Exhibit 10.62
REVOLVING LINE OF CREDIT LOAN AGREEMENT
AND SECURITY AGREEMENT
THIS REVOLVING LINE OF CREDIT LOAN AGREEMENT AND SECURITY AGREEMENT
("Agreement") is made as of February 13th, 2002, by and among OCM DIRECT, INC.,
a Delaware corporation; CAREPACKAGES, INC., a Delaware corporation; and
COLLEGIATE CARPETS, INC., a Maryland corporation, each having an address at c/o
OCM DIRECT, INC., 0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx 00000,
and Bank of America, N.A., a national banking corporation, having an address at
0000 Xxxxxxxxx Xxxxx, 0xx Xxxxx, Xxxxxxxx, Xxxxxxxx 00000.
RECITALS
A. The Borrower (as defined below) has applied to the Lender (as
defined below) for a revolving loan facility in the maximum principal amount of
Five Million and 00/100 Dollars ($5,000,000.00) to be used by the Borrower for
working capital.
B. The Lender is willing to make the Revolving Loan on the terms and
conditions hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Lender hereby
agree as follows:
ARTICLE 1. DEFINITIONS.
1.1 Defined Terms. Certain capitalized terms not otherwise defined
herein are used in this Agreement with the following meanings, unless the
context otherwise requires:
a. "Account" means collectively and includes any of the
following, whether now owned or hereafter acquired by
the Borrower: all present and future rights to
payments for goods or other property sold, assigned,
leased or otherwise disposed of, or for services
rendered, whether or not earned by performance; all
present and future rights to payments arising out of
the licensing of computer hardware or software and
systems; all accounts, contract rights, chattel
paper, instruments and documents; proceeds of any
letter of credit of which the Borrower is a
beneficiary; all forms of obligations whatsoever owed
to the Borrower, together with all instruments and
documents of title representing any of the foregoing;
all rights in any returned or repossessed goods; all
rights, security and guaranties with respect to any
of the foregoing, including, without limitation, any
right of stoppage in transit; together with all
property
included within the definitions of "accounts", and
"documents" as presently or hereafter defined in the
UCC.
b. "Advance" means an advance of funds under the
Revolving Loan.
c. "Affiliate" means, with respect to any specified
Person, any other Person which, directly or
indirectly, through one or more intermediaries,
controls or is controlled by, or is under common
control with, such specified Person. The term
"control" means the possession, directly or
indirectly, of the power to direct or cause the
direction of management and policies of a Person,
whether through ownership of common stock, by
contract, or otherwise.
d. "Agreement" means this Revolving Line of Credit Loan
Agreement and Security Agreement as the same may be
amended, modified or supplemented from time to time.
e. "Allowed Amount of Advances" means the aggregate
amount of all Advances of principal under the
Revolving Loan permitted to be outstanding at any
particular time under the Paragraph below titled
"Allowed Amount of Advances."
f. "Borrower" shall refer to OCM Direct, Inc., a
Delaware corporation; Collegiate Carpets, Inc., a
Maryland corporation; and to CarePackages, Inc., a
Delaware corporation, and to each such Person or to
all of them, as the context may require, and the
representations and obligations hereunder of the
Persons comprised by the term "Borrower" shall be
joint and several. For purposes of testing compliance
with the financial covenants hereinafter, the
negative covenants hereinafter and the unused fee
provided hereinafter, financial information
concerning the Borrower shall mean financial
information for OCM Direct, Inc., and Collegiate
Carpets, Inc., and CarePackages, Inc. stated on a
consolidated and consolidating basis.
g. "Borrowing Date" means the date on which an Advance
is made.
h. "Business Day" means any day that is not a Saturday,
Sunday or banking holiday in the Commonwealth of
Virginia.
i. "Capital Lease" means any lease which has been or
should be capitalized on the books of the lessee in
accordance with GAAP.
j. "Cash Collateral Account" means an account to be
established by Lender in Borrower's name, with the
Lender, for the purpose of receiving
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Payments, which shall constitute part of the
Collateral unless and until disbursed to the Borrower
or applied for the Borrower's account in accordance
with this Agreement.
k. "Chattel Paper" means collectively and includes all
of the following, whether now owned or hereafter
acquired by the Borrower: any writing or writings, or
record or records that evidence both a monetary
obligation and any one or more of the following: a
security interest in specific goods, a security
interest in specific goods and software used in the
goods, a security interest in specific goods and
license of software used in the goods, a lease of
specific goods, or a lease of specific goods and
license of software used in the goods, together with
all other such items which are included within the
definition of "chattel paper" as presently or
hereafter defined in the UCC.
l. "Closing Date" means the date the transaction
actually closes.
m. "Code" means the Internal Revenue Code of the United
States, as amended.
n. "Collateral" means all of the personal property of
the Borrower, wherever located, and now owned or
hereafter acquired, including without limitation, all
of the following kinds of property, now owned or
hereafter acquired by the Borrower:
1. all Accounts;
2. all Deposit Accounts and other obligations or indebtedness
owed to Borrower from whatever source arising, by Lender or any of Lender's
Affiliates;
3. all rights to receive any payment in money or in kind;
4. all contract rights;
5. all Instruments;
6. all Inventory;
7. all property, plant and Equipment;
8. all Chattel Paper;
9. all General Intangibles;
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10. all Letter-of-Credit Rights;
11. all Supporting Obligations;
12. all books and records and computer hardware, software and
systems;
13. all policies of insurance and the proceeds thereof;
14. all additions and accessions to and replacements of the
collateral described above; and
15. all products and proceeds of all of the collateral
described above.
o. "Compliance Certificate" means a certificate in form
and substance reasonably satisfactory to Lender,
signed by Borrower's officer acceptable to Lender,
certifying that Borrower is in compliance with this
Agreement.
p. "Customer" means any governmental entity (federal,
state, county, municipal or otherwise) or business
entity (corporation, association, partnership,
limited liability company or partnership, sole
proprietorship or otherwise) or individual to which
Borrower provides goods or services for compensation.
q. "Debt" means:
1. indebtedness or liability for borrowed money, or for the
deferred purchase price of property or services;
2. obligations as a lessee under a Capital Lease;
3. obligations to reimburse the issuer of letters of credit or
acceptances;
4. all guaranties, endorsements (other than for collection or
deposit in the ordinary course of business), and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; and
5. obligations secured by any lien or Encumbrance on property
owned by the Borrower.
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r. "Deposit Account" means collectively and includes all
of the following, whether now owned or hereafter
acquired by the Borrower: a demand, time, savings,
passbook, or similar account maintained with a bank,
together with all other such items which are included
within the definition of "deposit account" as
presently or hereafter defined in the UCC.
s. "EBITDA" means the Borrower's net income, less income
or plus loss from discontinued operations and
extraordinary items, plus income taxes, plus interest
expense, plus depreciation, depletion, amortization
and other non-cash charges. It is agreed that EBITDA
for the first, second, third and fourth quarters of
2001 are as follows: a negative One Million Six
Hundred Thirty Seven Thousand Dollars ($1,637,000)
for the quarter ending on March 31, 2001; a negative
Five Hundred Thirty Three Thousand Dollars ($533,000)
for the quarter ending on June 30, 2001; a positive
Three Million Six Hundred Eighty Two Thousand Dollars
($3,682,000) for the quarter ending September 30,
2001; and a positive Five Hundred Fifty One Thousand
and 00/100 Dollars ($551,000.00) for the quarter
ending December 31, 2001. The amounts agreed to for
EBITDA as set forth above incorporate the reversal of
certain accruals on the books and records of OCM
Direct, Inc., in connection with the acquisition by
Guarantor of OCM Direct, Inc.; however, no further
acquisition related accrual adjustments shall be
permitted without the Lender's prior written consent.
t. "Encumbrance" means any mortgage, pledge, deed of
trust, assignment, security interest, hypothecation,
lien or charge of any kind (including any conditional
sale or other title retention agreement, any
financing lease having substantially the same
economic effect as any of the foregoing, and the
filing of, or agreement to give, any financing
statement under the UCC or comparable law of any
jurisdiction).
u. "Ending Date" means January 31, 2003.
v. "Environmental Laws" mean all laws relating to
Hazardous Wastes, Toxic Substances or materials that
might be emitted, released or discharged into the
environment or other laws or regulations protecting
the environment.
w. "Equipment" means collectively and includes all of
the following, whether now owned or hereafter
acquired by the Borrower: all goods (other than farm
products, consumer goods or inventory), equipment and
fixtures, including, without limitation, computer
hardware, computer software and systems, furniture,
machinery, vehicles and trade fixtures, together with
any and all accessories, accessions, parts and
appurtenances thereto, substitutions therefor and
replacements thereof, together with all other such
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items which are included within the definitions of
"equipment" and "fixtures" as presently or hereafter
defined in the UCC.
x. "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and any successor statute
thereto, as interpreted by the rules and regulations
thereunder, all as the same may be in effect from
time to time. References to sections of ERISA shall
be construed also to refer to any successor sections.
y. "ERISA Affiliate" means an entity, whether or not
incorporated, which is under common control with the
Borrower or any of its subsidiaries within the
meaning of Section 4001(a)(14) of ERISA, or is a
member of a group which includes the Borrower or any
of its subsidiaries and which is treated as a single
employer under Sections 414(b), (c), (m), or (o) of
the Code.
z. "Event of Default" means any one of the events
specified as an "Event of Default" under this
Agreement.
aa. "GAAP" means generally accepted accounting principles
in the United States of America.
bb. "General Intangibles" means collectively and includes
all of the following, whether now owned or hereafter
acquired by the Borrower: choses in action, causes of
action and all other intangible property of every
kind and nature, including, without limitation, all
present and future rights to payments arising out of
the licensing of computer hardware and software and
systems, all payment intangibles, any software or
computer program and any supporting information
provided in connection with a transaction relating to
the program, corporate or other business records,
inventions, designs, patents, patent applications,
trademarks, trademark applications, trade names,
trade secrets, goodwill, registrations, copyrights,
licenses, franchises, customer lists, tax refunds,
tax refund claims, rights of claims against carriers
and shippers, leases and rights to indemnification,
together with all property which is included within
the definition of "general intangibles" as presently
or hereafter defined in the UCC.
cc. "Governance Documents" means the Borrower's Articles
or Certificate of Incorporation and Bylaws or other
documents or agreements affecting the Borrower's
corporate governance.
dd. "Guarantor" means Student Advantage, Inc., a Delaware
corporation.
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ee. "Guaranty" means the Unconditional Guaranty or
Unconditional Guaranties of even date herewith
executed by Guarantor.
ff. "Hazardous Wastes" mean all waste materials subject
to regulation under the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C.
Sections 9601 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Sections 6901 et seq., or
applicable state law and any other applicable
federal, state or local laws and their regulations
now in force or hereafter enacted relating to
hazardous wastes.
gg. "Instruments" means collectively and includes all of
the following, whether now owned or hereafter
acquired by the Borrower: any promissory note, or any
negotiable instrument or any other writing that
evidences a right to payment of a monetary obligation
and is not itself a security agreement or lease, and
may be transferred by delivery with any necessary
endorsement or assignment, together with all property
included within the definition of "instruments" as
presently or hereafter defined in the UCC.
hh. "Intellectual Property" shall mean all patents,
licenses, trade names, trademarks, copyrights,
inventions, service marks, trademark registrations,
service xxxx registrations and copyright
registrations, whether domestic or foreign and
applications for any of the foregoing, and all
proprietary technology, know-how, trade secrets or
other intellectual property rights owned or used by
the Borrower or any subsidiary in the operation of
their respective businesses.
ii. "Inventory" means collectively and includes all of
the following, whether now owned or hereafter
acquired by the Borrower: all goods held or intended
for sale or lease by the Borrower, or furnished or to
be furnished under contracts of service, all raw
materials, work in process, finished goods, all
software or computer programs embedded in goods and
all supporting information provided in connection
with a transaction related to the programs, materials
and supplies of every nature used or usable in
connection with the manufacture, packing, shipping,
advertising or sale of any such goods, together with
all property included within the definition of
"inventory" as presently or hereafter defined in the
UCC.
jj. "Investment Property" means collectively and includes
all of the following, whether now owned or hereafter
acquired by the Borrower: all securities owned by
Borrower (other than the stock of Collegiate Carpets,
Inc. and CarePackages, Inc. owned by OCM Direct, Inc.
and the stock of the inactive entity incorporated
under the name Xxxxxxxx.xxx, Inc., which entity is
not to become active unless and until Xxxxxxxx.xxx,
Inc. becomes
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a "Borrower" under this Agreement), whether
certificated or uncertificated, and all securities
entitlements, securities accounts, commodity
contracts, or commodity accounts of Borrower,
together with all property included within the
definition of "investment property" as presently or
hereafter defined in the UCC.
kk. "Item" means any "item" as defined in Section 4-104
of the UCC, to include, without exclusion or
limitation, checks, drafts, money orders or other
media by which Payment may be made.
ll. "Lender" means Bank of America, N.A. and its
successors and assigns.
mm. "Letter-of-Credit Rights" means collectively and
includes all of the following, whether now owned or
hereafter acquired by the Borrower: any and all
rights of Borrower to payment or performance under a
letter of credit, together with all property included
within the definition of "letter-of-credit rights" as
presently or hereafter defined in the UCC.
nn. "Loan" means the Revolving Loan.
oo. "Loan Documents" mean this Agreement, the Revolving
Note, the Guaranty, the Subordination Agreement, or
any other document executed by the Borrower or any
other Person evidencing, securing, guaranteeing or
relating to the Revolving Loan, as such documents or
instruments may be amended, modified or extended from
time to time.
pp. "Maximum Revolving Commitment Amount" means Five
Million and 00/100 Dollars ($5,000,000.00), or such
lesser amount that Borrower may request as
hereinafter provided.
qq. "Multiemployer Plan" means a Plan which is a
multiemployer plan as defined in Sections 3(37) or
4001(a)(3) of ERISA.
rr. "Multiple Employer Plan" means a Plan which the
Borrower or any of its subsidiaries or any ERISA
Affiliate and at least one employer other than the
Borrower or any of its subsidiaries or any ERISA
Affiliate are contributing sponsors.
ss. "Operating Account" means a demand deposit account to
be established by the Borrower with the Lender for
the Borrower's use in connection with its business
operations and with the Revolving Loan.
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tt. "Payment" or "Payments" means any check, draft, cash
or any other remittance or credit in payment or on
account of any or all of the Accounts.
uu. "PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of
ERISA and any successor thereto.
vv. "Permitted Encumbrance" means a purchase money
security interest; liens imposed by law for taxes
that are not yet due and payable or are being
contested in accordance with the terms of this
Agreement; pledges and deposits made in the ordinary
course of business in compliance with workers'
compensation, unemployment insurance and other social
security laws or regulations; and deposits of cash or
a cash equivalent made in the ordinary course of
business which, in the aggregate, are not at any time
outstanding in an amount that exceeds Two Hundred
Fifty Thousand and 00/100 Dollars ($250,000.00).
ww. "Person" means any individual, partnership,
association, trust, corporation, limited liability
company or partnership, or other entity.
xx. "Plan" means any employee benefit plan (as defined in
Section 3(3) of ERISA) which is covered by ERISA and
with respect to which the Borrower or any of its
subsidiaries or any ERISA Affiliate is (or, if such
plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer"
within the meaning of Section 3(5) of ERISA.
yy. "Reportable Event" means a "reportable event" as
defined in Section 4043 of ERISA with respect to
which the notice requirements to the PBGC have not
been waived.
zz. "Revolving Loan" means the Revolving Loan facility
made available by Lender to Borrower pursuant to this
Agreement in the maximum principal amount of Five
Million and 00/100 Dollars ($5,000,000.00), evidenced
by the Revolving Note.
aaa. "Revolving Note" means the Borrower's promissory
note, of even date, in the amount of Five Million and
00/100 Dollars ($5,000,000.00), payable to the order
of the Lender, and evidencing Borrower's obligation
to repay the Revolving Loan.
bbb. "Single Employer Plan" means any Plan which is
covered by Title IV of ERISA, but which is not a
Multiemployer Plan.
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ccc. "Subordination Agreement" means the Subordination
Agreement of even date herewith executed by the
Borrower, Lender and the Guarantor to whom the
Borrower is indebted in the sum of Two Million Two
Hundred Fifty Thousand and 00/100 Dollars
($2,250,000.00), which shall provide for the
subordination of such indebtedness to any
indebtedness or liability of Borrower to Lender.
ddd. "Supporting Obligations" means collectively and
includes all of the following, whether now owned or
hereafter acquired by the Borrower: any
Letter-of-Credit Right or secondary obligation that
supports the payment or performance of an Account, a
Chattel Paper, a document, a General Intangible, an
Instrument, or Investment Property, together with all
property included within the definition of
"supporting obligations" as presently or hereafter
defined in the UCC.
eee. "Termination Event" means (i) with respect to any
Plan, the occurrence of a Reportable Event or the
substantial cessation of operations (within the
meaning of Section 4062(e) of ERISA); (ii) the
withdrawal of the Borrower or any of its subsidiaries
or any ERISA Affiliate from a Multiple Employer Plan
during a plan year in which it was a substantial
employer (as such term is defined in Section
4001(a)(2) of ERISA), or the termination of a
Multiple Employer Plan; (iii) the distribution of a
notice of intent to terminate or the actual
termination of a Plan pursuant to Section 4041(a)(2)
or 4041A of ERISA; (iv) the institution of
proceedings to terminate or the actual termination of
a Plan by the PBGC under Section 4042 of ERISA; (v)
any event or condition which might constitute grounds
under Section 4042 of ERISA for the termination of,
or the appointment of a trustee to administer, any
Plan; (vi) the complete or partial withdrawal of the
Borrower or any of its subsidiaries or any ERISA
Affiliate from a Multiemployer Plan.
fff. "Toxic Substances" mean any materials which have been
shown to have significant adverse effects on human
health or which are subject to regulation under the
Toxic Substances Control Act, 15 U.S.C. Sections 2601
et seq., applicable state law, or any other
applicable federal, state or local laws now in force
or hereafter enacted relating to toxic substances.
"Toxic Substances" includes, but is not limited to,
asbestos, polychlorinated biphenyls (PCBs), petroleum
products, and lead-based paints.
ggg. "UCC" means the Uniform Commercial Code in effect in
the various state or states as set forth in Section
1.4 of this Agreement.
1.2 Accounting Terms. Accounting terms used in this Agreement but not
defined in this Agreement shall have the meanings given to them in accordance
with GAAP in effect on the
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date of this Agreement. Except as otherwise provided in this Agreement, all
financial computations made pursuant to this Agreement and all financial reports
provided to the Lender shall be made in accordance with GAAP, consistently
applied. Except as otherwise provided in this Agreement, whenever this Agreement
refers to a balance sheet, financial statement or the information contained in a
balance sheet or other financial statement, the Agreement shall be construed to
refer to most recent consolidated balance sheet or other financial statement
that Borrower has provided to the Lender.
1.3 Use of Defined Terms. All terms defined in this Agreement shall
have the same defined meanings when used in any certificate, report or other
document made or delivered in connection with this Agreement, unless otherwise
set forth therein.
1.4 UCC Terms. Terms that incorporate definitions provided in the
Uniform Commercial Code shall have such meanings as are mandated by the Uniform
Commercial Code of the state or states applicable for the determination of such
meanings. Terms not otherwise defined herein and not incorporating a definition
under the Uniform Commercial Code of any particular state, but which are defined
in the Uniform Commercial Code as adopted by the State of Maryland, shall have
the meanings ascribed to them under the Uniform Commercial Code as adopted by
the State of Maryland.
ARTICLE 2. LOAN.
2.1 Revolving Line of Credit. The Lender agrees to extend the Revolving
Loan to Borrower, subject to the terms and conditions of this Agreement. Until
the Ending Date, Borrower may borrow, repay and reborrow Advances in accordance
with this Agreement.
a. Allowed Amount of Advances. At no time shall the sum
of the aggregate outstanding principal amount of all
Advances exceed the Maximum Revolving Commitment
Amount.
b. Mandatory Prepayments. If the principal outstanding
under the Revolving Loan, at any time exceeds the
Allowed Amount of Advances, then Borrower shall
either, at its option (1) make an immediate payment
of principal under the Revolving Loan in an amount
sufficient that the principal outstanding under the
Revolving Loan will no longer exceed the Allowed
Amount of Advances, or (2) deliver additional cash or
cash collateral, in form and substance satisfactory
to Lender, and in the amount that the principal
outstanding balance owing under the Revolving Loan
exceeds the Allowed Amount of Advances.
c. Procedure for Advances. Unless Borrower has
previously entered into a separate auto borrow or
similar cash management service with Lender, Borrower
may request Advances by telephone through its
employees or
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agents, as hereinafter provided. Each Advance request
must be received by Lender not later than 1:00 p.m.
(Eastern time) on the date the Advance is to be made
and must specify the amount of the Advance. Lender
shall deposit the Advance into Borrower's Operating
Account on such date if Borrower is entitled to the
Advance, subject to the terms and conditions of this
Agreement. If Borrower has entered into a separate
auto borrow or similar cash management service with
Lender, then the provisions of such service shall
control with respect to the procedures for making
Advances to Borrower. Lender shall have the right to
terminate such auto borrow or similar cash management
service at any time, as determined in Lender's sole
and absolute discretion.
2.2 Repayment of Revolving Loan; Auto Debit. Borrower promises to repay
the Revolving Loan, with interest, at the time and in the manner and in
accordance with the terms provided in the Revolving Note and in this Subsection
2.2 of this Agreement. Borrower has elected to authorize Lender to effect
payment of sums due under the Revolving Note and this Agreement by means of
debiting Borrower's account with Lender, account number 003933755429. This
authorization shall not affect the obligation of Borrower to pay such sums when
due, without notice, if there are insufficient funds in such account to make
payment in full on the due date thereof, or if Lender fails to debit the
account.
2.3 Use of Revolving Loan Proceeds. The proceeds of the Revolving Loan
shall be used for working capital and general corporate purposes in Borrower's
ordinary course of business, and up to Two Million Five Hundred Thousand and
00/100 Dollars ($2,500,000) of the proceeds of the Revolving Loan (to be
advanced contemporaneous with the closing of the Revolving Loan) shall be used
to prepay certain expenses of Borrower, and for no other purpose.
2.4 Revolving Loan Fees. Borrower promises to pay Lender the following
fees in consideration of entering into this Agreement. These fees are in
addition to interest payable under the Revolving Note:
a. an up front fee of Seventy Five Thousand and 00/100
Dollars ($75,000.00), one half of which was paid
prior to the Closing Date and the other half of which
is payable on the Closing Date.
b. an unused fee on any difference between the Maximum
Revolving Commitment Amount and the amount of credit
Borrower actually uses, determined by the average of
the daily amount of credit outstanding during each
month. The fee will be calculated at one quarter of
one percent (.25%) per year. The fee is calculated
and payable monthly, in arrears, commencing on the
first day of the first month after the date of this
Agreement until the expiration of the availability of
Advances under this Agreement.
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c. the reasonable and documented fees and costs for each
field examination performed by the Lender or its
agents at Lender's standard per diem rate plus
expenses, the Lender having the right to perform
field examinations at any time during Borrower's
normal business hours upon reasonable prior notice,
as determined in Lender's sole discretion; provided
that if no Event of Default has occurred and is
continuing under this Agreement, Lender shall conduct
no more than two (2) field examinations in any
calendar year.
ARTICLE 3. CONDITIONS PRECEDENT TO LOAN.
3.1 Conditions Precedent to Initial Advance. The obligation of the
Lender to make any Advance under the Revolving Loan is subject to the
satisfaction (in the sole judgment of the Lender) of the following conditions:
a. Representations and Warranties; Compliance. All
representations and warranties made by Borrower in or
in connection with this Agreement or any of the other
Loan Documents or otherwise made in writing in
connection with this Agreement shall be true and
correct on the Closing Date, and the Borrower shall
have performed all of the promises or undertakings
under this Agreement and satisfied all of the
conditions of this Agreement that the Borrower was
required to perform or to satisfy as of the Closing
Date.
b. Documents Concerning the Borrower. Borrower shall
deliver to the Lender copies of all documents
requested by the Lender, including a complete,
correct and current copy of the Borrower's Articles
of Incorporation or similar charter documents
satisfactory to Lender, certified by the Secretary of
State of the Borrower's state of incorporation; a
complete, correct and current copy of its Bylaws,
certified by Borrower's corporate secretary; a
complete, correct and current copy of all resolutions
of Borrower's Board of Directors authorizing the
execution, delivery and performance of this Agreement
and of the other Loan Documents, certified by
Borrower's corporate secretary; and appropriate
certificates of incumbency for those officers of
Borrower executing this Agreement or any of the other
Loan Documents, certified by Borrower's corporate
secretary and president. In addition, the following
documents and materials shall have been delivered to
the Lender, and must be satisfactory to the Lender in
form and substance:
1. all supporting documentation with regard
to the Borrower and the Revolving Loan as the Lender
may require;
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2. such additional information, instruments,
opinions, documents, certificates and reports
relating to the Borrower or the Collateral as the
Lender may deem necessary; and
3. such lien releases or termination
statements as Lender may deem necessary to remove any
Encumbrances on the Collateral.
c. Executed Note, Guaranty and Loan Documents. Borrower
shall deliver to the Lender, fully executed: this
Agreement, the Revolving Note, the Guaranty, the
Subordination Agreement, UCC-1 Financing Statements
and such other documents, instruments and
certificates as the Lender may reasonably require, in
form and substance satisfactory to the Lender. All
taxes, fees and charges with respect to the
preparation, filing and recording of the Loan
Documents (subject to the limitations, if any, set
forth herein) shall have been paid by Borrower. The
Loan Documents shall include an Intercreditor
Agreement, of even date, among the Lender, the
Borrower, the Guarantor and the Reservoir Parties (as
defined therein), and the Reservoir parties shall
have provided releases of the Borrower and collateral
belonging to the Borrower as provided in the
Intercreditor Agreement.
d. Landlord and Mortgagee Waivers. The Lender shall have
received such landlord and mortgagee waivers as it
shall request with respect to any of the Borrower's
landlords or mortgagees which could claim an interest
in any Collateral as a remedy for a default under any
lease, mortgage or deed of trust.
e. Financing Statements. All Financing Statements deemed
necessary by the Lender to perfect its security
interest in the Collateral or any other collateral
securing the Loan.
f. Legal Opinion. Borrower shall deliver to the Lender a
written opinion or opinions of legal counsel for
Borrower dated the Closing Date and addressed to the
Lender, which opinions must be in form and content
satisfactory to the Lender. Without limiting the
generality of the foregoing, the opinion or opinions
must address the Borrower's organization, existence,
power, good standing and authority and as to the
validity, binding effect and enforceability of the
Loan Documents, including the existence, validity,
enforceability, attachment, perfection, and binding
effect of any security interest, lien or assignment
being granted by Borrower or any Guarantor or other
Person providing Collateral to Lender with respect to
the Collateral.
14
g. Operating Account. The Borrower shall establish the
Operating Account with the Lender.
h. Compliance with Covenants. Borrower shall establish
to Lender's satisfaction that the Advance will not
cause Borrower to cease to comply with Borrower's
financial covenants as set forth hereinafter.
3.2 Future Advances. The obligation of the Lender to make any Advance
under the Revolving Loan subsequent to the Closing Date is further conditional
on:
a. Conditions of First Advance Remain Satisfied. The
Lender shall have determined, in its sole judgment,
that the conditions precedent to the first Advance
are satisfied as of the Borrowing Date for the
subsequent Advance (other than the issuance of a new
legal opinion); the Loan Documents shall remain in
full force and effect; and neither the Borrower nor
any Person providing Collateral or a Guaranty shall
have purported to terminate any of the Loan Documents
or notified Lender of an intention not to perform
under any applicable Loan Document;
b. Representations and Warranties. All representations
and warranties contained herein shall be true and
correct in all material respects at the date of such
disbursement;
c. No Material Adverse Change. The Lender shall have
determined, in its sole discretion, that no material
adverse change has occurred in the financial
condition of the Borrower from that disclosed in the
most recent financial statements furnished to the
Lender prior to the Closing Date; and
d. No Default. No Event of Default has occurred and
remains uncured, and no event has occurred or
circumstance exists which, with the passage of time
or the giving of notice or both, would constitute an
Event of Default.
3.3 Lender's Right To Rely On Communications. The Borrower authorizes
the Lender to accept, rely upon, act upon and comply with, any verbal or written
instructions, requests, confirmations and orders of the authorized list of
employees, officers or agents of the Borrower set forth on Schedule 3.3 attached
hereto and incorporated herein by reference. The Borrower acknowledges that the
transmission between the Borrower and the Lender of any such instructions,
requests, confirmations and orders involves the possibility of errors,
omissions, mistakes and discrepancies and agrees to adopt such internal measures
and operational procedures as Borrower deems necessary to protect its interests.
The Borrower hereby assumes all risk of loss arising out of: (I) the Lender's
acceptance, reliance on, compliance with or observation of any such
instructions, requests, confirmations or orders that Lender, in good faith,
believes are genuine; and (ii) any such errors, omissions, mistakes and
discrepancies, except those caused by the Lender's
15
gross negligence or willful misconduct. Borrower agrees to indemnify Lender and
to hold Lender harmless for and from all claims, demands, suits, actions,
judgments, decrees, losses or damages, including attorneys fees and expenses,
that Lender may incur as a result of the foregoing events or occurrences for
which the Borrower has assumed the risk of loss.
ARTICLE 4. SECURITY.
4.1 Grant of Security Interest. As security for (I) the payment of the
Loans, and any other extensions of credit, loans, letters of credit or other
financial accommodations now or hereafter made by the Lender for the benefit of
the Borrower, and (ii) for the performance of the Borrower's obligations under
or in connection with the Swap Agreement or any other interest rate swap
agreement as defined in 11 U.S.C. Section 101 by and between the Borrower and
the Lender or any Affiliate of the Lender (whether absolute or contingent and
whether now or hereafter becoming due or owing), and (iii) for any other
liability or obligation of Borrower to Lender whether now or hereafter existing,
of every kind and description, whether or not evidenced by notes or other
Instruments, and whether or not such liability or obligations are direct or
indirect, fixed or contingent, liquidated or unliquidated, the Borrower hereby
assigns, grants and conveys to the Lender a security interest in the Collateral.
Proceeds of the Collateral shall be allocated pari passu among the Loans and any
outstanding interest rate swap agreements. The Borrower further agrees that the
Lender shall have in respect of the Collateral all of the rights and remedies of
a secured party under the UCC, other applicable law and this Agreement. The
Borrower covenants and agrees to execute and deliver such financing statements
and other instruments and filings or perform any and all acts as are necessary
in the opinion of the Lender to perfect, maintain and protect the security
interest hereby granted. Except as otherwise set forth in this Agreement, Lender
does not authorize and Borrower agrees that it shall not take any of the
following actions without the prior written consent of Lender: (a) sell, lease,
license, transfer, exchange or otherwise dispose of any of the Collateral except
for sales in the ordinary course of business and for fair market value; or (b)
mortgage, pledge, lien, assign, grant a security interest or otherwise encumber
any of the Collateral (except for a Permitted Encumbrance).
4.2 Covenants Regarding Inventory and Equipment. With regard to
Collateral that constitutes Inventory or Equipment, the Borrower further
covenants as follows:
a. The Borrower shall not permit any of the Equipment or
other Collateral to become a fixture to any real
estate unless subordination agreements satisfactory
to the Lender are obtained by any owner or mortgagee
of such real estate.
b. The Lender's security interest shall extend and
attach to Inventory which is presently in existence
and is owned by the Borrower or in which the Borrower
purchases or acquires an interest at any time and
from time to time in the future, whether such
Inventory is in transit or in the Borrower's
constructive, actual or exclusive occupancy or
possession or not, and
16
wherever the same may be located, including, without
limitation, all Inventory which may be located at the
premises of the Borrower or upon the premises of any
carriers, forwarding agents, truckers, warehousemen,
vendors, selling agents, finishers, convertors or
other third parties who may have possession of the
Inventory.
c. Upon sale, exchange, lease or disposition of the
Inventory or Equipment, the security interest of the
Lender shall without break in continuity and without
further formality or act continue in and attach to
all cash and non-cash proceeds of such sale,
exchange, lease or disposition, including Inventory
returned or rejected by customers or repossessed by
either the Borrower or the Lender. As to any such
sale, exchange, lease or disposition, the Lender
shall have all of the rights of an unpaid seller
allowed by applicable law and this Agreement,
including stoppage in transit, replevin, detinue and
reclamation.
4.3 Certain Rights of the Lender. The Lender shall have the right, but
not the obligation, (i) to pay any taxes or levies on the Collateral or any
costs to repair or to preserve the Collateral; and (ii) to cure any defaults by
Borrower on contracts by the Borrower intended to give rise to Accounts. Such
payments and the costs of curing such defaults shall constitute Advances under
the Revolving Note and shall be secured pursuant to this Agreement, irrespective
of whether the Borrower would then be entitled to such Advances under this
Agreement.
4.4 Financing Statements; Possession of Collateral by Lender; Control.
At the request of the Lender, Borrower will execute financing statements,
continuation statements and other documents with respect to the Collateral
pursuant to the UCC or otherwise, in form satisfactory to the Lender, and
Borrower will pay the cost of filing the same in all public offices wherever the
Lender deems filing to be necessary or desirable. Borrower agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement, provided however,
that it shall not limit the obligations of Borrower as previously set forth
herein. Borrower grants the Lender the right, and irrevocably authorizes the
Lender, at the Lender's option, to file any or all such financing statements,
continuation statements and other documents pursuant to the UCC and otherwise,
without Borrower's signature, and irrevocably appoints the Lender as Borrower's
attorney-in-fact to execute any such statements and documents in Borrower's name
and to perform all other acts which the Lender deems appropriate to perfect and
to continue the security interests conferred by this Agreement.
In addition, upon request of Lender, Borrower shall immediately deliver to
Lender, or authorize and direct any and all Persons in possession of Collateral,
to immediately deliver to Lender all Collateral for which Lender requires
possession to perfect its security interest in such Collateral, properly
endorsed or acknowledged. Furthermore, Borrower shall take all such actions as
may be requested by Lender to allow Lender to exercise control over any
Collateral for the purpose of allowing Lender to perfect its security interest
in Collateral which Collateral may include Deposit
17
Accounts, Investment Property, Letter-of-Credit Rights and electronic Chattel
Paper. Borrower shall execute and deliver to Lender, and have any other Persons
in possession or control of Collateral, execute and deliver to Lender, control
or other agreements, in form and substance satisfactory to Lender.
4.5 Records of Collateral; Information. Borrower at all times will
maintain accurate books and records covering the Collateral. Borrower
immediately will xxxx all books and records with an entry showing the absolute
assignment of and granting of a security interest in all Collateral to Lender,
and hereby grants the Lender the right to audit and make copies of the books and
records of Borrower relating to Collateral at any time and from time to time.
Borrower shall (i) promptly furnish the Lender with any information with respect
to Collateral requested by Lender; (ii) allow the Lender or its representatives
to inspect the Collateral, at any time and wherever located and in whomever's
possession the Collateral may be, and to inspect and copy, or furnish the Lender
or its representatives with copies of all records relating to the Collateral;
(iii) furnish the Lender or its representatives such information as the Lender
may request to identify the Collateral, at the time and in the form requested by
Lender; and (iv) deliver upon request to Lender shipping and delivery receipts
evidencing the shipment of goods and invoices evidencing the receipt of the
Collateral and payment for the Collateral.
4.6 No Release. No injury to the Collateral, loss or destruction of the
Collateral, failure to perfect or to continue the perfection of Lender's
security interest in the Collateral, or release of Lender's security interest in
the Collateral, or any part of it, shall relieve Borrower of any obligation
under this Agreement or under any of the other Loan Documents. Borrower
expressly waives all defenses based on suretyship or impairment of collateral,
and shall not be released or discharged of any obligation under the Loan
Documents, in whole or in part, by Lender's failure to protect or preserve the
Collateral unless caused by the gross negligence or willful misconduct of
Lender. Each Person comprised by the term Borrower waives notice of any change
in financial condition of any Person liable for the Loans or any part thereof,
and agrees that maturity of the Loans or any part thereof may be accelerated,
extended or renewed one or more times by Lender in its discretion, without
notice to the Person and without affecting Lender's security interest in the
Collateral. Lender shall not be required to bring any action against any other
Person or to resort to any other security or to any balance of any deposit
account as a condition of enforcing its rights against any of the Collateral.
4.7 Indemnification; Risk of Loss. In any suit, proceeding or action
brought by or against the Lender relating to the Collateral, the Borrower will
defend, indemnify and keep the Lender harmless from and against all expense,
loss or damage (including reasonable attorneys' fees) suffered by reason of any
defense, set-off, counterclaim, recoupment or reduction of liability whatsoever
of account debtor or other obligor of the Borrower. The foregoing obligation of
the Borrower to indemnify the Lender shall survive the payment of the Loans and
the termination of this Agreement, but shall not extend to any suit, proceeding
or action arising out of the Lender's gross negligence or willful misconduct.
18
In addition, the risk of any loss or damage associated with the Collateral,
including without limitation, any Collateral in the possession of Lender shall
be borne by the Borrower; provided, that Lender shall be responsible for any
loss resulting from Lender's gross negligence or willful misconduct. In the
event that Lender is in possession of Collateral, (a) Borrower shall be liable
to Lender and shall pay to Lender, upon demand, all reasonable expenses,
including the cost of insurance and payment of taxes or other charges, incurred
in the custody, preservation, use or operation of the Collateral, and all such
expenses shall be secured by the Collateral; and (b) Lender may use and operate
the Collateral, as determined in its sole and absolute discretion, (I) to
preserve the Collateral or its value, (ii) as permitted by an order of a court
having competent jurisdiction, or (iii) as otherwise set forth herein or as
previously or hereafter agreed to by Borrower. Notwithstanding anything in this
Agreement to the contrary, Lender shall have no duty and be under no obligation
to collect any income accruing on the Collateral or to preserve any rights
relating to the Collateral.
ARTICLE 5. BORROWER'S REPRESENTATIONS AND WARRANTIES.
To induce the Lender to enter into this Agreement and to extend the
Revolving Loan to Borrower, Borrower makes the following representations and
warranties to the Lender. These representations and warranties are continuing,
and each request for an Advance shall be deemed to be an affirmation that these
representations and warranties are true, complete and correct in all material
respects as of the date of the most recent Compliance Certificate submitted
prior to the request.
5.1 Corporate Authority; Subsidiaries. Each Person encompassed by the
definition of Borrower (I) is a corporation duly organized, validly existing,
and in good standing under the laws of its state of incorporation as shown on
Schedules 5.1-1 through 5.1-3 , and the exact legal name of the Borrower is as
set forth above in the definition of Borrower; (ii) is qualified to do business
as a foreign corporation and is in good standing in all jurisdictions where its
activities or ownership of property require such qualification, and (iii) has
the full and unrestricted power and authority, corporate and otherwise, to own,
operate and lease its properties, to carry on its business as currently
conducted, to execute and deliver and perform the Loan Documents, to incur the
obligations provided for herein and therein, and to perform the transactions
contemplated hereby and thereby (including without limitation, the creation of
the lien and security interest in favor of the Lender in the Collateral and any
other Collateral required by this Agreement), all of which have been duly and
validly authorized by all proper and necessary action (all of which actions are
in full force and effect). Borrower has no subsidiaries other than those
previously disclosed in writing to the Lender, which subsidiaries are as
follows: OCM Direct, Inc. owns all of the stock of Collegiate Carpets, Inc., a
Maryland corporation, CarePackages, Inc., a Delaware corporation and
Xxxxxxxx.xxx, Inc., an inactive Delaware corporation. Each of the Persons
comprised by the term Borrower maintains it chief executive office at the
location stated in Schedules 5.1-1 through 5.1-3 attached hereto and made a
part hereof, and the information in Exhibit A to Schedules 5.1-1 through 5.1-3
is complete and accurate in all material respects.
19
5.2 Approvals. Borrower has provided Lender with a true and accurate
certificate of a Resolution of the Borrower's Board of Directors authorizing the
loan transactions contemplated by this Agreement. No further approval, consent
or other action by the stockholders of Borrower, by any governmental authority
or by any other Person is or will be necessary to permit the valid execution,
delivery or performance by Borrower of this Agreement or any of the other Loan
Documents.
5.3 Binding Effect, No Violations. Each of the Loan Documents, upon its
execution and delivery, will constitute a legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms, except as
such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws of general
applicability affecting the enforcement of creditors' rights and (b) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The
execution, delivery and performance of the Loan Documents will not (I) violate,
conflict with or constitute a default (with due notice, lapse of time or both)
under any law, regulation, order or any other requirement of any court,
tribunal, arbitrator or governmental authority, any terms of the Articles or
Certificate of Incorporation or Bylaws of Borrower, or any contract, agreement
or other arrangement binding upon or affecting Borrower or any of its
properties, or (ii) result in the creation, imposition or acceleration of any
indebtedness or any Encumbrance of any nature upon, or with respect to, Borrower
or any of its properties, except such Encumbrances in favor of Lender.
5.4 Litigation. Except as set forth in Schedule 5.4 attached hereto and
made a part hereof, there is no claim, litigation, proceeding or investigation
pending, threatened or reasonably anticipated against or affecting Borrower, its
properties or business, this Agreement, any of the other Loan Documents, or any
of the transactions contemplated hereby or thereby, the total of any such
claims, litigation, proceedings or investigations exceeding in the aggregate at
any time the sum of Fifty Thousand and 00/100 Dollars ($50,000.00), before or by
any court, tribunal, arbitrator or governmental authority, and to the best of
Borrower's information, knowledge and belief, there is no possibility of any
judgment, liability or award which reasonably may be expected to result in any
material adverse change in the business, operations, prospects, properties or
assets or condition, financial or otherwise, of Borrower. Borrower is not in
default with respect to any judgment, order, writ, injunction, decree, rule,
award or regulation of any court, governmental instrumentality or agency,
commission, board, bureau, arbitrator or arbitration panel.
5.5 Title to and Condition of Assets. The Borrower has good, valid and
marketable title to all of its properties and assets (whether real or personal)
and has the power to transfer its rights and interest in the Collateral, and
there exist no Encumbrances on any of Borrower's properties or assets, including
without limitation, the Collateral. Upon the execution and delivery of this
Agreement, and upon (a) the filing of financing statements, (b) the Lender's
taking possession of the Collateral, (c) Lender's receipt of a satisfactory
acknowledgment from a Person in possession of any Collateral that such
Collateral is in the possession of such Person and is
20
being held for the benefit of Lender, or (d) Lender obtaining satisfactory
control over any of the Collateral consisting of Investment Property, Deposit
Accounts, Letter-of-Credit Rights or electronic Chattel Paper or such other
Collateral for which control is required to perfect a security interest (as
control is defined in the UCC), as the case may be, the Lender will have a good,
valid and perfected first priority lien and security interest in the Collateral,
subject to no Encumbrance in favor of any other Person except Permitted
Encumbrances.
5.6 Loan Application. The statements made and the documents delivered
by Borrower to the Lender in connection with its application for the Revolving
Loan and in connection with this Agreement and the other Loan Documents on or
after January 1, 2001 are true, correct and complete, in all material respects,
omit no material facts, are not misleading, and present fairly the condition
(financial or otherwise) of Borrower. Borrower certifies further that the
information set forth in the Borrower Information Statements attached hereto as
Schedules 5.1-1 through 5.1-3 (and in all exhibits thereto) is true, accurate
and complete as of the date of this Agreement.
5.7 No Change. No change in the business, operations, properties or
condition (financial or otherwise) of Borrower or Guarantor, or any other event,
has occurred since the date of the most recent financial statements submitted to
the Lender by Borrower, which change might adversely affect the ability of
Borrower to perform or comply with all terms, conditions and agreements to be
performed or complied with by Borrower under this Agreement or under any of the
other Loan Documents, or to perform the transactions contemplated by this
Agreement or the other Loan Documents.
5.8 Taxes. Borrower has timely filed all tax returns and reports
required by any governmental authority to be filed by Borrower or has with
reasonable grounds contested the same or has filed for an extension of the
filing period therefor, and such returns and reports are true and correct.
Borrower has paid all taxes, assessments and other government charges imposed
upon it or its income, profits or properties, or upon any part thereof, other
than those presently payable without penalty or interest, except such taxes,
assessments or other government charges for which (I) the validity thereof is
being contested by Borrower in good faith and by proper proceedings, (ii)
Borrower has set aside on its books adequate reserves therefor, and (iii) in the
case where any such tax, assessment or other government charge might become an
Encumbrance upon any item of the Collateral or any part thereof, Borrower has
made arrangements acceptable to the Lender to secure the payment thereof.
Borrower has also timely filed all claims for refunds to which Borrower is
entitled. The amounts reserved as a liability for income and other taxes payable
in the most recent financial statements of Borrower provided to the Lender are
sufficient for the payment of all unpaid federal, state, county and local
income, excise, property and other taxes, whether or not disputed, of Borrower,
accrued for or applicable to the period and on the dates of such financial
statements and all years and periods prior thereto, and for which Borrower may
be liable in its own right or as a transferee of the assets of, or as successor
to, any other Person.
5.9 No Default. No Event of Default, and no event which with notice,
lapse of time or other condition would constitute an Event of Default, has
occurred and is continuing.
21
5.10 Compliance with Laws, Governance Documents and Agreements.
Borrower has complied and is in full compliance with all applicable laws,
ordinances, rules, regulations, orders and other requirements of any
governmental authority or arbitrator, and with all terms and conditions of its
Governance Documents, and with each agreement binding upon or affecting Borrower
or any of its properties. Borrower is not in default with respect to any Debt.
Borrower will take all necessary actions to remain in full compliance with such
laws, ordinances, rules, regulations, orders and any other requirements, the
Governance Documents and all other agreements. Should Borrower be deemed by any
governmental authority or deem itself to be in violation of any relevant law,
ordinance, rule, regulation, orders or other requirement, Governance Document or
agreement, Borrower shall notify the Lender promptly of such violation and take
all appropriate remedial actions. Without limiting the generality of the
foregoing, Borrower represents to Lender that: (1) Borrower has previously
disclosed to Lender all of Borrower's activities that involve the use,
manufacturing, storage, disposal, emission, discharge, generation or
transportation of Hazardous Wastes, Toxic Substances or other materials
regulated by Environmental Laws; (2) Borrower has complied and is in full
compliance with all Environmental Laws; (3) Borrower maintains in full force and
effect all permits required by Environmental Laws; and (4) there exists no
pending or threatened litigation, order, ruling, notice or investigation
regarding the Borrower's use, manufacturing, storage, disposal, emission,
discharge generation or transportation of Hazardous Wastes or Toxic Substances
or regarding any violation or alleged violation of any Environmental Laws.
5.11 Licenses and Contracts. All franchises, licenses, trademarks,
trade names, copyrights, patents, permits, certificates, consents, approvals,
authorizations, agreements and contracts necessary to operate Borrower's
business as it currently is being operated and to own or lease Borrower's
property have been obtained, are in effect, have been complied with in all
material respects by Borrower, are free from challenge, and are fully assignable
to the Lender for the purpose of securing the Revolving Loan. Borrower has no
knowledge and has not received any notice to the effect that any product it
manufactures or sells, or any service it renders, or any process, method,
know-how, trade secret, part or material it employs in the manufacture of any
product it makes or sells or any service it renders, or the marketing or use by
it or another of any such product or service, may infringe any trademark, trade
name, copyright, patent, trade secret or legally protected right of any other
Person.
5.12 Intellectual Property. The Borrower owns all right, title and
interest in and to all Intellectual Property used in and material to the
operation of its business or, for such Intellectual Property that is not owned,
possesses adequate licenses or other legally enforceable rights to use the same.
The Borrower has no reason to believe that any valid basis exists upon which a
claim adversely affecting any such Intellectual Property may be asserted against
the Borrower or any subsidiary. To the best knowledge of the Borrower, no Person
is infringing upon the Intellectual Property used by the Borrower or any
subsidiary material to the operation of their respective businesses. The
Borrower has taken appropriate steps to protect the secrecy, confidentiality and
22
value of its and all subsidiaries' rights in and to such Intellectual Property
and to prevent others from using such Intellectual Property without consent.
5.13 Disclosure. No representation or warranty of Borrower contained in
this Agreement or any of the Loan Documents and no written statement of fact
furnished or to be furnished by Borrower to the Lender pursuant to this
Agreement or any of the Loan Documents, when viewed together, contains or will
contain any untrue statement of a fact material to the financial condition of
Borrower, or omits or will omit to state any material fact necessary in order to
make the statements contained herein or therein, or furnished herewith or
therewith, not misleading.
5.14 Trade Name; Merger. Except as shown in Schedules 5.1-1 through
5.1-3 attached hereto and made a part hereof, during the fifteen years
immediately preceding the date of this Agreement: (1) neither the Borrower nor
any predecessor of the Borrower has used any corporate or fictitious name other
than its current corporate name; (2) Borrower has not changed its name, or been
the surviving entity in a merger or acquired any business; (3) neither the
Borrower nor any predecessor of Borrower has changed its state of incorporation;
and (4) Borrower has not utilized and does not utilize any trade name or trade
names in the conduct of its business.
5.15 Payment of Employees and Subcontractors. Borrower is not in
default with regard to the payment of any employee or subcontractor.
5.16 ERISA Borrower is in compliance with Borrower's obligations under
ERISA. Without limiting the generality of the foregoing:
a. During the five-year period prior to the date on
which this representation is made or deemed made: (I)
no Termination Event has occurred, and, to the best
of the Borrower's knowledge, no event or condition
has occurred or exists as a result of which any
Termination Event could reasonably be expected to
occur, with respect to any Plan; (ii) no "accumulated
funding deficiency," as such term is defined in
Section 302 of ERISA and Section 412 of the Code,
whether or not waived, has occurred with respect to
any Plan; (iii) each Plan has been maintained,
operated and funded in compliance with its own terms
and in material compliance with the provisions of
ERISA, the Code, and any other applicable federal or
state laws; and (iv) no lien in favor of the PBGC or
a Plan has arisen or is reasonably likely to arise on
account of any Plan.
b. The actuarial present value of all "benefit
liabilities" under each Single Employer Plan
(determined within the meaning of Section 401(a)(2)
of the Code, utilizing the actuarial assumptions used
to fund such Plans), whether or not vested, did not,
as of the last annual valuation date prior to the
date
23
on which this representation is made or deemed made,
exceed the current value of the assets of such Plan
allocable to such accrued liabilities.
c. Neither the Borrower nor any of its subsidiaries nor
any ERISA Affiliate has incurred, or, to the best of
the Borrower's knowledge, are reasonably expected to
incur any withdrawal liability under ERISA to any
Multiemployer Plan or Multiple Employer Plan. Neither
the Borrower, any of its subsidiaries nor any ERISA
Affiliate has received any notification that any
Multiemployer Plan is in reorganization (within the
meaning of Section 4241 of ERISA), is insolvent
(within the meaning of Section 4245 of ERISA), or has
been terminated (within the meaning of Title IV of
ERISA), and no Multiemployer Plan is, to the best
knowledge of the Borrower, reasonably expected to be
in reorganization, insolvent or terminated.
d. No prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) or
breach of fiduciary responsibility has occurred with
respect to a Plan which has subjected or may subject
the Borrower or any of its subsidiaries or any ERISA
Affiliate to any liability under Sections 406, 409,
502(i), or 502(l) of ERISA or Section 4975 of the
Code, or under any agreement or other instrument
pursuant to which the Borrower or any of its
subsidiaries or any ERISA Affiliate has agreed or is
required to indemnify any Person against any such
liability.
ARTICLE 6. BORROWER'S AFFIRMATIVE COVENANTS.
Until all obligations of Borrower under this Agreement and the other
Loan Documents are paid in full and performed, Borrower covenants and agrees
that it shall:
6.1 Payment of Revolving Loan. Punctually make the payments on the
Revolving Loan at the times and places and in the manner specified in the
Revolving Note.
6.2 Corporate Existence. Preserve, maintain and keep in full force and
effect its corporate existence and good corporate standing in the jurisdiction
of its incorporation.
6.3 Corporate Rights and Franchises; Qualification; Orderly Conduct of
Business. Preserve, maintain and keep in full force and effect all franchises,
licenses, permits, certificates, consents, approvals, authorizations, agreements
and contracts material to the operation of Borrower's business as it currently
is being conducted and which are necessary to carry on Borrower's business,
whether now existing or hereafter granted to or obtained by Borrower; qualify
and remain qualified as a foreign corporation in each jurisdiction in which such
qualification is necessary or desirable in view of its activities and ownership
of property and which are necessary to carry on Borrower's business; continue to
engage in a business of the same
24
general type as now conducted by it; and conduct such business in an orderly,
efficient and regular manner consistent with the conduct of its business prior
to the date of this Agreement. Borrower shall also have delivered to Lender
prior to the Closing Date, true, exact and complete copies of the employment
contracts entered into with Borrower by Xxxxx Xxxxxx, Xxxx Xxxxxx, Xxxxx Xxxxxxx
and Xxxxxx Xxxxxxx.
6.4 Taxes, Charges and Obligations. Pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income, profits, properties or any part thereof, prior to the date on which
penalties attach thereto, as well as all claims which, if unpaid, might become
an Encumbrance upon any properties of Borrower, and pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all of the indebtedness and other obligations of whatever nature of
Borrower; however, Borrower shall not be required to pay any such tax,
assessment, charge, levy, claim, indebtedness or obligation so long as (I) the
validity thereof is being contested by Borrower in good faith and by proper
proceedings, (ii) Borrower sets aside on its books adequate reserves therefor,
and (iii) in the case where any such tax, assessment, charge, claim or levy
might become an Encumbrance upon any item of the Collateral or any part thereof,
Borrower makes arrangements acceptable to the Lender to secure the payment
thereof.
6.5 Maintenance of Property. Preserve and keep all property used in its
business, including without limitation, the Collateral, in good repair, working
order and condition, and from time to time make all necessary or desirable
repairs, renewals and replacements thereof.
6.6 Insurance. Maintain and keep in full force and effect, with
financially sound and reputable insurance companies reasonably acceptable to the
Lender, insurance in such amounts and covering such risks as the Borrower and
Lender believe are reasonably necessary and as are usually carried by companies
engaged in similar businesses and owning similar properties in the same general
areas in which Borrower operates (but in any event, casualty insurance covering
the Borrower's tangible personal property and real estate for their full
replacement value and comprehensive public liability insurance coverage with
limits of not less than One Million and 00/100 Dollars ($1,000,000.00) for any
one occurrence and Three Million and 00/100 Dollars ($3,000,000.00) for the
aggregate of all occurrences during a policy period of no more than one (1)
year), all such insurance policies to be in form and substance reasonably
satisfactory to the Lender. If requested by the Lender, Borrower shall also
procure, maintain and keep in full force and effect business interruption
insurance in an amount, in form and issued by companies acceptable to the Lender
in all respects. All liability insurance policies shall name the Lender as an
additional insured, and all casualty insurance or business interruption
insurance policies shall name Lender as the lender loss payee. All insurance
policies shall prohibit cancellation (including cancellation for nonpayment of
premium) or reduction of coverage except with thirty (30) days' prior written
notice to and consent of the Lender. At least thirty (30) days prior to the
expiration date of each and every insurance policy required by this Agreement,
Borrower shall obtain and deliver to the Lender a renewal or substitution policy
in form and substance satisfactory to the Lender.
25
6.7 Contract Obligations. Perform in accordance with its terms every
contract, agreement, obligation or other arrangement to which Borrower is a
party or by which it or any of its property is bound which are material to the
operation or condition (financial or otherwise) of Borrower, except to the
extent that the contract or agreement is inconsistent with this Agreement. In
the event that any default or performance deficiency occurs, Borrower shall
notify the Lender promptly in writing. Notwithstanding the above, Borrower shall
perform in accordance with the terms of this Agreement and the Loan Documents,
regardless of whether such terms are material to the operation or condition
(financial or otherwise) of the Borrower.
6.8 Compliance with Laws. Comply with all applicable laws, regulations,
orders and other requirements of any court, tribunal, arbitrator or governmental
authority, non-compliance with which could have a material adverse effect on the
business, operations, property or condition (financial or otherwise) of
Borrower. Without limiting the generality of the foregoing, Borrower shall: (1)
comply strictly and in all respects with all Environmental Laws affecting the
Borrower or its property; (2) promptly forward to the Lender copies of all
orders, notices, permits, applications or other communications and reports
finding or alleging that Borrower or its property does not comply with any of
the Environmental Laws; (3) promptly provide a proposed response action, or plan
with respect to any failure to comply with Environmental Laws; and (4) defend
the Lender, indemnify the Lender, and hold the Lender harmless from and against
any claims, demands, suits, actions, judgements, decrees, losses or damages,
including attorneys' fees, arising out of the failure of Borrower of any of its
properties to comply with any of the Environmental Laws. To the extent that
Federal or state laws, rules, regulations or orders establish requirements which
relate to the disposition of property, compliance by Lender with such laws,
rules or regulations in any disposition or sale of the Collateral shall not be
deemed to adversely effect the commercial reasonableness of any such sale or
disposition, or otherwise render the sale or disposition commercially
unreasonable.
6.9 Books and Records. Keep and maintain at its chief executive offices
adequate and proper records and books of account, in which complete entries are
made in accordance with GAAP, consistently applied, and in accordance with all
laws, regulations, orders and other requirements of any court, tribunal,
arbitrator or governmental authority, reflecting all financial and other
transactions of Borrower normally and customarily included in records and books
of account of companies engaged in the same or similar businesses and activities
as Borrower.
6.10 Access to Borrower's Properties, Books and Records. Permit the
Lender and any agents or representatives thereof to visit and inspect the
Borrower's properties to examine and make abstracts and copies from any of
Borrower's books and records at any and all times (during normal business hours
and after reasonable notice if no Event of Default has occurred and continues to
exist under this Agreement, and at any and all times if an Event of Default has
occurred and continues to exist under this Agreement) and as often as the Lender
or such agents or representatives may desire, and to discuss the business,
operations, properties and condition
26
(financial and otherwise) of Borrower with any of the officers, directors,
agents or representatives (including without limitation, the independent
certified public accountants) of Borrower.
6.11 Financial and Other Statements. Furnish (or cause to be furnished
or provided) to the Lender the following statements, which must be satisfactory
to the Lender in form and substance, at the times and in the manner specified
below:
a. Annual Financial Statements. As soon as available,
but in no event more than ninety (90) days after the
close of each of the Borrower's fiscal years, audited
consolidated financial statements for that year to
include consolidating statements stating the
Borrower's financial condition. The financial
statements shall be prepared by an independent
certified public accountant reasonably acceptable to
Lender, in accordance with GAAP, consistently
applied. The financial statements must be acceptable
to Lender in form and substance, and shall contain
such detail as Lender may require. The financial
statements shall include a consolidated balance sheet
as of the end of such fiscal year, a statement of
financial condition, changes in shareholder equity, a
profit and loss statement and a cash flow statement,
with consolidating schedules, and a Compliance
Certificate. Borrower shall also furnish to Lender on
December 15 of each year, projections (budgets) for
the upcoming fiscal year, which projections shall
include a balance sheet, cash flow and profit and
loss statement, all in detail satisfactory to Lender.
If the Borrower comprises a parent corporation and
its subsidiaries, the financial statements shall
state the financial condition of the parent
corporation and those subsidiaries on a consolidated
basis.
b. Management Letters. Promptly upon receipt thereof,
copies of any reports submitted to the Borrower by
independent certified public accountants in
connection with examination of the financial
statements of the Borrower made by such accountants,
or if no management letter is prepared, a letter from
such auditor stating that no deficiencies were noted
that would otherwise be addressed in a management
letter;
c. Annual Financial Statements and Tax Returns for
Guarantor. At all times that securities issued in the
Guarantor are subject to the reporting requirements
under the Securities Exchange Act of 1934, as amended
(the "34 Act"), Guarantor shall filer annual audited
consolidating financial statements for the Guarantor
in a timely manner in accordance with the rules and
regulations of the Securities Exchange Commission
promulgated pursuant to the 34 Act. In the event that
securities issued in Guarantor should cease being
subject to the reporting requirements of the 34 Act,
Guarantor shall deliver to Lender annual audited
consolidating financial statements for the Guarantor,
by no later than ninety (90) days after the end
27
of each of Guarantor's fiscal years, prepared in
accordance with generally accepted accounting
principles and providing such information as Lender
may require concerning the Guarantor's financial
condition, said financial statements to include a
consolidating balance sheet, profit and loss
statement and a cashflow statement, all as of the
Guarantor's fiscal year end, with consolidating
schedules.
Guarantor shall also deliver to Lender, upon filing with the applicable taxing
authorities (1) full and complete copies of all federal and state tax returns,
together with all schedules thereto, and (2) all requests for extensions of time
to file any such tax returns.
In addition to all of the above, Guarantor shall deliver to Lender, with
reasonable promptness, such additional information, reports or statements as the
Lender may from time to time request.
d. Borrower Quarterly Statements and Certificates. As
soon as available but in no event more than
forty-five (45) days after the close of each of the
Borrower's fiscal quarters, the Borrower will
provide:
1. management prepared balance sheets,
profit and loss statements and cashflow statements,
with supporting schedules, prepared on a consolidated
and consolidating basis, and with comparisons to
original projections previously provided to Lender.
2. a Compliance Certificate signed by an
authorized financial officer of the Borrower (1)
setting forth the information and computations (in
sufficient detail) to establish that Borrower is in
compliance with all financial covenants at the end of
the period covered by the financial statements then
being furnished and (2) stating whether any Event of
Default has occurred as of the date of the financial
statements or the date of the Compliance Certificate,
or any event which, upon notice or lapse of time or
both, would constitute an Event of Default, and if
such an Event of Default exists, specifying the
nature thereof and the action Borrower is taking and
proposes to take with respect thereto. At Lender's
request, the Borrower shall furnish to the Lender
such schedules, certificates, lists, records,
reports, information and documents to enable the
Lender to verify the Compliance Certificate.
e. Guarantor Quarterly Statements and Certificates. As
soon as available but in no event more than
forty-five (45) days after the close of each of
Guarantor's fiscal quarters, the Guarantor will
provide:
28
1. management prepared balance sheets,
profit and loss statements and cashflow statements,
with supporting schedules, prepared on a consolidated
and consolidating basis.
f. Additional Reports and Information. With reasonable
promptness, such additional information, reports or
statements as the Lender may from time to time
request.
6.12 Accounts. Upon the creation of Accounts and Lender's request
therefor, or at any time and from time to time as the Lender may require upon
the occurrence and continuation of an Event of Default under this Agreement,
Borrower shall deliver to the Lender schedules of all outstanding Accounts. Such
schedules shall be in form and detail satisfactory to the Lender, shall show the
age of such Accounts in increments of thirty (30) day increments until any
Account is ninety one (91) or more days past due and shall contain such other
information and be accompanied by such supporting documents as the Lender may
from time to time request. Borrower also shall, upon request of Lender, deliver
to the Lender copies of Borrower's invoices, evidences of shipment or delivery
and such other schedules and information as the Lender may reasonably require.
The items to be provided under this Section are to be prepared and delivered to
the Lender from time to time solely for its convenience in maintaining records
of the Collateral, and Borrower's failure to give any of such items to the
Lender shall not affect, terminate, modify or otherwise limit the Lender's
security interest granted in the Accounts. Borrower shall use its best efforts
and shall take any and all steps necessary to collect its Accounts, including
without limitation, the filing and pursuit of legal action in furtherance of
said collection efforts.
6.13 Collateral. Maintain all tangible Collateral in good condition,
wear and tear and casualty loss excluded; insure insurable Collateral for its
full replacement cost under an insurance policy acceptable to Lender that names
Lender as loss payee; execute, deliver and file, or cause the execution,
delivery and filing of, any and all documents (including without limitation,
financing statements, continuation statements or other writings or records),
necessary or desirable for the Lender to create, perfect, preserve, validate or
otherwise protect a first priority lien and security interest in the Collateral;
maintain, or cause to be maintained, at all times, the Lender's first priority
lien and security interest in the Collateral; immediately upon learning thereof,
report to the Lender any reclamation, return or repossession of any goods
forming a part of the Collateral, any claim or dispute asserted by any account
debtor or other obligor owing an obligation to Borrower, and any other matters
affecting the value or enforceability or collectibility of any of the
Collateral; defend the Collateral against all claims and demands of all Persons
at any time claiming the same or any interest therein adverse to the Lender, and
pay all costs and expenses (including attorneys' fees and expenses) incurred in
connection with such defense; at Borrower's sole cost and expense (including
attorneys' fees and expenses), settle any and all claims, demands and disputes,
and indemnify and protect the Lender against any liability, loss or expenses
arising from any such claims, demands or disputes or out of any such
reclamation, return or repossession of goods forming a part of the Collateral;
however, if the Lender shall so elect, after the occurrence of an Event of
Default and the expiration of relevant cure periods, if any, the Lender
29
shall have the right at all times to settle, compromise, adjust or litigate all
claims and disputes directly with the Customer or other obligor owing an
obligation to Borrower upon such terms and conditions as the Lender deems
advisable, and all costs and expenses thereof (including attorneys' fees and
expenses) shall be incurred for the account of Borrower and shall constitute a
part of the obligations owed to the Lender and secured pursuant to this
Agreement (with collections received by Lender from Customers and applied
towards the Borrower's obligations under this Agreement or the Loan to be
credited towards such obligations or the Loan. The Borrower's Equipment, goods
and other tangible personal property set forth in Schedule 6.13 attached hereto
and made a part hereof shall be kept and maintained at the locations set forth
in said Schedule 6.13; Borrower shall not relocate or move the Equipment, goods
or other tangible personal property without the Lender's prior written consent,
which shall not be unreasonably withheld. If Lender consents to the relocation
of certain Equipment, goods or certain other tangible personal property,
Borrower shall execute, and hereby authorizes the execution by Lender of, all
documents, records or financing statements, and Borrower shall take such action
as Lender may request to assure that Lender's first priority security interest
in the Equipment, goods or other tangible personal property continues to be
perfected under the UCC or other applicable laws.
6.14 Financial Covenants. Maintain:
a. Senior Funded Debt to EBITDA Ratio. A ratio of Senior
Funded Debt to EBITDA on a consolidated basis not
exceeding 3.40 to 1.0 as of the quarter ending March
31, 2002, and no exceeding 2.50 to 1.00 thereafter.
"Senior Funded Debt" shall mean all outstanding
interest bearing indebtedness of Borrower, plus the
face amount of all issued letters of credit, plus all
capitalized lease obligations, less the principal
amount owing by Borrower to Guarantor which has been
subordinated to all indebtedness and obligations of
Borrower to Lender in a manner acceptable to Lender
in its sole discretion.
Compliance with the Senior Funded Debt to EBITDA
ratio will be measured at the end of each quarter, or
at such additional times as Lender may require, on a
rolling four quarter basis, with the initial test to
be on March 31, 2002. The initial test conducted for
the quarter ending on March 31, 2002 shall be based
upon, among other things, the profit and loss
statement for OCM Enterprises, Inc. prior to and
following the acquisition of OCM Enterpises, Inc.,
for the four quarters then ended.
b. Out of Debt Covenant. Reduce the amount of Advances
outstanding on the Revolving Loan under this
Agreement to not more than zero dollars ($0.00) for a
period of at least thirty (30) consecutive days in
each Line-Year. "Line-Year" means the period between
August 1 and October 31 of each year. For purposes of
this Covenant, "Advances" does not include undrawn
amounts of outstanding letters of credit
30
Unless otherwise expressly provided in this Agreement, if the Borrower comprises
a parent corporation and its subsidiaries, the covenants herein relating to the
financial condition of the Borrower refer to the financial condition of the
parent corporation and those subsidiaries stated on a consolidated basis.
6.15 Notice of Litigation, Default and Loss. Give immediate notice to
the Lender upon the occurrence of any Event of Default or event which with
notice or lapse of time or otherwise would constitute an Event of Default, and
of any loss or damage to any of the Collateral. Borrower also shall give
immediate notice to the Lender of any action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or agency (domestic or
foreign), commission, board, bureau, arbitrator or arbitration panel which, if
adversely determined, could materially impair or affect the right of Borrower to
carry on its business substantially as now conducted or could materially affect
its respective business, operations, prospects, properties, assets (including
the Collateral) or condition, financial or otherwise. Immediately upon becoming
aware that the holder of any Debt or Encumbrance has given notice or taken any
action with respect to a claimed breach, default or event of default, a written
notice shall be given by Borrower to Lender specifying the notice given or
action taken by such holder and the nature of the claimed breach, default or
event of default by the Borrower thereunder, and the action being taken or
proposed to be taken with respect thereto.
6.16 Proxy Statements, Etc. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements and reports which
the Borrower sends to its stockholders, and copies of all regular, periodic and
special reports, and all registration statements which the Borrower files with
the Securities and Exchange Commission or any governmental authority which may
be substituted therefor, or with any national securities exchange.
6.17 ERISA. Give prompt notice to Lender of any of the following: (i)
of any event or condition, including, but not limited to, any Reportable Event,
that constitutes, or might reasonably lead to, a Termination Event; (ii) with
respect to any Multiemployer Plan, the receipt of notice as prescribed in ERISA
or otherwise of any withdrawal liability assessed against the Borrower, any of
its subsidiaries or any of its ERISA Affiliates, or of a determination that any
Multiemployer Plan is in reorganization or insolvent (both within the meaning of
Title IV of ERISA); (iii) the failure to make full payment on or before the due
date (including extensions) thereof of all amounts which the Borrower or any of
its subsidiaries or ERISA Affiliate is required to contribute to each Plan
pursuant to its terms and as required to meet the minimum funding standard set
forth in ERISA and the Code with respect thereto; or (iv) any change in the
funding status of any Plan that could have a material adverse effect on the
Borrower's financial condition; together, with a description of any such event
or condition or a copy of any such notice and a statement by the principal
financial officer of the Borrower briefly setting forth the details regarding
such event, condition, or notice, and the action, if any, which has been or is
being taken or is proposed to be taken by Borrower with respect thereto.
Promptly upon request, the Borrower shall furnish to Lender such additional
information concerning any Plan as may be reasonably
31
requested, including, but not limited to, copies of each annual report/return
(Form 5500 series), as well as all schedules and attachments thereto required to
file with the Department of Labor or the Internal Revenue Service pursuant to
ERISA and the Code, respectively, for each "plan year" (within the meaning of
Section 3(39) of ERISA). Such notice shall be given in any event within five (5)
business days after the occurrence of any event that Borrower is required to
report to Lender under this clause.
6.18 Place of Business; Location of Records. Each of the Persons
comprised by the term Borrower shall maintain its chief executive office, and
the office where its records are kept, at its respective address stated in
Schedules 5.1-1 through 5.1-3 attached hereto and made a part hereof. The
Borrower shall provide Lender with fourteen (14) days' advance written notice of
any change in the location of its chief executive office or the office at which
its records are kept.
6.19 Depository Accounts. Maintain Lender as its principal depository
bank, including for maintenance of business, cash management, operating and
administrative deposit accounts.
ARTICLE 7. BORROWER'S NEGATIVE COVENANTS.
Until all obligations of Borrower under this Agreement and the other
Loan Documents are paid in full and performed, Borrower covenants and agrees
that it shall not, unless the Lender otherwise consents in advance in writing:
7.1 Indebtedness and Contingent Obligations. Contract for any
additional Debt other than the loan from Guarantor to Borrower in the principal
amount of Two Million Two Hundred Fifty Thousand and 00/100 Dollars
($2,250,000.00) which loan shall have been, among other things, fully
subordinated to the Revolving Loan, this Agreement and the other Loan Documents
pursuant to a Subordination Agreement executed by Guarantor, Borrower and Lender
of even date herewith, or agree to assume, guarantee, indorse or otherwise in
any way be or become responsible or liable, directly or indirectly, for the
obligation of any other Person. However, notwithstanding the foregoing sentence,
Borrower may incur trade debt in the ordinary course of business. As set forth
in the Subordination Agreement, Borrower shall not, among other things, make any
payment of principal on the loan from Guarantor to Borrower which is subject to
the Subordination Agreement unless Borrower shall have a Tangible Net Worth of
not less than Four Million and 00/100 Dollars ($4,000,000.00), after taking into
account the proposed principal payment, and Borrower shall maintain a Tangible
Net Worth of at least Four Million and 00/100 Dollars ($4,000,000.00) at all
times. For purposes of this covenant, "Tangible Net Worth" shall be defined as
Borrower's consolidated stockholder's equity, less goodwill and general
intangibles, less advances due from affiliates, shareholders, officers and
employees (including Two Million Five Hundred Thousand and 00/100 Dollars
($2,500,000.00) or any portion thereof in prepaid expenses delivered by Borrower
to Student Advantage, Inc. contemporaneous with the execution of this Agreement)
, plus any indebtedness that is formally subordinated by an executed written
subordination agreement to the indebtedness owing to Lender.
32
7.2 Encumbrances. Create, incur, assume or suffer to exist any
Encumbrance (other than a permitted Encumbrance) upon any of its properties or
assets (including without limitation, the Collateral), whether now owned or
hereafter acquired.
7.3 Fundamental Changes. Amend its Articles or Certificate of
Incorporation by any amendment which would adversely affect Borrower's ability
to perform or comply with any of the terms, conditions or agreements to be
performed or complied with by Borrower hereunder or to perform any of the
transactions contemplated hereby; change its state of incorporation; change its
fiscal year or corporate name; have Guarantor directly or indirectly sell,
assign, transfer, encumber or otherwise convey more than ten percent (10%) of
the stock in OCM Direct, Inc. (the entire outstanding stock of OCM Direct, Inc.
being owned as of closing by Guarantor); have OCM Direct, Inc. directly or
indirectly sell, assign, transfer, encumber or otherwise convey more than ten
percent (10%) of the stock in Collegiate Carpets, Inc. or CarePackages, Inc.
(the entire outstanding stock of Collegiate Carpets, Inc. and CarePackages, Inc.
being owned by OCM Direct, Inc.); convert its organizational form into another
entity form or establish any new entity to perform the business or similar
business of Borrower; reorganize, acquire, consolidate or merge with any other
entity, whether in one transaction or a series of related transactions.
7.4 Acquisitions. Purchase, lease or otherwise acquire the assets,
business, goodwill or securities of any other Person, including, without
limitation, shares of stock in corporations, partnership interests in general or
limited partnerships or membership interests in limited liability companies, or
acquire any other business.
7.5 Transfer of Assets. Sell, lease, assign, pledge or otherwise
dispose of any of its properties, stock or assets (including without limitation,
the Collateral), whether now owned or hereafter acquired, except in the ordinary
course of business and for fair market value.
7.6 Investments. Purchase or hold any stock, or evidence of
indebtedness of any other Person or entity except investments in direct
obligations of the United States Government and certificates of deposit of
United States commercial banks insured by the Federal Deposit Insurance
Corporation.
7.7 Loans. Make loans or advances to any Person or Persons that exceed
the sum of Twenty Five Thousand and 00/100 Dollars ($25,000.00) for any one
loan, and which loans exceed at any time in the aggregate the sum of Seventy
Five Thousand and 00/100 Dollars ($75,000.00) outstanding at any time, except
reasonable advances for business expenses of Borrower's employees that would be
reimbursable under Borrower's existing expense reimbursement policy and are made
in the ordinary course of Borrower's business.
7.8 Guaranty. Guaranty or provide surety or pledge or hypothecate
assets for the obligation of any other Person or Persons, except for a Permitted
Encumbrance.
33
7.9 Repurchase of Securities. Purchase, redeem or otherwise acquire any
of its own capital stock or purchase, acquire, redeem, retire or make any
payment on account of the principal of any indebtedness of Borrower, except at
the stated maturity of such indebtedness, and except payments of indebtedness
incurred under this Agreement.
7.10 Use of Proceeds. Use, or allow the use of, the proceeds of the
Revolving Loan for any purpose which would cause this Agreement to violate any
Regulations of the Board of Governors of the Federal Reserve System; or for any
purpose other than the purposes or purposes specified hereinabove.
7.11 Other Agreements. Enter into any agreement or undertaking
containing any provision which would be violated or breached by Borrower's
performance of its obligations under the Loan Documents.
7.12 Sale and Leaseback. Enter into any arrangement whereby Borrower
sells or transfers all or any substantial part of its fixed assets then owned by
it and thereupon, or within one (1) year thereafter, rents or leases the assets
so sold or transferred from the purchaser or transferor (or their respective
successors in interest).
7.13 Capital Expenditures. Spend or incur obligations (including the
total amount of any capital leases) for more than Five Hundred Thousand and
00/100 Dollars ($500,000.00) in any single fiscal year to acquire fixed assets.
7.14 Dividends. Declare or pay dividends on account of any class of
stock in the Borrower, or make any advances or distribution of assets to
Borrower's stockholders, whether in cash, assets or obligations of Borrower;
provided, however, that Borrower shall be permitted to make a one time
distribution at Closing to the Reservoir Parties (as defined under that certain
Intercreditor Agreement between such Reservoir Parties, Student Advantage, Inc.,
the Subsidiaries [as also defined therein] and Lender dated as of February 13,
2002), from an Advance on the Revolving Loan made in accordance with and subject
to the terms and provisions of this Agreement, in an amount not to exceed Two
Million Five Hundred Thousand and 00/100 Dollars ($2,500,000.00), such
distribution to be deemed a prepayment by OCM Direct, Inc. to the Guarantor for
future services to be rendered by the Guarantor to OCM Direct, Inc. Borrower
represents, warrants and covenants that the referenced $2,500,000.00
distribution is, and shall be recorded on the Borrower's books as, a prepaid
expense, and shall be fully applied towards such expense (resulting in a zero
balance) by no later than June 30, 2002.
7.15 Transactions with Affiliates. Except as specifically permitted by
the terms of this Agreement, enter into any transaction, including without
limitation, the purchase, sale or exchange of property or the rendering of any
service, with any Affiliate, except in the ordinary course of and pursuant to
the reasonable requirements of the Borrower's business and upon fair and
reasonable terms no less favorable to the Borrower than would be applicable in a
comparable arm's-length transaction with a Person not an Affiliate.
34
ARTICLE 8. COLLECTION, DEPOSIT AND ASSIGNMENT OF PAYMENTS.
8.1 Cash Collateral Account. Upon the occurrence of a default or Event
of Default under this Agreement and following a request of Lender, Borrower
shall cause all Payments to be deposited into the Cash Collateral Account. In
furtherance of this covenant, Borrower shall instruct all Customers to make all
Payments either by electronic funds transfer directly to the Cash Collateral
Account or by check to a post office box or other collection facility under
Lender's control for deposit into the Cash Collateral Account. If any Payments
are made directly to the Borrower or otherwise come into the Borrower's
possession, the Borrower shall not commingle any such Payment with the
Borrower's other funds or property, but shall hold the Payment separate and
apart in trust for the Lender and shall promptly deliver the Payment to the
Lender (appropriately endorsed, if the Payment is in the form of a check) for
deposit into the Cash Collateral Account. Interest (if any) earned on sums on
deposit in the Cash Collateral Account shall be added to the Cash Collateral
Account. The Borrower hereby appoints the Lender and any officer, employee or
agent of the Lender as the Lender may from time to time designate as
attorneys-in-fact for the Borrower to endorse and sign the name of the Borrower
on all checks, drafts, money orders or other Items delivered to the Lender for
deposit into the Cash Collateral Account. The Cash Collateral Account shall
constitute part of the Collateral, and funds on deposit in the Cash Collateral
Account shall be applied towards the amounts due and owing under the Revolving
Note, this Agreement and/or the other Loan Documents as determined by Lender in
its sole and absolute discretion, and provided no Event of Default has occurred
and remains uncured, the remaining funds shall be deposited into Borrower's
Operating Account. If an Event of Default has occurred and remains uncured,
Payments received by Lender shall be applied as the Lender may determine in its
sole discretion. Borrower retains sole responsibility for assuring that
Borrower's Operating Account contains sufficient funds to pay any Items that may
be presented for payment from the Operating Account.
8.2 Overdrafts. At Lender's sole option in each instance, Lender may do
one of the following:
a. Lender may make Advances under the Revolving Note to
prevent or to cover an overdraft on account of
Borrower with Lender. Each such Advance will accrue
interest from the date of the Advance or the date on
which the account is overdrawn, whichever occurs
first, at the interest rate described in the
Revolving Note. Lender may make such Advances even if
the Advances may cause the balance owing under the
Revolving Note to exceed the Maximum Revolving
Commitment Amount.
b. Lender may reduce the amount of credit otherwise
available under the Revolving Note by the amount of
any overdraft on any account of Borrower with Lender.
This section shall not be deemed to authorize Borrower to create overdrafts on
any of Borrower's accounts with Lender.
35
ARTICLE 9. EVENTS OF DEFAULT AND REMEDIES.
9.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default under this Agreement:
a. Borrower shall fail to pay, when due, any sum payable
under the Revolving Note or this Agreement within
five (5) calendar days from the date when such sum
became due; or
b. any representation or warranty made by or on behalf
of Borrower herein or in any of the other Loan
Documents which, in the Lender's judgment, shall
prove to have been materially incorrect or misleading
or breached in any respect on or as of any date as of
which made; or
c. a decree or order for relief of Borrower shall be
entered by a court of competent jurisdiction in any
involuntary case involving Borrower under any
bankruptcy, insolvency or similar law now or
hereafter in effect, or a receiver, liquidator or
other similar agent for Borrower or for any
substantial part of Borrower's assets or property
shall be appointed, or the winding up or liquidation
of Borrower's affairs shall be ordered, or any action
by any creditor (other than the Lender) of Borrower
preparatory to or for the purpose of commencing any
such involuntary case, appointment, winding up or
liquidation shall be taken, and such proceeding shall
not have been dismissed within sixty (60) days after
the date it commenced; or
d. Borrower shall commence a voluntary case under any
bankruptcy, insolvency or similar law now or
hereafter in effect, or Borrower shall consent to the
entry of an order for relief in an involuntary case
under any such law or to the appointment of or taking
possession by a receiver, liquidator or other similar
agent for Borrower or for any substantial part of
Borrower's assets or property, or Borrower shall make
any general assignment for the benefit of creditors,
or Borrower shall take any action preparatory to or
otherwise in furtherance of any of the foregoing, or
Borrower shall fail generally to pay its debts as
such debts come due; or
e. there shall be a default or event of default under
any indebtedness or obligation of Borrower or
Guarantor to any third party in excess of Fifty
Thousand and 00/100 Dollars ($50,000.00) that causes
that third party to declare such indebtedness or
other obligation due prior to its scheduled date of
maturity; or
f. one or more judgments or decrees in an amount of more
than Fifty Thousand and 00/100 Dollars ($50,000.00)
shall be entered against
36
Borrower (not paid or fully covered by insurance) and
all such judgments or decrees have not been vacated,
discharged, stayed or bonded pending appeal within
thirty (30) days from the entry thereof, or any
attachment or garnishment shall be issued against
Borrower or Borrower's property; or
g. any material change in the business, operations,
property, assets or condition (financial or
otherwise) of Borrower or the Guarantor shall occur
which adversely affects the ability of Borrower to
meet and carry out its obligations under this
Agreement or any of the other Loan Documents or to
perform the transactions contemplated herein or
thereby, the materiality of such change to be
determined by the Lender in its sole discretion; or
h. any loss, theft, damage or destruction of any
material portion of the Collateral for which there is
either no insurance coverage or for which, in the
opinion of the Lender, there is insufficient
insurance coverage; or
i. the majority voting control in Borrower is directly
or indirectly sold, assigned, transferred, encumbered
or otherwise conveyed without the prior written
consent of the Lender; or
j. any of the following events or conditions shall
occur: (1) any "accumulated funding deficiency," as
such term is defined in Section 302 of ERISA and
Section 412 of the Code, whether or not waived, shall
exist with respect to any Plan, or any lien shall
arise on the assets of the Borrower or any of its
subsidiaries or any ERISA Affiliate in favor of the
PBGC or a Plan; (2) a Termination Event shall occur
with respect to a Single Employer Plan, which, in the
Lender's opinion, is likely to result in the
termination of such Plan for purposes of Title IV of
ERISA; (3) a Termination Event shall occur with
respect to a Multiemployer Plan or Multiple Employer
Plan, which in the Lender's opinion, is likely to
result in (i) the termination of such Plan for
purposes of Title IV of ERISA, or (ii) the Borrower
or any of its subsidiaries or any ERISA Affiliate
incurring any liability in connection with a
withdrawal from, reorganization of (within the
meaning of Section 4241 of ERISA), or insolvency or
(within the meaning of Section 4245 of ERISA) such
Plan; or (4) any prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of
the Code) or breach of fiduciary responsibility shall
occur which may subject the Borrower or any of its
subsidiaries or any ERISA Affiliate to any liability
under Section 406, 409, 502(i), or 502(l) of ERISA or
Section 4975 of the Code, or under any agreement or
other instrument pursuant to which the Borrower or
any of its subsidiaries or any ERISA Affiliate has
agreed or is required to indemnify any Person against
any such liability; or
37
k. any event of default occurs under the Guaranty,
or any notice is given by any Guarantor purporting to
terminate such Guarantor's liability with respect to
all or any part of the Revolving Loan or any other
obligations under such Guarantor's Guaranty; or
l. the death, disability or termination of legal
existence of any Guarantor; or
m. Borrower or any other Person standing as a Guarantor
for the Loan or providing security for the Loan shall
fail to observe or perform any other term, covenant
or agreement contained in this Agreement or in any
other Loan Document or in any other agreement
(including, without limitation, any Swap Agreement)
with the Lender or any of Lender's Affiliates to be
observed or performed on its part and such default
shall continue unremedied for a period of ten (10)
Business Days after written notice of the existence
of such default is given by Lender. The cure period
described in this paragraph is inapplicable to the
Events of Default listed in the paragraphs above.
If one of the foregoing events or circumstances occurs to which a cure period
applies, Lender will not exercise its rights and remedies under this Agreement
to collect the Loans except as Lender reasonably deems necessary to protect its
interests in the Collateral, but Lender shall not be required to make any new
Advances or other financial accommodations unless and until the default is
timely cured under this Agreement. Notwithstanding anything in this Agreement to
the contrary, any right to cure a default is applicable only to defaults for
which a cure period has been provided. Borrower shall have no right to cure any
default for which no cure period has been provided.
9.2 Rights and Remedies of the Lender. Upon the occurrence of any Event
of Default and the expiration of any applicable cure periods, the Lender may, at
its option, exercise any one or more of the following rights and remedies:
a. Declare this Agreement and the Lender's obligation to
make or extend any Advances on the Revolving Loan to
be terminated, and declare the entire unpaid
principal amounts of the Revolving Loan, all interest
accrued and unpaid thereon, and all other amounts
payable under this Agreement and the other Loan
Documents to be accelerated, and to be immediately
due and payable (except that upon the occurrence of
an Event of Default arising out of voluntary or
involuntary bankruptcy proceedings in which the
Borrower is the debtor, such acceleration shall occur
automatically and immediately without any declaration
or other action on the part of the Lender) whereupon
the Revolving Loan, all such accrued interest, and
all such amounts shall become and be immediately due
and payable, without presentment, demand, protest or
further notice of any kind, all of which are
38
hereby expressly waived by Borrower, anything
contained herein or in any of the other Loan
Documents to the contrary notwithstanding;
b. Take possession or control of, store, lease, operate,
manage, sell or otherwise dispose of all or any part
of the Collateral in accordance with the remedies
provided to secured parties under the UCC, this
Agreement, the Loan Documents or other applicable
law. In taking possession of the Collateral, the
Lender may enter the Borrower's premises and
otherwise proceed without legal process, and the
Borrower shall on the Lender's demand, promptly
assemble and make the Collateral available to the
Lender at a place designated by the Lender. The
Lender shall be entitled to immediate possession of
all books and records evidencing or pertaining to any
of the Collateral. In the event of any sale or other
disposition of the Collateral, Lender may disclaim
any warranty relating to title, possession, quiet
enjoyment or any other warranty of the like,
including without limitation, any warranty of
merchantability or fitness for a particular purpose.
c. Notify any or all Customers to make any Payments due
to Borrower from such Customers directly to the
Lender and render performance to or for the benefit
of Lender of any obligations of such Customer(s) to
Borrower. To facilitate direct collection, Borrower
hereby appoints the Lender and any officer or
employee of the Lender, as the Lender may from time
to time designate, as attorney-in-fact for Borrower
to (i) receive, open and dispose of all mail
addressed to Borrower and take therefrom any Payments
on or proceeds of Accounts; (ii) take over Borrower's
post office boxes or make such other arrangements, in
which Borrower shall cooperate, to receive Borrower's
mail, including notifying the post office authorities
to change the address for delivery of mail addressed
to Borrower to such address as the Lender shall
designate; (iii) endorse the name of Borrower in
favor of the Lender upon any and all checks, drafts,
money orders, notes, acceptances or other evidences
of payment or Collateral that may come into the
Lender's possession; (iv) sign and endorse the name
of Borrower on any invoice or xxxx of lading relating
to any of the Accounts, on verifications of Accounts
sent to any Customer, to drafts against any Customer,
to assignments of Accounts, and to notices to any
Customer; and (v) do all acts and things necessary to
carry out this Agreement and the transactions
contemplated hereby, including signing the name of
Borrower on any instruments required by law in
connection with the transactions contemplated hereby
and on financing statements as permitted under the
UCC of any appropriate state. Borrower hereby
ratifies and approves all acts of such
attorneys-in-fact, and neither the Lender nor any
other such attorney-in-fact shall be liable for any
acts of commission or omission, or
39
for any error of judgment or mistake of fact or law
of any such attorney-in-fact. This power, being
coupled with an interest and given to secure an
obligation, is irrevocable so long as the Revolving
Loan remains unsatisfied, or any Loan Document
remains effective, as solely determined by the
Lender. Lender shall have no obligation or duty to
pursue any Person other than Borrower for the amounts
owing under or in connection with the Revolving Loan,
this Agreement or the other Loan Documents, including
without limitation any guarantors or Persons pledging
property to secure the Loans. To the extent such
rights may now or hereafter exist, Borrower waives
the right to require Lender to pursue any Persons
other than Borrower to pay the amounts owing under
the Revolving Note, this Agreement or other Loan
Documents;
d. In the Lender's own name, or in the name of Borrower,
demand, collect, receive, xxx for and give receipts
and releases for, any and all amounts due on
Accounts, but the Lender shall not, under any
circumstances, be liable for any error or omission or
delay of any kind occurring in the settlement,
collection or payment of any Accounts or any
instrument received in payment thereof or for any
damage resulting therefrom;
e. Endorse as the agent of Borrower any Chattel Paper,
documents or Instruments forming all or any part of
the Collateral;
f. Make formal application for the transfer of all of
Borrower's permits, licenses, approvals, agreements
and the like relating to the Collateral or to
Borrower's business to the Lender or to any assignee
of the Lender or to any purchaser of any of the
Collateral;
g. Obtain appointment of a receiver for all or any of
the Collateral, Borrower hereby consenting to the
appointment of such a receiver and agreeing not to
oppose any such appointment. Any receiver so
appointed shall have such powers as may be conferred
by the appointing authority including any or all of
the powers, rights and remedies which the Lender is
authorized to exercise by the Loan Documents, and
shall have the right to incur such obligations and to
issue such certificates therefor as the appointing
authority shall authorize;
h. Take any other action which the Lender deems
necessary or desirable to protect and realize upon
its security interest in the Collateral;
i. File any legal action or lawsuit and obtain a
judgement for any and all amounts owing under the
Revolving Note, this Agreement or the other Loan
Documents, and in conjunction with any such action,
Lender may
40
pursue any ancillary remedies provided by law,
including without limitation, attachment,
garnishment, execution and levy.
j. Borrower acknowledges that any failure to comply with
its obligation regarding the Collateral, including
(without limiting the generality of the foregoing)
granting of Assignments and collection of the
Accounts, shall cause irreparable harm to the Lender
for which the Lender has no adequate remedy at law,
and agrees that the Lender shall be entitled to
specific performance, an injunction or other
equitable relief to enforce the Borrower's
obligations under this Agreement; and
k. In addition to the foregoing, and not in substitution
therefor, exercise any one or more of the rights and
remedies exercisable by the Lender under other
provisions of this Agreement, under any of the other
Loan Documents, or provided by applicable law
(including, without limiting the generality of the
foregoing, the UCC) including without limitation,
generally enforcing any or all of Borrower's rights
and remedies against any Customers; provided, that
Lender shall be under no obligation to do so.
9.3 Application of Proceeds. Any proceeds from the collection or sale
or other disposition of the Collateral shall be applied in the following order
of priority:
First, to the payment of all expenses of retaking, holding,
preparing for disposition, processing, collecting, storing, leasing, operating,
managing, selling or disposing of the Collateral, and to the payment of all sums
which the Lender may be required or may elect to pay, if any, for taxes,
assessments, insurance and other charges upon such Collateral or any part
thereof, and of all other payments which the Lender may be required or
authorized to make under any provision of this Agreement or of any other Loan
Document (including in each such case reasonable legal costs and attorneys' fees
and expenses);
Second, to the payment of all obligations on the Revolving
Loan under this Agreement, and under the other Loan Documents, and to the
payment of any other obligations due to the Lender, in such order as the Lender
may determine in its sole discretion; and
Third, if required by the UCC or other applicable law, to the
satisfaction of obligations secured by any security interest in or other lien on
the Collateral or as otherwise directed by a court of competent jurisdiction;
and
Fourth, to the payment of any surplus then remaining to
Borrower; provided that Borrower shall be liable for any deficiency if the
proceeds of the Collateral are insufficient to satisfy all obligations due to
the Lender.
41
9.4 Collection/Enforcement Costs. Borrower shall pay all reasonable
costs and expenses incurred by Lender in connection with the enforcement of its
rights under this Agreement and the other Loan Documents, including without
limitation, legal costs and attorneys' fees (whether or not suit is instituted),
paralegal and expert witness fees and costs, and arbitration fees and costs, and
in connection with the collection of any sums from Borrower.
ARTICLE 10. MISCELLANEOUS PROVISIONS.
10.1 Additional Actions and Documents. Borrower shall take or cause to
be taken such further actions, shall execute, deliver and file or cause to be
executed, delivered and filed such further documents and instruments, and shall
obtain such consents as may be necessary or as the Lender may reasonably request
in order fully to effectuate the purposes, terms and conditions of this
Agreement and the other Loan Documents, whether before, at or after the closing
of transactions contemplated hereby and thereby or the occurrence of an Event of
Default hereunder, including without limitation, executing such documents and
taking such further actions as requested by Lender to evidence or perfect the
security interest(s) granted in accordance with this Agreement, to maintain a
first priority security interest in the Collateral for the benefit of Lender, or
to effectuate the rights of Lender hereunder.
10.2 Expenses. Borrower shall, whether or not the transactions
contemplated hereby are consummated, (i) reimburse the Lender, on demand, and
save the Lender harmless against liability for the payment of all out-of-pocket
expenses arising in connection with: (a) the preparation, execution, delivery or
filing of this Agreement or any of the Loan Documents; or (b) the administration
or enforcement of this Agreement or any of the Loan Documents; or (c) the
preservation or exercise of any rights (including the right to collect and
dispose of the Collateral) under this Agreement or any of the other Loan
Documents; and (ii) pay on demand of Lender and hold the Lender and each
subsequent holder of the Note harmless from and against, any and all present and
future stamp taxes or similar document taxes or recording taxes and any and all
charges with respect to or resulting from any delay in paying, or failure to
pay, such taxes. Without limiting the generality of the foregoing, the expenses
covered by this paragraph include the Lender's legal fees, the costs of audits
or examinations conducted by the Lender's employees and any arbitration fees or
court costs.
10.3 Notices. Except as may otherwise be provide herein, all notices,
demands, requests or other communications provided for herein or in the other
Loan Documents shall be in writing and shall be deemed to be effective one (1)
day after dispatch if sent by Federal Express or any other commercially
recognized overnight delivery service or four (4) days after dispatch if sent by
registered or certified mail, return receipt requested and addressed as follows:
If to Borrower:
OCM Direct, Inc.
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
42
with copies to:
Student Advantages, Inc.
000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Chief Financial Officer and General Counsel
and
Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Esquire
If to Lender:
Bank of America, N.A.
0000 Xxxxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Vice President
and
Bank of America, N.A.
000 X. Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
With copy to:
Xxxxxx X. Xxxxxx, Esquire
Bean, Xxxxxx & Xxxxxx, P.C.
0000 X. 00xx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
If the Borrower comprises more than one Person, notice to the Borrower at the
address specified above in this section for OCM Direct, Inc. shall constitute
notice to all such Persons, and each Person signing below as the Borrower hereby
irrevocably appoints OCM Direct, Inc. as that Person's agent to receive notices
from the Lender under this Agreement or the other Loan Documents.
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication thereafter may be so given, served or sent.
Each notice, demand, request or communication which is mailed, delivered or
transmitted in the manner described above shall be
43
deemed sufficiently given, served, sent or received for all purposes at such
time as it is delivered: (i) to the United States Postal Service, in the case of
a notice given by certified mail; or (ii) to Federal Express or any other
commercially recognized overnight delivery service, in accordance with the terms
and procedures for such delivery.
Any notices required under the UCC with respect to the sale or other disposition
of the Collateral shall be deemed reasonable if mailed by the Lender to the
Persons entitled thereto at their last known address at least ten (10) days
prior to disposition of the Collateral.
10.4 Severability. If fulfillment of any provision of the Loan
Documents or performance of any transaction related thereto, at the time such
fulfillment or performance shall be due, shall involve transcending the limit of
validity prescribed by law, then the obligation to be fulfilled or performed
shall be reduced to the limit of such validity; and if any clause or provision
contained in any Loan Document operates or would operate prospectively to
invalidate any Loan Document, in whole or in part, then such clause or provision
only shall be held ineffective, as though not herein or therein contained, and
the remainder of the Loan Documents shall remain operative and in full force and
effect.
10.5 Survival. It is the express intention and agreement of the parties
hereto that all covenants, agreements, statements, representations, warranties
and indemnities made by Borrower in the Loan Documents shall survive the
execution and delivery of the Loan Documents and the making of all Advances and
extensions of credit thereunder.
10.6 Waivers. No waiver by the Lender of, or consent by the Lender to,
a variation from the requirements of any provision of the Loan Documents shall
be effective unless made in a written instrument duly executed on behalf of the
Lender by its duly authorized officer, and any such waiver shall be limited
solely to those rights or conditions expressly waived.
10.7 Rights Cumulative. The rights and remedies of the Lender described
in any of the Loan Documents are cumulative and not exclusive of any other
rights or remedies which the Lender or the then holder of the Revolving Note
otherwise would have at law or in equity or otherwise. No notice to or demand on
Borrower in any case shall entitle Borrower to any other notice or demand in
similar or other circumstances.
10.8 Entire Agreement; Modification; Benefit. This Agreement, the
schedules hereto, and the other Loan Documents constitute the entire agreement
of the parties hereto with respect to the matters contemplated herein, supersede
all prior oral and written agreements with respect to the matters contemplated
herein, and may not be modified, deleted or amended except by written instrument
executed by the parties. All terms of this Agreement and of the other Loan
Documents shall be binding upon, and shall inure to the benefit of and be
enforceable by, the parties hereto and their respective successors and assigns;
however, Borrower may not assign or transfer any of its rights or obligations
hereunder without the prior written consent of the Lender. In the event of
44
any conflict between the terms of this Agreement and the terms of the other Loan
Documents, the terms of this Agreement shall control.
10.9 Setoff. In addition to any rights or remedies of the Lender
provided by law, upon the occurrence of any Event of Default hereunder, or any
event or circumstance which, with the giving of notice or the passage of time or
both, would constitute an Event of Default hereunder, the Lender is irrevocably
authorized, at any time or times without prior notice to Borrower, to set off,
appropriate and apply any and all deposits, credits, indebtedness or claims at
any time held or owing by the Lender to or for the credit or the account of
Borrower, in such amounts as the Lender may elect, against and on account of the
obligations and liabilities of Borrower to the Lender hereunder or under any of
the other Loan Documents, whether or not the Lender has made any demand for
payment, and although such obligations and liabilities may be contingent or
unmatured.
10.10 Construction. This Agreement and the other Loan Documents, the
rights and obligations of the parties hereto, and any claims or disputes
relating thereto shall be governed by and construed in accordance with the laws
of the State of Maryland (excluding the choice of law rules thereof) except to
the extent that the UCC provides for either (a) the application of the laws of
the state in which Borrower maintains its chief executive office, (b) the
application of the laws of the state in which the collateral is located, (c) the
application of the laws of the state in which the Debtor is located or (d)
otherwise mandates the application of the laws of another state or jurisdiction.
Each party hereto hereby acknowledges that all parties hereto participated
equally in the negotiation and drafting of this Agreement and that, accordingly,
no court construing this Agreement shall construe it more stringently against
one party than against the other.
10.11 Pronouns. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the identity
of the Person may require.
10.12 Headings. Article, section and subsection headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.
10.13 Payments. If any payment or performance of any of the obligations
under this Agreement or any of the other Loan Documents becomes due on a day
other than a Business Day, the due date shall be extended to the next succeeding
Business Day, and interest thereon (if applicable) shall be payable at the then
applicable rate during such extension.
10.14 Execution. To facilitate execution, this Agreement and any of the
other Loan Documents may be executed in as many counterparts as may be required;
and it shall not be necessary that the signature of, or on behalf of, each
party, or the signatures of all Persons required to bind any party, appear on
each counterpart; but it shall be sufficient that the signature of, or on behalf
of, each party, or the signatures of the Persons required to bind any party,
appear
45
on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of this
Agreement or any other Loan Document to produce or account for any particular
number of counterparts; but rather any number of counterparts shall be
sufficient so long as those counterparts contain the respective signatures of,
or on behalf of, all of the parties hereto.
10.15 Consent to Jurisdiction. Subject to any provision of this
Agreement requiring that disputes be submitted to arbitration, the Borrower
irrevocably consents to the jurisdiction of any state or federal court sitting
in the State of Maryland over any suit, action, or proceeding arising out of or
relating to this Agreement or the other Loan Documents. The Borrower irrevocably
waives, to the fullest extent permitted by law, any objection that the Borrower
may now or hereafter have to the laying of venue of any such suit, action, or
proceeding brought in any such court, or any claim that any such suit, action,
or proceeding brought in any such court has been brought in an inconvenient
forum. Final judgment in any such suit, action, or proceeding brought in any
such court shall be conclusive and binding upon the Borrower.
10.16 Service of Process. The Borrower consents to process being served
in any suit, action or proceeding by mailing a copy thereof by registered or
certified mail postage prepaid, return receipt requested, to the Borrower's
address specified in or designated in this Agreement. The Borrower agrees that
such service (I) shall be deemed in every respect effective service of process
upon the Borrower in any such suit, action or proceeding and (ii) shall, to the
fullest extent permitted by law, be taken and held to be valid personal service
upon and personal delivery to the Borrower. Nothing in this Section shall affect
the right of the Lender to serve process in any manner permitted by law, or
limit any right that the Lender may have to bring proceedings against the
Borrower in the courts of any jurisdiction or to enforce in any lawful manner a
judgment obtained in one jurisdiction in any other jurisdiction.
10.17 Assignment; Sale of Loan Documents; Disclosure of Information.
Subject to Lender receiving a confidentiality agreement satisfactory to Lender
from such Person interested in purchasing or being assigned any rights of Lender
in the Loan Documents, Borrower hereby consents to and agrees that Lender may
disclose to any Person any and all information connected with or related to the
Revolving Loan or other Loan Documents for the purpose of selling or assigning
any rights of Lender in the Loan Documents. The information which may be
disclosed by Lender includes but is not limited to all Loan Documents, credit
files and correspondence files and all other writings and oral communications
which Lender wishes to disclose, in its sole and absolute discretion. Borrower
also hereby consents to and agrees that Lender may sell or assign any rights of
Lender in any or all of the Loan Documents pursuant to such terms and conditions
as may be acceptable to Lender in its sole and absolute discretion, to any
interested Person, and nothing in this Agreement or the other Loan Documents
shall prevent, delay or otherwise impede or effect the right of Lender to
immediately sell or assign any rights of Lender in the Loan Documents on such
terms as it deems acceptable. Furthermore, Debtor waives and agrees not to
assert against any Person assigned any rights of Lender in the Loan Documents
any claims,
46
defenses or set-offs which Debtor may have been entitled to assert against
Lender, except such defenses which may not be waived by operation of law.
Borrower shall not be entitled to assign its interest in this Agreement without
the prior written consent of Lender, and any such attempt of Borrower to assign
its interest without the prior written consent of Lender shall be null and void.
10.18 ARBITRATION.
This paragraph concerns the resolution of any controversies or claims
between the Borrower and the Lender, whether arising in contract, tort or by
statute, including but not limited to controversies or claims that arise out of
or relate to: (I) this Agreement (including any renewals, extensions or
modifications); or (ii) any document related to this Agreement; (collectively a
"Claim").
At the request of the Borrower or the Lender, any Claim shall be
resolved by binding arbitration in accordance with the Federal Arbitration Act
(Title 9, U.S. Code) (the "Act"). The Act will apply even though this Agreement
provides that it is governed by the law of a specified state.
Arbitration proceedings will be determined in accordance with the Act,
the applicable rules and procedures for the arbitration of disputes of JAMS or
any successor thereof ("JAMS"), and the terms of this paragraph. In the event of
any inconsistency, the terms of this paragraph shall control.
The arbitration shall be administered by JAMS and conducted in any U.S.
state where real or tangible personal property collateral for this credit is
located or if there is no such collateral, in Maryland. All Claims shall be
determined by one arbitrator; however, if Claims exceed $5,000,000, upon the
request of any party, the Claims shall be decided by three arbitrators. All
arbitration hearings shall commence within 90 days of the demand for arbitration
and close within 90 days of commencement and the award of the arbitrator(s)
shall be issued within 30 days of the close of the hearing. However, the
arbitrator(s), upon a showing of good cause, may extend the commencement of the
hearing for up to an additional 60 days. The arbitrator(s) shall provide a
concise written statement of reasons for the award. The arbitration award may be
submitted to any court having jurisdiction to be confirmed and enforced.
The arbitrator(s) will have the authority to decide whether any Claim
is barred by the statute of limitations and, if so, to dismiss the arbitration
on that basis. For purposes of the application of the statute of limitations,
the service on JAMS under applicable JAMS rules of a notice of Claim is the
equivalent of the filing of a lawsuit. Any dispute concerning this arbitration
provision or whether a claim is arbitrable shall be determined by the
arbitrator(s). The arbitrator(s) shall have the power to award legal fees
pursuant to the terms of this Agreement.
47
This paragraph does not limit the right of the Borrower or the Lender
to: (I) exercise self-help remedies, such as but not limited to, setoff; (ii)
initiate judicial or nonjudicial foreclosure against any real or personal
property collateral; (iii) exercise any judicial or power of sale rights, or
(iv) act in a court of law to obtain an interim remedy, such as but no limited
to, injunctive relief, writ of possession or appointment of a receiver, or
additional or supplementary remedies.
10.19 WAIVER OF TRIAL BY JURY. BY AGREEING TO BINDING ARBITRATION,
BORROWER AND LENDER IRREVOCABLY AND VOLUNTARILY WAIVE ANY RIGHT THEY MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF A CLAIM. FURTHERMORE, WITHOUT INTENDING IN ANY WAY
TO LIMIT THIS AGREEMENT TO ARBITRATE, TO THE EXTENT ANY CLAIM IS NOT ARBITRATED,
THE PARTIES IRREVOCABLY AND VOLUNTARILY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF SUCH CLAIM. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE PARTIES ENTERING INTO THIS AGREEMENT.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement,
or have caused this Agreement to be duly executed on their behalf, as of the day
and year first hereinabove set forth.
OCM DIRECT, INC., a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxx, Xx.
---------------------------------------------
Name: Xxxxxxx X. Xxxxx, Xx.
-------------------------------------------
Title: President
------------------------------------------
COLLEGIATE CARPETS, INC., a Maryland corporation
By: /s/ Xxxxxxx X. Xxxxx, Xx.
---------------------------------------------
Name: Xxxxxxx X. Xxxxx, Xx.
-------------------------------------------
Title: President
------------------------------------------
CAREPACKAGES, INC., a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxx, Xx.
---------------------------------------------
Name: Xxxxxxx X. Xxxxx, Xx.
-------------------------------------------
Title: President
------------------------------------------
48
BANK OF AMERICA, N.A.
By: /s/ Xxxxxxx X. Xxxxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxxxx
Vice President
Commonwealth of Massachusetts )
County of Suffolk ) S/S
--------------------
Subscribed and sworn to before me this 14th day of February, 2002, by
Xxxxxxx X. Xxxxx, Xx. as President of OCM Direct, Inc., a Delaware
corporation.
/s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
Notary Public
My commission expires: 9/4/03
---------------------
[SEAL]
Commonwealth of Massachusetts )
County of Suffolk ) S/S
--------------------
Subscribed and sworn to before me this 14th day of February, 2002, by
Xxxxxxx X. Xxxxx, Xx. as President of Collegiate Carpets, Inc., a Maryland
corporation.
/s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
Notary Public
My commission expires: 9/4/03
---------------------
[SEAL]
49
Commonwealth of Massachusetts )
County of Suffolk ) S/S
--------------------
Subscribed and sworn to before me this 14th day of February, 2002, by
Xxxxxxx X. Xxxxx, Xx. as President of CarePackages, Inc., a Maryland
corporation.
/s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
Notary Public
My commission expires: 9/4/03
---------------------
[SEAL]
50
SCHEDULE 3.3
(List of Authorized Employees/Officers/Agents)
1. Xxxxxxx Xxxxx
2. Xxxxxxx Xxxxxxx
3. Xxxxx Xxxxx
4. Xxxx Xxxxxx
5. Xxxxx Xxxxxxx
SCHEDULES 5.1-1 through 5.1-3
-----------------------------
[ATTACH SCHEDULE(S) HERE]
SCHEDULE 5.4
------------
LITIGATION AND CLAIMS SCHEDULE
(Description of Litigation and Amount Claimed)
53
SCHEDULE 6.13
-------------
EQUIPMENT LIST AND LOCATION
54
