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EXHIBIT 10.77
LOAN AND SECURITY AGREEMENT DATED AS OF JUNE 20, 1997
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$100,000,000
LOAN AND SECURITY AGREEMENT
among
RDM HOLDINGS, INC., SPORTS GROUP, INC.,
INTERNATIONAL SPORTS AND FITNESS, INC.,
DIVERSIFIED PRODUCTS CORPORATION,
WILLOW HOSIERY COMPANY, INC., HUTCH SPORTS USA INC., and
DIVERSIFIED TRUCKING CORP.,
as Borrowers,
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
as Lenders,
and
FOOTHILL CAPITAL CORPORATION,
as Agent
June 20, 1997
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TABLE OF CONTENTS
Page(s)
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1. DEFINITIONS AND CONSTRUCTION..................................................................................-1-
1.1 Definitions..............................................................................................-1-
1.2 Accounting Terms........................................................................................-19-
1.3 Code....................................................................................................-19-
1.4 Construction............................................................................................-19-
1.5 Schedules and Exhibits..................................................................................-19-
2. LOAN AND TERMS OF PAYMENT....................................................................................-19-
2.1 Revolving Advances......................................................................................-19-
2.2 Letters of Credit.......................................................................................-26-
2.4 Payments................................................................................................-30-
2.5 Overadvances............................................................................................-31-
2.6 Interest and Letter of Credit Fees: Rates, Payments, and Calculations...................................-31-
2.7 Collection of Accounts..................................................................................-32-
2.8 Crediting Payments; Application of Collections..........................................................-33-
2.9 Designated Account......................................................................................-33-
2.10 Maintenance of Loan Account; Statements of Obligations..................................................-34-
2.11 Fees....................................................................................................-34-
2.12 Joint and Several Liability.............................................................................-35-
2.13 Tax Indemnity...........................................................................................-35-
2.14 Payments in United States Dollars.......................................................................-37-
2.15 Capital Adequacy........................................................................................-37-
3. CONDITIONS; TERM OF AGREEMENT................................................................................-37-
3.1 Conditions Precedent to the Initial Advance, Letter of Credit and the Fixed Period Loans................-37-
3.2 Conditions Precedent to all Advances, all Letters of Credit and the Fixed Period Loans..................-40-
3.3 Condition Subsequent....................................................................................-40-
3.4 Term....................................................................................................-41-
3.5 Effect of Termination...................................................................................-41-
3.6 Early Termination by Borrowers..........................................................................-41-
3.7 Termination Upon Event of Default.......................................................................-41-
4. CREATION OF SECURITY INTEREST................................................................................-41-
4.1 Grant of Security Interest..............................................................................-41-
4.2 Negotiable Collateral...................................................................................-42-
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral..................................-42-
4.4 Delivery of Additional Documentation Required...........................................................-42-
4.5 Power of Attorney.......................................................................................-42-
4.6 Right to Inspect........................................................................................-43-
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5. REPRESENTATIONS AND WARRANTIES...............................................................................-43-
5.1 No Encumbrances.........................................................................................-43-
5.2 Eligible Accounts.......................................................................................-43-
5.3 Eligible Inventory......................................................................................-43-
5.4 Equipment...............................................................................................-43-
5.5 Location of Inventory and Equipment.....................................................................-44-
5.6 Inventory Records.......................................................................................-44-
5.7 Location of Chief Executive Office; FEIN................................................................-44-
5.8 Due Organization and Qualification; Subsidiaries........................................................-44-
5.9 Due Authorization; No Conflict..........................................................................-44-
5.10 Litigation..............................................................................................-45-
5.11 No Material Adverse Change. ............................................................................-45-
5.12 Solvency................................................................................................-45-
5.13 Employee Benefits.......................................................................................-45-
5.14 Environmental Condition.................................................................................-46-
5.15 Licenses................................................................................................-46-
5.16 Other Representations and Warranties....................................................................-46-
6. AFFIRMATIVE COVENANTS........................................................................................-46-
6.1 Accounting System.......................................................................................-46-
6.2 Collateral and Other Reporting..........................................................................-46-
6.3 Financial Statements, Reports, Certificates.............................................................-47-
6.4 Tax Returns.............................................................................................-48-
6.5 Guarantor Reports.......................................................................................-48-
6.6 Returns.................................................................................................-48-
6.7 Title to Equipment......................................................................................-49-
6.8 Maintenance of Equipment................................................................................-49-
6.9 Taxes...................................................................................................-49-
6.10 Insurance...............................................................................................-49-
6.11 No Setoffs or Counterclaims.............................................................................-50-
6.12 Location of Inventory and Equipment.....................................................................-51-
6.13 Compliance with Laws....................................................................................-51-
6.14 Employee Benefits.......................................................................................-51-
6.15 Leases..................................................................................................-52-
6.16 Other Loan Parties......................................................................................-52-
7. NEGATIVE COVENANTS...........................................................................................-52-
7.1 Indebtedness............................................................................................-52-
7.2 Liens...................................................................................................-52-
7.3 Restrictions on Fundamental Changes.....................................................................-53-
7.4 Disposal of Assets......................................................................................-53-
7.5 Change Name.............................................................................................-53-
7.6 Guarantee...............................................................................................-53-
7.7 Nature of Business......................................................................................-53-
7.8 Payments, Prepayments and Amendments....................................................................-53-
7.9 Change of Control.......................................................................................-54-
7.10 Consignments............................................................................................-54-
7.11 Distributions...........................................................................................-54-
7.12 Accounting Methods......................................................................................-54-
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7.13 Investments.............................................................................................-54-
7.14 Transactions with Affiliates............................................................................-54-
7.15 Suspension..............................................................................................-54-
7.16 Compensation............................................................................................-54-
7.17 Use of Proceeds.........................................................................................-55-
7.18 Change in Location of Chief Executive Office; Inventory and Equipment with Bailees......................-55-
7.19 No Prohibited Transactions Under ERISA..................................................................-55-
7.20 Financial Covenants.....................................................................................-56-
7.21 Capital Expenditures....................................................................................-57-
7.22 Management..............................................................................................-57-
8. EVENTS OF DEFAULT............................................................................................-57-
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.......................................................................-59-
9.1 Rights and Remedies......................................................................................-59-
9.2 Remedies Cumulative......................................................................................-61-
10.TAXES AND EXPENSES...........................................................................................-61-
11.WAIVERS; INDEMNIFICATION.....................................................................................-62-
11.1 Demand; Protest; etc....................................................................................-62-
11.2 The Lender Group's Liability for Collateral.............................................................-62-
11.3 Indemnification.........................................................................................-62-
12.NOTICES......................................................................................................-62-
13.CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER...................................................................-63-
14.DESTRUCTION OF BORROWERS' DOCUMENTS..........................................................................-64-
15.ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS...................................................................-65-
15.1 Assignments and Participations..........................................................................-65-
15.2 Successors..............................................................................................-67-
16.AMENDMENTS; WAIVERS..........................................................................................-67-
16.1 Amendments and Waivers..................................................................................-67-
16.2 No Waivers; Cumulative Remedies.........................................................................-68-
17.AGENT; THE LENDER GROUP......................................................................................-68-
17.1 Appointment and Authorization of Agent..................................................................-68-
17.2 Delegation of Duties....................................................................................-69-
17.3 Liability of Agent-Related Persons......................................................................-69-
17.4 Reliance by Agent.......................................................................................-70-
17.5 Notice of Default or Event of Default...................................................................-70-
17.6 Credit Decision.........................................................................................-71-
17.7 Costs and Expenses; Indemnification.....................................................................-71-
17.8 Agent in Individual Capacity............................................................................-72-
17.9 Successor Agent.........................................................................................-72-
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17.10 Withholding Tax.........................................................................................-72-
17.11 Collateral Matters......................................................................................-73-
17.12 Restrictions on Actions by Lenders; Sharing of Payments.................................................-74-
17.13 Agency for Perfection...................................................................................-75-
17.14 Payments by Agent to the Lenders........................................................................-75-
17.15 Concerning the Collateral and Related Loan Documents....................................................-75-
17.16 Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports
and Information.........................................................................................-75-
17.17 Several Obligations; No Liability.......................................................................-77-
18.GENERAL PROVISIONS...........................................................................................-77-
18.1 Effectiveness...........................................................................................-77-
18.2 Section Headings........................................................................................-77-
18.3 Interpretation..........................................................................................-77-
18.4 Severability of Provisions..............................................................................-77-
18.5 Counterparts; Telefacsimile Execution...................................................................-77-
18.6 Revival and Reinstatement of Obligations................................................................-78-
18.7 Integration.............................................................................................-78-
18.8 Time is of the Essence..................................................................................-78-
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SCHEDULES AND EXHIBITS
Schedule C-1 Commitments
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 5.7 Location of Chief Executive Office of Each Borrower
Schedule 5.8 Subsidiaries
Schedule 5.9 Status of Liens
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Schedule 5.14 Hazardous Materials
Schedule 5.15 Licenses
Schedule 6.12 Location of Inventory and Equipment
Schedule 7.16 Director/Management Compensation Plan
Exhibit A-1 Form of Assignment and Acceptance
Exhibit C-1 Form of Compliance Certificate
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$100,000,000
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (THIS "AGREEMENT"), is entered into
as of June 20, 1997, among RDM HOLDINGS, INC., a Delaware corporation, SPORTS
GROUP, INC., an Alabama corporation, INTERNATIONAL SPORTS AND FITNESS, INC., a
Delaware corporation, DIVERSIFIED PRODUCTS CORPORATION, an Alabama corporation,
WILLOW HOSIERY COMPANY, INC., a New York corporation, HUTCH SPORTS USA INC., a
Delaware corporation and DIVERSIFIED TRUCKING CORP., an Alabama corporation
(collectively, "Borrowers", individually "Borrower"), on the one hand, and the
financial institutions listed on the signature pages hereof (such financial
institutions, together with their respective successors and assigns, are
referred to hereinafter each individually as a "Lender" and collectively as the
"Lenders"), and FOOTHILL CAPITAL CORPORATION, as Agent, on the other hand.
The parties agree as follows:
I. DEFINITIONS AND CONSTRUCTION.
A. DEFINITIONS. As used in this Agreement, the following terms shall
have the following definitions:
"Account Debtor" means any Person who is or who may become obligated
under, with respect to, or on account of, an Account.
"Accounts" means, with respect to any Person, all currently existing
and hereafter arising accounts, contract rights, and all other forms of
obligations owing to such Person arising out of the sale or lease of goods or
the rendition of services by such Person, irrespective of whether earned by
performance, and any and all credit insurance, guaranties, or security
therefor.
"Advances" has the meaning set forth in Section 2.1(a).
"Affiliate" means, as applied to any Person, any other Person who
directly or indirectly controls, is controlled by, is under common control with
or is a director or officer of such Person. For purposes of this definition,
"control" means the possession, directly or indirectly, of the power to vote
five percent (5%) or more of the securities having ordinary voting power for
the election of directors or the direct or indirect power to direct the
management and policies of a Person.
"Agent" means Foothill, solely in its capacity as agent for the
Lenders, and shall include any successor agent.
"Agent's Account" has the meaning set forth in Section 2.7.
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"Agent Advance" has the meaning set forth in Section 2.1(h).
"Agent Loan" has the meaning set forth in Section 2.1(g).
"Agent-Related Persons" means Agent, together with its Affiliates,
and the officers, directors, employees, counsel, agents, and attorneys-in-fact
of Agent and such Affiliates.
"Agreement" has the meaning set forth in the preamble hereto.
"Assignee" has the meaning set forth in Section 15.1.
"Assignment and Acceptance" has the meaning set forth in Section
15.1 (a) and shall be in the form of Exhibit A-1.
"Authorized Person" means any officer or other employee of Borrowers
"Availability" means, as of the date of determination, the result
(so long as such result is a positive number) of (a) the lesser of the
Borrowing Base or the Maximum Revolving Amount, less (b) the Revolving Facility
Usage.
"Average Unused Portion of Maximum Revolving Amount" means, as of
any date of determination, (a) the Maximum Revolving Amount, less (b) the sum
of (i) the average Daily Balance of Advances that were outstanding during the
immediately preceding month, plus (ii) the average Daily Balance of the undrawn
Letters of Credit that were outstanding during the immediately preceding month.
"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C.
Section 101 et seq.), as amended, and any successor statute.
"Benefit Plan" means a "defined benefit plan" (as defined in Section
3(35) of ERISA) for which any Borrower, any Subsidiary of any Borrower, or any
ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
"Borrower Stock Pledge Agreement" means that certain Borrower Stock
Pledge Agreement of even date by and among Hutch Sports USA Inc., Sports Group,
Inc., International Sports and Fitness, Inc., RDM Holdings, Inc., and Agent, in
form and substance satisfactory to Agent.
"Borrower Trademark Security Agreement" means that certain Borrower
Trademark Security Agreement of even date by and among the Borrowers and
Foothill, in form and substance satisfactory to Agent.
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"Borrowers" and "Borrower" have the meanings set forth in the
preamble to this Agreement.
"Borrower's Books" means, with respect to each Borrower, all of
such Borrower's books and records including: ledgers; records indicating,
summarizing, or evidencing such Borrower's properties or assets (including the
Collateral) or liabilities; all information relating to such Borrower's
business operations or financial condition; and all computer programs, disk or
tape files, printouts, runs, or other computer prepared information.
"Borrowing" means a borrowing hereunder consisting of Advances made
on the same day by the Lenders, or by Agent in the case of an Agent Loan or an
Agent Advance.
"Borrowing Base" has the meaning set forth in Section 2.1(a).
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which national banks are authorized or required to close.
"Canadian Subsidiary" means RDM Sports & Leisure Inc., an Ontario
corporation.
"Canadian Guaranty" means that certain Guarantee and Indemnity of
even date herewith executed and delivered by the Canadian Subsidiary, in form
and substance satisfactory to the Agent.
"Canadian Security Agreement" means that certain General Security
Agreement of even date herewith between the Canadian Subsidiary and the Agent,
in form and substance satisfactory to the Agent.
"Change of Control" shall be deemed to have occurred at such time
as a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) (other than an underwriter in connection
with a public offering) becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of
more than twenty-five percent (25%) of the total voting power of all classes of
stock then outstanding of any Borrower or the Canadian Subsidiary entitled to
vote in the election of directors.
"Closing Date" means the date of the first to occur of the making
of the initial Advance, or the issuance of the initial Letter of Credit.
"Code" means the Georgia Uniform Commercial Code.
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"Collateral" means, with respect to each Borrower, all real and
personal property of such Borrower, whether now existing or hereafter arising,
including without limitation each of the following:
1. the Accounts of such Borrower;
2. Borrower's Books;
3. the Equipment;
4. the General Intangibles;
5. the Inventory of such Borrower;
6. the Negotiable Collateral;
7. the Real Property Collateral;
8. any money, or other assets of such Borrower
that now or hereafter come into the possession, custody, or control of the
Lender Group; and
9. the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the Collateral, and any and all Accounts of such Borrower,
Borrower's Books, Equipment, General Intangibles, Inventory of such Borrower,
Negotiable Collateral, Real Property, money, deposit accounts, or other tangible
or intangible property resulting from the sale, exchange, collection, or other
disposition of any of the foregoing, or any portion thereof or interest
therein, and the proceeds thereof.
"Collateral Access Agreement" means a landlord waiver, mortgagee
waiver, bailee letter, or acknowledgement agreement of any warehouseman,
processor, lessor, consignee, or other Person in possession of, having a Lien
upon, or having rights or interests in the Equipment or Inventory of Borrowers
and the Canadian Subsidiary, in each case, in form and substance satisfactory
to Agent.
"Collections" means all cash, checks, notes, instruments, and other
items of payment(including, insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds).
"Commitment" means, at any time with respect to a Lender, the
principal amount set forth beside such Lender's name under the heading
"Commitment" on Schedule C-1 or on the signature page of the Assignment and
Acceptance pursuant to which such Lender became a Lender hereunder in
accordance with the provisions of Section 15.1, as such Commitment may be
adjusted from time to time in accordance with the provisions of Section 15.1
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and "Commitments" means, collectively, the aggregate amount of the commitments
of all of the Lenders.
"Compliance Certificate" means a certificate substantially in the
form of Exhibit C-1 and delivered by the chief accounting officers of Borrowers
to Agent.
"Consolidated Current Assets" means, as of any date of
determination, the aggregate amount of the consolidated current assets of the
Loan Parties that would, in accordance with GAAP, be classified on a balance
sheet as current assets.
"Consolidated Current Liabilities" means, as of any date of
determination, the aggregate amount of the consolidated current liabilities of
the Loan Parties that would, in accordance with GAAP, be classified on a
balance sheet as current liabilities. For purposes of this definition, all
Obligations outstanding under this Agreement shall be deemed to be current
liabilities without regard to whether they would be deemed to be so under GAAP.
"Cost" means the lower of cost or fair market value in accordance
with GAAP.
"Credit Enhancement" shall mean that certain $15,000,000 letter of
credit issued to the Agent for the benefit of the Lender Group, in form and
substance satisfactory to Agent and issued by a bank satisfactory to Agent.
"Daily Balance" means the amount of an Obligation owed at the end
of a given day.
"deems itself insecure" means that the Person deems itself insecure
in accordance with the provisions of Section 1-208 of the Code.
"Default" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"Defaulting Lender" has the meaning set forth in Section 2.1
(f)(ii).
"Defaulting Lenders Rate" means the Reference Rate for the first
three (3) days from and after the date the relevant payment is due and
thereafter at the interest rate then applicable to Advances.
"Deposit Account Agreement" means that certain Assignment of
Deposit Account among The Chase Manhattan Bank, the Agent and RDM Environmental
Remediation Management, Inc., in form and substance satisfactory to the Agent.
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"Designated Account" means account number 443911 of Borrowers
maintained with Borrowers' Designated Account Bank, or such other deposit
account of Borrowers (located within the United States) which has been
designated, in writing and from time to time, by any Borrower to Agent.
"Designated Account Bank" means LaSalle National Bank, whose office
is located at ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and whose ABA number is
▇▇▇▇▇▇▇▇▇, or such other bank as Foothill and Borrowers may designate from time
to time.
"Dilution" means, in each case based upon the experience of the
immediately prior three (3) months, the result of dividing the Dollar amount of
(a) bad debt write-downs, discounts, advertising, returns, promotions, credits,
or other dilution with respect to the Accounts of Borrowers and the Canadian
Subsidiary, by (b) Borrowers' and the Canadian Subsidiary's Collections
(excluding extraordinary items) plus the Dollar amount of clause (a).
"Dilution Reserve" means, as of any date of determination, an
amount sufficient to reduce the Lenders' advance rate against Eligible Accounts
by one percentage point for each percentage point by which Dilution is in
excess of five percent (5%).
"Disbursement Letter" means an instructional letter executed and
delivered by any Borrower to Agent regarding the extensions of credit to be
made on the Closing Date, the form and substance of which shall be satisfactory
to Agent.
"Dollars or $" means United States dollars.
"Early Termination Premium" has the meaning set forth in Section
3.6.
"EBITDA" means, for any period, the consolidated net income (or net
loss) of the Loan Parties for such period as determined in accordance with
GAAP, plus (i) the sum of, without duplication, the following for the Loan
Parties, (A) the excess, if any, of gross interest expense for such period over
gross interest income for such period, in each case determined in accordance
with GAAP, (B) total income tax expense, (C) depreciation expense, (D)
amortization expense net of negative goodwill amortization and (E) non-cash
losses (provided that any such losses do not at any time result in a cash
outlay by any Loan Party), which include the cumulative effect on earnings from
the adoption of GAAP pronouncements, less (ii) extraordinary gains for the Loan
Parties.
"Eligible Accounts" means those Accounts net of customary reserves,
including but not limited to reserves for sales returns and allowances (the
amount of such sales returns and
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allowances reserve to be determined in Agent's discretion except with respect
to sales returns and allowances for which the applicable Borrower or the
Canadian Subsidiary, as the case may be, is issuing its debit and credit
memorandum in the ordinary course in which case the amount of such reserve
shall be equal to fifty percent (50%) of such Borrower's or the Canadian
Subsidiary's, as the case may be, general ledger reserve for such sales returns
and allowances), unapplied cash, cash on delivery sales, charge backs, debit
memorandums (to the extent not elsewhere reserved) and such other reserves as
determined by Agent in its reasonable discretion, created by Borrowers and the
Canadian Subsidiary in the ordinary course of business, that arise out of
Borrowers' and the Canadian Subsidiary's sale of goods or rendition of
services, that strictly comply with each and all of the representations and
warranties respecting Accounts made by Borrowers and the Canadian Subsidiary to
the Lender Group in the Loan Documents, and that are and at all times continue
to be acceptable to Agent in all respects; provided, however, that standards of
eligibility may be fixed and revised from time to time by Agent in Agent's
reasonable credit judgment. Eligible Accounts shall not include the following:
(a) Accounts that the Account Debtor has failed
to pay within sixty (60) days of due date or Accounts with selling terms of
more than ninety (90) days from invoice date;
(b) Accounts owed by an Account Debtor or its
Affiliates where 50% or more of all Accounts owed by that Account Debtor (or
its Affiliates) are deemed ineligible under clause (a) above;
(c) Accounts with respect to which the Account
Debtor is an employee, Affiliate, or agent of the applicable Borrower or the
Canadian Subsidiary, as the case may be;
(d) Accounts with respect to which goods are
placed on consignment, guaranteed sale, sale or return, sale on approval, ▇▇▇▇
and hold, or other terms by reason of which the payment by the Account Debtor
may be conditional;
(e) Accounts that are not payable in Dollars
or Canadian dollars or with respect to which the Account Debtor: (i) does not
maintain its chief executive office in the United States or Canada, or (ii) is
not organized under the laws of the United States or any State thereof or Canada
or any province thereof, or (iii) is the government of any foreign country or
sovereign state, or of any state, province, municipality, or other political
subdivision thereof, or of any department, agency, public corporation, or other
instrumentality thereof, unless (y) the Account is supported by an irrevocable
letter of credit satisfactory to Agent (as to form, substance, and issuer or
domestic confirming bank) that has been delivered to Agent and is directly
drawable by Agent, or (z) the Account is covered by credit insurance in form
and amount, and by an insurer, satisfactory to Agent;
(f) Accounts with respect to which the Account
Debtor is either (i) the United States or any department, agency, or
instrumentality of
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the United States (exclusive, however, of Accounts with respect to which the
applicable Borrower or the Canadian Subsidiary, as the case may be, has
complied, to the satisfaction of Agent, with the Assignment of Claims Act, 31
U.S.C. Section 3727), or (ii) any State of the United States (exclusive,
however, of Accounts owed by any State that does not have a statutory
counterpart to the Assignment of Claims Act);
(g) Accounts with respect to which the Account
Debtor is a creditor of the applicable Borrower or the Canadian Subsidiary,
as the case may be, (including without limitation Accounts with respect to which
commissions are due to the Account Debtor as a commission agent), has asserted
a right of setoff, has disputed its liability, or has made any claim with
respect to the Account, to the extent of such debt, right of setoff, disputed
amount or claim;
(h) Accounts with respect to an Account Debtor
(other than Sears, Target, Toys R Us, Sports Authority, Home Shopping Club and
Wal-Mart) whose total obligations owing to Borrowers and the Canadian
Subsidiary exceed ten (10%) of all Eligible Accounts, to the extent of the
obligations owing by such Account Debtor in excess of such percentage;
(i) Accounts with respect to Sears, Target, Toys
R Us, Sports Authority, or Home Shopping Club, as an Account Debtor, whose total
obligations owing to Borrowers and the Canadian Subsidiary exceed twenty
percent (20%) of all Eligible Accounts, to the extent of the obligations owing
by such Account Debtor in excess of such percentage;
(j) Accounts with respect to Wal-Mart, as
Account Debtor, whose total obligations owing to Borrowers and the Canadian
Subsidiary exceed twenty-five percent (25%) of all Eligible Accounts, to the
extent of the obligations owing by such Account Debtor in excess of such
percentage;
(k) Accounts with respect to which the Account
Debtor is subject to any Insolvency Proceeding, or becomes insolvent, or goes
out of business;
(l) Accounts the collection of which Agent, in
its reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(m) Accounts with respect to which the goods
giving rise to such Account have not been shipped and billed to the Account
Debtor, the services giving rise to such Account have not been performed and
accepted by the Account Debtor, or the Account otherwise does not represent a
final sale;
(n) Accounts with respect to which the Account
Debtor is located in the states of New Jersey, Minnesota, or West Virginia
(or any other state that requires a creditor to file a Business Activity Report
or similar document in order to bring suit or otherwise enforce its remedies
against such
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Account Debtor in the courts or through any judicial process of such state),
unless the applicable Borrower or the Canadian Subsidiary, as the case may be,
has qualified to do business in New Jersey, Minnesota, West Virginia, or such
other states, or has filed a Notice of Business Activities Report with the
applicable division of taxation, the department of revenue, or with such other
state offices, as appropriate, for the then-current year, or is exempt from
such filing requirement;
(o) Accounts that represent progress payments
or other advance ▇▇▇▇▇▇▇▇ that are due prior to the completion of performance
by the applicable Borrower or the Canadian Subsidiary, as the case may be, of
the subject contract for goods or services; and
(p) Accounts with respect to which the Agent
does not have a first priority perfected security interest, including without
limitation Accounts owed to the Canadian Subsidiary by an Account Debtor
located in one of the Maritime Provinces.
"Eligible In-Transit Inventory" means those items of
Inventory of the Borrowers and the Canadian Subsidiary that do not qualify
as Eligible Landed Inventory solely because they are not in a location set forth
on Schedule E-1 but: (a) such Inventory is currently in-transit from a location
not set forth on Schedule E-1 to a location set forth on Schedule E-1, (b)
title to such Inventory has passed to the applicable Borrower or the Canadian
Subsidiary, as the case may be, (c) documents of title with respect to such
Inventory have been delivered to Agent or its agent; (d) such Inventory is
insured against types of loss, damage, hazards, and risks, and in amounts,
satisfactory to Agent in its discretion, and (e) such Inventory has been paid
for or, if purchased under an Inventory Letter of Credit, such Inventory Letter
of Credit either has been drawn upon in full and reimbursed, or expired
undrawn; in each case, with documentation therefor in form and substance
satisfactory to Agent in its discretion.
"Eligible Inventory" means the Eligible In-Transit
Inventory and the Eligible Landed Inventory net of reserves, including but not
limited to reserves for slow moving Inventory of the Borrowers and the Canadian
Subsidiary, work-in-process Inventory of the Borrowers and the Canadian
Subsidiary incorrectly classified as raw materials, miscounts and outsourcing
variances and such other reserves determined by Agent in its reasonable
discretion.
"Eligible Landed Inventory" means Inventory of the
Borrowers and the Canadian Subsidiary consisting of first quality finished
goods held for sale in the ordinary course of Borrowers' and the Canadian
Subsidiary's business and raw materials for such finished goods, that are
located at or in-transit between Borrowers' and the Canadian Subsidiary's
premises identified on Schedule E-1, that strictly comply with each and all of
the representations and warranties respecting Inventory made by Borrowers and
the Canadian Subsidiary to the Lender Group in the Loan Documents, and that
-9-
17
are and at all times continue to be acceptable to the Agent in all respects;
provided, however, that standards of eligibility may be fixed and revised from
time to time by the Agent in the Agent's reasonable credit judgment. In
determining the amount to be so included, Inventory of Borrowers and the
Canadian Subsidiary shall be valued at the lower of cost or market on a basis
consistent with Borrowers' and the Canadian Subsidiary's current and historical
accounting practices. An item of Inventory shall not be included in Eligible
Landed Inventory if:
(a) it is not owned solely by a Borrower or the Canadian
Subsidiary or a Borrower or the Canadian Subsidiary does not have good, valid,
and marketable title thereto;
(b) it is not located at one of the locations set forth on
Schedule E-1;
(c) it is not located on property owned or leased by a
Borrower or the Canadian Subsidiary or in a contract warehouse, in each case,
subject to a Collateral Access Agreement executed by the mortgagee, lessor, the
warehouseman, or other third party, as the case may be, and segregated or
otherwise separately identifiable from goods of others, if any, stored on the
premises;
(d) it is not subject to a valid and perfected first
priority security interest in favor of the Agent;
(e) it consists of goods returned or rejected by the
applicable Borrower's or the Canadian Subsidiary's customers or goods in
transit; and
(f) it is obsolete or slow moving, a restrictive or custom
item, work-in-process, a component that is not part of finished goods, or
constitutes spare parts, packaging and shipping materials, paints and enamels,
manuals and brochures, supplies used or consumed in a Borrower's or the
Canadian Subsidiary's business, Inventory subject to a Lien in favor of any
third Person, ▇▇▇▇ and hold goods, defective goods, "seconds," or Inventory
acquired on consignment.
"Eligible Transferee" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having total
assets in excess of $5,000,000,000, or the asset based lending Affiliate of
such bank, (b) a commercial bank organized under the laws of any other country
which is a member of the Organization for Economic Cooperation and Development
or a political subdivision of any such country, and having total assets in
excess of $5,000,000,000, or the asset based lending Affiliate of such bank;
provided that such bank is acting through a branch or agency located in the
United States, (c) a finance company, insurance or other financial institution,
or fund that is engaged in making, purchasing, or otherwise investing in
commercial loans in the ordinary course of its business
-10-
18
and having total assets in excess of $500,000,000, (d) any Affiliate (other
than individuals) of an existing Lender, and (e) any other Person approved by
Agent and, so long as no Default or Event of Default exists, approved by
Borrowers.
"Equipment" means, with respect to each Borrower all of
such Borrower's present and hereafter acquired machinery, machine tools,
motors, equipment, furniture, furnishings, fixtures, vehicles (including motor
vehicles and trailers), tools, parts, goods (other than consumer goods, farm
products, or Inventory), wherever located, including, (a) any interest of such
Borrower in any of the foregoing, and (b) all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to any of
the foregoing.
"ERISA" means the Employee Retirement Income Security Act
of 1974, 29 U.S.C. Section Section 1000 et seq., amendments thereto, successor
statutes, and regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject to
ERISA whose employees are treated as employed by the same employer as the
employees of any Borrower under IRC Section 414(b), (b) any trade or business
subject to ERISA whose employees are treated as employed by the same employer
as the employees of any Borrower under IRC Section 414(c), (c) solely for
purposes of Section 302 of ERISA and Section 412 of the IRC, any organization
subject to ERISA that is a member of an affiliated service group of which any
Borrower is a member under IRC Section 414(m), or (d) solely for purposes of
Section 302 of ERISA and Section 412 of the IRC, any party subject to ERISA
that is a party to an arrangement with any Borrower and whose employees are
aggregated with the employees of any Borrower under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with respect to
any Benefit Plan or Multiemployer Plan, (b) the withdrawal of any Borrower, any
of its Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year
in which it was a "substantial employer" (as defined in Section 4001(a)(2) of
ERISA), (c) the providing of notice of intent to terminate a Benefit Plan in a
distress termination (as described in Section 4041(c) of ERISA), (d) the
institution by the PBGC of proceedings to terminate a Benefit Plan or
Multiemployer Plan, (e) any event or condition (i) that provides a basis under
Section 4042(a)(1), (2), or (3) of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan or Multiemployer Plan,
or (ii) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA, (f) the partial or complete withdrawal within the
meaning of Sections 4203 and 4205 of ERISA, of any Borrower, any of its
Subsidiaries or ERISA Affiliates from a Multiemployer Plan, or (g) providing any
security to any Plan under Section 401(a)(29) of the IRC by any Borrower or its
Subsidiaries or any of their ERISA Affiliates.
"Event of Default" has the meaning set forth in Section 8.
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19
"Existing Lender" means BankAmerica Business Credit, Inc.,
as agent for the lenders party to that certain Loan and Security Agreement
dated as of September 6, 1996 among Roadmaster Corporation now known as RDM
Holdings, Inc., Roadmaster Leisure Inc. now known as RDM Sports & Leisure Inc.,
Willow Hosiery Company, Inc. and Hutch Sports, Inc. now known as Hutch Sports
USA Inc., as borrowers, the lenders party thereto and BankAmerica Business
Credit, Inc., as agent for the lenders.
"FEIN" means Federal Employer Identification Number.
"Fixed Period Loans" means the Tranche A Fixed Period Loans
and the Tranche B Fixed Period Loans.
"Foothill" means Foothill Capital Corporation, a California
corporation.
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"General Intangibles" means, with respect to each Borrower,
all of such Borrower's present and future general intangibles and other
personal property (including contract rights, rights arising under common law,
statutes, or regulations, choses or things in action, goodwill, patents, trade
names, trademarks, servicemarks, copyrights, blueprints, drawings, purchase
orders, customer lists, monies due or recoverable from pension funds, route
lists, rights to payment and other rights under any royalty or licensing
agreements, infringement claims, computer programs, information contained on
computer disks or tapes, literature, reports, catalogs, deposit accounts,
insurance premium rebates, tax refunds, and tax refund claims), other than
goods, Accounts, and Negotiable Collateral.
"Governing Documents" means the certificate or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
"Hazardous Materials" means (a) substances that are defined
or listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity,
or "EP toxicity", (b) oil, petroleum, or petroleum derived substances, natural
gas, natural gas liquids, synthetic gas, drilling fluids, produced waters, and
other wastes associated with the exploration, development, or production of
crude oil, natural gas, or geothermal resources, (c) any flammable substances
or explosives or any radioactive materials, and (d) asbestos in any form or
-12-
20
electrical equipment that contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty (50) parts per million.
"Indebtedness" means: (a) all obligations of Borrowers for
borrowed money, (b) all obligations of Borrowers evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations of Borrowers in respect of letters of credit, bankers acceptances,
interest rate swaps, or other financial products, (c) all obligations of
Borrowers under capital leases, (d) all obligations or liabilities of others
secured by a Lien on any property or asset of Borrowers, irrespective of
whether such obligation or liability is assumed, and (e) any obligation of
Borrowers guaranteeing or intended to guarantee (whether guaranteed, endorsed,
co-made, discounted, or sold with recourse to Borrowers) any indebtedness,
lease, dividend, letter of credit, or other obligation of any other Person.
"Insolvency Proceeding" means any proceeding commenced by
or against any Person under any provision of the Bankruptcy Code or any other
proceeding under any other bankruptcy or insolvency law of any jurisdiction,
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extensions generally with creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.
"Intangible Assets" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.
"Inventory" means, with respect to any Person, all present
and future inventory in which such Person has any interest, including goods
held for sale or lease or to be furnished under a contract of service and all
of such Person's present and future raw materials, work in process, finished
goods, and packing and shipping materials, wherever located.
"Inventory Letter of Credit" means a documentary Letter of
Credit issued to support the purchase by a Borrower of Inventory prior to
transit to a location set forth on Schedule E-1, that provides that all draws
thereunder must require presentation of customary documentation (including, if
applicable, commercial invoices, packing list, certificate of origin, ▇▇▇▇ of
lading or airwaybill, customs clearance documents, quota statement, inspection
certificate, beneficiaries statement, and ▇▇▇▇ of exchange, bills of lading,
dock warrants, dock receipts, warehouse receipts, or other documents of title)
in form and substance satisfactory to Agent and reflecting the passage to such
Borrower of title to first quality Inventory conforming to such Borrower's
contract with the seller thereof. Any such Letter of Credit shall cease to be
an "Inventory Letter of Credit" at such time, if any, as the goods purchased
thereunder become Eligible Landed Inventory.
"Inventory Reserves" means reserves (determined from time
to time by Agent in its discretion) for (a) the estimated costs relating to
unpaid freight charges, warehousing or storage charges, taxes, duties, and
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21
other similar unpaid costs associated with the acquisition of Eligible
In-Transit Inventory by Borrowers, plus (b) the estimated reclamation claims of
unpaid sellers of Inventory sold to Borrowers and the Canadian Subsidiary.
"IRC" means the Internal Revenue Code of 1986, as amended,
and the regulations thereunder.
"L/C" has the meaning set forth in Section 2.2(a).
"L/C Guaranty" has the meaning set forth in Section 2.2(a).
"Lender" and "Lenders" have the respective meanings set
forth in the preamble to this Agreement, and shall include any other Person
made a party to this Agreement in accordance with the provisions of Section
15.1.
"Lender Group" means, individually and collectively, each
of the individual Lenders and Agent.
"Lender Group Expenses" means all: costs or expenses
(including taxes, and insurance premiums) required to be paid by Borrowers
under any of the Loan Documents that are paid or incurred by the Lender Group;
fees or charges paid or incurred by the Lender Group in connection with the
Lender Group's transactions with Borrowers, including, fees or charges for
photocopying, notarization, couriers and messengers, telecommunication, public
record searches (including tax lien, litigation, and UCC searches and including
searches with the patent and trademark office, the copyright office, or the
department of motor vehicles), filing, recording, publication, appraisal
(including periodic Personal Property Collateral or Real Property Collateral
appraisals), real estate surveys, real estate title policies and endorsements,
and environmental audits; costs and expenses incurred by Agent in the
disbursement of funds to Borrowers (by wire transfer or otherwise); charges
paid or incurred by Agent resulting from the dishonor of checks; costs and
expenses paid or incurred by Agent to correct any default or enforce any
provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or
advertising to sell the Personal Property Collateral or the Real Property
Collateral, or any portion thereof, irrespective of whether a sale is
consummated; costs and expenses paid or incurred by the Lender Group in
examining each Borrower's Books; costs and expenses of third party claims or
any other suit paid or incurred by the Lender Group in enforcing or defending
the Loan Documents or in connection with the transactions contemplated by the
Loan Documents or the Lender Group's relationship with Borrowers or any
guarantor; and the Lender Group's reasonable attorneys fees and expenses
incurred in advising, structuring, drafting, reviewing, administering,
amending, terminating, enforcing (including attorneys fees and expenses
incurred in connection with a "workout," a "restructuring," or an Insolvency
Proceeding concerning any Borrower or any guarantor of the Obligations),
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defending, or concerning the Loan Documents, irrespective of whether suit is
brought.
"Letter of Credit" means an L/C or an L/C Guaranty, as the
context requires.
"Lien" means any interest in property securing an
obligation owed to, or a claim by, any Person other than the owner of the
property, whether such interest shall be based on the common law, statute, or
contract, whether such interest shall be recorded or perfected, and whether
such interest shall be contingent upon the occurrence of some future event or
events or the existence of some future circumstance or circumstances, including
the lien or security interest arising from a mortgage, deed of trust,
encumbrance, pledge, hypothecation, assignment, deposit arrangement, security
agreement, adverse claim or charge, conditional sale or trust receipt, or from
a lease, consignment, or bailment for security purposes and also including
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases, and other title exceptions and encumbrances
affecting Real Property.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Disbursement
Letter, the Letters of Credit, the Lockbox Agreements, the Borrower Stock
Pledge Agreement, the Stock Pledge Agreement, the Parent Stock Pledge
Agreement, the Subsidiary Guaranty, the Parent Guaranty, the Trademark Security
Agreement, Borrower Trademark Security Agreement, the Parent Trademark Security
Agreement, Security Agreement, the Parent Security Agreement, the Metromedia
Subordination Agreement, the Subordination Agreement, the Canadian Guaranty,
the Canadian Security Agreement, the Deposit Account Agreement, the Credit
Enhancement, any note or notes executed by any Borrower and payable to the
Lender Group, and any other agreement entered into, now or in the future, in
connection with this Agreement.
"Loan Parties" means the Borrowers, RDM and the other
direct and indirect Subsidiaries of RDM, any one of whom shall be referred to
as a "Loan Party".
"Lockbox Account" shall mean a depositary account
established pursuant to one of the Lockbox Agreements.
"Lockbox Agreements" means those certain Lockbox Operating
Procedural Agreements and those certain Depository Account Agreements, in form
and substance satisfactory to Agent, each of which is among a Borrower or the
Canadian Subsidiary, as the case may be, Agent, and one of the Lockbox Banks.
"Lockbox Banks" means LaSalle National Bank, Fifth Third
Bank, Bank of Montreal, Farmers National Bank, and such other banks as Foothill
and Borrower may designate from time to time.
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"Lockboxes" has the meaning set forth in Section 2.7.
"Maritime Provinces" means the Canadian Provinces of
Newfoundland and ▇▇▇▇▇▇ ▇▇▇▇▇▇ Island.
"Material Adverse Change" means (a) a material adverse
change in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of any Borrower, (b) the
material impairment of any Borrower's ability to perform its obligations under
the Loan Documents to which it is a party or of the Lender Group to enforce the
Obligations or realize upon the Collateral, (c) a material adverse effect on
the value of the Collateral or the amount that the Lender Group would be likely
to receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral, or (d) a material
impairment of the priority of the Lender Group's Liens with respect to the
Collateral.
"Maturity Date" has the meaning set forth in Section 3.4.
"Maximum Amount" means, as of any date of determination,
the sum of (a) the Maximum Revolving Amount and (b) the then outstanding
principal balance of the Fixed Period Loans.
"Maximum Revolving Amount" means $75,000,000.
"Metromedia Subordination Agreement" means that certain
Metromedia Guaranty, Subordination, Subrogation and Drawing Agreement of even
date by and among Metromedia Company, the Loan Parties and the Agent, in form
and substance satisfactory to Agent.
"Mortgages" means one or more mortgages, deeds of trust, or
deeds to secure debt, executed by a Borrower in favor of Agent, the form and
substance of which shall be satisfactory to Agent, that encumber the Real
Property Collateral and the related improvements thereto.
"Multiemployer Plan" means a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) to which any Loan Party, any of its
Subsidiaries, or any ERISA Affiliate has contributed, or was obligated to
contribute, within the past six years.
"Negotiable Collateral" means, with respect to each
Borrower, all of such Borrower's present and future letters of credit, notes,
drafts, instruments, investment property, security entitlements, securities
(including the shares of stock of Subsidiaries of such Borrower), documents,
personal property leases (wherein such Borrower is the lessor), chattel paper,
and such Borrower's Books relating to any of the foregoing.
"Net Orderly Liquidation Value" means the estimated net
amount, expressed in terms of money, projected to be obtainable, over a finite
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24
period, for Inventory sold under the direction of a secured party. For purposes
of this definition, the express intent of sale in this manner is liquidation
through continued operation of the entity, with the secured party responsible
for all operating expenses and the beneficiary of all sales proceeds.
"Obligations" means all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations under any
outstanding Letters of Credit, premiums (including Early Termination Premiums),
liabilities (including all amounts charged to Borrowers' Loan Account pursuant
hereto), obligations, fees, charges, costs, or Lender Group Expenses (including
any fees or expenses that, but for the provisions of the Bankruptcy Code, would
have accrued), lease payments, guaranties, covenants, and duties owing by
Borrowers to the Lender Group of any kind and description (pursuant to or
evidenced by this Agreement and the other Loan Documents, and irrespective of
whether for the payment of money), whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, and
including any debt, liability, or obligation owing from Borrowers to others
that the Lender Group may have obtained by assignment or otherwise, and further
including all interest not paid when due and all Lender Group Expenses that
Borrowers are required to pay or reimburse by the Loan Documents, by law, or
otherwise.
"Originating Lender" has the meaning set forth in Section
15.1(e).
"Overadvance" has the meaning set forth in Section 2.5.
"Parent Guaranty" means that certain Guaranty Agreement of
even date executed and delivered by RDM, in form and substance satisfactory to
Agent.
"Parent Security Agreement" means that certain Security
Agreement (RDM Sports Group, Inc.) of even date by and between RDM and Agent,
in form and substance satisfactory to Agent.
"Parent Stock Pledge Agreement" means that certain Stock
Pledge Agreement (RDM Sports Group, Inc.) of even date by and between RDM and
Agent, in form and substance satisfactory to Agent.
"Parent Trademark Security Agreement" means that certain
Trademark Security Agreement (RDM Sports Group, Inc.) of even date by and
between RDM and Agent, in form and substance satisfactory to Agent.
"Participant" has the meaning set forth in Section 15.1(e).
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25
"Pay-Off Letter" means a letter, in form and substance
reasonably satisfactory to Agent, from Existing Lender respecting the amount
necessary to repay in full all of the obligations of certain Borrowers owing to
Existing Lender and obtain a termination or release of all of the Liens
existing in favor of Existing Lender in and to the properties or assets of such
Borrowers.
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto.
"Permitted Liens" means (a) Liens held or to be held by the
Lender Group, (b) Liens for unpaid taxes that either (i) are not yet due and
payable or (ii) are the subject of Permitted Protests, (c) Liens set forth on
Schedule P-1, (d) the interests of lessors under operating leases and purchase
money security interests and Liens of lessors under capital leases to the
extent that the acquisition or lease of the underlying asset is permitted under
Section 7.21 and so long as the Lien only attaches to the asset purchased or
acquired and only secures the purchase price of the asset, (e) Liens arising by
operation of law in favor of warehousemen, landlords, carriers, mechanics,
materialmen, laborers, or suppliers, incurred in the ordinary course of
business of Borrowers or the Canadian Subsidiary, as the case may be and not in
connection with the borrowing of money, and which Liens either (i) are for sums
not yet due and payable, or (ii) are the subject of Permitted Protests, (f)
Liens arising from deposits made in connection with obtaining worker's
compensation or other unemployment insurance, (g) Liens or deposits to secure
performance of bids, tenders, or leases (to the extent permitted under this
Agreement), incurred in the ordinary course of business of Borrowers or the
Canadian Subsidiary, as the case may be and not in connection with the
borrowing of money, (h) Liens arising by reason of security for surety or
appeal bonds in the ordinary course of business of Borrowers or the Canadian
Subsidiary, as the case may be, (i) Liens of or resulting from any judgment or
award that would not cause a Material Adverse Change and as to which the time
for the appeal or petition for rehearing of which has not yet expired, or in
respect of which Borrowers or the Canadian Subsidiary, as the case may be are
in good faith prosecuting an appeal or proceeding for a review, and in respect
of which a stay of execution pending such appeal or proceeding for review has
been secured, (j) Liens with respect to the Real Property Collateral that are
exceptions to the commitments for title insurance issued in connection with the
Mortgages, as accepted by Agent, and (k) with respect to any Real Property that
is not part of the Real Property Collateral, easements, rights of way, zoning
and similar covenants and restrictions, and similar encumbrances that
customarily exist on properties of Persons engaged in similar activities and
similarly situated and that in any event do not materially interfere with or
impair the use or operation of the Collateral by Borrowers or the Canadian
Subsidiary, as the case may be or the value of the Lender Group's Lien thereon
or therein, or materially interfere with the ordinary conduct of the business
of Borrowers or the Canadian Subsidiary, as the case may be.
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"Permitted Protest" means the right of Borrowers to protest
any Lien (other than any such Lien that secures the Obligations), tax (other
than payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with respect to such
obligation is established on the books of Borrowers in an amount that is
reasonably satisfactory to Agent, (b) any such protest is instituted and
diligently prosecuted by Borrowers in good faith, and (c) Agent is satisfied
that, while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Liens of the Lender Group
in and to the Collateral.
"Person" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general partnerships,
limited liability partnerships, joint ventures, trusts, land trusts, business
trusts, or other organizations, irrespective of whether they are legal
entities, and governments and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other
than the Real Property Collateral.
"Plan" means any employee benefit plan, program, or
arrangement maintained or contributed to by any Borrower or with respect to
which it may incur liability.
"Pricing Benchmarks" means (a) the sum of the outstanding
balance of the Obligations hereunder as of the last day of each fiscal year of
the Loan Parties, divided by (b) EBITDA for the twelve month period then ended,
which amount must be equal to or less than the following amounts for the twelve
month period then ended:
Measurement Date: Maximum Amount:
----------------- ---------------
December 31, 1997 5.865
December 31, 1998 3.089
December 31, 1999
and thereafter 2.479
"Pro-Rata Share" means, with respect to a Lender, a
fraction (expressed as a percentage), the numerator of which is the amount of
such Lender's Commitment and the denominator of which is the aggregate amount
of the Commitments.
"RDM" means RDM Sports Group, Inc., a Delaware corporation.
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27
"Real Property" means, with respect to each Borrower, any
estates or interests in real property now owned or hereafter acquired by such
Borrower.
"Real Property Collateral" means the parcel or parcels of
real property and the related improvements thereto identified on Schedule R-1,
and any Real Property hereafter acquired by any Borrower, and any assignments
of rents and leases relating to any Real Property.
"Reference Rate" means the variable rate of interest, per
annum, most recently announced by Norwest Bank Minnesota, National Association,
or any successor thereto, as its "base rate," irrespective of whether such
announced rate is the best rate available from such financial institution.
"Reportable Event" means any of the events described in
Section 4043(c) of ERISA or the regulations thereunder other than a Reportable
Event as to which the provision of 30 days notice to the PBGC is waived under
applicable regulations.
"Required Lenders" means, at any time, Agent together with
such other Lenders whose Pro Rata Shares together with Agent's Pro Rata Share
aggregate 50.1% or more of the Commitments.
"Retiree Health Plan" means an "employee welfare benefit
plan" within the meaning of Section 3(1) of ERISA that provides benefits to
individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"Revolving Facility Usage" means, as of any date of
determination, the aggregate amount of Advances and undrawn or unreimbursed
Letters of Credit outstanding.
"Security Agreement" means that certain Security Agreement
of even date by and among the direct and indirect Subsidiaries of RDM that are
not Borrowers (other than the Canadian Subsidiary) and Agent, in form and
substance satisfactory to Agent.
"Settlement" has the meaning set forth in Section
2.1(i)(i).
"Settlement Date" has the meaning set forth in Section
2.1(i)(i).
"Solvent" means, with respect to any Person on a particular
date, that on such date (a) at fair valuations, all of the properties and
assets of such Person are greater than the sum of the debts, including
contingent liabilities, of such Person, (b) the present fair salable value of
the properties and assets of such Person is not less than the amount
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that will be required to pay the probable liability of such Person on its debts
as they become absolute and matured, (c) such Person is able to realize upon
its properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it
will, incur debts beyond such Person's ability to pay as such debts mature, and
(e) such Person is not engaged in business or a transaction, and is not about
to engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. In computing the amount of contingent liabilities at any time, it
is intended that such liabilities will be computed at the amount that, in light
of all the facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual or matured liability.
"Stock Pledge Agreement" means that certain Subsidiary
Stock Pledge Agreement of even date by and among NWR, Inc., Roadmaster North
American Corporation and Agent, in form and substance satisfactory to Agent,
and such other Subsidiary Stock Pledge Agreements in form and substance
satisfactory to the Agent as are required to be executed by any new
Subsidiaries of RDM.
"Subordinated Debentures" means (i) those certain 11 3/4%
Senior Subordinated Notes due 2002 in the original principal amount of
$100,000,000 issued pursuant to that certain Indenture dated as of December 15,
1993 as modified by that certain First Supplemental Indenture dated as of
November 15, 1994, between Roadmaster Industries, Inc. n/k/a RDM Sports Group,
Inc. and LaSalle National Bank, as Trustee and (ii) those certain 8%
Convertible Subordinated Debentures due 2003 in the original principal amount
of $51,745,000 issued pursuant to that certain Indenture dated as of July 15,
1995 between Roadmaster Industries, Inc. n/k/a RDM Sports Group, Inc. and
LaSalle National Bank, as Trustee.
"Subordination Agreement" means that certain Subordination
Agreement of even date between the Borrowers, RDM, the other direct and
indirect Subsidiaries of RDM (other than the Canadian Subsidiary) and the
Agent, in form and substance satisfactory to the Agent.
"Subsidiary" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors (or
appoint other comparable managers) of such corporation, partnership, limited
liability company, or other entity.
"Subsidiary Guaranty" means that certain Subsidiary
Guaranty Agreement of even date executed and delivered by the direct and
indirect Subsidiaries of RDM that are not Borrowers (other than the Canadian
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Subsidiary) to Agent, in form and substance satisfactory to Agent, and
such other Subsidiary Guaranty Agreements in form and substance satisfactory to
the Agent as are required to be executed by any new Subsidiaries of RDM.
"Super-Majority Lenders" means, at any time, Agent together
with such other Lenders whose Pro-Rata Shares together with Agent's Pro Rata
Share aggregate 66.67% or more of the Commitments.
"Tangible Net Worth" means, as of any date of
determination, the difference of (a) Loan Parties' total stockholder's equity,
minus (b) the sum of: (i) all Intangible Assets of Loan Parties, (ii) all of
Loan Parties' prepaid expenses, (iii) all amounts due to Loan Parties from
non-Loan Party Affiliates, (iv) amounts listed as deferred tax-current assets
on the Loan Parties' consolidated financial statements and (v) amounts listed
as deferred tax-long term assets on the Loan Parties' consolidated financial
statements, plus (c) the sum of (i) amounts listed as deferred tax-long term
liabilities on the Loan Parties' consolidated financial statements, and (ii)
the amount outstanding under the Subordinated Debentures.
"Trademark Security Agreement" means that certain
Subsidiary Trademark Security Agreement of even date by and among the direct
and indirect Subsidiaries of RDM that are not Borrowers and Agent, in form and
substance satisfactory to Agent, and such other Subsidiary Trademark Security
Agreements as are required to be executed by any new Subsidiaries of RDM.
"Tranche A Fixed Period Loan" has the meaning set forth in
Section 2.3.
"Tranche B Fixed Period Loan" has the meaning set forth in
Section 2.3
"Voidable Transfer" has the meaning set forth in Section
15.8.
1.2 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP; provided, however,
to the extent a change in GAAP materially affects the financial covenants set
forth in Section 7.20 hereof, upon the mutual agreement by the Borrowers, the
Agent and the Required Lenders, in their reasonable discretion, such covenants
will be reset to give effect to such change in GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrowers" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Loan Parties on a consolidated basis
unless the context clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined
in the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
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1.4 CONSTRUCTION. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the term "including" is not
limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement refer to
this Agreement as a whole and not to any particular provision of this
Agreement. An Event of Default shall "continue" or be "continuing" until such
Event of Default has been waived in writing by the requisite members of the
Lender Group. Section, subsection, clause, schedule, and exhibit references are
to this Agreement unless otherwise specified. Any reference in this Agreement
or in the Loan Documents to this Agreement or any of the Loan Documents shall
include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, and supplements, thereto and thereof, as
applicable.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and
exhibits attached to this Agreement shall be deemed incorporated herein by
reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVING ADVANCES.
(a) Subject to the terms and conditions of this Agreement,
each Lender agrees to make advances in United States dollars ("Advances") to
Borrowers in an amount at any one time outstanding not to exceed such Lender's
Pro Rata Share of an amount equal to the lesser of (i) the Maximum Revolving
Amount less the outstanding balance of all undrawn or unreimbursed Letters of
Credit, and (ii) the Borrowing Base less (A) the aggregate amount of all
undrawn or unreimbursed Letters of Credit (other than Inventory Letters of
Credit), less (B) one hundred percent (100%) minus the applicable Inventory
advance rate shown as a percentage, multiplied by the aggregate amount of all
undrawn or unreimbursed Inventory Letters of Credit, less (C) the aggregate
amount of the Inventory Reserves. For purposes of this Agreement, "Borrowing
Base", as of any date of determination, shall mean the result of:
(x) the lesser of (i) eighty-five percent (85%) of
Eligible Accounts, less the amount, if any, of the Dilution
Reserve, and (ii) an amount equal to Borrowers' and the
Canadian Subsidiary's Collections with respect to Accounts
of the Borrowers and the Canadian Subsidiary for the
immediately preceding ninety (90) day period, plus
(y) the lowest of
(i) eighty percent (80%) of the Net Orderly
Liquidation Value of all Eligible Inventory, as determined
by Foothill from time to time,
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(ii) the aggregate of (A) sixty percent (60%) of the
Cost of Eligible Inventory consisting of finished goods and
(B) the lowest of (y) $12,000,000 from the Closing Date
through September 30, 1997, $8,000,000 from October 1, 1997
through December 31, 1997 and $5,000,000 thereafter and (z)
thirty-five percent (35%) of the Cost of Eligible Inventory
consisting of raw materials, such percentage to be reduced
to the following percentages as of the dates set forth in
the table below:
Date of Applicable
Reduction Percentage
--------- ----------
October 1, 1997 thirty percent (30%)
November 1, 1997 twenty-five percent (25%)
December 1, 1997 twenty percent (20%)
January 1, 1998 fifteen percent (15%)
February 1, 1998 and thereafter ten percent (10%); and
(iii) one hundred (100%) of the amount of credit
availability created by clause (x) above, minus
(z) the aggregate amount of reserves, if any, established
by Agent under Sections 2.1(b), 6.15 and 10 and, from and
after October 1, 1997, an availability reserve in the
amount of $2,500,000.
(b) Anything to the contrary in Section 2.1(a) above
notwithstanding, Agent may create reasonable reserves against or reduce its
advance rates based upon Eligible Accounts or Eligible Inventory without
declaring an Event of Default if it determines that there has occurred a
Material Adverse Change.
(c) Amounts borrowed pursuant to this Section 2.1 may be repaid
and, subject to the terms and conditions of this Agreement, reborrowed at any
time during the term of this Agreement.
(d) Procedure for Borrowing. Each Borrowing shall be made upon a
Borrower's irrevocable request therefor delivered to Agent (which notice must
be received by Agent no later than 12:00 Noon (Rosemont, Illinois time) on the
Funding Date if such advance is for $5,000,000 or less or no later than 12:00
Noon (Rosemont, Illinois time) on the Business Day immediately preceding the
requested Funding Date if such advance is for more
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than $5,000,000) specifying (i) the amount of the Borrowing; and (ii) the
requested Funding Date, which shall be a Business Day.
(e) Agent's Election. Promptly after receipt of a request for a
Borrowing pursuant to Section 2.1(d) in excess of $5,000,000, the Agent shall
elect, in its discretion, (i) to have the terms of Section 2.1(f) apply to such
requested Borrowing, or (ii) to make an Agent Loan pursuant to the terms of
Section 2.1(g) in the amount of the requested Borrowing. Any requested
Borrowing of $5,000,000 or less shall be made as an Agent Loan pursuant to the
terms of Section 2.1(g).
(f) Making of Advances.
(i) In the event that the Agent shall elect to have the
terms of this Section 2.1(f) apply to a requested Borrowing in excess of
$5,000,000 as described in Section 2.1(e), then promptly after receipt of a
request for a Borrowing pursuant to Section 2.1(d), the Agent shall notify the
Lenders, not later than 3:00 p.m. (Rosemont, Illinois time) on the Business Day
immediately preceding the Funding Date applicable thereto, by telephone and
promptly followed by telecopy, or other similar form of transmission, of the
requested Borrowing. Each Lender shall make the amount of such Lender's Pro
Rata Share of the requested Borrowing available to the Agent in same day funds,
to such account of the Agent as the Agent may designate, not later than 2:00
p.m. (Rosemont, Illinois time) on the Funding Date applicable thereto. After
the Agent's receipt of the proceeds of such Advances, upon satisfaction of the
applicable conditions precedent set forth in Sections 3.1 and 3.2, the Agent
shall make the proceeds of such Advances available to Borrowers on the
applicable Funding Date by transferring same day funds equal to the proceeds of
such Advances received by the Agent to the Designated Deposit Account;
provided, however, that, subject to the provisions of Section 2.1(l), the Agent
shall not request any Lender to make, and no Lender shall have the obligation
to make, any Advance if the Agent shall have received written notice from any
Lender, or otherwise has actual knowledge, that (A) one or more of the
applicable conditions precedent set forth in Sections 3.1 or 3.2 will not be
satisfied on the requested Funding Date for the applicable Borrowing, or (B)
the requested Borrowing would exceed the Availability on such Funding Date.
(ii) Unless Agent receives notice from a Lender on or
prior to the Closing Date or, with respect to any Borrowing after the Closing
Date, at least one Business Day prior to the date of such Borrowing, that such
Lender will not make available as and when required hereunder to Agent for the
account of Borrowers the amount of that Lender's Pro Rata Share of the
Borrowing, Agent may assume that each Lender has made or will make such amount
available to Agent in immediately available funds on the Funding Date and Agent
may (but shall not be so required), in reliance upon such assumption, make
available to Borrowers on such date a corresponding amount. If and to the
extent any Lender shall not have made its full amount available to Agent in
immediately available funds and Agent in such circumstances has made
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available to Borrowers such amount, that Lender shall on the Business Day
following such Funding Date make such amount available to Agent, together with
interest at the Defaulting Lenders Rate for each day during such period. A
notice from Agent submitted to any Lender with respect to amounts owing under
this subsection shall be conclusive, absent manifest error. If such amount is
paid to Agent such payment to Agent shall constitute such Lender's Advance on
the date of Borrowing for all purposes of this Agreement. If such amount is not
paid to Agent on the Business Day following the Funding Date, Agent will notify
Borrowers of such failure to fund and, upon demand by Agent, Borrowers shall
pay such amount to Agent for Agent's account, together with interest thereon
for each day elapsed since the date of such Borrowing, at a rate per annum
equal to the interest rate applicable at the time to the Advances composing
such Borrowing; provided, however, that any such payment by Borrowers shall be
made without prejudice to any rights Borrowers may have against such Lender.
The failure of any Lender to make any Advance on any Funding Date shall not
relieve any other Lender of any obligation hereunder to make an Advance on such
Funding Date, but no Lender shall be responsible for the failure of any other
Lender to make the Advance to be made by such other Lender on any Funding Date.
Any Lender that fails to make any Advance that it is required to make hereunder
on any Funding Date and that has not cured such failure by making such Advance
within one Business Day after written demand upon it by Agent to do so, shall
constitute a "Defaulting Lender" for purposes of this Agreement until such
Advance is made.
(iii) Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by Borrowers to Agent for the Defaulting
Lender's benefit; nor shall a Defaulting Lender be entitled to the sharing of
any payments hereunder. Amounts payable to a Defaulting Lender shall instead be
paid to or retained by Agent. Agent may hold and, in its discretion, re-lend to
Borrowers the amount of all such payments received or retained by it for the
account of such Defaulting Lender. Solely for the purposes of voting or
consenting to matters with respect to the Loan Documents and determining Pro
Rata Shares, such Defaulting Lender shall be deemed not to be a "Lender" and
such Defaulting Lender's Commitment shall be deemed to be zero. This section
shall remain effective with respect to such Defaulting Lender until (A) the
Obligations under this Agreement shall have been declared or shall have become
immediately due and payable or (B) the requisite non-Defaulting Lenders, Agent,
and Borrowers shall have waived such Defaulting Lender's default in writing.
The operation of this section shall not be construed to increase or otherwise
affect the Commitment of any non-Defaulting Lender, or relieve or excuse the
performance by Borrowers of their duties and obligations hereunder.
(g) Making of Agent Loans.
(i) In the event the Agent shall elect to have the terms of
this Section 2.1(g) apply to a requested Borrowing in excess of $5,000,000 as
described in Section 2.1(e) or in the event of any requested Borrowing of
$5,000,000 or less, Agent shall make an Advance in the amount of
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such Borrowing (any such Advance made solely by Agent pursuant to this Section
2.1(g) being referred to as an "Agent Loan" and such Advances being referred to
collectively as "Agent Loans") available to Borrowers on the Funding Date
applicable thereto by transferring same day funds to Borrowers' Designated
Deposit Account. Each Agent Loan is an Advance hereunder and shall be subject
to all the terms and conditions applicable to other Advances, except that all
payments thereon shall be payable to Agent solely for its own account (and for
the account of the holder of any participation interest with respect to such
Advance). Subject to the provisions of Section 2.1(l), the Agent shall not make
any Agent Loan if the Agent shall have received written notice from any Lender,
or otherwise has actual knowledge, that (i) one or more of the applicable
conditions precedent set forth in Sections 3.1 or 3.2 will not be satisfied on
the requested Funding Date for the applicable Borrowing, or (ii) the requested
Borrowing would exceed the Availability on such Funding Date. Agent shall not
otherwise be required to determine whether the applicable conditions precedent
set forth in Sections 3.1 or 3.2 have been satisfied on the Funding Date
applicable thereto prior to making, in its sole discretion, any Agent Loan.
(ii) The Agent Loans shall be secured by the Collateral and
shall constitute Advances and Obligations hereunder, and shall bear interest at
the rate applicable from time to time to Obligations pursuant to Section 2.6.
(h) Agent Advances.
(i) Agent hereby is authorized by Borrowers and the Lenders,
from time to time in Agent's sole discretion, (1) after the occurrence of a
Default or an Event of Default (but without constituting a waiver of such
Default or Event of Default), or (2) at any time that any of the other
applicable conditions precedent set forth in Section 3.1 or 3.2 have not been
satisfied, to make Advances to Borrowers on behalf of the Lenders which Agent,
in its reasonable business judgment, deems necessary or desirable (A) to
preserve or protect the Collateral, or any portion thereof, (B) to enhance the
likelihood of, or maximize the amount of, repayment of the Obligations, or (C)
to pay any other amount chargeable to Borrowers pursuant to the terms of this
Agreement, including Lender Group Expenses and the costs, fees, and expenses
described in Section 10 (any of the Advances described in this Section 2.1(h)
being hereinafter referred to as "Agent Advances"); provided, that Agent shall
not make any Agent Advances to Borrowers without the consent of the Required
Lenders if the amount thereof would exceed $5,000,000 in the aggregate at any
one time.
(ii) Agent Advances shall be repayable on demand and
secured by the Collateral, shall constitute Advances and Obligations hereunder,
and shall bear interest at the rate applicable from time to time to the
Obligations pursuant to Section 2.6.
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(i) Settlement. It is agreed that each Lender's funded
portion of the Advances is intended by the Lenders to be equal at all times to
such Lender's Pro Rata Share of the outstanding Advances. Such agreement
notwithstanding, the Agent and the Lenders agree (which agreement shall not be
for the benefit of or enforceable by Borrowers) that in order to facilitate the
administration of this Agreement and the other Loan Documents, settlement among
them as to the Advances, the Agent Loans, and the Agent Advances shall take
place on a periodic basis in accordance with the following provisions:
(i) The Agent shall request settlement
("Settlement") with the Lenders on a weekly basis, or on a more frequent basis
if so determined by the Agent, (1) for itself, with respect to each Agent Loan
and Agent Advance, and (2) with respect to Collections received, as to each by
notifying the Lenders by telephone and promptly followed by telecopy, or other
similar form of transmission, of such requested Settlement, no later than 3:00
p.m. (Rosemont, Illinois time) on the Business Date immediately preceding the
date of such requested Settlement (the "Settlement Date"). Such notice of a
Settlement Date shall include a summary statement of the amount of outstanding
Advances, Fixed Period Loans, Agent Loans, and Agent Advances for the period
since the prior Settlement Date, the amount of repayments received in such
period, and the amounts allocated to each Lender of the principal, interest,
fees, and other charges for such period. Subject to the terms and conditions
contained herein (including Section 2.1(i)(ii)): (y) if a Lender's balance of
the Advances, Fixed Period Loans, Agent Loans, and Agent Advances exceeds such
Lender's Pro Rata Share of the Advances, Fixed Period Loans, Agent Loans, and
Agent Advances as of a Settlement Date, then Agent shall by no later than 3:00
p.m (Rosemont, Illinois time) on the Settlement Date transfer in same day funds
to the account of such Lender as Lender may designate, an amount such that
each such Lender shall, upon receipt of such amount, have as of the Settlement
Date, its Pro Rata Share of the Advances, Fixed Period Loans, Agent Loans, and
Agent Advances; and (z) if a Lender's balance of the Advances, Fixed Period
Loans, Agent Loans, and Agent Advances is less than such Lender's Pro Rata
Share of the Advances, Fixed Period Loans, Agent Loans, and Agent Advances as
of a Settlement Date, such Lender shall no later than 3:00 p.m. (Rosemont,
Illinois time) on the Settlement Date transfer in same day funds to such
account of the Agent as the Agent may designate, an amount such that each such
Lender shall, upon transfer of such amount, have as of the Settlement Date,
its Pro Rata Share of the Advances, Fixed Period Loans, Agent Loans, and Agent
Advances. Such amounts made available to the Agent under clause (z) of the
immediately preceding sentence shall be applied against the amounts of the
applicable Agent Loan or Agent Advance and, together with the portion of such
Agent Loan or Agent Advance representing Foothill's Pro Rata Share thereof,
shall constitute Advances of such Lenders. If any such amount is not made
available to the Agentby any Lender on the Settlement Date applicable thereto
to the extent required by the terms hereof, the Agent shall be entitled to
recover for its account such amount on demand from such Lender together with
interest thereon at the Defaulting Lenders Rate.
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(ii) In determining whether a Lender's balance of the
Advances, Fixed Period Loans, Agent Loans, and Agent Advances is less than,
equal to, or greater than such Lender's Pro Rata Share of the Advances, Fixed
Period Loans, Agent Loans, and Agent Advances as of a Settlement Date, Agent
shall, as part of the relevant Settlement, apply to such balance the portion of
payments actually received by Agent with respect to principal, interest, fees
payable by Borrowers and allocable to the Lenders hereunder, and proceeds of
Collateral. To the extent that a net amount is owed to any such Lender after
such application, such net amount shall be distributed by Agent to that Lender
as part of such Settlement; provided, however, that the closing fee payable by
Borrowers under Section 2.11(a) shall be distributed to the Lenders within
three Business Days following the Closing Date without regard to the netting of
amounts owing to or owed by any Lender as part of a Settlement.
(iii) Between Settlement Dates, the Agent, to the extent
no Agent Advances or Agent Loans are outstanding, may pay over to Foothill any
payments received by the Agent, which in accordance with the terms of the
Agreement would be applied to the reduction of the Advances, for application to
Foothill's Pro Rata Share of the Advances. If, as of any Settlement Date,
Collections received since the then immediately preceding Settlement Date have
been applied to Foothill's Pro Rata Share of the Advances other than to Agent
Loans or Agent Advances, as provided for in the previous sentence, Foothill
shall pay to the Agent for the accounts of the Lenders, and Agent shall pay
to the Lenders, to be applied to the outstanding Advances of such Lenders, an
amount such that each Lender shall, upon receipt of such amount, have, as of
such Settlement Date, its Pro Rata Share of the Advances. During the period
between Settlement Dates, the Agent with respect to Agent Loans and Agent
Advances, and each Lender with respect to the Fixed Period Loans and the
Advances other than Agent Loans and Agent Advances, shall be entitled to
interest at the applicable rate or rates payable under this Agreement on the
daily amount of funds employed by the Agent or the Lenders, as applicable.
(j) Notation. The Agent shall record on its books the principal
amount of the Fixed Period Loans and the Advances owing to each Lender,
including the Agent Loans and Agent Advances owing to the Agent, and the
interests therein of each Lender, from time to time. In addition, each Lender
is authorized, at such Lender's option, to note the date and amount of each
payment or prepayment of principal of such Lender's Fixed Period Loans and
Advances in its books and records, including computer records, such books and
records constituting rebuttably presumptive evidence, absent manifest error, of
the accuracy of the information contained therein.
(k) Lenders' Failure to Perform. All Advances (other than Agent
Loans and Agent Advances) shall be made by the Lenders simultaneously and in
accordance with their Pro Rata Shares. It is understood that (i) no Lender
shall be responsible for any failure by any other Lender to perform its
obligation to make any Advances hereunder, nor shall any Commitment of any
Lender be increased or decreased as a result of any failure
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by any other Lender to perform its obligation to make any Advances hereunder,
and (ii) no failure by any Lender to perform its obligation to make any
Advances hereunder shall excuse any other Lender from its obligation to make
any Advances hereunder.
(l) Overadvances. Agent may make voluntary Overadvances without
the written consent of the Required Lenders for amounts charged to the
applicable Loan Account for interest, fees or Lender Group Expenses pursuant to
Section 2.1(h)(i)(2)(C). If the conditions for borrowing under Section 3.2(d)
cannot be fulfilled, the Agent may, but is not obligated to, knowingly and
intentionally continue to make Advances (including Agent Loans) to Borrowers
such failure of condition notwithstanding, so long as, at any time, (i) either
(A) the outstanding Revolving Facility Usage would not exceed the Borrowing
Base by more than $2,000,000 or (B) (y) the outstanding Revolving Facility
Usage would not exceed the Borrowing Base by more than the amount proposed by
Agent and agreed to by the Required Lenders, and (z) such Advances are made
pursuant to a plan (proposed by Agent and agreed to by the Required Lenders)
for the elimination of the outstanding Revolving Facility Usage in excess of
the Borrowing Base, and (ii) the outstanding Revolving Facility Usage (except
for and excluding amounts charged to the applicable Loan Account for interest,
fees, or Lender Group Expenses) does not exceed the Maximum Revolving Amount.
The foregoing provisions are for the sole and exclusive benefit of the Agent
and the Lenders and are not intended to benefit Borrower in any way. The
Advances and Agent Loans, as applicable, that are made pursuant to this Section
2.1(l) shall be subject to the same terms and conditions as any other Agent
Advance or Agent Loan, as applicable, except that the rate of interest
applicable thereto shall be the rates set forth in Section 2.6(c)(i) without
regard to the presence or absence of a Default or Event of Default; provided,
that the Required Lenders may, at any time, revoke Agent's authorization
contained in this Section 2.1(l) to make Overadvances (except for and excluding
amounts charged to the applicable Loan Account for interest, fees, or Lender
Group Expenses), any such revocation to be in writing and to become effective
upon Agent's receipt thereof; provided further, however, that the making of
such Overadvances shall not constitute a waiver of such Event of Default
arising therefrom.
In the event Agent obtains actual knowledge that Revolving
Facility Usage exceeds the amount permitted by the preceding paragraph,
regardless of the amount of or reason for such excess, Agent shall notify
Lenders as soon as practicable (and prior to making any (or any further)
intentional Overadvances (except for and excluding amounts charged to the
applicable Loan Account for interest, fees, or Lender Group Expenses) unless
Agent determines that prior notice would result in imminent harm to the
Collateral or its value), and Lenders thereupon shall, together with Agent,
jointly determine the terms of arrangements that shall be implemented with
Borrowers intended to reduce, within a reasonable time, the outstanding
principal amount of the Advances to Borrowers to an amount permitted by the
preceding paragraph. In the event any Lender disagrees over the terms of
reduction and/or repayment of any Overadvance, the terms of reduction and/or
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repayment thereof shall be implemented according to the determination of the
Required Lenders.
Each Lender shall be obligated to settle with Agent as provided
in Section 2.1(i) for the amount of such Lender's Pro Rata Share of any
unintentional Overadvances by Agent reported to such Lender, any intentional
Overadvances made as permitted under this Section 2.1(l), and any Overadvances
resulting from the charging to the applicable Loan Account of interest, fees,
or Lender Group Expenses.
(m) Effect of Bankruptcy. If a case is commenced by or against
any Borrower under the Bankruptcy Code, or other statute providing for debtor
relief, then, without the approval of Super-Majority Lenders, the Lender Group
shall not make additional loans or provide additional financial accommodations
under the Loan Documents to such Borrower as debtor or debtor-in-possession, or
to any trustee for such Borrower, nor consent to the use of cash collateral
(provided that the applicable Loan Account shall continue to be charged, to the
fullest extent permitted by law, for accruing interest, fees, and Lender Group
Expenses).
2.2 LETTERS OF CREDIT.
(a) Agreement to Cause Issuance; Amounts; Outside Expiration
Date. Subject to the terms and conditions of this Agreement, Agent agrees to
issue letters of credit for the account of Borrowers (each, an "L/C") or to
issue guarantees of payment (each such guaranty, an "L/C Guaranty") with
respect to letters of credit issued by an issuing bank for the account of
Borrowers. Agent shall have no obligation to issue a Letter of Credit if any of
the following would result:
(i) the sum of (y) one hundred percent (100%) minus the
applicable Inventory advance rate shown as a percentage, multiplied by the
aggregate amount of all undrawn and unreimbursed Inventory Letters of Credit
plus (z) one hundred percent (100%) of the aggregate amount of all other types
of undrawn and unreimbursed Letters of Credit, would exceed (x) the Borrowing
Base less (y) the amount of outstanding Advances (including any Agent Advances
and Agent Loans) less (z) the aggregate amount of Inventory Reserves and
reserves established under Section 2.1(b); or
(ii) the aggregate amount of all undrawn or unreimbursed
Letters of Credit (including Inventory Letters of Credit) would exceed the
lower of: (x) the Maximum Revolving Amount less the amount of outstanding
Advances (including any Agent Advances and Agent Loans) less the aggregate
amount of Inventory Reserves and reserves established under Section 2.1(b); or
(y) $15,000,000; or
(iii)the outstanding Obligations (other than under the Fixed
Period Loans) would exceed the Maximum Revolving Amount.
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Borrowers expressly understand and agree that Agent shall have no
obligation to arrange for the issuance by issuing banks of the letters of
credit that are to be the subject of L/C Guarantees. Borrowers and the Lender
Group acknowledge and agree that certain of the letters of credit that are to
be the subject of L/C Guarantees may be outstanding on the Closing Date. Each
Letter of Credit shall have an expiry date no later than sixty (60) days prior
to the date on which this Agreement is scheduled to terminate under Section 3.4
(without regard to any potential renewal term) and all such Letters of Credit
shall be in form and substance acceptable to Agent in its sole discretion. If
the Lender Group is obligated to advance funds under a Letter of Credit,
Borrowers immediately shall reimburse such amount to Agent and, in the absence
of such reimbursement, the amount so advanced immediately and automatically
shall be deemed to be an Advance hereunder and, thereafter, shall bear interest
at the rate then applicable to Advances under Section 2.6.
(b) Indemnification. Borrowers, jointly and severally, hereby
agree to indemnify, save, defend, and hold the Lender Group harmless from any
loss, cost, expense, or liability, including payments made by the Lender Group,
expenses, and reasonable attorneys fees incurred by the Lender Group arising
out of or in connection with any Letter of Credit. Borrowers agree to be bound
by the issuing bank's regulations and interpretations of any letters of credit
guarantied by the Lender Group and opened to or for Borrowers' account or by
Agent's interpretations of any Letter of Credit issued by Agent to or for
Borrowers' account, even though this interpretation may be different from
Borrowers' own, and Borrowers understand and agree that the Lender Group shall
not be liable for any error, negligence, or mistake, whether of omission or
commission, in following Borrowers' instructions or those contained in the
Letter of Credit or any modifications, amendments, or supplements thereto.
Borrowers understand that the L/C Guarantees may require the Lender Group to
indemnify the issuing bank for certain costs or liabilities arising out of
claims by Borrowers against such issuing bank. Borrowers, jointly and
severally, hereby agree to indemnify, save, defend, and hold the Lender Group
harmless with respect to any loss, cost, expense (including reasonable
attorneys fees), or liability incurred by the Lender Group under any L/C
Guaranty as a result of the Lender Group's indemnification of any such issuing
bank.
(c) Supporting Materials. Borrowers hereby authorize and direct
any bank that issues a letter of credit guaranteed by an L/C Guaranty to deliver
to Agent all instruments, documents, and other writings and property received
by the issuing bank pursuant to such letter of credit, and to accept and rely
upon Agent's instructions and agreements with respect to all matters arising in
connection with such letter of credit and the related application. Borrowers
may or may not be the "applicant" or "account party" with respect to such
letter of credit.
(d) Costs of Letters of Credit. Any and all charges,
commissions, fees, and costs incurred by Agent relating to the letters of
credit guaranteed by an L/C Guaranty shall be considered Lender Group Expenses
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for purposes of this Agreement and immediately shall be reimbursable by
Borrowers to Agent.
(e) Indemnification. Immediately upon the termination of this
Agreement, Borrowers agree to either (i) provide cash collateral to be held by
Agent in an amount equal to one hundred two percent (102%) of the maximum
amount of the Lender Group's obligations under Letters of Credit, or (ii) cause
to be delivered to Agent releases of all of the Lender Group's obligations
under outstanding Letters of Credit. At Agent's discretion, any proceeds of
Collateral received by Agent after the occurrence and during the continuation
of an Event of Default may be held as the cash collateral required by this
Section 2.2(e).
(f) Increased Costs. If by reason of (i) any change in any
applicable law, treaty, rule, or regulation or any change in the interpretation
or application by any governmental authority of any such applicable law,
treaty, rule, or regulation, or (ii) compliance by the issuing bank or the
Lender Group with any direction, request, or requirement (irrespective of
whether having the force of law) of any governmental authority or monetary
authority including, without limitation, Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect (and any successor
thereto):
(i) any reserve, deposit, or similar requirement is or shall
be imposed or modified in respect of any Letters of Credit issued hereunder, or
(ii) there shall be imposed on the issuing bank or the
Lender Group any other condition regarding any letter of credit, or Letter of
Credit, as applicable, issued pursuant hereto;
and the result of the foregoing is to increase, directly or
indirectly, the cost to the issuing bank or the Lender Group of issuing,
making, guaranteeing, or maintaining any letter of credit, or Letter of Credit,
as applicable, or to reduce the amount receivable in respect thereof by such
issuing bank or the Lender Group, then, and in any such case, Agent may, at any
time within a reasonable period after the additional cost is incurred or the
amount received is reduced, notify Borrowers, and Borrowers shall pay on demand
such amounts as the issuing bank or Lender Group may specify to be necessary to
compensate the issuing bank or Lender Group for such additional cost or reduced
receipt, together with interest on such amount from the date of such demand
until payment in full thereof at the rate set forth in Section 2.6(a) or
(c)(i), as applicable. The determination by the issuing bank or Lender Group, as
the case may be, of any amount due pursuant to this Section 2.2(f), as set
forth in a certificate setting forth the calculation thereof in reasonable
detail, shall, in the absence of manifest or demonstrable error, be final and
conclusive and binding on all of the parties hereto.
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(g) Participations.
(i) Purchase of Participations. Immediately
upon issuance of any Letter of Credit in accordance with this Section
2.2, each Lender shall be deemed to have irrevocably and unconditionally
purchased and received without recourse or warranty, an undivided interest and
participation in the credit support or enhancement provided through the Agent
to such issuer in connection with the issuance of such Letter of Credit, equal
to such Lender's Pro Rata Share of the face amount of such Letter of Credit
(including, without limitation, all obligations of Borrowers with respect
thereto, and any security therefor or guaranty pertaining thereto).
(ii) Documentation. Upon the request of any
Lender, the Agent shall furnish to such Lender copies of any Letter of Credit,
reimbursement agreements executed in connection therewith, application for any
Letter of Credit and credit support or enhancement provided through the Agent
in connection with the issuance of any Letter of Credit, and such other
documentation as may reasonably by requested by such Lender.
(iii) Obligations Irrevocable. The obligations
of each Lender to make payments to the Agent with respect to any Letter of
Credit or with respect to any credit support or enhancement provided through
the Agent with respect to a Letter of Credit, and the obligations of Borrowers
to make payments to the Agent, for the account of the Lenders, shall be
irrevocable, not subject to any qualification or exception whatsoever,
including, without limitation, any of the following circumstances:
(A) any lack of validity or enforceability
of this Agreement or any of the other Loan Documents;
(B) the existence of any claim, setoff,
defense, or other right which any Borrower may have at any time against a
beneficiary named in a Letter of Credit or any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), any Lender,
the Agent, the issuer of such Letter of Credit, or any other Person, whether
in connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transactions between such Borrower or any other Person and the beneficiary
named in any Letter of Credit);
(C) any draft, certificate, or any other
document presented under the Letter of Credit proving to be forged, fraudulent,
invalid, or insufficient in any respect or any statement therein being untrue
or inaccurate in any respect;
(D) the surrender or impairment of any
security for the performance or observance of any of the terms of any of the
Loan Documents; or
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(E) the occurrence of any Default or
Event of Default.
2.3 FIXED PERIOD LOANS.
(a) Several Fixed Period Loans. Subject to the terms and
conditions of this Agreement, each Lender severally agrees to make a fixed
period loan (each a "Tranche A Fixed Period Loan" and collectively the "Tranche
A Fixed Period Loans") to Borrowers on the Closing Date, in an amount equal to
each such Lender's Pro Rata Share of $15,000,000. Subject to the terms and
conditions of this Agreement, each Lender severally agrees to make a fixed
period loan (each a "Tranche B Fixed Period Loan" and collectively the "Tranche
B Fixed Period Loans") to Borrowers on the Closing Date, in an amount equal to
each such Lender's Pro Rata Share of $10,000,000. Each Lender shall make the
amount of such Lender's Fixed Period Loans available to Agent in same day
funds, not later than 11:00 a.m. (Rosemont, Illinois time), on the Closing
Date. After Agent's receipt of the proceeds of such Fixed Period Loans, upon
satisfaction of the applicable conditions precedent set forth in Section 3.1
and 3.2, Agent shall make the proceeds of such Fixed Period Loans available to
Borrowers on the Closing Date by transferring same day funds equal to the
proceeds of such Fixed Period Loans received by Agent to the Designated Deposit
Account. All amounts outstanding under the Fixed Period Loans shall constitute
Obligations.
(b) Amortization. The Fixed Period Loans of each Lender
shall be repaid to the Agent for the account of the Lenders in equal monthly
installments of principal in an amount equal to each Lender's Pro Rata Share of
$200,000. Each such installment shall be due and payable on the first day of
each month commencing on August 1, 1997 and continuing on the first Business
Day of each succeeding month. On the termination of this Agreement, whether by
its terms, by prepayment, by acceleration, or otherwise, the outstanding
principal balance, and all accrued and unpaid interest under the Fixed Period
Loans shall be due and payable in full. All installments of principal on the
Fixed Period Loans shall first be applied to the balance outstanding on the
Tranche B Fixed Period Loans and then to the balance outstanding on the Tranche
A Fixed Period Loans upon payment in full of the Tranche B Fixed Period Loans.
(c) Prepayments of Fixed Period Loans. The unpaid principal
balance of the Fixed Period Loans must be prepaid by the amount of any proceeds
of a sale of obsolete Equipment permitted by Section 7.4 hereof and may be
prepaid in whole or in part without penalty or premium at any time during the
term of this Agreement upon thirty (30) days prior written notice by Borrowers
to Agent. All partial prepayments of principal on the Fixed Period Loans will
be applied to installments due on each Tranche B Fixed Period Loan and then to
each Tranche A Fixed Period Loan, in the inverse order of their maturity.
2.4 PAYMENTS.
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(a) Payments by Borrowers.
(i) All payments to be made by Borrowers shall
be made without set-off, recoupment, deduction, or counterclaim, except as
otherwise required by law. Except as otherwise expressly provided herein, all
payments by Borrowers shall be made to Agent for the account of the Lenders or
Agent, as the case may be, at Agent's address set forth in Section 12, and
shall be made in immediately available funds, no later than 1:00 p.m.
(Rosemont, Illinois time) on the date specified herein. Any payment received
by Agent later than 1:00 p.m. (Rosemont, Illinois time), at the option of
Agent, shall be deemed to have been received on the following Business Day and
any applicable interest or fee shall continue to accrue until such following
Business Day.
(ii) Whenever any payment is due on a day other
than a Business Day, such payment shall be made no later than the following
Business Day, and such extension of time shall in such case be included in the
computation of interest or fees, as
the case may be.
(iii) Unless Agent receives notice from Borrowers
prior to the date on which any payment is due to the Lenders that Borrowers will
not make such payment in full as and when required, Agent may assume that
Borrowers have made such payment in full to Agent on such date in immediately
available funds and Agent may (but shall not be so required), in reliance upon
such assumption, distribute to each Lender on such due date an amount equal to
the amount then due such Lender. If and to the extent Borrowers have not made
such payment in full to Agent, each Lender shall repay to Agent on demand such
amount distributed to such Lender, together with interest thereon at the
Reference Rate for each day from the date such amount is distributed to such
Lender until the date repaid.
(b) Apportionment and Application of Payments. Except as
otherwise provided with respect to Defaulting Lenders, aggregate principal and
interest payments shall be apportioned ratably among the Lenders (according to
the unpaid principal balance of the Advances to which such payments relate held
by each Lender) and payments of the fees (other than fees designated for
Agent's separate account) shall, as applicable, be apportioned ratably among
the Lenders. All payments shall be remitted to Agent and all such payments not
relating to principal or interest on the Fixed Period Loans or of specific
Advances, or not constituting payment of specific fees and all proceeds of
Collateral received by Agent, shall be applied, first, to pay any fees (other
than fees set forth in Section 2.11(e) hereof) or expense reimbursements then
due to Agent from Borrowers; second, to pay any fees or expense reimbursements
then due to Agent under Section 2.11(e) hereof and to the Lenders from
Borrowers to be allocated on a pro-rata basis with respect to the amount then
due to the Agent under Section 2.11(e) hereof and to the Lenders; third, to pay
interest due in respect of all Advances, including Agent Loans and Agent
Advances; fourth, to pay or prepay principal of Agent Loans and Agent Advances;
fifth, ratably to pay principal of the Advances (other than Agent
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Loans and Agent Advances) and unreimbursed obligations in respect of Letters of
Credit; and sixth, ratably to pay any other Obligations due to Agent or any
Lender by Borrowers. Agent shall promptly distribute to each Lender, pursuant
to the applicable wire transfer instructions received from each Lender in
writing, such funds as it may be entitled to receive, subject to a Settlement
delay as provided for in Section 2.1(i).
(c) Promise to Pay. Borrowers, jointly and severally,
hereby promise to pay in United States dollars in full to Agent, for the
benefit of the Lender Group, the Obligations, including, without limitation,
the principal amount of all Advances, together with accrued interest, fees and
other amounts due thereon, all in accordance with the terms of this Agreement.
2.5 OVERADVANCES. If, at any time or for any reason, the
amount of Obligations owed by Borrowers to the Lender Group pursuant to
Sections 2.1 and 2.2 is greater than either the Dollar or percentage
limitations set forth in Sections 2.1 or 2.2 (an "Overadvance"), Borrowers
immediately shall pay to Agent, in cash, the amount of such excess to be used
by Agent to reduce the Obligations pursuant to the terms of Section 2.4(b).
2.6 INTEREST AND LETTER OF CREDIT FEES: RATES, PAYMENTS, AND
CALCULATIONS.
(a) Interest Rate. Except as provided in Section 2.6(c),
below, (i) all Obligations (except for undrawn Letters of Credit and the Fixed
Period Loans) shall bear interest at a per annum rate of one percentage point
(1%) above the Reference Rate, (ii) the Tranche A Fixed Period Loans shall bear
interest at a per annum rate of one percentage point (1%) above the Reference
Rate, and (iii) the Tranche B Fixed Period Loans shall bear interest at a per
annum rate of one and one-half percentage points (1.5%) above the Reference
Rate; provided however, the rate set forth in subsection (i) above shall be
reduced to one half of one percentage point (0.50%) above the Reference Rate
upon the date Borrowers achieve the Pricing Benchmarks and during the
succeeding twelve (12) month period; provided further, however, that during the
period in which the advance rate against raw materials Inventory exceeds ten
percent (10%), the interest rate set forth in subsection (i) above shall be
increased by four percent (4%) per annum over the otherwise charged rate with
respect to an amount equal to the lower of the average raw materials
availability and total Advances outstanding, during the applicable period for
which interest is accruing.
(b) Letter of Credit Fee. Borrower shall pay Agent a fee
(in addition to the charges, commissions, fees, and costs set forth in Section
2.2(d)) equal to two percent (2%) per annum times the aggregate undrawn amount
of all outstanding Letters of Credit. A portion of such fee equal to one and
three quarters percent (1.75%) per annum times the aggregate undrawn amount of
all outstanding Letters of Credit shall be for the benefit of the Lenders with
the remaining portion being paid for the sole benefit of the Agent.
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(c) Default Rate. Upon the occurrence and during the
continuation of an Event of Default, (i) all Obligations (except for undrawn
Letters of Credit) shall bear interest at a per annum rate equal to four
percentage points (4%) above the otherwise charged rate, (ii) the Letter of
Credit fee provided in Section 2.6(b) shall be increased by four percentage
points (4%) per annum above the otherwise charged rate times the amount of the
aggregate undrawn amount of all outstanding Letters of Credit for the benefit
of the Lenders.
(d) Minimum Interest. In no event shall the rate of
interest chargeable hereunder for any day be less than seven percent (7%) per
annum. To the extent that interest accrued hereunder at the rate set forth
herein would be less than the foregoing minimum daily rate, the interest rate
chargeable hereunder for such day automatically shall be deemed increased to
the minimum rate.
(e) Payments. Interest and Letter of Credit fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
during the term hereof. Borrowers hereby authorize Agent, at its option,
without prior notice to Borrowers, to charge such interest and Letter of Credit
fees, all Lender Group Expenses (as and when incurred), the charges,
commissions, fees, and costs provided for in Section 2.2(d) (as and when
accrued or incurred), the fees and charges provided for in Section 2.11 (as and
when accrued or incurred), and all installments or other payments due under the
Fixed Period Loans, or any Loan Document to the applicable Loan Account, which
amounts thereafter shall accrue interest at the rate then applicable to
Advances hereunder. Any interest not paid when due shall be compounded and
shall thereafter accrue interest at the rate then applicable to Advances
hereunder.
(f) Computation. The Reference Rate as of the date of this
Agreement is eight and one half of one percent (8.5%) per annum. In the event
the Reference Rate is changed from time to time hereafter, the applicable rate
of interest hereunder automatically and immediately shall be
increased or decreased by an amount equal to such change in the Reference Rate.
All interest and fees chargeable under the Loan Documents shall be computed on
the basis of a three hundred sixty (360) day year for the actual number of days
elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no
event shall the interest rate or rates payable under this Agreement, plus any
other amounts paid in connection herewith, exceed the highest rate permissible
under any law that a court of competent jurisdiction shall, in a final
determination, deem applicable. Borrowers and the Lender Group, in executing
and delivering this Agreement, intend legally to agree upon the rate or rates
of interest and manner of payment stated within it; provided, however, that,
anything contained herein to the contrary notwithstanding, if said rate or
rates of interest or manner of payment exceeds the maximum allowable under
applicable law, then, ipso facto as of the date of this
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Agreement, Borrowers are and shall be liable only for the payment of such
maximum as allowed by law, and payment received from Borrowers in excess of
such legal maximum, whenever received, shall be applied to reduce the principal
balance of the Obligations to the extent of such excess.
2.7 COLLECTION OF ACCOUNTS. Borrowers shall and shall cause
the Canadian Subsidiary to at all times maintain lockboxes (the "Lockboxes")
and, immediately after the Closing Date, shall instruct all Account Debtors
with respect to the Accounts, General Intangibles, and Negotiable Collateral of
Borrowers and the Canadian Subsidiary to remit all Collections in respect
thereof to such Lockboxes. Borrowers and the Canadian Subsidiary, as
applicable, Agent, and the Lockbox Banks shall enter into the Lockbox
Agreements, which among other things shall provide for the opening of a Lockbox
Account for the deposit of Collections at a Lockbox Bank. Borrowers agree that
all Collections and other amounts received by Borrowers and the Canadian
Subsidiary from any Account Debtor or any other source immediately upon receipt
shall be deposited into a Lockbox Account. No Lockbox Agreement or arrangement
contemplated thereby shall be modified by Borrowers or the Canadian Subsidiary
without the prior written consent of Agent. Upon the terms and subject to the
conditions set forth in the Lockbox Agreements and except as provided below
with respect to Collections of the Canadian Subsidiary which are deposited into
the Lockbox Account at Bank of Montreal or such other bank acceptable to Agent,
all amounts received in each Lockbox Account shall be wired each Business Day
into an account (the "Agent's Account") maintained by Agent at a depositary
selected by Agent. With respect to the Collections of the Canadian Subsidiary
which are deposited into the Lockbox Account at Bank of Montreal or such other
bank acceptable to Agent, upon the terms and subject to the conditions set
forth in the applicable Lockbox Agreement, RDM Holdings, Inc. and International
Sports and Fitness, Inc., the indirect and direct parents of the Canadian
Subsidiary, shall cause all amounts received in such Lockbox Account or
otherwise received by the Canadian Subsidiary to be distributed on the date of
receipt to such indirect and direct parents in the form of loans or dividends
by causing such amounts to be wired into the Agent's Account on each Business
Day on which (a) a Default or Event of Default exists hereunder or under any
other Loan Document or (b) the amount available to be borrowed hereunder is
less than or equal to $5,000,000.
2.8 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The
receipt of any Collections by Agent (whether from transfers to Agent by the
Lockbox Banks pursuant to the Lockbox Agreements or otherwise) immediately
shall be applied provisionally to reduce the Obligations outstanding under
Section 2.1, but shall not be considered a final payment on account unless such
Collection item is a wire transfer of immediately available federal funds and
is made to the Agent's Account or unless and until such Collection item is
honored when presented for payment. From and after the Closing Date, Agent
shall be entitled to charge Borrowers for one (1) Business Day of `clearance'
or `float' solely for the benefit of Agent and not to be shared with the
Lenders at the rate set forth in Section 2.6(a) or Section 2.6(c)(i), as
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applicable, on all Collections of the Borrowers and the Canadian Subsidiary
that are received by Agent (regardless of whether forwarded by the Lockbox
Banks to Agent, whether provisionally applied to reduce the Obligations under
Section 2.1, or otherwise). This across-the-board one (1) Business Day
clearance or float charge on all Collections is acknowledged by the parties to
constitute an integral aspect of the pricing of the financing of Borrowers, and
shall apply irrespective of the characterization of whether receipts are owned
by Borrowers, the Canadian Subsidiary or Agent, and whether or not there are
any outstanding Advances, the effect of such clearance or float charge being
the equivalent of charging one (1) Business Day of interest on such
Collections. Should any Collection item not be honored when presented for
payment, then Borrowers shall be deemed not to have made such payment, and
interest shall be recalculated accordingly. Anything to the contrary contained
herein notwithstanding, any Collection item shall be deemed received by Agent
only if it is received into the Agent's Account on a Business Day on or before
1:00 p.m. (Rosemont, Illinois time). If any Collection item is received into
the Agent's Account on a non-Business Day or after 1:00 p.m. (Rosemont,
Illinois time) on a Business Day, it shall be deemed to have been received by
Agent as of the opening of business on the immediately following Business Day.
2.9 DESIGNATED ACCOUNT. Agent and the Lender Group are
authorized to make the Advances and the Letters of Credit under this Agreement
based upon telephonic or other instructions received from anyone purporting to
be an Authorized Person, or without instructions if pursuant to Section 2.6(e).
Borrowers agree to establish and maintain the Designated Account with the
Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by Borrowers and made by the Lender Group hereunder. Unless
otherwise agreed by Agent and Borrowers, any Advance requested by Borrowers and
made by the Lender Group hereunder shall be made to the Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF
OBLIGATIONS. Agent shall maintain an account on its books in the name of
Borrowers (the "Loan Account") on which Borrowers will be charged with all
Advances made by the Lender Group to Borrowers or for Borrowers' account,
including, accrued interest, Lender Group Expenses, and any other payment
Obligations of Borrowers. In accordance with Section 2.8, the Loan Account will
be credited with all payments received by Agent from Borrowers or for
Borrowers' account, including all amounts received in the Agent's Account from
any Lockbox Bank. Agent shall render statements regarding the Loan Account to
Borrowers, including principal, interest, fees, and including an itemization of
all charges and expenses constituting the Lender Group Expenses owing, and such
statements shall be conclusively presumed to be correct and accurate and
constitute an account stated between Borrowers and the Lender Group unless,
within thirty (30) days after receipt thereof by Borrowers, Borrowers shall
deliver to Agent written objection thereto describing the error or errors
contained in any such statements.
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2.11 FEES. Borrowers shall pay to Agent for the ratable
benefit of the Lender Group (except where otherwise indicated) the following
fees:
(a) Closing Fee. On the Closing Date, a closing
fee of $750,000;
(b) Unused Line Fee. On the first day of each
month during the term of this Agreement, an unused line fee in an amount equal
to one quarter of one percent (0.25%) per annum times the Average Unused Portion
of the Maximum Revolving Amount.
(c) Annual Facility Fee. On each anniversary of
the Closing Date, an annual facility fee in an amount equal to one half of one
percent (0.50%) of the Maximum Amount;
(d) Financial Examination, Documentation, and
Appraisal Fees. For each of the respective sole accounts of Agent and, to the
extent a Lender accompanies Agent under Section 4.6, such Lender: (i) fee of
$650 per day per examiner, plus out-of-pocket expenses for each financial
analysis and examination (i.e., audits) of Borrowers performed by personnel
employed by Agent and any such Lender; provided, however, so long as no Default
or Event of Default exists, audits shall be conducted once each quarter and the
examiner fee shall be limited to five (5) examiners per audit; (ii) an appraisal
fee of $1,500 per day per appraiser, plus out-of-pocket expenses for each
appraisal of the Collateral performed by personnel employed by Agent and any
such Lender; provided, however, so long as no Default or Event of Default exists
no piece of Collateral shall be appraised more than twice per year; (iii) the
actual charges paid or incurred by Agent if it elects to employ the services of
one or more third Persons to perform such financial analyses and examinations
(i.e., audits) of Borrowers or to appraise the Collateral; and (iv) on each
anniversary of the Closing Date, a fee of $1,000 per year for Agent's loan
documentation review;
(e) Agent's Origination Fee and Agency and
Syndication Fee. (i) on the Closing Date, an origination fee for the sole
benefit of Agent, and (ii) on the first day of each quarter during the term of
this Agreement, and thereafter so long as any Obligations are outstanding, an
agency and syndication fee for the sole benefit of Agent, all as more fully
described in that certain fee letter of even date between Borrowers and Agent;
and
(f) Miscellaneous. The fees set forth above shall
be fully earned when due, non-refundable when paid and, if applicable, computed
on the basis of a 360 day year for the actual number of days elapsed.
SECTION 2.12 JOINT AND SEVERAL LIABILITY. (a) Each Borrower expressly
represents and acknowledges that any financial accommodations by Agent and
Lenders, or any of them, to any other Borrower hereunder and under
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the other Loan Documents are and will be of direct interest, benefit and
advantage to all Borrowers. Each Borrower acknowledges that any notice given by
Agent or any Lender to any Borrower shall be effective with respect to all
Borrowers. Each Borrower shall be entitled to subrogation and contribution
rights from and against any other Borrower to the extent such Borrower is
required to pay to Lenders any amount in excess of the Advances and Fixed
Period Loans hereunder directly to such Borrower or as otherwise available
under applicable law; provided, however, that such subrogation and contribution
rights are and shall be subject to the terms and conditions of Section 2.12(b)
hereof. The provisions of this Section 2.12(a) shall in no way limit the
obligations and liabilities of any Borrower to Agent and Lenders and each
Borrower shall remain liable to Agent and Lenders for the full amount of the
Obligations.
(b) No Borrower will exercise any rights which it may
acquire by way of subrogation hereunder or under any other Loan Document or at
law by any payment made hereunder or otherwise, nor shall any Borrower seek or
be entitled to seek any contribution or reimbursement from any other Borrower
in respect of payments made by such Borrower hereunder or under any other Loan
Document, until all amounts owing to Agent and Lenders on account of the
Obligations are paid in full and the Commitment is terminated. If any amounts
shall be paid to any Borrower on account of such subrogation or contribution
rights at any time when all of the Obligations shall not have been paid in
full, such amount shall be held by such Borrower in trust for Agent and
Lenders, segregated from other funds of such Borrower, and shall, forthwith
upon receipt by such Borrower, be turned over to Agent in the exact form
received by such Borrower (duly endorsed by such Borrower to Agent, if
required), to be applied against the Obligations, whether matured or unmatured,
as provided for herein.
SECTION 2.13 TAX INDEMNITY. (a) All payments by the Borrowers under
this Agreement or under any other Loan Document shall be made free and clear of
and without deduction or withholding for any and all taxes, levies, imposts,
deductions, charges or withholdings and all liabilities with respect thereto,
excluding taxes paid or payable by any Lender or required to be withheld from a
payment to any Lender as a result of a Lender having a present or former
connection to the jurisdiction imposing such tax (other than such connection
arising solely from a Lender having executed and delivered or performed its
obligations or received a payment under, this Agreement or any other Loan
Document) (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and other liabilities being referred to herein as "Taxes"), unless
such Taxes are required by law or the administration thereof to be withheld or
deducted. If a Borrower shall be required by law or the administration thereof
to deduct or withhold any Taxes from or in respect of any sum payable under
this Agreement or any other Loan Document: (i) the sum payable shall be
increased (and, for greater certainty, in the case of interest, the amount of
interest shall be increased) as may be necessary so that after making all
required deductions or withholdings (including deductions or withholdings
applicable to additional amounts paid
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under this Section 2.14) the Lender Group receives an amount equal to the sum
it would have received if no deduction or withholding had been made; (ii) the
Borrower shall make such deductions or withholdings; and (iii) the Borrower
shall pay the full amount deducted or withheld to the relevant taxation or
other authority in accordance with applicable law.
(b) The Borrowers shall pay any present or future stamp or
documentary taxes or any other excise, foreign exchange, foreign investment,
property or any other type of taxes, charges, fees or costs or similar levies
or any financial institutions duty and debits tax which arise from any payment
made under this Agreement or any other Loan Document or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or
any other Loan Document (all such taxes, fees or charges, costs, and levies
being herein referred to as "Other Taxes").
(c) The Borrowers shall jointly and severally indemnify the
Lender Group for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.14) paid by the Lender Group and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes are correctly or legally
asserted so that, after the receipt of any indemnity payment under this Section
2.14, each member of the Lender Group shall be in the same position as it would
have been had it not been required to pay any Taxes or Other Taxes. The
Borrowers shall also jointly and severally indemnify each member of the Lender
Group on a after-tax basis for any additional taxes on net income that each
member of the Lender Group may be obliged to pay as the result of the receipt
of additional amounts under this Section 2.14 (computed on the basis that the
only receipts and deductions of each member of the Lender Group are in respect
of the Obligations). Payment under this indemnification shall be made within
thirty (30) days from the date any member of the Lender Group makes written
demand therefor. A certificate as to the amounts owing by the Borrowers under
this Section 2.14 submitted to the Borrowers by any member of the Lender Group
shall be conclusive evidence, absent manifest error, of the amount due from the
Borrowers to that member of the Lender Group. For greater certainty, the
parties acknowledge that nothing contained in this Section 2.14 shall be
interpreted as requiring any Borrower to pay to any taxation authority any
Taxes or Other Taxes owed by it to such taxation authority and which are
contested in good faith and by proper proceedings and against which adequate
reserves are maintained, provided that any such contest of Taxes or Other Taxes
shall have no effect on any rights of the Lender Group under this Section 2.14,
including without limitation, the right to receive indemnification payments
within thirty (30) days of written demand therefor.
(d) The Borrowers shall furnish to the Agent the original or a
certified copy of a receipt evidencing payment of Taxes or Other Taxes,
promptly after receipt by a Borrower of any such receipt.
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(e) If any Lender is, in its sole opinion, entitled to
claim a refund or able to apply for or otherwise take advantage of any tax
credit, tax deduction or similar benefit by reason of any withholding or
deduction made by the Borrowers in respect of a payment made by them hereunder
which payment shall have been increased pursuant to Section 2.13(a), then such
Lender will use reasonable efforts to obtain such refund, credit, deduction or
benefit and upon receipt thereof will pay to the Borrowers such amount (if any)
not exceeding the increased amount paid by the Borrowers as equals the net
after-tax value to such Lender of such part of such refund, credit, deduction
or benefit as it considers is allocable to such withholding or deduction having
regard to all its dealings giving rise to similar credits, deductions or
benefits in relation to the same tax period and to the cost of obtaining the
same. There is no obligation for any Lender to claim any refund or to apply for
or take advantage of any tax credit, tax deduction or similar benefit as
contemplated by this paragraph. Nothing herein shall (i) interfere with the
right of any Lender to arrange its tax affairs in whatever manner it deems
appropriate; and (ii) no Lender shall be obligated to disclose to any Borrower
any information regarding its tax affairs or tax computations. Further no
Lender shall be under any obligation to claim relief from its corporate profits
or similar tax liability in respect of any such deduction or withholding in
priority to any other relief, claims, credits or deductions available to it.
(f) Without prejudice to the survival of any other
agreement or obligation of the Borrowers hereunder, the obligations of the
Borrowers under this Section 2.14 shall survive the payment in full of the
Obligations.
SECTION 2.14 PAYMENTS IN UNITED STATES DOLLARS. All amounts
payable under any of the Loan Documents shall be paid in United States dollars
unless the Agent agrees in writing to accept payment thereof in Canadian
dollars.
SECTION 2.15 CAPITAL ADEQUACY. If after the date hereof,
any Lender or any Affiliate of such Lender shall have reasonably determined
that the adoption of any applicable law, governmental rule, regulation or order
regarding the capital adequacy of banks or bank holding companies, 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 any Lender or
any Affiliate of such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such governmental
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Lender's or any Affiliate's of such Lender
capital as a consequence of the Lender's Commitment or obligations hereunder to
a level below that which it could have achieved but for such adoption, change
or compliance (taking into consideration such Lender's or any Affiliate's of
such Lender policies with respect to capital adequacy immediately before such
adoption, change or compliance and assuming that such Lender's or any
Affiliate's of such Lender, capital was fully utilized prior
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to such adoption, change or compliance), then, upon demand by such Lender, the
Borrowers shall immediately pay to the Lender such additional amounts as shall
be sufficient to compensate such Lender for any such reduction actually
suffered. A certificate of such Lender setting forth the amount to be paid to
such Lender by the Borrowers as a result of any event referred to in this
paragraph shall, absent manifest error, be conclusive.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE, LETTER
OF CREDIT AND THE FIXED PERIOD LOANS. The obligation of the Lender Group to make
the initial Advance, to issue the initial Letter of Credit or to make the Fixed
Period Loans, is subject to the fulfillment, to the satisfaction of Agent and
its counsel, of each of the following conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before
June 27, 1997;
(b) Agent shall have received searches
reflecting the filing of its financing statements and fixture filings;
(c) Agent shall have received each of the
following documents, duly executed, and each such document shall be in full
force and effect:
a. the Lockbox Agreements;
b. the Disbursement Letter;
c. the Pay-Off Letter, together with UCC
termination statements and other
documentation evidencing the termination by
Existing Lender of its Liens in and to the
properties and assets of Borrowers;
d. the Stock Pledge Agreement;
e. the Borrower Stock Pledge Agreement;
f. the Parent Stock Pledge Agreement;
g. the Subsidiary Guaranty;
h. the Parent Guaranty
i. the Trademark Security Agreement;
j. the Borrower Trademark Security
Agreement;
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k. the Parent Trademark Security
Agreement
l. the Mortgages;
m. the Security Agreement;
n. the Parent Security Agreement;
o. the Metromedia Subordination
Agreement;
p. the Canadian Guaranty;
q. the Deposit Account Agreement;
r. the Canadian Security Agreement; and
s. the Subordination Agreement.
(d) Agent shall have received a certificate from the
Secretary of each Loan Party attesting to the resolutions of such Loan Party's
Board of Directors authorizing its execution, delivery, and performance of the
Loan Documents to which such Loan Party is a party and authorizing specific
officers of such Loan Party to execute the same;
(e) Agent shall have received copies of each Loan Party's
Governing Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of such Loan Party;
(f) Agent shall have received a certificate of status with
respect to each Loan Party, dated within ten (10) days of the Closing Date,
such certificate to be issued by the appropriate officer of the jurisdiction of
organization of such Loan Party, which certificate shall indicate that such
Loan Party is in good standing in such jurisdiction;
(g) Agent shall have received certificates of status with
respect to each Loan Party, each dated within fifteen (15) days of the Closing
Date, such certificates to be issued by the appropriate officer of the
jurisdictions in which its failure to be duly qualified or licensed would
constitute a Material Adverse Change, which certificates shall indicate that
such Loan Party is in good standing in such jurisdictions;
(h) Agent shall have received a certificate of insurance,
together with the endorsements thereto, as are required by Section 6.10, the
form and substance of which shall be satisfactory to Agent and its counsel;
(i) Agent shall have received duly executed certificates of
title with respect to that portion of the Collateral that is subject to
certificates of title;
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(j) Agent shall have received such Collateral Access
Agreements from lessors, warehousemen, bailees, and other third persons as
Agent may require;
(k) Agent shall have received an opinion of Loan Parties'
counsel in form and substance satisfactory to Agent in its sole discretion;
(l) Agent shall have received (i) appraisals and phase 1
environmental reports of the Real Property Collateral and appraisals of the
Equipment, in each case satisfactory to Agent, and (ii) mortgagee title
insurance policies (or marked commitments to issue the same) for the Real
Property Collateral issued by a title insurance company satisfactory to Agent
(each a "Mortgage Policy" and, collectively, the "Mortgage Policies") in
amounts satisfactory to Agent assuring Agent that the Mortgages on such Real
Property Collateral are valid and enforceable first priority mortgage Liens on
such Real Property Collateral free and clear of all defects and encumbrances
except Permitted Liens, and the Mortgage Policies shall otherwise be in form
and substance reasonably satisfactory to Agent;
(m) Agent shall have received evidence satisfactory to it
that, after making the initial Advance and the funding of the Fixed Period
Loans hereunder, and the issuance of any Letter of Credit on the Closing Date,
Borrowers shall have an aggregate amount equal to or greater than $15,000,000
available to be borrowed hereunder on the Closing Date;
(n) Agent shall have received satisfactory evidence that
▇▇▇ ▇▇▇▇▇▇'▇ employment agreement with RDM shall have been extended for a new
term ending on or after the Maturity Date;
(o) Agent shall have received satisfactory evidence that
the $7,000,000 letter of credit issued by Norwest Bank Minnesota, National
Association for the account of certain of the Borrowers in favor of the
Existing Lender shall have been cancelled and of no further force and effect
and the cash collateral securing such letter of credit shall have been released
to the Borrowers;
(p) Agent shall have received the Credit Enhancement;
(q) Agent shall have completed a satisfactory field audit;
(r) Agent shall have completed a satisfactory review of all
licenses of Borrowers and obtained all consents required by Agent upon such
review:
(s) Agent shall have received satisfactory reference checks
on key management;
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(t) Agent shall have received and approved a business plan
of Borrowers giving effect to the transactions contemplated hereby, including
without limitation, the borrowings hereunder;
(u) Agent shall have received satisfactory evidence that
all tax returns required to be filed by Loan Parties have been timely filed and
all taxes upon Loan Parties or their properties, assets, income, and franchises
(including real property taxes and payroll taxes) have been paid prior to
delinquency, except such taxes that are the subject of a Permitted Protest; and
(v) all other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to Agent
and its counsel.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES, ALL LETTERS OF
CREDIT AND THE FIXED PERIOD LOANS. The following shall be conditions precedent
to all Advances, all Letters of Credit and the Fixed Period Loans.
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);
(b) no Default or Event of Default shall have occurred and
be continuing on the date of such extension of credit, nor shall either result
from the making thereof; and
(c) no injunction, writ, restraining order, or other order
of any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any governmental authority
against any Borrower, the Lender Group or any of their Affiliates.
3.3 CONDITION SUBSEQUENT. As a condition subsequent to
initial closing hereunder, Borrowers shall perform or cause to be performed the
following (the failure by Borrowers to so perform or cause to be performed
constituting an Event of Default):
(a) within thirty (30) days of the Closing Date, deliver to
Agent the certified copies of the policies of insurance, together with the
endorsements thereto, as are required by Section 6.10, the form and substance
of which shall be satisfactory to Agent and its counsel; and
(b) within sixty (60) days of the Closing Date, deliver to
Agent a Lockbox Agreement among Bank of Montreal, the Canadian Subsidiary and
Agent, in form and substance satisfactory to Agent.
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3.4 TERM. This Agreement shall become effective upon the
execution and delivery hereof by Borrowers and the Lender Group and shall
continue in full force and effect for a term ending on the date (the "Maturity
Date") that is four (4) years from the Closing Date, unless sooner terminated
pursuant to the terms hereof. The foregoing notwithstanding, Agent (on behalf
of the Lender Group) shall have the right to terminate the Lender Group's
obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of
this Agreement, all Obligations (including the obligation to provide cash
collateral for contingent reimbursement obligations of Borrowers with respect
to any outstanding Letters of Credit) immediately shall become due and payable
without notice or demand. No termination of this Agreement, however, shall
relieve or discharge Borrowers of Borrowers' duties, Obligations, or covenants
hereunder, and the Lender Group's continuing security interests in the
Collateral shall remain in effect until all Obligations have been fully and
finally discharged and the Lender Group's obligation to provide additional
credit hereunder is terminated. If Borrowers have sent a notice of termination
pursuant to the provisions of Section 3.6, but fails to pay the Obligations in
full on the date set forth in said notice, then Agent (on behalf of the Lender
Group) may, but shall not be required to, renew this Agreement for an
additional term of one (1) year.
3.6 EARLY TERMINATION BY BORROWERS. Notwithstanding the
provisions of Section 3.4 that provide for termination of this Agreement on the
Maturity Date, Borrowers have the option, at any time upon ninety (90) days
prior written notice to Agent, to terminate this Agreement by paying to Agent
(for the ratable benefit of the Lender Group), in cash, the Obligations
(including cash collateral in an amount equal to 102% of the undrawn amount of
the Letters of Credit), in full, together with a premium (the "Early
Termination Premium") for the benefit of the Lenders equal to (a) $3,500,000,
if the Agreement is terminated on or before the first anniversary of the
Closing Date, (b) $2,625,000 if the Agreement is terminated after the first
anniversary of the Closing Date and on or before the second anniversary of the
Closing Date, (c) $1,750,000, if the Agreement is terminated after the second
anniversary of the Closing Date and on or before the third anniversary of the
Closing Date, and (d) $825,000 if the Agreement is terminated after the third
anniversary of the Closing Date and before the Maturity Date.
3.7 TERMINATION UPON EVENT OF DEFAULT. If the Lender Group
terminates this Agreement upon the occurrence of an Event of Default, in view
of the impracticability and extreme difficulty of ascertaining actual damages
and by mutual agreement of the parties as to a reasonable calculation of the
Lender Group's lost profits as a result thereof, Borrowers shall pay to Agent
(for the ratable benefit of the Lender Group) upon the effective date of such
termination, a premium in an amount equal to the Early Termination Premium. The
Early Termination Premium shall be presumed to be the amount of damages
sustained by the Lender Group as the result of the early termination and
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Borrowers agree that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this Section 3.7 shall
be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Each Borrower hereby grants
to Agent for the benefit of the Lender Group a continuing security interest in
all currently existing and hereafter acquired or arising Personal Property
Collateral in order to secure prompt repayment of any and all Obligations and
in order to secure prompt performance by Borrowers of each of their covenants
and duties under the Loan Documents. The security interests of Agent for the
benefit of the Lender Group in the Personal Property Collateral shall attach to
all Personal Property Collateral without further act on the part of the Lender
Group or Borrowers. Anything contained in this Agreement or any other Loan
Document to the contrary notwithstanding, except as provided in Section 7.4 and
except for the sale of Inventory to buyers in the ordinary course of business,
Borrowers have no authority, express or implied, to dispose of any item or
portion of the Personal Property Collateral or the Real Property Collateral;
provided, however, so long as no Default or Event of Default exists, the
Borrowers may use the funds in the Disbursement Account in the ordinary course
of business for the purposes permitted by Section 7.17.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral, the
applicable Borrower, immediately upon the request of Agent, shall endorse and
deliver physical possession of such Negotiable Collateral to Agent.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND
NEGOTIABLE COLLATERAL. At any time upon a Default or Event of Default or when
the Agent deems itself insecure, Agent or Agent's designee may (a) notify
customers or Account Debtors of Borrowers that the Borrowers' Accounts, General
Intangibles, or Negotiable Collateral have been assigned to Agent for the
benefit of the Lender Group or that Agent for the benefit of the Lender Group
has a security interest therein, and (b) collect the Borrowers' Accounts,
General Intangibles, and Negotiable Collateral directly and charge the
collection costs and expenses to the Loan Account. Each Borrower agrees that it
will hold in trust for the Lender Group, as the Lender Group's trustee, any
Collections that it receives and immediately will deliver said Collections to
Agent in their original form as received by such Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any
time upon the request of Agent, Borrowers shall execute and deliver to Agent
all financing statements, continuation financing statements, fixture filings,
security agreements, pledges, assignments, endorsements of certificates of
title, applications for title, affidavits, reports, notices, schedules of
accounts, letters of authority, and all other documents that Agent reasonably
may request, in form satisfactory to Agent, to perfect and continue perfected
the Liens of the Lender Group in the Collateral, and in order to fully
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consummate all of the transactions contemplated hereby and under the other the
Loan Documents.
4.5 POWER OF ATTORNEY. Each Borrower hereby irrevocably
makes, constitutes, and appoints Agent (and any of Agent's officers, employees,
or agents designated by Agent) as such Borrower's true and lawful attorney,
with power to (a) if such Borrower refuses to, or fails timely to execute and
deliver any of the documents described in Section 4.4, sign the name of such
Borrower on any of the documents described in Section 4.4, (b) at any time that
an Event of Default has occurred and is continuing or the Lender Group deems
itself insecure, sign such Borrower's name on any invoice or ▇▇▇▇ of lading
relating to any Account of such Borrower, drafts against Account Debtors,
schedules and assignments of Accounts of such Borrower, verifications of
Accounts, and notices to Account Debtors, (c) send requests for verification of
Accounts of such Borrower, (d) endorse such Borrower's name on any Collection
item that may come into the Lender Group's possession, (e) at any time that an
Event of Default has occurred and is continuing or the Lender Group deems
itself insecure, notify the post office authorities to change the address for
delivery of such Borrower's mail to an address designated by Agent, to receive
and open all mail addressed to such Borrower, and to retain all mail relating
to the Collateral and forward all other mail to such Borrower, (f) at any time
that an Event of Default has occurred and is continuing or the Lender Group
deems itself insecure, make, settle, and adjust all claims under such Borrower's
policies of insurance and make all determinations and decisions with respect
to such policies of insurance, and (g) at any time that an Event of Default has
occurred and is continuing or Agent deems itself insecure, settle and adjust
disputes and claims respecting the Accounts of such Borrower directly with
Account Debtors, for amounts and upon terms that Agent determines to be
reasonable, and Agent may cause to be executed and delivered any documents and
releases that Agent determines to be necessary. The appointment of Agent as
such Borrower's attorney, and each and every one of Agent's rights and powers,
being coupled with an interest, is irrevocable until all of the Obligations
have been fully and finally repaid and performed and the Lender Group's
obligation to extend credit hereunder is terminated.
4.6 RIGHT TO INSPECT. Agent (through any of its officers,
employees, or agents) and together with any Lender that so elects shall have
the right, from time to time hereafter to inspect each Borrower's Books and to
check, test, and appraise the Collateral in order to verify Borrowers'
financial condition or the amount, quality, value, condition of, or any other
matter relating to, the Collateral.
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5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this
Agreement, Borrowers make the following representations and warranties which
shall be true, correct, and complete in all respects as of the date hereof, and
shall be true, correct, and complete in all respects as of the Closing Date,
and at and as of the date of the making of each Advance, Letter of Credit or
Fixed Period Loans made thereafter, as though made on and as of the date of
such Advance, Letter of Credit or Fixed Period Loans (except to the extent that
such representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:
5.1 NO ENCUMBRANCES. Borrowers have good and
indefeasible title to the Collateral, free and clear of Liens except for
Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide
existing obligations created by the sale and delivery of Inventory or the
rendition of services to Account Debtors in the ordinary course of Borrowers'
and the Canadian Subsidiary's business, unconditionally owed to Borrowers and
the Canadian Subsidiary without defenses, disputes, offsets, counterclaims, or
rights of return or cancellation. The property giving rise to such Eligible
Accounts has been delivered to the Account Debtor, or to the Account Debtor's
agent for immediate shipment to and unconditional acceptance by the Account
Debtor. Borrowers have not received notice of actual or imminent bankruptcy,
insolvency, or material impairment of the financial condition of any Account
Debtor regarding any Eligible Account.
5.3 ELIGIBLE INVENTORY. All Eligible Inventory is of
good and merchantable quality, free from defects.
5.4 EQUIPMENT. Except as previously disclosed to the
Lender Group in writing, all of the Equipment is used or held for use in
Borrowers' business and is fit for such purposes.
5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory of
the Borrowers and the Canadian Subsidiary and Equipment are not stored with a
bailee, warehouseman, or similar party (without Agent's prior written consent)
and are located only at the locations identified on Schedule 6.12 or otherwise
permitted by Section 6.12.
5.6 INVENTORY RECORDS. Borrowers and the Canadian
Subsidiary keep correct and accurate records itemizing and describing the kind,
type, quality, and quantity of the Borrowers' and the Canadian Subsidiary's
Inventory, and Borrowers' and the Canadian Subsidiary's cost therefor.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief
executive office of each Borrower and the Canadian Subsidiary is located at the
address indicated on Schedule 5.7 of this Agreement. RDM Holding, Inc.'s
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FEIN is ▇▇-▇▇▇▇▇▇▇, Sports Group Inc.'s FEIN is ▇▇-▇▇▇▇▇▇▇,, International
Sports and Fitness, Inc.'s FEIN is ▇▇-▇▇▇▇▇▇▇, Diversified Products
Corporation's FEIN is ▇▇-▇▇▇▇▇▇▇, Willow Hosiery Company, Inc.'s FEIN is
▇▇-▇▇▇▇▇▇▇, Hutch Sports USA Inc.'s FEIN is ▇▇-▇▇▇▇▇▇▇ and Diversified Trucking
Corp.'s FEIN is ▇▇-▇▇▇▇▇▇▇.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each Loan Party is duly organized and
existing and in good standing under the laws of the jurisdiction of its
incorporation and qualified and licensed to do business in, and in good standing
in, any state where the failure to be so licensed or qualified reasonably
could be expected to have a Material Adverse Change.
(b) Set forth on Schedule 5.8, is a complete and
accurate list of each Loan Party's direct and indirect Subsidiaries, showing:
(i) the jurisdiction of their incorporation; (ii) the number of shares of each
class of common and preferred stock authorized for each of such Subsidiaries;
and (iii) the number and the percentage of the outstanding shares of each such
class owned directly or indirectly by such Loan Party. All of the outstanding
capital stock of each such Subsidiary has been validly issued and is fully paid
and non-assessable. Roadmaster Ltd. (UK) and AA Funding Corp. have no material
assets and are inactive.
(c) Except as set forth on Schedule 5.8, no
capital stock (or any securities, instruments, warrants, options, purchase
rights, conversion or exchange rights, calls, commitments or claims of any
character convertible into or exercisable for capital stock) of any direct or
indirect Subsidiary of any Loan Party is subject to the issuance of any security
instrument, warrant, option, purchase right, conversion or exchange right,
call, commitment or claim of any right, title, or interest therein or thereto.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by
each Loan Party of the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action.
(b) The execution, delivery, and performance by
each Loan Party of the Loan Documents to which it is a party do not and will
not (i) violate any provision of federal, state, provincial or local law or
regulation (including Regulations G, T, U, and X of the Federal Reserve Board)
applicable to such Loan Party, the Governing Documents of such Loan Party, or
any order, judgment, or decree of any court or other Governmental Authority
binding on such Loan Party, (ii) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any
material contractual obligation or material lease of such Loan Party, (iii)
result in or require the creation or imposition of any Lien of any nature
whatsoever upon any properties or assets of such Loan Party, other than
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Permitted Liens, or (iv) require any approval of stockholders or any approval
or consent of any Person under any material contractual obligation of such Loan
Party.
(c) Other than the filing of appropriate
financing statements, fixture filings, and mortgages, the execution, delivery,
and performance by each Loan Party of the Loan Documents to which such Loan
Party is a party do not and will not require any registration with, consent, or
approval of, or notice to, or other action with or by, any federal, state,
foreign, or other Governmental Authority or other Person.
(d) The Loan Documents to which each Loan Party
is a party, and all other documents contemplated hereby and thereby, when
executed and delivered by such Loan Party will be the legally valid and binding
obligations of such Loan Party, enforceable against such Loan Party in
accordance with their respective terms, except as enforcement may be limited by
equitable principles or by bankruptcy, insolvency, reorganization, moratorium,
or similar laws relating to or limiting creditors' rights generally.
(e) Except as provided in Schedule 5.9, the
Liens granted by each Loan Party to Agent (for the benefit of the Lender Group)
in and to its properties and assets pursuant to the Loan Documents are validly
created, perfected, and first priority Liens, subject only to Permitted Liens.
5.10 LITIGATION. There are no actions or proceedings pending
by or against any Loan Party before any court or administrative agency and no
Loan Party has knowledge or belief of any pending, threatened, or imminent
litigation, governmental investigations, or claims, complaints, actions, or
prosecutions involving any Loan Party, except for: (a) ongoing collection
matters in which a Loan Party is the plaintiff; (b) matters disclosed on
Schedule 5.10; and (c) matters arising after the date hereof that, if decided
adversely to a Loan Party, would not result in a Material Adverse Change.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements
relating to Loan Parties that have been delivered by Loan Parties to the Lender
Group have been prepared in accordance with GAAP (except, in the case of
unaudited financial statements, for the lack of footnotes and being subject to
year-end audit adjustments) and fairly present each Loan Party's financial
condition as of the date thereof and each Loan Party's results of operations
for the period then ended. There has not been a Material Adverse Change with
respect to any Loan Party since the date of the latest financial statements
submitted to the Lender Group on or before the Closing Date.
5.12 SOLVENCY. Each Loan Party is Solvent. No transfer of
property is being made by Loan Parties and no obligation is being incurred by
Loan Parties in connection with the transactions contemplated by this Agreement
or the other Loan Documents with the intent to hinder, delay, or defraud either
present or future creditors of Loan Parties.
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5.13 EMPLOYEE BENEFITS. None of Loan Parties, any of their
Subsidiaries, or any of their ERISA Affiliates maintains or contributes to any
Benefit Plan, other than those listed on Schedule 5.13. Loan Parties, each of
their Subsidiaries and each ERISA Affiliate have satisfied the minimum funding
standards of ERISA and the IRC with respect to each Benefit Plan to which it is
obligated to contribute. No ERISA Event has occurred nor has any other event
occurred that may result in an ERISA Event that reasonably could be expected to
result in a Material Adverse Change. None of Loan Parties or their
Subsidiaries, any ERISA Affiliate, or any fiduciary of any Plan is subject to
any direct or indirect liability with respect to any Plan resulting from a
violation of any applicable law, treaty, rule, regulation, or agreement. None
of Loan Parties or their Subsidiaries or any ERISA Affiliate is required to
provide security to any Plan under Section 401(a)(29) of the IRC.
5.14 ENVIRONMENTAL CONDITION. Except as provided in the phase
1 environmental reports previously provided to Agent and in Schedule 5.14
hereof and except in compliance with all applicable laws, none of Loan Parties'
properties or assets has ever been used by Loan Parties or, to the best of
Borrowers' knowledge, by previous owners or operators in the disposal of, or to
produce, store, handle, treat, release, or transport, any Hazardous Materials.
None of Loan Parties' properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
Hazardous Materials disposal site, or a candidate for closure pursuant to any
environmental protection statute. No Lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned or operated by Loan Parties. No Loan Party has received a
summons, citation, notice, or directive from the Environmental Protection Agency
or any other federal or state governmental agency concerning any action or
omission by such Loan Party resulting in the releasing or disposing of Hazardous
Materials into the environment.
5.15 LICENSES. The Borrowers and the Canadian Subsidiary
possess adequate licenses and other rights that are necessary for Borrowers and
the Canadian Subsidiary to continue to conduct their business as heretofore
conducted by them and all such licenses are listed on Schedule 5.15.
5.16 OTHER REPRESENTATIONS AND WARRANTIES. The best of
each Borrower's knowledge, the representations and warranties of the Loan
Parties set forth in the other Loan Documents are true and correct.
6. AFFIRMATIVE COVENANTS.
Borrowers covenant and agree that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrowers shall, and shall cause the Canadian Subsidiary to, do
all of the following:
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6.1 ACCOUNTING SYSTEM. Maintain a standard and modern system
of accounting that enables Loan Parties to produce financial statements in
accordance with GAAP, and maintain records pertaining to the Collateral that
contain information as from time to time may be requested by Agent. Loan
Parties also shall keep a modern inventory reporting system that shows all
additions, sales, claims, returns, and allowances with respect to the Inventory
of the Borrowers and the Canadian Subsidiary.
6.2 COLLATERAL AND OTHER REPORTING. Provide Agent with the
following documents at the following times in form satisfactory to Agent: (a)
on each Business Day, a sales journal, collection journal, and credit register
since the last such schedule and a calculation of the Borrowing Base as of such
date, (b) on a monthly basis and, in any event, by no later than the 10th day
of each month during the term of this Agreement, (i) a detailed calculation of
the Borrowing Base giving account to all reserves disclosed to Borrowers by the
Agent, and (ii) a detailed aging, by total, of the Borrowers' and the Canadian
Subsidiary's Accounts, together with a reconciliation to the detailed
calculation of the Borrowing Base previously provided to Agent, (c) on a
monthly basis and, in any event, by no later than the tenth (10th) day of each
month during the term of this Agreement, a summary aging, by vendor, of
Borrowers' accounts payable and any book overdraft, (d) on a weekly basis,
Inventory reports specifying Borrowers' and the Canadian Subsidiary's Cost of
their Inventory by category, with additional detail showing additions to and
deletions from their Inventory, (e) on each Business Day, notice of all
returns, disputes, or claims, (f) upon request, copies of invoices in
connection with the Borrowers' and the Canadian Subsidiary's Accounts, customer
statements, credit memos, remittance advices and reports, deposit slips,
shipping and delivery documents in connection with the Borrowers' and the
Canadian Subsidiary's Accounts and for Inventory and Equipment acquired by
Borrowers and the Canadian Subsidiary, purchase orders and invoices, (g) on a
quarterly basis, a detailed list of Borrowers' and the Canadian Subsidiary's
customers, (h) on a monthly basis, a calculation of the Dilution for the prior
month; and (i) upon receipt by any Borrower or the Canadian Subsidiary, a copy
of any notice of termination or expiration of any license agreement of any
Borrower or the Canadian Subsidiary and a copy of any new or renewed license
agreement of any Borrower or the Canadian Subsidiary, (j) upon the occurrence
thereof, notice of any Default or Event of Default hereunder or under any other
Loan Document, (k) upon the threat or filing thereof, notice of any material
litigation, (l) upon the occurrence thereof, notice of any Material Adverse
Change, (m) such other reports as to the Collateral or the financial condition
of Borrowers and the Canadian Subsidiary as Agent may request from time to
time. Original sales invoices evidencing daily sales shall be mailed (or
electronically transmitted, as the case may be) by Borrowers to each Account
Debtor and, at Agent's direction, the invoices shall indicate on their face
that the Account has been assigned to Agent (for the benefit of the Lender
Group) and that all payments are to be made directly to the Lockboxes.
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6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to
Agent and each Lender: (a) as soon as available, but in any event within thirty
(30) days after the end of each month during each of Loan Parties' fiscal
years, a company prepared balance sheet, income statement, and statement of
cash flow covering Loan Parties' operations during such period; and (b) as soon
as available, but in any event within one hundred twenty (120) days after the
end of each of Loan Parties' fiscal years, consolidated financial statements of
Loan Parties for each such fiscal year, audited by independent certified public
accountants reasonably acceptable to Agent and certified, without any
qualifications, by such accountants to have been prepared in accordance with
GAAP, together with a certificate of such accountants addressed to Agent
stating that such accountants do not have knowledge of the existence of any
Default or Event of Default with respect to financial or accounting matters of
the Borrowers. Such audited financial statements shall include a balance sheet,
profit and loss statement, and statement of cash flow and, if prepared, such
accountants' letter to management. Borrowers agree to deliver financial
statements of Loan Parties prepared on an unaudited consolidating basis so as
to present such Loan Parties and each such related entity separately, and on a
consolidated basis.
Together with the above, Borrowers also shall
deliver to Agent and each Lender any Loan Party's Form 10-Q Quarterly Reports,
Form 10-K Annual Reports, and Form 8-K Current Reports, and any other filings
made by Loan Parties with the Securities and Exchange Commission, if any, as
soon as the same are filed, or any other information that is provided by Loan
Parties to their shareholders, as soon as the same is provided to any such
parties, and any other report reasonably requested by Agent relating to the
financial condition of Loan Parties.
Each month, together with the financial statements
provided pursuant to Section 6.3(a), Borrowers shall deliver to Agent and each
Lender a certificate signed by their respective chief financial officers to the
effect that: (i) all financial statements delivered or caused to be delivered
to Agent hereunder have been prepared in accordance with GAAP (except, in the
case of unaudited financial statements, for the lack of footnotes and being
subject to year-end audit adjustments) and fairly present the financial
condition of Loan Parties, (ii) the representations and warranties of Borrowers
contained in this Agreement and the other Loan Documents are true and correct
in all material respects on and as of the date of such certificate, as though
made on and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date), (iii) for each month that also is
the date on which a financial covenant in Section 7.20 is to be tested, a
Compliance Certificate demonstrating in reasonable detail compliance at the end
of such period with the applicable financial covenants contained in Section
7.20, and (iv) on the date of delivery of such certificate to Agent there does
not exist any condition or event that constitutes a Default or Event of Default
(or, in the case of clauses (i), (ii), or (iii), to the extent of any
non-compliance, describing such non-compliance as to which he or she may have
knowledge and
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what action Borrowers have taken, are taking, or propose to take with respect
thereto).
Loan Parties shall have issued written instructions
to their independent certified public accountants authorizing them to
communicate with Agent and each Lender and to release to Agent and each Lender
whatever financial information concerning Loan Parties that Agent may
reasonably request. Borrowers hereby irrevocably authorize and direct all
auditors, accountants, or other third parties to deliver to Agent and each
Lender, at Borrowers' expense, copies of Loan Parties' financial statements,
papers related thereto, and other accounting records of any nature in their
possession, and to disclose to Agent and each Lender any information they may
have regarding Loan Parties' business affairs and financial conditions.
6.4 TAX RETURNS. Deliver to Agent copies of each of
Borrowers' and the Canadian Subsidiary's future federal income tax returns, and
any amendments thereto, within thirty (30) days of the filing thereof with the
Internal Revenue Service or Revenue Canada, as the case may be.
6.5 GUARANTOR REPORTS. Cause any other guarantor of any
of the Obligations to deliver copies of all future federal income tax returns as
soon as the same are available and in any event no later than thirty (30) days
after the same are required to be filed by law.
6.6 RETURNS. Cause returns and allowances, if any, as between
Borrowers and the Canadian Subsidiary and their Account Debtors to be on the
same basis and in accordance with the usual customary practices of Borrowers
and the Canadian Subsidiary, as they exist at the time of the execution and
delivery of this Agreement. If, at a time when no Event of Default has occurred
and is continuing, any Account Debtor returns any Inventory to a Borrower or
the Canadian Subsidiary, such Borrower promptly shall, or the parents of the
Canadian Subsidiary shall cause the Canadian Subsidiary to, determine the
reason for such return and, if a Borrower or the Canadian Subsidiary accepts
such return, issue, or cause the Canadian Subsidiary to issue, a credit
memorandum (with a copy to be sent to Agent) in the appropriate amount to such
Account Debtor. If, at a time when an Event of Default has occurred and is
continuing, any Account Debtor returns any Inventory to a Borrower or the
Canadian Subsidiary, such Borrower promptly shall, or the parents of the
Canadian Subsidiary shall cause the Canadian Subsidiary to, determine the
reason for such return and, if Agent consents (which consent shall not be
unreasonably withheld), issue, or cause the Canadian Subsidiary to issue, a
credit memorandum (with a copy to be sent to Agent) in the appropriate amount
to such Account Debtor.
6.7 TITLE TO EQUIPMENT. Upon Agent's request, Borrowers
immediately shall deliver to Agent, properly endorsed, any and all evidences of
ownership of, certificates of title, or applications for title to any items
of Equipment.
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6.8 MAINTENANCE OF EQUIPMENT. Maintain the Equipment in good
operating condition and repair (ordinary wear and tear excepted), and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Other than those items
of Equipment that constitute fixtures on the Closing Date, Borrowers shall not
permit any item of Equipment to become a fixture to real estate or an accession
to other property, and such Equipment shall at all times remain personal
property.
6.9 TAXES. Cause all assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against Loan Parties or any of their property to be paid in full, before
delinquency or before the expiration of any extension period, except to the
extent that the validity of such assessment or tax shall be the subject of a
Permitted Protest. Borrowers shall make due and timely payment or deposit of
all such federal, state, and local taxes, assessments, or contributions
required of it by law, and will execute and deliver to Agent, on demand,
appropriate certificates attesting to the payment thereof or deposit with
respect thereto. Borrowers will make timely payment or deposit of all tax
payments and withholding taxes required of them by applicable laws, including
those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state,
and federal income taxes, and will, upon request, furnish Agent with proof
satisfactory to Agent indicating that Borrowers have made such payments or
deposits.
6.10 INSURANCE.
(a) At their expense, keep the Personal
Property Collateral insured against loss or damage by fire, theft, explosion,
sprinklers, and all other insurable hazards and risks, and in such amounts, as
are ordinarily insured against by other owners in similar businesses. Borrowers
also shall maintain business interruption, public liability, product liability,
and property damage insurance relating to Borrowers' ownership and use of the
Personal Property Collateral, as well as insurance against larceny,
embezzlement, and criminal misappropriation.
(b) At its expense, obtain and maintain (i)
insurance of the type necessary to insure the Improvements and chattels (as
described in the Mortgages), for the full replacement cost thereof, against any
loss by fire, lightning, windstorm, hail, explosion, aircraft, smoke damage,
vehicle damage, earthquakes, elevator collision, and other risks from time to
time included under "extended coverage" policies, in such amounts as Agent may
require, but in any event in amounts sufficient to prevent Borrowers from
becoming co-insurers under such policies, (ii) combined single limit bodily
injury and property damages insurance against any loss, liability, or damages
on, about, or relating to each parcel of Real Property Collateral, in such
amount as Agent may require in its discretion; (iii) business rental insurance
covering annual receipts for a 12 month period for each parcel of Real Property
Collateral; and (iv) insurance for such other risks as Agent may
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require. Replacement costs, at Agent's option, may be redetermined by an
insurance appraiser, satisfactory to Agent, not more frequently than once every
12 months at Borrowers' cost.
(c) All such policies of insurance shall be in
such form, with such companies, and in such amounts as may be reasonably
satisfactory to Agent. All insurance required herein shall be written by
companies which are authorized to do insurance business in the State of
California or any other State where the insured assets are located. All hazard
insurance and such other insurance as Agent shall specify, shall contain a
California Form 438BFU (NS) mortgagee endorsement, or an equivalent endorsement
satisfactory to Agent, showing Agent (for the ratable benefit of the Lenders)
as sole loss payee thereof and shall contain a waiver of warranties. Every
policy of insurance referred to in this Section 6.10 shall contain an agreement
by the insurer that it will not cancel such policy except after thirty (30)
days prior written notice to Agent (for the ratable benefit of the Lenders) and
that any loss payable thereunder shall be payable notwithstanding any act or
negligence of Borrowers or the Lender Group which might, absent such agreement,
result in a forfeiture of all or a part of such insurance payment and
notwithstanding (i) occupancy or use of the Real Property Collateral for
purposes more hazardous than permitted by the terms of such policy, (ii) any
foreclosure or other action or proceeding taken by the Lender Group pursuant to
the Mortgages upon the happening of an Event of Default, or (iii) any change in
title or ownership of the Real Property Collateral. Borrowers shall deliver to
Agent certified copies of such policies of insurance and evidence of the
payment of all premiums therefor.
(d) Original policies or certificates thereof
satisfactory to Agent evidencing such insurance shall be delivered to Agent at
least thirty (30) days prior to the expiration of the existing or preceding
policies. Borrowers shall give Agent prompt notice of any loss covered by such
insurance, and Agent, shall have the right to adjust any loss. Agent shall have
the exclusive right to adjust all losses payable under any such insurance
policies without any liability to Borrowers whatsoever in respect of such
adjustments. Any monies received as payment for any loss under any insurance
policy including the insurance policies mentioned above, shall be paid over to
Agent (for the ratable benefit of Lenders) to be applied at the option of Agent
either to the prepayment of the Obligations without premium, in such order or
manner as Agent may elect, or shall be disbursed to Borrowers under stage
payment terms satisfactory to Agent for application to the cost of repairs,
replacements, or restorations. All repairs, replacements, or restorations shall
be effected with reasonable promptness and shall be of a utility at least equal
to the utility of the items or property destroyed prior to such damage or
destruction. Upon the occurrence of an Event of Default, Agent shall have the
right to apply all prepaid premiums to the payment of the Obligations in such
order as set forth in Section 2.4(b) hereof.
(e) Borrowers shall not take out separate
insurance concurrent in form or contributing in the event of loss with that
required to
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be maintained under this Section 6.10, unless Agent is included thereon as
named insured with the loss payable to Agent (for the ratable benefit of
Lenders) under a standard California 438BFU (NS) Mortgagee endorsement, or its
local equivalent. Borrowers immediately shall notify Agent whenever such
separate insurance is taken out, specifying the insurer thereunder and full
particulars as to the policies evidencing the same, and originals of such
policies immediately shall be provided to Agent.
6.11 NO SETOFFS OR COUNTERCLAIMS. Make payments hereunder and
under the other Loan Documents by or on behalf of Borrowers without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any federal, state, or local taxes.
6.12 LOCATION OF INVENTORY AND EQUIPMENT. Keep, and cause the
Canadian Subsidiary to keep, the Inventory of the Borrowers and the Canadian
Subsidiary and Equipment only at the locations identified on Schedule 6.12;
provided, however, that Borrowers may amend Schedule 6.12 so long as such
amendment occurs by written notice to Agent not less than thirty (30) days prior
to the date on which the Inventory or Equipment is moved to such new location,
so long as such new location is within the continental United States and Canada,
and so long as, at the time of such written notification, Borrowers provide any
financing statements or fixture filings necessary to perfect and continue
perfected (the Lien of Agent for the benefit of the Lender Group), security
interests in such assets and also provides to Agent a Collateral Access
Agreement.
6.13 COMPLIANCE WITH LAWS. Comply, and cause the Canadian
Subsidiary to comply, with the requirements of all applicable laws, rules,
regulations, and orders of any governmental authority, including the Fair Labor
Standards Act and the Americans With Disabilities Act, other than laws, rules,
regulations, and orders the non-compliance with which, individually or in the
aggregate, would not have and could not reasonably be expected to cause a
Material Adverse Change.
6.14 EMPLOYEE BENEFITS.
(a) Deliver to Agent: (i) Promptly, and in
any event within ten (10) Business Days after Borrowers or any of their
Subsidiaries know or have reason to know that an ERISA Event has occurred that
reasonably could be expected to result in a Material Adverse Change, a written
statement of the chief financial officer of Borrowers describing such ERISA
Event and any action that is being taking with respect thereto by Borrowers, any
such Subsidiary or ERISA Affiliate, and any action taken or threatened by the
IRS, Department of Labor, or PBGC. Borrowers or such Subsidiary, as applicable,
shall be deemed to know all facts known by the administrator of any Benefit Plan
of which it is the plan sponsor, (ii) promptly, and in any event within three
(3) Business Days after the filing thereof with the IRS, a copy of each funding
waiver request filed with respect to any Benefit Plan and all communications
received by Borrowers, any of their Subsidiaries or, to the knowledge of
Borrowers, any ERISA Affiliate with respect to such request, and (iii) promptly,
and in any event within three (3) Business Days after receipt by Borrowers, any
of their Subsidiaries or, to the
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knowledge of Borrowers, any ERISA Affiliate, of the PBGC's intention to
terminate a Benefit Plan or to have a trustee appointed to administer a Benefit
Plan, copies of each such notice.
(b) Cause to be delivered to Agent, upon Agent's
request, each of the following: (i) a copy of each Plan (or, where any such
plan is not in writing, complete description thereof) (and if applicable,
related trust agreements or other funding instruments) and all amendments
thereto, all written interpretations thereof and written descriptions thereof
that have been distributed to employees or former employees of Loan Parties or
their Subsidiaries; (ii) the most recent determination letter issued by the IRS
with respect to each Benefit Plan; (iii) for the three most recent plan years,
annual reports on Form 5500 Series required to be filed with any governmental
agency for each Benefit Plan; (iv) all actuarial reports prepared for the last
three (3) plan years for each Benefit Plan; (v) a listing of all Multiemployer
Plans, with the aggregate amount of the most recent annual contributions
required to be made by Loan Parties or any ERISA Affiliate to each such plan
and copies of the collective bargaining agreements requiring such
contributions; (vi) any information that has been provided to Loan Parties or
any ERISA Affiliate regarding withdrawal liability under any Multiemployer
Plan; and (vii) the aggregate amount of the most recent annual payments made to
former employees of Loan Parties or their Subsidiaries under any Retiree Health
Plan.
6.15 LEASES. Pay when due all rents and other amounts payable
under any leases to which any Borrower is a party or by which any Borrower's
properties and assets are bound, unless such payments are the subject of a
Permitted Protest. To the extent that any Borrower fails timely to make payment
of such rents and other amounts payable when due under its leases, Agent shall
be entitled, in its discretion, to reserve an amount equal to such unpaid
amounts against the Borrowing Base.
6.16 OTHER LOAN PARTIES. Cause each Loan Party to perform such
Loan Party's covenants under each Loan Document to which such Loan Party is a
party.
7. NEGATIVE COVENANTS.
Borrowers covenant and agree that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrowers will not, and will not permit the Canadian Subsidiary to,
do any of the following:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
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(a) Indebtedness evidenced by this Agreement and the Canadian
Guaranty, together with Indebtedness to issuers of letters of credit that are
the subject of L/C Guarantees;
(b) Indebtedness set forth in the latest financial statements
of Borrowers and the Canadian Subsidiary submitted to Agent on or prior to the
Closing Date;
(c) Indebtedness secured by Permitted Liens;
(d) Intercompany Indebtedness among any of the Borrowers and
the Canadian Subsidiary in accordance with Section 7.14 hereof; and
(e) Refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b), (c), and (d) of this Section 7.1 (and continuance
or renewal of any Permitted Liens associated therewith) so long as: (i) the
terms and conditions of such refinancings, renewals, or extensions do not
materially impair the prospects of repayment of the Obligations by Borrowers or
the Canadian Subsidiary, (ii) the net cash proceeds of such refinancings,
renewals, or extensions do not result in an increase in the aggregate principal
amount of the Indebtedness so refinanced, renewed, or extended, (iii) such
refinancings, renewals, refundings, or extensions do not result in a shortening
of the average weighted maturity of the Indebtedness so refinanced, renewed, or
extended and (iv) to the extent that Indebtedness that is refinanced was
subordinated in right of payment to the Obligations, then the subordination
terms and conditions of the refinancing Indebtedness must be at least as
favorable to the Lender Group as those applicable to the refinanced
Indebtedness.
7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of their property or assets, of
any kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 7.1(e) and so long as the replacement Liens only encumber those assets
or property that secured the original Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation, reorganization, or recapitalization, or reclassify their capital
stock, or liquidate, wind up, or dissolve themselves (or suffer any liquidation
or dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose
of, in one transaction or a series of transactions, all or any substantial part
of its property or assets, or create any new Subsidiary except upon the prior
written consent of Agent, execution by such new Subsidiary of a guaranty
agreement, security agreement and trademark security agreement, all in form and
substance satisfactory to Agent, and execution of a stock pledge agreement by
the applicable Borrower or the Canadian Subsidiary, as the case may be, creating
such Subsidiary, and such other documents as Agent may require in its sole
discretion, all in form and
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substance satisfactory to Agent; provided, however, the Borrowers may cause
Willow Hosiery Company, Inc. to merge into Hutch Sports USA Inc.
7.4 DISPOSAL OF ASSETS. Sell, lease, assign, transfer, or otherwise
dispose of any of Borrowers' or the Canadian Subsidiary's properties or assets
other than sales of Inventory to buyers in the ordinary course of Borrowers'
and the Canadian Subsidiary's business as currently conducted and obsolete
Equipment up to $50,000 per year; provided, however, any proceeds from the sale
of obsolete Equipment shall be paid to the Agent for the account of the Lenders
to be applied to the principal amount of the Fixed Period Loans.
7.5 CHANGE NAME. Change any Borrower's or the Canadian Subsidiary's
name, FEIN, corporate structure (within the meaning of Section 9-402(7) of the
Code), or identity, or add any new fictitious name.
7.6 GUARANTEE. Except for the Canadian Guaranty, guarantee or
otherwise become in any way liable with respect to the obligations of any third
Person except by endorsement of instruments or items of payment for deposit to
the account of Borrowers or which are transmitted or turned over to Agent.
7.7 NATURE OF BUSINESS. Make any change in the principal nature of
Borrowers' or the Canadian Subsidiary's business.
7.8 PAYMENTS, PREPAYMENTS AND AMENDMENTS.
(a) Make any principal or interest payment on Indebtedness to
RDM or any Subsidiary of RDM which is not (i) a Borrower hereunder or (ii) the
Canadian Subsidiary;
(b) Except in connection with a refinancing permitted by
Section 7.1(e), prepay, redeem, retire, defease, purchase, or otherwise acquire
any Indebtedness owing to any third Person, other than the Obligations in
accordance with this Agreement; and
(c) Directly or indirectly, amend, modify, alter, increase, or
change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under Sections 7.1(b), (c), (d), or (e).
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 CONSIGNMENTS. Consign any Inventory or sell any Inventory on
▇▇▇▇ and hold, sale or return, sale on approval, or other conditional terms of
sale.
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7.11 DISTRIBUTIONS. Make any distribution or declare or pay any
dividends (in cash or other property, other than capital stock) on, or purchase,
acquire, redeem, or retire any of Borrowers' capital stock, of any class,
whether now or hereafter outstanding; provided, however, (i) so long as no
Default or Event of Default exists or would be caused thereby, Borrowers may
distribute to RDM an amount equal to the regularly scheduled interest payments
on the Subordinated Debentures as such interest payments are due, plus actual
operating expenses of RDM, which aggregate distribution shall not exceed
$6,000,000 per year and (ii) may make payments on behalf of RDM for
normal, ordinary course of business purposes that may ultimately be expensed to
RDM, but which aggregate payments shall not exceed $3,500,000 per year; provided
further, however, that the Borrowers may cause the Canadian Subsidiary to make
distributions to its parent, International Sports and Fitness, Inc.
7.12 ACCOUNTING METHODS. Modify or change its method of accounting or
enter into, modify, or terminate any agreement currently existing, or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or storage of Borrowers' and the Canadian
Subsidiary's accounting records without said accounting firm or service bureau
agreeing to provide Agent information regarding the Collateral or Borrowers'
financial condition. Borrowers waive the right to assert a confidential
relationship, if any, it may have with any accounting firm or service bureau in
connection with any information requested by Agent pursuant to or in accordance
with this Agreement, and agrees that Agent may contact directly any such
accounting firm or service bureau in order to obtain such information.
7.13 INVESTMENTS. Directly or indirectly make, acquire, or incur any
liabilities (including contingent obligations) for or in connection with (a) the
acquisition of the securities (whether debt or equity) of, or other interests
in, a Person, (b) except for loans to the Canadian Subsidiary, loans, advances,
capital contributions, or transfers of property to a Person, including without
limitation to Roadmaster Ltd. (UK) and AA Funding Corp. which shall remain
inactive Subsidiaries of RDM, or (c) the acquisition of all or substantially all
of the properties or assets of a Person.
7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrowers or the
Canadian Subsidiary except for transactions that are in the ordinary course of
Borrowers' and the Canadian Subsidiary's business, upon fair and reasonable
terms, that are fully disclosed to Agent, and that are no less favorable to
Borrowers or the Canadian Subsidiary than would be obtained in an arm's length
transaction with a non-Affiliate.
7.15 SUSPENSION. Suspend or go out of a substantial portion of its
business.
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7.16 COMPENSATION. Except as provided in Schedule 7.16, increase the
annual fee or per-meeting fees paid to directors during any year by more than
fifteen percent (15%) over the prior year; pay or accrue total cash
compensation, during any year, to officers and senior management employees in an
aggregate amount in excess of one hundred fifteen percent (115%) of that paid or
accrued in the prior year.
7.17 USE OF PROCEEDS. Use the proceeds of the Advances and the Fixed
Period Loans for any purpose other than (a) on the Closing Date, (i) to
repay in full the outstanding principal, accrued interest, and accrued fees and
expenses owing to Existing Lender, and (ii) to pay transactional costs and
expenses incurred in connection with this Agreement, and (b) thereafter,
consistent with the terms and conditions hereof, for their lawful and permitted
corporate purposes.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Relocate their chief executive offices to a new location
without providing thirty (30) days prior written notification thereof to Agent
and so long as, at the time of such written notification, Borrowers and the
Canadian Subsidiary provide any financing statements or fixture filings
necessary to perfect and continue perfected the Lien of Agent (for the benefit
of the Lender Group) and also provides to Agent a Collateral Access Agreement
with respect to such new location. The Inventory of the Borrowers and the
Canadian Subsidiary and Equipment shall not at any time now or hereafter be
stored with a bailee, warehouseman, or similar party without Agent's prior
written consent.
7.19 NO PROHIBITED TRANSACTIONS UNDER ERISA. Directly or indirectly:
(a) engage, or permit any other Loan Party or any Subsidiary
of any Loan Party to engage, in any prohibited transaction which is reasonably
likely to result in a civil penalty or excise tax described in Sections 406 of
ERISA or 4975 of the IRC for which a statutory or class exemption is not
available or a private exemption has not been previously obtained from the
Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;
(c) fail, or permit any other Loan Party or any Subsidiary of
any Loan Party to fail, to pay timely required contributions or annual
installments due with respect to any waived funding deficiency to any Benefit
Plan;
(d) terminate, or permit any other Loan Party or any
Subsidiary of any Loan Party to terminate, any Benefit Plan where such event
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would result in any liability of any Borrower, any other Loan Party or any
Subsidiary of any Loan Party or any ERISA Affiliate under Title IV of ERISA;
(e) fail, or permit any other Loan Party or any Subsidiary of
any Loan Party to fail, to make any required contribution or payment to any
Multiemployer Plan;
(f) fail, or permit any other Loan Party or any Subsidiary of
any Loan Party to fail, to pay any required installment or any other payment
required under Section 412 of the IRC on or before the due date for such
installment or other payment;
(g) amend, or permit any other Loan Party or any Subsidiary of
any Loan Party to amend, a Plan resulting in an increase in current liability
for the plan year such that either of any Borrower, any other Loan Party or any
Subsidiary of any Loan Party or any ERISA Affiliate is required to provide
security to such Plan under Section 401(a)(29) of the IRC; or
(h) withdraw, or permit any other Loan Party or any Subsidiary
of any Loan Party to withdraw, from any Multiemployer Plan where such withdrawal
is reasonably likely to result in any liability of any such entity under Title
IV of ERISA;
which, individually or in the aggregate, results in or reasonably would
be expected to result in a claim against or liability of Loan Parties, any of
their Subsidiaries or any ERISA Affiliate in excess of $50,000.
7.20 FINANCIAL COVENANTS. Fail to maintain:
(a) Current Ratio. A ratio of Consolidated Current Assets
divided by the sum of (i) Consolidated Current Liabilities plus (ii) issued and
outstanding Letters of Credit of at least the ratio set forth in the table below
as of the date opposite such ratio, measured on a fiscal quarter-end basis;
As of: Minimum Ratio
------ -------------
June 30, 1997 0.792:1.0
September 30, 1997 0.778:1.0
December 31, 1997 0.946:1.0
March 31, 1998 0.926:1.0
June 30, 1998 0.889:1.0
September 30, 1998 0.861:1.0
December 31, 1998 0.952:1.0
March 31, 1999 0.937:1.0
June 30, 1999 0.908:1.0
September 30, 1999 0.892:1.0
December 31, 1999 0.960:1.0
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March 31, 2000 0.997:1.0
(b) Total Liabilities to Tangible Net Worth Ratio. A ratio of
Borrowers' (i) total liabilities plus issued and outstanding Letters of Credit
divided by (ii) Tangible Net Worth of the ratio set forth in the table below as
of the date opposite such ratio or less, measured on a fiscal quarter-end basis;
As of: Maximum Ratio
------ -------------
June 30, 1997 53.446:1.0
September 30, 1997 60.626:1.0
December 31, 1997 16.806:1.0
March 31, 1998 24.762:1.0
June 30, 1998 50.363:1.0
September 30, 1998 37.380:1.0
December 31, 1998 16.374:1.0
March 31, 1999 21.057:1.0
June 30, 1999 30.931:1.0
September 30, 1999 24.279:1.0
December 31, 1999 13.694:1.0
March 31, 2000 and 11.784:1.0
thereafter
(c) Tangible Net Worth. Tangible Net Worth of at least the
amount set forth in the table below as of the date opposite such amount,
measured on a fiscal quarter-end basis; and
As of: Minimum Amount
------ --------------
June 30, 1997 $4,409,000
September 30, 1997 4,291,000
December 31, 1997 15,609,000
March 31, 1998 9,624,000
June 30, 1998 4,513,000
September 30, 1998 6,848,000
December 31, 1998 15,415,000
March 31, 1999 11,023,000
June 30, 1999 7,290,000
September 30, 1999 10,474,000
December 31, 1999 19,763,000
March 31, 2000 and 19,678,000
thereafter
7.21 CAPITAL EXPENDITURES. Make capital expenditures in any
fiscal year in excess of $5,000,000.
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7.22 MANAGEMENT. Cease to employ the president, chief
executive officer, chief operating officer or the chief financial officer in
office as of the Closing Date or such other individuals acceptable to Foothill
in its reasonable discretion.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an
event of default (each, an "Event of Default") under this Agreement:
8.1 If Borrowers fail to pay when due and payable or when
declared due and payable, any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts), fees and charges due the Lender
Group, reimbursement of Lender Group Expenses, or other amounts constituting
Obligations);
8.2 (a) If Borrowers fail or neglect to perform, keep, or
observe any term, provision, condition, covenant, or agreement contained in
Sections 6.2 (Collateral Reporting), 6.3 (Financial Statements, Reports,
Certificates), 6.4 (Tax Returns), 6.7 (Title to Equipment), 6.12 (Location of
Inventory and Equipment), 6.13 (Compliance with Laws), 6.14 (Employee Benefits),
or 6.15 (Leases) of this Agreement and such failure continues for a period of
five (5) Business Days; (b) if Borrowers fail or neglect to perform, keep, or
observe any term, provision, condition, covenant, or agreement contained in
Sections 6.1 (Accounting System) or 6.8 (Maintenance of Equipment) of this
Agreement and such failure continues for a period of fifteen (15) Business Days;
or (c) If Borrowers or any other Loan Party fail or neglect to perform, keep, or
observe any other term, provision, condition, covenant, or agreement contained
in this Agreement, or in any of the other Loan Documents (giving effect to any
grace periods, cure periods, or required notices, if any, expressly provided for
in such Loan Documents); in each case, other than any such term, provision,
condition, covenant, or agreement that is the subject of another provision of
this Section 8, (in which event such other provision of this Section 8 shall
govern); provided that, during any period of time that any such failure or
neglect of Borrowers or such other Loan Party referred to in this paragraph
exists, even if such failure or neglect is not yet an Event of Default by virtue
of the existence of a grace or cure period or the pre-condition of the giving of
a notice, Lenders shall not be required during such period to make Advances to
Borrowers or issue Letters of Credit for the account of Borrowers.
8.3 If there is a Material Adverse Change;
8.4 If any material portion of any Loan Party's properties or
assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any third Person;
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8.5 If any Loan Party shall admit its insolvency or make a
proposal or a general assignment for the benefit of creditors, or any Loan Party
commences an Insolvency Proceeding or any other proceeding seeking appointment
of a receiver, receiver and manager, trustee, custodian or other similar
official for it or any substantial part of its property and assets or any Loan
Party shall take any corporate action to authorize any of the actions set forth
in this Section 8.5.
8.6 If any Insolvency Proceeding or any proceeding seeking
appointment of a receiver, receiver and manager, trustee, custodian or similar
official for a Loan Party or for any substantial part of its property and assets
is commenced against any Loan Party and any of the following events occur: (a)
such Loan Party consents to or acquiesces in the institution of the Insolvency
Proceeding against it; (b) the petition commencing the Insolvency Proceeding is
not timely controverted; (c) the petition commencing the Insolvency Proceeding
is not or is no longer being contested in good faith by appropriate proceedings
or is not dismissed within sixty (60) calendar days of the date of the filing
thereof; provided, however, that, during the pendency of such period, the Lender
Group shall be relieved of its obligation to extend credit hereunder; (d) an
interim trustee is appointed to take possession of all or a substantial portion
of the properties or assets of, or to operate all or any substantial portion of
the business of, such Loan Party; or (e) an order for relief shall have been
issued or entered therein;
8.7 If any Loan Party is enjoined, restrained, or in any way
prevented by court order from continuing to conduct all or any material part of
its business affairs;
8.8 If a notice of Lien, levy, or assessment is filed of
record with respect to any of Loan Parties' properties or assets by the United
States Government or the Government of Canada, or any department, agency, or
instrumentality thereof, or by any state, provincial, county, municipal, or
governmental agency, or if any taxes or debts owing at any time hereafter to any
one or more of such entities becomes a Lien, whether ▇▇▇▇▇▇ or otherwise, upon
any of Loan Parties' properties or assets and the same is not paid on the
payment date thereof;
8.9 If a judgment or other claim becomes a Lien or encumbrance
upon any material portion of Loan Parties' properties or assets;
8.10 If there is a default in any material agreement to which
any Loan Party is a party with one or more third Persons and such default (a)
occurs at the final maturity of the obligations thereunder, or (b) results in a
right by such third Person(s), irrespective of whether exercised, to accelerate
the maturity of such Loan Party's obligations thereunder;
8.11 If any Borrower makes any payment on account of
Indebtedness that has been contractually subordinated in right of payment to
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the payment of the Obligations, except to the extent such payment is permitted
by the terms of the subordination provisions applicable to such Indebtedness;
8.12 If any misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to the
Lender Group by any Loan Party or any officer, employee, agent, or director of
any Loan Party, or if any such warranty or representation is withdrawn; or
8.13 If the obligation of any guarantor under its guaranty or
other third Person under any Loan Document is limited or terminated by
operation of law or by the guarantor or other third Person thereunder, or any
such guarantor or other third Person becomes the subject of an Insolvency
Proceeding.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default Agent may (at the direction of the Required
Lenders or at the Agent's discretion if the Lenders cannot reach the Required
Lenders vote to either direct the Agent to exercise or to refrain from
exercising the Lender Group's rights and remedies hereunder), pursuant to
Sections 17.4 and 17.5, without notice of its election and without demand, do
any one or more of the following, all of which are authorized by Borrowers:
(a) Declare all Obligations, whether evidenced by
this Agreement or by any of the other Loan Documents, immediately due and
payable; provided, however, notwithstanding anything herein to the contrary,
upon an Event of Default described in Section 8.5 or Section 8.6, all
Obligations shall immediately be due and payable;
(b) Cease advancing money or extending credit to or
for the benefit of Borrowers under this Agreement, under any of the Loan
Documents, or under any other agreement between any Borrower and the Lender
Group;
(c) Terminate this Agreement and any of the other
Loan Documents as to any future liability or obligation of the Lender Group, but
without affecting the Lender Group's rights and security interests in the
Personal Property Collateral or the Real Property Collateral and without
affecting the Obligations;
(d) Settle or adjust disputes and claims directly
with Account Debtors for amounts and upon terms which Agent considers advisable,
and in such cases, Agent will credit Borrowers' Loan Account with only the net
amounts received by Agent in payment of such disputed Accounts after deducting
all Lender Group Expenses incurred or expended in connection therewith;
(e) Cause Borrowers to hold all returned Inventory in
trust for the Lender Group, segregate all returned Inventory from all other
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property of Borrowers or in Borrowers' possession and conspicuously label said
returned Inventory as the property of the Lender Group;
(f) Without notice to or demand upon Borrowers or any
guarantor, make such payments and do such acts as Agent considers necessary or
reasonable to protect its security interests in the Collateral. Borrowers agree
to assemble the Personal Property Collateral or any part of it if Agent so
requires, and to make the Personal Property Collateral available to Agent as
Agent may designate. Borrowers authorize Agent to enter the premises where the
Personal Property Collateral is located, to take and maintain possession of the
Personal Property Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or Lien that in Agent's determination
appears to conflict with the Liens of Agent (for the benefit of the Lender
Group) in the Collateral and to pay all expenses incurred in connection
therewith. With respect to any of Borrowers' owned or leased premises, Borrowers
hereby grant Agent a license to enter into possession of such premises and to
occupy the same, without charge, for up to one hundred twenty (120) days in
order to exercise any of the Lender Group's rights or remedies provided herein,
at law, in equity, or otherwise;
(g) Without notice to Borrowers (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9-505 of the Code),
set off and apply to the Obligations any and all (i) balances and deposits of
Borrowers held by the Lender Group (including any amounts received in the
Lockbox Accounts), or (ii) indebtedness at any time owing to or for the credit
or the account of Borrowers held by the Lender Group;
(h) Hold, as cash collateral, any and all balances
and deposits of Borrowers held by the Lender Group, and any amounts received in
the Lockbox Accounts, to secure the full and final repayment of all of the
Obligations;
(i) Seek the appointment of a receiver or keeper to
take possession of the Collateral and to enforce any of Agent's remedies with
respect to such appointment without prior notice or hearing;
(j) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Personal Property Collateral. Agent is hereby granted a license
or other right to use, without charge, Borrowers' labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it
pertains to the Personal Property Collateral, in completing production of,
advertising for sale, and selling any Personal Property Collateral and
Borrowers' rights under all licenses and all franchise agreements shall inure to
the Lender Group's benefit;
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(k) Sell the Personal Property Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places
(including Borrowers' premises) as Agent determines is commercially reasonable.
It is not necessary that the Personal Property Collateral be present at any
such sale;
(l) Agent shall give notice of the disposition of the
Personal Property Collateral as follows:
(A) Agent shall give Borrowers and each holder
of a security interest in the Personal Property Collateral who has filed with
Agent a written request for notice, a notice in writing of the time and place of
public sale, or, if the sale is a private sale or some other disposition other
than a public sale is to be made of the Personal Property Collateral, then the
time on or after which the private sale or other disposition is to be made;
(B) The notice shall be personally delivered or
mailed, postage prepaid, to Borrowers as provided in Section 12, at least ten
(10) days before the date fixed for the sale, or at least ten (10) days before
the date on or after which the private sale or other disposition is to be made;
no notice needs to be given prior to the disposition of any portion of the
Personal Property Collateral that is perishable or threatens to decline speedily
in value or that is of a type customarily sold on a recognized market. Notice to
Persons other than Borrowers claiming an interest in the Personal Property
Collateral shall be sent to such addresses as they have furnished to Agent;
(C) If the sale is to be a public sale, Agent
also shall give notice of the time and place by publishing a notice as required
by applicable law;
(m) Agent may credit bid and purchase at any
public sale; and
(n) Any deficiency that exists after disposition
of the Personal Property Collateral as provided above will be paid immediately
by Borrowers. Any excess will be returned, without interest and subject to the
rights of third Persons, by Agent to Borrowers.
9.2 REMEDIES CUMULATIVE. The Lender Group's rights and
remedies under this Agreement, the Loan Documents, and all other agreements
shall be cumulative. The Lender Group shall have all other rights and remedies
not inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the Lender Group of any Event of Default shall be deemed a
continuing waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.
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10. TAXES AND EXPENSES.
If Borrowers fail to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or assets,
rents or other amounts payable under such leases) due to third Persons, or fail
to make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Agent
determines that such failure by Borrowers could result in a Material Adverse
Change, in its discretion and without prior notice to Borrowers, Agent may do
any or all of the following: (a) make payment of the same or any part thereof;
(b) set up such reserves in Borrowers' Loan Account as Agent deems necessary to
protect the Lender Group from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type described in Section 6.10,
and take any action with respect to such policies as Agent deems prudent. Any
such amounts paid by Agent shall constitute Lender Group Expenses. Any such
payments made by Agent shall not constitute an agreement by the Lender Group to
make similar payments in the future or a waiver by the Lender Group of any Event
of Default under this Agreement. Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Borrowers waive demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, nonpayment at maturity, release, compromise, settlement, extension,
or renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by the Lender Group on which Borrowers may in any way be liable.
11.2 THE LENDER GROUP'S LIABILITY FOR COLLATERAL. So long as
the Lender Group complies with its obligations, if any, under Section 9-207 of
the Code, the Lender Group shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person. All risk of loss,
damage, or destruction of the Collateral shall be borne by Borrowers.
11.3 INDEMNIFICATION. Borrowers, jointly and severally, shall
pay, indemnify, defend, and hold each Agent-Related Person, each Lender, each
Participant, and each of their respective officers, directors, employees,
counsel, agents, and attorneys-in-fact (each, an "Indemnified Person") harmless
(to the fullest extent permitted by law) from and against any and all claims,
demands, suits, actions, investigations, proceedings, and damages, and all
reasonable attorneys fees and disbursements and other costs and expenses
actually incurred in connection therewith (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against,
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imposed upon, or incurred by any of them in connection with or as a result of
or related to the execution, delivery, enforcement, performance, and
administration of this Agreement and any other Loan Documents or the
transactions contemplated herein, and with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event
or circumstance in any manner related thereto (all the foregoing, collectively,
the "Indemnified Liabilities"). Borrowers shall have no obligation to any
Indemnified Person under this Section 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other Loan Document shall
be in writing and (except for financial statements and other informational
documents which may be sent by first-class mail, postage prepaid) shall be
personally delivered or sent by registered or certified mail (postage prepaid,
return receipt requested), overnight courier, or telefacsimile to Borrowers or
to Agent, as the case may be, at its address set forth below:
IF TO BORROWERS: RDM SPORTS GROUP, INC.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇. ▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
RDM SPORTS GROUP, INC
▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇. ▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
WITH COPIES TO: ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
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IF TO AGENT OR THE FOOTHILL CAPITAL CORPORATION
LENDER GROUP IN CASE 11111 Santa ▇▇▇▇▇▇ Boulevard
OF AGENT: ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Business Finance Division Manager
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
WITH COPIES TO: PAUL, HASTINGS, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III, Esq.
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other. All notices or demands sent in accordance with this Section 12, other
than notices by Agent in connection with Sections 9-504 or 9-505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or three
(3) days after the deposit thereof in the mail. Borrowers acknowledge and agree
that notices sent by Agent in connection with Sections 9-504 or 9-505 of the
Code shall be deemed sent when deposited in the mail or personally delivered,
or, where permitted by law, transmitted telefacsimile or other similar method
set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE
RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING
HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY
IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF ▇▇▇▇▇▇, STATE OF
GEORGIA OR, AT THE SOLE OPTION OF THE LENDER GROUP, IN ANY OTHER COURT IN WHICH
THE LENDER GROUP SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS
SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH BORROWER AND
EACH MEMBER OF THE LENDER GROUP WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 13. EACH BORROWER AND EACH MEMBER OF THE LENDER
GROUP HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH
BORROWER AND EACH MEMBER OF THE LENDER GROUP REPRESENTS THAT IT HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY
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WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT. 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
REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO SUCH BORROWER AT ITS
ADDRESS SET FORTH IN SECTION 12 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED SIX (6) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S.
MAILS, OR, AT AGENT'S OPTION, BY SERVICE UPON ▇▇▇▇▇ ▇▇▇▇▇▇, RDM SPORTS GROUP,
INC., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇. ▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, WHICH
SUCH BORROWER IRREVOCABLY APPOINTS AS ITS AGENT FOR THE PURPOSE OF ACCEPTING
SERVICE OF PROCESS WITHIN THE STATE OF GEORGIA, OR SUCH SUBSTITUTE AGENT FOR
SUCH PURPOSE OF WHICH SUCH BORROWER SHALL NOTIFY AGENT IN WRITING. IN ADDITION,
AGENT AGREES TO PROMPTLY FORWARD BY REGISTERED MAIL ANY PROCESS SO SERVED UPON
SAID AGENT TO SUCH BORROWER AT ITS ADDRESS SET FORTH BELOW. EACH BORROWER HEREBY
CONSENTS TO SERVICE OF PROCESS AS AFORESAID.
14. DESTRUCTION OF BORROWERS' DOCUMENTS.
Except for Negotiable Collateral, all documents, schedules,
invoices, agings, or other papers delivered to Agent may be destroyed or
otherwise disposed of by Agent four (4) months after they are delivered to or
received by Agent, unless Borrowers request in writing, the return of said
documents, schedules, or other papers and makes arrangements, at Borrowers'
expense, for their return.
15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
15.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Any Lender may, with the written consent of
Agent, assign and delegate to one or more Eligible Transferees (each an
"Assignee") all, or any ratable part, of the Obligations, the Commitments, and
the other rights and obligations of such Lender hereunder and under the other
Loan Documents, in a minimum amount of $7,500,000; provided, however, that so
long as Foothill Capital Corporation is the Agent hereunder, it shall retain a
minimum Commitment hereunder of $20,000,000; provided further, however, that
Borrowers and Agent may continue to deal solely and directly with such Lender
in connection with the interest so assigned to an Assignee until (i) written
notice of such assignment, together with payment instructions, addresses, and
related information with respect to the Assignee, shall have been given to
Borrowers and Agent by such Lender and the Assignee; (ii) such Lender and its
Assignee shall have delivered to Borrowers and Agent a fully executed
Assignment and Acceptance ("Assignment and Acceptance") in the form of Exhibit
A-1; and (iii) the Assignee has paid to Agent for Agent's sole and separate
account a processing fee in the amount of $2,500. Anything contained herein to
the contrary notwithstanding, the consent of Agent shall not be required (and
payment of any fees shall not be required) if such assignment is in connection
with any merger, consolidation, sale, transfer, or other
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disposition of all or any substantial portion of the business or loan portfolio
of such Lender.
(b) From and after the date that Agent notifies the
assignor Lender that it has received a fully executed Assignment and Acceptance
and payment of the above-referenced processing fee, (i) the Assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, shall have
the rights and obligations of a Lender under the Loan Documents, and (ii) the
assignor Lender shall, to the extent that rights and obligations hereunder and
under the other Loan Documents have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement and the other Loan Documents, such Lender
shall cease to be a party hereto and thereto), and such assignment shall effect
a novation between Borrowers and the Assignee.
(c) By executing and delivering an Assignment and
Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm
to and agree with each other and the other parties hereto as follows: (1) other
than as provided in such Assignment and Acceptance, such assigning Lender makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties, or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency, or value of this Agreement or any other Loan Document furnished
pursuant hereto; (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrowers or any guarantor or the performance or observance by Borrowers or any
guarantor of any of its obligations under this Agreement or any other Loan
Document furnished pursuant hereto; (3) such Assignee confirms that it has
received a copy of this Agreement, together with such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (4) such Assignee will,
independently and without reliance upon Agent, such assigning Lender, or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (5) such Assignee appoints and
authorizes Agent to take such action as agent on its behalf and to exercise such
powers under this Agreement as are delegated to Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and (6) such
Assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(d) Immediately upon each Assignee's making its
processing fee payment under the Assignment and Acceptance, this Agreement shall
be deemed to be amended to the extent, but only to the extent, necessary
to reflect the addition of the Assignee and the resulting adjustment of the
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Commitments of the Assignor and Assignee arising therefrom. The Commitment
allocated to each Assignee shall reduce such Commitment of the assigning Lender
pro tanto.
(e) Any Lender may at any time, with the written
consent of Agent, which consent shall not be unreasonably withheld, sell to one
or more Persons (a "Participant") participating interests in the Obligations,
the Commitment, and the other rights and interests of that Lender (the
"Originating Lender") hereunder and under the other Loan Documents; provided,
however, that (i) the Originating Lender's obligations under this Agreement
shall remain unchanged, (ii) the Originating Lender shall remain solely
responsible for the performance of such obligations, (iii) Borrowers and Agent
shall continue to deal solely and directly with the Originating Lender in
connection with the Originating Lender's rights and obligations under this
Agreement and the other Loan Documents, (iv) no Originating Lender shall
transfer or grant any participating interest under which the Participant has the
sole and exclusive right to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the extent
such amendment to, or consent or waiver with respect to, this Agreement or of
any other Loan Document would (A) extend the final maturity date of the
Obligations hereunder in which such participant is participating; (B) reduce the
interest rate applicable to the Obligations hereunder in which such Participant
is participating; (C) release all or a material portion of the Collateral
(except to the extent expressly provided herein or in any of the Loan Documents)
supporting the Obligations hereunder in which such Participant is participating;
(D) postpone the payment of, or reduce the amount of, the interest or fees
hereunder in which such Participant is participating; or (E) change the amount
or due dates of scheduled principal repayments or prepayments or premiums in
respect of the Obligations hereunder in which such Participant is participating;
and (v) all amounts payable by Borrowers hereunder shall be determined as if
such Originating Lender had not sold such participation; except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement; provided, however, that no Participant may exercise
any such right of setoff without the notice to and consent of Agent. The rights
of any Participant shall only be derivative through the Originating Lender with
whom such Participant participates and no Participant shall have any direct
rights as to the other Lenders, Agent, Borrowers, the Collections, the
Collateral, or otherwise in respect of the Advances, the Letters of Credit or
the Fixed Period Loans. No Participant shall have the right to participate
directly in the making of decisions by the Lenders among themselves. The
provisions of this Section 15.1(e) are solely for the benefit of the Lender
Group, and Borrowers shall have no rights as a third party beneficiary of any of
such provisions.
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(f) In connection with any such assignment or
participation or proposed assignment or participation, a Lender may disclose to
a third party all documents and information which it now or hereafter may have
relating to Borrowers or Borrowers' business.
(g) Notwithstanding any other provision in this
Agreement, any Lender may at any time create a security interest in, or pledge,
all or any portion of its rights under and interest in this Agreement in favor
of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S.
Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
15.2 SUCCESSORS. This Agreement shall bind and inure to the
benefit of the respective successors and assigns of each of the parties;
provided, however, that Borrowers may not assign this Agreement or any rights or
duties hereunder without the Lenders' prior written consent and any prohibited
assignment shall be absolutely void. No consent to assignment by the Lenders
shall release Borrowers from their Obligations. A Lender may assign this
Agreement and its rights and duties hereunder pursuant to Section 15.1 and,
except as expressly required pursuant to Section 15.1, no consent or approval by
Borrowers is required in connection with any such assignment.
16. AMENDMENTS; WAIVERS.
16.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by Borrowers therefrom, shall be effective unless the
same shall be in writing and signed by the Required Lenders (or by Agent at the
written request of the Required Lenders) (or with respect to Section 2.1(m)
hereof, the Super-Majority Lenders (or by Agent at the written request of the
Super-Majority Lenders)) and Borrowers and then any such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that no such waiver, amendment, or consent
shall, unless in writing and signed by all the Lenders and Borrowers and
acknowledged by Agent, do any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this
Agreement or any other Loan Document for any payment of principal, interest,
fees, or other amounts due to the Lenders (or any of them) hereunder or under
any other Loan Document;
(c) reduce the principal of, or the rate of interest
specified herein on, any Advance or Fixed Period Loan, or any fees or other
amounts payable hereunder or under any other Loan Document;
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(d) change the percentage of the Commitments or of
the aggregate unpaid principal amount of the Advances and Fixed Period Loans
which is required for the Lenders or any of them to take any action hereunder;
(e) increase the advance rate with respect to
Advances, (except with respect to any change in the eligibility requirements of
Accounts and Inventory in such a way as to effectively increase the advance rate
with respect to Advances which change shall require the consent of the Required
Lenders and except for the restoration of an advance rate after the prior
reduction thereof), or change Section 2.1(b);
(f) amend this Section or any provision of the
Agreement providing for consent or other action by all Lenders;
(g) release Collateral other than as permitted by
Section 17.11;
(h) change the definition of "Required Lenders" or
"Super-Majority Lenders";
(i) release Borrowers from any Obligation for the
payment of money; or
(j) amend any of the provisions of Article 17.
and, provided further, that no amendment, waiver or consent shall,
unless in writing and signed by Agent, affect the rights or duties of Agent
under this Agreement or any other Loan Document; and, provided further, that the
limitation contained in clause (e) above shall not be deemed to limit the
ability of Agent to make Advances or Agent Loans, as applicable, in accordance
with the provisions of Sections 2.1(g), (h), or (l). The foregoing
notwithstanding, any amendment, modification, waiver, consent, termination, or
release of or with respect to any provision of this Agreement or any other Loan
Document that relates only to the relationship of the Lender Group among
themselves, and that does not affect the rights or obligations of Borrowers,
shall not require consent by or the agreement of Borrowers.
16.2 NO WAIVERS; CUMULATIVE REMEDIES. No failure by Agent or
any Lender to exercise any right, remedy, or option under this Agreement, any
other Loan Document, or any present or future supplement hereto or thereto, or
in any other agreement between or among Borrowers and Agent and/or any Lender,
or delay by Agent or any Lender in exercising the same, will operate as a
waiver thereof. No waiver by Agent or any Lender will be effective unless it is
in writing, and then only to the extent specifically stated. No waiver by Agent
or the Lenders on any occasion shall affect or diminish Agent's and each
Lender's rights thereafter to require strict performance by Borrowers of any
provision of this Agreement. Agent's and each Lender's rights under this
Agreement and the other Loan Documents will be cumulative and not exclusive of
any other right or remedy which Agent or any Lender may have.
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17. AGENT; THE LENDER GROUP.
17.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender
hereby designates and appoints Foothill as its Agent under this Agreement and
the other Loan Documents and each Lender hereby irrevocably authorizes Agent to
take such action on its behalf under the provisions of this Agreement and each
other Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto. Agent
agrees to act as such on the express conditions contained in this Article 17.
The provisions of this Article 17 are solely for the benefit of Agent and the
Lenders, and Borrowers shall not have any rights as third party beneficiaries
of any of the provisions contained herein; provided, however, that the
provisions of Sections 17.10, 17.11, and 17.16(d) also shall be for the benefit
of Borrowers. Any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document notwithstanding, Agent shall not have
any duties or responsibilities, except those expressly set forth herein, nor
shall Agent have or be deemed to have any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations, or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against Agent. Except as expressly otherwise
provided in this Agreement, Agent shall have and may use its sole discretion
with respect to exercising or refraining from exercising any discretionary
rights or taking or refraining from taking any actions which Agent is expressly
entitled to take or assert under or pursuant to this Agreement and the other
Loan Documents, including making the determinations contemplated by Section
2.1(b). Except as otherwise specifically provided in this Agreement and without
limiting the generality of any of the foregoing, or of any other provision of
the Loan Documents that provides rights or powers to Agent, Lenders agree that
Agent shall have the right to exercise the following powers as long as this
Agreement remains in effect: (a) maintain, in accordance with its customary
business practices, ledgers and records reflecting the status of the Advances
and the Fixed Period Loans, the Collateral, the Collections, and related
matters; (b) execute and/or file any and all financing or similar statements or
notices, amendments, renewals, supplements, documents, instruments, proofs of
claim for Lenders, notices and other written agreements with respect to the
Loan Documents; (c) make Advances for itself or on behalf of Lenders as
provided in the Loan Documents; (d) exclusively receive, apply, and distribute
the Collections as provided in the Loan Documents; (e) open and maintain such
bank accounts and lock boxes as Agent deems necessary and appropriate in
accordance with the Loan Documents for the foregoing purposes with respect to
the Collateral and the Collections; (f) perform, exercise, and enforce any and
all other rights and remedies of the Lender Group with respect to Borrowers,
the Advances, the Fixed Period Loans, the Collateral, the Collections, or
otherwise related to any of same as provided in the Loan Documents; and (g)
incur and pay such Lender Group Expenses as Agent may deem necessary or
appropriate for the performance and fulfillment of its functions and powers
pursuant to the Loan Documents.
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17.2 DELEGATION OF DUTIES. Except as otherwise provided in
this Section, Agent may execute any of its duties under this Agreement or any
other Loan Document by or through agents, employees, or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. Agent shall not be responsible for the negligence or misconduct of any
agent or attorney-in-fact that it selects as long as such selection was made in
compliance with this Section and without gross negligence or willful misconduct.
The foregoing notwithstanding, Agent shall not make any material delegation of
duties to subagents or non-employee delegees without the prior written consent
of Required Lenders (it being understood that routine delegation of such
administrative matters as filing financing statements, or conducting appraisals
or audits, is not viewed as a material delegation that requires prior Required
Lender approval).
17.3 LIABILITY OF AGENT-RELATED PERSONS. None of the
Agent-Related Persons shall (i) be liable for any action taken or omitted to be
taken by any of them under or in connection with this Agreement or any other
Loan Document or the transactions contemplated hereby (except for its own gross
negligence or willful misconduct), or, (ii) be responsible in any manner to any
of the Lenders for any recital, statement, representation or warranty made by
Borrowers, or any Subsidiary or Affiliate of Borrowers, or any officer or
director thereof, contained in this Agreement or in any other Loan Document, 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
other Loan Document, or the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document, or for any failure
of Borrowers or any other party to any Loan Document to perform their
obligations hereunder or thereunder. No Agent-Related Person shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books, or
records of Borrowers, or any of Borrowers' Subsidiaries or Affiliates.
17.4 RELIANCE BY AGENT. Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex, or
telephone message, statement or other document or conversation believed by it to
be genuine and correct and to have been signed, sent, or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to Borrowers or counsel to any Lender), independent accountants, and
other experts selected by Agent. Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless it shall first receive such advice or concurrence of the Required
Lenders or all Lenders, as applicable, and until such instructions are received,
Agent shall act, or refrain from acting, as it deems advisable so long as it is
not grossly negligent or guilty of wilful misconduct. If Agent so requests, it
shall first be indemnified to its reasonable satisfaction by Lenders against any
and all liability and expense which may be incurred by it
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by reason of taking or continuing to take any such action. Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
the Required Lenders or all Lenders, as applicable, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all of the
Lenders.
17.5 NOTICE OF DEFAULT OR EVENT OF DEFAULT. Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest,
fees, and expenses required to be paid to Agent for the account of Agent or the
Lenders, except with respect to actual knowledge of the existence of an
Overadvance, and except with respect to Defaults and Events of Default of which
Agent has actual knowledge, unless Agent shall have received written notice from
a Lender or Borrowers referring to this Agreement, describing such Default or
Event of Default, and stating that such notice is a "notice of default." Agent
promptly will notify the Lenders of its receipt of any such notice or of any
Event of Default of which Agent has, or is deemed to have, actual knowledge. If
any Lender obtains actual knowledge of any Event of Default, such Lender
promptly shall notify the other Lenders and Agent of such Event of Default. Each
Lender shall be solely responsible for giving any notices to its Participants,
if any. Subject to Section 17.4, Agent shall take such action with respect to
such Default or Event of Default as may be requested by the Required Lenders;
provided, however, that:
(a) At all times, Agent may propose and, with the
consent of Required Lenders (which shall not be unreasonably withheld and which
shall be deemed to have been given by a Lender unless such Lender has notified
Agent to the contrary in writing within three (3) Business Days of notification
of such proposed actions by Agent) exercise, any remedies on behalf of the
Lender Group; and
(b) At all times, once Required Lenders or all
Lenders, as the case may be, have approved the exercise of a particular remedy
or pursuit of a course of action, Agent may, but shall not be obligated to, make
all administrative decisions in connection therewith or take all other actions
reasonably incidental thereto (for example, if the Required Lenders approve the
foreclosure of certain Collateral, Agent shall not be required to seek consent
for the administrative aspects of conducting such sale or handling of such
Collateral).
17.6 CREDIT DECISION. Each Lender acknowledges that none of
the Agent-Related Persons has made any representation or warranty to it, and
that no act by Agent hereinafter taken, including any review of the affairs of
Borrowers and their Subsidiaries or Affiliates, shall be deemed to constitute
any representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and
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investigation into the business, prospects, operations, property, financial and
other condition, and creditworthiness of Borrowers and any other Person (other
than the Lender Group) party to a Loan Document, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to Borrowers.
Each Lender also represents that it will, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals, and decisions in taking or not taking action under this Agreement
and the other Loan Documents, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations, property,
financial and other condition, and creditworthiness of Borrowers, and any other
Person (other than the Lender Group) party to a Loan Document. Except for
notices, reports, and other documents expressly herein required to be furnished
to the Lenders by Agent, Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
prospects, operations, property, financial and other condition, or
creditworthiness of Borrowers, and any other Person party to a Loan Document
that may come into the possession of any of the Agent-Related Persons.
17.7 COSTS AND EXPENSES; INDEMNIFICATION. Agent may incur and
pay Lender Group Expenses to the extent Agent deems reasonably necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including without limiting the
generality of the foregoing, but subject to any requirements of the Loan
Documents that it obtain any applicable consents or engage in any required
consultation, court costs, reasonable attorneys fees and expenses, costs of
collection by outside collection agencies and auctioneer fees and costs of
security guards or insurance premiums paid to maintain the Collateral, whether
or not Borrowers are obligated to reimburse Agent or Lenders for such expenses
pursuant to the Loan Agreement or otherwise. Agent is authorized and directed
to deduct and retain sufficient amounts from Collections to reimburse Agent for
such out-of-pocket costs and expenses prior to the distribution of any amounts
to Lenders. In the event Agent is not reimbursed for such costs and expenses
from Collections, each Lender hereby agrees that it is and shall be obligated
to pay to or reimburse Agent for the amount of such Lender's Pro Rata Share
thereof. Whether or not the transactions contemplated hereby are consummated,
the Lenders shall indemnify upon demand the Agent-Related Persons (to the
extent not reimbursed by or on behalf of Borrowers and without limiting the
obligation of Borrowers to do so), according to their Pro Rata Shares, from and
against any and all Indemnified Liabilities; provided, however, that no Lender
shall be liable for the payment to the Agent-Related Persons of any portion of
such Indemnified Liabilities resulting solely from such Person's gross
negligence, bad faith, or willful misconduct. Without limitation of the
foregoing, each Lender shall reimburse Agent upon demand for its ratable share
of any costs or out-of-pocket expenses (including reasonable attorney fees and
expenses) incurred by Agent in connection with the preparation, execution,
delivery, administration, modification, amendment, or
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enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that Agent is not reimbursed for such expenses by or on behalf of
Borrowers. The undertaking in this Section 17.7 shall survive the payment of all
Obligations hereunder and the resignation or replacement of Agent.
17.8 AGENT IN INDIVIDUAL CAPACITY. Foothill and its Affiliates
may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in, and generally engage in any kind of banking,
trust, financial advisory, underwriting, or other business with Borrowers and
their Subsidiaries and Affiliates and any other Person party to any Loan
Documents as though Foothill were not Agent hereunder without notice to or
consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, Foothill and its Affiliates may receive information regarding
Borrowers or their Affiliates and any other Person party to any Loan Documents
that is subject to confidentiality obligations in favor of Borrowers or such
other Person and that prohibit the disclosure of such information to the
Lenders, and the Lenders acknowledge that, in such circumstances (and in the
absence of a waiver of such confidentiality obligations, which waiver Agent will
use its reasonable best efforts to obtain), Agent shall be under no obligation
to provide such information to them. With respect to the Agent Loans and Agent
Advances, Foothill shall have the same rights and powers under this Agreement as
any other Lender and may exercise the same as though it were not Agent, and the
terms "Lender" and "Lenders" include Foothill in its individual capacity.
17.9 SUCCESSOR AGENT. Agent may resign as Agent following
notice of such resignation ("Notice") to the Lenders and Borrowers, and
effective upon the appointment of and acceptance of such appointment by, a
successor Agent. If Agent resigns under this Agreement, the Required Lenders
shall appoint any Lender or Eligible Transferee as successor Agent for the
Lenders. If no successor Agent is appointed within thirty (30) days of such
retiring Agent's Notice, Agent may appoint a successor Agent, after consulting
with the Lenders and Borrowers. In any such event, upon the acceptance of its
appointment as successor Agent hereunder, such successor Agent shall succeed to
all the rights, powers and duties of the retiring Agent and the term "Agent"
shall mean such successor Agent and the retiring Agent's appointment, powers,
and duties as Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Section 17 shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
17.10 WITHHOLDING TAX.
(a) If any Lender is a "foreign corporation, partnership
or trust" within the meaning of the IRC and such Lender claims exemption from,
or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the
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IRC, such Lender agrees with and in favor of Agent and Borrowers, to deliver to
Agent and Borrowers:
(i) if such Lender claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly completed IRS
Forms 1001 and W-8 before the payment of any interest in the first calendar year
and before the payment of any interest in each third succeeding calendar year
during which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two properly
completed and executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Lender and in each succeeding
taxable year of such Lender during which interest may be paid under this
Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under the
IRC or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Lender agrees to promptly notify Agent and Borrowers of any change
in circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such Lender
sells, assigns, grants a participation in, or otherwise transfers all or part of
the Obligations of Borrowers, such Lender agrees to notify Agent and Borrowers
of the percentage amount in which it is no longer the beneficial owner of
Obligations of Borrowers to such Lender. To the extent of such percentage
amount, Agent and Borrowers will treat such Lender's IRS Form 1001 as no longer
valid.
(c) If any Lender claiming exemption from United States withholding
tax by filing IRS Form 4224 with Agent sells, assigns, grants a participation
in, or otherwise transfers all or part of the Obligations of Borrowers to such
Lender, such Lender agrees to undertake sole responsibility for complying with
the withholding tax requirements imposed by Sections 1441 and 1442 of the IRC.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to Agent, then Agent may withhold from any
interest payment to such Lender not providing such
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forms or other documentation an amount equivalent to the applicable withholding
tax.
(e) If the IRS or any other Governmental Authority of
the United States or other jurisdiction asserts a claim that Agent or Borrowers
did not properly withhold tax from amounts paid to or for the account of any
Lender (because the appropriate form was not delivered, was not properly
executed, or because such Lender failed to notify Agent and Borrowers of a
change in circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Lender shall
indemnify Agent and Borrowers fully for all amounts paid, directly or
indirectly, by Agent or Borrowers as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the amounts
payable to Agent or Borrowers under this Section, together with all costs and
expenses (including attorneys fees and expenses). The obligation of the Lenders
under this subsection shall survive the payment of all Obligations and the
resignation of Agent.
17.11 COLLATERAL MATTERS.
(a) The Lenders hereby irrevocably authorize Agent, to
release any Lien on any Collateral (i) upon the termination of the Commitments
and payment and satisfaction in full by Borrowers of all Obligations; and upon
such termination and payment Agent shall deliver to Borrowers, at Borrowers'
sole cost and expense, all UCC termination statements and any other documents
necessary to terminate the Loan Documents and release the Liens with respect to
the Collateral; (ii) constituting property being sold or disposed of if a
release is required or desirable in connection therewith and if Borrowers
certifies to Agent that the sale or disposition is permitted under Section 7.4
of this Agreement or the other Loan Documents (and Agent may rely conclusively
on any such certificate, without further inquiry); (iii) constituting property
in which Borrowers owned no interest at the time the Lien was granted or at any
time thereafter; or (iv) constituting property leased to Borrowers under a
lease that has expired or been terminated in a transaction permitted under this
Agreement. Except as provided above, Agent will not release any Lien on any
Collateral without the prior written authorization of the Lenders. Upon request
by Agent or Borrowers at any time, the Lenders will confirm in writing Agent's
authority to release any such Liens on particular types or items of Collateral
pursuant to this Section 17.11; provided, however, that (i) Agent shall not be
required to execute any document necessary to evidence such release on terms
that, in Agent's opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of such Lien
without recourse, representation, or warranty, and (ii) such release shall not
in any manner discharge, affect or impair the Obligations or any Liens (other
than those expressly being released), upon (or obligations of Borrowers in
respect of) all interests retained by Borrowers, including, the proceeds of any
sale, all of which shall continue to constitute part of the Collateral.
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(b) Agent shall have no obligation whatsoever to any of
the Lenders to assure that the Collateral exists or is owned by Borrowers, is
cared for, protected, or insured or has been encumbered, or that the Liens of
the Agent (for the benefit of the Lender Group) have been properly or
sufficiently or lawfully created, perfected, protected, or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure, or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available to
Agent pursuant to any of the Loan Documents, it being understood and agreed that
in respect of the Collateral, or any act, omission or event related thereto,
subject to the terms and conditions contained herein, Agent may act in any
manner it may deem appropriate, in its sole discretion given Agent's own
interest in the Collateral in its capacity as one of the Lenders and that Agent
shall have no other duty or liability whatsoever to any Lender as to any of the
foregoing, except as otherwise provided herein.
17.12 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF
PAYMENTS.
(a) Each of the Lenders agrees that it shall not,
without the express consent of Agent, and that it shall, to the extent it is
lawfully entitled to do so, upon the request of Agent, set off against the
Obligations any amounts owing by such Lender to Borrowers or any accounts of
Borrowers now or hereafter maintained with such Lender. Each of the Lenders
further agrees that it shall not, unless specifically requested to do so by
Agent, take or cause to be taken any action, including the commencement of any
legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce
any security interest in, any of the Collateral the purpose of which is, or
could be, to give such Lender any preference or priority against the other
Lenders with respect to the Collateral.
(b) Subject to Section 17.8, if, at any time or times
any Lender shall receive (i) by payment, foreclosure, setoff, or otherwise, any
proceeds of Collateral or any payments with respect to the Obligations of
Borrowers to such Lender arising under, or relating to, this Agreement or the
other Loan Documents, except for any such proceeds or payments received by such
Lender from Agent pursuant to the terms of this Agreement, or (ii) payments
from Agent in excess of such Lender's Pro Rata Share of all such distributions
by Agent, such Lender shall promptly (1) turn the same over to Agent, in kind,
and with such endorsements as may be required to negotiate the same to Agent,
or in same day funds, as applicable, for the account of all of the Lenders and
for application to the Obligations in accordance with the applicable provisions
of this Agreement, or (2) purchase, without recourse or warranty, an undivided
interest and participation in the Obligations owed to the other Lenders so that
such excess payment received shall be applied ratably as among the Lenders in
accordance with their Pro Rata Shares; provided, however, that if all or part
of such excess payment received by the purchasing party is thereafter recovered
from it, those purchases of participations shall be rescinded in whole or in
part, as applicable, and the
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applicable portion of the purchase price paid therefor shall be returned to such
purchasing party, but without interest except to the extent that such purchasing
party is required to pay interest in connection with the recovery of the excess
payment.
17.13 AGENCY FOR PERFECTION. Agent and each Lender hereby
appoints each other Lender as agent for the purpose of perfecting the Liens of
the Lender Group in assets which, in accordance with Article 9 of the UCC can be
perfected only by possession. Should any Lender obtain possession of any such
Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's
request therefor shall deliver such Collateral to Agent or in accordance with
Agent's instructions.
17.14 PAYMENTS BY AGENT TO THE LENDERS. All payments to be
made by Agent to the Lenders shall be made by bank wire transfer or internal
transfer of immediately available funds pursuant to the instructions set forth
on Schedule C-1, or pursuant to such other wire transfer instructions as each
party may designate for itself by written notice to Agent. Concurrently with
each such payment, Agent shall identify whether such payment (or any portion
thereof) represents principal, premium or interest on revolving advances or
otherwise.
17.15 CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS.
Each member of the Lender Group authorizes and directs Agent to enter into this
Agreement and the other Loan Documents relating to the Collateral, for the
ratable benefit (subject to Sections 2.4(b) and 4.1) of the Lender Group. Each
member of the Lender Group agrees that any action taken by Agent, Required
Lenders, or all Lenders, as applicable, in accordance with the terms of this
Agreement or the other Loan Documents relating to the Collateral and the
exercise by Agent, Required Lenders, or all Lenders, as applicable, of their
respective powers set forth therein or herein, together with such other powers
that are reasonably incidental thereto, shall be binding upon all of the
Lenders.
17.16 FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY;
DISCLAIMERS BY LENDERS; OTHER REPORTS AND INFORMATION. By signing this
Agreement, each Lender;
(a) is deemed to have requested that Agent furnish such
Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "Report" and collectively, "Reports") prepared by
Agent, and Agent shall so furnish each Lender with such Reports;
(b) expressly agrees and acknowledges that Agent (i)
does not make any representation or warranty as to the accuracy of any Report,
and (ii) shall not be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports
are not comprehensive audits or examinations, that Agent or other party
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performing any audit or examination will inspect only specific information
regarding Borrowers and will rely significantly upon Borrowers' books and
records, as well as on representations of Borrowers' personnel;
(d) agrees to keep all Reports and other material
information obtained by it pursuant to the requirements of this Agreement in
accordance with its reasonable customary procedures for handling confidential
information; it being understood and agreed by Borrowers that in any event such
Lender may make disclosures (i) reasonably required by any bona fide potential
or actual Assignee, transferee, or Participant in connection with any
contemplated or actual assignment or transfer by such Lender of an interest
herein or any participation interest in such Lender's rights hereunder, (ii) of
information that has become public by disclosures made by Persons other than
such Lender, its Affiliates, assignees, transferees, or participants, (iii) as
required or requested by any court, governmental or administrative agency (other
than any bank regulatory authority), pursuant to any subpoena or other legal
process, or by any law, statute, regulation, or court order or (iv) as required
or requested by any bank regulatory authority; provided, however, that, unless
prohibited by applicable law, statute, regulation, or court order, such Lender
shall notify Borrowers of any request by any court, governmental or
administrative agency, or pursuant to any subpoena or other legal process for
disclosure of any such non-public material information concurrent with, or where
practicable, prior to the disclosure thereof; and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold Agent
and any such other Lender preparing a Report harmless from any action the
indemnifying Lender may take or conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other credit accommodations
that the indemnifying Lender has made or may make to Borrowers, or the
indemnifying Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of Borrowers, except for harm caused by the gross
negligence or willful misconduct of Agent or any such other Lender; and (ii) to
pay and protect, and indemnify, defend, and hold Agent and any such other Lender
preparing a Report harmless from and against, the claims, actions, proceedings,
damages, costs, expenses and other amounts (including, attorney costs) incurred
by Agent and any such other Lender preparing a Report as the direct or indirect
result of any third parties who might obtain all or part of any Report through
the indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time
request of Agent in writing that Agent provide to such Lender a copy of any
report or document provided by Borrowers to Agent, and, upon receipt of such
request, Agent shall provide a copy of same to such Lender promptly upon
receipt thereof; (y) to the extent that Agent is entitled, under any provision
of the Loan Documents, to request additional reports or information from
Borrowers, any Lender may, from time to time, reasonably request Agent to
exercise such right as specified in such Lender's notice to Agent, whereupon
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Agent promptly shall request of Borrowers the additional reports or information
specified by such Lender, and, upon receipt thereof, Agent promptly shall
provide a copy of same to such Lender; and (z) any time that Agent renders to
Borrowers a statement regarding the Loan Account, Agent shall send a copy of
such statement to each Lender.
17.17 SEVERAL OBLIGATIONS; NO LIABILITY. Notwithstanding that
certain of the Loan Documents now or hereafter may have been or will be executed
only by or in favor of Agent in its capacity as such, and not by or in favor of
the Lenders, any and all obligations on the part of Agent (if any) to make any
Advances shall constitute the several (and not joint) obligations of the
respective Lenders on a ratable basis, according to their respective
Commitments, to make an amount of such Advances not to exceed, in principal
amount, at any one time outstanding, the amount of their respective Commitments.
Nothing contained herein shall confer upon any Lender any interest in, or
subject any Lender to any liability for, or in respect of, the business, assets,
profits, losses, or liabilities of any other Lender. Each Lender shall be solely
responsible for notifying its Participants of any matters relating to the Loan
Documents to the extent any such notice may be required, and no Lender shall
have any obligation, duty, or liability to any Participant of any other Lender.
Except as provided in Section 17.7, no member of the Lender Group shall have any
liability for the acts of any other member of the Lender Group. No Lender shall
be responsible to Borrowers or any other Person for any failure by any other
Lender to fulfill its obligations to make Advances, nor to advance for it or on
its behalf in connection with its Commitment, nor to take any other action on
its behalf hereunder or in connection with the financing contemplated herein.
18. GENERAL PROVISIONS.
18.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrowers and the Lender Group.
18.2 SECTION HEADINGS. Headings and numbers have been set
forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each section applies equally to this entire
Agreement.
18.3 INTERPRETATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against the
Lender Group or Borrowers, whether under any rule of construction or otherwise.
On the contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used so
as to fairly accomplish the purposes and intentions of all parties hereto.
18.4 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
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18.5 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may
be executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
18.6 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the
incurrence or payment of the Obligations by Borrowers or any guarantor of the
Obligations or the transfer by any or all of such parties to the Lender Group of
any property of either or both of such parties should for any reason
subsequently be declared to be void or voidable under any state or federal law
relating to creditors' rights, including provisions of the Bankruptcy Code
relating to fraudulent conveyances, preferences, and other voidable or
recoverable payments of money or transfers of property (collectively, a
"Voidable Transfer"), and if the Lender Group is required to repay or restore,
in whole or in part, any such Voidable Transfer, or elects to do so upon the
reasonable advice of its counsel, then, as to any such Voidable Transfer, or the
amount thereof that the Lender Group is required or elects to repay or restore,
and as to all reasonable costs, expenses, and attorneys fees of the Lender Group
related thereto, the liability of Borrowers or such guarantor automatically
shall be revived, reinstated, and restored and shall exist as though such
Voidable Transfer had never been made.
18.7 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to
the transactions contemplated hereby and shall not be contradicted or qualified
by any other agreement, oral or written, before the date hereof.
18.8 TIME IS OF THE ESSENCE. Time is of the essence of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in Atlanta, Georgia.
BORROWERS:
RDM HOLDINGS, INC.,
a Delaware corporation
By
--------------------------------------------
Title:
----------------------------------------
SPORTS GROUP, INC.,
an Alabama corporation
By
--------------------------------------------
Title:
----------------------------------------
INTERNATIONAL SPORTS AND FITNESS,INC., a
Delaware corporation
By
--------------------------------------------
Title:
----------------------------------------
DIVERSIFIED PRODUCTS CORPORATION, an Alabama
corporation
By
--------------------------------------------
Title:
----------------------------------------
WILLOW HOSIERY COMPANY, INC.,
a New York corporation
By
--------------------------------------------
Title:
----------------------------------------
LOAN AND SECURITY AGREEMENT
102
HUTCH SPORTS USA INC.,
a Delaware corporation
By
--------------------------------------------
Title:
----------------------------------------
DIVERSIFIED TRUCKING CORP.,
an Alabama corporation
By
--------------------------------------------
Title:
----------------------------------------
AGENT:
FOOTHILL CAPITAL CORPORATION,
a California corporation
By
--------------------------------------------
Title: Vice President
LENDERS:
FOOTHILL CAPITAL CORPORATION,
a California corporation
By
---------------------------------------------
Title: Vice President
LOAN AND SECURITY AGREEMENT
103
AT&T COMMERCIAL FINANCE
CORPORATION,
a Delaware corporation
By
---------------------------------------------
Title:
-----------------------------------------
Address for notices:
AT&T Capital Corporation
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
BANKBOSTON, N.A.
By
---------------------------------------------
Title:
-----------------------------------------
Address for notices:
BankBoston, N.A.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
THE CIT GROUP/CREDIT FINANCE, INC.,
a Delaware corporation
By
---------------------------------------------
Title:
-----------------------------------------
Address for notices:
The CIT Group/Credit Finance
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ Shoppe
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
LOAN AND SECURITY AGREEMENT
104
FREMONT FINANCIAL CORPORATION,
a California corporation
By
----------------------------------------------------
Title:
------------------------------------------------
Address for notices:
Fremont Financial Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
NATIONSCREDIT COMMERCIAL
CORPORATION, through its
Commercial Funding Division
a Delaware corporation
By
----------------------------------------------------
Title:
------------------------------------------------
NationsCredit Commercial Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
LOAN AND SECURITY AGREEMENT
105
The undersigned hereby acknowledges and agrees to the provisions of
Section 2.7 hereof as such Section relates to Collections of the Canadian
Subsidiary and Section 6.2 hereof as such Section relates to reporting
requirements related to the Canadian Subsidiary.
RDM SPORTS & LEISURE INC.,
an Ontario corporation
By
---------------------------------
Title:
-----------------------------
LOAN AND SECURITY AGREEMENT
106
SCHEDULE C-1
COMMITMENTS ON CLOSING DATE
=============================================================================
Fixed Period Loans
=============================================================================
Tranche A Tranche B
Fixed Fixed
Revolving Period Period
Lenders Commitment Loans Loans
------------------------------------------------------------------------------
Foothill Capital Corporation $22,500,000 $ 4,500,000 $ 3,000,000
-------------------------------------------------------------------------------
BankBoston, N.A $11,250,000 $ 2,250,000 $ 1,500,000
-------------------------------------------------------------------------------
The CIT Group/Credit Finance, Inc. $11,250,000 $ 2,250,000 $ 1,500,000
-------------------------------------------------------------------------------
AT&T Commercial Finance Corporation $ 7,500,000 $ 1,500,000 $ 1,000,000
-------------------------------------------------------------------------------
Fremont Financial Corporation $11,250,000 $ 2,250,000 $ 1,500,000
-------------------------------------------------------------------------------
NationsCredit Commercial Corporation $11,250,000 $ 2,250,000 $ 1,500,000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Total $75,000,000 $15,000,000 $10,000,000
===============================================================================
LOAN AND SECURITY AGREEMENT
