SECOND AMENDED AND RESTATED CREDIT AGREEMENT Dated as of October 28, 2010 among NAPCO SECURITY TECHNOLOGIES, INC. as the Borrower, CAPITAL ONE, N.A., as a Lender, The Other Lenders from Time to Time Parties Hereto and HSBC BANK USA, NATIONAL ASSOCIATION as Administrative Agent and Collateral Agent

SECTION 1:	DEFINITIONS	2
1.1.	Defined Terms	2
1.2.	Other Definitional Provisions.	18
SECTION 2:	AMOUNT AND TERMS OF COMMITMENTS	19
2.1.	Revolving Commitments.	19
2.2.	Procedure for Revolving Credit Borrowing	19
2.3.	Repayment of Revolving Credit Loans	20
2.4.	Termination and Reduction of Revolving Credit Commitments	20
2.5.	Term Commitments	20
2.6.	Intentionally Omitted.	20
2.7.	Repayment of Term Loans	20
2.8.	Swing Line Commitment.	21
SECTION 3:	LETTERS OF CREDIT	22
3.1.	Letters of Credit	22
3.2.	Procedure for Issuance of Letters of Credit	23
3.3.	Participating Interests	24
3.4.	Payments.	24
3.5.	Further Assurances	25
3.6.	Obligations Absolute	25
3.7.	Letter of Credit Application	25
3.8.	Purpose of Letters of Credit	25
SECTION 4:	GENERAL PROVISIONS	26
4.1.	Interest Rates and Payment Dates.	26
4.2.	Conversion and Continuation Options.	26
4.3.	Minimum Amounts of Tranches	27
4.4.	Optional and Mandatory Prepayments.	27
4.5.	Commitment Fees; Other Fees.	28
4.6.	Computation of Interest and Fees.	29
4.7.	Inability to Determine Interest Rate	30
4.8.	Pro Rata Treatment and Payments.	30
4.9.	Illegality	32
4.10.	Increased Costs.	32
4.11.	Indemnity	34
4.12.	Taxes.	34
4.13.	Use of Proceeds	36
4.14.	Change in Lending Office; Replacement of Lender.	37
4.15.	Break Funding Payments	37

 

 

 

 

 

4.16.	Evidence of Debt.	38
SECTION 5:	REPRESENTATIONS AND WARRANTIES	39
5.1.	Financial Condition; Accuracy of Information	39
5.2.	No Change	39
5.3.	Corporate Existence; Compliance with Law	39
5.4.	Corporate Power; Authorization; Enforceable Obligations	39
5.5.	No Legal Bar	40
5.6.	No Material Litigation	40
5.7.	No Default	40
5.8.	Ownership of Property; Liens	40
5.9.	Intellectual Property	40
5.10.	Taxes	41
5.11.	Federal Regulations	41
5.12.	ERISA.	41
5.13.	Investment Company Act; Other Regulations	42
5.14.	Subsidiaries	42
5.15.	Environmental Matters	42
5.16.	Solvency	43
5.17.	Security Documents	43
5.18.	Insurance	43
5.19.	Affiliate Transactions	43
5.20.	Accuracy of Information	43
5.21.	OFAC	44
5.22.	Deposit Accounts	44
5.23.	Acknowledgement	44
SECTION 6:	CONDITIONS PRECEDENT	44
6.1.	Conditions to Closing Date	44
6.2.	Conditions to Each Extension of Credit	47
SECTION 7:	AFFIRMATIVE COVENANTS	47
7.1.	Financial Statements	47
7.2.	Certificates; Other Information	48
7.3.	Payment of Obligations	49
7.4.	Maintenance of Existence	49
7.5.	Maintenance of Property; Insurance	49
7.6.	Inspection of Property; Books and Records; Discussions; Audits and Appraisals	49
7.7.	Notices	50
7.8.	Environmental Laws.	51
7.9.	Additional Subsidiaries; Additional Collateral.	51
7.10.	Post Closing Obligations.	52

SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”), dated as of October 28, 2010, among NAPCO SECURITY TECHNOLOGIES, INC. a Delaware corporation (the “Borrower”),  CAPITAL ONE, N.A., a national banking association, HSBC BANK USA, NATIONAL ASSOCIATION, a national banking association and other financial institutions from time to time parties hereto as lenders (collectively, the “Lenders”), HSBC BANK USA, NATIONAL ASSOCIATION, a national banking association, as administrative agent and collateral agent for the Lenders hereunder (in such capacities, the “Administrative Agent” and the “Collateral Agent,” respectively and each an “Agent” and collectively, the “Agents”).

 

W I T N E S S E T H :

 

WHEREAS, the Borrower, the Agents and the Lenders are party to that certain Amended and Restated Credit Agreement dated as of August 18, 2008, as amended from time to time prior to the date hereof (the “Existing Credit Agreement”);

 

WHEREAS, the Existing Defaults (as defined in Section 11.18 hereto) have occurred and are continuing as of the date hereof;

 

WHEREAS, the Borrower has requested that the Agents and Lenders agree to amend and restate the Existing Credit Agreement to, among other things, waive all of the Existing Defaults and to amend certain provisions of the Existing Credit Agreement;

 

WHEREAS, in order to induce the Agents and Lenders to waive the Existing Defaults and enter into this Agreement, the Borrower has agreed to reduce the outstanding principal balance of the Revolving Credit Loans by $1,000,000 (the “Revolving Credit Loan Paydown”) and repay the outstanding principal balance of the Term Loan by $1,786,000 (the “Term Loan Paydown”);

 

WHEREAS, the Agents and the Lenders are willing to so amend and restate the Existing Credit Agreement in its entirety;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein set forth, the parties hereto agree as follows:

 

 

As of the Closing Date, the Existing Credit Agreement shall be deemed amended and restated in its entirety as set forth in this Agreement, and all of the terms and conditions contained in this Agreement shall control and supersede in its entirety the terms and conditions of the Existing Credit Agreement (and any amendments or modifications thereto).  All Liens and security interests granted under the Existing Loan Documents shall continue to be in full force and effect in accordance with the terms of the applicable Existing Loan Documents and are hereby ratified and confirmed.

 

 

 

The amendment and restatement contained herein shall not, in any manner, be construed to constitute payment of, or impair, limit, cancel or extinguish, or constitute a novation in respect of, the Indebtedness of the Loan Parties evidenced by or arising under the Existing Credit Agreement, and the Liens and security interests of the Collateral Agent, for its benefit and the benefit of the Lenders, securing such Indebtedness, which Liens shall not in any manner be impaired, limited, terminated, waived or released, but shall continue in full force and effect as provided in this Agreement and the other Loan Documents.  All references in the Existing Loan Documents to the “Credit Agreement” shall be deemed to refer to this Agreement, as it may be amended, modified, supplemented or restated from time to time in accorda nce with terms hereof.

 

SECTION 1:  DEFINITIONS

 

1.1. Defined Terms.  As used in this Agreement, the following terms shall have the following meanings:

 

“Administrative Agent”:  as defined in the preamble hereto, and shall include any successor appointed in accordance with subsection 10.9.

 

“Affiliate”:  of any Person, (a) any other Person (other than a wholly owned Subsidiary of such Person) which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person or (b) any other Person who is a director or officer of (i) such Person, (ii) any Subsidiary of such Person or (iii) any Person described in clause (a) above.  For purposes of this definition, a Person shall be deemed to be “controlled by” such other Person if such other Person possesses, directly or indirectly, power either to (A) vote 10% or more of the securities having ordinary voting power for the election of directors of such first Person or (B) direct or cause the direction of the man agement and policies of such first Person whether by contract or otherwise.

 

“Agent”:  as defined in the preamble hereto.

 

“Aggregate Available Revolving Credit Commitments”:  as at any date of determination with respect to all Revolving Lenders, the aggregate amount of Available Revolving Credit Commitments of all Revolving Lenders on such date.

 

“Aggregate Loans”:  on any date, the sum of the Aggregate Revolving Credit Commitments (or if the Revolving Credit Commitments have terminated or expired at such time, the Aggregate Revolving Credit Outstanding of all Revolving Lenders) and the aggregate Term Loans outstanding.

 

“Aggregate Revolving Credit Commitments”:  the aggregate amount of the Revolving Credit Commitments of all the Revolving Lenders.

 

“Aggregate Revolving Credit Outstanding”:  as at any date of determination with respect to any Revolving Lender, the sum of (a) the aggregate unpaid principal amount of such Lender’s Revolving Credit Loans on such date and (b) such Lender’s Revolving Credit Commitment Percentage of the aggregate Letter of Credit Obligations and Swing Line Loans on such date.

 

“Agreement”:  this Second Amended and Restated Credit Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

 

 

“Applicable Margin”:  the rate per annum set forth under the relevant column heading below:

 

Applicable Margin for        Eurodollar Loans	Applicable Margin for             Prime Loans	Commitment              Fee
4.5%	4.0%	0.50%

“Approved Fund”: as defined in subsection 11.6(b).

 

“Arranger”:  HSBC Bank USA, National Association.

 

“Assignee”:  as defined in subsection 11.6(b)(iii).

 

“Assignment and Acceptance”:  an assignment and acceptance agreement substantially in the form attached hereto as Exhibit C.

 

“Available Revolving Credit Commitment”:  as at any date of determination with respect to any Revolving Lender, an amount equal to the excess, if any, of (a) the amount of such Lender’s Revolving Credit Commitment in effect on such date over (b) the Aggregate Revolving Credit Outstanding of such Lender on such date.

 

“Bank Products”: any deposit account, checking account, cash management services, lockbox, commercial credit cards, stored value cards, treasury management services, and other similar services (including, without limitation, controlled disbursement, automated clearing house transactions, returned items, overdrafts and interstate depository network services) provided by any Agent, any Lender or any Affiliate of any Agent or any Lender.

 

“Bank Product Obligations”: any and all obligations, whether absolute or contingent and however and whenever created, arising, evidenced or acquired in connection with Bank Products.

 

“Benefited Lender”:  as defined in subsection 11.7(a).

 

“Board”:  the Board of Governors of the Federal Reserve System of the United States of America (or any successor thereto).

 

“Borrower”:  as defined in the preamble hereto.

 

“Borrowing Date”:  any Business Day specified in a notice pursuant to subsection 2.2, 2.8 or 3.2 as a date on which the Borrower requests the Lenders to make Loans hereunder or issue a Letter of Credit.

 

“Business”:  as defined in subsection 5.15(b).

 

 

 

“Business Day”:  (a) for all purposes other than as covered by clause (b) below, a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close and (b) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (a) and which is also a London Banking Day.

 

“Capital Expenditures”:  direct or indirect (by way of the acquisition of securities of a Person or the expenditure of cash or the incurrence of Indebtedness) expenditures in respect of the purchase or other acquisition of fixed or capital assets, except when such expenditures are fully funded with insurance proceeds and are utilized to replace the fixed asset subject to a casualty with a like asset.

 

“Capital Stock”:  any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) (collectively, “Underlying Equity Interests”), and any and all warrants or options to purchase any of the foregoing.  For purposes of subsection 8.7 hereof, the term “Capital Stock” shall exclude options and warrants issued pursuant to employee stock option plans and Underlying Equity Interests issued upon the exercise thereof.

 

“Cash Equivalents”:  (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition and overnight bank deposits of any Lender or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at leas t A-2 by S&P or P-2 by Moody’s, (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody’s (or the equivalent rating by either such rating agency for such type of securities), (f) securities with maturities of one year or less from the date of acquisition backed by standby letters of credit issued by any commercial bank satisfying the requirements of clause (b) of this definition or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition.

 

“Class”:  the classification of loans as Term Loans, Revolving Credit Loans or Swing Line Loans, each of which categories shall be deemed to be a “Class” of Loans.

 

“Closing Date”: the first date that all the conditions precedent in Section 6.01 are satisfied or waived in accordance with Section 11.1.

 

“Code”:  the Internal Revenue Code of 1986, as amended from time to time.

 

“Collateral Agent”:  as defined in the preamble hereto, and shall include any successor appointed in accordance with subsection 10.9.

 

“Collateral Tracking Amount”:  as of the end of any fiscal quarter, an amount equal to:

 

 

 

(i)           the product of (x) all Receivables of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal quarter multiplied by (y) 70%; plus

 

(ii)           the product of (x) the value (determined in accordance with GAAP consistently applied) of all inventory of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal quarter multiplied by (y) 25%; plus

 

(iii)           all cash of the Borrower and its Domestic Subsidiaries maintained in deposit accounts at the Collateral Agent or any Lender as of the end of such fiscal quarter; less

 

(iv)           the outstanding principal balance of Revolving Credit Loans and Swing Line Loans as of the end of such fiscal quarter.

 

; provided that, for purposes of calculating the Collateral Tracking Amount, to the extent that up to $500,000 of Receivables of the Borrower owed by Alarmax, Inc. (“Alarmax”) are credited as a result of Alarmax returning inventory, so long as the Administrative Agent shall have received evidence of such return and credit reasonably satisfactory to it, such returned inventory shall be included in the calculation contained in sub-clause (ii) of this definition and, for ninety (90) days after such return the Borrower shall be allowed to add to the calculation in sub-clause (ii) of this definition an amount equal to the difference between 70% of the Receivables credited as a result of such return of inventory and 25% of the value of the returned inventory.

 

“Commercial Letters of Credit”:  as defined in subsection 3.1(ii).

 

“Commitments”: the collective reference to the Term Commitments, the Revolving Credit Commitments and the Swing Line Commitment.

 

“Consolidated EBITDA”: for any fiscal period, the sum of (i) Consolidated Net Income for such period, plus non-recurring and non-cash losses (net of tax for such period) minus non-recurring and non-cash gains (net of taxes for such period), (ii)  Consolidated Interest Expense for such period and (iii) the amount of taxes, depreciation and amortization deducted from earnings in determining such Consolidated Net Income for such period.

 

“Consolidated Interest Expense”:  for any fiscal period, the amount which would, in conformity with GAAP, be set forth opposite the caption “interest expense” (or any like caption) on a consolidated income statement of the Borrower and its Subsidiaries for such period.

 

“Consolidated Net Income”:  for any fiscal period, the consolidated net income (or deficit) of the Borrower and its Subsidiaries for such period (taken as a cumulative whole), determined on a consolidated basis in accordance with GAAP; provided that any non-cash extraordinary gains and losses in accordance with GAAP shall be excluded in determining Consolidated Net Income.

 

“Consolidated Subsidiaries”:  means the Subsidiaries of the Borrower whose financial results are consolidated in accordance with GAAP.

 

 

 

“Continuing Directors”:  the directors of the Borrower on the Closing Date and each other director, if such other director’s nomination for election to the Board of Directors of the Borrower is recommended by a majority of the then Continuing Directors.

 

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

 

“Default”:  a condition, act or event that, after notice or lapse of time or both, would constitute an Event of Default if that condition, act or event were not cured or removed within any applicable grace or cure period.

 

“Dollars,” “U.S. Dollars” and “$”:  dollars in lawful currency of the United States of America.

 

“Domestic Subsidiary”:  any Subsidiary other than a Foreign Subsidiary.

 

“Environmental Laws”:  the common law and all laws, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, the preservation or reclamation of natural resources, the management, Release or threatened Release of any Hazardous Materials or to health and safety matters.

 

“ERISA”:  the Employee Retirement Income Security Act of 1974, as amended from time to time.

 

“ERISA Affiliate”:  any trade or business (whether or not incorporated) that, together with the Borrower or any of its Subsidiaries, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

 

“ERISA Event”:  (a) any “reportable event,” as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) with respect to any Plan, failure to satisfy the minimum funding standard (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived, (c) the failure to make by its due date a required installment under Section 412(m) of the Code (or Section 430(j) of the Code, as amended by the Pension Protection Act of 2006) with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan; (d) the filing pursuant to Section 412of the Code or of an a pplication for a waiver of the minimum funding standard with respect to any Plan; (e) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (f) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (g) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; (h) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, “insolvent” or in “reorganization”, within the meaning of Title IV o f ERISA; or (i) the making of any amendment to any Plan which could result in the imposition of a lien or the posting of a bond or other security.

 

 

 

“Eurodollar Loans”:  Loans the rate of interest applicable to which is based upon the Eurodollar Rate.

 

“Eurodollar Rate”:  with respect to a Eurodollar Loan for the relevant Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBOR Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

 

“Event of Default”:  any of the events specified in Section 9.1, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.

 

 “Excess Cash Flow”:  for each fiscal year, the amount of the aggregate of net increase (decrease) in Cash and Cash Equivalents reflected on the Borrower’s consolidated annual statement of cash flows contained in the Borrower’s financial statements delivered pursuant to Section 7.1(a) over the prior fiscal year, as increased by the amount of any reductions in Revolving Credit Loans or decreased by the amount of any increases in Revolving Credit Loans during such period.

 

“Exchange Act”:  the Securities Exchange Act of 1934, as amended.

 

“Excluded Taxes”:  with respect to the Administrative Agent, any Lender, the Issuing Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) any Taxes imposed by any jurisdiction other than the United States (or any taxing authority thereof or therein), any jurisdiction in which the Borrower conducts business or claims an interest deduction with respect to this Agreement or any other taxing jurisdiction from or through which payments hereunder are made, (b) income or franchise taxes imposed on (or measured by) its net income or net profits by the United States of America, or by the jurisdiction under the laws of which such recipient is organized, in which such recipient conducts business (other than a business that is deemed to arise solely as a result of entering into this Agreement, receipt of payments hereunder or enforcement of its rights hereunder)) or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (c) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located and (d) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under subsection 4.14(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s failure to comply with subsection 4.12(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignmen t), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to subsection 4.12(a).

 

“Existing Credit Agreement”:  as defined in the recitals hereto.

 

“Existing Defaults”: as defined in Section 11.18 hereto.

 

 

 

“Existing Letters of Credit”:  each letter of credit listed on Schedule III hereto.

 

“Existing Loan Documents”: the “Loan Documents” as defined in the Existing Credit Agreement.

 

“Extension of Credit”:  as to any Lender, the making of a Loan by such Lender and, with respect to any Lender, the issuance of any Letter of Credit.

 

“Extraordinary Receipts” means any cash payment received after the Closing Date by any Loan Party outside the ordinary course of business, in connection with the following:  (a) foreign, United States, state or local tax refunds, (b) pension plan reversions, (c) proceeds of casualty insurance, (d) judgments, proceeds of settlements or other consideration of any kind in connection with any cause of action, net of costs incurred to obtain such proceeds, (e) condemnation awards and payments in lieu thereof, (f) indemnity payments, net of costs incurred to obtain such payment and (g) any purchase price adjustment received in connection with any purchase agreement.

 

“Federal Funds Effective Rate”:  for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

 

“Financial Covenants”: the financial covenants set forth in subsection 8.1.

 

“Financial Officer”: with respect to any Person, the chief financial officer, principal accounting officer, treasurer, controller or senior vice president of finance of such Person.

 

“Financing Lease”:  (a) any lease of property, real or personal, the obligations under which are capitalized on a consolidated balance sheet of the Borrower and its Subsidiaries and (b) any other such lease to the extent that the then present value of the minimum rental commitment thereunder should, in accordance with GAAP, be capitalized on a balance sheet of the lessee.

 

“Foreign Plan”:  any employee benefit plan, program, policy, arrangement or agreement maintained or contributed to by, or entered into with, Borrower or any Subsidiary with respect to employees employed outside the United States.

 

“Foreign Lender”:  any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located.  For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

 

“Foreign Subsidiary”:  as to any Person, any Subsidiary of such Person which is organized under the laws of any jurisdiction outside of the country of the jurisdiction of organization of such Person.

 

 

 

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

 

“Governmental Authority”:  any nation or government, any state, province or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

 

“Guarantee Agreements”:  collectively, any Guarantee Agreement, substantially in the form attached hereto as Exhibit B-1, executed and delivered by a Domestic Subsidiary of the Borrower (other than Napco Gulf Security Group, LLC, so long as it is an Inactive Subsidiary), as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Guarantee Obligation”:  as to any Person, any obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the “primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to mai ntain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business.  The amount of any Guarantee Obligation shall be deemed to be an amount equal to the value as of any date of determination of the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made (unless such Gua rantee Obligation shall be expressly limited to a lesser amount, in which case such lesser amount shall apply) or, if not stated or determinable, the value as of any date of determination of the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith.

 

“Hazardous Materials”:  any solid wastes, toxic or hazardous substances, materials or wastes, defined, listed, classified or regulated as such in or under any Environmental Laws, including, without limitation, asbestos, petroleum or petroleum products (including gasoline, crude oil or any fraction thereof), polychlorinated biphenyls, and urea-formaldehyde insulation, and any other substance the presence of which may give rise to liability under any Environmental Law.

 

“Hedge Agreement”:  any interest rate protection agreement, interest rate swap or other interest rate hedge arrangement, or currency swap or other currency hedge arrangement (other than any interest rate cap or other similar agreement or arrangement pursuant to which the Borrower has no credit exposure), to or under which the Borrower or any of its Subsidiaries is a party or a beneficiary.

 

 

 

“Hedge Agreement Obligation”:  any obligation of the Borrower under any one or more Hedge Agreements to make payments to the counterparties thereunder upon the occurrence of a termination event or similar event thereunder.

 

“HSBC”:  HSBC Bank USA, National Association.

 

“Inactive Subsidiary”: a Domestic Subsidiary of the Borrower that does not own assets having a value in excess of $50,000 and that does not conduct any business.

 

“Indebtedness”:  of a Person, at a particular date, the sum (without duplication) at such date of (a) indebtedness for borrowed money or for the deferred purchase price of property or services in respect of which such Person is liable as obligor (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices of such Person), (b) indebtedness secured by any Lien on any property or asset owned or held by such Person regardless of whether the indebtedness secured thereby shall have been assumed by or is a primary liability of such Person, (c) obligations of such Person under Financing Leases, (d) the face amount of all letters of credit issued for the account of or upon the applicatio n of such Person and, without duplication, the unreimbursed amount of all drafts drawn thereunder and (e) obligations (in the nature of principal or interest) of such Person in respect of acceptances or similar obligations issued or created for the account of such Person.  Indebtedness shall not include amounts due under leases of real property.

 

“Indemnified Taxes”:  Taxes other than Excluded Taxes.

 

“Intellectual Property”:  as defined in subsection 5.9.

 

“Interest Payment Date”:  (a) as to any Prime Loan, the last day of each month to occur while such Loan is outstanding, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period and (c) as to any Eurodollar Loan having an Interest Period longer than three months, (i) each day which is three months after the first day of such Interest Period and (ii) the last day of such Interest Period.

 

“Interest Period”:  with respect to any Eurodollar Loan:

 

(a)           initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months (or nine or twelve months, if approved by all Lenders) thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and

 

(b)           thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto;

 

provided that all of the foregoing provisions relating to Interest Periods are subject to the following:

 

 

 

(i)           if any Interest Period pertaining to a Eurodollar Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day;

 

(ii)           any Interest Period applicable to a Eurodollar Loan that would otherwise extend beyond the date final payment is due on such Loan shall end on such date of final payment; and

 

(iii)           any Interest Period pertaining to a Eurodollar Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month.

 

“Issuing Lender”:  HSBC or any of its Affiliates, in its capacity as issuer of the Letters of Credit, and any other Lender which the Borrower, the Administrative Agent and the Required Lenders shall have approved, in its capacity as issuer of the Letters of Credit.

 

“Legal Requirement”:  as to (a) any Person, any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject, and (b) any property, any law, treaty, rule, regulation, requirement, judgment, decree or determination of any Governmental Authority applicable to or binding upon such property or to which such property is subject.

 

“Lenders”:  as defined in the preamble hereto.

 

“Letter of Credit Applications”:  (a) in the case of Standby Letters of Credit, a letter of credit application for a Standby Letter of Credit on the standard form of the applicable Issuing Lender for standby letters of credit, and (b) in the case of Commercial Letters of Credit, a letter of credit application for a Commercial Letter of Credit on the standard form of the applicable Issuing Lender for commercial letters of credit.

 

“Letter of Credit Obligations”:  at any particular time, all liabilities of the Borrower with respect to Letters of Credit, whether or not any such liability is contingent, including (without duplication) the sum of (a) the aggregate undrawn face amount of all Letters of Credit then outstanding plus (b) the aggregate amount of all unpaid Reimbursement Obligations at such time.

 

“Letters of Credit”:  as defined in subsection 3.1(ii).

 

 

 

“LIBOR Rate”:  with respect to any Eurodollar Loan for any Interest Period, the rate per annum (rounded upward, if necessary, to the nearest 1/32 of one percent) as determined on the basis of the offered rates for deposits in U.S. dollars, for a period of time comparable to such Interest Period which appears on the Reuters LIBOR 01 page as of 11:00 a.m. London time on the day that is two (2) London Banking Days preceding the first day of such Eurodollar Loan (or such other page as may replace the Reuters LIBOR 01 page on that service for the purpose of displaying such rates) or the rate which is quoted by another source selected by Administrative Agent which has been approved by the British Bankers’ Association as an authorized information vendor for the purpose of displaying rates at which U.S. dollar deposits are offered by leading banks in the London interbank market (an “Alternative Source”); provided, however, if the rate described above is not available from Reuters or an Alternative Source on any applicable interest determination date, the rate shall be the rate (rounded upwards as described above, if necessary) per annum equal to the average rate at which Administrative Agent determines that U.S. dollars in an amount comparable to the amount of the applicable Eurodollar Loans are being offered to prime banks for settlement in immediately available funds by leading banks in the London interbank market selected by Administrative Agent as of 11:00 a.m. (London Time), on the day th at is two London Banking days prior to the beginning of such Interest Period for a term comparable to such Interest Period.  “Banking Day” shall mean, in respect of any city, any date on which commercial banks are open for business in that city.

 

“Lien”:  any mortgage, pledge, hypothecation, assignment, deposit arrangement (other than a bank or similar deposit account), encumbrance, lien (statutory or other), or preference, priority or other security interest or similar preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any Financing Lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction in respect of any of the foregoing, and, in the case of securities, a third party’s right to purchase such securities).

 

“Loan Documents”:  the collective reference to this Agreement, any Notes, the Guarantee Agreements, the Security Documents, any Letter of Credit Application and any documents or instruments evidencing or governing the Security Documents.

 

“Loan Parties”:  the collective reference to the Borrower and each guarantor or grantor party to any Security Document.

 

“Loans”:  the collective reference to the Term Loans, the Revolving Credit Loans and the Swing Line Loans.

 

“London Banking Day”:  any day on which banks in London are open for general banking business, including dealings in foreign currency and exchange.

 

“Material Adverse Effect”:  a material adverse change in the business, assets, operations, properties, condition (financial or otherwise), contingent liabilities (including as to products, and whether such liabilities have been or yet may be asserted), prospects or material agreements of the Borrower and its Subsidiaries, taken as a whole.

 

“Modified Quick Ratio”: the ratio of (x) the aggregate of cash and Cash Equivalents, plus accounts receivables to (y) current liabilities.  For purposes of calculating the Modified Quick Ratio, “current liabilities” shall not include (i) the final principal payment of the Term Loans due on the Term Loan Maturity Date and (ii) the Aggregate Revolving Credit Outstandings of each Revolving Lender.

 

“Moody’s”:  Moody’s Investors Service, Inc. or any successor thereto.

 

 

 

“Mortgages”: the mortgages in favor of Collateral Agent, for its benefit and the ratable benefit of the Lenders, encumbering the land and improvements located at 333 Bayview Avenue, Amityville, New York, as same may be amended, restated, supplemented or modified from time to time.

 

“Multiemployer Plan”:  a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

 

“Notes”:  the collective reference to the Term Loan Notes, the Revolving Credit Notes and the Swing Line Notes.

 

“Obligations”:  collectively, the unpaid principal of and interest on the Loans, the Reimbursement Obligations and all other obligations and liabilities of the Borrower to any Agent, the Issuing Lender and the Lenders under or in connection with this Agreement, the other Loan Documents and any Hedge Agreement with any Lender or any Affiliate of a Lender or with respect to any Bank Product Obligations owing to Agents, any Lender or any Affiliate of a Lender (including in each case, without limitation, interest, fees or other amounts accruing at the then applicable rate provided in this Agreement or any other applicable Loan Document or Hedge Agreement after the maturity of the Loans and interest, fees or other amounts accruing at the then applicable rate provided in this Agreement or any other applicable Loan Document or Hedge Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, the Notes, the Letters of Credit, the Letter of Credit Applications, the other Loan Documents or any Hedge Agreement with a Lender or any Affiliate of a Lender or with respect to any Bank Products provided by any Agent, any Lender or any Affiliate of any Agent or a Lender or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation , all fees and disbursements of counsel to the Agents or to the Lenders).

 

“Original Closing Date”:  the Closing Date under and as defined in the Existing Credit Agreement.

 

“Other Taxes”:  any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement.

 

“Participant Register”:  as defined in subsection 11.6(c).

 

“Participants”:  as defined in subsection 11.6(c).

 

“Participating Interest”:  with respect to any Letter of Credit (a) in the case of the Issuing Lender, its interest in such Letter of Credit and any Letter of Credit Application relating thereto after giving effect to the granting of any participating interests therein pursuant hereto and (b) in the case of each Participating Lender, its undivided participating interest in such Letter of Credit and any Letter of Credit Application relating thereto.

 

 

 

“Participating Lender”:  any Revolving Lender (other than the Issuing Lender) with respect to its Participating Interest in a Letter of Credit.

 

“Patriot Act”:  as defined in subsection 11.17.

 

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

 

“Person”:  an individual, partnership, corporation, business trust, joint stock company, limited liability company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.

 

“Plan”:  any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower, any of its Subsidiaries or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

 

“Pledge Agreement”: any Pledge Agreement executed by Borrower or any of its Domestic Subsidiary, substantially in the form attached hereto as Exhibit B-3, as further amended, supplemented or otherwise modified from time to time.

 

“Pledgee”:  as defined in subsection 11.15.

 

“Prime Loans”:  Loans the rate of interest applicable to which is based upon the Prime Rate.

 

“Prime Rate”:  the rate of interest per annum publicly announced by Administrative Agent from time to time as its prime rate and is a base rate for calculating interest on certain loans.  The prime rate may or may not be the most favorable rate charged by Administrative Agent to its customers.  Each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

 

“Properties”:  as defined in subsection 5.15(a).

 

“Receivables”: as to any Person, all of such Person’s accounts, contract rights, instruments, documents, chattel paper (including electronic chattel paper), general intangibles relating to accounts, drafts and acceptances, credit card receivables and all other forms of obligations owing to such Person arising out of or in connection with the sale or lease of inventory or the rendition of services, whether secured or unsecured, now existing or hereafter created.

 

“Refunded Swing Line Loans”:  as defined in subsection 2.8(b).

 

“Register”:  as defined in subsection 11.6(b).

 

 

 

“Reimbursement Obligation”:  the obligation of the Borrower to reimburse the Issuing Lender in accordance with the terms of this Agreement and the related Letter of Credit Application for any payment made by the Issuing Lender under any Letter of Credit.

 

“Related Parties”:  with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

 

“Release”:  any spilling, leaking, pumping, pouring, emitting, emptying, discharging, escaping, leaking, dumping, disposing, spreading, depositing or dispersing of any Hazardous Materials in, unto or onto the environment.

 

“Required Lenders”:  at any time (i) there are two Lenders, all of the Lenders and (ii) there are more than two Lenders, Lenders having Total Loan Percentages of which aggregate more than 66%.

 

“Requirement of Law”:  as to (a) any Person, the certificate of incorporation and by-laws or the partnership or limited partnership agreement or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject, and (b) any property, any law, treaty, rule, regulation, requirement, judgment, decree or determination of any Governmental Authority applicable to or binding upon such property or to which such property is subject, including, without limitation, any Environmental Laws.

 

“Responsible Officer”:  with respect to any Loan Party, the chief executive officer, the president, any Financial Officer, any vice president, the treasurer or the assistant treasurer of such Loan Party.

 

“Restricted Payments”:  as defined in subsection 8.7.

 

“Revolving Credit Commitment”:  as to any Revolving Lender at any time, its obligation to make Revolving Credit Loans, issue or participate in Letters of Credit issued for the account of the Borrower and/or make or participate in Swing Line Loans to the Borrower in an aggregate amount not to exceed at any time outstanding the amount set forth opposite such Lender’s name in Schedule I hereto under the heading “Revolving Credit Commitment,” as such amount may be reduced from time to time pursuant to subsection 2.4 and the other applicable provisions hereof.

 

“Revolving Credit Commitment Percentage”:  as to any Revolving Lender at any time, the percentage which such Lender’s Revolving Credit Commitment then constitutes of the Aggregate Revolving Credit Commitments (or, if the Revolving Credit Commitments have terminated or expired at such time, the percentage which (a) the Aggregate Revolving Credit Outstanding of such Lender at such time then constitutes of (b) the Aggregate Revolving Credit Outstanding of all Lenders at such time).

 

“Revolving Credit Commitment Period”:  the period from and including the Closing Date to but not including the Revolving Credit Termination Date, or such earlier date on which the Revolving Credit Commitments shall terminate as provided herein.

 

 

 

“Revolving Credit Loan”:  as defined in subsection 2.1(a).

 

“Revolving Credit Loan Paydown”: as defined in the recitals to this Agreement.

 

“Revolving Credit Note”:  as defined in subsection 4.16(d).

 

“Revolving Credit Termination Date”:  August 18, 2012.

 

“Revolving Lender”:  each Lender that has a Revolving Credit Commitment or that holds Revolving Credit Loans.

 

“S&P”:  Standard & Poor’s Ratings Group or any successor thereto.

 

“Security Agreements”: any Security Agreement executed by Borrower or any Domestic Subsidiary, substantially in the form attached hereto as Exhibit B-2, as amended, supplemented or otherwise modified from time to time.

 

“Security Documents”:  the collective reference to the Guarantee Agreements, the Security Agreements, the Pledge Agreements, the Mortgages and each other pledge agreement, security document, mortgage or similar agreement that may be delivered to the Collateral Agent as collateral security for any or all of the Obligations, in each case as amended, restated, supplemented or otherwise modified from time to time.

 

“Solvent”:  with respect to any Person on a particular date, that on such date, (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and mature, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature, and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, f or which such Person’s property would constitute an unreasonably small amount of capital.

 

“Standby Letters of Credit”:  as defined in subsection 3.1(i).

 

“Statutory Reserve Rate”:  a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject with respect to the Eurodollar Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board).  Such reserve percentages shall include those imposed pursuant to such Regulation D.  Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation.  The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

 

 

 

“Subsidiary”:  as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly, through one or more intermediaries, or both, by such Person (exclusive of any Affiliate in which such Person has a minority ownership interest).  Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in thi s Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.

 

“Swing Line Commitment”:  the Swing Line Lender’s obligation to make Swing Line Loans pursuant to subsection 2.8.

 

“Swing Line Lender”:  HSBC Bank USA, National Association, in its capacity as lender of the Swing Line Loans.

 

“Swing Line Loan Participation Certificate”:  a certificate in substantially the form attached hereto as Exhibit D, as the same may be amended, supplemented or otherwise modified from time to time.

 

“Swing Line Loans”:  as defined in subsection 2.8(a).

 

“Swing Line Note”:  as defined in subsection 4.16(d).

 

“Taxes”:  any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

 

“Term Commitment”:  as to any Term Lender, the obligation of such Lender to make a Term Loan to the Borrower on the Original Closing Date in the aggregate amount set forth opposite such Lender’s name in Schedule I hereto under the heading “Term Commitment”.

 

“Term Lenders”:  each Lender that holds a Term Loan.

 

“Term Loan Paydown”: as defined in the recitals to this Agreement.

 

“Term Loans”:  as defined in subsection 2.5.

 

“Term Loan Maturity Date”:  August 18, 2013.

 

“Term Loan Note”:  as defined in subsection 4.16(d).

 

“Term Loan Percentage”:  as to any Term Lender at any time, the percentage which the aggregate principal amount of such Lender’s Term Loans then outstanding constitutes of the aggregate principal amount of the Term Loans then outstanding.

 

“Total Loan Percentage”: as to any Lender, the percentage which the sum of such Lender’s Term Loans then outstanding and Revolving Credit Commitments (or, if the Revolving Credit Commitments have terminated or expired at such time, such Lender’s Aggregate Revolving Credit Outstanding) then in effect constitutes of the Aggregate Loans.

 

 

 

“Trailing”:  with respect to the determination of any financial results for any period, the applicable financial result for the four fiscal quarters ended on such date.

 

“Tranche”:  the collective reference to Eurodollar Loans the then current Interest Periods with respect to which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day).

 

“Transferee”:  as defined in subsection 11.15.

 

“Type”:  as to any Loan, its nature as a Prime Loan or a Eurodollar Loan.

 

“Withdrawal Liability”:  liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

 

 

4.8.           Pro Rata Treatment and Payments.

 

(a)           (i)           Each borrowing of Loans by the Borrower from the Lenders hereunder shall be made pro rata according to the Revolving Credit Commitment Percentages of the Revolving Lenders in effect on the date of such borrowing.

 

(ii)           Each payment (including each prepayment) by the Borrower, on account of principal of and interest on the Term Loans shall be made pro rata according to the respective outstanding principal amounts of the Term Loans then held by the Term Lenders.  The amount of each principal prepayment of the Term Loans (other than the Term Loan Paydown) shall be applied in inverse order of maturity to reduce the then remaining installments of the Term Loans.  The Term Loan Paydown shall be applied to the Term Loans on the date of payment to the remaining principal installments of the Term Loans in the direct order of maturity. & #160;Amounts prepaid on account of the Term Loans may not be reborrowed.

 

(iii)           Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Revolving Credit Loans shall be made pro rata according to the respective outstanding principal amounts of the Revolving Credit Loans then held by the Revolving Lenders.

 

(iv)           Each payment by the Borrower on account of any commitment fee or letter of credit fee (other than the fronting fee) hereunder shall be allocated by the Administrative Agent among the Revolving Lenders pro rata in accordance with the Revolving Credit Commitment Percentages of the Lenders as of such date.

 

 

 

(v)           Any reduction of the Revolving Credit Commitments of the Lenders shall be allocated by the Administrative Agent among the Lenders pro rata according to the Revolving Credit Commitment Percentages of the Lenders on the date of such reduction.

 

(vi)           All payments (including prepayments) to be made by the Borrower in respect of Loans hereunder, whether on account of principal, interest, fees or otherwise, shall be made without set-off or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders entitled thereto, at the Administrative Agent’s office specified in subsection 11.2, in U.S. Dollars and in immediately available funds.  The Administrative Agent shall distribute such payments to the Lenders entitled to receive the same promptly upon receipt in like funds as received.

 

(vii)           If any payment hereunder (other than payments on the Eurodollar Loans) becomes due and payable on a day other than a Business Day, the maturity of such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.  If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity of such payment shall be extended to the next succeeding Business Day (and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension) unless the result of such extension would be to extend such payment into another calendar month, in which even t such payment shall be made on the immediately preceding Business Day.

 

(b)           Unless the Administrative Agent shall have been notified in writing by any Lender prior to a Borrowing Date that such Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount.  If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate per annum equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent.  A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error.  If such Lender’s share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Borrower shall repay such Lender’s share of such borrowing (together with interest thereon from the date such amount was made available to the Borrower) at the rate per annum applicable to Prime Loans hereunder to the Administrative Agent not later than three Business Days after receipt of written notice from the Administrative Agent specifying such Lender’s share of such borrowing that was not made available to such Administrative Agent, and the Borrower shall have the right to pursue any remedies against such Lender for its failure to make its portion of such borrowing available.

 

 

 

(c)           Unless the Administrative Agent shall have been notified in writing by the Borrower prior to a date on which a payment is due from the Borrower hereunder that the Borrower will not make such payment available to the Administrative Agent, the Administrative Agent may assume that the Borrower is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the applicable Lenders a corresponding amount.  If such amount is not made available to the Administrative Agent by the required time on the due date therefor, each applicable Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate per annum equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent.  A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error.

 

4.9.           Illegality.  Notwithstanding any other provision herein, if the adoption of or any change in any Legal Requirement or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert Prime Loans to Eurodollar Loans shall forthwith be cancelled until such time as it shall no longer be unlawful for such Lender to make or maintain the affected Loans and (b) such Lender’s Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Prime Loans on the respec tive last days of the then current Interest Periods with respect to such Eurodollar Loans or within such earlier period as may be required by law.  If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 4.11.

 

4.10.         Increased Costs.

 

(a)           In the event that the adoption of or any change in any Legal Requirement (or in the interpretation or application thereof) or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority:

 

(i)           does or shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note, any Loans made by it or any Letter of Credit, or change the basis of taxation of payments to such Lender of principal, fees, interest or any other amount payable hereunder (except for (A) changes in the rate  of tax on the overall net income or profits of such Lender, (B) any tax to the extent that the Borrower is or would be required to pay an additional amount with respect to such tax under subsection 4.12 or (C) any tax with respect to which the Borrower would not be required to pay an additional amount under subsection 4.12 because payment of such additional amount with respect to such tax would be specifically excluded thereunder);

 

(ii)           does or shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender which are not otherwise included in the determination of the Eurodollar Rate; or

 

 

 

(iii)           does or shall impose on such Lender any other condition affecting this Agreement or the Loans made by any Lender or any Letter of Credit participation therein;

 

and the result of any of the foregoing is to increase the cost to such Lender, by any amount which such Lender deems to be material, of making, renewing, maintaining or participating in advances or extensions of credit or to reduce any amount receivable hereunder, in each case in respect of its Loans or Letters of Credit which it issues or in which it holds Participating Interests, then, in any such case, the Borrower shall promptly pay such Lender, upon receipt of its demand setting forth in reasonable detail, any additional amounts necessary to compensate such Lender for such additional cost or reduced amount receivable, together with interest on each such amount from the date two Business Days after the date demanded until payment in full thereof at the Prime Rate.  A certificate as to any additional amounts payable pursua nt to the foregoing sentence submitted by such Lender, through the Administrative Agent, to the Borrower shall be conclusive in the absence of manifest error.  This covenant shall survive the termination of this Agreement and payment of all amounts outstanding hereunder for a period of one year.

 

(b)           In the event that any Lender shall have determined that the adoption of any law, rule, regulation or guideline regarding capital adequacy (or any change therein or in the interpretation or application thereof) or compliance by any Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority, including, without limitation, the issuance of any final rule, regulation or guideline, does or shall have the effect of reducing the rate of return on such Lender’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such ad option, change or compliance (taking into consideration such Lender’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a written request therefor, the Borrower shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction.  A certificate as to any additional amounts payable pursuant to this subsection 4.10(b), submitted by a Lender to the Borrower shall be conclusive in the absence of manifest error.  The provisions of this subsection 4.10(b) shall survive the termination of this Agreement and the payment of all amounts outstanding hereunder.

 

(c)           Any request by any Lender for compensation under this subsection 4.10 shall be accompanied by a certificate of a duly authorized officer of such Lender setting forth such information and calculations supporting such request as such Lender shall customarily provide in similar situations.

 

(d)           Failure or delay on the part of any Lender to demand compensation pursuant to this subsection 4.10 shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this subsection 4.10 for any increased costs or reductions incurred more than 180 days prior to the date that such Lender notifies the Borrower of the circumstance giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor; provided, further, that, if the circumstance giving rise to such increased costs or reductions is retroactive in effect, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

 

 

 

4.11.           Indemnity.  Without duplication of the provisions of subsection 4.15, the Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in payment when due of the principal amount of or interest on any Loans of such Lender, (b) default by the Borrower in making a borrowing, continuation or conversion after the Borrower has given a notice of borrowing, a notice of continuation or a notice of conversion in accordance with this Agreement, (c) default by the Borrower in making any prepayment after the Borrower has given a notice in accordance with this Agreement or (d) the making of a prepayment, continuation or conversion of a Eurodollar Loan on a day which is not the last day of an Interest Period with respect thereto, including, without limitation, in each case, any such loss or expense arising from the reemployment of funds obtained by it to maintain its Eurodollar Loans hereunder or from fees payable to terminate the deposits from which such funds were obtained, but excluding, in each case, lost profit.  A certificate as to any amounts payable pursuant to this subsection 4.11, submitted by a Lender to the Borrower shall be conclusive in the absence of manifest error.  This covenant shall survive termination of this Agreement and payment of all amounts outstanding hereunder.

 

4.12.           Taxes.

 

(a)           Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this subsection) the Administrative Agent, Lender or Issuing Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii)  ;the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

 

(b)           In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

 

(c)           The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Lender, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Lender, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this subsection) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the am ount of such payment or liability delivered to the Borrower by a Lender or the Issuing Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Lender, shall be conclusive absent manifest error.

 

 

 

(d)           Each Lender shall indemnify the Administrative Agent within 10 days after demand therefor, for the full amount of any Excluded Taxes attributable to such Lender that are payable by the Administrative Agent and reasonable expenses arising therefrom or with respect thereto, whether or not such Excluded Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error.

 

(e)           As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

 

(f)           Any Lender that is entitled to an exemption from or reduction of any applicable withholding tax with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding.  In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrat ive Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, in the case of any withholding tax other than U.S. federal withholding tax the completion, execution and submission of such forms shall not be required if in the Lender’s judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

 

 

(i)           duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States of America is a party,

 

(ii)           duly completed copies of Internal Revenue Service Form W-8ECI,

 

 

 

(iii)           in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate substantially in the Form of Exhibit G to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Code, (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (D) the interest payment in question are not effectively connected with the United States trade or business conducted by such Lender (a “U.S. Tax Compliance Certificate”) and (y) duly completed copies of  Internal Revenue Ser vice Form W-8BEN,

 

(iv)           to the extent a Foreign Lender is not the beneficial owner (for example, where the Foreign Lender is a partnership or participating Lender granting a typical participation), an Internal Revenue Service Form W-8IMY, accompanied by a Form W-8ECI, W-8BEN, U.S. Tax Compliance Certificate, Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that, if the Foreign Lender is a partnership (and not a participating Lender) and one or more beneficial owners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate on behalf of such beneficial owner(s), or

 

(v)            any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made.

 

 

(g)           If the Administrative Agent or a Lender determines, in its reasonable discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this subsection 4.12, it shall pay over such refund to the Borrower as determined in good faith by the Administrative Agent or such Lender in its sole discretion (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this subsection 4.12 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governme ntal Authority with respect to such refund); provided that the Borrower upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This subsection 4.12 shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to the Borrower or any other Person.

 

 

 

4.13.           Use of Proceeds.  The proceeds of the Revolving Credit Loans shall be used for the general working capital and general corporate purposes of the Borrower and its Subsidiaries.  The proceeds of the Term Loans were used to fund the Transaction (as defined in the Existing Credit Agreement).  The Letters of Credit shall be used for the purposes set forth in subsection 3.8.

 

4.14.           Change in Lending Office; Replacement of Lender.

 

   (a)           Each Lender agrees that if it makes any demand for payment under subsection 4.10 or 4.12, or if any adoption or change of the type described in subsection 4.9 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its sole discretion) to designate a different lending office or to assign its rights and obligations hereunder to another of its offices, branches or affiliates if such designation or assignment would reduce or obviate the need for the Borrower to make payments under subsection 4.10 or 4.12, or would eliminate or reduce the effect of any adoption or change described in subsection 4.9.

 

   (b)           If any Lender requests any payment under subsection 4.10 or 4.12, the Borrower shall have the right to replace such Lender with one or more replacement lenders, each of which shall be reasonably acceptable to the Administrative Agent; provided that (i) the Borrower shall repay (or the replacement lender shall purchase) all Loans and other amounts owing hereunder to such replaced Lender prior to the date of replacement, (ii) until such time as such replacement shall be consummated, the Borrower shall pay additional amounts (if any) required pursuant to subsection 4.10 or 4.12 for the period prior to replacement and (iii) any such replacement shall not be deemed to be a wa iver of any rights which the Borrower, the Administrative Agent or any other Lender shall have against the replaced Lender.

 

4.15.           Break Funding Payments.  In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including, without limitation, as a result of an Event of Default), (b) the conversion of any Eurodollar other than on the last day of an Interest Period applicable thereto, or (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event.  Such loss, cost or expense to any Lender shall be the amount determined by such Lender to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such Loan had such event not occurred, at the Eurodollar Rate that would have been applicable to such Loan (excluding, for the avoidance of doubt, any Applicable Margin), for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan) over (ii) the amount of interest that would accrue on such principal amount for such period at the interest rate such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market.  A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this subsection 4.15 shall be delivered to the Borrower and shall be con clusive absent manifest error.  The Borrower shall pay such lender the amount shown as due on any such certificate within 10 days after receipt thereof.  The Lender is authorized (but not obligated) to debit any deposit account of the Borrower now or hereafter maintained by the Borrower with the Lender to pay any such amount that is not paid when due.

 

 

 

4.16.           Evidence of Debt.

 

   (a)           Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Revolving Credit Loan or Term Loan of such Lender from time to time, including the amounts of principal and interest payable thereon and paid to such Lender from time to time under this Agreement.

 

   (b)           The Administrative Agent shall maintain the Register pursuant to subsection 11.6(b), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Revolving Credit Loan or Term Loan made hereunder, the Type thereof and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder in respect of the Revolving Credit Loans or Term Loans and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower in respect of the Revolving Credit Loans or Term Loans and each Lender’s share thereof.

 

   (c)           The entries made in the Register and the accounts of each Lender maintained pursuant to subsection 4.16(a) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender to maintain such account or the Administrative Agent to maintain the Register, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement.

 

   (d)           The Borrower agrees that it will, upon the request of any Term Lender, execute and deliver to such Lender a promissory note of the Borrower evidencing the Term Loans of such Lender owed by it, substantially in the form attached hereto as Exhibit A-1 with appropriate insertions as to date and principal amount (each, a “Term Loan Note”).  The Borrower agrees that it will, upon the request of any Revolving Lender, execute and deliver to such Lender (i) a promissory note of the Borrower evidencing the Revolving Credit Commitment of such Lender, substantially in the form attached hereto as Exhibit A-2 with appropriate insertions as to date and principal amount (each, a “Revolving Credit Note”) and/or (ii) a promissory note of the Borrower evidencing the Swing Line Loans of the Swing Line Lender, substantially in the form attached hereto as Exhibit A-3 with appropriate insertions as to date and principal amount (each, a “Swing Line Note”); provided that any Revolving Credit Note or Swing Line Note previously delivered to such Lender (or any predecessor thereof) has been returned to the Borrower and marked cancelled or an affidavit of lost or destroyed Note (in form acceptable to the Borrower) is executed and delivered by such requesting Lender in lieu of such Note.

 

 

 

SECTION 5:    REPRESENTATIONS AND WARRANTIES

 

 

5.1.           Financial Condition; Accuracy of Information.  During the period from March 31, 2010 to and including the date hereof, there has been no sale, transfer or other disposition by the Borrower or any of its Consolidated Subsidiaries of any material part of its business or property and no purchase or other acquisition of any business or property (including any capital stock of any other Person) material in relation to the consolidated financial condition of the Borrower and its Consolidated Subsidiaries at March 31, 2010, other than the sale of inventory in the ordinary course of business.

 

5.2.           No Change.  Since March 31, 2010, there has been no development or event which has had or would reasonably be expected to have a Material Adverse Effect.

 

5.3.           Corporate Existence; Compliance with Law.  Each Loan Party and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification except to the extent that the failure to be so qualified in any such jurisdiction could not, in the a ggregate, reasonably be expected to have a Material Adverse Effect, and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

5.4.           Corporate Power; Authorization; Enforceable Obligations.  Each Loan Party has the power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and to borrow and obtain other extensions of credit hereunder and has taken all necessary action to authorize the borrowings and other extensions of credit hereunder on the terms and conditions of this Agreement and any Notes and to authorize the execution, delivery and performance of the Loan Documents to which it is a party.  No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required as a condition pre cedent to the borrowings or other extensions of credit hereunder or the execution, delivery, performance, validity or enforceability of the Loan Documents.  This Agreement has been, and each other Loan Document to which it is a party will be, duly executed and delivered on behalf of each Loan Party that is a party hereto or thereto.  This Agreement constitutes, and each other Loan Document to which it is a party constitutes, a legal, valid and binding obligation of each Loan Party that is a party hereto or thereto, enforceable against such Loan Party in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

 

 

 

5.5.           No Legal Bar.  The execution, delivery and performance by the Borrower of the Loan Documents and the borrowings and other extensions of credit hereunder and the use of the proceeds thereof will not (a) violate any Requirement of Law or Contractual Obligation of any Loan Party or of any of its Subsidiaries except (other than with respect to Security Documents or the organizational and governing documents of such Loan Party or Subsidiaries), as would not, in the aggregate, reasonably be expected to result in a Material Adverse Effect, or (b) result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation (other than those Liens created by the Loan Documents).

 

5.6.           No Material Litigation.  No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Loan Parties, threatened by or against any Loan Party or any of its Subsidiaries or against any of its or their respective properties or revenues (a) with respect to any of the Loan Documents and the other transactions contemplated hereby or thereby, or (b) which would reasonably be expected to have a Material Adverse Effect.

 

5.7.           No Default.  After giving effect to this Agreement and the waiver of the Existing Defaults, no Loan Party or any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect.  After giving effect to this Agreement and the waiver of the Existing Defaults, no Default or Event of Default has occurred and is continuing.

 

5.8.           Ownership of Property; Liens.  Each of the Loan Parties and its Subsidiaries has good record and marketable title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, except to the extent that the failure to have such title would not have a Material Adverse Effect.  None of such property is subject to any Lien except as permitted by subsection 8.3.  With respect to real property or interests in real property, as of the Closing Date, the Borrower or its Subsidiaries have (i) fee title to all of the real property listed on Schedule 5.8 under the heading “Fee Properties”, and (ii) good and valid title to the leasehold estates in all of the real property leased by it and listed on Schedule 5.8 under the heading “Leased Properties”, in each case free and clear of all mortgages, liens, security interests, easements, covenants, rights-of-way and other similar restrictions of any nature whatsoever, except (A) Liens permitted pursuant to subsection 8.3, (B) as to leased property, the terms and provisions of the respective lease therefor and any matters affecting the fee title and any estate superior to the leasehold estate related thereto, and (C) title or lease defects, or leases or subleases granted to others, which are not material to the fee properties or the leased properties, as the case may be, taken as a whole.  The fee properties constitute, as of the Closing Date, substantially all of the rea l property owned in fee by the Borrower and its Subsidiaries.

 

 

 

5.9.           Intellectual Property.  Each Loan Party, and each of its Subsidiaries, owns, or is licensed to use or otherwise has the right to use, all trademarks, trade names, copyrights, patents, domain names, trade secrets and other proprietary information that it uses in the conduct of its business as currently conducted except for those for which the failure to own or license which would not reasonably be expected to have a Material Adverse Effect (the “Intellectual Property”).  To the knowledge of each Loan Party, no claim has been asserted and is pending or is threatened to be asserted by any Person challenging or questioning the use of any material Intellectual Property or the validity or enforceability of any such Intellectual Property which would reasonably be expected to have a Material Adverse Effect, nor does any Loan Party know of any valid basis for any such claim.  The use of such Intellectual Property by each Loan Party and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

 

5.10.           Taxes.  Except as disclosed in Schedule 5.10, each Loan Party, and each of its Subsidiaries, has filed or caused to be filed all material tax returns which are required to be filed (and each such tax return is true and correct in all material respects) and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of such Loan Party or its Subsidiaries, as the case may be), and no tax Lien has been filed, and, to the knowledge of the Loan Parties, no claim is being asserted, with respect to any such tax, fee or other charge, in each case other than to the extent that any such failure to act or existence of claim would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

5.11.           Federal Regulations.  No part of the proceeds of any Loans, and no Letter of Credit, will be used for “purchasing” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U of the Board as now and from time to time hereafter in effect.  If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1 referred to in said Regulation U, as the case may be.

 

5.12.           ERISA.

 

  (a)           No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, would reasonably be expected to result in a Material Adverse Effect.  The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan by more than $1,000,000, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting S tandards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such underfunded Plans by more than $1,000,000.

 

  (b)           Except as would not reasonably be expected to result in a Material Adverse Effect, (i) each Foreign Plan has been maintained in compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities, and (ii) neither the Borrower nor any Subsidiary have incurred any obligation in connection with the termination of or withdrawal from any Foreign Plan.

 

 

 

5.13.           Investment Company Act; Other Regulations.  The Borrower is not an “investment company,” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.  The Borrower is not subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board) which limits its ability to incur Indebtedness.

 

5.14.           Subsidiaries.  Schedule II sets forth all Subsidiaries of the Borrower as of the Closing Date.  Napco Gulf Security Group, LLC is an Inactive Subsidiary; provided that Napco Gulf Security Group, LLC shall not cease to be considered an Inactive Subsidiary, solely as a result of the collection of up to $300,000 in the aggregate of written off accounts receivable, so long as it complies with the covenant set forth in Section 8.14(b) of this Agreement.

 

5.15.           Environmental Matters.  Except to the extent that all of the following, in the aggregate, could not reasonably be expected to result in a Material Adverse Effect:

 

   (a)           The facilities and properties owned, leased or operated by each Loan Party or any of its Subsidiaries (the “Properties”) do not contain any Hazardous Materials in amounts or concentrations which (i) constitute a violation of, or (ii) could reasonably be expected to give rise to liability under, any Environmental Law.

 

   (b)           The Properties and all operations at the Properties are in compliance in all material respects with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the business operated by any Loan Party or any of its Subsidiaries (the “Business”) which could materially interfere with the continued operation of the Properties.

 

   (c)           Neither any Loan Party nor any of its Subsidiaries has received any written notice of violation, alleged violation, non-compliance, liability or potential liability regarding any Environmental Laws with regard to any of the Properties or the Business, nor does any Loan Party have knowledge that any such notice will be received or is being threatened.

 

   (d)           No Hazardous Materials have been transported or disposed of from the Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, any Environmental Law, nor have any Hazardous Materials been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law.

 

   (e)           No judicial proceeding or governmental or administrative action is pending or, to the knowledge of any Loan Party, threatened, under any Environmental Law to which any Loan Party or any Subsidiary thereof is or will be named as a party with respect to the Properties or the Business, nor are there any decrees, orders or agreements which impose obligations, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business.

 

 

 

   (f)           There has been no release or threat of release of Hazardous Materials at, under or from the Properties, or arising from or related to the operations of any Loan Party or any Subsidiary thereof in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably be expected to give rise to liability under Environmental Laws.

 

5.16.           Solvency.  Each Loan Party is, and after giving effect to the transactions contemplated by this Agreement, will be, Solvent.

 

5.17.           Security Documents.  The Security Agreements are effective to create in favor of the Collateral Agent, for its benefit and the benefit of the Lenders, a legal, valid and enforceable security interest in the Collateral described, and as defined, therein and proceeds thereof.

 

5.18.           Insurance.  Schedule 5.18 sets forth a true, complete and correct summary description of all material insurance maintained by each Loan Party.  Such insurance is in full force and effect and all premiums have been duly paid.  Each Loan Party has insurance through insurers it reasonably believes to be of recognized financial responsibility covering its properties, operations, personnel and businesses, including business interruption insurance, which insurance is in amounts and insures against such losses and risks as it reasonably believes are adequate to protect it and its Subsidiaries and their respect ive businesses; and neither the Borrower nor any of its Subsidiaries has received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance.

 

5.19.           Affiliate Transactions.  All Contractual Obligations between the Borrower and any of its Subsidiaries on the one hand, and their respective Affiliates, on the other hand, are disclosed in the Borrower’s most recent proxy statement filed on Form 14A with the Securities and Exchange Commission to the extent required under its regulations.

 

5.20.           Accuracy of Information.  No statement or information contained in this Agreement, any other Loan Document or any other document, certificate or statement furnished in writing to the Administrative Agent or the Lenders or any of them (including, without limitation, filings made by the Borrower under the Exchange Act and the regulations promulgated thereunder), by or on behalf of any Loan Party for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, taken as a whole together with all other information provided in this Agreement, the other Loan Documents or any other such document, certificate or statement, contained as of the date such statement , information, document or certificate was so furnished any untrue statement of any fact material to the interests of the Administrative Agent or any Lender, or omitted to state a fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which they were made, not misleading in any respect material to the interests of the Administrative Agent or any Lender; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed by the Borrower to be reasonable at the time.  There is no fact known to any Loan Party that would reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents in the Borrower’s filings with the U.S. Securities and Exchange Commission pursuant to the Exchange Act on Form 10-Q made on May 17, 2010, or in such other documents, certificates and st atements furnished to the Administrative Agent and the Lenders for use in connection with the transactions contemplated hereby and by the other Loan Documents.

 

 

 

5.21.           OFAC.  Neither any Loan Party, nor any Subsidiary of any Loan Party, nor any Affiliate of any Loan Party, is (a) named on the list of Specially Designated Nationals or Blocked Persons maintained by the U.S. Department of the Treasury’s Office of Foreign Assets Control available at http://www.treas.gov/offices/eotffe/ofac/sdn/index.html, or (b)(i) an agency of the government of a country, (ii) an organization controlled by a country, or (iii) a Person resident in a country that is subject to a sanctions program identified on the list maintained by the U.S. Department of the Treasury’s Office of Foreign Assets Control and available at http://www.treas.gov/offices/eotffc/ofac/sancti ons/index.html, or as otherwise published from time to time, as such program maybe be applicable to such agency, organization or Person, and the proceeds from the credit extensions made pursuant to this Agreement will not be used to fund any operations in, finance any investments or activities in, or make any payments to, any such country or Person.

 

5.22.           Deposit Accounts.  Schedule 5.22 hereto set forth each deposit account of the Borrower and its Subsidiaries as of the Closing Date.

 

5.23.           Acknowledgement.  As of the Closing Date:

 

   (a)           after giving effect to the Revolving Credit Loan Paydown, the Term Loan Paydown and the payment by the Borrower of $207,500.00 in costs, fees and expenses of the Agents and Lenders as contemplated by Section 6.1(a)(i) of this Agreement,  there is presently owing to the Lenders, (i) $10,100,000 in outstanding principal amount of Revolving Credit Loans, (ii) $16,070,000 in the outstanding principal balance of the Term Loan, and (iii) of interest on the amounts set forth in sub-clauses (i) and (ii) of this Section 5.23(a) (collectively, the “Amount”); and

 

   (b)           each of the Borrower and the other Loan Parties hereby (i) confirms and acknowledges to the Agents and the Lenders that it is validly and justly indebted to the Agents and the Lenders for the payment of the Amount without offset, defense, cause of action, demand or counterclaim of any kind or nature whatsoever under the Loan Documents pursuant to the terms thereof and (b) reaffirms and admits the validity and enforceability of this Agreement and the other Loan Documents to which it is a party and the Liens on the collateral which were granted to the Agents and the Lenders pursuant to any of the Loan Documents.

 

SECTION 6:   CONDITIONS PRECEDENT

 

6.1.           Conditions to Closing Date.  The Closing Date shall occur on the date of satisfaction of the following conditions precedent:

 

 (a)           Loan Documents.  The Administrative Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of the Borrower and each Loan Party, with a counterpart or a conformed copy for each Lender, (ii) Security Documents, executed and delivered by a duly authorized officer of each party thereto, with a counterpart or a conformed copy for each Lender.

 

 

 

 (b)           Prepayment of Loans. Administrative Agent shall have received the Revolving Credit Loan Paydown and the Term Loan Paydown.  Such prepayments shall be applied as set forth in Section 4.8(a).

 

 (c)           Closing Date Certificate.  The Administrative Agent shall have received, with a copy for each Lender, a certificate of each of the Borrower and the other Loan Parties, dated the Closing Date, substantially in the form attached hereto as Exhibit F, with appropriate insertions and attachments satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower or the relevant Loan Party, as applicable.

 

 (d)           Corporate Proceedings of the Borrower.  The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of the Borrower authorizing (i) the execution, delivery and performance of this Agreement and (ii) the borrowings contemplated hereunder, certified by the Secretary or an Assistant Secretary of the Borrower as of the Closing Date, which certificate shall be in form and substance satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded.

 

 (e)           Incumbency Certificate of the Borrower.  The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of the Borrower dated the Closing Date, as to the incumbency and signature of the officers of the Borrower executing any Loan Document satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower.

 

 (f)           Corporate Proceedings of Subsidiaries.  The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of each other Subsidiary of the Borrower which is a party to a Loan Document authorizing the execution, delivery and performance of the Loan Documents to which it is a party, certified by the Secretary or an Assistant Secretary of each such Subsidiary as of the Closing Date, which certificate shall be in form and substance satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, rev oked or rescinded.

 

 (g)           Subsidiary Incumbency Certificates.  The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of each other Subsidiary of the Borrower which is a party to a Loan Document, dated the Closing Date, as to the incumbency and signature of the officers of such Subsidiary, satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of each such Subsidiary.

 

 (h)           Corporate Documents.  The Administrative Agent shall have received, with a counterpart for each Lender, true and complete copies of the certificate of incorporation and by-laws or (comparable organizational documents) of each Loan Party, certified as of the Closing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of such Loan Party.

 

 

 

 (i)           Fees.  The Agents and the Lenders shall have received all invoiced fees, costs, expenses and compensation required to be paid on the Closing Date (including reasonable fees, disbursements and other charges of legal counsel to the Agents and the Lenders and expenses of appraisers, consultants and other advisors to the Agents and the Lenders and who have been approved by the Borrower).

 

 (j)           Legal Opinions.  The Administrative Agent shall have received, with a counterpart for each Lender, the executed legal opinion of Shapiro Forman Allen & Sava LLP, special counsel to the Borrower and the other Loan Parties, substantially in the form attached hereto as Exhibit E.

 

(k)           Actions to Perfect Liens.  The Administrative Agent shall have received evidence in form and substance satisfactory to it that all filings, recordings, registrations and other actions, including, without limitation, the filing of duly executed financing statements on form UCC-1 necessary or, in the opinion of the Administrative Agent, desirable to perfect or continue the Liens created by the Security Documents shall have been completed or shall continue to be in full force and effect.

 

 (l)           Lien Searches.  The Administrative Agent shall have received the results of a recent search by a Person satisfactory to the Administrative Agent of the Uniform Commercial Code filings which may have been filed with respect to personal property of each Loan Party and each patent, trademark or copyright recorded with the United States Patent and Trademark Office or the United States Copyright Office, as applicable, and such search shall reveal no material liens on any of the assets of such Loan Party except for liens created by the Security Documents or Liens permitted by the Loan Documents.

 

(m)           Consents, Licenses and Approvals.  All governmental and material third party approvals necessary in connection with the execution, delivery and performance of the Loan Documents shall have been obtained and be in full force and effect or shall continue to be in full force and effect.

 

(n)           Litigation.  There shall be no litigation or administrative proceeding or proposed or pending regulatory changes in law or regulations applicable to the Borrower or its Subsidiaries, that would reasonably be expected to have a Material Adverse Effect on the ability of the parties to consummate the execution, delivery and performance of the Loan Documents and the borrowings hereunder.

 

(o)           Indebtedness.  The Borrower and its Subsidiaries shall not have outstanding Indebtedness for borrowed money or preferred stock other than (w) Indebtedness under the Loan Documents, and (x) Indebtedness permitted hereunder.

 

(p)           Documentation.  The Lenders have received such other legal opinions, corporate documents and other instruments and/or certificates as they may reasonably request.

 

(q)           Material Adverse Change.  Since March 31, 2010, there has been no development or event which has had or would reasonably be expected to have a Material Adverse Effect.

 

 

 

(r)           Execution by Lenders.  This Agreement shall have been executed and delivered by each Lender hereunder.

 

6.2.           Conditions to Each Extension of Credit.  The agreement of each Lender to make any Extension of Credit requested to be made by it on any date (including, without limitation, the Closing Date), is subject to the receipt of a notice of request for a Revolving Credit Loan or a Swing Line Loan, as applicable, and the satisfaction of the following conditions precedent as of the date such Extension of Credit is requested to be made:

 

(a)           Representations and Warranties.  Each of the representations and warranties made by each of the Loan Parties in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date, other than any such representations and warranties that, by their terms, refer to a specific date other than such date, in which case such representations and warranties shall be true and correct in all material respects as of such specific date.

 

(b)           No Default.  No Default or Event of Default shall have occurred and be continuing on such date or immediately after giving effect to the Extension of Credit requested to be made on such date.

 

 

SECTION 7:    AFFIRMATIVE COVENANTS

 

 

7.1.           Financial Statements.  Furnish to each Lender:

 

(a)           within one hundred twenty (120) days after the end of each fiscal year, audited consolidated financial statements of Borrower and its Consolidated Subsidiaries as of the end of such year, fairly presenting Borrower’s and its Consolidated Subsidiaries’ financial position, which statements shall consist of a balance sheet and related statements of income, retained earnings, and cash flow covering the period of Borrower’s immediately preceding fiscal year, and which shall be prepared by Borrower and audited by independent certified public accountants satisfactory to the Administrative Agent in the form submitted to the Securities and Exchange Commission, and in accordance with GAAP.  At the same time, Borrower shall deliver to each Lender (i) a copy of the Form 10-K filed with the Securities and Exchange Commission, and internally prepared consolidating financial statements of Borrower and its Consolidated Subsidiaries, and (ii) the compliance certificate described in Section 7.2(b).  All such financial statements and other documents delivered to each Lender are to be certified as accurate by the chief financial officer of Borrower.

 

 

 

(b)           Within sixty (60) days of each first, second and third fiscal quarter of each fiscal year, consolidated 10-Q report filed with the Securities and Exchange Commission of Borrower and its Consolidated Subsidiaries as of the end of such period, fairly presenting Borrower’s and its Consolidated Subsidiaries’ financial position, and internally prepared consolidating financial statements of Borrower and its Consolidated Subsidiaries. At the same time, the Borrower shall deliver to each Lender the compliance certificate described in Section 7.2(b).  All such reports shall be in such detail as the Securities and Exchange Commission shall request and in accordance with GAAP and shall be signed and certified to be correct by the chief financial officer of Borrower or such other financial officer satisfactory to the Administrative Agent.

 

(c)           As soon as available, a true copy of any management letter or other communication to Borrower, from its certified public accountants regarding matters which arose or were ascertained during the course of their review and which such accountants determined ought to be brought to management’s attention.

 

(d)           [Intentionally Omitted].

 

(e)           Copies of any and all proxy statements, financial statements, and reports which Borrower sends to its shareholders, and copies of any and all periodic and special reports and registration statements which Borrower files with the Securities and Exchange Commission, and such additional information as each Lender may from time to time reasonably request regarding the financial and business affairs of Borrower or any Consolidated Subsidiary.

 

(f)           Within thirty (30) days after the end of each month, the internally prepared financial statements of the Borrower and its Consolidated Subsidiaries which statements shall consist of a balance sheet, income statement, and statement of changes in financial position covering the period of the Borrower’s immediately preceding month.

 

(g)           All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except that interim statements may exclude detailed footnote disclosure in accordance with standard practice).

 

7.2.           Certificates; Other Information.  Furnish to each Lender:

 

(a)           concurrently with the delivery of the financial statements referred to in subsection 7.1(a), an unqualified opinion of the independent certified public accountants reporting on such financial statements;

 

(b)           concurrently with the delivery of the financial statements referred to in subsections 7.1(a), 7.1(b) and 7.1(f), a certificate of a Responsible Officer of Borrower stating that, to the best of such officer’s knowledge, each Loan Party during such period has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to be observed, performed or satisfied by it, and that such officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate; and in the case of financial statements referred to in subsections 7.1(a), 7.1(b) and 7.1(f), including calculations and information demonstrating in reasonable detail compliance with the re quirements of subsection 8.1 (if applicable) and certifying (and demonstrating) as to compliance with the covenant contained in subsection 8.14(b);

 

 

 

(c)           promptly, such additional financial and other information as any Lender may from time to time reasonably request;

 

(d)           no later than thirty (30) days prior to the beginning of each of the Borrower’s fiscal years (commencing with the fiscal year commencing July 1, 2011), a month by month projected income statement, balance sheet and cash flow of the Borrower and its Subsidiaries on a consolidated basis (with revenue provided on a consolidating basis) for such fiscal year; and

 

(e)           within five (5) Business Days after the close of each month and the first two week period of each such month, an accounts receivable aging report (including a report listing the accounts receivable by Subsidiary), an accounts payable aging report and an inventory schedule of the Borrower and all of its Subsidiaries in the form previously submitted to and found acceptable by the Lenders (modified to report the inventory of the Borrower and its Subsidiaries by location).

 

7.3.           Payment of Obligations.  Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature (including taxes), except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be.

 

7.4.           Maintenance of Existence.  Preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business except as otherwise permitted pursuant to subsection 8.5; and comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith would not, in the aggregate, be reasonably expected to have a Material Adverse Effect.

 

7.5.           Maintenance of Property; Insurance.  Keep all property material to the conduct of the business of the Borrower and its Subsidiaries, taken as a whole, in good working order and condition; maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business; and furnish to each Lender, upon written request, full information as to the insurance carried.

 

 

 

7.6.           Inspection of Property; Books and Records; Discussions; Audits and Appraisals.  Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and, upon prior written notice, permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records during normal business hours and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employee s of the Borrower and its Subsidiaries and, in the presence of an officer of the Borrower, with its independent certified public accountants.  Subject to the limitations set forth in this Section 7.6, the Borrower agrees to pay all fees and expenses of the firm or individual(s) engaged by the Administrative Agent to perform field audits or appraisals of the Borrower’s and its Subsidiaries’ assets and/or operations. Initially, the Administrative Agent intends to conduct four (4) field audits per year; provided that nothing in this Section 7.6 shall be deemed to limit the number of field audits the Administrative Agent may conduct (at its expense).  Notwithstanding the foregoing, if Administrative Agent uses its internal or external auditors to perform any such field audit, Borrower agrees to pay to Administrative Agent, for its own account, an audit fee with respect to each such audit equal to $1,000 per auditor per day (not to exceed twelve (10) days per audit) or any portion thereof together with all out of pocket expenses.   Notwithstanding the foregoing, Borrower will not have to pay for more than three (3) field audits per year and one (1) inventory appraisal per year; provided that (i) after the first anniversary of the Closing Date, the Borrower shall not have to pay from more than two (2) field audits per year and (ii) after the occurrence and during the continuance of an Event of Default all such limitations shall not apply and Borrower will be responsible for the costs of all field audits and appraisals conducted by the Administrative Agent.

 

7.7.           Notices.  Promptly give notice to the Administrative Agent (who shall promptly notify each Lender) of:

 

(a)           the occurrence of any Default or Event of Default;

 

(b)           any (i) default or event of default under any Contractual Obligation of the Borrower or any of its Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between the Borrower or any of its Subsidiaries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, would reasonably be expected to have a Material Adverse Effect;

 

(c)           any litigation or proceeding (including without limitation any notice of violation, alleged violation, liability or potential liability under any Environmental Law)  that is filed or commenced (in each case after the Closing Date) affecting the Borrower or any of its Subsidiaries in which the amount claimed by the plaintiff is $1,000,000 or more and not covered by insurance;

 

(d)           any ERISA Event, that alone or together with any other ERISA Events that have occurred, would reasonably be expected to result in a liability of the Borrower and its Subsidiaries in an amount exceeding $1,000,000 (as soon as possible and in any event within 30 days after any Loan Party knows or has reason to know thereof); and

 

(e)           any development or event which has had or would reasonably be expected to have a Material Adverse Effect.

 

 

 

 

7.8.           Environmental Laws.

 

(a)           Comply with, and ensure compliance by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply in all respects with and maintain, and ensure that all tenants and subtenants obtain and comply in all respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws, except to the extent that any failures could not, in the aggregate, reasonably be expected to have a Material Adverse Effect or to result in the payment of an amount of more than $1,000,000.00.

 

(b)           Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not be reasonably expected to have a Material Adverse Effect.

 

7.9.           Additional Subsidiaries; Additional Collateral.

 

(a)           With respect to any Domestic Subsidiary created after the Closing Date by the Borrower or if Napco Gulf Security Group, LLC ceases to be an Inactive Subsidiary, promptly cause such Subsidiary to (i) execute a Guarantee Agreement substantially in the form of Exhibit B-1 and a Security Agreement substantially in the form of Exhibit B-2 (in each case with such charges acceptable to Administrative Agent in its sole discretion), (ii) deliver to the Administrative Agent the certificates representing the Capital Stock of such Subsidiary, together with undated stock powers, executed in blank, (iii) take all required actions to perfect the security interests created by such Security Agreement in the assets of such Subsidiary and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the preceding matters, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.

 

(b)           With respect to each direct Foreign Subsidiary of the Borrower or of any Domestic Subsidiary formed after the Closing Date or a Foreign Subsidiary that otherwise becomes a direct Foreign Subsidiary after the Closing Date, promptly after the formation thereof or such other Foreign Subsidiary becoming a direct Foreign Subsidiary, execute and deliver and cause each such Foreign Subsidiary to execute and deliver to the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent, such documents and instruments (including, without limitation, pledge agreements) and take such action (including, without limitation, the delivery of stock certificates and instruments) as the Administrative Agent may reasonably request in order to grant to th e Administrative Agent, for the ratable benefit of the Lenders, as collateral security for the Obligations, a first priority perfected security interest in 65% of the voting Capital Stock and 100% of the non-voting Capital Stock of, or equivalent ownership interests in, such direct Foreign Subsidiary, along with any warrants, options, or other rights to acquire the same, in all cases to the extent legally permissible and practicable and deliver to the Administrative Agent such legal opinions as it shall reasonably request with respect thereto.  For purposes of this subsection 7.9(b), “direct” means directly held by the Borrower or any Domestic Subsidiary.

 

 

 

(c)           If requested by the Administrative Agent, grant in favor of the Administrative Agent, for the benefit of the Lenders, Liens on any other assets other than leased real property hereafter acquired by the Borrower or any Domestic Subsidiary and on previously encumbered assets which become unencumbered, to the extent such Liens are then permissible under applicable law and pursuant to any agreements to which the Borrower or its Subsidiaries are a party, pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent.

 

7.10.         Post Closing Obligations.   The Borrower will deliver to the Administrative Agent the following in form and content reasonably satisfactory to the Administrative Agent and the Required Lenders in each case, at the Borrower’s sole cost and expense:

 

(a)           By no later than December 31, 2010, the Borrower shall have used commercially reasonable efforts to have obtained and delivered warehouseman’s waivers in form and substance reasonably satisfactory to the Administrative Agent, with respect to each public warehouse utilized by the Borrower and the other Loan Parties to store inventory.  For the avoidance of doubt, if the Borrower uses commercially reasonable efforts, but fails to provide warehouseman’s waivers as provided in the immediately preceding sentence, it shall not constitute a Default or Event of Default under this Agreement; provided at such time the Administrative Agent shall have the right to institute a reserve against t he Borrower’s ability to borrow Revolving Credit Loans in an amount equal to three months of warehouse charges with respect to each warehouse not covered by a warehouseman’s waiver until such time as (x) all inventory located in such warehouse is moved to a warehouse that is subject to an acceptable warehouseman’s waiver or (y) such warehouse becomes subject to an acceptable warehouseman’s waiver.

 

SECTION 8:   NEGATIVE COVENANTS

 

 

8.1.           Financial Condition Covenants.

 

(a)           Minimum EBITDA.  For any fiscal quarter set forth below, permit Consolidated EBITDA to be less (or in the case of a negative amount of not more) than the amount listed below for the period ending on the last day of the corresponding fiscal quarter listed below (amounts in “( )” are negative):

 

 

 

 

Period	EBITDA
Fiscal quarter ended June 30, 2010	($1,286,000)
Two fiscal quarter period ending September 30, 2010	($3,021,000)
Three fiscal quarter period ending December 31, 2010	($3,490,000)
Four fiscal quarter ending period March 31, 2011	($3,648,000)
Four fiscal quarter period ending June 30, 2011	($2,076,000
Four fiscal quarter period ending September 30, 2011	($1,275,000)
Four fiscal quarter period ending December 31, 2011	($467,000)
Four fiscal quarter period ending March 31, 2012	$859,000
Four fiscal quarter period ending June 30, 2012	$2,430,000
Four fiscal quarter period ending September 30, 2012	$2,921,000
Four fiscal quarter period ending December 31, 2012	$3,457,000
Four fiscal quarter period ending March 31, 2013	$3,961,000
Four fiscal quarter period ending June 30, 2013	$4,516,000

(b)           Minimum Modified Quick Ratio.  Permit at the end of each fiscal quarter, the Modified Quick Ratio of the Borrower and its Consolidated Subsidiaries to be less than 1.15 to 1.0.

 

(c)           Capital Expenditures.  Contract for, purchase or make any expenditure or commitments for Capital Expenditures in any fiscal year in an aggregate amount in excess of $1,500,000.

 

(d)           Collateral Tracking.  Permit at the end of each fiscal quarter set forth below, the Collateral Tracking Amount to be less than the amount set forth in the table below for such fiscal quarter:

 

Fiscal Quarter	Minimum Collateral Balance Amount
June 30, 2010	$3,396,000
September 30, 2010	$2,489,000
December 31, 2010	$3,007,000
March 31, 2011	$3,160,000
June 30, 2011	$3,015,000
September 30, 2011	$2,314,000
December 31, 2011	$2,261,000
March 31, 2012	$2,208,000
June 30, 2012	$2,155,000
September 30, 2012	$1,453,000
December 31, 2012	$1,689,000
March 31, 2013	$1,942,000
June 30, 2013	$2,452,000

 

 

 

(e)           Inventory Mix.  Permit at any time the value of Inventory of Borrower and its Domestic Subsidiaries located in the United States to be less than 25% of the value of all Inventory of Borrower and its Consolidated Subsidiaries.

 

8.2.           Limitation on Indebtedness.  Create, incur, assume or suffer to exist any Indebtedness, except:

 

(a)           Indebtedness of the Borrower or any Subsidiary under this Agreement or any other Loan Document;

 

(b)           existing Indebtedness of the Borrower and its Subsidiaries listed on Schedule 8.2;

 

(c)           Indebtedness of the Borrower under Hedge Agreements entered into solely to hedge interest rate exposure and not for speculative purposes; and

 

(d)           Indebtedness of the Borrower or any Subsidiary (other than Indebtedness incurred pursuant to the Term Loans or Revolving Credit Loans hereunder) incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including obligations under Financing Leases and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof which Lien was not created in contemplation of such acquisition and on any extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (A) such Indebtedness is incurred prior to or wit hin 120 days after such acquisition or the completion of such construction or improvement and (B) the aggregate principal amount of Indebtedness permitted by this paragraph (d) shall not exceed $750,000 per fiscal year.

 

8.3.           Limitation on Liens.  Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for:

 

(a)           Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of such Person in conformity with GAAP (or, in the case of Foreign Subsidiaries, generally accepted accounting principles in effect from time to time in their respective jurisdictions of incorporation);

 

(b)           carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings;

 

 

 

(c)           pledges or deposits in connection with workers’ compensation, unemployment insurance and other social security legislation;

 

(d)           deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

 

(e)           easements, zoning restrictions, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which do not secure any monetary obligations and do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of such Person;

 

(f)           Liens existing as of the Closing Date and listed on Schedule 8.3 and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;

 

(g)           Liens securing Indebtedness of the Borrower or any Subsidiaries permitted by subsection 8.2(d) incurred to finance the acquisition of fixed or capital assets (whether pursuant to a loan, a Financing Lease or otherwise), provided that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, (iii) the amount of Indebtedness secured thereby is not increased and (iv) the principal amount of Indebtedness secured by any such Lien shall at no time exceed the original purchase price of such property at the time it was acquir ed; and

 

(h)           Liens created pursuant to the Security Documents.

 

8.4.          Limitation on Guarantee Obligations.  Create, incur, assume or suffer to exist any Guarantee Obligation except:

 

(a)           Guarantee Obligations in existence on the date hereof and listed on Schedule 8.4;

 

(b)           guarantees made in the ordinary course of its business by the Borrower of obligations of any of its Domestic Subsidiaries, which obligations are otherwise permitted under this Agreement; and

 

(c)           the guarantees by the Domestic Subsidiaries under the Guarantee Agreements.

 

8.5.          Limitation on Fundamental Changes.  Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, except:

 

(a)           any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any one or more wholly owned Subsidiaries of the Borrower (provided that if a Domestic Subsidiary is a party to such transaction, such Domestic Subsidiary shall be the continuing or surviving corporation); and

 

 

 

(b)           any wholly owned Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any other wholly owned Domestic Subsidiary of the Borrower.

 

8.6.          Limitation on Sale of Assets.  Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary’s Capital Stock to any Person other than the Borrower or any wholly owned Domestic Subsidiary, except:

 

(a)           the sale or other disposition of obsolete or worn out property in the ordinary course of business;

 

(b)           the sale of inventory in the ordinary course of business; and

 

(c)           as permitted by subsection 8.5(b).

 

8.7.          Limitation on Dividends and Other Restricted Payments.  Declare or pay any dividend (other than dividends payable solely in its common stock) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the Borrower or any Subsidiary or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary thereof (such declarations, payments, setting apart , purchases, redemptions, defeasances, retirements, acquisitions and distributions being herein called “Restricted Payments”) except (a) any Subsidiary may pay dividends to the Borrower or any other Subsidiary and (b) the Borrower or any Subsidiary may make Restricted Payments pursuant to and in accordance with customary stock option plans or other customary benefit plans for management or employees of the Borrower and its Subsidiaries.

 

8.8.          Limitation on Investments, Loans and Advances.  Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in, any Person, except:

 

(a)           extensions of trade credit in the ordinary course of business;

 

(b)           investments in Cash Equivalents;

 

(c)           loans and advances to employees of the Borrower or its Subsidiaries for travel, entertainment and relocation expenses in the ordinary course of business in an aggregate amount for the Borrower and its Subsidiaries not to exceed $500,000 at any one time outstanding;

 

 

 

(d)           investments by the Borrower or its Domestic Subsidiaries in any wholly owned Domestic Subsidiary of the Borrower which has complied with the conditions set forth in subsection 7.9(a); or

 

(e)           investments by the Borrower and its Subsidiaries existing on the Closing Date and set forth on Schedule 8.8(e).

 

8.9.          Limitation on Transactions with Affiliates.  Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (a) otherwise permitted under this Agreement and (b) in the reasonable determination of the Administrative Agent, upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm’s length transaction with a Person which is not an Affiliate.

 

8.10.        Limitation on Changes in Fiscal Year.  Permit the fiscal year of the Borrower to end on a day other than June 30.

 

8.11.        Limitation on Negative Pledge Clauses.  Enter into with any Person any agreement, other than (a) this Agreement and the other Loan Documents or Financing Leases permitted by this Agreement (in which cases, any prohibition or limitation shall only be effective against the assets financed thereby), which prohibits or limits the ability of the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired; provided that the foregoing shall not apply to (i) restrictions and conditions imposed by law, (ii) customary restrictions and conditions contained in agreements relating to the sale of a Subsid iary permitted hereunder pending such sale, provided such restrictions or conditions apply only to the Subsidiary that is to be sold, (iii) restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted hereunder if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (iv) customary provisions in leases and other contracts restricting the assignment thereof.

 

8.12.           Limitation on Lines of Business.  Enter into any lines of business, either directly or through any Subsidiary, except for those engaged in on the Closing Date.

 

8.13.           Hedging Agreements.  Enter into any Hedging Agreement, except (a) Hedging Agreements entered into to hedge or mitigate risks to which the Borrower or any Subsidiary has actual exposure (other than those in respect of Capital Stock of the Borrower or any of its Subsidiaries) and (b) Hedging Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of the Borrower or any Subsidiary.

 

8.14.           Deposit Accounts.

 

  (a)           Establish any new deposit accounts; provided that (x) the Borrower and its Domestic Subsidiaries may establish new deposit accounts at the Collateral Agent or any Lender, (y) the Borrower and its Domestic Subsidiaries may establish new accounts at financial institutions located in the United States, so long as the Administrative Agent is given ten (10) days prior written notice of the establishment of such deposit account and the Borrower remains in compliance with the covenant set forth in Section 8.14(b)(x), and (z) the Borrower and its Subsidiaries may establish new accounts at financial institutions located outside the United States, so long as the Administrative Agent is given ten (10) days prior written notice of the establishment of such deposit account and the Borrower remains in compliance with the covenant set forth in Section 8.14(b)(y); or

 

 

 

  (b)           Maintain cash (x) in an amount greater than $1,000,000 in the aggregate in deposit accounts at financial institutions located in the United States other than the Agents or Lenders; provided that (i) Agents and Lenders agree to charge their standard rates for any banking services provided to the Loan Parties (as those rates may change from time to time) and (ii) if greater than 66% of Aggregate Revolving Credit Commitments are held by Lenders that cannot provide depository or cash management services to the Loan Parties, the Loan Parties shall be permitted to maintain amounts up to $2,000,000 at financial institutions located in the United States other than the Agents and Lenders and (y) in an amo unt greater than $150,000 in the aggregate in deposit accounts at financial institutions located outside of the United States for more than five (5) consecutive Business Days or more than seven (7) Business Days in any thirty (30) day period; provided that Napco Gulf Security Group, LLC shall be permitted to maintain no more than $300,000 in the aggregate at financial institutions located outside of the United States for up to a total of twenty (20) Business Days as a result of the collection of certain written off accounts receivable, so long as prior to the expiration of such period, all such amounts are transferred to the Borrower and deposited in an account maintained at the Collateral Agent.

 

SECTION 9:    EVENTS OF DEFAULT; REMEDIES.

 

9.1.           Events of Default.  Upon the occurrence of any of the following events:

 

(a)           The Borrower shall fail to pay (i) any principal of any Loans or any Reimbursement Obligations when due (whether at the stated maturity, by acceleration or otherwise) in accordance with the terms thereof or hereof, provided that if any failure to make a payment of principal when due by the Borrower is a result of the Administrative Agent failing to exercise its rights under Section 4.1 to automatically deduct such amount from the Borrower’s Account at a time when the Borrower had an amount on deposit in the Borrower’s Account sufficient to make such payment, then, unless prior to the date such payment is due the Administrative Agent has notified the Borrower in writing that it will not deduct such amount from the Borrower’s Account on the date such payment is due, the Borrower will have ten (10) days from the date such payment was due to make such payment or (ii) any interest on any Loans, or any fee or other amount payable hereunder, within ten (10) days after any such interest, fee or other amount becomes due in accordance with the terms hereof; or

 

(b)           Any representation or warranty made or deemed made by the Borrower or any other Loan Party herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement or any other Loan Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made or furnished; or

 

 

 

(c)           The Borrower or any other Loan Party shall default in the observance or performance of any covenant contained in Section 8 (other than subsections 8.1(d) or (e)), Section 7.1, Section 7.2 or Section 7.7(a) (to the extent relating to notice of an Event of Default) hereof or in any negative covenant contained in any Security Document to which it is a party; provided, that if the Borrower obtains extensions from the Securities and Exchange Commission (“SEC”) with respect to the filing of any of its quarterly or annual financial statements with the SEC, then the date(s) for the deliveries to be made under Section 7.1 and Section 7.2 hereof, as applicable, will be extended to give effect to the length of such extensions, but not to exceed thirty (30) days (the “Extension Period”); or

 

(d)           The Borrower or any other Loan Party shall default in the observance or performance of any covenant contained in Subsections 8.1(d) or (e) and such default shall continue unremedied for a period of fifteen (15) days after the earlier to occur of (A) actual knowledge of such default by a Responsible Officer of the Borrower and (B) notice from the Administrative Agent to the Borrower of such default (provided that (x) with respect to subsection 8.1(e), the Agents and the Lenders agree to consult with the Borrower as to the reasons such covenant was not complied with, although the Agents and Lenders are under no obligations to extend such fifteen day period or waive any default of such covenant) and (y) wi th respect to Subsection 8.1(d), the only manner in which the Borrower may remedy a violation of such covenant is by paying down the outstanding principal balance of the Revolving Credit Loans to the extent necessary to bring the Borrower into compliance with Subsection 8.1(d)).

 

(e)           The Borrower or any other Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document other than as provided in (a), (b), (c) or (d) above, and such default shall continue unremedied for a period of fifteen (15) days, after the earlier to occur of (A) actual knowledge of such default by a Responsible Officer of the Borrower and (B) notice from the Administrative Agent to the Borrower; or

 

(f)           Any Loan Document shall cease, for any reason, to be in full force and effect, or the Borrower or any other Loan Party shall so assert; or any security interest created by any of the Security Documents in a material portion of the Collateral shall cease to be enforceable and of the same effect and priority purported to be created thereby; or

 

(g)           The Borrower or any of its Subsidiaries shall (i) default in any payment of principal of or interest on any Indebtedness (other than Indebtedness under this Agreement), in the payment of any Guarantee Obligation or in the payment of any Hedge Agreement Obligation beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness, Guarantee Obligation or Hedge Agreement Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness, Guarantee Obligation or Hedge Agreement Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which defa ult or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or Hedge Agreement Obligation or, beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; or

 

 

 

(h)           (i) The Borrower, any Domestic Subsidiary or any Foreign Subsidiary shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or the Borrower, any Domestic Subsidiary or any  Foreign Subsidiary shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower, any Domestic Subsidiary or any  Foreign Subsidiary any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Borrower, any Domestic Subsidiary or any  Foreign Subsidiary any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Borrower, any Domestic Subsidiary or any  Foreign Subsidiary shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower, any Domestic Subsidiary or any  Foreign Subsidiary shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or

 

(i)           An ERISA Event shall have occurred that, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $1,000,000 and such ERISA Events shall continue unremedied for a period of 30 days after the earlier to occur of (A) actual knowledge of such ERISA Events by a Responsible Officer of the Borrower and (B) notice from the Administrative Agent to the Borrower; or

 

(j)           One or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving in the aggregate a liability (not paid by insurance or otherwise fully covered by insurance or paid by a third-party indemnitor) and all such judgments or decrees requiring payments in excess of $100,000 shall not have been paid pursuant to its terms, vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or

 

(k)           (i) Any Person or “group” (within the meaning of Section 13(d) or 15(d) of the Exchange Act), other than any Person or group beneficially owning 10% or more of the Capital Stock of the Borrower on the date hereof (A) shall have acquired, combined with previous holdings, beneficial ownership of 33% or more of any outstanding class of Capital Stock of the Borrower having ordinary voting power in the election of directors or (B) shall obtain the power (whether or not exercised) to elect a majority of the Borrower’s directors; or (ii) the Board of Directors of the Borrower shall not consist of a majority of Continuing Directors;

 

 

 

then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (h) above with respect to the Borrower automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all Reimbursement Obligations, regardless of whether or not such Reimbursement Obligations are then due and payable) shall immediately become due and payable, and (B) if such event is any other Event of Default, any of the following actions may be taken:  (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the direction of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the direction of the Required Lenders, the Administrative Agent shall, by notice of default to the Borrower declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement  (including, without limitation, all Reimbursement Obligations, regardless of whether or not such Reimbursement Obligations are then due and payable) to be due and payable forthwith, whereupon the same shall immediately become due and payable and (iii) with the consent of the Required Lenders the Administrative Agent and Collateral Agent may, and upon the direction of the Required Lenders, the Administrative Agent and Collateral Agent shall, exercise any and all remedies and other rights provided pursuant to this Agreement and/or the other Loan Documents.

 

 

 

9.2.           Allocation of Payments.  All moneys collected by the Collateral Agent upon any sale or other disposition of the Collateral, together with all other moneys received by the Collateral Agent or Administrative Agent as a result of any exercise of rights and remedies under this Agreement or any Security Document, shall be applied as follows:

 

 

 

FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees) of the Agents in connection with enforcing their rights and the rights of the Lenders under this Agreement and the other Loan Documents;

 

SECOND, to payment of that portion of the Obligations constituting fees owed to the Agents in their capacity as such;

 

THIRD, to the payment of all out-of-pocket costs and expenses (including reasonable attorneys’ fees) of each of the Lenders to the extent owing to such Lender pursuant to the terms of this Agreement ratably among them in proportion to the respective amounts described in this clause THIRD payable to them;

 

FOURTH, to the payment of all of the Obligations consisting of accrued fees owed to the Lenders pursuant to the terms of this Agreement (excluding any fees owing with respect to Bank Product Obligations or Hedge Agreement Obligations) ratably among them in proportion to the respective amounts described in this clause FOURTH payable to them;

 

FIFTH, to the payment of all of the Obligations consisting of accrued interest (excluding any interest owing with respect to Bank Product Obligations or Hedge Agreement Obligations);

 

SIXTH, to the payment of the outstanding principal amount of the Obligations (including the payment or cash collateralization of any outstanding Letters of Credit, but excluding any amounts owing in respect of Bank Product Obligations or Hedge Agreement Obligations);

 

SEVENTH, to all other Obligations which shall have become due and payable under this Agreement or the other Loan Documents or otherwise and not repaid pursuant to clauses “FIRST” through “SIXTH” above, including, without limitation, all Bank Product Obligations and Hedge Agreement Obligations; and

 

EIGHTH, to the payment of the surplus, if any, to whoever may be lawfully entitled to receive such surplus.

 

In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; (ii) each of the Lenders shall receive an amount equal to its pro rata share (based on the proportion that the then outstanding Loans held by such Lender bears to the aggregate then outstanding Loans) of amounts available to be applied pursuant to clauses “FIFTH”, “SIXTH” and “SEVENTH” above; and (iii) to the extent that any amounts available for distribution pursuant to clause “SIXTH” above are attributable to the issued but undrawn amount of outstanding Letters of Credit, such amounts shall be held by the Administrative Agent in a cash collateral account and applied (A) first, to reimburse the Issuing Lender from time to time for any drawings under such Letters of Credit and (B) then, following the expiration of all Letters of Credit, to all other obligations of the types described in clauses “SIXTH” and “SEVENTH” above in the manner provided in this Section 9.2.  Notwithstanding the foregoing, to the extent any Mortgage only secures the Obligations related to the Term Loans, all moneys collected by the Collateral Agent with respect to such Mortgages will be applied in the order set forth above, but only to the Obligations related to the Term Loans.

 

 

 

SECTION 10:    THE AGENT AND THE ARRANGER

 

10.1.           Appointment.  Each Lender hereby irrevocably designates and appoints HSBC as the Administrative Agent and as the Collateral Agent of such Lender under this Agreement and the other Loan Documents, and each Lender irrevocably authorizes each of the Administrative Agent and the Collateral Agent, in such respective capacities, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent and the Collateral Agent, as the case may be, by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidenta l thereto.  Notwithstanding any provision to the contrary elsewhere in this Agreement, no Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against any Agent.

 

10.2.           Delegation of Duties.  Each Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  No Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.

 

10.3.           Exculpatory Provisions.  No Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its or such Person’s own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by su ch Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of the Borrower to perform its obligations hereunder or thereunder.  No Agent shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrower.

 

 

 

10.4.           Reliance by Agent.  The Agents shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by such Agent with reasonable care.  The Agents may deem and treat the Person whose name is recorded in the Register pursuant to the terms hereof as the owne r thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent.  The Agents shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, to the extent provided in subsection 11.1, all of the Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.  The Agents shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, to the extent provided in subsection 11.1, all of the Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding up on all the Lenders and all future holders of the Loans.

 

10.5.           Notice of Default.   No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default” (and, in the case of the Collateral Agent, shall have received notice thereof as described in the following sentence).  In the event that the Administrative Agent receives such a notice, the Administrative Agent shall promptly give notice thereof to the other Agents and Lenders.  The Agents shall take such actions w ith respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders); provided that unless and until the applicable Agent shall have received such directions, such may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.

 

10.6.           Non-Reliance on Agent and Other Lenders.  Each Lender expressly acknowledges that no Agent nor any Agent’s officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs of the Borrower shall be deemed to constitute any representation or warranty by any Agent to any Lender.  Each Lender represents to each Agent that it has, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations , property, financial and other condition and creditworthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement.  Each Lender also represents that it will, independently and without reliance upon the Agents, the Arranger or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower.  Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent or the Collateral Agent hereunder, no Agent shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, op erations, property, condition (financial or otherwise), prospects or creditworthiness of the Borrower which may come into the possession of such Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.

 

 

 

10.7.           Indemnification.  The Lenders agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Total Loan Percentages in effect on the date on which indemnification is sought (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with their Total Loan Percentages immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind wha tsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from such Agent’s gross negligence or willful misconduct.  The agreements in this subsection 10.7 shall survive the payment of the Loans and all other amounts payable hereunder.

 

10.8.           Agent in Its Individual Capacity.  Each entity which is an Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the entity which is such Agent were not such Agent hereunder and under the other Loan Documents.  With respect to the Loans made by it, such entity shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Agent, and the terms “Lender” and “Lenders” shall include the entity which is such Agent in its individual capacity.

 

10.9.           Successor Agents.  Any Agent may resign as Agent upon 45 days’ notice to the Lenders.  If any Agent shall resign as Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall be approved by the Borrower (except during the occurrence and continuation of an Event of Default), such approval not to be unreasonably withheld or delayed, whereupon such successor agent shall succeed to the rights, powers and duties of such Agent, and the term “Administrative Agent,” or “Collateral Agent”, as the case may be, shall mean such successor agen t effective upon such appointment and approval, and the former Agent’s rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement or any holders of the Loans.  After any retiring Agent’s resignation as Agent, the provisions of this Section 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents.

 

10.10.           Issuing Lender.  Each Lender hereby acknowledges that the provisions of this Section 10 shall apply to the Issuing Lender, in its capacity as issuer of any Letter of Credit, in the same manner as such provisions are expressly stated to apply to the Agents.

 

 

 

SECTION 11:   MISCELLANEOUS

 

11.1.           Amendments and Waivers.  Neither this Agreement nor any other Loan Document, nor any terms hereof or thereof, may be amended, supplemented, waived or modified except in accordance with the provisions of this subsection 11.1.  The Required Lenders may, or, with the written consent of the Required Lenders, the Administrative Agent may, from time to time, (a) enter into with the applicable Loan Parties written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights or obligations of the Lenders or of the Borrower or of any other Loan Party hereunder or thereunder or (b) waive at the Borrower’s request, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall:

 

(i)           increase the Commitment of any Lender without the written consent of such Lender,

 

(ii)          reduce the principal amount of any Loan or Reimbursement Obligation or reduce the rate of interest thereon or require any Lender to offer Interest Periods of longer than six months without regard to availability, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby,

 

(iii)         postpone the scheduled date of payment of the principal amount of any Loan or Reimbursement Obligation, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby,

 

(iv)         change subsection 4.8 in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender affected thereby,

 

(v)          release any Guarantee Agreement or Security Agreement or all or substantially all of the Collateral under, and as defined in, the Security Documents, or any Guarantor without the written consent of each Lender,

 

(vi)         change any of the provisions of this subsection 11.1 or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender, or

 

(vii)        amend or waive any provisions of this Agreement or any other Loan Document for purposes of determining whether the conditions precedent set forth in subsection 6.2 to the making of any Revolving Credit Loan have been satisfied without the written consent of the Required Lenders.

 

 

 

(viii)       In addition to the foregoing, (x) no such amendment, supplement or modification shall amend, modify or otherwise affect the rights or duties of any Agent, the Issuing Bank or the Swing Line Lender hereunder without the prior written consent of such Agent, the Issuing Bank or the Swing Line Lender, as the case may be, and (y) no such amendment, supplement, modification or waiver shall amend, modify or otherwise affect subsection 8.1 at a time when a Default or Event of Default shall have occurred and be continuing unless the Lenders holding a majority in interest of the Aggregate Revolving Credit Commitments shall have consented in writing to such amendment, modification or waiver.  Any waiver and any amendment, supplement or modification pursuant to this subsection 1 1.1 shall apply to each of the Lenders and shall be binding upon the Borrower, the applicable other Loan Parties, the Lenders, the Agents and all future holders of the Loans and the Reimbursement Obligations.  In the case of any waiver, the Borrower, the Lenders and the Agents shall be restored to their former positions and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon.

 

 

 

11.2.   Notices.  All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) in the case of delivery by hand, when delivered, (b) in the case of delivery by mail, three days after being deposited in the mails, postage prepaid, or (c) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows in the case of the Borrower, the Issuing Lender, the Collateral Agent and the Administrative Agent, and as set forth in Schedule I in the case of the other parties he reto, or to such other address as may be hereafter notified in writing by the respective parties hereto:

 

 

	The Borrower:	Napco Security Technologies, Inc.
		Amityville, New York 11701
		333 Bayview Avenue Attn:   Mr. Kevin S. Buchel     Senior Vice President of     Operations and Finance       and     Mr. Richard L. Soloway, Chairman

	The Administrative Agent,
	the Collateral Agent and
	the Issuing Lender:	HSBC Bank USA, National Association 8 East 40th Street, 3rd Floor New York, New York 10016 Attn:     Debbie Linder

 

 

provided that any notice, request or demand to or upon any Agent, the Issuing Lender or the Lenders pursuant to subsection 2.2, 2.4, 2.8, 3.2 or 4.2 shall not be effective until received.

 

11.3.           No Waiver; Cumulative Remedies.  No failure to exercise and no delay in exercising, on the part of any Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

 

11.4.           Survival.  All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder until all Obligations and under the other Loan Documents have been paid in full and the Commitments hereunder have been terminated.  In addition to all other covenants and agreements which are stated to survive the termination of this Agreement and the payment of the Loans, the Notes and all other amounts payable hereunder, the agreements in subsection 4.12 shall survive the termination of this Agreeme nt and the payment of the Notes and all other amounts payable hereunder until the expiration of the applicable statute of limitations for such taxes.

 

11.5.           Payment of Expenses and Taxes.  The Borrower agrees (a) to pay or reimburse the Agents and Lenders for all their reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of New York counsel to the Agents and Lenders, (b) to pay or reimburse each Lender and any Agent for all its costs and expenses incurred durin g the continuance of any Default or Event of Default in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including, without limitation, the fees and disbursements of counsel to each Lender and of counsel to the Agents, (c) to pay, indemnify, and hold harmless each Lender and the Agent from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, Other Taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold harmless each Lender and each Agent and their respective officers, directors, employees, affiliates, agents and cont rolling persons (each, an “Indemnitee”) from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and related documents or the use of the proceeds of the Loans, including, without limitation, any of the foregoing relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower, any of its Subsidiaries or any of the Properties (all the foregoing in this clause (d), collectively, the “indemnified liabilities”), provided that the Borrower shall have no obligation hereunder to the any Agent or any Lender with respect to indemnified liabilities solely arising from the gross negligence or willful misconduct of such Indemnitee.  The agreements in this subsection shall survive the termination of this Agreement and the repayment of the Loans and all other amounts payable hereunder.

 

 

 

11.6.           Successors and Assigns; Participation and Assignments.

 

(a)           This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agents and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Lender that issues any Letter of Credit), except that (i) the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this subsection 11.6.  Nothing in this Agreement, express or implied, shall be construed to confer upon any Person (other than the part ies hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Lender that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this subsection 11.6) and, to the extent expressly contemplated hereby, the Related Parties of each of the Agents, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

(b)           (i)           Subject to the conditions set forth in clause (ii) below, any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld, delayed or conditioned) of:

 

(A)           the Borrower, provided however, that notwithstanding anything herein to the contrary, the Borrower shall not be deemed to have unreasonably withheld, delayed or conditioned its consent to a proposed assignment to a new lender if during the period commencing on the Closing Date and ending on the first anniversary of the Closing Date, within fifteen (15) days of receipt of notice of the proposed assignment, Borrower identifies another financial institution acceptable to Borrower that will purchase the assigning Lender’s interest at the same price and Borrower causes such assignment to be effectuated within forty-five (45) days of the aforesaid notice; provided further that no consent of the Borrower shall be required (i) at any time for an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, or (ii) if a Default or Event of Default has occurred and is continuing; and

 

(B)           the Administrative Agent, provided that no consent of the Administrative Agent shall be required for (i) an assignment of any Revolving Credit Commitment to an assignee that is a Lender with a Revolving Credit Commitment immediately prior to giving effect to such assignment or an Affiliate of such Lender or (ii) an assignment of all or portion of a Term Loan to an assignee that is a Term Lender immediately prior to giving effect to such assignment or an Affiliate of such Lender.

 

 

 

(ii)           Assignments shall be subject to the following additional conditions:

 

(A)           except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans of any Class, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $2,500,000, unless the Administrative Agent and Borrower otherwise consents; provided that no consent of the Borrower shall be required if a Default or Event of Default has occurred and is continuing;

 

(B)           each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement, provided that this clause shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender’s rights and obligations in respect of one Class of Commitments or Loans;

 

(C)           each assignment of Term Loans by a Lender shall include a ratable assignment of Term Loans made to the Borrower;

 

(D)           the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, provided that only one such fee shall be payable in the event of simultaneous assignments by a Lender to or from two or more Approved Funds; and

 

(E)           the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent a completed Administrative Questionnaire.

 

 

 

(iii)           Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this subsection, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder (“Assignee”) shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, su ch Lender shall cease to be a party hereto).  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection 11.6 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this subsection.

 

 

 

(iv)           The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and Letter of Credit disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive, and the Borrower, the Agents, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreemen t, notwithstanding notice to the contrary.  The Register shall be available for inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

 

(v)           Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an Assignee, the Assignee’s completed Administrative Questionnaire (unless the Assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this subsection and any written consent to such assignment required by paragraph (b) of this subsection, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register.  No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

 

(c)            (i)           Any Lender may, without the consent of the Borrower, the Administrative Agent, the Issuing Bank or the Swing Line Lender, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of s uch obligations and (C) the Borrower, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in clauses (ii), (iii) and (v) of subsection 11.1 that affects such Participant.  Subject to paragraph (c)(ii) of this subsection, the Borrower agrees that each Participant shall be entitled to the benefits of subsections 4.10, 4. 11 and 4.12 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this subsection.  To the extent permitted by law, each Participant also shall be entitled to the benefits of subsection 11.7 as though it were a Lender, provided that such Participant agrees to be subject to subsection 4.8 as though it were a Lender.  Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each participant’s interest in the Loans or other obligations under this Agreement (the “Participant Register”).  The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

 

 

 

(ii)           A Participant shall not be entitled to receive any greater payment under subsections 4.10 or 4.12 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent.  A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of subsection 4.12 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with subsection 4.12(e) as though it were a Lender.

 

(d)           Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank, and this subsection shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

11.7.         Adjustments; Set-off.

 

(a)           If any Lender (a “Benefited Lender”) shall at any time receive any payment of all or part of its Loans owing to it by the Borrower, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in clause (h) of Section 9.1 or otherwise, except for payments pursuant to the operation of subsections 4.14(b) or 11.6), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender’s Loans owing to it by the Borrower or interest thereon, such Benefited Lender shall purchase for cash from the other Lenders a pa rticipating interest in such portion of each such other Lender’s Loan owing to it by the Borrower or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.

 

(b)           In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower.  Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application.

 

 

 

11.8.           Counterparts.  This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile or electronic transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.  A set of the copies of this Agreement signed by all the parties shall be delivered to the Borrower and the Administrative Agent.

 

11.9.           Severability.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

11.10.           Integration.  This Agreement and the other Loan Documents represent the entire agreement of the Borrower, the Agents and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Borrower, any Agent or any Lender relative to the subject matter hereof or thereof not expressly set forth or referred to herein or in the other Loan Documents.

 

11.11.           GOVERNING LAW.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

11.12.           Submission to Jurisdiction; Waivers.  The Borrower hereby irrevocably and unconditionally:

 

(i)           submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Loan Document to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the County and State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof;

 

(ii)           consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

 

(iii)           agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in subsection 11.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; and

 

 

 

(iv)           agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction.

 

11.13.           Acknowledgements.  The Borrower hereby acknowledges that:

 

    (a)           it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents;

 

    (b)           none of the Agents or any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Administrative Agents and the Lenders, on the one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

 

    (c)           no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders.

 

11.14.           WAIVERS OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

 

11.15.           Confidentiality.  Each Agent and Lender and the Issuing Lender agrees to take normal and reasonable precautions to maintain the confidentiality of information provided to it by the Borrower or any Subsidiary in connection with this Agreement (and, if delivered after the date of this Agreement, designated in writing as confidential); provided, however, that any such Person may disclose such information (a) at the request of any regulatory authority having supervisory jurisdiction over it or in connection with an examination of such Person by any such authority or the request of any rating agency requiring access to a Lende r’s portfolio, (b) pursuant to subpoena or other court process, (c) when required to do so in accordance with the provisions of any applicable law, (d) at the direction of any other Governmental Authority, (e) to such Person’s Affiliates, independent auditors and other professional advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential), (f) which has become generally available to the public, other than as a result of a disclosure by such Person or agent of such Person or a disclosure known to such Person or agent of such Person to have been made by any person or entity to which such Person or agent has delivered such confidential information, (g) which becomes available to such Person from a source other than the Borrower or any Subsidiary (provided that such source is not known to such Person to be bound by a duty of confidentiality to the Borrower or any Subsidiary), (h) subject to an agreement containing provisions substantially the same as those of this subsection 11.15, to any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations or (i) to any Participant or Assignee or potential Participant or Assignee (each, a “Transferee”) or any pledgee (or prospective pledgee) (each, a “Pledgee”) of any Lender that is a Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business; provided that such Transferee or Pledgee agrees in writing to comply with the provisions of this subsection 11.15.

 

 

 

11.16.           USA PATRIOT ACT.  Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the Patriot Act.

 

11.17.           Release.  The Loan Parties acknowledge and agree that: (a) neither they nor any of their Affiliates have any claim or cause of action against (x) the Agents, any Lender or any of their respective Affiliates (including any subsidiaries, parent entities and related corporate divisions of the Agents, any Lender or any of their respective Affiliates) or (y) any employees, agents, representatives, consultants, attorneys, fiduciaries, servants, officers, directors, partners, predecessors, successors and assigns of the Agents, any Lender or any of their respective Affiliates (including any subsidiaries, parent entities and related corporate divisions of the Agents, any Lender or any of their respe ctive Affiliates) (all of the foregoing referred to in the preceding sub-clauses (x) and (y) hereinafter called the “Released Parties”) and (b) the Agents and each Lender have heretofore properly performed and satisfied in a timely manner all of their respective obligations to the Loan Parties and their Affiliates under the Existing Credit Agreement and the Existing Loan Documents.  Notwithstanding the foregoing, the Agents and Lenders wish (and the Loan Parties agree) to eliminate any possibility that any past conditions, acts, omissions, events or circumstances would impair or otherwise adversely affect any of the Agents’ and the Lenders’ rights, interests, security and/or remedies under this Agreement and the other Loan Documents.  Accordingly, for and in consideration of the agreements contained in this Agreement and other good and valuable consideration, the Loan Parties (and their Affiliates and the successors, assigns, heirs and representatives of each of the foregoing) (collectively, the “Releasors”) do hereby fully, finally, unconditionally and irrevocably release and forever discharge the Released Parties from any and all debts, claims, obligations, damages, costs, attorneys’ fees, suits, demands, liabilities, actions, proceedings and causes of action, in each case, whether known or unknown, contingent or fixed, direct or indirect, and of whatever nature or description, and whether in law or in equity, under contract, tort, statute or otherwise, which any Releasor has heretofore had or now or hereafter can, shall or may have against any Released Party by reason of any act, omission or thing whatsoever done or omitted to be done on or prior to the date hereof arising out of, connected with or related in any way to this Agreement, the Existing Credit Agreement or any other Loan Document, or any act, event or transa ction related or attendant thereto, or the agreements of the Agents or any Lender contained therein, or the possession, use, operation or control of any of the assets of any of the Loan Parties, or the making of any Loan or other advance, or the management of such Loan or advance or the Collateral.  This Section 11.17 shall survive the termination of this Agreement, the payment in full of all Obligations and the termination of all Commitments.  This release may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of this release; and no fact, event, circumstance, evidence or transaction which could now be asserted or which may hereafter be discovered shall affect in any manner the final and unconditional nature of this release.  Each Loan Party represents and warrants that it has had the advice of counsel of its own choosing in the negotiation and preparation of this release, that it has read this release, that it is fully aware of its contents and legal effect and has voluntarily and without coercion or duress of any kind executed and delivered this release to the Agents and the Lenders

 

 

 

11.18.           Waiver of Existing Defaults.  The Loan Parties confirm and agree that Events of Default under, and as defined in, the Existing Credit Agreement have occurred and are continuing, including, without limitation, the Events of Default under the Existing Credit Agreement set forth on Schedule IV hereto (collectively, the “Existing Defaults”).  As a result of the Existing Defaults, the Loan Parties acknowledge and agree that the Agents and Lenders were and are entitled to exercise all of their rights and remedies under the Existing Credit Agreement.  Notwithstanding the foregoing, the Agents and Lenders elected not to exercise their rights and remedies with respect to the Existing Defaults while reserving all of their rights and remedies under the Existing Credit Agreement.  In consideration of the parties entering into this Agreement, the Agent and Lenders agree that upon the satisfaction of the conditions precedent set forth in Section 6 hereof, the Agent and Lenders hereby waive the Existing Defaults; provided, however, that such waiver of the Existing Defaults shall not constitute a waiver, now or in the future, of any Default or Event of Default under this Agreement, even if such Default or Event of Default arises out of, is based upon, or results from, any breach or non-compliance with this Agreement (i) based on any fact, event or circumstance occurring prior to the Closing Date or (ii) that is the same or similar to any breach or failure to comply with the Existing Credit Agreement that gave rise to, or constituted, any of the Existing Defaults.  The Loan Parties confirm and agree that the waiver of the Existing Defaults shall extend only to the Existing Defaults, and shall not be deemed (A) to be a consent granted pursuant to, or a waiver or modification of, any term or condition of this Agreement or the other Loan Documents (as in effect on the Closing Date) or any of the instruments or agreements referred to therein or (B) to prejudice any right or rights which the Agents or the Lenders may now have or have in the future with respect to any Default or Event of Default under or in connection with this Agreement or any other Loan Document or any of the instruments or agreements referred to in any Loan Document.

 

 

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