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D & K HEALTHCARE RESOURCES, INC.,
D & K PHARMACY SOLUTIONS, INC.,
DIVERSIFIED HEALTHCARE, LLC,
JEWETT DRUG CO.,
MEDICAL & VACCINE PRODUCTS, INC.,
WALSH HEALTHCARE SOLUTIONS, INC.,
WALSH DISTRIBUTION, L.L.C.,
WALSH HEARTLAND, L.L.C.,
AS BORROWERS
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SEVENTH AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Dated: January 7, 2005
$635,000,000
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FLEET CAPITAL CORPORATION
INDIVIDUALLY AND AS AGENT FOR EACH LENDER WHICH IS
OR BECOMES A PARTY HERETO,
THE CIT GROUP/BUSINESS CREDIT, INC.,
AS SYNDICATION AGENT,
JPMORGAN CHASE BANK, N.A.
(FORMERLY KNOWN AS JPMORGAN CHASE BANK) AND
GENERAL ELECTRIC CAPITAL CORPORATION,
AS CO-DOCUMENTATION AGENT,
CONGRESS FINANCIAL CORPORATION AND
LASALLE BUSINESS CREDIT, LLC,
AS CO-AGENT,
BANC OF AMERICA SECURITIES LLC,
AS LEAD ARRANGER
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TABLE OF CONTENTS
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Page
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SECTION 1. CREDIT
FACILITY...............................................................
1
1.1.
Loans........................................................................
2
1.2. Letters of Credit; LC
Guaranties............................................. 4
1.3. Incremental Last Out
Loan.................................................... 4
1.4. All Loans to Constitute One Obligation; Joint and Several
Liability.......... 5
1.5. Appointment of D&K as Borrower
Representative................................ 5
1.6. Commitment
Increase..........................................................
5
SECTION 2. INTEREST, FEES AND
CHARGES.................................................... 6
2.1.
Interest.....................................................................
6
2.2. Computation of Interest and
Fees............................................. 7
2.3. Fee
Letter...................................................................
7
2.4. Letter of Credit and LC Guaranty
Fees........................................ 8
2.5. Unused Line
Fee..............................................................
8
2.6. Reimbursement of
Expenses.................................................... 9
2.7. Audit
Fees...................................................................
9
2.8. Bank
Charges.................................................................
10
2.9. Collateral Protection Expenses;
Appraisals................................... 10
2.10. Payment of
Charges...........................................................
10
2.11. No
Deductions................................................................
10
SECTION 3. LOAN
ADMINISTRATION...........................................................
11
3.1. Manner of Borrowing Revolving Credit Loans/LIBOR
Option...................... 11
3.2.
Payments.....................................................................
13
3.3. Mandatory and Optional
Prepayments........................................... 14
3.4. Application of Payments and
Collections...................................... 15
3.5. All Loans to Constitute One
Obligation....................................... 16
3.6. Loan
Account.................................................................
16
3.7. Statements of
Account........................................................
16
3.8. Increased
Costs..............................................................
16
3.9. Sharing of Payments,
Etc..................................................... 18
3.10. Effect On Prior Loans; Prior Loan and Security
Agreement..................... 18
SECTION 4. TERM AND
TERMINATION..........................................................
19
4.1. Term of
Agreement............................................................
19
4.2.
Termination..................................................................
19
SECTION 5. SECURITY
INTERESTS............................................................
20
5.1. Security Interest in
Collateral.............................................. 20
5.2. Other
Collateral.............................................................
21
5.3. Lien Perfection; Further
Assurances.......................................... 22
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5.4. Lien on
Realty...............................................................
22
SECTION 6. COLLATERAL
ADMINISTRATION.....................................................
23
6.1.
General......................................................................
23
6.2. Administration of
Accounts................................................... 24
6.3. Administration of
Inventory.................................................. 25
6.4. Administration of
Equipment.................................................. 26
6.5. Payment of
Charges...........................................................
26
SECTION 7. REPRESENTATIONS AND
WARRANTIES................................................ 26
7.1. General Representations and
Warranties....................................... 26
7.2. Continuous Nature of Representations and
Warranties.......................... 33
7.3. Survival of Representations and
Warranties................................... 34
SECTION 8. COVENANTS AND CONTINUING
AGREEMENTS........................................ 34
8.1. Affirmative
Covenants........................................................
34
8.2. Negative
Covenants...........................................................
37
8.3. Specific Financial
Covenants................................................. 44
SECTION 9. CONDITIONS
PRECEDENT..........................................................
45
9.1.
Documentation................................................................
45
9.2. No
Default...................................................................
45
9.3. Other
Conditions.............................................................
45
9.4.
Availability.................................................................
45
9.5. No
Litigation................................................................
45
9.6. Diligence and
Appraisal......................................................
45
9.7. Material Adverse
Effect...................................................... 46
9.8.
Fees.........................................................................
46
9.9. Financial
Information........................................................
46
9.10.
Capitalization...............................................................
46
9.11.
Consent......................................................................
46
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON
DEFAULT............................ 46
10.1. Events of
Default............................................................
46
10.2. Acceleration of the
Obligations.............................................. 49
10.3. Other
Remedies...............................................................
49
10.4. Set Off and Sharing of
Payments.............................................. 51
10.5. Remedies Cumulative; No
Waiver............................................... 51
SECTION 11.
AGENT........................................................................
52
11.1. Authorization and
Action..................................................... 52
11.2. Agent's Reliance,
Etc........................................................ 52
11.3. Fleet and
Affiliates.........................................................
53
11.4. Lender Credit
Decision.......................................................
53
11.5.
Indemnification..............................................................
54
11.6. Rights and Remedies to be Exercised by Agent
Only............................ 54
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11.7. Agency Provisions Relating to
Collateral..................................... 54
11.8. Agent's Right to Purchase
Commitments........................................ 55
11.9. Right of Sale, Assignment,
Participations.................................... 55
11.10.
Amendment....................................................................
58
11.11. Resignation of Agent; Appointment of
Successor............................... 58
11.12. Audit and Examination Reports; Disclaimer by
Lenders......................... 59
11.13. Syndication Agent/Documentation
Agent/Co-Agent............................... 59
SECTION 12.
MISCELLANEOUS................................................................
60
12.1. Power of
Attorney............................................................
60
12.2.
Indemnity....................................................................
61
12.3. Sale of
Interest.............................................................
61
12.4.
Severability.................................................................
61
12.5. Successors and
Assigns.......................................................
61
12.6. Cumulative Effect; Conflict of
Terms......................................... 61
12.7. Execution in
Counterparts....................................................
62
12.8.
Notice.......................................................................
62
12.9.
Consent......................................................................
63
12.10. Credit
Inquiries.............................................................
63
12.11. Time of
Essence..............................................................
63
12.12. Entire
Agreement.............................................................
63
12.13.
Interpretation...............................................................
63
12.14. Intentionally
Omitted........................................................
63
12.15. GOVERNING LAW; CONSENT TO
FORUM.............................................. 63
12.16. WAIVERS BY
BORROWERS.........................................................
64
12.17. Private Sale; Commercial
Reasonableness...................................... 65
12.18.
Confidentiality..............................................................
65
12.19.
Advertisement................................................................
66
SECTION 13. CROSS
GUARANTY...............................................................
66
13.1.
Cross-Guaranty...............................................................
66
13.2. Waivers by
Borrowers.........................................................
67
13.3. Benefit of
Guaranty..........................................................
67
13.4. Waiver of Subrogation,
Etc................................................... 67
13.5. Election of
Remedies.........................................................
68
13.6.
Limitation...................................................................
68
13.7. Contribution with Respect to Guaranty
Obligations............................ 69
13.8. Liability
Cumulative.........................................................
69
SECTION 14. AMENDMENT AND RESTATEMENT OF EXISTING LOAN AND
SECURITY AGREEMENT........... 70
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SEVENTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS SEVENTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
is
made as of this 7th day of January, 2005, by and among FLEET
CAPITAL CORPORATION
("Fleet"), a Rhode Island corporation, individually as a Lender
and as Agent
("Agent") for itself and each other financial institution which
is or becomes a
party hereto (each such financial institution, including Fleet,
is referred to
hereinafter individually as a "Lender" and collectively as the
"Lenders"), the
LENDERS, D&K HEALTHCARE RESOURCES, INC., a Delaware
corporation ("D&K"), D & K
PHARMACY SOLUTIONS, INC., a Delaware corporation ("D&K
Pharmacy Solutions"),
JEWETT DRUG CO., a South Dakota corporation ("Jewett"),
DIVERSIFIED HEALTHCARE,
LLC, a Kentucky limited liability company ("DH"), MEDICAL &
VACCINE PRODUCTS,
INC. d/b/a DEVICTORIA MEDICAL, a Puerto Rico corporation
("MVP"), WALSH
HEALTHCARE SOLUTIONS, INC., an Arkansas corporation ("Walsh"),
WALSH
DISTRIBUTION, L.L.C., an Arkansas limited liability company
("Walsh
Distribution"), WALSH HEARTLAND, L.L.C., an Arkansas limited
liability company
("Walsh Heartland"; D&K, D&K Pharmacy Solutions, Jewett,
DH, MVP, Walsh, Walsh
Distribution and Walsh Heartland are sometimes hereafter
referred to
individually as a "Borrower" and collectively as
"Borrowers").
RECITALS
WHEREAS, D&K, Jewett, DH, MVP, Walsh, Walsh Distribution,
Walsh
Heartland, myhca, RxDirect, Inc., Agent and certain of the
Lenders signatory
hereto are parties to that certain Sixth Amended and Restated
Loan and Security
Agreement (as supplemented, restated, amended or otherwise
modified from time to
time, the "Prior Loan and Security Agreement"), dated as of
March 28, 2003,
pursuant to which the Agent and the other Lenders party thereto
provided to
Borrowers a revolving loan commitment of $600,000,000 (such
commitment being
herein referred to as the "Prior Commitment" and the Loans and
Obligations
outstanding pursuant thereto being herein referred to as the
"Prior Loans"); and
WHEREAS, Borrowers desire that Lenders, among other things,
provide
an additional incremental last out loan facility in the
aggregate principal
amount of $35,000,000 to Borrowers and extend the maturity of
the prior
revolving credit facility and Lenders are willing to provide
Borrower with Loan
Commitments in that amount upon the terms and conditions set
forth herein;
WHEREAS, capitalized terms used in this Agreement shall have
the
meanings assigned to them in Appendix A, General Definitions.
Accounting terms
not otherwise specifically defined herein shall be construed in
accordance with
GAAP consistently applied. These Recitals shall be construed as
part of the
Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual
covenants hereinafter contained, and for other good and valuable
consideration,
the parties hereto agree as follows:
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon
the
representations and warranties made in, this Agreement and the
other Loan
Documents, Lenders agree to make a credit facility of up to
$635,000,000 (as the
Revolving Loan Commitment may be increased pursuant to Section
1.6) available
upon Borrower Representative's request therefor, as follows:
<PAGE>
1.1 Loans.
1.1.1. Revolving Credit Loans. Each Lender agrees, severally and
not
jointly, for so long as no Default or Event of Default exists,
to make Revolving
Credit Loans in the aggregate to Borrowers from time to time
during the period
from the date hereof to but not including the last day of the
Term, as requested
by Borrower Representative in the manner set forth in subsection
3.1.1 hereof,
up to a maximum principal amount at any time outstanding equal
to the lesser of
(i) such Lender's Revolving Loan Commitment minus the product of
such Lender's
Revolving Loan Percentage and the LC Amount minus the product of
such Lender's
Revolving Loan Percentage and reserves, if any and (ii) the
product of such
Lender's Revolving Loan Percentage and an amount equal to the
Borrowing Base at
such time minus the product of such Lender's Revolving Loan
Percentage and the
LC Amount minus the product of such Lender's Revolving Loan
Percentage and
reserves, if any. Agent shall have the right to establish
reserves in such
amounts, and with respect to such matters, as Agent shall
reasonably deem
necessary or appropriate in its reasonable credit judgment,
against the amount
of Revolving Credit Loans which Borrower Representative may
otherwise request
under this subsection 1.1.1 including without limitation with
respect to (i)
price adjustments, damages, unearned discounts, rebates,
returned products or
other matters for which credit memoranda are issued in the
ordinary course of
any Borrower's business; (ii) dilution related to Accounts;
(iii) shrinkage,
spoilage and obsolescence of any Borrower's Inventory; (iv) slow
moving
Inventory; (v) other sums chargeable against any Borrower's Loan
Account as
Revolving Credit Loans under any section of this Agreement; (vi)
amounts owing
by any Borrower to any Person to the extent secured by a Lien
on, or trust over,
any Property of any Borrower other than Permitted Liens; (vii)
amounts owing by
any Borrower in connection with Product Obligations; and (viii)
such other
specific events, conditions or contingencies as to which Agent,
in its
reasonable credit judgment, determines reserves should be
established from time
to time hereunder. The Revolving Credit Loans shall be repayable
in accordance
with the terms of the Revolving Notes and shall be secured by
all of the
Collateral.
1.1.2. Overadvances. Insofar as Borrower Representative may
request
and Agent or Majority Lenders (as provided below) may be willing
in their sole
and absolute discretion to make Revolving Credit Loans to
Borrowers at a time
when the unpaid balance of Revolving Credit Loans plus the sum
of the LC Amount
plus the amount of LC Obligations that have not been reimbursed
by Borrowers or
funded with a Revolving Credit Loan, plus reserves, exceeds, or
would exceed,
with the making of any such Revolving Credit Loan, the Borrowing
Base (any such
Loan or Loans being herein referred to individually as an
"Overadvance" and
collectively, as "Overadvances"), Agent shall enter such
Overadvances as debits
in the Loan Account. All Overadvances shall be repaid on demand,
shall be
secured by the Collateral and shall bear interest as provided in
this Agreement
for Revolving Credit Loans generally. Any Overadvance made
pursuant to the terms
hereof shall be made by all Lenders ratably in accordance with
their respective
Revolving Loan Percentages. Overadvances in the aggregate amount
of $5,000,000
or less may, unless a Default or Event of Default has occurred
and is
continuing, be made in the sole and absolute discretion of
Agent. Overadvances
in an aggregate amount of more than $5,000,000 but less than
$10,000,000 may,
unless a Default or an Event of Default has occurred and is
continuing, be made
in the sole and
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absolute discretion of Majority Lenders. Overadvances in an
aggregate amount of
$10,000,000 or more and Overadvances to be made after the
occurrence and during
the continuation of a Default or an Event of Default shall
require the consent
of all Lenders. The foregoing notwithstanding, in no event,
unless otherwise
consented to by all Lenders, (w) shall any Overadvances be
outstanding for more
than ninety (90) consecutive days, (x) after all outstanding
Overadvances have
been repaid, shall Agent or Lenders make any additional
Overadvances unless
thirty (30) days or more have expired since the last date on
which any
Overadvances were outstanding, (y) shall Overadvances be
outstanding on more
than one hundred twenty (120) days within any one hundred eighty
day (180)
period or (z) shall Agent make Revolving Credit Loans on behalf
of Lenders under
this subsection 1.1.2 to the extent such Revolving Credit Loans
would cause a
Lender's share of the Revolving Credit Loans to exceed such
Lender's Revolving
Loan Commitment minus such Lender's Revolving Loan Percentage of
the LC Amount.
1.1.3. Use of Proceeds. The Revolving Credit Loans shall be
used
solely for (i) the refinancing by Borrowers of their obligations
under the Prior
Loan and Security Agreement held by Lenders that do not become
Lenders
hereunder, (ii) Borrowers' working capital and general corporate
purposes in a
manner consistent with the provisions of this Agreement and all
applicable laws,
and (iii) other purposes permitted under this Agreement.
1.1.4. Swingline Loans. In order to reduce the frequency of
transfers of funds from Lenders to Agent for making Revolving
Credit Loans and
for so long as no Default or Event of Default exists, Agent
shall be permitted
(but not required) to make Revolving Credit Loans to Borrowers
upon request by
Borrower Representative (such Revolving Credit Loans to be
designated as
"Swingline Loans"); provided that the aggregate amount of
Swingline Loans
outstanding at any time will not (i) exceed $30,000,000; (ii)
when added to the
principal amount of Agent's other Revolving Credit Loans then
outstanding plus
Agent's Revolving Loan Percentage of the LC Amount, exceed
Agent's Revolving
Loan Commitment; or (iii) when added to the principal amount of
all other
Revolving Credit Loans then outstanding plus the LC Amount,
exceed the Borrowing
Base. Within the foregoing limits, Borrowers may borrow, repay
and reborrow
Swingline Loans. All Swingline Loans shall be treated as
Revolving Credit Loans
for purposes of this Agreement, except that, notwithstanding
anything herein to
the contrary (other than as set forth in the next succeeding
sentence), all
principal and interest paid with respect to Swingline Loans
shall be for the
sole account of Agent in its capacity as the lender of Swingline
Loans.
Notwithstanding the foregoing, not less frequently than once per
month and not
more than 2 Business Days after (a) Lenders receive notice from
Agent that a
Swingline Loan has been advanced in respect of a drawing under a
Letter of
Credit or LC Guaranty or (b) in any other circumstance, demand
is made by Agent
during the continuance of an Event of Default, each Lender shall
irrevocably and
unconditionally purchase and receive from Agent, without
recourse or warranty
from Agent, an undivided interest and participation in each
Swingline Loan to
the extent of such Lender's Revolving Loan Percentage thereof,
by paying to
Agent, in same day funds, an amount equal to such Lender's
Revolving Loan
Percentage of such Swingline Loan.
3
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1.1.5. Agent Loans. Upon the occurrence and during the
continuance of an Event of Default, Agent, in its sole
discretion, may
make Revolving Credit Loans on behalf of Lenders, in an
aggregate amount
not to exceed $5,000,000, if Agent, in its reasonable business
judgment,
deems that such Revolving Credit Loans are necessary or
desirable (i) to
protect all or any portion of the Collateral, (ii) to enhance
the
likelihood, or maximize the amount of, repayment of the Loans
and the
other Obligations, or (iii) to pay any other amount chargeable
to any
Borrower pursuant to this Agreement, including without
limitation costs,
fees and expenses as described in Sections 2.6 and 2.7
(hereinafter,
"Agent Loans"); provided, that (a) in no event shall the maximum
principal
amount of the Revolving Credit Loans exceed the aggregate
Revolving Loan
Commitments and (b) Majority Lenders may at any time revoke
Agent's
authorization to make Agent Loans (any such revocation must be
in writing
and shall become effective prospectively upon Agent's receipt
thereof).
Each Lender shall be obligated to advance its Revolving Loan
Percentage of
each Agent Loan. If Agent Loans are made pursuant to the
preceding
sentence, then (1) the Borrowing Base shall be deemed increased
by the
amount of such permitted Agent Loans, but only for so long as
Agent allows
such Agent Loans to be outstanding, and (2) all Lenders that
have
committed to make Revolving Credit Loans shall be bound to make,
or permit
to remain outstanding, such Agent Loans based upon their
Revolving Loan
Percentages in accordance with the terms of this Agreement.
1.2. Letters of Credit; LC Guaranties.
Agent agrees, for so long as no Default or Event of Default
exists
and if requested by Borrower Representative, to (i) issue its,
or cause to be
issued by Bank or another Affiliate of Agent, on the date
requested by Borrower
Representative, Letters of Credit for the account of such
Borrower or (ii)
execute LC Guaranties by which Agent, Bank, or another Affiliate
of Agent, on
the date requested by Borrower Representative, shall guaranty
the payment or
performance by such Borrower of its reimbursement obligations
with respect to
letters of credit and letters of credit issued for such
Borrower's account by
other Persons in support of such Borrower's obligations (other
than obligations
for the repayment of Money Borrowed); provided that the LC
Amount shall not
exceed $50,000,000 at any time. No Letter of Credit or LC
Guaranty may have an
expiration date later than three (3) days prior to the last day
of the Term.
Notwithstanding anything to the contrary contained herein, each
Borrower, Agent
and Lenders hereby agree that all LC Obligations and all
obligations of such
Borrower relating thereto shall be satisfied by the prompt
issuance of one or
more Revolving Credit Loans, which such Borrower hereby
acknowledges are
requested and Lenders hereby agree to fund. In the event that
Revolving Credit
Loans are not, for any reason, promptly made to satisfy all then
existing LC
Obligations, each Lender hereby agrees to pay to Agent, on
demand, an amount
equal to such LC Obligations multiplied by such Lender's
Revolving Loan
Percentage, and until so paid, such amount shall be secured by
the Collateral
and shall bear interest and be payable at a fluctuating rate
equal to the
Applicable Margin then in effect plus the Base Rate. Immediately
upon the
issuance of a Letter of Credit or an LC Guaranty under this
Agreement, each
Lender shall be deemed to have irrevocably and unconditionally
purchased and
received from Agent, without recourse or warranty, an undivided
interest and
participation therein equal to such LC Obligations multiplied by
such Lender's
Revolving Loan Percentage.
1.3. Incremental Last Out Loan.
4
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Each Lender, severally and not jointly, agrees to make an
incremental last out loan (collectively, the "Incremental Last
Out Loan") to
Borrowers on the Closing Date, in the aggregate principal amount
of such
Lender's Incremental Last Out Loan Commitment, which shall be
repayable in
accordance with the terms of the Incremental Last Out Loan Notes
and this
Agreement and shall be secured by all of the Collateral. The
proceeds of the
Incremental Last Out Loan shall be used solely for the purposes
for which the
proceeds of the Revolving Credit Loans are authorized to be
used. No Lender
shall have any obligation to fund an Incremental Last Out Loan
Commitment after
the Closing Date. No payment with respect to the Incremental
Last Out Loan may
be reborrowed.
1.4. All Loans to Constitute One Obligation; Joint and
Several Liability.
All Loans and all other Obligations of the Borrowers,
including
Product Obligations, hereunder shall constitute one general
joint and several
obligation of Borrowers, and shall be secured by Agent's Lien
(for the benefit
of Agent and Lenders) upon all of the Collateral, and by all
other Liens
heretofore, now or at any time or times hereafter granted by any
Borrower to
Agent, for itself as a Lender and on behalf of the Lenders.
1.5. Appointment of D&K as Borrower Representative.
Borrowers hereby appoint D&K ("Borrower Representative") as
their
agent and attorney-in-fact to take any action, execute any
document or
instrument, consent or agree to any modification or amendment
hereto or waiver
of or departure from any of the terms hereof, to perform any
Obligation of any
Borrower hereunder, and to give or receive any notice by or to
any Borrower
hereunder. Without limiting the generality of the foregoing,
Borrower
Representative may request Loans or incur any other Obligations
for the account
of any Borrower, may elect on behalf of the Borrowers to have
interest accrued
pursuant to Section 2.1.3 hereof, shall prepare and deliver to
Agent all reports
concerning the Collateral and all financial statements required
by this
Agreement, and each Borrower shall be fully bound by the
statements and actions
of Borrower Representative acting as agent hereunder. Agent and
Lenders shall be
entitled to rely absolutely and without duty of inquiry or
investigation upon
any agreement, request, communication or other notice given by
Borrower
Representative hereunder. Any notice given by Agent or any
Lender to Borrower
Representative shall be deemed given to all Borrowers, whether
or not this
Agreement specifically so provides. This appointment of Borrower
Representative
shall be irrevocable, and Agent and Lenders shall have no duty
to act in
accordance with any direction given by any other Borrower. This
provision is
intended, among other things, to protect Agent against
inconsistent directions
given by individual Borrowers.
1.6. Commitment Increase.
From time to time after the Closing Date, the Revolving Loan
Commitments may be increased (but in no event in excess of
$100,000,000 such
that the aggregate Loan Commitments shall at no time exceed
$735,000,000) at the
option of the Borrowers pursuant to a proposed Commitment
Increase if each of
the following conditions have been met:
(i) No Default or Event of Default shall exist;
5
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(ii) No more than one Commitment Increase may be made in any
twelve-month period and no Commitment Increase may be in an
amount less than
$50,000,000;
(iii) Borrower Representative has forwarded to Agent a
written
offer (the "First Offer Requirement") to Lenders (which Agent
shall promptly
forward to each Lender) to provide the proposed Commitment
Increase. Each
existing Lender shall have the right, but no obligation, to
provide such
additional Revolving Loan Commitment pro rata in accordance with
such existing
Lender's Revolving Loan Commitment Percentage within fourteen
(14) days
following such notice and any portion of such requested
Commitment Increase
which is not provided by any such existing Lender shall be
available to the
other existing Lenders and shall be allocated among other
existing Lenders as
Agent may determine. If existing Lenders elect not to provide
the entire
Commitment increase, such remaining Commitment Increase may be
provided by any
additional lending institution or institutions proposed by the
Borrowers and
which are approved by Agent and which becomes a party to this
Agreement pursuant
to documentation reasonably acceptable to Agent and prepared at
the Borrowers'
expense;
(iv) The proposed Commitment Increase has been consented to
in
writing by the Lenders whose increase in Revolving Loan
Commitments, if any, in
the aggregate equals such proposed Commitment Increase (it being
understood and
agreed that no Revolving Loan Commitment of a Lender may be
increased hereunder
without such Lender's written consent);
(v) the proposed Commitment Increase, together with any
prior
Commitment Increase, shall not exceed the Commitment Increase
Cap; and
(vi) Agent shall have received amendments to this Agreement
and the Loan Documents, joinders, Revolving Notes, and all other
agreements, fee
letters, documents and instruments reasonably satisfactory to
Agent in its sole
discretion evidencing and setting forth the conditions of the
Commitment
Increase.
Each of Borrowers, Lenders and Agent acknowledge and agree that
each
Commitment Increase meeting the conditions set forth in this
Section 1.6 (each,
a "Qualifying Commitment Increase") shall not require the
consent of any Lender
other than those Lenders, if any, which have agreed to increase
their Revolving
Loan Commitments in connection with such proposed Qualifying
Commitment
Increase. Notwithstanding anything to the contrary set forth
herein, Agent may
unilaterally amend Exhibit 1.1.1 to the Agreement after the
occurrence of a
Qualifying Commitment Increase to reflect the then current
Revolving Loan
Commitments without the consent of any Lender.
SECTION 2. INTEREST, FEES AND CHARGES
2.1. Interest.
2.1.1. Rates of Interest. Unless the Borrower Representative
exercises the LIBOR Option, interest shall accrue on all (but
not a
portion of) the principal amount of the Revolving Credit Loans
and the
Incremental Last Out Loan outstanding at the end of each day at
a
fluctuating rate per annum equal to the Applicable Margin then
in effect
plus the Base Rate. Said rate of interest shall increase or
decrease by an
amount equal to
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any increase or decrease in the Base Rate, effective as of the
opening of
business on the day that any such change in the Base Rate
occurs. If
Borrower Representative exercises the LIBOR Option as provided
in Section
2.1.2, interest shall accrue on all (but not any portion) of the
principal
amount of the Revolving Credit Loans and the Incremental Last
Out Loan
outstanding at the end of each day at a rate per annum equal to
the
Applicable Margin then in effect plus LIBOR. Said rate of
interest shall
increase or decrease by an amount equal to any increase or
decrease in
LIBOR, effective as of the opening of business on the date that
any such
change in LIBOR occurs. Interest on all of the Revolving Credit
Loans and
the Incremental Last Out Loan shall accrue as a Base Rate Loan
or a LIBOR
Loan, but not both.
2.1.2. LIBOR. Provided that as of the date of the LIBOR
Request
no Default or Event of Default exists, Borrower Representative
may give
Agent a LIBOR Request no later than 11:00 a.m. (Chicago,
Illinois time) on
the Business Day prior to the date on which it elects to convert
all (but
not any portion) of the Revolving Credit Loans and the
Incremental Last
Out Loan from the Base Rate to LIBOR.
2.1.3. Default Rate of Interest. At the option of Agent or
the
Majority Lenders, upon and after the occurrence of an Event of
Default,
and during the continuation thereof, the principal amount of all
Loans
shall bear interest at a rate per annum equal to 2.0% plus the
interest
rate otherwise applicable thereto (the "Default Rate").
2.1.4. Maximum Interest. In no event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under the
Notes and
charged or collected pursuant to the terms of this Agreement or
pursuant
to the Notes exceed the highest rate permissible under any law
which a
court of competent jurisdiction shall, in a final determination,
deem
applicable hereto. If any provisions of this Agreement or the
Notes are in
contravention of any such law, such provisions shall be deemed
amended to
conform thereto (the "Maximum Rate"). If at any time, the amount
of
interest paid hereunder is limited by the Maximum Rate, and the
amount at
which interest accrues hereunder is subsequently below the
Maximum Rate,
the rate at which interest accrues hereunder shall remain at the
Maximum
Rate, until such time as the aggregate interest paid hereunder
equals the
amount of interest that would have been paid had the Maximum
Rate not
applied.
2.2. Computation of Interest and Fees.
Interest, Letter of Credit and LC Guaranty fees and Unused Line
Fees
hereunder shall be calculated daily and shall be computed on the
actual number
of days elapsed over a year of 360 days.
2.3. Fee Letter.
Borrowers shall pay to Agent and the Lead Arranger certain fees
and
other amounts in accordance with the terms of the fee letter
between Borrowers
and Agent dated December 12, 2004 (the "Fee Letter").
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2.4. Letter of Credit and LC Guaranty Fees.
Borrowers shall pay to Agent:
(i) for standby Letters of Credit and LC Guaranties of
standby
letters of credit, for the ratable benefit of Lenders, a per
annum
fee equal to the Applicable Margin then in effect for LIBOR
Revolving Loans of the aggregate face amount of such Letters
of
Credit and LC Guaranties outstanding from time to time during
the
term of this Agreement, plus all normal and customary
charges
associated with the issuance thereof, which fees and charges
shall
be deemed fully earned upon issuance of each such Letter of
Credit
or LC Guaranty, shall be due and payable on the first Business
Day
of each month and shall not be subject to rebate or proration
upon
the termination of this Agreement for any reason;
(ii) for documentary Letters of Credit and LC Guaranties of
documentary letters of credit, for the ratable benefit of
Lenders, a
per annum fee equal to the Applicable Margin then in effect
for
LIBOR Revolving Loans of the face amount of each such Letter
of
Credit or LC Guaranty, payable upon the issuance of such Letter
of
Credit or execution of such LC Guaranty and an additional per
annum
fee equal to the Applicable Margin then in effect for LIBOR
Revolving Loans multiplied by the face amount of such Letters
of
Credit or LC Guaranties payable upon each renewal thereof and
each
extension thereof plus all normal and customary charges
associated
with the issuance and administration of each such Letter of
Credit
or LC Guaranty (which fees and charges shall be fully earned
upon
issuance, renewal or extension (as the case may be) of each
such
Letter of Credit or LC Guaranty, shall be due and payable on
the
first Business Day of each month, and shall not be subject to
rebate
or proration upon the termination of this Agreement for any
reason);
and
(iii) with respect to all Letters of Credit and LC
Guaranties,
for the account of Agent only, a per annum fronting fee equal
to
0.125% of the aggregate face amount of such Letters of Credit
and LC
Guaranties outstanding from time to time during the term of
this
Agreement, which fronting fees shall be payable monthly in
arrears
on the first Business Day of each month and shall not be subject
to
rebate or proration upon the termination of this Agreement for
any
reason.
2.5. Unused Line Fee.
Borrowers shall pay to Agent, for the ratable benefit of
Lenders, a
fee (the "Unused Line Fee") equal to 0.375% per annum multiplied
by the average
daily amount by which the Revolving Credit Maximum Amount
exceeds the sum of (i)
the outstanding principal balance of the Revolving Credit Loans
(including
Swingline Loans) plus (ii) the LC Amount. The Unused Line Fee
shall be payable
monthly in arrears on the first day of each month hereafter.
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2.6. Reimbursement of Expenses.
If, at any time or times regardless of whether or not an Event
of
Default then exists, (i) Agent incurs out-of-pocket legal or
accounting expenses
or any other costs or expenses in connection with (1) the
negotiation and
preparation of this Agreement or any of the other Loan Documents
(subject to the
terms of the Commitment Letter, dated December 12, 2004), any
amendment of or
modification of this Agreement or any of the other Loan
Documents, or any
syndication or attempted syndication of the Obligations
(including, without
limitation, printing and distribution of materials to
prospective Lenders and
all costs associated with bank meetings, but excluding any
closing fees paid to
Lenders in connection therewith) or (2) the administration by
Agent of this
Agreement or any of the other Loan Documents and the
transactions contemplated
hereby and thereby; or (ii) Agent or any Lender incurs legal or
accounting
expenses or any other costs or out-of-pocket expenses in
connection with (1) any
litigation, contest, dispute, suit, proceeding or action
(whether instituted by
Agent, any Lender, any Borrower or any other Person) relating to
the Collateral,
this Agreement or any of the other Loan Documents or any
Borrower's, any of its
Subsidiaries' or any Guarantor's affairs; (2) any attempt to
enforce any rights
of Agent or any Lender against any Borrower or any other Person
which may be
obligated to Agent or any Lender by virtue of this Agreement or
any of the other
Loan Documents, including, without limitation, the Account
Debtors; or (3) any
attempt to inspect, verify, protect, preserve, restore, collect,
sell, liquidate
or otherwise dispose of or realize upon the Collateral to the
extent permitted
by this Agreement; then all such legal and accounting expenses,
other costs and
out of pocket expenses of Agent or any Lender, as applicable,
shall be charged
to such Borrower; provided, that such Borrower shall not be
responsible for such
costs and out-of-pocket expenses to the extent incurred because
of the gross
negligence or willful misconduct of Agent or any Lender. All
amounts chargeable
to Borrowers under this Section 2.6 shall be Obligations secured
by all of the
Collateral, shall be payable on demand to Agent or such Lender,
as the case may
be, and shall bear interest from the date such demand is made
until paid in full
at the rate applicable to Base Rate Revolving Loans from time to
time. Borrowers
shall also reimburse Agent for expenses incurred by Agent in its
administration
of the Collateral to the extent and in the manner provided in
Sections 2.9 and
2.10 hereof.
2.7. Audit Fees.
Borrowers shall pay to Agent audit fees in accordance with
Agent's
current schedule of fees in effect from time to time in
connection with audits
of the books and records and Properties of Borrowers and their
Subsidiaries and
such other matters as Agent shall deem appropriate in its
reasonable credit
judgment, plus all out-of-pocket expenses incurred by Agent in
connection with
such audits, whether such audits are conducted by employees of
Agent or by third
parties hired by Agent; provided that so long as no Event of
Default has
occurred and is continuing and except in connection with
Permitted Acquisitions,
Borrowers shall not be liable for such audit fees incurred in
connection with
more than two (2) such audits during any fiscal year. Such audit
fees and
out-of-pocket expenses shall be payable on the first day of the
month following
the date of issuance by Agent of a request for payment thereof
to Borrower
Representative. Agent may, in its discretion, provide for the
payment of such
amounts by making appropriate Revolving Credit Loans to Borrower
Representative
and charging Borrowers' Loan Accounts therefor.
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<PAGE>
2.8. Bank Charges.
Borrowers shall pay to Agent, on demand, any and all fees, costs
or
expenses which Agent or any Lender pays to a bank or other
similar institution
arising out of or in connection with (i) the forwarding to any
Borrower or any
other Person on behalf of any Borrower, by Agent or any Lender,
of proceeds of
Loans made to any Borrower pursuant to this Agreement and (ii)
the depositing
for collection by Agent or any Lender of any check or item of
payment received
or delivered to Agent or any Lender on account of the
Obligations.
2.9. Collateral Protection Expenses; Appraisals.
All out-of-pocket expenses incurred in protecting, storing,
warehousing, insuring, handling, maintaining and shipping the
Collateral, and
any and all excise, property, sales, and use taxes imposed by
any state,
federal, or local authority on any of the Collateral or in
respect of the sale
thereof shall be borne and paid by Borrowers. If Borrowers fail
to promptly pay
any portion thereof when due, Agent may, at its option, but
shall not be
required to, pay the same and charge Borrowers therefor. In
addition to
semi-annual Appraisals of Inventory as herein provided and
appraisals obtained
in connection with Permitted Acquisitions, from time to time, if
Agent or any
Lender determines that obtaining appraisals is necessary in
order for it to
comply with applicable laws or regulations, and at any time that
a Default or an
Event of Default shall have occurred and be continuing, Agent
may, at Borrowers'
expense, obtain appraisals from appraisers (who may be personnel
of Agent),
stating the then current fair market value of all or any portion
of the real
estate or personal property of any Borrower or any of its
Subsidiaries,
including without limitation the Inventory of such Borrower and
its
Subsidiaries.
2.10. Payment of Charges.
All amounts chargeable to Borrowers under this Agreement shall
be
Obligations secured by all of the Collateral, shall be, unless
specifically
otherwise provided, payable on demand and shall bear interest
from the date
demand was made or such amount is due, as applicable, until paid
in full at the
rate applicable to the Base Rate Revolving Loans from time to
time.
2.11. No Deductions.
Any and all payments or reimbursements made hereunder shall be
made
free and clear of and without deduction for any and all taxes,
levies, imposts,
deductions, charges or withholdings, and all liabilities with
respect thereto;
excluding, however, the following: taxes imposed on the income
of Agent or any
Lender or franchise taxes by the jurisdiction under the laws of
which Agent or
any Lender is organized or doing business or any political
subdivision thereof
and taxes imposed on its income by the jurisdiction of Agent's
or such Lender's
applicable lending office or any political subdivision thereof
or franchise
taxes (all such taxes, levies, imposts, deductions, charges or
withholdings and
all liabilities with respect thereto excluding such taxes
imposed on net income,
herein "Tax Liabilities"). If any Borrower shall be required by
law to deduct
any such Tax Liabilities from or in respect of any sum payable
hereunder to
Agent or any Lender, then the sum payable hereunder shall be
increased as may be
necessary so that, after all required deductions are made, Agent
or such Lender
receives an amount equal to the sum it would have received had
no such
deductions been made.
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SECTION 3. LOAN ADMINISTRATION.
3.1. Manner of Borrowing Revolving Credit Loans/LIBOR
Option.
Borrowings under the credit facility established pursuant to
Section
1 hereof shall be as follows:
3.1.1. Loan Requests. A request for a Revolving Credit Loan
shall be made, or shall be deemed to be made, in the following
manner: (i)
Borrower Representative may give Agent notice of its intention
to borrow
no later than 11:00 a.m. (Chicago, Illinois time) on the
proposed
borrowing date, in which notice Borrower Representative shall
specify the
amount of the proposed borrowing of a Revolving Credit Loan
(which shall
be no less than $5,000,000 or an integral multiple of $1,000,000
in excess
thereof except in the case of Swingline Loans (with respect to
which there
shall be no minimum borrowing or integral amount)) and the
proposed
borrowing date, which shall be a Business Day; provided,
however, that no
such request may be made at a time when there exists a Default
or an Event
of Default; and (ii) the becoming due of any amount required to
be paid
under this Agreement, or the Notes, whether as interest or for
any other
Obligation, shall be deemed irrevocably to be a request for a
Revolving
Credit Loan on the due date in the amount required to pay such
interest or
other Obligation.
3.1.2. Disbursement. Each Borrower hereby irrevocably
authorizes Agent to disburse the proceeds of each Loan
requested, or
deemed to be requested, pursuant to subsection 3.1.1 as follows:
(i) the
proceeds of each Revolving Credit Loan requested under
subsection 3.1.1(i)
shall be disbursed by Agent in lawful money of the United States
of
America in immediately available funds, in the case of the
initial
borrowing, in accordance with the terms of the written
disbursement letter
from Borrower Representative, and in the case of each
subsequent
borrowing, by wire transfer to such bank account as may be
agreed upon by
Borrower Representative and Agent from time to time or elsewhere
if
pursuant to a written direction from Borrower Representative;
and (ii) the
proceeds of each Revolving Credit Loan deemed requested under
subsection
3.1.1(ii) shall be disbursed by Agent by way of direct payment
of the
relevant interest or other Obligation. If at any time any Loan
is funded
by Agent or Lenders in excess of the amount requested or deemed
requested
by Borrower Representative, the applicable Borrowers that
received the
proceeds of such Loan agree to repay the excess to Agent
immediately upon
the earlier to occur of (a) such Borrower's discovery of the
error and (b)
notice thereof to Borrower Representative from Agent or any
Lender.
3.1.3. Payment by Lenders. Agent shall give to each Lender
prompt written notice by facsimile of the receipt by Agent from
Borrower
Representative of any request for a Revolving Credit Loan. Each
such
notice shall specify the requested date and amount of such
Revolving
Credit Loan and the amount of each Lender's advance thereunder
(in
accordance with its applicable Revolving Loan Percentage). Each
Lender
shall, not later than 1:00 p.m. (Chicago time) on such requested
date,
wire to a bank designated by Agent the amount of that Lender's
Revolving
Loan Percentage of the requested Revolving Credit Loan. The
failure of any
Lender to make the Revolving Credit Loans to be made by it shall
not
release any other Lender of its obligations
11
<PAGE>
hereunder to make its Revolving Credit Loan. Neither Agent nor
any other
Lender shall be responsible for the failure of any other Lender
to make
the Revolving Credit Loan to be made by such other Lender. The
foregoing
notwithstanding, Agent, in its sole discretion, may from its own
funds
make a Revolving Credit Loan on behalf of any Lender. In such
event, the
Lender on behalf of whom Agent made the Revolving Credit Loan
shall
reimburse Agent for the amount of such Revolving Credit Loan
made on its
behalf, on a weekly (or more frequent, as determined by Agent in
its sole
discretion) basis. In all events, Agent shall settle with
Lenders all
Revolving Credit Loans made and payments received (excluding the
Swingline
Loans, which shall be settled in accordance with Section 1.1.4,
and
interest which shall be settled monthly), including fees, in
accordance
with each Lender's Revolving Loan Percentage once per week or
more
frequently as determined by Agent. On each settlement date,
Agent will pay
to each Lender the net amount owing to such Lender in connection
with such
settlement, including without limitation amounts relating to
Loans, fees,
interest and other amounts payable hereunder. The entire amount
of
interest attributable to such Revolving Credit Loan for the
period from
the date on which such Revolving Credit Loan was made by Agent
on such
Lender's behalf until Agent is reimbursed by such Lender, shall
be paid to
Agent for its own account.
3.1.4. Authorization. Borrowers hereby irrevocably authorize
Agent, in Agent's sole discretion, to advance to Borrowers, and
to charge
when due to Borrowers' Loan Account hereunder as a Revolving
Credit Loan,
a sum sufficient to pay all interest accrued on the Obligations
during the
immediately preceding month and to pay all fees, costs and
expenses and
other Obligations at any time owed by Borrowers to Agent or any
Lender
hereunder.
3.1.5. Letter of Credit and LC Guaranty Requests. A request
for a Letter of Credit or LC Guaranty shall be made in the
following
manner: Borrower Representative may give Agent and Bank a
written notice
of its request for the issuance of a Letter of Credit or LC
Guaranty, not
later than 11:00 a.m. (Chicago, Illinois time), one Business Day
before
the proposed issuance date thereof, in which notice Borrower
Representative shall specify the proposed issuer, issuance date
and format
and wording for the Letter of Credit or LC Guaranty being
requested (which
shall be satisfactory to Agent and the Person being asked to
issue such
Letter of Credit or LC Guaranty); provided that no such request
may be
made at a time when there exists a Default or Event of Default.
Such
request shall be accompanied by an executed application and
reimbursement
agreement in form and substance satisfactory to Agent and the
Person being
asked to issue the Letter of Credit or LC Guaranty, as well as
any
required resolutions.
3.1.6. Method of Making Requests. As an accommodation to
Borrowers, unless a Default or an Event of Default is then in
existence,
(i) Agent shall permit telephonic or electronic requests for
Revolving
Credit Loans to Agent, (ii) Agent and Bank may, in their
discretion,
permit electronic transmittal of requests for Letters of Credit
and LC
Guaranties to them, and (iii) Agent may, in Agent's discretion,
permit
electronic transmittal of instructions, authorizations,
agreements or
reports to Agent. Unless Borrower Representative specifically
directs
Agent or Bank in writing not to accept or act upon telephonic
or
electronic communications from Borrower
12
<PAGE>
Representative, neither Agent nor Bank nor any Lender shall have
any
liability to any Borrower for any loss or damage suffered by
such Borrower
as a result of Agent's or Bank's honoring of any requests,
execution of
any instructions, authorizations or agreements or reliance on
any reports
communicated to it telephonically or electronically and
purporting to have
been sent to Agent or Bank by such Borrower, and neither Agent
nor Bank
shall have any duty to verify the origin of any such
communication or the
authority of the Person sending it. Each telephonic request for
a
Revolving Credit Loan, Letter of Credit or LC Guaranty accepted
by Agent
and Bank, if applicable, hereunder shall be promptly followed by
a written
confirmation of such request from Borrower Representative to
Lender and
Bank, if applicable.
3.1.7. Inability to Make LIBOR Loans. Notwithstanding any
other provision hereof, if any applicable law, treaty,
regulation or
directive, or any change therein or in the interpretation or
application
thereof, shall make it unlawful for any Lender (for purposes of
this
subsection 3.1.7, the term "Lender" shall include the office or
branch
where such Lender or any corporation or bank then controlling
such Lender
makes or maintains any LIBOR Loans) to make or maintain LIBOR
Loans, or if
Agent is unable to determine LIBOR, or adverse or unusual
conditions in,
or changes in applicable law relating to, the London interbank
market make
it, in the reasonable judgment of Agent, impracticable to fund
therein any
of the Revolving Credit Loans or Incremental Last Out Loan as
LIBOR Loans,
or make the projected LIBOR unreflective of the actual costs of
funds
therefor to any Lender, the obligation of Agent and Lenders to
provide the
LIBOR Loans or convert the Base Rate Loans to LIBOR Loans
hereunder shall
forthwith be suspended during the pendency of such circumstances
and
Borrowers shall promptly upon request from Agent, convert all
Loans to
Base Rate Loans.
3.2. Payments.
Except where evidenced by notes or other instruments issued or
made
by Borrowers to any Lender and accepted by such Lender
specifically containing
payment instructions that are in conflict with this Section 3.2
(in which case
the conflicting provisions of said notes or other instruments
shall govern and
control), the Obligations shall be payable as follows:
3.2.1. Principal. Principal on account of all Loans shall be
payable by Borrowers to Agent for the ratable benefit of the
applicable
Lenders immediately upon the earliest of (i) the receipt by
Agent or
Borrowers of any proceeds of any of the Collateral (except as
otherwise
provided herein, including without limitation pursuant to
subsections
3.3.1 and 6.4.2) to the extent of said proceeds, subject to
Borrowers'
rights to reborrow the Revolving Credit Loans in compliance
with
subsection 1.1.1 hereof; (ii) the occurrence of an Event of
Default under
Section 10.1.8 or in consequence of which Agent or Majority
Lenders elect
to accelerate the maturity and payment of the Obligations, or
(iii)
termination of this Agreement pursuant to Section 4 hereof;
provided,
however, that, if an Overadvance shall exist at any time,
Borrowers shall,
on demand, repay the Overadvance. Each payment (including any
principal
prepayment) by Borrowers on account of principal of all Loans
shall be
applied in accordance with subsection 3.4.2.
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<PAGE>
3.2.2. Interest. Interest shall be due and payable on the
earliest of (i) the first calendar day of each month (for the
immediately
preceding month), computed through the last calendar day of the
preceding
month, (ii) the occurrence of an Event of Default in consequence
of which
Agent or Majority Lenders elect to accelerate the maturity and
payment of
the Obligations or (iii) termination of this Agreement pursuant
to Section
4 hereof.
3.2.3. Costs, Fees and Charges. Costs, fees and charges
payable pursuant to this Agreement shall be payable by Borrowers
to Agent
for itself or for the benefit of Lenders, as applicable, as and
when
provided in Section 2 or Section 3 hereof, as applicable, to
Agent or a
Lender, as applicable, or to any other Person designated by
Agent or such
Lender in writing.
3.2.4. Other Obligations. The balance of the Obligations
requiring the payment of money, if any, shall be payable by
Borrowers to
Agent for distribution to Lenders, as appropriate, as and when
provided in
this Agreement, the Other Agreements or the Security Documents,
or on
demand, whichever is later.
3.3. Mandatory and Optional Prepayments.
3.3.1. Proceeds of Sale, Loss, Destruction or Condemnation
of
Collateral. Except as provided in subsections 6.4.2 and
8.2.9(i), (ii),
(iii), (iv), (v), (vi) and (viii), if any Borrower or any of
its
Subsidiaries sells any of the Collateral or if any of the
Collateral is
lost, damaged or destroyed or taken by condemnation, such
Borrower shall,
unless otherwise agreed by Majority Lenders, pay to Agent for
the ratable
benefit of Lenders as and when received by such Borrower or
such
Subsidiary and as a mandatory prepayment of the Loans, as herein
provided,
a sum equal to all proceeds (including insurance payments but
net of costs
and taxes incurred in connection with such sale or event)
received by such
Borrower or such Subsidiary from such sale, loss, damage,
destruction or
condemnation. The applicable prepayments shall be applied in
accordance
with subsection 3.4.2.
3.3.2. Other Proceeds. If any Borrower issues any additional
Indebtedness or obtains any additional equity in a manner
permitted under
this Agreement or receives any tax refunds, indemnity payments,
or pension
reversions, such Borrower shall pay to Agent for the ratable
benefit of
Lenders, when and as received by such Borrower and as a
mandatory
prepayment of the Obligations, a sum equal to 100% of such
proceeds to
such Borrower. Any such prepayment shall be applied to the Loans
in the
manner specified in subsection 3.4.2.
3.3.3. Optional Prepayments. So long as no Revolving Credit
Loan is outstanding, Borrowers may, at their option from time to
time upon
not less than 3 days prior written notice to Agent, prepay all
or a
portion of the Incremental Last Out Loan, provided that the
amount of any
such prepayment is at least $5,000,000 and in integral multiples
of
$1,000,000 in excess thereof, and that such prepayments are made
ratably
with respect to all Incremental Last Out Loans. Each such
prepayment shall
be applied to the principal due under the Incremental Last Out
Loan. Such
prepayments shall be without premium or penalty.
14
<PAGE>
3.3.4. Optional Reductions of Revolving Loan Commitments and
Incremental Last Out Loan. Borrowers may, at their option from
time to
time upon not less than 3 Business Days' prior written notice to
Agent,
terminate in whole or permanently reduce ratably in part, the
unused
portion of the Revolving Loan Commitments, provided, however,
that each
such partial reduction shall be in an amount of $5,000,000 or
integral
multiples of $1,000,000 in excess thereof, provided that
Borrowers shall
give Agent at least 10 Business Days' notice of any such
reduction in
excess of $100,000,000. In addition, at any time after June 30,
2005,
Borrowers may, at their option from time to time upon not less
than 3
Business Days' prior written notice to Agent, repay in full (but
not in
part) in cash all outstanding principal and accrued interest
under the
Incremental Last Out Loan so long as (i) Borrowers' Availability
is
greater than $60,000,000 after giving effect to such prepayment,
(ii) both
before and after giving effect to such prepayment, no Event of
Default is
continuing, and (iii) Borrowers have a Fixed Charge Coverage
Ratio, on a
Consolidated basis, for the most recently ended twelve-month
period of not
less than 1.0 to 1.0. Such prepayments and/or such reductions
shall be
without premium or penalty.
3.4. Application of Payments and Collections.
3.4.1. Collections. All items of payment received by Agent
by
12:00 noon, Chicago, Illinois, time, on any Business Day shall
be deemed
received on that Business Day. All items of payment received
after 12:00
noon, Chicago, Illinois, time, on any Business Day shall be
deemed
received on the following Business Day. If as the result of
collections of
Accounts as authorized by subsection 6.2.4 hereof or otherwise,
a credit
balance exists in the Loan Account, such credit balance shall
not accrue
interest in favor of Borrowers, but shall be disbursed to
Borrowers or
otherwise at Borrower Representative's direction in the manner
set forth
in subsection 3.1.2, upon Borrower Representative's request at
any time,
so long as no Default or Event of Default then exists. Agent may
at its
option, offset such credit balance against any of the
Obligations upon and
during the continuance of an Event of Default.
3.4.2. Apportionment, Application and Reversal of Payments.
Principal and interest payments shall be apportioned ratably
among Lenders
(according to the unpaid principal balance of the Loans to which
such
payments relate held by each Lender). All payments shall be
remitted to
Agent and all such payments not relating to principal or
interest of
specific Loans, or not constituting payment of specific fees,
and all
proceeds of Accounts, or, except as provided in subsection
3.3.1, other
Collateral received by Agent, shall be applied, ratably, subject
to the
provisions of this Agreement, first, to pay any fees,
indemnities,
or expense reimbursements (other than amounts related to
Product
Obligations) then due to Agent or Lenders from any Borrower;
second, to
pay interest due from Borrowers in respect of all Revolving
Credit
Loans, including Swingline Loans and Agent Loans; third, to pay
or prepay
principal of Swingline Loans and Agent Loans; fourth, to pay
or
prepay principal of the Revolving Credit Loans (other than
Swingline Loans and Agent Loans) and unpaid reimbursement
obligations in
respect of Letters of Credit; fifth, to pay an amount to Agent
equal to
all outstanding Letters of Credit, LC Guaranties and Letter
of
Credit Obligations to be held as cash Collateral for such
Obligations;
sixth, to pay interest due from Borrowers in respect of the
Incremental Last Out Loan; seventh, to pay or prepay principal
of
the Incremental Last Out Loan;
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eighth, to the payment of any other Obligation (other than
amounts related
to Product Obligations) due to Agent or any Lender by any
Borrower; and
ninth, to pay any principal, fees, indemnities or expense
reimbursements
related to Product Obligations. After the occurrence and during
the
continuance of an Event of Default, Agent shall have the
continuing
exclusive right to apply and reapply any and all such payments
and
collections received at any time or times hereafter by Agent or
its agent
against the Obligations, in such manner as Agent may deem
advisable
(provided that principal, fees, indemnities and expense
reimbursements in
connection with Product Obligations shall be paid following the
payment of
all other Obligations), notwithstanding any entry by Agent or
any Lender
upon any of its books and records.
3.5. All Loans to Constitute One Obligation.
The Loans and the LC Amounts shall constitute one general
Obligation
of Borrowers, and shall be secured by Agent's Lien upon all of
the Collateral.
3.6. Loan Account.
Agent shall enter all Loans as debits to a loan account (the
"Loan
Account") and shall also record in the Loan Account all payments
made by
Borrowers on any Obligations and all proceeds of Collateral
which are finally
paid to Agent, and may record therein, in accordance with
customary accounting
practice, other debits and credits, including interest and all
charges and
expenses properly chargeable to Borrowers.
3.7. Statements of Account.
Agent will account to Borrower Representative monthly with a
statement of Loans, charges and payments made pursuant to this
Agreement during
the immediately preceding month, and such account rendered by
Agent shall be
deemed final, binding and conclusive upon such Borrower absent
demonstrable
error unless Agent is notified by Borrower Representative in
writing to the
contrary within 60 days of the date each accounting is received
by Borrower
Representative. Such notice shall only be deemed an objection to
those items
specifically objected to therein.
3.8. Increased Costs.
3.8.1. If any law or any governmental or quasi-governmental
rule, regulation, policy, guideline or directive (whether or not
having
the force of law) adopted or implemented after the date of this
Agreement
and having general applicability to all banks or finance
companies within
the jurisdiction in which any Lender operates (excluding, for
the
avoidance of doubt, the effect of and phasing in of capital
requirements
or other regulations or guidelines passed prior to the date of
this
Agreement), or any interpretation or application thereof by
any
governmental authority charged with the interpretation or
application
thereof, or the compliance of such Lender therewith, shall:
(i) (1) subject such Lender to any tax with respect to this
Agreement (other than (a) any tax based on or measured by net
income
or otherwise in the nature of a net income tax, including,
without
limitation, any franchise tax or any similar tax based on
capital,
net worth or comparable basis
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for measurement and (b) any tax collected by a withholding
on
payments and which neither is computed by reference to the
net
income of the payee nor is in the nature of an advance
collection of
a tax based on or measured by the net income of the payee) or
(2)
change the basis of taxation of payments to such Lender of
principal, fees, interest or any other amount payable hereunder
or
under any Loan Documents (other than in respect of (a) any tax
based
on or measured by net income or otherwise in the nature of a
net
income tax, including, without limitation, any franchise tax or
any
similar tax based on capital, net worth or comparable basis
for
measurement and (b) any tax collected by a withholding on
payments
and which neither is computed by reference to the net income of
the
payee nor is in the nature of an advance collection of a tax
based
on or measured by the net income of the payee);
(ii) impose, modify or hold applicable any reserve (except
any reserve taken into account in the determination of the
applicable LIBOR), special deposit, assessment or similar
requirement against assets held by, or deposits in or for
the
account of, advances or loans by, or other credit extended by,
any
office of such Lender, including (without limitation) pursuant
to
Regulation D of the Board of Governors of the Federal
Reserve
System; or
(iii) impose on such Lender or the London interbank market
any other condition with respect to any Loan Document;
and the result of any of the foregoing is to increase the cost
to such
Lender of making, renewing or maintaining Loans hereunder or the
result of
any of the foregoing is to reduce the rate of return on such
Lender's
capital as a consequence of its obligations hereunder, or the
result of
any of the foregoing is to reduce the amount of any payment
(whether of
principal, interest or otherwise) in respect of any of the
Loans, then, in
any such case, Borrowers shall pay such Lender, upon demand
and
certification not later than sixty (60) days following
Borrower
Representative's receipt of notice of the imposition of such
increased
costs, such additional amount as will compensate such Lender for
such
additional cost or such reduction, as the case may be, to the
extent such
Lender has not otherwise been compensated, with respect to a
particular
Loan, for such increased cost as a result of an increase in the
Base Rate
or the LIBOR. An officer of the applicable Lender shall
determine the
amount of such additional cost or reduced amount using
reasonable
averaging and attribution methods and shall certify the amount
of such
additional cost or reduced amount to Borrower Representative,
which
certification shall include a written explanation of such
additional cost
or reduction to Borrowers. Such certification shall be
conclusive absent
manifest error. If a Lender claims any additional cost or
reduced amount
pursuant to this Section 3.8, then such Lender shall use
reasonable
efforts (consistent with legal and regulatory restrictions) to
designate a
different lending office or to file any certificate or document
reasonably
requested by Borrower Representative if the making of such
designation or
filing would avoid the need for, or reduce the amount of, any
such
additional cost or reduced amount and would not, in the sole
discretion of
such Lender, be otherwise disadvantageous to such Lender. Any
claims by a
Lender for compensation under this Section 3.8 shall be made
upon Borrower
Representative no later than one hundred and eighty (180) days
following
the adoption or implementation of any such law, rule, regulation
policy
guidelines or directive.
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3.8.2. Within thirty (30) days after receipt by Borrower
Representative of written notice and demand from any Lender (an
"Affected
Lender") for payment of additional amounts or increased costs as
provided
in Section 3.8.1, Borrower Representative may, at its option,
notify Agent
and such Affected Lender of its intention to replace the
Affected Lender.
So long as no Default or Event of Default has occurred and is
continuing,
Borrower Representative, with the consent of Agent, may obtain
at
Borrowers' expense, a replacement Lender ("Replacement Lender")
for the
Affected Lender, which Replacement Lender must be reasonably
satisfactory
to Agent. If Borrowers obtain a Replacement Lender within ninety
(90) days
following notice of their intention to do so, the Affected
Lender must
sell and assign its Loans and Revolving Loan Commitments to
such
Replacement Lender for an amount equal to the principal balance
of all
Loans held by the Affected Lender and all accrued interest and
fees with
respect thereto through the date of such sale and such
assignment shall
not require the payment of an assignment fee to Agent; provided,
that
Borrowers shall have reimbursed such Affected Lender for the
additional
amounts or increased costs that it is entitled to receive under
this
Agreement through the date of such sale and assignment.
Notwithstanding
the foregoing, Borrowers shall not have the right to obtain a
Replacement
Lender if the Affected Lender rescinds its demand for increased
costs or
additional amounts within 15 days following its receipt of
Borrowers'
notice of intention to replace such Affected Lender.
Furthermore, if
Borrowers give a notice of intention to replace and do not so
replace such
Affected Lender within ninety (90) days thereafter, Borrowers'
rights
under this Section 3.8.2 shall terminate with respect to such
Affected
Lender and Borrowers shall promptly pay all increased costs or
additional
amounts demanded by such Affected Lender pursuant to Section
3.8.1.
3.9. Sharing of Payments, Etc.
If any Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or
otherwise) on
account of any Revolving Credit Loan or any Incremental Last Out
Loan, as
applicable, made by it in excess of its ratable share of
payments on account of
the Revolving Credit Loans or Incremental Last Out Loan, as
applicable, made by
all Lenders, such Lender shall forthwith purchase from each
other Lender such
participation in such Loan as shall be necessary to cause such
purchasing Lender
to share the excess payment ratably with each other Lender;
provided, that if
all or any portion of such excess payment is thereafter
recovered from such
purchasing Lender, such purchase from each Lender shall be
rescinded and such
Lender shall repay to the purchasing Lenders the purchase price
to the extent of
such recovery, together with an amount equal to such Lender's
ratable share
(according to the proportion of (i) the amount of such Lender's
required
repayment to (ii) the total amount so recovered from the
purchasing Lender) of
any interest or other amount paid or payable by the purchasing
Lender in respect
of the total amount so recovered. Borrowers agree that any
Lender so purchasing
a participation from another Lender pursuant to this Section 3.9
may, to the
fullest extent permitted by law, exercise all its rights of
payment (including
the right of set-off) with respect to such participation as
fully as if such
Lender were the direct creditor of Borrowers in the amount of
such
participation. Notwithstanding anything to the contrary
contained herein, all
purchases and repayments to be made under this Section 3.9 shall
be made through
Agent.
3.10. Effect On Prior Loans; Prior Loan and Security
Agreement.
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The Prior Loans and Liens securing payment thereof shall in
all
respects be continuing, and this Agreement shall not be deemed
to evidence or
result in a novation or repayment and reborrowing of the Prior
Loans. This
Agreement shall supersede the Prior Loan and Security Agreement.
From and after
the Closing Date, this Agreement shall govern the terms of the
Prior Loans. To
the extent not replaced by Loan Documents dated as of the
Closing Date, Loan
Documents executed in connection with the Prior Loan and
Security Agreement
(other than any such Loan Document that is specifically
terminated by the
parties thereto) shall continue to be effective, and all
references in those
prior Loan Documents to the "Sixth Amended and Restated Loan and
Security
Agreement", the "Loan Agreement or the "Agreement" shall be
deemed to refer to
this Agreement without further amendment thereof.
SECTION 4. TERM AND TERMINATION
4.1. Term of Agreement.
Subject to the right of Lenders to cease making Loans to
Borrowers
during the continuance of any Default or Event of Default, this
Agreement shall
be in effect through and including March 28, 2009 (the "Term"),
unless
terminated as provided in Section 4.2 hereof.
4.2. Termination.
4.2.1. Termination by Lenders. Agent may, and at the
direction
of Majority Lenders shall, terminate this Agreement without
notice upon or
after the occurrence and during the continuance of an Event of
Default.
4.2.2. Termination by Borrowers. Upon at least 30 days prior
written notice to Agent and Lenders, Borrower Representative, on
behalf of
Borrowers, may, at their option, terminate this Agreement;
provided,
however, no such termination shall be effective until Borrowers
have paid
or collateralized to Agent's satisfaction all of the Obligations
in
immediately available funds, all Letters of Credit and LC
Guaranties have
expired, terminated or have been cash collateralized to
Agent's
satisfaction and Borrowers have complied with Section 2.6. Any
notice of
termination given by Borrower Representative shall be
irrevocable unless
all Lenders otherwise agree in writing and no Lender shall have
any
obligation to make any Loans or issue or procure any Letters of
Credit or
LC Guaranties on or after the termination date stated in such
notice.
Borrowers may elect to terminate this Agreement in its entirety
only. No
section of this Agreement or type of Loan available hereunder
may be
terminated singly.
4.2.3. Effect of Termination. All of the Obligations shall
be
immediately due and payable upon the earlier of the (a)
expiration of the
Term and (b) the termination date stated in any notice of
termination of
this Agreement. All undertakings, agreements, covenants,
warranties and
representations of each Borrower contained in the Loan Documents
shall
survive any such expiration or termination, as applicable, and
Agent shall
retain its Liens in the Collateral and Agent and each Lender
shall retain
all of its rights and remedies under the Loan Documents
notwithstanding
such expiration or termination, as applicable, until all
Obligations have
been discharged or paid, in full, in immediately available
funds,
including, without limitation, all Obligations under Section 2.6
resulting
from such expiration or termination, as applicable.
Notwithstanding the
foregoing or the payment in full of the Obligations, Agent shall
not be
required to
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terminate its Liens in the Collateral unless, with respect to
any loss or
damage Agent may incur as a result of dishonored checks or other
items of
payment received by Agent from any Borrower or any Account
Debtor and
applied to the Obligations, Agent shall, at its option, (i) have
received
a written agreement satisfactory to Agent, executed by such
Borrower and
by any Person whose loans or other advances to such Borrower are
used in
whole or in part to satisfy the Obligations, indemnifying Agent
and each
Lender from any such loss or damage or (ii) have retained cash
Collateral
or other Collateral for such period of time as Agent, in its
reasonable
discretion, may deem necessary to protect Agent and each Lender
from any
such loss or damage.
SECTION 5. SECURITY INTERESTS
5.1. Security Interest in Collateral.
To secure the prompt payment and performance to Agent and
each
Lender of the Obligations, each Borrower hereby grants to Agent
for the benefit
of itself and each Lender a continuing Lien upon all of such
Borrower's assets,
including all of the following Property and interests in
Property of such
Borrower, whether now owned or existing or hereafter created,
acquired or
arising and wheresoever located:
(i) Accounts, including Health Care Insurance Receivables;
(ii) Certificated Securities;
(iii) Chattel Paper;
(iv) Computer Hardware and Software and all rights with
respect thereto, including, any and all licenses, options,
warranties, service contracts, program services, test
rights,
maintenance rights, support rights, improvement rights,
renewal
rights and indemnifications, and any substitutions,
replacements,
additions or model conversions of any of the foregoing;
(v) Contract Rights;
(vi) Deposit Accounts;
(vii) Documents;
(viii) Equipment;
(ix) Financial Assets;
(x) Fixtures;
(xi) General Intangibles, including Payment Intangibles and
Software;
(xii) Goods (including all of its Equipment, Fixtures and
Inventory), and all accessions, additions, attachments,
improvements, substitutions and replacements thereto and
therefor;
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(xiii) Instruments;
(xiv) Intellectual Property;
(xv) Inventory;
(xvi) Investment Property;
(xvii) money (of every jurisdiction whatsoever);
(xviii) Letter-of-Credit Rights;
(xix) Payment Intangibles;
(xx) Security Entitlements;
(xxi) Software;
(xxii) Supporting Obligations;
(xxiii) Uncertificated Securities; and
(xxiv) to the extent not included in the foregoing, all
other personal property of any kind or description;
together with all books and records (including, without
limitation, customer
lists, credit files, computer programs, print-outs, and other
computer materials
and records and all records of purchases and sales of
prescription drugs and
controlled substances required to be kept by the Federal or any
state government
or agency thereof), writings, data bases, information and other
property
relating to, used or useful in connection with, or evidencing,
embodying,
incorporating, referring or pertaining to any of the foregoing,
and all
Proceeds, products, offspring, rents, issues, profits and
returns of and from
any of the foregoing; provided that to the extent that the
provisions of any
lease or license of Computer Hardware and Software or
Intellectual Property
expressly prohibit (which prohibition is enforceable under
applicable law) any
assignment thereof, and the grant of a security interest
therein, Agent will not
enforce its security interest in such Borrower's rights under
such lease or
license (other than in respect of the Proceeds thereof) for so
long as such
prohibition continues, it being understood that upon request of
Agent, such
Borrower will in good faith use reasonable efforts to obtain
consent for the
creation of a security interest in favor of Agent (and to
Agent's enforcement of
such security interest) in Agent's rights under such lease or
license.
5.2. Other Collateral.
5.2.1. Commercial Tort Claims. Each Borrower shall promptly
notify Agent in writing upon incurring or otherwise obtaining a
Commercial
Tort Claim in excess of $1,000,000 after the Closing Date
against any
third party and, upon request of Agent, promptly enter into an
amendment
to this Agreement and do such other acts or things deemed
appropriate by
Agent to give Agent a security interest in any such Commercial
Tort Claim.
Each Borrower represents and warrants that as of the date of
this
Agreement, to its knowledge, it does not possess any Commercial
Tort
Claims.
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5.2.2. Other Collateral. Each Borrower shall promptly notify
Agent in writing upon acquiring or otherwise obtaining any
Collateral
after the date hereof consisting of Deposit Accounts, Investment
Property,
Letter-of-Credit Rights or Electronic Chattel Paper and, upon
the request
of Agent, promptly execute such other documents, and do such
other acts or
things deemed appropriate by Agent to deliver to Agent control
with
respect to such Collateral; promptly notify Agent in writing
upon
acquiring or otherwise obtaining any Collateral after the date
hereof
consisting of Documents or Instruments and, upon the request of
Agent,
will promptly execute such other documents, and do such other
acts or
things deemed appropriate by Agent to deliver to Agent
possession of such
Documents which are negotiable and Instruments, and, with
respect to
nonnegotiable Documents, to have such nonnegotiable Documents
issued in
the name of Agent; and with respect to Collateral in the
possession of a
third party, other than Certificated Securities and Goods
covered by a
Document, obtain an acknowledgement from the third party that it
is
holding the Collateral for the benefit of Agent.
5.3. Lien Perfection; Further Assurances.
Each Borrower shall execute such UCC-1 financing statements as
are
required by the UCC and such other instruments, assignments or
documents as are
necessary to perfect Agent's Lien upon any of the Collateral and
shall take such
other action as may be required to perfect or to continue the
perfection of
Agent's Lien upon the Collateral. Unless prohibited by
applicable law, each
Borrower hereby authorizes Agent to execute and file any such
financing
statement, including, without limitation, financing statements
that indicate the
Collateral (i) as all assets of such Borrower or words of
similar effect, or
(ii) as being of an equal or lesser scope, or with greater or
lesser detail,
than as set forth in Section 5.1, on such Borrower's behalf.
Each Borrower also
hereby ratifies its authorization for Agent to have filed in any
jurisdiction
any like financing statements or amendments thereto if filed
prior to the date
hereof. The parties agree that a carbon, photographic or other
reproduction of
this Agreement shall be sufficient as a financing statement and
may be filed in
any appropriate office in lieu thereof. At Agent's request, each
Borrower shall
also promptly execute or cause to be executed and shall deliver
to Agent any and
all documents, instruments and agreements deemed necessary by
Agent, to give
effect to or carry out the terms or intent of the Loan
Documents.
5.4. Lien on Realty.
The due and punctual payment and performance of the
Obligations
shall also be secured by the Lien created by Mortgages upon all
real Property of
Borrowers now or hereafter owned. Each Mortgage shall be
executed by the
Borrowers in favor of Agent. Each Mortgage shall be duly
recorded, at Borrowers'
expense, in each office where such recording is required to
constitute a fully
perfected first Lien on the real Property covered thereby.
Borrowers shall
deliver to Agent, at Borrowers' expense, mortgagee title
insurance policies
issued by a title insurance company satisfactory to Agent, which
policies shall
be in form and substance satisfactory to Agent and shall insure
a valid first
Lien in favor of Agent, for the benefit of itself and the
Lenders, on the
Property covered by each Mortgage, subject only to those
exceptions reasonably
acceptable to Agent and its counsel. Borrowers shall deliver to
Agent such other
documents, including, without limitation, as-built survey prints
of the real
Property, as Agent and its counsel may request relating to the
real Property
subject to the Mortgages.
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SECTION 6. COLLATERAL ADMINISTRATION
6.1. General.
6.1.1. Location of Collateral. All Collateral, other than
Inventory in transit and motor vehicles, will at all times be
kept by
Borrowers and their Subsidiaries at one or more of the business
locations
set forth in Exhibit 6.1.1 hereto, as updated by Borrowers
providing prior
written notice to Agent of any new location.
6.1.2. Insurance of Collateral. Each Borrower shall maintain
and pay for insurance upon all Collateral wherever located and
with
respect to the business of such Borrower and each of its
Subsidiaries,
covering casualty, hazard, public liability, workers'
compensation and
such other risks in such amounts and with such insurance
companies as are
reasonably satisfactory to Agent. Each Borrower shall deliver
certified
copies of such policies to Agent as promptly as practicable,
with
satisfactory lender's loss payable endorsements, naming Agent as
a loss
payee, assignee or additional insured, as appropriate, as its
interest may
appear, and showing only such other loss payees, assignees and
additional
insureds as are satisfactory to Agent. Each policy of insurance
or
endorsement shall contain a clause requiring the insurer to give
not less
than 10 days' prior written notice to Agent in the event of
cancellation
of the policy for nonpayment of premium and not less than 30
days' prior
written notice to Agent in the event of cancellation of the
policy for any
other reason whatsoever and a clause specifying that the
interest of Agent
shall not be impaired or invalidated by any act or neglect of
any
Borrower, any of its Subsidiaries or the owner of the Property
or by the
occupation of the premises for purposes more hazardous than are
permitted
by said policy. Borrower Representative agrees to deliver to
Agent, as
promptly as rendered, true copies of all reports made in any
reporting
forms to insurance companies. All proceeds of business
interruption
insurance (if any) of any Borrower and its Subsidiaries shall be
remitted
to Agent for application to the outstanding balance of the
Revolving
Credit Loans.
Unless each Borrower provides Agent with evidence of the
insurance coverage required by this Agreement, Agent may
purchase
insurance at such Borrower's expense to protect Agent's
interests in the
Properties of such Borrower and its Subsidiaries. This insurance
may, but
need not, protect the interests of such Borrower and its
Subsidiaries. The
coverage that Agent purchases may not pay any claim that such
Borrower or
any Subsidiary makes or any claim that is made against such
Borrower or
any such Subsidiary in connection with said Property. Such
Borrower may
later cancel any insurance purchased by Agent, but only after
providing
Agent with evidence that such Borrower and its Subsidiaries have
obtained
insurance as required by this Agreement. If Agent purchases
insurance,
such Borrower will be responsible for the costs of that
insurance,
including interest and any other charges Agent may impose in
connection
with the placement of insurance, until the effective date of
the
cancellation or expiration of the insurance. The costs of the
insurance
may be added to the Obligations. The costs of the insurance may
be more
than the cost of insurance that such Borrower and its
Subsidiaries may be
able to obtain on their own.
6.1.3. Protection of Collateral. Neither Agent nor any
Lender
shall be liable or responsible in any way for the safekeeping of
any of
the Collateral or for any loss or damage thereto (except for
reasonable
care in the custody thereof while any
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Collateral is in Agent's or any Lender's actual possession) or
for any
diminution in the value thereof, or for any act or default of
any
warehouseman, carrier, forwarding agency, or other person
whomsoever, but
the same shall be at Borrowers' sole risk.
6.2. Administration of Accounts.
6.2.1. Records, Schedules and Assignments of Accounts. Each
Borrower shall keep accurate and complete records of its
Accounts and all
payments and collections thereon and shall submit to Agent on
such
periodic basis as Agent shall request a sales and collections
report for
the preceding period, in form consistent with the reports
currently
prepared by such Borrower with respect to such information.
Concurrently
with the delivery of the Borrowing Base Certificate for the last
week of
each month described in subsection 8.1.4, or more frequently as
requested
by Agent, from and after the date hereof, each Borrower shall
deliver to
Agent a detailed aged trial balance of all of its Accounts,
specifying the
names, addresses, face values, dates of invoices and due dates
for each
Account Debtor obligated on an Account so listed ("Schedule of
Accounts"),
and upon Agent's request therefor, copies of proof of delivery
and the
original copy of all documents, including, without limitation,
repayment
histories and present status reports relating to the Accounts so
scheduled
and such other matters and information relating to the status of
then
existing Accounts as Agent shall request. If requested by Agent,
each
Borrower shall execute and deliver to Agent formal written
assignments of
all of its Accounts weekly or daily, which shall include all
Accounts that
have been created since the date of the last assignment,
together with
copies of invoices or invoice registers related thereto. No
later than the
fifteenth (15th) day of each month, the Borrowers shall deliver
to the
Agent an aging report with respect to accounts receivable and a
listing of
accounts payable, in each case for the previous month.
6.2.2. Discounts, Allowances, Disputes. If any Borrower
grants
any discounts, allowances or credits that are not shown on the
face of the
invoice for the Account involved, such Borrower shall report
such
discounts, allowances or credits, as the case may be, to Agent
as part of
the next required Schedule of Accounts.
6.2.3. Account Verification. Any of Agent's officers,
employees or agents shall have the right, at any time or times
hereafter,
in the name of Agent, any designee of Agent or any Borrower, to
verify the
validity, amount or any other matter relating to any Accounts by
mail,
telephone, electronic communication or otherwise. Each Borrower
shall
cooperate fully with Agent in an effort to facilitate and
promptly
conclude any such verification process; provided that such
Account
verifications shall only be performed in conjunction with
semi-annual
audits, or more frequently if (i) an Event of Default has
occurred and is
continuing or (ii) in connection with Permitted
Acquisitions.
6.2.4. Maintenance of Dominion Account. Borrowers shall
maintain a Dominion Account or Accounts pursuant to lockbox and
blocked
account arrangements reasonably acceptable to Agent with such
banks as may
be selected by Borrowers and be acceptable to Agent. Borrowers
shall issue
to any such banks an irrevocable letter of instruction directing
such
banks to deposit all payments or other remittances received in
the lockbox
and blocked accounts to the Dominion Account for application on
account
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<PAGE>
of the Obligations as provided in subsection 3.2.1. All funds
deposited in
any Dominion Account shall immediately become the property of
Agent, for
the ratable benefit of Lenders, and Borrowers shall obtain the
agreement
by such banks in favor of Agent to waive any recoupment, setoff
rights,
and any security interest in, or against, the funds so
deposited. Agent
assumes no responsibility for such lockbox and blocked
account
arrangements, including, without limitation, any claim of accord
and
satisfaction or release with respect to deposits accepted by any
bank
thereunder.
6.2.5. Collection of Accounts, Proceeds of Collateral. Each
Borrower agrees that all invoices rendered and other requests
made by such
Borrower for payment in respect of Accounts shall contain a
written
statement directing payment in respect of such Accounts to be
paid to a
lockbox established pursuant to subsection 6.2.4. To expedite
collection,
each Borrower shall endeavor in the first instance to make
collection of
its Accounts for Agent. All remittances received by each
Borrower on
account of Accounts, together with the proceeds of any other
Collateral,
shall be held as Agent's property, for its benefit and the
benefit of
Lenders, by such Borrower as trustee of an express trust for
Agent's
benefit and such Borrower shall immediately deposit same in kind
in the
Dominion Account. Agent retains the right at all times after
the
occurrence and during the continuance of a Default or an Event
of Default
to notify Account Debtors that a Borrower's Accounts have been
assigned to
Agent and to collect such Borrower's Accounts directly in its
own name, or
in the name of Agent's agent, and to charge the collection costs
and
expenses, including attorneys' fees, to such Borrower.
6.2.6. Taxes. If an Account includes a charge for any tax
payable to any governmental taxing authority, Agent is
authorized, in its
sole discretion, to pay the amount thereof to the proper taxing
authority
for the account of any Borrower and to charge such Borrower
therefor,
except for taxes that (i) are being actively contested in good
faith and
by appropriate proceedings and with respect to which such
Borrower
maintains reasonable reserves on its books therefor and (ii)
would not
reasonably be expected to result in any Lien other than a
Permitted Lien.
In no event shall Agent or any Lender be liable for any taxes to
any
governmental taxing authority that may be due by any
Borrower.
6.3. Administration of Inventory.
6.3.1. Records and Reports of Inventory. Each Borrower shall
keep records of its Inventory which records shall be complete
and accurate
in all material respects. Each Borrower shall furnish to Agent
Inventory
reports concurrently with the delivery of each Borrowing Base
Certificate
described in subsection 8.1.4 or more frequently as reasonably
requested
by Agent, which reports will be in such other format and detail
as Agent
shall request and shall include a current list of all locations
of such
Borrower's Inventory. Each Borrower shall conduct a physical
inventory no
less frequently than annually and shall provide to Agent a
report based on
each such physical inventory promptly thereafter, together with
such
supporting information as Agent shall reasonably request. No
Inventory
will at any time be misbranded or adulterated, and all Inventory
shall
bear all labels and warnings required by all federal or state
laws, rules
and regulations.
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<PAGE>
6.3.2. Inventory Appraisal. Within 60 days after October 31
and April 30 of each year, and upon Agent's request during the
existence
of a Default or an Event of Default, Borrower Representative,
at
Borrowers' sole cost and expense, shall provide Agent with an
Appraisal of
the Inventory in form and substance reasonably acceptable to
Agent setting
forth the Net Orderly Liquidation Value of the Inventory.
6.4. Administration of Equipment.
6.4.1. Records and Schedules of Equipment. Each Borrower
shall
keep records of its Equipment which shall be complete and
accurate in all
material respects itemizing and describing the kind, type,
quality,
quantity and book value of its Equipment and all dispositions
made in
accordance with subsection 6.4.2 hereof, and upon request of
Agent such
Borrower shall, and shall cause each of its Subsidiaries to,
furnish Agent
with a current schedule containing the foregoing information on
at least
an annual basis. Promptly after the request therefor by Agent,
each
Borrower shall deliver to Agent any and all evidence of
ownership, if any,
of any of its Equipment.
6.4.2. Dispositions of Equipment. No Borrower shall or shall
permit any of its Subsidiaries to sell, lease or otherwise
dispose of or
transfer any of its respective Equipment or other fixed assets
or any part
thereof without the prior written consent of Agent; provided,
however,
that the foregoing restriction shall not apply, for so long as
no Default
or Event of Default exists and is continuing, to (i)
dispositions of
Equipment and other fixed assets which, in the aggregate during
any
consecutive twelve-month period, have a fair market value or a
book value,
which is $1,000,000 or less, provided that all proceeds thereof
are
remitted to Agent for application to the Loans as provided in
subsection
3.3.1, or (ii) replacements of Equipment or other fixed assets
that are
substantially worn, damaged or obsolete with Equipment or other
fixed
assets of like kind, function and value which are useful in the
business
of any Borrower or one of its Subsidiaries, provided that the
replacement
Equipment or other fixed assets shall be acquired within 90 days
after any
disposition of the Equipment or other fixed assets that are to
be replaced
and the replacement Equipment or other fixed assets shall be
free and
clear of Liens other than Permitted Liens that are not Purchase
Money
Liens.
6.5. Payment of Charges.
All amounts chargeable to Borrowers under Section 6 hereof shall
be
Obligations secured by all of the Collateral, shall be payable
on demand and
shall bear interest from the date such advance was made until
paid in full at
the rate applicable to the Revolving Credit Loans from time to
time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1. General Representations and Warranties.
To induce Agent and each Lender to enter into this Agreement and
to
make advances hereunder, Borrowers jointly and severally
warrant, represent and
covenant to Agent and each Lender that:
26
<PAGE>
7.1.1. Qualification. Each Borrower and each of its
Subsidiaries is a corporation, limited partnership or limited
liability
company duly organized, validly existing and in good standing
under the
laws of the jurisdiction of its incorporation or organization.
Each
Borrower and each of its Subsidiaries is duly qualified and is
authorized
to do business and is in good standing as a foreign limited
liability
company, limited partnership or corporation, as applicable, in
each state
or jurisdiction listed on Exhibit 7.1.1 hereto and in all other
states and
jurisdictions in which the failure of such Borrower or any of
its
Subsidiaries to be so qualified could reasonably be expected to
have a
Material Adverse Effect.
7.1.2. Power and Authority. Each Borrower and each of its
Subsidiaries is duly authorized and empowered to enter into,
execute,
deliver and perform this Agreement and each of the other Loan
Documents to
which it is a party. The execution, delivery and performance of
this
Agreement and each of the other Loan Documents have been duly
authorized
by all necessary corporate or other relevant action and do not
and will
not (i) require any consent or approval of the shareholders or
members, as
applicable, of any Borrower or any of the shareholders, partners
or
members, as the case may be, of any Subsidiary of such Borrower;
(ii)
contravene any Borrower's or any of its Subsidiaries' charter,
articles or
certificate of incorporation, partnership agreement, certificate
of
formation, by-laws, limited liability agreement, operating
agreement or
other organizational documents (as the case may be); (iii)
violate, or
cause any Borrower or any of its Subsidiaries to be in default
under, any
provision of any law, rule, regulation, order, writ, judgment,
injunction,
decree, determination or award in effect having applicability to
any
Borrower or any of its Subsidiaries, the violation of which
could
reasonably be expected to have a Material Adverse Effect; (iv)
result in a
breach of or constitute a default under any indenture or loan or
credit
agreement or any other agreement, lease or instrument to which
any
Borrower or any of its Subsidiaries is a party or by which it or
its
Properties may be bound or affected, the breach of or default
under which
could reasonably be expected to have a Material Adverse Effect;
or (v)
result in, or require, the creation or imposition of any Lien
(other than
Permitted Liens) upon or with respect to any of the Properties
now owned
or hereafter acquired by any Borrower or any of its
Subsidiaries.
7.1.3. Legally Enforceable Agreement. This Agreement is, and
each of the other Loan Documents when delivered under this
Agreement will
be, a legal, valid and binding obligation of each Borrower and
each of its
Subsidiaries party thereto, enforceable against it in accordance
with its
respective terms.
7.1.4. Capital Structure. Exhibit 7.1.4 hereto states, as of
the date hereof, (i) the correct name of each of the
Subsidiaries and
Affiliates of each Borrower, its jurisdiction of incorporation
or
organization and the percentage of its Voting Stock owned by
such
Borrower, (ii) the name of each Borrower's and each of its
Subsidiaries'
corporate or joint venture relationships and the nature of
the
relationship, (iii) the number, nature and holder of all
outstanding
Securities of each Borrower and the holder of Securities of
each
Subsidiary of such Borrower and (iv) the number of authorized,
issued and
treasury Securities of each Borrower. Each Borrower has good
title to all
of the Securities it purports to own of each of such
Subsidiaries, free
and clear in each case of any Lien other than Permitted Liens.
All such
Securities have been duly issued and
27
<PAGE>
are fully paid and non-assessable, except as set forth in
Exhibit 7.1.4.
As of the date hereof, there are no outstanding options to
purchase, or
any rights or warrants to subscribe for, or any commitments or
agreements
to issue or sell any Securities or obligations convertible into,
or any
powers of attorney relating to any Securities of any Borrower or
any of
its Subsidiaries. Except as set forth on Exhibit 7.1.4, as of
the date
hereof, there are no outstanding agreements or instruments
binding upon
any Borrower's or any of its Subsidiaries' partners, members
or
shareholders, as the case may be, relating to the ownership of
its
Securities.
7.1.5. Names; Organization. No Borrower or any of its
Subsidiaries has been known as or has used any legal, fictitious
or trade
names except those listed on Exhibit 7.1.5 hereto. Except as set
forth on
Exhibit 7.1.5, no Borrower or any of its Subsidiaries has been
the
surviving entity of a merger or consolidation or has acquired
all or
substantially all of the assets of any Person. Each Borrower's
and each of
its Subsidiaries' state(s) of incorporation or organization,
Type of
Organization and Organizational I.D. Number is set forth on
Exhibit 7.1.5.
The exact legal name of each Borrower and each of its
Subsidiaries is set
forth on Exhibit 7.1.5.
7.1.6. Business Locations; Agent for Process. Each
Borrower's
and each of its Subsidiary's chief executive office, location of
books and
records and other places of business are as listed on Exhibit
6.1.1
hereto, as updated from time to time by such Borrower in
accordance with
the provisions of subsection 6.1.1. During the preceding
one-year period,
no Borrower or any of its Subsidiaries has had an office, place
of
business or agent for service of process, other than as listed
on Exhibit
6.1.1. All tangible Collateral is and will at all times be kept
by each
Borrower and its Subsidiaries in accordance with subsection
6.1.1. Except
as shown on Exhibit 6.1.1, as of the date hereof, no Inventory
is stored
with a bailee, distributor, warehouseman or similar party, nor
is any
Inventory consigned to any Person.
7.1.7. Title to Properties; Priority of Liens. Each Borrower
and each of its Subsidiaries has good, indefeasible and
marketable title
to and fee simple ownership of, or valid and subsisting
leasehold
interests in, all of its real Property, and good title to all of
the
Collateral and all of its other Property, in each case, free and
clear of
all Liens except Permitted Liens. Each Borrower and each of
its
Subsidiaries has paid or discharged all lawful claims which, if
unpaid,
might become a Lien against any of such Borrower's or such
Subsidiary's
Properties that is not a Permitted Lien. The Liens granted to
Agent under
Section 5 hereof are first priority Liens, subject only to
Permitted
Liens.
7.1.8. Accounts. Agent may rely, in determining which
Accounts
are Eligible Accounts, on all statements and representations
made by any
Borrower with respect to any Account or Accounts. With respect
to each of
the Accounts of each Borrower, whether or not such Account is an
Eligible
Account, unless otherwise disclosed to Agent in writing:
(i) It is genuine and in all respects what it purports to
be, and it is not evidenced by a judgment;
28
<PAGE>
(ii) It arises out of a completed, bona fide sale and
delivery of goods or rendition of services by such Borrower, in
the
ordinary course of its business and in accordance with the terms
and
conditions of all purchase orders, contracts or other
documents
relating thereto and forming a part of the contract between
such
Borrower and the Account Debtor;
(iii) It is for a liquidated amount maturing as stated in
the duplicate invoice covering such sale or rendition of
services, a
copy of which has been furnished or is available to Agent;
(iv) There are no facts, events or occurrences which in any
way impair the validity or enforceability of any Accounts or
tend to
reduce the amount payable thereunder from the face amount of
the
invoice and statements delivered or made available to Agent
with
respect thereto;
(v) To the best of such Borrower's knowledge, the Account
Debtor thereunder (1) had the capacity to contract at the time
any
contract or other document giving rise to the Account was
executed
and (2) such Account Debtor is Solvent; and
(vi) To the best of such Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against
the
Account Debtor thereunder which might result in any material
adverse
change in such Account Debtor's financial condition or the
collectibility of such Account.
7.1.9. Equipment. The Equipment of each Borrower and its
Subsidiaries is in good operating condition and repair, and all
necessary
replacements of and repairs thereto shall be made so that the
operating
efficiency thereof shall be maintained and preserved, reasonable
wear and
tear excepted. No Borrower or any of its Subsidiaries will
permit any
Equipment to become affixed to any real Property leased to such
Borrower
or any of its Subsidiaries so that an interest arises therein
under the
real estate laws of the applicable jurisdiction unless the
landlord of
such real Property has executed a landlord waiver or leasehold
mortgage in
favor of and in form reasonably acceptable to Agent, and such
Borrower
will not permit any of the Equipment of such Borrower or any of
its
Subsidiaries to become an accession to any personal Property
other than
Equipment that is subject to first priority (except for
Permitted Liens)
Liens in favor of Agent.
7.1.10. Financial Statements; Fiscal Year. The Consolidated
and unaudited consolidating balance sheets of each Borrower and
its
Subsidiaries (including the accounts of all Subsidiaries of such
Borrower
and their respective Subsidiaries for the respective periods
during which
a Subsidiary relationship existed) as of October 31, 2004, and
the related
statements of income, changes in shareholder's equity, and
changes in
financial position for the periods ended on such dates, have
been prepared
in accordance with GAAP, and present fairly in all material
respects the
financial positions of such Borrower and such Subsidiaries,
taken as a
whole, at such dates and the results of such Borrower's and such
Persons'
operations, taken as a whole, for such periods. As of the date
hereof,
since June 30, 2004, there has been no material adverse change
in the
financial position of each Borrower and such Subsidiaries, taken
as a
whole, as reflected
29
<PAGE>
in the Consolidated balance sheet as of such date. As of the
date hereof,
the fiscal year of each Borrower and each of its Subsidiaries
ends on June
30 of each year.
7.1.11. Full Disclosure. The financial statements referred
to
in subsection 7.1.10 hereof do not, nor does this Agreement or
any other
written statement of any Borrower to Agent or any Lender contain
any
untrue statement of a material fact or omit a material fact
necessary to
make the statements contained therein or herein not misleading.
There is
no fact which any Borrower has failed to disclose to Agent or
any Lender
in writing which could reasonably be expected to have a Material
Adverse
Effect.
7.1.12. Solvent Financial Condition. Each Borrower and each
of
its Subsidiaries, is now and, after giving effect to the initial
Loans to
be made and the initial Letters of Credit and LC Guaranties to
be issued
hereunder and all related transactions, will be, Solvent.
7.1.13. Surety Obligations. Except as permitted by Section
8.2.3(ix) hereof, no Borrower or any of its Subsidiaries is
obligated as a
surety or indemnitor under any surety or similar bond or other
contract
issued or entered into or has entered into any agreement to
assure
payment, performance or completion of performance of any
undertaking or
obligation of any Person.
7.1.14. Taxes. D&K's federal tax identification number
is
43-1465483. Jewett's federal tax identification number is
46-0151530. DH's
federal tax identification number is 43-61-1400993. MVP's
federal tax
identification number is 66-0490722. D&K Pharmacy Solutions'
federal tax
identification number is 20-0881542. Walsh's federal tax
identification
number is 71-0185790. Walsh Heartland's federal tax
identification number
is 73-1575985. Walsh Distribution's federal tax identification
number is
62-1827502. The federal tax identification numbers of each
Borrower's
Subsidiaries are shown on Exhibit 7.1.14 hereto. Each Borrower
and each of
its Subsidiaries has filed all federal, state and local tax
returns and
other reports relating to taxes it is required by law to file,
and has
paid, or made provision for the payment of, all taxes,
assessments, fees,
levies and other governmental charges upon it, its income and
Properties
as and when such taxes, assessments, fees, levies and charges
are due and
payable, unless and to the extent any thereof are being actively
contested
in good faith and by appropriate proceedings and such Borrower
and each of
its Subsidiaries maintains reasonable reserves on its books
therefor. The
provision for taxes on the books of each Borrower and its
Subsidiaries is
adequate for all years not closed by applicable statutes, and
for the
current fiscal year.
7.1.15. Brokers. Except as shown on Exhibit 7.1.15 hereto,
there are no claims for brokerage commissions, finder's fees or
investment
banking fees in connection with the transactions contemplated by
this
Agreement.
7.1.16. Patents, Trademarks, Copyrights and Licenses. Each
Borrower and each of its Subsidiaries owns, possesses or
licenses or has
the right to use all the patents, trademarks, service marks,
trade names,
copyrights, licenses and other Intellectual Property necessary
for the
present and planned future conduct of its business without any
known
conflict with the rights of others, except for such conflicts as
could
30
<PAGE>
not reasonably be expected to have a Material Adverse Effect.
All such
patents, trademarks, service marks, tradenames, copyrights,
licenses, and
other similar rights are included on Exhibit 7.1.16 hereto. No
claim has
been asserted to any Borrower or any of its Subsidiaries which
is
currently pending that their use of their Intellectual Property
or the
conduct of their business does or may infringe upon the
Intellectual
Property rights of any third party. To the knowledge of each
Borrower and
except as set forth on Exhibit 7.1.16 hereto, as of the date
hereof, no
Person is engaging in any activity that infringes in any
material respect
upon such Borrower's or any of its Subsidiaries' material
Intellectual
Property. Except as set forth on Exhibit 7.1.16, each Borrower's
and each
of its Subsidiaries' (i) material trademarks, service marks,
and
copyrights are registered with the U.S. Patent and Trademark
Office or in
the U.S. Copyright Office, as applicable and (ii) material
license
agreements and similar arrangements relating to its Inventory
(1) permits,
and does not restrict, the assignment by such Borrower or any of
its
Subsidiaries to Agent, or any other Person designated by Agent,
of all of
such Borrower's or such Subsidiary's, as applicable, rights,
title and
interest pertaining to such license agreement or such similar
arrangement
and (2) would permit the continued use by such Borrower or
such
Subsidiary, or Agent or its assignee, of such license agreement
or such
similar arrangement and the right to sell Inventory subject to
such
license agreement for a period of no less than 6 months after a
default or
breach of such agreement or arrangement. The consummation and
performance
of the transactions and actions contemplated by this Agreement
and the
other Loan Document, including without limitation, the exercise
by Agent
of any of its rights or remedies under Section 10, will not
result in the
termination or impairment of any Borrower's or any of its
Subsidiaries'
ownership or rights relating to its Intellectual Property,
except for such
Intellectual Property rights the loss or impairment of which
could not
reasonably be expected to have a Material Adverse Effect. Except
as listed
on Exhibit 7.1.16 and except as could not reasonably be expected
to have a
Material Adverse Effect, (i) no Borrower or any of its
Subsidiaries is in
breach of, or default under, any term of any license or
sublicense with
respect to any of its Intellectual Property and (ii) to the
knowledge of
each Borrower, no other party to such license or sublicense is
in breach
thereof or default thereunder, and such license is valid and
enforceable.
7.1.17. Governmental Consents. Each Borrower and each of its
Subsidiaries has, and is in good standing with respect to,
all
governmental consents, approvals, licenses, authorizations,
permits,
certificates, inspections and franchises necessary to continue
to conduct
its business as heretofore or proposed to be conducted by it and
to own or
lease and operate its Properties as now owned or leased by it,
except
where the failure to possess or so maintain such rights could
not
reasonably be expected to have a Material Adverse Effect.
7.1.18. Compliance with Laws. Each Borrower and each of its
Subsidiaries has duly complied, and its Properties, business
operations
and leaseholds are in compliance with, the provisions of all
federal,
state and local laws, rules and regulations applicable to such
Borrower or
such Subsidiary, as applicable, its Properties or the conduct of
its
business, except for such non-compliance as could not reasonably
be
expected to have a Material Adverse Effect, and there have been
no
citations, notices or orders of noncompliance issued to such
Borrower or
any of its Subsidiaries under any such law, rule or regulation,
except
where such noncompliance could not reasonably be
31
<PAGE>
expected to have a Material Adverse Effect. Each Borrower and
each of its
Subsidiaries has established and maintains an adequate
monitoring system
to insure that it remains in compliance in all material respects
with all
federal, state and local rules, laws and regulations applicable
to it. No
Inventory produced by the Borrowers has been produced in
violation of the
Fair Labor Standards Act (29 U.S.C. Section 201 et seq.), as
amended.
7.1.19. Restrictions. No Borrower or any of its Subsidiaries
is a party or subject to any contract or agreement which
restricts its
right or ability to incur Indebtedness, other than as set forth
on Exhibit
7.1.19 hereto, none of which prohibit the execution of or
compliance with
this Agreement or the other Loan Documents by such Borrower or
any of its
Subsidiaries, as applicable.
7.1.20. Litigation. Except as set forth on Exhibit 7.1.20
hereto, there are no actions, suits, proceedings or
investigations
pending, or to the knowledge of any Borrower, threatened,
against or
affecting such Borrower or any of its Subsidiaries, or the
business,
operations, Properties, prospects, profits or condition of such
Borrower
or any of its Subsidiaries which, singly or in the aggregate,
could
reasonably be expected to have a Material Adverse Effect. No
Borrower or
any of its Subsidiaries is in default with respect to any order,
writ,
injunction, judgment, decree or rule of any court, governmental
authority
or arbitration board or tribunal, which, singly or in the
aggregate, could
reasonably be expected to have a Material Adverse Effect.
7.1.21. No Defaults. No event has occurred and no condition
exists which would, upon or after the execution and delivery of
this
Agreement or any Borrower's performance hereunder, constitute a
Default or
an Event of Default. No Borrower or any of its Subsidiaries is
in default
in (and no event has occurred and no condition exists which
constitutes,
or which the passage of time or the giving of notice or both
would
constitute, a default in) the payment of any Indebtedness to any
Person
for Money Borrowed in excess of $500,000.
7.1.22. Leases. Exhibit 7.1.22 hereto is a complete listing
of
all capitalized and operating personal property leases (in the
case of
operating personal property leases, only to the extent such
leases
individually require monthly rental payment in excess of $1,000)
of each
Borrower and its Subsidiaries and all real property leases of
each
Borrower and its Subsidiaries. Each Borrower and each of its
Subsidiaries
is in full compliance with all of the terms of each of its
respective
capitalized and operating leases, except where the failure to so
comply
could not reasonably be expected to have a Material Adverse
Effect.
7.1.23. Pension Plans. Except as disclosed on Exhibit 7.1.23
hereto, no Borrower or any of its Subsidiaries has any Plan.
Each Borrower
and each of its Subsidiaries is in compliance with the
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