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REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT

Security Agreement

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KATY INDUSTRIES INC

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Title: REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
Governing Law: New York     Date: 6/2/2010
Industry: Personal and Household Prods.     Law Firm: Blank Rome;DLA Piper;Ropes Gray     Sector: Consumer/Non-Cyclical

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Exhibit 10.1

 

 


 

EXECUTION COPY

 

 

REVOLVING CREDIT, TERM LOAN

AND

SECURITY AGREEMENT

 

PNC BANK, NATIONAL ASSOCIATION

(AS LENDER AND AS AGENT)

 

WITH

 

CONTINENTAL COMMERCIAL PRODUCTS, LLC

 

AND

 

GLIT/GEMTEX, LTD.

 

(BORROWERS)

 

AND

 

KATY INDUSTRIES, INC.

 

(GUARANTOR)

 

 

 

 

 

May 26, 2010

 

 

 

 

 


 

 

TABLE OF CONTENTS

 

                                                                                                                                                                                                                                                                            Page

 

 

I.            DEFINITIONS.

 

 

1.1.

Accounting Terms 

1

 

1.2.

General Terms 

1

 

 

1.3.

Uniform Commercial Code Terms 

29

 

1.4.

Certain Matters of Construction 

29

 

II.            ADVANCES, PAYMENTS.

 

 

2.1.

Revolving Advances. 

30

 

2.2.

Procedure for Revolving Advances Borrowing. 

32

 

 

2.3.

Disbursement of Advance Proceeds 

34

 

2.4.

Term Loans. 

35

 

 

2.5.

Maximum Advances 

36

 

2.6.

Repayment of Advances. 

36

 

 

2.7.

Repayment of Excess Advances 

37

 

2.8.

Statement of Account 

37

 

 

2.9.

Letters of Credit 

37

 

2.10.

Issuance of Letters of Credit. 

37

 

 

2.11.

Requirements For Issuance of Letters of Credit. 

38

 

2.12.

Disbursements, Reimbursement. 

39

 

 

2.13.

Repayment of Participation Advances. 

40

 

2.14.

Documentation 

40

 

 

2.15.

Determination to Honor Drawing Request 

41

 

2.16.

Nature of Participation and Reimbursement Obligations 

41

 

 

2.17.

Indemnity 

42

 

2.18.

Liability for Acts and Omissions 

42

 

 

2.19.

Additional Payments 

44

 

2.20.

Manner of Borrowing and Payment. 

44

 

 

2.21.

Mandatory and Voluntary Prepayments. 

46

 

2.22.

Use of Proceeds. 

47

 

 

2.23.

Defaulting Lender. 

47

 

III.            INTEREST AND FEES.

 

 

3.1.

Interest 

48

 

3.2.

Letter of Credit Fees. 

48

 

 

3.3.

Closing Fee and Facility Fee. 

49

 

3.4.

Collateral Evaluation Fee and Collateral Monitoring. 

50

 

 

3.5.

Computation of Interest and Fees. 

50

 

3.6.

Maximum Charges 

51

 

 

3.7.

Increased Costs 

51

 

3.8.

Basis For Determining Interest Rate Inadequate or Unfair 

51

 

 

3.9.

Capital Adequacy. 

52

 

3.10.

Gross Up for Taxes 

53

 

 

3.11.

Withholding Tax Exemption. 

53

 

3.12.

Currency Indemnity 

54

 

 

3.13.

Mitigation 

54

 

 

i


 

 

IV.            COLLATERAL:   GENERAL TERMS.

 

 

4.1.

Security Interest in the Collateral 

55

 

4.2.

Perfection of Security Interest 

55

 

 

4.3.

Disposition of Collateral 

56

 

4.4.

Preservation of Collateral 

56

 

 

4.5.

Ownership of Collateral. 

56

 

4.6.

Defense of Agent’s and Lenders’ Interests 

57

 

 

4.7.

Books and Records 

57

 

4.8.

Financial Disclosure 

58

 

 

4.9.

Compliance with Laws 

58

 

4.10.

Inspection of Premises 

58

 

 

4.11.

Insurance 

58

 

4.12.

Failure to Pay Insurance 

60

 

 

4.13.

Payment of Taxes 

60

 

4.14.

Payment of Leasehold Obligations 

60

 

 

4.15.

Receivables. 

60

 

4.16.

Inventory 

63

 

 

4.17.

Maintenance of Equipment 

63

 

4.18.

Exculpation of Liability 

63

 

 

4.19.

Environmental Matters. 

63

 

4.20.

Financing Statements 

65

 

 

4.21.

Appraisals 

65

 

4.22.

Attachment 

66

 

V.            REPRESENTATIONS AND WARRANTIES.

 

 

5.1.

Authority 

66

 

5.2.

Formation and Qualification. 

66

 

 

5.3.

Survival of Representations and Warranties 

67

 

5.4.

Tax Returns 

67

 

 

5.5.

Financial Statements. 

67

 

5.6.

Entity Names 

68

 

 

5.7.

O.S.H.A. and Environmental Compliance. 

68

 

5.8.

Solvency; No Litigation, Violation, Indebtedness or Default; ERISA Compliance. 

69

 

 

5.9.

Patents, Trademarks, Copyrights and Licenses 

70

 

5.10.

Licenses and Permits 

71

 

 

5.11.

Default of Indebtedness 

71

 

5.12.

No Default 

71

 

 

5.13.

No Burdensome Restrictions 

71

 

5.14.

No Labor Disputes 

71

 

 

5.15.

Margin Regulations 

71

 

5.16.

Investment Company Act 

72

 

 

5.17.

Disclosure 

72

 

5.18.

Swaps 

72

 

 

5.19.

Conflicting Agreements 

72

 

5.20.

Application of Certain Laws and Regulations 

72

 

 

5.21.

Business and Property of Borrowers 

72

 

5.22.

Section 20 Subsidiaries 

72

 

 

5.23.

Anti-Terrorism Laws. 

72

 

5.24.

Trading with the Enemy 

73

 

 

5.25.

Federal Securities Laws 

73

 

5.26.

Equity Interests 

73

 

 

5.27.

Commercial Tort Claims 

74

 

5.28.

Letter of Credit Rights 

74

 

 

5.29.

Canadian Union Plans 

74

 

 

ii


 

 

VI.            AFFIRMATIVE COVENANTS.

 

 

6.1.

Payment of Fees 

74

 

6.2.

Conduct of Business and Maintenance of Existence and Assets 

74

 

 

6.3.

Violations 

74

 

6.4.

Government Receivables 

74

 

 

6.5.

Financial Covenants. 

75

 

6.6.

Execution of Supplemental Instruments 

76

 

 

6.7.

Payment of Indebtedness 

76

 

6.8.

Standards of Financial Statements 

76

 

 

6.9.

Federal Securities Laws 

76

 

6.10.

Winddown of Collection Accounts 

76

 

VII.            NEGATIVE COVENANTS.

 

 

7.1.

Merger, Consolidation, Acquisition and Sale of Assets. 

76

 

7.2.

Creation of Liens 

77

 

 

7.3.

Guarantees 

77

 

7.4.

Investments 

77

 

 

7.5.

Loans 

77

 

7.6.

Capital Expenditures 

77

 

 

7.7.

Dividends and Distributions. 

78

 

7.8.

Indebtedness 

79

 

 

7.9.

Nature of Business 

79

 

7.10.

Transactions with Affiliates; Payment of Management Fees 

79

 

 

7.11.

Leases 

80

 

7.12.

Subsidiaries. 

80

 

 

7.13.

Fiscal Year and Accounting Changes 

80

 

7.14.

Pledge of Credit 

80

 

 

7.15.

Amendment of Articles of Incorporation, By-Laws Certificate of Formation, Operating Agreement 

80

 

7.16.

Compliance with ERISA and Canadian Pension Laws. 

80

 

 

7.17.

Prepayment of Indebtedness; Pentland Payments 

81

 

7.18.

Anti-Terrorism Laws 

82

 

 

7.19.

Membership/Partnership Interests 

82

 

7.20.

Trading with the Enemy Act 

82

 

 

7.21.

Management Agreement 

82

 

7.22.

Canadian Union Plans 

82

 

 

iii


 

 

VIII.            CONDITIONS PRECEDENT.

 

 

8.1.

Conditions to Initial Advances 

82

 

8.2.

Conditions to Each Advance 

86

 

IX.            INFORMATION AS TO BORROWERS.

 

 

9.1.

Disclosure of Material Matters 

87

 

9.2.

Schedules 

87

 

 

9.3.

Environmental Reports 

88

 

9.4.

Litigation 

88

 

 

9.5.

Material Occurrences 

88

 

9.6.

Government Receivables 

88

 

 

9.7.

Annual Financial Statements 

88

 

9.8.

Quarterly Financial Statements 

89

 

 

9.9.

Monthly Financial Statements 

89

 

9.10.

Other Reports 

89

 

 

9.11.

Additional Information 

89

 

9.12.

Projected Operating Budget 

90

 

 

9.13.

Variances From Operating Budget 

90

 

9.14.

Notice of Suits, Adverse Events 

90

 

 

9.15.

ERISA Notices and Requests 

90

 

9.16.

Additional Documents 

91

 

X.            EVENTS OF DEFAULT.

 

 

10.1.

Nonpayment 

91

 

10.2.

Breach of Representation 

91

 

 

10.3.

Financial Information 

91

 

10.4.

Judicial Actions 

92

 

 

10.5.

Noncompliance 

92

 

10.6.

Judgments 

92

 

 

10.6.

Bankruptcy 

92

 

10.7.

Inability to Pay 

92

 

 

10.8.

Subsidiary Bankruptcy 

92

 

10.9.

[Reserved.] 

93

 

 

10.10.

Lien Priority 

93

 

10.11.

[Reserved.] 

93

 

 

10.12.

Cross Default 

93

 

10.13.

Breach of Guaranty or Pledge Agreement 

93

 

 

10.14.

Change of Ownership 

93

 

10.15.

Invalidity 

93

 

 

10.16.

Licenses 

93

 

10.17.

Seizures 

94

 

 

10.18.

Operations 

94

 

10.19.

Pension Plans 

94

 

 

iv


 

 

XI.            LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT.

 

 

11.1.

Rights and Remedies. 

94

 

11.2.

Agent’s Discretion 

96

 

 

11.3.

Setoff 

97

 

11.4.

Rights and Remedies not Exclusive 

97

 

 

11.5.

Allocation of Payments After Event of Default 

97

 

XII.            WAIVERS AND JUDICIAL PROCEEDINGS.

 

 

12.1.

Waiver of Notice 

98

 

12.2.

Delay 

98

 

 

12.3.

Jury Waiver 

98

 

XIII.            EFFECTIVE DATE AND TERMINATION.

 

 

13.1.

Term 

98

 

13.2.

Termination 

99

 

XIV.            REGARDING AGENT.

 

 

14.1.

Appointment 

99

 

14.2.

Nature of Duties 

99

 

 

14.3.

Lack of Reliance on Agent and Resignation 

100

 

14.4.

Certain Rights of Agent 

101

 

 

14.5.

Reliance 

101

 

14.6.

Notice of Default 

101

 

 

14.7.

Indemnification 

101

 

14.8.

Agent in its Individual Capacity 

101

 

 

14.9.

Delivery of Documents 

102

 

14.10.

Borrowers’ Undertaking to Agent 

102

 

 

14.11.

No Reliance on Agent’s Customer Identification Program 

102

 

14.12.

Other Agreements 

102

 

XV.            BORROWING AGENCY; GUARANTEE PROVISIONS.

 

 

15.1.

Borrowing Agency Provisions. 

102

 

15.2.

Waiver of Subrogation 

104

 

 

v


 

 

XVI.            MISCELLANEOUS.

 

 

16.1.

Governing Law 

104

 

16.2.

Entire Understanding. 

104

 

 

16.3.

Successors and Assigns; Participations; New Lenders. 

107

 

16.4.

Application of Payments 

109

 

 

16.5.

Indemnity 

109

 

16.6.

Notice 

110

 

 

16.7.

Survival 

112

 

16.8.

Severability 

112

 

 

16.9.

Expenses 

112

 

16.10.

Injunctive Relief 

112

 

 

16.11.

Consequential Damages 

113

 

16.12.

Captions 

113

 

 

16.13.

Counterparts; Facsimile Signatures 

113

 

16.14.

Construction 

113

 

 

16.15.

Confidentiality; Sharing Information 

113

 

16.16.

Publicity 

114

 

 

16.17.

Certifications From Banks and Participants; USA PATRIOT Act 

114

 

 

 

 

vi


 

 

LIST OF EXHIBITS AND SCHEDULES

 

 Exhibits

 

 

 

 Exhibit 1.2    

 Borrowing Base Certificate

 Exhibit 2.1(a)  

 Continental Revolving Credit Note

 Exhibit 2.1(b)  

 Glit/Gemtex Revolving Credit Note

 Exhibit 2.4(a)  

 Term Note A

 Exhibit 2.4(b)

 Term Note B

 Exhibit 5.5(b) 

 Financial Projections

 Exhibit 8.1(j)

 Financial Condition Certificate

 Exhibit 16.3

 Commitment Transfer Supplement

 

 

 

 

 Schedules

 

 

 

 Schedule 1.2

 Permitted Encumbrances

 Schedule 4.5

 Equipment and Inventory Locations

 Schedule 4.15(h) 

 Deposit and Investment Accounts

 Schedule 4.19

 Real Property

 Schedule 5.1  

 Consents

 Schedule 5.2(a) 

 States of Qualification and Good Standing

 Schedule 5.2(b) 

 Subsidiaries

 Schedule 5.4

 Federal Tax Identification Number

 Schedule 5.6

 Prior Names

 Schedule 5.8(b)

 Litigation

 Schedule 5.8(d)

 Plans

 Schedule 5.9

 Intellectual Property, Source Code Escrow Agreements

 Schedule 5.10 

 Licenses and Permits

 Schedule 5.14

 Labor Disputes

 Schedule 5.26

 Capitalization Table

 Schedule 5.27

 Commercial Tort Claims

 Schedule 5.28

 Letter of Credit Rights

 Schedule 7.3 

 Guarantees

 

 

 

 

 

vii


 

 

REVOLVING CREDIT, TERM LOAN

 

AND

 

SECURITY AGREEMENT

 

Revolving Credit, Term Loan and Security Agreement dated as of May 26, 2010 among Continental Commercial Products, LLC, a limited liability company formed under the laws of the State of Delaware (“ Continental ”), Glit/Gemtex, Ltd., a corporation organized under the laws of the Province of Ontario (“ Glit/Gemtex ”) (Continental, Glit/Gemtex and each Person joined hereto as a borrower from time to time, collectively, the “ Borrowers ”, and each a “ Borrower ”), Katy Industries, Inc., a corporation organized under the laws of Delaware (“ Katy ”), as guarantor, the financial institutions which are now or which hereafter become a party hereto (collectively, the “ Lenders ” and each individually a “ Lender ”) and PNC Bank, National Association (“ PNC ”), as agent for Lenders (PNC, in such capacity, the “ Agent ”).

 

IN CONSIDERATION of the mutual covenants and undertakings herein contained, Borrowers, Lenders and Agent hereby agree as follows:

 

I.   DEFINITIONS.

 

1.1.   Accounting Terms .  As used in this Agreement, the Other Documents or any certificate, report or other document made or delivered pursuant to this Agreement, accounting terms not defined in Section 1.2 or elsewhere in this Agreement and accounting terms partly defined in Section 1.2 to the extent not defined, shall have the respective meanings given to them under GAAP; provided, however, whenever such accounting terms are used for the purposes of determining compliance with financial covenants in this Agreement, such accounting terms shall be defined in accordance with GAAP as applied in preparation of the audited financial statements of Borrowers for the fiscal year ended December 31, 2009.  If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in this Agreement and any Other Document, and either the Borrowing Agent or the Required Lenders shall so request, the Agent, the Lenders and the Borrowing Agent shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrowing Agent shall provide to the Agent and the Lenders as reasonably requested hereunder a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

 

1.2.   General Terms .  For purposes of this Agreement the following terms shall have the following meanings:

 

Accountants ” shall have the meaning set forth in Section 9.7 hereof.

 

Advance Rates ” shall have the meaning set forth in Section 2.1(a)(y)(II)(ii) hereof.

 

Advances ” shall mean and include the Revolving Advances, Letters of Credit and the Term Loan.

 

 

 


 

 

Affiliate ” of any Person shall mean (a) any Person which, directly or indirectly, is in control of, is controlled by, or is under common control with such Person, or (b) any Person who is a director, manager, member, managing member, general partner or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in clause (a) above.  For purposes of this definition, control of a Person shall mean the power, direct or indirect, (x) to vote 5% or more of the Equity Interests having ordinary voting power for the election of directors of such Person or other Persons performing similar functions for any such Person, or (y) to direct or cause the direction of the management and policies of such Person whether by ownership of Equity Interests, contract or otherwise.

 

Agent ” shall have the meaning set forth in the preamble to this Agreement and shall include its successors and assigns.

 

Agreement ” shall mean this Revolving Credit, Term Loan and Security Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

Alternate Canadian Base Rate ” shall mean, for any day, a rate per annum equal to the higher of (i) the interest rate per annum established from time to time by PNC Bank Canada Branch at its Toronto, Canada office as its reference rate of interest for loans in Canadian Dollars to Canadian borrowers, in effect on such date and (ii) the sum of the one month CDOR Rate in effect on such day plus one and three-quarters per cent (1.75%).

 

Alternate U.S. Base Rate ” shall mean, for any day, a rate per annum equal to the higher of (i) the Base Rate in effect on such day, (ii) the Federal Funds Open Rate in effect on such day plus one half of one-percent (1/2 of 1%), and (iii) the sum of the Daily LIBOR Rate in effect on such day plus one percent (1.0%), so long as a Daily LIBOR Rate is offered, ascertainable and not unlawful.

 

Anti-Terrorism Laws ” shall mean any Applicable Laws relating to terrorism or money laundering, including Executive Order No. 13224, the USA PATRIOT Act, the Proceeds of Crime (Money Laundering and Terrorist Financing Act (Canada), the Applicable Laws comprising or implementing the Bank Secrecy Act, and the Applicable Laws administered by the United States Treasury Department’s Office of Foreign Asset Control (as any of the foregoing Applicable Laws may from time to time be amended, renewed, extended, or replaced).

 

Applicable Law ” shall mean all laws, rules and regulations applicable to the Person, conduct, transaction, covenant, Other Document or contract in question, including all applicable common law and equitable principles; all provisions of all applicable state, provincial, federal and foreign constitutions, statutes, rules, regulations, treaties, directives and orders of any Governmental Body, and all orders, judgments and decrees of all courts and arbitrators.

 

Applicable Margin ” for Revolving Advances and the Term Loan shall mean, as of the Closing Date, the applicable percentage specified below:

 

APPLICABLE MARGINS FOR DOMESTIC RATE LOANS

APPLICABLE MARGINS FOR EURODOLLAR RATE LOANS

APPLICABLE MARGIN FOR CANADIAN REVOLVING ADVANCES

Revolving

Advances

Term Loan

Revolving

Advances

Term Loan

 

2.25%

5.25%

3.25%

6.25%

2.25%

 

 

2


 

 

Authority ” shall have the meaning set forth in Section 4.19(d) hereof.

 

Availability Block ” shall mean, as of the Closing Date, the sum of $1,500,000.  Such amount shall be reduced to zero (-0-) upon the later to occur of (i) the date upon which the Agent shall have received the audited year end financial statements of Katy on a Consolidated Basis for the fiscal year ending on December 31, 2010, so long as such financial statements evidence the compliance by the Borrowers with the financial covenants set forth in Section 6.5 hereof for the applicable measuring periods ending on such date and (ii) the date upon which the outstanding principal balance of Term Loan A shall have been reduced by the aggregate sum of $1,500,000 pursuant to the application by the Agent against such principal balance, as and when received by the Agent, of (a) regularly scheduled payments of principal of Term Loan A made under Section 2.4(a) hereof and (b) mandatory prepayments of principal of Term Loan A made under Section 2.21(b) hereof.

 

Base Rate ” shall mean the base commercial lending rate of PNC as publicly announced to be in effect from time to time, such rate to be adjusted automatically, without notice, on the effective date of any change in such rate.  This rate of interest is determined from time to time by PNC as a means of pricing some loans to its customers and is neither tied to any external rate of interest or index nor does it necessarily reflect the lowest rate of interest actually charged by PNC to any particular class or category of customers of PNC.

 

Benefited Lender ” shall have the meaning set forth in Section 2.20(d) hereof.

 

Blocked Accounts ” shall have the meaning set forth in Section 4.15(h) hereof.

 

Blocked Account Bank ” shall have the meaning set forth in Section 4.15(h) hereof.

 

Blocked Person ” shall have the meaning set forth in Section 5.23(b) hereof.

 

Borrower ” or “ Borrowers ” shall have the meaning set forth in the preamble to this Agreement and shall extend to all permitted successors and assigns of such Persons.

 

Borrowers’ Account ” shall have the meaning set forth in Section 2.8 hereof.

 

Borrowing Agent ” shall mean Continental.

 

 

Borrowing Base Certificate ” shall mean a certificate in substantially the form of Exhibit 1.2 duly executed by the President, Chief Financial Officer or Controller of Continental or Glit/Gemtex, as applicable, and delivered to the Agent, appropriately completed, by which such officer shall certify to Agent the Formula Amount and calculation thereof as of the date of such certificate.

 

 

3


 

 

Business Day ” shall mean any day other than Saturday or Sunday or a legal holiday on which commercial banks are authorized or required by law to be closed for business in East Brunswick, New Jersey and Toronto, Ontario and, if the applicable Business Day relates to any Eurodollar Rate Loans, such day must also be a day on which dealings are carried on in the London interbank market.

 

Canadian Benefit Plans ” shall mean any plan, fund, program, or policy, whether or not written, formal or informal, funded or unfunded, insured or uninsured, providing benefits including medical, hospital care, dental, sickness, accident, disability, life insurance, pension, retirement or savings benefits under which any Borrower has any liability with respect to any Canadian employees or former Canadian employees, but excluding any Canadian Pension Plan.

 

Canadian Dollar ” shall mean lawful money of Canada.

 

Canadian Lender ” shall mean PNC Bank Canada Branch.

 

Canadian Payment Office ” shall mean initially The Exchange Tower, 130 King Street West, Suite 2140 P.O. Box 462, Toronto, Ontario M5X 1E4; thereafter, such other office of Agent, if any, which it may designate by notice to Borrowing Agent and to each Canadian Lender to be the Canadian Payment Office.

 

Canadian Pension Event ” shall mean (a) the termination in whole or in part of any Canadian Pension Plan or Canadian Union Plan that contains a defined benefit provision or the institution of proceedings by any governmental authority to terminate in whole or in part or have a trustee appointed to administer a Canadian Pension Plan or Canadian Union Plan, (b) the merger of a Canadian Pension Plan with another pension plan, (c) a material change in the funded status of a Canadian Pension Plan or Canadian Union Plan, (d) the occurrence of an event under the Income Tax Act (Canada) that could reasonably be expected to affect the registered status of any Canadian Pension Plan, (e) the receipt by a Borrower of any order or notice of intention to issue an order from the applicable pension standards regulator that could reasonably be expected to affect the registered status or cause the termination (in whole or in part) of any Canadian Pension Plan that contains a defined benefit provision, (f) the receipt of notice by the administrator or the funding agent of any failure to remit contributions to a Canadian Pension Plan, (g) the adoption of any amendment to a Canadian Pension Plan that would require the provision of security pursuant to applicable law, or (h) any other extraordinary event or condition with respect to a Canadian Pension Plan that could reasonably be expected to result in a Lien or any acceleration of any statutory requirements to fund all or a substantial portion of the unfunded accrued benefit liabilities of such plan.

 

Canadian Pension Plans ” shall mean a pension plan or plan that is a “registered pension plan” as defined in the Income Tax Act (Canada) or is subject to the funding requirements of applicable pension benefits legislation in any Canadian jurisdiction and is applicable to employees or former employees resident in Canada of any Borrower.

 

Canadian Revolving Advances ” shall mean revolving loans and advances made to Glit/Gemtex by the Canadian Lender pursuant to Section 2.1(a)(y)(II) hereof.

 

 

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Canadian Revolving Loans ” shall mean any Canadian Revolving Advance that bears interest based upon the Alternate Canadian Base Rate.

 

Canadian Union Plans ” means any and all pension and other benefit plans for the benefit of Canadian employees or former Canadian employees of any Borrower that are not maintained, sponsored or administered by such Borrower, but to which such Borrower is or was required to contribute pursuant to a collective agreement or participation agreement.

 

Capital Expenditures ” shall mean expenditures made or liabilities incurred for the acquisition of any fixed assets or improvements, replacements, substitutions or additions thereto which have a useful life of more than one year, including the total principal portion of Capitalized Lease Obligations, which, in accordance with GAAP, would be classified as capital expenditures.

 

Capitalized Lease Obligation ” shall mean any Indebtedness of any Borrower represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.

 

CDOR Rate ” shall mean, on any day and for any period, an annual rate of interest equal to the greater of (i) one and one-half percent (1.5%) per annum and (ii) the rate applicable to Canadian Dollar bankers’ acceptances for a term equal to or comparable to thirty (30) days, as such rate appears on the “Reuters Screen CDOR Page” (as defined in the International Swaps and Derivatives Association, Inc. 2000 definitions, as modified and amended from time to time), rounded to the nearest 1/100 th of 1% (with .005% being rounded up), at approximately 10:00 a.m. (Eastern Time), on such day, or if such day is not a Business Day, then on the immediately preceding Business Day, provided that if such rate does not appear on the Reuters Screen CDOR Page on such day, the CDOR Rate on such day shall be the rate for such period applicable to Canadian Dollar bankers’ acceptances quoted by a bank listed in Schedule 1 of the Bank Act (Canada), as selected by the Agent, as of 10:00 a.m. (Eastern Time) on such day or, if such day is not a Business Day, then on the immediately preceding Business Day.

 

CERCLA ” shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq.

 

Change of Control ” shall mean (a) the occurrence of any event (whether in one or more transactions) which results in a transfer of control of any Borrower to a Person who is not the Original Owner or (b) any amalgamation, merger or consolidation of or with any Borrower or sale of all or substantially all of the property or assets of any Borrower.  For purposes of this definition, “control of Borrower” shall mean the power, direct or indirect to vote 50% or more of the Equity Interests having ordinary voting power for the election of directors (or the individuals performing similar functions) of any Borrower.

 

Change of Ownership ” shall mean (a) any portion of the Equity Interests of any Borrower is no longer owned or controlled by (including for the purposes of the calculation of percentage ownership, any Equity Interests into which any Equity Interests of any Borrower held by the Original Owner are convertible or for which any such Equity Interests of any Borrower or of any other Person may be exchanged and any Equity Interests issuable to the Original Owners upon exercise of any warrants, options or similar rights which may at the time of calculation be held by the Original Owners) a Person who is the Original Owner or (b) any merger, consolidation or sale of substantially all of the property or assets of any Borrower.

 

 

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Charges ” shall mean all taxes, charges, fees, imposts, levies or other assessments, including all net income, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation and property taxes, custom duties, fees, assessments, liens, claims and charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts, imposed by any taxing or other authority, domestic or foreign (including the PBGC or any environmental agency or superfund), upon the Collateral, any Borrower or any of its Affiliates.

 

CIP Regulations ” shall have the meaning set forth in Section 14.11 hereof.

 

Closing Date ” shall mean May 26, 2010 or such other date as may be agreed to by the parties hereto.

 

Code ” shall mean the Internal Revenue Code of 1986, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect.

 

Collateral ” shall mean and include:

 

(a)   all Receivables;

 

(b)   all Equipment;

 

(c)   all General Intangibles;

 

(d)   all Inventory;

 

(e)   all Investment Property;

 

(f)   all Real Property;

 

(g)   all Subsidiary Stock;

 

(h)   the Leasehold Interests;

 

(i)   all of each Borrower’s right, title and interest in and to, whether now owned or hereafter acquired and wherever located; (i) its respective goods and other property including, but not limited to, all merchandise returned or rejected by Customers, relating to or securing any of the Receivables; (ii) all of each Borrower’s rights as a consignor, a consignee, an unpaid vendor, mechanic, artisan, or other lienor, including stoppage in transit, setoff, detinue, replevin, reclamation and repurchase; (iii) all additional amounts due to any Borrower from any Customer relating to the Receivables; (iv) other property, including warranty claims, relating to any goods securing the Obligations; (v) all of each Borrower’s contract rights, rights of payment which have been earned under a contract right, instruments (including promissory notes), documents, documents of title, chattel paper (including electronic chattel paper), warehouse receipts, deposit accounts, letters of credit and money; (vi) all commercial tort claims (whether now existing or hereafter arising); (vii) if and when obtained by any Borrower, all real and personal property of third parties in which such Borrower has been granted a lien or security interest as security for the payment or enforcement of Receivables; (viii) all letter of credit rights (whether or not the respective letter of credit is evidenced by a writing); (ix) all supporting obligations; and (x) any other goods, personal property or real property now owned or hereafter acquired in which any Borrower has expressly granted a security interest or may in the future grant a security interest to Agent hereunder, or in any amendment or supplement hereto or thereto, or under any other agreement between Agent and any Borrower;

 

 

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(j)   all of each Borrower’s ledger sheets, ledger cards, files, correspondence, records, books of account, business papers, computers, computer software (owned by any Borrower or in which it has an interest), computer programs, tapes, disks and documents relating to (a), (b), (c), (d), (e), (f), (g), (h) or (i) of this paragraph; and

 

(k)   all proceeds and products of (a), (b), (c), (d), (e), (f), (g), (h), (i) and (j) in whatever form, including, but not limited to:  cash, deposit accounts (whether or not comprised solely of proceeds), certificates of deposit, insurance proceeds (including hazard, flood and credit insurance), negotiable instruments and other instruments for the payment of money, chattel paper, security agreements, documents, eminent domain proceeds, condemnation proceeds and tort claim proceeds.

 

Notwithstanding the foregoing, none of the following items will be included in the Collateral: (a) more than 65% of the common voting Equity Interests of any Foreign Subsidiary, (b) assets if the granting of a security interest in such asset would (I) be prohibited by Applicable Law (other than proceeds and receivables thereof, the assignment of which is expressly deemed effective under the UCC or any comparable provision under Canadian law, notwithstanding such prohibition), or (II) be prohibited by contract (except to the extent such prohibition is overridden by UCC Section 9-408 any comparable provision under Canadian law) so long as such negative pledge is otherwise permitted under clause (d) hereof, (c) any property and assets, the pledge of which would require governmental consent, approval, license or authorization, unless and until such consent, approval, license or authorization shall have been obtained or waived, and (d) assets in circumstances where the Agent and the Borrowing Agent agree in writing that the cost, burden or consequences (including adverse tax consequences) of obtaining or perfecting a security interest in such assets is excessive in relation to the practical benefit afforded thereby.

 

For avoidance of doubt, as of the Closing Date, no Borrower has executed or delivered in favor of Agent a leasehold mortgage encumbering any of the Leasehold Interests, nor is the execution of any such leasehold mortgage a condition precedent under Section 8.1 hereof.  In addition, no Borrower shall be required after the Closing Date to execute or deliver in favor of the Agent any such leasehold mortgage if the terms of the underlying lease prohibit such Borrower from so doing.

 

 

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Commitment Percentage ” of any Lender shall mean the percentage set forth below such Lender’s name on the signature page hereof as same may be adjusted upon any assignment by a Lender pursuant to Section 16.3(c) or (d) hereof.

 

Commitment Transfer Supplement ” shall mean a document in the form of Exhibit 16.3 hereto, properly completed and otherwise in form and substance satisfactory to Agent by which the Purchasing Lender purchases and assumes a portion of the obligation of Lenders to make Advances under this Agreement.

 

Compliance Certificate ” shall mean a compliance certificate to be signed by the Chief Financial Officer or Controller of Borrowing Agent, which shall state that, based on an examination sufficient to permit such officer to make an informed statement, no Default or Event of Default exists, or if such is not the case, specifying such Default or Event of Default, its nature, when it occurred, whether it is continuing and the steps being taken by Borrowers with respect to such default and, such certificate shall have appended thereto calculations which set forth Borrowers’ compliance with the requirements or restrictions imposed by Sections 6.5, 7.4, 7.5, 7.6, 7.7, 7.8, 7.10 and 7.11.

 

Consents ” shall mean all filings and all licenses, permits, consents, approvals, authorizations, qualifications and orders of Governmental Bodies and other third parties, domestic or foreign, necessary to carry on any Borrower’s business or necessary (including to avoid a conflict or breach under any agreement, instrument, other document, license, permit or other authorization) for the execution, delivery or performance of this Agreement or the Other Documents, including any Consents required under all applicable federal, state, provincial or other Applicable Law.

 

Consigned Inventory ” shall mean Inventory of any Borrower that is in the possession of another Person on a consignment, sale or return, or other basis that does not constitute a final sale and acceptance of such Inventory.

 

Continental ” shall have the meaning set forth in the preamble to this Agreement.

 

Continental Inventory Advance Rate ” shall have the meaning set forth in Section 2.1(a)(y)(I)(ii) hereof.

 

Continental Perfection Certificates ” shall mean collectively, the Perfection Certificates dated May 10, 2010 (as updated) and the responses thereto, provided by each Borrower and delivered to Agent.

 

Continental Receivables Advance Rate ” shall have the meaning set forth in Section 2.1(a)(y)(I)(i) hereof.

 

Continental Revolving Credit Note ” shall have the meaning set forth in Section 2.1(a) hereof.

 

Contract Rate ” shall have the meaning set forth in Section 3.1 hereof.

 

 

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Controlled Group ” shall mean, at any time, each Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control and all other entities which, together with any Borrower, are treated as a single employer under Section 414 of the Code.

 

Currency Due ” shall have the meaning set forth in Section 3.12 hereof.

 

Custome r” shall mean and include the account debtor with respect to any Receivable and/or the prospective purchaser of goods, services or both with respect to any contract or contract right, and/or any party who enters into or proposes to enter into any contract or other arrangement with any Borrower, pursuant to which such Borrower is to deliver any personal property or perform any services.

 

Customs ” shall have the meaning set forth in Section 2.11(b) hereof.

 

Daily  LIBOR  Rate ” shall mean, for any day, the rate per annum determined  by  the Agent by dividing (x) the Published Rate by (y) a number equal to 1.00 minus the Reserve Percentage.

 

Debt Payments ” shall mean and include (a) all cash actually expended by any Borrower to make interest payments on any Advances under this Agreement and the Ex-Im Agreement, plus (b) accrued but unpaid interest on account of Eurodollar Rate Loans under this Agreement, plus (c) scheduled principal payments on the Term Loan, plus (d) all cash actually expended by any Borrower to make payments for all fees, commissions and charges set forth herein and with respect to any Advances under this Agreement and the Ex-Im Agreement, plus (e) all cash actually expended by any Borrower to make payments on Capitalized Lease Obligations, plus (f) all cash actually expended by any Borrower to make payments with respect to any other Indebtedness for borrowed money (other than any such payment which is made in conjunction with a refinancing of the then outstanding principal balance of such Indebtedness), plus (g) all cash actually expended by any Borrower to pay dividends or distributions in respect of any Equity Interests issued by it.

 

Default ” shall mean an event, circumstance or condition which, with the giving of notice or passage of time or both, would constitute an Event of Default.

 

Default Rate ” shall have the meaning set forth in Section 3.1 hereof.

 

Defaulting Lender ” shall have the meaning set forth in Section 2.23(a) hereof.

 

Depository Accounts ” shall have the meaning set forth in Section 4.15(h) hereof.

 

Designated Lender ” shall have the meaning set forth in Section 16.2(b) hereof.

 

Documents ” shall have the meaning set forth in Section 8.1(m) hereof.

 

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

 

 

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Domestic Rate Loan ” shall mean any Advance that bears interest based upon the Alternate U.S. Base Rate.

 

Drawing Date ” shall have the meaning set forth in Section 2.12(b) hereof.

 

Early Termination Date ” shall have the meaning set forth in Section 13.1 hereof.

 

Earnings Before Interest and Taxes ” shall mean for any period the sum of (i) net income (or loss) of Katy on a Consolidated Basis for such period (excluding extraordinary gains and losses), plus (ii) all interest expense of Katy on a Consolidated Basis for such period, plus (iii) all charges against income of Katy on a Consolidated Basis for such period for federal, state and local taxes.

 

EBITDA ” shall mean for any period the sum of (i) Earnings Before Interest and Taxes for such period, plus (ii) depreciation expenses for such period, plus (iii) amortization expenses for such period, plus (iv) Management Fees expensed during such period, plus (v) to the extent not included in Earnings Before Interest and Taxes, gains and income from the license and sale described in Section 4.3(c) hereof received during such period, plus (vi) to the extent not included in Earnings Before Interest and Taxes, gains and income from the sale of the surplus brush equipment described in Section 4.3(d) hereof received during such period, (vii) minus restructuring charges for such period to the extent they are included in extraordinary gains and losses, minus (viii) to the extent not included in extraordinary gains, all non-cash gains, and plus (ix) to the extent not included in extraordinary losses, all non-cash losses.

 

 “ Eligible Inventory ” shall mean and include Inventory, excluding work in process, with respect to each Borrower, valued at the lower of cost or market value, determined on a first-in-first-out basis, which is not, in Agent’s sole opinion, exercised in a commercially reasonable manner, obsolete, slow moving or unmerchantable and which Agent, in its sole discretion, exercised in a commercially reasonable manner, shall not deem ineligible Inventory, based on such considerations as Agent may from time to time deem appropriate including whether the Inventory is subject to a perfected, first priority security interest in favor of Agent and no other Lien (other than a Permitted Encumbrance).  In addition, Inventory shall not be Eligible Inventory if it (i) does not conform to all standards imposed by any Governmental Body which has regulatory authority over such goods or the use or sale thereof, (ii) is in transit, other than Inventory which is in transit (x) between locations of the Borrowers or (y) from a vendor located in the United States or Canada, to a Borrower, as long as title to such in-transit Inventory has passed to such Borrower, and, in each case described in clauses (x) and (y) hereof, to the extent such location of such Borrower is situated in the United States or the Province of Ontario, (iii) is located outside the continental United States, in the case of Continental, or the Province of Ontario, in the case of Glit/Gemtex or at a location that is not otherwise in compliance with this Agreement, (iv) constitutes Consigned Inventory, (v) is the subject of an Intellectual Property Claim; (vi) is subject to a License Agreement or other agreement that limits, conditions or restricts any Borrower’s or Agent’s right to sell or otherwise dispose of such Inventory, unless Agent is a party to a Licensor/Agent Agreement with the Licensor under such License Agreement; (vii) is situated at a location not owned by a Borrower unless the owner or occupier of such location has executed in favor of Agent a Lien Waiver Agreement; (viii) if the sale of such Inventory would result in an ineligible Receivable; or (ix) is included in the Formula Amount under the Export-Import Agreement.

 

 

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Eligible Receivables ” shall mean and include with respect to each Borrower, each Receivable of such Borrower arising in the Ordinary Course of Business and which Agent, in its sole credit judgment, exercised in a commercially reasonable manner, shall deem to be an Eligible Receivable, based on such considerations as Agent may from time to time deem appropriate, in its commercially reasonable judgment.  A Receivable shall not be deemed eligible unless such Receivable is subject to Agent’s first priority perfected security interest and no other Lien (other than Permitted Encumbrances), and is evidenced by an invoice or other documentary evidence satisfactory to Agent in its commercially reasonable judgment.  In addition, no Receivable shall be an Eligible Receivable if:

 

(a)   it arises out of a sale made by any Borrower to an Affiliate of any Borrower or to a Person controlled by an Affiliate of any Borrower;

 

(b)   it is due and unpaid (i) in the case of Continental, more than sixty (60) days after the original due date or more than (A) ninety (90) days after the original invoice date, in the case of all Customers of Continental other than those listed in clause (B) hereof, or (B) one hundred twenty (120) days after the original invoice date, in the case of any of the Referenced Customers, provided that not more than $250,000 (based on the original invoice amount) of Receivables of Continental outstanding at any one time, in the aggregate, may constitute Eligible Receivables under this clause (B), or (ii) in the case of Glit/Gemtex, more than sixty (60) days after the original due date or more than ninety (90) days after the original invoice date;

 

(c)   fifty percent (50%) or more of the Receivables from such Customer are not deemed Eligible Receivables under any clause of this definition other than clause (l).  Such percentage may, in Agent’s sole discretion, exercised in a commercially reasonable manner, be increased or decreased from time to time;

 

(d)   any covenant, representation or warranty contained in this Agreement with respect to such Receivable has been breached;

 

(e)   the Customer shall (i) apply for, suffer, or consent to the appointment of, or the taking of possession by, a receiver, receiver and manager, custodian, trustee or liquidator of itself or of all or a substantial part of its property or call a meeting of its creditors, (ii) admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business, (iii) make a general assignment for the benefit of creditors, (iv) commence a voluntary case or proceeding under any state or federal bankruptcy laws in effect in the United States or provincial or federal bankruptcy laws in effect in Canada (in each case, whether now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is filed against it in any involuntary case under such bankruptcy laws, or (viii) take any action for the purpose of effecting any of the foregoing;

 

 

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(f)   the sale is to a Customer (i) in the case of Continental, outside the continental United States of America, or (ii) in the case of Glit/Gemtex, outside of Canada unless, in each case, the sale is on letter of credit, guaranty or acceptance terms, in each case acceptable to Agent in its sole discretion, exercised in a commercially reasonable manner;

 

(g)   the sale to the Customer is on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment or any other repurchase or return basis or is evidenced by chattel paper;

 

(h)   Agent believes, in its sole judgment, exercised in a commercially reasonable manner, that collection of such Receivable is insecure or that such Receivable may not be paid by reason of the Customer’s financial inability to pay;

 

(i)   the Customer is (1) the United States of America, any state or any department, agency or instrumentality of any of them (but only to the extent that such Receivables exceed an aggregate face amount of $100,000), unless the applicable Borrower assigns its right to payment of such Receivable to Agent pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with other applicable statutes or ordinances; or (2) Her Majesty in right of Canada or any Provincial or local governmental authority, or any ministry, unless (A) such Borrower assigns its right to payment of such Receivable to the Agent in compliance with the provisions of the Financial Administration Act , R.S.C. 185, c.F-11, as amended, or any similar applicable federal, provincial or local law, regulation or requirement;

 

(j)   the goods giving rise to such Receivable have not been delivered to and accepted by the Customer or the services giving rise to such Receivable have not been performed by the applicable Borrower and accepted by the Customer or the Receivable otherwise does not represent a final sale;

 

(k)   the Receivables of the Customer exceed a credit limit determined by Agent, in its sole discretion, exercised in a commercially reasonable manner, to the extent such Receivable exceeds such limit;

 

(l)   the Receivable is subject to any offset, deduction, defense, dispute, or counterclaim (to the extent of such offset, deduction, defense or counterclaim), the Customer is also a creditor or supplier of a Borrower (to the extent of the amount of the obligation owing by such Borrower to such Customer) or the Receivable is contingent in any respect or for any reason;

 

(m)   the applicable Borrower has made any agreement with any Customer for any deduction therefrom, except for discounts or allowances made in the Ordinary Course of Business for prompt payment, all of which discounts or allowances are reflected in the calculation of the face value of each respective invoice related thereto;

 

(n)   any return, rejection or repossession of the merchandise has occurred or the rendition of services has been disputed;

 

(o)   such Receivable is not payable to a Borrower;

 

 

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(p)   such Receivable is included in the Formula Amount under the Export-Import Agreement; or

 

(q)   such Receivable is not otherwise satisfactory to Agent as determined in good faith by Agent in the exercise of its discretion in a reasonable manner.

 

Environmental Complaint ” shall have the meaning set forth in Section 4.19(d) hereof.

 

Environmental Laws ” shall mean all federal, state, provincial, territorial and local environmental, land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances and codes relating to the protection of the environment and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Substances and the rules, regulations, policies, guidelines, interpretations, decisions, orders and directives of federal, state and local governmental agencies and authorities with respect thereto.

 

Equipment ” shall mean and include as to each Borrower all of such Borrower’s goods (other than Inventory) whether now owned or hereafter acquired and wherever located including all equipment, machinery, apparatus, motor vehicles, fittings, furniture, furnishings, fixtures, parts, accessories and all replacements and substitutions therefor or accessions thereto.

 

Equity Interests ” of any Person shall mean any and all shares, rights to purchase, options, warrants, general, limited or limited liability partnership interests, member interests, participation or other equivalents of or interest in (regardless of how designated) equity of such Person, whether voting or nonvoting, including common stock, preferred stock, convertible securities or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act).

 

ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and the rules and regulations promulgated thereunder.

 

Eurodollar Rate ” shall mean for any Eurodollar Rate Loan for the then current Interest Period relating thereto, the interest rate per annum determined by Agent by dividing (the resulting quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the rate which appears on the Bloomberg Page BBAM1 (or on such other substitute Bloomberg page that displays rates at which Dollar deposits are offered by leading banks in the London interbank deposit market), or the rate which is quoted by another source selected by Agent which has been approved by the British Bankers’ Association as an authorized information vendor for the purpose of displaying rates at which Dollar deposits are offered by leading banks in the London interbank deposit market (an “Alternate Source”), at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period as the London interbank offered rate for Dollars for an amount comparable to such Eurodollar Rate Loan and having a borrowing date and a maturity comparable to such Interest Period (or if there shall at any time, for any reason, no longer exist a Bloomberg Page BBAM1 (or any substitute page) or any Alternate Source, a comparable replacement rate determined by Agent at such time (which determination shall be conclusive absent manifest error)), by (ii) a number equal 1.00 minus the Reserve Percentage. The Eurodollar Rate may also be expressed by the following formula:

 

 

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Average of London interbank offered rates  quoted by Bloomberg or  appropriate Successor as shown on

Eurodollar Rate =

Bloomberg Page BBAM1

1.00 - Reserve Percentage

 

The Eurodollar Rate shall be adjusted with respect to any Eurodollar Rate Loan that is outstanding on the effective date of any change in the Reserve Percentage as of such effective date.  The Agent shall give prompt notice to the Borrowing Agent of the Eurodollar Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.

 

Eurodollar Rate Loan ” shall mean an Advance at any time that bears interest based on the Eurodollar Rate.

 

Event of Default ” shall have the meaning set forth in Article X hereof.

 

Excess Cash Flow ” for any fiscal period shall mean, in each case for Katy on a Consolidated Basis, EBITDA for such fiscal period, minus Unfunded Capital Expenditures during such fiscal period, minus taxes actually paid during such fiscal period, minus dividends and distributions made during such period, minus Debt Payments made during such period, minus Management Fees paid in cash during such period, and minus transactional fees and expenses paid or incurred in connection with the consummation of this Agreement, provided (i) such fees and expenses are set forth in reasonable detail in the calculation of such Excess Cash Flow, and (ii) the amount of such fees and expenses which may be used to reduce the calculation of Excess Cash Flow may not exceed $250,000 in the aggregate.

 

Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

 

Executive Order No. 13224 ” shall mean the Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.

 

Ex-Im Agent ” shall mean the “Agent” pursuant to the Ex-Im Agreement, as such term is defined therein.

 

Export-Import Agreement ” or “ Ex-Im Agreement ” shall mean that certain Export-Import Revolving Credit and Security Agreement among Ex-Im Agent, Lenders and Continental of even date herewith (as the same may be amended, restated, supplemented or replaced from time to time).

 

Ex-Im Credit Documents ” shall mean any and all documents executed in connection with the Ex-Im Agreement.

 

Federal Funds Effective Rate ” for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed and rounded upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the “Federal Funds Effective Rate” as of the date of this Agreement; provided, if such Federal Reserve Bank (or its successor) does not announce such rate on any day, the "Federal Funds Effective Rate" for such day shall be the Federal Funds Effective Rate for the last day on which such rate was announced.

 

 

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Federal Funds Open Rate ” for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed) which is the daily federal funds open rate as quoted by ICAP North America, Inc. (or any successor) as set forth on the Bloomberg Screen BTMM for that day opposite the caption “OPEN” (or on such other substitute Bloomberg Screen that displays such rate), or as set forth on such other recognized electronic source used for the purpose of displaying such rate as selected by PNC (an “Alternate Source”) (or if such rate for such day does not appear on the Bloomberg Screen BTMM (or any substitute screen) or on any Alternate Source, or if there shall at any time, for any reason, no longer exist a Bloomberg Screen BTMM (or any substitute screen) or any Alternate Source, a comparable replacement rate determined by the PNC at such time (which determination shall be conclusive absent manifest error); provided however, that if such day is not a Business Day, the Federal Funds Open Rate for such day shall be the “open” rate on the immediately preceding Business Day.  If and when the Federal Funds Open Rate changes, the rate of interest with respect to any advance to which the Federal Funds Open Rate applies will change automatically without notice to the Borrowers, effective on the date of any such change.

 

Fixed Charge Coverage Ratio ” shall mean and include, with respect to any fiscal period, the ratio of (a) EBITDA for such period, minus Unfunded Capital Expenditures (other than Replacement CapEx) made during such period, minus distributions (including tax distributions) and dividends made during such period, minus without duplication, cash taxes paid during such period, to (b) all Debt Payments made during such period, plus all Management Fees paid in cash during such period.

 

Foreign Subsidiary ” of any Person, shall mean any Subsidiary of such Person that is not organized or incorporated in the United States or any State or territory thereof.

 

Formula Amount ” shall have the meaning set forth in Section 2.1(a) hereof.

 

Funded Debt ” shall mean, with respect to any Person, without duplication, all Indebtedness for borrowed money evidenced by notes, bonds, debentures, or similar evidences of Indebtedness that by its terms matures more than one year from, or is directly or indirectly renewable or extendible at such Person’s option under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one year from the date of creation thereof, and specifically including Capitalized Lease Obligations, current maturities of long-term debt, revolving credit and short term debt extendible beyond one year at the option of the debtor, and also including, in the case of Borrower, the Obligations and, without duplication, Indebtedness consisting of guaranties of Funded Debt of other Persons.

 

GAAP ” shall mean generally accepted accounting principles in the United States of America in effect from time to time.

 

 

15


 

 

General Intangibles ” shall mean and include as to each Borrower all of such Borrower’s general intangibles and intangibles (as such term is defined in the PPSA), whether now owned or hereafter acquired, including all payment intangibles, all choses in action, causes of action, corporate or other business records, inventions, designs, patents, patent applications, equipment formulations, manufacturing procedures, quality control procedures, trademarks, trademark applications, service marks, trade secrets, goodwill, copyrights, design rights, software, computer information, source codes, codes, records and updates, registrations, licenses, franchises, customer lists, tax refunds, tax refund claims, computer programs, all claims under guaranties, security interests or other security held by or granted to such Borrower to secure payment of any of the Receivables by a Customer (other than to the extent covered by Receivables) all rights of indemnification and all other intangible property of every kind and nature (other than Receivables).

 

Glit/Gemtex ” shall have the meaning set forth in the preamble of this Agreement.

 

Glit/Gemtex Inventory Advance Rate ” shall have the meaning set forth in Section 2.1(a)(y)(II)(ii) hereof.

 

Glit/Gemtex Receivable Advance Rate ” shall have the meaning set forth in Section 2.1(a)(y)(II)(i) hereof.

 

Glit/Gemtex Revolving Credit Note ” shall have the meaning set forth in Section 2.1(a)(y)(II)(iii) hereof.

 

Governmental Acts ” shall have the meaning set forth in Section 2.17 hereof.

 

Governmental Body ” shall mean any nation or government, any state, province, territory or other political subdivision thereof or any entity, authority, agency, division or department exercising the legislative, judicial, regulatory or administrative functions of or pertaining to a government.

 

Gross-up Payment ” shall have the meaning set forth in Section 3.10 hereof.

 

Guarantor ” shall mean Katy, and any other Person who may hereafter guarantee payment or performance of the whole or any part of the Obligations and “Guarantors” means collectively all such Persons.

 

Guarantor Security Agreement ” shall mean any security agreement executed by any Guarantor in favor of Agent securing the Obligations or the Guaranty of such Guarantor, in form and substance satisfactory to Agent.

 

Guaranty ” shall mean any guaranty of the Obligations executed by a Guarantor in favor of Agent for its benefit and for the ratable benefit of Lenders, in form and substance satisfactory to Agent.

 

Hazardous Discharge ” shall have the meaning set forth in Section 4.19(d) hereof.

 

 

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Hazardous Substance ” shall mean, without limitation, any flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or related materials as defined in CERCLA, the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 5101, et  seq.), RCRA or any other applicable Environmental Law and in the regulations adopted pursuant thereto.

 

Hazardous Wastes ” shall mean all waste materials subject to regulation under CERCLA, RCRA or applicable state law, and any other applicable Federal, state and provincial laws now in force or hereafter enacted relating to hazardous waste disposal.

 

Hedge Liabilities ” shall have the meaning provided in the definition of “Lender-Provided Interest Rate Hedge”.

 

Increased Tax Burden ” shall mean the additional federal, state, provincial or local taxes assumed to be payable by a member of any Borrower as a result of such Borrower’s status as a limited liability company as evidenced and substantiated by the tax returns filed by such Borrower as a limited liability company, with such taxes being calculated for all members at the highest marginal rate applicable to any member.

 

Indebtedness ” of a Person at a particular date shall mean all obligations of such Person which in accordance with GAAP would be classified upon a balance sheet as liabilities (except capital stock and surplus earned or otherwise) and in any event, without limitation by reason of enumeration, shall include all indebtedness, debt and other similar monetary obligations of such Person whether direct or guaranteed, and all premiums, if any, due at the required prepayment dates of such indebtedness, and  all indebtedness secured by a Lien on assets owned by such Person, whether or not such indebtedness actually shall have been created, assumed or incurred by such Person.  Any indebtedness of such Person resulting from the acquisition by such Person of any assets subject to any Lien shall be deemed, for the purposes hereof, to be the equivalent of the creation, assumption and incurring of the indebtedness secured thereby, whether or not actually so created, assumed or incurred.

 

Individual Formula Amount ” shall mean at the date of determination thereof, with respect to each Borrower an amount equal to: (a) up to the Receivables Advance Rate of Eligible Receivables of such Borrower, plus (b) up to the Inventory Advance Rate of the value of Eligible Inventory of such Borrower; minus (c) in the case of Continental, the amount of the Availability Block as in effect from time to time, and minus (d) in the case of each Borrower, such other reserves as Agent may reasonably deem proper and necessary from time to time.

 

Individual Maximum Revolving Advance Amount ” shall mean (i) with respect to Continental, as of any date of determination, an amount equal to $25,000,000 minus the aggregate principal amount of all then outstanding Revolving Advances made to Glit/Gemtex, minus the aggregate principal amount of all Advances then outstanding under the Ex-Im Agreement and (ii) with respect to Glit/Gemtex, the sum of $2,000,000.

 

 

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Intellectual Property ” shall mean property constituting under any Applicable Law a patent, patent application, copyright, trademark, service mark, trade name, mask work, trade secret or license or other right to use any of the foregoing.

 

Intellectual Property Claim ” shall mean the assertion by any Person of a claim (whether asserted in writing, by action, suit or proceeding or otherwise) that any Borrower’s ownership, use, marketing, sale or distribution of any Inventory, Equipment, Intellectual Property or other property or asset is violative of any ownership of or right to use any Intellectual Property of such Person.

 

“Intellectual Property Security Agreement ” shall mean that certain security agreement dated on or about the Closing Date among the Agent, the Borrowers and Katy, pursuant to which each Borrower and Katy shall have separately granted to the Agent, for the ratable benefit of the Lenders, a Lien on the Intellectual Property owned by such Person or in which such Person has any rights or interest, as the same may be amended, modified, supplemented or restated from time to time.

 

Interest Period ” shall mean the period provided for any Eurodollar Rate Loan pursuant to Section 2.2(b) hereof.

 

Interest Rate Hedge ” shall mean an interest rate exchange, collar, cap, swap, adjustable strike cap, adjustable strike corridor or similar agreements entered into by any Borrower or its Subsidiaries in order to provide protection to, or minimize the impact upon, such Borrower, any Guarantor and/or their respective Subsidiaries of increasing floating rates of interest applicable to Indebtedness.

 

Inventory ” shall mean and include as to each Borrower all of such Borrower’s now owned or hereafter acquired goods, merchandise and other personal property, wherever located, to be furnished under any consignment arrangement, contract of service or held for sale or lease, all raw materials, work in process, finished goods and materials and supplies of any kind, nature or description which are or might be used or consumed in such Borrower’s business or used in selling or furnishing such goods, merchandise and other personal property, and all documents of title or other documents representing them.

 

Inventory Advance Rate ” shall have the meaning set forth in Section 2.1(a)(y)(II)(ii) hereof.

 

Investment Property ” shall mean and include as to each Borrower, all of such Borrower’s now owned or hereafter acquired securities (whether certificated or uncertificated), securities entitlements, securities accounts, commodities contracts and commodities accounts.

 

ISP98 Rules ” shall have the meaning set forth in Section 2.10(b) hereof.

 

Issuer ” shall mean any Person who issues a Letter of Credit and/or accepts a draft pursuant to the terms hereof.  So long as PNC is the Agent, PNC shall be the sole Issuer.

 

Judgment Currency ” shall have the meaning set forth in Section 3.12 hereof.

 

 

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Katy ” shall have the meaning set forth in the preamble to this Agreement.

 

Katy on a Consolidated Basis ” shall mean the consolidation in accordance with GAAP of the accounts or other items of Katy and its Subsidiaries.

 

Leasehold Interests ” shall mean all of each Borrower’s right, title and interest in and to, and as lessee, of the premises identified on Schedule 4.19 hereto.

 

Lender ” and “ Lenders ” shall have the meaning ascribed to such term in the preamble to this Agreement and shall include each Person which becomes a permitted transferee, successor or assign of any Lender.

 

Lender Default ” shall have the meaning set forth in Section 2.23(a) hereof.

 

Lender-Provided Interest Rate Hedge ” shall mean an Interest Rate Hedge which is provided by any Lender and with respect to which the Agent confirms meets the following requirements: such Interest Rate Hedge (i) is documented in a standard International Swap Dealer Association Agreement, (ii) provides for the method of calculating the reimbursable amount of the provider's credit exposure in a reasonable and customary manner, and (iii) is entered into for hedging (rather than speculative) purposes.  The liabilities of any Borrower to the provider of any Lender-Provided Interest Rate Hedge (the “Hedge Liabilities”) shall be “Obligations” hereunder, guaranteed obligations under the Guaranty and secured obligations under the Guarantor Security Agreement and otherwise treated as Obligations for purposes of each of the Other Documents. The Liens securing the Hedge Liabilities shall be pari passu with the Liens securing all other Obligations under this Agreement and the Other Documents.

 

Letter of Credit Application ” shall have the meaning set forth in Section 2.10(a) hereof.

 

Letter of Credit Borrowing ” shall have the meaning set forth in Section 2.12(d) hereof.

 

Letter of Credit Fees ” shall have the meaning set forth in Section 3.2(a) hereof.

 

Letter of Credit Sublimit ” shall mean $3,500,000.

 

Letters of Credit ” shall have the meaning set forth in Section 2.9 hereof.

 

License Agreement ” shall mean any agreement between any Borrower and a Licensor pursuant to which such Borrower is authorized to use any Intellectual Property in connection with the manufacturing, marketing, sale or other distribution of any Inventory of such Borrower or otherwise in connection with such Borrower’s business operations.

 

Licensor ” shall mean any Person from whom any Borrower obtains the right to use (whether on an exclusive or non-exclusive basis) any Intellectual Property in connection with such Borrower’s manufacture, marketing, sale or other distribution of any Inventory or otherwise in connection with such Borrower’s business operations.

 

 

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Licensor/Agent Agreement ” shall mean an agreement between Agent and a Licensor, in form and content satisfactory to Agent, by which Agent is given the unqualified right, vis-a-vis such Licensor, to enforce Agent’s Liens with respect to and to dispose of any Borrower’s Inventory with the benefit of any Intellectual Property applicable thereto, irrespective of such Borrower’s default under any License Agreement with such Licensor.

 

Lien ” shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, security interest, lien (whether statutory or otherwise), Charge, claim or encumbrance, or preference, priority or other security agreement or preferential arrangement held or asserted in respect of any asset of any kind or nature whatsoever including any conditional sale or other title retention agreement, any lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction.

 

Lien Waiver Agreement ” shall mean an agreement which is executed in favor of Agent by a Person who owns or occupies premises at which any Collateral may be located from time to time and by which such Person shall waive any Lien that such Person may ever have with respect to any of the Collateral and shall authorize Agent from time to time to enter upon the premises to inspect or remove the Collateral from such premises or to use such premises to store or dispose of such Inventory.

 

Management Agreement ” means that certain Management Agreement between Katy and Subordinated Lender, dated as of June 18, 2001, as the same may be amended, modified, supplemented or restated from time to time, in accordance with the terms of this Agreement.

 

Management Fees ” means those certain fees payable by Katy pursuant to the Management Agreement, as in effect on the Closing Date.

 

Material Adverse Effect ” shall mean a material adverse effect on (a) the condition (financial or otherwise), results of operations, assets, business, or properties of (i) the Borrowers, taken as a whole, or (ii) Katy, (b) any Borrower’s ability to duly and punctually pay or perform the Obligations in accordance with the terms thereof, (c) the value of the Collateral, or Agent’s Liens on the Collateral or the priority of any such Lien or (d) the practical realization of the benefits of Agent’s and each Lender’s rights and remedies under this Agreement and the Other Documents.

 

Maximum Face Amount ” shall mean, with respect to any outstanding Letter of Credit, the face amount of such Letter of Credit including all automatic increases provided for in such Letter of Credit, whether or not any such automatic increase has become effective.

 

Maximum Loan Amount ” shall mean $33,182,000.

 

Maximum Revolving Advance Amount ” shall mean, as of any date of determination, the sum of $25,000,000 less the aggregate principal amount of all Advances then outstanding under the Ex-Im Agreement.

 

Maximum Undrawn Amount ” shall mean with respect to any outstanding Letter of Credit, the amount of such Letter of Credit that is or may become available to be drawn, including all automatic increases provided for in such Letter of Credit, whether or not any such automatic increase has become effective.

 

 

20


 

 

Modified Commitment Transfer Supplement ” shall have the meaning set forth in Section 16.3(d) hereof.

 

Mortgage ” shall mean that certain Deed To Secure Debt, Security Agreement and Assignment of Rents and Leases (Georgia), dated on or about the Closing Date, executed by Continental in favor of the Agent, for the ratable benefit of the Lenders, encumbering the real estate owned by Continental, and improvements, located at 809 Broad Street, Wrens, Georgia, together with all extensions, renewals, amendments, supplements, modifications, substitutions and replacements thereto and thereof.

 

Multiemployer Plan ” shall mean a “multiemployer plan” as defined in Sections 3(37) and 4001(a)(3) of ERISA to which contributions are required by any Borrower or any member of the Controlled Group.

 

Multiple Employer Plan ” shall mean a Plan which has two or more contributing sponsors (including any Borrower or any member of the Controlled Group) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.

 

Non-Defaulting Lender ” shall have the meaning set forth in Section 2.23(b) hereof.

 

Notes ” shall mean, collectively, the Term Notes and the Revolving Credit Notes.

 

Obligations ” shall mean and include any and all loans (including without limitation, all Advances), advances, debts, liabilities, obligations, covenants and duties owing by any Borrower to Lenders or Agent or to any other direct or indirect subsidiary or affiliate of Agent or any Lender of any kind or nature, present or future (including any interest or other amounts accruing thereon, and any costs and expenses of any Person payable by Borrower and any indemnification obligations payable by Borrower arising or payable after maturity, or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to any Borrower, whether or not a claim for post-filing or post-petition interest or other amounts is allowable or allowed in such proceeding), whether or not evidenced by any note, guaranty or other instrument, whether arising under any agreement, instrument or document (including this Agreement and the Other Documents), whether or not for the payment of money, whether arising by reason of an extension of credit, opening of a letter of credit, loan, equipment lease or guarantee, under any interest or currency swap, future, option or other similar agreement, or in any other manner, whether arising out of overdrafts or deposit or other accounts or electronic funds transfers, (whether through automated clearing houses or otherwise) or out of the Agent’s or any Lenders non-receipt of or inability to collect funds or otherwise not being made whole in connection with depository transfer check or other similar arrangements, whether direct or indirect (including those acquired by assignment or participation), absolute or contingent, joint or several, due or to become due, now existing or hereafter arising, contractual or tortious, liquidated or unliquidated, regardless of how such indebtedness or liabilities arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument, including, but not limited to, any and all of any Borrower’s Indebtedness and/or liabilities under this Agreement, the Export-Import Agreement or any other Ex-Im Credit Documents, the Other Documents or under any other agreement between Agent or Lenders and any Borrower and any amendments, extensions, renewals or increases and all costs and expenses of Agent and any Lender incurred in the documentation, negotiation, modification, enforcement, collection or otherwise in connection with any of the foregoing, including but not limited to reasonable attorneys’ fees and expenses and all obligations of any Borrower to Agent or Lenders to perform acts or refrain from taking any action.

 

 

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Old Lender ” shall mean Bank of America, N.A.

 

Order ” shall have the meaning set forth in Section 2.18 hereof.

 

Ordinary Course of Business ” shall mean with respect to any Borrower, the ordinary course of such Borrower’s business as conducted on the Closing Date.

 

Original Owner ” shall mean Katy.

 

Other Documents ” shall mean the Mortgage, the Notes, the Continental Perfection Certificates, any Guaranty, any Guarantor Security Agreement, the Intellectual Property Security Agreement, any Pledge Agreement, any Lender-Provided Interest Rate Hedge and any and all other agreements, instruments and documents, including the Subordination Agreement guaranties, pledges, powers of attorney, consents, interest or currency swap agreements or other similar agreements and all other writings heretofore, now or hereafter executed by any Borrower or any Guarantor and/or delivered to Agent or any Lender in respect of the transactions contemplated by this Agreement.

 

Out-of-Formula Loans ” shall have the meaning set forth in Section 16.2(b) hereof.

 

Parent ” of any Person shall mean a corporation or other entity owning, directly or indirectly at least 50% of the shares of stock or other ownership interests having ordinary voting power to elect a majority of the directors of the Person, or other Persons performing similar functions for any such Person.

 

Participant ” shall mean each Person who shall be granted the right by any Lender to participate in any of the Advances and who shall have entered into a participation agreement in form and substance satisfactory to such Lender.

 

Participation Advance ” shall have the meaning set forth in Section 2.12(d) hereof.

 

Participation Commitment ” shall mean each Lender’s obligation to buy a participation in the Letters of Credit issued hereunder.

 

Payee ” shall have the meaning set forth in Section 3.10 hereof.

 

Payment Office ” shall mean initially Two Tower Center Boulevard, East Brunswick, New Jersey 08816; thereafter, such other office of Agent, if any, which it may designate by notice to Borrowing Agent and to each Lender to be the Payment Office.

 

PBGC ” shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor.

 

 

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Pension Benefit Plan ” shall mean at any time any employee pension benefit plan (including a Multiple Employer Plan, but not a Multiemployer Plan) which is covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained or to which contributions are required by any member of the Controlled Group for employees of any member of the Controlled Group; or (ii) has at any time within the preceding five years been maintained or to which contributions have been required by any entity which was at such time a member of the Controlled Group for employees of any entity which was at such time a member of the Controlled Group.

 

Pentland Payments ” shall mean those certain payments made, on or before May 31, 2010 by Katy to Pentland USA, Inc. in the aggregate amount of up to $1,800,000.

 

 “ Permitted Encumbrances ” shall mean (a) Liens in favor of Agent for the benefit of Agent and Lenders; (b) Liens for taxes, assessments or other governmental charges not delinquent or being Properly Contested; (c) Liens disclosed in the financial statements referred to in Section 5.5, the existence of which Agent has consented to in writing; (d) deposits or pledges to secure obligations under worker’s compensation, social security or similar laws, or under unemployment insurance; (e) deposits or pledges to secure bids, tenders, contracts (other than contracts for the payment of money), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the Ordinary Course of Business; (f) Liens arising by virtue of the rendition, entry or issuance against any Borrower or any Subsidiary, or any property of any Borrower or any Subsidiary, of any judgment, writ, order, or decree for so long as each such Lien (I) is in existence for less than 30 consecutive days after it first arises or is being Properly Contested and (II) is at all times junior in priority to any Liens in favor of Agent; (g) mechanics’, workers’, materialmen’s or other like Liens arising in the Ordinary Course of Business with respect to obligations which are not due or which are being Properly Contested; (h) Liens placed upon fixed assets hereafter acquired to secure a portion of the purchase price thereof, provided that (I) any such lien shall not encumber any other property of any Borrower and (II) the aggregate amount of Indebtedness secured by such Liens incurred as a result of such purchases during any fiscal year shall not exceed the amount provided for in Section 7.6; (i)other Liens incidental to the conduct of any Borrower’s business or the ownership of its property and assets which were not incurred in connection with the borrowing of money or the obtaining of advances or credit, and which do not in the aggregate materially detract from Agent’s or Lenders’ rights in and to the Collateral or the value of any Borrower’s property or assets or which do not materially impair the use thereof in the operation of any Borrower’s business; (i) easements, rights-of-way, zoning restrictions, minor defects or irregularities in title and other charges or encumbrances, in each case, which do not interfere in any material respect with the Ordinary Course of Business of the Borrowers and their Subsidiaries; (j) any exceptions listed on Schedule B of the title insurance policies delivered to and accepted by, Agent and the Lenders under Section 8.1(g); and (k) Liens disclosed on Schedule 1.2 provided that such Liens shall secure only those obligations which they secure on the Closing Date (and extensions, renewals and refinancings such obligations permitted by Section 7.8 hereof) and shall not subsequently apply to any other property or assets of any Borrower other than the property and assets to which they apply as of the Closing Date.

 

 

23


 

 

Person ” shall mean any individual, sole proprietorship, partnership, corporation, business trust, joint stock company, trust, unincorporated organization, association, limited liability company, limited liability partnership, institution, public benefit corporation, joint venture, entity or Governmental Body (whether federal, state, provincial, territorial, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof).

 

Plan ” shall mean any employee benefit plan within the meaning of Section 3(3) of ERISA (including a Pension Benefit Plan and a Multiemployer Plan), maintained for employees of any Borrower or any member of the Controlled Group or any such Plan to which any Borrower or any member of the Controlled Group is required to contribute.

 

Pledge Agreement ” shall mean any pledge agreement executed on or after the Closing Date in favor of the Agent by any Person to secure the Obligations.

 

PNC ” shall have the meaning set forth in the preamble to this Agreement and shall extend to all of its successors and assigns.

 

PPSA ” shall mean the Personal Property Security Act (Ontario), the Civil Code of Quebec or any other applicable Canadian federal or provincial statute pertaining to the granting, perfecting, priority or ranking of security interests, liens, hypothecs on personal property, and any successor statutes, together with any regulations thereunder, in each case as in effect from time to time.  References to sections of the PPSA shall be construed to also refer to any successor sections.

 

Priority Payables ” shall mean (a) the full amount of the liabilities of any Borrower which (i) have a trust imposed to provide for payment or a security interest, pledge, lien, hypothec or charge ranking or capable of ranking senior to or pari passu with security interests, liens, hypothecs or charges securing the Obligations on any Collateral under any federal, provincial, state, county, district, municipal, local or foreign law or (ii) have a right imposed to provide for payment ranking or capable of ranking senior to or pari passu with the Obligations under federal, provincial, state, county, district, municipal, local or foreign law, regulation or directive, including, but not limited to, claims for unremitted and/or accelerated rents, taxes, wages, withholdings taxes, value added taxes, amounts payable to an insolvency administrator, employee withholdings or deductions, vacation pay, severance and termination pay, workers’ compensation obligations, government royalties or pension obligations in each case to the extent such trust, or security interest, lien hypothec or charge has been or may be imposed and (b) if a Default or Event of Default occurs which, in Agent’s sole judgment, exercised in a commercially reasonable manner, is not capable of cure, the amount equal to the aggregate value of the Inventory which the Agent, in good faith, and on a reasonable basis, considers is or may be subject to retention of title by a supplier or a right of a supplier to recover possession thereof, where such supplier’s right has priority over the security interests, liens, hypothecs or charges securing the Obligations, including, without limitation, Inventory subject to a right of a supplier to repossess goods pursuant to Section 81.1 of the Bankruptcy and Insolvency Act (Canada) or any applicable laws granting revendication or similar rights to unpaid suppliers or any similar laws of Canada or any other applicable jurisdiction (provided, that, to the extent such Inventory has been identified and has been excluded from Eligible Inventory, the amount owing to the supplier shall not be considered a Priority Payable).

 

 

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Pro Forma Balance Sheet ” shall have the meaning set forth in Section 5.5(a) hereof.

 

Pro Forma Financial Statements ” shall have the meaning set forth in Section 5.5(b) hereof.

 

Properly Contested ” shall mean, in the case of any Indebtedness or Lien, as applicable, of any Person (including any taxes) that is not paid as and when due or payable by reason of such Person’s bona fide dispute concerning its liability to pay same or concerning the amount thereof: (i) such Indebtedness or Lien, as applicable, is being properly contested in good faith by appropriate proceedings promptly instituted and diligently conducted; (ii) such Person has established appropriate reserves as shall be required in conformity with GAAP; (iii) the non-payment of such Indebtedness will not have a Material Adverse Effect and will not result in the forfeiture of any assets of such Person; (iv) no Lien is imposed upon any of such Person’s assets with respect to such Indebtedness unless such Lien is at all times junior and subordinate in priority to the Liens in favor of the Agent (except only with respect to property taxes that have priority as a matter of applicable state law) and enforcement of such Lien is stayed during the period prior to the final resolution or disposition of such dispute; (v) if such Indebtedness or Lien, as applicable, results from, or is determined by the entry, rendition or issuance against a Person or any of its assets of a judgment, writ, order or decree, enforcement of such judgment, writ, order or decree is stayed pending a timely appeal or other judicial review; and (vi) if such contest is abandoned, settled or determined adversely (in whole or in part) to such Person, such Person forthwith pays such Indebtedness and all penalties, interest and other amounts due in connection therewith.

 

Projections ” shall have the meaning set forth in Section 5.5(b) hereof.

 

Published  Rate ”  shall mean the rate of interest published each Business Day in the Wall Street Journal “Money Rates” listing under the  caption  “London Interbank Offered Rates” for a one month period (or, if no such rate is published therein for any reason, then the Published Rate shall be the Eurodollar Rate for a one month period as published in another publication selected by the Agent).

 

Purchasing CLO ” shall have the meaning set forth in Section 16.3(d) hereof.

 

Purchasing Lender ” shall have the meaning set forth in Section 16.3(c) hereof.

 

RCRA ” shall mean the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., as same may be amended from time to time.

 

Real Property ” shall mean all of each Borrower’s right, title and interest in and to the owned and leased premises identified on Schedule 4.19 hereto or which is hereafter owned or leased by any Borrower.

 

 

25


 

 

Receivables ” shall mean and include, as to each Borrower, all of such Borrower’s accounts, contract rights, instruments (including those evidencing indebtedness owed to such Borrower by its Affiliates), documents, chattel paper (including electronic chattel paper), general intangibles relating to accounts, drafts and acceptances, credit card receivables and all other forms of obligations owing to such Borrower arising out of or in connection with the sale or lease of Inventory or the rendition of services, all supporting obligations, guarantees and other security therefor, whether secured or unsecured, now existing or hereafter created, and whether or not specifically sold or assigned to Agent hereunder.

 

Receivables Advance Rate ” shall have the meaning set forth in Section 2.1(a)(y)(II)(i) hereof.

 

Receiver ” shall have the meaning set forth in Section 11.1(c).

 

Referenced Customer ” shall mean any of the following: Bunzl, Staples, Ace Hardware, Distribution America (Emery Waterhouse, House Hasson, Monroe Hardware, Florida Hardware, United Hardware, Jensen Wholesale, Five Start Group, HDW, Inc., Handy Hardware, Blish Mize), Lowes Companies, Orgill, Sherwin Williams, and Home Depot.

 

Register ” shall have the meaning set forth in Section 16.3(e) hereof.

 

Regulations ” shall have the meaning set forth in Section 3.11(a) hereof.

 

Reimbursement Obligation ” shall have the meaning set forth in Section 2.12(b) hereof.

 

Release ” shall have the meaning set forth in Section 5.7(c)(i) hereof.

 

Replacement CapEx ” shall mean Capital Expenditures referenced in clauses (i) and (ii) of the proviso in Section 7.6 hereof.

 

Reportable Event ” shall mean a reportable event described in Section 4043(c) of ERISA or the regulations promulgated thereunder.

 

Required Lenders ” shall mean Lenders holding at least fifty-one percent (51%) of the Advances and, if no Advances are outstanding, shall mean Lenders holding fifty-one percent (51%) of the Commitment Percentages; provided, however, if there are fewer than three (3) Lenders, Required Lenders shall mean all Lenders.

 

Reserve Percentage ” shall mean as of any day the maximum percentage in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including supplemental, marginal and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as “Eurocurrency Liabilities”.

 

Revolving Advances ” shall mean U.S. Revolving Advances and Canadian Revolving Advances.

 

Revolving Credit Note ” shall mean, collectively, the promissory notes referred to in Section 2.1(a) hereof.

 

 

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Revolving Interest Rate ” shall mean (a) with respect to Domestic Rate Loans, an interest rate per annum equal to the sum of the Applicable Margin plus the Alternate U.S. Base Rate, (b) with respect to Eurodollar Rate Loans, the sum of the Applicable Margin plus the Eurodollar Rate, (c) with respect to Canadian Revolving  Loans, an interest rate per annum equal to the sum of the Applicable Margin plus the Alternate Canadian Base Rate and (d) with respect to Canadian Revolving Advances which are not Canadian Revolving Loans, an interest rate per annum equal to the sum of the Applicable Margin plus the Alternate U.S. Base Rate.

 

SEC ” shall mean the Securities and Exchange Commission or any successor thereto.

 

Section 20 Subsidiary ” shall mean the Subsidiary of the bank holding company controlling PNC, which Subsidiary has been granted authority by the Federal Reserve Board to underwrite and deal in certain Ineligible Securities.

 

Securities Act ” shall mean the Securities Act of 1933, as amended.

 

Settlement Date ” shall mean the Closing Date and thereafter Wednesday or Thursday of each week or more frequently if Agent deems appropriate unless such day is not a Business Day in which case it shall be the next succeeding Business Day.

 

Subordinated Lender ” shall mean Kohlberg & Company, L.L.C.

 

Subordination Agreement ” shall mean the Management Fee Subordination Agreement, dated on or about the Closing Date, among Agent, Borrowers and Subordinated Lender.

 

Subsidiary ” of any Person shall mean a corporation or other entity of whose Equity Interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the directors of such corporation, or other Persons performing similar functions for such entity, are owned, directly or indirectly, by such Person.

 

Subsidiary Stock ” shall mean all of the issued and outstanding Equity Interests of any Subsidiary owned by any Borrower (not to exceed 65% of the Equity Interests of any Foreign Subsidiary).

 

Term ” shall have the meaning set forth in Section 13.1 hereof.

 

Term Loan ” shall mean, collectively, Term Loan A and Term Loan B.

 

Term Loan A ” shall mean the Advances in the original aggregate principal amount of $4,091,000 made pursuant to Section 2.4(a) hereof.

 

Term Loan B ” shall mean the Advances in the original aggregate principal amount of $4,091,000 made pursuant to Section 2.4(b) hereof.

 

Term Loan Rate ” shall mean (a) with respect to Domestic Rate Loans, an interest rate per annum equal to the sum of the Applicable Margin plus the Alternate U.S. Base Rate and (b) with respect to Eurodollar Rate Loans, the sum of the Applicable Margin plus the Eurodollar Rate.

 

Term Note ” shall mean, collectively, Term Note A and Term Note B.

 

 

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Term Note A ” shall mean the promissory note executed by Continental described in Section 2.4(a) hereof.

 

Term Note B ” shall mean the promissory note executed by Continental described in Section 2.4(b) hereof.

 

Termination Event ” shall mean: (i) a Reportable Event with respect to any Plan; (ii) the withdrawal of any Borrower or any member of the Controlled Group from a Plan during a plan year in which such entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to terminate a Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan; (v) any event or condition (a) which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (b) that may result in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or complete withdrawal within the meaning of Section 4203 or 4205 of ERISA, of any Borrower or any member of the Controlled Group from a Multiemployer Plan.

 

Toxic Substance ” shall mean and include any material present on the Real Property or the Leasehold Interests which has been shown to have significant adverse effect on human health or which is subject to regulation under the Toxic Substances Control Act (TSCA), 15 U.S.C. §§ 2601 et seq., applicable state law, or any other applicable Federal or state laws now in force or hereafter enacted relating to toxic substances.  “Toxic Substance” includes but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.

 

Trading with the Enemy Act ” shall mean the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any enabling legislation or executive order relating thereto.

 

Transactions ” shall have the meaning set forth in Section 5.5(a) hereof.

 

Transferee ” shall have the meaning set forth in Section 16.3(d) hereof.

 

UCC ” shall have the meaning set forth in Section 1.3 hereof.

 

UCP ” shall have the meaning set forth in Section 2.10(b) hereof.

 

Undrawn Availability ” at a particular date shall mean an amount equal to (a) the lesser of (i) (without duplication) the sum of the Formula Amount plus the Formula Amount under the Ex-Im Agreement or (ii) the Maximum Revolving Advance Amount less the Maximum Undrawn Amount of all outstanding Letters of Credit, minus (b) the sum of (i) the outstanding amount of Advances (other than the Term Loan) plus (ii) the outstanding amount of Advances under the Ex-Im Agreement, plus (iii) all amounts due and owing to any Borrower’s trade creditors which are outstanding sixty (60) days or more past their due date (excluding up to $75,000 of such payables which are being Properly Contested by Borrowers), plus (iv) fees and expenses for which Borrowers are liable but which have not been paid or charged to Borrowers’ Account under this Agreement or the Ex-Im Agreement.

 

 

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Unfunded Capital Expenditures ” shall mean Capital Expenditures funded with the proceeds of Revolving Advances or  Borrowers’ own funds other than through equity contributed subsequent to the Closing Date or purchase money or other financing or lease transactions permitted hereunder.

 

Uniform Commercial Code ” shall have the meaning set forth in Section 1.3 hereof.

 

U.S. Revolving Advances ” means revolving loans and advances made to Continental by the Lender pursuant to Section 2.1(a)(y)(I) hereof.

 

USA PATRIOT Act ” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.

 

Week ” shall mean the time period commencing with the opening of business on a Wednesday and ending on the end of business the following Tuesday.

 

Withholding Certificate ” shall have the meaning set forth in Section 3.11 hereof.

 

1.3.   Uniform Commercial Code Terms .  All terms used herein and defined in the Uniform Commercial Code (in respect of Collateral located in the United States) as adopted in the State of New York from time to time (the “UCC” or the “Uniform Commercial Code”) shall have the meaning given therein unless otherwise defined herein.  Without limiting the foregoing, the terms “accounts”, “chattel paper”, “commercial tort claims”, “instruments”, “general intangibles”, “goods”, “payment intangibles”, “proceeds”, “supporting obligations”, “securities”, “investment property”, “documents”, “deposit accounts”, “software”, “letter of credit rights”, “inventory”, “equipment” and “fixtures”, as and when used in the description of Collateral located in the United States shall have the meanings given to such terms in Articles 8 or 9 of the Uniform Commercial Code.  To the extent the definition of any category or type of collateral is expanded by any amendment, modification or revision to the Uniform Commercial Code, such expanded definition will apply automatically as of the date of such amendment, modification or revision.

 

       All terms used herein and defined in the PPSA (in respect of Collateral located in Canada) shall have the meaning given therein unless otherwise defined herein.  Without limiting the foregoing, the terms “accounts”, “chattel paper”, “goods”, “instruments”, “intangibles”, “proceeds”, “securities”, “investment property”, “document of title”, “inventory”, “equipment” and “fixtures”, as and when used in the description of Collateral located in Canada shall have the meanings given to such terms in the PPSA.  To the extent the definition of any category or type of collateral is expanded by any amendment, modification or revision to the PPSA, such expanded definition will apply automatically as of the date of such amendment, modification or revision.

 

1.4.   Certain Matters of Construction .  The terms “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision.  All references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement.  Any pronoun used shall be deemed to cover all genders. 

 

 

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Wherever appropriate in the context, terms used herein in the singular also include the plural and vice versa.  All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations.  Unless otherwise provided, all references to any instruments or agreements to which Agent is a party, including references to any of the Other Documents, shall include any and all modifications, supplements or amendments thereto, any and all restatements or replacements thereof and any and all extensions or renewals thereof.  All references herein to the time of day shall mean the time in New York, New York.  Unless otherwise provided, all financial calculations shall be performed with Inventory valued on a first-in, first-out basis, and the calculations contained in any compliance certificate required to be delivered pursuant to Section 9.7, 9.8 or 9.9 hereof shall clearly reflect the Borrower’s adjustment from a last-in-first-out inventory valuation to a first-in, first-out inventory valuation.  Whenever the words “including” or “include” shall be used, such words shall be understood to mean “including, without limitation” or “include, without limitation”.  A Default or Event of Default shall be deemed to exist at all times during the period commencing on the date that such Default or Event of Default occurs to the date on which such Default or Event of Default is waived in writing pursuant to this Agreement or, in the case of a Default, is cured within any period of cure expressly provided for in this Agreement; and an Event of Default shall “continue” or be “continuing” until such Event of Default has been waived in writing by the Required Lenders or all Lenders, as applicable.  Any Lien referred to in this Agreement or any of the Other Documents as having been created in favor of Agent, any agreement entered into by Agent pursuant to this Agreement or any of the Other Documents, any payment made by or to or funds received by Agent pursuant to or as contemplated by this Agreement or any of the Other Documents, or any act taken or omitted to be taken by Agent, shall, unless otherwise expressly provided, be created, entered into, made or received, or taken or omitted, for the benefit or account of Agent and Lenders. Wherever the phrase “to the best of Borrowers’ knowledge” or words of similar import relating to the knowledge or the awareness of any Borrower are used in this Agreement or Other Documents, such phrase shall mean and refer to (i) the actual knowledge of a senior officer of any Borrower or (ii) the knowledge that a senior officer would have obtained if he had engaged in good faith and had diligently performed his duties, including the making of such reasonably specific inquiries as may be reasonably necessary of the employees or agents of such Borrower and a good faith attempt to ascertain the existence or accuracy of the matter to which such phrase relates.  All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or otherwise within the limitations of, another covenant shall not avoid the occurrence of a default if such action is taken or condition exists.  In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect the incorrectness of a breach of a representation or warranty hereunder.

 

II.   ADVANCES, PAYMENTS.

 

2.1.   Revolving Advances .

 

(a)   Amount of Revolving Advances .  Subject to the terms and conditions set forth in this Agreement including Sections 2.1(b) and (c), each Lender, severally and not jointly, will make Revolving Advances to Borrowers in aggregate amounts outstanding at any time equal to such Lender’s Commitment Percentage of the lesser of (x) the Maximum Revolving Advance Amount less the aggregate Maximum Undrawn Amount of all issued and outstanding Letters of Credit or (y) an amount equal to the sum of (I) in the case of Continental:

 

 

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(i)   up to eighty-five percent (85%), subject to the provisions of Section 2.1(c) hereof (“Continental Receivables Advance Rate”), of Eligible Receivables of Continental, plus

 

(ii)   up to the lesser of (A) sixty-five percent (65%), subject to the provisions of Section 2.1(c) and (d) hereof, of the value of the Eligible Inventory of Continental, or (B) eighty-five percent (85%) of the appraised net orderly liquidation value of Eligible Inventory of Continental (as evidenced by an Inventory appraisal satisfactory to Agent in its sole discretion exercised in good faith and in a commercially reasonable manner) (as applicable, the “Continental Inventory Advance Rate” and together with the Continental Receivables Advance Rate, collectively, the “Continental Advance Rate”) minus

 

(iii)   the aggregate Maximum Undrawn Amount of all issued and outstanding Letters of Credit, minus

 

(iv)   the amount of the Availability Block, minus

 

(v)   such reserves as Agent may reasonably deem proper and necessary from time to time, plus

 

(II) in the case of Glit/Gemtex:

 

(i)   up to eighty-five percent (85%), subject to the provisions of Section 2.1(c) hereof (the “Glit/Gemtex Receivables Advance Rate”, and together with the Continental Receivables Advance Rate, collectively the “Receivables Advance Rate”) of Eligible Receivables of Glit/Gemtex, plus

 

(ii)   up the lesser of (A) sixty-five percent (65%), subject to the provisions of Section 2.1(c) and (d) hereof, of the value of the Eligible Inventory of Glit/Gemtex or (B) eighty-five percent (85%) of the appraisal net orderly liquidation value of Eligible Inventory of Glit/Gemtex (as evidenced by an Inventory appraisal satisfactory to Agent in its sole discretion exercised in good faith and in a commercially reasonable manner) (as applicable, the “Glit/Gemtex Inventory Advance Rate”, and together with the Continental Inventory Advance Rate, collectively, the “Inventory Advance Rate”; the Receivables Advance Rate and the Inventory Advance Rate, collectively, the “Advance Rates”), minus

 

(iii)   Such reserves (including reserves on account of Priority Payables) as Agent may reasonably deem proper and necessary from time to time.

 

The amount derived from (1) the sum of (x) Sections 2.1(a)(y)(I)(i) and (ii) minus (y) Section 2.1 (a)(y)(I)(iii, (iv) and (v), plus (2) the sum of (x) Sections 2.1(a)(y)(II)(i) and (ii) minus (y) Section 2.1(a)(y)(II)(iii) at any time and from time to time shall be referred to as the “Formula Amount”.  The Revolving Advances made to Continental shall be evidenced by one or more secured promissory notes (collectively, the “Continental Revolving Credit Note”) substantially in the form attached hereto as Exhibit 2.1(a).  The Revolving Advances made to Glit/Gemtex shall be evidenced by one or more secured promissory notes (collectively “Glit/Gemtex Revolving Credit Note”, and together with the Continental Revolving Credit Note, collectively the “Revolving Credit Note”) substantially in the form attached hereto as Exhibit 2.1(b).

 

 

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(b)   Individual Revolving Advances .  Each Lender, severally and not jointly, will make Revolving Advances to each Borrower in aggregate amounts outstanding at any time not greater than such Lender’s Commitment Percentage of the lesser of (x) such Borrower’s Individual Maximum Revolving Advance Amount less, in the case of Continental, the aggregate undrawn amount of outstanding Letters of Credit or (y) such Borrower’s Individual Formula Amount.  Canadian Lender, as a Lender under this Agreement, shall make Revolving Advances in Canadian Dollars and Dollars only to Glit/Gemtex, up to Glit/Gemtex’s Individual Maximum Revolving Advance Amount.  Canadian Lender shall not be permitted to make Revolving Advances to any Borrower that is not organized under the laws of Canada or a province or a territory thereof.

 

(c)   Discretionary Rights .  The Advance Rates may be increased or decreased by Agent at any time and from time to time in the exercise of its reasonable discretion.  Each Borrower consents to any such increases or decreases and acknowledges that decreasing the Advance Rates or increasing or imposing reserves may limit or restrict Advances requested by Borrowing Agent.  The rights of Agent under this subsection are subject to the provisions of Section 16.2(b).

 

(d)   Sublimit for Revolving Advances made against Eligible Inventory .  The aggregate amount of Revolving Advances made to Continental against Eligible Inventory of Continental shall not exceed in the aggregate, at any time outstanding $12,500,000, and the aggregate amount of Revolving Advances made to Glit/Gemtex against Eligible Inventory of Glit/Gemtex shall not exceed in the aggregate, at any time outstanding $750,000.

 

2.2.   Procedure for Revolving Advances Borrowing .

 

(a)   Borrowing Agent on behalf of any Borrower may notify Agent prior to 11:00 a.m. on a Business Day of a Borrower’s request to incur, on that day, a Revolving Advance hereunder.  Should any amount required to be paid as interest hereunder, or as fees or other charges under this Agreement or any other agreement with Agent or Lenders, or with respect to any other Obligation, become due, same shall be deemed a request for a Revolving Advance maintained as a Domestic Rate Loan, if Continental is the obligor with respect to such amount, fee, charge or other Obligation, or a Canadian Revolving Advance bearing interest based on the Alternate Canadian Base Rate (if the Canadian Revolving Advance is denominated in Canadian Dollars) or based on the Alternate U.S. Base Rate (if the Canadian Revolving Advance is denominated in Dollars), if Glit/Gemtex is the obligor with respect to such amount, fee, charge or other Obligation, in each case as of the date such payment is due, in the amount required to pay in full such interest, fee, charge or Obligation under this Agreement or any other agreement with Agent or Lenders, and such request shall be irrevocable.

 

 

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(b)   Notwithstanding the provisions of subsection (a) above, in the event Continental desires to obtain a Eurodollar Rate Loan, Continental shall give Agent written notice by no later than 11:00 a.m. on the day which is three (3) Business Days prior to the date such Eurodollar Rate Loan is to be borrowed, specifying (i) the date of the proposed borrowing (which shall be a Business Day), (ii) the type of borrowing and the amount on the date of such Advance to be borrowed, which amount shall be in a minimum amount of $250,000 and in integral multiples of $100,000 thereafter, and (iii) the duration of the first Interest Period therefor.  Interest Periods for Eurodollar Rate Loans shall be for one, two, or three months; provided, if an Interest Period would end on a day that is not a Business Day, it shall end on the next succeeding Business Day unless such day falls in the next succeeding calendar month in which case the Interest Period shall end on the next preceding Business Day.  No Eurodollar Rate Loan shall be made available to Continental during the continuance of a Default or an Event of Default.  After giving effect to each requested Eurodollar Rate Loan, including those which are converted from a Domestic Rate Loan under Section 2.2(d), there shall not be outstanding more than five (5) Eurodollar Rate Loans, in the aggregate.

 

(c)   Each Interest Period of a Eurodollar Rate Loan shall commence on the date such Eurodollar Rate Loan is made and shall end on such date as Continental may elect as set forth in subsection (b)(iii) above provided that the exact length of each Interest Period shall be determined in accordance with the practice of the interbank market for offshore Dollar deposits and no Interest Period shall end after the last day of the Term.

 

Continental shall elect the initial Interest Period applicable to a Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to Section 2.2(b) or by its notice of conversion given to Agent pursuant to Section 2.2(d), as the case may be.  Continental shall elect the duration of each succeeding Interest Period by giving irrevocable written notice to Agent of such duration not later than 11:00 a.m. on the day which is three (3) Business Days prior to the last day of the then current Interest Period applicable to such Eurodollar Rate Loan.  If Agent does not receive timely notice of the Interest Period elected by Continental, Continental shall be deemed to have elected to convert to a Domestic Rate Loan, subject to the terms of Section 2.2(d) hereof.

 

(d)   Continental may, on the last Business Day of the then current Interest Period applicable to any outstanding Eurodollar Rate Loan, or on any Business Day with respect to Domestic Rate Loans, convert any such loan into a loan of another type in the same aggregate principal amount, provided that (i) any conversion of a Eurodollar Rate Loan shall be made only on the last Business Day of the then current Interest Period applicable to such Eurodollar Rate Loan and (ii) no Event of Default shall have occurred and be continuing on the day on which Continental proposes to convert a Domestic Rate Loan to a Eurodollar Rate Loan.  If Continental desires to convert a loan, Continental shall give Agent written notice by no later than 11:00 a.m. (i) on the day which is three (3) Business Days’ prior to the date on which such conversion is to occur with respect to a conversion from a Domestic Rate Loan to a Eurodollar Rate Loan, or (ii) on the day which is one (1) Business Day prior to the date on which such conversion is to occur with respect to a conversion from a Eurodollar Rate Loan to a Domestic Rate Loan, specifying, in each case, the date of such conversion, the loans to be converted and if the conversion is from a Domestic Rate Loan to a Eurodollar Rate Loan, the duration of the first Interest Period therefor.

 

 

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(e)   At its option and upon written notice given prior to 11:00 a.m. (New York time) at least three (3) Business Days’ prior to the date of such prepayment, Continental may prepay the Eurodollar Rate Loans in whole at any time or in part from time to time with accrued interest on the principal being prepaid to the date of such repayment.  Continental shall specify the date of prepayment of Advances which are Eurodollar Rate Loans and the amount of such prepayment.  In the event that any prepayment of a Eurodollar Rate Loan is required or permitted on a date other than the last Business Day of the then current Interest Period with respect thereto, Continental shall indemnify Agent and Lenders therefor in accordance with Section 2.2(f) hereof.

 

(f)   Continental shall indemnify Agent and Lenders and hold Agent and Lenders harmless from and against any and all losses or expenses (excluding lost profits) that Agent and Lenders may sustain or incur as a consequence of any prepayment, conversion of or any default by Continental in the payment of the principal of or interest on any Eurodollar Rate Loan or failure by Continental to complete a borrowing of, a prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof has been given, including, but not limited to, any interest payable by Agent or Lenders to lenders of funds obtained by it in order to make or maintain its Eurodollar Rate Loans hereunder.  A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by Agent or any Lender to Continental shall be conclusive absent manifest error.

 

(g)   Notwithstanding any other provision hereof, if any Applicable Law, or any change therein or in the interpretation or application thereof, shall make it unlawful for any Lender (for purposes of this subsection (g), the term “Lender” shall include any Lender and the office or branch where any Lender or any corporation or bank controlling such Lender makes or maintains any Eurodollar Rate Loans) to make or maintain its Eurodollar Rate Loans, the obligation of Lenders to make Eurodollar Rate Loans hereunder shall forthwith be cancelled and Continental shall, if any affected Eurodollar Rate Loans are then outstanding, promptly upon request from Agent, either pay all such affected Eurodollar Rate Loans or convert such affected Eurodollar Rate Loans into loans of another type.  If any such payment or conversion of any Eurodollar Rate Loan is made on a day that is not the last day of the Interest Period applicable to such Eurodollar Rate Loan, Continental shall pay Agent, upon Agent’s request, such amount or amounts as may be necessary to compensate Lenders for any loss or expense sustained or incurred by Lenders in respect of such Eurodollar Rate Loan as a result of such payment or conversion, including (but not limited to) any interest or other amounts payable by Lenders to lenders of funds obtained by Lenders in order to make or maintain such Eurodollar Rate Loan.  A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by Lenders to Continental shall be conclusive absent manifest error.

 

2.3.   Disbursement of Advance Proceeds .  All Advances shall be disbursed from whichever office or other place Agent may designate from time to time and, together with any and all other Obligations of Borrowers to Agent or Lenders, shall be charged to the applicable sub-account of the Borrowers’ Account on Agent’s books.  During the Term, Borrowers may use the Revolving Advances by borrowing, prepaying and reborrowing, all in accordance with the terms and conditions hereof.  The proceeds of each Revolving Advance requested by Borrowing Agent on behalf of any Borrower or deemed to have been requested by any Borrower under Section 2.2(a) hereof shall, with respect to requested Revolving Advances to the extent Lenders make such Revolving Advances, be made available to the applicable Borrower on the day so requested by way of credit to such Borrower’s operating account at PNC, or such other bank as Borrowing Agent may designate following notification to Agent, in immediately available federal funds or other immediately available funds or, with respect to Revolving Advances deemed to have been requested by any Borrower, be disbursed to Agent to be applied to the outstanding Obligations giving rise to such deemed request, in which case such Obligations shall be deemed to have been repaid to the extent of the amount of such Revolving Advances so disbursed by Agent.

 

 

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2.4.   Term Loans .

 

(a)   Term Loan A .  Subject to the terms and conditions of this Agreement, each Lender, severally and not jointly, will make a Term Loan to Continental in the sum equal to such Lender’s Commitment Percentage of $4,091,000 (collectively “Term Loan A”).  All of the proceeds of Term Loan A shall be advanced on the Closing Date.  Subject to acceleration upon the occurrence of an Event of Default under this Agreement or termination of this Agreement, the principal balance of Term Loan A shall be payable in consecutive monthly installments, each of which shall be due and payable on the first Business Day of each month, commencing on July 1, 2010, as follows: twelve (12) installments of $100,000 each, followed by twelve (12) installments of $112,500 each, followed by ten (10) installments of $125,000 each, followed by a final installment equal to the then outstanding and unpaid principal balance of Term Loan A.  Term Loan A shall be evidenced by one or more secured promissory notes (collectively, “Term Note A”) in substantially the form attached hereto as Exhibit 2.4(a).  Term Loan A may consist of Domestic Rate Loans or Eurodollar Rate Loans, or a combination thereof, as Borrowing Agent may request.  In the event that Continental desires to obtain or extend any portion of Term Loan A as a Eurodollar Rate Loan or to convert any portion of Term Loan A then outstanding as a Domestic Rate Loan to a Eurodollar Rate Loan, Borrowing Agent shall comply with the notification requirements set forth in Sections 2.2(b) and (d) and the provisions of Sections 2.2(b) through (g) shall apply.

 

(b)   Term Loan B .  Subject to the terms and conditions of this Agreement, each Lender, severally and not jointly, will make a Term Loan to Continental in the sum equal to such Lender’s Commitment Percentage of $4,091,000 (collectively “Term Loan B”).  All of the proceeds of Term Loan B shall be advanced on the Closing Date.  Subject to acceleration upon the occurrence of an Event of Default under this Agreement or termination of this Agreement, the principal balance of Term Loan B shall be payable in full in one installment and shall be due on the last day of the Term, provided , however , that in the event that the outstanding principal balance of Term Loan A shall have been paid in full at least thirty (30) days prior to the last day of the Term, then commencing on the first Business Day of the month immediately following the date on which the outstanding principal balance of Term Loan A shall have been so paid in full, the principal balance of Term Loan B shall begin amortizing in consecutive monthly installments, each of which shall be due and payable on the first Business Day of each month, in the same monthly amounts of principal as the monthly installments of principal of Term Loan A are scheduled to be paid pursuant to Section 2.4(a). Term Loan B shall be evidenced by one or more secured promissory notes (collectively, “Term Note B”) in substantially the form attached hereto as Exhibit 2.4(b).  Term Loan B may consist of Domestic Rate Loans or Eurodollar Rate Loans, or a combination thereof, as Borrowing Agent may request.  In the event that Continental desires to obtain or extend any portion of Term Loan B as a Eurodollar Rate Loan or to convert any portion of Term Loan B then outstanding as a Domestic Rate Loan to a Eurodollar Rate Loan, Borrowing Agent shall comply with the notification requirements set forth in Sections 2.2(b) and (d) and the provisions of Sections 2.2(b) through (g) shall apply.

 

 

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2.5.   Maximum Advances .  The aggregate balance of Revolving Advances outstanding at any time shall not exceed the lesser of (a) the Maximum Revolving Advance Amount less the Maximum Undrawn Amount of all issued and outstanding Letters of Credit or (b) the Formula Amount.

 

2.6.   Repayment of Advances .

 

(a)   The Revolving Advances shall be due and payable in full on the last day of the Term subject to earlier prepayment as herein provided.  Term Loan A and Term Loan B shall be due and payable as provided in Section 2.4(a) and (b) hereof, respectively, and in the Term Note, subject to mandatory prepayments as herein provided.

 

(b)   Each Borrower recognizes that the amounts evidenced by checks, notes, drafts or any other items of payment relating to and/or proceeds of Collateral may not be collectible by Agent on the date received.  In consideration of Agent’s agreement to conditionally credit the applicable sub-account of the Borrowers’ Account as of the next Business Day following Agent’s receipt of those items of payment, each Borrower agrees that, in computing the charges under this Agreement, all items of payment shall be deemed applied by Agent on account of the Obligations one (1) Business Day after (i) the Business Day following Agent’s receipt of such payments via wire transfer or electronic depository check or (ii) in the case of payments received by Agent in any other form, the Business Day such payment constitutes good funds in Agent’s account.  Agent is not, however, required to credit the applicable sub-account of the Borrowers’ Account for the amount of any item of payment which is unsatisfactory to Agent (in its commercially reasonable judgment) and Agent may charge the applicable sub-account of the Borrowers’ Account for the amount of any item of payment which is returned to Agent unpaid.

 

(c)   All payments of principal, interest and other amounts payable hereunder, or under any of the Other Documents shall be made to Agent at the Payment Office not later than 1:00 P.M. (New York time) on the due date therefor currency in which the Advance is denominated in federal funds or other funds immediately available to Agent; except that all payments of principal, interest and other amounts payable hereunder, or under any of the Other Documents in respect of Canadian Advances shall be made to the Canadian Payment Office not later than 1:00 P.M. (New York time) on the due date therefore in the currency in which the Canadian Advance is denominated in immediately available funds.  Agent shall have the right to effectuate payment on any and all Obligations due and owing hereunder by charging the applicable sub-account within the Borrowers’ Account or by making Advances as provided in Section 2.2 hereof.

 

(d)   Borrowers shall pay principal, interest, and all other amounts payable hereunder, or under any related agreement, without any deduction whatsoever, including, but not limited to, any deduction for any setoff or counterclaim.

 

 

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2.7.   Repayment of Excess Advances .  The aggregate balance of Advances outstanding at any time in excess of the maximum amount of Advances permitted hereunder shall be immediately due and payable without the necessity of any demand, at the Payment Office, whether or not a Default or Event of Default has occurred.

 

2.8.   Statement of Account .  Agent shall maintain, in accordance with its customary procedures, a separate sub-loan account for each Borrower (collectively the “Borrowers’ Account”) in which shall be recorded separately the date and amount of each Advance made by Agent to each Borrower and the date and amount of each payment in respect thereof; provided, however, the failure by Agent to record the date and amount of any Advance shall not adversely affect Agent or any Lender.  Each month, Agent shall send to Borrowing Agent a statement showing the accounting for the Advances made, payments made or credited in respect thereof, and other transactions between Agent and each Borrower during such month.  The monthly statements shall be deemed correct and binding upon each Borrower in the absence of manifest error and shall constitute an account stated between Lenders and each Borrower unless Agent receives a written statement of such Borrower’s specific exceptions thereto within thirty (30) days after such statement is received by Borrowing Agent.  The records of Agent with respect to the loan account shall be conclusive evidence absent manifest error of the amounts of Advances and other charges thereto and of payments applicable thereto.

 

2.9.   Letters of Credit .  Subject to the terms and conditions hereof, Agent shall issue or cause the issuance of standby and/or trade letters of credit (“Letters of Credit”) for the account of Continental except to the extent that the issuance thereof would then cause the sum of (i) the outstanding Revolving Advances plus (ii) the Maximum Undrawn Amount of all issued and outstanding Letters of Credit to exceed the lesser of (x) the Maximum Revolving Advance Amount or (y) the Formula Amount (but excluding from the calculation of the Formula Amount the amount calculated under Section 2.1(a)(y)(I)(iii) hereof); provided, further, however, that Agent will not be required to issue or cause to be issued any Letters of Credit to the extent that the issuance of such Letters of Credit for the benefit of Continental would then cause the sum of (i) the outstanding Revolving Advances to Continental plus (ii) the Maximum Undrawn Amount of all issued outstanding Letters of Credit issued or caused to be issued on behalf of Continental to exceed the lesser of (x) Continental’s Individual Maximum Revolving Advance Amount or (y) Continental’s Individual Formula Amount.  The Maximum Undrawn Amount of all issued and outstanding Letters of Credit shall not exceed in the aggregate at any time the Letter of Credit Sublimit.  All disbursements or payments related to Letters of Credit shall be deemed to be Domestic Rate Loans, made to Continental, consisting of Revolving Advances and shall bear interest at the Revolving Interest Rate for Domestic Rate Loans.  Letters of Credit that have not been drawn upon shall not bear interest.

 

2.10.   Issuance of Letters of Credit .

 

(a)   Continental may request Agent to issue or cause the issuance of a Letter of Credit by delivering to Agent at the Payment Office, prior to 11:00 a.m. (New York time), at least five (5)  Business Days’ prior to the proposed date of issuance, Agent’s form of Letter of Credit Application (the “Letter of Credit Application”) completed to the satisfaction of Agent; and, such other certificates, documents and other papers and information as Agent may reasonably request.  Continental also has the right to give instructions and make agreements with respect to any application, any applicable letter of credit and security agreement, any applicable letter of credit reimbursement agreement and/or any other applicable agreement, any letter of credit and the disposition of documents, disposition of any unutilized funds, and to agree with Agent upon any amendment, extension or renewal of any Letter of Credit.

 

 

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(b)   Each Letter of Credit shall, among other things, (i) provide for the payment of sight drafts, other written demands for payment, or acceptances of usance drafts when presented for honor thereunder in accordance with the terms thereof and when accompanied by the documents described therein and (ii) have an expiry date not later than twelve (12) months after such Letter of Credit’s date of issuance and in no event later than the last day of the Term.  Each standby Letter of Credit shall be subject either to the Uniform Customs and Practice for Documentary Credits as most recently published by the International Chamber of Commerce at the time a Letter of Credit is issued (the “UCP”) or the International Standby Practices (ISP98-International Chamber of Commerce Publication Number 590) (the “ISP98 Rules”), and any subsequent revision or replacement thereof at the time a standby Letter of Credit is issued, as determined by Agent, and each trade Letter of Credit shall be subject to the UCP.

 

(c)   Agent shall use its reasonable efforts to notify Lenders of the request by Continental for a Letter of Credit hereunder.

 

2.11.   Requirements For Issuance of Letters of Credit .

 

(a)   Continental shall authorize and direct any Issuer to name Continental as the “Applicant” or “Account Party” of each Letter of Credit.  If Agent is not the Issuer of any Letter of Credit, Continental shall authorize and direct the Issuer to deliver to Agent all instruments, documents, and other writings and property received by the Issuer pursuant to the Letter of Credit and to accept and rely upon Agent’s instructions and agreements with respect to all matters arising in connection with the Letter of Credit, the application therefor or any acceptance thereof.

 

(b)   In connection with all Letters of Credit issued or caused to be issued by Agent under this Agreement, Continental hereby appoints Agent, or its designee, as its attorney, with full power and authority if an Event of Default shall have occurred, (i) to sign and/or endorse Continental’s name upon any warehouse or other receipts, letter of credit applications and acceptances, (ii) to sign Continental’s name on bills of lading; (iii) to clear Inventory through the United States of America Customs Department (“Customs”) in the name of Continental or Agent’s designee, and to sign and deliver to Customs officials powers of attorney in the name of Continental for such purpose; and (iv) to complete in Continental’s name or Agent’s, or in the name of Agent’s designee, any order, sale or transaction, obtain the necessary documents in connection therewith, and collect the proceeds thereof.  Neither Agent nor its attorneys will be liable for any acts or omissions nor for any error of judgment or mistakes of fact or law, except for Agent’s or its attorney’s gross negligence or willful misconduct.  This power, being coupled with an interest, is irrevocable as long as any Letters of Credit remain outstanding.

 

 

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2.12.   Disbursements, Reimbursement .

 

(a)   Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from Agent a participation in such Letter of Credit and each drawing thereunder in an amount equal to such Lender’s Commitment Percentage of the Maximum Face Amount of such Letter of Credit and the amount of such drawing, respectively.

 

(b)   In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, Agent will promptly notify Continental. Provided that Continental shall have received such notice, Continental shall reimburse (such obligation to reimburse Agent shall sometimes be referred to as a “Reimbursement Obligation”) Agent prior to 12:00 Noon, New York time on each date that an amount is paid by Agent under any Letter of Credit (each such date, a “Drawing Date”) in an amount equal to the amount so paid by Agent, unless such Letter of Credit is paid and Continental receives such notice after 12:00 Noon, New York time on such date, in which case the Drawing Date shall be deemed to be the next succeeding Business Day.  In the event Continental fails to reimburse Agent for the full amount of any drawing under any Letter of Credit by 12:00 Noon, New York time, on the Drawing Date, Agent will promptly notify each Lender thereof, and Continental shall be deemed to have requested that a Revolving Advance maintained as a Domestic Rate Loan be made by the Lenders to be disbursed on the Drawing Date under such Letter of Credit, subject to the amount of the unutilized portion of the lesser of (i) Continental’s Individual Maximum Revolving Advance Amount, less the Maximum Undrawn Amount of all issued and outstanding Letters of Credit, or (ii) Continental’s Individual Formula Amount and, in each case, subject to Section 8.2 hereof.  Any notice given by Agent pursuant to this Section 2.12(b) may be oral if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

 

(c)   Each Lender shall upon any notice pursuant to Section 2.12(b) make available to Agent an amount in immediately available funds equal to its Commitment Percentage of the amount of the drawing, whereupon the participating Lenders shall (subject to Section 2.12(d)) each be deemed to have made a Revolving Advance maintained as a Domestic Rate Loan to Continental in that amount.  If any Lender so notified fails to make available to Agent the amount of such Lender’s Commitment Percentage of such amount by no later than 2:00 p.m., New York time on the Drawing Date, then interest shall accrue on such Lender’s obligation to make such payment, from the Drawing Date to the date on which such Lender makes such payment (i) at a rate per annum equal to the Federal Funds Effective Rate during the first three days following the Drawing Date and (ii) at a rate per annum equal to the rate applicable to Revolving Advances maintained as a Domestic Rate Loans on and after the fourth day following the Drawing Date.  Agent will promptly give notice of the occurrence of the Drawing Date, but failure of Agent to give any such notice on the Drawing Date or in sufficient time to enable any Lender to effect such payment on such date shall not relieve such Lender from its obligation under this Section 2.12(c), provided that such Lender shall not be obligated to pay interest as provided in Section 2.12(c) (i) and (ii) until and commencing from the date of receipt of notice from Agent of a drawing.

 

 

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(d)   With respect to any unreimbursed drawing that is not converted into a Revolving Advance maintained as a Domestic Rate Loan to Continental in whole or in part as contemplated by Section 2.12(b), because of Continental’s failure to satisfy the conditions set forth in Section 8.2 hereof (other than any notice requirements) or for any other reason, Continental shall be deemed to have incurred from Agent a borrowing (each a “Letter of Credit Borrowing”) in the amount of such drawing. Such Letter of Credit Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the rate per annum applicable to a Revolving Advance maintained as a Domestic Rate Loan.  Each Lender’s payment to Agent pursuant to Section 2.12(c) shall be deemed to be a payment in respect of its participation in such Letter of Credit Borrowing and shall constitute a “Participation Advance” from such Lender in satisfaction of its Participation Commitment under this Section 2.12.

 

(e)   Each Lender’s Participation Commitment with respect to issued and outstanding Letters of Credit shall continue until the last to occur of any of the following events: (x) Agent ceases to be obligated to issue or cause to be issued Letters of Credit hereunder; (y) no Letter of Credit issued or created hereunder remains outstanding and uncancelled; and (z) all Persons (other than Continental) have been fully reimbursed for all payments made under or relating to Letters of Credit.

 

2.13.   Repayment of Participation Advances .

 

(a)   Upon (and only upon) receipt by Agent for its account of immediately available funds from Continental (i) in reimbursement of any payment made by the Agent under the Letter of Credit with respect to which any Lender has made a Participation Advance to Agent, or (ii) in payment of interest on any payment identified in clause (i) hereof, Agent will pay to each Lender, in the same funds as those received by Agent, the amount of such Lender’s Commitment Percentage of such funds, except Agent shall retain the amount of the Commitment Percentage of such funds of any Lender that did not make a Participation Advance in respect of such payment by Agent.

 

(b)   If Agent is required at any time to return to Continental, or to a trustee, receiver, liquidator, custodian, or any official in any insolvency proceeding, any portion of the payments made by Continental to Agent pursuant to Section 2.13(a) in reimbursement of a payment made under the Letter of Credit or interest or fee thereon, each Lender shall, on demand of Agent, forthwith return to Agent the amount of its Commitment Percentage of any amounts so returned by Agent plus interest at the Federal Funds Effective Rate.

 

2.14.   Documentation .  Continental agrees to be bound by the terms of the Letter of Credit Application and by Agent’s interpretations of any Letter of Credit issued on behalf of such Borrower and by Agent’s written regulations and customary practices relating to letters of credit, though Agent’s interpretations may be different from Continental’s own.  In the event of a conflict between the Letter of Credit Application and this Agreement, this Agreement shall govern.  It is understood and agreed that, except in the case of gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment), Agent shall not be liable for any error, negligence and/or mistakes, whether of omission or commission, in following Continental’s instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto.

 

 

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2.15.   Determination to Honor Drawing Request .  In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, Agent shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit and that any other drawing condition appearing on the face of such Letter of Credit has been satisfied in the manner so set forth.

 

2.16.   Nature of Participation and Reimbursement Obligations .  Each Lender’s obligation in accordance with this Agreement to make the Revolving Advances or Participation Advances as a result of a drawing under a Letter of Credit, and the obligations of Continental to reimburse Agent upon a draw under a Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Section 2.16 under all circumstances, including the following circumstances:

 

(i)   any set-off, counterclaim, recoupment, defense or other right which such Lender may have against Agent, Continental or any other Person for any reason whatsoever;

 

(ii)   the failure of Continental or any other Person to comply, in connection with a Letter of Credit Borrowing, with the conditions set forth in this Agreement for the making of a Revolving Advance, it being acknowledged that such conditions are not required for the making of a Letter of Credit Borrowing and the obligation of the Lenders to make Participation Advances under Section 2.12;

 

(iii)   any lack of validity or enforceability of any Letter of Credit;

 

(iv)   any claim of breach of warranty that might be made by Continental or any Lender against the beneficiary of a Letter of Credit, or the existence of any claim, set-off, recoupment, counterclaim, cross-claim, defense or other right which Continental or any Lender may have at any time against a beneficiary, any successor beneficiary or any transferee of any Letter of Credit or the proceeds thereof (or any Persons for whom any such transferee may be acting), Agent or any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between Continental or any Subsidiaries of Continental and the beneficiary for which any Letter of Credit was procured);

 

(v)   the lack of power or authority of any signer of (or any defect in or forgery of any signature or endorsement on) or the form of or lack of validity, sufficiency, accuracy, enforceability or genuineness of any draft, demand, instrument, certificate or other document presented under or in connection with any Letter of Credit, or any fraud or alleged fraud in connection with any Letter of Credit, or the transport of any property or provisions of services relating to a Letter of Credit, in each case even if Agent or any of Agent’s Affiliates has been notified thereof;

 

(vi)   payment by Agent under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit;

 

 

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(vii)   the solvency of, or any acts or omissions by, any beneficiary of any Letter of Credit, or any other Person having a role in any transaction or obligation relating to a Letter of Credit, or the existence, nature, quality, quantity, condition, value or other characteristic of any property or services relating to a Letter of Credit;

 

(viii)   any failure by the Agent or any of Agent’s Affiliates to issue any Letter of Credit in the form requested by Continental, unless the Agent has received written notice from Continental of such failure within three (3) Business Days after the Agent shall have furnished Continental a copy of such Letter of Credit and such error is material and no drawing has been made thereon prior to receipt of such notice;

 

(ix)   any Material Adverse Effect;

 

(x)   any breach of this Agreement or any Other Document by any party thereto;

 

(xi)   the occurrence or continuance of an insolvency proceeding with respect to Continental or any Guarantor;

 

(xii)   the fact that a Default or Event of Default shall have occurred and be continuing;

 

(xiii)   the fact that the Term shall have expired or this Agreement or the Obligations hereunder shall have been terminated; and

 

(xiv)   any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.

 

2.17.   Indemnity .  In addition to amounts payable as provided in Section 16.5, Continental hereby agrees to protect, indemnify, pay and save harmless Agent and any of Agent’s Affiliates that have issued a Letter of Credit from and against any and all claims, demands, liabilities, damages, taxes, penalties, interest, judgments, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which the Agent or any of Agent’s Affiliates may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit, other than as a result of (a) the gross negligence or willful misconduct of the Agent as determined by a final and non-appealable judgment of a court of competent jurisdiction or (b) the wrongful dishonor by the Agent or any of Agent’s Affiliates of a proper demand for payment made under any Letter of Credit, except if such dishonor resulted from any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Body (all such acts or omissions herein called “Governmental Acts”).

 

2.18.   Liability for Acts and Omissions .  As between Continental and Agent and Lenders, Continental assumes all risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit.  In furtherance and not in limitation of the respective foregoing, Agent shall not be responsible for:

 

 

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(i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged (even if Agent shall have been notified thereof); (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) the failure of the beneficiary of any such Letter of Credit, or any other party to which such Letter of Credit may be transferred, to comply fully with any conditions required in order to draw upon such Letter of Credit or any other claim of Continental against any beneficiary of such Letter of Credit, or any such transferee, or any dispute between or among Continental and any beneficiary of any Letter of Credit or any such transferee; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, facsimile, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of Agent, including any Governmental Acts, and none of the above shall affect or impair, or prevent the vesting of, any of Agent’s rights or powers hereunder. Nothing in the preceding sentence shall relieve Agent from liability for Agent’s gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment) in connection with actions or omissions described in such clauses (i) through (viii) of such sentence.  In no event shall Agent or Agent’s Affiliates be liable to Continental for any indirect, consequential, incidental, punitive, exemplary or special damages or expenses (including without limitation attorneys’ fees), or for any damages resulting from any change in the value of any property relating to a Letter of Credit.

 

Without limiting the generality of the foregoing, Agent and each of its Affiliates: (i) may rely on any oral or other communication believed in good faith by Agent or  such Affiliate to have been authorized or given by or on behalf of the applicant for a Letter of Credit; (ii) may honor any presentation if the documents presented appear on their face substantially to comply with the terms and conditions of the relevant Letter of Credit; (iii) may honor a previously dishonored presentation under a Letter of Credit, whether such dishonor was pursuant to a court order, to settle or compromise any claim of wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the same extent as if such presentation had initially been honored, together with any interest paid by Agent or its Affiliates; (iv) may honor any drawing that is payable upon presentation of a statement advising negotiation or payment, upon receipt of such statement (even if such statement indicates that a draft or other document is being delivered separately), and shall not be liable for any failure of any such draft or other document to arrive, or to conform in any way with the relevant Letter of Credit; (v) may pay any paying or negotiating bank claiming that it rightfully honored under the laws or practices of the place where such bank is located; and (vi) may settle or adjust any claim or demand made on Agent or its Affiliate in any way related to any order issued at the applicant’s request to an air carrier, a letter of guarantee or of indemnity issued to a carrier or any similar document (each an “Order”) and honor any drawing in connection with any Letter of Credit that is the subject of such Order, notwithstanding that any drafts or other documents presented in connection with such Letter of Credit fail to conform in any way with such Letter of Credit.

 

 

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In furtherance and extension and not in limitation of the specific provisions set forth above, any action taken or omitted by Agent under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith and without gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment), shall not put Agent under any resulting liability to Continental or any Lender.

 

2.19.   Additional Payments .  Any sums expended by Agent or any Lender due to any Borrower’s failure to perform or comply with its obligations under this Agreement or any Other Document including such Borrower’s obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to the applicable sub-account within the Borrowers’ Account as a Revolving Advance and added to the Obligations of such Borrower.

 

2.20.   Manner of Borrowing and Payment .

 

(a)   Each borrowing of Revolving Advances shall be advanced according to the applicable Commitment Percentages of Lenders.  The Term Loan shall be advanced according to the Commitment Percentages of Lenders.

 

(b)   Each payment (including each prepayment) by any Borrower on account of the principal of and interest on the Revolving Advances made to such Borrower shall be applied to such Revolving Advances pro rata according to the applicable Commitment Percentages of Lenders and for greater certainty, Canadian Lender’s funded portion of the Canadian Advances is intended by the Lenders to equal, at all times, such Canadian Lender’s pro rata share of the outstanding Revolving Advances.  Each payment (including each prepayment) by Continental on account of the principal of and interest on the applicable Term Note shall be applied to that portion of the applicable Term Loan evidenced by such Term Note pro rata according to the Commitment Percentages of Lenders.  Except as expressly provided herein, all payments (including prepayments) to be made by any Borrower on account of principal, interest and fees shall be made without set off or counterclaim and shall be made to Agent on behalf of the Lenders to the Payment Office, or to the Canadian Lender to the Canadian Payment Office, in each case on or prior to 1:00 P.M., New York time, in the same currency as advanced to such Borrower and in immediately available funds.

 

(c)   (i) Notwithstanding anything to the contrary contained in Sections 2.20(a) and (b) hereof, commencing with the first Business Day following the Closing Date, each borrowing of Revolving Advances made to such Borrower shall be advanced by Agent and each payment by any Borrower on account of Revolving Advances shall be applied first to those Revolving Advances advanced by Agent.  On or before 1:00 P.M., New York time, on each Settlement Date commencing with the first Settlement Date following the Closing Date, Agent and Lenders shall make certain payments as follows: (I) if the aggregate amount of new Revolving Advances made by Agent during the preceding Week (if any) exceeds the aggregate amount of repayments applied to outstanding Revolving Advances during such preceding Week, then each Lender shall provide Agent with funds in an amount equal to its applicable Commitment Percentage of the difference between (w) such Revolving Advances and (x) such repayments and (II) if the aggregate amount of repayments applied to outstanding Revolving Advances during such Week exceeds the aggregate amount of new Revolving Advances made during such Week, then Agent shall provide each Lender with funds in an amount equal to its applicable Commitment Percentage of the difference between (y) such repayments and (z) such Revolving Advances.

 

 

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(ii)   Each Lender shall be entitled to earn interest at the applicable Contract Rate on outstanding Advances which it has funded.

 

(iii)   Promptly following each Settlement Date, Agent shall submit to each Lender a certificate with respect to payments received and Advances made during the Week immediately preceding such Settlement Date.  Such certificate of Agent shall be conclusive in the absence of manifest error.

 

(d)   If any Lender or Participant (a “Benefited Lender”) shall at any time receive any payment of all or part of its Advances, or interest thereon, or receive any Collateral in respect thereof (whether voluntarily or involuntarily or by set-off) in a greater proportion than any such payment to and Collateral received by any other Lender, if any, in respect of such other Lender’s Advances, or interest thereon, and such greater proportionate payment or receipt of Collateral is not expressly permitted hereunder, such Benefited Lender shall purchase for cash from the other Lenders a participation in such portion of each such other Lender’s Advances, or shall provide such other Lender with the benefits of any such Collateral, or the proceeds thereof, as shall be necessary to cause such Benefited Lender to share the excess payment or benefits of such Collateral or proceeds ratably with each of the other Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.  Each Lender so purchasing a participation in such portion of another Lender’s Advances may exercise all rights of payment (including rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion.

 

(e)   Unless Agent shall have been notified by telephone, confirmed in writing, by any Lender that such Lender will not make the amount which would constitute its applicable Commitment Percentage of the Advances available to Agent, Agent may (but shall not be obligated to) assume that such Lender shall make such amount available to Agent on the next Settlement Date and, in reliance upon such assumption, make available to Borrowers a corresponding amount.  Agent will promptly notify Borrowing Agent of its receipt of any such notice from a Lender.  If such amount is made available to Agent on a date after such next Settlement Date, such Lender shall pay to Agent on demand an amount equal to the product of (i) the one month CDOR Rate for Advances in Canadian Dollars or the daily average Federal Funds Effective Rate (computed on the basis of a year of 360 days) for Advances in Dollars during such period as quoted by Agent, times (ii) such amount, times (iii) the number of days from and including such Settlement Date to the date on which such amount becomes immediately available to Agent.  A certificate of Agent submitted to any Lender with respect to any amounts owing under this paragraph (e) shall be conclusive, in the absence of manifest error.  If such amount is not in fact made available to Agent by such Lender within three (3) Business Days after such Settlement Date, Agent shall be entitled to recover such an amount, with interest thereon at the rate per annum then applicable to such Revolving Advances hereunder, on demand from Borrowers; provided, however, that Agent’s right to such recovery shall not prejudice or otherwise adversely affect Borrowers’ rights (if any) against such Lender.

 

 

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2.21.   Mandatory and Voluntary Prepayments .

 

(a)   Subject to the 180 day reinvestment provision contained in Section 4.3 hereof, when any Borrower sells or otherwise disposes of any Collateral other than Inventory in the Ordinary Course of Business, such Borrower shall repay the Advances made to such Borrower in an amount equal to the net proceeds of such sale (i.e., gross proceeds less the reasonable costs of such sales or other dispositions), such repayments to be made promptly but in no event more than one (1) Business Day following receipt of such net proceeds, and until the date of payment, such proceeds shall be held in trust for Agent.  The foregoing shall not be deemed to be implied consent to any such sale otherwise prohibited by the terms and conditions hereof.  Such repayments shall be applied, first , with respect to the first $50,000 of proceeds received by Borrowers in any fiscal year, to the Revolving Advances, subject to such Borrower’s ability to reborrow Revolving Advances in accordance with the terms hereof, second , in the case of Continental, to the outstanding principal installments of Term Loan A in the inverse order of the maturities thereof, and third , in the case of both B


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