the Funding Bank’s or Lender’s policies with respect to capital adequacy) by an amount deemed by such Lender to be material, and the result of any of the foregoing events described in clauses (i), (ii) or (iii) is or results in an increase in the cost to any Lender of funding or maintaining the Loans or the Letter of Credit Accommodations, then Borrower shall from time to time upon demand by Agent pay to Agent additional amounts without duplication, sufficient in the aggregate to indemnify Lenders against such increased cost on an after-tax basis (after taking into account applicable deductions and credits in respect of the amount indemnified). Notwithstanding anything to the contrary contained in this Section 3.3(a), if any Lender fails to notify Borrower of any event that will entitle such Lender to indemnification under this Section 3.3(a) within ninety (90) days after the date such Lender obtains actual knowledge of such event, then such Lender shall not be entitled to indemnification from Borrower for such amounts arising prior to the date that is ninety (90) days before the date on which such Lender notifies Borrower of such event. A certificate as to the amount of such increased cost shall be submitted to Borrower by Agent and shall be presumptive evidence of amounts due, absent manifest error.

 

(b)            If prior to the first day of any Interest Period, (i) Agent shall have determined in good faith (which determination shall be conclusive and binding upon Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, (ii) Agent has received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Eurodollar Rate Loans during such Interest Period, or (iii) Dollar deposits in the principal amounts of the Eurodollar Rate Loans to which such Interest Period is to be applicable are not generally available in the London interbank market, Agent shall give telecopy or telephonic notice thereof to Borrower and Lenders as soon as practicable thereafter, and will also give prompt written notice to Borrower when such conditions no longer exist. If such notice is given (A) any Eurodollar Rate Loans requested to be made on the first day of such Interest Period shall be made as Prime Rate Loans, (B) any Loans that were to have been converted on the first day of such Interest Period to or continued as Eurodollar Rate Loans shall be converted to or continued as Prime Rate Loans and (C) each outstanding Eurodollar Rate Loan shall be converted, on the last day of the then-current Interest Period thereof, to Prime Rate Loans. Until

 

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such notice has been withdrawn by Agent, no further Eurodollar Rate Loans shall be made or continued as such, nor shall Borrower have the right to convert Prime Rate Loans to Eurodollar Rate Loans.

 

(c)            Notwithstanding any other provision herein, if the adoption of or any change in any law, treaty, rule or regulation or final, non-appealable determination of an arbitrator or a court or other Governmental Authority or in the interpretation or application thereof occurring after the date hereof shall make it unlawful for Agent or any Lender to make or maintain Eurodollar Rate Loans as contemplated by this Agreement, (i) Agent or such Lender shall promptly give written notice of such circumstances to Borrower and Agent (which notice shall be withdrawn whenever such circumstances no longer exist), (ii) the commitment of such Lender hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans as such and convert Prime Rate Loans to Eurodollar Rate Loans shall forthwith be canceled and, until such time as it shall no longer be unlawful for such Lender to make or maintain Eurodollar Rate Loans, such Lender shall then have a commitment only to make a Prime Rate Loan when a Eurodollar Rate Loan is requested and (iii) such Lender’s Loans then outstanding as Eurodollar Rate Loans, if any, shall be converted automatically to Prime Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Rate Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 3.3(d) below.

 

(d)            Borrower shall indemnify Agent and each Lender and to hold Agent and each Lender harmless from any loss or expense which Agent or such Lender may sustain or incur (other than through Agent’s or such Lender’s gross negligence or wilful misconduct) as a consequence of (i) default by Borrower in making a borrowing of, conversion into or extension of Eurodollar Rate Loans after Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (ii) default by Borrower in making any prepayment of a Eurodollar Rate Loan after Borrower has given a notice thereof in accordance with the provisions of this Agreement, and (iii) the making of a prepayment of Eurodollar Rate Loans on a day which is not the last day of an Interest Period with respect thereto. With respect to Eurodollar Rate Loans, such indemnification may include an amount equal to the excess, if any, of (A) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or extended, for the period from the date of such prepayment or of such failure to borrow, convert or extend to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or extend, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Eurodollar Rate Loans provided for herein over (B) the amount of interest (as reasonably determined by Agent or such Lender) which would have accrued to Agent or such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market. This covenant shall survive the termination of this Agreement and the payment of the Obligations.

 

(e)            If Borrower is required to pay additional amounts to any Lender pursuant to Section 3.3(a) that increase the effective lending rate of such Lender with respect to its share of the Loans to greater than one-eighth (1/8%) percent in excess of the percentage of the effective lending rate of the other Lenders, then such Lender shall use reasonable efforts

 

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(consistent with legal and regulatory restrictions) to change the jurisdiction of its lending office with respect to making Eurodollar Rate Loans so as to eliminate any such additional payment by Borrower which may thereafter accrue, if such change in the judgment of such Lender is not otherwise disadvantageous to such Lender. In the event that any one or more Lenders, pursuant to Section 3.3(a) hereof, incur any increased costs (other than increased costs to the extent such increased costs are not a recurring cost) for which any such Lender demands compensation pursuant to Section 3.3(a) hereof which increases the effective lending rate of such Lender with respect to its share of the Loans to greater than one-eighth (1/8%) percent in excess of the percentage of the effective lending rate of the other Lenders and such Lender has not mitigated such costs within sixty (60) days after receipt by such Lender from Borrower of a written notice that such Lender’s effective lending rate has so exceeded the effective lending rate of the other Lenders, then and in any such event, Borrower may substitute another financial institution which is an Eligible Transferee acceptable to Agent for such Lender to assume the Commitment of such Lender and to purchase the Loans of such Lender hereunder, without recourse to or warranty by, or expense to, such Lender for a purchase price equal to the outstanding principal amount of the Loans owing to such Lender plus any accrued but unpaid interest on such Loans and accrued but unpaid fees and other amounts in respect of such Lender’s Commitment and share of the Loans (other than any prepayment penalty or other premiums). Upon such purchase such Lender shall no longer be a party hereto or have any rights or benefits hereunder (except for rights or benefits that such Lender would retain hereunder and under the other Financing Agreements upon payment in full of all of the Obligations) and the replacement Lender shall succeed to the rights and benefits, and shall assume the obligations, of such Lender hereunder and thereunder. Agent and Lenders shall cooperate with Borrower to amend the Financing Agreements to reflect such substitution. In no event may Borrower replace a Lender that is also Agent or an issuer of a Letter of Credit Accommodation.

 

SECTION 4.         CONDITIONS PRECEDENT

 

4.1            Conditions Precedent to Amendment and Restatement . Each of the following is a condition precedent to the effectiveness hereof:

 

(a)            all requisite corporate action and proceedings in connection with this Agreement and the other Financing Agreements shall be reasonably satisfactory in form and substance to Agent, and Agent shall have received all information and copies of all documents, including records of requisite corporate action and proceedings which Agent may have requested in connection therewith, such documents where requested by Agent or its counsel to be certified by appropriate corporate officers or Governmental Authority (and including a copy of the certificate of incorporation of Borrower certified by the Secretary of State (or equivalent Governmental Authority) which shall set forth the same complete corporate name of Borrower as is set forth herein and such document as shall set forth the organizational identification number of Borrower, if one is issued in its jurisdiction of incorporation);

 

(b)            no Material Adverse Effect shall have occurred since December 31, 2007;

 

(c)            Agent shall have received, in form and substance satisfactory to Agent in good faith, all consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or desirable in order to permit, protect and perfect its security

 

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interests in and liens upon the Collateral or to effectuate the provisions or purposes of this Agreement and the other Financing Agreements, including, without limitation, Collateral Access Agreements by owners and lessors of leased premises of Borrower and by processors and warehouses at which Collateral is located, except, in the case of Collateral Access Agreements or Deposit Account Control Agreements, to the extent Agent may have agreed with Borrower in writing that the foregoing may be so delivered by Borrower after the date hereof;

 

(d)            no court of competent jurisdiction shall have issued any injunction, restraining order or other order with respect to the Sale Order which otherwise prohibits the consummation of the transactions described in the Sale Order, the Atlantis Purchase Agreement or the Financing Agreements or modifies such transactions, and no governmental or other action or proceeding shall have been commenced, seeking any injunction, restraining order or other order which seeks to void or otherwise modify the transactions described in the Sale Order, the Atlantis Purchase Agreement, or the Financing Agreements;

 

(e)            Agent shall have received a certified copy of the Sale Order, as duly entered by the Bankruptcy Court and the time within which any Person may contest or appeal from the Sale Order shall have expired, without such contest or appeal having been taken (or if any contest or appeal shall have been taken from such Sale Order, the contest for appeal shall have been finally disposed of, and the same shall not be subject to any further appeal or contest) and the Sale Order shall, inter alia, (i) contain a finding that Borrower is a good faith purchaser for value of the assets of Atlantis Plastic constituting the Atlantis Plastic Assets under the Atlantis Purchase Agreement within the meaning of Section 363(m) of the Bankruptcy Code, (ii) authorize Atlantis Plastic to sell the Atlantis Plastic Assets to Borrower, free and clear of any security interests, liens, claims or encumbrances and to execute, deliver and perform the terms and provisions of the Atlantis Purchase Agreement, and (iii) authorize Borrower (and Borrower hereby authorizes Agent) for purposes of the Uniform Commercial Code of all applicable states of Agent to file termination statements with respect to any of the Atlantis Plastic Assets;

 

(f)             the Excess Availability as determined by Agent, as of the date hereof, shall be not less than $30,000,000 after provision for payment of all fees and expenses of the transactions contemplated hereby;

 

(g)            without limitation upon the proviso set forth in clause (c) above as to deposit accounts not subject to Deposit Account Control Agreements, Agent shall have received evidence, in form and substance satisfactory to Agent, that Agent has a valid perfected first priority security interest in all of the Collateral, other than motor vehicles (except as to the priority of the security interest of Agent, as may be otherwise permitted under Section 9.8 hereof);

 

(h)            Agent shall have received and reviewed lien search results for the jurisdiction of incorporation of Borrower, and judgment search results in such jurisdiction and the jurisdiction of the chief executive office of Borrower, which search results shall be in form and substance satisfactory to Agent (it being understood that a search result shall not be unsatisfactory to Agent because it indicates a lien otherwise permitted hereunder); and

 

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(i)             Agent shall have received an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel for Borrower, in substantially the form of Exhibit E hereto.

 

4.2            Conditions Precedent to All Loans and Letter of Credit Accommodations . Each of the following is an additional condition precedent to the Loans and/or providing Letter of Credit Accommodations to Borrower, including the initial Loans and Letter of Credit Accommodations and any future Loans and Letter of Credit Accommodations:

 

(a)            all representations and warranties contained herein and in the other Financing Agreements shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of the making of each such Loan or providing each such Letter of Credit Accommodation and after giving effect thereto, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date);

 

(b)            no law, regulation, order, judgment or decree of any Governmental Authority shall exist, and no action, suit, investigation, litigation or proceeding shall be pending or to the best of the knowledge of Borrower or to the actual knowledge of Agent, threatened in any court or before any arbitrator or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or otherwise affect (A) the making of the Loans or providing the Letter of Credit Accommodations, or (B) the consummation of the transactions contemplated pursuant to the terms hereof or the other Financing Agreements or (ii) has or has a reasonable likelihood of having a Material Adverse Effect; and

 

(c)            no Default or Event of Default shall exist or have occurred and be continuing on and as of the date of the making of such Loan or providing each such Letter of Credit Accommodation and after giving effect thereto.

 

SECTION 5.          GRANT AND PERFECTION OF SECURITY INTEREST

 

5.1            Grant of Security Interest . To secure payment and performance of all Obligations, Borrower hereby grants to Agent, for itself and the ratable benefit of Lenders, a continuing security interest in, a lien upon, and a right of set off against, and hereby assigns to Agent, for itself and the ratable benefit of Lenders, as security, and hereby confirms, reaffirms and restates the prior grant thereof for itself and the Lenders pursuant to the Existing Agreement, all personal and real property and fixtures, and interests in property and fixtures of Borrower, whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the Obligations at any time granted to or held or acquired by Agent or any Lender, collectively, the “Collateral”):

 

(a)            all Accounts;

 

(b)            all general intangibles, including, without limitation, all Intellectual Property;

 

(c)            all goods, including, without limitation, Inventory and Equipment;

 

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(d)            all Real Property and fixtures;

 

(e)            all chattel paper, including, without limitation, all tangible and electronic chattel paper;

 

(f)             all instruments, including, without limitation, all promissory notes;

 

(g)            all documents;

 

(h)            all deposit accounts;

 

(i)             all letters of credit, banker’s acceptances and similar instruments and including all letter-of-credit rights;

 

(j)             all supporting obligations and all present and future liens, security interests, rights, remedies, title and interest in, to and in respect of Receivables and other Collateral, including (i) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (ii) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (iii) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Receivables or other Collateral, including returned, repossessed and reclaimed goods, and (iv) deposits by and property of account debtors or other persons securing the obligations of account debtors;

 

(k)            all (i) investment property (including securities, whether certificated or uncertificated, securities accounts, security entitlements, commodity contracts or commodity accounts) and (ii) monies, credit balances, deposits and other property of Borrower now or hereafter held or received by or in transit to Agent, any Lender or its Affiliates or at any other depository or other institution from or for the account of Borrower, whether for safekeeping, pledge, custody, transmission, collection or otherwise;

 

(l)             all commercial tort claims, including, without limitation, those identified in the Information Certificate;

 

(m)           to the extent not otherwise described above, all Receivables;

 

(n)            all Records; and

 

(o)            all products and proceeds of the foregoing, in any form, including insurance proceeds and all claims against third parties for loss or damage to or destruction of or other involuntary conversion of any kind or nature of any or all of the other Collateral.

 

5.2            Excluded Property . Notwithstanding anything to the contrary set forth in Section 5.1 above, the types or items of Collateral described in such Section shall not include:

 

(a)            any rights or interests in any contract, lease, permit, license, charter or license agreement covering real or personal property, as such, if under the terms of such contract,

 

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lease, permit, license, charter or license agreement, or applicable law with respect thereto, the valid grant of a security interest or lien therein to Agent is prohibited and such prohibition has not been or is not waived or the consent of the other party to such contract, lease, permit, license, charter or license agreement has not been or is not otherwise obtained or under applicable law such prohibition cannot be waived; provided , that , the foregoing exclusion shall in no way be construed (i) to apply if any such prohibition is unenforceable under Sections 9-406, 9-407 or 9-408 of the UCC or other applicable law or (ii) so as to limit, impair or otherwise affect Agent’s unconditional continuing security interests in and liens upon any rights or interests of Borrower in or to monies due or to become due under any such contract, lease, permit, license, charter or license agreement (including any Receivables);

 

(b)            any Equipment acquired after the Initial Closing Date which is subject to a purchase money lien or purchase money security interest (including Capital Leases) permitted under Section 9.8 hereof if: (i) the valid grant of a security interest or lien to Agent in such item of Equipment is prohibited by the terms of the agreement between Borrower and the holder of such purchase money lien or security interest or under applicable law and such prohibition has not been or is not waived, or the consent of the holder of the purchase money mortgage or other purchase money lien or security interest has not been or is not otherwise obtained, or under applicable law such prohibition cannot be waived and (ii) the purchase money lien or security interest on such item of Equipment is or shall become valid and perfected;

 

(c)            the Capital Stock of the Foreign Subsidiaries in excess of sixty-six (66%) percent of all of the issued and outstanding shares of Capital Stock of such Subsidiary, provided , that , for purposes of the laws of Australia and any State thereof, Section 5.1 shall not be deemed to grant a security interest in any of the shares of Capital Stock of AEP Industries (Australia) Pty Ltd. to the extent such shares are subject to the pledge and security interest of Agent pursuant to the Pledge and Security Agreement by Borrower in favor of Agent with respect thereto (and if for any reason this Agreement were deemed to create a security interest in any of such shares of AEP Industries (Australia) Pty Ltd. as result of such shares not being subject to the Pledge and Security Agreement, then the amount of the Obligations secured by the shares will be limited to the Limitation Amount, as such term is defined in the Pledge and Security Agreement by Borrower with respect thereto);

 

(d)            the Wrightsville Fixed Assets;

 

(e)            the Atlantis Real Property; provided , that , with respect to any Atlantis Real Property that is not the subject of a binding letter of intent for the purchase thereof within 180 days after the Atlantis Plastic Closing, Borrower shall grant a mortgage thereon in favor of Agent (and such Atlantis Real Property shall thereafter constitute Collateral) promptly after the expiration of such period (or promptly after 90 days following such 180-day period if a sale has not been consummated pursuant to a binding letter of intent). Such mortgage shall be granted pursuant to documentation reasonably satisfactory in form and substance to Agent and Borrower and Borrower shall take such actions and execute and/or deliver to Agent such documents as Agent shall reasonably require to confirm the validity and perfection of any such mortgage; provided , that , opinions of counsel with respect to such mortgage shall not be required; and

 

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(f)             the accounts in which the Deposit Escrow Funds and the Working Capital Escrow Funds (each as defined in the Atlantis Purchase Agreement) are held in escrow pursuant to the terms of the Atlantis Purchase Agreement (collectively, the “Atlantis Escrow Accounts”).

 

5.3            Release of Capital Stock of Foreign Subsidiaries .

 

(a)            At any time after the satisfaction of each of the conditions set forth in Section 5.3(b) below with respect to a Foreign Subsidiary (other than any Subsidiary organized or incorporated under the laws of Canada, France or Spain or any jurisdiction therein or which has substantially all of its assets in Canada, France or Spain), Agent shall upon the written request of Borrower received within ten (10) Business Days’ of the satisfaction of all of such conditions, at the expense of Borrower, execute and deliver to Borrower, in form and substance satisfactory to Agent and Borrower, a written release of the security interest of Agent in the Capital Stock of such Subsidiary, such release to only be effective upon the satisfaction of each of the conditions in Section 5.3(b) with respect thereto.

 

(b)            Agent shall only be required to so execute and deliver such written release with respect to its security interest in the Capital Stock of a Foreign Subsidiary (other than any Subsidiary organized or incorporated under the laws of Canada, France or Spain or any jurisdiction therein or which has substantially all of its assets in Canada, France or Spain) if each of the following conditions with respect to such Foreign Subsidiary is satisfied as determined by Agent:  (i) such Subsidiary shall have received not less than the US Dollar Equivalent of $2,000,000 in immediately available funds from a financial institution that is not an Affiliate of Borrower as proceeds of a loan or loans (net of any repayments thereof), the proceeds of which are to be used for the general corporate purposes of such Subsidiary and are made pursuant to a credit facility entered into by such Subsidiary after the date hereof where the financial institution has committed to make loans to such Subsidiary, subject to the terms and conditions set forth in the applicable documentation with respect to such credit facility, (ii) the Indebtedness of such Subsidiary arising pursuant to such loan or loans shall be permitted under Section 9.9(f) hereof, (iii) Agent shall have received not less than ten (10) Business Days’ prior written notice of the intention of such Subsidiary to obtain such loan or loans, which notice shall reasonably specify the Subsidiary which is obtaining such loan or loans, the financial institution which is to provide such loan or loans, the interest rate, the fees, the term, the amortization of the Indebtedness pursuant thereto (if any), and such other terms and conditions with respect thereto as Agent may reasonably specify, (iv) Borrower shall have delivered, or caused to be delivered, to Agent written evidence from the financial institution providing such loan or loans that the conditions to such financial institution providing such loan or loans include the requirement that Agent release its security interest in any Capital Stock of such Subsidiary, and (v)  no Event of Default shall exist or have occurred and is continuing.

 

5.4            Perfection of Security Interests .

 

(a)            Borrower irrevocably and unconditionally authorizes Agent (or its agent) to file at any time and from time to time such financing statements with respect to the Collateral naming Agent or its designee as the secured party and Borrower as debtor, as Agent may require, and including any other information with respect to Borrower or otherwise required by part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Agent may determine in good

 

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faith, together with any amendment and continuations with respect thereto, which authorization shall apply to all financing statements filed on, prior to or after the date hereof. Borrower hereby ratifies and approves all financing statements naming Agent or its designee as secured party and Borrower, as debtor with respect to the Collateral (and any amendments with respect to such financing statements) filed by or on behalf of Agent prior to the date hereof and ratifies and confirms the authorization of Agent to file such financing statements (and amendments, if any). Borrower hereby authorizes Agent to adopt on behalf of Borrower any symbol required for authenticating any electronic filing. Borrower hereby authorizes the Agent to use collateral descriptions such as “all personal property” or “all assets”, in each case “whether now owned or hereafter acquired”, words of similar import or any other description the Agent, in its sole discretion, so chooses in any such financing statements. In the event that the description of the collateral in any financing statement naming Agent or its designee as the secured party and Borrower as debtor includes assets and properties of Borrower that do not at any time constitute Collateral, whether hereunder, under any of the other Financing Agreements or otherwise, the filing of such financing statement shall nonetheless be deemed authorized by Borrower or to the extent of the Collateral included in such description and it shall not render the financing statement ineffective as to any of the Collateral or otherwise affect the financing statement as it applies to any of the Collateral, provided , that , in such event, upon Borrower’s written request and at Borrower’s expense, Agent shall file such amendments to its financing statements to change the assets described therein so as to constitute the Collateral. In no event shall Borrower at any time file, or permit or cause to be filed,  any correction statement or termination statement with respect to any financing statement (or amendment or continuation with respect thereto) naming Agent or its designee as secured party and Borrower as debtor so long as this Agreement has not been terminated or all of the Obligations have not been paid and satisfied in full in immediately available funds.

 

(b)            Borrower does not have any chattel paper (whether tangible or electronic) or instruments as of the date hereof in each case evidencing a monetary obligation in excess of $100,000 in any one case or in the aggregate in excess of $250,000, except as set forth in the Information Certificate. In the event that Borrower shall be entitled to or shall receive any chattel paper or instrument after the date hereof, Borrower shall promptly notify Agent thereof in writing. Promptly upon the receipt thereof by or on behalf of Borrower (including by any agent or representative), Borrower shall deliver, or cause to be delivered to Agent, all tangible chattel paper and instruments that Borrower has or may at any time acquire, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time specify, in each case except as Agent may otherwise agree, provided , that , unless and until a Default or Event of Default shall exist or have occurred and for so long as the same is continuing, Borrower shall not be required to deliver to Agent any tangible chattel paper or instruments until the aggregate amount of the monetary obligations evidenced thereby exceed $250,000. At Agent’s option, Borrower shall, or Agent may at any time on behalf of Borrower, cause the original of any such instrument or chattel paper to be conspicuously marked in a form and manner acceptable to Agent with the following legend referring to chattel paper or instruments as applicable: “This [chattel paper][instrument] is subject to the security interest of Wachovia Bank, National Association, as Agent and any sale, transfer, assignment or encumbrance of this [chattel paper][instrument] violates the rights of such secured party.”

 

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(c)            In the event that Borrower shall at any time hold or acquire an interest in any electronic chattel paper or any “transferable record” (as such term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction), Borrower shall promptly notify Agent thereof in writing. Promptly upon Agent’s request, Borrower shall take, or cause to be taken, such actions as Agent may request to give Agent control of such electronic chattel paper under Section 9-105 of the UCC and control of such transferable record under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction.

 

(d)            Borrower does not have any deposit accounts as of the date hereof, except as set forth in the Information Certificate. Borrower shall not, directly or indirectly, after the date hereof open, establish or maintain any deposit account unless each of the following conditions is satisfied:  (i) Agent shall have received not less than five (5) Business Days prior written notice of the intention of Borrower to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the bank at which such account is to be opened or established, the individual at such bank with whom Borrower is dealing and the purpose of the account, (ii) the bank where such account is opened or maintained shall be acceptable to Agent, and (iii) on or before the opening of such deposit account, Borrower shall as Agent may specify either (A) deliver to Agent a Deposit Account Control Agreement with respect to such deposit account duly authorized, executed and delivered by Borrower and the bank at which such deposit account is opened and maintained or (B) arrange for Agent to become the customer of the bank with respect to the deposit account on terms and conditions acceptable to Agent, except, that, Borrower shall not be required to comply with clauses (i), (ii) or (iii) of this subsection (d) as to any deposit account which at all times has less than $25,000 so long as the aggregate amount of all deposits in all such accounts is less than $100,000 and no Default or Event of Default shall exist or have occurred and be continuing. The terms of this subsection (d) shall not apply to the Atlantis Escrow Accounts or any deposit accounts specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s salaried employees.

 

(e)            Borrower does not own or hold, directly or indirectly, beneficially or as record owner or both, any investment property, as of the date hereof, or have any investment account, securities account, commodity account or other similar account with any bank or other financial institution or other securities intermediary or commodity intermediary as of the date hereof, in each case except as set forth in the Information Certificate.

 

(i)             Subject to Section 5.2(c) hereof,  in the event that Borrower shall be entitled to or shall at any time after the date hereof hold or acquire any certificated securities, upon Agent’s request, Borrower shall promptly endorse, assign and deliver the same to Agent, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time specify. Subject to Section 5.2(c) hereof, any securities, now or hereafter acquired by Borrower are uncertificated and are issued to Borrower or its nominee directly by the issuer thereof, Borrower shall immediately notify Agent thereof and shall as Agent may specify, either (A) cause the issuer to agree to comply with instructions from Agent as to such

 

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securities, without further consent of Borrower or such nominee, or (B) arrange for Agent to become the registered owner of the securities.

 

(ii)            Borrower shall not, directly or indirectly, after the date hereof open, establish or maintain any investment account, securities account, commodity account or any other similar account (other than a deposit account) with any securities intermediary or commodity intermediary unless each of the following conditions is satisfied:  (A) Agent shall have received not less than five (5) Business Days prior written notice of the intention of Borrower to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the securities intermediary or commodity intermediary at which such account is to be opened or established, the individual at such intermediary with whom Borrower is dealing and the purpose of the account, (B) the securities intermediary or commodity intermediary (as the case may be) where such account is opened or maintained shall be acceptable to Agent, and (C) on or before the opening of such investment account, securities account or other similar account with a securities intermediary or commodity intermediary, Borrower shall as Agent may specify either (1) execute and deliver, and cause to be executed and delivered to Agent, an Investment Property Control Agreement with respect thereto duly authorized, executed and delivered by Borrower and such securities intermediary or commodity intermediary or (2) arrange for Agent to become the entitlement holder with respect to such investment property on terms and conditions acceptable to Agent.

 

(f)             Borrower is not the beneficiary or otherwise entitled to any right to payment under any letter of credit, banker’s acceptance or similar instrument as of the date hereof, except as set forth in the Information Certificate. In the event that Borrower shall be entitled to or shall receive any right to payment under any letter of credit, banker’s acceptance or any similar instrument having a face amount in excess of $30,000 in any one case or $75,000 in the aggregate, whether as beneficiary thereof or otherwise after the date hereof, Borrower shall promptly notify Agent thereof in writing. Upon Agent’s request, Borrower shall immediately, as Agent may specify, either (i) deliver, or cause to be delivered to Agent, with respect to any such letter of credit, banker’s acceptance or similar instrument, the written agreement of the issuer and any other nominated person obligated to make any payment in respect thereof (including any confirming or negotiating bank), in form and substance satisfactory to Agent, consenting to the assignment of the proceeds of the letter of credit to Agent by Borrower and agreeing to make all payments thereon directly to Agent or as Agent may otherwise direct or (ii) cause Agent to become, at Borrower’s expense, the transferee beneficiary of the letter of credit, banker’s acceptance or similar instrument (as the case may be) to the extent permitted under the letter of credit, banker’s acceptance or similar instrument, provided , that , upon Agent’s request, Borrower shall use its best efforts (but without having to pay more than the customary fees of the applicable bank) to have such letter of credit, banker’s acceptance or similar instrument be transferable

 

(g)            Borrower does not have any commercial tort claims as of the date hereof, except as set forth in the Information Certificate. In the event that Borrower shall at any time after the date hereof have any commercial tort claims, Borrower shall promptly notify Agent thereof in writing, which notice shall (i) set forth in reasonable detail the basis for and nature of such commercial tort claim and (ii) include the express grant by Borrower to Agent of a security

 

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interest in such commercial tort claim (and the proceeds thereof). In the event that such notice does not include such grant of a security interest, the sending thereof by Borrower to Agent shall be deemed to constitute such grant to Agent. Upon the sending of such notice, any commercial tort claim described therein shall constitute part of the Collateral and shall be deemed included therein. Without limiting the authorization of Agent provided in Section 5.4(a) hereof or otherwise arising by the execution by Borrower of this Agreement or any of the other Financing Agreements, Agent is hereby irrevocably authorized from time to time and at any time to file such financing statements naming Agent or its designee as secured party and Borrower as debtor, or any amendments to any financing statements, covering any such commercial tort claim as Collateral. In addition, Borrower shall promptly upon Agent’s request, execute and deliver, or cause to be executed and delivered,  to Agent such other agreements, documents and instruments as Agent may require in connection with such commercial tort claim.

 

(h)            Borrower does not have any goods, documents of title or other Collateral in the custody, control or possession of a third party as of the date hereof, except (i) as set forth in the Information Certificate, (ii) for goods located in the United States of America in transit to a location of Borrower permitted herein in the ordinary course of business of Borrower in the possession of the carrier transporting such goods or (iii) as otherwise permitted pursuant to Section 9.2 hereof.. In the event that any goods, documents of title or other Collateral are at any time after the date hereof in the custody, control or possession of any other person not referred to in the Information Certificate or such carriers, Borrower shall promptly notify Agent thereof in writing. Promptly upon Agent’s request, Borrower shall deliver to Agent a Collateral Access Agreement duly authorized, executed and delivered by such person and Borrower, provided , that , Borrower shall not be required to deliver a Collateral Access Agreement from public warehouses that may from time to time be in possession of Inventory so long as (A) no Default or Event of Default shall exist or have occurred and be continuing, and (B) the aggregate value of all Inventory at such warehouses is less than $250,000.

 

(i)             Borrower shall take any other actions reasonably requested by Agent in good faith from time to time to cause the attachment, perfection and first priority of, and the ability of Agent to enforce, the security interest of Agent in any and all of the Collateral, including, without limitation, (i) executing, delivering and, where appropriate, filing financing statements and amendments relating thereto under the UCC or other applicable law, to the extent, if any, that Borrower’s signature thereon is required therefor, (ii) causing Agent’s name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral; provided , that , any such notation shall not be required under this Agreement on any certificate of title for any motor vehicle with a fair market value of less than $25,000, (iii) complying with any provision of any statute, regulation or treaty of the United States of America as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, (iv) obtaining the consents and approvals of any Governmental Authority or third party, including, without limitation, any consent of any licensor, lessor or other person obligated on Collateral, and taking all actions required by any earlier versions of the UCC or by other law, as applicable in any relevant jurisdiction.

 

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5.5            Dutch Collateral . As to any of the Financing Agreements that are governed by the laws of the Netherlands, and to the extent that Agent is granted a security interest in any sh