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Exhibit 10.1
CREDIT AND SECURITY AGREEMENT
This Credit and Security Agreement ("Agreement") is entered into as of
June 6, 2001, by and between SIMON WORLDWIDE, INC., a Delaware corporation
("BORROWER"), and CITY NATIONAL BANK, a national banking association ("CNB").
1. DEFINITIONS. As used in this Agreement, these terms have the
following meanings:
1.1 "ACCOUNT" or "ACCOUNTS" means any right to payment for goods
sold or leased or for services rendered which is not evidenced by an instrument
or chattel paper from any Person, whether now existing or hereafter arising or
acquired, whether or not it has been earned by performance.
1.2 "ACCOUNT DEBTOR" means the Person obligated on an Account.
1.3 "BANKER'S ACCEPTANCE" shall mean a time draft accepted by CNB
upon the drawing of a Letter of Credit issued under this Agreement.
1.4 "BORROWER'S DEMAND DEPOSIT ACCOUNT" shall mean account number
101 779 068 maintained by Borrower with CNB.
1.5 "BUSINESS DAY" means a day that CNB's Head Office is open and
conducts a substantial portion of its business.
1.6 "CODE" means the Uniform Commercial Code of California as it
may be amended from time to time, except where the Uniform Commercial Code of
another state governs the perfection of a security interest in Collateral
located in that state.
1.7 "COLLATERAL" means all property securing the Obligations, as
described in Section 7.
1.8 "COMMERCIAL LETTERS OF CREDIT" means letters of credit issued
pursuant to this Agreement and in response to Borrower's submission of the CNB
form entitled Irrevocable Letter of Credit Application and Security Agreement.
1.9 "COMMITMENT" means CNB's commitment to issue or consider
issuing the Letters of Credit in the aggregate principal amount outstanding at
any one time of up to Twenty One Million Dollars ($21,000,000).
1.10 "DEBT" means, at any date, the aggregate amount of, without
duplication, (a) all obligations of Borrower for borrowed money, or
reimbursement for open letters of credit and banker's acceptances, (b) all
obligations of Borrower evidenced by bonds, debentures, notes or other similar
instruments, (c) all obligations of Borrower to pay the deferred purchase price
of property or services, (d) all capitalized lease obligations of Borrower, (e)
all obligations or liabilities of others secured by a lien on any asset of
Borrower, whether or not such obligation or liability is assumed, (f) all
obligations guaranteed by Borrower, (g) all obligations, direct or indirect,
for letters of credit, and (h) any other obligations or liabilities which are
required by GAAP to be shown as liabilities on the balance sheet of Borrower.
1.11 "EVENT OF DEFAULT" is an event described in Section 8.1 after
any applicable cure period.
1.12 "GAAP" means generally accepted accounting principles,
consistently applied.
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1.13 "GUARANTOR" shall mean Simon Marketing, Inc.
1.14 "GUARANTY" shall be in the form attached hereto as Exhibit A.
1.15 "GUIDANCE LINE FACILITY" is Fifteen Million Dollars ($15,000,000).
1.16 "INVENTORY" means goods owned by Borrower and held for sale or lease
in the ordinary course of business, work in process and any and all raw
materials used in connection with the foregoing.
1.17 "LETTERS OF CREDIT" means Commercial Letters of Credit and Standby
Letters of Credit.
1.18 "LIQUID ASSETS" shall mean the sum of cash, cash equivalents and
Marketable Securities held in Guarantor's name upon which there is no security
interest, lien or other encumbrance, other than in favor of CNB.
1.19 "LOAN DOCUMENTS" means, individually and collectively, this
Agreement, any note, guaranty, security or pledge agreement, financing
statement and all other contracts, instruments, and documents executed in
connection with or related to extensions of credit under this Agreement.
1.20 "MARKETABLE SECURITIES" shall mean "margin stock" as defined in
Regulation U of the Federal Reserve Board; mutual funds; and bonds and other
debt securities of United States corporations not falling within the definition
of "margin stock" with a credit quality rating of at least A by Standard &
Poors or A-2 by Moody's; commercial paper with a credit quality rating of at
least A-2 by Standard & Poors or P-2 by Moody's; obligations issued by or
guaranteed by the United States government or agencies thereof; and obligations
of any state, territory, municipality or other local governmental subdivision
or entity of the United States, with a credit quality rating of at least A by
Standard & Poors or A-2 by Moody's.
1.21 "OBLIGATIONS" means all present and future liabilities and
obligations of Borrower to CNB hereunder, including any extensions and renewals
thereof and substitutions therefor.
1.22 "PERSON" means any individual or entity.
1.23 "PRIME RATE" means the rate most recently announced by CNB at its
principal office in Beverly Hills, California as its "Prime Rate." Any change
in the interest rate with respect to Prime Loans resulting from a change in the
Prime Rate will become effective on the day on which each change in the Prime
Rate is announced by CNB.
1.24 "STANDBY LETTERS OF CREDIT" means standby letters of credit issued
pursuant to this Agreement and in response to Borrower's submission of an
Irrevocable Standby Letter of Credit Application and Letter of Credit Agreement.
1.25 "STANDBY LETTER OF CREDIT COMMITMENT" is Six Million Dollars
($6,000,000.00).
1.26 "TERMINATING EVENT" is an event set forth in Section 8.2 after any
applicable cure period.
1.27 "TERMINATION DATE" means May 15, 2002, unless the term of this
Agreement is renewed by CNB for an additional period under Section 3, or such
earlier termination date under
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Section 8.3 upon the occurrence of an Event of Default. Upon any renewal, the
Termination Date will be the renewed maturity date determined by CNB. Provided,
however, this Agreement may be terminated at any time by Borrower when there are
no Obligations outstanding and, upon such termination by Borrower, CNB shall
promptly comply with the requirements of Code Section 9404(1), or any successor
statute, with respect to termination of any UCC-1 Financing Statement on file.
2. THE CREDIT.
2.1 STANDBY LETTER OF CREDIT FACILITY. CNB will, at the request of
Borrower any time up to the Termination Date, issue Standby Letters of Credit
for the account of Borrower. The aggregate face amount of outstanding Standby
Letters of Credit at any time will not exceed the Standby Letter of Credit
Commitment.
2.1.1 ISSUANCE OF STANDBY LETTERS OF CREDIT.
(a) Standby Letters of Credit will be issued in accordance
with an Irrevocable Standby Letter of Credit Application and Letter of Credit
Agreement submitted by Borrower and incorporated herein by this reference,
subject to the terms of this Agreement in the event of any conflict herewith.
The reimbursement obligation with respect to each Standby Letter of Credit will
be secured by cash held in the form of a CNB Certificate of Deposit prior to
issuance of the Standby Letter of Credit. Standby Letters of Credit will be
issued on the normal documentation used by CNB from time to time in accord with
the International Standby Practices 1998. Published CNB fees and charges, as
delivered to Borrower from time to time, will apply to the issuance of Standby
Letters of Credit, provided, however, each Standby Letter of Credit shall be
subject to a fee of one percent (1%) per annum of the amount of the Standby
Letter of Credit, prorated over the term of the Standby Letter of Credit, but in
no event less than $250.00 for each Standby Letter of Credit.
(b) For Borrower's convenience and pursuant to its request,
Borrower may submit the Irrevocable Standby Letter of Credit Application by
telephone facsimile ("FAX") which will include FAX signatures. CNB is authorized
to accept faxed documents without any need, requirement or responsibility to
verify in any way the genuineness or authenticity of the faxed documents or
signatures. Borrower will deliver to CNB an originally executed Irrevocable
Standby Letter of Credit Application within fifteen (15) days of each faxing.
CNB's failure to receive an original set of documents shall not be deemed or
construed in any way to affect the propriety of issuing the Letters of Credit or
Borrower's liability to reimburse CNB for the amount of any drawings under the
issued Letter of Credit.
(c) Borrower hereby authorizes the following persons, or
others designated in writing by two of the three following persons, to request
the issuance of Letters of Credit under this Agreement: Xxxxxxx X. Xxxxxxx,
Xxxxxxx Xxxxxxxx, and Xxxxxxx Xxxxx. Provided, however, CNB may, in its sole
discretion, obtain telephonic clarification, guidance, instruction or
confirmation concerning the issuance or other aspects of any Letter of Credit
issued hereunder from any one of the following persons on behalf of the
Borrower: Xxxxxxx X. Xxxxxxx, Xxxxxxx Xxxxxxxx, and Xxxxxxx Xxxxx, or any other
person designated by Xxxxxxx X. Xxxxxxx, Xxxxxxx Xxxxxxxx, and Xxxxxxx Xxxxx in
writing.
2.1.2 REIMBURSEMENT FOR FUNDING A STANDBY LETTER OF CREDIT.
Borrower's obligation to reimburse CNB shall be satisfied by charging Borrower's
certificate of deposit given to secure the reimbursement obligation pursuant to
Section 7.1.9
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2.2 GUIDANCE LINE FACILITY. CNB shall, at the request of Borrower,
consider requests for issuance of Commercial Letters of Credit ("Guidance Line
Letters of Credit") and Banker's Acceptances arising from the drawing of such
Letters of Credit, from time to time, to, but not including, the Termination
Date, which, in the aggregate, including Guidance Line Letters of Credit made,
committed and requested, do not exceed the amount of the Guidance Line Facility.
2.2.1 NO COMMITMENT. This Agreement shall not evidence an agreement to
issue Letters of Credit by CNB under this Section 2.2 Borrower acknowledges
that CNB, by entering into this Agreement agrees to consider, in good faith,
requests for issuance of Letters of Credit made by Borrower pursuant to the
Guidance Line Facility. CNB shall have the sole and exclusive option to accept
or decline requests for issuance of Letters of Credit made by Borrower; however,
provided there is no Terminating Event or Event of Default hereunder, CNB agrees
to consider requests for Guidance Line Letters of Credit in good faith.
Provided, however, CNB's declination of a request to issue a Guidance Line
Letter of Credit will not affect Borrower's right to have a Letter of Credit
issued under the Standby Letter of Credit Facility, or Borrower's ability to
prepay a Letter of Credit.
2.2.2 ISSUANCE OF LETTERS OF CREDIT.
(a) Commercial Letters of Credit will be issued to finance the
purchase of merchandise, for resale to Xxxxxxx Xxxxxx, Inc. or Ty, Inc., in
accordance with an Irrevocable Letter of Credit Application and Security
Agreement submitted by Borrower and incorporated herein by this reference,
subject to the terms of this Agreement in the event of any conflict herewith.
Letters of Credit will be issued on the normal documentation used by CNB from
time to time in accord with the Uniform Customs and Practices for Documentary
Credits (1993 Revision) International Chamber of Commerce Publication No. 500.
Commercial Letters of Credit will expire no more than one hundred and eighty
(180) days after the Termination Date. Published CNB fees and charges, as
delivered to Borrower from time to time, will apply to the issuance of Letters
of Credit, provided, however, the issuance of each Commercial Letter of Credit
shall be subject to a minimum fee of $115.00.
(b) For Borrower's convenience and pursuant to its request,
Borrower may submit the Irrevocable Letter of Credit Application by telephone
facsimile ("FAX") which will include FAX signatures. CNB is authorized to accept
faxed documents without any need, requirement or responsibility to verify in any
way the genuineness of authenticity of the faxed documents or signatures.
Borrower will deliver to CNB an originally executed Irrevocable Letter of Credit
Application with fifteen (15) days of each faxing. CNB's failure to receive an
original set of documents shall not be deemed or construed in any way to affect
the propriety of issuing the Letters of Credit or Borrower's liability to
reimburse CNB for the amount of any drawings under the issued Letter of Credit.
(c) Borrower hereby authorizes the following persons, or others
designated in writing by two of the three following persons, to request the
issuance of Letters of Credit under this Agreement: Xxxxxxx X. Xxxxxxx, Xxxxxxx
Xxxxxxxx, and Xxxxxxx Xxxxx. Provided, however, CNB may, in its sole discretion,
obtain telephonic clarification, guidance, instruction or confirmation
concerning the issuance or other aspects of any Letter of Credit issued
hereunder from any one of the following persons on behalf of the Borrower:
Xxxxxxx X. Xxxxxxx, Xxxxxxx Xxxxxxxx, and Xxxxxxx Xxxxx, or any other person
designated by Xxxxxxx X. Xxxxxxx, Xxxxxxx Xxxxxxxx, and Xxxxxxx Xxxxx in
writing.
2.2.3 PROCEDURE FOR GUIDANCE LINE LETTERS OF CREDIT. Borrower shall
give CNB at least five (5) Business Days advanced written notice of its request
for a Guidance Line Letter of
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Credit ("Notice of Request"), which Notice of Request shall specify (a) the
amount of the Guidance Line Letter of Credit; (b) the proposed issuance date;
(c) the proposed termination date; (d) the proposed drawing language, (e) the
written consent of Guarantor, in its sole discretion, to the issuance of the
Letter of Credit and (f) the purpose of the Guidance Line Letter of Credit.
2.2.4 CNB'S REVIEW OF SUBMISSIONS. CNB agrees to review the
Notice of Request in good faith and respond thereto within three (3) Business
Days from CNB's receipt of the Notice of Request unless Borrower is notified
within said time that more information is required. CNB's failure to respond
shall be deemed a denial of the requested Guidance Line Letter of Credit. CNB
shall not be obligated to grant or accept any Notice of Request and may, in its
sole discretion, reject any Notice of Request.
2.2.5 ACCEPTANCE OF REQUEST. Only CNB's written notice to
Borrower of its unconditional acceptance of a Notice of Request shall
constitute a commitment on the part of CNB to issue a Guidance Line Letter of
Credit; and provided further that prior to there being any obligation to issue
a Letter of Credit on the part of CNB, the conditions precedent set forth in
Section 4 below must also be satisfied.
2.2.6 REIMBURSEMENT FOR FUNDING A COMMERCIAL LETTER OF CREDIT.
Any sight drawing under a Letter of Credit shall be satisfied by (a) charging
Borrower's Demand Deposit Account, (b) immediate wire transfer of funds
following demand therefor, or (c) creation of a Banker's Acceptance. All
drawings under Letters of Credit which are not payable at sight will be deemed
to be requests for the creation of Banker's Acceptances hereunder.
2.2.7 CREATION OF BANKER'S ACCEPTANCES. Banker's Acceptances
will be created in response to Borrower's request or the acceptance by CNB of a
draft drawn against a Letter of Credit not payable at sight, on the normal
documentation used by CNB, and will mature within 120 days. Creation of
Banker's Acceptances will be subject to standard CNB fees and charges plus, if
applicable, a payment equal to the published CNB Banker's Acceptance discount
rate plus one percent (1%). There will be no obligation to accept drafts which
would:
(a) not be eligible for discount by a Federal Reserve Bank;
(b) become a liability subject to reserve requirements under
any regulation of the Board of Governors of the Federal Reserve System; or
(c) cause CNB to violate any lending limit imposed upon CNB by
any law, regulation or administrative order.
2.2.8 REIMBURSEMENT FOR PAYMENT OF BANKER'S ACCEPTANCES.
Borrower's obligation to reimburse CNB for payment under any Banker's
Acceptance shall be satisfied by charging Borrower's Demand Deposit Account or
by immediate wire transfer of funds, following demand therefor, in the event
insufficient collected funds are in Borrower's Demand Deposit Account.
2.3 DEFAULT INTEREST RATE. In the event Borrower does not reimburse CNB
for payment of any Letter of Credit or Banker's Acceptance, when due hereunder,
and, from and after written notice by CNB to Borrower of the occurrence of an
Event of Default (and without constituting a waiver of such Event of Default),
any amounts due CNB hereunder (and interest to the extent permitted by law)
will bear interest at a fluctuating rate equal to the Prime Rate of CNB plus
five
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percent (5.0%) per year, until the Event of Default has been cured. All
interest provided for in this Section will be compounded monthly and payable on
demand.
2.4 PAYMENTS. All payments will be in United States Dollars and in
immediately available funds. Interest will accrue daily and will be computed on
the basis of a 360-day year, actual days elapsed.
3. TERM AND TERMINATION
3.1 ESTABLISHMENT OF TERMINATION DATE. The term of this Agreement will
begin as of the date hereof and continue until the Termination Date, unless the
term is renewed upon mutual agreement for an additional period by CNB giving
Borrower prior written notice, in which event the Termination Date will mean
the renewed maturity date set forth in such notice. Notwithstanding the
foregoing, CNB may, at its option, terminate this Agreement pursuant to Section
8.3; the date of any such termination will become the Termination Date as that
term is used in this Agreement.
3.2 OBLIGATIONS UPON THE TERMINATION DATE. Borrower will, upon the
Termination Date:
3.2.1 Pay the amount of the balance due for reimbursement of the
funding of a Letter of Credit or Banker's Acceptance plus any accrued interest,
fees and charges; and
3.2.2 Pay CNB cash in the aggregate face amount of the Letters of
Credit or Banker's Acceptances outstanding to be held as cash collateral for
Borrower's obligation to reimburse CNB upon the funding of such Letters of
Credit; and
3.2.3 Pay the amounts due on all other Obligations owing to CNB. In
this connection and notwithstanding anything to the contrary contained in the
instruments evidencing such Obligations, the Termination Date hereunder will
constitute the maturity date of such other Obligations.
3.3 SURVIVAL OF RIGHTS. Any termination of this Agreement will not affect
the rights, liabilities and obligations of the parties with respect to any
Obligations outstanding on the date of such termination. Until all Obligations
have been fully repaid, CNB will retain its security interest in all existing
Collateral and Collateral arising thereafter, and Borrower will continue to
assign all Accounts to CNB and to immediately turn over to CNB, in kind, all
collections received on the Accounts.
4. CONDITIONS PRECEDENT.
4.1 EXTENSION OF CREDIT. The obligation of CNB to issue any Letter of
Credit hereunder is subject to CNB's receipt of each of the following, in form
and substance reasonably satisfactory to CNB, and duly executed as required by
CNB:
4.1.1 All Loan Documents required by CNB, including but not limited
to this Agreement and any guaranties required hereunder;
4.1.2 (a) a copy of Borrower's Articles of Incorporation; (b) a
Resolution of Borrower's Board of Directors approving and authorizing the
execution, delivery and performance of this Agreement and any other documents
required pursuant to this Agreement, certified by
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Borrower's corporate secretary; and, (c) a copy of the last certificate filed
on behalf of Borrower in the state of its incorporation containing the
information with respect to officer, directors agent for service of process, as
required by the laws of the state of incorporation;
4.1.3 (a) executed copies (and acknowledgement copies to the extent
reasonably available) of financing statements (Form UCC-1) duly filed under the
Code in all such jurisdictions as may be necessary or, in CNB's reasonable
opinion, desirable to perfect CNB's security interests created under this
Agreement; and (b) evidence that all filings, recordings and other actions that
are necessary or advisable, in CNB's reasonable opinion, to establish, preserve
and perfect CNB's security interests and liens as legal, valid and enforceable
first security interests and liens in the Collateral have been effected; and
4.1.4 The Guaranty executed by the Guarantor.
4.2 CONDITIONS TO EACH EXTENSION OF CREDIT. The obligation of CNB to
issue any Letter of Credit hereunder will be subject to the fulfillment of
each of the following conditions to CNB's reasonable satisfaction:
4.2.1 The representations and warranties of Borrower set forth in
Section 5 will be true and correct on the date of the making of each Loan or
other extension of credit with the same effect as though such representations
and warranties had been made on and as of such date;
4.2.2 There will be in full force and effect in favor of CNB a
legal, valid and enforceable first security interest in, and a valid and
binding first lien on the Collateral; and CNB will have received evidence, in
form and substance acceptable to CNB, that all filings, recordings and other
actions that are necessary or advisable, in the reasonable opinion of CNB, in
order to establish, protect, preserve and perfect CNB's security interests and
liens as legal, valid and enforceable first security interests and liens in the
Collateral have been effected;
4.2.3 There will have occurred no Event of Default or Terminating
Event; and
4.2.4 All other documents and legal matters in connection with the
transactions described in this Agreement will be reasonably satisfactory in
form and substance to CNB.
5. REPRESENTATIONS AND WARRANTIES. Borrower makes the following
representations and warranties, which will survive the making and repayment of
the reimbursement obligation under any Letter of Credit or Banker's Acceptance.
5.1 FINANCIAL CONDITION. The most recent financial statements of
Borrower, copies of which have been delivered to CNB, have been prepared in
accordance with GAAP and are true, complete and correct and fairly present the
financial condition of Borrower, including operating results, as of the
accounting period referenced therein. There has been no material adverse change
in the financial condition or business of Borrower since the date of such
financial statements. Borrower has no material liabilities for taxes or
long-term leases or commitments, except as disclosed in the financial
statements.
5.2 NO VIOLATIONS. Borrower is not in violation of any law, ordinance,
rule or regulation to which it or any of its properties is subject, which would
have a material adverse affect on the property or operations of Borrower.
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5.3 COLLATERAL. Borrower owns and has possession of and has the right and
power to grant a security interest in the Collateral, and the Collateral is
genuine and free from material liens, adverse claims, set-offs, defaults,
prepayments, defenses and encumbrances except those in favor of CNB. No bills
of lading, warehouse receipts or other documents or instruments of title are
outstanding with respect to the Collateral or any portion of the Collateral, in
favor of a Person other than Borrower. The office where Borrower keeps its
records concerning all Accounts is set forth in Section 9.6.
5.4 ERISA. Borrower is in compliance in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974
("ERISA"). No "Reportable Event" (as defined in ERISA and the regulations
issued thereunder [other than a "Reportable Event" not subject to the provision
for thirty (30) day notice to the Pension Benefit Guaranty Corporation ("PBGC")
under such regulations]) has occurred with respect to any benefit plan of
Borrower nor are there any unfunded vested liabilities under any benefit plan
of Borrower. Borrower has met its minimum funding requirements under ERISA with
respect to each of its plans and has not incurred any material liability to the
PBGC in connection with any such plan.
6. AFFIRMATIVE COVENANTS. Borrower agrees that until payment in full of all
Obligations, Borrower will comply with the following covenants:
6.1 COLLATERAL. Borrower shall execute and deliver to CNB any instrument,
document, financing statement, assignment or other writing which CNB may
reasonably deem necessary or desirable to carry out the terms of this
Agreement, to perfect CNB's security interest in any Collateral for the
Obligations, or to enable CNB to enforce its security interest in any of the
foregoing.
6.2 FINANCIAL STATEMENTS. Borrower will furnish to CNB on a continuing
basis;
6.2.1 Within sixty (60) days after the end of each of the first three
quarterly accounting periods of each fiscal year, a financial statement
consisting of not less than a balance sheet and income statement, prepared in
accordance with GAAP, which financial statement may be internally prepared;
6.2.2 Within one hundred and twenty (120) days after the close of
Borrower's fiscal year, a copy of the annual audit report for Borrower
including therein a balance sheet, income statement, reconciliation of net
worth and statement of cash flows, with notes thereto, the balance sheet,
income statement and statement of cash flows to be audited by a certified
public accountant reasonably acceptable to CNB, certified by such accountant to
have been prepared in accordance with GAAP and accompanied by Borrower's
certification as to whether any event has occurred which constitutes an Event
of Default or Terminating Event, and if so, stating the facts with respect
thereto;
6.3 TAXES AND PREMIUMS. Borrower will, pay and discharge all taxes,
assessments, governmental charges, and real and personal taxes including, but
not limited to, federal and state income taxes, employee withholding taxes and
payroll taxes, and all premiums for insurance required hereunder, prior to the
date upon which penalties are attached thereto, except those being contested in
good faith.
6.4 NOTICE. Borrower will promptly advise CNB in writing of (a) the
opening of any new, or the closing of any existing, principal place of
business, each location at which Inventory or equipment is or will be kept, and
any change of Borrower's name, trade name or other name under which it does
business or of any such new or additional name; (b) the occurrence of any Event
of Default or Terminating Event; (c) any litigation pending or threatened where
the non-insured amount
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or amounts in controversy exceed $500,000 other than those matters described in
Schedule 1, attached hereto; (d) any unpaid taxes in excess of $100,000 which
are more than fifteen (15) days delinquent and not being contested in good
faith; and (e) any other matter which, in Borrower's reasonable opinion, might
materially or adversely affect Borrower's financial condition, property or
business.
6.5 FAIR LABOR STANDARDS ACT. Borrower will comply with the requirements
of, and all regulations promulgated under, the Fair Labor Standards Act.
6.6 CORPORATE EXISTENCE. Borrower will maintain its corporate existence
and all of its rights, privileges and franchises necessary or desirable in the
normal course of its business.
6.7 COMPLIANCE WITH LAW. Borrower will comply in all material respects
with all requirements of all applicable laws, rules, regulations (including,
but not limited to, ERISA with respect to each of their benefit plans, and all
environmental and hazardous materials laws), orders and all material agreements
with any governmental agency to which they are a party.
6.8 EVENT OF DEFAULT. Borrower and Guarantor will not permit a default to
occur under any document or instrument evidencing Debt incurred under any
indenture, agreement or other instrument under which such Debt may be issued,
including but not limited to those in favor of CNB, or any event to occur under
any of the foregoing which would permit any holder of the Debt outstanding
thereunder to declare the same due and payable before its stated maturity,
whether or not such acceleration occurs or such default be waived.
6.9 MINIMUM LIQUIDITY. Guarantor shall maintain Liquid Assets of at least
the greater of (a) $20,000,000.00, or (b) the face amount of outstanding Letters
of Credit, Banker's Acceptances and Revolving Credit Loans, outstanding
pursuant to (and as each is defined in) the Amended and Restated Credit and
Security Agreement dated as of December 15, 1999, between Guarantor and CNB, as
amended, excluding therefrom such obligations which are secured by cash or a
deposit account. Compliance with this provision shall be tested quarterly, or
at such other time as CNB may determine upon reasonable notice to Borrower.
7. SECURITY AGREEMENT.
7.1 GRANT OF SECURITY INTEREST. To secure all Obligations hereunder
arising under the Guidance Line Facility, Borrower hereby grants and transfers
to CNB a continuing security interest in the following property whether now
owned or hereafter acquired, which security interest shall remain in existence
until this Agreement has been terminated when there are no Obligations
outstanding and, upon such termination, CNB shall promptly comply with the
requirements of Code Section 9404(1), or any successor statute, with respect to
termination of any UCC-1 Financing Statement on file.:
7.1.1 All of Borrower's Inventory;
7.1.2 All of Borrower's Accounts;
7.1.3 All of Borrower's general intangibles as that term is
defined in the Code;
7.1.4 All of Borrower's equipment, as that term is defined in the
Code;
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7.1.5 All of Borrower's interest in any patents (now existing or
pending), copyrights, trade names, trademarks and service marks useful to the
operation of Borrower's business;
7.1.6 All notes, drafts, acceptances, instruments, documents of
title, policies and certificates of insurance, chattel paper, guaranties and
securities now or hereafter received by Borrower or in which Borrower has or
acquires an interest;
7.1.7 All cash and noncash proceeds of the foregoing property,
including, without limitation, proceeds of policies of fire, credit or other
insurance;
7.1.8 All of Borrower's books and records pertaining to any of the
Collateral described in this Section 7.1; and
7.1.9 Any other Collateral which CNB and Borrower may designate as
additional security from time to time by separate instruments.
7.2 NOTIFICATION OF ACCOUNT DEBTORS. CNB will have the right to notify
any Account Debtor to make payments directly to CNB, take control of the cash
and noncash proceeds of any Account, and settle any Account, which right CNB
may exercise at any time an Event of Default has occurred regardless of whether
Borrower was theretofore making collections thereon. Until CNB elects to
exercise such right, Borrower is authorized on behalf of CNB to collect and
enforce the Accounts.
7.3 ATTORNEY-IN-FACT. Upon the occurrence of an Event of Default, CNB or
any of its officers is hereby irrevocably made the true and lawful attorney for
Borrower with full power of substitution to do the following: (a) endorse the
name of Borrower upon any and all checks, drafts, money orders and other
instruments for the payment of moneys which are payable to Borrower and
constitute collections on Accounts; (b) execute in the name of Borrower any
schedules, assignments, instruments, documents and statements which Borrower is
obligated to give CNB hereunder; (c) receive, open and dispose of all mail
addressed to Borrower; (d) notify the Post Office authorities to change the
address for delivery of mail addressed to Borrower to such address as CNB will
designate; and (e) do such other acts in the name of Borrower which CNB may
deem necessary or desirable to enforce any Account or other Collateral. The
powers granted CNB hereunder are solely to protect its interests in the
Collateral and will not impose any duty upon CNB to exercise any such powers.
8. EVENTS OF DEFAULT AND PROCEEDINGS UPON DEFAULT.
8.1 EVENTS OF DEFAULT. Borrower's fails to pay when due any reimbursement
obligation arising under this Agreement or any other amount payable under this
Agreement, subject to the provisions of Section 8.4, CNB will give Borrower at
least ten (10) days' written notice of any event which constitutes an Event of
Default, during which time Borrower will be entitled to cure same.
8.2 TERMINATING EVENTS. Borrower's right to request the issuance of
Letters of Credit shall be suspended during the existence of any the following
Terminating Events, and shall be permanently terminated if such Terminating
Event is not cured within thirty (30) Business Days after Borrower's receipt of
written notice from CNB specifying the Terminating Event which has occurred:
8.2.1 Any Person, which is a party to any Loan Document fails to
perform or observe any of the terms, provisions, covenants, agreements or
obligations;
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8.2.2 Any financial statement, representation or warranty made or
furnished by Borrower in connection with the Loan Documents proves to be in any
material respect incorrect;
8.2.3 The entry of an order for relief or the filing of an
involuntary petition, which remains undismissed after sixty (60) days, with
respect to Borrower under the United States Bankruptcy Code; the appointment of
a receiver, trustee, custodian or liquidator of or for any part of the assets
or property of Borrower or Borrower makes a general assignment for the benefit
of creditors;
8.2.4 CNB's security interest in or lien on any portion of the
Collateral becomes impaired or otherwise unenforceable;
8.2.5 Any Person obtains an order or decree in any court of
competent jurisdiction enjoining or prohibiting Borrower or CNB from performing
any material term of this Agreement, and such proceedings are not dismissed or
such decree is not vacated within ten (10) days after the granting thereof;
8.2.6 Borrower neglects, fails or refuses to keep in full force
and effect any governmental permit, license or approval which is necessary to
the operation of its business and such failure has a material impact on the
ability of Borrower to operate its business;
8.2.7 All or substantially all of the property of Borrower is
condemned, seized or otherwise appropriated;
8.2.8 The occurrence of (a) a Reportable Event (as defined in
ERISA) which CNB determines in good faith constitutes grounds for the
institution of proceedings to terminate any pension plan by the PBGC, (b) an
appointment of a trustee to administer any pension plan of Borrower, or (c) any
other event or condition which might constitute grounds under ERISA for the
involuntary termination of any pension plan of Borrower, where such event set
forth in (a), (b) or (c) results in a significant monetary liability to
Borrower; or
8.2.9 The Termination Date is not extended.
8.3 CNB's REMEDIES. Upon the occurrence of an Event of Default, at the
sole and exclusive option of CNB, and upon written notice to Borrower, CNB may
(a) demand amounts set forth in Section 3.2 immediately due and payable in
full, whereupon the same will immediately become due and payable; (b) terminate
this Agreement as to any future liability or obligation of CNB, but without
affecting CNB's rights and security interest in the Collateral and without
affecting the Obligations owing by Borrower to CNB; and/or (c) exercise its
rights and remedies under the Loan Documents and all rights and remedies of a
secured party under the Code and other applicable laws with respect to the
Collateral.
8.4 ADDITIONAL REMEDIES. Notwithstanding any other provision of this
Agreement, upon the occurrence of any event, action or inaction by Borrower, or
if any action or inaction is threatened which CNB reasonably believes will
materially affect the value of the Collateral, CNB may take such legal actions
as it deems necessary to protect the Collateral, including, but not limited to,
seeking injunctive relief and the appointment of a receiver, whether an Event
of Default or Terminating Event has occurred under this Agreement.
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9. MISCELLANEOUS
9.1 REIMBURSEMENT OF COSTS AND EXPENSES. Borrower will reimburse CNB for
all costs and expenses relating to this Agreement including, but not limited
to, filing, recording or search fees, audit or verification fees, appraisals of
the Collateral and other out-of-pocket expenses, and reasonable attorney's fees
and expenses expended or incurred by CNB in collecting any sum which becomes
due CNB under the Loan Documents, irrespective of whether suit is filed, or in
the protection, perfection, preservation or enforcement of any and all rights
of CNB in connection with the Loan Documents, including, without limitation,
the fees and costs incurred in any out-of-court workout or a bankruptcy or
reorganization proceeding.
9.2 DISPUTE RESOLUTION
9.2.1 MANDATORY ARBITRATION. At the request of CNB or Borrower, any
dispute, claim or controversy of any kind (whether in contract or tort,
statutory or common law, legal or equitable) now existing or hereafter arising
between CNB and Borrower and in any way arising out of, pertaining to or in
connection with: (1) this Agreement, and/or any renewals, extensions, or
amendments thereto; (2) any of the Loan Documents; (3) any violation of this
Agreement or the Loan Documents; (4) all past, present and future loans; (5) any
incidents, omissions, acts, practices or occurrences arising out of or related
to this Agreement or the Loan Documents causing injury to either party whereby
the other party or its agents, employees or representatives may be liable, in
whole or in part, or (6) any aspect of the present or future relationships of
the parties, will be resolved through final and binding arbitration conducted at
a location determined by the arbitrator in Los Angeles County, California, and
administered by the American Arbitration Association ("AAA") in accordance with
the California Arbitration Act (Title 9, California Code of Civil Procedure
Section 1280 et. seq.) and the then existing Commercial Rules of the AAA.
Judgement upon any award rendered by the arbitrator(s) may be entered in any
state or federal court having jurisdiction thereof.
9.2.2 PROVISIONAL REMEDIES, SELF HELP AND FORECLOSURE. No provision
of this Agreement will limit the right of any party to: (1) exercise any rights
or remedies as a secured party against any personal property collateral pursuant
to the terms of a security agreement or pledge agreement, or applicable law, (2)
exercise self help remedies such as setoff, or (3) obtain provisional or
ancillary remedies such as injunctive relief or the appointment of a receiver
from a court having jurisdiction before, during or after the pendency of any
arbitration or referral. The institution and maintenance of an action for
judicial relief or pursuit of provisional or ancillary remedies, or exercise of
self help remedies will not constitute a waiver of the right of any party,
including the plaintiff, to submit any dispute to arbitration or judicial
reference.
9.2.3 POWERS AND QUALIFICATIONS OF ARBITRATORS. The arbitrator(s)
will give effect to statutes of limitation, waiver and estoppel and other
affirmative defenses in determining any claim. Any controversy concerning
whether an issue is arbitratable will be determined by the arbitrator(s). The
laws of the State of California will govern. The arbitration award may include
equitable and declaratory relief. All arbitrator(s) selected will be required to
be a practicing attorney or retired judge licensed to practice law in the State
of California and will be required to be experienced and knowledgeable in the
substantive laws applicable to the subject matter of the controversy or claim at
issue.
9.2.4 DISCOVERY. The provisions of California Code of Civil Procedure
Section 1283.05 or its successor section(s) are incorporated herein and made a
part of this Agreement.
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Depositions may be taken and discovery may be obtained in any arbitration
under this Agreement in accordance with said section(s).
9.2.5 MISCELLANEOUS. The arbitrator(s) will determine which
is the prevailing party and will include in the award that party's reasonable
attorneys' fees and costs (including allocated costs of in-house legal counsel).
Each party agrees to keep all controversies and claims and the arbitration
proceedings strictly confidential, except for disclosures of information
required in the ordinary course of business of the parties or by applicable law
or regulation.
9.3 CUMULATIVE RIGHTS AND NO WAIVER. All rights and remedies granted
to CNB under the Loan Documents are cumulative and no one such right or remedy
is exclusive of any other. No failure or delay on the part of CNB in exercising
any right or remedy will operate as a waiver thereof, and no single or partial
exercise or waiver by CNB of any such right or remedy will preclude any further
exercise thereof or the exercise of any other right or remedy.
9.4 APPLICABLE LAW. This Agreement will be governed by California
law.
9.5 LIEN AND RIGHT OF SET-OFF. Subject to Section 7.1, Borrower
grants to CNB a continuing lien for all Obligations of Borrower to CNB, arising
under the Guidance Line Facility, upon any and all moneys, securities and other
property of Borrower and the proceeds thereof, now or hereafter held or received
by or in transit to CNB from or for Borrower, whether for safekeeping, custody,
pledge, transmission, collection or otherwise, and also upon any and all
deposits (general or special) and credits of Borrower with, and any and all
claims of Borrower against, CNB at any time existing. Upon the occurrence of any
Event of Default, CNB is hereby authorized at any time and from time to time,
without notice to Borrower or any other Person to setoff, appropriate and apply
any or all items hereinabove referred to against all Obligations of Borrower,
arising under the Guidance Line Facility, and whether now existing or hereafter
arising.
9.6 NOTICES. Any notice required or permitted under any Loan Document
will be given in writing and will be deemed to have been given when personally
delivered or when sent by the U.S. mail, postage prepaid, certified, return
receipt requested, properly addressed. For the purposes hereof, the addresses of
the parties will, until further notice given as herein provided, be as follows:
CNB: City National Bank
Westside Commercial Banking Center
000 X. Xxxxxxx Xxxxx, Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: May Xxxxx, Vice President
with copy to: City National Bank, Legal Department
000 Xxxxx Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: Managing Counsel, Credit Unit
Borrower: Simon Worldwide, Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx
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with copies to: Simon Marketing, Inc.
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000,
Xxx Xxxxxxx, XX 00000-0000
Attention: Chief Financial Officer
Attention: General Counsel
9.7 ASSIGNMENTS. The provisions of this Agreement are hereby made
applicable to and will inure to the benefit of CNB's successor and assigns and
Borrower's successors and assigns; provided, however, that Borrower may not
assign or transfer its rights or obligations under this Agreement without the
prior written consent of CNB.
9.8 INDEMNIFICATION. Borrower will, at all times, defend and indemnify
and hold CNB harmless from and against any and all claims arising out of or
resulting from (a) any breach of the representations, warranties, agreements or
covenants made by Borrower herein; (b) any suit or proceeding of any kind or
nature whatsoever against CNB arising from or connected with the transactions
contemplated by this Agreement, the Loan Documents or any of the rights and
properties assigned to CNB hereunder, other than to the extent arising from
CNB's gross negligence or willful misconduct; and/or (c) any suit or proceeding
that CNB reasonably may deem necessary or advisable to institute, in the name
of CNB, Borrower or both, against any other Person, for any reason whatsoever
to protect the substantive rights of CNB hereunder or under any of the
documents, instruments or agreements executed or to be executed pursuant
hereto, including reasonable attorneys' fees and court costs and all other
costs and expenses incurred by CNB (or allocable to CNB's in-house counsel),
all of which will be charged to and paid by Borrower and will be secured by the
Collateral. Any obligation or liability of Borrower to CNB under this Section
will survive the Termination Date and the repayment of all Loans and other
extensions of credit and the payment or performance of all other Obligations of
Borrower to CNB.
9.9 COMPLETE AGREEMENT. This Agreement, together with other Loan
Documents, constitutes the entire agreement of the parties and supersedes any
prior or contemporaneous oral or written agreements or understandings, if any,
which are merged into this Agreement. This Agreement may be amended only in
a writing signed by Borrower and CNB.
9.10 HEADINGS. Section headings in this Agreement are included for
convenience of reference only and do not constitute a part of the Agreement for
any purpose.
9.11 ACCOUNTING TERMS. Except as otherwise stated in this Agreement, all
accounting terms and financial covenants and information will be construed in
conformity with, and all financial data required to be submitted will be
prepared in conformity with, GAAP as in effect on the date hereof.
9.12 SEVERABILITY. Any provision of the Loan Documents which is
prohibited or unenforceable in any jurisdiction, will be, only as to such
jurisdiction, ineffective to the extent of
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such prohibition or unenforceability, but all the remaining provisions of the
Loan Documents will remain valid.
9.13 COUNTERPARTS. This Agreement may be signed in any number of
counterparts which, when taken together, will constitute but one agreement.
IN WITNESS WHEREOF, CNB and Borrower have caused this Agreement to be
executed as of the date first specified at the beginning of this Agreement.
BORROWER SIMON WORLDWIDE, INC.,
a Delaware corporation
By: ___________________________________
Xxxxxxx X. Xxxxxxx, Executive Vice
President/Chief Financial Officer
CNB CITY NATIONAL BANK, a
national banking association
By: ___________________________________
May Xxxxx, Vice President
ACKNOWLEDGED AND AGREED:
SIMON MARKETING, INC.,
a Delaware corporation
By: ___________________________________
Xxxxxxx Xxxxxxxx, Executive Vice President/Chief Financial Officer
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