LOAN AND SECURITY AGREEMENT
Dated as of Novemeber 10, 1997
Among
TEARDROP GOLF COMPANY
and
TEARDROP ACQUISITION CORP.,
Borrowers
and
CORESTATES BANK, N.A.,
Lender
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS............................................ 1
SECTION 1.1 Certain Defined Terms................................... 1
SECTION 1.2 Accounting Terms........................................ 11
ARTICLE II
THE REVOLVING CREDIT........................................................ 11
SECTION 2.1 The Revolving Credit.................................... 11
SECTION 2.2 Place and Manner of Payments............................ 13
SECTION 2.3 Computation of Interest................................. 14
SECTION 2.4 Interest................................................ 14
SECTION 2.5 Late Charges; Default Rate.............................. 14
SECTION 2.6 Payment on Non-Business Days............................ 15
SECTION 2.7 Reimbursement to Lender for Increased
Costs Due to Capital Adequacy
Requirements............................................ 15
SECTION 2.8 Illegality.............................................. 16
SECTION 2.9 Prepayment.............................................. 16
SECTION 2.10 Letter of Credit Cash Collateral
Account................................................. 17
SECTION 2.11 Letters of Credit....................................... 18
SECTION 2.12 Special Provisions for LIBOR Tranches................... 22
SECTION 2.13 Ineligible LIBOR Interest Periods....................... 23
SECTION 2.14 Availability of Rate Quotations......................... 23
ARTICLE III
COLLATERAL.................................................................. 23
SECTION 3.1 Security Interests...................................... 23
SECTION 3.2 Further Security........................................ 24
SECTION 3.3 Financing Statements; Certificates of
Title................................................... 24
SECTION 3.4 Landlord's Waiver....................................... 24
SECTION 3.5 Places of Business; Location of
Collateral.............................................. 24
SECTION 3.6 Lender's Rights With Respect to
Accounts, Chattel Paper, Instruments and
General Intangibles..................................... 25
SECTION 3.7 The Cash Collateral Account............................. 25
SECTION 3.8 Accounts................................................ 26
SECTION 3.9 Chattel Paper, Letters of Credit and
Instruments............................................. 27
SECTION 3.10 Equipment and Inventory................................. 27
SECTION 3.11 Condition of Inventory.................................. 28
SECTION 3.12 Expenses of Lender...................................... 28
SECTION 3.13 Notices................................................. 28
SECTION 3.14 Insurance; Discharge of Taxes, etc...................... 28
SECTION 3.15 Waiver and Release by Borrower.......................... 28
SECTION 3.16 Access to Inventory..................................... 28
SECTION 3.17 Records and Reports..................................... 29
SECTION 3.18 Further Assurances...................................... 29
SECTION 3.19 Application of Proceeds of Collateral................... 30
SECTION 3.20 Continuing Collateral................................... 30
ARTICLE IV
CONDITIONS OF LENDING....................................................... 30
SECTION 4.1 Conditions Precedent to Lender's
Obligations............................................. 30
SECTION 4.2 Additional Conditions Precedent. ...................... 33
SECTION 4.3 Conditions to Issuance of Letters of
Credit.................................................. 34
ARTICLE V
REPRESENTATIONS AND WARRANTIES.............................................. 34
SECTION 5.1 Existence............................................... 34
SECTION 5.2 Authorization........................................... 35
SECTION 5.3 Validity of Documents................................... 35
SECTION 5.4 Financial Information................................... 35
SECTION 5.5 Litigation.............................................. 35
SECTION 5.6 Contingent Liabilities.................................. 36
SECTION 5.7 Taxes................................................... 36
SECTION 5.8 Encumbrances............................................ 36
SECTION 5.9 Consents................................................ 36
SECTION 5.10 ERISA................................................... 36
SECTION 5.11 Subsidiaries and Affiliates; Fictitious
Name.................................................... 37
SECTION 5.12 Licenses, Permits, etc.................................. 37
SECTION 5.13 Compliance with Laws Generally.......................... 38
SECTION 5.14 Environmental Matters................................... 38
SECTION 5.15 Patents, etc............................................ 38
SECTION 5.16 Debt and Credit Arrangements............................ 38
SECTION 5.17 Regulation U, Etc....................................... 38
SECTION 5.18 Labor Matters........................................... 39
SECTION 5.19 Outstanding Judgments or Orders......................... 39
SECTION 5.20 No Defaults on Other Agreements......................... 39
SECTION 5.21 Full Disclosure......................................... 39
ARTICLE VI
COVENANTS................................................................... 39
SECTION 6.1 Use of Proceeds......................................... 39
SECTION 6.2 Financial Information................................... 39
SECTION 6.3 Insurance............................................... 41
SECTION 6.4 Encumbrances............................................ 41
SECTION 6.5 Minimum Tangible Net Worth.............................. 41
SECTION 6.6 Leverage Ratio.......................................... 41
SECTION 6.7 Fiscal Year............................................. 41
SECTION 6.8 Taxes................................................... 41
SECTION 6.9 Guarantees, etc......................................... 42
SECTION 6.10 Loans and Investments................................... 42
SECTION 6.11 Compliance with Laws.................................... 42
SECTION 6.12 Environmental Matters................................... 42
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SECTION 6.13 Maintenance of Property................................. 43
SECTION 6.14 Inspection by Lender.................................... 43
SECTION 6.15 Limitations on Borrowing................................ 44
SECTION 6.16 Reports................................................. 44
SECTION 6.17 ERISA................................................... 45
SECTION 6.18 Mergers, etc............................................ 47
SECTION 6.19 Ownership of Interests, Etc............................. 47
SECTION 6.20 Nature of Business...................................... 48
SECTION 6.21 Disposal of Assets...................................... 48
SECTION 6.22 Patents, etc............................................ 48
SECTION 6.23 Indemnification......................................... 48
SECTION 6.24 RICO.................................................... 48
SECTION 6.25 Licenses, Permits....................................... 48
SECTION 6.26 Capital Expenditures.................................... 48
SECTION 6.27 Primary Operating Accounts; Cash
Management Services..................................... 49
ARTICLE VII
DEFAULT..................................................................... 49
SECTION 7.1 Events of Default....................................... 49
SECTION 7.2 Remedies................................................ 51
ARTICLE VIII
ADDITIONAL PROVISIONS....................................................... 52
SECTION 8.1 No Waiver, Cumulative Remedies.......................... 52
SECTION 8.2 Notices................................................. 52
SECTION 8.3 Set-off................................................. 53
SECTION 8.4 Costs and Expenses...................................... 53
SECTION 8.5 Governing Law........................................... 53
SECTION 8.6 Survival of Agreements and
Representations; JURY WAIVER; Consent to
Jurisdiction............................................ 53
SECTION 8.7 Binding Effect; Assignment.............................. 54
SECTION 8.8 Headings................................................ 54
SECTION 8.9 Time of the Essence..................................... 54
SECTION 8.10 Sole Discretion of Lender............................... 54
SECTION 8.11 Amendments.............................................. 54
SECTION 8.12 Usury................................................... 55
SECTION 8.13 Participations.......................................... 55
SECTION 8.14 Entire Agreement........................................ 55
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SCHEDULE OF EXHIBITS
Exhibit Subject
------- -------
1.1 Prior Letters of Credit
2.1(B) Borrowing Base Certificate
2.1(D) Form of Note
2.11 Letter of Credit Application
3.5 List of Locations of Collateral and Chief
Executive Offices
5.5 Litigation
5.8 Encumbrances
5.10 List of ERISA Plans
5.11 Subsidiaries and Affiliates
5.15 Patents
5.16 Debt and Credit Arrangements
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LOAN AND SECURITY AGREEMENT dated as of this 10th day of November,
1997, among TEARDROP GOLF COMPANY, a Delaware corporation ("TearDrop"), TEARDROP
ACQUISITION CORP., a Delaware corporation ("TAC"; TearDrop and TAC shall be
referred to individually herein as a "Borrower" and collectively as "Borrowers")
and CORESTATES BANK, N.A., a national banking association ("Lender").
BACKGROUND
Borrowers have requested that Lender provide a revolving credit
facility (the "Revolving Credit") in the amount of Eighteen Million Dollars
($18,000,000.00) to Borrowers to finance the Acquisition (as such term is
defined herein) and for working capital and general corporate purposes. Lender
has agreed to provide the Revolving Credit on the terms and conditions herein
contained.
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Account" has the meaning given to such term in the New Jersey Uniform
Commercial Code as in effect on the date hereof.
"Acquired Assets" means the tangible and intangible assets
of Xxxxx Xxxxxx Golf Company, USI Canada, Inc. and Xxxxx Xxxxxx
Golf (Scotland) Ltd. to be acquired pursuant to the Acquisition
Agreement.
"Acquisition" means the acquisition of the Acquired Assets
pursuant to the Acquisition Agreement.
"Acquisition Agreement" means that certain Asset Purchase Agreement
dated October 31, 1997 among Xxxxx Xxxxxx Golf Company, USI Canada, Inc., Xxxxx
Xxxxxx Golf (Scotland) Ltd., USI American Holdings, Inc. and Borrowers.
"Acquisition Documents" means the Acquisition Agreement and all
documents executed and delivered in connection therewith.
"Adjusted LIBOR" means LIBOR plus 2%.
"Adjusted Prime Rate" means the Prime Rate minus 1/2%. The Adjusted
Prime Rate shall change simultaneously with each change in the Prime Rate.
"Advance" has the meaning given to such term in Section 2.1
hereof.
"Affiliate" of a Person means (A) any other Person which directly or
indirectly controls, or is controlled by, or is under common control with, such
Person, (B) any director or officer (or, in the case of a Person which is not a
corporation, any individual having analogous powers) of such Person or of a
Person who is an Affiliate of such Person, and (C) any individual related to
such Person or Affiliate by consanguinity or adoption within the third degree.
For purposes of the preceding sentence, "control" of a Person means (1) the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by contract or otherwise and (2) in any case
shall include direct or indirect ownership (beneficially or of record) of, or
direct or indirect power to vote, 35% or more of the outstanding shares of any
class of capital stock of such Person (or in the case of a Person that is not a
corporation, 35% or more of any class of equity interest).
"Agreement" means this Loan and Security Agreement, as amended,
modified, extended or restated from time to time.
"Books and Records" has the meaning given to such term in
Section 3.1 hereof.
"Borrower" and "Borrowers" have the meanings given to such terms in the
introductory paragraph hereof.
"Borrowing Base" at any time means the sum of (A) 65% of Borrowers'
Qualified Accounts at such time, plus (B) 65% of Borrowers' Qualified Inventory
at such time.
"Business Day" means a day other than a Saturday, Sunday, or other day
on which banks are authorized or required to close under the laws of New Jersey
or under Federal law.
"Capital Asset" means any property or asset (real, personal or mixed,
tangible or intangible) which is of a kind subject to an allowance for
depreciation or amortization under GAAP.
"Capital Expenditures" means any expenditures made or cost incurred by
a Borrower, whether paid or due and owing, for the acquisition, purchase,
alteration or improvement of any Capital Asset and shall include, without
limitation, all capital expenditures within the meaning of Section 263 of the
Code and the regulations promulgated thereunder.
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"Cash Collateral Account" has the meaning given to such term in Section
3.7 hereof.
"Cash Equivalents" means at any date: (A) demand deposits, time
deposits or certificates of deposit at Lender or at any commercial bank
organized under the laws of the United States of America or any state thereof,
having combined capital and surplus of not less than $500,000,000.00,; (B)
obligations backed by the full faith and credit of the United States of America
or an agency thereof maturing not in excess of one year from the date of
acquisition; and (C) commercial paper which is rated A-1 (or better) by Standard
& Poor's Corporation or P-1 (or better) by Xxxxx'x Investor Services, Inc.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act, as amended from time to time.
"Certificate of Designation" means the Certificate of Powers,
Designations, Preferences and Relative, Participating, Optional or other Special
Rights and Qualifications, Limitations and Restrictions thereof of the Series A
Convertible Preferred Stock of TearDrop Golf Company filed by TearDrop with the
Secretary of State of Delaware on November 10, 1997.
"Chattel Paper" has the meaning given to such term in the New Jersey
Uniform Commercial Code as in effect on the date hereof.
"Closing Date" means the date on which all of the conditions precedent
set forth in Article IV are satisfied.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" means all property of Borrowers which serves as collateral
for any of the Liabilities under Article III hereof, or otherwise.
"Consents" has the meaning given to such term in Section 4.1
hereof.
"Consolidated" refers to the consolidation of the accounts of Borrowers
in accordance with GAAP, including principles of consolidation.
"Consolidating" refers to the separate entity reporting and
consolidation of the accounts of Borrowers in accordance with GAAP.
"Controlled Group" means all trades or businesses which are under
common control (as defined in ss.4001(b)(1) of ERISA) with a Borrower.
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"Contingent Liabilities" means all liabilities that would, in
accordance with GAAP, be classified as contingent liabilities of a Borrower.
"Credit Limit" at any time means the lesser of (A) the Borrowing Base,
or (B) Eighteen Million Dollars ($18,000,000.00).
"Credit Obligation" means any obligation for the payment of borrowed
money or the installment purchase price of property or on account of a lease of
property which, in accordance with GAAP, is capitalized, and shall also mean any
obligation under a guaranty or suretyship agreement covering obligations of such
type.
"Debt" means the sum of (A) the outstanding principal amount of the
Revolving Credit, plus (B) the outstanding principal amount of any other long
term indebtedness (including without limitation, and any other Credit Obligation
outstanding at any one time) in each case including, without limitation, current
maturities of such Debt.
"Default" means the occurrence or non-occurrence of an event which but
for the giving of notice, the passage of time or both would constitute an Event
of Default.
"Default Rate" has the meaning given to such term in Section
2.5 hereof.
"Defined Benefit Pension Plan" means an employee benefit pension plan
(other than a Multiemployer Plan) covered by Title IV of ERISA as provided in
Section 4021 of ERISA.
"Defined Contribution Plan" means an individual account plan as defined
in ss.3(34) of ERISA.
"Delinquent Purchaser" means a Purchaser more than 50% of whose
aggregate Account indebtedness to a Borrower is due for more than 60 days past
the due date set forth on the invoice for such Account, provided that the
invoice due date for such Account must be 90 days or less from the issue date of
such invoice.
"Document" has the meaning given to such term in the New Jersey Uniform
Commercial Code as in effect on the date hereof.
"Effective Date" means, for a LIBOR Tranche, the date a Borrower
designates as the date on which a LIBOR Interest Period is to commence pursuant
to Sections 2.1 or 2.4 hereof.
"Employee Benefit Plan" has the meaning given to such term
in ss.3(3) of ERISA.
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"Environmental Law" means any federal, state, or local statute, law,
ordinance, regulation, rule, standard, permit or requirement, including but not
limited to those statutes, ordinances, laws, regulations, rules, standards,
permits and requirements promulgated under the laws of the United States of
America or any other nation, concerning or relating to the generation,
treatment, storage, transportation, disposal and release into the environment,
cleanup and remediation of any "hazardous substance" as that term is defined in
Section 101(14) of CERCLA.
"Equipment" has the meaning given to such term in the New Jersey
Uniform Commercial Code as in effect on the date hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirement" means, for any LIBOR Tranche for any
LIBOR Interest Period relating thereto, the daily average of the stated maximum
rate (expressed as a decimal) at which reserves (including any marginal,
supplemental, or emergency reserves) are required to be maintained during such
LIBOR Interest Period under Regulation D by a member bank of the Federal Reserve
System against "Eurocurrency liabilities" (as such term is used in Regulation D)
but without benefit of or credit for proration, exemptions, or offsets that
might otherwise be available to such member bank from time to time under
Regulation D. Without limiting the effect of the foregoing, the Eurocurrency
Reserve Requirement shall reflect any other reserves required to be maintained
by such member bank against (A) any category of liabilities which includes
deposits by reference to which the LIBOR for LIBOR Tranches is to be determined
or (B) any category of extension of credit or other assets that include LIBOR
Tranches.
"Event of Default" has the meaning given to such term in
Section 7.1 hereof.
"Fixtures" has the meaning given to such term in the New Jersey Uniform
Commercial Code as in effect on the date hereof.
"GAAP" means generally accepted accounting principles,
applied in a consistent manner.
"General Intangible" has the meaning given to such term in the New
Jersey Uniform Commercial Code as in effect on the date hereof.
"Instrument" has the meaning given to such term in the New Jersey
Uniform Commercial Code as in effect on the date hereof.
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"Intangible Property Assignments" has the meaning given to such term in
Section 3.2 hereof.
"Interest Rate" means Adjusted LIBOR, the Adjusted Prime
Rate or the Default Rate, as appropriate.
"International Account" means an Account which arises out of a
transaction between a Borrower and a Purchaser who meets at least one of the
following criteria: (A) the Purchaser is not any state, local or Federal
government or governmental agency; or (B) the Account arises out of transactions
between a Borrower and (1) a non-United States government, governmental agency
or government-controlled business, (2) a Person who is not subject to the
jurisdiction of the court system of the United States and a state of the United
States, or (3) a Person who does not maintain net assets in the United States at
least five times as great as the aggregate of all Accounts arising from
transactions between such Borrower and such Person.
"Inventory" has the meaning given to such term in the New Jersey
Uniform Commercial Code as in effect on the date hereof.
"Landlord's Waiver" has the meaning given to such term in
Section 3.4 hereof.
"Lender" has the meaning given to such term in the
introductory paragraph hereof.
"Letter of Credit" means any Letter of Credit issued by Lender pursuant
to Section 2.11 and the Prior Letters of Credit.
"Letter of Credit Cash Collateral Account" has the meaning given to
such term in Section 2.10 hereof.
"Letter of Credit Liability" means, at any date of determination, the
sum of (A) the maximum aggregate amount which is or at any time thereafter may
become available for drawing under all Letters of Credit then outstanding plus
(B) the aggregate amount of all drawings under Letters of Credit which have not
theretofore been reimbursed by Borrowers. For purposes hereof, Letters of Credit
on which a draw has not been received shall be deemed outstanding for a period
of 30 Business Days after the expiration date thereof.
"Letter of Credit Sublimit" means Two Million Dollars
($2,000,000.00).
"Leverage Ratio" means the ratio of (A) Total Debt to (B)
Tangible Net Worth and Subordinated Debt.
"Liabilities" has the meaning given to such term in Section
3.1 hereof.
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"LIBOR" means, for each LIBOR Tranche, the rate per annum (rounded
upwards, if necessary, to the nearest 1/16th of 1%) determined by Lender
according to the following formula:
R = X
-----
1-Y
where R = LIBOR
X = London Interbank Offered Rate for such LIBOR
Tranche for the applicable LIBOR Interest Period
Y = Eurocurrency Reserve Requirement for such LIBOR
Tranche for the applicable LIBOR Interest Period
"LIBOR Interest Period" for a LIBOR Tranche means a period of time,
beginning on an Effective Date, of 30 days, 60 days or 90 days, in length
selected by a Borrower by telephone or in writing (and if by telephone,
confirmed by such Borrower the same day by facsimile), during which the Interest
Rate for such LIBOR Tranche is Adjusted LIBOR. If a LIBOR Interest Period would
otherwise end on a day that is not a Business Day, such LIBOR Interest Period
shall be extended to the next Business Day, unless such Business Day would fall
in the next calendar month, in which event such LIBOR Interest Period shall end
on the immediately preceding Business Day.
"LIBOR Tranche" means any portion of the Revolving Credit to which
Adjusted LIBOR applies having the same LIBOR Interest Period.
"Loan Documents" means this Agreement, the Note, the Intangible
Property Assignments, the UCC financing statements and all other documents
executed and delivered by Borrowers in connection with the Revolving Credit.
"London Business Day" means any Business Day on which commercial banks
are open for international business (including dealing in Dollar deposits) in
London, England, and Philadelphia, Pennsylvania.
"London Interbank Offered Rate" applicable to any elected LIBOR
Interest Period for a LIBOR Tranche means the rate per annum (rounded upwards,
if necessary, to the nearest 1/16th of 1%) quoted by the principal London branch
of Lender two London Business Days prior to the first day of such LIBOR Interest
Period for the offering from leading banks in the London interbank market of
Dollar deposits in immediately available funds for a period, and in an amount,
comparable to the LIBOR Interest Period and principal amount of the LIBOR
Tranche which shall be made by Lender and/or be outstanding during such LIBOR
Interest Period.
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"Multiemployer Plan" has the meaning given to such term in ss.3(37) of
ERISA and regulations issued thereunder.
"Note" has the meaning given to such term in Section 2.1
hereof.
"Operating Account" has the meaning given to such term in
Section 2.1 hereof.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" means the liens, encumbrances and other title
objections described in Section 6.4.
"Person" means an individual, corporation, partnership,
trust or any other entity.
"Plan" means an Employee Benefit Plan or other plan maintained for
employees of a Borrower or any member of its Controlled Group and covered by
ERISA.
"Prime Rate" means the rate of interest which Lender announces from
time to time to be its "prime rate" (which rate is not necessarily the lowest
rate of interest which Lender charges any of its customers, but rather an index
rate used by Lender to price many of its loans).
"Prime Rate Tranche" means any portion of the Revolving Credit to which
the Adjusted Prime Rate applies.
"Prior Letters of Credit" means those Letters of Credit listed on
Exhibit 1.1 attached hereto issued by Lender prior to the date of this
Agreement.
"Proceeds" has the meaning given to such term in the New Jersey Uniform
Commercial Code as in effect on the date hereof.
"Prohibited Transaction" has the meaning given to such term in ss.406
of ERISA or regulations issued thereunder.
"Purchaser" means a buyer of goods from a Borrower or a customer for
whom services have been rendered or materials furnished by a Borrower.
"Qualified Account" means any Account of a Borrower created in an arm's
length transaction in the ordinary course of such Borrower's business which
meets all the following specifications at the time of determination of Qualified
Accounts: (A) the Account is lawfully owned by such Borrower free and clear of
all liens, security interests or prior assignments except as set forth in
subsection (B) hereof, and such Borrower has the right of assignment thereof and
the power to grant a security interest
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therein; (B) the Account is subject to a first priority security interest in
favor of Lender; (C) the Account is valid and enforceable, representing the
undisputed indebtedness of a Purchaser to such Borrower; (D) the Account is not
subject to any defense, setoff, counterclaim, credit, allowance or adjustment;
(E) the Purchaser has accepted the goods, the sale of which to such Purchaser
has given rise to the Account; and no part of such goods have been returned,
rejected, lost or damaged; (F) if the Account arises from the sale of goods by
such Borrower, such sale was an absolute sale and not on consignment or on
approval or on a sale-or-return basis nor subject to any other guaranty,
repurchase or return agreements, and such goods have been shipped to the
Purchaser; (G) if the Account arises from the performance of services, such
services have actually been performed; (H) no notice of the death, bankruptcy,
receivership, reorganization, or insolvency of the Purchaser owing such Account
has been received by Lender or such Borrower; (I) the Purchaser is not a
Subsidiary or Affiliate of Borrowers; (J) the invoice due date for such Account
is 90 days or less from the issue date of such invoice; (K) the Account is less
than 60 days past the due date set forth on the invoice for such Account; (L)
the original invoice creating such Account was delivered on the date the
underlying goods or services were provided or within 15 days after such date;
(M) the credit-worthiness of the Purchaser is reasonably acceptable to Lender;
(N) the Account is not an International Account, unless such Account is a
Qualified International Account, in which case, the Account shall not be deemed
an International Account; (O) the Purchaser for such Account has not submitted a
medium of payment therefor which has been returned uncollected for any reason;
(P) the Purchaser for such Account is not otherwise in default pursuant to the
terms underlying the agreement creating such Account; (Q) such Account is not a
contra Account; (R) such Account is not owed by a Delinquent Purchaser or any
Subsidiary or Affiliate of a Delinquent Purchaser; and (S) such Account is
otherwise reasonably acceptable to Lender. Any Account or portion of an Account
that does not comply with the limitations set forth in the preceding sentence
shall not constitute a Qualified Account, provided however that, to the extent a
portion of such Account does comply with the limitations set forth in the
preceding sentence such portion shall be counted as a Qualified Account, but
only to the extent that it does so comply.
"Qualified International Account" means: an International Account of a
Borrower either (A) secured by a letter of credit in the amount of the
International Account issued by a bank acceptable to Lender, (B) insured under a
foreign credit insurance policy acceptable to Lender with respect to such
International Account in favor of such Borrower or (C) otherwise acceptable to
Lender in its sole discretion, provided however that no International Account
will be a Qualified International Account unless Lender has informed Borrowers
in writing that such
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International Account will be accepted by Lender as a Qualified International
Account hereunder.
"Qualified Inventory" means any item of Inventory of a Borrower meeting
all the following specifications: (A) (1) it is lawfully owned by such Borrower,
(2) is in the possession of such Borrower at a location specified on Exhibit 3.5
attached hereto, (3) to the extent such location is not owned by such Borrower,
Lender has received a Landlord's Waiver or warehouseman's waiver or consent with
respect to such location, (4) except as set forth in subsection (B) below, is
subject to no mortgage, pledge, security interest, lien, or other encumbrances
of any kind, and (5) such Borrower has the power to grant a security interest
therein; (B) it is subject to a first priority perfected security interest in
favor of Lender (provided however that, with respect to the initial Advance
only, Lender shall have a first priority security interest which will become a
first priority perfected security interest upon the filing of UCC-1 financing
statements delivered to Lender on or before the Closing Date); (C) it is insured
as required by Section 3.13 hereof pursuant to policies in full compliance with
the requirements of such Section; (D) it is in good condition and repair; (E) it
constitutes readily saleable finished goods, work-in-process or raw materials,
excluding the packaging portion of raw materials; (F) it is not slow-moving,
consignment or damaged inventory in the reasonable determination of Lender; and
(G) it is otherwise acceptable to Lender in its reasonable discretion.
"Reimbursement Date" has the meaning given to such term in
Section 2.11 hereof.
"Reorganization" has the meaning given such term in ss.4241 of
ERISA.
"Reportable Event" has the meaning given to such term in ss.4043(b) of
ERISA or regulations issued thereunder.
"Revolving Credit" has the meaning given to such term in the
Background section hereof.
"Security" has the meaning given to such term in the New Jersey Uniform
Commercial Code as in effect on the date hereof.
"Subordinated Debt" means all indebtedness for borrowed money of a
Borrower now or hereafter owed which indebtedness is subordinated to the
Liabilities.
"Subsidiary" of a Person (identified for purposes of this definition as
"Z") means any Person, 50% or more of the voting capital stock (or other
ownership interests) of which is owned, directly or indirectly, by Z.
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"TAC" has the meaning given to such term in the introductory
paragraph hereof.
"Tangible Assets" means all assets of Borrowers on a Consolidated basis
that would, in accordance with GAAP, be classified as tangible assets of
Borrowers on a Consolidated basis less any amount due from Subsidiaries or
Affiliates not otherwise eliminated by such consolidation.
"Tangible Net Worth" means the amount by which Tangible
Assets exceed Total Liabilities.
"TearDrop" has the meaning given to such term in the
introductory paragraph hereof.
"Termination Date" means the earlier of (A) the date on which Lender's
obligations to make Advances terminates pursuant to any provision of this
Agreement, or (B) November 10, 1999.
"Total Debt" means Total Liabilities minus Subordinated
Debt.
"Total Liabilities" means the sum of (A) all liabilities of Borrowers
on a Consolidated basis that would, in accordance with GAAP, be classified as
liabilities of Borrowers on a Consolidated basis plus (B) all obligations of
Borrowers on a Consolidated basis with respect to Contingent Liabilities not
otherwise classified as liabilities pursuant to (A), above, including without
limitation, the Letter of Credit Liability.
"Withdrawal Liability" has the meaning given such term in
ss.4201 of ERISA.
SECTION 1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed, and all financial data submitted pursuant to this
Agreement shall be prepared, in accordance with GAAP.
ARTICLE II
THE REVOLVING CREDIT
SECTION 2.1 The Revolving Credit. (A) Subject to the terms and conditions
hereinafter provided, Lender shall (1) advance to Borrowers such sums as a
Borrower may request (each such advance, an "Advance") and (2) issue Letters of
Credit for the account of Borrowers in accordance with Section 2.11 hereof, from
time to time during the period from the date hereof through but not including
the Termination Date, in an aggregate principal amount not to exceed the Credit
Limit. It is agreed by Borrowers that Advances shall be used for working capital
and general corporate
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purposes, provided however that, all or a portion of the initial Advance may be
used to finance the Acquisition. The total Advances outstanding plus the Letter
of Credit Liability shall not at any time exceed the Credit Limit. If the
aggregate amount of the Advances outstanding at any time plus the Letter of
Credit Liability exceeds the Credit Limit, Borrowers shall repay immediately the
amount of the excess. Borrowers may borrow, repay and reborrow under the
Revolving Credit until the Termination Date subject to the terms and conditions
of this Agreement.
(B) Any requests for Advances which shall earn interest at the Adjusted
Prime Rate shall be submitted to Lender in writing or by facsimile copy by 2:00
p.m. of the Business Day of the requested Advance signed by an officer of
Borrowers accompanied by a completed and signed Borrowing Base certificate in
the form of Exhibit 2.1(B) attached hereto and made a part hereof. Any requests
for Advances which shall earn interest at Adjusted LIBOR shall be submitted to
Lender in writing or by facsimile copy by 11:00 a.m. three London Business Days
prior to the date of the requested Advance signed by an officer of Borrowers
accompanied by a completed and signed Borrowing Base certificate in the form of
Exhibit 2.1(B) attached hereto and made a part hereof. Such request shall set
forth the date and amount of the requested Advance (which, if a LIBOR Tranche,
shall be in the minimum amount of $250,000.00) and, if a LIBOR Tranche is
requested, the length of the proposed LIBOR Interest Period. Each request for an
Advance shall constitute a representation that, at the time thereof and giving
effect to the Advance requested thereby: (1) no Event of Default or Default has
occurred hereunder; (2) the representations and warranties contained herein are
expressly reaffirmed and are correct as of the date of such request; and (3) the
sum of the outstanding Advances plus the requested Advance plus the Letter of
Credit Liability will not exceed the Credit Limit. Lender shall make any Advance
to which Borrowers are entitled by depositing the amount thereof into an
operating account which Borrowers shall maintain with Lender (the "Operating
Account") prior to the Termination Date. Borrowers shall hold Lender harmless
from any liability for any loss resulting from Lender's reliance on any writing
or facsimile copy purportedly made by an officer of Borrowers, provided that
Lender has acted in good faith in doing so. Lender's books and records shall be
deemed conclusive evidence of whether or not a request was made and the terms
thereof. If Borrowers submit a request for an Advance by facsimile copy,
Borrowers shall deliver to Lender the original request (along with the Borrowing
Base certificate to be submitted therewith) to Lender no later than five (5)
Business Days after submission of the facsimile copy.
(C) Borrowers shall pay interest on the principal amount of the
Revolving Credit outstanding from time to time at the rates and at the times set
forth in Section 2.4 hereof. On the
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Termination Date, Borrowers shall repay in full the aggregate principal amount
of all Advances outstanding under the Revolving Credit, any drawings under
Letters of Credit which have not been previously reimbursed by Borrowers, all
accrued but unpaid interest thereon and any other amount owing in connection
therewith. On the Termination Date, if there remain any unexpired Letters of
Credit on such date, Borrowers shall deposit into the Letter of Credit Cash
Collateral Account an amount equal to such Letter of Credit Liability, as
determined by Lender.
(D) The joint and several obligation of Borrowers to repay the Advances
outstanding under the Revolving Credit shall be evidenced by a promissory note,
dated the date of this Agreement, payable to the order of Lender, in the
principal amount of Eighteen Million Dollars ($18,000,000.00), and otherwise
substantially in the form of Exhibit 2.1(D) attached hereto (the "Note").
SECTION 2.2 Place and Manner of Payments. All payments by Borrowers on account
of principal, interest or any other sums due under any of the Loan Documents,
shall be made without setoff or counterclaim to Lender at Lender's office
located at its address specified in Section 8.2 hereof at or before 2:00 p.m.
New Jersey time on the date due, in lawful money of the United States of America
and in immediately available funds. Borrowers covenant and agree to maintain the
Operating Account and the Cash Collateral Account with Lender at all times
during which the Revolving Credit remains outstanding. Borrowers agree to keep
in the Cash Collateral Account and the Operating Account an amount sufficient to
make any and all payments of principal and interest on the Revolving Credit and
any other amounts which become owing hereunder, as such payments become due.
Borrowers hereby authorize Lender to charge the Cash Collateral Account and/or
the Operating Account in order to satisfy Borrowers' payment obligations
hereunder, commencing with any and all payments due from and after November 30,
1997. Lender shall charge the Cash Collateral Account and the Operating Account
in order to satisfy Borrowers' payment obligations hereunder. Lender's failure
to so charge the Cash Collateral Account and/or the Operating Account in order
to satisfy Borrowers' payment obligations hereunder shall not relieve Borrowers
of their joint and several obligations to maintain a sufficient balance in the
Cash Collateral Account and/or the Operating Account to satisfy a payment
obligation on the date such payment becomes due, and Borrowers shall continue to
be obligated to make such payment. If the Cash Collateral Account and the
Operating Account contain insufficient funds to make any payment when due and
payable to Lender hereunder, and such payment is not made by Borrowers in some
other manner on the date such payment becomes due, such failure shall constitute
an Event of Default hereunder. All payments received by Lender from Borrowers
shall be applied in the following order: (A) to the payment of fees and other
costs
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and expenses then due and owing from Borrowers, (B) to the payment of accrued
and unpaid interest then due, (C) to the payment of any principal then due and
owing under the Revolving Credit, (D) to the payment of any amounts outstanding
under the Revolving Credit, and (E) to the Letter of Credit Cash Collateral
Account.
SECTION 2.3 Computation of Interest. Interest on the amounts outstanding under
the Revolving Credit shall be computed on the basis of a year of 360 days for
the actual number of days elapsed.
SECTION 2.4 Interest. Borrowers shall pay interest on Advances outstanding under
the Revolving Credit as follows:
(A) Prime Rate Tranches. Borrowers shall pay interest in arrears on the
unpaid principal amount of each Prime Rate Tranche at an annual rate equal to
the Adjusted Prime Rate, from the date on which such Prime Rate Tranche is
disbursed until such principal amount has been repaid in full, or converted to a
LIBOR Tranche, (1) monthly on the last day of each month commencing with the
last day of the first month following the Closing Date and (2) on the
Termination Date.
(B) LIBOR Tranches. Borrowers shall pay interest in arrears on the
unpaid principal amount of each LIBOR Tranche at the Adjusted LIBOR Rate (1) on
the last day of each LIBOR Interest Period and (2) on the Termination Date.
(C) Conversions to LIBOR Tranches. By notifying Lender at least three
London Business Days prior to an Effective Date and subject to the limitations
set fort herein, Borrowers may convert into a LIBOR Tranche any Prime Rate
Tranche in an aggregate principal amount of Two Hundred Fifty Thousand Dollars
($250,000.00). At the end of the applicable LIBOR Interest Period, the LIBOR
Tranche will convert back to a Prime Rate Tranche unless Borrowers notify Lender
at least three London Business Days before the end of the existing LIBOR
Interest Period that Borrowers are electing to continue the LIBOR Tranche as a
LIBOR Tranche and is selecting a new LIBOR Interest Period.
(D) Restrictions With Respect to LIBOR Tranches. There shall be no more
than 5 LIBOR Tranches at any one time.
SECTION 2.5 Late Charges; Default Rate. (A) In the event that Borrowers fail to
make any payment required hereunder or under any of the other Loan Documents
within ten (10) days of the date such payment is due, Borrowers shall pay to
Lender an amount equal to four percent (4%) of such late payment as a late
charge to defer Lender's costs of collecting such late payments. Borrowers
authorize Lender to charge the Cash Collateral Account, the Operating Account
and/or any other account maintained by
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Borrowers with Lender for any late charge not otherwise paid by Borrowers.
(B) After the occurrence of any Event of Default the Interest Rate then
in effect on the Revolving Credit immediately shall be increased to the Adjusted
Prime Rate otherwise payable hereunder plus four percent (4%) (such rate, the
"Default Rate").
SECTION 2.6 Payment on Non-Business Days. Whenever any payment to be made
hereunder or under the Note or Loan Documents shall be stated to be due on a day
that is not a Business Day, such payment shall be made on the next succeeding
Business Day, and, except as otherwise specifically provided herein, such
extension of time shall in such case be included in the computation of payment
of interest hereunder or under the Note, as the case may be.
SECTION 2.7 Reimbursement to Lender for Increased Costs Due to Capital Adequacy
Requirements. If any law or regulation or the interpretation thereof by any
court or administrative or governmental authority charged with the
administration thereof, or compliance by Lender with any request or directive
(whether or not having the force of law) of any such authority, applicable from
time to time now or after the date hereof to banks in general, shall (A) impose,
modify, deem applicable or result in the application of any capital maintenance,
capital ratio or similar requirements against loan commitments or other
facilities made by Lender and the result thereof shall be to impose upon Lender
a fee or a requirement to increase any capital requirement applicable as a
result of the making or maintenance of the Revolving Credit (which imposition of
or increase in capital requirements may be determined by Lender's reasonable
allocation of the aggregate of such capital impositions or increases), or (B)
subject Lender to any tax, duty or other charge with respect to the Revolving
Credit, the Note, or its obligation to advance the Revolving Credit, or change
the basis of taxation of payments to Lender of the principal of or interest on
the Revolving Credit or any other amounts due under this Agreement in respect of
the Revolving Credit or its obligation to advance the Revolving Credit (except
for changes in the rate of tax on the overall net income of Lender imposed by
any jurisdiction in which Lender is obligated to pay taxes) to Borrowers, then,
upon demand by Lender, Borrowers shall immediately pay to Lender from time to
time as specified by Lender, such additional amounts or fees which shall be
sufficient to compensate Lender for such impositions of or increases in capital
requirements or taxes from the date of such change, together with interest on
each such amount from the date demanded until payment in full thereof at the
Default Rate with respect to amounts or fees not paid when due. Upon the
occurrence of any event referred to above, a certificate setting forth in
reasonable detail the amounts necessary to compensate Lender as a result of an
imposition of or
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increase in capital requirements or taxes submitted by Lender to Borrowers shall
be conclusive, absent manifest error or bad faith, as to the amount thereof. For
purposes of the application of this Section 2.7, and in calculating the amount
necessary to compensate Lender for any imposition of or increase in capital
requirements or taxes hereunder, Lender shall determine the applicability of
this provision and calculate the amount payable to it hereunder in a manner
consistent with the manner in which it shall apply and calculate similar
compensation payable to it by other borrowers having provisions in their credit
agreements comparable to this Section 2.7.
SECTION 2.8 Illegality. Notwithstanding any other provision in this Agreement,
if the adoption of any applicable law, rule, or regulation, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by Lender (or its
lending office) with any request or directive (whether or not having the force
of law) of any such authority, central bank, or comparable agency shall make it
unlawful or impossible for Lender (or its lending office) to maintain the
Revolving Credit, then upon notice to Borrowers by Lender, the Revolving Credit
shall terminate.
SECTION 2.9 Prepayment. (A) Borrower may prepay the Prime Rate Tranche in whole
or in part at any time and from time to time without premium or penalty.
(B) Borrowers agree not to prepay any LIBOR Tranche prior to the
expiration of its LIBOR Interest Period unless otherwise expressly required
hereunder or after acceleration by Lender pursuant to Section 7.2. In the event
that Borrowers prepay any LIBOR Tranche prior to the expiration of its LIBOR
Interest Period, whether in violation of the previous sentence, or with the
consent of Lender, or in compliance with the express requirement of this
Agreement, or otherwise, Borrowers shall pay to Lender, upon the request of
Lender, such amount or amounts as shall be sufficient (in the reasonable opinion
of Lender) to compensate it for any loss, cost or expense which Lender
determines is attributable to:
(1) any payment, prepayment, conversion or renewal of a LIBOR
Tranche made by Lender on a date other than the last day of
the applicable LIBOR Interest Period for such LIBOR Tranche
(whether by reason of acceleration or otherwise); or
(2) any failure by Borrowers to borrow, convert into or renew
a LIBOR Tranche to be made, converted into or renewed by
Lender on the date specified therefor pursuant to Borrowers'
prior election.
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Without limiting the foregoing, such compensation shall include an
amount equal to the excess, if any, of: (a) the amount of interest which
otherwise would have accrued on the principal amount so paid, prepaid, converted
or renewed or not borrowed, converted or renewed for the period from and
including the date of the event described in clauses (1) or (2) above to, but
excluding, the last day of the then current LIBOR Interest Period for such LIBOR
Tranche which would have commenced on the date specified therefor in the
relevant notice), at the applicable rate of interest for such LIBOR Tranche
provided for herein; over (b) the amount of interest (as reasonably determined
by Lender) Lender would have bid to New York dealers of London interbank dollar
deposits for amounts comparable to such principal amount prepaid and maturities
comparable to the remainder of such LIBOR Interest Period. A determination of
Lender as to the amounts payable pursuant to this Section shall be conclusive
absent manifest error or bad faith.
SECTION 2.10 Letter of Credit Cash Collateral Account. Cash collateral delivered
to Lender pursuant to Sections 2.1 or 2.11 hereof shall be maintained in a
deposit account of Borrowers to be established with Lender at the time such cash
collateral is first created, over which Lender shall have sole control (the
"Letter of Credit Cash Collateral Account"); provided that, so long as no
Default or Event of Default has occurred and is continuing hereunder, Borrowers
shall have the right to request, and Lender shall withdraw from the Letter of
Credit Cash Collateral Account, the amount by which the balance in such account
exceeds the Letter of Credit Liability which amount shall be deposited by Lender
into the Operating Account. Borrowers hereby grant, bargain, convey and set over
to Lender a security interest in and lien upon the Letter of Credit Cash
Collateral Account and all cash and any other assets at any time hereafter
contained therein as security for the payment and performance of all of
Borrowers' obligations now or hereafter incurred hereunder, under the Note or
otherwise in connection herewith. Borrowers shall take such action and execute
and deliver such documents, including financing statements, as Lender may
determine necessary or desirable to further the security interest hereby
created. After the occurrence of an Event of Default and acceleration of the
Revolving Credit as set forth in Section 7.2 hereof, or if Borrowers shall have
failed to pay all amounts which have come due on or prior to such applicable due
date, Lender shall apply all funds held in the Letter of Credit Cash Collateral
Account in the manner provided in Section 2.2. On the Termination Date, all
monies in the Letter of Credit Cash Collateral Account in excess of the amount
required to repay Loans, the Letter of Credit Liability, and any other amount
then owing hereunder shall be returned to Borrowers.
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SECTION 2.11 Letters of Credit.
(A) Letters of Credit. In addition to a Borrower requesting that Lender
make Advances pursuant to Section 2.1, a Borrower may request, in accordance
with the provisions of this Section, that on and after the date on which all of
the conditions set forth in Section 4.1 are satisfied through but not including
the Termination Date, Lender issue and Lender shall issue, subject to the terms
and conditions hereof, Letters of Credit for the account of such Borrower in an
aggregate amount up to the Letter of Credit Sublimit; provided, that (1) in no
event shall any Letter of Credit have an expiration date later than the
Termination Date, (2) in no event shall any Letter of Credit have an expiration
date later than one (1) year after its issue date, and (3) no Borrower shall
request any Letter of Credit if, after giving effect to such issuance, the
Letter of Credit Liability would exceed the Letter of Credit Sublimit. The
issuance of any Letter of Credit in accordance with the provisions of this
Section shall require the satisfaction of each condition set forth in Sections
4.2 and 4.3.
(B) Notice of Issuance or Amendment. Whenever a Borrower desires the
issuance of a Letter of Credit or the amendment of a Letter of Credit, it shall
deliver to Lender a written notice no later than 11:00 A.M. at least two (2)
Business Days, or in each case such shorter period as may be agreed to by Lender
in any particular instance, in advance of the proposed date of issuance. That
notice shall specify (1) the proposed date of issuance (which shall be a
Business Day), (2) the face amount of the Letter of Credit, (3) the expiration
date of the Letter of Credit, (4) the purpose of the Letter of Credit and (5)
the name and address of the beneficiary. On the proposed date of issuance of any
Letter of Credit, Lender shall determine to the best of its knowledge whether
the proposed Letter of Credit, when added to the then outstanding Letter of
Credit Liability, would be within the Letter of Credit Sublimit and, when added
to the then outstanding Letter of Credit Liability and Advances, would be within
the Credit Limit. Unless both such criteria are satisfied, Lender shall not
issue or cause to be issued the requested Letter of Credit. Borrowers shall hold
Lender harmless for any miscalculations or other errors in making such
determinations. In the event that, upon issuance of such proposed Letter of
Credit, (a) the Letter of Credit Sublimit is exceeded, Borrowers shall
immediately establish with Lender, if not already so established, and deposit
into the Letter of Credit Cash Collateral Account the amount of such excess; and
(b) the Credit Limit is exceeded, Borrowers shall immediately repay to Lender
the amount of such excess first for application against the Advances, together
with accrued interest thereon and then for deposit into the Letter of Credit
Cash Collateral Account. Prior to the date of issuance, Borrowers shall deliver
to Lender an executed application for such Letter of Credit in the form
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customarily required by Lender for the issuance of letters of credit (the
current version of such form is attached hereto as Exhibit 2.11), and specify a
precise description of the documents and the verbatim text of any certificate to
be presented by the beneficiary which, if presented by the beneficiary prior to
the expiration date of the Letter of Credit, would require Lender to make
payment under the Letter of Credit; provided, that Lender may require reasonable
changes in any such documents and certificates; and provided, further, that no
Letter of Credit shall require payment against a conforming draft to be made
hereunder on the same Business Day that such draft is presented if such
presentation is made after 11:00 A.M. on such Business Day. In determining
whether to pay under any Letter of Credit, Lender shall be responsible only to
determine that the documents and certificates required to be delivered under the
Letter of Credit have been delivered and that they comply on their face with the
requirements of that Letter of Credit.
(C) Payment of Amounts Drawn Under Letters of Credit. In the event of
any request for drawing under any Letter of Credit by the beneficiary thereof,
Lender shall notify Borrowers and Borrowers shall reimburse Lender on the day on
which such drawing is honored in an amount in same day funds equal to the amount
of such drawing; provided that (1) if sufficient funds are then in the Letter of
Credit Cash Collateral Account to reimburse Lender in full for the amount of
such drawing, Lender shall reimburse itself by debiting such amount necessary to
reimburse Lender from the Letter of Credit Cash Collateral Account, (2) if the
funds then in the Letter of Credit Cash Collateral Account are insufficient to
reimburse Lender in full for the amount of such drawing, Lender shall debit the
Letter of Credit Cash Collateral Account in the amount thereof and the
unreimbursed balance of such drawing shall be reimbursed in accordance with
clause (3) below, and (3) if there are no funds (or insufficient funds) then in
the Letter of Credit Cash Collateral Account then unless Borrowers shall have
notified Lender prior to 11:00 A.M. on the date of such drawing that Borrowers
intend to reimburse Lender for the amount of such drawing with funds other than
the proceeds of the Advances, Borrowers shall be deemed to have given notice to
Lender requesting it to make an Advance in accordance with Section 2.1 on the
day on which such drawing is honored (the "Reimbursement Date") in an aggregate
amount equal to the amount of such drawing less the amount, if any, remitted to
Lender pursuant to clause (2) above.
(D) Compensation. Borrowers agree to pay the following amounts to
Lender:
(1) with respect to each Letter of Credit issued by Lender, a
fee in the amount of 1% of the face amount of such Letter of Credit;
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(2) with respect to drawings made under any Letter of Credit,
interest, payable on demand, on the amount paid by Lender in respect of each
such drawing from the date of the drawing to the date such amount is reimbursed
by Borrowers (including any such reimbursement out of the proceeds of Advances
or out of the Letter of Credit Cash Collateral Account) at a rate equal to the
Adjusted Prime Rate for the period from the date of such drawing to and
including the first Business Day after the date of such drawing and thereafter
at a rate which is at all times equal to the Default Rate; and
(3) with respect to the issuance, amendment, transfer,
administration, cancellation or conversion of each Letter of Credit and each
drawing made thereunder, processing charges in accordance with Lender's standard
schedule for such charges in effect at the time of such issuance, amendment,
transfer, administration, cancellation or drawing, as the case may be, or as
otherwise agreed to by Lender.
(E) Obligations Absolute. The joint and several obligation of Borrowers
to reimburse Lender for drawings made under the Letters of Credit issued by it
shall be unconditional and irrevocable and shall be paid strictly in accordance
with the terms of this Agreement under all circumstances including, without
limitation, the following circumstances:
(1) any lack of validity or enforceability of any
Letter of Credit;
(2) the existence of any claim, set-off, defense or other
right which a Borrower may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any persons or entities for whom any such
transferee may be acting), Lender, any Affiliate of Lender, or any other Person,
whether in connection with this Agreement, the transactions contemplated herein
or any unrelated transaction (including any underlying transaction between such
Borrower and the beneficiary for which the Letter of Credit was procured);
(3) any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(4) payment by Lender under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of such Letter of Credit; provided, that such payment does
not constitute willful misconduct or gross negligence on the part of Lender;
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(5) any breach of this Agreement or any document delivered in
connection herewith by any party hereto or thereto; and
(6) the fact that an Event of Default or an event which, but
for the giving of notice, the passage of time or both, would constitute an Event
of Default shall have occurred and be continuing.
(F) Indemnification; Nature of Lender's Duties. In addition to amounts
payable as elsewhere provided in this Section 2.11, each Borrower hereby agrees
to protect, indemnify and save Lender harmless from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees and allocated costs of internal counsel)
which Lender may incur or be subject to as a consequence, direct or indirect, to
the extent not caused by the gross negligence, bad faith or willful misconduct
of Lender, its directors, officers, employees, agents or attorneys, of (1) the
issuance of any Letter of Credit, or (2) the failure of Lender to honor a
drawing under any Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto government or
governmental authority. Without limiting the foregoing, Lender shall not have
any obligation to ascertain whether the stated purpose of any requested Letter
of Credit is permitted by this Agreement and shall not be liable for any
Borrower's use of a Letter of Credit issued pursuant to the terms hereof in
violation of Borrowers' covenants contained herein.
As among each Borrower on one hand and Lender on the other hand, each
Borrower assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit issued by Lender by the respective beneficiaries of such
Letters of Credit. In furtherance and not in limitation of the foregoing, Lender
shall not be responsible for: (a) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the application for and issuance of such Letters of Credit, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (b) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
such Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; (c) failure of the beneficiary of any such Letter of Credit to comply
fully with conditions required in order to draw upon such Letter of Credit,
unless (i) such failure is material and substantive, and (ii) Lender's payment
on such Letter of Credit constitutes gross negligence or willful misconduct; (d)
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether
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or not they be in cipher; (e) errors in interpretation of technical terms; (f)
any loss or delay in the transmission or otherwise of any document required in
order to make a drawing under any such Letter of Credit or of the proceeds
thereof; (g) the misapplication by the beneficiary of any such Letter of Credit;
or (h) any consequences arising from causes beyond the control of Lender. None
of the above shall affect, impair, or prevent the vesting of any of Lender's
rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by Lender under or
in connection with the Letters of Credit issued by it or the related
certificates, if (i) taken or omitted in good faith and (ii) substantially in
accordance with the terms thereof, shall not put Lender under any resulting
liability to Borrowers.
SECTION 2.12 Special Provisions for LIBOR Tranches.
(A) Unavailability of Funds and Indeterminate Interest Rates. If on or
before the date Lender is to make any LIBOR Tranche or on or before any
Effective Date (1) Lender determines in good faith that it is unable to obtain
funds at LIBOR for the elected LIBOR Interest Period for any reason, including,
but not limited to the unavailability of funds at such rate, any change in
existing law, any new law, the length of such LIBOR Interest Period, or
otherwise or (2) Lender determines in good faith that no adequate means exists
to determine LIBOR for such LIBOR Interest Period, then, at Lender's option,
Borrowers shall be deemed to have requested an Advance at the Adjusted Prime
Rate or shall be required to elect a LIBOR Interest Period of a length for which
Lender may obtain funds at the rate the adjustment of which determines LIBOR.
(B) Changes Affecting Ability to Maintain Funds. If, during any LIBOR
Interest Period, any change in existing law, any new law, or any other factor
beyond the control of Lender prevents Lender in its good faith determination
from maintaining funds at the rate the adjustment of which determines LIBOR for
such LIBOR Interest Period and requires Lender to cease so maintaining funds
actually so maintained prior to termination of such LIBOR Interest Period, then
on the date of such required cessation, Borrowers shall be required to specify a
different Interest Rate for such LIBOR Interest Period or, in the alternative,
to elect an Interest Period of a length for which Lender may maintain funds at
the rate the adjustment of which determines LIBOR. In addition, within five days
after Lender notifies Borrowers of such required conversion, Borrowers shall
reimburse Lender for any loss or expense Lender has certified in writing to
Borrowers that Lender has incurred as a result of any such required cessation.
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SECTION 2.13 Ineligible LIBOR Interest Periods. If, on any date Lender is to
make a LIBOR Tranche or on any Effective Date, the period of time from such date
or such Effective Date to the Termination Date or final repayment date is less
than a LIBOR Interest Period which Borrowers could otherwise elect, Borrowers
will elect a LIBOR Tranche whose LIBOR Interest Period will end on or before the
Termination Date or the final repayment date, as necessary. If an appropriate
LIBOR Interest Period is not available, then the Advance shall be made at the
Adjusted Prime Rate.
SECTION 2.14 Availability of Rate Quotations. Notwithstanding anything herein to
the contrary, if Lender reasonably determines (which determination shall be
conclusive) that quotations of interest rates for the relevant deposits referred
to in the definition used to calculate LIBOR are not being provided in the
relevant amounts or for the relevant maturities for purposes of determining the
rate of interest on a LIBOR Tranche as provided in this Agreement, then Lender
shall forthwith give notice thereof to Borrowers. From and after the date on
which such notice is given, (A) the obligation of Lender to make LIBOR Tranches
shall be suspended; and (B) Borrowers shall repay in full the then outstanding
principal amount of each LIBOR Tranche, together with accrued interest thereon,
on the last day of the then current Interest Period applicable to such LIBOR
Tranche by remitting sufficient funds to Lender or by conversion to a Prime Rate
Tranche.
ARTICLE III
COLLATERAL
SECTION 3.1 Security Interests. As security for the performance of this
Agreement, and/or any of the other Loan Documents, the payment of principal and
interest under the Revolving Credit and the payment of all other liabilities of
each Borrower to Lender, whether absolute or contingent, matured or unmatured,
direct or indirect, sole, joint, several, or joint and several, similar or
dissimilar, related or unrelated to the Loan Documents, due or to become due or
heretofore or hereafter contracted or acquired, including without limitation,
obligations of any Borrower as surety under any guaranty or suretyship agreement
given or to be given by such Borrower to Lender for the debt of others (the
"Liabilities"), each Borrower hereby grants, pledges, and assigns to Lender a
security interest in all assets of such Borrower now owned or hereafter acquired
including, without limitation, all of the following, (A) Accounts (including but
not limited to Qualified Accounts), (B) Chattel Paper, (C) Equipment (whether or
not constituting Fixtures), (D) Documents, (E) Instruments, (F) General
Intangibles (including, but not limited to, any and all interests in trademarks,
service marks,
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patents, licenses, permits, and copyrights), (G) Inventory (including but not
limited to Qualified Inventory) of such Borrower, (H) all books, records, tapes,
information, data, stored material, computer media, passwords, access codes
arising or related to such Borrower's business, now existing or hereafter
acquired (collectively, "Books and Records"), (I) the Operating Account, the
Cash Collateral Account, the Letter of Credit Cash Collateral Account and any
other account maintained by such Borrower with Lender and all cash held therein,
and (J) all Proceeds and products of the foregoing, including insurance thereon,
now owned or hereafter acquired by such Borrower.
SECTION 3.2 Further Security. As further security for payment of the
Liabilities, Borrowers shall execute and deliver to Lender agreements in form
and substance satisfactory to Lender in which Borrowers assign to Lender any and
all patents, patent applications, trademarks, tradenames, trademark,
servicemarks and trademark, servicemark or tradename applications in the event
Borrowers have registered patents or trademarks or applied for registration of
patents or trademarks (the "Intangible Property Assignments").
SECTION 3.3 Financing Statements; Certificates of Title. (A) Each Borrower will
join with Lender in executing such financing statements and continuation
statements (in form reasonably satisfactory to Lender) under the Uniform
Commercial Code as Lender may specify, and will pay the cost of filing the same
in such public offices as Lender shall designate. Each Borrower shall have noted
on the Certificate of Title of any Collateral the liens created hereby and shall
deliver to Lender the originals of each such Certificate of Title. Each Borrower
agrees to take whatever action Lender reasonably requests to perfect and to
continue perfection of Lender's security interest in the Collateral.
SECTION 3.4 Landlord's Waiver. Each Borrower shall cause the owners of the
locations identified on Exhibit 3.5 to execute and deliver to Lender an
instrument (in form satisfactory to Lender) by which each such owner waives its
right to distrain on any of the Collateral, and by which such owner grants to
Lender the right (but not the obligation) to cure any default by such Borrower
under the applicable lease (the "Landlord's Waiver").
SECTION 3.5 Places of Business; Location of Collateral. (A) Each Borrower
represents that the properties listed on part A of Exhibit 3.5 attached hereto
serves as such Borrower's chief place of business, chief executive office, and
the place where it keeps its Books and Records, and that all of the Equipment or
Inventory serving as Collateral hereunder are kept at the locations listed on
part B of Exhibit 3.5 attached hereto.
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(B) Each Borrower will notify Lender prior to (1) any change in the
location of the chief place of business or chief executive office of such
Borrower, (2) any change in the place where such Borrower keeps its Equipment
and/or Inventory or its Books and Records, (3) the establishment of any new or
the discontinuance of any existing place of business, and (4) the establishment
of any new or the discontinuance of any location where Inventory, Equipment or
Books and Records are kept.
(C) No Borrower will permit its Equipment to be removed from its
current location or any of its Inventory serving as Collateral to be so removed
without Lender's prior consent, except for sales of Inventory in the ordinary
course of such Borrower's business and the replacement of Equipment or disposal
of obsolete Equipment.
SECTION 3.6 Lender's Rights With Respect to Accounts, Chattel Paper, Instruments
and General Intangibles. With respect to any Account, Chattel Paper, Instrument
and General Intangible that is Collateral hereunder, Lender shall have the right
at any time and from time to time, with notice to Borrowers (which may be oral
or written), to: (A) endorse in the name of a Borrower all proceeds of the
Accounts, Chattel Paper, Instruments and General Intangibles payable to such
Borrower that come to Lender which will then be deposited into the Cash
Collateral Account; (B) upon the occurrence and during the continuance of a
Default or an Event of Default, notify Purchasers under a Borrower's Accounts,
Chattel Paper, Instruments and General Intangibles that such Accounts, Chattel
Paper, Instruments and General Intangibles have been assigned to Lender, (C)
upon the occurrence and during the continuance of a Default or an Event of
Default, forward invoices to Purchasers directing them to make payments to
Lender, collect all Accounts, Chattel Paper, Instruments and General Intangibles
of a Borrower in Lender's or such Borrower's name, and take control of any cash
or non-cash proceeds of a Borrower's Accounts, Chattel Paper, any Instruments
and General Intangibles which will then be deposited into the Cash Collateral
Account; (D) upon the occurrence and during the continuance of a Default or an
Event of Default, compromise, extend, or renew any Account, Chattel Paper,
Instrument or General Intangible of a Borrower or deal with such Borrower's
Accounts, Chattel Paper, Instruments and General Intangibles as Lender may deem
advisable; (E) make exchanges, substitutions, or surrenders of Collateral; and
(F) upon the occurrence and during the continuance of a Default or an Event of
Default, take control of any cash or non-cash proceeds of any Collateral which
cash proceeds will be deposited into the Cash Collateral Account.
SECTION 3.7 The Cash Collateral Account. (A) Borrowers hereby agree to establish
a restricted access account which will be under the exclusive control of Lender
(the "Cash Collateral Account") into which Borrowers shall deposit all payments
of any
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of its Accounts, Instruments, Chattel Paper and General Intangibles to be made;
provided that, so long as no Default or Event of Default has occurred and is
continuing hereunder and there are no Advances outstanding hereunder, Borrowers
shall have the right to request, and Lender shall withdraw from the Cash
Collateral Account, any balance in such account which balance shall be deposited
into the Operating Account. Borrowers hereby grant, bargain, convey and set over
to Lender a security interest in and lien upon such Cash Collateral Account and
any other account established by a Borrower with Lender or any affiliate
thereof, and all cash and any other assets at any time hereafter contained
therein. For purposes of determining whether a requested Advance may be made in
accordance with Section 2.1 hereof only, the total outstanding principal under
the Revolving Credit shall be reduced each Business Day by an amount equal to
any and all amounts deposited into the Cash Collateral Account, provided however
that, if any checks deposited into the Cash Collateral Account are returned
unpaid or otherwise dishonored and as a result of such dishonor the total
outstanding principal including the amount of any such dishonored check exceeds
the Credit Limit, Borrowers shall repay immediately the amount of the excess.
Amounts deposited into the Cash Collateral Account shall be applied to amounts
outstanding hereunder in accordance with Section 2.2 hereof each Business Day.
Borrowers shall pay Lender interest at the Adjusted Prime Rate on the average
daily uncollected funds deposited into the Cash Collateral Account. Such
interest on the average daily uncollected funds shall be due at the end of each
month.
SECTION 3.8 Accounts. With respect to any Borrower's Account (A) such Borrower
represents that: (1) such Account is not evidenced by a judgment, an Instrument
or Chattel Paper or secured by a letter of credit (except (a) such judgment as
has been assigned to Lender, (b) such Instrument or Chattel Paper as has been
endorsed and delivered to Lender and (c) such letter of credit as has been
assigned and delivered to Lender) and represents a bona fide completed
transaction; (2) the amount shown on such Borrower's Books and Records and on
any list, invoice or statement furnished to Lender is owing to such Borrower;
(3) the title of such Borrower to the Account and, except as against the
Purchaser, to any goods represented thereby is absolute; (4) the Account has not
been transferred to any other person, and, at the time such Account is created,
no person except such Borrower has any claim thereto or, with the sole exception
of the Purchaser therefor, to the goods represented thereby; (5) no partial
payment against any Account has been made by anyone; and (6) no set-off or
counter-claim to such Account exists, and no agreement has been made with any
person under which any deduction or discount may be claimed.
(B) Each Borrower will immediately notify Lender if any Account arises
out of contracts with the United States or any
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department, agency or instrumentality thereof, furnish Lender with copies of
each such contract and execute any instruments and take any steps reasonably
required by Lender in order that all moneys due and to become due under any such
contract shall be assigned to Lender and notice given under the Federal
Assignment of Claims Act.
(C) Each Borrower will (1) inform Lender of the rejection of any goods
represented by any Account of such Borrower, any material delay in delivery or
performance by such Borrower or claims made in regard to any Account by
providing Lender with notice of any credits given to any Purchaser on the next
Borrowing Base certificate delivered to Lender; (2) make no change in the
payment terms of any Account of such Borrower without notifying Lender of the
change in writing; (3) furnish Lender upon Lender's request with all information
received by such Borrower affecting the financial standing of any Purchaser; (4)
if requested by Lender, xxxx such Borrower's records concerning each of its
Accounts in a manner satisfactory to Lender so as to show that each Account has
been assigned to Lender; (5) if requested by Lender, furnish Lender with
satisfactory evidence of the shipment and receipt of any goods and the
performance of any services represented by any Accounts; and (6) furnish Lender
with such other information as Lender may from time to time reasonably request.
SECTION 3.9 Chattel Paper, Letters of Credit and Instruments. Each Borrower
represents and warrants to Lender that it has delivered to Lender and covenants
that it will deliver to Lender promptly on receipt all originals of (A) letters
of credit securing its Accounts, (B) Chattel Paper, and/or (C) Instruments now
in its possession or hereafter acquired, each properly assigned and/or endorsed
over to Lender, which letters of credit, Chattel Paper and Instruments shall be
held by Lender as security hereunder. Each Borrower shall remain solely
responsible for the observance and performance of all of its covenants and
obligations under all Chattel Paper and Instruments, and Lender shall not be
required to observe or perform any such covenants or obligations.
SECTION 3.10 Equipment and Inventory. Each Borrower represents, warrants and
agrees that (A) such Borrower is the absolute owner of its Inventory and
Equipment, subject only to the security interests created hereby and Permitted
Encumbrances; (B) such Borrower will not dispose of any of its Equipment
excluding obsolete Equipment or permit any of its Equipment to become a fixture
or an accession to other goods; and (C) such Borrower will sell its Inventory
only in the ordinary course of business; and (D) if any Inventory is or becomes
represented by a Document, Lender may require that such Document be in such form
as to permit Lender or anyone to whom Lender may negotiate the
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same to obtain delivery to it of the Inventory represented thereby.
SECTION 3.11 Condition of Inventory. Each Borrower will immediately notify
Lender of any event of deterioration, loss or depreciation of value of any
substantial portion of its Inventory and the amount of such deterioration, loss
or depreciation.
SECTION 3.12 Expenses of Lender. Borrowers will reimburse Lender on demand for
all expenses (including the reasonable fees and expenses of legal counsel for
Lender) in connection with the enforcement of Lender's rights to take possession
of the Collateral and the proceeds thereof and to hold, collect, render in
compliance with applicable environmental laws and regulations, prepare for sale,
sell and dispose of the Collateral.
SECTION 3.13 Notices. If notice of sale, disposition or other intended action by
Lender with respect to the Collateral is required by the Uniform Commercial Code
or other applicable law, any notice thereof sent to Borrowers at the address
specified in Section 8.2 hereof or such other address of Borrower as may from
time to time be shown on the records of Lender at least ten days prior to such
action, shall constitute reasonable notice to Borrowers.
SECTION 3.14 Insurance; Discharge of Taxes, etc. Lender shall have the right at
any time and from time to time, with or without notice to Borrowers, to (A)
obtain insurance covering any of the Collateral if a Borrower fails to do so,
(B) discharge taxes, liens, security interests or other encumbrances at any time
levied or placed on any of the Collateral and (C) pay for the maintenance and
preservation of any of the Collateral. Borrowers will reimburse Lender, on
demand, with interest at the Default Rate for any payment Lender makes, or any
expense Lender incurs under this authorization. Each Borrower assigns to Lender
all right to receive the proceeds of insurance covering the Collateral, directs
any insurer to pay all such proceeds directly to Lender and authorizes Lender to
endorse in the name of such Borrower any draft for such proceeds.
SECTION 3.15 Waiver and Release by Borrower. Each Borrower (A) waives protest of
all commercial paper at any time held by Lender on which such Borrower is in any
way liable, notice of nonpayment at maturity of any and all Accounts of such
Borrower and, except where required hereby or by law, notice of action taken by
Lender, and (B) releases Lender from all claims for loss or damage caused by any
failure to collect any Account or by any act or omission on the part of Lender
or its officers, agents and employees, except gross negligence and willful
misconduct.
SECTION 3.16 Access to Inventory. Each Borrower shall permit Lender's
representatives to have access to its Inventory from
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time to time, as requested by Lender, for purposes of audit, examination,
inspection, and appraisal thereof and verification of such Borrower's records
pertaining thereto. Except after the occurrence of a Default or an Event of
Default, Lender shall give a Borrower at least 24 hours telephone notice before
exercising the rights granted in the preceding sentence and such audit,
examination, inspection, appraisal or verification shall be conducted, to the
extent taking place on such Borrower's premises, during normal business hours.
Upon demand by Lender, each Borrower shall assemble its Inventory which
constitutes Collateral hereunder and make it available to Lender at such
Borrower's place of business. At the request of Lender, after the occurrence of
an Event of Default, each Borrower shall provide warehousing space in its own
premises to Lender for the purpose of taking Inventory into the custody of
Lender without removal thereof from such premises and will erect such structures
and post such signs as Lender may require in order to place such Inventory under
the exclusive control of Lender. Each Borrower shall conduct an annual inventory
count and shall provide Lender with five (5) days notice prior to any such
inventory count.
SECTION 3.17 Records and Reports. Each Borrower shall keep accurate and complete
records of its Accounts (and the collection thereof), General Intangibles,
Chattel Paper, Instruments, Documents and Inventory and furnish Lender such
information about its Accounts, General Intangibles, Chattel Paper, Instruments,
Documents, and Inventory as Lender may reasonably request. Lender shall have the
right to conduct periodic examinations and verifications of each Borrower's
Books and Records, which examination may include, without limitation,
verifications of Accounts by contacting Purchasers. Each Borrower agrees to make
its Books and Records available to Lender at such Borrower's principal place of
business for purposes of such examination. Provided there does not exist a
Default or an Event of Default, Lender agrees to give a Borrower at least 24
hours notice of such examination (which notice need not be in writing) and to
conduct such examination during normal business hours. Borrowers shall reimburse
Lender for the costs and expenses (whether internal or external) of any such
examination which, prior to the occurrence of an Event of Default hereunder,
shall not exceed $7,500.00 in the aggregate per annum.
SECTION 3.18 Further Assurances. From time to time each Borrower will execute
and deliver to Lender such additional instruments as Lender may reasonably
request to effectuate the purposes of this Agreement and to assure to Lender, as
secured party, a security interest in the Collateral. Each Borrower hereby
irrevocably appoints Lender as such Borrower's attorney-in-fact (A) to take any
action Lender deems necessary to perfect or maintain perfection of any security
interest granted to Lender herein or in connection herewith, including the
execution of any document on such Borrower's behalf, and (B) to take any other
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action to effectuate the rights granted in this Article III, which power of
attorney is coupled with an interest and irrevocable until all of the
Liabilities are paid in full. Until all of the Liabilities are paid in full,
Lender may, at any time and from time to time, send to any Purchaser a
verification form, make such calls or otherwise contact Purchasers of a Borrower
as are necessary or desirable, in Lender's sole discretion, to verify Accounts,
Instruments, Chattel Paper and/or General Intangibles that are Collateral and
the balance due.
SECTION 3.19 Application of Proceeds of Collateral. All proceeds of Collateral
shall be applied (A) to the costs of preservation and, after the occurrence of
an Event of Default, liquidation of such Collateral and Lender's exercise of its
rights under Articles III and VII hereof, then (B) to any unpaid fees due
hereunder, then (C) to any unpaid interest due hereunder or under the Note, then
(D) to the principal payable hereunder or under the Note, then (E) to all other
Liabilities.
SECTION 3.20 Continuing Collateral. Lender shall be under no obligation to
proceed first against any part of the Collateral before proceeding against any
other part of the Collateral. It is expressly agreed that all of the Collateral
stands as equal security for all Liabilities and Lender shall have the right to
proceed against or sell any and/or all of the Collateral in any order, or
simultaneously, as it, in its sole discretion, shall determine.
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.1 Conditions Precedent to Lender's Obligations. The obligations of
Lender hereunder are subject to the conditions precedent that, on or before the
day the initial Advance under the Revolving Credit is to be made or the initial
Letter of Credit is to be issued, Lender shall have received all of the
following, in form and substance satisfactory to Lender:
(A) a copy, certified in writing by a Secretary or Assistant Secretary
of each Borrower, of (1) resolutions of the Board of Directors of such Borrower
evidencing approval of the Loan Documents and the Acquisition Documents by such
Borrower and the matters contemplated thereby, (2) each document evidencing
other necessary action and governmental approvals, if any, with respect to the
Loan Documents and Acquisition Documents, and (3) such Borrower's charter
documents and by-laws;
(B) a favorable opinion of independent counsel for Borrowers on such
matters and in form and substance acceptable to Lender;
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(C) a written certificate by the Secretary or an Assistant Secretary of
each Borrower as to the names and signatures of the officers of such Borrower
authorized to sign the Loan Documents to which such Borrower is a party and the
other documents or certificates of such Borrower to be executed and delivered
pursuant thereto and to request Advances or the issuance of Letters of Credit;
(D) recent certificates, issued by the Secretary of State of the State
of Delaware, stating that each Borrower is a corporation duly incorporated and
in good standing under the laws of Delaware;
(E) recent certificates, issued by the Secretaries of State of each
state in which each Borrower does business, stating that such Borrower is in
good standing as a foreign corporation under the laws of such state;
(F) the Note duly executed by each Borrower;
(G) the UCC financing statements required by Lender duly executed by a
Borrower;
(H) copies of all real property leases under which a Borrower is lessee
or lessor;
(I) the Landlord's Waivers required by Section 3.4 hereof;
(J) the Intangible Assignments duly executed by Borrowers, acknowledged
and in form suitable for recording;
(K) a copy of each and every authorization, permit, consent and
approval of and other action by, and notice to and filing with (collectively,
"Consents"), every governmental authority and regulatory body which is required
to be obtained or made by each Borrower for the due execution, delivery and
performance of this Agreement and the other Loan Documents and the Acquisition
Documents, or a certificate of an officer of each Borrower and such supporting
evidence as Lender may request that no such Consents are required;
(L) the financial information required by Section 5.4 hereof relating
to Borrowers;
(M) a certificate of insurance confirming that each Borrower has
procured insurance policies covering worker's compensation, public liability and
completed operations, protecting such Borrower against any liability for loss or
damage to persons or property in any way occurring during the progress of the
work or in any way arising from the work, whether under the Worker's
Compensation Law or otherwise, and whether injury shall be to employees or to
persons other than employees. Lender
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shall be named an additional insured on the liability insurance policy, and the
aforesaid certificate shall confirm Lender's status as an additional insured and
contain the agreement of the insurer to give not less than thirty (30) days
notice to Lender prior to cancellation of such policies or material change in
the coverage thereof;
(N) an original all-risk hazard insurance policy or policies on a full
replacement cost basis (with no co-insurance) (including flood insurance, if
applicable) for the full insurable value of all Collateral with a standard
lender loss payee clause in favor of the Lender, in an amount or amounts and
with a company or companies reasonably satisfactory to Lender, and which
contains the agreement of the insurer to give not less than thirty (30) days
notice to Lender prior to cancellation of such policies or material change in
the coverage thereof;
(O) evidence of liability, errors and omissions, and product liability
insurance in amounts as are customary in each Borrower's industry and are
reasonably acceptable to Lender, with a company or companies reasonably
satisfactory to Lender, with a long form endorsement in favor of Lender, and
which contains the agreement of the insurer to give not less than thirty (30)
days notice to Lender prior to cancellation of such policies or material change
in the coverage thereof;
(P) a lien search prepared by a search company acceptable to Lender
showing no perfected liens against any of the assets of Borrowers or the
Acquired Assets;
(Q) a lien search prepared by a search company acceptable to Lender
showing no perfected liens against any of the trademarks or patents of
Borrowers, including without limitation, the trademarks and patents that are
part of the Acquired Assets;
(R) such evidence as Lender may reasonably require that each Borrower
and its business and the transactions contemplated hereby are in full compliance
with all federal, state and local environmental laws, ordinances, rules and
regulations;
(S) evidence that Borrowers have paid or has made arrangements
satisfactory to Lender to pay all fees, costs and expenses incurred in
connection with the transactions contemplated hereby including, without
limitation, audit fees, lien search fees, filing fees and the fees and expenses
of Lender's counsel;
(T) results satisfactory to Lender of (1) an examination of the
Collateral and Books and Records conducted by Lender; (2) inquiries conducted by
Lender of Borrowers' trade and bank creditors and Purchasers; and (3) any other
due diligence conducted by Lender with respect to Borrowers;
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(U) each other document required by Article III hereof as to the
Collateral and any other documents or condition which Lender may reasonably
request;
(V) an executed Borrowing Base certificate in the form attached hereto
as Exhibit 2.1(B);
(W) documents necessary to open the Operating Account and
the Cash Collateral Account;
(X) a letter from Borrowers' certified public accountants addressed to
Lender acknowledging and agreeing that Lender may rely on financial statements
required under Section 6.2(A)(1) in administering the Revolving Credit;
(Y) originals of all of each Borrower's Instruments, Chattel Paper and
letters of credit (drawn on a bank other than Lender), if any, supporting any
Account, each properly endorsed and/or assigned to Lender; and
(Z) copies of the executed Acquisition Documents, certified as true,
complete and correct by an officer of Borrowers;
(AA) evidence that all of the conditions precedent set forth in the
Acquisition Documents (excluding payment of the purchase price thereunder) have
been satisfied or waived;
(AB) such other documents as Lender may require.
SECTION 4.2 Additional Conditions Precedent. The obligations of Lender hereunder
are subject to the further conditions precedent that:
(A) the representations and warranties contained in this Agreement and
in the other Loan Documents shall be correct and accurate on and as of the date
of each Advance or issuance as though made on and as of such date;
(B) no Default or Event of Default shall have occurred and be
continuing or will result from the making of any Advance or issuance of any
Letter of Credit;
(C) there shall have occurred no material adverse change in the
financial condition, assets, nature of the assets, operations or prospects of a
Borrower; and
(D) there shall be no litigation pending or, to the best of any
Borrower's knowledge, threatened which may have a material adverse effect on the
financial condition, assets, operations or prospects of a Borrower.
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SECTION 4.3 Conditions to Issuance of Letters of Credit. The obligation of
Lender to issue any Letter of Credit hereunder is subject to the prior or
concurrent satisfaction of all of the following conditions:
(A) On or before the date of issuance of the Letter of Credit, each of
the conditions set forth in Section 4.1 shall have been satisfied or waived;
(B) On or before the date of issuance of each Letter of Credit, Lender
in respect of such Letter of Credit shall have received in accordance with the
provisions of Section 2.11, a notice requesting the issuance of such Letter of
Credit, an executed application for such Letter of Credit in the form
customarily required by Lender for the issuance of letters of credit, all other
information specified in Section 2.11, and such other documents as Lender may
reasonably require in connection with the issuance of such Letter of Credit;
(C) On the date of issuance of each Letter of Credit, all conditions
precedent described in Section 4.2 shall be satisfied to the same extent as
though the issuance of such Letter of Credit were the making of an Advance, and
each request by a Borrower to Lender to issue a Letter of Credit shall
constitute a representation by Borrowers that at the time thereof (1) all
conditions precedent described in Section 4.2 have been satisfied and (2) the
sum of the proposed Letter of Credit plus the Letter of Credit Liability plus
the Advances then outstanding would not exceed the Credit Limit; and
(D) On or before the date of issuance of such Letter of Credit,
Borrowers shall have paid the fees therefor required under Section 2.11.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In addition to all other representations and warranties set forth in
this Agreement (including, without limitation, those in Article III hereof),
each Borrower represents and warrants as follows:
SECTION 5.1 Existence. Each Borrower is a corporation, duly formed, validly
existing, and in good standing under the laws of the State of Delaware. Each
Borrower has all requisite power and authority to conduct its business and to
own its properties and is duly qualified as a foreign corporation in good
standing in all other jurisdictions in which its failure so to qualify could
have a material adverse effect on its financial condition or business.
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SECTION 5.2 Authorization. The execution, delivery, and performance by each
Borrower of each Loan Document to which it is a party has been duly authorized
by all necessary corporate action, and does not and will not violate any
provision of law or of the certificate of incorporation or by-laws of such
Borrower or result in a breach of or constitute a default under any agreement,
indenture, or instrument to which such Borrower is a party or by which such
Borrower, or any of its properties, may be bound or affected.
SECTION 5.3 Validity of Documents. Each Loan Document when duly executed and
delivered will constitute the valid and legally binding obligation of each
Borrower, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, or other similar laws
affecting the enforcement of creditors' rights generally.
SECTION 5.4 Financial Information. The financial information and statements of
Borrowers, including without limitation annual financial statements of TearDrop
since its inception, previously delivered to Lender (excluding projections
delivered to Lender), are complete and correct and accurately reflect the
financial positions of such Borrower as of the dates and for the periods
indicated, in accordance with GAAP (subject with respect to quarterly or interim
statements to year-end adjustments and the absence of footnotes); provided
however that, with respect to financial information related to the Acquired
Assets, Borrowers are relying on the representations and warranties made in the
Acquisition Agreement. Since the date of such statements or as disclosed in the
Acquisition Agreement, there has been no material adverse change in such
financial position. Borrowers hereby represent and warrant that projections
delivered to Lender in connection herewith prior to the Closing Date (A) were
based on reasonable estimates and assumptions made by Borrowers in good faith,
(B) are the projections used in the financial planning of Borrowers, and (C) no
fact is known to Borrowers that has not been disclosed in writing to Lender that
would result in a material change in any such projections or in any estimates or
assumptions reflected therein.
SECTION 5.5 Litigation. Except as disclosed on Exhibit 5.5 attached hereto,
there are no actions, suits, or proceedings pending or, to the knowledge of
Borrowers, threatened, against a Borrower or any of its properties before any
court or governmental department, commission, board, bureau, agency, or
instrumentality (domestic or foreign) that, if determined adversely to such
entity, would have a material adverse effect on the financial condition or
operations of such Borrower or which relate to its entering into the Loan
Documents, or the consummation of the transactions contemplated thereby.
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SECTION 5.6 Contingent Liabilities. There are no suretyship agreements,
guarantees, or other Contingent Liabilities of a Borrower that are not included
on the financial statements mentioned in Section 5.4 hereof or otherwise
disclosed in this Agreement other than suretyship agreements and guarantees
given to Lender.
SECTION 5.7 Taxes. Each Borrower has filed all tax returns and reports required
to be filed before the date hereof and has paid all taxes, assessments, and
charges imposed upon it or its property, or that it is required to withhold and
pay over, to the extent that they were required to be paid before the date
hereof.
SECTION 5.8 Encumbrances. Except as disclosed on Exhibit 5.8 attached hereto,
the property and assets of each Borrower are not subject to any mortgage,
pledge, security, interest, lien, or other encumbrance except for Permitted
Encumbrances.
SECTION 5.9 Consents. No authorization, consent, approval, license, exemption by
or filing or registration with any court or governmental department, commission,
board (including the Board of Governors of the Federal Reserve System), bureau,
agency, or instrumentality, domestic or foreign, or other Person is or will be
necessary for the valid execution, delivery, or performance by Borrowers of the
Loan Documents.
SECTION 5.10 ERISA. Each Borrower and other members of its Controlled Group
maintain only those Defined Benefit Pension Plans and Defined Contribution Plans
listed on Exhibit 5.10 attached hereto. No Borrower is obligated to contribute
to any Multiemployer Plans and no Borrower has any Withdrawal Liability with
respect to any Multiemployer Plan of which such Borrower or any member of its
Controlled Group had previously been a member. Other than the underfunding
represented on the Final Balance Sheet (as such term is defined in the
Acquisition Agreement), all such Defined Benefit Pension Plans and Defined
Contribution Plans, as of the date hereof, meet the minimum funding standards of
Section 302 of ERISA and Section 412 of the Code without regard to any funding
waiver and no Prohibited Transaction has occurred with respect to any such plan.
Other than the underfunding represented on the Final Balance Sheet, no Defined
Benefit Pension Plan sponsored by a Borrower or any member of its Controlled
Group has any amount of "unfunded benefit liabilities" (as such term is defined
in 4001(a)(18) of ERISA). No trust was established in connection with any such
Defined Benefit Pension Plan pursuant to ss.4049 of ERISA (as in effect on
December 17, 1987) and no liability (whether or not such liability is being
litigated) has been asserted against a Borrower or any Controlled Group member
in connection with any such Defined Benefit Pension Plan by the PBGC or by a
trustee appointed pursuant to ss.4042(b) or (c) of ERISA, and no lien has been
attached and, to the best of each Borrower's knowledge, no person has threatened
to attach
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a lien on any property of a Borrower or any Controlled Group member as a result
of any failure to comply with the Code or ERISA. Each such Defined Benefit
Pension Plan and Defined Contribution Plan, as most recently amended, including,
without limitation, amendments to any trust agreement, group annuity, or
insurance contracts, or other governing instrument, is the subject of a
favorable determination letter by the Internal Revenue Service with respect to
its qualification under ss.401(a) of the Code or an application for such
determination within the applicable remedial amendment period has been filed
and, to the best of each Borrower's knowledge, such plans are in material
compliance, both in form and in operation, with the requirements of the Code and
ERISA. All Plans maintained by a Borrower or any member of its Controlled Group
are in material compliance in all respects (A) in operation with the
requirements of the Code and the regulations thereunder and ERISA, and (B) in
form with those requirements of the Code and the regulations thereunder and
ERISA which must be met on the date hereof. There is not now, and has not been,
any violation of the Code or the regulations thereunder or ERISA that creates a
material liability with respect to the filing of applicable reports, documents,
and notices regarding the Plans of a Borrower or any member of its Controlled
Group with the Secretary of Labor, the Secretary of the Treasury, the PBGC or
any other governmental entity or the furnishing of such documents to the
participants or beneficiaries of the Plans. Except to the extent accrued by
Sellers (as such term is defined in the Acquisition Agreement) on the Final
Balance Sheet pursuant to the Acquisition Agreement and except for the
assumption of termination and severance liability pursuant to Section 6.3(a) of
the Acquisition Agreement, no Borrower nor any member of its Controlled Group
has any unfunded liabilities of unfunded and uninsured "employee welfare benefit
plans" (as defined in ss.3(1) of ERISA). There is not now, and has not been, any
violation of the "continuation coverage requirements" of "group health plans" of
former ss.162(k) of the Code and the regulations thereunder (as in effect for
tax years beginning on or before December 31, 1988) and of ss.4980B of the Code
and the regulations thereunder (as in effect for tax years beginning on or after
January 1, 1989) and Part 6 of Subtitle B of Title I of ERISA that creates a
material liability with respect to any Employee Benefit Plan of a Borrower or of
any member of its Controlled Group to which such continuation coverage
requirements apply.
SECTION 5.11 Subsidiaries and Affiliates; Fictitious Name. No Borrower has any
Subsidiaries or Affiliates other than as listed on Exhibit 5.11 attached hereto
and does not trade under any fictitious names.
SECTION 5.12 Licenses, Permits, etc. Each Borrower is in possession of and
operating in compliance with all material franchises, grants, authorizations,
licenses, permits, easements, consents, certificates and orders required for the
conduct of its
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business as now conducted, and all of them are valid and in full force and
effect.
SECTION 5.13 Compliance with Laws Generally. Each Borrower is in material
compliance with all laws, rules, regulations, and orders of all federal, state,
and governmental agencies and courts which are applicable to it, to the conduct
of its business, or to the ownership and use of its properties.
SECTION 5.14 Environmental Matters. To the extent necessary for the conduct of
its business, each Borrower is in possession of and in compliance with all
required permits relating to the discharge or release of liquids, gases or
solids into the air, water, and soil. No Borrower refines, processes, generates,
stores, recycles, transports, disposes of, or releases into the environment any
"hazardous substance" as that term is defined in Section 101(14) of CERCLA or
any hazardous or toxic substances as those terms are used in any state or local
environmental statute or regulation except in compliance with all Environmental
Laws. No Borrower has received notice from any governmental agency that it is a
potentially responsible party in any proceeding under CERCLA or any similar
state or local environmental statute or regulation, received any notice of
violation, citation, complaint, request for information, order, directive,
compliance schedule, notice of any claim, proceeding, or litigation from any
party concerning such Borrower's compliance with any Environmental Law.
SECTION 5.15 Patents, etc. Each Borrower possesses all patents, trademarks,
copyrights, tradenames, trade secrets, and other intellectual property rights,
or licenses therefor, that are required to conduct its business without, to the
best of any Borrower's knowledge, conflict with the rights or claimed rights of
others, except as disclosed on Exhibit 5.15.
SECTION 5.16 Debt and Credit Arrangements. Except as set forth on Exhibit 5.16,
no Borrower has any debt and is not a party to any credit agreement, guaranty,
capital lease or other investments, agreements and arrangements presently in
effect providing for or relating to extensions of credit in respect of which
such Borrower is in any manner directly or contingently obligated, except to the
extent such Borrower is obligated to pay for goods and services obtained or
acquired in the ordinary course of business under customary trade terms.
SECTION 5.17 Regulation U, Etc. The Revolving Credit will not constitute a
violation of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System. No part of the proceeds of the Revolving Credit will be used for
any purposes which violate or are inconsistent with the provisions of any of
such regulations.
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SECTION 5.18 Labor Matters. There are no existing, or to the knowledge of
Borrowers, threatened, or contemplated, strikes, slowdowns, picketing or work
stoppages by any employees against a Borrower, any lockouts by a Borrower of any
of its employees or any labor trouble or other occurrence, event or condition of
a similar character.
SECTION 5.19 Outstanding Judgments or Orders. Each Borrower has satisfied all
judgments against it to the extent outstanding and not stayed pending appeal for
more than thirty (30) days, and no Borrower is in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any court, arbitrator
or commission, board bureau, agency or instrumentality, domestic or foreign,
pertaining to it.
SECTION 5.20 No Defaults on Other Agreements. No Borrower is in default in the
performance, observance or fulfillment of any of the material obligations,
covenants or conditions contained in any agreement or instrument to which it is
a party which has not been waived in writing or cured which would have a
material adverse effect on a Borrower or any Loan Document.
SECTION 5.21 Full Disclosure. No representation or warranty by a Borrower in
this Agreement and no information in any statement, certificate, schedule or
other document furnished or to be furnished to Lender pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading. Except as disclosed in this Agreement and the Exhibits attached
hereto, there is no fact known to Borrowers which has not been disclosed to
Lender in writing which materially adversely affects a Borrower.
ARTICLE VI
COVENANTS
In addition to all other covenants set forth in this Agreement, each
Borrower covenants that so long as any of the Liabilities shall remain unpaid
unless Lender shall otherwise consent in writing:
SECTION 6.1 Use of Proceeds. The proceeds of the Revolving Credit will be used
as set forth in Article II hereof.
SECTION 6.2 Financial Information. (A) In addition to the reports which
Borrowers are obligated to deliver pursuant to Article III hereof, Borrowers
will furnish to Lender:
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(1) as soon as available, and in any event within ninety (90)
days after the close of each fiscal year of Borrowers, a Consolidated and
Consolidating balance sheet of Borrower as of the close of each such fiscal year
together with related statements of operations, retained earnings and changes in
financial position for such fiscal year, audited and unqualifiedly certified by
Xxxxxxxxx Xxxx or such other independent certified public accountants acceptable
to Lender);
(2) as soon as available, and in any event no later than
forty-five (45) days after the end of each fiscal quarter, a copy of TearDrop's
Form 10Q;
(3) as soon as available, and in any event no later than the
fifteenth day of each month, (a) an aging report of each Borrower's accounts
payable, (b) an aging report of the Accounts of each Borrower showing the names
of Purchasers, the amounts owed by them respectively, and the invoice dates for
each such Account, (c) a monthly reconciliation report reconciling the last two
monthly Accounts aging reports provided to Lender, and (d) a monthly inventory
report, all of which shall be in form and detail reasonably satisfactory to
Lender;
(4) as soon as available, and in any event by Monday of each
week, a completed Borrowing Base certificate in the form attached hereto as
Exhibit 2.1(B), provided that Lender in its sole discretion shall have the right
at any time to increase the frequency of Borrowers' delivery of Borrowing Base
certificates;
(5) as soon as available a copy of any document (other than
Form 10Q) filed by TearDrop with the Securities and Exchange Commission;
(6) promptly upon the request of Lender, a list containing the
name, address and telephone number of all current Purchasers; and
(7) promptly upon the request of Lender, any other information
reasonably requested by Lender.
(B) All data will be prepared according to GAAP.
(C) Each statement required to be delivered in accordance with Section
6.2(A)(1) and (2) above shall be accompanied by a certificate of the chief
executive officer or chief financial officer of Borrowers that such officer has
reviewed the operations of Borrowers for that fiscal period and that no Event of
Default or Default has occurred, or, if any such Event of Default or Default has
occurred, a written statement setting forth the details of each such Event of
Default or Default, stating whether or not the same is continuing and, if so,
the action that Borrowers propose to take with respect thereto.
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SECTION 6.3 Insurance. In addition to the requirements of Article III hereof,
each Borrower will at all times carry insurance, in form and amount reasonably
satisfactory to Lender, and underwritten by financially sound and reputable
insurers reasonably satisfactory to Lender, against fire (with extended coverage
and, if required by the location of any of such Borrower's premises on a flood
plain, flood coverage), liability, errors and omissions, product liability and
all other hazards specified by Lender and will furnish to Lender a copy of all
such insurance policies which shall insure the interest of Lender in accordance
with a standard lender's loss payable clause as to all non-liability policies.
All insurance policies will name the Lender as an additional insured and contain
provisions (A) that with respect to Lender, the insurance policies may be
cancelled only for nonpayment of premiums by a Borrower after not less than 30
days notice of intent to cancel provided to Lender and (B) that the insured will
make payment to Lender under any such policy notwithstanding any defense which
such insurer may have against any of the other insureds on such policy.
SECTION 6.4 Encumbrances. No Borrower will create, incur, assume, or suffer to
exist any mortgage, pledge, lien, or other encumbrance of any kind upon, or any
security interest in, any of its property or assets (including, but not limited
to, the Collateral), whether now owned or hereafter acquired, except for the
following (collectively, "Permitted Encumbrances"): (A) liens for taxes not yet
delinquent; (B) statutory inchoate liens in connection with workmen's
compensation, unemployment insurance, or other social security obligations; (C)
mechanic's, xxxxxxx'x, materialman's, landlord's, carrier's, or other similar
liens arising in the ordinary course of business with respect to obligations
that are not due; (D) liens listed on Exhibit 5.8 attached hereto; and (E) liens
in favor of Lender. No Borrower will agree with any Person to restrict its
ability to grant mortgages, pledges, liens, or other encumbrances upon, or
security interests in, any of its property or assets.
SECTION 6.5 Minimum Tangible Net Worth. Borrowers shall maintain a Tangible Net
Worth at all times of not less than $10,000,000.00.
SECTION 6.6 Leverage Ratio. Borrowers shall maintain a Leverage Ratio at all
times of not greater than 3.0:1.0.
SECTION 6.7 Fiscal Year. Each Borrower shall at all times maintain its fiscal
year ending on December 31, unless otherwise required by government regulation.
SECTION 6.8 Taxes. Each Borrower shall pay when due all taxes, assessments, and
charges imposed upon it or its properties or which it is required to withhold or
pay over.
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SECTION 6.9 Guarantees, etc. No Borrower shall become liable on the obligation
of another Person or otherwise incur any consensual Contingent Liability except
by endorsement of negotiable instruments for deposit or collection in the usual
course of business and except for guarantees or suretyship agreements given to
Lender.
SECTION 6.10 Loans and Investments. No Borrower shall make any loans or
investments (including without limitation loans to officers or loans to or
investments in Affiliates or Subsidiaries) except for (A) investments in (1)
Cash Equivalents, (2) direct obligations of, or obligations fully guaranteed by,
the United States of America, and (3) obligations of Lender, and (B) investments
in or loans to the other Borrower.
SECTION 6.11 Compliance with Laws. Each Borrower shall comply in all material
respects with all laws and regulations applicable to it in the operation of its
business.
SECTION 6.12 Environmental Matters. (A) To the extent necessary for the conduct
of its business, each Borrower will obtain and comply with all permits,
licenses, registrations, and approvals required by Environmental Laws relating
to the discharge or release of liquids, gases or solids into the environment. To
the extent that such are applicable to the conduct of its business, each
Borrower will comply with all laws, rules, regulations and governmental orders
and directives relating to the generation, treatment, storage, transportation,
disposal and release into the environment and cleanup of any hazardous or toxic
waste or substance which is subject to the provisions of CERCLA, or any similar
state or local environmental statute or regulation at all premises owned or
operated by such Borrower. Each Borrower will comply with all laws, rules,
regulations, and governmental orders and directives relating to the cleanup of
hazardous or toxic substances at all premises owned or operated by it.
(B) Each Borrower will promptly notify Lender if it receives (1) any
notice from any governmental agency that it is a potentially responsible party
in any proceeding under CERCLA or any similar state or local environmental
statute or regulation, (2) any notice of any claim, proceeding, litigation,
order, directive, citation, or request for information concerning environmental
conditions, or notice of any alleged violation of any environmental statute,
ordinance, regulation, or permit condition against such Borrower or related to
any location owned, used or occupied by such Borrower at any time, or (3) any
written notice or information concerning any potentially materially adverse
environmental condition, including, but not limited to, any spilling, leaking,
discharge, release, or threat of release of any hazardous or toxic waste or
substance above regulatory
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limits at any location owned, used or occupied by such Borrower at any time.
(C) Each Borrower shall comply with any notice or directive from any
other governmental authority, whether state, federal, or local, regarding the
removal or discharge of any hazardous substance on any of its properties within
such period as may be required therein unless the same is being contested by
such Borrower in good faith and, upon request of Lender shall provide a bond or
title insurance endorsement reasonably satisfactory to Lender insuring Lender's
continued lien on the Collateral affected by such notice or directive.
(D) Each Borrower hereby indemnifies and agrees to defend and hold
harmless Lender, its parent corporation, subsidiaries, successors, assigns,
officers, directors, shareholders, employees, agents and counsel from and
against any and all claims, actions, causes of action, liabilities, penalties,
fines, damages, judgments, losses, suits, expenses, legal or administrative
proceedings, interest, costs and expenses (including court costs and reasonable
attorneys', consultants' and experts' fees) arising out of or in any way
relating to (1) the presence of any substance which is or becomes regulated
under any Environmental Law whether now or hereafter enacted, on, about, beneath
or arising from any property used or occupied by a Borrower; (2) the failure of
a Borrower to comply with any Environmental Law; (3) a Borrower's breach of any
of the representations and warranties or covenants contained herein; (4) any
notice of violation, citation, complaint, request for information, order,
directive, compliance schedule, notice of claim, consent decree, action,
litigation or proceeding brought or instituted by any governmental authority or
any third party under or in connection with any Environmental Law or based on
the presence of any substances described in (1) above against a Borrower or
related to any location owned, used or occupied by a Borrower at any time; and
(5) the imposition or recording of a lien against any property of or occupied by
a Borrower pursuant to any Environmental Law, unless due solely to the gross
negligence or willful misconduct of Lender. IT IS INTENDED THAT THE INDEMNITY
PROVIDED IN THIS SECTION SHALL SURVIVE THE REPAYMENT OF THE LIABILITIES.
SECTION 6.13 Maintenance of Property. Each Borrower will maintain all of its
property (subject to ordinary wear and tear) in good condition and repair.
SECTION 6.14 Inspection by Lender. Each Borrower will permit representatives of
Lender to inspect, examine and/or audit the Collateral, any of its other
property and/or its Books and Records and to make extracts therefrom at
Borrowers' expense and at all reasonable times, provided however that except
after the occurrence of a Default or an Event of Default, Lender shall give
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a Borrower at least 24 hours telephone notice before exercising the rights
granted in the preceding clause and such audit, examination or inspection shall
be conducted, to the extent taking place on a Borrower's premises, during normal
business hours.
SECTION 6.15 Limitations on Borrowing. No Borrower will incur or otherwise
permit to exist any obligation for the payment of borrowed money, whether as
borrower or guarantor, except debt owed to Lender in connection herewith, trade
debt incurred by such Borrower in the ordinary course of business and the Debt
set forth on Exhibit 5.16.
SECTION 6.16 Reports. Borrowers will furnish the following to Lender:
(A) as soon as possible and in any event within 5 days after a Borrower
becomes aware of the occurrence of any Default or Event of Default a written
statement of Borrowers signed by the chief executive officer or chief financial
officer of Borrowers setting forth details of such Default or Event of Default,
stating whether or not the same is continuing and, if so, the action proposed to
be taken with respect thereto;
(B) immediately after receiving knowledge thereof, notice in writing of
all actions, suits, or proceedings before any court or governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign,
affecting a Borrower;
(C) as soon as possible and in any event within 5 days after a Borrower
becomes aware of the occurrence of a significant material adverse change in the
business, properties, operations, or condition (financial or otherwise) of a
Borrower, a written statement of Borrowers signed by the chief executive or
chief financial officer of Borrower setting forth details of such significant
material adverse change and the action proposed to be taken with respect
thereto;
(D) immediately after receiving knowledge thereof, notice in writing of
any strike, walkout, boycott or other labor dispute involving a Borrower;
(E) if requested by Lender, furnish to Lender copies, with such
duplicate copies as Lender may request, of any invoice applicable to a
Borrower's Accounts; and
(F) such other information respecting the business properties,
operations, and condition (financial or otherwise) of a Borrower as Lender may
at any time and from time to time reasonably request.
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SECTION 6.17 ERISA. (A) Each Borrower and all members of its Controlled Group
will comply in all material respects with the provisions of ERISA and the Code
with respect to any Defined Benefit Pension Plan and Defined Contribution Plan
including the timely filing of required annual reports and the payment of PBGC
premiums.
(B) Each Borrower will furnish to Lender, promptly after the filing
thereof with the United States Secretary of Labor and the PBGC, copies of each
annual or other report with respect to each Defined Benefit Pension Plan and
Defined Contribution Plan maintained by such Borrower or any member of its
Controlled
Group.
(C) Each Borrower will cause to be made all contributions required to
amortize any accumulated funding deficiency (as defined in ss.412(a) of the Code
and the regulations thereunder and ss.302(a) of ERISA), unless waived, with
respect to any pension plan (as defined in ss.3(2) of ERISA), other than a
Multiemployer Plan, which is subject to Part 3 of the Subtitle B of Title I of
ERISA or Section 412 of the Code and the regulations thereunder and which is
maintained by such Borrower or any member of its Controlled Group.
(D) As soon as possible (and in any event within 10 days) after a
Borrower knows (1) that any Reportable Event has occurred with respect to any
Defined Benefit Pension Plan maintained by a Borrower or any member of its
Controlled Group, (2) that any Defined Benefit Pension Plan maintained by a
Borrower or any member of its Controlled Group is to be terminated in a distress
termination (within the meaning of 4041(c) of ERISA), (3) that the PBGC has
instituted or will institute proceedings under Title IV of ERISA to terminate
any Defined Benefit Pension Plan maintained by a Borrower or any member of its
Controlled Group, (4) that a Borrower has incurred Withdrawal Liability from a
Multiemployer Plan maintained by a Borrower or any member of its Controlled
Group, or (5) that any Multiemployer Plan to which a Borrower or any member of
its Controlled Group has made contributions is in Reorganization, Borrowers will
furnish a statement to Lender setting forth the details as to such Reportable
Event, distress termination, termination proceedings, Withdrawal Liability, or
Reorganization, and the action that Borrowers propose to take with respect
thereto, together with a copy of any notice of such Reportable Event or distress
termination given to the PBGC, or a copy of any notice of termination
proceedings, Withdrawal Liability, or Reorganization received by a Borrower or
any member of its Controlled Group.
(E) Borrowers will furnish to Lender as soon as possible (and in any
event within 10 days) after receipt thereof a copy of any notice that a Borrower
or any member of its Controlled Group receives from the PBGC or the Internal
Revenue Service or from
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the sponsor of any Multiemployer Plan that sets forth or proposes any action to
be taken or determination made by the PBGC or the Internal Revenue Service with
respect to any Defined Benefit Pension Plan, Defined Contribution Plan or
Multiemployer Plan.
(F) Borrowers will promptly notify Lender of any taxes, penalties,
interest charges and other financial obligation that have been assessed or
imposed or threatened to be assessed or imposed against a Borrower or any member
of its Controlled Group by the Internal Revenue Service, the PBGC or any other
governmental entity with respect to any Plan or Multiemployer Plan.
(G) Borrowers will promptly notify Lender of the adoption of any
Defined Benefit Pension Plan or Defined Contribution Plan or any obligation to
contribute to any Multiemployer Plan by a Borrower or any member of its
Controlled Group.
(H) No Borrower will become obligated to contribute to, or permit any
other member of the Controlled Group to contribute to, any Multiemployer Plan.
No Borrower will permit (1) with respect to any Employee Benefit Plan, any
Prohibited Transaction or Prohibited Transactions under ERISA or the Code
resulting in liability of such Borrower or any of its Controlled Group members
in excess of $25,000 in the aggregate or (2) with respect to any Defined Benefit
Pension Plan, any Reportable Event under ERISA, if upon termination of the Plan
or Plans with respect to which one or more such Reportable Events has occurred
there is or would be any liability of such Borrower or any of its Controlled
Group members to the PBGC in excess of $25,000 in the aggregate. No Borrower
will voluntarily take or fail to take any action which would result in any
Withdrawal Liability becoming due.
(I) No Borrower will fail to make required minimum contributions, or
permit any other Controlled Group member to fail to make required minimum
contributions with respect to a Defined Benefit Pension Plan, resulting in a
lien (as provided in ss.302(f) of ERISA) against such Borrower or any of its
Controlled Group members.
(J) No Borrower will permit the adoption of a plan amendment which
results in significant underfunding (as defined in ss.307 of ERISA) of a Defined
Benefit Pension Plan which requires such Borrower or any of its Controlled Group
members to provide security.
(K) Except to the extent accrued by Sellers on the Final Balance Sheet
pursuant to the Acquisition Agreement and except for the assumption of
termination and severance liability pursuant to Section 6.3(a) of the
Acquisition Agreement, no Borrower will permit the unfunded liabilities of
unfunded and uninsured "employee welfare benefit plans" (as defined in ss.3(1)
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of ERISA) of such Borrower and of any members of its Controlled Group to exceed,
in the aggregate $10,000.
(L) No Borrower will acquire or permit the acquisition by any of its
Controlled Group members, of any trade or business which has incurred an
unfunded benefit liability (as defined in ss.4001 of ERISA) under any Defined
Benefit Pension Plan prior to such acquisition or acquire or permit the
acquisition, by such Borrower or any of its Controlled Group members, of any
trade or business which has incurred either directly or indirectly an unfunded
benefit liability under any Defined Benefit Pension Plan.
SECTION 6.18 Mergers, etc. No Borrower will directly or indirectly without the
prior written consent of Lender, (A) merge or consolidate with any other Person,
(B) except for the sale of Inventory in the ordinary course of business, sell or
lease or otherwise transfer all or any substantial part of its assets to any
Person, (C) acquire whether through purchase or exchange of equity or assets or
otherwise, all or any substantial part of the assets of any other Person or any
equity interest in any other Person, or (D) create any Subsidiary, excluding
Subsidiaries listed on Exhibit 5.11.
SECTION 6.19 Ownership of Interests, Etc.. (A) Xxxx Xxxxxxx shall at all times
own 10% of the voting stock of TearDrop.
(B) TearDrop will not make or declare any dividend or distribution of
any kind or redeem any of its stock, provided however that so long as (1) no
Event of Default under Sections 6.5 or 6.6 hereof has occurred and is continuing
or would result from the declaration or making of such dividend, distribution or
redemption, (2) such dividend payment or redemption payment is permitted to be
made pursuant to the Agreement dated as of the date hereof among Borrowers,
Lender and Xxxxx Xxxxxx Golf Company, and (3) TearDrop gives Lender 20 days
written notice prior to making any such payment, TearDrop shall be permitted to
declare and make such dividend, distribution or redemption.
(C) TearDrop will not, without the prior written consent of Lender,
permit or effect (1) any change in the capitalization or capital structure of
TearDrop, including the issuance of any new, additional or different type or
class of stock, (2) any modification, reduction or retirement of any existing
class or type of stock, excluding the warrants outstanding on the date hereof
and the preferred stock issued pursuant to the Certificate of Designation, (3)
the alteration or modification of the voting rights of any stock, or (4) the
amendment or modification of the Certificate of Designation.
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SECTION 6.20 Nature of Business. No Borrower will make any material change in
the nature of its business as conducted on the date hereof.
SECTION 6.21 Disposal of Assets. Except for the sale of Inventory in the
ordinary course of business, replacement of Equipment and the disposaL of
obsolete Equipment, no Borrower will dispose of any assets.
SECTION 6.22 Patents, etc. Each Borrower will maintain all of its material
patents, trademarks, copyrights, trade secrets and other intellectual property
rights, and licenses therefor, if any, in full force and effect.
SECTION 6.23 Indemnification. Each Borrower hereby indemnifies and agrees to
protect, defend, and hold harmless Lender and its directors, officers,
employees, agents, attorneys and shareholders from and against any and all
losses, damages, expenses or liabilities of any kind or nature and from any
suits, claims, or demands, including all reasonable counsel fees incurred in
investigating, evaluating, or defending such claims, suffered by any of them and
caused by, relating to, arising out of, resulting from, or in any way connected
with this Agreement, the Note, any other Loan Document and any transaction
contemplated herein or therein including, but not limited to, claims based upon
any act or omission by Lender in connection with this Agreement, the Note or any
Loan Document and any transaction contemplated herein or therein to the extent
not caused by the gross negligence, bad faith or willful misconduct of Lender or
its directors, officers, employees, agents or attorneys. If a Borrower shall
have knowledge of any claim or liability hereby indemnified against, it shall
promptly give written notice to Lender. THIS COVENANT SHALL SURVIVE THE PAYMENT
OF THE INDEBTEDNESS CREATED BY THIS AGREEMENT, THE NOTE OR THE LOAN DOCUMENTS.
SECTION 6.24 RICO. No Borrower shall engage in any conduct or fail to take any
action which will, or would, under the facts and circumstances relative thereto,
violate the Racketeer Influenced and Corrupt Organization Act as amended by the
Comprehensive Act of 1984, 18 U.S.C. ss.ss.1961-68.
SECTION 6.25 Licenses, Permits. Each Borrower will maintain the validity, force
and effect of, and operate in material compliance with, all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates and orders
required for the conduct of its business.
SECTION 6.26 Capital Expenditures. Borrowers will not make or become obligated
to make Capital Expenditures in excess of $1,500,000.00 in the aggregate during
the fiscal year ending December 31, 1998, and during each fiscal year
thereafter,
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$1,500,000.00 plus, to the extent a positive number, the lesser of (A)
$250,000.00, or (B) (1) $1,500,000.00 minus (2) the actual amount of capital
expenditures made during the immediately preceding fiscal year.
SECTION 6.27 Primary Operating Accounts; Cash Management Services. While any of
the Liabilities remain outstanding or Lender has any obligation to make Advance
under the Revolving Credit, each Borrower shall keep its primary operating
accounts at Lender and shall use the cash management services of Lender.
ARTICLE VII
DEFAULT
SECTION 7.1 Events of Default. Each of the following shall, at the option of the
Lender, be an event of default ("Event of Default"):
(A) If Borrowers shall fail to pay when due any interest, principal,
any fee, or any other Liabilities;
(B) If Borrowers shall request an Advance which, if made, would result
in the outstanding principal amount of Advances to be in excess of the Credit
Limit, or if the outstanding principal amount of Advances under the Revolving
Credit shall exceed the Credit Limit at any time and such excess is not
immediately paid by Borrowers as required hereunder;
(C) If any representation or warranty made by a Borrower in any Loan
Document or in any certificate, agreement, instrument, statement, or report
contemplated by or made or delivered pursuant to or in connection with any
thereof, or if any information furnished to Lender pertaining to the Revolving
Credit shall prove to have been incorrect or false in any material respect when
made or reaffirmed;
(D) If a Borrower shall fail to pay any Credit Obligation owing by it,
or any interest or premium thereon, when due, whether owed to Lender or any
other Person and whether such Credit Obligation shall become due by scheduled
maturity, by required prepayment, by acceleration, by demand, or otherwise, or
shall fail to perform any term, covenant, or agreement on its part to be
performed under any agreement or instrument evidencing or securing or relating
to any such Credit Obligation when required to be performed, if the effect of
such failure is to accelerate, or to permit the holder or holders of such Credit
Obligation to accelerate, the maturity of such Credit Obligation, whether or not
such failure to perform shall be waived by the holder or holders of such Credit
Obligation, unless such waiver has the effect of terminating the right of such
holder or holders
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to accelerate the maturity of such Credit Obligation as a result of such
failure;
(E) If any Borrower shall be adjudicated bankrupt or insolvent, or
admit in writing its inability to pay its debts as they mature, or make an
assignment for the benefit of its creditors; or if any Borrower shall apply for
or consent to the appointment of any receiver, trustee, or similar officer for
it or for all or any substantial part of its property; or any such receiver,
trustee, or similar officer shall be appointed without the application or
consent of a Borrower and shall continue undischarged for a period of 60 days;
or if any Borrower shall institute (by petition, application, answer, consent,
or otherwise) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation, or similar proceeding relating
to it under the laws of any jurisdiction; or if such proceeding shall be
instituted (by petition, application, or otherwise) against any Borrower and an
order for relief shall be entered in such proceeding or such proceeding shall
remain undismissed for a period of 60 days; or if any judgment, writ, warrant of
attachment or execution or similar process shall be issued or levied against
property of any Borrower for all or a portion of the property which represents a
substantial portion of the property of such Borrower, and such judgment, writ,
or similar process shall not be released, vacated, or fully bonded within 30
days after its issue or levy;
(F) If (1) any Reportable Event, or any failure of compliance required
by Section 6.17 hereof that Lender reasonably determines in good faith creates a
reasonable possibility of the termination of any Defined Benefit Pension Plan of
any Borrower or of the appointment by the appropriate United States District
Court of a trustee to administer any such Plan of any Borrower, shall have
occurred and be continuing 30 days, or (2) any such plan shall be terminated, or
(3) the plan administrator of any such Plan shall file with the PBGC a notice of
intention to terminate such Defined Benefit Pension Plan, or (4) the PBGC shall
institute proceedings to terminate any such Defined Benefit Pension Plan or to
appoint a trustee to administer any such Defined Benefit Pension Plan and such
proceedings shall remain undismissed or unstayed for 30 days and if, in any of
the cases described in the foregoing clauses (1) to (4), Lender further
determines that the amount of the unfunded guaranteed benefits (within the
meaning of Title IV of ERISA) resulting upon termination of such Defined Benefit
Pension Plan would have a material adverse effect on the business, properties,
operation, or condition (financial or otherwise) of a Borrower if a lien against
the assets of such Borrower were to result under ERISA;
(G) If an event of default (as therein defined) shall occur under any
other Loan Document;
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(H) If any Borrower shall fail to comply with any of the following
Sections -- 6.1, 6.3, 6.5, 6.6, 6.9, 6.10, 6.15, 6.18, 6.19, 6.20, 6.21, 6.24,
6.26, or 6.27;
(I) If any Borrower shall fail to observe and perform each and every
one of the terms, covenants, promises and agreements on its part to be observed
and performed under this Agreement not set forth elsewhere in this Section and
such failure is not fully cured within 15 days of the earlier of (1) the date a
Borrower becomes aware of such failure or (2) the receipt of notice of such
failure from Lender;
(J) If there occurs a material adverse change to the financial
condition, assets, nature of the assets, operations or prospects of a Borrower;
(K) Any execution shall have been levied against any part of the
Collateral and shall continue unstayed and in effect for a period of ten (10)
days;
(L) The dissolution, termination or liquidation of a Borrower;
(M) If the security interests granted to Lender hereunder and the other
Loan Documents no longer constitute a first lien on any part of the Collateral;
or
(N) If any "Voting Right Triggering Event" (as such term is defined in
the Certificate of Designation) or any event occurs under Section VII(D)(i)(e)
or (f) occurs, and such occurrence is not cured within 15 days after it
occurred.
SECTION 7.2 Remedies. If any Event of Default other than those described in
Section 7.1(E) shall occur and be continuing, then upon notice from Lender to
Borrowers, and if any Event of Default described in Section 7.1(E) shall occur
then automatically:
(A) the Revolving Credit and the obligation of Lender to make Advances
or the issue Letters of Credit hereunder shall terminate;
(B) the Revolving Credit shall be due and payable immediately without
presentment, demand, protest, or further action of any kind, all of which are
hereby waived;
(C) Lender may exercise all of the rights and remedies of a secured
party under the Uniform Commercial Code or any other applicable law with respect
to the Collateral;
(D) with respect to any Equipment and Inventory of Borrowers serving as
Collateral hereunder, Lender may require
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each Borrower to assemble its Equipment and Inventory and make it available to
Lender at a place designated by Lender which is reasonably convenient to it and
to such Borrower;
(E) Lender may exercise its rights under any Loan Document (including
this Agreement);
(F) Lender shall have and is hereby granted a right of set-off, a lien
upon and a security interest in all property of each Borrower now or at any time
hereafter in Lender's possession in any capacity whatsoever, including, without
limitation, any balance or share of any deposit, trust or agency account, as
security for all liabilities of Borrowers to Lender;
(G) Lender may exercise its rights with respect to the Operating
Account, the Cash Collateral Account an the Letter of Credit Cash Collateral
Account and apply the proceeds of such accounts against the Liabilities in such
order as Lender shall elect; and
(H) Lender may exercise any other rights and remedies available to
Lender whether available at law, in equity, or otherwise.
ARTICLE VIII
ADDITIONAL PROVISIONS
SECTION 8.1 No Waiver, Cumulative Remedies. No failure or delay on the part of
Lender in exercising any right, power, or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power, or remedy preclude any other or further exercise thereof or the exercise
of any other right, power, or remedy hereunder. No waiver of any provision
hereof shall be effective unless the same shall be in writing and signed by
Lender. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 8.2 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be given to each party hereto
by overnight delivery service at its address specified below or at such other
address as shall be designated by such party in a notice to each other party
complying with the terms of this Section 8.2:
If to Borrowers:
TearDrop Golf Company
0000 Xxxxxxx Xxxx
Xxxxx, Xxx Xxxxxx 00000
Attention: Xx. Xxxx Xxxxxxx
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If to Lender:
CoreStates Bank, N.A.
000 Xxxxxx Xxxx, XX-0
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxx Xxxxxx
All notices, requests, demands and other communications provided for hereunder
shall be effective when delivered or received at the aforesaid addresses.
SECTION 8.3 Set-off. Lender shall have a right of set-off against, a lien upon,
and a security interest in all property of a Borrower now or at any time in the
possession of Lender in any capacity whatever, including, but not limited to
such Borrower's interest in any deposit account, as security for the
Liabilities, including without limitation, the obligations of such Borrower
under the Loan Documents and to reimburse Lender for any returned checks.
SECTION 8.4 Costs and Expenses. Borrowers agree to pay on demand (A) all
reasonable costs and expenses of Lender in connection with the preparation,
execution, delivery and administration of the Loan Documents and in connection
with any request for an amendment, modification, or waiver of any of the
provisions of any thereof (including the reasonable fees and out-of-pocket
expenses of counsel with respect thereto); (B) all filing, recording, and
similar fees and charges; (C) all costs and expenses, if any, of Lender in
connection with the enforcement of any Loan Document (including the reasonable
fees and out-of-pocket expenses of legal counsel with respect thereto) after the
occurrence of a Default or an Event of Default; and (D) all costs and expenses,
if any, of Lender in connection with the enforcement of Lender's right to take
possession of the Collateral after the occurrence of a Default or an Event of
Default and the proceeds thereof and to hold, collect, prepare for sale, render
in compliance with federal, state or local environmental statutes, ordinances,
regulations, orders, directives, and permits, sell and dispose of the Collateral
(including the reasonable fees and out-of-pocket expenses of legal counsel with
respect thereto).
SECTION 8.5 Governing Law. This Agreement and the other Loan Documents shall be
governed in all respects by the law of the State of New Jersey, the jurisdiction
in which the Loan Documents have been executed and delivered, and for all
purposes shall be construed in accordance with such law.
SECTION 8.6 Survival of Agreements and Representations; JURY WAIVER; Consent to
Jurisdiction. All agreements, representations and warranties made herein shall
survive the delivery of this Agreement and the Note. Any and all judicial
proceedings brought
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by Lender against a Borrower with respect to this Agreement may be brought in:
(A) any court of competent jurisdiction in the State of New Jersey; and (B) any
Federal district court having subject matter jurisdiction and being located in
the State of New Jersey. AFTER CONSULTATION WITH COUNSEL, AND WITH KNOWLEDGE OF
THE CONSEQUENCES, EACH BORROWER AND LENDER HEREBY WAIVE ALL RIGHTS TO DEMAND A
JURY TRIAL AND AGREE THAT ALL SUITS WILL BE HEARD BY JUDGE ONLY. Each Borrower
hereby accepts, for itself and its properties, the non-exclusive jurisdiction of
the aforesaid courts and agrees to be bound by any judgments rendered by such
courts in connection with this Agreement. No Borrower will move to transfer any
such proceeding to any different court. Any such process may be mailed by
registered or certified mail to Borrowers at the address referred to in Section
8.2 hereof. Each Borrower agrees that service by mail will constitute sufficient
notice. Service will be considered complete upon delivery. Nothing herein limits
the right of Lender to bring proceedings against a Borrower in the courts of any
other jurisdiction.
SECTION 8.7 Binding Effect; Assignment. The Loan Documents shall be binding upon
and inure to the benefit of each Borrower, Lender, and their respective
successors and assigns, except that no Borrower shall have the right to assign
or delegate its respective rights or obligations under any of such documents.
SECTION 8.8 Headings. Article, Section and subsection headings used in this
Agreement are for convenience only and shall not affect the construction of this
Agreement.
SECTION 8.9 Time of the Essence. Whether or not elsewhere herein expressly
stated, all dates and times for performance herein set forth shall be of the
essence of this Agreement.
SECTION 8.10 Sole Discretion of Lender. It is understood and agreed that, except
as expressly provided otherwise in this Agreement, Lender shall have, with
respect to all matters herein which must be approved by or be acceptable or
satisfactory to Lender or which may be determined by or consented to by Lender,
including, but not limited to, any conditions, provisions, agreements,
contracts, documents, surveys, reports, legal opinions, and title requirements,
the sole and absolute discretion to determine the acceptability thereof to
Lender.
SECTION 8.11 Amendments. Any of the provisions of this Agreement may be waived,
modified or amended only by written agreement or agreements entered into by
Borrowers and Lender, except that no such waiver, modification or amendment
shall extend to or affect any obligation not expressly waived, modified or
amended, or impair any right of Lender related to such obligation.
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SECTION 8.12 Usury. Nothing herein contained or in the Note, or any other Loan
Document nor any transaction related thereto shall be construed or shall so
operate either presently or prospectively to require Borrowers (A) to pay
interest at a rate greater than is now lawful in such case to contract for, but
shall require payment of interest only to the extent of such lawful rate, or (B)
to make any payment or do any act contrary to law, but if any provision herein
or therein contained shall otherwise so operate to invalidate this Agreement,
the Note, or any other Loan Document, in whole or in part, then such provision
only shall be held for naught as though not herein or therein contained and the
remainder of this Agreement, the Note, and the other Loan Documents shall remain
operative and in full force and effect. Any interest paid in excess of the
lawful rate shall be refunded to Borrowers. Such refund shall be made by
application of the excessive amount of interest paid against any sums
outstanding under this Agreement and shall be applied in such order as Lender
may determine. If the excessive amount of interest paid exceeds the sums
outstanding hereunder, the portion exceeding the said sums outstanding shall be
refunded in cash by Lender. Any such crediting or refund shall not cure or waive
any default by Borrowers hereunder or under the Note or any other Loan Document.
Borrowers agree, however, that in determining whether or not any interest
payable exceeds the highest rate permitted by law, any non-principal payment
(except payments specifically stated in this Agreement to be "interest"),
including without limitation prepayment premiums, shall be deemed, to the extent
permitted by law, to be an expense, fee, premium or penalty rather than
interest.
SECTION 8.13 Participations. Each Borrower acknowledges and agrees that Lender
may sell a participation interest or participating interests in the Revolving
Credit. After such sale and provided Lender shall notify Borrowers thereof,
Borrowers shall, at the option of Lender, have a direct obligation to the
purchaser under such sale to the extent of the participation interest purchased.
Borrower acknowledges that Lender may share with any participant or prospective
participant, any and all information obtained by Lender in connection with the
Revolving Credit, including without limitation information delivered to Lender
by Borrower, and Borrower consents thereto. Borrowers agree to cooperate with
Lender in connection with any reasonable request made by Lender with respect to
any such sale or prospective sale.
SECTION 8.14 Entire Agreement. This Agreement, the Exhibits attached hereto and
the Loan Documents constitute the entire understanding among the parties with
respect to the subject matter hereof, and supersedes any and all contemporaneous
and prior agreements between the parties hereto with respect to the subject
matter hereof.
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SECTION 8.15 No Joint Venture. The parties expressly agree that the relationship
of Lender to each Borrower is that of lender only, and Lender is not a partner
or co-venturer of any Borrower.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have caused this Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
TEARDROP GOLF COMPANY
By:/s/ X. Xxxxxxx
----------------------------
Name:
Title:
TEARDROP ACQUISITION CORP.
By:/s/ X. Xxxxxxx
----------------------------
Name:
Title:
CORESTATES BANK, N.A.
By:/s/ Xxxx X. Xxxxxx
----------------------------
Name: Xxxx Xxxxxx
Title: