REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
[GRAPHIC OMITTED]
PNC BANK, NATIONAL ASSOCIATION
(AS LENDER AND AS AGENT)
---------------------------
AND
HMG WORLDWIDE CORPORATION, HMG WORLDWIDE IN-STORE MARKETING,
INC., HMG/INTERMARK WORLDWIDE MANUFACTURING, INC., DISPLAY DEPOT,
INC., HMG XXXXXXXX, INC. and HMG XXXXXX INTERNATIONAL, INC.
(BORROWERS)
August 27, 1999
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TABLES OF CONTENTS
1. DEFINITIONS................................................................1
1.1 Accounting Terms...............................................1
1.2 General Terms..................................................1
1.3 Uniform Commercial Code Terms.................................20
1.4 Certain Matters of Construction...............................20
2. ADVANCES, PAYMENTS........................................................20
2.1 Advances......................................................20
2.2 Procedure for Revolving Advances Borrowing....................21
2.3 Disbursement of Advance Proceeds..............................23
2.4 Term Loan.....................................................23
2.5 Maximum Advances..............................................24
2.6 Repayment of Advances.........................................24
2.7 Repayment of Excess Advances..................................25
2.8 Statement of Account..........................................25
2.9 Letters of Credit.............................................25
2.10 Issuance of Letters of Credit.................................25
2.11 Requirements For Issuance of Letters of Credit................26
2.12 Additional Payments...........................................27
2.13 Manner of Borrowing and Payment...............................28
2.14 Use of Proceeds...............................................29
2.15 Defaulting Lender.............................................30
3. INTEREST AND FEES.........................................................31
3.1 Interest......................................................31
3.2 Letter of Credit Fees.........................................31
3.3 Closing Fee...................................................32
3.4 Facility Fee..................................................32
3.5 Collateral Monitoring Fee.....................................32
3.6 Computation of Interest and Fees..............................32
3.7 Maximum Charges...............................................32
3.8 Increased Costs...............................................32
3.9 Basis For Determining Interest Rate Inadequate or Unfair......33
3.10 Capital Adequacy..............................................34
4. COLLATERAL; GENERAL TERMS................................................35
4.1 Security Interest in the Collateral...........................35
4.2 Perfection of Security Interest...............................35
4.3 Disposition of Collateral.....................................35
4.4 Preservation of Collateral....................................35
4.5 Ownership of Collateral.......................................36
4.6 Defense of Agent's and Lenders' Interests.....................36
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4.7 Books and Records.............................................37
4.8 Financial Disclosure..........................................37
4.9 Compliance with Laws..........................................37
4.10 Inspection of Premises........................................37
4.11 Insurance.....................................................38
4.12 Failure to Pay Insurance......................................38
4.13 Payment of Taxes..............................................39
4.14 Payment of Leasehold Obligations..............................39
4.15 Receivables...................................................39
4.16 Inventory.....................................................42
4.17 Maintenance of Equipment......................................42
4.18 Exculpation of Liability......................................42
4.19 Environmental Matters.........................................43
4.20 Financing Statements..........................................45
5. REPRESENTATIONS AND WARRANTIES............................................45
5.1 Authority; Ownership..........................................45
5.2 Formation and Qualification...................................45
5.3 Survival of Representations and Warranties....................46
5.4 Tax Returns...................................................46
5.5 Financial Statements..........................................46
5.6 Name..........................................................47
5.7 O.S.H.A. and Environmental Compliance.........................47
5.8 Solvency; No Litigation, Violation, Indebtedness or Default...47
5.9 Patents, Trademarks, Copyrights and Licenses..................49
5.10 Licenses and Permits..........................................49
5.11 Default of Indebtedness.......................................49
5.12 No Default....................................................49
5.13 No Burdensome Restrictions....................................50
5.14 No Labor Disputes.............................................50
5.15 Margin Regulations............................................50
5.16 Investment Company Act........................................50
5.17 Disclosure....................................................50
5.18 Swaps.........................................................50
5.19 Conflicting Agreements........................................50
5.20 Application of Certain Laws and Regulations...................51
5.21 Business and Property of Borrower.............................51
5.22 Year 2000.....................................................51
5.23 Interrelatedness of Borrowers.................................51
6. AFFIRMATIVE COVENANTS.....................................................51
6.1 Payment of Fees...............................................51
6.2 Conduct of Business and Maintenance of Existence and Assets...52
6.3 Violations....................................................52
6.4 Government Receivables........................................52
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6.5 Fixed Charge Coverage.........................................52
6.6 Execution of Supplemental Instruments.........................52
6.7 Payment of Indebtedness.......................................52
6.8 Standards of Financial Statements.............................53
6.9 Interest Rate Protection......................................53
7. NEGATIVE COVENANTS........................................................53
7.1 Merger, Consolidation, Acquisition and Sale of Assets.........53
7.2 Creation of Liens.............................................53
7.3 Guarantees....................................................53
7.4 Investments...................................................53
7.5 Loans.........................................................54
7.6 Distributions.................................................54
7.7 Indebtedness..................................................54
7.8 Nature of Business............................................54
7.9 Transactions with Affiliates..................................55
7.10 Leases........................................................55
7.11 Subsidiaries..................................................55
7.12 Fiscal Year and Accounting Changes............................55
7.13 Pledge of Credit..............................................55
7.14 Amendment of Certificate of Incorporation; By-Laws............55
7.15 Compliance with ERISA.........................................55
7.16 Capital Expenditures..........................................56
8. CONDITIONS PRECEDENT......................................................56
8.1 Conditions to Initial Advances................................56
8.2 Conditions to Each Advance....................................59
9. INFORMATION AS TO BORROWER................................................60
9.1 Disclosure of Material Matters................................60
9.2 Schedules.....................................................60
9.3 Environmental Reports.........................................61
9.4 Litigation....................................................61
9.5 Material Occurrences..........................................61
9.6 Government Receivables........................................61
9.7 Annual Financial Statements...................................61
9.8 Quarterly Financial Statements................................62
9.9 Monthly Financial Statements..................................62
9.10 Other Reports.................................................63
9.11 Additional Information........................................63
9.12 Projected Operating Budget....................................63
9.13 Variances From Operating Budget...............................63
9.14 Notice of Suits, Adverse Events...............................63
9.15 ERISA Notices and Requests....................................63
9.16 Borrowing Base Certificate....................................64
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9.17 Daily Settlement Schedules....................................64
9.18 Additional Documents..........................................64
00.XXXXXX OF DEFAULT.........................................................65
11.LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT................................67
11.1 Rights and Remedies...........................................67
11.2 Agent's Discretion............................................68
11.3 Setoff........................................................68
11.4 Rights and Remedies not Exclusive.............................68
12.WAIVERS AND JUDICIAL PROCEEDINGS..........................................68
12.1 Waiver of Notice..............................................68
12.2 Delay.........................................................69
12.3 Jury Waiver...................................................69
13.EFFECTIVE DATE AND TERMINATION............................................69
13.1 Term..........................................................69
13.2 Termination...................................................69
14.REGARDING AGENT...........................................................70
14.1 Appointment...................................................70
14.2 Nature of Duties..............................................70
14.3 Lack of Reliance on Agent and Resignation.....................71
14.4 Certain Rights of Agent.......................................71
14.5 Reliance......................................................72
14.6 Notice of Default.............................................72
14.7 Indemnification...............................................72
14.8 Agent in its Individual Capacity..............................72
14.9 Delivery of Documents.........................................72
14.10 Borrower's Undertaking to Agent...............................73
15.BORROWING AGENCY..........................................................73
15.1 Borrowing Agency Provisions...................................73
15.2 Waiver of Subrogation.........................................73
MISCELLANEOUS................................................................74
16.1 Governing Law.................................................74
16.2 Entire Understanding..........................................74
16.3 Successors and Assigns; Participations; New Lenders...........76
16.4 Application of Payments.......................................77
16.5 Indemnity.....................................................78
16.6 Notice........................................................78
16.7 Survival......................................................79
16.8 Severability..................................................79
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16.9 Expenses......................................................79
16.10 Injunctive Relief.............................................80
16.11 Consequential Damages.........................................80
16.12 Captions......................................................80
16.13 Counterparts; Telecopied Signatures...........................80
16.14 Construction..................................................80
16.15 Confidentiality; Sharing Information..........................80
16.16 Publicity.....................................................81
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12
REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT dated August 27, 1999,
among HMG WORLDWIDE CORPORATION, HMG WORLDWIDE IN-STORE MARKETING, INC.,
HMG/INTERMARK WORLDWIDE MANUFACTURING, INC., DISPLAY DEPOT, INC., HMG XXXXXXXX,
INC. and HMG XXXXXX INTERNATIONAL, INC. (each, individually, a "Borrower" and
jointly, severally and collectively, "Borrowers"), the financial institutions
which are now or which hereafter become a party hereto (collectively, the
"Lenders" and individually a "Lender") and PNC BANK, NATIONAL ASSOCIATION
("PNC"), as agent for Lenders (PNC, in such capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, Borrower, Lenders and Agent hereby agree as follows:
1. DEFINITIONS.
1.1 Accounting Terms. As used in this Agreement, the Notes, or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2, to the extent
therein not defined, shall have the respective meanings given to them under
GAAP; provided, however, whenever such accounting terms are used for the
purposes of determining compliance with financial covenants in this Agreement,
such accounting terms shall be defined in accordance with GAAP as applied in
preparation of the audited consolidated and consolidating financial statements
of HMG Worldwide for the fiscal year ended December 31, 1998.
1.2 General Terms. For purposes of this Agreement the following terms shall
have the following meanings:
"Acceptances" shall mean any existing and future drafts which
involve any Borrower or beneficiary under a Letter of Credit as drawer that are
processed and accepted for payment by Agent or other accepting bank in its
absolute discretion.
"Accountants" shall have the meaning set forth in Section 9.7 hereof.
"Additional Convertible Notes" shall mean one or more 10%
Convertible Debentures issued by HMG Worldwide Corporation in an aggregate
principal amount not to exceed Two Million Dollars ($2,000,000.00), in form and
content and on such terms and conditions as shall be satisfactory to Lenders in
their discretion.
"Advances" shall mean and include the Revolving Advances,
Letters of Credit and the Term Loan.
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"Advance Rates" shall mean, collectively, the Receivables Advance Rate, the
Inventory Advance Rate and the Securities Advance Rate.
"Affiliate" of any Person shall mean (a) any Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with such Person, or (b) any Person who is a director
or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of
any Person described in clause (a) above. For purposes of this definition,
control of a Person shall mean the power, direct or indirect, (x) to vote 30% or
more of the securities having ordinary voting power for the election of
directors of such Person, or (y) to direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
"Agent" shall have the meaning set forth in the preamble to this Agreement
and shall include its successors and assigns.
"Authority" shall have the meaning set forth in Section 4.19(d).
"Base Rate" shall mean the base commercial lending rate of PNC as publicly
announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by PNC as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index, nor does it necessarily reflect the lowest rate of interest
actually charged by PNC to any particular class or category of customers of PNC.
"Blocked Accounts" shall have the meaning set forth in Section 4.15(h).
"Borrower" or "Borrowers" shall have the meaning set forth in the preamble
to this Agreement and shall extend to all permitted successors and assigns of
such Persons.
"Borrowers' Account" shall have the meaning set forth in Section 2.8.
"Borrowing Agent" shall mean HMG Worldwide.
"Business Day" shall mean, with respect to Eurodollar Rate Loans, any day
on which commercial banks are open for domestic and international business,
including dealings in Dollar deposits in London, England and Philadelphia,
Pennsylvania, and with respect to all other matters, any day other than a day on
which commercial banks in Pennsylvania are authorized or required by law to
close.
"Capital Expenditures" shall mean any expenditure that would be classified
as a capital expenditure on a statement of cash flow of any Borrower prepared in
accordance with GAAP.
"Cash" shall mean all lawful cash money of the United States of America,
and all cash equivalents acceptable to Lenders.
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"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. "9601 et seq.
"Change of Control" shall mean (a) the occurrence of any event (whether in
one or more transactions) which results in a transfer of control of any Borrower
(other than HMG Worldwide) to a Person who is not listed on Schedule 5.1 or (b)
any merger or consolidation of or with any Borrower (other than in connection
with or as part of a Permitted Acquisition) or sale of all or substantially all
of the property or assets of any Borrower. For purposes of this definition,
"control of any Borrower (other than HMG Worldwide)" shall mean the power,
direct or indirect (x) to vote 50% or more of the securities having ordinary
voting power for the election of directors of such Borrower (other than HMG
Worldwide) or (y) to direct or cause the direction of the management and
policies of such Borrower (other than HMG Worldwide) by contract or otherwise.
"Change of Ownership" shall mean (a) fifty percent (50%) or more of the
common stock of any Borrower (other than HMG Worldwide) is no longer owned or
controlled by (including, for the purposes of the calculation of percentage
ownership, any shares of common stock into which any capital stock of any
Borrower (other than HMG Worldwide) held by any of the Original Owners is
convertible or for which any such shares of the capital stock of any Borrower
(other than HMG Worldwide) or of any other Person may be exchanged and any
shares of common stock issuable to such Original Owners upon exercise of any
warrants, options or similar rights which may at the time of calculation be held
by such Original Owners) one or more Persons who is or are either an Original
Owner or an Affiliate or Subsidiary of an Original Owner or (b) any merger or
consolidation of or with any Borrower (other than in connection with or as part
of a Permitted Acquisition) or the sale of substantially all of the property or
assets of any Borrower.
"Charges" shall mean all taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation and property taxes,
custom duties, liens, claims and charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts, imposed
by any taxing or other authority, domestic or foreign (including, without
limitation, the Pension Benefit Guaranty Corporation or any environmental agency
or superfund), upon the Collateral, any Borrower or any of its Affiliates.
"Closing Date" shall mean August 27, 1999, or such other date as may be
agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated thereunder.
"Collateral" shall mean and include:
(a) all Receivables;
(b) all Equipment;
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(c) all Financial Assets;
(d) all General Intangibles;
(e) all Inventory;
(f) all Investment Property;
(g) all Real Property;
(h) the Securities Account;
(i) all of each Borrower's right, title and interest in and to (i) its
respective goods and other property including, but not limited to, all
merchandise returned or rejected by Customers, relating to or securing any of
the Receivables; (ii) all of such Borrower's rights as a consignor, a consignee,
an unpaid vendor, mechanic, artisan, or other lienor, including stoppage in
transit, setoff, detinue, replevin, reclamation and repurchase; (iii) all
additional amounts due to such Borrower from any Customer relating to the
Receivables; (vi) other property, including warranty claims, relating to any
goods securing this Agreement; (v) all of such Borrower's contract rights,
rights of payment which have been earned under a contract right, instruments,
documents, chattel paper, warehouse receipts, deposit accounts, money,
securities and investment property; (vi) if and when obtained by such Borrower,
all real and personal property of third parties in which such Borrower has been
granted a lien or security interest as security for the payment or enforcement
of Receivables; and (vii) any other goods, personal property or real property
now owned or hereafter acquired in which such Borrower has expressly granted a
security interest or may in the future grant a security interest to Agent
hereunder, or in any amendment or supplement hereto or thereto, or under any
other agreement between Agent and such Borrower;
(j) all of each Borrower's ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computers, computer
software (owned by such Borrower or in which it has an interest), computer
programs, tapes, disks and documents relating to (a), (b), (c), (d), (e), (f),
(g), (h) or (i) of this Paragraph; and
(k) all proceeds and products of (a), (b), (c), (d), (e), (f), (g), (h),
(i) or (j) in whatever form, including, but not limited to: cash, deposit
accounts (whether or not comprised solely of proceeds), certificates of deposit,
insurance proceeds (including hazard, flood and credit insurance), negotiable
instruments and other instruments for the payment of money, chattel paper,
security agreements, documents, eminent domain proceeds, condemnation proceeds
and tort claim proceeds.
"Commitment Percentage" of any Lender shall mean the percentage set forth
below such Lender's name on the signature page hereof as same may be adjusted
upon any assignment by a Lender pursuant to Section 16.3(c) hereof.
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"Commitment Transfer Supplement" shall mean a document in the form of
Exhibit 16.3 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.
"Consents" shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and other third parties, domestic or foreign, necessary to carry on any
Borrower's business, including, without limitation, any Consents required under
all applicable federal, state or other applicable law.
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Borrowers, are treated as a single employer
under Section 414 of the Code.
"Convertible Notes" means those certain HMG Worldwide Corporation 7%
Convertible Notes due February 24, 2002 in the aggregate principal amount of
$5,000,000.00.
"Customer" shall mean and include the account debtor with respect to any
Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with any Borrower
pursuant to which such Borrower is to deliver any personal property or perform
any services.
"Default" shall mean an event which, with the giving of notice or passage
of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning set forth in Section 3.1 hereof.
"Defaulting Lender" shall have the meaning set forth in Section 2.15(a)
hereof.
"Depository Accounts" shall have the meaning set forth in Section 4.15(h)
hereof.
"Documents" shall have the meaning set forth in Section 8.1(c) hereof.
"Dollar" and the sign "$" shall mean lawful money of the United States of
America.
"Domestic Rate Loan" shall mean any Advance that bears interest based upon
the Base Rate.
"Early Termination Date" shall have the meaning set forth in Section 13.1
hereof.
"Earnings Before Interest and Taxes" shall mean for any period the sum of
(i) net income (or loss) of HMG Worldwide on a consolidated basis for such
period (excluding extraordinary gains, other than on account of any "swap
agreement" contemplated under Section 6.9 hereof), plus (ii) all interest
expense of HMG Worldwide on a consolidated basis for such period,
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plus (iii) all charges against income of HMG Worldwide on a consolidated
basis for such period for federal, state and local taxes.
"EBITDA" shall mean for any period the sum of (i) Earnings Before Interest
and Taxes for such period, plus (ii) depreciation expenses of HMG Worldwide on a
consolidated basis for such period, plus (iii) amortization expenses of HMG
Worldwide on a consolidated basis for such period.
"Eligible Inventory" shall mean and include each Borrower's Inventory of
finished goods and raw materials, valued at the lower of cost or market,
determined on a first-in-first-out basis, which is not, in Agent's opinion,
obsolete, slow moving or unmerchantable and which Agent, in its sole discretion,
shall not deem ineligible Inventory, based on such considerations as Agent may
from time to time deem appropriate including, without limitation, whether the
Inventory is subject to a perfected, first priority security interest in favor
of Agent and whether the Inventory conforms to all applicable and relevant
standards imposed by any governmental agency, division or department thereof.
Eligible Inventory shall include all Inventory in-transit which otherwise meets
all criteria of Eligible Inventory from time to time, the payment for which is
being made pursuant to a Letter of Credit.
"Eligible Receivables" shall mean and include Receivables of each Borrower
arising in the ordinary course of such Borrower's business and which Agent, in
its sole credit judgment, shall deem to be an Eligible Receivable, based on such
considerations as Agent may from time to time deem appropriate. A Receivable
shall not be deemed eligible unless such Receivable is subject to Agent's first
priority perfected security interest and no other Lien (other than Permitted
Encumbrances), and is evidenced by an invoice or other documentary evidence
satisfactory to Agent. In addition, no Receivable shall be an Eligible
Receivable if:
(a) it arises out of a sale made by any Borrower to an Affiliate of any
Borrower or to a Person controlled by an Affiliate of any Borrower;
(b) it is due or unpaid more than sixty (60) days after the original due
date, but in no event more than one hundred twenty (120) days after the original
invoice date;
(c) fifty percent (50%) or more of the Receivables from the Customer
obligated with respect to such Receivable are not deemed Eligible Receivables
hereunder. Such percentage may, in Lenders' sole discretion, be increased or
decreased from time to time;
(d) any covenant, representation or warranty contained in this Agreement
with respect to such Receivable has been breached;
(e) the Customer obligated with respect to such Receivable shall (i) apply
for, suffer, or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property or call a meeting of its creditors, (ii) admit in writing
its inability, or be generally unable, to pay its debts as they become due or
cease operations of its present business, (iii) make a general assignment for
the benefit of creditors, (iv)
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commence a voluntary case under any state or federal bankruptcy laws (as
now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi)
file a petition seeking to take advantage of any other law providing for the
relief of debtors, (vii) acquiesce to, or fail to have dismissed, any petition
which is filed against it in any involuntary case under such bankruptcy laws, or
(viii) take any action for the purpose of effecting any of the foregoing;
(f) the sale giving rise to such Receivable is to a Customer outside the
United States of America and Canada, unless the sale is on letter of credit,
guaranty or acceptance terms, in each case acceptable to Agent in its sole
discretion;
(g) the sale to the Customer obligated with respect to such Receivable is
on a xxxx-and-hold, guaranteed sale, sale- and-return, sale on approval,
consignment or any other repurchase or return basis or is evidenced by chattel
paper;
(h) Agent believes, in its sole judgment, that collection of such
Receivable is insecure or that such Receivable may not be paid by reason of the
relevant Customer's financial inability to pay;
(i) the Customer obligated with respect to such Receivable is the United
States of America, any state or any department, agency or instrumentality of any
of them, unless the relevant Borrower assigns its right to payment of such
Receivable to Agent pursuant to the Assignment of Claims Act of 1940, as amended
(31 U.S.C. Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has
otherwise complied with other applicable statutes or ordinances;
(j) the goods giving rise to such Receivable have not been shipped and
delivered to and accepted by the relevant Customer or its designee or the
services giving rise to such Receivable have not been performed by the relevant
Borrower and accepted by the relevant Customer or such Receivable otherwise does
not represent a final sale;
(k) the Receivables of the Customer obligated with respect to such
Receivable exceed a credit limit determined by Agent, in its sole discretion, to
the extent such Receivable exceeds such limit;
(l) such Receivable is subject to any offset, deduction, defense, dispute,
or counterclaim, the Customer is also a creditor or supplier of any Borrower or
such Receivable is contingent in any respect or for any reason;
(m) the relevant Borrower has made any agreement with the Customer
obligated with respect to such Receivable for any deduction therefrom, except
for discounts or allowances made in the ordinary course of business for prompt
payment, all of which discounts or allowances are reflected in the calculation
of the face value of each respective invoice related thereto, but the relevant
Receivable shall be excluded form Eligible Receivables only to the extent of
such deduction to the extent not already deducted in determining the amount of
such Receivable;
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12
7
(n) any return, rejection or repossession of the merchandise giving rise to
such Receivable has occurred;
(o) such Receivable is not payable to any Borrower; or
(p) such Receivable is not otherwise satisfactory to Agent as determined in
good faith by Agent in the exercise of its discretion in a reasonable manner.
"Eligible Securities" shall mean the Cash and Government Securities from
time to time maintained in the Securities Account, which shall be deemed to be
an Eligible Security by Agent based on such considerations as Agent may from
time to time deem appropriate and which shall be subject to a first priority
security interest in favor of Agent.
"Environmental Complaint" shall have the meaning set forth in Section
4.19(d) ----------------------- --------------- hereof.
"Environmental Laws" shall mean all federal, state and local environmental,
land use, zoning, health, chemical use, safety and sanitation laws, statutes,
ordinances and codes relating to the protection of the environment and/or
governing the use, storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Substances and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and
directives of federal, state and local governmental agencies and authorities
with respect thereto.
"Equipment" shall mean and include all of each Borrower's goods (other than
Inventory) whether now owned or hereafter acquired and wherever located
including, without limitation, all of such Borrower's equipment, machinery,
apparatus, motor vehicles, fittings, furniture, furnishings, fixtures, parts and
accessories and all replacements and substitutions therefor or accessions
thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder.
"Eurodollar Rate Loan" shall mean an Advance at any time that bears
interest based on the Eurodollar Rate.
"Eurodollar Rate" shall mean for any Eurodollar Rate Loan for the then
current Interest Period relating thereto the interest rate per annum determined
by PNC by dividing (the resulting quotient rounded upwards, if necessary, to the
nearest 1/100th of 1% per annum) (i) the rate of interest determined by PNC in
accordance with its usual procedures (which determination shall be conclusive
absent manifest error) to be the eurodollar rate two (2) Business Days prior to
the first day of such Interest Period for an amount comparable to such
Eurodollar Rate Loan and having a borrowing date and a maturity comparable to
such Interest Period by (ii) a number equal to 1.00 minus the Reserve
Percentage.
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"Event of Default" shall mean the occurrence and continuance of any of the
events set forth in Article 10 hereof subject to, to the extent provided for
therein, the giving of notice, the lapse of time or both.
"Excess Cash Flow" shall mean, for any fiscal year of HMG Worldwide, the
sum remaining after deducting from HMG Worldwide's consolidated EBITDA for such
fiscal year the following amounts actually paid or accrued during or in respect
of such fiscal year: (a) Senior Debt Payments; (b) non-financed capital
expenditures permitted hereunder; (c) cash dividends; and (d) accrued taxes. For
purposes of the foregoing and for purposes of the definition of "Fixed Charge
Coverage Ratio" below, the conversion of a portion of the Convertible Notes, the
Additional Convertible Notes or any of the obligations evidenced thereby into
capital stock of any Borrower shall not be deemed a Senior Debt Payment.
"Federal Funds Rate" shall mean, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of quotations for such day on such
transactions received by PNC from three Federal funds brokers of recognized
standing selected by PNC.
"Fee Letter" shall mean that certain letter agreement between Agent and
Borrowers of even date herewith regarding certain fees to be paid by Borrowers
to Agent.
"Financial Assets" shall have the meaning provided for such term under the
Uniform Commercial Code as adopted in the State of New York and shall in any
event include, without limitation, all items from time to time in the Securities
Account.
"Fixed Charge Coverage Ratio" shall mean and include, with respect to any
fiscal period, the ratio of (a) EBITDA, minus unfinanced capital expenditures,
minus cash taxes paid during such period, to (b) all Senior Debt Payments during
such period
"Formula Amount" shall have the meaning set forth in Section 2.1(a).
"GAAP" shall, subject to Section 1.1 hereof, mean generally accepted
accounting principles in the United States of America in effect from time to
time.
"General Intangibles" shall mean and include all of each Borrower's general
intangibles, whether now owned or hereafter acquired including, without
limitation, all choses in action, causes of action, corporate or other business
records, inventions, designs, patents, patent applications, equipment
formulations, manufacturing procedures, quality control procedures, trademarks,
service marks, trade secrets, goodwill, copyrights, design rights,
registrations, licenses, franchises, customer lists, tax refunds, tax refund
claims, computer programs, all claims under guaranties, security interests or
other security held by or granted to such Borrower to secure payment
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12
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of any of the Receivables by a Customer, all rights of indemnification and
all other intangible property of every kind and nature (other than Receivables).
"Governmental Body" shall mean any nation or government, any state or other
political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.
"Government Securities" shall mean obligations issued or guaranteed by the
United States of America or any agency thereof.
"HMG Worldwide" shall mean HMG Worldwide Corporation.
"Hazardous Discharge" shall have the meaning set forth in Section 4.19(d)
hereof.
"Hazardous Substance" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, or any other
applicable Environmental Law and in the regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials subject to regulation
under CERCLA, RCRA or applicable state law, and any other applicable Federal and
state laws now in force or hereafter enacted relating to hazardous waste
disposal.
"Indebtedness" of a Person at a particular date shall mean all obligations
of such Person which in accordance with GAAP would be classified upon a balance
sheet as liabilities (except capital stock and surplus earned or otherwise) and
in any event, without limitation by reason of enumeration, shall include all
indebtedness, debt and other similar monetary obligations of such Person,
whether direct or guaranteed, and all premiums, if any, due at the required
prepayment dates of such indebtedness, and all indebtedness secured by a Lien on
assets owned by such Person, whether or not such indebtedness actually shall
have been created, assumed or incurred by such Person. Any indebtedness of such
Person resulting from the acquisition by such Person of any assets subject to
any Lien shall be deemed, for the purposes hereof, to be the equivalent of the
creation, assumption and incurring of the indebtedness secured thereby, whether
or not actually so created, assumed or incurred; provided, however, that, to the
extent any such indebtedness is a non-recourse or limited recourse obligation
where (by law, contract or otherwise) the recovery with respect thereto is
limited to the assets and other collateral pledged to secure the payment
thereof, for purposes of the foregoing, the amount of such indebtedness shall be
limited to the value of the assets that have been acquired by such Person and
that secure such indebtedness.
"Interest Period" shall mean the period provided for any Eurodollar Rate
Loan pursuant to Section 2.2(b) hereof.
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"Inventory" shall mean all of each Borrower's now owned or hereafter
acquired goods, merchandise and other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease, all raw
materials, work in process, finished goods and materials and supplies of any
kind, nature or description which are or might be used or consumed in such
Borrower's business or used in selling or furnishing such goods, merchandise and
other personal property, and all documents of title or other documents
representing them.
"Inventory Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(ii) ---------------------- --------------------- hereof.
"Investment Property" shall have the meaning provided for such term under
the Uniform Commercial Code as adopted in the State of New York and shall in any
event include, without limitation, all items from time to time in the Securities
Account.
"Issuer" shall mean any Person who issues a Letter of Credit under this
Agreement.
"Lender" and "Lenders" shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender.
"Letter of Credit" shall mean merchandise and standby letters of credit
issued for the account of any Borrower under this Agreement.
"Letter of Credit Fees" shall have the meaning set forth in Section 3.2(a).
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), Charge or
encumbrance, or preference, priority or other security agreement or preferential
arrangement held or asserted in respect of any asset of any kind or nature
whatsoever including, without limitation, any conditional sale or other title
retention agreement, any lease having substantially the same economic effect as
any of the foregoing, and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction.
"Material Adverse Change" shall mean any set of circumstances or events
which (a) has or could reasonably be expected to have any Material Adverse
Effect whatsoever upon the validity or enforceability of this Agreement or any
Other Documents, (b) is or could reasonably be expected to be material and
adverse to the business, properties, assets, financial condition, results of
operations or prospects of any Borrower, (c) impairs materially or could
reasonably be expected to impair materially the ability of any Borrower to duly
and punctually pay or perform its Obligations, or (d) impairs materially or
could reasonably be expected to impair materially the ability of the Agent or
Lenders, to the extent permitted, to enforce their legal remedies pursuant to
this Agreement or any Other Documents.
"Material Adverse Effect" shall mean a material adverse effect with respect
to (a) the condition, operations, assets, business or prospects of the
applicable Person or Persons, (b)
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Borrowers' ability to pay the Obligations in accordance with the terms
thereof, (c) the value of the Collateral, or Agent's Liens on the Collateral or
the priority of any such Lien or (d) the practical realization of the benefits
of Agent's and each Lender's rights and remedies under this Agreement and the
Other Documents.
"Maximum Revolving Advance Amount" shall mean Thirty-One Million Nine
Hundred Thousand Dollars ($31,900,000.00).
"Monthly Advances" shall have the meaning set forth in Section 3.1 hereof.
"Mortgage" shall mean, collectively, the mortgages on the Real Property in
favor of Agent for the benefit of Lenders, and all extensions, renewals,
amendments, supplements, modifications, substitutions and replacements thereto
and thereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Sections 3(37) and 4001(a)(3) of ERISA.
"Note" shall mean, collectively, each of the Revolving Credit Notes and the
Term ---- Notes.
"Obligations" shall mean and include any and all of Borrowers' Indebtedness
and/or liabilities to Agent or Lenders or any corporation that directly or
indirectly controls or is controlled by or is under common control with Agent or
any Lender of every kind, nature and description, direct or indirect, secured or
unsecured, joint, several, joint and several, absolute or contingent, due or to
become due, now existing or hereafter arising, contractual or tortious,
liquidated or unliquidated, under this Agreement and/or the Other Documents or,
to the extent entered into with PNC (or any Affiliate of PNC), under or in
connection with the "swap agreement" contemplated under Section 6.9 hereof.
"Original Owners" shall mean HMG Worldwide and its Subsidiaries.
"Other Documents" shall mean the Note, the Mortgage, the Securities Pledge
Agreement, the Questionnaire and any and all other agreements, instruments and
documents, including, without limitation, guaranties, pledges, powers of
attorney, consents, and all other writings heretofore, now or hereafter executed
by Borrowers, or any of them, and/or delivered to Agent or any Lender in respect
of the transactions contemplated by this Agreement and, to the extent entered
into with PNC (or any Affiliate of PNC), any documents in connection with the
"swap agreement" contemplated under Section 6.9 hereof.
"Parent" of any Person shall mean a corporation or other entity owning,
directly or indirectly, at least 50% of the shares of stock or other ownership
interests having ordinary voting power to elect a majority of (a) the directors
of the Person, or (b) other Persons performing similar functions for such
Person.
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"Participant" shall mean each Person who shall be granted the right by any
Lender to participate in any of the Advances and who shall have entered into a
participation agreement in form and substance satisfactory to such Lender.
"Payment Office" shall mean initially Xxx Xxxxx Xxxxxx Xxxxxxxxx, Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000; thereafter, such other office of Agent, if any,
which it may designate by notice to Borrowing Agent and to each Lender to be the
Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Acquisition" shall mean:
(a) an acquisition by any Borrower of the ownership interests of another
Person, in respect of which (i) the consideration to such Person is comprised
solely of the capital stock of any Borrower, (ii) neither such Borrower nor any
other Borrower assumes or becomes in any way, directly or indirectly, liable for
any of the obligations of such Person, (iii) such Person does not become a
"Borrower" under this Agreement and does not otherwise receive at any time,
directly or indirectly, the proceeds of any Advances and (iv) the assets of such
Person are not included as Eligible Inventory, Eligible Receivables or Eligible
Securities; and
(b) an acquisition by any Borrower of assets or ownership interests of
another Person other than as set forth in clause (a) above, subject to the
following conditions with respect to each such acquisition:
(i) for the thirty (30) day period immediately prior to the date of such
acquisition and after giving effect to such acquisition, Borrowers shall have
Undrawn Availability of not less than Three Million Dollars ($3,000,000.00);
(ii) after giving effect to such acquisition, the aggregate amount of
Advances made in respect of all acquisitions shall not be greater than Five
Million Dollars ($5,000,000.00);
(iii) the assets or ownership interests acquired shall be from or with
respect to a Person engaged in the same or a similar business as any Borrower;
(iv) any liabilities to be assumed by any Borrower in respect of such
acquisition shall have been disclosed to Agent in writing and approved by the
Required Lenders;
(v) Borrowers shall have delivered to Lenders a summary regarding such
acquisition, which summary shall include,
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without limitation, the following: (A) whether such acquisition is an
ownership interest or asset acquisition, (B) the purchase price, (C) the terms
of any proposed seller financing, (D) the amount of Advances required for such
acquisition, (E) name(s) and location(s) of the seller and (F) any liabilities
to be assumed in connection therewith. Based on such summary and such additional
information in connection therewith as may be reasonably requested by Lenders,
Lenders shall advise Borrowers within seven (7) Business Days of receipt by
Lenders of such summary and such additional information of Lenders' approval or
disapproval (and the reasons therefor) of such acquisition;
(vi) Borrowers shall have delivered to Lenders at least seven (7) Business
Days prior to closing on such acquisition, true and complete copies of all
documents in connection therewith, all of which must be on terms and conditions
consistent in all material respects with the summary provided to Lenders under
Subsection (v) above and otherwise reasonably satisfactory to Required Lenders;
(vii) Borrowers shall have delivered to Agent all such financing statements
and other agreements reasonably required by Agent in order to perfect Agent's
first priority security interest for the benefit of Lenders in the assets or
ownership interests being acquired;
(viii) if the transaction consists of the acquisition by any Borrower of
the ownership interests of another Person (except as contemplated in clause (a)
above), such Person shall become a "Borrower" under this Agreement and each of
the Other Documents, as applicable, and shall deliver or cause to be delivered
to Agent all such documents, financing statements, resolutions, opinions of
counsel and other agreements as reasonably requested by Agent, all in form and
content reasonably satisfactory to Agent, pursuant to which, inter alia, -----
---- (A) such Person shall become fully liable for all Obligations and (B)
Agent, for the benefit of Lenders, shall be granted a first priority security
interest in all assets of such Person (subject only to Permitted Encumbrances
and other encumbrances acceptable to Required Lenders);
(ix) assets acquired in connection with any such acquisition shall not be
included as Eligible Inventory, Eligible Receivables or Eligible Securities, as
applicable, unless and until Agent shall
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have completed all necessary due diligence with respect to such assets and
the results thereof shall be satisfactory to Agent;
(x) within ten (10) days after closing on such acquisition, Borrowers shall
have delivered to Lenders true, complete and executed copies of all documents in
connection therewith; and
(xi) if the acquisition consists of the merger or consolidation of such
Person with such Borrower, such Borrower shall be the surviving entity.
"Permitted Acquisition Indebtedness" shall mean Indebtedness to a seller in
connection with or as part of a Permitted Acquisition, which shall be unsecured
and fully subordinate to the Obligations and otherwise subject to terms and
conditions satisfactory to Required Lenders.
"Permitted Encumbrances" shall mean (a) Liens in favor of Agent for the
benefit of Agent and Lenders; (b) Liens for Charges not delinquent or being
contested in good faith and by appropriate proceedings and with respect to which
proper reserves have been taken by the relevant Borrower; provided, that, the
Lien shall have no effect on the priority of the Liens in favor of Agent or the
value of the assets in which Agent has such a Lien and, if enforcement of such
Lien has been initiated, a stay of enforcement of any such Lien shall be in
effect; (c) Liens disclosed in the financial statements referred to in Section
5.5; (d) deposits or pledges to secure obligations under worker's compensation,
social security or similar laws, or under unemployment insurance; (e) deposits
or pledges to secure bids, tenders, contracts (other than contracts for the
payment of money), leases, statutory obligations, surety and appeal bonds and
other obligations of like nature arising in the ordinary course of any
Borrower's business; (f) judgment Liens that have been stayed or bonded and
mechanics', workers', materialmen's or other like Liens arising in the ordinary
course of any Borrower's business with respect to obligations which are not due
or which are being contested in good faith by Borrower; (g) Liens placed upon
fixed assets hereafter acquired to secure a portion of the purchase price
thereof, provided that any such lien shall not encumber any other property of
any Borrower; (h) Liens disclosed on Schedule 1.2; (i) exceptions to title and
other encumbrances regarding real property disclosed in Title Commitments
Numbered 9917CLA and 99116CLA, respectively issued by Xxxxxxx Title Guaranty
Company or in any other title policy issued with respect to any real property
hereafter acquired; (j) the interest of lessors and others in or to any property
(real or personal) leased by any Borrower as lessee; (k) the interest of any
Person, as lessee, in or to any property leased by any Borrower as lessor; (l)
the rights and interests of others under any contract constituting part of the
Collateral; and (m) liens in favor of PNC.
"Permitted Investments" shall have the meaning set forth in Section 7.4
hereof.
"Person" shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, institution, public
benefit corporation, joint venture, entity or government (whether
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Xxxxxxx, xxxxx, xxxxxx, xxxx, xxxxxxxxx or otherwise, including any
instrumentality, division, agency, body or department thereof).
"Plan" shall mean any employee benefit plan within the meaning of Section
3(3) of ERISA, maintained for employees of the relevant Borrower or any member
of the Controlled Group or any such Plan to which the relevant Borrower or any
member of the Controlled Group is required to contribute on behalf of any of its
employees.
"Pro Forma Balance Sheet" shall have the meaning set forth in Section
5.5(a) ----------------------- -------------- hereof.
"Pro Forma Financial Statements" shall have the meaning set forth in
Section 5.5(b) hereof.
"Projections" shall have the meaning set forth in Section 5.5(b) hereof.
"Purchasing Lender" shall have the meaning set forth in Section 16.3(c)
hereof.
"Questionnaire" shall mean the Information Certificate and the responses
thereto provided by Borrowers and delivered to Agent.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C. "
6901 et seq., as same may be amended from time to time.
"Real Property" shall mean all real property and all improvements thereon
now or hereafter owned or leased by any Borrower.
"Receivables" shall mean and include all of the relevant Borrower's
accounts, contract rights, instruments (including those evidencing indebtedness
owed to such Borrower by its Affiliates), documents, chattel paper, general
intangibles relating to accounts, drafts and acceptances, and all other forms of
obligations owing to such Borrower arising out of or in connection with the sale
or lease of Inventory or the rendition of services, all guarantees and other
security therefor, whether secured or unsecured, now existing or hereafter
created, and whether or not specifically sold or assigned to Agent hereunder.
"Receivables Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(i) ------------------------ -------------------- hereof.
"Release" shall have the meaning set forth in Section 5.7(c)(i) hereof.
"Reportable Event" shall mean a reportable event described in Section
4043(b) of ERISA or the regulations promulgated thereunder.
"Required Lenders" shall mean (a) all Lenders, at all times during which
there are not more than two Lenders; and (b) Lenders holding at least 662/3% of
the Advances and, if no
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Advances are outstanding, shall mean Lenders holding 662/3% of the
Commitment Percentages, at all times during which there are more than two
Lenders.
"Reserve Percentage" shall mean the maximum effective percentage in effect
on any day as prescribed by the Board of Governors of the Federal Reserve System
(or any successor) for determining the reserve requirements (including, without
limitation, supplemental, marginal and emergency reserve requirements) with
respect to eurocurency funding.
"Revolving Advances" shall mean Advances made other than Letters of Credit
and the Term Loan.
"Revolving Credit Note" shall have the meaning set forth in Section 2.1(a)
hereof.
"Revolving Interest Rate" shall mean an interest rate per annum equal to
the sum of the (a) Base Rate plus .25% with respect to Domestic Rate Loans, and
(b) Eurodollar Rate plus 2.5% with respect to Eurodollar Rate Loans.
"Xxxxxx Note" means that certain Promissory Note from HMG Xxxxxx
International, Inc. to Xxxxxx International, Inc. dated July 31, 1998 in the
original stated principal amount of Three Million Five Hundred Seventeen
Thousand Two Hundred Eight Dollars ($3,517,208.00)
"Securities Account" shall mean that certain securities account maintained
by HMG Worldwide with PNC, being account number _______________ and all
substitutions and replacements thereof.
"Securities Advance Rate" shall have the meaning set forth in Section
2.1(a)(y) (iii) ----------------------- ----------------------- hereof.
"Securities Pledge Agreement" shall mean that certain Securities Pledge
Agreement of even date herewith between HMG Worldwide and Agent for the benefit
of Lenders.
"Senior Debt Payments" shall mean and include all cash actually expended by
Borrowers to make (a) interest payments on any Advances hereunder, plus (b)
scheduled principal payments on the Term Loan (which, for these purposes, shall
not be deemed to include payments of principal required to be made on account of
Excess Cash Flow as contemplated by Section 2.4(b) hereof), plus, (c) payments
for all fees, commissions and charges set forth herein and with respect to any
Advances (but for these purposes fees, commissions and charges payable on or at,
or with respect to any services performed or costs or expenses incurred on or
prior to, the Closing Date shall be amortized over the Term), plus (d)
capitalized lease payments, plus (e) payments with respect to any other
Indebtedness for borrowed money (including, without limitation, all payments due
under the Convertible Notes, the Xxxxxx Note and the Additional Convertible
Notes).
"Settlement Date" shall mean the Closing Date and thereafter Wednesday of
each week unless such day is not a Business Day, in which case it shall be the
next succeeding Business Day.
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"Subsidiary" shall mean a corporation or other entity of whose shares of
stock or other ownership interests having ordinary voting power (other than
stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"Term" shall have the meaning set forth in Section 13.1 hereof.
"Term Loan" shall mean Advances made pursuant to Section 2.4 hereof.
"Term Loan Rate" shall mean an interest rate per annum equal to the sum of
the (a) Base Rate plus .75% with respect to Domestic Rate Loans, and (b)
Eurodollar Rate plus 3.0% with respect to Eurodollar Rate Loans.
"Term Note" shall have the meaning set forth in Section 2.4 hereof.
"Termination Event" shall mean (i) a Reportable Event with respect to any
Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower or any member of
the Controlled Group from a Plan or Multiemployer Plan during a plan year in
which such entity was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; (iii) the providing of notice of intent to terminate a Plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the institution
by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any
event or condition (a) which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan or Multiemployer Plan, or (b) that may result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of
any Borrower or any member of the Controlled Group from a Multiemployer Plan.
"Toxic Substance" shall mean and include any material present on the Real
Property which has been shown to have significant adverse effect on human health
or which is subject to regulation under the Toxic Substances Control Act (TSCA),
15 U.S.C. " 2601 et seq., applicable state law, or any other applicable Federal
or state laws now in force or hereafter enacted relating to toxic substances.
"Toxic Substance" includes but is not limited to asbestos, polychlorinated
biphenyls (PCBs) and lead-based paints.
"Transactions" shall have the meaning set forth in Section 5.5(a) hereof.
"Transferee" shall have the meaning set forth in Section 16.3(b) hereof.
"Undrawn Availability" at a particular date shall mean an amount equal to
(a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving Advance
Amount, minus (b) the sum of (i) the outstanding amount of Advances (other than
the Term Loan), plus (ii) all amounts due and owing to Borrowers' trade
creditors which are outstanding beyond normal trade terms, plus (iii) fees and
expenses for which Borrowers are liable but which have not been paid or charged
to Borrowers' Account.
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"Week" shall mean the time period commencing with the opening of business
on a Wednesday and ending on the end of business the following Tuesday.
"Year 2000 Problem" shall have the meaning set forth in Section 5.22
hereof.
1.3 Uniform Commercial Code Terms. All terms used herein and defined in the
Uniform Commercial Code as adopted in the State of New York shall have the
meaning given therein unless otherwise defined herein.
1.4 Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise provided, all
references to any instruments or agreements to which Agent is a party,
including, without limitation, references to any of the Other Documents, shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
2. ADVANCES, PAYMENTS.
2.1 Advances.
(a) Revolving Advances. Subject to the terms and conditions set forth in
this Agreement, each Lender, severally and not jointly, will make Revolving
Advances to Borrowers in aggregate amounts outstanding at any time equal to such
Lender's Commitment Percentage of the lesser of (x) the Maximum Revolving
Advance Amount less the aggregate amount of outstanding Letters of Credit or (y)
an amount equal to the sum of:
(i) up to 85%, subject to the provisions of Section 2.1(b) hereof
("Receivables Advance Rate"), of Eligible Receivables, plus
(ii) up to the lesser of (A) 60%, subject to the provisions of Section
2.1(b) hereof ("Inventory Advance Rate"), of the value of the Eligible Inventory
or (B) 50% in the aggregate at any one time of (I) the sum of the amount
determined pursuant to Sections 2.1(a)(y)(i), 2.1(a)(y)(ii)(A) and
2.1(a)(y)(iii) hereof, minus (II) the amount determined pursuant to Section
2.1(a)(y)(v) below, plus
(iii) up to 100% of Eligible Securities consisting of Cash, and up to 90%
of Eligible Securities consisting of Government Securities, in each case subject
to the provisions of Section 2.1(b) hereof (the "Securities Advance Rate"),
minus
(iv) the aggregate amount of outstanding Letters of Credit, minus
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19
(v) such reserves as Agent may reasonably deem proper and necessary from
time to time.
The amount derived from the sum of (x) Sections 2.1(a)(y)(i), (ii) and
(iii) minus (y) Section 2.1 (a)(y)(v) at any time and from time to time shall be
referred to as the "Formula Amount". The Revolving Advances shall be evidenced
by the secured promissory notes delivered to the Lenders from time to time
(collectively, the "Revolving Credit Note"), substantially in the form attached
hereto as Exhibit 2.1(a).
(b) Discretionary Rights. The Advance Rates may be increased or decreased
by Agent at any time and from time to time in the exercise of its reasonable
discretion. Borrowers consent to any such increases or decreases and acknowledge
that decreasing the Advance Rates or increasing the reserves may limit or
restrict Advances requested by Borrowing Agent.
2.2 Procedure for Revolving Advances Borrowing.
(a) Borrowing Agent on behalf of Borrowers may notify Agent prior to 11:00
a.m. on a Business Day of Borrowers' request to incur, on that day, a Revolving
Advance hereunder. Should any amount required to be paid as interest hereunder,
or as fees or other charges under this Agreement or any other agreement with
Agent or Lenders included in the Other Documents, or with respect to any other
Obligation, become due, same shall be deemed a request for a Revolving Advance
as of the date such payment is due, in the amount required to pay in full such
interest, fee, charge or Obligation under this Agreement or any such other
agreement with Agent or Lenders, and such request shall be irrevocable.
(b) Notwithstanding the provisions of (a) above, in the event Borrowers
desire to obtain a Eurodollar Rate Loan, Borrowing Agent shall give Agent at
least three (3) Business Days' prior written notice, specifying (i) the date of
the proposed borrowing (which shall be a Business Day), (ii) the type of
borrowing and the amount on the date of such Advance to be borrowed, which
amount shall be at least Five Hundred Thousand Dollars ($500,000.00) and an
integral multiple of One Hundred Thousand Dollars ($100,000.00) thereof, and
(iii) the duration of the first Interest Period therefor. Interest Periods for
Eurodollar Rate Loans shall be for one, two or three months; provided, if an
Interest Period would end on a day that is not a Business Day, it shall end on
the next succeeding Business Day unless such day falls in the next succeeding
calendar month in which case the Interest Period shall end on the next preceding
Business Day. No Eurodollar Rate Loan shall be made available to Borrowers
during the continuance of a Default or an Event of Default.
(c) Each Interest Period of a Eurodollar Rate Loan shall commence on the
date such Eurodollar Rate Loan is made and shall end on such date as Borrowing
Agent may elect as set forth in (b)(iii) above; provided that the exact length
of each Interest Period shall be determined in accordance with the practice of
the interbank market for offshore Dollar deposits and no Interest Period shall
end after the last day of the Term.
Borrowing Agent shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(b) or by its notice of conversion
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20
given to Agent pursuant to Section 2.2(d), as the case may be. Borrowing
Agent shall elect the duration of each succeeding Interest Period by giving
irrevocable written notice to Agent of such duration not less than three (3)
Business Days prior to the last day of the then current Interest Period
applicable to such Eurodollar Rate Loan. If Agent does not receive timely notice
of the Interest Period elected by Borrowing Agent, Borrowers shall be deemed to
have elected to convert to a Domestic Rate Loan subject to Section 2.2(d)
hereinbelow.
(d) Provided that no Default or Event of Default shall have occurred and be
continuing, Borrowers may, on the last Business Day of the then current Interest
Period applicable to any outstanding Eurodollar Rate Loan, or on any Business
Day with respect to Domestic Rate Loans, convert any such loan into a loan of
another type in the same aggregate principal amount provided that any conversion
of a Eurodollar Rate Loan shall be made only on the last Business Day of the
then current Interest Period applicable to such Eurodollar Rate Loan. If
Borrowers desire to convert a loan, Borrowing Agent shall give Agent not less
than three (3) Business Days' prior written notice to convert from a Domestic
Rate Loan to a Eurodollar Rate Loan or one (1) Business Day's prior written
notice to convert from a Eurodollar Rate Loan to a Domestic Rate Loan,
specifying the date of such conversion, the loans to be converted and if the
conversion is from a Domestic Rate Loan to any other type of loan, the duration
of the first Interest Period therefor. After giving effect to each such
conversion, there shall not be outstanding more than five (5) Eurodollar Rate
Loans, in the aggregate.
(e) At its option and upon three (3) Business Days' prior written notice,
Borrowers may prepay the Eurodollar Rate Loans in whole at any time or in part
from time to time, without premium or penalty, but with accrued interest on the
principal being prepaid to the date of such repayment. Borrowing Agent shall
specify the date of prepayment of Advances which are Eurodollar Rate Loans and
the amount of such prepayment. In the event that any prepayment of a Eurodollar
Rate Loan is required or permitted on a date other than the last Business Day of
the then current Interest Period with respect thereto, Borrowers shall indemnify
Agent and Lenders therefor in accordance with Section 2.2(f) hereof.
(f) Borrowers shall indemnify Agent and Lenders and hold Agent and Lenders
harmless from and against any and all losses or expenses that Agent and Lenders
may sustain or incur as a consequence of any prepayment, conversion of or any
default by Borrowers in the payment of the principal of or interest on any
Eurodollar Rate Loan or failure by Borrowers to complete a borrowing of, a
prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof
has been given, including, but not limited to, any interest payable by Agent or
Lenders to lenders of funds obtained by it in order to make or maintain its
Eurodollar Rate Loans hereunder. A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by Agent or any Lender to
Borrowing Agent shall be conclusive absent manifest error.
(g) Notwithstanding any other provision hereof, if any applicable law,
treaty, regulation or directive, or any change therein or in the interpretation
or application thereof, shall make it unlawful for any Lender (for purposes of
this subsection (g), the term "Lender" shall include any Lender and the office
or branch where any Lender or any corporation or bank controlling such Lender
makes or maintains any Eurodollar Rate Loans) to make or maintain its Eurodollar
Rate
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12
21
Loans, the obligation of such Lender to make Eurodollar Rate Loans
hereunder shall forthwith be canceled and Borrowers shall, if any affected
Eurodollar Rate Loans are then outstanding, promptly upon request from Agent,
either pay all such affected Eurodollar Rate Loans or convert such affected
Eurodollar Rate Loans into loans of another type. If any such payment or
conversion of any Eurodollar Rate Loan is made on a day that is not the last day
of the Interest Period applicable to such Eurodollar Rate Loan, Borrowers shall
pay Agent, upon Agent's request, such amount or amounts as may be necessary to
compensate the applicable Lender for any loss or expense sustained or incurred
by such Lender in respect of such Eurodollar Rate Loan as a result of such
payment or conversion, including (but not limited to) any interest or other
amounts payable by such Lender to lenders of funds obtained by such Lender in
order to make or maintain such Eurodollar Rate Loan. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by the
applicable Lender to Borrowing Agent shall be conclusive absent manifest error.
2.3 Disbursement of Advance Proceeds. All Advances shall be disbursed from
whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrowers to Agent or Lenders,
shall be charged to Borrowers' Account on Agent's books. During the Term,
Borrowers may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions hereof. The
proceeds of each Revolving Advance requested by Borrowers or deemed to have been
requested by Borrowers under Section 2.2(a) hereof shall, with respect to
requested Revolving Advances to the extent Lenders make such Revolving Advances,
be made available to Borrowers on the day so requested by way of credit to
Borrowers' operating account at PNC, or such other bank as Borrowing Agent may
designate following notification to Agent, in immediately available federal
funds or other immediately available funds or, with respect to Revolving
Advances deemed to have been requested by Borrowers, be disbursed to Agent to be
applied to the outstanding Obligations giving rise to such deemed request.
2.4 Term Loan. Subject to the terms and conditions of this Agreement, each
Lender, severally and not jointly, will make a Term Loan to Borrowers in the sum
equal to such Lender's Commitment Percentage of Three Million One Hundred
Thousand Dollars ($3,100,000.00). The Term Loan shall be advanced on the Closing
Date and shall be, with respect to principal, payable as follows, subject to
acceleration upon the occurrence and during the continuance of an Event of
Default under this Agreement or termination of this Agreement:
(a) The principal balance of the Term Loan shall be repaid in equal
installments of One Hundred Fifty-Five Thousand Dollars ($155,000.00) each,
payable on the first day of each calendar quarter commencing on January 1, 2000.
(b) In addition to the foregoing, Borrowers shall pay to Agent for the
ratable benefit of Lenders an amount equal to fifty percent (50%) of the Excess
Cash Flow for each fiscal year of Borrowers, payable upon delivery to Agent of
the annual financial statements referred to in Section 9.7 below, but in no
event later than the ninety (90) Business Day following the end of each such
fiscal year, commencing with Borrowers' fiscal year ending December 31, 1999.
Borrowers shall provide Agent with a calculation of the Excess Cash Flow
together with each such payment, which shall be in form and content reasonably
satisfactory to Agent and which shall be certified by
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 22
the Chief Financial Officer of HMG to be complete and accurate. Each
payment in respect of the Excess Cash Flow shall be applied to the principal
payments due under the Term Loan in the inverse order of their maturities.
(c) On August 27, 2004, Borrowers shall pay to Agent for the ratable
benefit of Lenders, in full, the remaining principal balance of the Term Loan,
all accrued and unpaid interest thereon and all other sums due in connection
therewith.
The Term Loan shall be evidenced by secured promissory notes (collectively,
"Term Note") delivered to the Lenders from time to time in substantially the
form attached hereto as Exhibit 2.4.
2.5 Maximum Advances. The aggregate balance of Revolving Advances
outstanding at any time shall not exceed the lesser of the (a) Maximum Revolving
Advance Amount less the aggregate amount of outstanding Letters of Credit or (b)
Formula Amount less the aggregate amount of outstanding Letters of Credit.
2.6 Repayment of Advances.
(a) The Revolving Advances shall be due and payable in full on the last day
of the Term subject to earlier prepayment as herein provided. The Term Loan
shall be due and payable as provided in Section 2.4 above and in the Term Note.
(b) Borrowers recognize that the amounts evidenced by checks, notes, drafts
or any other items of payment relating to and/or proceeds of Collateral may not
be collectible by Agent on the date received. In consideration of Agent's
agreement to conditionally credit Borrowers' Account as of the Business Day on
which Agent receives those items of payment, Borrowers agree that, in computing
the charges under this Agreement, all items of payment shall be deemed applied
by Agent on account of the Obligations one (1) Business Day after the Business
Day Agent receives such payments. Agent is not, however, required to credit
Borrowers' Account for the amount of any item of payment which is unsatisfactory
to Agent and Agent may charge Borrowers' Account for the amount of any item of
payment which is returned to Agent unpaid.
(c) All payments of principal, interest and other amounts payable
hereunder, or under any of the related agreements shall be made to Agent at the
Payment Office not later than 1:00 P.M. (New York Time) on the due date therefor
in lawful money of the United States of America in federal funds or other funds
immediately available to Agent. Agent shall have the right to effectuate payment
on any and all Obligations due and owing hereunder by charging Borrowers'
Account or by making Advances as provided in Section 2.2 hereof.
(d) Borrowers shall pay principal, interest, and all other amounts payable
hereunder, or under any related agreement, without any deduction whatsoever,
including, but not limited to, any deduction for any setoff or counterclaim.
2.7 Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall be
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12
23
immediately due and payable without the necessity of any demand, at the
Payment Office, whether or not a Default or Event of Default has occurred.
2.8 Statement of Account. Agent shall maintain, in accordance with its
customary procedures, a loan account ("Borrowers' Account") in the name of
Borrowers in which shall be recorded the date and amount of each Advance made by
Agent and the date and amount of each payment in respect thereof; provided,
however, the failure by Agent to record the date and amount of any Advance shall
not adversely affect Agent or any Lender. Each month, Agent shall send to
Borrowing Agent a statement showing the accounting for the Advances made,
payments made or credited in respect thereof, and other transactions between
Agent and Borrowers, during such month. The monthly statements shall be deemed
correct and binding upon Borrowers in the absence of manifest error and shall
constitute an account stated between Lenders and Borrowers unless Agent receives
a written statement of Borrowers' specific exceptions thereto within thirty (30)
days after such statement is received by Borrowing Agent. The records of Agent
with respect to the loan account shall be conclusive evidence absent manifest
error of the amounts of Advances and other charges thereto and of payments
applicable thereto.
2.9 Letters of Credit. Subject to the terms and conditions hereof, Agent
shall issue or cause the issuance of Letters of Credit for the account of any
Borrower; provided, however, that Agent will not be required to issue or cause
to be issued any Letters of Credit to the extent that the face amount of such
Letters of Credit would then cause the sum of the outstanding (a) Revolving
Advances, plus (b) outstanding Letters of Credit to exceed the lesser of (x) the
Maximum Revolving Advance Amount or (y) the Formula Amount. The maximum amount
of outstanding Letters of Credit shall not exceed One Million Dollars
($1,000,000.00) in the aggregate at any time. All disbursements or payments
related to Letters of Credit shall be deemed to be Domestic Rate Loans
consisting of Revolving Advances and shall bear interest at the Revolving
Interest Rate for Domestic Rate Loans. Letters of Credit that have not been
drawn upon shall not bear interest.
2.10 Issuance of Letters of Credit.
(a) Borrowing Agent, on behalf of any Borrower, may request Agent to issue
or cause the issuance of a Letter of Credit by delivering to Agent at the
Payment Office, Agent's form of Letter of Credit Application (the "Letter of
Credit Application") completed to the satisfaction of Agent and such other
certificates, documents and other papers and information as Agent may reasonably
request. Borrowing Agent, on behalf of any Borrower, also has the right to give
instructions and make agreements with respect to any application, any applicable
letter of credit and security agreement, any applicable letter of credit
reimbursement agreement and/or any other applicable agreement, any letter of
credit and the disposition of documents, disposition of any unutilized funds,
and to agree with Agent upon any amendment, extension or renewal of any Letter
of Credit.
(b) Each Letter of Credit shall, among other things, (i) provide for the
payment of sight drafts or acceptances of usance drafts when presented for honor
thereunder in accordance with the terms thereof and when accompanied by the
documents described therein and (ii) have an expiry date not later than six (6)
months after such Letter of Credit's date of issuance and in no event
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 24
later than the last day of the Term. Each Letter of Credit shall be subject
to the Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500, and any amendments or
revision thereof adhered to by the Issuer and, to the extent not inconsistent
therewith, the laws of the State of New York.
(c) Agent shall use its reasonable efforts to notify Lenders of the request
by Borrowing Agent for a Letter of Credit hereunder.
(d) Agent shall have absolute discretion whether to accept any draft.
Without in any way limiting Agent's absolute discretion whether to accept any
draft, Borrowing Agent will not present for acceptance any draft, and Agent will
generally not accept any drafts (i) that arise out of transactions involving the
sale of goods by any Borrower not in the ordinary course of its business, (ii)
that involve a sale to an Affiliate of any Borrower, (iii) that involve any
purchase for which Agent has not received all related documents, instruments and
forms reasonably requested by Agent, (iv) for which Agent is unable to locate a
purchaser in the ordinary course of business on standard terms, or (v) that is
not eligible for discounting with Federal Reserve Banks pursuant to paragraph 7
of Section 13 of the Federal Reserve Act, as amended.
2.11 Requirements For Issuance of Letters of Credit.
(a) In connection with the issuance of any Letter of Credit, Borrowers
shall indemnify, save and hold Agent, each Lender and each Issuer harmless from
any loss, cost, expense or liability, including, without limitation, payments
made by Agent, any Lender or any Issuer and expenses and reasonable attorneys'
fees incurred by Agent, any Lender or Issuer arising out of, or in connection
with, any Letter of Credit to be issued or created for any Borrower. Borrowers
shall be bound by Agent's or any Issuer's regulations and good faith
interpretations of any Letter of Credit issued or created for Borrowers'
Account, although this interpretation may be different from its own; and,
neither Agent, nor any Lender, nor any Issuer nor any of their correspondents
shall be liable for any error, negligence, or mistakes, whether of omission or
commission, in following Borrowing Agent's or Borrowers' instructions or those
contained in any Letter of Credit or of any modifications, amendments or
supplements thereto or in issuing or paying any Letter of Credit, except for
Agent's, any Lender's, any Issuer's or such correspondents' willful misconduct.
(b) Borrowing Agent shall authorize and direct any Issuer to name the
relevant Borrower as the "Applicant" or "Account Party" of each Letter of
Credit. If Agent is not the Issuer of any Letter of Credit, Borrowers shall
authorize and direct the Issuer to deliver to Agent all instruments, documents,
and other writings and property received by the Issuer pursuant to the Letter of
Credit and to accept and rely upon Agent's instructions and agreements with
respect to all matters arising in connection with the Letter of Credit or the
application therefor.
(c) In connection with all Letters of Credit issued or caused to be issued
by Agent under this Agreement, Borrowers hereby appoint Agent, or its designee,
as its attorney, with full power and authority during the continuance of an
Event of Default or if Borrowers fail to do so promptly upon request of Agent
(unless Borrowers' failure is for good cause reasonably satisfactory to Agent)
(i) to sign and/or endorse any Borrower's name upon any warehouse or other
receipts,
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 25
letter of credit applications and acceptances; (ii) to sign any Borrower's
name on bills of lading; (iii) to clear Inventory through the United States of
America Customs Department ("Customs") in the name of any Borrower or Agent or
Agent's designee, and to sign and deliver to Customs officials powers of
attorney in the name of any Borrower for such purpose; and (iv) to complete in
any Borrower's name or Agent's, or in the name of Agent's designee, any order,
sale or transaction, obtain the necessary documents in connection therewith, and
collect the proceeds thereof. Neither Agent nor its attorneys will be liable for
any acts or omissions nor for any error of judgment or mistakes of fact or law,
except for Agent's or its attorney's willful misconduct. This power, being
coupled with an interest, is irrevocable as long as any Letters of Credit remain
outstanding.
(d) Each Lender shall to the extent of the percentage amount equal to the
product of such Lender's Commitment Percentage times the aggregate amount of all
unreimbursed reimbursement obligations arising from disbursements made or
obligations incurred with respect to the Letters of Credit be deemed to have
irrevocably purchased an undivided participation in each such unreimbursed
reimbursement obligation. In the event that at the time a disbursement is made
the unpaid balance of Revolving Advances exceeds or would exceed, with the
making of such disbursement, the lesser of the Maximum Revolving Advance Amount
or the Formula Amount, and such disbursement is not reimbursed by Borrowers
within two (2) Business Days, Agent shall promptly notify each Lender and upon
Agent's demand each Lender shall pay to Agent such Lender's proportionate share
of such unreimbursed disbursement together with such Lender's proportionate
share of Agent's unreimbursed costs and expenses relating to such unreimbursed
disbursement. Upon receipt by Agent of a repayment from Borrowers of any amount
disbursed by Agent for which Agent had already been reimbursed by Lenders, Agent
shall deliver to each Lender that Lender's pro rata share of such repayment.
Each Lender's participation commitment shall continue until the last to occur of
any of the following events: (A) Agent ceases to be obligated to issue or cause
to be issued Letters of Credit hereunder; (B) no Letter of Credit issued
hereunder remains outstanding and uncancelled or (C) all Persons (other than the
Borrowers) have been fully reimbursed for all payments made under or relating to
Letters of Credit.
2.12 Additional Payments. Any sums expended by Agent or any Lender due to
any Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document including, without limitation, any Borrower's
obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be
charged to Borrowers' Account as a Revolving Advance and added to the
Obligations.
2.13 Manner of Borrowing and Payment.
(a) Each borrowing of Revolving Advances shall be advanced according to the
applicable Commitment Percentages of Lenders. The Term Loan shall be advanced
according to the applicable Commitment Percentages of Lenders.
(b) Each payment (including each prepayment) by Borrowers on account of the
principal of and interest on the Revolving Advances, shall be applied to the
Revolving Advances pro rata according to the applicable Commitment Percentages
of Lenders. Each payment (including repayment) by Borrowers on account of the
principal of and interest on the Term Note, shall be
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 26
applied to the Term Loan pro rata according to the applicable Commitment
Percentages of Lenders. Except as expressly provided herein, all payments
(including prepayments) to be made by Borrowers on account of principal,
interest and fees shall be made without set off or counterclaim and shall be
made to Agent on behalf of the Lenders to the Payment Office, in each case on or
prior to 1:00 P.M., New York time, in Dollars and in immediately available
funds.
(c) (i) Notwithstanding anything to the contrary contained in Sections
2.13(a) and (b) hereof, commencing with the first Business Day following the
Closing Date, each borrowing of Revolving Advances shall be advanced by Agent
and each payment by Borrowers on account of Revolving Advances shall be applied
first to those Revolving Advances advanced by Agent. On or before 1:00 P.M., New
York time, on each Settlement Date commencing with the first Settlement Date
following the Closing Date, Agent and Lenders shall make certain payments as
follows: (I) if the aggregate amount of new Revolving Advances made by Agent
during the preceding Week (if any) exceeds the aggregate amount of repayments
applied to outstanding Revolving Advances during such preceding Week, then each
Lender shall provide Agent with funds in an amount equal to its applicable
Commitment Percentage of the difference between (w) such Revolving Advances and
(x) such repayments and (II) if the aggregate amount of repayments applied to
outstanding Revolving Advances during such Week exceeds the aggregate amount of
new Revolving Advances made during such Week, then Agent shall provide each
Lender with funds in an amount equal to its applicable Commitment Percentage of
the difference between (y) such repayments and (z) such Revolving Advances.
(ii) Each Lender shall be entitled to earn interest at the applicable
Revolving Interest Rate or Term Loan Rate, as the case may be, on outstanding
Advances which it has funded.
(iii) Promptly following each Settlement Date, Agent shall submit to each
Lender a certificate with respect to payments received and Advances made during
the Week immediately preceding such Settlement Date. If not objected to by any
Lender within seven (7) days of receipt thereof, such certificate of Agent shall
be conclusive in the absence of manifest error.
(d) If any Lender or Participant (a "Benefitted Lender") shall at any time
receive any payment of all or part of its Advances, or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender's
Advances, or interest thereon, and such greater proportionate payment or receipt
of Collateral is not expressly permitted hereunder, such Benefitted Lender shall
purchase for cash from the other Lenders a participation in such portion of each
such other Lender's Advances, or shall provide such other Lender with the
benefits of any such Collateral, or the proceeds thereof, as shall be necessary
to cause such Benefitted Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of the other Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such Benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Each Lender so purchasing a portion of another
Lender's Advances may exercise
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 27
all rights of payment (including, without limitation, rights of set-off)
with respect to such portion as fully as if such Lender were the direct holder
of such portion.
(e) Unless Agent shall have been notified by telephone, confirmed in
writing, by any Lender that such Lender will not make available to Agent the
amount which would constitute such Lender's applicable Commitment Percentage of
the Advances, Agent may (but shall not be obligated to) assume that such Lender
shall make such amount available to Agent on the next Settlement Date and, in
reliance upon such assumption, make available to Borrowers a corresponding
amount. Agent will promptly notify Borrowing Agent of its receipt of any such
notice from a Lender. If such amount is made available to Agent on a date after
such next Settlement Date, such Lender shall pay to Agent on demand an amount
equal to the product of (i) the daily average Federal Funds Rate (computed on
the basis of a year of 360 days) during such period as quoted by Agent, times
(ii) such amount, times (iii) the number of days from and including such
Settlement Date to the date on which such amount becomes immediately available
to Agent. A certificate of Agent submitted to any Lender with respect to any
amounts owing under this paragraph (e) shall be conclusive, in the absence of
manifest error. If such amount is not in fact made available to Agent by such
Lender within three (3) Business Days after such Settlement Date, Agent shall be
entitled to recover such an amount, with interest thereon at the rate per annum
then applicable to such Revolving Advances hereunder, on demand from Borrowers;
provided, however, that Agent's right to such recovery shall not prejudice or
otherwise adversely affect Borrowers' rights (if any) against such Lender.
2.14 Use of Proceeds. Borrowers shall apply the proceeds of Advances to (i)
repay existing indebtedness owed to Congress Financial Corp., (ii) pay fees and
expenses relating to this transaction, (iii) provide for their working capital
needs and other general corporate purposes in the ordinary course of business
and (iv) fund the costs of Permitted Acquisitions, subject to the conditions set
forth in this Agreement with respect to the use of Advances for Permitted
Acquisitions.
2.15 Defaulting Lender.
(a) Notwithstanding anything to the contrary contained herein, in the event
any Lender (x) has refused (which refusal constitutes a breach by such Lender of
its obligations under this Agreement) to make available its portion of any
Advance or (y) notifies either Agent or Borrowing Agent that it does not intend
to make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement)
(each, a "Lender Default"), all rights and obligations hereunder of such Lender
(a "Defaulting Lender") as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.15 while such Lender Default remains in effect.
(b) Advances shall be incurred pro rata from Lenders (the "Non- Defaulting
Lenders") which are not Defaulting Lenders based on their respective Commitment
Percentages, and no Commitment Percentage of any Lender or any pro rata share of
any Advances required to be advanced by any Lender shall be increased as a
result of such Lender Default. Amounts received in respect of principal of any
type of Advances shall be applied to reduce the applicable Advances
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 28
of each Lender pro rata based on the aggregate of the outstanding Advances
of that type of all Lenders at the time of such application; provided, that,
such amount shall not be applied to any Advances of a Defaulting Lender at any
time when, and to the extent that, the aggregate amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage
of all Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to give instructions to Agent
or to approve, disapprove, consent to or vote on any matters relating to this
Agreement and the Other Documents. All amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of "Required
Lenders", a Defaulting Lender shall be deemed not to be a Lender and not to have
Advances outstanding.
(d) Other than as expressly set forth in this Section 2.15, the rights and
obligations of a Defaulting Lender (including the obligation to indemnify Agent)
and the other parties hereto shall remain unchanged. Nothing in this Section
2.15 shall be deemed to release any Defaulting Lender from its obligations under
this Agreement and the Other Documents, shall alter such obligations, shall
operate as a waiver of any default by such Defaulting Lender hereunder, or shall
prejudice any rights which any Borrower, Agent or any Lender may have against
any Defaulting Lender as a result of any default by such Defaulting Lender
hereunder.
(e) In the event a Defaulting Lender retroactively cures to the
satisfaction of Agent the breach which caused such Lender to become a Defaulting
Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement. 3. INTEREST AND FEES.
3.1 Interest. Interest on Advances shall be payable in arrears on the last
day of each month with respect to Domestic Rate Loans and, with respect to
Eurodollar Rate Loans, at the end of each Interest Period. Interest charges
shall be computed on the actual principal amount of Advances outstanding during
the month (the "Monthly Advances") at a rate per annum equal to (a) with respect
to Revolving Advances, the applicable Revolving Interest Rate and (b) with
respect to the Term Loan, the applicable Term Loan Rate. Whenever, subsequent to
the date of this Agreement, the Base Rate is increased or decreased, the
Revolving Interest Rate and the Term Loan Rate for Domestic Rate Loans shall be
similarly changed without notice or demand of any kind by an amount equal to the
amount of such change in the Base Rate during the time such change or changes
remain in effect. The Eurodollar Rate shall be adjusted with respect to
Eurodollar Rate Loans without notice or demand of any kind on the effective date
of any change in the Reserve Percentage as of such effective date. Upon and
after the occurrence of an Event of Default, and during the continuation
thereof, the Obligations shall bear interest at a rate equal to two percent (2%)
per annum in excess of the applicable Revolving Interest Rate or Term Loan Rate,
as the case may be, otherwise in effect (the "Default Rate").
3.2 Letter of Credit Fees.
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(a) Borrowers shall pay (x) to Agent, for the benefit of Lenders, fees for
each Letter of Credit in an amount equal to (i) 1/2% of the face amount of each
documentary Letter of Credit plus all other charges customarily charged by
Lenders in connection therewith, (ii) for the period from and excluding the date
of issuance of same to and including the date of expiration or termination, the
average daily face amount of each outstanding standby Letter of Credit
multiplied by 1 1/2% per annum, such fee to be calculated on the basis of a
360-day year for the actual number of days elapsed and to be payable monthly in
arrears on the first day of each month and on the last day of the Term and (y)
to the Issuer, any and all fees and expenses as agreed upon by the Issuer and
the Borrowing Agent in connection with any Letter of Credit, including, without
limitation, in connection with the opening, amendment or renewal of any such
Letter of Credit and any acceptances created thereunder and shall reimburse
Agent for any and all fees and expenses, if any, paid by Agent to the Issuer
(all of the foregoing fees, the "Letter of Credit Fees"). Any such charge in
effect at the time of a particular transaction shall be the charge for that
transaction, notwithstanding any subsequent change in the Issuer's prevailing
charges for that type of transaction. All Letter of Credit Fees payable
hereunder shall be deemed earned in full on the date when the same are due and
payable hereunder and shall not be subject to rebate or proration upon the
termination of this Agreement for any reason.
On demand after the occurrence and during the continuance of an Event of
Default or expiration of the Term, Borrowers will cause cash to be deposited and
maintained in an account with Agent, as cash collateral, in an amount equal to
one hundred and five percent (105%) of the outstanding Letters of Credit, and
Borrowers hereby irrevocably authorize Agent, in its discretion, on Borrowers'
behalf and in Borrowers' name, to open such an account and to make and maintain
deposits therein, or in an account opened by Borrowers, in the amounts required
to be made by Borrowers, out of the proceeds of Receivables or other Collateral
or out of any other funds of Borrowers coming into any Lender's possession at
any time. Agent will invest such cash collateral (less applicable reserves) in
such short-term money-market items as to which Agent and Borrowers mutually
agree and the net return on such investments shall be credited to such account
and constitute additional cash collateral. Borrowers may not withdraw amounts
credited to any such account except upon payment and performance in full of all
Obligations and termination of this Agreement or the cure of any Event of
Default that gave rise to the creation of such account; provided, however, that,
as long as no Event of Default shall have occurred and be continuing, upon the
cancellation, expiration or termination of any Letter of Credit that was
outstanding at the time such account was required to be established and was used
in calculating the amount Borrowers were required to deposit into such account,
Borrowers shall be entitled to withdraw from such account an amount equal to one
hundred and five percent (105%) of the amount of such Letter of Credit.
3.3 Closing Fee. Borrowers shall pay to Agent a closing fee in the amount
set forth in the Fee Letter.
3.4 Facility Fee. If, for any month during the Term, the average daily
unpaid balance of the Revolving Advances for each day of such month does not
equal the Maximum Revolving Advance Amount, then Borrowers shall pay to Agent
for the ratable benefit of Lenders a fee at a rate equal to one-fourth of one
percent (.25%) per annum on the amount by which the Maximum
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Revolving Advance Amount exceeds such average daily unpaid balance. Such
fee shall be payable to Agent in arrears on the last day of each month.
3.5 Collateral Monitoring Fee. Borrowers shall pay to Agent a collateral
monitoring fee in the amount set forth in the Fee Letter.
3.6 Computation of Interest and Fees. Interest and fees hereunder shall be
computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the applicable
Revolving Interest Rate or Term Loan Rate, as the case may be, during such
extension.
3.7 Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law. In the
event interest and other charges as computed hereunder would otherwise exceed
the highest rate permitted under law, such excess amount shall be first applied
to any unpaid principal balance owed by Borrowers, and if the then remaining
excess amount is greater than the previously unpaid principal balance, Lenders
shall promptly refund such excess amount to Borrowers and the provisions hereof
shall be deemed amended to provide for such permissible rate.
3.8 Increased Costs. In the event that any applicable law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of this Section
3.8, the term "Lender" shall include Agent or any Lender and any corporation or
bank controlling Agent or any Lender and the office or branch where Agent or any
Lender (as so defined) makes or maintains any Eurodollar Rate Loans) with any
request or directive (whether or not having the force of law) from any central
bank or other financial, monetary or other authority, shall:
(a) subject Agent or any Lender to any tax of any kind whatsoever with
respect to this Agreement or any Other Document or change the basis of taxation
of payments to Agent or any Lender of principal, fees, interest or any other
amount payable hereunder or under any Other Documents (except for changes in the
rate of tax on the overall net income of Agent or any Lender by the jurisdiction
in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by, any office of
Agent or any Lender, including (without limitation) pursuant to Regulation D of
the Board of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender or the London interbank Eurodollar market
any other condition with respect to this Agreement or any Other Document;
and the result of any of the foregoing is to increase the cost to Agent or
any Lender of making, renewing or maintaining its Advances hereunder by an
amount that Agent or such Lender deems to be material or to reduce the amount of
any payment (whether of principal, interest or otherwise) in
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respect of any of the Advances by an amount that Agent or such Lender deems
to be material, then, in any case Borrowers shall promptly pay Agent or such
Lender, upon its demand, such additional amount as will compensate Agent or such
Lender for such additional cost or such reduction, as the case may be. Agent or
such Lender shall certify the amount of such additional cost or reduced amount
to Borrowing Agent, and such certification shall be conclusive absent manifest
error.
3.9 Basis For Determining Interest Rate Inadequate or Unfair. In the event
that Agent or any Lender shall have determined that:
(a) reasonable means do not exist for ascertaining the Eurodollar Rate for
any Interest Period; or
(b) Dollar deposits in the relevant amount and for the relevant maturity
are not available in the London interbank Eurodollar market, with respect to an
outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan, or a proposed
conversion of a Domestic Rate Loan into a Eurodollar Rate Loan, then Agent shall
give Borrowing Agent prompt written, telephonic or telegraphic notice of such
determination. If such notice is given, (i) any such requested Eurodollar Rate
Loan shall be made as a Domestic Rate Loan, unless Borrowing Agent shall notify
Agent no later than 10:00 a.m. (New York City time) two (2) Business Days prior
to the date of such proposed borrowing, that its request for such borrowing
shall be canceled or made as an unaffected type of Eurodollar Rate Loan, (ii)
any Domestic Rate Loan or Eurodollar Rate Loan which was to have been converted
to an affected type of Eurodollar Rate Loan shall be continued as or converted
into a Domestic Rate Loan or, if Borrowing Agent shall notify Agent, no later
than 10:00 a.m. (New York City time) two (2) Business Days prior to the proposed
conversion, shall be maintained as an unaffected type of Eurodollar Rate Loan,
and (iii) any outstanding affected Eurodollar Rate Loans shall be converted into
a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent, no later than
10:00 a.m. (New York City time) two (2) Business Days prior to the last Business
Day of the then current Interest Period applicable to such affected Eurodollar
Rate Loan, shall be converted into an unaffected type of Eurodollar Rate Loan,
on the last Business Day of the then current Interest Period for such affected
Eurodollar Rate Loans. Until such notice has been withdrawn, Lenders shall have
no obligation to make an affected type of Eurodollar Rate Loan or maintain
outstanding affected Eurodollar Rate Loans and Borrowers shall not have the
right to convert a Domestic Rate Loan or an unaffected type of Eurodollar Rate
Loan into an affected type of Eurodollar Rate Loan.
3.10 Capital Adequacy.
(a) In the event that Agent or any Lender shall have determined that any
applicable law, rule, regulation or guideline regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Agent or any Lender
(for purposes of this Section 3.10, the term "Lender" shall include Agent or any
Lender and any corporation or bank controlling Agent or any Lender and the
office or branch where Agent or any Lender (as so defined) makes or maintains
any Eurodollar Rate Loans ) with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 32
return on Agent or any Lender's capital as a consequence of its obligations
hereunder to a level below that which Agent or such Lender could have achieved
but for such adoption, change or compliance (taking into consideration Agent's
and each Lender's policies with respect to capital adequacy) by an amount deemed
by Agent or any Lender to be material, then, from time to time, Borrowers shall
pay upon demand to Agent or such Lender such additional amount or amounts as
will compensate Agent or such Lender for such reduction. In determining such
amount or amounts, Agent or such Lender may use any reasonable averaging or
attribution methods. The protection of this Section 3.10 shall be available to
Agent and each Lender regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation or condition.
(b) A certificate of Agent or such Lender setting forth such amount or
amounts as shall be necessary to compensate Agent or such Lender with respect to
Section 3.10(a) hereof when delivered to Borrowing Agent shall be conclusive
absent manifest error.
4. COLLATERAL; GENERAL TERMS.
4.1 Security Interest in the Collateral. To secure the prompt payment and
performance to Agent and each Lender of the Obligations, each Borrower hereby
assigns, pledges and grants to Agent for the ratable benefit of each Lender a
continuing security interest in and to all of its Collateral, whether now owned
or existing or hereafter acquired or arising and wheresoever located. Each
Borrower shall xxxx its books and records as may be necessary or appropriate to
evidence, protect and perfect Agent's security interest and shall cause its
financial statements to reflect such security interest.
4.2 Perfection of Security Interest. Borrowers shall take all action that
may be necessary or desirable, or that Agent may reasonably request, so as at
all times to maintain the validity, perfection, enforceability and priority of
Agent's security interest in the Collateral or to enable Agent to protect,
exercise or enforce its rights hereunder and in the Collateral, including, but
not limited to, (i) immediately discharging all Liens other than Permitted
Encumbrances, (ii) obtaining landlords' or mortgagees' lien waivers, (iii)
delivering to Agent, endorsed or accompanied by such instruments of collateral
assignment as Agent may reasonably specify, and stamping or marking, in such
manner as Agent may reasonably specify, any and all chattel paper, instruments,
letters of credits and advices thereof and documents evidencing or forming a
part of the Collateral, (iv) entering into warehousing, lockbox and other
custodial arrangements reasonably satisfactory to Agent, and (v) executing and
delivering financing statements, instruments of pledge, mortgages, notices and
collateral assignments, in each case in form and substance reasonably
satisfactory to Agent, relating to the creation, validity, perfection,
maintenance or continuation of Agent's security interest under the Uniform
Commercial Code or other applicable law. Agent is hereby authorized to file
financing statements signed by Agent instead of the relevant Borrower in
accordance with Section 9-402(2) of the Uniform Commercial Code as adopted in
the State of New York. All reasonable charges, expenses and fees Agent may incur
in doing any of the foregoing, and any local taxes relating thereto, shall be
charged to Borrowers' Account as a Revolving Advance of a Domestic Rate Loan and
added to the Obligations, or, at Agent's option, shall be paid to Agent for the
ratable benefit of Lenders immediately upon demand.
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 33
4.3 Disposition of Collateral. Borrowers will safeguard and protect all
Collateral for Agent's general account and make no disposition thereof whether
by sale, lease or otherwise except the sale of Inventory in the ordinary course
of business.
4.4 Preservation of Collateral. Following the occurrence and during the
continuance of a Default or Event of Default and in addition to the rights and
remedies set forth in Section 11.1 hereof, Agent: (a) may at any time take such
steps as Agent deems necessary to protect Agent's interest in and to preserve
the Collateral, including the hiring of such security guards or the placing of
other security protection measures as Agent may deem appropriate; (b) may employ
and maintain at any of any Borrower's premises a custodian who shall have full
authority to do all acts necessary to protect Agent's interests in the
Collateral; (c) may lease warehouse facilities to which Agent may move all or
part of the Collateral; (d) may use any Borrower's owned or leased lifts,
hoists, trucks and other facilities or equipment for handling or removing the
Collateral; and (e) shall have, and is hereby granted, a right of ingress and
egress to the places where the Collateral is located, and may proceed over and
through any Borrower's owned or leased property. Borrowers shall cooperate fully
with all of Agent's efforts to preserve the Collateral and will take such
actions to preserve the Collateral as Agent may reasonably direct. All of
Agent's reasonable expenses of preserving the Collateral, including any
reasonable expenses relating to the bonding of a custodian, shall be charged to
Borrowers' Account as a Revolving Advance of a Domestic Rate Loan and added to
the Obligations.
4.5 Ownership of Collateral. With respect to the Collateral, at the time
the Collateral becomes subject to Agent's security interest: (a) the relevant
Borrower shall be the sole owner of and fully authorized and able to sell,
transfer, pledge and/or grant a first priority security interest in each and
every item of the its respective Collateral to Agent; and, except for Permitted
Encumbrances, the Collateral shall be free and clear of all Liens and
encumbrances whatsoever; (b) each document and agreement executed by Borrowers
or delivered to Agent or any Lender in connection with this Agreement shall be
true and correct in all respects as regards information represented or warranted
therein by the relevant Borrower; (c) all signatures and endorsements of any
Borrower that appear on such documents and agreements shall be genuine and such
Borrower shall have full capacity to execute same; and (d) Borrowers' Equipment
and Inventory shall be located as set forth on Schedule 4.5 and shall not be
removed from such location(s) without the prior written consent of Agent except
with respect to the sale of Inventory in the ordinary course of business.
4.6 Defense of Agent's and Lenders' Interests. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. During such period Borrowers shall not, without Agent's prior written
consent, pledge, sell (except Inventory in the ordinary course of business),
assign, transfer, create or suffer to exist a Lien upon or encumber or allow or
suffer to be encumbered in any way except for Permitted Encumbrances, any part
of the Collateral. Borrowers shall defend Agent's interests in the Collateral
against any and all Persons whatsoever. At any time after and during the
continuance of an Event of Default, Agent shall have the right to take
possession of the indicia of the Collateral and the Collateral in whatever
physical form contained, including without limitation: labels, stationery,
documents, instruments and advertising materials. If Agent exercises this right
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 34
to take possession of the Collateral, Borrowers shall, upon demand,
assemble it in the best manner possible and make it available to Agent at a
place reasonably convenient to Agent. In addition, with respect to all
Collateral, Agent and Lenders shall be entitled to all of the rights and
remedies set forth herein and further provided by the Uniform Commercial Code or
other applicable law. With respect to (i) cash or checks in which Agent holds a
security interest, Borrowers shall, and Agent may, at its option, and (ii)
documents or instruments in which Agent holds a security interest, Borrowers
shall, at Agent's request, instruct all suppliers, carriers, forwarders,
warehouses or others receiving or holding such cash, checks, documents or
instruments to deliver same to Agent and/or subject to Agent's order and if they
shall come into any Borrower's possession, they, and each of them, shall be held
by such Borrower in trust as Agent's trustee, and such Borrower will immediately
deliver them to Agent in their original form together with any necessary
endorsement.
4.7 Books and Records. Each Borrower shall (a) keep proper books of record
and account in which full, true and correct entries will be made of all dealings
or transactions of or in relation to its business and affairs; (b) set up on its
books accruals with respect to all taxes, assessments, charges, levies and
claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including without limitation by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties), which
should be set aside from such earnings in connection with its business. All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by such Borrower.
4.8 Financial Disclosure. Each Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by such Borrower at any time
during the Term to exhibit and deliver to Agent and each Lender copies of any of
such Borrower's financial statements, trial balances or other accounting records
of any sort in the accountant's or auditor's possession, and to disclose to
Agent and each Lender any information such accountants may have concerning such
Borrower's financial status and business operations. Each Borrower hereby
authorizes all federal, state and municipal authorities to furnish to Agent and
each Lender copies of reports or examinations relating to such Borrower, whether
made by such Borrower or otherwise; however, Agent and each Lender will attempt
to obtain such information or materials directly from such Borrower prior to
obtaining such information or materials from such accountants or such
authorities. 4.9 Compliance with Laws. Each Borrower shall comply with all acts,
rules, regulations and orders of any legislative, administrative or judicial
body or official applicable to its respective Collateral or any part thereof or
to the operation of such Borrower's business the non-compliance with which could
reasonably be expected to have a Material Adverse Effect on such Borrower. The
assets of each Borrower at all times shall be maintained in accordance with the
requirements of all insurance carriers which provide insurance with respect to
the assets of such Borrower so that such insurance shall remain in full force
and effect.
4.10 Inspection of Premises. At all reasonable times Agent and each Lender
shall have full access to and the right to audit, check, inspect and make
abstracts and copies from each Borrower's books, records, audits, correspondence
and all other papers relating to the Collateral and
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the operation of such Borrower's business. Agent, any Lender and their
agents may enter upon any of any Borrower's premises at any time during business
hours and at any other reasonable time, and from time to time, for the purpose
of inspecting the Collateral and any and all records pertaining thereto and the
operation of any Borrower's business. Provided no Event of Default shall have
occurred and be continuing, Agent and Lenders shall (a) give the relevant
Borrower reasonable prior notice of any such inspections under this Section 4.10
and (b) use their best efforts not to interfere with any Borrower or the normal
operation or conduct of its business during any inspections under this Section
4.10.
4.11 Insurance. Each Borrower shall bear the full risk of any loss of any
nature whatsoever with respect to the Collateral. At each Borrower's own cost
and expense in amounts and with carriers reasonably acceptable to Agent, each
Borrower shall (a) keep all its insurable properties and properties in which
such Borrower has an interest insured against the hazards of fire, flood,
sprinkler leakage, those hazards covered by extended coverage insurance and such
other hazards, and for such amounts, as is customary in the case of companies
engaged in businesses similar to such Borrower's including, without limitation,
business interruption insurance; (b) maintain a bond in such amount as is
customary in the case of companies engaged in businesses similar to such
Borrower insuring against larceny, embezzlement or other criminal
misappropriation of insured's officers and employees who may either singly or
jointly with others at any time have access to the assets or funds of such
Borrower either directly or through authority to draw upon such funds or to
direct generally the disposition of such assets; (c) maintain public and product
liability insurance against claims for personal injury, death or property damage
suffered by others; (d) maintain all such worker's compensation or similar
insurance as may be required under the laws of any state or jurisdiction in
which such Borrower is engaged in business; (e) furnish Agent with (i) copies of
all policies and evidence of the maintenance of such policies and the renewal
thereof at least thirty (30) days before any expiration date, and (ii)
appropriate lender's loss payable and standard mortgagee endorsements in form
and substance reasonably satisfactory to Agent, naming Agent as loss payee and
insured mortgagee as its interests may appear, and providing (A) that all
proceeds thereunder shall be payable to Agent, (B) no such insurance shall be
affected by any act or neglect of the insured or owner of the property described
in such policy, and (C) that such policy and loss payable clauses may not be
canceled, amended or terminated unless at least thirty (30) days' prior written
notice is given to Agent. In the event of any loss thereunder, the carriers
named therein hereby are directed by Agent and each Borrower to make payment for
such loss to Agent and not to the relevant Borrower and Agent jointly. If any
insurance losses are paid by check, draft or other instrument payable to any
Borrower and Agent jointly, Agent may endorse such Borrower's name thereon and
do such other things as Agent may deem advisable to reduce the same to cash. If
an Event of Default has occurred and is continuing, or if Borrowers have failed
to do so within a reasonable period of time after any loss or damage to
Collateral, Agent is hereby authorized to adjust and compromise claims under
insurance coverage with respect to the Collateral. All loss recoveries received
by Agent upon any such insurance may be applied to the outstanding Obligations,
in such order as Agent in its sole discretion shall determine. Any surplus shall
be paid by Agent to Borrowers or applied as may be otherwise required by law.
Any deficiency thereon shall be paid by Borrowers to Agent, on demand to the
extent the same is then due and payable hereunder.
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 36
4.12 Failure to Pay Insurance. If any Borrower fails to obtain insurance as
hereinabove provided, or to keep the same in force, Agent, if Agent so elects,
may obtain such insurance and pay the premium therefor on behalf of such
Borrower, and charge Borrowers' Account therefor as a Revolving Advance of a
Domestic Rate Loan and such expenses so paid shall be part of the Obligations.
4.13 Payment of Taxes. Each Borrower will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon such Borrower or
any of the Collateral including, without limitation, real and personal property
taxes, assessments and charges and all franchise, income, employment, social
security benefits, withholding and sales taxes. If any tax by any governmental
authority is or may be imposed on or as a result of any transaction between any
Borrower and Agent or any Lender which Agent or that Lender may be required to
withhold or pay or if any taxes, assessments, or other Charges remain unpaid
after the date fixed for their payment, or if any claim shall be made which, in
Agent's or any Lender's reasonable opinion, may possibly create a valid Lien on
the Collateral, Agent may without notice to such Borrower pay such taxes,
assessments or other Charges and each Borrower hereby indemnifies and holds
Agent and each Lender harmless in respect thereof. The amount of any payment by
Agent under this Section 4.13 shall be charged to Borrowers' Account as a
Revolving Advance and added to the Obligations.
4.14 Payment of Leasehold Obligations. Each Borrower shall at all times
pay, when and as due, its rental obligations under all leases under which it is
a tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect and, at Agent's
request will provide evidence of having done so; provided, however, that no
Borrower shall be deemed in violation or breach of the foregoing as a result of
such Borrower's termination or failure to renew any lease, or allowing any lease
to expire or terminate, with respect to any property (real or personal) for
which such Borrower no longer has a required use.
4.15 Receivables.
(a) Nature of Receivables. Each of the Receivables shall be a bona fide and
valid account representing a bona fide obligation incurred by the Customer
therein named, for a fixed sum as set forth in the invoice relating thereto
(provided immaterial or unintentional invoice errors shall not be deemed to be a
breach hereof) with respect to an absolute sale or lease and delivery of goods
upon stated terms of a Borrower, or work, labor or services theretofore rendered
by a Borrower as of the date each Receivable is created. Same shall be due and
owing in accordance with the applicable Borrower's standard terms of sale
without dispute, setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by Borrowers to Agent.
(b) Solvency of Customers. Each Customer, to the best of Borrowers'
knowledge, as of the date each Receivable for such Customer is created, is and
will be solvent and able to pay all Receivables on which such Customer is
obligated in full when due or, with respect to such Customers who are not
solvent, the relevant Borrower has set up on its books and in its financial
records bad debt reserves adequate to cover such Receivables.
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 37
(c) Locations of Borrower. The chief executive office of each Borrower is
identified on Schedule 4.15(c) hereto. Until written notice is given to Agent by
Borrowing Agent of any other office at which any Borrower keeps its records
pertaining to Receivables, all such records shall be kept at such executive
office or at such other locations(s) as may be specified in Schedule 4.15(c).
(d) Collection of Receivables. Until any Borrower's authority to do so is
terminated by written notice to such effect from Agent (which notice Agent may
give at any time following the occurrence and during the continuance of an Event
of Default or a Default or when Agent in its sole discretion deems it to be in
Lenders' best interest to do so), each Borrower will, at such Borrower's sole
cost and expense, but on Agent's behalf and for Agent's account, collect as
Agent's property and in trust for Agent all amounts received on Receivables, and
shall not commingle such collections with such Borrower's funds or use the same
except to pay Obligations. Each Borrower shall, upon request, deliver to Agent,
or deposit in the Blocked Account, in original form and on the date of receipt
thereof, all checks, drafts, notes, money orders, acceptances, cash and other
evidences of Indebtedness received on account of, or representing payment with
respect to, any Receivables or the proceeds of any other Collateral.
(e) Notification of Assignment of Receivables. At any time following the
occurrence and during the continuance of a Default or Event of Default, Agent
shall have the right to send notice of the assignment of, and Agent's security
interest in, the Receivables to any and all Customers or any third party holding
or otherwise concerned with any of the Collateral. Thereafter, during the
continuation of an Event of Default, Agent shall have the sole right to collect
the Receivables, take possession of the Collateral, or both. Agent's reasonable
collection expenses, including, but not limited to, stationery and postage,
telephone and telegraph, secretarial and clerical expenses and the salaries of
any collection personnel used for collection, may be charged to Borrowers'
Account and added to the Obligations.
(f) Power of Agent to Act on Borrower's Behalf. Agent shall have the right
to receive, endorse, assign and/or deliver in the name of Agent or any Borrower
any and all checks, drafts and other instruments for the payment of money
relating to the Receivables, and each Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Each
Borrower hereby constitutes Agent or Agent's designee as such Borrower's
attorney with power (i) to endorse such Borrower's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment for
Collateral; (ii) to sign such Borrower's name on any invoice or xxxx of lading
relating to any of the Receivables of such Borrower, drafts against Customers,
assignments and verifications of Receivables of such Borrower; (iii) to send
verifications of Receivables of such Borrower to any Customer; (iv) to sign such
Borrower's name on all financing statements or any other documents or
instruments deemed reasonably necessary or appropriate by Agent to preserve,
protect, or perfect Agent's interest in the Collateral and to file same; (v)
upon the occurrence and during the continuance of an Event of Default or a
Default, to demand payment of the Receivables of such Borrower; (vi) upon the
occurrence and during the continuance of an Event of Default or a Default, to
enforce payment of the Receivables of such Borrower by legal proceedings or
otherwise; (vii) upon the occurrence and during the continuance of an Event of
Default, to exercise all of such Borrower's rights and remedies with respect to
the collection of the
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 38
Receivables of such Borrower and any other Collateral; (viii) upon the
occurrence and during the continuance of an Event of Default, to settle, adjust,
compromise, extend or renew the Receivables of such Borrower; (ix) upon the
occurrence and during the continuance of an Event of Default, to settle, adjust
or compromise any legal proceedings brought to collect Receivables of such
Borrower; (x) upon the occurrence and during the continuance of an Event of
Default or a Default, to prepare, file and sign such Borrower's name on a proof
of claim in bankruptcy or similar document against any Customer of such
Borrower; (xi) upon the occurrence and during the continuance of an Event of
Default, to prepare, file and sign such Borrower's name on any notice of Lien,
assignment or satisfaction of Lien or similar document in connection with the
Receivables of such Borrower; and (xii) upon the occurrence and during the
continuance of an Event of Default or a Default, to do all other acts and things
necessary to carry out this Agreement. All acts of said attorney or designee are
hereby ratified and approved, and said attorney or designee shall not be liable
for any acts of omission or commission nor for any error of judgment or mistake
of fact or of law, unless done maliciously or with gross (not mere) negligence;
this power being coupled with an interest is irrevocable while any of the
Obligations remain unpaid. Agent shall have the right at any time after and
during the continuance of an Event of Default to change the address for delivery
of mail addressed to any Borrower to such address as Agent may designate and to
receive, open and dispose of all mail addressed to any Borrower; provided,
however, that, forthwith after receipt of any such mail by Agent or any designee
of Agent, Agent shall (subject to its right to retain copies thereof) deliver or
cause to be delivered to Borrowing Agent all such mail other than payments with
respect to any of the Collateral.
(g) No Liability. Neither Agent nor any Lender shall, under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Receivables or any instrument received in payment thereof, or for
any damage resulting therefrom. Following the occurrence and during the
continuance of an Event of Default Agent may, without notice or consent from any
Borrower, xxx upon or otherwise collect, extend the time of payment of,
compromise or settle for cash, credit or upon any terms any of the Receivables
or any other securities, instruments or insurance applicable thereto and/or
release any obligor thereof. Agent is authorized and empowered to accept
following the occurrence and during the continuance of an Event of Default or
Default the return of the goods represented by any of the Receivables, without
notice to or consent by any Borrower, all without discharging or in any way
affecting Borrowers' liability hereunder.
(h) Establishment of a Lockbox Account, Dominion Account. All proceeds of
Collateral shall, at the direction of Agent, be deposited by the relevant
Borrower into a lockbox account, dominion account or such other "blocked
account" ("Blocked Accounts") as Agent may require pursuant to an arrangement
with such bank as may be selected by such Borrower and be reasonably acceptable
to Agent. Each Borrower shall issue to the relevant bank an irrevocable letter
of instruction directing said bank to transfer such funds so deposited to Agent,
either to any account maintained by Agent at said bank or by wire transfer to
appropriate account(s) of Agent. All funds deposited in such Blocked Account
shall immediately become the property of Agent and the relevant Borrower shall
obtain the agreement by such bank to waive any offset rights against the funds
so deposited. Neither Agent nor any Lender assumes any responsibility for such
Blocked Account arrangement, including without limitation, any claim of accord
and satisfaction or release with
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 39
respect to deposits accepted by any bank thereunder. Alternatively, Agent
may establish depository accounts ("Depository Accounts") in the name of Agent
at a bank or banks for the deposit of such funds and Borrower shall deposit all
proceeds of Collateral or cause same to be deposited, in kind, in such
Depository Accounts of Agent in lieu of depositing same to the Blocked Accounts.
(i) Adjustments. No Borrower will, without Agent's consent, compromise or
adjust any material amount of the Receivables (or extend the time for payment
thereof) or accept any material returns of merchandise or grant any additional
discounts, allowances or credits thereon except for such compromises,
adjustments, returns, discounts, credits and allowances are consistent with
compromises, adjustments, returns, discounts, credits and allowances that have
been granted, given or accepted by such Borrower in the ordinary course of
business.
4.16 Inventory. To the extent Inventory held for sale or lease has been
produced by any Borrower, it has been and will be produced by such Borrower in
accordance with, to the extent applicable, the Federal Fair Labor Standards Act
of 1938, as amended, and all rules, regulations and orders thereunder.
4.17 Maintenance of Equipment. The Equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
(net of market value depreciation) and operating efficiency of the Equipment
shall be maintained and preserved; provided, however, that no Borrower shall be
obligated to maintain or repair any Equipment that is or has become obsolete or
that otherwise is not necessary for the proper operation of such Borrower's
business. Each Borrower shall provide Agent a report on a quarterly basis and in
detail reasonably satisfactory to Agent regarding any Equipment that such
Borrower has deemed obsolete or otherwise not necessary for the proper operation
of such Borrower's business. No Borrower shall use or operate the Equipment in
violation of any law, statute, ordinance, code, rule or regulation.
4.18 Exculpation of Liability. Except for the appointment of Agent as
attorney-in-fact for Borrowers under this Agreement, nothing herein contained
shall be construed to constitute Agent or any Lender as any Borrower's agent for
any purpose whatsoever, nor shall Agent or any Lender be responsible or liable
for any shortage, discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of the cause thereof.
Neither Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assume any of any Borrower's obligations under any contract or
agreement assigned to Agent or such Lender, and neither Agent nor any Lender
shall be responsible in any way for the performance by any Borrower of any of
the terms and conditions thereof.
4.19 Environmental Matters.
(a) Each Borrower shall ensure that its Real Property remains in compliance
with all Environmental Laws and shall not place or permit to be placed any
Hazardous Substances on any such Real Property except as not prohibited by
applicable law or appropriate governmental authorities.
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 40
(b) Each Borrower shall establish and maintain a system to assure and
monitor continued compliance with all applicable Environmental Laws which system
shall include periodic reviews of such compliance.
(c) Each Borrower shall (i) employ in connection with the use of its Real
Property appropriate technology necessary to maintain compliance with any
applicable Environmental Laws and (ii) dispose of any and all Hazardous Waste
generated at its Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Each Borrower shall use its best efforts to obtain certificates of disposal,
such as hazardous waste manifest receipts, from all treatment, transport,
storage or disposal facilities or operators employed by such Borrower in
connection with the transport or disposal of any Hazardous Waste generated at
its Real Property.
(d) In the event any Borrower obtains, gives or receives notice of any
Release or threat of Release of a reportable quantity of any Hazardous
Substances at its Real Property (any such event being hereinafter referred to as
a "Hazardous Discharge") or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions at such Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting such Real Property or
such Borrower's interest therein (any of the foregoing is referred to herein as
an "Environmental Complaint") from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
such Real Property is located or the United States Environmental Protection
Agency (any such Person hereinafter the "Authority"), then Borrowing Agent
shall, within five (5) Business Days, give written notice of same to Agent
detailing facts and circumstances of which such Borrower is aware giving rise to
the Hazardous Discharge or Environmental Complaint. Such information is to be
provided to allow Agent to protect its security interest in such Real Property
and is not intended to create nor shall it create any obligation upon Agent or
any Lender with respect thereto.
(e) Each Borrower shall promptly forward to Agent copies of any request for
information, notification of potential liability, demand letter relating to
potential responsibility with respect to the investigation or cleanup of
Hazardous Substances at any other site owned, operated or used by such Borrower
to dispose of Hazardous Substances and shall continue to forward copies of
correspondence between such Borrower and the Authority regarding such claims to
Agent until the claim is settled. Each Borrower shall promptly forward to Agent
copies of all documents and reports concerning a Hazardous Discharge at its Real
Property that such Borrower is required to file under any Environmental Laws.
Such information is to be provided solely to allow Agent to protect Agent's
security interest in such Real Property and the Collateral.
(f) Each Borrower shall respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting its Collateral or Real Property to
any Lien other than a Permitted Encumbrance. If any Borrower shall fail to
respond promptly to any Hazardous Discharge or Environmental Complaint or such
Borrower shall fail to comply with any of the requirements of any Environmental
Laws, Agent on behalf of Lenders may, but without the obligation to do so, for
the
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 41
sole purpose of protecting Agent's interest in Collateral: (A) give such
notices or (B) enter onto such Borrower's Real Property (or authorize third
parties to enter onto such Real Property) and take such actions as Agent (or
such third parties as directed by Agent) deem reasonably necessary or advisable
to clean up, remove, mitigate or otherwise deal with any such Hazardous
Discharge or Environmental Complaint. All reasonable costs and expenses incurred
by Agent and Lenders (or such third parties) in the exercise of any such rights,
including any reasonable sums paid in connection with any judicial or
administrative investigation or proceedings, fines and penalties, together with
interest thereon from the date expended at the Revolving Interest Rate for
Domestic Rate Loans shall be paid upon demand by such Borrower, and until paid
shall be added to and become a part of the Obligations secured by the Liens
created by the terms of this Agreement or any Other Documents.
(g) Promptly upon the written request of Agent from time to time, each
Borrower shall provide Agent with an environmental site assessment or
environmental audit report prepared by an environmental engineering firm
acceptable in the reasonable opinion of Agent, to assess with a reasonable
degree of certainty the existence of a Hazardous Discharge and the potential
costs in connection with abatement, cleanup and removal of any Hazardous
Substances found on, under, at or within such Borrower's Real Property. Any
report or investigation of such Hazardous Discharge proposed and acceptable to
an appropriate Authority that is charged to oversee the clean-up of such
Hazardous Discharge shall be acceptable to Agent. Agent shall have the right to
require such Borrower to post a bond, letter of credit or other security
reasonably satisfactory to Agent to secure payment of these costs and expenses.
Provided that (i) an Event of Default shall have occurred and be continuing,
(ii) Agent or any Lender shall have a reasonable good faith belief that any
Borrower has failed to comply with any Environmental Law or (iii) a Hazardous
Discharge has occurred with respect to such Borrower's Real Property, the costs
of any such assessments or audit reports shall be paid by Borrowers.
(h) Borrowers shall defend and indemnify Agent and Lenders and hold Agent,
Lenders and their respective employees, agents, directors and officers harmless
from and against all loss, liability, damage and expense, claims, costs, fines
and penalties, including attorney's fees, suffered or incurred by Agent or
Lenders under or on account of any Environmental Laws, including, without
limitation, the assertion of any Lien thereunder, with respect to any Hazardous
Discharge, the presence of any Hazardous Substances affecting the Real Property,
whether or not the same originates or emerges from the Real Property or any
contiguous real estate, including any loss of value of the Real Property as a
result of the foregoing except to the extent such loss, liability, damage and
expense is attributable to any Hazardous Discharge resulting from actions on the
part of Agent or any Lender or any officer, employee, agent or other
representative of Agent or any Lender. Borrowers' obligations under this Section
4.19 shall arise upon the discovery of the presence of any Hazardous Substances
at the Real Property, whether or not any federal, state, or local environmental
agency has taken or threatened any action in connection with the presence of any
Hazardous Substances. Borrowers' obligation and the indemnifications hereunder
shall survive the termination of this Agreement.
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 42
(i) For purposes of Sections 4.19 and 5.7, all references to Real Property
shall be deemed to include the property described on Schedule 4.19 hereto and
all of each Borrower's right, title and interest in and to its other owned and
leased premises.
4.20 Financing Statements. Except as respects the financing statements
filed by Agent and the financing statements described on Schedule 1.2, no
financing statement covering any of the Collateral or any proceeds thereof is on
file in any public.
5. REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants as follows:
5.1 Authority; Ownership. Such Borrower has full power, authority and legal
right to enter into this Agreement and the Other Documents to which it is a
party and to perform all its respective Obligations hereunder and thereunder.
The execution, delivery and performance of this Agreement and such Other
Documents (a) are within such Borrower's corporate powers, have been duly
authorized, are not in contravention of law or the terms of such Borrower's
Certificate of Incorporation, Bylaws or other applicable documents relating to
Borrower's formation or to the conduct of Borrower's business or of any material
agreement or undertaking to which such Borrower is a party or by which such
Borrower is bound, and (b) will not conflict with nor result in any breach in
any of the provisions of or constitute a default under or result in the creation
of any Lien except Permitted Encumbrances upon any asset of such Borrower under
the provisions of any agreement, charter document, instrument, by-law, or other
instrument to which such Borrower is a party or by which it or its property may
be bound. The holders of all ownership interests in such Borrower (except HMG
Worldwide) are as listed on Schedule 5.1.
5.2 Formation and Qualification.
(a) Such Borrower is duly formed and in good standing under the laws of the
state listed on Schedule 5.2(a) and is qualified to do business and is in good
standing in the states listed on Schedule 5.2(a), which states constitute all
states in which qualification and good standing are necessary for such Borrower
to conduct its business and own its property and where the failure to so qualify
could reasonably be expected to have a Material Adverse Effect on such Borrower.
Such Borrower has delivered to Agent true and complete copies of its Certificate
of Incorporation and Bylaws and will promptly notify Agent of any amendment or
change thereto.
(b) The only Subsidiaries of such Borrower are listed on Schedule 5.2(b).
5.3 Survival of Representations and Warranties. All representations and
warranties of such Borrower contained in this Agreement and the Other Documents
to which it is a party shall be true at the time of such Borrower's execution of
this Agreement and such Other Documents, and shall survive the execution,
delivery and acceptance thereof by the parties thereto and the closing of the
transactions described therein or related thereto.
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 43
5.4 Tax Returns. Such Borrower's federal tax identification number is set
forth on Schedule 5.4. Such Borrower has filed all federal, state and local tax
returns and other reports it is required by law to file and has paid all taxes,
assessments, fees and other governmental charges that are due and payable by it.
Federal, state and local income tax returns of such Borrower have been examined
and reported upon by the appropriate taxing authority or closed by applicable
statute and satisfied for all fiscal years prior to and including the fiscal
year ending December 31,1989. The provision for taxes on the books of such
Borrower are adequate for all years not closed by applicable statutes, and for
its current fiscal year, and such Borrower has no knowledge of any deficiency or
additional assessment in connection therewith not provided for on its books.
5.5 Financial Statements.
(a) The pro forma consolidated and consolidating balance sheet of HMG
Worldwide (the "Pro Forma Balance Sheet") furnished to Agent on the Closing Date
reflects the consummation of the transactions contemplated under this Agreement
and the Other Documents (the "Transactions") and is accurate, complete and
correct in all material respects and fairly reflects the financial condition of
each Borrower as of the Closing Date after giving effect to the Transactions,
and has been prepared in accordance with GAAP, consistently applied. The Pro
Forma Balance Sheet has been certified as accurate, complete and correct in all
material respects by the President and Chief Financial Officer of HMG Worldwide.
All financial statements referred to in this subsection 5.5(a), including the
related schedules and notes thereto, have been prepared, in accordance with
GAAP, except as may be disclosed in such financial statements.
(b) The twelve-month cash flow projections of HMG Worldwide, on a
consolidated and consolidating basis, and its projected consolidated and
consolidating balance sheets as of the Closing Date, copies of which are annexed
hereto as Exhibit 5.5(b) (the "Projections") were prepared by the Chief
Financial Officer of HMG Worldwide, are based on underlying assumptions which
provide a reasonable basis for the projections contained therein and reflect
Borrowers' judgment based on present circumstances of the most likely set of
conditions and course of action for the projected period. The cash flow
Projections together with the Pro Forma Balance Sheet are hereinafter referred
to collectively as the "Pro Forma Financial Statements".
5.6 Name. Such Borrower has not been known by any other name in the past
five years and does not sell Inventory under any other name except as set forth
on Schedule 5.6, nor has such Borrower been the surviving entity of a merger or
consolidation or acquired all or substantially all of the assets of any Person
during the preceding five (5) years except as shown on Schedule 5.6.
5.7 O.S.H.A. and Environmental Compliance.
(a) Such Borrower has duly complied in all material respects with, and
except as disclosed in Schedule 5.7(a), its facilities, business, assets,
property, leaseholds and Equipment are in compliance in all material respects
with, the provisions of the Federal Occupational Safety and Health Act, the
Environmental Protection Act, RCRA and all other Environmental Laws; there have
been no outstanding citations, notices or orders of non-compliance issued to
such Borrower or
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 44
relating to its business, assets, property, leaseholds or Equipment under
any such laws, rules or regulations.
(b) Such Borrower has been issued all required federal, state and local
licenses, certificates or permits relating to all applicable Environmental Laws.
(c) (i) Except as disclosed in Schedule 5.7(a), there are no visible signs
of releases, spills, discharges, leaks or disposal (collectively referred to as
"Releases") of Hazardous Substances at, upon, under or within such Borrower's
Real Property or any premises leased by such Borrower; (ii) there are no
underground storage tanks or polychlorinated biphenyls on such Real Property or
any premises leased by such Borrower; (iii) neither such Real Property nor any
premises leased by such Borrower has, to such Borrower's knowledge, ever been
used as a treatment, storage or disposal facility of Hazardous Waste; and (iv)
no Hazardous Substances are present on such Real Property or any premises leased
by such Borrower, excepting such quantities as are handled in accordance with
all applicable manufacturer's instructions and governmental regulations and in
proper storage containers and as are necessary for the operation of the
commercial business of such Borrower or of its tenants.
5.8 Solvency; No Litigation, Violation, Indebtedness or Default.
(a) After giving effect to the Transactions, Borrowers on a consolidated
basis will be solvent, able to pay their debts as they mature, have capital
sufficient to carry on their businesses and all businesses in which they are
about to engage, and (i) as of the Closing Date, the aggregate fair present
saleable value of Borrowers' assets, calculated on a going concern basis, is in
excess of the amount of their consolidated liabilities and (ii) subsequent to
the Closing Date, the aggregate fair saleable value of Borrowers' assets
(calculated on a going concern basis) will be in excess of the amount of
Borrowers' liabilities on a consolidated basis.
(b) Except as disclosed in Schedule 5.8(b), such Borrower has no (i)
pending or threatened litigation, arbitration, actions or proceedings which
involve the reasonable possibility of having a Material Adverse Effect on such
Borrower, and (ii) liabilities nor indebtedness for borrowed money or
capitalized lease obligations other than the Obligations.
(c) Such Borrower is not in violation of any applicable statute, regulation
or ordinance in any respect which could reasonably be expected to have a
Material Adverse Effect on such Borrower, nor is such Borrower in violation of
any order of any court, governmental authority or arbitration board or tribunal
in a manner that could reasonably be expected to have a Material Adverse Effect
on such Borrower.
(d) Neither such Borrower nor any member of the Controlled Group maintains
or contributes to any Plan other than those listed on Schedule 5.8(d) hereto.
Except as set forth in Schedule 5.8(d), (i) no Plan has incurred any
"accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA and
Section 412(a) of the Code, whether or not waived, and such Borrower and each
member of the Controlled Group has met all applicable minimum funding
requirements under Section 302 of ERISA in respect of each Plan, (ii) each Plan
which is intended
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 45
to be a qualified plan under Section 401(a) of the Code as currently in
effect has been determined by the Internal Revenue Service to be qualified under
Section 401(a) of the Code and the trust related thereto is exempt from federal
income tax under Section 501(a) of the Code, (iii) neither such Borrower nor any
member of the Controlled Group has incurred any liability to the PBGC other than
for the payment of premiums, and there are no premium payments which have become
due which are unpaid, (iv) no Plan has been terminated by the plan administrator
thereof nor by the PBGC, and no event which would cause the PBGC to institute
proceedings under Title IV of ERISA to terminate any Plan has occurred, (v) at
this time, the current value of the assets of each Plan exceeds the present
value of the accrued benefits and other liabilities of such Plan and neither
such Borrower nor any member of the Controlled Group knows of any facts or
circumstances which would materially change the current value of such assets and
accrued benefits and other liabilities, (vi) neither such Borrower nor any
member of the Controlled Group has breached any of the responsibilities,
obligations or duties imposed on it by ERISA with respect to any Plan, (vii)
neither such Borrower nor any member of the Controlled Group has incurred any
liability for any excise tax arising under Section 4972 or 4980B of the Code,
and no circumstance which could give rise to any such liability has occurred,
(viii) neither such Borrower nor any member of the Controlled Group nor any
fiduciary of, nor any trustee to, any Plan, has engaged in a "prohibited
transaction" described in Section 406 of the ERISA or Section 4975 of the Code
nor taken any action which would constitute or result in a Termination Event
with respect to any such Plan which is subject to ERISA, (ix) such Borrower and
each member of the Controlled Group has made all contributions due and payable
with respect to each Plan, (x) no event described in Section 4043(b) of ERISA,
for which the thirty (30) day notice period contained in 29 CFR '2615.3 has not
been waived has occurred, (xi) neither such Borrower nor any member of the
Controlled Group has any fiduciary responsibility for investments with respect
to any Plan existing for the benefit of persons other than employees or former
employees of such Borrower and any member of the Controlled Group, and (xii)
neither such Borrower nor any member of the Controlled Group has withdrawn,
completely or partially, from any Multiemployer Plan so as to incur liability
under the Multiemployer Pension Plan Amendments Act of 1980. 5.9 Patents,
Trademarks, Copyrights and Licenses. All patents, patent applications,
trademarks, trademark applications, service marks, service xxxx applications,
copyrights, copyright applications, design rights, tradenames, assumed names,
trade secrets and licenses owned or utilized by such Borrower are set forth on
Schedule 5.9, are valid and have been duly registered or filed with all
appropriate governmental authorities and constitute all of the intellectual
property rights which are necessary for the operation of its business; there is
no objection to or pending challenge to the validity of any such material
patent, trademark, copyright, design right, tradename, trade secret or license
and such Borrower is not aware of any grounds for any challenge, except as set
forth in Schedule 5.9 hereto. Each patent, patent application, patent license,
trademark, trademark application, trademark license, service xxxx, service xxxx
application, service xxxx license, copyright, copyright application and
copyright license owned or held by such Borrower and all trade secrets owned by
such Borrower consist of original material or property developed by such
Borrower or was lawfully acquired by such Borrower from the proper and lawful
owner thereof. Each of such items has been maintained so as to preserve the
value thereof from the date of creation or acquisition thereof. With respect to
all software used by such Borrower, such Borrower is in possession of all source
and object codes related to each piece of software or is the beneficiary of a
source code escrow agreement, each such source code escrow agreement being
listed on Schedule 5.9 hereto.
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 46
Notwithstanding anything contained herein to the contrary, no Borrower
makes any representation or warranty as to (A) whether any patent, patent
application, trademark, trademark application, service xxxx, service xxxx
application, copyright, copyright application, design right, trade name, assumed
name, trade secret, license or other intellectual property (all of the
foregoing, collectively, "Intellectual Property") not owned by such Borrower is
valid or has been duly registered or filed, (B) whether there is currently
pending or threatened any objection or challenge to any Intellectual Property
not owned by such Borrower or (C) whether such Borrower has (under any escrow
agreement or otherwise) any source or object code related to any
word-processing, accounting, inventory or other software that is marketed
generally to the public or that otherwise has not been created expressly or
exclusively for such Borrower.
5.10 Licenses and Permits. Except as set forth in Schedule 5.10, such
Borrower is in compliance with, and has procured and is now in possession of,
all material licenses or permits required by any applicable federal, state or
local law or regulation for the operation of its business in each jurisdiction
wherein it is now conducting or proposes to conduct business and where the
failure to procure such licenses or permits could have a Material Adverse Effect
on such Borrower.
5.11 Default of Indebtedness. Except as set forth on Schedule 5.11, such
Borrower is not in default in the payment of the principal of or interest on any
Indebtedness or under any instrument or agreement under or subject to which any
Indebtedness has been issued and no event has occurred under the provisions of
any such instrument or agreement which with or without the lapse of time or the
giving of notice, or both, constitutes or would constitute an event of default
thereunder.
5.12 No Default. Except as set forth on Schedule 5.12, such Borrower is not
in default in the payment or performance of any of its contractual obligations
and no Default has occurred. 5.13 No Burdensome Restrictions. Such Borrower is
not party to any contract or agreement the performance of which is reasonably
expected to have a Material Adverse Effect on such Borrower. Such Borrower has
not agreed or consented to cause or permit in the future (upon the happening of
a contingency or otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a Lien which is not a Permitted Encumbrance.
5.14 No Labor Disputes. Such Borrower is not involved in any labor dispute;
there are no strikes or walkouts or union organization of such Borrower's
employees threatened or in existence and no labor contract is scheduled to
expire during the Term other than as set forth on Schedule 5.14 hereto.
5.15 Margin Regulations. Such Borrower is not engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U or
Regulation G of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any Advance
will be used for "purchasing" or "carrying" "margin stock" as defined in
Regulation U of such Board of Governors.
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5.16 Investment Company Act. Such Borrower is not an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.17 Disclosure. No representation or warranty made by such Borrower in
this Agreement or in any financial statement, report, certificate or any other
document furnished in connection herewith or therewith contains any untrue
statement of fact or omits to state any fact necessary to make the statements
herein or therein, in the circumstances in which they are made, not misleading.
There is no currently existing condition known to such Borrower or which
reasonably should be known to such Borrower which such Borrower has not
disclosed to Agent in writing with respect to the transactions contemplated by
this Agreement which could reasonably be expected to have a Material Adverse
Effect on such Borrower.
5.18 Swaps. Such Borrower is not a party to, nor will it be a party to, any
swap agreement whereby such Borrower has agreed or will agree to swap interest
rates or currencies unless same provides that damages upon termination following
an event of default thereunder are payable on an unlimited "two-way basis"
without regard to fault on the part of either party.
5.19 Conflicting Agreements. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on such Borrower or
affecting its Collateral conflicts with, or requires any Consent which has not
already been obtained or waived as a condition to, or would in any way prevent
the execution, delivery or performance by such Borrower of, the terms of this
Agreement or the Other Documents to which it is a party.
5.20 Application of Certain Laws and Regulations. Neither such Borrower nor
any Affiliate of such Borrower is subject to any statute, rule or regulation
which regulates the incurrence of any Indebtedness, including without
limitation, statutes or regulations relative to common or interstate carriers or
to the sale of electricity, gas, steam, water, telephone, telegraph or other
public utility services and that would proscribe or otherwise restrict such
Borrower entering into this Agreement, any of the Other Documents to which such
Borrower is a party or performing its obligations hereunder or thereunder.
5.21 Business and Property of Borrower. Upon and after the Closing Date,
such Borrower does not currently propose to engage in any business other than
the business in which it (directly or through any Subsidiary or Affiliate) is
currently engaged or similar businesses and activities necessary to conduct the
foregoing. On the Closing Date, such Borrower will own all the property and
possess all of the rights and Consents necessary for the conduct of the business
of such Borrower.
5.22 Year 2000. Such Borrower and its Subsidiaries have reviewed the areas
within their business and operations which could be adversely affected by, and
have developed or are developing a program to address, on a timely basis, the
risk that certain computer applications used by such Borrower or its
Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving dates prior to and after December 31, 1999 (the "Year 2000
Problem"). To the
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best of such Borrower's knowledge, the Year 2000 Problem will not result in
any Material Adverse Change to such Borrower.
5.23 Interrelatedness of Borrowers. The business operations of each
Borrower are interrelated and complement one another, and Borrowers have a
common business purpose, with intercompany bookkeeping and accounting
adjustments used to separate their respective properties, liabilities and
transactions. To permit Borrowers' uninterrupted and continuous operations,
Borrowers now require and will from time to time hereafter require funds and
credit accommodations for general business purposes. The proceeds of Advances
will directly or indirectly benefit each Borrower, severally and jointly,
regardless of which Borrower requests or receives part or all of the proceeds of
such advances.
6. AFFIRMATIVE COVENANTS.
Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement, jointly and severally with the other Borrowers:
6.1 Payment of Fees. Pay to Agent on demand all usual and customary fees
and expenses which Agent incurs in connection with (a) the forwarding of Advance
proceeds and (b) the establishment and maintenance of any Blocked Accounts or
Depository Accounts as provided for in Section 4.15(h). Agent may, without
making demand, charge Borrowers' Account for all such fees and expenses.
6.2 Conduct of Business and Maintenance of Existence and Assets. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
design rights, tradenames, trade secrets and trademarks and take all actions
necessary to enforce and protect the validity of any intellectual property right
or other right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect on such Borrower; and
(c) make all such reports and pay all such franchise and other taxes and license
fees and do all such other acts and things as may be lawfully required to
maintain its rights, licenses, leases, powers and franchises under the laws of
the United States or any political subdivision thereof.
6.3 Violations. Promptly notify Agent in writing of any violation of any
law, statute, regulation or ordinance of any Governmental Body, or of any agency
thereof, applicable to such Borrower which could reasonably be expected to have
a Material Adverse Effect on such Borrower.
6.4 Government Receivables. Take all steps necessary to protect Agent's
interest in the Collateral under the Federal Assignment of Claims Act or other
applicable state or local statutes or ordinances and deliver to Agent
appropriately endorsed, any instrument or chattel paper connected
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with any Receivable arising out of contracts between such Borrower and the
United States, any state or any department, agency or instrumentality of any of
them.
6.5 Fixed Charge Coverage Ratio. Maintain at all times a Fixed Charge
Coverage Ratio of not less than 1.05 to 1.0 as of the end of each fiscal
quarter, calculated on a rolling four-quarter basis commencing with the
four-quarter period ending September 30, 1999.
6.6 Execution of Supplemental Instruments. Execute and deliver to Agent
from time to time, promptly following demand therefor, such supplemental
agreements, statements, assignments and transfers, or instructions or documents
relating to the Collateral, and such other instruments as Agent may reasonably
request, in order that the full intent of this Agreement may be carried into
effect.
6.7 Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the failure to do so could not
reasonably be expected to have a Material Adverse Effect or when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and Borrower shall have provided for such reserves as Agent may
reasonably deem proper and necessary.
6.8 Standards of Financial Statements. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and 9.14 as to
which GAAP is stated herein to be applicable to be complete and correct in all
material respects (subject, in the case of interim financial statements, to
normal year-end audit adjustments) and to be prepared in reasonable detail and
in accordance with GAAP applied consistently throughout the periods reflected
therein (except as concurred in by such reporting accountants or officer, as the
case may be, and disclosed therein).
6.9 Interest Rate Protection. On or before October 27, 1999, Borrowers
shall enter into a "swap agreement" which provides for interest rate protection
for a period of at least five (5) years for an amount not less than Five Million
Dollars ($5,000,000.00), and otherwise on terms and conditions reasonably
satisfactory to Lenders. The Borrowers entering into and/or performing any such
"swap agreement" shall be permitted under this Agreement and, notwithstanding
anything contained in this Agreement or in any Other Document to the contrary,
shall not constitute a breach or violation of, or default under, any
representation, warranty, covenant or other agreement set forth in this
Agreement or in any Other Document.
7. NEGATIVE COVENANTS.
No Borrower shall, until satisfaction in full of the Obligations and
termination of this Agreement:
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7.1 Merger, Consolidation, Acquisition and Sale of Assets.
(a) Except with respect to any Permitted Acquisition, enter into any
merger, consolidation or other reorganization with or into any other Person or
acquire all or a substantial portion of the assets or ownership interests of any
Person or permit any other Person to consolidate with or merge with it.
(b) Sell, lease, transfer or otherwise dispose of any of its properties or
assets, except in the ordinary course of its business.
7.2 Creation of Liens. Create or suffer to exist any Lien upon or against
any of its property or assets now owned or hereafter acquired, except Permitted
Encumbrances.
7.3 Guarantees. Become liable upon the obligations of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders)
except the endorsement of checks in the ordinary course of business and the
guarantee by any Borrower of the Permitted Acquisition Indebtedness of another
Borrower, which guarantee must be on terms and conditions satisfactory to
Required Lenders.
7.4 Investments. Except with respect to any Permitted Acquisition, purchase
or acquire obligations or stock of, or any other interest in, any Person, except
(a) obligations issued or guaranteed by the United States of America or any
agency thereof, (b) commercial paper with maturities of not more than 180 days
and a published rating of not less than A-1 or P-1 (or the equivalent rating),
(c) certificates of time deposit and bankers' acceptances having maturities of
not more than 180 days and repurchase agreements backed by United States
government securities of a commercial bank if (i) such bank has a combined
capital and surplus of at least $500,000,000, or (ii) its debt obligations, or
those of a holding company of which it is a Subsidiary, are rated not less than
A (or the equivalent rating) by a nationally recognized investment rating
agency, and (d) U.S. money market funds that invest solely in obligations issued
or guaranteed by the United States of America or an agency thereof.
7.5 Loans. Make advances, loans or extensions of credit to any Person,
including without limitation, any Parent, Subsidiary or Affiliate; provided,
however, as long as no Event of Default shall have occurred and be continuing,
any Borrower (a) may make advances, loans or extensions of credit to any other
Borrower and (b) shall be entitled to make advances, loans or extensions of
credit (in an aggregate amount, when aggregated with similar advances, loans or
extensions of credit made by the other Borrowers, not to exceed $300,000.00) to
employees of one or more of the Borrowers.
7.6 Distributions. Declare, pay or make any distribution on any of its
ownership interests or apply any of its funds, property or assets to the
purchase, redemption or other retirement of any of its ownership interests, or
of any options to purchase or acquire any such shares of its ownership
interests. Notwithstanding anything contained herein to the contrary and subject
to the provisions of this Agreement regarding Change of Control and Change of
Ownership, each Borrower shall be entitled (a) to issue any preferred stock
(whether or not convertible into common stock or
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 51
other securities of such Borrower), (b) to grant and issue stock options
and warrants, under any of the employee stock option plans described on Schedule
7.6, a true and complete copy of which has been delivered to Agent or any other
stock option plan of any Borrower adopted after the date hereof, true and
complete copies of which shall be delivered to Agent promptly after the adoption
thereof by such Borrower, (c) upon the conversion of any security convertible
into, or the exercise of any security exercisable for, any security of such
Borrower, to issue the security of such Borrower into which such security is
convertible or for which such security is exercisable and (d) as part of any
Permitted Acquisition or otherwise, to issue any share of its capital stock.
7.7 Indebtedness. Create, incur, assume or suffer to exist any Indebtedness
(exclusive of trade debt) except in respect of (i) Indebtedness to Lenders, (ii)
Permitted Acquisition Indebtedness, (iii) Indebtedness described on Schedule 7.7
and (iv) Indebtedness in respect of Additional Convertible Notes.
7.8 Nature of Business. Substantially change the nature of the business in
which it is presently engaged, nor except as specifically permitted under this
Agreement purchase or invest, directly or indirectly, in any assets or property
other than in the ordinary course of business for assets or property which are
useful in, necessary for and are to be used in its business as presently
conducted.
7.9 Transactions with Affiliates. Directly or indirectly, purchase, acquire
or lease any property from, or sell, transfer or lease any property to, or
otherwise deal with, any Affiliate, except transactions disclosed in the
ordinary course of business, on an arm's-length basis on terms no less favorable
than terms which would have been obtainable from a Person other than an
Affiliate.
7.10 Leases. Enter as lessee into any lease arrangement for real or
personal property if after giving effect thereto, aggregate annual rental
payments for all leased property would exceed Two Million Dollars
($2,000,000.00) in any one fiscal year.
7.11 Subsidiaries. Except in connection with or as part of any Permitted
Acquisitions, (a) form any Subsidiary or (b) enter into any partnership, joint
venture or similar arrangement.
7.12 Fiscal Year and Accounting Changes. Change its fiscal year from
December 31 or make any change (i) in accounting treatment and reporting
practices except as required by GAAP or (ii) in tax reporting treatment except
as required by law.
7.13 Pledge of Credit. Now or hereafter pledge Agent's or any Lender's
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than such Borrower's business as conducted
on the date of this Agreement or business similar thereto.
7.14 Amendment of Certificate of Incorporation; By-Laws. Amend, modify or
waive any term or material provision of its Certificate of Incorporation or
By-Laws if the same could reasonably be expected to have a Material Adverse
Effect on such Borrower.
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 52
7.15 Compliance with ERISA. (i) (x) Maintain, or permit any member of the
Controlled Group to maintain, or (y) become obligated to contribute, or permit
any member of the Controlled Group to become obligated to contribute, to any
Plan, other than those Plans disclosed on Schedule 5.8(d) and Plan(s) adopted by
any Borrower after the date hereof, which must be reasonably satisfactory to
Required Lenders, (ii) engage, or permit any member of the Controlled Group to
engage, in any non-exempt "prohibited transaction", as that term is defined in
section 406 of ERISA and Section 4975 of the Code, (iii) except as set forth on
Schedule 7.15 hereto, incur, or permit any member of the Controlled Group to
incur, any "accumulated funding deficiency", as that term is defined in Section
302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any member of
the Controlled Group to terminate, any Plan where such event could result in any
liability of such Borrower or any member of the Controlled Group or the
imposition of a lien on the property of such Borrower or any member of the
Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any
member of the Controlled Group to assume, any obligation to contribute to any
Multiemployer Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (vii) fail promptly to notify Agent of the occurrence of any
Termination Event, (viii) fail to comply, or permit a member of the Controlled
Group to fail to comply, with the requirements of ERISA or the Code or other
applicable laws in respect of any Plan (provided that as long as Borrowers are
in compliance with the current funding requirements with respect to the funding
deficiency described on Schedule 7.15, Borrowers shall not be deemed to be in
breach of this covenant), or (ix) fail to meet, or permit any member of the
Controlled Group to fail to meet, all minimum funding requirements under ERISA
or the Code or postpone or delay or allow any member of the Controlled Group to
postpone or delay any funding requirement with respect of any Plan.
7.16 Capital Expenditures. Borrowers will not cause, suffer or permit
Borrowers' aggregate Capital Expenditures to exceed Two Million Dollars
($2,000,000.00) during any fiscal year, exclusive of any Capital Expenditure
made in conjunction with any Permitted Acquisition. Such permitted Capital
Expenditures are on a non-cumulative basis as to unused portions for any fiscal
year.
8. CONDITIONS PRECEDENT.
8.1 Conditions to Initial Advances. The agreement of Lenders to make the
initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Agent, immediately prior to or concurrently with the
making of such Advances, of the following conditions precedent:
(a) Note. Agent shall have received the Note duly executed and delivered by
an authorized officer of Borrowers;
(b) Filings, Registrations and Recordings. Each document (including,
without limitation, any Uniform Commercial Code financing statement) required by
this Agreement, any related agreement or under law or reasonably requested by
the Agent to be filed, registered or recorded in order to create, in favor of
Agent, a perfected security interest in or lien upon the Collateral shall have
been properly filed, registered or recorded in each jurisdiction in which the
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 53
filing, registration or recordation thereof is so required or requested,
and Agent shall have received an acknowledgment copy, or other evidence
reasonably satisfactory to it, of each such filing, registration or recordation
and reasonably satisfactory evidence of the payment of any necessary fee, tax or
expense relating thereto;
(c) Corporate Proceedings of Borrower. Agent shall have received a copy of
the resolutions in form and substance reasonably satisfactory to Agent, of the
Board of Directors or shareholders of each Borrower authorizing (i) the
execution, delivery and performance of this Agreement, the Note and any related
agreements (collectively the "Documents") and (ii) the granting by each Borrower
of the security interests in and liens upon the Collateral, in each case
certified by the Secretary or an Assistant Secretary of each Borrower as of the
Closing Date; and, such certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded as of the date
of such certificate;
(d) Incumbency Certificates of Borrower. Agent shall have received a
certificate of the Secretary or an Assistant Secretary of each Borrower, dated
the Closing Date, as to the incumbency and signature of the officers of such
Borrower executing this Agreement, any certificate or other documents to be
executed and delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
(e) Certificates. Agent shall have received a copy of the Certificate of
Incorporation of each Borrower, and all amendments thereto, certified by the
Secretary of State or other appropriate official of its jurisdiction together
with a copy of the By-Laws of each Borrower certified as accurate and complete
by the Secretary of such Borrower;
(f) Good Standing Certificates. Agent shall have received good standing
certificates for each Borrower dated not more than twenty (20) days prior to the
Closing Date, issued by the Secretary of State or other appropriate official of
each Borrower's jurisdiction of incorporation and each jurisdiction where the
conduct of each Borrower's business activities or the ownership of its
properties necessitates qualification;
(g) Legal Opinion. Agent shall have received the executed legal opinion of
Borrowers' counsel in form and substance reasonably satisfactory to Agent which
shall cover such matters incident to the transactions contemplated by this
Agreement, the Note and related agreements as Agent may reasonably require and
each Borrower hereby authorizes and directs such counsel to deliver such opinion
to Agent and Lenders;
(h) No Litigation. (i) No litigation, investigation or proceeding before or
by any arbitrator or Governmental Body shall be continuing or threatened against
any Borrower or against the officers or directors of any Borrower (A) in
connection with the Other Documents or any of the transactions contemplated
thereby and which, in the reasonable opinion of Agent, is deemed material or (B)
which could, in the reasonable opinion of Agent, have a Material Adverse Effect
on such Borrower; and (ii) no injunction, writ, restraining order or other order
of any nature materially adverse to any Borrower or the conduct of its business
or inconsistent with the due consummation of the Transactions shall have been
issued by any Governmental Body;
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 54
(i) Financial Condition Certificates. Agent shall have received an executed
Financial Condition Certificate in the form of Exhibit 8.1(i).
(j) Collateral Examination. Agent shall have completed Collateral
examinations and received appraisals with respect to such Collateral as Lenders
shall require, the results of which shall be reasonably satisfactory in form and
substance to Agent.
(k) Fees. Agent shall have received or shall be entitled to deduct from
Borrowers' Account, all fees payable to Agent and Lenders on or prior to the
Closing Date pursuant to Article III hereof and in the Fee Letter;
(l) Pro Forma Financial Statements. Agent shall have received a copy of the
Pro Forma Financial Statement which shall be reasonably satisfactory in all
respects to Agent;
(m) Insurance. Agent shall have received, in form and substance reasonably
satisfactory to Agent, certified copies of each Borrower's casualty insurance
policies, together with loss payable endorsements on Agent's standard form of
loss payee endorsement naming Agent as lenders' loss payee and insured
mortgagee, and certified copies of each Borrower's liability insurance policies,
together with endorsements naming Agent as additional insured;
(n) Payment Instructions. Agent shall have received written instructions
from Borrowing Agent directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(o) Blocked Accounts. Agent shall have received duly executed agreements
establishing the Blocked Accounts or Depository Accounts with financial
institutions reasonably acceptable to Agent for the collection or servicing of
the Receivables and proceeds of the Collateral;
(p) Consents. Agent shall have received any and all Consents necessary to
permit the effectuation of the transactions contemplated by this Agreement and
the Other Documents; and Agent shall have received such Consents and waivers of
such third parties as might assert claims with respect to the Collateral, as
Agent and its counsel shall reasonably deem necessary;
(q) No Adverse Material Change. (i) Since the date of Borrowers' most
recent financial statements delivered to Agent, there shall not have occurred
any event, condition or state of facts which could reasonably be expected to
have a Material Adverse Effect on any Borrower and (ii) no representations made
or information supplied to Agent shall have been proven to be inaccurate or
misleading in any material respect;
(r) Contract Review. Agent shall have reviewed all material contracts of
each Borrower including, without limitation, leases, union contracts, labor
contracts, vendor supply contracts, license agreements and distributorship
agreements, and such contracts and agreements shall be reasonably satisfactory
in all material respects to Agent;
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(s) Closing Certificate. Agent shall have received a closing certificate
signed by the Chief Financial Officer of each Borrower dated as of the date
hereof, stating that (i) all representations and warranties of such Borrower set
forth in this Agreement and the Other Documents to which such Borrower is a
party are true and correct on and as of such date, (ii) such Borrower is on such
date in compliance with all the terms and provisions set forth in this Agreement
and such Other Documents and (iii) on such date no Default or Event of Default
has occurred or is continuing;
(t) Borrowing Base. Agent shall have received evidence from Borrowers that
the aggregate amount of Eligible Receivables, Eligible Inventory and Eligible
Securities is sufficient in value and amount to support Advances in the amount
requested by Borrowing Agent on the Closing Date; (u) Undrawn Availability.
After giving effect to the initial Advances hereunder, Borrowers shall have
Undrawn Availability of at least Two Million Five Hundred Thousand Dollars
($2,500,000.00);
(v) Title Insurance. Agent shall have received fully paid mortgagee title
insurance policies (or binding commitments to issue title insurance policies,
marked to Agent's satisfaction to evidence the form of such policies to be
delivered with respect to the Mortgage), in standard ALTA form, issued by a
title insurance company reasonably satisfactory to Agent, each in an amount
equal to not less than the fair market value of the Real Property subject to the
Mortgage, insuring the Mortgage to create a valid Lien on the Real Property with
no exceptions which Agent shall not have approved in writing and no survey
exceptions;
(w) Environmental Reports. Agent shall have received all environmental
studies and reports prepared by independent environmental engineering firms
reasonably acceptable to Agent with respect to all Real Property, in form and
content reasonably satisfactory to Agent;
(x) Leasehold Agreements. Agent shall have received landlord, mortgagee or
warehouseman agreements reasonably satisfactory to Agent with respect to all
premises leased by Borrowers at which Inventory is located;
(y) Mortgage. Agent shall have received in form and substance reasonably
satisfactory to Agent (i) an executed Mortgage and (ii) surveys with respect to
the Real Property; (z) Securities. [INTENTIONALLY OMITTED]
(aa) Convertible Notes. Evidence that the aggregate outstanding principal
balance under the Convertible Notes is not less than $5,000,000.00, together
with true and complete copies of the Convertible Notes and all material
documents in connection therewith, all of which must be on terms and conditions
reasonably satisfactory to Agent; and
(bb) Other. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the Transactions, shall
be reasonably satisfactory in form and substance to Agent and its counsel.
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 56
8.2 Conditions to Each Advance. The agreement of Lenders to make any
Advance requested to be made on any date (including, without limitation, the
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
(a) Representations and Warranties. Each of the representations and
warranties made by Borrower in or pursuant to this Agreement and any related
agreements to which it is a party, and each of the representations and
warranties contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this Agreement or
any related agreement shall be true and correct in all material respects on and
as of such date as if made on and as of such date, or the reason for any such
representations and warranties no longer being true and correct in all material
respects shall have been disclosed to and approved by the Required Lenders or
all Lenders, as applicable;
(b) No Default. No Event of Default or Default shall have occurred and be
continuing on such date, or would exist after giving effect to the Advances
requested to be made on such date; provided, however that Lenders, in their sole
discretion, may continue to make Advances notwithstanding the existence of an
Event of Default or Default and that any Advances so made shall not be deemed a
waiver of any such Event of Default or Default; and
(c) Maximum Advances. In the case of any Advances requested to be made,
after giving effect thereto, the aggregate Advances shall not exceed the maximum
amount of Advances permitted under Section 2.1 hereof.
Each request for an Advance by Borrowing Agent hereunder shall constitute a
representation and warranty by Borrowers as of the date of such Advance that the
conditions contained in this subsection (except the approval by the Required
Lenders or Lenders as contemplated by clause (a) above) shall have been
satisfied.
9. INFORMATION AS TO BORROWER
Each Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
9.1 Disclosure of Material Matters. Immediately upon learning thereof,
report to Agent all matters materially and adversely affecting the value,
enforceability or collectibility of any portion of the Collateral including,
without limitation, such Borrower's reclamation or repossession of, or the
return to such Borrower of, a material amount of goods or claims or disputes
asserted by any Customer or other obligor.
9.2 Schedules. Deliver to Agent on or before the fifteenth (15th) day of
each month as and for the prior month (a) accounts receivable ageings, (b)
accounts payable schedules and (c) perpetual Inventory reports. In addition,
such Borrower will deliver to Agent at such intervals as Agent may reasonably
require: (i) confirmatory assignment schedules, (ii) copies of Customer's
invoices, (iii) evidence of shipment or delivery, and (iv) such further
schedules, documents and/or
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information regarding the Collateral as Agent may reasonably require
including, without limitation, trial balances and test verifications. Agent
shall have the right to confirm and verify all Receivables by any manner and
through any medium it reasonably considers advisable and do whatever it may
reasonably deem necessary to protect its interests hereunder. The items to be
provided under this Section are to be in form reasonably satisfactory to Agent
and executed by such Borrower and delivered to Agent from time to time solely
for Agent's convenience in maintaining records of the Collateral, and such
Borrower's failure to deliver any of such items to Agent shall not affect,
terminate, modify or otherwise limit Agent's Lien with respect to the
Collateral.
9.3 Environmental Reports. Furnish Agent, concurrently with the delivery of
the financial statements referred to in Sections 9.7 and 9.8, a certificate
signed by the President of such Borrower stating, to the best of his knowledge,
that such Borrower is in compliance in all material respects with all federal,
state and local laws relating to environmental protection and control and
occupational safety and health. To the extent such Borrower is not in compliance
with the foregoing laws, the certificate shall set forth with specificity all
areas of non-compliance and the proposed action such Borrower will implement in
order to achieve full compliance.
9.4 Litigation. Promptly notify Agent in writing of any litigation, suit or
administrative proceeding affecting such Borrower, whether or not the claim is
covered by insurance, and of any suit or administrative proceeding, which in any
such case could reasonably be expected to have a Material Adverse Effect on such
Borrower.
9.5 Material Occurrences. Promptly notify Agent in writing upon the
occurrence of (a) any Event of Default or Default; (b) any event, development or
circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of Borrowers
as of the date of such statements or the periods covered thereby; (c) any
accumulated retirement plan funding deficiency which, if such deficiency
continued for two plan years and was not corrected as provided in Section 4971
of the Code, could subject such Borrower to a tax imposed by Section 4971 of the
Code; (d) each and every default by such Borrower which might result in the
acceleration of the maturity of any Indebtedness, including the names and
addresses of the holders of such Indebtedness with respect to which there is a
default existing or with respect to which the maturity has been or could be
accelerated, and the amount of such Indebtedness; and (e) any other development
in the business or affairs of such Borrower which could reasonably be expected
to have a Material Adverse Effect on such Borrower; in each case describing the
nature thereof and the action such Borrower proposes to take with respect
thereto.
9.6 Government Receivables. Notify Agent immediately if any of its
Receivables arises out of contracts between such Borrower and the United States,
any state, or any department, agency or instrumentality of any of them.
9.7 Annual Financial Statements. Furnish Agent within ninety (90) days
after the end of each fiscal year of Borrowers, audited financial statements of
Borrowers, on a consolidated and a consolidating basis, including, but not
limited to, statements of income and stockholders' equity and cash flow from the
beginning of the current fiscal year to the end of such fiscal year and the
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balance sheet as at the end of such fiscal year, all prepared in accordance
with GAAP applied on a basis consistent with prior practices, and in reasonable
detail and reported upon without qualification by an independent certified
public accounting firm selected by Borrowers and reasonably satisfactory to
Agent (the "Accountants"). The independent certified public accounting firm of
Xxxxxxxx Xxxxxx & Green LLP is currently satisfactory to Agent. The report of
the Accountants shall be accompanied by a statement of the Accountants
certifying that (i) they have caused the Loan Agreement to be reviewed, (ii) in
making the examination upon which such report was based either no information
came to their attention which to their knowledge constituted an Event of Default
or a Default under this Agreement or any related agreement or, if such
information came to their attention, specifying any such Default or Event of
Default, its nature, when it occurred and whether it is continuing, and such
report shall contain or have appended thereto calculations which set forth
Borrowers' compliance with the requirements or restrictions imposed by Section
6.5 hereof. In addition, the reports shall be accompanied by a certificate of
each Borrower's Chief Financial Officer, which shall state that, based on an
examination sufficient to permit him to make an informed statement, no Default
or Event of Default exists, or, if such is not the case, specifying such Default
or Event of Default, its nature, when it occurred, whether it is continuing and
the steps being taken by Borrowers with respect to such event, and such
certificate shall have appended thereto calculations which set forth Borrowers'
compliance with the requirements or restrictions imposed by Section 6.5 hereof.
9.8 Quarterly Financial Statements. Furnish Agent within forty-five (45)
days after the end of each fiscal quarter, an unaudited balance sheet of
Borrowers and unaudited statements of income and stockholders' equity and cash
flow of Borrowers, on a consolidated and a consolidating basis, reflecting
results of operations from the beginning of the fiscal year to the end of such
quarter and for such quarter, prepared on a basis consistent with prior
practices and complete and correct in all material respects, subject to normal
year end adjustments. The reports shall be accompanied by a certificate signed
by the Chief Financial Officer of each Borrower, which shall state that, based
on an examination sufficient to permit him to make an informed statement, no
Default or Event of Default exists, or, if such is not the case, specifying such
Default or Event of Default, its nature, when it occurred, whether it is
continuing and the steps being taken by Borrowers with respect to such default
and, such certificate shall have appended thereto calculations which set forth
Borrowers' compliance with the requirements or restrictions imposed by Section
6.5 hereof.
9.9 Monthly Financial Statements. Furnish Agent within thirty (30) days
after the end of each month, an unaudited balance sheet of Borrowers and
unaudited statements of income and stockholders' equity and cash flow of
Borrowers, on a consolidated and a consolidating basis, reflecting results of
operations from the beginning of the fiscal year to the end of such month and
for such month, prepared on a basis consistent with prior practices and complete
and correct in all material respects, subject to normal year end adjustments.
The reports shall be accompanied by a certificate of the Chief Financial Officer
of each Borrower, which shall state that, based on an examination sufficient to
permit him to make an informed statement, no Default or Event of Default exists,
or, if such is not the case, specifying such Default or Event of Default, its
nature, when it occurred, whether it is continuing and the steps being taken by
Borrowers with respect to such event and, such certificate shall have appended
thereto calculations which set forth Borrowers' compliance with the requirements
or restrictions imposed by Section 6.5 hereof.
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9.10 Other Reports. Furnish Agent as soon as available, but in any event
within ten (10) days after the issuance thereof, with copies of such financial
statements, reports and returns as any Borrower shall send to its shareholders.
9.11 Additional Information. Furnish Agent with such additional information
as Agent shall reasonably request in order to enable Agent to determine whether
the terms, covenants, provisions and conditions of this Agreement and the Note
have been complied with by Borrowers, including, without limitation and without
the necessity of any request by Agent, (a) copies of all environmental audits
and reviews, (b) at least thirty (30) days prior thereto, notice of such
Borrower's opening of any new office or place of business or such Borrower's
closing of any existing office or place of business, and (c) promptly upon such
Borrower's learning thereof, notice of any labor dispute to which Borrower may
become a party, any strikes or walkouts relating to any of its plants or other
facilities, and the expiration of any labor contract to which such Borrower is a
party or by which such Borrower is bound.
9.12 Projected Operating Budget. Furnish Agent, no later than thirty (30)
days prior to the beginning of Borrowers' fiscal year commencing with the fiscal
year beginning January 1, 2000, a month-by-month projected operating budget and
cash flow of Borrowers on a consolidated and consolidating basis for such fiscal
year (including an income statement for each month and a balance sheet as at the
end of the last month in each fiscal quarter), such projections to be
accompanied by a certificate signed by the President or Chief Financial Officer
of each Borrower to the effect that such projections have been prepared on the
basis of sound financial planning practice consistent with past budgets and
financial statements and that such officer has no reason to question the
reasonableness of any material assumptions on which such projections were
prepared.
9.13 Variances From Operating Budget. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Section 9.7 and each monthly
report, a written report summarizing all material variances from budgets
submitted by Borrowers pursuant to Section 9.12 and a discussion and analysis by
management with respect to such variances.
9.14 Notice of Suits, Adverse Events. Furnish Agent with prompt notice of
(i) any lapse or other termination of any Consent issued to such Borrower by any
Governmental Body or any other Person that is material to the operation of such
Borrower's business, (ii) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (iii) copies of any periodic or
special reports filed by such Borrower with any Governmental Body or Person, if
such reports indicate any material change in the business, operations, affairs
or condition of such Borrower, or if copies thereof are requested by Lender, and
(iv) copies of any material notices and other communications from any
Governmental Body or Person which specifically relate to such Borrower.
9.15 ERISA Notices and Requests. Furnish Agent with immediate written
notice in the event that (i) such Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which Borrower or member of the Controlled Group has
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taken, is taking, or proposes to take with respect thereto and, when known,
any action taken or threatened by the Internal Revenue Service, Department of
Labor or PBGC with respect thereto, (ii) such Borrower or any member of the
Controlled Group knows or has reason to know that a prohibited transaction (as
defined in Sections 406 of ERISA and 4975 of the Code) has occurred, together
with a written statement describing such transaction and the action which such
Borrower or any member of the Controlled Group has taken, is taking or proposes
to take with respect thereto, (iii) a funding waiver request has been filed with
respect to any Plan, together with all communications received by such Borrower
or any member of the Controlled Group with respect to such request, (iv) any
increase in the benefits of any existing Plan or the establishment of any new
Plan or the commencement of contributions to any Plan to which such Borrower or
any member of the Controlled Group was not previously contributing shall occur,
(v) such Borrower or any member of the Controlled Group shall receive from the
PBGC a notice of intention to terminate a Plan or to have a trustee appointed to
administer a Plan, together with copies of each such notice, (vi) such Borrower
or any member of the Controlled Group shall receive any favorable or unfavorable
determination letter from the Internal Revenue Service regarding the
qualification of a Plan under Section 401(a) of the Code, together with copies
of each such letter; (vii) such Borrower or any member of the Controlled Group
shall receive a notice regarding the imposition of withdrawal liability,
together with copies of each such notice; (viii) such Borrower or any member of
the Controlled Group shall fail to make a required installment or any other
required payment under Section 412 of the Code on or before the due date for
such installment or payment (provided that as long as Borrowers are in
compliance with the current funding requirements with respect to the funding
deficiency described on Schedule 7.15, the existence of such funding deficiency
shall not require notice under this Section 9.15(viii); (ix) such Borrower or
any member of the Controlled Group knows that (a) a Multiemployer Plan with
respect to which such Borrower is obligated has been terminated, (b) the
administrator or plan sponsor of any such Multiemployer Plan intends to
terminate a Multiemployer Plan, or (c) the PBGC has instituted or will institute
proceedings under Section 4042 of ERISA to terminate any such Multiemployer
Plan.
9.16 Borrowing Base Certificate. Deliver to Agent on or before the
fifteenth (15th) day of each month a borrowing base certificate and related
documents in form reasonably satisfactory to Agent.
9.17 Daily Settlement Schedules. Deliver to Agent on each Business Day a
sales and cash report in form reasonably satisfactory to Agent.
9.18 Additional Documents. Execute and deliver to Agent, upon request, such
documents and agreements as Agent may, from time to time, reasonably request to
carry out the purposes, terms or conditions of this Agreement.
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10. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall constitute
an "Event of Default":
10.1 failure by any Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities or make when due any
other payment, fee or charge provided for herein or in any Other Document;
10.2 any representation or warranty made or deemed made by any Borrower in
this Agreement or any related agreement or in any certificate, document or
financial or other statement furnished at any time in connection herewith or
therewith shall prove to have been misleading in any material respect on the
date when made or deemed to have been made;
10.3 failure by any Borrower to (i) furnish financial information when due
or when requested, or (ii) permit the inspection of its books or records;
10.4 issuance of a notice of Lien, levy, assessment, injunction or
attachment, other than a Permitted Encumbrance, against a material portion of
any Borrower's property which Lien, levy, assessment, injunction or attachment
shall not be bonded, discharged, stayed or dismissed within fifteen (15) days
after the issuance thereof.
10.5 except as otherwise provided for in this Article 10, failure or
neglect of any Borrower to perform, keep or observe any term, provision,
condition, covenant in this Agreement, or contained in any other agreement or
arrangement, now or hereafter entered into between any Borrower and Agent or any
Lender, which is not cured within fifteen (15) days from the earlier of (a) the
date such Borrower first has knowledge of such failure or neglect or (b) the
date of receipt of written notice from Agent to Borrowing Agent of such failure
or neglect;
10.6 failure or neglect of any Borrower to perform, keep or observe any
term, provision, condition or covenant contained in Sections 4.5, 4.6, 4.7, 4.9,
4.11, 4.15, 6.1, 6.3, 6.4, 6.5, 7.1, 7.2, 7.6, 7.7, 9.4 or 9.6 hereof;
10.7 any judgment or judgments are rendered or judgment liens filed against
any Borrower, in each case in excess of Two Hundred Fifty Thousand Dollars
($250,000.00) individually or in the aggregate, which within forty (40) days of
such rendering or filing is not either satisfied, stayed or discharged of
record;
10.8 Any Borrower shall (i) apply for, consent to or suffer the appointment
of, or the taking of possession by, a receiver, custodian, trustee, liquidator
or similar fiduciary of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within
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thirty (30) days, any petition filed against it in any involuntary case
under such bankruptcy laws (provided that Lenders shall not be required to make
any Advances during such thirty (30) day period), or (vii) take any action for
the purpose of effecting any of the foregoing;
10.9 Any Borrower shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business;
10.10 any change in any Borrower's condition or affairs (financial or
otherwise) which in Agent's reasonable opinion has a Material Adverse Effect;
10.11 any Lien in favor of Agent or Lenders created hereunder or provided
for hereby or under any related agreement for any reason ceases to be or is not
a valid and perfected Lien having a first priority interest (subject only to
Permitted Encumbrances);
10.12 any Change of Control shall occur;
10.13 a default shall occur and be continuing under the Convertible Notes,
the Additional Convertible Notes or the Xxxxxx Note;
10.14 any material provision of this Agreement shall, for any reason, cease
to be valid and binding on any Borrower or any Borrower shall so claim in
writing to Agent;
10.15 (i) any Governmental Body shall (A) revoke, terminate, suspend or
adversely modify any license, permit, patent trademark or tradename of any
Borrower, the continuation of which is material to the continuation of any
Borrower's business, or (B) commence proceedings to suspend, revoke, terminate
or adversely modify any such license, permit, trademark, tradename or patent and
such proceedings shall not be dismissed or discharged within sixty (60) days, or
(c) schedule or conduct a hearing on the renewal of any license, permit,
trademark, tradename or patent necessary for the continuation of any Borrower's
business and the staff of such Governmental Body issues a report recommending
the termination, revocation, suspension or material, adverse modification of
such license, permit, trademark, tradename or patent; (ii) any agreement which
is necessary or material to the operation of any Borrower's business shall be
revoked or terminated and not replaced by a substitute acceptable to Agent
within thirty (30) days after the date of such revocation or termination, and
such revocation or termination and non-replacement would reasonably be expected
to have a Material Adverse Effect on such Borrower;
10.16 any portion of the Collateral shall be seized or taken by a
Governmental Body, or any Borrower or the title and rights of any Borrower
therein shall have become the subject matter of litigation which might, in the
reasonable opinion of Agent, upon final determination, result in impairment or
loss of the security provided by this Agreement or the Other Documents;
10.17 the operations of any of any Borrower's revenue producing facilities
are interrupted at any time for more than forty-five (45) consecutive days,
unless such Borrower shall (i) be entitled to receive for such period of
interruption, proceeds of business interruption insurance in amounts reasonably
satisfactory to Lenders and (ii) receive such proceeds commencing not later than
thirty
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(30) days following the initial date of any such interruption; provided,
however, that notwithstanding the provisions of clauses (i) and (ii) of this
section, an Event of Default shall be deemed to have occurred if any Borrower
shall be receiving the proceeds of business interruption insurance for a period
of sixty (60) consecutive days;
10.18 an event or condition specified in Sections 7.15 or 9.15 hereof shall
occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, any Borrower or
any member of the Controlled Group shall incur, or in the reasonable opinion of
Agent be reasonably likely to incur, a liability to a Plan or the PBGC (or both)
which, in the reasonable judgment of Agent, would have a Material Adverse Effect
on such Borrower; or
10.19 Borrowers fail to make any payment required in respect of the funding
deficiency described on Schedule 7.15 hereto or Borrowers give notice to the
PBGC or any other Person required to receive such notice that Borrowers intend
to miss a payment with respect thereto.
11. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1 Rights and Remedies. Upon the occurrence of (i) an Event of Default
pursuant to Section 10.8 all Obligations shall be immediately due and payable
and this Agreement and the obligation of Lenders to make Advances shall be
deemed terminated; and, (ii) any of the other Events of Default and at any time
thereafter (such default not having previously been cured or waived at Lenders'
sole discretion), at the option of Required Lenders (as evidenced by notice to
such effect to Borrowing Agent) all Obligations shall be immediately due and
payable and Lenders shall have the right to terminate this Agreement and to
terminate the obligation of Lenders to make Advances and (iii) a filing of a
petition against any Borrower in any involuntary case under any state or federal
bankruptcy laws, the obligation of Lenders to make Advances hereunder shall be
terminated other than as may be required by an appropriate order of the
bankruptcy court having jurisdiction over such Borrower. Upon the occurrence and
during the continuance of any Event of Default, Agent shall have the right to
exercise any and all other rights and remedies provided for herein, under the
Uniform Commercial Code and at law or equity generally, including, without
limitation, the right to foreclose the security interests granted herein and to
realize upon any Collateral by any available judicial procedure and/or to take
possession of and sell any or all of the Collateral with or without judicial
process. Agent may enter any of any Borrower's premises without legal process
and without incurring liability to any Borrower therefor, and Agent may
thereupon, or at any time thereafter, in its reasonable discretion without
notice or demand, take the Collateral and remove the same to such place as Agent
may reasonably deem advisable and Agent may require any Borrower to make the
Collateral available to Agent at a convenient place. With or without having the
Collateral at the time or place of sale, Agent may sell the Collateral, or any
part thereof, at public or private sale, at any time or place, in one or more
sales, at such price or prices, and upon such terms, either for cash, credit or
future delivery, as Agent may reasonably elect. Except as to that part of the
Collateral which is perishable or threatens to decline speedily in value or is
of a type customarily sold on a recognized market, Agent shall give Borrowing
Agent reasonable notification of such sale or sales, it being agreed that in all
events written notice mailed to Borrowing Agent at least five (5) days prior to
such sale or sales is reasonable notification. At any public sale Agent or
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any Lender may bid for and become the purchaser, and Agent, any Lender or
any other purchaser at any such sale thereafter shall hold the Collateral sold
absolutely free from any claim or right of whatsoever kind, including any equity
of redemption and such right and equity are hereby expressly waived and released
by Borrowers. In connection with the exercise of the foregoing remedies, Agent
is granted permission to use all of any Borrower's trademarks, trade styles,
trade names, patents, patent applications, licenses, franchises and other
proprietary rights which are used in connection with (a) Inventory for the
purpose of disposing of such Inventory and (b) Equipment for the purpose of
completing the manufacture of unfinished goods. The proceeds realized from the
sale of any Collateral shall be applied as follows: first, to the reasonable
costs, expenses and attorneys' fees and expenses incurred by Agent for
collection and for acquisition, completion, protection, removal, storage, sale
and delivery of the Collateral; second, to interest due upon any of the
Obligations and any fees payable under this Agreement; and, third, to the
principal of the Obligations. If any deficiency shall arise, Borrowers shall
remain liable to Agent and Lenders therefor.
11.2 Agent's Discretion. Subject to the provisions of Section 14 below,
Agent shall have the right in its sole discretion to determine which rights,
Liens, security interests or remedies Agent may at any time pursue, relinquish,
subordinate, or modify or to take any other action with respect thereto and such
determination will not in any way modify or affect any of Agent's or Lenders'
rights hereunder.
11.3 Setoff. In addition to any other rights which Agent or any Lender may
have under applicable law, upon the occurrence and during the continuance of an
Event of Default hereunder, Agent and such Lender shall have a right to apply
any Borrower's property held by Agent and such Lender to reduce the Obligations.
11.4 Rights and Remedies not Exclusive. The enumeration of the foregoing
rights and remedies is not intended to be exhaustive and the exercise of any
right or remedy shall not preclude the exercise of any other right or remedies
provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
12. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1 Waiver of Notice. After and during the continuance of an Event of
Default, each Borrower hereby waives notice of non-payment of any of the
Receivables, demand, presentment, protest and notice thereof with respect to any
and all instruments, notice of acceptance hereof, notice of loans or advances
made, credit extended, Collateral received or delivered, or any other action
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taken in reliance hereon, and all other demands and notices of any
description, except such as are expressly provided for herein.
12.2 Delay. No delay or omission on any Borrower's, Agent's or any Lender's
part in exercising any right, remedy or option shall operate as a waiver of such
or any other right, remedy or option or of any default.
12.3 Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE, AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
13. EFFECTIVE DATE AND TERMINATION.
13.1 Term. This Agreement, which shall inure to the benefit of and shall be
binding upon the respective successors and permitted assigns of each Borrower,
Agent and each Lender, shall become effective on the date hereof and shall
continue in full force and effect until August 27, 2004 (the "Term") unless
sooner terminated as herein provided. Borrowers may terminate this Agreement at
any time upon at least ninety (90) days' prior written notice upon payment in
full of the Obligations. In the event the Obligations are prepaid in full prior
to the last day of the Term (the date of such prepayment hereinafter referred to
as the "Early Termination Date"), Borrowers shall pay to Agent for the benefit
of Lenders an early termination fee in an amount equal to Three Hundred Fifty
Thousand Dollars ($350,000.00) if the Early Termination Date occurs on or before
February 27, 2001.
13.2 Termination. The termination of this Agreement shall not affect any
Borrower's, Agent's or any Lender's rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The security interests, Liens and rights
granted to Agent and Lenders hereunder and the financing statements filed
hereunder shall continue in full force and effect,
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notwithstanding the termination of this Agreement or the fact that
Borrowers' Account may from time to time be temporarily in a zero or credit
position, until all of the Obligations of Borrowers have been paid or performed
in full after the termination of this Agreement or Borrowers have furnished
Agent and Lenders with an indemnification satisfactory to Agent and Lenders with
respect thereto. Accordingly, each Borrower waives any rights which it may have
under Section 9-404(1) of the Uniform Commercial Code to demand the filing of
termination statements with respect to the Collateral, and Agent shall not be
required to send such termination statements to any Borrowers, or to file them
with any filing office, unless and until this Agreement shall have been
terminated in accordance with its terms and all Obligations paid in full in
immediately available funds. All representations, warranties, covenants, waivers
and agreements contained herein shall survive termination hereof until all
Obligations are paid or performed in full.
14. REGARDING AGENT.
14.1 Appointment. Each Lender hereby designates PNC to act as Agent for
such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in the Fee
Letter), charges and collections (without giving effect to any collection days)
received pursuant to this Agreement, for the ratable benefit of Lenders. Agent
may perform any of its duties hereunder by or through its agents or employees.
As to any matters not expressly provided for by this Agreement (including,
without limitation, collection of the Note) Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and, as regards any claim by any Lender, shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Required Lenders, and such instructions shall be binding on all Lenders;
provided, however, that Agent shall not be required to take any action which
exposes Agent to liability or which is contrary to this Agreement or the Other
Documents or applicable law unless Agent is furnished with an indemnification
reasonably satisfactory to Agent with respect thereto.
14.2 Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by any Borrower or any officer
thereof contained in this Agreement, or in any of the Other Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any of the
Other Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any of the Other Documents
or for any failure of any Borrower to perform its obligations hereunder. Agent
shall not be under any obligation to any Lender to ascertain or to
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inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any of the Other Documents or
to inspect the properties, books or records of any Borrower. The duties of Agent
as respects the Advances to Borrowers shall be mechanical and administrative in
nature; Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender; and nothing in this Agreement, expressed
or implied, is intended to or shall be so construed as to impose upon Agent any
obligations in respect of this Agreement except as expressly set forth herein.
14.3 Lack of Reliance on Agent and Resignation. Independently and without
reliance upon Agent or any other Lender, each Lender has made and shall continue
to make (i) its own independent investigation of the financial condition and
affairs of each Borrower in connection with the making and the continuance of
the Advances hereunder and the taking or not taking of any action in connection
herewith and (ii) its own appraisal of the creditworthiness of each Borrower.
Agent shall have no duty or responsibility, either initially or on a continuing
basis, to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before making of the Advances or at
any time or times thereafter except as shall be provided by any Borrower
pursuant to the terms hereof. Agent shall not be responsible to any Lender for
any recitals, statements, information, representations or warranties herein or
in any agreement, document, certificate or a statement delivered in connection
with or for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any Other Document, or of the
financial condition of any Borrower, or be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement, the Note, the Other Documents or the financial
condition of any Borrower, or the existence of any Event of Default or any
Default.
Agent may resign on sixty (60) days' written notice to each of Lenders and
Borrowing Agent, and upon such resignation, the Required Lenders will promptly
designate a successor Agent reasonably satisfactory to Borrowing Agent.
Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term "Agent" shall mean such successor agent effective upon its
appointment, and the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent. After any Agent's resignation as Agent, the provisions of this Article 14
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
14.4 Certain Rights of Agent. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
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14.5 Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person, and, with respect to all
legal matters pertaining to this Agreement and the Other Documents and its
duties hereunder, upon advice of counsel selected by it. Agent may employ agents
and attorneys-in-fact and shall not be liable for the default or misconduct of
any such agents or attorneys-in-fact selected by Agent with reasonable care.
14.6 Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or any
Borrower referring to this Agreement or the Other Documents, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided, that, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of Lenders.
14.7 Indemnification. To the extent Agent is not reimbursed and indemnified
by Borrowers, each Lender will reimburse and indemnify Agent in proportion to
its respective portion of the Advances (or, if no Advances are outstanding,
according to its Commitment Percentage), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against Agent in performing its duties
hereunder, or in any way relating to or arising out of this Agreement or any
Other Document; provided that, Lenders shall not be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent's gross (not mere)
negligence or willful misconduct.
14.8 Agent in its Individual Capacity. With respect to the obligation of
Agent to lend under this Agreement, the Advances made by it shall have the same
rights and powers hereunder as any other Lender and as if it were not performing
the duties as Agent specified herein; and the term "Lender" or any similar term
shall, unless the context clearly otherwise indicates, include Agent in its
individual capacity as a Lender. Agent may engage in business with any Borrower
as if it were not performing the duties specified herein and may accept fees and
other consideration from any Borrower for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.
14.9 Delivery of Documents. To the extent Agent receives financial
statements required under Sections 9.7, 9.8 and 9.9 from Borrowers pursuant to
the terms of this Agreement, Agent will promptly furnish such documents and
information to Lenders.
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14.10 Borrower's Undertaking to Agent. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
each Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy the Borrowers' obligations to make payments for the account of Lenders
or the relevant one or more of them pursuant to this Agreement.
15. BORROWING AGENCY.
15.1 Borrowing Agency Provisions.
(a) Each Borrower hereby irrevocably designates Borrowing Agent to be its
attorney and agent and in such capacity to borrow, sign and endorse notes, and
execute and deliver all instruments, documents, writings and further assurances
now or hereafter required hereunder, on behalf of such Borrower, and hereby
authorizes Agent to pay over or credit all loan proceeds hereunder in accordance
with the request of Borrowing Agent.
(b) The handling of this credit facility as a co-borrowing facility with a
borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to Borrowers and at their request. Neither Agent nor any Lender
shall incur liability to any Borrower as a result thereof. To induce Agent and
Lenders to do so and in consideration thereof, each Borrower hereby indemnifies
Agent and each Lender and holds Agent and each Lender harmless from and against
any and all liabilities, expenses, losses, damages and claims of damage or
injury asserted against Agent or any Lender by any Person arising from or
incurred by reason of the handling of the financing arrangements of Borrowers as
provided herein, reliance by Agent or any Lender on any request or instruction
from Borrowing Agent or any other action taken by Agent or any Lender with
respect to this Section 15.1 except due to willful or unlawful misconduct or
gross (not mere) negligence by the indemnified party.
(c) All Obligations shall be joint and several, and Borrowers shall make
payment upon the maturity of the Obligations by acceleration or otherwise, and
such obligation and liability on the part of Borrowers shall in no way be
affected by any extensions, renewals and forbearance granted by Agent or any
Lender to any Borrower, failure of Agent or any Lender to give any Borrower
notice of borrowing or any other notice not provided for herein, any failure of
Agent or any Lender to pursue or preserve its rights against any Borrower, the
release by Agent or any Lender of any Collateral now or thereafter acquired from
any Borrower, and such agreement by any Borrower to pay upon any notice issued
pursuant thereto is, subject to the terms and conditions of this Agreement,
unconditional and unaffected by prior recourse by Agent or any Lender to any
Borrower or any Collateral for such Borrower's Obligations or the lack thereof.
15.2 Waiver of Subrogation. Each Borrower expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, or contribution or
any other claim which such
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Borrower may now or hereafter have against any other Person directly or
contingently liable for the Obligations hereunder, or against or with respect to
such Borrower's property (including, without limitation, any property which is
Collateral for the Obligations), arising from the existence or performance of
this Agreement, until termination of this Agreement and repayment in full of the
Obligations.
16. MISCELLANEOUS.
16.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applied to contracts to be
performed wholly within such state. Any judicial proceeding brought by or
against any Borrower with respect to any of the Obligations, this Agreement or
any related agreement may be brought in any court of competent jurisdiction in
the State of New York, United States of America, and, by execution and delivery
of this Agreement, each Borrower accepts for itself and in connection with its
properties, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts, and (subject to all rights of appeal) irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. Each
Borrower hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by both registered mail
(return receipt requested) and regular first class mail directed to Borrowing
Agent and its counsel at their respective addresses set forth in Section 16.6,
and service so made shall be deemed completed five (5) days after the same shall
have been so deposited in the mails of the United States of America, or, at the
Agent's and/or any Lender's option, by service upon Borrowing Agent which each
Borrower irrevocably appoints as Borrower's Agent for the purpose of accepting
service within the State of New York. Nothing herein shall affect the right to
serve process in any manner permitted by law or shall limit the right of Agent
or any Lender to bring proceedings against any Borrower in the courts of any
other jurisdiction. Each Borrower waives any objection to jurisdiction and venue
of any action instituted hereunder and shall not assert any defense based on
lack of jurisdiction or venue or based upon forum non conveniens. Any judicial
proceeding by any Borrower against Agent or any Lender involving, directly or
indirectly, any matter or claim in any way arising out of, related to or
connected with this Agreement or any related agreement, shall be brought only in
a federal or state court located in the County of New York, State of New York.
16.2 Entire Understanding.
(a) This Agreement and the Other Documents contain the entire understanding
among Borrowers, Agent and each Lender and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof and thereof. Any
promises, representations, warranties or guarantees not herein contained and
hereinafter made shall have no force and effect unless in writing, signed by the
party to be charged therewith. Neither this Agreement nor any portion or
provisions hereof may be changed, modified, amended, waived, supplemented,
discharged, canceled or terminated orally or by any course of dealing or in any
manner other than by an agreement in writing, signed by the party to be charged.
Each Borrower acknowledges that it has been advised by counsel in connection
with the execution of this Agreement and Other Documents and is not
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relying upon oral representations or statements inconsistent with the terms
and provisions of this Agreement.
(b) The Required Lenders, Agent with the consent in writing of the Required
Lenders, and Borrowers may, subject to the provisions of this Section 16.2 (b),
from time to time enter into written supplemental agreements to this Agreement
or the Other Documents executed by Borrowers, for the purpose of adding or
deleting any provisions or otherwise changing, varying or waiving in any manner
the rights of Lenders, Agent or Borrowers thereunder or the conditions,
provisions or terms thereof or waiving any Event of Default, but only to the
extent specified in such written agreements; provided, however, that no such
supplemental agreement shall, without the consent of all Lenders:
(i) increase the Commitment Percentage of any Lender.
(ii) extend the maturity of any Note or the due date for any amount payable
hereunder, or decrease the rate of interest or reduce any fee payable by
Borrower to Lenders pursuant to this Agreement.
(iii) alter the definition of the term Required Lenders or alter, amend or
modify this Section 16.2(b).
(iv) release any Collateral during any calendar year (other than in
accordance with the provisions of this Agreement).
(v) change the rights and duties of Agent.
(vi) permit any Revolving Advance to be made if after giving effect thereto
the total of Revolving Advances plus Letters of Credit outstanding hereunder
would exceed the Formula Amount for more than thirty (30) consecutive Business
Days or exceed one hundred and ten percent (110%) of the Formula Amount.
(vii) increase the Advance Rates above the Advance Rates in effect on the
Closing Date.
(viii) increase the Maximum Revolving Advance Amount.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent on such subsequent Event of Default.
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In the event that Agent requests the consent of a Lender pursuant to this
Section 16.2 and such Lender shall not respond or reply to Agent in writing
within ten (10) days of receipt of such request, such Lender shall be deemed to
have consented to the matter that was the subject of the request. In the event
that Agent requests the consent of a Lender pursuant to this Section 16.2 and
such consent is denied, then PNC may, at its option, require such Lender to
assign its interest in the Advances to PNC or to another Lender or to any other
Person designated by the Agent (the "Designated Lender"), for a price equal to
the then outstanding principal amount thereof plus accrued and unpaid interest
and fees due such Lender, which interest and fees shall be paid when collected
from Borrowers. In the event PNC elects to require any Lender to assign its
interest to PNC or to a Designated Lender, PNC will so notify such Lender in
writing within forty five (45) days following such Lender's denial, and such
Lender will assign its interest to PNC or such Designated Lender no later than
five (5) days following receipt of such notice pursuant to a Commitment Transfer
Supplement executed by such Lender, PNC or such Designated Lender, as
appropriate, and Agent.
16.3 Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure to the benefit of
Borrowers, Agent, each Lender, all future holders of the Obligations and their
respective successors and assigns, except that no Borrower may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.
(b) Each Borrower acknowledges that in the regular course of commercial
banking business one or more Lenders may at any time and from time to time sell
participating interests in the Advances to other financial institutions (each
such transferee or purchaser of a participating interest, a "Transferee"). Each
Transferee may exercise all rights of payment (including, without limitation
rights of set-off) with respect to the portion of such Advances held by it or
other Obligations payable hereunder as fully as if such Transferee were the
direct holder thereof, provided that no Borrower shall be required to pay to any
Transferee more than such Transferee's applicable portion of the amount which
such Borrower would have been required to pay to the Lender which granted an
interest in its Advances or other Obligations payable hereunder to such
Transferee had such Lender retained such interest in the Advances hereunder or
other Obligations payable hereunder and in no event shall any Borrower be
required to pay any such amount arising from the same circumstances and with
respect to the same Advances or other Obligations payable hereunder to both such
Lender and such Transferee. Each Borrower hereby grants to any Transferee a
continuing security interest in any deposits, moneys or other property of such
Borrower actually or constructively held by such Transferee as security for the
Transferee's interest in the Advances.
(c) Any Lender may, with the consent of Agent (which shall not be
unreasonably withheld or delayed), sell, assign or transfer all or any part of
its rights under this Agreement and the Other Documents to one or more
additional banks or financial institutions, and one or more additional banks or
financial institutions may commit to make Advances hereunder (each a
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 73
"Purchasing Lender"), in minimum amounts of not less than Five Million
Dollars ($5,000,000.00), pursuant to a Commitment Transfer Supplement, executed
by a Purchasing Lender, the transferor Lender, and Agent and delivered to Agent
for recording. Upon such execution, delivery, acceptance and recording, from and
after the transfer effective date determined pursuant to such Commitment
Transfer Supplement, (i) Purchasing Lender thereunder shall be a party hereto
and, to the extent provided in such Commitment Transfer Supplement, have the
rights and obligations of a Lender thereunder with a Commitment Percentage as
set forth therein, and (ii) the transferor Lender thereunder shall, to the
extent provided in such Commitment Transfer Supplement, be released from its
obligations under this Agreement, the Commitment Transfer Supplement creating a
novation for that purpose. Such Commitment Transfer Supplement shall be deemed
to amend this Agreement to the extent, and only to the extent, necessary to
reflect the addition of such Purchasing Lender and the resulting adjustment of
the Commitment Percentages arising from the purchase by such Purchasing Lender
of all or a portion of the rights and obligations of such transferor Lender
under this Agreement and the Other Documents. Each Borrower hereby consents to
the addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the purchase by such Purchasing Lender of
all or a portion of the rights and obligations of such transferor Lender under
this Agreement and the Other Documents. Each Borrower shall execute and deliver
such further documents and do such further acts and things in order to
effectuate the foregoing.
(d) Agent shall maintain at its address a copy of each Commitment Transfer
Supplement delivered to it and a register (the "Register") for the recordation
of the names and addresses of the Advances owing to each Lender from time to
time. The entries in the Register shall be conclusive, in the absence of
manifest error, and Borrowers, Agent and Lenders may treat each Person whose
name is recorded in the Register as the owner of the Advance recorded therein
for the purposes of this Agreement. The Register shall be available for
inspection by any Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice. Agent shall receive a fee in the amount of
$2,500 payable by the applicable Purchasing Lender upon the effective date of
each transfer or assignment to such Purchasing Lender; and no Borrower shall
have any obligation to pay or reimburse any Purchasing Lender for such fee or
any portion thereof.
(e) Each Borrower authorizes each Lender to disclose to any Transferee or
Purchasing Lender and any prospective Transferee or Purchasing Lender any and
all financial information in such Lender's possession concerning Borrowers which
has been delivered to such Lender by or on behalf of Borrowers pursuant to this
Agreement or in connection with such Lender's credit evaluation of Borrowers,
provided that such disclosure shall be subject to Section 16.15.
16.4 Application of Payments. Agent shall have the continuing and exclusive
right to apply or reverse and re-apply any payment and any and all proceeds of
Collateral to any portion of the Obligations. To the extent that any Borrower
makes a payment or Agent or any Lender receives any payment or proceeds of the
Collateral for any Borrower's benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 74
or equitable cause, then, to such extent, the Obligations or part thereof
intended to be satisfied shall be revived and continue as if such payment or
proceeds had not been received by Agent or such Lender.
16.5 Indemnity. Each Borrower shall indemnify Agent, each Lender and each
of their respective officers, directors, Affiliates, employees and agents from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, reasonable fees and
disbursements of counsel) that are imposed on, incurred by, or asserted against
Agent or any Lender in any litigation, proceeding or investigation instituted or
conducted by any governmental agency or instrumentality or any other Person with
respect to any aspect of, or any transaction contemplated by, or referred to in,
or any matter related to, this Agreement or the Other Documents, whether or not
Agent or any Lender is a party thereto and that have occurred on account of any
breach by any Borrower of this Agreement or any Other Document to which it is a
party, except to the extent that any of the foregoing arises out of the willful
or unlawful misconduct or gross negligence of the party being indemnified.
16.6 Notice. Any notice or request hereunder may be given to any Borrower
or Agent or any Lender at its respective addresses set forth below or at such
other address as may hereafter be specified in a notice designated as a notice
of change of address under this Section. Any notice or request hereunder shall
be given by (a) hand delivery, (b) overnight courier, (c) registered or
certified mail, return receipt requested, (d) telex or telegram, subsequently
confirmed by registered or certified mail, or (e) telecopy to the number set out
below (or such other number as may hereafter be specified in a notice designated
as a notice of change of address) with electronic confirmation of its receipt.
Any notice or other communication required or permitted pursuant to this
Agreement shall be deemed given (a) when personally delivered to any officer of
the party to whom it is addressed, (b) on the earlier of actual receipt thereof
or three (3) Business Days following posting thereof by certified or registered
mail, postage prepaid, (c) upon actual receipt thereof when sent by a recognized
overnight delivery service or (d) upon actual receipt thereof when sent by
telecopier to the number set forth below with electronic confirmation of its
receipt, in each case addressed to each party at its address set forth below or
at such other address as has been furnished in writing by a party to the other
by like notice:
(A) If to Agent or
PNC at: PNC Bank, National Association
Xxx Xxxxx Xxxxxx Xxxxxxxxx
Xxxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 75
with a copy to:
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
000 Xxxxxx Xxxxxxx, Xxxx. 000
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esquire
Telephone: (000) 00000000
Telecopier: (000) 000-00000
(If after September 1, 1999:
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
0000 Xxxx Xxxxxx - 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esquire
Telecopier: (000) 000-0000))
(B) If to Borrowing Agent
or any Borrower, at:
HMG Worldwide Corporation
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Xx.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx Xxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esquire
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
16.7 Survival. The obligations of Borrowers under Sections 2.2(f), 3.9,
3.10, 3.11, 4.19(h), 14.7 and 16.5 shall survive termination of this Agreement
and the Other Documents and payment in full of the Obligations.
16.8 Severability. If any part of this Agreement is contrary to, prohibited
by, or deemed invalid under applicable laws or regulations, such provision shall
be inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.
16.9 Expenses. All reasonable costs and expenses including, without
limitation, reasonable attorneys' fees (including the allocated costs of in
house counsel) and disbursements incurred by Agent, Agent on behalf of Lenders
and Lenders (a) in all efforts made to enforce payment of any Obligation or
effect collection of any Collateral, or (b) in connection with the entering
into, modification, amendment, administration and enforcement of this Agreement
or any consents or waivers hereunder and all related agreements, documents and
instruments, or (c) in
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instituting, maintaining, preserving, enforcing and foreclosing on Agent's
security interest in or Lien on any of the Collateral, whether through judicial
proceedings or otherwise, or (d) in defending or prosecuting any actions or
proceedings arising out of or relating to Agent's or any Lender's transactions
with Borrowers, or (e) in connection with any advice given to Agent or any
Lender with respect to its rights and obligations under this Agreement and all
related agreements, may be charged to Borrowers' Account and shall be part of
the Obligations.
16.10 Injunctive Relief. Each Borrower recognizes that, in the event such
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to Lenders; therefore, Agent, if Agent so requests, shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving that actual damages are not an adequate remedy.
16.11 Consequential Damages. Neither Agent nor any Lender, nor any agent or
attorney for any of them, shall be liable to Borrowers for consequential damages
arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.
16.12 Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
16.13 Counterparts; Telecopied Signatures. This Agreement may be executed
in any number of and by different parties hereto on separate counterparts, all
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
16.14 Construction. The parties acknowledge that each party and its counsel
have reviewed this Agreement and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
16.15 Confidentiality; Sharing Information.
(a) Agent, each Lender and each Transferee shall hold all non-public
information obtained by Agent, such Lender or such Transferee pursuant to the
requirements of this Agreement in accordance with Agent's, such Lender's and
such Transferee's customary procedures for handling confidential information of
this nature; provided, however, Agent, each Lender and each Transferee may
disclose such confidential information (a) to its examiners, affiliates, outside
auditors, counsel and other professional advisors, (b) to Agent, any Lender or
to any prospective Transferees and Purchasing Lenders, and (c) as required or
requested by any Governmental Body or representative thereof or pursuant to
legal process; provided, further that (i) unless specifically prohibited by
applicable law or court order, Agent, each Lender and each Transferee shall use
its
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 77
best efforts as soon as reasonably practical, and in any event prior to
disclosure thereof, to notify the relevant Borrower[s] of the applicable request
for disclosure of such non-public information (A) by a Governmental Body or
representative thereof (other than any such request in connection with an
examination of the financial condition of a Lender or a Transferee by such
Governmental Body) or (B) pursuant to legal process and (ii) in no event shall
Agent, any Lender or any Transferee be obligated to return any materials
furnished by Borrowers other than those documents and instruments in possession
of Agent or any Lender in order to perfect its Lien on the Collateral once the
Obligations have been paid in full and this Agreement has been terminated.
(b) Each Borrower acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided to such
Borrower or one or more of its Affiliates (in connection with this Agreement or
otherwise) by any Lender or by one or more Subsidiaries or Affiliates of such
Lender and such Borrower hereby authorizes each Lender to share any information
delivered to such Lender by such Borrower and its Subsidiaries pursuant to this
Agreement, or in connection with the decision of such Lender to enter into this
Agreement, to any such Subsidiary or Affiliate of such Lender, it being
understood that any such Subsidiary or Affiliate of any Lender receiving such
information shall be bound by the provision of Section 16.15 as if it were a
Lender hereunder. Such authorization shall survive the repayment of the
Obligations and the termination of this Agreement.
16.16 Publicity. Each Borrower and each Lender hereby authorizes Agent to
make appropriate announcements of the financial arrangement entered into among
Borrowers, Agent and Lenders, including, without limitation, announcements which
are commonly known as tombstones, in such publications and to such selected
parties as Agent shall in its sole and absolute discretion deem appropriate.
[SIGNATURES ON NEXT PAGE]
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 78
Each of the parties has signed this Revolving Credit, Term Loan and
Security Agreement as of the day and year first above written. HMG WORLDWIDE
CORPORATION
By:_______________________________
Xxxxxx X. Xxxxxxx, Xx.,
Executive Vice President
HMG WORLDWIDE IN-STORE
MARKETING, INC.
By:___________________________________
Xxxxxx X. Xxxxxxx, Xx.,
Executive Vice President
HMG/INTERMARK WORLDWIDE
MANUFACTURING, INC.
By:___________________________________
Xxxxxx X. Xxxxxxx, Xx.,
Executive Vice President
DISPLAY DEPOT, INC.
By:___________________________________
Xxxxxx X. Xxxxxxx, Xx.,
Executive Vice President
HMG XXXXXXXX, INC.
By:___________________________________
Xxxxxx X. Xxxxxxx, Xx.,
Executive Vice President
(SIGNATURES CONTINUED ON FOLLOWING PAGE)
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12 79
(SIGNATURES CONTINUED FROM PREVIOUS PAGE)
HMG XXXXXX INTERNATIONAL, INC.
By:___________________________________
Xxxxxx X. Xxxxxxx, Xx.,
Executive Vice President
000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000
PNC BANK, NATIONAL ASSOCIATION, as
Lender and as Agent
By:_______________________________
Xxxxx X. Xxxxxx, Vice President
Xxx Xxxxx Xxxxxx Xxxxxxxxx
Xxxx Xxxxxxxxx, XX 00000
Commitment Percentage: 57.14%
FIRSTAR BANK, N.A.
By: _________________________________
Name/Title: ___________________________
0000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxx, XX 00000
Commitment Percentage: 42.86%
BLU-69367_7/ZRM1343/PNC008-129635 012000/11:12
80
List of Exhibits and Schedules
Exhibits
Exhibit 2.1(a) Revolving Credit Note
Exhibit 2.4 Term Note
Exhibit 5.5(b) Financial Projections
Exhibit 8.1(i) Financial Condition Certificate
Exhibit 16.3 Commitment Transfer Supplement
Schedules
Schedule 1.2 Permitted Encumbrances
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.15(c) Location of Executive Offices
Schedule 4.19 Real Property
Schedule 5.1 Holders of Ownership Interests
Schedule 5.2(a) States of Qualification and Good Standing
Schedule 5.2(b) Subsidiaries
Schedule 5.4 Federal Tax Identification Number
Schedule 5.6 Prior Names
Schedule 5.7(a) Compliance Issues
Schedule 5.8(b) Litigation
Schedule 5.8(d) Plans
Schedule 5.9 Intellectual Property
Schedule 5.10 Licenses and Permits
Schedule 5.11 Contested Defaults
Schedule 5.12 Defaults under Contractual Obligations
Schedule 5.14 Labor Disputes
Schedule 7.6 Employee Stock Option Plan
Schedule 7.7 Permitted Indebtedness
Schedule 7.15 Accumulated Funding Deficiency
81
