EXHIBIT 10.1
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT, dated as of December 17, 2002, entered
into by and among ADVANCED MARKETING SERVICES, INC., a Delaware corporation
("Borrower"); CALIFORNIA BANK & TRUST, a California banking corporation (in such
capacity, "CBT"), BANK OF THE WEST, a California banking corporation ("Bank of
the West"), and UNION BANK OF CALIFORNIA, N.A., a national banking association
("Union Bank of California"; referred to collectively with CBT and Bank of the
West as "Lenders"); and CALIFORNIA BANK & TRUST, a California banking
corporation, as agent for the Lenders (in such capacity, "Agent"), with
reference to the following
R E C I T A L S:
A. Borrower has requested Lenders to provide a revolving line of credit to
be used for working capital and other corporate purposes. Lenders are willing to
make available to Borrower, upon the terms and subject to the conditions set
forth in this Agreement, the requested revolving line of credit in the maximum
amount of $45,000,000.
B. CBT and Borrower are parties to that certain Revolving Credit Agreement
dated as of January 11, 2002, as amended, relating to a secured revolving credit
facility originally in the maximum principal amount of $13,000,000 but
subsequently increased to $33,000,000 ("Existing CBT Secured Facility"). CBT and
Borrower are also parties to that certain Amended and Restated Loan Agreement
dated as of July 27, 2000, as amended, relating to a $12,000,000 unsecured
revolving credit facility ("Existing CBT Unsecured Facility"; with the Existing
Secured Facility, the "Existing CBT Credit Facilities"). The aggregate balance
outstanding on the Existing CBT Credit Facilities is evidenced by two promissory
notes ("Existing CBT Notes") and has been averaging approximately $30,000,000
outstanding. The parties intend that the Existing CBT Credit Facilities be
retired in full upon the initial Funding Date described below.
THE PARTIES AGREE:
ARTICLE 1. DEFINITIONS
1.1 Captions as Defined Terms. The captions appearing in the balance of
this Article 1 will be used as defined terms in this Agreement.
1.2 Accounts Receivable. All accounts, as that term is defined in Section
9102(a)(2) of the California Commercial Code, presently existing and hereafter
arising, including without limitation all accounts receivable, contract rights,
chattel paper, and all other forms of obligations owing to Borrower, payable in
United States Dollars, arising out of the sale or lease of goods, or the
rendition of services, by Borrower, whether or not earned by performance, and
any and all credit insurance, guaranties and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower, and Borrower's books and
records relating to any of the foregoing.
1.3 Advance. Each separate disbursement of funds by Lenders to Borrower
pursuant to this Agreement.
1.4 Agent. CALIFORNIA BANK & TRUST, a California banking corporation, in
its capacity as agent for the Lenders.
1.5 Agent Fee. A fee to Agent for acting as such, in the amount of one
hundred twenty-five thousandths percent (0.125%) of the Loan amount.
1.6 Agreement. This Revolving Credit Agreement, as the same may from time
to time be amended or supplemented.
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1.7 Applicable Indebtedness. All obligations of Borrower for secured
purchase money obligations, real estate-secured obligations, and unsecured loans
or other obligations payable to Lenders or any third-party lenders, and all
renewals and extensions of the same, but not including the Loan, or any
operating lease commitments, or Borrower's accounts payable, accruals or income
tax payable.
1.8 Borrowing Base Certificate. A certificate in the form attached as
Exhibit A.
1.9 Business Day. Any day other than a Saturday or Sunday, which is not a
legal holiday in the State of California and which is not a date on which
national banks in the State of California are authorized to close.
1.10 Change of Law. The adoption, modification or changed interpretation
of any Governmental Requirement, or the compliance by any Lender with any
request or directive (whether or not having the force of law) of any
Governmental Authority.
1.11 Collateral. The Accounts Receivable and any other personal property
of Borrower in which Agent and Lenders are granted a security interest by the
Security Agreement.
1.12 Computation Period. Any period of four (4) prior consecutive fiscal
quarters of Borrower (including any fiscal year).
1.13 Current Assets. At a particular date, all amounts that would, in
conformity with GAAP, be included under current assets on a balance sheet of
Borrower as of such date; provided, however, that such amounts shall not include
any Intangibles.
1.14 Current Liabilities. At a particular date, all amounts that would, in
conformity with GAAP, be included under current liabilities on a balance sheet
of Borrower as of such date, but in any event including the amounts of (i) all
Indebtedness of Borrower payable on demand or, at the option of the Person to
whom such Indebtedness is owed, not more than twelve (12) months after such
date, (ii) any payments in respect of any Indebtedness of Borrower (whether
installment, serial maturity or sinking fund payments or otherwise) required to
be made not more than twelve (12) months after such date, (iii) all Indebtedness
of Borrower hereunder to Lenders with respect to the Loan, and (iv) to the
extent that maintenance of such reserves is required under GAAP, all reserves in
respect of liabilities or Indebtedness payable on demand, or at the option of
the Person to whom such Indebtedness is owed, not more than twelve (12) months
after such date, the validity of which is contested at such date.
1.15 Current Ratio. The ratio of Current Assets to Current Liabilities.
1.16 EBITDA. For any referenced Computation Period, the aggregate earnings
of Borrower before interest, income and franchise taxes, amortization and
depreciation for the Computation Period, excluding extraordinary items, each as
determined in accordance with GAAP.
1.17 Eligible Accounts Receivable. All domestic Accounts Receivable that
are less than ninety (90) days past due from the payment due date of the
applicable invoice.
1.18 Event of Default. Any event described in Paragraph 5.1 of this
Agreement.
1.19 Federal Funds Rate. For any day, the rate per annum set forth in the
weekly statistical release designated as H.15 (519), or any successor
publication, published by the Federal Reserve Board for such day opposite the
caption "Federal Funds (Effective)."
1.20 Financial Statements. With respect to any quarterly or annual
accounting period for any Person, statements of income, shareholders' equity and
cash flows of such Person for such period, and a balance sheet of such Person as
of the end of such period, setting forth in each case in comparative form
figures for the corresponding period in the preceding fiscal year if such period
is less than a full fiscal year or, if such period is a full fiscal year,
corresponding figures from the preceding annual audit, all prepared in
reasonable detail and in accordance with GAAP.
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1.21 Funding Date. The date on which Lenders make an Advance hereunder.
1.22 GAAP. Generally accepted accounting principles as in effect in the
United States of America from time to time, consistently applied.
1.23 Governmental Authority. The United States, the State of California,
the County of San Diego and any other political subdivision therein, and any
agency, department, commission, board, bureau or instrumentality of any of them.
1.24 Governmental Requirements. Any law, ordinance, order, rule,
regulation or requirement of a Governmental Authority.
1.25 Indebtedness. The Loan and all other loans and advances to Borrower
(including those made hereunder), whether by Lenders or by a third-party lender,
and debts, liabilities, obligations, covenants and duties of Borrower, whether
now or hereafter made, incurred, covenanted or created, whether voluntary or
involuntary, and however arising, whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, regardless
of whether Borrower may be liable individually or jointly with others, or
whether recovery upon any of the same may be or hereafter become barred by any
statute of limitations, and whether any of the same may be or hereafter become
otherwise unenforceable. The term "Indebtedness" also includes all renewals and
extensions of any and all such loans, advances, debts, obligations and
liabilities.
1.26 Intangibles. At a particular date, all assets of Borrower, determined
at such date, that would be classified as intangible assets in accordance with
GAAP, but in any event including, without limitation, unamortized debt discount
and expense, unamortized organization and reorganization expense, costs in
excess of the net asset value of acquired companies, patents, trade or service
marks, franchises, trade names, goodwill and the amount of any write-up in the
book value of any assets resulting from any revaluation thereof after the
Funding Date.
1.27 Lender's Commitment. With respect to any Lender at any time, such
Lender's Proportionate Share of the Total Commitment at that time. The Lenders'
Commitments as of the date of this Agreement are as follows:
CBT $25,000,000
Bank of the West $10,000,000
Union Bank of California $10,000,000
1.28 Leverage Ratio. The ratio of Total Liabilities to Tangible Net Worth.
1.29 LIBOR-Based Interest Period. A period of one (1), three (3), six (6),
nine (9) or twelve (12) months, as specified by Borrower for any LIBOR-Based
Portion pursuant to Paragraph 3 of the Note.
1.30 LIBOR-Based Applicable Margin. The per annum margin which is used in
determining the LIBOR-Based Rate for any LIBOR-Based Portion. The LIBOR-Based
Margin shall be determined based on the trailing twelve months' EBITDA as
reflected in the most recent Financial Statements submitted by Borrower in
accordance with clause (ii) of Subparagraph 4.13(a), and shall be as follows:
RATIO OF SENIOR DEBT TO EBITDA LIBOR-BASED MARGIN
> (or equal to) 1.80:1 200 basis points
> (or equal to)1.40:1 and < 1.80:1 180 basis points
> (or equal to)1.00:1 and < 1.40:1 160 basis points
< 1.00:1 150 basis points
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1.31 LIBOR-Based Portions. Portions of the Loan, each of which shall be in
the minimum amount of $2,000,000, for which interest accrues at the LIBOR-Based
Rate during the applicable LIBOR-Based Interest Period.
1.32 LIBOR-Based Rate. The rate per annum defined as such in the Note.
1.33 Lien. With respect to any property, any security interest, mortgage,
pledge, lien, charge or other encumbrance in, of, or on such property or the
income therefrom, including, without limitation, the interest of a vendor or
lessor under a conditional sale agreement, capital lease or other title
retention agreement, or any agreement to provide any of the foregoing, and the
filing of any financing statement or similar instrument under the Uniform
Commercial Code or comparable law of any jurisdiction.
1.34 Loan. Up to Forty-Five Million Dollars ($45,000,000), subject to the
terms of this Agreement and the other Loan Documents.
1.35 Loan Documents. This Agreement, the Note, the Security Agreement and
any other documents delivered by Borrower pursuant hereto.
1.36 Loan Fee. A fee for the Loan in the amount of one hundred twenty-five
thousandths percent (0.125%) of the Loan amount, which shall be allocated among
the Lenders in accordance with their respective Proportionate Shares.
1.37 Long-Term Liabilities. At a particular date, all amounts that would,
in conformity with GAAP, be included under liabilities on a balance sheet of
Borrower as of such date, but excluding Current Liabilities.
1.38 Margin Stock. Margin stock as defined in Regulation U issued by the
Federal Reserve Board, as amended from time to time, and any successor
regulation thereto.
1.39 Material Adverse Effect. A material adverse effect on (i) the
business, assets, operations, or financial or other condition of Borrower,
without regard to general economic conditions or conditions generally applicable
in the business in which Borrower is involved; (ii) the ability of Borrower to
pay or perform its obligations in accordance with the terms of this Agreement
and the other Loan Documents; (iii) the rights and remedies of Agent or any
Lender under this Agreement, the other Loan Documents or any related document,
instrument or agreement; or (iv) the value of the Collateral, Agent's or any
Lender's security interest in the Collateral or the perfection or priority of
such security interests.
1.40 Maturity Date. December 31, 2005.
1.41 Note. The promissory note of even date herewith signed and delivered
by Borrower in favor of Agent and Lenders, in original principal amount of
Forty-Five Million Dollars ($45,000,000).
1.42 Person. Any individual, general partnership, limited partnership,
limited liability company, joint venture, trust, estate, corporation,
association or other entity.
1.43 PGW. Borrower's indirect subsidiary PUBLISHERS GROUP WEST
INCORPORATED, a California corporation.
1.44 PGW Guaranty. A guaranty agreement made by PGW
1.45 PGW Security Agreement. The Security Agreement made by PGW in favor
of Agent and Lenders, as security for the PGW Guaranty, granting Agent and
Lenders a security interest in the collateral described therein.
1.46 Prime Rate. The "California Bank & Trust Prime Rate" as announced
from time to time by CBT. In the event CBT should cease to announce a California
Bank & Trust Prime Rate, the Prime Rate shall be the "Prime Rate" as published
from time to time in the Western edition of the Wall Street Journal, and if a
range of rates or more than one such rate is published, the Prime Rate shall be
the highest rate so published.
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1.47 Proportionate Share. With respect to each Lender, the following
percentage:
CBT 55.5555555556%
Bank of the West 22.2222222222%
Union Bank of California 22.2222222222%
1.48 Senior Debt. The Loan.
1.49 Security Agreement. The Security Agreement made by Borrower in favor
of Agent and Lenders, granting Agent and Lenders a security interest in the
Collateral.
1.50 Subordinated Debt. All Long-Term Liabilities that have been
subordinated to the Senior Debt by subordination agreements, acceptable to Agent
and Lenders in their sole discretion, signed by Borrower and the creditor on the
Subordinated Debt.
1.51 Tangible Net Worth. Borrower's book net worth, as established in
accordance with GAAP, minus Intangibles but plus Subordinated Debt, if any.
1.52 Total Liabilities. At a particular date, all Current Liabilities,
plus all Long-Term Liabilities that are not Subordinated Debt.
1.53 Total Commitment. Forty-Five Million Dollars ($45,000,000), i.e., the
maximum amount of the Loan.
1.54 Unused Commitment. At a particular date, the amount of the Total
Commitment that has not been disbursed, i.e., the amount that remains available
for disbursement to Borrower.
1.55 Unused Commitment Fee. One-quarter of one percent (0.25%) of the
Unused Commitment, determined on the basis of actual elapsed days.
ARTICLE 2. TERMS OF THE REVOLVING CREDIT
2.1 The Loan.
(a) Subject to the terms and conditions of this Agreement, each
Lender severally agrees to lend to Borrower from time to time, such Advances as
Borrower may request on two (2) Business Days' prior notice; provided, however,
that: (i) the aggregate principal amount of all Advances made by each Lender at
any time outstanding shall not exceed such Lender's Commitment; (ii) all
Advances shall be made on a pro rata basis by the Lenders in accordance with
their respective Proportionate Shares; (iii) the aggregate principal amount
outstanding under the Loan at any time shall not exceed eighty percent (80%) of
Borrower's Eligible Accounts Receivable; and (iv) the aggregate principal amount
outstanding under the Loan shall not exceed the Total Commitment. The Loan is a
revolving line of credit, and within the overall maximum principal amount,
Borrower may borrow, repay and reborrow at any time or from time to time, from
the date hereof until the Maturity Date.
(b) The Loan shall mature and, except as otherwise set forth herein,
all amounts due from Borrower to Lenders hereunder shall be due and payable in
full, on the Maturity Date. Borrower acknowledges and agrees that Borrower is
and shall be solely responsible for arranging funds necessary to pay Lenders in
full on or before the Maturity Date. Borrower expressly acknowledges and agrees
that Lenders have not agreed herein to provide long-term funding for Borrower's
business.
(c) Principal outstanding under the Loan shall bear interest at the
Prime Rate, as the same may change from time to time; provided, however, that as
set forth in the Note, at Borrower's request from time to time specified
portions of the Loan (each, a "Portion") shall bear interest at the LIBOR-Based
Rate during any LIBOR-Based Interest Period. Upon expiration of the LIBOR-Based
Interest Period, the
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applicable Portion shall thereafter bear interest at the Prime Rate, unless and
except to the extent that Borrower has established another LIBOR-Based Portion
in accordance with Paragraph 3 of the Note.
(d) Notwithstanding anything herein or in the Note to the contrary,
if after the date of this Agreement, any Change of Law shall make it unlawful or
impossible for any Lender to make or maintain any LIBOR-Based Portions, such
Lender shall immediately notify Agent and Borrower of such Change of Law. After
any Lender notifies Agent and Borrower of such a Change of Law and until it is
no longer unlawful or impossible for such Lender to make or maintain a
LIBOR-Based Portion, all amounts outstanding payable to such Lender shall bear
interest at the Prime Rate.
(e) Borrower shall make monthly payments of accrued interest in
arrears on the first day of each month. Borrower shall make all payments due to
each Lender hereunder by payments to Agent at the address specified in Paragraph
7.15, with each payment due to a Lender to be for the account of such Lender.
Agent shall promptly disburse to each Lender each payment received by Agent for
the account of such Lender.
(f) Unless Agent has received notice from Borrower at least one
Business Day prior to the date on which any payment is due, Agent may assume
that Borrower has made or will make the required payment to Agent in full and on
time, and Agent may, in reliance upon such assumption, cause to be paid to the
Lenders on the payment due date the amount then due such Lenders. If Borrower
does not in fact make payment in full to Agent, each Lender shall repay to Agent
on demand the amount distributed to such Lender together with interest thereon,
for each day from the date such amount is distributed to such Lender until the
date such Lender repays the amount to Agent, at (i) the Federal Funds Rate for
the first three (3) days, and (ii) the Prime Rate thereafter. A certificate of
Agent submitted to any Lender with respect to any amounts owing by such Lender
under this Subparagraph shall be conclusive absent manifest error.
(g) Advances may be requested by Borrower on at least two Business
Days prior notice. Requests may be made orally if confirmed in writing the day
of the request. All communications, instructions, or directions by telephone or
otherwise to Lenders are to be directed to Agent's office shown herein. Any of
the following persons currently are authorized to request advances and authorize
payments under the lines of credit until Agent receives from Borrower, at
Agent's address shown herein, written notice of revocation of their authority:
Xxxxxxx X. Xxxxxx, President and Chief Executive Officer; Xxxxxx X. Xxxxxxx,
Executive Vice President, Chief Financial Officer and Secretary; Xxxxx Xxxxx,
Vice President and Treasurer; and Xxxxx X. Xxxxx, Cash Manager.
(h) Each Advance shall be evidenced by endorsements on the Note or
by Agent's internal records, including daily computer print-outs.
2.2 Fees. In consideration of the agreement by Agent and Lenders to make
the Loan, upon execution of this Agreement by the parties the Agent Fee shall be
due and payable to Agent, and the Loan Fee shall be due and payable to Agent for
the benefit of and to be divided among the Lenders in accordance with their
respective Proportionate Shares. Borrower shall also reimburse Agent for all
reasonable costs of Agent's legal counsel in preparing loan documentation and
any other out-of-pocket costs incurred by Agent in connection with the Loan. In
addition, beginning January 1, 2003 and continuing on the first day of each
calendar quarter thereafter, Borrower shall pay an Unused Commitment Fee
calculated based the average amount of the Unused Commitment that existed at any
time during the preceding calendar quarter.
2.3 Borrower's Deliveries Prior to Initial Funding Date. Prior to the
initial Funding Date, and as conditions precedent to Lenders' obligation to make
the initial Advance, the following shall have been received and approved by
Agent, at its sole discretion:
(a) The Note.
(b) The Security Agreement.
(c) The PGW Guaranty.
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(d) The PGW Security Agreement.
(e) The Financial Statements of Borrower.
(f) A Uniform Commercial Code financing statement for filing in the
State of Delaware, naming Borrower as the debtor.
(g) A Uniform Commercial Code financing statement for filing in the
State of California, naming PGW as the debtor.
(h) Uniform Commercial Code termination statements (appropriately
completed and executed) for filing in such jurisdictions as Agent may request to
terminate any financing statement evidencing Liens of other Persons in the
Collateral which are prior to the Liens granted to Agent in the Security
Agreement.
(i) Uniform Commercial Code search certificates reflecting no other
financing statements or filings which evidence Liens of other Persons in the
Collateral, except for any such prior Liens for which Agent has received a
termination statement pursuant to the preceding Subparagraph.
(j) The Articles of Incorporation of Borrower and of PGW, certified
as of a recent date prior to the Closing Date by the Secretary of State (or
comparable official) of the applicable jurisdiction of incorporation.
(k) A Certificate of Good Standing (or comparable certificate) for
Borrower and for PGW, certified as of a recent date prior to the Closing Date by
the Secretary of State (or comparable official) of the applicable jurisdiction
of incorporation,
(l) A certificate of the Secretary or an Assistant Secretary of
Borrower, dated the Closing Date, certifying (a) that attached thereto is a true
and correct copy of the Bylaws of Borrower as in effect on the Closing Date; (b)
that attached thereto are true and correct copies of resolutions duly adopted by
the Board of Directors of Borrower and continuing in effect, which authorize the
execution, delivery and performance by Borrower of this Agreement and the other
Loan Documents executed or to be executed by Borrower and the consummation of
the transactions contemplated hereby and thereby; and (c) that there are no
proceedings for the dissolution or liquidation of Borrower.
(m) A certificate of the Secretary or an Assistant Secretary of
Borrower, dated the Closing Date, certifying the incumbency, signatures and
authority of the officers of Borrower authorized to execute, deliver and perform
this Agreement, the other Loan Documents and all other documents, instruments or
agreements related thereto executed or to be executed by Borrower.
(n) A certificate of the Secretary or an Assistant Secretary of PGW,
dated the Closing Date, certifying the incumbency, signatures and authority of
the officers of PGW authorized to execute, deliver and perform the PGW Guaranty
and the PGW Security Agreement and all other documents, instruments or
agreements related thereto executed or to be executed by PGW.
(o) Certificates of Good Standing (or comparable certificates) for
Borrower and for PGW, certified as of a recent date prior to the Closing Date by
the Secretaries of State (or comparable official) of each state in which
Borrower is qualified to do business.
(p) Such other documentation as Agent may reasonably require.
2.4 Conditions Precedent to Each Funding Date. Prior to the initial and
each other Funding Date, and as conditions precedent to Lenders' obligation to
make the requested Advance, the following shall have been received and approved
by agent, at its sole discretion:
(a) Evidence satisfactory to Agent that except for the Loan,
Borrower is not and will not become obligated for more than $10,000,000 in the
aggregate for Applicable Indebtedness.
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(b) Evidence satisfactory to Agent that there are no Liens of other
Persons in any of Borrower's real or personal property, except the Lien of Agent
and Lenders under the Security Agreement on Borrower's Accounts Receivable, and
subject to the limitation of Subparagraph 2.4(a) above, Liens securing (i)
purchase money Indebtedness incurred in the purchase of real and personal
property in the ordinary course of Borrower's business so long as each is
secured only by the property purchased, and (ii) obligations constituting
Indebtedness under GAAP arising under capitalized leases entered into in the
ordinary course of Borrower's business.
(c) Evidence satisfactory to Agent that all of Borrower's
representations and warranties herein remain true and correct in all material
respects.
(d) Evidence satisfactory to Agent that there has been no material
adverse change in Borrower's financial condition.
(e) Evidence satisfactory to Agent that no Event of Default has
occurred, and no event or condition has occurred or exists which with notice or
the lapse of time or both would constitute an Event of Default.
2.5 Funding of Advances.
(a) Each Lender shall, before 11:00 a.m. on the Funding Date, make
available to Agent, in same day or immediately available funds, such Lender's
Proportionate Share of the Advance. After Agent's receipt of such funds and upon
satisfaction of the applicable conditions set forth in Paragraphs 2.3 and 2.4,
Agent shall promptly disburse such funds to Borrower in same day or immediately
available funds. Unless otherwise directed by Borrower, Agent shall disburse all
other proceeds of each Advance by disbursement to the account or accounts
specified by Borrower.
(b) Unless Agent has received prior notice from a Lender that the
Lender will not make available to Agent such Lender's Proportionate Share of an
Advance, Agent may assume that such Lender has made or will make such portion
available to Agent on the date of such Advance in accordance with Subparagraph
2.5(a), and Agent may on such date, in reliance upon such assumption, disburse
or otherwise credit to Borrower a corresponding amount. If any Lender does not
make the amount of its Proportionate Share of any Advance available to Agent on
or prior to the date of such Advance, such Lender shall pay to Agent, on demand,
interest which shall accrue on such amount from the date of such Advance until
such amount is paid to Agent at rates equal to (i) the daily Federal Funds Rate
during the period from the date of such Advance through the third Business Day
thereafter, and (ii) the Prime Rate thereafter. A certificate of Agent submitted
to any Lender with respect to any amounts owing under this Subparagraph shall be
conclusive absent manifest error. If the amount of any Lender's Proportionate
Share of any Advance is not paid to Agent by such Lender within three (3)
Business Days after the date of Agent's request, Borrower shall repay such
amount to Agent, on demand, together with interest thereon, for each day from
the date such amount was disbursed to Borrower until the date such amount is
repaid to Agent, at the interest rate applicable at the time to the funds
comprising such Advance.
(c) The failure of any Lender to deliver funds to be made by it as
part of any Advance shall not relieve any other Lender of its obligation
hereunder to deliver its Proportionate Share of such Advance, but no Lender
shall be obligated in any way to fund another Lender's Proportional Share or
otherwise be in any way responsible for the failure or refusal of any other
Lender to deliver funds when and as required hereunder.
2.6 Initial Advance. The Initial Advance shall include funds sufficient to
retire the Existing CBT Credit Facilities in full.
2.7 Pro Rata Treatment. Except as otherwise provided herein, each Advance
and each payment shall be made or shared among the Lenders pro rata according to
their respective Proportionate Shares.
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2.8 Purpose. Borrower shall use the proceeds of each Advance for
Borrower's working capital and other corporate purposes.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES BY BORROWER
As a material inducement to Agent and Lenders to enter into this Agreement
and to make the Loan to Borrower, Borrower hereby unconditionally makes the
following representations and warranties, which shall be deemed to be continuing
representations and warranties so long as any credit hereunder shall be
available and until payment in full of the Loan.
3.1 Due Organization. Borrower is duly organized, validly existing and in
good standing under the laws of Delaware, and is qualified to do business and in
good standing in the State of California, with full power and authority to
consummate the transaction contemplated hereby.
3.2 Borrower's Powers. Borrower has full power and adequate authority and
rights to own its property and to carry on its business as now conducted, and is
duly qualified and in good standing in each State in which the character of its
business makes such qualification necessary, except where failure to do so would
not have a Material Adverse Effect. Borrower has full power and authority to
sign and enter into the Loan Documents, to undertake and consummate the
transactions contemplated thereby, and to pay, perform and observe all of the
conditions, covenants, agreements and obligations contained therein.
3.3 Loan Documents Authorized. The execution, delivery and performance by
Borrower of and under the Loan Documents have been duly authorized by all
necessary corporate action, and do not require the consent or approval of any
governmental body or other regulatory authority. The Loan Documents are the
valid and binding obligations of Borrower, legally enforceable against Borrower
in accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, debtor relief or other similar laws affecting
the enforcement of creditors' rights generally or by equitable principles.
3.4 No Conflict. The execution, delivery and performance of the Loan
Documents by Borrower will not breach or constitute a default under any
agreement, indenture, undertaking or other instrument to which Borrower is a
party or by which Borrower may be bound or affected.
3.5 PGW's Powers. PGW is a corporation duly organized and existing in good
standing under the laws of the State of California, with full power and adequate
authority, and rights to own its property and to carry on its business as now
conducted, and is duly qualified and in good standing in each State in which the
character of its business makes such qualification necessary, except where
failure to do so would not have a Material Adverse Effect. PGW has full power
and authority to sign and enter into the PGW Guaranty and the PGW Security
Agreement, to undertake and consummate the transactions contemplated thereby,
and to pay, perform and observe all of the conditions, covenants, agreements and
obligations contained therein.
3.6 PGW Guaranty and Security Agreement Authorized. The execution,
delivery and performance by PGW of and under the PGW Guaranty and the PGW
Security Agreement have been duly authorized by all necessary corporate action,
and do not require the consent or approval of any governmental body or other
regulatory authority. The PGW Guaranty and the PGW Security Agreement are the
valid and binding obligations of PGW, legally enforceable against PGW in
accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, debtor relief or other similar laws affecting
the enforcement of creditors' rights generally or by equitable principles.
3.7 Litigation. Except as otherwise disclosed to Agent and Lenders, there
is no litigation or other proceedings pending or, to the knowledge of Borrower,
threatened against or affecting Borrower or any of Borrower's assets which, if
determined adversely to Borrower, would have a Material Adverse Effect, and
Borrower is not in default with respect to any order, writ, injunction, decree
or demand of any court or other governmental or regulatory authority.
3.8 No Violation. The consummation of the transaction contemplated by this
Agreement, and the payment and performance of all of the obligations set forth
in this Agreement, the Note, the Security Agreement and the other Loan
Documents, will not result in any breach of, or constitute a default under, any
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mortgage, deed of trust, lease, contract, loan or credit agreement, corporate
charter, bylaws, partnership agreement, trust agreement, operating agreement or
other instrument to which Borrower is a party or by which Borrower or the
Collateral may be bound or affected.
3.9 Financial Statements. All Financial Statements of Borrower delivered
to Agent and Lenders are true and correct in all material respects, have been
prepared in accordance with GAAP unless otherwise noted therein, and fairly
present the financial condition of Borrower as of their respective dates. No
Material Adverse Change has occurred in the financial condition of Borrower from
that reflected in the Financial Statements, and no additional borrowings have
been made by Borrower, other than borrowings approved by Agent, since their
respective dates. Borrower understands and acknowledges that there are criminal
penalties for giving false financial information to federally insured financial
institutions.
3.10 Title; Possession Under Leases. Borrower owns and has good and
marketable title, or a valid leasehold interest in, all of Borrower's properties
and assets as reflected in the most recent Financial Statements delivered to
Agent (except those assets and properties disposed of in the ordinary course of
business or otherwise in compliance with this Agreement since the date of such
Financial Statements) and all assets and properties acquired by Borrower since
such date (except those disposed of in the ordinary course of business or
otherwise in compliance with this Agreement). Borrower has complied with all
material obligations under all material leases to which it is a party and all
such leases are in full force and effect. Borrower enjoys peaceful and
undisturbed possession under each such lease.
3.11 No Agreement to Sell Assets or Merge. Borrower has no legal
obligation, absolute or contingent, to any Person to sell the assets of Borrower
other than in t he ordinary course of Borrower's business, or to effect any
merger, consolidation or other reorganization of Borrower or to enter into any
agreement to do so.
3.12 No Prior Security Interests in or Actions Affecting Collateral.
Except for the security interest in the Accounts Receivable granted to CBT in
connection with the Existing CBT Secured Facility, there are no current security
interests outstanding or perfected against any of Borrower's Accounts
Receivable, inventory or other assets. Without limiting the generality of the
foregoing, Borrower specifically represents and warrants that during the past
thirty (30) days, Borrower has not granted any security interests in any
inventory, or accepted any inventory subject to any such existing security
interest, as to which perfection by UCC filing has not yet occurred. There has
in the past twelve (12) months been no levy against any of the Collateral.
3.13 Margin Stock. Borrower owns no Margin Stock which, in the aggregate,
would constitute a substantial part of the assets of Borrower, and no proceeds
of any Advance will be used to purchase or carry, directly or indirectly, any
Margin Stock or to extend credit, directly or indirectly, to any Person for the
purpose of purchasing or carrying any Margin Stock.
3.14 Taxes. Borrower has filed all required Federal, State and local tax
returns and has paid all taxes due and payable. Borrower knows of no basis for
additional material assessments with respect to any taxes.
3.15 Broker's Fees. Borrower has not dealt with any person or entity who
is or may be entitled to any brokerage commission, finder's fee, loan commission
or other sum in connection with signing and entering into this Agreement, the
consummation of the transaction contemplated hereby or the making of the Loan by
Lenders to Borrower, and Borrower hereby agrees to indemnify, defend and hold
Agent and Lenders harmless from and against any and all losses, costs,
liabilities and expenses, including attorneys' fees, that Agent and Lenders may
suffer or sustain should such representation or warranty prove to be inaccurate
in whole or in part.
3.16 Catastrophic Events. Neither Borrower nor any of its properties is or
has been affected by any fire, explosion, accident, strike, lockout or other
labor dispute, drought, storm, hail, earthquake, embargo, act of God or other
casualty that is reasonably likely to have a Material Adverse Effect. There are
no disputes presently subject to grievance procedure, arbitration or litigation
under any of the collective bargaining agreements, employment contracts or
employee welfare or incentive plans to which Borrower is a party, and there are
no strikes, lockouts, work stoppages or slowdowns, or, to the best knowledge of
Borrower,
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jurisdictional disputes or organizing activities occurring or threatened which
alone or in the aggregate are reasonably likely to have a Material Adverse
Effect.
3.17 No Material Adverse Effect. No event has occurred and no condition
exists which is reasonably likely to have a Material Adverse Effect.
3.18 Accuracy. All reports, documents, instruments, information and forms
of evidence delivered to Agent and Lenders concerning the Loan or required by
this Agreement or any of the other Loan Documents are accurate, correct and
sufficiently complete to give Agent and Lenders true and accurate knowledge of
their subject matter, and do not contain any untrue statement of a material fact
or omit any material fact necessary to make the same not misleading in light of
the circumstances under which they were made.
3.19 Nature of Representations and Warranties. Borrower certifies to Agent
and Lenders that all representations and warranties made in this Agreement and
all other Loan Documents are true and correct in all material respects and do
not contain any untrue statement of a material fact or omit any material fact
necessary to make such representations and warranties not misleading in light of
the circumstances under which they were made. Any such representations and
warranties shall remain true and correct in all material respects and shall
survive so long as any of Borrower's obligations under this Agreement have not
been satisfied or the Loan or any part thereof remains outstanding, and for any
applicable statute of limitations period thereafter. Each representation and
warranty made in this Agreement, in any other Loan Documents, and in any other
document delivered to Agent and Lenders by Borrower shall be deemed to have been
relied upon by Agent and Lenders, notwithstanding any investigation, inspection
or inquiry theretofore or thereafter made by or on behalf of Agent and Lenders,
or any disbursement made by Lenders related thereto. The representations and
warranties contained in this Agreement which are made to the best knowledge of
Borrower have been made after diligent inquiry calculated to ascertain the truth
and accuracy of the subject matter of each such representation and warranty.
ARTICLE 4. COVENANTS OF BORROWER
Borrower covenants and agrees that so long as any credit hereunder shall
be available and until payment in full of the Loan, unless Agent and Lenders
shall otherwise consent in writing:
4.1 Litigation. Borrower shall promptly inform Agent and Lenders in
writing of (i) all material adverse changes in Borrower's or PGW's financial
condition; and (ii) all litigation and claims and all threatened litigation and
claims affecting Borrower or PGW which could have a Material Adverse Effect on
the financial condition of Borrower or PGW.
4.2 Maintain Records. Borrower shall keep and maintain full and accurate
accounts and records of its operations according to GAAP and customary practices
for Borrower's type of business.
4.3 Taxes. Borrower shall pay and discharge all lawful claims, including
taxes, assessments and governmental charges or levies, imposed upon Borrower,
Borrower's income or profits and upon all properties belonging to Borrower,
before the date upon which penalties attach thereto, except where the failure to
do so would not have a Material Adverse Effect.
4.4 Inspections. Borrower shall permit any Person designated by any Agent
(including, on verbal approval by Agent, a Person designated by a Lender), upon
reasonable notice and during normal business hours, to visit and inspect any of
the properties and offices of Borrower, to conduct audits of any or all of the
Collateral, to examine the books and records of Borrower and make copies thereof
and to discuss the affairs, finances and business of Borrower with, and to be
advised as to the same by, their officers, auditors and accountants, all at such
times and intervals as Agent may reasonably request. Borrower shall be
responsible for reasonable costs of any such Collateral audits or inspections.
4.5 Insurance. Borrower shall maintain insurance with responsible
insurance carriers against such risks and in such amounts as is customarily
carried by similar businesses, including, without limitation, fire, public
liability, property damage, workers' compensation and interruption of business
insurance.
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4.6 Payment of Costs. Borrower shall bear all costs and expenses required
to satisfy the terms and conditions of this Agreement, including, without
limitation, the reasonable costs and expenses for Agent's counsel in connection
with the Loan.
4.7 Notification of Default. Borrower shall promptly notify Agent and
Lenders in writing of the occurrence of any Event of Default as defined in this
Agreement, or of any facts then in existence that could become an Event of
Default upon the giving of notice or the lapse of time or both.
4.8 Notification of New Security Interests. Borrower shall notify Agent
prior to the grant by Borrower, PGW or any of Borrower's other subsidiaries of
any security interests in any inventory owned by Borrower, PGW or any of
Borrower's other subsidiaries.
4.9 Compliance. Borrower shall comply promptly with all governmental
requirements applicable to Borrower, and shall cause all conditions in this
Agreement to be satisfied at the time and in the manner provided in this
Agreement.
4.10 Use of Proceeds. Borrower shall not use any part of the proceeds of
any Advance, directly or indirectly, for the purpose of purchasing or carrying
any Margin Stock or for the purpose of purchasing or carrying or trading in any
securities under such circumstances as to involve Borrower, any Lender or Agent
in a violation of Regulations G, T, U or X issued by the Federal Reserve Board.
4.11 General Business Operations. Borrower shall (i) preserve and maintain
its corporate existence and all of its rights, privileges and franchises
reasonably necessary to the conduct of its business, (ii) conduct its business
activities in compliance with all applicable Governmental Requirements, the
violation of which is reasonably likely to have a Material Adverse Effect, and
(iii) keep all property useful and necessary in its business in good working
order and condition, ordinary wear and tear excepted. Borrower shall maintain
its chief executive office and principal place of business in the United States
and shall not relocate its chief executive office or principal place of business
outside of San Diego County, California except upon not less than ninety (90)
days prior written notice to Agent.
4.12 Sale Of Business. Except in the ordinary course of its business as
now conducted or as conducted by any business hereafter acquired, Borrower shall
not sell any assets, or sell, lease, assign, or transfer any substantial part of
Borrower's business or fixed assets, or any property or other assets necessary
for the continuance of its business as now conducted or as conducted by any
business hereafter acquired, including, without limitation, the selling of any
property or other asset accompanied by the leasing back of the same.
4.13 Financial Covenants.
(a) No later than sixty (60) days after the end of each fiscal
quarter and one hundred twenty (120) days after the end of each fiscal year,
Borrower shall demonstrate to Agent's reasonable satisfaction that (i)
Borrower's Tangible Net Worth is not less than Seventy Million Dollars
($70,000,000), (ii) the ratio of Senior Debt to EBITDA for the Computation
Period just ended is not more than 1.85:1, and (iii) Borrower's Current Ratio is
not less than 1.00:1.
(b) Borrower shall, no later than sixty (60) days after the end of
each quarter, demonstrate to Agent's reasonable satisfaction a Leverage Ratio
that is no more than 3.50:1 for the quarters ending March 31, June 30 and
December 31, and 4.00:1 for the quarter ending September 30.
(c) Borrower shall, no later than forty-five (45) days after the end
of each quarter, demonstrate to Agent's reasonable satisfaction that the total
principal outstanding on the Loan does not exceed eighty percent (80%) of the
Eligible Accounts Receivable.
(d) Borrower shall, no later than sixty (60) days after the end of
each quarter, demonstrate to Agent's reasonable satisfaction, using the interim
Borrower-certified Financial Statements and Form 10-Q filing described in
Paragraph 4.14, that Borrower has not operated at an after-tax loss for the two
preceding consecutive calendar quarters.
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(e) Borrower shall, no later than one hundred twenty (120) days
after the end of each fiscal year, demonstrate to Agent's reasonable
satisfaction, using the audited Financial Statements for Borrower described in
Paragraph 4.14, that Borrower has not operated at an after-tax loss for the
preceding fiscal year.
(f) Without the prior consent of Agent, Borrower shall not at any
time during the term of the Loan be or become obligated for more than
$10,000,000 in the aggregate for Applicable Indebtedness.
4.14 Financial Reporting. Borrower shall deliver to Agent and Lenders: (i)
within one hundred twenty (120) days after the end of each fiscal year, audited
Financial Statements for Borrower; (ii) within sixty (60) days after the end of
each fiscal quarter, interim Borrower-certified Financial Statements of Borrower
and Borrower's Form 10-Q filing; (iii) within forty-five (45) days after the end
of each fiscal quarter, aging summaries of Borrower's Accounts Receivable and
accounts payable; (iv) within forty-five (45) days after the end of each fiscal
quarter, a Borrowing Base Certificate; (v) within forty-five (45) days after
request, such interim or periodic financial information regarding Borrower as
Agent and Lenders may reasonably require; and (vi) within forty-five (45) days
after request by Agent, consolidating statements for PGW. All such Financial
Statements and other financial information shall be in a form reasonably
acceptable to Agent, and shall be the most recent that has been prepared by or
for the subjects thereof. Agent and Lenders may rely thereon until otherwise
notified in writing by Borrower, and may, but shall not be obligated to, verify
the information contained therein. From time to time, Agent and Lenders may
receive financial information about Borrower from others, and may answer
questions and requests from others seeking credit and experience information
about Borrower and their relationships with Lenders.
ARTICLE 5. DEFAULT; REMEDIES
5.1 Events of Default. Any one or more of the following events shall be an
Event of Default:
(a) Failure of Borrower to pay any installment of principal or
interest on the Note or any other monetary obligations as required hereunder or
thereunder within ten (10) days after the date due.
(b) Failure of Borrower to perform any of its obligations under any
covenant, condition or agreement set forth in this Agreement, if such failure is
not cured within ten (10) days after written notice from Agent (or such longer
period as is reasonably determined by Agent to be necessary for completion of
the cure, so long as Borrower begins promptly and thereafter diligently
continues to cure the failure).
(c) Failure of Borrower to perform any of its obligations under any
covenant, condition or agreement set forth in the Note or any of the other Loan
Documents, if such failure is an event of default thereunder and is not cured
within the applicable cure period (if any).
(d) Failure of Borrower to pay, or any default on the payment of,
any principal of or any interest on any Indebtedness, or any breach with respect
to any term of any evidence of such Indebtedness, or of any loan agreement,
mortgage, indenture or other agreement relating thereto, whether or not waived
by the note holder or obligee.
(e) Failure of Borrower to timely demonstrate compliance with the
financial covenants of Paragraph 4.13 above.
(f) Failure of Borrower to comply with any Governmental Requirements
within the applicable cure period (if any), if Agent reasonably determines that
such failure would have a material adverse effect on Borrower's financial
condition or Lenders's security for the Loan.
(g) Any of Borrower' representations or warranties made herein or
any statement or certificate at any time given in writing by Borrower pursuant
hereto or in connection herewith shall be false or misleading in any material
respect.
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(h) A court having jurisdiction shall enter a decree or order for
relief in respect of Borrower in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of Borrower, or for any substantial part of the properties
of any Borrower, or ordering the winding up or liquidation of the affairs of any
Borrower; or Borrower shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar
official) of Borrower, or for any substantial part of the properties of any
Borrower, or shall make any general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they come due or shall take any action
in furtherance of any of the foregoing.
(i) The attachment, levy, execution or other judicial seizure of any
Collateral provided by Borrower under any of the Loan Documents which is not
released, expunged, discharged or dismissed before the earlier of thirty (30)
days after such attachment, levy, execution or seizure, or (ii) five (5) days
prior to the date of any proposed sale of the assets affected thereby, if Agent
reasonably determines that such attachment, levy, execution or other judicial
seizure of Collateral would have a material adverse effect on Borrower's
financial condition or Lenders's security for the Loan.
5.2 Remedies Upon Default. Upon the occurrence of an Event of Default,
Agent may at its option, without demand, presentment or notice, all of which
hereby are expressly waived, exercise one or more of the following remedies:
(a) Terminate all credit hereunder and all obligations of Lenders to
make any further Advances hereunder.
(b) Declare the Note and all other sums owing to Lenders with
respect to the other Loan Documents to be immediately due and payable, whereupon
the same shall be due and payable in full.
(c) Exercise its remedies under the Security Agreement and/or the
other Loan Documents.
(d) Exercise any and all other rights and remedies as it shall deem
appropriate at law, in equity, or otherwise.
5.3 Repayment of Funds Advanced. If Agent or any Lender spends its funds
in exercising or enforcing any of its rights or remedies under the Loan
Documents, the amount of funds spent shall be payable to Agent or such Lender
upon demand, together with interest at the rate applicable to the principal
balance of the Note, from the date such funds were spent until repaid.
5.4 Right of Setoff. In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, with the prior reasonable
consent of Agent but without prior notice to or consent of Borrower (any such
notice and consent being expressly waived by Borrower to the extent permitted by
applicable law), upon the occurrence and during the continuance of an Event of
Default, to setoff and apply any amount owing from such Lender to Borrower
against the amounts due from Borrower to such Lender. The right of setoff may be
exercised by such Lender against Borrower or against any trustee in bankruptcy,
debtor in possession, assignee for the benefit of creditors, receiver or
execution, judgment or attachment creditor of Borrower or against anyone else
claiming through or against Borrower or such trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, receiver, or execution,
judgment or attachment creditor, notwithstanding the fact that such right of
setoff may not have been exercised by such Lender at any prior time. Each Lender
agrees promptly to notify Borrower after any such setoff and application made by
such Lender, provided that the failure to give such notice shall not affect the
validity of such setoff and application.
5.5 Remedies Cumulative. Agent shall have the right to enforce one or more
remedies hereunder successively or concurrently, and any such action shall not
stop or prevent Bank from pursuing any further remedy which it may have
hereunder or by law.
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5.6 Waiver of Trial By Jury. EACH OF BORROWER, LENDERS AND AGENT, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT.
5.7 Application Of Proceeds. Any money collected by Agent pursuant to this
Article (whether by means of voluntary payment, foreclosure or otherwise) shall
be promptly applied as follows unless otherwise required by provision of
applicable law:
(a) First, to the payment of all expenses incurred by Agent and
Lenders under this Agreement and in enforcing their rights hereunder, including,
without limitation, all costs and expenses of collection, attorneys' fees, court
costs and foreclosure expenses.
(b) Next, to the payment of all principal and accrued interest on
the Note.
(c) Next, to the payment of any other amounts owed by Borrower to
Agent or Lenders under this Agreement or the other Loan Documents.
(d) Next, to Borrower.
ARTICLE 6. THE AGENT AND RELATIONS AMONG LENDERS
6.1 Appointment, Powers and Immunities. Each Lender hereby appoints and
authorizes Agent to act as its agent hereunder and under the other Loan
Documents with such powers as are expressly delegated to Agent by the terms of
this Agreement and the other Loan Documents, together with such other powers as
are reasonably incidental thereto. Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in any
other Loan Document, be a trustee for any Lender or have any fiduciary duty to
any Lender. Notwithstanding anything to the contrary contained herein Agent
shall not be required to take any action which is contrary to this Agreement or
any other Loan Document or any applicable Governmental Requirements. Neither
Agent nor any Lender shall be responsible to any other Lender for any recitals,
statements, representations or warranties made by Borrower contained in this
Agreement or in any other Loan Document, for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure by Borrower to perform its obligations hereunder or
thereunder. Agent may employ agents and attorneys-in-fact and shall not be
responsible to any Lender for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Neither Agent nor any of
its directors, officers, employees, agents or advisors shall be responsible to
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith, except
for its or their own gross negligence or willful misconduct. Except as otherwise
provided under this Agreement, Agent shall take such action with respect to the
Loan Documents (including without limitation acting on any requests for covenant
waivers) as shall be directed by the Lenders.
6.2 Reliance by Agent. Agent shall be entitled to rely upon any
certificate, notice or other document (including any electronic mail or
facsimile) believed by it in good faith to be genuine and correct and to have
been signed or sent by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel, independent accountants and other
experts selected by Agent with reasonable care. As to any other matters not
expressly provided for by this Agreement, Agent shall not be required to take
any action or exercise any discretion, but shall be required to act or to
refrain from acting upon instructions of the Lenders and shall in all cases be
fully protected by the Lenders in acting, or in refraining from acting,
hereunder or under any other Loan Document in accordance with the instructions
of the Lenders, and such instructions of the Lenders and any action taken or
failure to act pursuant thereto shall be binding on all of the Lenders.
6.3 Defaults. Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default unless Agent has received a written notice from a
Lender or Borrower, referring to this Agreement, describing such Default and
stating that such notice is a "Notice of Default." If Agent receives such a
notice of the occurrence of a Default, Agent shall give prompt notice thereof to
the Lenders. Agent shall take such action with respect to such Default as shall
be reasonably directed by the Lenders; provided, however, that
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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 as it shall deem advisable in the best interest of the Lenders.
6.4 Indemnification. Without limiting the obligations of Borrower
hereunder, each Lender agrees to indemnify Agent, ratably in accordance with
their Proportionate Shares, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may at any time be imposed on, incurred
by or asserted against Agent in any way relating to or arising out of this
Agreement or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or the enforcement of any of the
terms hereof or thereof; provided, however, that no Lender shall be liable for
any of the foregoing to the extent they arise from Agent's gross negligence or
willful misconduct. Agent shall be fully justified in refusing to take or in
continuing to take any action hereunder unless it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
The obligations of each Lender under this Paragraph shall survive the payment
and performance of the Borrower's obligations, the termination of this Agreement
and any Lender ceasing to be a party to this Agreement (with respect to events
which occurred prior to the time such Lender ceased to be a Lender hereunder).
6.5 Non-Reliance. Each Lender represents that it has, independently and
without reliance on Agent, or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of the
business, prospects, management, financial condition and affairs of Borrower and
its own decision to enter into this Agreement and agrees that it will,
independently and without reliance upon Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own appraisals and decisions in taking or not taking action
under this Agreement. Neither Agent nor any of its directors, officers,
employees, agents or advisors shall (i) be required to keep any Lender informed
as to the performance or observance by Borrower of the obligations under this
Agreement or any other document referred to or provided for herein or to make
inquiry of, or to inspect the properties or books of Borrower; (ii) have any
duty or responsibility to provide any Lender with any credit or other
information concerning Borrower which may come into the possession of Agent,
except for notices, reports and other documents and information expressly
required to be furnished to the Lenders by Agent hereunder; or (iii) be
responsible to any Lender for (A) any recital, statement, representation or
warranty made by Borrower or any officer, employee or agent of Borrower in this
Agreement or in any of the other Loan Documents, (B) the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any Loan Document, (C) the value or sufficiency of the Collateral or the
validity or perfection of any of the liens or security interests intended to be
created by the Loan Documents, or (D) any failure by Borrower to perform its
obligations under this Agreement or any other Loan Document.
6.6 Resignation or Removal of Agent. Agent may resign at any time by
giving thirty (30) days prior written notice thereof to Borrower and the
Lenders; provided, however, CBT shall not resign as Agent without Borrower's
consent (which consent shall not be unreasonably withheld) so long as CBT
retains a Proportionate Share greater than fifty percent (50%), and provided
further that no Event of Default has occurred. In addition, Agent may be removed
by the Lenders for gross negligence or default of Agent's duties hereunder. Upon
any such resignation or removal, the Lenders shall have the right to appoint a
successor Agent, which Agent, if not a Lender, shall be reasonably acceptable to
Borrower; provided, however, that Borrower shall have no right to approve a
successor Agent if a Default has occurred and is continuing. Upon the acceptance
of any appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from the duties and obligations thereafter arising hereunder. After
any retiring Agent's resignation or removal hereunder as Agent, the provisions
of this Article 6 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Agent.
6.7 Authorization. Agent is hereby authorized by the Lenders to execute,
deliver and perform, each of the Loan Documents to which Agent is or is intended
to be a party and each Lender agrees to be bound by all of the agreements of
Agent contained in the Loan Documents.
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6.8 Agent In Its Individual Capacity. Agent may make loans to, accept
deposits from and generally engage in any kind of banking or other business with
Borrower as though Agent were not Agent hereunder. Agent in its capacity as a
Lender shall have the same rights and powers under this Agreement and the other
Loan Documents as any other Lender, and may exercise the same as though it were
not Agent, and the terms "Lender" or "Lenders" shall include Agent in its
capacity as a Lender.
6.9 Assignments. Each Lender may, at any time, sell and assign to an
affiliate of that Lender, to another Lender or its affiliate, or to another
commercial bank or financial institution that is reasonably acceptable to Agent,
all or a portion of its rights and obligations under this Agreement and the
other Loan Documents, subject to the following terms and conditions:
(a) The sale and assignment must be in the minimum amount of at
least $2,500,000 of the assigning Lender's Commitment, and if less than the
entire amount of the assigning Lender's Commitment, must leave the assigning
Lender with at least $2,500,000 remaining on that Lender's Commitment.
(b) The sale and assignment must be reasonably approved in advance
by Agent and Borrower (unless an Event of Default exists, in which case
Borrower's approval shall not be required).
(c) The sale and assignment shall be effected through an assignment
and assumption agreement signed by the assignor Lender and the assignee, which
agreement has been reasonably approved in advance by Agent.
(d) Agent shall have received a processing and registration fee of
$3,500 from the assignor or assigned, as a condition to reflecting the
assignment on Agent's books relating to the Loan.
ARTICLE 7. MISCELLANEOUS
7.1 Survival Of Warranties. All agreements, representations and warranties
made herein shall survive the execution and delivery of this Agreement, the
making of Advances hereunder, and the execution and delivery of the Note.
7.2 Indemnity. Borrower hereby agrees to defend, indemnify, protect and
hold Agent and Lenders and its directors, officers, employees, partners,
attorneys, agents, participants, successors and assigns harmless from and
against all losses, damages, liabilities, claims, actions, judgments, costs and
attorneys' fees which Agent or any Lender may incur as a direct or indirect
consequence of (i) the making of the Loan, except for violations of banking laws
or regulations by Agent or any Lender; (ii) Borrower's failure to perform any
obligations as and when required by this Agreement or any of the other Loan
Documents; (iii) the failure at any time of any of Borrower's representations or
warranties to be true and correct in all material respects; (iv) any lien or
claim which may be alleged to have arisen on or against the Collateral or any
part thereof under the laws of the local or state government or any other
governmental or quasi-governmental authority or any liability asserted against
Agent or any Lender with respect thereto; (v) any tax attributable to the
execution, delivery, filing or recording of the Security Agreement or the Note;
or (vi) any act or omission by Borrower or other Person (other than Agent or any
Lender or its agents) with respect to the Collateral or any portion thereof.
Borrower shall pay immediately upon demand any amounts owing under this
indemnity, together with interest from the date the indebtedness arises until
paid at the rate of interest applicable to the principal balance of the Note.
Borrower's duty to defend, indemnify, protect and hold Agent and Lenders
harmless shall survive the release and cancellation of the Note.
7.3 Further Assurances. At Agent's reasonable request and at Borrower's
expense, Borrower shall execute, acknowledge and deliver all other instruments
and perform all other acts necessary, desirable or proper to carry out the
purposes of the Loan Documents or to perfect and preserve any liens created by
the Loan Documents.
7.4 Form of Documents. The form and substance of all documents,
instruments and forms of evidence to be delivered to Agent and Lenders under the
terms of any of the Loan Documents shall be subject
17
to Agent's approval, and shall not be modified, superseded or terminated in any
respect without Agent's prior written approval.
7.5 Not Assignable. Neither this Agreement nor any rights of Borrower to
receive any sums, proceeds or disbursements under this Agreement or under the
Note may be assigned, pledged, hypothecated or otherwise encumbered by Borrower,
without the prior written consent of Agent and Lenders. Subject to the foregoing
restrictions, this Agreement shall inure to the benefit of Agent and Lenders,
its successors and assigns, and shall bind Borrower and its permitted heirs,
executors, administrators, successors and assigns.
7.6 Attorneys' Fees. If Agent refers this Agreement or any of the other
Loan Documents to an attorney to enforce, construe or defend the same, or as a
consequence of any Event of Default as defined in this Agreement, with or
without the filing of any legal action or proceeding, Borrower shall pay to
Agent, immediately upon demand, the amount of all reasonable attorneys' fees and
costs incurred by Agent in connection therewith, together with interest thereon
from the date of such demand at the rate of interest applicable to the principal
balance of the Note. The reference to "attorneys' fees" in this Paragraph,
elsewhere in this Agreement and in all of the other Loan Documents shall
include, without limitation, fees charged by Agent for the services furnished by
attorneys who are in its employ, at rates not exceeding those that would be
charged by outside attorneys for comparable services.
7.7 Governing Law. The Loan Documents shall be governed by and construed
in accordance with the laws of the State of California, except the extent
preempted by Federal law. Borrower and all Persons and entities in any manner
obligated to Agent and Lenders under the Loan Documents hereby consent to the
jurisdiction of any Federal or State court within the State of California and
also consent to service of process by any means authorized by California or
Federal law.
7.8 No Third Parties Benefitted. No Person other than Agent and Lenders
and Borrower and their permitted successors and assigns shall have any right of
action under any of the Loan Documents.
7.9 Time of the Essence. Time is hereby declared to be of the essence of
this Agreement and of every part of this Agreement.
7.10 Severability. If any provision of the Loan Documents is determined by
a court of competent jurisdiction to be invalid, illegal or unenforceable, that
portion shall be deemed severed from the Loan Documents, and all remaining parts
shall continue in full force as though the invalid, illegal or unenforceable
portion had never been part of the Loan Documents.
7.11 Joint and Several Obligations. The obligations of Borrower shall be
the joint and several obligations of all entities comprising Borrower.
7.12 Gender. When the context and construction so require, all words used
in the singular in this Agreement shall be deemed to have been used in the
plural, the masculine shall include the feminine and neuter, and vice versa.
7.13 Failure Or Indulgence Not Waiver. No failure or delay on the part of
Agent or any Lender or any holder of the Note in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this Agreement and the Note are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
7.14 Modification. This Agreement may not be amended, waived or modified
in any manner without the written consent of Agent and Lenders and Borrower.
7.15 Notices. Unless otherwise specifically provided herein, all notices,
demands or other communications given hereunder shall be in writing and shall be
deemed to have been duly delivered upon confirmed personal delivery, or by
Federal Express (or similar reputable express delivery service), or by confirmed
facsimile transmission with back-up copy mailed the same day, or as of the
second business day
18
after mailing by United States certified mail, return receipt requested, postage
prepaid, addressed as follows (until notice of a change thereof served as
provided in this Paragraph):
Borrower: Advanced Marketing Services, Inc.
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Facsimile: 000-000-0000
Agent: California Bank & Trust
0000 Xx Xxxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Metropolitan Corporate Banking
Facsimile: 000-000-0000
CBT: California Bank & Trust
0000 Xx Xxxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Metropolitan Corporate Banking
Facsimile: 000-000-0000
Bank of the West: Bank of the West
Agency Services Center
000 X. Xxxxx Xxxxxx, Mail Sort CP5-7
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxx Xxxxxxx, Financial Analyst
Facsimile: 000-000-0000
Union Bank of California: Union Bank of California
000 X Xxxxxx, 0xx Xxxxx, X-000
San Diego, California. 92101
Attention: Xx. Xxxx Xxxxxxx, Vice President
Facsimile: 000-000-0000
In any case where this Agreement authorizes notices, requests, demands or other
communications by Borrower to Agent or any Lender to be made by telephone or
facsimile, Agent or any Lender may conclusively presume that anyone purporting
to be a person designated in any incumbency certificate or other similar
document received by Agent or a Lender is such a person.
7.16 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
7.17 Paragraph Headings. The various headings used in this Agreement are
inserted for convenience only and shall not affect the meaning or
interpretations of this Agreement or any provision hereof.
AGENT: CALIFORNIA BANK & TRUST, a California banking corporation
By
------------------------------------------
Name
----------------------------------------
Title
---------------------------------------
By
------------------------------------------
Name
----------------------------------------
Title
---------------------------------------
19
BORROWER: ADVANCED MARKETING SERVICES, INC., a Delaware corporation
By
------------------------------------------
Xxxxxxx X. Xxxxxx, President and CEO
By
------------------------------------------
Xxxxxx X. Xxxxxxx, Exec. Vice Pres., CFO and Secretary
CBT: CALIFORNIA BANK & TRUST, a California banking corporation
By
------------------------------------------
Name
----------------------------------------
Title
---------------------------------------
By
------------------------------------------
Name
----------------------------------------
Title
---------------------------------------
BANK OF THE WEST: BANK OF THE WEST, a California banking corporation
By
------------------------------------------
Name
----------------------------------------
Title
---------------------------------------
By
------------------------------------------
Name
----------------------------------------
Title
---------------------------------------
UNION BANK OF CALIFORNIA: UNION BANK OF CALIFORNIA, N.A.
By
------------------------------------------
Name
----------------------------------------
Title
---------------------------------------
By
------------------------------------------
Name
----------------------------------------
Title
---------------------------------------
20
EXHIBIT A
FORM OF BORROWING BASE CERTIFICATE
[Attached]
1
