LOAN AND SECURITY AGREEMENT
among
ALLIED HEALTHCARE PRODUCTS, INC.,
B&F MEDICAL PRODUCTS, INC.,
BEAR MEDICAL SYSTEMS, INC.,
HOSPITAL SYSTEMS, INC.,
LIFE SUPPORT PRODUCTS, INC.,
and
BICORE MONITORING SYSTEMS, INC.,
as Borrowers, on the one hand,
and
FOOTHILL CAPITAL CORPORATION,
on the other hand
Dated as of August 7, 1997
TABLE OF CONTENTS
Page(s)
1. DEFINITIONS AND CONSTRUCTION. . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms. . . . . . . . . . . . . . . . . . . . . . 16
1.3 Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.4 Construction. . . . . . . . . . . . . . . . . . . . . . . . 16
1.5 Schedules and Exhibits. . . . . . . . . . . . . . . . . . . 17
2. LOAN AND TERMS OF PAYMENT. . . . . . . . . . . . . . . . . . . . . 17
2.1 Revolving Advances. . . . . . . . . . . . . . . . . . . . . .17
2.2 Letters of Credit. . . . . . . . . . . . . . . . . . . . . . 18
2.3 Term Loans. . . . . . . . . . . . . . . . . . . . . . . . . .20
2.4 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . 21
2.5 Overadvances. . . . . . . . . . . . . . . . . . . . . . . . .21
2.6 Interest and Letter of Credit Fees: Rates, Payments, and
Calculations. . . . . . . . . . . . . . . . . . . . . . . 21
2.7 Collection of Accounts. . . . . . . . . . . . . . . . . . . 22
2.8 Crediting Payments; Application of Collections. . . . . . . 22
2.9 Designated Account. . . . . . . . . . . . . . . . . . . . . 23
2.10 Maintenance of Loan Account; Statements of Obligations. . . 23
2.11 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3. CONDITIONS; TERM OF AGREEMENT. . . . . . . . . . . . . . . . . . 24
3.1 Conditions Precedent to the Initial Advance, the
Initial Letter of Credit, and the Term Loans.. . . . . . 24
3.2 Conditions Precedent to all Advances, all Letters
of Credit and the Term Loans. . . . . . . . . . . . . 26
3.3 Condition Subsequent. . . . . . . . . . . . . . . . . . . . .27
3.4 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.5 Effect of Termination. . . . . . . . . . . . . . . . . . . . 27
3.6 Early Termination by Borrowers. . . . . . . . . . . . . . . .27
3.7 Termination Upon Event of Default. . . . . . . . . . . . . . 28
4. CREATION OF SECURITY INTEREST. . . . . . . . . . . . . . . . . . . 28
4.1 Grant of Security Interest. . . . . . . . . . . . . . . . . .28
4.2 Negotiable Collateral. . . . . . . . . . . . . . . . . . . . 28
4.3 Collection of Accounts, General Intangibles,
and Negotiable Collateral. . . . . . . . . . . . . . . . . 28
4.4 Delivery of Additional Documentation Required. . . . . . . . 29
4.5 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . 29
4.6 Right to Inspect. . . . . . . . . . . . . . . . . . . . . . .29
5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . 30
5.1 No Encumbrances. . . . . . . . . . . . . . . . . . . . . . .30
5.2 Eligible Accounts. . . . . . . . . . . . . . . . . . . . . .30
5.3 Eligible Inventory. . . . . . . . . . . . . . . . . . . . . 30
5.4 Equipment. . . . . . . . . . . . . . . . . . . . . . . . . .30
5.5 Location of Inventory and Equipment. . . . . . . . . . . . .30
5.6 Inventory Records. . . . . . . . . . . . . . . . . . . . . .30
5.7 Location of Chief Executive Office; FEIN. . . . . . . . . . 30
5.8 Due Organization and Qualification; Subsidiaries. . . . . . 31
5.9 Due Authorization; No Conflict. . . . . . . . . . . . . . . 31
5.10 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 32
5.11 No Material Adverse Change. . . . . . . . . . . . . . . . . 32
5.12 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.13 Employee Benefits. . . . . . . . . . . . . . . . . . . . . .33
5.14 Environmental Condition. . . . . . . . . . . . . . . . . . .33
6. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . .33
6.1 Accounting System. . . . . . . . . . . . . . . . . . . . . .33
6.2 Collateral Reporting. . . . . . . . . . . . . . . . . . . . 33
6.3 Financial Statements, Reports, Certificates. . . . . . . . .34
6.4 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . .35
6.5 Intentionally Deleted. . . . . . . . . . . . . . . . . . . .35
6.6 Returns. . . . . . . . . . . . . . . . . . . . . . . . . . .35
6.7 Title to Equipment. . . . . . . . . . . . . . . . . . . . . 36
6.8 Maintenance of Equipment. . . . . . . . . . . . . . . . . . 36
6.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .36
6.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . .36
6.11 No Setoffs or Counterclaims. . . . . . . . . . . . . . . . .38
6.12 Location of Inventory and Equipment. . . . . . . . . . . . .38
6.13 Compliance with Laws. . . . . . . . . . . . . . . . . . . . 38
6.14 Employee Benefits. . . . . . . . . . . . . . . . . . . . . .38
6.15 Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 39
7.1 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 39
7.2 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . .40
7.3 Restrictions on Fundamental Changes. . . . . . . . . . . . .40
7.4 Disposal of Assets. . . . . . . . . . . . . . . . . . . . . 40
7.5 Change Name. . . . . . . . . . . . . . . . . . . . . . . . .40
7.6 Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . .40
7.7 Nature of Business. . . . . . . . . . . . . . . . . . . . . 41
7.8 Prepayments and Amendments. . . . . . . . . . . . . . . . . 41
7.9 Change of Control. . . . . . . . . . . . . . . . . . . . . .41
7.10 Consignments. . . . . . . . . . . . . . . . . . . . . . . . 41
7.11 Distributions. . . . . . . . . . . . . . . . . . . . . . . .41
7.12 Accounting Methods. . . . . . . . . . . . . . . . . . . . . 41
7.13 Investments. . . . . . . . . . . . . . . . . . . . . . . . .41
7.14 Transactions with Affiliates. . . . . . . . . . . . . . . . 42
7.15 Suspension. . . . . . . . . . . . . . . . . . . . . . . . . 42
7.16 Intentionally Deleted. . . . . . . . . . . . . . . . . . . .42
7.17 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . .42
7.18 Change in Location of Chief Executive Office;
Inventory and Equipment with Bailees. . . . . . . . . . . 42
7.19 No Prohibited Transactions Under ERISA. . . . . . . . . . . 42
7.20 Financial Covenants. . . . . . . . . . . . . . . . . . . . .43
7.21 Capital Expenditures. . . . . . . . . . . . . . . . . . . . 45
8. EVENTS OF DEFAULT.. . . . . . . . . . . . . . . . . . . . . . . . 45
9. FOOTHILL'S RIGHTS AND REMEDIES.. . . . . . . . . . . . . . . . . .47
9.1 Rights and Remedies.. . . . . . . . . . . . . . . . . . . . 47
9.2 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . .49
10. TAXES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . 49
11. WAIVERS; INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . 50
11.1 Demand; Protest; etc.. . . . . . . . . . . . . . . . . . . .50
11.2 Foothill's Liability for Collateral. . . . . . . . . . . . .50
11.3 Indemnification. . . . . . . . . . . . . . . . . . . . . . .50
11.4 Joint Borrowers. . . . . . . . . . . . . . . . . . . . . . .50
12. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. . . . . . . . . . . . 56
14. DESTRUCTION OF BORROWERS' DOCUMENTS. . . . . . . . . . . . . . . .57
15. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . 57
15.1 Effectiveness. . . . . . . . . . . . . . . . . . . . . . . .57
15.2 Successors and Assigns. . . . . . . . . . . . . . . . . . . 57
15.3 SECTION Headings. . . . . . . . . . . . . . . . . . . . . . 58
15.4 Interpretation. . . . . . . . . . . . . . . . . . . . . . . 58
15.5 Severability of Provisions. . . . . . . . . . . . . . . . . 58
15.6 Amendments in Writing. . . . . . . . . . . . . . . . . . . .58
15.7 Counterparts; Telefacsimile Execution. . . . . . . . . . . .58
15.8 Revival and Reinstatement of Obligations. . . . . . . . . . 58
15.9 Integration. . . . . . . . . . . . . . . . . . . . . . . . .59
SCHEDULES AND EXHIBITS
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Schedule 6.12 Location of Inventory and Equipment
Exhibit C-1 Form of Compliance Certificate
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into
as of August 7, 1997, among FOOTHILL CAPITAL CORPORATION, a California
corporation ("Foothill"), with a place of business located at 00000 Xxxxx
Xxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000, on the one
hand, and ALLIED HEALTHCARE PRODUCTS, INC., a Delaware corporation
("Parent"), B&F MEDICAL PRODUCTS, INC., a Delaware corporation ("B&F"), BEAR
MEDICAL SYSTEMS, INC., a California corporation ("Bear"), HOSPITAL SYSTEMS,
INC., a California corporation ("Hospital Systems"), LIFE SUPPORT PRODUCTS,
INC., a California corporation ("Life Support"), BICORE MONITORING SYSTEMS,
INC., a California corporation ("Bicore") each, with its chief executive
office located at 0000 Xxxxxxxx Xxxxxx, Xx. Xxxxx, Xxxxxxxx 00000, on the
other hand.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 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 all currently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing
to a 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 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.
"Agreement" has the meaning set forth in the preamble
hereto.
"Authorized Person" means any officer or other employee of
Borrower.
1
"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.
"B&F" has the meaning set forth in the preamble to this
Agreement.
"Bankruptcy Code" means the United States Bankruptcy Code
(11 U.S.C. Section 101 et seq.), as amended, and any successor statute.
"Bear" has the meaning set forth in the preamble to this
Agreement.
"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.
"Bicore" has the meaning set forth in the preamble to this
Agreement.
"Borrower" means any one of Parent, B&F, Bear, Hospital
Systems, Life Support or Bicore.
"Borrowers' Books" means all of Borrowers' books and
records including: ledgers; records indicating, summarizing, or evidencing
Borrowers' properties or assets (including the Collateral) or liabilities;
all information relating to Borrowers' business operations or financial
condition; and all computer programs, disk or tape files, printouts, runs, or
other computer prepared information.
"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.
"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) becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934),
directly or indirectly, of more than 20% of the total voting power of all
classes of stock then outstanding of any Borrower 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, the issuance of the initial Letter of Credit,
or the funding of the Term Loans.
2
"Code" means the California Uniform Commercial Code.
"Collateral" means each Borrower's right, title, and
interest in each of the following:
(a) Accounts,
(b) Borrowers' Books,
(c) Equipment,
(d) General Intangibles,
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
(h) Real Property Collateral,
(i) any money, or other assets of Borrowers that now or
hereafter come into the possession, custody, or control of Foothill, and
(j) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the Collateral of Borrowers, and any and all Accounts,
Borrowers' Books, Equipment, General Intangibles, Inventory, Investment
Property, 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 any Borrower, in each case, in form and substance satisfactory
to Foothill.
"Collections" means all cash, checks, notes, instruments,
and other items of payment (including, insurance proceeds, proceeds of cash
sales, rental proceeds, and tax refunds).
3
"Compliance Certificate" means a certificate substantially
in the form of Exhibit C-1 and delivered by the chief accounting officer of a
Borrower to Foothill.
"Consolidated Current Assets" means, for any Person, as of
any date of determination, the aggregate amount of all current assets of such
Person that would, in accordance with GAAP, be classified on a balance sheet
as current assets.
"Consolidated Current Liabilities" means, for any Person,
as of any date of determination, the aggregate amount of all current
liabilities of such Person 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.
"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 1208 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.
"Designated Account" means account number 00-0000-000000 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 Borrowers to Foothill.
"Designated Account Bank" means NationsBank, N.A., whose
office is located at St. Louis, Missouri, and whose ABA number is 000000000.
"Dilution" means, in each case based upon the experience of
the immediately prior three 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, by (b)
Borrowers' 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 Foothill's advance rate against Eligible Accounts
by one percentage point for each percentage point by which Dilution is in
excess of 5.00%.
4
"Disbursement Letter" means an instructional letter
executed and delivered by Borrowers to Foothill regarding the extensions of
credit to be made on the Closing Date, the form and substance of which shall
be satisfactory to Foothill.
"Dollars or $" means United States dollars.
"Domestic Eligible Accounts" means Eligible Accounts that
are payable in Dollars with respect to Account Debtors that maintain their
chief executive offices in the United States; however, Domestic Eligible
Accounts shall not include: (a) Accounts with selling terms of more than 60
days, (b) Accounts that the Account Debtor has failed to pay within 120 days
of invoice date (but in no event shall more than $1,000,000 of domestic
Accounts more than 90 days from invoice date be deemed eligible), and (c)
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 (b) above.
"Early Termination Premium" has the meaning set forth in
SECTION 3.6.
"EBITDA" means, for any Person, the consolidated net income
of such Person and its Subsidiaries (excluding extraordinary items) for the
prior 12 month period (a) plus all interest expense, income tax expense,
depreciation and amortization (including amortization of any goodwill or
other intangibles) for the period, (b) plus or minus losses or gains
attributable to any fixed asset sales in the period and (c) plus or minus any
other non- cash charges which have been subtracted or added in calculating
consolidated net income for the period. The calculation of EBITDA shall
exclude amortization of capitalized leases.
"Eligible Accounts" means those Accounts created by a
Borrower in the ordinary course of business, that arise out of such
Borrower's sale of goods or rendition of services, that strictly comply with
each and all of the representations and warranties respecting Accounts made
by such Borrower to Foothill in the Loan Documents, and that are and at all
times continue to be acceptable to Foothill in all respects; provided,
however, that standards of eligibility may be fixed and revised from time to
time by Foothill in Foothill's reasonable credit judgment. Eligible Accounts
shall not include the following:
(a) Accounts with respect to which the Account Debtor is
an employee, Affiliate, or agent of a Borrower;
(b) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, xxxx and
hold, or other terms by reason of which the payment by the Account Debtor may
be conditional;
(c) Intentionally Omitted;
5
(d) Accounts with respect to which the Account Debtor is
either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of Accounts with respect to which the
relevant Borrower has complied, to the satisfaction of Foothill, 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);
(e) Accounts with respect to which the Account Debtor is
a creditor of any Borrower, has or has asserted a right of setoff, has
disputed its liability, or has made any claim with respect to the Account;
(f) Accounts with respect to an Account Debtor whose
total obligations owing to the Borrowers exceed 10% of all Eligible Accounts
of the Borrowers, to the extent of the obligations owing by such Account
Debtor in excess of such percentage;
(g) Accounts with respect to which the Account Debtor is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(h) Accounts the collection of which Foothill, in its
reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(i) 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;
(j) 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 Account Debtor in the courts or through any judicial process of
such state), unless the relevant Borrower 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; and
(k) Accounts that represent progress payments or other
advance xxxxxxxx that are due prior to the completion of performance by a
Borrower of the subject contract for goods or services.
"Eligible Inventory" means Inventory (net of cost price
adjustments) consisting of first quality finished goods held for sale in the
ordinary course of a Borrower's
6
business and raw materials for such finished goods, including component
parts, that are located at or in-transit between such Borrower's premises
identified on Schedule E-1, that strictly comply with each and all of the
representations and warranties respecting Inventory made by such Borrower to
Foothill in the Loan Documents, and that are and at all times continue to be
acceptable to Foothill in all respects as reasonably determined by Foothill
pursuant to its standard credit policy; provided, however, that standards of
eligibility may be fixed and revised from time to time by Foothill in
Foothill's reasonable credit judgment. In determining the amount to be so
included, Inventory shall be valued on a first in first out basis at the
lower of cost or market on a basis consistent with such Borrower's current
and historical accounting practices. An item of Inventory shall not be
included in Eligible Inventory if:
(a) it is not owned solely by such Borrower or such
Borrower 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 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 Foothill;
(e) it consists of goods returned or rejected by such
Borrower's customers, goods held for return to vendor or goods in transit; and
(f) it is obsolete or slow moving, a restrictive or
custom item, work-in-process, or constitutes spare parts, samples, field
service inventory, floor reject inventory, packaging and shipping materials,
supplies used or consumed in such Borrower's business, Inventory subject to a
Lien in favor of any third Person, xxxx and hold goods, defective goods,
"seconds," or Inventory acquired on consignment.
"Equipment" means all of a Person'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 all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing.
7
"ERISA" means the Employee Retirement Income Security Act
of 1974, 29 U.S.C. Sections 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 a 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 a 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 a
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 a Borrower and whose employees are
aggregated with the employees of such 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 a 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 a
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 a Borrower or its Subsidiaries or any of their ERISA Affiliates.
"Event of Default" has the meaning set forth in Section 8.
"Existing Lender" means NationsBank, N.A. as agent for a
syndicated lending group, pursuant to a Loan Agreement dated October 13, 1995.
"FEIN" means Federal Employer Identification Number.
"Financing or Sale Event" means any of the following which
is approved by Foothill in its reasonable discretion: (a) a sale of all or
substantially all of the issued and outstanding stock of any Subsidiary of
Parent in one or a series of related transactions or all or substantially all
of the assets of any Subsidiary or division of Parent in one or a series of
related transactions, (b) a private placement of debt or equity by Parent,
(c) a public offering of debt or equity by Parent, or (d) a capital infusion
in Parent or any Subsidiary.
8
"Foothill" has the meaning set forth in the preamble to
this Agreement.
"Foothill Account" has the meaning set forth in Section 2.7.
"Foothill Expenses" means all: costs or expenses
(including taxes, and insurance premiums) required to be paid by a Borrower
under any of the Loan Documents that are paid or incurred by Foothill; fees
or charges paid or incurred by Foothill in connection with Foothill'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
Foothill in the disbursement of funds to Borrowers (by wire transfer or
otherwise); charges paid or incurred by Foothill resulting from the dishonor
of checks; costs and expenses paid or incurred by Foothill 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
Foothill in examining Borrowers' Books; costs and expenses of third party
claims or any other suit paid or incurred by Foothill in enforcing or
defending the Loan Documents or in connection with the transactions
contemplated by the Loan Documents or Foothill's relationship with Borrowers
or any guarantor; and Foothill's reasonable attorneys fees and expenses
incurred in advising, structuring, drafting, reviewing, administering,
amending, terminating, enforcing, defending, or concerning the Loan
Documents, (including attorneys fees and expenses incurred in connection with
a "workout," a "restructuring," or an Insolvency Proceeding concerning
Borrowers or any guarantor of the Obligations) irrespective of whether suit
is brought.
"Foreign Eligible Accounts" means Eligible Accounts with
respect to which the Account Debtor does not maintain its chief executive
office in the United States where the Accounts are either (i) supported by an
irrevocable letter of credit satisfactory to Foothill (as to form, substance,
and issuer or United States confirming bank) that has been delivered to
Foothill and is directly drawable by Foothill, or (ii) covered by credit
insurance in form and amount, and by an insurer, satisfactory to Foothill;
however, Foreign Eligible Accounts shall not include: (a) Accounts with
selling terms of more than 90 days from invoice date, (b) Accounts more than
60 days from due date, not to exceed 150 days from invoice date, and (c)
Accounts owed by an Account Debtor or its Affiliates where 50% or
9
more of all Accounts owed by that Account Debtor (or its Affiliates) are deemed
ineligible under clause (b) above.
"Free Cash Flow" for a period means, for any Person, the
total of such Person's: EBITDA minus interest expense, minus cash taxes
paid, minus scheduled principal payments on debt for borrowed money, minus
actual capital expenditures in each case as determined in accordance with
GAAP, plus or minus changes in working capital.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"General Intangibles" means all of any Person'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 electrical equipment that contains
any oil or dielectric fluid containing levels of polychlorinated biphenyls in
excess of 50 parts per million.
"Hospital Systems" has the meaning set forth in the
preamble to this Agreement.
"Indebtedness" means: (a) all obligations of a Person for
borrowed money, (b) all obligations of a Person evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or
other obligations of a Person in respect of letters of credit, bankers
acceptances, interest rate swaps, or other financial products, (c) all
obligations
10
of a Person under capital leases, (d) all obligations or liabilities of others
secured by a Lien on any property or asset of a Person, irrespective of whether
such obligation or liability is assumed, and (e) any obligation of a Person
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to such Person) 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 under any
other bankruptcy or insolvency law, 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.
"Intellectual Property Security Agreements" means those
certain Intellectual Property Security Agreements between Foothill and each
of Parent, B&F, Bear, Bicore, Hospital Systems and Life Support, all of even
date herewith.
"Inventory" means all present and future inventory in which
a 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 Reserve" means a reserve established on October
1, 1997 in the amount of $125,000, which shall increase by an additional
$125,000 on the first day of each month thereafter up to a maximum of
$2,000,000; provided, however, that upon the repayment of Term Loans A, B,
and C in full, such Inventory Reserve shall immediately and automatically be
increased to $2,000,000.
"Investment Property" has the meaning set forth in Section
9115 of the Code.
"IRC" means the Internal Revenue Code of 1986, as amended,
and the regulations thereunder.
"Junior Notes" means those certain subordinated notes in
the aggregate principal amount of $5,000,000, in favor of Xxx Xxx, Xxxxxx
Xxxxxxxxx, Xxxxxx Xxxxxxx, and Woodbourne Partners, L.P., a Missouri limited
partnership.
"L/C" has the meaning set forth in Section 2.2(a).
11
"L/C Guaranty" has the meaning set forth in Section 2.2(a).
"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.
"Life Support" has the meaning set forth in the preamble to
this Agreement.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Intellectual
Property Security Agreements, the Disbursement Letter, the Letters of Credit,
the Lockbox Agreements, the Mortgages, any note or notes executed by any
Borrower and payable to Foothill, and any other agreement entered into, now
or in the future, in connection with this Agreement.
"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 Foothill, each of which is among a
Borrower or Borrowers, Foothill, and one of the Lockbox Banks.
"Lockbox Banks" means NationsBank, N.A., or such other
banks as may be agreed to by Foothill and Borrower from time to time.
"Lockboxes" has the meaning set forth in Section 2.7.
"Material Adverse Change" means (a) a material adverse
change in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial
12
or otherwise) of a Borrower, (b) the material impairment of a Borrower's ability
to perform its obligations under the Loan Documents to which it is a party or of
Foothill to enforce the Obligations or realize upon the Collateral, (c) a
material adverse effect on the value of the Collateral or the amount that
Foothill 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 Foothill's Liens with respect to the
Collateral.
"Maximum Amount" means, as of any date of determination,
the sum of (a) the Maximum Revolving Amount, (b) the then outstanding
principal balance of the Term Loans.
"Maximum Revolving Amount" means $25,000,000.
"Mortgages" means one or more mortgages, deeds of trust, or
deeds to secure debt, executed by a Borrower in favor of Foothill, the form
and substance of which shall be satisfactory to Foothill, 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 a Borrower, any of its
Subsidiaries, or any ERISA Affiliate has contributed, or was obligated to
contribute, within the past six years.
"Negotiable Collateral" means all of a Person's present and
future letters of credit, notes, drafts, instruments, investment property,
security entitlements, securities (including the shares of stock of
Subsidiaries of such Person), documents, personal property leases (wherein
such Person is the lessor), and chattel paper.
"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 Foothill 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 a Borrower to Foothill of any kind
and description (whether pursuant to or evidenced by the Loan Documents or
pursuant to any other agreement between Foothill and any Borrower, 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 a Borrower to others that Foothill may have obtained by assignment or
otherwise, and further including all interest not paid when due and all
Foothill Expenses that a Borrower is required to pay or reimburse by the Loan
Documents, by law, or otherwise.
13
"Overadvance" has the meaning set forth in Section 2.5.
"Parent" has the meaning set forth in the preamble to this
Agreement.
"Pay-Off Letter" means a letter, in form and substance
reasonably satisfactory to Foothill, from Existing Lender respecting the
amount necessary to repay in full all of the obligations of 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 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 by Foothill, (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 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 a Borrower and not
in connection with the borrowing of money, and which Liens either (i) are for
sums not yet due and payable, (ii) are the subject of Permitted Protests, or
(iii) removed by payment or bonded within 20 Business Days of any Borrower's
obtaining notice thereof, (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 a Borrower 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 a Borrower, (i) Liens of or resulting from any
judgment or award that would not have a Material Adverse Effect and as to
which the time for the appeal or petition for rehearing of which has not yet
expired, or in respect of which a Borrower is 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 Foothill, 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 any Borrower or the value of Foothill's
Lien thereon or therein, or materially interfere with the ordinary conduct of
the business of a Borrower.
14
"Permitted Protest" means the right of a Borrower 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 such Borrower in an
amount that is reasonably satisfactory to Foothill, (b) any such protest is
instituted and diligently prosecuted by such Borrower in good faith, and (c)
Foothill 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 Foothill 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 a Borrower or with respect to
which it may incur liability.
"Real Property" means any estates or interests in real
property now owned or hereafter acquired by a 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 a Borrower.
"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.
"Renewal Date" has the meaning set forth in Section 3.4.
"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.
"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.
15
"Senior Debt" means the Foothill Obligations (other than
L/Cs and L/C Guaranties).
"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 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.
"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.
"Tangible Net Worth" means, as of any date of
determination, the difference of (a) a Person's total stockholder's equity,
minus (b) the sum of: (i) all Intangible Assets of such Person, and (ii) all
amounts due to such Person from Affiliates.
"Term Loans" means Term Loan A, Term Loan B and Term Loan C.
"Term Loan A" has the meaning set forth in Section 2.3.
"Term Loan B" has the meaning set forth in Section 2.3.
"Term Loan C" has the meaning set forth in Section 2.3.
"Voidable Transfer" has the meaning set forth in Section
15.8.
"Warrant" means that certain Warrant, dated as of the
Closing Date, for the purchase by Foothill of 50,000 shares of Parent's
Common Stock.
16
"Working Capital" means the result of subtracting
Consolidated Current Liabilities from Consolidated Current Assets.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used herein,
the term "financial statements" shall include the notes and schedules
thereto. Whenever the term "Borrower" is used in respect of a financial covenant
or a related definition, it shall be understood to mean Borrowers 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.
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 Foothill. 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, Foothill agrees to make advances ("Advances") to Borrowers in an
amount outstanding not to exceed at any one time the lesser of (i) the
Maximum Revolving Amount less the outstanding balance of all undrawn or
unreimbursed Letters of Credit, or (ii) the Borrowing Base less the aggregate
amount of all undrawn or unreimbursed Letters of Credit. For purposes of
this Agreement, "Borrowing Base," as of any date of determination, shall mean
the result of:
(w) the lesser of (i) 85% of Domestic Eligible
Accounts, less the amount, if any, of the Dilution Reserve; provided,
however, that Advances based upon Domestic Eligible Accounts and Foreign
Eligible Accounts, in the aggregate, shall not exceed an amount equal to
Borrower's Collections with
17
respect to Accounts for the immediately preceding 75 day period through November
30, 1997 and 60 day period thereafter, plus
(x) the lesser of (i) (a) 85% of Foreign Eligible
Accounts supported by letters of credit, plus (b) 85% of Foreign Eligible
Accounts supported by credit insurance (net of the aggregate amount of all
applicable deductibles), and (ii) $8,000,000, plus
(y) the lesser of (i) $10,000,000, and (ii) 45% of the
value of Eligible Inventory, minus the Inventory Reserve, minus
(z) the aggregate amount of reserves, if any,
established by Foothill under Sections 2.1(b), 6.15 and 10.
(b) Anything to the contrary in Section 2.1(a) above
notwithstanding, Foothill may create reserves against or reduce its advance
rates based upon Eligible Accounts or Eligible Inventory without declaring an
Event of Default if it reasonably 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.
2.2 Letters of Credit.
(a) Subject to the terms and conditions of this
Agreement, Foothill agrees to issue letters of credit for the account of a
Borrower (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 a Borrower. Foothill shall have no
obligation to issue a Letter of Credit if any of the following would result:
(i) 100% of the aggregate amount of all other types
of undrawn and unreimbursed Letters of Credit, would exceed the Borrowing
Base less the amount of outstanding Advances less the 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 less reserves established under Section 2.1(b); or (y)
$3,000,000.
Each Borrower expressly understands and agrees that Foothill shall have no
obligation to arrange for the issuance by issuing banks of the letters of
credit that are to be the subject of
18
L/C Guarantees. Each Borrower and Foothill 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 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 Foothill
in its sole discretion. If Foothill is obligated to advance funds under a Letter
of Credit, Borrowers immediately shall reimburse such amount to Foothill 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) Each Borrower hereby agrees to indemnify, save,
defend, and hold Foothill harmless from any loss, cost, expense, or
liability, including payments made by Foothill, expenses, and reasonable
attorneys fees incurred by Foothill arising out of or in connection with any
Letter of Credit. Each Borrower agrees to be bound by the issuing bank's
regulations and interpretations of any Letters of Credit guarantied by
Foothill and opened to or for such Borrower's account or by Foothill's
interpretations of any L/C issued by Foothill to or for such Borrower's
account, even though this interpretation may be different from such
Borrower's own, and Borrowers understand and agree that Foothill shall not be
liable for any error, negligence, or mistake, whether of omission or
commission, in following any Borrower's instructions or those contained in
the Letter of Credit or any modifications, amendments, or supplements
thereto. Each Borrower understands that the L/C Guarantees may require
Foothill to indemnify the issuing bank for certain costs or liabilities
arising out of claims by a Borrower against such issuing bank. Each Borrower
hereby agrees to indemnify, save, defend, and hold Foothill harmless with
respect to any loss, cost, expense (including reasonable attorneys fees), or
liability incurred by Foothill under any L/C Guaranty as a result of
Foothill's indemnification of any such issuing bank.
(c) Each Borrower hereby authorizes and directs any bank
that issues a letter of credit guaranteed by Foothill to deliver to Foothill
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
Foothill's instructions and agreements with respect to all matters arising in
connection with such letter of credit and the related application. A
Borrower may or may not be the "applicant" or "account party" with respect to
such letter of credit.
(d) Any and all charges, commissions, fees, and costs
incurred by Foothill relating to the letters of credit guaranteed by Foothill
shall be considered Foothill Expenses for purposes of this Agreement and
immediately shall be reimbursable by Borrowers to Foothill.
(e) Immediately upon the termination of this Agreement,
Borrowers agree to either (i) provide cash collateral to be held by Foothill
in an amount equal to 102%
19
of the maximum amount of Foothill's obligations under outstanding Letters of
Credit, or (ii) cause to be delivered to Foothill releases of all of Foothill's
obligations under outstanding Letters of Credit. At Foothill's discretion, any
proceeds of Collateral received by Foothill 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) 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 Foothill 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):
(A) any reserve, deposit, or similar requirement is
or shall be imposed or modified in respect of any Letters of Credit issued
hereunder, or
(B) there shall be imposed on the issuing bank or
Foothill 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 Foothill 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
Foothill, then, and in any such case, Foothill 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 Foothill may specify to be necessary to
compensate the issuing bank or Foothill 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)(i) or
(c)(i), as applicable. The determination by the issuing bank or Foothill, 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.
2.3 Term Loans. Foothill agrees to provide Borrowers with Term
Loans in the amounts of $10,000,000 ("Term Loan A"), $7,000,000 ("Term Loan
B"), and $4,000,000 ("Term Loan C"), respectively. Principal payments on
Term Loan A and B shall be made on the first day of October, 1997 and shall
continue on the first day of each subsequent month until paid in full. For
Term Loan A, during the first 24 months, each principal payment shall be in
the amount of $104,166.66; for the next 11 months, each principal payment
shall be in the amount of $541,666.66, and on the third anniversary of the
Closing Date, the outstanding balance of Term Loan A shall be paid in full.
For Term Loan
20
B, for the first 12 months each principal payment shall be in the amount of
$229,166.66, and for the next 12 months each principal payment shall be in the
amount of $354,166.66. In addition, Borrowers shall prepay Term Loan B in an
amount equal to 25% of the amount of Borrowers' Free Cash Flow for the fiscal
years ending June 30, 1998 and June 30, 1999, such amount to be paid within 20
days of delivery to Foothill of Borrower's audited financial statements for each
of such fiscal years and shall be applied to regularly scheduled payments of
principal in the inverse order of their maturity. Term Loan C shall be interest
only with principal payable in full on the earlier of: (a) six months from the
Closing Date, or (b) from proceeds of a Financing or Sale Event; provided,
however, Borrowers' shall have the option to extend the maturity of Term Loan C
for an additional 30 days as long as no Event of Default has occurred and is
continuing and Borrowers' pay Foothill an extension fee in the amount of
$40,000.
Payments of accrued interest under the Term Loans shall be made on
the first day of each month commencing on the first day of September, 1997.
The outstanding principal balance and all accrued and unpaid interest under
each of the Term Loans shall be due and payable upon the earliest to occur
of: (a) the acceleration of the Obligations by Foothill following an Event
of Default; (b) the Maturity Date; and (c) the maturity date for each such
Term Loan. Upon completion of a Financing or Sale Event, the proceeds
therefrom shall be used first to repay in full Term Loan C, second to repay
in full the Junior Notes (provided that Foothill has not accelerated the
Obligations), third to repay in full Term Loan B and fourth to repay in full
Term Loan A. Borrower shall have the right to prepay Term Loans B and C, in
whole or in part, at any time, without penalty or premium. Borrower shall
have the right to prepay Term Loan A, in whole or in part, from the proceeds
of asset sales, without penalty or premium. All such prepaid amounts to be
applied to the installments due on Term Loans in the inverse order of their
maturity. All amounts outstanding under the Term Loans shall constitute
Obligations.
2.4 Intentionally Omitted.
2.5 Overadvances. If, at any time or for any reason, the
amount of Obligations owed by Borrowers to Foothill pursuant to Sections 2.1
or 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
Foothill, in cash, the amount of such excess to be used by Foothill first, to
repay Advances outstanding under Section 2.1 and, thereafter, to be held by
Foothill as cash collateral to secure Borrower's obligation to repay Foothill
for all amounts paid pursuant to Letters of Credit; provided, however, that
with respect to any Overadvance caused by Foothill's charging fees, costs,
expenses, or interest to the Loan Account, the Borrowers shall have two
Business Days to make such payments.
21
2.6 Interest and Letter of Credit Fees: Rates, Payments, and
Calculations.
(a) Interest Rate. Except as provided in clause (b)
below, (i) all Obligations (except for undrawn Letters of Credit and the Term
Loans B and C) shall bear interest at a per annum rate of 0.50 percentage
point above the Reference Rate, and (ii) Term Loans B and C shall bear
interest at a per annum rate of 14%.
(b) Letter of Credit Fee. Borrowers shall pay Foothill a
fee (in addition to the charges, commissions, fees, and costs set forth in
Section 2.2(d)) equal to 1.00% per annum times the aggregate undrawn amount
of all outstanding Letters of Credit.
(c) Default Rate. Upon the occurrence and during the
continuation of an Event of Default, (i) all Obligations (except for undrawn
Letters of Credit and Term Loans B and C) shall bear interest at a per annum
rate equal to 4.50 percentage point above the Reference Rate, and (ii) Term
Loans B and C shall bear interest at a per annum rate equal to 18%,(iii) the
Letter of Credit fee provided in Section 2.6(b) shall be increased to 5.00%
per annum times the aggregate undrawn amount of all outstanding Letters of
Credit.
(d) Minimum Interest. In no event shall the rate of
interest chargeable hereunder for any day for Advances or Term Loan A be less
than 7.00% 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. Each Borrower hereby authorizes Foothill, at
its option, without prior notice to such Borrower, to charge such interest
and Letter of Credit fees, all Foothill 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 Term Loans, or any Loan Document to Borrowers' 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 8.50% 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 360
day year for the actual number of days elapsed.
22
(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 Foothill, 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 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 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 to remit all Collections in
respect thereof to such Lockboxes. Borrowers, Foothill, 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. Each Borrower agrees that all Collections and other amounts received by
such Borrower 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 a Borrower without the
prior written consent of Foothill. Upon the terms and subject to the conditions
set forth in the Lockbox Agreements, all amounts received in each Lockbox
Account shall be wired each Business Day into an account (the "Foothill
Account") maintained by Foothill at a depositary selected by Foothill.
2.8 Crediting Payments; Application of Collections. The
receipt of any Collections by Foothill (whether from transfers to Foothill 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 payment on
account unless such Collection item is a wire transfer of immediately
available federal funds and is made to the Foothill Account or unless and
until such Collection item is honored when presented for payment. From and
after the Closing Date, Foothill shall be entitled to charge Borrowers for
one Business Day of `clearance' or `float' at the rate set forth in Section
2.6(a)(i) or Section 2.6(c)(i), as applicable, on all Collections that are
received by Foothill (regardless of whether forwarded by the Lockbox Banks to
Foothill, whether provisionally applied to reduce the Obligations under
Section 2.1, or otherwise). This across-the-board one Business Day clearance
or float charge on all Collections is acknowledged by the parties to
constitute an integral aspect of the pricing of Foothill's financing of
Borrowers, and shall apply irrespective of the characterization of whether
receipts are owned by a Borrower or Foothill, and whether or not there are
any outstanding Advances, the effect of such clearance or float charge being
the equivalent of charging one Business Day of interest
23
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 Foothill
only if it is received into the Foothill Account on a Business Day on or before
11:00 a.m. California time. If any Collection item is received into the Foothill
Account on a non-Business Day or after 11:00 a.m. California time on a Business
Day, it shall be deemed to have been received by Foothill as of the opening of
business on the immediately following Business Day.
2.9 Designated Account. Foothill is authorized to make the
Advances, the Letters of Credit and the Term Loans 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 a single Designated Account with
the Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by Borrowers and made by Foothill hereunder. Unless
otherwise agreed by Foothill and Borrowers, any Advance requested by
Borrowers and made by Foothill hereunder shall be made to the Designated
Account.
2.10 Maintenance of Loan Account; Statements of Obligations. At
the request of Borrowers, to facilitate and expedite the administration and
accounting processes and procedures of their borrowings under this Agreement,
Foothill has agreed, in lieu of maintaining separate loan accounts on Foothill's
books in the name of each of the Borrowers, that Foothill shall maintain a
single account on its books in the names of all of the Borrowers (the "Loan
Account"). All Advances and the Term Loans made by Foothill to Borrowers or for
Borrower's account, including accrued interest, Foothill Expenses, and any other
payment Obligations of Borrowers shall be made jointly and severally to the
Borrowers and shall be charged to the Loan Account. In accordance with Section
2.8, the Loan Account will be credited with all payments received by Foothill
from any Borrower or for any Borrowers' account, including all amounts received
in the Foothill Account from any Lockbox Bank. Foothill shall render one
statement regarding the Loan Account to Parent on behalf of Borrowers, including
principal, interest, fees, and including an itemization of all charges and
expenses constituting Foothill Expenses owing, and such statements shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrowers and Foothill unless, within 90 days after receipt
thereof by Borrowers, Borrowers shall deliver to Foothill written objection
thereto describing the error or errors contained in any such statements. Each
Borrower hereby expressly agrees and acknowledges that Foothill shall have no
obligation to account separately to such Borrower.
2.11 Fees. Borrowers shall pay to Foothill the following fees:
(a) Commitment Fee. A commitment fee in the amount of
$415,000 of which $157,500 has already been paid, and $257,500 of which shall
be payable on the Closing Date;
24
(b) Anniversary Fee. On the first and second
anniversaries of the Closing Date, an anniversary fee in an amount equal to
0.25% of the Maximum Revolving Amount plus the outstanding balance of the
Term Loans, which fee is fully earned on each anniversary.
(c) Term Loan C Fee. A fee in the amount of $120,000 of
which $60,000 has already been paid and $60,000 shall be payable on the
Closing Date.
(d) 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
0.25% per annum times the Average Unused Portion of the Maximum Revolving
Amount;
(e) Financial Examination, Documentation, and Appraisal
Fees. Foothill's customary 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 Foothill; Foothill's
customary 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 Foothill; and, the actual charges paid or incurred by Foothill 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; provided, however, that prior to the occurrence and
continuation of an Event of Default or Foothill deeming itself insecure,
Borrowers shall not be obligated to pay for more than four audits and [one]
appraisal in any 12 month period; and
(f) Servicing Fee. On the first day of each month during
the term of this Agreement, and thereafter so long as any Obligations are
outstanding, a servicing fee in an amount equal to $6,000.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Initial Advance, the Initial
Letter of Credit, and the Term Loans. The obligation of Foothill to make the
initial Advance, to issue the initial Letter of Credit, or to make the Term
Loans, is subject to the fulfillment, to the satisfaction of Foothill and its
counsel, of each of the following conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before August 14,
1997;
(b) Foothill shall have received searches regarding
Borrowers;
(c) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
25
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 Mortgages;
e. the Warrant; and
f. a subordination agreement with the holders of
the Junior Notes;
(d) Foothill shall have received a certificate from the
Secretary of each Borrower attesting to the resolutions of each Borrower's
Board of Directors authorizing its execution, delivery, and performance of
this Agreement and the other Loan Documents to which such Borrower is a party
and authorizing specific officers of such Borrower to execute the same;
(e) Foothill shall have received copies of each
Borrower's Governing Documents, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary of such Borrower;
(f) Foothill shall have received a certificate of status
with respect to each Borrower, dated within 10 days of the Closing Date, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of such Borrower, which certificate shall indicate that such
Borrower is in good standing in such jurisdiction;
(g) Foothill shall have received certificates of status
with respect to each Borrower, each dated within 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 Borrower is in good standing in such jurisdictions;
(h) Foothill 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 Foothill and
its counsel;
(i) Borrower shall have received not less than $5,000,000
in cash from an equity investment or the issuance of the Junior Notes;
26
(j) Foothill shall have received such Collateral Access
Agreements from lessors, warehousemen, bailees, and other third persons as
Foothill may require;
(k) Foothill shall have received an opinion of Borrowers'
counsel in form and substance satisfactory to Foothill in its sole discretion;
(l) Foothill shall have received (i) appraisals of the
Real Property Collateral and appraisals of the Equipment of Borrowers, in
each case satisfactory to Foothill, 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 Foothill (each
a "Mortgage Policy" and, collectively, the "Mortgage Policies") in amounts
satisfactory to Foothill assuring Foothill 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 Foothill;
(m) Foothill shall have received a phase-I environmental
report and a real estate survey shall have been completed with respect to the
Real Property Collateral and copies thereof delivered to Foothill; the
environmental consultants and surveyors retained for such reports or surveys,
the scope of the reports or surveys, and the results thereof shall be
acceptable to Foothill in its sole discretion;
(n) Foothill shall have received satisfactory evidence
that all tax returns required to be filed by Borrowers have been timely filed
and all taxes upon each Borrower or its 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
(o) 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 Foothill and its counsel.
3.2 Conditions Precedent to all Advances, all Letters of Credit
and the Term Loans. The following shall be conditions precedent to all
Advances, all Letters of Credit and the Term Loans hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all
material 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);
27
(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, Foothill, 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 30 days of the Closing Date, deliver to
Foothill 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 Foothill and its counsel.
3.4 Term. This Agreement shall become effective upon the
execution and delivery hereof by Borrowers and Foothill and shall continue in
full force and effect for a term ending on the date (the "Maturity Date") that
is three years from the Closing Date, unless sooner terminated pursuant to the
terms hereof. The foregoing notwithstanding, Foothill shall have the right to
terminate its 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 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 Foothill's continuing
security interests in the Collateral shall remain in effect until all
Obligations have been fully and finally discharged and Foothill's obligation
to provide additional credit hereunder is terminated.
3.6 Early Termination by Borrowers. The provisions of Section
3.4 that allow termination of this Agreement by Borrowers only on the Maturity
Date notwithstanding, Borrowers have the option, at any time upon 90 days prior
written notice to Foothill, to terminate this Agreement by paying to Foothill,
in cash, the Obligations (including an amount equal to 102% of the undrawn
amount of the Letters of Credit), in full, together with a premium (the "Early
Termination Premium") equal to the following percentage of the Maximum Revolving
Amount plus the outstanding balance of Term Loan A (subject to the provisions of
Section 2.3): (a) three percent if such prepayment occurs within the first 12
months of the Closing Date; (b) one percent if such prepayment occurs during
28
months 13 through 24 after the Closing Date, and (c) one-half percent if such
prepayment occurs after the 24th month after the Closing Date. Notwithstanding
the preceding sentence, no Early Termination Premium shall be charged if, after
18 months from the Closing Date, Borrowers obtain financing to repay the
Obligations from Norwest Bank, N.A. or any of its subsidiaries.
3.7 Termination Upon Event of Default. If Foothill 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 Foothill's
lost profits as a result thereof, Borrowers shall pay to Foothill 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 Foothill as the result of the early
termination and 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
Foothill a continuing security interest in all of such Borrower's 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 such Borrower of each of its covenants and
duties under the Loan Documents. Foothill's security interests in the
Personal Property Collateral shall attach to all Personal Property Collateral
without further act on the part of Foothill or Borrowers. Anything contained
in this Agreement or any other Loan Document to the contrary notwithstanding,
except for the sale of Inventory to buyers in the ordinary course of business,
no Borrower has any authority, express or implied, to dispose of any item or
portion of the Personal Property Collateral or the Real Property Collateral.
4.2 Negotiable Collateral. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrowers, immediately upon the request of Foothill, shall endorse and
deliver physical possession of such Negotiable Collateral to Foothill.
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral. At any time, Foothill or Foothill's designee may (a) notify
customers or Account Debtors of any Borrower that the Accounts, General
Intangibles, or Negotiable Collateral of such Borrower have been assigned to
Foothill or that Foothill has a security interest therein, and (b) after an
Event of Default, collect the Accounts, General Intangibles, and Negotiable
Collateral of such Borrower directly and charge the collection costs and
expenses to the Loan Account. Each Borrower agrees that it will hold in
trust for Foothill, as Foothill's trustee,
29
any Collections that it receives and immediately will deliver said Collections
to Foothill in their original form as received by Borrower.
4.4 Delivery of Additional Documentation Required. At any time
upon the request of Foothill, Borrowers shall execute and deliver to Foothill
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 Foothill
reasonably may request, in form satisfactory to Foothill, to perfect and
continue perfected Foothill's security interests in the Collateral, and in
order to fully 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 Foothill (and any of Foothill's officers,
employees, or agents designated by Foothill) 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 Foothill deems itself insecure, sign such Borrower's name on any invoice
or xxxx of lading relating to any Account of such Borrower, drafts against
Account Debtors, schedules and assignments of Accounts of such Borrower,
verifications of Accounts of such Borrower, 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 Foothill's
possession, (e) at any time that an Event of Default has occurred and is
continuing or Foothill deems itself insecure, notify the post office
authorities to change the address for delivery of such Borrower's mail to an
address designated by Foothill, to receive and open all mail addressed to
such Borrower, and to retain all mail relating to the Collateral of such
Borrower and forward all other mail to such Borrower, (f) at any time that an
Event of Default has occurred and is continuing or Foothill 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 Foothill 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 Foothill determines to be reasonable,
and Foothill may cause to be executed and delivered any documents and releases
that Foothill determines to be necessary. The appointment of Foothill as such
Borrower's attorney, and each and every one of Foothill'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 Foothill's obligation to extend
credit hereunder is terminated.
4.6 Right to Inspect. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect Borrowers' Books and
30
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.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement, each
Borrower makes 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 and Term
Loans as though made on and as of the date of such Advance, Letter of Credit
and Term 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. Each Borrower has good and indefeasible
title to its Collateral, free and clear of Liens except for Permitted Liens.
5.2 Eligible Accounts. The Eligible Accounts of each Borrower
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 such Borrower's business, unconditionally owed to such Borrower
without (to the best of such Borrower's knowledge) 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 of Borrowers is
of good and merchantable quality, free from known defects.
5.4 Equipment. All of the Equipment of Borrowers is used or
held for use in Borrowers' business and is fit for such purposes.
5.5 Location of Inventory and Equipment. The Inventory and
Equipment of Borrowers are not stored with a bailee, warehouseman, or similar
party (without Foothill'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. Each Borrower keeps correct and
accurate records itemizing and describing the kind, type, quality, and
quantity of its Inventory, and such Borrower's cost therefor.
31
5.7 Location of Chief Executive Office; FEIN. The chief
executive office of each Borrower is located at 0000 Xxxxxxxx Xxxxxx, Xx.
Xxxxx, Xxxxxxxx 00000, and each Borrower's FEIN is set forth below:
Borrower FEIN
Parent 00-0000000
B&F 00-0000000
Bear 00-0000000
Hospital Systems 00-0000000
Life Support 00-0000000
Bicore 00-0000000
5.8 Due Organization and Qualification; Subsidiaries.
(a) Each Borrower 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 Borrower'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 Borrower. All of the outstanding
capital stock of each such Subsidiary has been validly issued and is fully
paid and non-assessable.
(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 Borrower 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
Borrower of this Agreement and 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
Borrower of this Agreement and the Loan Documents to which it is a party do
not and will not (i) violate
32
any provision of federal, state, or local law or regulation (including
Regulations G, T, U, and X of the Federal Reserve Board) applicable to such
Borrower, the Governing Documents of such Borrower, or any order, judgment, or
decree of any court or other Governmental Authority binding on such Borrower,
(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 Borrower, (iii) result in or require the creation or
imposition of any Lien of any nature whatsoever upon any properties or assets of
such Borrower, other than Permitted Liens, or (iv) require any approval of
stockholders or any approval or consent of any Person under any material
contractual obligation of such Borrower.
(c) Other than the filing of appropriate financing
statements, fixture filings, and mortgages, the execution, delivery, and
performance by each Borrower of this Agreement and the Loan Documents to
which such Borrower 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) This Agreement and the Loan Documents to which any
Borrower is a party, and all other documents contemplated hereby and thereby,
when executed and delivered by such Borrower will be the legally valid and
binding obligations of such Borrower, enforceable against such Borrower 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) The Liens granted by each Borrower to Foothill in and
to its properties and assets pursuant to this Agreement and the other 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 Borrower before any court or administrative agency and no
Borrower has any knowledge or belief of any pending, threatened, or imminent
litigation, governmental investigations, or claims, complaints, actions, or
prosecutions involving any Borrower or any guarantor of the Obligations, except
for: (a) ongoing collection matters in which a Borrower is the plaintiff; (b)
matters disclosed on Schedule 5.10; and (c) matters arising after the date
hereof that, if decided adversely to a Borrower, would not have a Material
Adverse Change.
5.11 No Material Adverse Change. All financial statements
relating to any Borrower or any guarantor of the Obligations that have been
delivered by any Borrower to Foothill 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
such Borrower's (or such guarantor's, as applicable) financial condition as of
the date thereof and such Borrower's results of operations for the period then
ended. There has not been a Material Adverse Change with respect to any Borrower
(or such
33
guarantor, as applicable) since the date of the latest financial statements
submitted to Foothill on or before the Closing Date.
5.12 Solvency. Each Borrower is Solvent. No transfer of
property is being made by any Borrower and no obligation is being incurred by
any Borrower 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 any Borrower.
5.13 Employee Benefits. None of Borrowers, 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. Each Borrower,
each of its 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 Borrowers 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 under
any applicable law, treaty, rule, regulation, or agreement. None of
Borrowers 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. None of Borrowers' properties or
assets has ever been used by any Borrower or, to the best of each Borrower's
knowledge, by previous owners or operators in the disposal of, or to produce,
store, handle, treat, release, or transport, any Hazardous Materials. None
of Borrowers' 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 any Borrower. No Borrower 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 any Borrower resulting in the releasing or disposing of
Hazardous Materials into the environment.
6. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, and unless Foothill shall otherwise consent in writing, such
Borrower shall do all of the following:
6.1 Accounting System. Maintain a standard and modern system
of accounting that enables such Borrower to produce financial statements in
accordance with GAAP, and maintain records pertaining to its Collateral that
contain information as from time to time may be requested by Foothill. Such
Borrower also shall keep a modern inventory
34
reporting system that shows all additions, sales, claims, returns, and
allowances with respect to its Inventory.
6.2 Collateral Reporting. Provide Foothill with the following
documents at the following times in form satisfactory to Foothill: (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 using the amount of ineligible Accounts as determined based upon
the prior month's aging of Accounts, (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, and (ii) a
detailed aging, by total, of such Borrower's Accounts, together with a
reconciliation to the detailed calculation of the Borrowing Base previously
provided to Foothill, (c) on a monthly basis and, in any event, by no later
than the 10th day of each month during the term of this Agreement, a summary
aging, by vendor, of such Borrower's accounts payable and any book overdraft,
(d) on a weekly basis, Inventory reports specifying such Borrower's cost, (e)
on each Business Day, notice of all returns, disputes, or claims, (f) upon
request, copies of invoices in connection with its Accounts, customer
statements, credit memos, remittance advices and reports, deposit slips,
shipping and delivery documents in connection with its Accounts and for
Inventory and Equipment acquired by such Borrower, purchase orders and
invoices, (g) on a quarterly basis, a detailed list of such Borrower's
customers, (h) on a monthly basis, a calculation of the Dilution for the
prior month; and (i) such other reports as to the Collateral or the financial
condition of such Borrower as Foothill may request from time to time.
Original sales invoices evidencing daily sales shall be mailed by such
Borrower to each Account Debtor and, at Foothill's direction, the invoices
shall indicate on their face that such Borrower's Account has been assigned
to Foothill and that all payments are to be made directly to Foothill.
6.3 Financial Statements, Reports, Certificates. Deliver to
Foothill: (a) as soon as available, but in any event within 45 days after the
end of each month during each of Parent's fiscal years, a company prepared
balance sheet, income statement, and statement of cash flow covering Parent's
operations during such period; and (b) as soon as available, but in any event
within 90 days after the end of each of such Parent's fiscal years, financial
statements of Parent for each such fiscal year, audited by independent certified
public accountants reasonably acceptable to Foothill 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 Foothill
stating that such accountants do not have knowledge of the existence of any
Default or Event of Default. 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, and shall be accompanied by a
calculation of the Borrowers' Free Cash Flow. In addition to the financial
statements referred to above, Parent agrees to deliver financial statements
prepared on a consolidating basis so as to present such Parent and each such
related entity separately, and on a consolidated basis.
35
Together with the above, Parent also shall deliver to Foothill such
Parent's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and Form 8-K
Current Reports, and any other filings made by Parent with the Securities and
Exchange Commission, if any, as soon as the same are filed, or any other
information that is provided by Parent to its shareholders, and any other
report reasonably requested by Foothill relating to the financial condition
of such Parent.
Each month, together with the financial statements provided pursuant
to Section 6.3(a), Parent shall deliver to Foothill a certificate signed by
its chief financial officer to the effect that: (i) all financial statements
delivered or caused to be delivered to Foothill 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 Parent, (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 Foothill 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
what action Parent has taken, is taking, or proposes to take with respect
thereto).
Each Borrower shall have issued written instructions to its
independent certified public accountants authorizing them to communicate with
Foothill and to release to Foothill whatever financial information concerning
such Borrower that Foothill may request. Each Borrower hereby irrevocably
authorizes and directs all auditors, accountants, or other third parties to
deliver to Foothill, at such Borrower's expense, copies of such Borrower's
financial statements, papers related thereto, and other accounting records of
any nature in their possession, and to disclose to Foothill any information
they may have regarding such Borrower's business affairs and financial
conditions.
6.4 Tax Returns. Deliver to Foothill copies of each of such
Parent's future federal income tax returns, and any amendments thereto,
within 45 days of the filing thereof with the Internal Revenue Service.
6.5 Intentionally Deleted.
6.6 Returns. Cause returns and allowances, if any, as between
such Borrower and its Account Debtors to be on the same basis and in
accordance with the usual customary practices of such Borrower, as they exist
at the time of the execution and delivery
36
of this Agreement. If, at a time when no Event of Default has occurred and is
continuing, any Account Debtor returns any Inventory to such Borrower, such
Borrower shall determine the reason for such return as soon as reasonably
practicable and, if such Borrower accepts such return, issue a credit memorandum
(with a copy to be sent to Foothill) 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 such Borrower, such Borrower
promptly shall determine the reason for such return and, if Foothill consents
(which consent shall not be unreasonably withheld), issue a credit memorandum
(with a copy to be sent to Foothill) in the appropriate amount to such Account
Debtor.
6.7 Title to Equipment. Upon Foothill's request, such Borrower
immediately shall deliver to Foothill, properly endorsed, any and all
evidences of ownership of, certificates of title, or applications for title
to any items of its Equipment.
6.8 Maintenance of Equipment. Maintain its 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, such
Borrower shall not permit any item of its 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 such Borrower or any of its 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. Such Borrower 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
Foothill, on demand, appropriate certificates attesting to the payment
thereof or deposit with respect thereto. Such Borrower will make timely
payment or deposit of all tax payments and withholding taxes required of it
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 Foothill with proof satisfactory to Foothill indicating that
such Borrower has made such payments or deposits.
6.10 Insurance.
(a) At its expense, keep its Personal Property Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as are ordinarily insured
against by other owners in similar businesses. Such Borrower also shall
maintain business interruption, public liability, product liability, and
property damage insurance relating to such Borrower's ownership and use of
its Personal
37
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 such terms are
defined 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 Foothill
may require, but in any event in amounts sufficient to prevent such Borrower
from becoming a co-insurer 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
an amount of not less than $1,000,000; and (iii) insurance for such other
risks as Foothill may require. Replacement costs, at Foothill's option, may
be redetermined by an insurance appraiser, satisfactory to Foothill, not more
frequently than once every 12 months at such Borrower's 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
Foothill. All insurance required herein shall be written by companies which
are authorized to do insurance business in the State of California. All
hazard insurance and such other insurance as Foothill shall specify, shall
contain a California Form 438BFU (NS) mortgagee endorsement, or an equivalent
endorsement satisfactory to Foothill, showing Foothill 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 30 days prior written notice
to Foothill and that any loss payable thereunder shall be payable
notwithstanding any act or negligence of such Borrower or Foothill 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
Foothill 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.
Such Borrower shall deliver to Foothill certified copies of such policies of
insurance and evidence of the payment of all premiums therefor.
(d) Original policies or certificates thereof
satisfactory to Foothill evidencing such insurance shall be delivered to
Foothill prior to the expiration of the existing or preceding policies. Such
Borrower shall give Foothill prompt notice of any loss covered by such
insurance, and Foothill shall have the right to adjust any loss. Foothill shall
have the exclusive right to adjust all losses payable under any such insurance
policies without any liability to such Borrower 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
Foothill to be applied at the option of Foothill either to the prepayment of the
Obligations without premium, in such order or manner as Foothill may
38
elect, or shall be disbursed to such Borrower under stage payment terms
satisfactory to Foothill 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 value at least equal to the value
of the items or property destroyed prior to such damage or destruction. Upon the
occurrence of an Event of Default, Foothill shall have the right to apply all
prepaid premiums to the payment of the Obligations in such order or form as
Foothill shall determine.
(e) Such Borrower shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required to
be maintained under this Section 6.10, unless Foothill is included thereon as
named insured with the loss payable to Foothill under a standard California
438BFU (NS) Mortgagee endorsement, or its local equivalent. Such Borrower
immediately shall notify Foothill 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 Foothill.
6.11 No Setoffs or Counterclaims. Make payments hereunder and
under the other Loan Documents by or on behalf of such Borrower 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 its Inventory
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 Foothill not less than 30 days prior to the date
on which the Inventory or Equipment of Borrowers is moved to such new
location, so long as such new location is within the continental United
States, 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 Foothill's security interests in such assets and also
provides to Foothill a Collateral Access Agreement.
6.13 Compliance with Laws. 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 have a Material Adverse Change.
6.14 Employee Benefits.
(a) Deliver to Foothill: (i) promptly, and in any event
within 10 Business Days after such Borrower or any of its Subsidiaries knows
or has 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 such Borrower
39
describing such ERISA Event and any action that is being taken with respect
thereto by such Borrower, any such Subsidiary or ERISA Affiliate, and any action
taken or threatened by the IRS, Department of Labor, or PBGC. Such Borrower 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 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 such Borrower, any of its Subsidiaries
or, to the knowledge of such Borrower, any ERISA Affiliate with respect to such
request, and (iii) promptly, and in any event within 3 Business Days after
receipt by such Borrower, any of its Subsidiaries or, to the knowledge of such
Borrower, 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 Foothill, upon Foothill'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 such Borrower
or its 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 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 such Borrower 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 such Borrower 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 such Borrower or its
Subsidiaries under any Retiree Health Plan.
6.15 Leases. Pay when due all rents and other amounts payable
under any leases to which such Borrower is a party or by which such
Borrower's properties and assets are bound, unless such payments are the
subject of a Permitted Protest. To the extent that such Borrower fails
timely to make payment of such rents and other amounts payable when due under
its leases, Foothill shall be entitled, in its discretion, to reserve an
amount equal to such unpaid amounts against the Borrowing Base.
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, such Borrower will not, without Foothill's prior written
approval which may be given in Foothill's sole discretion, do any of the
following:
40
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to
any Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, 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 submitted to Foothill on or prior to the Closing Date;
(c) Indebtedness secured by Permitted Liens;
(d) Indebtedness evidenced by the Junior Notes;
(e) The private placement of subordinate debt on terms
and conditions consistent in all material respects with the X.X. Xxxxxxx
draft Private Placement Memorandum dated July 24, 1997, with subordination
provisions no less favorable than those set forth in those certain
Subordination Agreements entered into by Foothill in connection with the
Junior Notes; and
(f) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) 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,
(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 Foothill 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 its 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(d) 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 its
capital stock, or liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, assign,
41
lease, transfer, or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its property or assets.
7.4 Disposal of Assets. Sell, lease, assign, transfer, or
otherwise dispose of any of such Borrower's properties or assets other than
sales of Inventory to buyers in the ordinary course of such Borrower's
business as currently conducted.
7.5 Change Name. Change such Borrower's name, FEIN, corporate
structure (within the meaning of Section 9402(7) of the Code), or identity,
or add any new fictitious name.
7.6 Guarantee. 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 such Borrower
or which are transmitted or turned over to Foothill.
7.7 Nature of Business. Make any change in the principal
nature of such Borrower's business.
7.8 Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by
Section 7.1(d) or, so long as no Event of Default has occurred and is
continuing, the prepayment of the Junior Notes upon completion of a Financing
or Sale Event, 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
(b) 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), or (d).
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 of its
Inventory on xxxx and hold, sale or return, sale on approval, or other
conditional terms of sale.
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 such Borrower's capital stock, of
any class, whether now or hereafter outstanding.
42
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 such
Borrower's accounting records without said accounting firm or service bureau
agreeing to provide Foothill information regarding the Collateral or such
Borrower's financial condition. Such Borrower waives 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 Foothill
pursuant to or in accordance with this Agreement, and agrees that Foothill
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) loans, advances, capital contributions, or
transfers of property to a Person, 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 such
Borrower except for transactions that are in the ordinary course of such
Borrower's business, upon fair and reasonable terms, that are fully disclosed
to Foothill, and that are no less favorable to such Borrower 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.
7.16 Intentionally Deleted.
7.17 Use of Proceeds. Use (a) the proceeds of the Advances and
the Term Loans made hereunder for any purpose other than (i) on the Closing
Date, (y) to repay in full the outstanding principal, accrued interest, and
accrued fees and expenses owing to Existing Lender, and (z) to pay
transactional costs and expenses incurred in connection with this Agreement,
and (ii) thereafter, consistent with the terms and conditions hereof, for its
lawful and permitted corporate purposes.
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees. Relocate its chief executive office to a new
location without providing 30 days prior written notification thereof to
Foothill and so long as, at the time of such written notification, such
Borrower provides any financing statements or fixture filings necessary to
perfect and continue perfected Foothill's security interests and also
provides to Foothill a Collateral Access Agreement with respect to such new
location. The Inventory and Equipment of such Borrower shall not at any time
now or hereafter be stored with a bailee, warehouseman, or similar party
without Foothill's prior written consent.
43
7.19 No Prohibited Transactions Under ERISA. Directly or
indirectly:
(a) engage, or permit any Subsidiary of such Borrower 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 Subsidiary of such Borrower 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 Subsidiary of such Borrower
to terminate, any Benefit Plan where such event would result in any liability
of such Borrower, any of its Subsidiaries or any ERISA Affiliate under Title
IV of ERISA;
(e) fail, or permit any Subsidiary of such Borrower to
fail, to make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of such Borrower 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 Subsidiary of such Borrower to
amend, a Plan resulting in an increase in current liability for the plan year
such that either of such Borrower, any Subsidiary of such Borrower 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 Subsidiary of such Borrower
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 such Borrower, any of
its Subsidiaries or any ERISA Affiliate in excess of $500,000.
44
7.20 Financial Covenants. Have Parent fail to maintain:
(a) Maximum Senior Debt to EBITDA. A ratio of the Senior
Debt to EBITDA of less than the following as of the end of each of the
following fiscal quarters:
Fiscal Quarter Ending Maximum Ratio
September 30, 1997 7.3 - 1.0
December 31, 1997 5.9 - 1.0
March 31, 1998 5.4 - 1.0
June 30, 1998 4.1 - 1.0
September 30, 1998 4.1 - 1.0
December, 31, 1998 4.1 - 1.0
March 31, 1999 4.1 - 1.0
June 30, 1999 2.7 - 1.0
September 30, 1999 2.7 - 1.0
December 31, 1999 2.7 - 1.0
March 31, 2000 2.7 - 1.0
June 30, 2000 2.2 - 1.0
(b) Minimum Tangible Net Worth. Tangible Net Worth of at
least the following amounts as of the end of the following fiscal quarters:
Fiscal Quarter Ending Minimum Amount
September 30, 1997 $5,950,000
December 31, 1997 6,450,000
March 31, 1998 7,000,000
June 30, 1998 7,500,000
September 30, 1998 7,500,000
December, 31, 1998 7,500,000
March 31, 1999 7,500,000
June 30, 1999 11,350,000
September 30, 1999 11,350,000
December 31, 1999 11,350,000
March 31, 2000 11,350,000
June 30, 2000 $16,900,000
(c) Minimum EBITDA. EBITDA of at least the following
amounts as of the end of the following fiscal quarters:
45
Fiscal Quarter Ending Maximum Ratio
September 30, 1997 $6,294,000
December 31, 1997 7,619,000
March 31, 1998 8,115,000
June 30, 1998 10,498,000
September 30, 1998 10,498,000
December, 31, 1998 10,498,000
March 31, 1999 10,498,000
June 30, 1999 12,244,000
September 30, 1999 12,244,000
December 31, 1999 12,244,000
March 31, 2000 12,244,000
June 30, 2000 $14,222,000
After the occurrence of a Financing or Sale Event, Borrowers and
Foothill shall negotiate modifications to the financial covenants to reflect
such Financing and Sale Event, which modifications shall be reasonably
satisfactory to Foothill.
7.21 Capital Expenditures. Borrowers shall, in the
aggregate, make capital expenditures in any fiscal year in excess of
$3,000,000.
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 Foothill, reimbursement of Foothill Expenses, or other amounts
constituting Obligations);
8.2 If any Borrower fails to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in this
Agreement, in any of the Loan Documents, or in any other present or future
agreement between such Borrower and Foothill; provided, however, that
Borrowers' failure to perform, keep, or observe the terms of Sections 6.2,
6.3, 6.4, 6.7, 6.8, 6.13, 6.14 or 6.15 shall not constitute an Event of
Default unless such failure continues for five Business Days or more in the
case of Section 6.2 and otherwise 15 days or more;
8.3 If there is a Material Adverse Change;
46
8.4 If any material portion of any Borrower'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;
8.5 If an Insolvency Proceeding is commenced by any Borrower;
8.6 If an Insolvency Proceeding is commenced against any
Borrower and any of the following events occur: (a) such Borrower consents
to 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 dismissed within 60
calendar days of the date of the filing thereof; provided, however, that,
during the pendency of such period, Foothill 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
Borrower; or (e) an order for relief shall have been issued or entered
therein;
8.7 If any Borrower 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 any Borrower's properties or assets by the
United States Government, or any department, agency, or instrumentality
thereof, or by any state, 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 xxxxxx or otherwise, upon any of such
Borrower's properties or assets and the same is not paid on the payment date
thereof; provided, however, that no such Liens or debts for aggregate amounts
of less than $250,000 (in the case of the United States Government) or
$1,000,000 (for any state, county or municipality) shall constitute an Event
of Default if the same are discharged within 30 days of the date thereof;
provided, however, that Foothill shall have the right to establish a reserve
in Borrowers' Loan Account for the amount of such Liens;
8.9 If judgments or other claims, in excess of $250,000 in
the aggregate, become Liens or encumbrances upon any material portion of any
Borrower's properties or assets, and such Liens or encumbrances are not
discharged within 30 days of the date thereof or stayed pending appeal;
8.10 If there is a default in any material agreement to which
any Borrower 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 Borrower'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
the payment of the Obligations,
47
except to the extent such payment is permitted by the terms of the subordination
provisions applicable to such Indebtedness; or
8.12 If any material misstatement or misrepresentation exists
now or hereafter in any warranty, representation, statement, or report made
to Foothill by any Borrower or any officer, employee, agent, or director of
any Borrower, or if any such warranty or representation is withdrawn.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and during
the continuation, of an Event of Default Foothill may, at its election,
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, by any of the other Loan Documents, or otherwise, immediately
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 Borrowers and Foothill;
(c) Terminate this Agreement and any of the other
Loan Documents as to any future liability or obligation of Foothill, but
without affecting Foothill'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 Foothill considers
advisable, and in such cases, Foothill will credit Borrowers' Loan Account
with only the net amounts received by Foothill in payment of such disputed
Accounts after deducting all Foothill Expenses incurred or expended in
connection therewith;
(e) Cause Borrowers to hold all of their returned
Inventory in trust for Foothill, segregate all such returned Inventory from
all other property of any Borrower or in any Borrower's possession and
conspicuously label said returned Inventory as the property of Foothill;
(f) Without notice to or demand upon any Borrower or
any guarantor, make such payments and do such acts as Foothill considers
necessary or reasonable to protect its security interests in the Collateral.
Borrowers agree to assemble the Personal Property Collateral if Foothill so
requires, and to make the Personal Property Collateral available to Foothill
as Foothill may designate. Each Borrower authorizes Foothill to enter
48
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 Foothill's determination appears to conflict with its security interests and
to pay all expenses incurred in connection therewith. With respect to any of
Borrowers' owned or leased premises, each Borrower hereby grants Foothill a
license to enter into possession of such premises and to occupy the same,
without charge, for up to 120 days in order to exercise any of Foothill's rights
or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to any Borrower (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9505 of the
Code), set off and apply to the Obligations any and all (i) balances and
deposits of any Borrower held by Foothill (including any amounts received in
the Lockbox Accounts), or (ii) indebtedness at any time owing to or for the
credit or the account of any Borrower held by Foothill;
(h) Hold, as cash collateral, any and all balances
and deposits of any Borrower held by Foothill, and any amounts received in
the Lockbox Accounts, to secure the full and final repayment of all of the
Obligations;
(i) 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. Foothill is hereby granted a
license or other right to use, without charge, any Borrower's 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 each
Borrower's rights under all licenses and all franchise agreements shall inure to
Foothill's benefit;
(j) 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 any Borrower's premises) as Foothill determines is commercially
reasonable. It is not necessary that the Personal Property Collateral be
present at any such sale;
(k) Foothill shall give notice of the disposition of
the Personal Property Collateral as follows:
(1) Foothill shall give Borrowers and each holder of
a security interest in the Personal Property Collateral who has filed with
Foothill 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
49
Property Collateral, then the time on or after which the private sale or other
disposition is to be made;
(2) The notice shall be personally delivered or
mailed, postage prepaid, to Borrowers as provided in Section 12, at least 5
days before the date fixed for the sale, or at least 5 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 Foothill;
(3) If the sale is to be a public sale,
Foothill also shall give notice of the time and place by publishing a notice
one time at least 5 days before the date of the sale in a newspaper of
general circulation in the county in which the sale is to be held;
(l) Foothill may credit bid and purchase at any
public sale; and
(m) 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 Foothill to Borrowers.
9.2 Remedies Cumulative. Foothill's rights and remedies
under this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Foothill shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by Foothill of one right or remedy shall be deemed an election, and
no waiver by Foothill of any Event of Default shall be deemed a continuing
waiver. No delay by Foothill shall constitute a waiver, election, or
acquiescence by it.
10. TAXES AND EXPENSES.
If any Borrower fails 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 fails 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 Foothill determines that such failure by such Borrower
could result in a Material Adverse Change, in its discretion and without
prior notice to Borrowers, Foothill 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 Foothill deems necessary to protect Foothill 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 Foothill deems prudent. Any such amounts paid by
Foothill shall constitute Foothill Expenses. Any such
50
payments made by Foothill shall not constitute an agreement by Foothill to make
similar payments in the future or a waiver by Foothill of any Event of Default
under this Agreement. Foothill 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. Each Borrower waives 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 Foothill on which such Borrower may in any way
be liable.
11.2 Foothill's Liability for Collateral. So long as
Foothill complies with its obligations, if any, under Section 9207 of the
Code, Foothill 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 shall pay, indemnify,
defend, and hold Foothill, 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, 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 (including any of the foregoing arising out of
the administration of the credit facilities hereunder on a joint borrowing
basis) 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.
51
11.4 Joint Borrowers.
(a) Each Borrower agrees that it is jointly and
severally, directly and primarily liable to Foothill for payment in full of
all Obligations, whether for principal, interest or otherwise and that such
liability is independent of the duties, obligations, and liabilities of the
other Borrowers. Foothill may bring a separate action or actions on each,
any, or all of the Obligations against any Borrower, whether action is
brought against the other Borrowers or whether the other Borrowers are joined
in such action. In the event that any Borrower fails to make any payment of
any Obligations on or before the due date thereof, the other Borrowers
immediately shall cause such payment to be made or each of such Obligations
to be performed, kept, observed, or fulfilled.
(b) The Loan Documents are a primary and original
obligation of each Borrower, are not the creation of a surety relationship,
and are an absolute, unconditional, and continuing promise of payment and
performance which shall remain in full force and effect without respect to
future changes in conditions, including any change of law or any invalidity
or irregularity with respect to the Loan Documents. Each Borrower agrees
that its liability under the Loan Documents shall be immediate and shall not
be contingent upon the exercise or enforcement by Foothill of whatever
remedies it may have against the other Borrowers, or the enforcement of any
lien or realization upon any security Foothill may at any time possess. Each
Borrower consents and agrees that Foothill shall be under no obligation
(under Section 2899 or 3433 of the California Civil Code or otherwise) to
marshal any assets of any Borrower against or in payment of any or all of the
Obligations.
(c) Each Borrower acknowledges that it is presently
informed as to the financial condition of the other Borrowers and of all other
circumstances which a diligent inquiry would reveal and which bear upon the risk
of nonpayment of the Obligations. Each Borrower hereby covenants that it will
continue to keep informed as to the financial condition of the other Borrowers,
the status of the other Borrowers and of all circumstances which bear upon the
risk of nonpayment of the Obligations. Absent a written request from any
Borrower to Foothill for information, such Borrower hereby waives any and all
rights it may have to require Foothill to disclose to such Borrower any
information which Foothill may now or hereafter acquire concerning the condition
or circumstances of the other Borrowers.
(d) The liability of each Borrower under the Loan
Documents includes Obligations arising under successive transactions
continuing, compromising, extending, increasing, modifying, releasing, or
renewing the Obligations, changing the interest rate, payment terms, or other
terms and conditions thereof, or creating new or additional Obligations after
prior Obligations have been satisfied in whole or in part. To the maximum
extent permitted by law, each Borrower hereby waives any right to revoke its
liability under the Loan Documents as to future indebtedness, and in
connection therewith, each Borrower hereby waives any rights it may have
under Section 2815 of the California Civil Code. If such a revocation is
effective notwithstanding the foregoing waiver,
52
each Borrower acknowledges and agrees that (a) no such revocation shall be
effective until written notice thereof has been received by Foothill, (b) no
such revocation shall apply to any Obligations in existence on such date
(including, any subsequent continuation, extension, or renewal thereof, or
change in the interest rate, payment terms, or other terms and conditions
thereof), (c) no such revocation shall apply to any Obligations made or created
after such date to the extent made or created pursuant to a legally binding
commitment of Foothill in existence on the date of such revocation, (d) no
payment by such Borrower or from any other source prior to the date of such
revocation shall reduce the maximum obligation of the other Borrowers hereunder,
and (e) any payment by such Borrower or from any source other than Borrowers,
subsequent to the date of such revocation, shall first be applied to that
portion of the Obligations as to which the revocation is effective and which are
not, therefore, guaranteed hereunder, and to the extent so applied shall not
reduce the maximum obligation of each Borrower hereunder.
(e) (i) Each Borrower absolutely, unconditionally,
knowingly, and expressly waives:
(1) (A) notice of acceptance hereof; (B) notice
of any loans or other financial accommodations made or extended under the
Loan Documents or the creation or existence of any Obligations; (C) notice of
the amount of the Obligations, subject, however, to each Borrower's right to
make inquiry of Foothill to ascertain the amount of the Obligations at any
reasonable time; (D) notice of any adverse change in the financial condition
of the other Borrowers or of any other fact that might increase such
Borrower's risk hereunder; (E) notice of presentment for payment, demand,
protest, and notice thereof as to any instruments among the Loan Documents;
and (F) all notices (except if such notice is specifically required to be
given to Borrowers hereunder or under the Loan Documents) and demands to
which such Borrower might otherwise be entitled.
(2) its right, under Sections 2845 or 2850 of
the California Civil Code, or otherwise, to require Foothill to institute
suit against, or to exhaust any rights and remedies which Foothill has or may
have against, the other Borrowers or any third party, or against any
Collateral provided by the other Borrowers, or any third party. In this
regard, each Borrower agrees that it is bound to the payment of all
Obligations, whether now existing or hereafter accruing, as fully as if such
Obligations were directly owing to Foothill by such Borrower. Each Borrower
further waives any defense arising by reason of any disability or other
defense (other than the defense that the Obligations shall have been fully
and finally performed and indefeasibly paid) of the other Borrowers or by
reason of the cessation from any cause whatsoever of the liability of the
other Borrowers in respect thereof.
(3) (A) any rights to assert against Foothill
any defense (legal or equitable), set-off, counterclaim, or claim which such
Borrower may now
53
or at any time hereafter have against the other Borrowers or any other party
liable to Foothill; (B) any defense, set-off, counterclaim, or claim, of any
kind or nature, arising directly or indirectly from the present or future lack
of perfection, sufficiency, validity, or enforceability of the Obligations or
any security therefor; (C) any defense such Borrower has to performance
hereunder, and any right such Borrower has to be exonerated, provided by
Sections 2819, 2822, or 2825 of the California Civil Code, or otherwise, arising
by reason of: the impairment or suspension of Foothill's rights or remedies
against the other Borrowers; the alteration by Foothill of the Obligations; any
discharge of the other Borrowers' obligations to Foothill by operation of law as
a result of Foothill's intervention or omission; or the acceptance by Foothill
of anything in partial satisfaction of the Obligations; (D) the benefit of any
statute of limitations affecting such Borrower's liability hereunder or the
enforcement thereof, and any act which shall defer or delay the operation of any
statute of limitations applicable to the Obligations shall similarly operate to
defer or delay the operation of such statute of limitations applicable to such
Borrower's liability hereunder.
(ii) Each Borrower absolutely, unconditionally,
knowingly, and expressly waives any defense arising by reason of or deriving
from (i) any claim or defense based upon an election of remedies by Foothill
including any defense based upon an election of remedies by Foothill under
the provisions of Sections 580a, 580b, 580d, and 726 of the California Code
of Civil Procedure or any similar law of California or any other
jurisdiction; or (ii) any election by Foothill under Bankruptcy Code Section
1111(b) to limit the amount of, or any collateral securing, its claim against
the Borrowers. Pursuant to California Civil Code Section 2856(b):
"Each Borrower waives all rights and defenses
arising out of an election of remedies by the creditor,
even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a
guaranteed obligation, has destroyed such Borrower's rights
of subrogation and reimbursement against the other
Borrowers by the operation of Section 580(d) of the
California Code of Civil Procedure or otherwise."
If any of the Obligations at any time is secured by a mortgage or deed of
trust upon real property, Foothill may elect, in its sole discretion, upon a
default with respect to the Obligations, to foreclose such mortgage or deed
of trust judicially or nonjudicially in any manner permitted by law, before
or after enforcing the Loan Documents, without diminishing or affecting the
liability of any Borrower hereunder except to the extent the Obligations are
repaid with the proceeds of such foreclosure. Each Borrower understands that
(a) by virtue of the operation of California's antideficiency law applicable
to nonjudicial foreclosures, an election by Foothill nonjudicially to
foreclose such a mortgage or deed of trust probably would have the effect of
impairing or destroying rights of subrogation, reimbursement, contribution,
or indemnity of such Borrower against the other Borrowers or other guarantors
or sureties, and (b) absent the waiver given by such Borrower, such an
election would prevent
54
Foothill from enforcing the Loan Documents against such Borrower. Understanding
the foregoing, and understanding that such Borrower is hereby relinquishing a
defense to the enforceability of the Loan Documents, such Borrower hereby waives
any right to assert against Foothill any defense to the enforcement of the Loan
Documents, whether denominated "estoppel" or otherwise, based on or arising from
an election by Foothill nonjudicially to foreclose any such mortgage or deed of
trust. Each Borrower understands that the effect of the foregoing waiver may be
that each Borrower may have liability hereunder for amounts with respect to
which such Borrower may be left without rights of subrogation, reimbursement,
contribution, or indemnity against the other Borrower or other guarantors or
sureties. Each Borrower also agrees that the "fair market value" provisions of
Section 580a of the California Code of Civil Procedure shall have no
applicability with respect to the determination of such Borrower's liability
under the Loan Documents.
(iii) Until such time as all Obligations have been
fully, finally, and indefeasibly paid in full, in cash, each Borrower hereby
absolutely, unconditionally, knowingly, and expressly postpones: (1) any
right of subrogation such Borrower has or may have as against the other
Borrowers with respect to the Obligations; (2) any right to proceed against
the other Borrowers or any other Person, now or hereafter, for contribution,
indemnity, reimbursement, or any other suretyship rights and claims, whether
direct or indirect, liquidated or contingent, whether arising under express
or implied contract or by operation of law, which such Borrower may now have
or hereafter have as against the other Borrowers with respect to the
Obligations; and (3) any right to proceed or seek recourse against or with
respect to any property or asset of the other Borrowers.
(iv) WITHOUT LIMITING THE GENERALITY OF ANY OTHER
WAIVER OR OTHER PROVISION SET FORTH IN THIS SECTION 11.4, EACH BORROWER
HEREBY ABSOLUTELY, KNOWINGLY, UNCONDITIONALLY, AND EXPRESSLY WAIVES AND
AGREES NOT TO ASSERT ANY AND ALL BENEFITS OR DEFENSES ARISING DIRECTLY OR
INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE SECTIONS 2799,
2808, 2809, 2810, 2815, 2819, 2820, 2821, 2822, 2825, 2839, 2845, 2848, 2849,
AND 2850, CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 580a, 580b, 580c, 580d,
AND 726, AND CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA CIVIL CODE.b
(f) Each Borrower consents and agrees that, without
notice to or by such Borrower, and without affecting or impairing the
liability of such Borrower hereunder, Foothill may, by action or inaction:
(i) compromise, settle, extend the duration or
the time for the payment of, or discharge the performance of, or may refuse
to or otherwise not enforce the Loan
55
Documents, or any part thereof, with respect to the other Borrowers;
(ii) release the other Borrowers or grant other
indulgences to the other Borrowers in respect thereof; or
(iii) release or substitute any guarantor, if
any, of the Obligations, or enforce, exchange, release, or waive any security
for the Obligations or any guaranty of the Obligations, or any portion
thereof.
(g) Foothill shall have the right to seek recourse
against each Borrower to the fullest extent provided for herein, and no
election by Foothill to proceed in one form of action or proceeding, or
against any party, or on any obligation, shall constitute a waiver of
Foothill's right to proceed in any other form of action or proceeding or
against other parties unless Foothill has expressly waived such right in
writing. Specifically, but without limiting the generality of the foregoing,
no action or proceeding by Foothill under the Loan Documents shall serve to
diminish the liability of any Borrower thereunder except to the extent that
Foothill finally and unconditionally shall have realized indefeasible payment
by such action or proceeding.
(h) The Obligations shall not be considered
indefeasibly paid for purposes of this Section 11.4 unless and until all
payments to Foothill are no longer subject to any right on the part of any
person, including any Borrower, any Borrower as a debtor in possession, or
any trustee (whether appointed pursuant to 11 U.S.C., or otherwise) of any
Borrower's assets to invalidate or set aside such payments or to seek to
recoup the amount of such payments or any portion thereof, or to declare same
to be fraudulent or preferential. Upon such full and final performance and
indefeasible payment of the Obligations, Foothill shall have no obligation
whatsoever to transfer or assign its interest in the Loan Documents to any
Borrower. In the event that, for any reason, any portion of such payments to
Foothill is set aside or restored, whether voluntarily or involuntarily,
after the making thereof, then the obligation intended to be satisfied
thereby shall be revived and continued in full force and effect as if said
payment or payments had not been made, and each Borrower shall be liable for
the full amount Foothill is required to repay plus any and all costs and
expenses (including attorneys' fees and attorneys' fees incurred pursuant to
11 U.S.C.) paid by Foothill in connection therewith.
Borrowers and each of them warrant and agree that each of the
waivers and consents set forth herein are made after consultation with legal
counsel and with full knowledge of their significance and consequences, with
the understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Borrowers
otherwise may have against other Borrowers, the Lender Group or others, or
against Collateral. If any of the waivers or consents herein are determined
to be contrary
56
to any applicable law or public policy, such waivers and consents shall be
effective to the maximum extent permitted by law.
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
Borrower or to Foothill, as the case may be, at its address set forth below:
If to Borrowers: c/o ALLIED HEALTHCARE PRODUCTS, INC.
0000 Xxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxx, Vice President Finance
Fax No. 000.000.0000
with copies to: XXXXXXXXX XXXXXXX XXXXX & OSKINSKY LLP
0000 X Xxxxxx XX
Xxxxxxxxxx, X.X. 00000-0000
Attn: Xxxxx X. Xxxxxxxxx, Esq.
Fax No. 000.000.0000
If to Foothill: FOOTHILL CAPITAL CORPORATION
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Business Finance Division Manager
Fax No. 000.000.0000
with copies to: BUCHALTER, NEMER, FIELDS & YOUNGER
000 Xxxxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Fax No. 000.000.0000
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 Foothill in connection with Sections 9504 or 9505
of the Code, shall be deemed received on the earlier of the date of actual
receipt or 3 days after the deposit thereof in the mail. Each Borrower
acknowledges and agrees that notices sent by Foothill in connection with
Sections 9504 or 9505 of the Code
57
shall be deemed sent when deposited in the mail or personally delivered, or,
where permitted by law, transmitted by 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 AN 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
CALIFORNIA. 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
LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY
OTHER COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS
AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY.
EACH BORROWER AND FOOTHILL WAIVE, 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 FOOTHILL HEREBY WAIVE THEIR
RESPECTIVE RIGHTS 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
FOOTHILL REPRESENTS THAT THEY HAVE REVIEWED THIS WAIVER AND EACH KNOWINGLY
AND VOLUNTARILY 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.
14. DESTRUCTION OF BORROWERS' DOCUMENTS.
All documents, schedules, invoices, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by Foothill
four months after they are delivered to or received by Foothill, unless
Borrowers request, in writing, the return of said documents, schedules, or
other papers and makes arrangements, at Borrowers' expense, for their return.
58
15. GENERAL PROVISIONS.
15.1 Effectiveness. This Agreement shall be binding and
deemed effective when executed by Borrowers and Foothill.
15.2 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the respective successors and assigns of each of the
parties; provided, however, that no Borrower may assign this Agreement or any
rights or duties hereunder without Foothill's prior written consent and any
prohibited assignment shall be absolutely void. No consent to an assignment
by Foothill shall release the assigning Borrower from its Obligations.
Foothill may assign this Agreement and its rights and duties hereunder and no
consent or approval by Borrowers is required in connection with any such
assignment. Foothill reserves the right to sell, assign, transfer,
negotiate, or grant participations in all or any part of, or any interest in
Foothill's rights and benefits hereunder. In connection with any such
assignment or participation, Foothill may disclose all documents and
information which Foothill now or hereafter may have relating to any Borrower
or any Borrower's business. To the extent that Foothill assigns its rights
and obligations hereunder to a third Person, Foothill thereafter shall be
released from such assigned obligations to Borrowers and such assignment
shall effect a novation between Borrowers and such third Person.
15.3 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.
15.4 Interpretation. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against
Foothill 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.
15.5 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.
15.6 Amendments in Writing. This Agreement can only be
amended by a writing signed by both Foothill and Borrowers.
15.7 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
59
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.
15.8 Revival and Reinstatement of Obligations. If the
incurrence or payment of the Obligations by any Borrower or any guarantor of
the Obligations or the transfer by either or both of such parties to Foothill
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 Foothill 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 Foothill is required or elects to repay or restore,
and as to all reasonable costs, expenses, and attorneys fees of Foothill
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.
15.9 Integration. This Agreement, certain supplemental
letters delivered concurrently herewith, 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in Los Angeles, California.
ALLIED HEALTHCARE PRODUCTS, INC.,
a Delaware corporation
/s/ Xxx X. Xxxxxxxx
By: ________________________________________
Title: President and Chief Executive Officer
B&F MEDICAL PRODUCTS, INC.,
a Delaware corporation
/s/ Xxx X. Xxxxxxxx
By: ________________________________________
Title: President and Chief Executive Officer
60
BEAR MEDICAL SYSTEMS, INC.,
a California corporation
/s/ Xxx X. Xxxxxxxx
By: ________________________________________
Title: President and Chief Executive Officer
HOSPITAL SYSTEMS, INC.,
a California corporation
/s/ Xxx X. Xxxxxxxx
By: ________________________________________
Title: President and Chief Executive Officer
LIFE SUPPORT PRODUCTS, INC.,
a California corporation
/s/ Xxx X. Xxxxxxxx
By: ________________________________________
Title: President and Chief Executive Officer
BICORE MONITORING SYSTEMS, INC.,
California corporation
/s/ Xxx X. Xxxxxxxx
By: ________________________________________
Title: President and Chief Executive Officer
61
FOOTHILL CAPITAL CORPORATION,
a California corporation
/s/ Senior Vice President
By: __________________________________
Title: Senior Vice President
62
FACILITY ADDRESS CITY COUNTY STATE FOOTHILL NAME AMOUNT
NAME AND LIEN OF OF
ZIP POSITION PRIOR PRIOR
CODE LIENOR LIEN
63
