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REVOLVING CREDIT
AND
SECURITY AGREEMENT
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BETWEEN
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THE BANK OF NEW YORK COMMERCIAL CORPORATION
AND
O'BRIEN INTERNATIONAL, INC.
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DATED AS OF MARCH 17, 1997
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Table of Contents
I. DEFINITIONS........................................................................................... 1
1.1. Accounting Terms........................................................................ 1
1.2. General Terms........................................................................... 1
1.3. Uniform Commercial Code Terms........................................................... 19
. Certain Matters of Construction......................................................... 19
II. ADVANCES, PAYMENTS.................................................................................... 19
2.1. (a) Revolving Advances............................................................ 19
(b) Discretionary Rights.......................................................... 20
2.2. Procedure for Borrowing Revolving Advances.............................................. 21
2.3. Disbursement of Advance Proceeds........................................................ 21
2.4. Maximum Advances........................................................................ 22
2.5. Repayment of Advances................................................................... 22
2.6. Repayment of Excess Advances............................................................ 23
2.7. Statement of Account.................................................................... 23
2.8. Letters of Credit....................................................................... 23
2.9. Issuance of Letters of Credit........................................................... 24
2.10. Requirements For Issuance of Letters of Credit.......................................... 25
2.11. Additional Payments..................................................................... 26
2.12. Mandatory Prepayments................................................................... 26
2.13. Use of Proceeds......................................................................... 26
III. INTEREST AND FEES..................................................................................... 26
3.1. Interest................................................................................ 26
3.2. Letter of Credit Fees................................................................... 28
3.3. (a) Closing Fee................................................................... 28
(b) Facility Fee.................................................................. 29
3.4. (a) Administration Fee............................................................ 29
(b) Collateral Monitoring Fee..................................................... 29
3.6. Computation of Interest and Fees........................................................ 29
3.7. Maximum Charges......................................................................... 30
3.8. Increased Costs......................................................................... 30
........................................................................................ 31
3.9. Capital Adequacy........................................................................ 31
IV. COLLATERAL: GENERAL TERMS............................................................................. 31
4.1. Security Interest in the Collateral..................................................... 31
4.2. Perfection of Security Interest......................................................... 31
4.3. Disposition of Collateral............................................................... 32
4.4. Preservation of Collateral.............................................................. 32
4.5. Ownership of Collateral................................................................. 33
4.6. Defense of Lender's Interests........................................................... 33
4.7. Books and Records....................................................................... 34
4.8. Financial Disclosure.................................................................... 34
4.9. Compliance with Laws.................................................................... 34
4.10. Inspection of Premises.................................................................. 35
4.11. Insurance............................................................................... 35
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4.12. Failure to Pay Insurance................................................................ 36
4.13. Payment of Taxes........................................................................ 36
4.14. Payment of Leasehold Obligations........................................................ 36
4.15. Receivables............................................................................. 37
(a) Nature of Receivables......................................................... 37
(b) Solvency of Customers......................................................... 37
(c) Locations of Borrower......................................................... 37
(d) Collection of Receivables..................................................... 37
(e) Notification of Assignment of Receivables..................................... 37
(f) Power of Lender to Act on Borrower's Behalf................................... 38
(g) No Liability.................................................................. 39
(h) Establishment of a Lockbox Account, Dominion Account.......................... 39
(i) Adjustments................................................................... 39
4.16. Inventory............................................................................... 40
4.17. Maintenance of Equipment................................................................ 40
4.18. Exculpation of Liability................................................................ 40
4.19. Environmental Matters................................................................... 40
4.20. Financing Statements.................................................................... 42
V. REPRESENTATIONS AND WARRANTIES........................................................................ 43
5.1. Authority............................................................................... 43
5.2. Formation and Qualification............................................................. 43
5.3. Survival of Representations and Warranties.............................................. 43
5.4. Tax Returns............................................................................. 43
5.5. Financial Statements.................................................................... 44
5.6. Corporate Name.......................................................................... 45
5.7. O.S.H.A. and Environmental Compliance................................................... 45
5.8. Solvency; No Litigation, Violation, Indebtedness or Default............................. 46
5.9. Patents, Trademarks, Copyrights and Licenses............................................ 47
5.10. Licenses and Permits.................................................................... 48
5.11. Default of Indebtedness................................................................. 48
5.12. No Default.............................................................................. 48
5.13. No Burdensome Restrictions.............................................................. 48
5.14. No Labor Disputes....................................................................... 48
5.15. Margin Regulations...................................................................... 48
5.16. Investment Company Act.................................................................. 49
5.17. Disclosure.............................................................................. 49
........................................................................................ 49
5.18. Swaps................................................................................... 49
5.19. Conflicting Agreements.................................................................. 49
5.20. Application of Certain Laws and Regulations............................................. 49
5.21. Business and Property of Borrower....................................................... 49
VI. AFFIRMATIVE COVENANTS................................................................................. 49
6.1. Payment of Fees......................................................................... 50
6.2. Conduct of Business and Maintenance of Existence and Assets............................. 50
6.3. Violations.............................................................................. 50
6.4. Government Receivables.................................................................. 50
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6.5. Net Worth............................................................................... 50
6.6. Fixed Charge Coverage Ratio............................................................. 51
6.7. Leverage Ratio.......................................................................... 51
6.8. Execution of Supplemental Instruments................................................... 52
6.9. Payment of Indebtedness................................................................. 52
6.10. Standards of Financial Statements....................................................... 52
6.11. Capital Contribution Adjustment......................................................... 52
6.12 Kent Property Lease..................................................................... 52
6.13 Meridian Indebtedness Payment........................................................... 52
VII. NEGATIVE COVENANTS.................................................................................... 53
7.1. Merger, Consolidation, Acquisition and Sale of Assets................................... 53
7.2. Creation of Liens....................................................................... 53
7.3. Guarantees.............................................................................. 53
7.4. Investments............................................................................. 53
7.5. Loans................................................................................... 53
7.6. Capital Expenditures.................................................................... 54
7.7. Dividends............................................................................... 54
7.8. Indebtedness............................................................................ 54
7.9. Nature of Business...................................................................... 55
7.10. Transactions with Affiliates............................................................ 55
7.11. Leases.................................................................................. 55
7.12. Subsidiaries............................................................................ 55
7.13. Fiscal Year and Accounting Changes...................................................... 55
7.14. Pledge of Credit........................................................................ 55
7.15. Amendment of Articles of Incorporation, By-Laws ........................................ 55
7.16. Compliance with ERISA................................................................... 55
7.17. Prepayment of Indebtedness.............................................................. 56
VIII. CONDITIONS PRECEDENT.................................................................................. 56
8.1. Conditions to Initial Advances.......................................................... 56
(a) Note.......................................................................... 56
(b) Filings, Registrations and Recordings......................................... 56
(c) Corporate Proceedings of Borrower............................................. 57
(d) Incumbency Certificates of Borrower........................................... 57
(e) Certificates.................................................................. 57
(f) Good Standing Certificates.................................................... 57
(g) Legal Opinions................................................................ 57
(h) No Litigation................................................................. 58
(i) Financial Condition Certificate............................................... 58
(j) Collateral Examination........................................................ 58
(k) Fees.......................................................................... 58
(l) Pro Forma Financial Statements................................................ 58
(n) Guaranty and Other Documents.................................................. 58
(o) Insurance..................................................................... 58
(p) Title Insurance............................................................... 59
(q) Environmental Reports......................................................... 59
(r) Payment Instructions.......................................................... 59
(s) Blocked Accounts.............................................................. 59
(t) Consents...................................................................... 59
(u) No Adverse Material Change.................................................... 59
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(v) Leasehold Agreements.......................................................... 59
(w) Mortgage...................................................................... 59
(x) Contract Review............................................................... 60
(y) Closing Certificate........................................................... 60
(z) Borrowing Base................................................................ 60
(aa) Undrawn Availability.......................................................... 60
(ab) Minimum Net Worth............................................................. 60
(ac) Other......................................................................... 60
8.2. Conditions to Each Advance.............................................................. 60
(a) Representations and Warranties................................................ 60
(b) No Default.................................................................... 61
(c) Maximum Advances.............................................................. 61
IX. INFORMATION AS TO BORROWER............................................................................ 61
9.1. Disclosure of Material Matters.......................................................... 61
9.2. Schedules............................................................................... 61
9.3. Environmental Reports................................................................... 62
9.4. Litigation.............................................................................. 62
9.5. Material Occurrences.................................................................... 62
9.6. Government Receivables.................................................................. 62
9.7. Annual Financial Statements............................................................. 62
9.8. Quarterly Financial Statements.......................................................... 63
9.9. Monthly Financial Statements............................................................ 63
9.10. Other Reports........................................................................... 64
9.11. Additional Information.................................................................. 64
9.12. Projected Operating Budget.............................................................. 64
9.13. Variances From Operating Budget......................................................... 65
9.14. Notice of Suits, Adverse Events......................................................... 65
9.15. ERISA Notices and Requests.............................................................. 65
9.16. Additional Documents.................................................................... 66
X. EVENTS OF DEFAULT..................................................................................... 66
XI. LENDER'S RIGHTS AND REMEDIES AFTER DEFAULT............................................................ 69
11.1. Rights and Remedies..................................................................... 69
11.2. Lender's Discretion..................................................................... 71
11.3. Setoff.................................................................................. 71
11.4. Rights and Remedies not Exclusive....................................................... 71
XII. WAIVERS AND JUDICIAL PROCEEDINGS...................................................................... 71
12.1. Waiver of Notice........................................................................ 71
12.2. Delay................................................................................... 71
12.3. Jury Waiver............................................................................. 71
XIII. EFFECTIVE DATE AND TERMINATION........................................................................ 72
13.1. Term.................................................................................... 72
13.2. Termination............................................................................. 72
XIV. MISCELLANEOUS......................................................................................... 73
14.1. Governing Law........................................................................... 73
14.2. Entire Understanding.................................................................... 73
14.3. Successors and Assigns; Participations; New Lenders..................................... 74
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14.4. Application of Payments................................................................. 74
14.5. Indemnity............................................................................... 75
14.6. Notice.................................................................................. 75
14.7. Survival................................................................................ 76
14.8. Severability............................................................................ 76
14.9. Expenses................................................................................ 76
14.10. Injunctive Relief....................................................................... 77
14.11. Consequential Damages................................................................... 77
14.12. Captions................................................................................ 77
14.13. Counterparts; Telecopied Signatures..................................................... 77
14.14. Construction............................................................................ 77
14.15. Confidentiality......................................................................... 77
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REVOLVING CREDIT
AND
SECURITY AGREEMENT
------------------
Revolving Credit and Security Agreement dated as of March 17, 1997
between O'BRIEN INTERNATIONAL, INC., a corporation organized under the laws of
the State of Washington ("Borrower"), and THE BANK OF NEW YORK COMMERCIAL
CORPORATION ("BNYCC" or "Lender"), a corporation organized under the laws of
the State of New York.
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, Borrower and Lender hereby agree as follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, the
Note, or any certificate, report or other document made or delivered pursuant
to this Agreement, accounting terms not defined in Section 1.2 or elsewhere in
this Agreement and accounting terms partly defined in Section 1.2 to the extent
not defined, shall have the respective meanings given to them under GAAP;
provided, however, whenever such accounting terms are used for the purposes of
determining compliance with financial covenants in this Agreement, such
accounting terms shall be defined in accordance with GAAP applied in
preparation of the audited financial statements of Borrower for the fiscal year
ended December 31, 1996.
1.2. General Terms. For purposes of this Agreement the
following terms shall have the following meanings:
"Accounts Receivable Availability" shall mean the
amount derived from the sum of the amounts set forth in Sections 2.1(a)(y)(i)
and (ii) at any time and from time to time.
"Advances" shall mean and include the Revolving
Advances (including Special Advances), Letters of Credit and
Standby L/C Advances.
"Advance Rates" shall mean the Receivables Advance
Rate, the Special Advance Rate, the Program Receivables Advance Rate and/or the
Inventory Advance Rate.
"Affiliate" of any Person shall mean (a) any Person
(other than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with such Person, or (b) any Person
who is a director or officer (i) of such Person, (ii) of any Subsidiary of such
Person or (iii) of any Person described in clause (a) above. For purposes of
this definition, control of a Person shall mean the power, direct or indirect,
(x) to vote 5% or more of the securities having ordinary voting power for the
election of directors of such Person, or (y) to direct or cause the direction
of the management and policies of such Person whether by contract or otherwise.
"Alternate Base Rate" shall mean, for any day, a
rate per annum equal to the higher of (i) the Prime Rate in effect on such day
and (ii) the Federal Funds Rate in effect on such day plus 1/2 of 1%.
"Annual Fees" shall have the meaning set forth in
Section 3.5 hereof.
"Authority" shall have the meaning set forth in
Section 4.19(d) hereof.
"Average Monthly LIBOR Rate" shall mean, at any date
of determination thereof, the one month LIBOR as published in The Wall Street
Journal on such date.
"Bank" shall mean The Bank of New York and any
successor thereto.
"Base Rent" shall mean the Monthly Base Rent, the
Tenant's Initial Monthly Escrow Payment for Taxes and Other Charges, Tenant's
Initial Monthly Common Area Maintenance Charge and Tenant's Initial Monthly
Insurance Escrow Payment (as such terms are defined in the Kent Lease) and any
other periodic payment or periodic charge of a similar nature which may
hereafter become due and owing by Borrower under the Kent Lease.
"Blocked Accounts" shall have the meaning set forth
in Section 4.15(h).
"Borrower" shall mean O'Brien International, Inc., a
Washington corporation, and all permitted successors and assigns.
"Borrower's Account" shall have the meaning set
forth in Section 2.7.
"Business Day" shall mean any day other than a day
on which commercial banks in New York are authorized or required by
law to close.
"Capital Expenditures" shall mean expenditures for
property, plant and equipment which are capitalized in accordance with GAAP,
including amounts capitalized under capital leases.
"Cash Capital Expenditures" shall mean Capital
Expenditures other than amounts capitalized under capital leases.
"Cash Flow" for any period, shall mean the sum of
(i) Earnings Before Interest and Taxes for such period plus (ii) depreciation
and amortization and all other non-cash charges, which were deducted in
determining Earnings Before Interest and Taxes for such period, minus (iii) non
cash credits which were taken into account in determining Earnings Before
Interest and Taxes for such period.
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"Cash Flow Loans" shall have the meaning set forth
in Section 7.5.
"CERCLA" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. ss.ss.9601 et seq.
"Change of Control" shall mean (a) the occurrence of
any event (whether in one or more transactions) which results in a transfer of
control of Borrower to a Person other than to Meridian or any of its
Subsidiaries or (b) any merger or consolidation of or with Borrower or sale of
all or substantially all of the property or assets of Borrower (other than with
the prior written consent of Lender) with or to Meridian or any of its
Subsidiaries. For purposes of this definition, "control of Borrower" shall mean
the power, direct or indirect (x) to vote 50% or more of the securities having
ordinary voting power for the election of directors of Borrower or (y) to
direct or cause the direction of the management and policies of Borrower by
contract or otherwise.
"Change of Ownership" shall mean (a) 50% or more of
the common stock of either Borrower or Meridian is no longer owned or
controlled by (including for the purposes of the calculation of percentage
ownership, any shares of common stock into which any capital stock of Borrower
or Meridian is convertible or for which any such shares of the capital stock of
Borrower or Meridian or of any other Person may be exchanged and any shares of
common stock issuable upon exercise of any warrants, options or similar rights
which may at the time of calculation be held by any Person) a Person who is
either an Original Owner or an Affiliate of an Original Owner or (b) any
merger, consolidation or sale of substantially all of the property or assets of
either Borrower or Meridian; it being understood by Borrower and Lender that
the sale by Meridian of shares of the capital stock of Borrower shall be deemed
a sale of substantially all of Meridian's assets.
"Charges" shall mean all taxes, charges, fees,
imposts, levies or other assessments related to, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise, severance, stamp,
occupation and property taxes, custom duties, fees, assessments, liens, claims
and charges of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts, imposed by any taxing or
other authority, domestic or foreign (including, without limitation, the
Pension Benefit Guaranty Corporation or any environmental agency or superfund),
upon the Collateral or Borrower.
"Closing Date" shall mean March 17, 1997 or such
other date as may be agreed to by the parties hereto.
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"Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time and the regulations promulgated thereunder.
"Collateral" shall mean and include:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Real Property;
(f) the Leasehold Interests;
(g) all of Borrower's right, title and interest in
and to (i) its goods and other property including, but not limited to, all
merchandise returned or rejected by Customers, relating to or securing any of
the Receivables; (ii) all of Borrower's rights as a consignor, a consignee, an
unpaid vendor, mechanic, artisan, or other lienor, including stoppage in
transit, setoff, detinue, replevin, reclamation and repurchase; (iii) all
additional amounts due to Borrower from any Customer relating to the
Receivables; (iv) other property, including warranty claims, relating to any
goods securing this Agreement; (v) all of Borrower's contract rights, rights of
payment which have been earned under a contract right, instruments, documents,
chattel paper, warehouse receipts, deposit accounts, money, investment property
and securities; (vi) if and when obtained by Borrower, all real and personal
property of third parties in which Borrower has been granted a lien or security
interest as security for the payment or enforcement of Receivables; and (vii)
any other goods, personal property or real property now owned or hereafter
acquired in which Borrower has expressly granted a security interest or may in
the future grant a security interest to Lender hereunder, or in any amendment
or supplement hereto or thereto, or under any other agreement between Lender
and Borrower;
(h) all of Borrower's ledger sheets, ledger cards,
files, correspondence, records, books of account, business papers, computers,
computer software (whether owned by Borrower or in which it has an interest),
computer programs, tapes, disks and documents relating to (a), (b), (c), (d),
(e), (f) or (g) of this Paragraph; and
(i) all proceeds and products of (a), (b), (c),
(d), (e), (f), (g) and (h) in whatever form, including, but not limited to:
cash, deposit accounts (whether or not comprised solely of proceeds),
certificates of deposit, insurance proceeds (including hazard, flood and credit
insurance), negotiable
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instruments and other instruments for the payment of money, chattel paper,
security agreements or documents, eminent domain proceeds, condemnation
proceeds and tort claim proceeds.
"Xxxxxxx UK" shall mean Xxxxxxx U.K. P.L.C., a
United Kingdom corporation.
"Consents" shall mean all filings and all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and other third parties, domestic or foreign,
necessary to carry on Borrower's business, including, without limitation, any
Consents required under all applicable federal, state or other applicable law.
"Controlled Group" shall mean all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with Borrower, are treated
as a single employer under Section 414 of the Code.
"Customer" shall mean the account debtor with
respect to any Receivable and/or the prospective purchaser of goods, services
or both with respect to any contract or contract right, and/or any party who
enters into or proposes to enter into any contract or other arrangement with
Borrower, pursuant to which Borrower is to deliver any personal property or
perform any services.
"Default" shall mean an event which, with the giving
of notice or passage of time or both, would constitute an Event of
Default.
"Default Rate" shall have the meaning set forth in
Section 3.1 hereof.
"Depository Accounts" shall have the meaning set
forth in Section 4.15(h) hereof.
"Documents" shall have the meaning set forth in
Section 8.1(c) hereof.
"Dollars" and the sign "$" shall mean lawful money
of the United States of America.
"Domestic Rate Loan" shall mean any Revolving
Advance that bears interest based upon the Alternate Base Rate.
"Earnings Before Interest and Taxes" shall mean for
any period the sum of (i) net income (or loss) of Borrower for such period
(excluding extraordinary gains or losses), plus (ii) all interest expense of
Borrower for such period, plus (iii) all charges against Borrower's income for
such period for federal, state and local taxes actually paid.
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"EBITDA" shall mean for any period the sum of (i)
Earnings Before Interest and Taxes for such period, plus (ii) depreciation and
amortization expenses for such period, to the extent such depreciation and
amortization expenses were deducted in calculating Earnings Before Interest and
Taxes.
"Eligible Inventory" shall mean and include
Inventory excluding work in process, valued at the lower of cost or market
value, determined on a first-in-first-out basis, which is not, in Lender's good
faith opinion, obsolete, slow moving or unmerchantable and which Lender, in its
sole discretion, shall not deem ineligible Inventory, based on such
considerations as Lender may from time to time deem appropriate in good faith
including, without limitation, whether the Inventory is subject to a perfected,
first priority security interest in favor of Lender and whether the Inventory
conforms to all standards imposed by any governmental agency, division or
department thereof which has regulatory authority over such goods or the use or
sale thereof. Until the date Lender receives the Kent Landlord Waiver, no
Inventory located at the Kent Property shall be "Eligible Inventory".
"Eligible Program Receivables" shall mean any
Program Receivable which (a) is unpaid not more than thirty (30) days after the
original due date with respect to invoices due more than one hundred and eighty
(180) days but less than or equal to two hundred and sixty (260) days after the
original invoice date, (b) is due no later than July 1 in the calendar year
following the calendar year in which it was created and (c) would not be
excluded as an Eligible Receivable according to the exclusion criteria set
forth in the definition of Eligible Receivables (other than the criteria set
forth in clause (b) of the definition of Eligible Receivables).
"Eligible Receivables" shall mean each Receivable
arising in the ordinary course of Borrower's business and which Lender, in its
sole credit judgment, shall deem to be an Eligible Receivable, based on such
considerations as Lender may from time to time deem appropriate in good faith.
A Receivable shall not be deemed eligible unless such Receivable is subject to
Lender's first priority perfected security interest and no other Lien (other
than Permitted Encumbrances), and is evidenced by an invoice, xxxx of lading or
other documentary evidence satisfactory to Lender. In addition, no Receivable
from any Customer shall be an Eligible Receivable if:
(a) it arises out of a sale made by Borrower to an
Affiliate of Borrower or to a Person controlled by an Affiliate of Borrower
(other than on an arms-length basis to Xxxxxxx U.K. or any other Affiliate of
Borrower acceptable to Lender);
(b) (i) it is unpaid more than (x) sixty (60) days
after the original due date with respect to invoices due sixty (60)
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days or less after the original invoice date or (y) thirty (30) days after the
original due date with respect to invoices due more than sixty (60) days but
less than or equal to one hundred and eighty (180) days after the original
invoice date or (ii) it is due more than one hundred and eighty (180) days
after the original invoice date;
(c) thirty-five percent (35%) or more of the
Receivables from such Customer are not deemed Eligible Receivables pursuant to
clause (b) of this definition or Eligible Program Receivables pursuant to the
definition thereof. Such percentage may, in Lender's sole discretion, be
increased or decreased from time to time provided, that, if no Event of Default
exists and is then continuing and no Overadvance exists, Lender shall provide
Borrower with fifteen (15) Business Days' prior written notice prior to
adjusting such percentage;
(d) any covenant, representation or warranty
contained in this Agreement with respect to such Receivable has
been breached;
(e) such Customer shall (i) apply for, suffer, or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property or call a meeting of its creditors, (ii) admit in writing its
inability, or be generally unable, to pay its debts as they become due or cease
operations of its present business, (iii) make a general assignment for the
benefit of creditors, (iv) commence a voluntary case under any state or federal
bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt
or insolvent, (vi) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vii) acquiesce to, or fail to have
dismissed, any petition which is filed against it in any involuntary case under
such bankruptcy laws, or (viii) take any action for the purpose of effecting
any of the foregoing;
(f) the sale is to a Customer outside the United
States of America or Canada (other than sales to Xxxxxxx UK or any other
Affiliate of Borrower acceptable to Lender, subject to Section 2.1(d) hereof),
unless the sale is on letter of credit, guaranty or acceptance terms created
under a letter of credit, in each case acceptable to Lender in its sole
discretion;
(g) the sale to such Customer is on a xxxx-and-
hold, guaranteed sale, sale-and-return, sale on approval, consignment or any
other repurchase or return basis or is evidenced by chattel paper;
(h) Lender reasonably believes, in its sole
judgment, that collection of such Receivable is insecure or that such
Receivable may not be paid by reason of such Customer's financial inability
to pay;
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(i) such Customer is the United States of America,
any state or any department, agency or instrumentality of any of them, unless
Borrower effectuates an assignment of its right to payment of such Receivable
to Lender pursuant to the Assignment of Claims Act of 1940, as amended (31
U.S.C. Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has
otherwise complied with other applicable statutes or ordinances;
(j) the goods giving rise to such Receivable have
not been shipped and delivered to and accepted by such Customer or the services
giving rise to such Receivable have not been performed by Borrower and accepted
by the Customer or the Receivable otherwise does not represent a final sale;
(k) the Receivables of such Customer exceed a
credit limit determined by Lender in good faith, in its sole discretion, to the
extent such Receivable exceeds such limit;
(l) the Receivable is subject to any offset,
deduction, defense, dispute, or counterclaim, such Customer is also a creditor
or supplier or the Receivable is contingent in any respect or for any reason;
(m) Borrower has made any agreement with such
Customer for any deduction therefrom, except for discounts or allowances made
in the ordinary course of business for prompt payment, all of which discounts
or allowances are reflected in the calculation of the face value of each
respective invoice related thereto;
(n) shipment of the merchandise or the rendition of
services has not been completed;
(o) any return, rejection or repossession of the
merchandise has occurred;
(p) such Receivable is not payable to Borrower; or
(q) such Receivable is not otherwise satisfactory
to Lender as determined in good faith by Lender in the exercise of
its discretion in a reasonable manner.
"Environmental Complaint" shall have the meaning set
forth in Section 4.19(d) hereof.
"Environmental Laws" shall mean all federal, state
and local environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances and codes relating to the protection of
the environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
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decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
"Equipment" shall mean and include all of Borrower's
goods (excluding Inventory) whether now owned or hereafter acquired and
wherever located including, without limitation, all equipment, machinery,
apparatus, motor vehicles, fittings, furniture, furnishings, fixtures, parts,
accessories and all replacements and substitutions therefor or accessions
thereto.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time and the rules and
regulations promulgated thereunder.
"Eurodollar Rate Loan" shall mean a Revolving
Advance at any time that it bears interest based on the Average Monthly LIBOR
Rate.
"Event of Default" shall mean the occurrence of any
of the events set forth in Article X hereof.
"Excess Cash Flow" for any fiscal period shall mean
(a) Cash Flow for such period minus (b) the sum of (i) Cash Capital
Expenditures plus, (ii) all payments made during such fiscal period on
Indebtedness for Borrowed Money plus, (iii) all taxes paid during such fiscal
period plus, (iv) dividends paid during such fiscal period.
"Federal Funds Rate" shall mean, for any day, the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or if such
rate is not so published for any day which is a Business Day, the average of
quotations for such day on such transactions received by the Bank from three
Federal funds brokers of recognized standing selected by the Bank.
"Fixed Charge Coverage Ratio" shall mean with
respect to any fiscal period, the ratio of (a) EBITDA during such fiscal period
to (b) the sum of Borrower's (i) interest expense on Indebtedness for Borrowed
Money and capitalized lease obligations plus (ii) payments on capitalized lease
obligations plus (iii) payments of Indebtedness for Borrowed Money plus (iv)
Cash Capital Expenditures plus (v) taxes paid plus (vi) dividends paid, each
during such period.
"Formula Amount" shall have the meaning set forth in
Section 2.1(a).
"Fully Satisfied" shall mean, with respect to the
Obligations as of any date, that, on or before such date, (a) the
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principal of and interest accrued to such date on the Revolving Advances
(including on the Standby L/C Advances) as evidenced by the Note shall have
been paid in full in cash, (b) the Letters of Credit shall have been cash
collateralized in an amount equal to one hundred and five percent (105%) of the
aggregate undrawn and unexpired amount of any then outstanding Letters of
Credit to the satisfaction of Lender or Lender shall have received an
indemnification acceptable to Lender with respect to such outstanding Letters
of Credit, (c) all fees, expenses and other amounts then due and payable which
constitute Obligations shall have paid in full in cash, (d) all indemnification
claims which have been made by Lender shall have been cash collateralized or
otherwise indemnified to the satisfaction of Lender and (e) this Agreement and
all of the Other Documents shall have been irrevocably terminated such that the
Lender shall not have any obligation to make or issue Advances hereunder or
thereunder.
"GAAP" shall mean generally accepted accounting
principles in the United States of America in effect from time to time, except
for the purposes and as set forth in Section 1.1 hereof.
"General Intangibles" shall mean and include all of
Borrower's general intangibles, whether now owned or hereafter acquired
including, without limitation, all choses in action, causes of action,
corporate or other business records, inventions, designs, patents, patent
applications, equipment formulations, manufacturing procedures, quality control
procedures, trademarks, service marks, trade secrets, goodwill, copyrights,
design rights, registrations, licenses, franchises, customer lists, tax
refunds, tax refund claims, all claims under guaranties, security interests or
other security held by or granted to Borrower to secure payment of any of the
Receivables by a Customer, all rights of indemnification and all other
intangible property of every kind and nature (other than Receivables).
"Governmental Body" shall mean any nation or
government, any state or other political subdivision thereof or any entity
exercising the legislative, judicial, regulatory or administrative functions of
or pertaining to a government.
"Guarantor" shall mean Meridian.
"Guaranty" shall mean the guaranty of the
obligations of Borrower executed by Guarantor in favor of Lender on the date
hereof (as the same may be amended, modified, restated or otherwise
supplemented from time to time).
"Hazardous Discharge" shall have the meaning set
forth in Section 4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation,
any flammable explosives, radon, radioactive materials,
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asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum and petroleum products, methane, hazardous materials, Hazardous
Wastes, hazardous or toxic substances or related materials as defined in
CERCLA, the Hazardous Materials Transportation Act, as amended (49 U.S.C.
Sections 1801, et seq.), RCRA, Articles 15 and 27 of the New York State
Environmental Conservation Law or any other applicable Environmental Law and in
the regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials
subject to regulation under CERCLA, RCRA or applicable state law, and any other
applicable Federal and state laws now in force or hereafter enacted relating to
hazardous waste disposal.
"Indebtedness" of a Person at a particular date
shall mean all obligations of such Person which in accordance with GAAP would
be classified upon a balance sheet as liabilities (except capital stock and
surplus earned or otherwise) and in any event, without limitation by reason of
enumeration, shall include all indebtedness, debt and other similar monetary
obligations of such Person whether direct or guaranteed, and all premiums, if
any, due at the required prepayment dates of such indebtedness, and all
indebtedness secured by a Lien on assets owned by such Person, whether or not
such indebtedness actually shall have been created, assumed or incurred by such
Person. Any indebtedness of such Person resulting from the acquisition by such
Person of any assets subject to any Lien shall be deemed, for the purposes
hereof, to be the equivalent of the creation, assumption and incurring of the
indebtedness secured thereby, whether or not actually so created, assumed or
incurred.
"Indebtedness for Borrowed Money" shall mean, with
respect to Borrower, its Indebtedness under this Agreement and any other of its
Indebtedness classified as long-term debt (including the current portion
thereof) in accordance with GAAP.
"Initial Term" shall mean the Closing Date through
March 17, 2000.
"Inventory" shall mean all of Borrower's now owned
or hereafter acquired goods, merchandise and other personal property, wherever
located, to be furnished under any contract of service or held for sale or
lease, all raw materials, work in process, finished goods and materials and
supplies of any kind, nature or description which are or might be used or
consumed in Borrower's business or used in selling or furnishing such goods,
merchandise and other personal property, and all documents of title or other
documents representing them.
"Inventory Advance Rate" shall have the meaning set
forth in Section 2.1(a)(y)(iii) hereof.
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"Inventory Availability" shall mean the amount
derived from Section 2.1(a)(y)(iii) hereof at any time and from
time to time.
"Kent Landlord" shall mean Pacific Northwest Group
A, a joint venture with an office on the date hereof located at X.X. Xxx 00000,
0000 Xxxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxx 00000, and its successors and
assigns.
"Kent Landlord Waiver" shall mean that certain
Landlord's Waiver and Consent executed and delivered by Kent Landlord
subsequent to the Closing Date in favor of Lender in the form attached hereto
as Exhibit 1.1 .
"Kent Lease" shall mean the Lease Agreement by and
between Kent Landlord and Borrower dated August 24, 1993, as amended by the 1st
Amendment to Lease dated June 4, 1996 and as may be further amended, restated,
modified or supplemented from time to time.
"Kent Property" shall mean the property located at
00000 00xx Xxxxxx Xxxxx, Xxxx, Xxxxxxxxxx 00000 which is leased by Borrower
from Kent Landlord.
"Leasehold Interests" shall mean all of Borrower's
right, title and interest in and to the premises located at (a) 00000 XX 00xx
Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000, and (b) 00000 00xx
Xxxxxx Xxxxx, Xxxx, Xxxxxxxxxx 00000.
"Lender" shall mean BNYCC and any successor or
assign.
"Letter of Credit Application" shall have the
meaning set forth in Section 2.9(a).
"Letter of Credit Fees" shall have the meaning set
forth in Section 3.2.
"Letters of Credit" shall have the meaning set forth
in Section 2.8.
"Leverage Ratio" shall mean, at any time, the ratio
of (a) the sum of (i) Indebtedness for Borrowed Money less (ii) Subordinated
Debt to (b) the sum of (i) Tangible Net Worth plus (ii) Subordinated Debt, at
such time.
"Lien" shall mean any mortgage, deed of trust,
pledge, hypothecation, assignment, security interest, lien (whether statutory
or otherwise), Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease having
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substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction.
"Material Adverse Effect" shall mean a material
adverse effect on (i) the condition, operations, assets, business or prospects
of Borrower, (ii) Borrower's ability to pay or perform the Obligations in
accordance with the terms hereof, (iii) the value of the Collateral, the Liens
on the Collateral or the priority of any such Lien or (iv) the practical
realization of the benefits of Lender's rights and remedies under this
Agreement and the Other Documents.
"Maximum Program Receivable Amount" shall mean, at
any time, the lesser of: (a) the amount of outstanding Eligible Program
Receivables and (b) an amount equal to (i) during the month of September in any
year, twenty-five percent (25%) of the outstanding amount of Receivables during
such month, (ii) during the month of October in any year, forty (40%) of the
outstanding amount of Receivables during such month, (iii) during the month of
November in any year, sixty percent (60%) of the outstanding amount of
Receivables during such month, (iv) during the month of December in any year,
fifty percent (50%) of the outstanding amount of Receivables during such month,
(v) during the month of January in any year, forty percent (40%) of the
outstanding amount of Receivables during such month, (vi) during the month of
February in any year, thirty-five percent (35%) of the amount of outstanding
Receivables during such month, (vii) during the months of March and April in
any year, thirty percent (30%) of the outstanding amount of Receivables during
such months, (viii) during the month of May in any year, fifteen percent (15%)
of the outstanding amount of Receivables during such month and (ix) during the
months of June, July and August in any year, zero percent (0%) of the
outstanding amount of Receivables during such months.
"Maximum Revolving Advance Amount" shall mean
$14,000,000; provided, that upon the written request of Borrower to Lender, at
any time prior to receipt of the Kent Landlord Waiver by Lender, the "Maximum
Revolving Advance Amount" shall be permanently reduced to an amount not less
than $12,000,000.
"Meridian" shall mean Meridian Sports Incorporated,
a Delaware corporation.
"Mortgage" shall mean the deed of trust on the Real
Property securing the original principal amount of $14,000,000 together with
all extensions, renewals, amendments, supplements, modifications, substitutions
and replacements thereto and thereof.
"Multiemployer Plan" shall mean a "multiemployer
plan" as defined in Sections 3(37) and 4001(a)(3) of ERISA.
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"Net Worth" at a particular date, shall mean all
amounts which would be included under shareholders' equity on a balance sheet
of Borrower determined in accordance with GAAP as at such date.
"Net Worth Adjustment" shall have the meaning set
forth in Section 6.11 hereof.
"Note" shall mean the promissory note referred to in
Section 2.1(a) hereof.
"Obligations" shall mean and include (i) any and all
of Borrower's Indebtedness and/or liabilities to Lender, due or to become due,
now existing or hereafter arising, under this Agreement, the Other Documents to
which it is party or under any other agreement between Lender and Borrower, of
every kind, nature and description, direct or indirect, secured or unsecured,
joint, several, joint and several, absolute or contingent, contractual or
tortious, liquidated or unliquidated, including, without limitation, any amount
expended by Lender in connection with and arising under any landlord waiver and
consent executed and delivered in connection with this Agreement and (ii) all
obligations of Borrower to Lender to perform acts or refrain from taking any
action.
"Original Owners" shall mean (a) with respect to
Meridian, Mafco Holdings Inc., a Delaware corporation and (b) with respect to
Borrower, Meridian.
"Other Documents" shall mean the Mortgage, the Note,
the Guaranty, the Trademark Security Agreement, the Patent Security Agreement,
any Letter of Credit Application and (a) any and all other agreements,
instruments and documents, including, without limitation, powers of attorney,
consents, and all other writings heretofore, now or hereafter executed by
Borrower and/or delivered to Lender in respect of the transactions contemplated
by this Agreement and (b) any and all other guaranties and pledges that may be
hereafter executed by Borrower and/or delivered to Lender in respect of the
transactions contemplated by this Agreement.
"Overadvance" shall have the meaning set forth in
Section 2.6 hereof.
"Parent" of any Person shall mean a corporation or
other entity owning, directly or indirectly, at least a majority of the shares
of stock or other ownership interests having ordinary voting power to elect a
majority of the directors of the Person, or other Persons performing similar
functions for any such Person.
"Participant" shall mean each Person who shall be
granted the right by Lender to participate in any of the Advances and who shall
have entered into a participation agreement in form and substance satisfactory
to Lender.
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"Patent Security Agreement" shall mean the Patent
Security Agreement dated as of the Closing Date by and between Borrower and
Lender.
"Payment Office" shall mean initially 0000 Xxxxxx xx
xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000; thereafter, such other office of
Lender, if any, which it may designate by prior notice to Borrower to be the
Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation.
"Permitted Cash Flow Amount" shall mean, for any
fiscal year commencing after December 31, 1997, an amount equal to the sum of
(x) fifty percent (50%) of the first $750,000 of Excess Cash Flow for such
fiscal year and (y) seventy-five percent (75%) of Excess Cash Flow in excess of
$750,000, for such fiscal year.
"Permitted Encumbrances" shall mean (a) Liens in
favor of Lender; (b) Liens for taxes, assessments or other governmental charges
not delinquent, or, being contested in good faith and by appropriate
proceedings and with respect to which proper reserves have been taken by
Borrower; provided, that, the Lien shall (x) have no effect on the priority of
the Liens in favor of Lender or (y) have a material adverse effect on the value
of the assets in which Lender has such a Lien, and a stay of enforcement of any
such Lien shall be in effect; (c) Liens disclosed in the financial statements
referred to in Section 5.5, the existence of which Lender has consented to in
writing; (d) deposits or pledges to secure obligations under workers'
compensation, social security or similar laws, or under unemployment insurance;
(e) deposits or pledges to secure bids, tenders, contracts (other than
contracts for the payment of money), leases, statutory obligations, surety and
appeal bonds and other obligations of like nature arising in the ordinary
course of Borrower's business; (f) judgment Liens that have been stayed or
bonded and mechanics', worker's, materialmen's or other like Liens arising in
the ordinary course of Borrower's business with respect to obligations which
are not due or which are being contested in good faith by Borrower; (g) Liens
placed upon fixed or capital assets hereafter acquired to secure a portion of
the purchase price thereof, provided, that, (x) any such lien shall not
encumber any other property of Borrower and (y) the aggregate amount of
Indebtedness secured by such Liens incurred as a result of such purchases
during any fiscal year shall not exceed the amount provided for in Section 7.6;
and (h) Liens disclosed on Schedule 1.2.
"Person" shall mean any individual, sole
proprietorship, partnership, corporation, business trust, joint stock company,
trust, unincorporated organization, association, limited liability company,
institution, public benefit corporation, joint venture, entity or government
(whether Xxxxxxx, xxxxx,
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xxxxxx, xxxx, xxxxxxxxx or otherwise, including, any instrumentality, division,
agency, body or department thereof).
"Plan" shall mean any employee benefit plan within
the meaning of Section 3(3) of ERISA, maintained for employees of Borrower or
any member of the Controlled Group or any such Plan to which Borrower or any
member of the Controlled Group is required to contribute on behalf of any of
its employees.
"Prime Rate" shall mean the prime commercial lending
rate of the Bank as publicly announced to be in effect from time to time, such
rate to be adjusted automatically, without notice, on the effective date of any
change in such rate. This rate of interest is determined from time to time by
the Bank as a means of pricing some loans to its customers and is neither tied
to any external rate of interest or index nor does it necessarily reflect the
lowest rate of interest actually charged by the Bank to any particular class or
category of customers of the Bank.
"Pro Forma Balance Sheet" shall have the meaning set
forth in Section 5.5(a) hereof.
"Pro Forma Financial Statements" shall have the
meaning set forth in Section 5.5(b) hereof.
"Program Receivable" shall mean any Receivable from
a Customer (a) due more than one hundred and eighty (180) days after the
original invoice date and (b) created in connection with Borrower's sales
incentive program pursuant to which such Customer receives and accepts delivery
from Borrower of the Inventory giving rise to such Receivable between September
1 through and including December 31 of each calendar year.
"Program Receivables Advance Rate" shall have the
meaning set forth in Section 2.1(a)(y)(ii) hereof.
"Projections" shall have the meaning set forth in
Section 5.5(b) hereof.
"RCRA" shall mean the Resource Conservation and
Recovery Act, 42 U.S.C. xx.xx. 6901 et seq., as same may be amended
from time to time.
"Real Property" shall mean all of Borrower's right,
title and interest in and to the owned and leased premises
identified on Schedule 4.19 hereto.
"Receivables" shall mean and include all of
Borrower's accounts, contract rights, instruments (including those evidencing
indebtedness owed to Borrower by its Affiliates), documents, chattel paper,
general intangibles relating to accounts, drafts and acceptances, and all other
forms of obligations owing to Borrower arising out of or in connection with the
sale or lease of
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Inventory or the rendition of services, all guarantees and other security
therefor, whether secured or unsecured, now existing or hereafter created, and
whether or not specifically sold or assigned to Lender hereunder.
"Receivables Advance Rate" shall have the meaning
set forth in Section 2.1(a)(y)(i) hereof.
"Rent" shall mean any installment of the Base Rent
or any payment with respect to taxes under the Kent Lease, or any other payment
or reimbursement to the Kent Landlord required by the Kent Lease.
"Release" shall have the meaning set forth in
Section 5.7(c)(i) hereof.
"Reportable Event" shall mean a reportable event
described in Section 4043(b) of ERISA or of the regulations promulgated
thereunder other than an event for which notice has been waived by the PBGC.
"Revolving Advances" shall mean Advances made
pursuant to Section 2.1 hereof (including any Special Advances).
"Revolving Interest Rate" shall mean an interest
rate per annum equal to (a) the sum of the Alternate Base Rate plus
three-quarters of one percent (.75%) with respect to Domestic Rate Loans or (b)
the sum of the Average Monthly LIBOR Rate plus two and three-quarters percent
(2.75%) with respect to Eurodollar Rate Loans, subject to the provisions of
Section 3.1 hereof.
"Special Advance Amount" shall mean (a) during the
Special Advance Period the lesser of (i) $1,000,000 in the aggregate at any one
time and (ii) the product of (x) 10%, subject to the provisions of Section
2.1(b) ("Special Advance Rate"), and (y) the sum of (I) Accounts Receivable
Availability plus (II) Inventory Availability and (b) $0 at all other times.
"Special Advances" shall mean any Revolving Advances
made pursuant to Section 2.1(c) hereof in excess of availability calculated
under subsection 2.1(a) hereof excluding the amount calculated under Section
2.1(a)(y)(iv) hereof.
"Special Advance Period" shall mean during each
calendar year the period commencing on January 1 and ending on
March 31.
"Special Advance Rate" shall have the meaning set
forth in the definition of Special Advance Amount.
"Standby L/C Advance" shall have the meaning set
forth in Section 2.8 hereof.
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"Subsidiary" shall mean, with respect to any Person,
a corporation or other entity of whose shares of stock or other ownership
interests having ordinary voting power (other than stock or other ownership
interests having such power only by reason of the happening of a contingency)
to elect a majority of the directors of such corporation, or other Persons
performing similar functions for such entity, are owned, directly or
indirectly, by such Person.
"Subordinated Debt" shall mean all Indebtedness for
Borrowed Money that is subordinated to the Obligations of Borrower to Lender
under this Agreement, the subordination terms of which shall be acceptable to
Lender and with respect to which no payments may be made until all Obligations
are Fully Satisfied.
"Tangible Net Worth" shall mean, at a particular
date, (a) Net Worth on such date less (b) the aggregate amount of all
intangible assets of Borrower as may be properly classified as such in
accordance with GAAP consistently applied on such date.
"Term" shall mean the Closing Date through March 17,
2000, as same may be extended in accordance with the provisions of
Section 13.1 hereof.
"Termination Event" shall mean (i) a Reportable
Event with respect to any Plan; (ii) the withdrawal of either Borrower or any
member of the Controlled Group from a Plan or Multiemployer Plan during a plan
year in which such entity was a "substantial employer" as defined in Section
4001(a)(2) of ERISA; (iii) the providing of notice of intent to terminate a
Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the
institution by the PBGC of proceedings to terminate a Plan or Multiemployer
Plan; (v) any event or condition (a) which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Plan or Multiemployer Plan, or (b) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi)
the partial or complete withdrawal within the meaning of Sections 4203 and 4205
of ERISA, of either Borrower or any member of the Controlled Group from a
Multiemployer Plan, which in any case in clauses (i) through (vi), is
reasonably likely to result in a material liability to Borrower.
"Toxic Substance" shall mean and include any
material present on the Real Property or the Leasehold Interests which has been
shown to have significant adverse effect on human health or which is subject to
regulation under the Toxic Substances Control Act (TSCA), 15 U.S.C. xx.xx. 2601
et seq., applicable state law, or any other applicable Federal or state laws
now in force or hereafter enacted relating to toxic substances. "Toxic
substance" includes but is not limited to asbestos, polychlorinated biphenyls
(PCBs) and lead-based paints.
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"Trademark Security Agreement" shall mean the
Trademark Security Agreement dated as of the Closing Date by and between
Borrower and Lender.
"Transactions" shall have the meaning set forth in
Section 5.5 hereof.
"Transferee" shall have the meaning set forth in
Section 14.3(b) hereof.
"Undrawn Availability" at a particular date shall
mean an amount equal to (a) the lesser of (i) the Formula Amount or (ii) the
Maximum Revolving Advance Amount, minus (b) the sum of (i) the outstanding
amount of Advances plus (ii) all amounts due and owing to Borrower's trade
creditors which are outstanding beyond normal trade terms plus (iii) fees and
expenses for which Borrower is liable to Lender under this Agreement or any
Other Document to which it is a party but which have not been paid or charged
to Borrower's Account.
1.3. Uniform Commercial Code Terms. All terms used herein and
defined in the Uniform Commercial Code as adopted in the State of New York
shall have the meaning given therein unless otherwise defined herein.
1.4. Certain Matters of Construction. The terms "herein", "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular section, paragraph or subdivision. Any pronoun
used shall be deemed to cover all genders. Wherever appropriate in the context,
terms used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. All references to any
instruments or agreements to which Lender is a party, including, without
limitation, references to any of the Other Documents shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.
II. ADVANCES, PAYMENTS.
2.1. (a) Revolving Advances. Subject to the terms and
conditions set forth in this Agreement, Lender will make Revolving Advances to
Borrower in aggregate amounts outstanding at any time equal to the lesser of
(x) the Maximum Revolving Advance Amount less the sum of (i) the aggregate
undrawn amount of all outstanding Letters of Credit, plus (ii) the aggregate
outstanding amounts of all Standby L/C Advances or (y) an amount equal to:
(i) up to (A) 78%, during the months of September,
October, November, December, January, February, March and April and (B) 80%
during the months of May, June, July and
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August, subject to the provisions of Section 2.1(b) hereof ("Receivables
Advance Rate"), of Eligible Receivables, plus
(ii) up to the lesser of (A)(I) 78% during the
months of September, October, November, December, January, February, March and
April and (II) 80% during the months of May June, July and August, subject to
the provisions of Section 2.1(b) hereof ("Program Receivables Advance Rate"),
of Eligible Program Receivables or (B) the Maximum Program Receivable Amount in
the aggregate at any one time, plus
(iii) up to the lesser of (A) 50%, subject to
the provisions of Section 2.1(b) hereof ("Inventory Advance Rate"), of the
value of the Eligible Inventory or (B) $2,750,000 in the aggregate at any one
time , plus
(iv) solely during the Special Advance Period,
the Special Advance Amount, plus
(v) following receipt by Lender of the Kent
Landlord Waiver, the product of (a) the aggregate undrawn amount of all
outstanding documentary Letters of Credit times (b) the Inventory Advance Rate,
minus
(vi) the aggregate undrawn amount of all
outstanding documentary Letters of Credit, minus
(vii) such reserves as Lender may reasonably
deem proper and necessary from time to time.
The amount derived from the sum of (1) Sections 2.1(a)(y)(i),
(ii), (iii), (iv) and (v) minus (2) Section 2.1(a)(y)(vii) at any time and from
time to time shall be referred to as the "Formula Amount". The Revolving
Advances shall be evidenced by the secured promissory note ("Note")
substantially in the form attached hereto as Exhibit 2.1.
(b) Discretionary Rights. Upon fifteen (15)
Business Days' prior written notice to the Borrower (which notice shall only be
provided so long as (i) no Event of Default is then continuing and (ii) no
Overadvance is then outstanding), the Advance Rates may be increased or
decreased by Lender at any time and from time to time in the exercise of its
reasonable discretion. Borrower consents to any such increases or decreases and
acknowledges that decreasing the Advance Rates or increasing the reserves may
limit or restrict Advances requested by Borrower.
(c) Special Advances. Subject to the terms and
conditions of this Agreement, Lender shall, solely during the Special Advance
Period, make Revolving Advances constituting Special Advances available to
Borrower in an amount not to exceed at any time outstanding the Special Advance
Amount.
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(d) Advances Against Receivables from Xxxxxxx UK
and Other Affiliates. Notwithstanding any provision to the contrary contained
herein, Advances against Receivables due and owing from Xxxxxxx UK and any
other Affiliate of Borrower acceptable to Lender shall not exceed $500,000 in
the aggregate at any one time.
2.2. Procedure for Borrowing Revolving Advances.
(a) Borrower may notify Lender prior to 1:00 p.m. on
a Business Day of Borrower's request to incur, on that day, a Revolving Advance
hereunder, which notification shall specify whether such requested Revolving
Advance shall consist of a Domestic Rate Loan or a Eurodollar Rate Loan (which
Eurodollar Rate Loan shall be subject to the notice requirement contained in
Section 2.2(b) below). Should any amount required to be paid as interest
hereunder, or as fees or other charges under this Agreement or any other
agreement with Lender, or with respect to any other Obligation, become due,
same shall be deemed a request for a Revolving Advance as of the date such
payment is due, in the amount required to pay in full such interest, fee,
charge or Obligation under this Agreement or any other agreement with Lender,
and such request shall be irrevocable. Notwithstanding anything contained in
this Agreement to the contrary, the aggregate amount of outstanding Eurodollar
Rate Loans shall not at any time exceed eighty percent (80%) of the aggregate
amount of all outstanding Revolving Advances.
(b) Notwithstanding the provisions of (a) above, in
the event Borrower desires to obtain a Eurodollar Rate Loan, it shall give
Lender at least three (3) Business Days' prior written notice which notice
shall specify (i) the date of the proposed borrowing (which shall be a Business
Day) and (ii) the amount to be borrowed. No Eurodollar Rate Loan shall be made
available to Borrower during the continuance of a Default or an Event of
Default.
(c) Provided that no Event of Default shall have
occurred and be continuing, Borrower may, on any Business Day convert any
Eurodollar Rate Loan or Domestic Rate Loan into a loan of another type in the
same aggregate principal amount. If Borrower desires to convert a loan, it
shall give Lender not less than three (3) Business Days' prior written notice
to convert from a Domestic Rate Loan to a Eurodollar Rate Loan or one (1)
Business Day's prior written notice to convert a Eurodollar Rate Loan to a
Domestic Rate Loan, the loans to be converted and if the conversion is from a
Domestic Rate Loan to a Eurodollar Rate Loan, the commencement date of such
loan.
2.3. Disbursement of Advance Proceeds. All Revolving
Advances shall be disbursed from whichever office or other place Lender may
designate from time to time and, together with any and all other Obligations of
Borrower to Lender, shall be charged to
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Borrower's Account on Lender's books. During the Term, Borrower may borrow,
prepay and reborrow the Revolving Advances, all in accordance with the terms
and conditions of this Agreement. The proceeds of each Revolving Advance
requested by Borrower or deemed to have been requested by Borrower under
Section 2.2(a) hereof shall, with respect to requested Revolving Advances to
the extent Lender makes such Revolving Advances, be made available to Borrower
on the day so requested by way of credit to Borrower's operating account at the
Bank, or such other bank as Borrower may designate following notification to
Lender, in immediately available federal funds or other immediately available
funds or, with respect to Revolving Advances deemed to have been requested, be
disbursed to Lender to be applied to the outstanding Obligations giving rise to
such deemed request.
2.4. Maximum Advances. The aggregate balance of
Revolving Advances outstanding at any time shall not exceed the amounts
permitted pursuant to Section 2.1 hereof.
2.5. Repayment of Advances.
(a) The Advances shall be due and payable in full
on the last day of the Term subject to acceleration following the occurrence of
an Event of Default or earlier prepayment as herein provided and all
outstanding Letters of Credit shall be terminated, cancelled or cash
collateralized as provided herein.
(b) Borrower recognizes that the amounts evidenced
by checks, notes, drafts or any other items of payment relating to and/or
proceeds of Collateral may not be collectible by Lender on the date received.
In consideration of Lender's agreement to conditionally credit Borrower's
Account as of the Business Day on which Lender receives those items of payment,
Borrower agrees that, in computing the charges under this Agreement, all items
of payment shall be deemed applied by Lender on account of the Obligations one
(1) Business Day after the Business Day Lender receives such remittances via
wire transfer or electronic depository check or by the lockbox bank crediting
Lender's account for such items of payment. Lender is not, however, required to
credit Borrower's Account for the amount of any item of payment which is
unsatisfactory to Lender and Lender may charge Borrower's Account for the
amount of any item of payment which is returned unpaid to Lender or lockbox
bank. Payments by wire transfer or electronic depository check are satisfactory
to and preferred by Lender. Payments by Borrower shall be applied by Lender as
follows: (i) first, to interest on Eurodollar Rate Loans; (ii) then, to
interest on Domestic Rate Loans; (iii) then, to the outstanding principal
amount of Eurodollar Rate Loans; (iv) then, to the outstanding principal amount
of Domestic Rate Loans; (v) then, to the outstanding amount of fees due and
owing by Borrower under this Agreement; and (vi) then, to the remainder of the
Obligations in such order as Lender shall determine in its discretion.
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(c) All payments of principal, interest and other
amounts payable hereunder, or under any Other Document to which Borrower is a
party shall be made to Lender at the Payment Office not later than 1:00 P.M.
(New York time) on the due date therefor in lawful money of the United States
of America in federal funds or other funds immediately available to Lender.
Lender shall have the right to effectuate payment on any and all Obligations
involving monetary payments due and owing hereunder by charging Borrower's
Account or by making Revolving Advances as provided in Section 2.2 hereof.
(d) Borrower shall pay principal, interest, and all
other amounts payable hereunder, or under any Other Documents to which it is a
party, without any deduction whatsoever, including, but not limited to, any
deduction for any setoff or counterclaim.
2.6. Repayment of Excess Advances. Any aggregate balance
of Advances outstanding at any time in excess of the maximum amount of Advances
permitted hereunder (an "Overadvance") shall be due and payable one (1) day
following the occurrence of any such Overadvance, without the necessity of any
demand, at the Payment Office, whether or not a Default or Event of Default has
occurred.
2.7. Statement of Account. Lender shall maintain, in
accordance with its customary procedures, a loan account ("Borrower's Account")
in the name of Borrower in which shall be recorded the date and amount of each
Advance made by Lender and the date and amount of each payment in respect
thereof; provided, however, the failure by Lender to record the date and amount
of any Advance shall not adversely affect Lender's ability to assert such
Advance was, in fact, made by Lender. Each month, Lender shall send to Borrower
a statement showing the accounting for the Advances made, payments made or
credited in respect thereof, and other transactions between Lender and
Borrower, during such month. The monthly statements shall be deemed correct and
binding upon Borrower in the absence of manifest error and shall constitute an
account stated between Lender and Borrower unless Lender receives a written
statement of Borrower's specific exceptions thereto within thirty (30) days
after such statement is received by Borrower. The records of Lender with
respect to the loan account shall be prima facie evidence of the amounts of
Advances and other charges thereto and of payments applicable thereto.
2.8. Letters of Credit. Subject to the terms and
conditions of Sections 2.8, 2.9, 2.10 and Article VIII, Lender shall cause the
issuance of letters of credit ("Letters of Credit"); provided, however, that
Lender will not be required to cause to be issued any Letters of Credit to the
extent that the face amount of such Letters of Credit would then cause the sum
of (i) the outstanding amount of all Revolving Advances plus (ii) the undrawn
amounts of all outstanding Letters of Credit (with the requested Letter of
Credit being deemed to be outstanding for purposes of this calculation) plus
(iii) the outstanding amount of
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all Standby L/C Advances to exceed the lesser of (x) the Maximum Revolving
Advance Amount or (y) the sum of (I) the Formula Amount (which, solely for the
purposes of this Section 2.8 with respect to requested documentary Letters of
Credit, shall be calculated as if the requested documentary Letter of Credit
has been issued) plus (II) the outstanding amount of all Standby L/C Advances,
plus (III) the undrawn amounts of all outstanding standby Letters of Credit
(with the requested standby Letter of Credit being deemed to be outstanding for
purposes of this calculation). The maximum amount of the undrawn amounts of all
outstanding Letters of Credit shall not exceed $3,000,000 in the aggregate at
any one time (of which (a) the undrawn amounts of all standby Letters of Credit
shall not exceed $1,700,000 in the aggregate at any one time and (b) the
undrawn amounts of all outstanding documentary Letters of Credit shall not
exceed $1,300,000 in the aggregate at any one time). All disbursements or
payments related to Letters of Credit shall be deemed to be Revolving Advances
and shall bear, subject to the last sentence of this Section 2.8, interest at
the Revolving Interest Rate for Domestic Rate Loans; Letters of Credit that
have not been drawn upon shall not bear interest. Letters of Credit shall be
subject to the terms and conditions set forth in the Letter of Credit and
Security Agreement attached hereto as Exhibit 2.8. Notwithstanding any
provision to the contrary contained herein, in the event that (a) Lender makes
a disbursement or payment related to a standby Letter of Credit issued on
behalf of Borrower and (b) any Revolving Advance which is a result of such
disbursement or payment (a "Standby L/C Advance") is not repaid by Borrower
within thirty (30) days following the date of such Standby L/C Advance (because
Meridian shall not have remitted payment to Borrower (by intercompany loan or
otherwise) in respect of such disbursement or payment and Borrower shall not
have remitted such payment from Meridian to Lender), then the principal amount
of such Standby L/C Advance shall be payable by Borrower to Lender in equal
consecutive monthly installments based upon a thirty-six (36) month
amortization schedule commencing on the first day of the first month following
the date of such Standby L/C Advance, with the unpaid balance of such Standby
L/C Advance being due and payable upon the last day of the Term, subject to
acceleration following the occurrence of an Event of Default. Interest on a
Standby L/C Advance shall bear interest at the applicable Revolving Interest
Rate as selected by Borrower.
2.9. Issuance of Letters of Credit.
(a) Borrower may request Lender to cause the
issuance of a Letter of Credit by delivering to Lender at the Payment Office,
Lender's standard form of Letter of Credit and Security Agreement together with
Bank's standard form of Letter of Credit Application (collectively, the "Letter
of Credit Application") and any draft, if applicable, completed to the
satisfaction of Lender; and, such other certificates, documents and other
papers and information as Lender may reasonably request.
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(b) Each Letter of Credit shall, among other
things, (i) provide for the payment of sight drafts when presented for honor
thereunder in accordance with the terms thereof and when accompanied by the
documents described therein, (ii) have an expiry date not later than six months
after such Letter of Credit's date of issuance and in no event later than the
last day of the Term and (iii) be issued by the Bank. Each Letter of Credit
Application and each Letter of Credit shall be subject to the Uniform Customs
and Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500, and any amendments or revision thereof and, to
the extent not inconsistent therewith, the laws of the State of New York.
2.10. Requirements For Issuance of Letters of Credit.
(a) In connection with the issuance of any Letter
of Credit Borrower shall indemnify, save and hold Lender harmless from any
loss, reasonable cost, reasonable expense or liability, including, without
limitation, payments made by Lender, and reasonable expenses and reasonable
attorneys' fees incurred by Lender arising out of, or in connection with, any
Letter of Credit to be issued or created for Borrower. Borrower shall be bound
by Lender's or any issuing or accepting bank's regulations and good faith
interpretations of any Letter of Credit issued or created for Borrower's
Account, although this interpretation may be different from Borrower's own;
and, neither Lender, the bank which opened the Letter of Credit, nor any of its
correspondents shall be liable for any error, negligence, or mistakes, whether
of omission or commission, in following Borrower's instructions or those
contained in any Letter of Credit or of any modifications, amendments or
supplements thereto or in issuing or paying any Letter of Credit, except for
Lender's or such correspondents' willful misconduct or gross (not mere)
negligence.
(b) Borrower shall authorize and direct any bank
which issues a Letter of Credit to name Borrower as the "Account Party" therein
and to deliver to Lender all instruments, documents, and other writings and
property received by the bank pursuant to the Letter of Credit and to accept
and rely upon Lender's instructions and agreements with respect to all matters
arising in connection with the Letter of Credit, the application therefor or
any acceptance therefor.
(c) In connection with all documentary Letters of
Credit issued or caused to be issued by Lender under this Agreement, Borrower
hereby appoints Lender, or its designee, as its attorney, with full power and
authority, (i) to sign and/or endorse Borrower's name upon any warehouse or
other receipts, letter of credit applications and acceptances; (ii) to sign
Borrower's name on bills of lading; (iii) to clear Inventory through the United
States of America Customs Department ("Customs") in the name of Borrower or
Lender or Lender's designee, and to sign and deliver to Customs officials
powers of attorney in the name of Borrower for
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such purpose; and (iv) to complete in Borrower's name or Lender's, or in the
name of Lender's designee, any order, sale or transaction, obtain the necessary
documents in connection therewith, and collect the proceeds thereof. Neither
Lender nor its attorneys will be liable for any acts or omissions nor for any
error of judgment or mistakes of fact or law, except for Lender's or its
attorney's willful misconduct or gross (not mere) negligence. This power, being
coupled with an interest, is irrevocable as long as any Letters of Credit
remain outstanding.
2.11. Additional Payments. Any sums expended by Lender
due to Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document to which it is a party including, without
limitation, Borrower's obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14
and 6.1 hereof, may be charged to Borrower's Account as a Revolving Advance and
added to the Obligations.
2.12. Mandatory Prepayments. When Borrower sells or
otherwise disposes of any Collateral (other than Inventory in the ordinary
course of business) and (a) receives net proceeds in excess of (i) $20,000 in
any one transaction (or a series of related transactions) or (ii) $50,000 in
the aggregate during any fiscal year or (b) an Event of Default has occurred
and is then continuing or (c) there is an Overadvance existing, Borrower shall
repay the Standby L/C Advances in an amount equal to the net proceeds of such
sale (i.e., gross proceeds less the reasonable costs of such sales or other
dispositions), such repayments to be made promptly but in no event more than
one (1) Business Day following receipt of such net proceeds, and until the date
of payment, such proceeds shall be held in trust for Lender. The foregoing
shall not be deemed to be implied consent to any such sale otherwise prohibited
by the terms and conditions hereof. Such repayments shall be applied first, to
the outstanding principal installments on the Standby L/C Advances in the
inverse order of the maturities thereof and, second, to the remaining Advances
in such order as Lender may determine, subject to Borrower's ability to
reborrow Revolving Advances in accordance with the terms hereof.
2.13. Use of Proceeds. Borrower shall apply the proceeds
of Advances to (i) repay existing indebtedness and other intercompany
obligations owed to Meridian, (ii) refinance certain letters of credit, (iii)
pay fees and expenses relating to this transaction, and (iv) provide for its
working capital needs and for other general corporate purposes.
III. INTEREST AND FEES.
3.1. Interest. Interest on Revolving Advances shall be
payable in arrears on the last day of each calendar month. Interest charges
shall be computed daily on the actual principal amount of Revolving Advances
outstanding during the month at a rate
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per annum equal to the applicable Revolving Interest Rate. Whenever, subsequent
to the date of this Agreement, the Alternate Base Rate or Average Monthly LIBOR
Rate is increased or decreased, the applicable Revolving Interest Rate shall be
similarly changed without notice or demand of any kind by an amount equal to
the amount of such change in the Alternate Base Rate or Average Monthly LIBOR
Rate during the time such change or changes remain in effect.
So long as no Default or Event of Default shall be in existence,
the applicable Revolving Interest Rate shall be reduced by one-quarter of one
percent (.25%) thirty (30) days after delivery of the annual financial
statements pursuant to Section 9.7 hereof during the Initial Term, if (a) such
financial statements show that, as determined by Lender in its reasonable
discretion, at the end of the immediately preceding fiscal year-end, Borrower
had (i) Excess Cash Flow of at least (x) $287,000 with respect to the fiscal
year ending December 31, 1997, (y) $575,000 with respect to the fiscal year
ending December 31, 1998 and (z) $862,500 with respect to the fiscal year
ending December 31, 1999, (ii) a Fixed Charge Coverage Ratio of at least (x)
1.0 to 1.0 with respect to the fiscal year ending December 31, 1997, (y) 1.6 to
1.0 with respect to the fiscal year ending December 31, 1998 and (z) 1.9 to 1.0
with respect to the fiscal year ending December 31, 1999 and (iii) a Leverage
Ratio not exceeding (x) 0.5 to 1.0 with respect to the fiscal year ending
December 31, 1997, (y) 0.4 to 1.0 with respect to the fiscal year ending
December 31, 1998 and (z) 0.3 to 1.0 with respect to the fiscal year ending
December 31, 1999 and (b) Undrawn Availability (computed as an arithmetic
average of the amount of Undrawn Availability as at the end of the months of
October, November and December for the fiscal year such computation is made),
as determined by Lender in its reasonable discretion, is at least (i)
$1,500,000 with respect to the fiscal year ending December 31, 1997, (ii)
$1,750,000 with respect to the fiscal year ending December 31, 1998 and (iii)
$2,000,000 with respect to the fiscal year ending December 31, 1999 (the tests
pursuant to clauses (a) and (b) hereinafter referred to as the "Interest Rate
Tests") and (c) a certificate of Borrower's Vice President - Finance setting
forth Borrower's calculations of its compliance with the Interest Rate Tests is
delivered to Lender along with such annual financial statements (which
certificate shall not be binding on Lender when Lender determines the Interest
Rate Tests); provided, however, that if the Revolving Interest Rates are
reduced after the first year of the Initial Term but Borrower does not meet the
Interest Rate Tests for the fiscal year ending December 31, 1998, then Lender,
in its sole discretion, may increase the Revolving Interest Rates for the third
twelve month period of the Term by one-quarter of one percent (.25%) and no
further rate reductions shall be permitted thereafter. If the Revolving
Interest Rates are reduced after the second year of the Initial Term but
Borrower does not meet the Interest Rate Tests for the fiscal year ending
December 31, 1999, then Lender, in its sole discretion, may increase the
Revolving Interest Rates for the fourth twelve month period of the Term
(assuming the Agreement is not terminated at the
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end of the Initial Term) by one-quarter of one percent (.25%). Unless expressly
agreed to by Lender, no interest rate reductions shall be made after the end of
the Initial Term.
Notwithstanding the foregoing, in the event that (A) the amount of
outstanding Advances exceeds the lesser of (x) the Maximum Revolving Advance
Amount or (y) the Formula Amount or (B) any Special Advances are outstanding,
then all of the outstanding Revolving Advances shall bear interest at the
Alternate Base Rate plus one and one-half percent (1.50%) and any outstanding
Eurodollar Rate Loans shall automatically be converted to Domestic Rate Loans.
From and after the occurrence and declaration of an Event of
Default, and during the continuation thereof, all monetary Obligations shall
bear interest at the applicable Revolving Interest Rate plus two percent (2%)
per annum and the commissions payable with respect to Letters of Credit shall
increase two percent (2%) per annum (the "Default Rate") and any outstanding
Eurodollar Rate Loans shall automatically be converted to Domestic Rate Loans.
3.2. Letter of Credit Fees.
Borrower shall pay Lender (i) (A) for issuing or
causing the issuance of a standby Letter of Credit, a fee computed at a rate
per annum of one and one-half percent (1.50%) on the daily average undrawn face
amount thereof for the period from and including the date of issuance of such
Letter of Credit to but excluding the date such Letter of Credit is drawn in
full or is terminated or cancelled and (B) for issuing or causing the issuance
of a Letter of Credit that is not a standby Letter of Credit, a fee computed at
a rate per annum of one and one-half percent (1.50%) on the daily average
undrawn face amount thereof for the period from and including the date of
issuance of such Letter of Credit to but excluding the date such Letter of
Credit is drawn in full or is terminated or cancelled (the fees set forth in
(A) and (B) referred to as "Letter of Credit Fees"), and (ii) Bank's other
customary charges payable in connection with Letters of Credit, as in effect
from time to time. Such fees and charges shall be payable (i) in the case of
any Letter of Credit, on the date of its opening and (A) commencing with the
next calendar month thereafter, monthly in arrears and (B) on the date of each
increase in the outstanding amount thereof. Any such charge in effect at the
time of a particular transaction shall be the charge for that transaction,
notwithstanding any subsequent change in Bank's prevailing charges for that
type of transaction. All Letter of Credit Fees payable hereunder shall be
deemed earned in full on the date when the same are due and payable hereunder
and shall not be subject to rebate or proration upon the termination of this
Agreement for any reason.
3.3. (a) Closing Fee. Upon the execution of this
Agreement, Borrower shall pay to Lender a closing fee of $70,000
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less that portion of (i) the commitment fee of $40,000 heretofore paid by
Borrower to Lender and (ii) the deposit of $25,000 heretofore paid by Borrower
to Lender, remaining after application of such deposit to Lender's out of
pocket expenses.
(b) Facility Fee. If, for any month during the
Term, the average daily unpaid balance of the Advances (including the average
daily undrawn face amount of outstanding Letters of Credit) for each day of
such month does not equal the Maximum Revolving Advance Amount, then Borrower
shall pay to Lender a fee at a rate equal to three-eighths of one percent
(.375%) per annum on the amount by which the Maximum Revolving Advance Amount
exceeds such average daily unpaid balance. Such fee shall be payable to Lender
in arrears on the last day of each month.
3.4. (a) Administration Fee. Upon the execution of this
Agreement and on each anniversary of the Closing Date, Borrower shall pay
Lender an administration fee equal to $25,000 (not to exceed $75,000 in the
aggregate for the Initial Term). The administration fee shall be deemed earned
in full on the date when same is due and payable hereunder and shall not be
subject to rebate or proration upon termination of this Agreement for any
reason.
(b) Collateral Monitoring Fee. Borrower shall pay
to Lender on the first day of each month following any month in which Lender
performs any reasonable collateral monitoring (namely any field examination,
collateral analysis or other business analysis, the need for which is to be
reasonably determined by Lender and which monitoring is undertaken by Lender or
for Lender's benefit) a collateral monitoring fee in an amount equal to $750.00
per day for each person employed to perform such monitoring, plus all
reasonable costs and disbursements incurred by Lender in the performance of
such examination or analysis.
3.5. Minimum Fees. In the event the total amount of
interest and fees (the "Annual Fees") paid by Borrower to Lender in any
contract year during the Term is less than $300,000 multiplied by the ratio of
the Maximum Revolving Advance Amount divided by $14,000,000 (the "Minimum
Annual Fees"), Borrower shall pay to Lender a fee in an amount equal to the
difference between the Minimum Annual Fees and the Annual Fees; provided, that,
the Borrower shall not be obligated to pay any amounts under this Section 3.5
in any fiscal year if the Borrower shall have paid or shall be obligated to pay
any early termination fees pursuant to and under Section 13.1 hereof during
such fiscal year.
3.6. Computation of Interest and Fees. Interest and fees
hereunder shall be computed on the basis of a year of 360 days and for the
actual number of days elapsed. If any payment to be made hereunder becomes due
and payable on a day other than a Business Day, the due date thereof shall be
extended to the next succeeding
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Business Day and interest thereon shall be payable at the applicable Revolving
Interest Rate during such extension.
3.7. Maximum Charges. In no event whatsoever shall
interest and other charges charged hereunder exceed the highest rate
permissible under law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that a court determines
that Lender received interest and other charges hereunder in excess of the
highest rate permissible hereto, such excess amount shall be first applied to
any unpaid principal balance owed by Borrower, and if the then remaining excess
amount is greater than the previously unpaid principal balance, Lender shall
promptly refund such excess amount to Borrower and the provisions hereof shall
be deemed amended to provide for such permissible rate.
3.8. Increased Costs. In the event that after the date
hereof any change in any applicable law, treaty or governmental regulation, or
in the interpretation or application thereof, or compliance by Lender (for
purposes of this Section 3.8, the term "Lender" shall include Lender and any
corporation or bank controlling Lender) and the office or branch where Lender
(as so defined) makes or maintains any Eurodollar Rate Loans with any request
or directive (whether or not having the force of law) from any central bank or
other financial, monetary or other authority, shall:
(a) subject Lender to any tax of any kind
whatsoever with respect to this Agreement or any Eurodollar Rate Loan or change
the basis of taxation of payments to Lender of principal, fees, interest or any
other amount payable hereunder or under any Other Documents (except for changes
in respect of tax on the overall net income or franchise tax of Lender by the
jurisdiction in which it maintains its principal office or in which the Payment
Office is located or by any political subdivision or taxing authority therein);
(b) impose, modify or hold applicable any reserve,
special deposit, assessment or similar requirement against assets held by, or
deposits in or for the account of, advances or loans by, or other credit
extended by, any office of Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System; or
(c) impose on Lender or the London interbank
Eurodollar market any other condition with respect to this Agreement, any Other
Documents or any other Eurodollar Rate Loan;
and the result of any of the foregoing is to increase the cost to Lender of
making, renewing or maintaining its Advances hereunder by an amount that Lender
deems to be material or to reduce the amount of any payment (whether of
principal, interest or otherwise) in respect of any of the Advances by an
amount that Lender deems to be
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material, then, in any case Borrower shall promptly pay Lender, upon its
demand, such additional amount as will compensate Lender for such additional
cost or such reduction, as the case may be. Lender shall certify the amount of
such additional cost or reduced amount to Borrower, and such certification
shall be conclusive absent manifest error.
3.9. Capital Adequacy.
(a) In the event that Lender shall have determined
that any applicable law, rule, regulation or guideline regarding capital
adequacy issued after the date hereof, or any change after the date hereof in
any applicable law, rule, regulation or guide, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by Lender (for purposes of this Section 3.9, the term
"Lender" shall include Lender and any corporation or bank controlling Lender)
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, has
or would have the effect of reducing the rate of return on Lender's capital as
a consequence of its obligations hereunder to a level below that which Lender
could have achieved but for such adoption, change or compliance (taking into
consideration Lender's policies with respect to capital adequacy) by an amount
deemed by Lender to be material, then, from time to time, Borrower shall pay
upon demand to Lender such additional amount or amounts as will compensate
Lender for such reduction. In determining such amount or amounts, Lender may
use any reasonable averaging or attribution methods. The protection of this
Section 3.9 shall be available to Lender regardless of any possible contention
of invalidity or inapplicability with respect to the applicable law, regulation
or condition.
(b) A certificate of Lender setting forth such
amount or amounts as shall be necessary to compensate Lender with respect to
Section 3.9(a) hereof when delivered to Borrower shall be conclusive absent
manifest error.
IV. COLLATERAL: GENERAL TERMS
4.1. Security Interest in the Collateral. To secure the
prompt payment and performance to Lender of the Obligations, Borrower hereby
assigns, pledges and grants to Lender a continuing security interest in and to
all of the Collateral, whether now owned or existing or hereafter acquired or
arising and wheresoever located. Borrower shall xxxx its books and records as
may be necessary or appropriate to evidence, protect and perfect Lender's
security interest and shall cause its financial statements to reflect such
security interest.
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4.2. Perfection of Security Interest. Borrower shall
take all action that may be necessary or desirable, or that Lender may
reasonably request, so as at all times to maintain the validity, perfection,
enforceability and priority of Lender's security interest in the Collateral or
to enable Lender to protect, exercise or enforce its rights hereunder and in
the Collateral, including, but not limited to, (i) immediately discharging all
Liens other than Permitted Encumbrances, (ii) obtaining landlords' or
mortgagees' lien waivers, (iii) delivering to Lender, endorsed or accompanied
by such instruments of assignment as Lender may specify, and stamping or
marking, in such manner as Lender may specify, any and all chattel paper,
instruments, letters of credit and advices thereof and documents evidencing or
forming a part of the Collateral, (iv) entering into warehousing, lockbox and
other custodial arrangements satisfactory to Lender, and (v) executing and
delivering financing statements, instruments of pledge, mortgages, notices and
assignments, in each case in form and substance satisfactory to Lender,
relating to the creation, validity, perfection, maintenance or continuation of
Lender's security interest under the Uniform Commercial Code or other
applicable law. Lender is hereby authorized to file financing statements signed
by Lender instead of Borrower in accordance with Section 9-402(2) of the
Uniform Commercial Code as adopted in the State of New York. All charges,
expenses and fees Lender may incur in doing any of the foregoing, and any local
taxes relating thereto, shall be charged to Borrower's Account as a Revolving
Advance and added to the Obligations, or, at Lender's option, shall be paid to
Lender immediately upon demand.
4.3. Disposition of Collateral. Borrower will safeguard
and protect all Collateral for Lender's general account and make no disposition
thereof whether by sale, lease or otherwise except (a) the sale of Inventory in
the ordinary course of business and (b) the disposition or transfer of
Equipment in the ordinary course of business during any fiscal year having an
aggregate fair market value of not more than $100,000 and only to the extent
that (i) the proceeds of any such disposition are used to acquire replacement
Equipment which is subject to Lender's first priority security interest or (ii)
the proceeds of which are remitted to Lender as a prepayment in accordance with
Section 2.12.
4.4. Preservation of Collateral. Following the
occurrence and during the continuance of an Event of Default in addition to the
rights and remedies set forth in Section 11.1 hereof, Lender: (a) may at any
time take such steps as Lender deems necessary to protect Lender's interest in
and to preserve the Collateral, including the hiring of such security guards or
the placing of other security protection measures as Lender may deem
appropriate; (b) may employ and maintain at any of Borrower's premises a
custodian who shall have full authority to do all acts necessary to protect
Lender's interests in the Collateral; (c) may lease warehouse facilities to
which Lender may move all or part of the Collateral; (d) may use any of
Borrower's owned or leased
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lifts, hoists, trucks and other facilities or equipment for handling or
removing the Collateral; and (e) shall have, and is hereby granted, a right of
ingress and egress to the places where the Collateral is located, and may
proceed over and through any of Borrower's owned or leased property. Borrower
shall cooperate fully with all of Lender's efforts to preserve the Collateral
and will take such actions to preserve the Collateral as Lender may direct. All
of Lender's expenses of preserving the Collateral, including any expenses
relating to the bonding of a custodian, shall be charged to Borrower's Account
as a Revolving Advance and added to the Obligations.
4.5. Ownership of Collateral. With respect to the
Collateral, at the time the Collateral becomes subject to Lender's security
interest: (a) Borrower shall be the sole owner of and fully authorized and able
to sell, transfer, pledge and/or grant a first priority security interest in
each and every item of the Collateral to Lender; and, except for Permitted
Encumbrances the Collateral shall be free and clear of all Liens and
encumbrances whatsoever; (b) each Other Document executed by Borrower or
delivered to Lender in connection with this Agreement shall be true and correct
in all respects; (c) all signatures and endorsements of Borrower that appear on
such Other Documents shall be genuine and Borrower shall have full capacity to
execute same; and (d) Borrower's Equipment and Inventory shall be located as
set forth on Schedule 4.5 and shall not be removed from such location(s)
without the prior written consent of Lender except with respect to the sale of
Inventory in the ordinary course of business and Equipment to the extent
permitted in Section 4.3 hereof.
4.6. Defense of Lender's Interests. Until all of the
Obligations shall have been Fully Satisfied, Lender's interests in the
Collateral shall continue in full force and effect. During such period Borrower
shall not, without Lender's prior written consent, pledge, sell (except
Inventory in the ordinary course of business and Equipment to the extent
permitted in Section 4.3 hereof), assign, transfer, create or suffer to exist a
Lien upon or encumber or allow or suffer to be encumbered in any way except for
Permitted Encumbrances, any part of the Collateral. Borrower shall defend
Lender's interests in the Collateral against any and all Persons whatsoever. At
any time upon the occurrence of an Event of Default which shall be continuing
following demand by Lender for payment of all monetary Obligations, Lender
shall have the right to take possession of the indicia of the Collateral and
the Collateral in whatever physical form contained, including without
limitation: labels, stationery, documents, instruments and advertising
materials. If Lender exercises this right to take possession of the Collateral,
Borrower shall, upon demand, assemble it in the best manner possible and make
it available to Lender at a place reasonably convenient to Lender. In addition,
with respect to all Collateral, Lender shall be entitled to all of the rights
and remedies set forth herein and further provided by the Uniform Commercial
Code or other applicable law. Upon the occurrence of an
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Event of Default which shall be continuing, Borrower shall, and Lender may, at
its option, instruct all suppliers, carriers, forwarders, warehouses or others
receiving or holding cash, checks, Inventory, documents or instruments in which
Lender holds a security interest to deliver same to Lender and/or subject to
Lender's order and if they shall come into Borrower's possession, they, and
each of them, shall be held by Borrower in trust as Lender's trustee, and
Borrower will immediately deliver them to Lender in their original form
together with any necessary endorsement.
4.7. Books and Records. Borrower shall (a) keep proper
books of record and account in which full, true and correct entries will be
made of all dealings or transactions of or in relation to its business and
affairs; (b) set up on its books accruals with respect to all taxes,
assessments, charges, levies and claims; and (c) on a reasonably current basis
set up on its books, from its earnings, allowances against doubtful
Receivables, advances and investments and all other proper accruals (including
without limitation by reason of enumeration, accruals for premiums, if any, due
on required payments and accruals for depreciation, obsolescence, or
amortization of properties), which should be set aside from such earnings in
connection with its business. All determinations pursuant to this subsection
shall be made in accordance with, or as required by, GAAP consistently applied
in the opinion of such independent public accountant as shall then be regularly
engaged by Borrower.
4.8. Financial Disclosure. Borrower hereby irrevocably
authorizes and directs all accountants and auditors employed by Borrower at any
time during the Term to exhibit and deliver to Lender copies of any of
Borrower's financial statements, trial balances or other accounting records of
any sort in the accountant's or auditor's possession, and to disclose to Lender
any information such accountants may have concerning Borrower's financial
status and business operations. Borrower hereby authorizes all federal, state
and municipal authorities to furnish to Lender copies of reports or
examinations relating to Borrower, whether made by Borrower or otherwise.
Notwithstanding the foregoing, Lender shall first request such information or
materials directly from Borrower and, so long as Borrower promptly provides the
requested information, or materials to Lender, Lender shall discuss the same
with Borrower so that Borrower shall have an opportunity to address Lender's
concerns, if any, prior to obtaining such information or materials from such
accountants or such authorities.
4.9. Compliance with Laws. Borrower shall comply with
all acts, rules, regulations and orders of any Government Body applicable to
the Collateral or any part thereof or to the operation of Borrower's business
the non-compliance with which could reasonably be expected to have a Material
Adverse Effect. The Collateral at all times shall be maintained in accordance
with
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the requirements of all insurance carriers which provide insurance with respect
to the Collateral so that such insurance shall remain in full force and effect.
4.10. Inspection of Premises. Upon twenty four (24) hours
prior written or oral notice (such notice shall only be provided so long as no
(i) Event of Default is continuing and (ii) Overadvance is outstanding), at all
reasonable times Lender shall have full access to and the right to audit,
check, inspect and make abstracts and copies from Borrower's books, records,
audits, correspondence and all other papers relating to the Collateral and the
operation of Borrower's business. Lender and its agents may enter upon any of
Borrower's premises at any time during business hours and at any other
reasonable time, and from time to time, for the purpose of inspecting the
Collateral and any and all records pertaining thereto and the operation of
Borrower's business.
4.11. Insurance. Borrower shall bear the full risk of any
loss of any nature whatsoever with respect to the Collateral. At Borrower's own
cost and expense in amounts and with carriers acceptable to Lender, Borrower
shall (a) keep all its insurable properties and properties in which Borrower
has an interest insured against the hazards of fire, flood, sprinkler leakage,
those hazards covered by extended coverage insurance and such other hazards,
and for such amounts, as is customary in the case of companies engaged in
businesses similar to Borrower's including, without limitation, business
interruption insurance, (b) maintain a bond in such amounts as is customary in
the case of companies engaged in businesses similar to Borrower's insuring
against larceny, embezzlement or other criminal misappropriation of insured's
officers and employees who may either singly or jointly with others at any time
have access to the assets or funds of Borrower either directly or through
authority to draw upon such funds or to direct generally the disposition of
such assets; (c) maintain public and product liability insurance coverage in an
amount not less than $25,000,000 against claims for personal injury, death or
property damage suffered by others (such coverage currently is afforded to
Borrower under the liability policies of Mafco Holdings, Inc.); (d) maintain
all such worker's compensation or similar insurance as may be required under
the laws of any state or jurisdiction in which Borrower is engaged in business;
(e) furnish Lender with (i) copies of all policies and evidence of the
maintenance of such policies by the renewal thereof at least thirty (30) days
before any expiration date, and (ii) appropriate loss payable endorsements in
form and substance satisfactory to Lender, naming Lender as a co-insured and
loss payee as its interests may appear with respect to all insurance coverage
referred to in clauses (a) and (c) above, and providing (A) that all proceeds
thereunder shall be payable to Lender, (B) no such insurance shall be affected
by any act or neglect of the insured or owner of the property described in such
policy, and (C) that such policy and loss payable clauses may not be cancelled,
amended or terminated unless at least thirty (30) days' prior written notice is
given to
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Lender. In the event of any loss thereunder, the carriers named therein hereby
are directed by Lender and Borrower to make payment for such loss to Lender and
not to Borrower and Lender jointly. If any insurance losses are paid by check,
draft or other instrument payable to Borrower and Lender jointly, Lender may
endorse Borrower's name thereon and do such other things as Lender may deem
advisable to reduce the same to cash. Lender is hereby authorized to adjust and
compromise claims under insurance coverage referred to in clauses (a) and (b)
above. All loss recoveries received by Lender upon any such insurance may be
applied to the monetary Obligations, in such order as Lender in its sole
discretion shall determine. Any surplus shall be paid by Lender to Borrower or
applied as may be otherwise required by law. Any deficiency thereon shall be
paid by Borrower to Lender, on demand.
4.12. Failure to Pay Insurance. If Borrower fails to
obtain insurance as hereinabove provided, and keep the same in force, Lender,
if Lender so elects, may obtain such insurance and pay the premium therefor for
Borrower's Account, and charge Borrower's Account therefor and such expenses so
paid shall be part of the Obligations.
4.13. Payment of Taxes. Borrower will pay, when due, all
taxes, assessments and other Charges lawfully levied or assessed upon Borrower
or any of the Collateral including, without limitation, real and personal
property taxes, assessments and charges and all franchise, income, employment,
social security benefits, withholding, and sales taxes, other than (i) any
taxes, assessments or other Charges the validity of which Borrower contests in
good faith by appropriate proceedings with respect to which Borrower has set
aside on its books adequate reserves and would not, if unpaid, result in the
imposition of any Lien on the Collateral which is not a Permitted Encumbrance
and (ii) taxes other than income or franchise taxes that in the aggregate are
not material and that would not, if unpaid, result in the imposition of any
Lien on any property or assets of Borrower. If any Charge by any governmental
authority is or may be imposed on or as a result of any transaction between
Borrower and Lender which Lender may be required to withhold or pay or if any
taxes, assessments, or other Charges remain unpaid after the date fixed for
their payment, or if any claim shall be made which, in Lender's opinion, may
possibly create a valid Lien on the Collateral (other than a Lien which is a
Permitted Encumbrance), Lender may without notice to Borrower pay the Charges
and Borrower hereby indemnifies and holds Lender harmless in respect thereof.
The amount of any payment by Lender under this Section 4.13 shall be charged to
Borrower's Account as a Revolving Advance and added to the Obligations and,
until Borrower shall furnish Lender with an indemnity therefor (or supply
Lender with evidence satisfactory to Lender that due provision for the payment
thereof has been made), Lender may hold without interest any balance standing
to Borrower's credit and Lender shall retain its security interest in any and
all Collateral held by Lender.
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4.14. Payment of Leasehold Obligations. Borrower shall at
all times pay, when and as due, its rental obligations under all leases under
which it is a tenant (unless such obligation is being disputed, such dispute is
promptly disclosed in writing to Lender and Lender reasonably determines that
such dispute is in good faith), and shall otherwise comply, in all material
respects with all other terms of such leases and keep them in full force and
effect to the extent needed for the business of Borrower and, at Lender's
request, will provide evidence of having done so.
4.15. Receivables.
(a) Nature of Receivables. Each of the Receivables
shall be a bona fide and valid account representing a bona fide indebtedness
incurred by the Customer therein named, for a fixed sum as set forth in the
invoice relating thereto (provided immaterial or unintentional invoice errors
shall not be deemed to be a breach hereof) with respect to an absolute sale or
lease and delivery of goods upon stated terms of Borrower, or work, labor or
services theretofore rendered by Borrower as of the date each Receivable is
created. Same shall be due and owing in accordance with Borrower's standard
terms of sale without dispute, setoff or counterclaim except as may be stated
on the accounts receivable schedules delivered by Borrower to Lender.
(b) Solvency of Customers. Each Customer, to the
best of Borrower's knowledge, as of the date each Receivable is created, is and
will be solvent and able to pay all Receivables on which the Customer is
obligated in full when due or with respect to such Customers of Borrower who
are not solvent Borrower has set up on its books and in its financial records
bad debt reserves adequate to cover such Receivables in accordance with GAAP.
(c) Locations of Borrower. Borrower's chief
executive office is located at 00000 XX 00xx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000.
Until written notice is given to Lender by Borrower of any other office at
which it keeps its current records pertaining to Receivables, all such current
records shall be kept at such executive office.
(d) Collection of Receivables. Unless and until an
Event of Default shall have occurred and be continuing and Borrower's authority
to do so is terminated by Lender (which notice Lender may give at any time
following the occurrence of an Event of Default, Borrower will, at Borrower's
sole cost and expense, but on Lender's behalf and for Lender's account, collect
as Lender's property and in trust for Lender all amounts received on
Receivables, and shall not commingle such collections with Borrower's funds or
use the same except to pay monetary Obligations. Borrower shall, upon request,
deliver to Lender, the Blocked Account or the Depositary Account in original
form and on the date of receipt thereof, all checks, drafts, notes, money
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orders, acceptances, cash and other evidences of Indebtedness relating to such
Receivables or to other Collateral.
(e) Notification of Assignment of Receivables.
Following the occurrence of an Event of Default which shall be continuing,
Lender shall have the right to send notice of the assignment of, and Lender's
security interest in, the Receivables to any and all Customers or any third
party holding or otherwise concerned with any of the Collateral. Thereafter,
Lender shall have the sole right to collect the Receivables, take possession of
the Collateral, or both. Lender's actual collection expenses, including, but
not limited to, stationery and postage, telephone and telecopy, reasonable
secretarial and clerical expenses and the reasonable salaries of any collection
personnel used for collection, may be charged to Borrower's Account and added
to the Obligations.
(f) Power of Lender to Act on Borrower's Behalf.
Lender shall have the right to receive, endorse, assign and/or deliver in the
name of Lender or Borrower any and all checks, drafts and other instruments for
the payment of money relating to the Receivables, and Borrower hereby waives
notice of presentment, protest and non-payment of any instrument so endorsed.
Borrower hereby constitutes Lender or Lender's designee as Borrower's attorney
with power (i) to endorse Borrower's name upon any notes, acceptances, checks,
drafts, money orders or other evidences of payment or Collateral for purposes
of applying same in reduction of outstanding Obligations; (ii) to sign
Borrower's name on any invoice or xxxx of lading relating to any of the
Receivables and any assignments of Receivables; (iii) to send verifications of
Receivables to any Customer; (iv) to sign Borrower's name on all financing
statements or any other documents or instruments deemed necessary or
appropriate by Lender to preserve, protect, or perfect Lender's interest in the
Collateral and to file same; (v) to demand payment of the Receivables; (vi) to
enforce payment of the Receivables by legal proceedings or otherwise; (vii) to
exercise all of Borrower's rights and remedies with respect to the collection
of the Receivables and any other Collateral; (viii) to settle, adjust,
compromise, extend or renew the Receivables; (ix) to settle, adjust or
compromise any legal proceedings brought to collect Receivables; (x) to
prepare, file and sign Borrower's name on a proof of claim in bankruptcy or
similar document against any Customer; (xi) to prepare, file and sign
Borrower's name on any notice of Lien, assignment or satisfaction of Lien or
similar document in connection with the Receivables; and (xii) to do all other
acts and things necessary to carry out this Agreement; provided, that, the
powers conferred to Lender or Lender's designee by clauses (ii) and (v) through
(xi) shall only be exercised by Lender or Lender's designee, as the case may
be, upon the occurrence and during the continuance of an Event of Default. All
acts of said attorney or designee as provided in this Section 4.15(f) are
hereby ratified and approved, and said attorney or designee shall not be liable
for any acts of omission or commission
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nor for any error of judgment or mistake of fact or of law, unless done by
willful misconduct or with gross (not mere) negligence; this power being
coupled with an interest is irrevocable while any of the Obligations remain
unpaid. Lender shall have the right at any time following the occurrence and
during the continuance of an Event of Default, to change the address for
delivery of mail addressed to Borrower to such address as Lender may designate
and to receive, open and dispose of all mail addressed to Borrower.
(g) No Liability. Lender shall not, under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or
payment of any of the Receivables or any instrument received in payment
thereof, or for any damage resulting therefrom except for such liability or
damage resulting from Lender's gross (not mere) negligence or willful
misconduct. Following the occurrence and during the continuance of an Event of
Default, Lender may, without notice or consent from Borrower, (i) xxx upon or
otherwise collect, extend the time of payment of, compromise or settle for
cash, credit or upon any terms any of the Receivables or any other securities,
instruments or insurance applicable thereto and/or release any obligor thereof
Lender is authorized and empowered to accept the return of the goods
represented by any of the Receivables, without notice to or consent by
Borrower, all without discharging or in any way affecting Borrower's liability
hereunder.
(h) Establishment of a Lockbox Account, Dominion
Account. All proceeds of Collateral shall be deposited by Borrower into a
lockbox account, dominion account or such other "blocked account" ("Blocked
Accounts") as Lender may require pursuant to an arrangement with such bank as
may be selected by Borrower and be acceptable to Lender. Borrower shall issue
to any such bank, an irrevocable letter of instruction directing said bank to
transfer such funds so deposited to Lender, either to any account maintained by
Lender at said bank or by wire transfer to appropriate account(s) of Lender.
All funds deposited in such Blocked Account shall immediately become subject to
the rights of Lender and Borrower shall obtain the agreement by such bank to
waive any offset rights against the funds so deposited. Lender assumes no
responsibility for any Blocked Account arrangement, including without
limitation, any claim of accord and satisfaction or release with respect to
deposits accepted by any bank thereunder. Alternatively, Lender may establish
depository accounts ("Depository Accounts") in the name of Lender at a bank or
banks for the deposit of such funds and Borrower shall deposit all proceeds of
Collateral or cause same to be deposited, in kind, in such Depository Accounts
of Lender in lieu of depositing same to the Blocked Accounts.
(i) Adjustments. Borrower will not, without
Lender's consent, compromise or adjust any Receivables (or extend the time for
payment thereof) or accept any returns of merchandise
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or grant any additional discounts, allowances or credits thereon except for
those compromises, adjustments, returns, discounts, credits and allowances as
have been heretofore customary in the business of Borrower.
4.16. Inventory. All Inventory that is produced by
Borrower has been, and will be, produced in accordance with the Federal Fair
Labor Standards Act of 1938, as amended, and all rules, regulations and orders
thereunder.
4.17. Maintenance of Equipment. The Equipment shall be
maintained in good operating condition and repair (reasonable wear and tear
excepted) and all necessary replacements of and repairs thereto shall be made
so that the value and operating efficiency of the Equipment shall be maintained
and preserved. Borrower shall use or operate the Equipment in material
compliance with any law, statute, ordinance, code, rule or regulation. Borrower
shall have the right to sell Equipment to the extent set forth in Section 4.3
hereof.
4.18. Exculpation of Liability. Nothing herein contained
shall be construed to constitute Lender as Borrower's agent for any purpose
whatsoever, nor shall Lender be responsible or liable for any shortage,
discrepancy, damage, loss or destruction of any part of the Collateral wherever
the same may be located and regardless of the cause thereof. Lender does not,
whether by anything herein or in any assignment or otherwise, assume any of
Borrower's obligations under any contract or agreement assigned to Lender, and
Lender shall not be responsible in any way for the performance by Borrower of
any of the terms and conditions thereof.
4.19. Environmental Matters.
(a) Borrower shall ensure that the Real Property
remains in compliance in all material respects with all Environmental Laws and
it will not place or permit to be placed any Hazardous Substances on any Real
Property except as not prohibited by applicable law or appropriate governmental
authorities.
(b) Intentionally Omitted.
(c) Borrower shall (i) employ in connection with
its use of the Real Property appropriate technology necessary to maintain
compliance with any applicable Environmental Laws and (ii) dispose of any and
all Hazardous Waste generated at the Real Property only at facilities and with
carriers that maintain valid permits under RCRA and any other applicable
Environmental Laws. Borrower shall use its best efforts to obtain certificates
of disposal, such as hazardous waste manifest receipts, from all treatment,
transport, storage or disposal facilities or operators employed by Borrower in
connection with the transport or disposal of any Hazardous Waste generated at
the Real Property.
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(d) In the event Borrower obtains, gives or
receives notice of any Release or threat of Release of a reportable quantity of
any Hazardous Substances at the Real Property (any such event being hereinafter
referred to as a "Hazardous Discharge") or receives any notice of violation,
request for information or notification that it is potentially responsible for
investigation or cleanup of environmental conditions at the Real Property,
demand letter or complaint, order, citation, or other written notice with
regard to any Hazardous Discharge or violation of Environmental Laws affecting
the Real Property or Borrower's interest therein (any of the foregoing is
referred to herein as an "Environmental Complaint") from any Person or entity,
including any state agency responsible in whole or in part for environmental
matters in the state in which the Real Property is located or the United States
Environmental Protection Agency (any such person or entity hereinafter the
"Authority"), then Borrower shall, within five (5) Business Days, give written
notice of same to Lender detailing facts and circumstances of which Borrower is
aware giving rise to the Hazardous Discharge or Environmental Complaint. Such
information is to be provided to allow Lender to protect its security interest
in the Real Property and is not intended to create nor shall it create any
obligation upon Lender with respect thereto.
(e) Borrower shall promptly forward to Lender
copies of any request for information, notification of potential liability,
demand letter relating to potential responsibility with respect to the
investigation or cleanup of Hazardous Substances at any other site owned,
operated or used by Borrower to dispose of Hazardous Substances and shall
continue to forward copies of correspondence between Borrower and the Authority
regarding such claims to Lender until the claim is settled. Borrower shall
promptly forward to Lender copies of all documents and reports concerning a
Hazardous Discharge at the Real Property that Borrower is required to file
under any Environmental Laws. Such information is to be provided solely to
allow Lender to protect Lender's security interest in the Real Property and the
Collateral.
(f) Borrower shall respond promptly to any
Hazardous Discharge or Environmental Complaint and take all necessary action in
order to safeguard the health of any Person and to avoid subjecting the
Collateral or Real Property to any Lien. If Borrower shall fail to respond
promptly to any Hazardous Discharge or Environmental Complaint or Borrower
shall fail to comply with any of the requirements of any Environmental Laws,
Lender may, following ten (10) days' notice to Borrower, other than in the
event of emergency, but without the obligation to do so, for the sole purpose
of protecting Lender's interest in Collateral: (A) give such notices or (B)
enter onto the Real Property (or authorize third parties to enter onto the Real
Property) and take such actions as Lender (or such third parties as directed by
Lender) deem reasonably necessary or advisable, to clean up, remove, mitigate
or otherwise deal with any such Hazardous
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Discharge or Environmental Complaint. All reasonable costs and expenses
incurred by Lender (or such third parties) in the exercise of any such rights,
including any sums paid in connection with any judicial or administrative
investigation or proceedings, fines and penalties, together with interest
thereon from the date expended at the Default Rate for Domestic Rate Loans
constituting Revolving Advances shall be paid by Borrower, and until paid, such
sums shall be added to and become a part of the Obligations secured by the
Liens created by the terms of this Agreement or any other agreement between
Lender and Borrower.
(g) Promptly upon the written request of Lender
from time to time, Borrower shall provide Lender, at Borrower's expense, with
an environmental site assessment or environmental audit report prepared by an
environmental engineering firm acceptable in the reasonable opinion of Lender,
to assess with a reasonable degree of certainty the existence of a Hazardous
Discharge and the potential costs in connection with abatement, cleanup and
removal of any Hazardous Substances found on, under, at or within the Real
Property. Any report or investigation of such Hazardous Discharge proposed and
acceptable to an appropriate Authority that is charged to oversee the clean-up
of such Hazardous Discharge shall be acceptable to Lender. If such estimates,
individually or in the aggregate, exceed $100,000, Lender shall have the right
to require Borrower to post a bond, letter of credit or other security
reasonably satisfactory to Lender to secure payment of these costs and
expenses.
(h) Borrower shall defend and indemnify Lender and
hold Lender and its employees, agents, Affiliates, directors and officers
harmless from and against all loss, liability, damage and expense, claims,
costs, fines and penalties, including attorney's fees, suffered or incurred by
Lender under or on account of any Environmental Laws, including, without
limitation, the assertion of any Lien thereunder, with respect to any Hazardous
Discharge, the presence of any Hazardous Substances affecting the Real
Property, whether or not the same originates or emerges from the Real Property
or any contiguous real estate, including any loss of value of the Real Property
as a result of the foregoing except to the extent such loss, liability, damage
and expense is attributable to any Hazardous Discharge resulting from actions
on the part of Lender. Borrower's obligations under this Section 4.19 shall
arise upon the discovery of the presence of any Hazardous Substances at the
Real Property, whether or not any federal, state, or local environmental agency
has taken or threatened any action in connection with the presence of any
Hazardous Substances. Borrower's obligation and the indemnifications hereunder
shall survive the termination of this Agreement.
(i) For purposes of Section 4.19 and 5.7, all
references to Real Property shall be deemed to include all of Borrower's right,
title and interest in and to its owned and leased premises including, without
limitation, the Leasehold Interests.
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4.20. Financing Statements. Except as respects financing
statements filed by Lender and the financing statements described on Schedule
1.2, no financing statement covering any of the Collateral or any proceeds
thereof is on file in any public office.
V. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1. Authority. Borrower has full power, authority and
legal right to enter into this Agreement and the Other Documents to which it is
party and to perform all Obligations hereunder and thereunder. The execution,
delivery and performance hereof and of the Other Documents to which it is a
party (a) are within Borrower's corporate powers, have been duly authorized,
are not in contravention of law or the terms of Borrower's by-laws, certificate
of incorporation or other applicable documents relating to Borrower's formation
or to the conduct of Borrower's business or of any material agreement or
undertaking to which Borrower is a party or by which Borrower is bound, and (b)
will not conflict with nor result in any breach in any of the provisions of or
constitute a default under or result in the creation of any Lien except
Permitted Encumbrances upon any asset of Borrower under the provisions of any
agreement, charter document, instrument, by-law, or other instrument to which
Borrower is a party or by which it or its property may be bound.
5.2. Formation and Qualification.
(a) Borrower is duly incorporated and in good
standing under the laws of the State of Washington and is qualified to do
business and is in good standing in the states listed on Schedule 5.2(a) which
constitute all states in which qualification and good standing are necessary
for Borrower to conduct its business and own its property except where the
failure to so qualify could reasonably be expected to have a Material Adverse
Effect. Borrower has delivered to Lender true and complete copies of its
certificate of incorporation and by-laws and will promptly notify Lender of any
amendment or changes thereto.
(b) The only Subsidiaries of Borrower are listed on
Schedule 5.2(b).
5.3. Survival of Representations and Warranties. All
representations and warranties of Borrower contained in this Agreement and the
Other Documents to which it is a party shall be true at the time of Borrower's
execution of this Agreement and the Other Documents to which it is a party, and
shall survive the execution, delivery and acceptance thereof by Lender and the
parties thereto and the closing of the transactions described therein or
related thereto.
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5.4. Tax Returns. Borrower's federal tax identification
number is 00-0000000. Borrower has filed all federal, state and local tax
returns and other reports it is required by law to file and has paid all taxes,
assessments, fees and other governmental charges that are due and payable,
other than (i) any taxes, assessments or other Charges the validity of which
Borrower contests in good faith by appropriate proceedings with respect to
which Borrower has set aside on its books adequate reserves and would not, if
unpaid, result in the imposition of any Lien on the Collateral which is not a
Permitted Encumbrance and (ii) taxes other than income or franchise taxes that
in the aggregate are not material and that would not, if unpaid, result in the
imposition of any Lien on any property or assets of Borrower. Federal, state
and local income tax returns of Borrower have been examined and reported upon
by the appropriate taxing authority or closed by applicable statute and
satisfied for all fiscal periods and fiscal years prior to and including the
four months ended April 30, 1989. The provision for taxes on the books of
Borrower are adequate for all years not closed by applicable statutes, and for
its current fiscal year, and Borrower has no knowledge of any deficiency or
additional assessment in connection therewith not provided for on its books.
5.5. Financial Statements.
(a) The pro forma balance sheet of Borrower (the
"Pro Forma Balance Sheet") furnished to Lender on the Closing Date reflects
making of and issuance of the initial Advances and the consummation of the
transactions described in Section 8.1(m) hereof (the "Transactions") and is
accurate, complete and correct in all material respects and fairly reflects the
financial condition of Borrower as of the Closing Date after giving effect to
the Transactions, and has been prepared in accordance with GAAP, consistently
applied. The Pro Forma Balance Sheet of Borrower has been certified as
accurate, complete and correct in all material respects by the President and
Vice President - Finance of Borrower. All financial statements referred to in
this subsection 5.5(a), including the related schedules and notes thereto, have
been prepared, in accordance with GAAP, except as may be disclosed in such
financial statements.
(b) The twelve-month cash flow projections of
Borrower and its projected balance sheets as of the Closing Date, copies of
which are annexed hereto as Exhibit 5.5(b) (the "Projections") were prepared by
the Vice President - Finance of Borrower, are based on underlying assumptions
which provide a reasonable basis for the projections contained therein and
reflect Borrower's judgment based on present circumstances as at the Closing
Date of the most likely set of conditions and course of action for the
projected period. The Projections, together with the Pro Forma Balance Sheet,
are referred to as the "Pro Forma Financial Statements".
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(c) The balance sheet of Borrower as of December
31, 1996, and the related statements of income, changes in stockholder's
equity, and changes in cash flow for the period ended on such date, all
accompanied by reports thereon containing opinions without qualification by
independent certified public accountants, copies of which have been delivered
to Lender, have been prepared in accordance with GAAP, consistently applied
(except for changes in application in which such accountants concur and the
absence of certain footnote disclosures which may be required under GAAP as may
be required from time to time) and present fairly the financial position of
Borrower at such date and the results of their operations for such period.
Since December 31, 1996 there has been no change in the condition, financial or
otherwise, of Borrower as shown on the balance sheet as of such date and no
change in the aggregate value of machinery, equipment and Real Property owned
by Borrower, except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse.
5.6. Corporate Name. Borrower has not been known by any
other corporate name in the past five years and does not sell Inventory under
any other name except as set forth on Schedule 5.6, nor has Borrower been the
surviving corporation of a merger or consolidation or acquired all or
substantially all of the assets of any Person during the preceding five (5)
years.
5.7. O.S.H.A. and Environmental Compliance.
(a) Except as set forth on Schedule 5.7 hereto,
Borrower has duly complied with, and its facilities, business, assets,
property, leaseholds and Equipment are in compliance in all material respects
with, the provisions of the Federal Occupational Safety and Health Act, the
Environmental Laws; to the best of Borrower's knowledge after diligent inquiry,
there have been no outstanding citations, notices or orders of non-compliance
issued to Borrower or relating to its business, assets, property, leaseholds or
equipment under any such laws, rules or regulations.
(b) To the best of Borrower's knowledge after
diligent inquiry, Borrower has been issued all required federal, state and
local licenses, certificates or permits relating to all applicable
Environmental Laws.
(c) Except as set forth on Schedule 5.7 hereto, (i)
There are no visible signs of releases, spills, discharges, leaks or disposal
(collectively referred to as "Releases") of Hazardous Substances at, upon,
under or within any Real Property or any premises leased by Borrower; (ii)
there are no underground storage tanks or polychlorinated biphenyls on the Real
Property or any premises leased by Borrower; (iii) neither the Real Property
nor any premises leased by Borrower has ever been used as a treatment, storage
or disposal facility of Hazardous Waste; and (iv) no Hazardous Substances are
present on the Real Property or any other
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premises leased by Borrower, excepting such quantities as are handled in
accordance with all applicable manufacturer's instructions and governmental
regulations and in proper storage containers and as are necessary for the
operation of the commercial business of Borrower or of its tenants.
5.8. Solvency; No Litigation, Violation, Indebtedness or
Default.
(a) After giving effect to the Transactions,
Borrower will be solvent, able to pay its debts as they mature, have capital
sufficient to carry on its business and all businesses in which it is about to
engage, and (i) as of the Closing Date, the fair present saleable value of its
assets, calculated on a going concern basis, is in excess of the amount of its
liabilities and (ii) subsequent to the Closing Date, the fair saleable value of
its assets (calculated on a going concern basis) will be in excess of the
amount of its liabilities.
(b) Except as described in the financial statements
delivered to Lender prior to the date hereof and as disclosed in Schedule
5.8(b), Borrower has (i) no pending or threatened litigation, arbitration
actions or proceedings which could reasonably be expected to have a Material
Adverse Effect, and (ii) no indebtedness other than the Obligations and other
indebtedness permitted under Section 7.8.
(c) Borrower is not in violation of any applicable
statute, regulation or ordinance in any respect which could reasonably be
expected to have a Material Adverse Effect on Borrower, nor is Borrower in
violation of any order of any court, governmental authority or arbitration
board or tribunal.
(d) Neither Borrower nor any member of the
Controlled Group maintains or contributes to any Plan which is subject to Title
IV of ERISA other than those listed on Schedule 5.8(d) hereto or any other
employee benefit plan which is subject to Title IV of ERISA which is reasonably
likely to result in a material increase in the liabilities of Borrower. Except
as set forth in Schedule 5.8(d), (i) no Plan has incurred any "accumulated
funding deficiency," as defined in Section 302(a)(2) of ERISA and Section
412(a) of the Code, whether or not waived, and Borrower and each member of the
Controlled Group has met all applicable minimum funding requirements under
Section 302 of ERISA in respect of each Plan, (ii) each Plan which is intended
to be a qualified plan under Section 401(a) of the Code as currently in effect
has been determined by the Internal Revenue Service to be qualified under
Section 401(a) of the Code and the trust related thereto is exempt from federal
income tax under Section 501(a) of the Code, (iii) neither Borrower nor any
member of the Controlled Group has incurred any material liability to the PBGC
other than for the payment of premiums, and there are no premium payments which
have become due which are unpaid, (iv) no Plan has been terminated by
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the plan administrator thereof or by the PBGC which has resulted or is
reasonably likely to result in a material liability to Borrower, and there is
no occurrence which would cause the PBGC to institute proceedings under Title
IV of ERISA to terminate any Plan, (v) as of the most recent annual valuation
date the present value of the accrued benefits and other liabilities of each
Plan does not exceed the current value of the assets of such Plan by an amount
which is reasonably likely to result in a Material Adverse Effect and Borrower
knows of no facts or circumstances which would materially change the amount of
such underfunding, (vi) neither Borrower nor any member of the Controlled Group
has breached any of the responsibilities, obligations or duties imposed on it
by ERISA with respect to any Plan which has resulted or is reasonably likely to
result in any material unpaid liability to Borrower, (vii) neither Borrower nor
any member of a Controlled Group has incurred any liability for any excise tax
arising under Section 4972 or 4980B of the Code, and no fact exists which could
give rise to any such liability which has resulted or is reasonably likely to
result in any material unpaid liability to Borrower, (viii) neither Borrower
nor any member of the Controlled Group nor, to Borrower's knowledge, any
fiduciary of, nor any trustee to, any Plan, has engaged in a non-exempt
"prohibited transaction" described in Section 406 of the ERISA or Section 4975
of the Code which has resulted in a material liability to Borrower nor taken
any action which constitutes or results or is reasonably likely to result in a
Termination Event with respect to any Plan which is subject to ERISA, (ix)
Borrower and each member of the Controlled Group has made all required
contributions due and payable with respect to each Plan, (x) neither Borrower
nor, to Borrower's knowledge, any other member of the Controlled Group has any
fiduciary responsibility for investments with respect to any plan existing for
the benefit of persons other than employees or former employees of Borrower and
any member of the Controlled Group, and (xi) neither Borrower nor any member of
the Controlled Group has withdrawn, completely or partially, from any
Multiemployer Plan so as to incur liability under the Multiemployer Pension
Plan Amendments Act of 1980 which has resulted in any material unpaid liability
to Borrower.
5.9. Patents, Trademarks, Copyrights and Licenses. All
patents, patent applications, trademarks, trademark applications, service
marks, service xxxx applications, design rights, copyrights, copyright
applications, tradenames, assumed names, trade secrets and licenses owned or
utilized by Borrower are set forth on Schedule 5.9, are valid and have been
duly registered or filed with all appropriate governmental authorities and
constitute all of the intellectual property rights which are necessary for the
operation of its business; there is no objection to or pending challenge to the
validity of any such patent, trademark, copyright, design right, tradename,
trade secret or license and Borrower is not aware of any grounds for any
challenge, except as set forth in Schedule 5.9 hereto. Each patent, patent
application, patent license, trademark, trademark application, trademark
license,
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service xxxx, service xxxx application, service xxxx license, design right,
copyright, copyright application and copyright license owned or held by
Borrower and all trade secrets used by Borrower consists of original material
or property developed by Borrower or was lawfully acquired by Borrower from the
proper and lawful owner thereof. Each of such items has been maintained so as
to preserve the value thereof from the date of creation or acquisition thereof.
With respect to all software used by Borrower, Borrower is in possession of all
source and object codes related to each piece of software or is the beneficiary
of a source code escrow agreement, each such source code escrow agreement being
listed on Schedule 5.9 hereto.
5.10. Licenses and Permits. Except as set forth in
Schedule 5.10, Borrower (a) is in compliance with and (b) has procured and is
now in possession of, all material licenses or permits required by any
applicable federal, state, provincial or local law or regulation for the
operation of its business in each jurisdiction wherein it is now conducting or
proposes to conduct business and where the failure to procure such licenses or
permits could reasonably be expected to have a Material Adverse Effect.
5.11. Default of Indebtedness. Borrower is not in default
in the payment of the principal of or interest on any Indebtedness for Borrowed
Money or under any instrument or agreement under or subject to which any
Indebtedness for Borrowed Money has been issued and no event has occurred under
the provisions of any such instrument or agreement which with or without the
lapse of time or the giving of notice, or both, constitutes or would constitute
an event of default thereunder.
5.12 No Default. Borrower is not in default in the
payment or performance of any of its material contractual
obligations and no Default has occurred.
5.13 No Burdensome Restrictions. Borrower is not party
to any contract or agreement the performance of which could reasonably be
expected to have a Material Adverse Effect. Borrower has not agreed or
consented to cause or permit in the future (upon the happening of a contingency
or otherwise) any of its property, whether now owned or hereafter acquired, to
be subject to a Lien which is not a Permitted Encumbrance.
5.14 No Labor Disputes. Borrower is not involved in any
labor dispute; there are no strikes or walkouts or union organization of any of
Borrower's employees threatened or in existence and no labor contract is
scheduled to expire during the Term other than as set forth on Schedule 5.14
hereto.
5.15 Margin Regulations. Borrower is not engaged, nor
will it engage, principally or as one of its important activities, in the
business of extending credit for the purpose of "purchasing" or "carrying" any
"margin stock" within the respective meanings of
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each of the quoted terms under Regulation U or Regulation G of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect. No part of the proceeds of any Advance will be used for "purchasing"
or "carrying" "margin stock" as defined in Regulation U of such Board of
Governors.
5.16. Investment Company Act. Borrower is not an
"investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended, nor is it controlled by such a
company.
5.17. Disclosure. No representation or warranty made by
Borrower in this Agreement, or in any financial statement, report, certificate
or any other document furnished in connection herewith contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements herein or therein not misleading. There is no fact known to
Borrower or which reasonably should be known to Borrower which Borrower has not
disclosed to Lender in writing with respect to the Transactions which could
reasonably be expected to have a Material Adverse Effect.
5.18. Swaps. Borrower is not a party to, nor will it be a
party to, any swap agreement whereby Borrower has agreed or will agree to swap
interest rates or currencies unless same provides that damages upon termination
following an event of default thereunder are payable on an unlimited "two-way
basis" without regard to fault on the part of either party.
5.19. Conflicting Agreements. No provision of any
mortgage, indenture, contract, agreement, judgment, decree or order binding on
Borrower or affecting the Collateral conflicts with, or requires any Consent
which has not already been obtained to, or would in any way prevent the
execution, delivery or performance of, the terms of this Agreement or the Other
Documents.
5.20. Application of Certain Laws and Regulations.
Borrower is not subject to any statute, rule or regulation which regulates the
incurrence of any Indebtedness for Borrowed Money, including without
limitation, statutes or regulations relative to common or interstate carriers
or to the sale of electricity, gas, steam, water, telephone, telegraph or other
public utility services.
5.21. Business and Property of Borrower. Upon and after
the Closing Date, Borrower does not propose to engage in any business other
than the manufacturing and distribution of water recreational products
including water skis, kneeboards, wakeboards, inflatables and related products
and activities necessary to conduct such business or other products of a
similar nature. On the Closing Date, Borrower will own all the property and
possess all of the rights and Consents necessary for the conduct of the
business of Borrower.
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VI. AFFIRMATIVE COVENANTS.
Borrower shall, until the Obligations shall have been Fully
Satisfied:
6.1. Payment of Fees. Pay to Lender on demand all usual
and customary fees and expenses which Lender incurs in connection with (a) the
forwarding of Advance proceeds and (b) the establishment and maintenance of any
Blocked Accounts or Depository Accounts as provided for in Section 4.15(h).
Lender may, without making demand, charge the account of Borrower for all such
fees and expenses.
6.2. Conduct of Business and Maintenance of Existence and
Assets. (a) Conduct continuously and operate actively its business according to
good business practices and maintain all of its properties useful or necessary
in its business in good working order and condition (reasonable wear and tear
excepted and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
design rights, tradenames, trade secrets and trademarks and take all actions
necessary to enforce and protect the validity of any intellectual property
right or other right included in the Collateral; (b) keep in full force and
effect its existence and comply in all material respects with the laws and
regulations governing the conduct of its business where the failure to do so
could reasonably be expected to have a Material Adverse Effect; and (c) make
all such reports and pay all such franchise and other taxes and license fees
and do all such other acts and things as may be lawfully required to maintain
its rights, licenses, leases, powers and franchises under the laws of the
United States or any political subdivision thereof where the failure to do so
could reasonably be expected to have a Material Adverse Effect.
6.3. Violations. Promptly notify Lender in writing of
any violation of any law, statute, regulation or ordinance of any Government
Body, or of any agency thereof, applicable to Borrower which could reasonably
be expected to have a Material Adverse Effect.
6.4. Government Receivables. Take all steps necessary to
protect Lender's interest in the Collateral under the Federal Assignment of
Claims Act or other applicable state or local statutes or ordinances and
deliver to Lender appropriately endorsed, any instrument or chattel paper
connected with any Receivable arising out of contracts between Borrower and the
United States, any state or any department, agency or instrumentality of any of
them.
6.5. Net Worth. Maintain as at the end of each fiscal
quarter of Borrower ending on the dates set forth below a Net Worth
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in an amount greater than or equal to the amounts set forth
opposite such dates:
Quarterly Dates Amounts
--------------- -------
March 31, 1997 $7,415,000
June 30, 1997 $7,980,000
September 30, 1997 $6,800,000
December 31, 1997 $7,241,000
March 31, 1998 $7,275,000
June 30, 1998 $8,130,000
September 30, 1998 $6,725,000
December 31, 1998 $7,321,000
March 31, 1999 $7,390,000
June 30, 1999 $8,380,000
September 30, 1999 $6,885,000
December 31, 1999 $7,592,000
6.6. Fixed Charge Coverage Ratio. Maintain as of the end
of the fiscal quarter of Borrower ending on (i) March 31, 1997 a Fixed Charge
Coverage Ratio equal to or greater than 0.5 to 1.0, (ii) June 30, 1997 a Fixed
Charge Coverage Ratio, calculated on a cumulative two quarter basis, equal to
or greater than 1.2 to 1.0, (iii) September 30, 1997 a Fixed Charge Coverage
Ratio, calculated on a cumulative three quarter basis, equal to or greater than
0.4 to 1.0 and (iv) each fiscal quarter of Borrower on the dates set forth
below a Fixed Charge Coverage Ratio, calculated on a rolling four quarter
basis, equal to or greater than the ratio set forth opposite such dates:
Quarterly Dates Ratio
--------------- -----
December 31, 1997 0.6 to 1.0
March 31, 1998 0.9 to 1.0
June 30, 1998 1.1 to 1.0
September 30, 1998 0.9 to 1.0
December 31, 1998 1.0 to 1.0
March 31, 1999 1.0 to 1.0
June 30, 1999 1.1 to 1.0
September 30, 1999 1.1 to 1.0
December 31, 1999 1.2 to 1.0
6.7. Leverage Ratio. Maintain as at the end of each
fiscal quarter of Borrower ending on the dates set forth below a Leverage Ratio
of not greater than the ratio set forth opposite such dates:
Quarterly Dates Ratio
--------------- -----
March 31, 1997 1.3 to 1.0
June 30, 1997 0.7 to 1.0
September 30, 1997 0.3 to 1.0
December 31, 1997 0.6 to 1.0
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March 31, 1998 1.3 to 1.0
June 30, 1998 0.7 to 1.0
September 30, 1998 0.1 to 1.0
December 31, 1998 0.6 to 1.0
March 31, 1999 1.2 to 1.0
June 30, 1999 0.6 to 1.0
September 30, 1999 0.1 to 1.0
December 31, 1999 0.4 to 1.0
6.8. Execution of Supplemental Instruments. Execute and
deliver to Lender from time to time, upon demand, such supplemental agreements,
statements, assignments and transfers, or instructions or documents relating to
the Collateral, and such other instruments as Lender may reasonably request, in
order that the full intent of this Agreement may be carried into effect.
6.9. Payment of Indebtedness. Pay, discharge or
otherwise satisfy at or before maturity (subject, where applicable, to
specified grace periods and, in the case of the trade payables, to normal
payment practices) all its obligations and liabilities of whatever nature,
except when the amount or validity thereof is currently being contested in good
faith by appropriate proceedings and Borrower shall have provided for such
reserves as Lender may reasonably deem proper and necessary, subject at all
times to any applicable subordination arrangement in favor of Lender.
6.10. Standards of Financial Statements. Cause all
financial statements referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12,
9.13 and 9.14 as to which GAAP is applicable to be complete and correct in all
material respects (subject, in the case of interim financial statements, to
normal year-end audit adjustments, and in all cases, subject to the disclosure
limitations set forth in Section 5.5(c)) and to be prepared in reasonable
detail and in accordance with GAAP applied consistently throughout the periods
reflected therein (except as concurred in by such reporting accountants or
officer, as the case may be, and disclosed therein).
6.11. Capital Contribution Adjustment. On or before March
31, 1997, determine if Borrower's Net Worth on the Closing Date was not at
least $7,400,000, and based upon such determination, shall on or before March
31, 1997, either receive an additional capital contribution from Meridian or
remit back to Meridian a portion of the capital contribution made by Meridian
pursuant to Section 8.1(m) hereof, as the case may be, so that the Net Worth of
Borrower as of the Closing Date equals at least $7,400,000 (the "Net Worth
Adjustment") provided, that any remittance to Meridian shall not exceed
$250,000.
6.12 Kent Property Lease. (a) Prepay at least three (3)
months prior to the due date, by check, all Base Rent; (b) pay on demand any
other Rent; and (c) deliver to Lender a photocopy of all cancelled checks
executed and delivered to pay any Rent within
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forty five (45) days of the delivery of any such check to the Kent Landlord.
6.13 Meridian Indebtedness Payment. Pay Meridian a sum not to
exceed $2,030,000 such that the Indebtedness For Borrowed Money due and owing
by Borrower to Meridian is reduced to $0 immediately following the receipt by
Lender of the Kent Landlord Waiver.
VII. NEGATIVE COVENANTS.
Borrower shall not, until the Obligations shall have been Fully
Satisfied:
7.1. Merger, Consolidation, Acquisition and Sale of
Assets.
(a) Enter into any merger, consolidation or other
reorganization with or into any other Person or acquire all or a substantial
portion of the assets or stock of any Person or permit any other Person to
consolidate with or merge with it without Lender's prior written consent.
(b) Sell, lease, transfer or otherwise dispose of
any of its properties or assets, except in the ordinary course of its business
without Lender's prior written consent.
7.2. Creation of Liens. Create or suffer to exist any
Lien upon or against any of its property or assets now owned or hereafter
acquired, except Permitted Encumbrances.
7.3. Guarantees. Become liable upon the obligations of
any Person by assumption, endorsement or guaranty thereof or otherwise (other
than to Lender) except the endorsement of checks in the ordinary course of
business.
7.4. Investments. Purchase or acquire obligations or
stock of, or any other interest in, any Person, except (a) obligations issued
or guaranteed by the United States of America or any agency thereof; (b)
commercial paper with maturities of not more than 180 days and a published
rating of not less than A-1 or P-1 (or the equivalent rating); (c) certificates
of time deposit and bankers' acceptances having maturities of not more than 180
days and repurchase agreements backed by United States government securities of
a commercial bank if (i) such bank has a combined capital and surplus of at
least $500,000,000, or (ii) its debt obligations, or those of a holding company
of which it is a Subsidiary, are rated not less than A (or the equivalent
rating) by a nationally recognized investment rating agency; and (d) U.S. money
market funds that invest solely in obligations issued or guaranteed by the
United States of America or an agency thereof.
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7.5. Loans. Make advances, loans or extensions of credit
to any Person, including without limitation, any Parent, Subsidiary or
Affiliate except (a) with respect to the extension of commercial trade credit
in connection with the sale of Inventory in the ordinary course of its business
and (b) so long as (i) no Event of Default or Default shall have occurred and
be continuing and (ii) no Overadvance is outstanding, to Meridian for any
fiscal year, to the extent that loans (which loans shall be made on or after
thirty (30) Business Days following delivery of the financial statements to
Lender referred to in and required by Section 9.7 for the fiscal year
immediately preceding the fiscal year in which such loans are made) made
pursuant to this clause (b) do not exceed the Permitted Cash Flow Amount
payable in such fiscal year.
7.6. Capital Expenditures. Make any Capital Expenditure
(or any commitments for Capital Expenditures in any subsequent fiscal year
which would cause Borrower to exceed the amount permitted by this Section 7.6
in such subsequent fiscal year) in any fiscal year in an amount in excess of
the amounts set forth below opposite such fiscal year (each ending on December
31):
Fiscal Year Amount
----------- ------
1997 $809,000
1998 $500,000
1999 $500,000;
provided, that, any Capital Expenditures permitted to be made by Borrower in
any fiscal year set forth above and not made in such fiscal year, may be made
in the succeeding fiscal year to the extent such carryover amount of Capital
Expenditures does not exceed $100,000 in the aggregate in any fiscal year.
7.7. Dividends. Declare, pay or make any dividend or
distribution on any shares of the common stock or preferred stock of Borrower
(other than dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds, property or assets
to the purchase, redemption or other retirement of any common or preferred
stock, or of any options to purchase or acquire any such shares of common or
preferred stock of Borrower.
7.8. Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness for Borrowed Money of Borrower except in respect of (i)
Indebtedness for Borrowed Money to Lender; (ii) Indebtedness for Borrowed Money
incurred for Capital Expenditures permitted under Section 7.6 hereof; (iii)
Indebtedness for Borrowed Money outstanding on the date hereof which is listed
on Schedule 7.8 hereto; (iv) Subordinated Debt; (v) Indebtedness for Borrowed
Money to Meridian outstanding on the Closing Date (after giving effect to the
capital contribution in Section 8.1(m) hereof) in an amount not to exceed
$2,030,000 (which amount shall be permanently reduced to $0 in accordance with
Section 6.13 hereof) provided,
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that Borrower shall not make any payments or distributions of any kind to
Meridian with respect to such Indebtedness For Borrowed Money except as
specifically provided in Section 6.13 hereof; and (vi) Indebtedness for
Borrowed Money to Meridian which arises in connection with payments made by
Meridian on behalf of Borrower in the ordinary course of business for certain
typical and necessary operating expenditures of Borrower (including, without
limitation, for insurance premiums, pension expenses and other ordinary course
of business expenses); provided, that Borrower may only reimburse Meridian for
such payments made by Meridian so long as after giving effect to such
reimbursement no Default or Event of Default shall have occurred and be
continuing.
7.9. Nature of Business. Substantially change the nature
of the business in which it is presently engaged, nor except as specifically
permitted herein purchase or invest, directly or indirectly, in any assets or
property other than in the ordinary course of business for assets or property
which are useful in, necessary for and are to be used in its business as
presently conducted.
7.10. Transactions with Affiliates. Directly or
indirectly, purchase, acquire or lease any property from, or sell, transfer or
lease any property to, or otherwise deal with, any Affiliate, except
transactions in the ordinary course of business, on an arm's-length basis on
terms no less favorable than terms which would have been obtainable from a
Person other than an Affiliate.
7.11. Leases. Enter as lessee into any lease arrangement
for real or personal property (unless capitalized and permitted under Section
7.6 hereof) if after giving effect thereto, aggregate annual rental payments
for all leased property would exceed $100,000 in any one fiscal year.
7.12. Subsidiaries.
(a) Form any Subsidiary without Lender's prior
written consent.
(b) Enter into any partnership, joint venture or
similar arrangement.
7.13. Fiscal Year and Accounting Changes. Change its
fiscal year end from December 31 or make any change (i) in accounting treatment
and reporting practices except as required by GAAP or (ii) in tax reporting
treatment except as required by law.
7.14. Pledge of Credit. Now or hereafter pledge Lender's
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than Borrower's business as conducted on
the date of this Agreement.
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7.15. Amendment of Articles of Incorporation, By-Laws.
Amend, modify or waive any term or material provision of its Articles of
Incorporation or By-Laws unless required by law.
7.16. Compliance with ERISA. (i) (x) Maintain, or permit
any member of the Controlled Group to maintain, or (y) become obligated to
contribute, or permit any member of the Controlled Group to become obligated to
contribute, to any Plan subject to Title IV of ERISA, other than those Plans
disclosed on Schedule 5.8(d) or any employee benefit plan subject to Title IV
of ERISA which is reasonably likely to result in a material increase in
liabilities to Borrower; (ii) engage, or permit any member of the Controlled
Group to engage, in any non-exempt "prohibited transaction", as that term is
defined in section 406 of ERISA and Section 4975 of the Code which is
reasonably likely to result in a material increase in liability to Borrower;
(iii) incur, or permit any member of the Controlled Group to incur, any
"accumulated funding deficiency", as that term is defined in Section 302 of
ERISA or Section 412 of the Code; (iv) terminate, or permit any member of the
Controlled Group to terminate, any Plan where such event is reasonably likely
to result in any material liability of Borrower or the imposition of a lien on
the property of Borrower pursuant to Section 4068 of ERISA; (v) assume, or
permit any member of the Controlled Group to assume, any obligation to
contribute to any Multiemployer Plan not disclosed on Schedule 5.8(d) which is
reasonably likely to have a Material Adverse Effect; (vi) incur, or permit any
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; which is reasonably likely to result in a material increase
in liabilities to Borrower; (vii) fail to substantially comply, or permit a
member of the Controlled Group to fail to substantially comply, with the
applicable requirements of ERISA or the Code or other applicable laws in
respect of any Plan; (viii) fail to meet, or permit any member of the
Controlled Group to fail to meet, all minimum funding requirements under ERISA
or the Code.
7.17. Prepayment of Indebtedness. At any time, directly
or indirectly, prepay any Indebtedness For Borrowed Money (other than to
Lender), or repurchase, redeem, retire or otherwise acquire any Indebtedness
For Borrowed Money of Borrower other than the payment to Meridian required
under Section 6.13 hereof.
VIII. CONDITIONS PRECEDENT.
8.1. Conditions to Initial Advances. The agreement of
Lender to make or issue the initial Advances requested to be made on the
Closing Date is subject to the satisfaction, or waiver by Lender, immediately
prior to or concurrently with the making or issuance of such Advances, of the
following conditions precedent:
(a) Note. Lender shall have received the Note duly
executed and delivered by an authorized officer of Borrower;
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(b) Filings, Registrations and Recordings. Each
document (including, without limitation, any Uniform Commercial Code financing
statement) required by this Agreement, any Other Document or under applicable
law or reasonably requested by Lender to be filed, registered or recorded in
order to create, in favor of Lender, a perfected security interest in or lien
upon the Collateral shall have been properly filed, registered or recorded in
each jurisdiction in which the filing, registration or recordation thereof is
so required or requested, and Lender shall have received an acknowledgment
copy, or other evidence satisfactory to it, of each such filing, registration
or recordation and satisfactory evidence of the payment of any necessary fee,
tax or expense relating thereto;
(c) Corporate Proceedings of Borrower. Lender
shall have received a copy of the resolutions in form and substance reasonably
satisfactory to Lender, of the Board of Directors of Borrower authorizing (i)
the execution, delivery and performance of this Agreement, the Note, the
Mortgage and any related agreements (collectively the "Documents") and (ii) the
granting by Borrower of the security interests in and liens upon the Collateral
in each case certified by the Secretary or an Assistant Secretary of Borrower
as of the Closing Date; and, such certificate shall state that the resolutions
thereby certified have not been amended, modified, revoked or rescinded as of
the date of such certificate;
(d) Incumbency Certificates of Borrower. Lender
shall have received a certificate of the Secretary or an Assistant Secretary of
Borrower, dated the Closing Date, as to the incumbency and signature of the
officers of Borrower executing this Agreement, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
(e) Certificates. Lender shall have received a
copy of the Articles or Certificate of Incorporation of Borrower, and all
amendments thereto, certified by the Secretary of State or other appropriate
official of its jurisdiction of incorporation together with copies of the
By-Laws of Borrower and all agreements of Borrower's shareholders certified as
accurate and complete by the Secretary of Borrower;
(f) Good Standing Certificates. Lender shall have
received good standing certificates for Borrower dated not more than thirty
(30) days prior to the Closing Date, issued by the Secretary of State or other
appropriate official of Borrower's jurisdiction of incorporation and each
jurisdiction where the conduct of Borrower's business activities or the
ownership of its properties necessitates qualification;
(g) Legal Opinions. Lender shall have received the
executed legal opinion of (i) Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx and (ii)
Xxxxxxx Jeppesen Xxxx X.X., each in form and
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substance reasonably satisfactory to Lender which opinions shall cover such
matters incident to the transactions contemplated by this Agreement, the Note,
the Mortgage and the Other Documents as Lender may reasonably require and
Borrower hereby authorizes and directs each such counsel to deliver such
opinions to Lender;
(h) No Litigation. (i) No litigation, investigation
or proceeding before or by any arbitrator or Governmental Body shall be
continuing or threatened against Borrower or against the officers or directors
of Borrower (A) in connection with the Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of Lender, is deemed
material or (B) which could be likely, in the reasonable opinion of Lender, to
have a Material Adverse Effect on Borrower; and (ii) no injunction, writ,
restraining order or other order of any nature materially adverse to Borrower
or the conduct of its business or inconsistent with the due consummation of the
Transactions shall have been issued by any Governmental Body;
(i) Financial Condition Certificate. Lender shall
have received an executed Financial Condition Certificate substantially in the
form of Exhibit 8.1(i) hereof;
(j) Collateral Examination. Lender shall have
completed Collateral examinations and received appraisals, the results of which
shall be reasonably satisfactory in form and substance to Lender, of the
Receivables, Inventory, General Intangibles, Real Property, Leasehold Interest
and Equipment of Borrower and all books and records in connection therewith;
(k) Fees. Lender shall have received all fees
payable to Lender on or prior to the Closing Date pursuant to Article III
hereof;
(l) Pro Forma Financial Statements. Lender shall
have received a copy of the Pro Forma Financial Statements which
shall be satisfactory in all respects to Lender;
(m) Capital Contribution. Lender shall have
received an executed copy of an officers' certificate of a vice president of
Meridian certifying that Meridian has made and Borrower has received from
Meridian prior to or concurrently with the making of the initial Advance, a
capital contribution representing the conversion of intercompany debt to equity
such that the Net Worth of Borrower as of the Closing Date will be at least
$7,400,000 as adjusted pursuant to Section 6.11 hereof.
(n) Guaranty and Other Documents. Lender shall
have received executed copies of the Guaranty and all Other Documents, each in
form and substance satisfactory to Lender;
(o) Insurance. Lender shall have received in form
and substance reasonably satisfactory to Lender, Borrower's or
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Meridian's casualty insurance certificates together with loss payable
endorsements on Lender's standard form of loss payee endorsement naming Lender
as loss payee, and Borrower's, Meridian's or Mafco Holdings, Inc.'s liability
insurance certificates, together with endorsements naming Lender as a
co-insured;
(p) Title Insurance. Lender shall have received
fully paid mortgagee title insurance policies (or binding commitments to issue
title insurance policies, marked to Lender's satisfaction to evidence the form
of such policies to be delivered with respect to the Mortgage), in standard
ALTA form, issued by a title insurance company satisfactory to Lender, each in
an amount equal to not less than the fair market value of the Real Property
subject to the Mortgage, insuring the Mortgage to create a valid Lien on the
Real Property with no exceptions which Lender shall not have approved in
writing and no survey exceptions;
(q) Environmental Reports. Lender shall have
received all environmental studies and reports prepared by independent
environmental engineering firms with respect to all Real Property owned by
Borrower;
(r) Payment Instructions. Lender shall have
received written instructions from Borrower directing the application of
proceeds of the initial Advances made pursuant to this Agreement;
(s) Blocked Accounts. Lender shall have received
duly executed agreements establishing the Blocked Accounts or Depository
Accounts with financial institutions acceptable to Lender for the collection or
servicing of the Receivables and proceeds of the Collateral;
(t) Consents. Lender shall have received any and
all Consents necessary to permit the effectuation of the transactions
contemplated by this Agreement and the Other Documents; and, Lender shall have
received such Consents and waivers of such third parties as might assert claims
with respect to the Collateral, as Lender and its counsel shall deem necessary;
(u) No Adverse Material Change. (i) Since June 30,
1996, there shall have occurred (x) no material adverse change in the
condition, financial or otherwise, operations, properties or prospects of
Borrower, (y) no material damage or destruction to any of the Collateral nor
any material depreciation in the value thereof and (z) no event, condition or
state of facts which could reasonably be expected to have a Material Adverse
Effect and (ii) no representations made or information supplied to Lender shall
have been proven to be inaccurate or misleading in any material respect;
(v) Leasehold Agreements. Lender shall have
received landlord waivers reasonably, satisfactory to Lender with
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respect to all premises leased by Borrower at which Inventory is located;
(w) Mortgage. Lender shall have received in form
and substance satisfactory to Lender (i) an executed Mortgage, (ii) a title
policy for the Real Property and (iii) survey;
(x) Contract Review. Lender shall have reviewed
all material contracts of Borrower including, without limitation, leases, union
contracts, labor contracts, vendor supply contracts, license agreements and
distributorship agreements and such contracts and agreements shall be
reasonably satisfactory in all material respects to Lender;
(y) Closing Certificate. Lender shall have
received a closing certificate signed by a Vice President of Borrower dated as
of the Closing Date, stating that (i) all representations and warranties of
Borrower set forth in this Agreement and the Other Documents to which Borrower
is a party are true and correct on and as of such date, (ii) Borrower is on
such date in compliance with all the terms and provisions set forth in this
Agreement and the Other Documents to which it is a party and (iii) on such date
no Default or Event of Default has occurred and is continuing; and
(z) Borrowing Base. Lender shall have received
evidence from Borrower that the aggregate amount of Eligible Receivables and
Eligible Inventory is sufficient in value and amount to support Advances in the
amount requested by Borrower on the Closing Date;
(aa) Undrawn Availability. After giving effect to
the initial Advances hereunder, Borrower shall have Undrawn
Availability of at least $1,000,000;
(ab) Minimum Net Worth. After giving effect to the
Transactions, Borrower shall have a Net Worth of not less than $7,400,000 as
reflected on the Pro Forma Balance Sheet;
(ac) Other. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection with the
Transactions shall be reasonably satisfactory in form and substance to Lender
and its counsel.
8.2. Conditions to Each Advance. The agreement of
Lender to make any Advance requested to be made on any date (including, without
limitation, the initial Advance), is subject to the satisfaction of the
following conditions precedent as of the date such Advance is made:
(a) Representations and Warranties. Each of the
representations and warranties made by Borrower in or pursuant to
this Agreement and any Other Document to which it is a party, and
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each of the representations and warranties contained in any certificate,
document or financial or other statement furnished at any time under or in
connection with this Agreement or any Other Document to which Borrower is a
party shall be true and correct in all material respects on and as of such date
as if made on and as of such date;
(b) No Default. No Event of Default or Default
shall have occurred and be continuing on such date, or would exist after giving
effect to the Advances requested to be made, on such date; provided, however,
that Lender, in its sole discretion, may continue to make Advances
notwithstanding the existence of an Event of Default or Default and that any
Advances so made shall not be deemed a waiver of any such Event of Default or
Default; and
(c) Maximum Advances. In the case of any Revolving
Advances requested to be made, after giving effect thereto, the aggregate
Revolving Advances shall not exceed the maximum amount of Revolving Advances
permitted under Section 2.1 hereof.
Each request for an Advance by Borrower hereunder shall constitute a
representation and warranty by Borrower as of the date of such Advance that the
conditions contained in this subsection shall have been satisfied.
IX. INFORMATION AS TO BORROWER.
Borrower shall, until the Obligations shall have been Fully
Satisfied:
9.1. Disclosure of Material Matters. Immediately upon
learning thereof, report to Lender all matters materially affecting the value,
enforceability or collectibility of any material portion of the Collateral
including, without limitation, Borrower's reclamation or repossession of, or
the return to Borrower of, a material amount of goods or claims or disputes
asserted by any Customer or other obligor.
9.2. Schedules. Deliver to Lender on or before the
fifteenth (15th) day of each month as and for the prior month (a) accounts
receivable ageings, (b) accounts payable schedules and (c) Inventory reports.
In addition, Borrower will deliver to Lender at such intervals as Lender may
reasonably require: (i) confirmatory assignment schedules, (ii) copies of
Customer's invoices, (iii) evidence of shipment or delivery, and (iv) such
further schedules, documents and/or information regarding the Collateral as
Lender may reasonably require including, without limitation, trial balances and
test verifications. Such reporting with respect to Receivables shall be
reported pursuant to a system acceptable to Lender in its sole discretion. Such
reporting shall be electronic on a daily basis at the sole discretion of
Lender. Lender shall have the right to confirm and verify all Receivables by
any manner
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and through any medium it considers advisable and do whatever it may deem
reasonably necessary to protect its interests hereunder. The items to be
provided under this Section are to be in form satisfactory to Lender and
executed by Borrower and delivered to Lender from time to time solely for
Lender's convenience in maintaining records of the Collateral, and Borrower's
failure to deliver any of such items to Lender shall not affect, terminate,
modify or otherwise limit Lender's Lien with respect to the Collateral.
9.3. Environmental Reports. Furnish Lender, concurrently
with the delivery of the financial statements referred to in Sections 9.7 and
9.8, with a certificate signed by the President and/or Vice President of
Borrower stating, to the best of his knowledge, that Borrower is in compliance
in all material respects with all Environmental Laws and occupational safety
and health laws. To the extent Borrower is not in compliance with the foregoing
laws, the certificate shall set forth with specificity all areas of
non-compliance and the proposed action Borrower will implement in order to
achieve full compliance.
9.4. Litigation. Promptly notify Lender in writing of
any litigation, suit or administrative proceeding affecting Borrower, whether
or not the claim is covered by insurance, and of any suit or administrative
proceeding, which could reasonably be expected to have a Material Adverse
Effect.
9.5. Material Occurrences. Promptly notify Lender in
writing upon the occurrence of (a) any Event of Default or Default; (b) any
event, development or circumstance whereby any financial statements or other
reports furnished to Lender fail in any material respect to present fairly, in
accordance with GAAP consistently applied, the financial condition or operating
results of Borrower as of the date of such statements; (c) any accumulated
retirement plan funding deficiency which, if such deficiency continued for two
plan years and was not corrected as provided in Section 4971 of the Code, could
subject Borrower to a tax imposed by Section 4971 of the Code; (d) each and
every default by Borrower which might, after the giving of notice or lapse of
time or both, result in the acceleration of the maturity of any Indebtedness,
including the names and addresses of the holders of such Indebtedness with
respect to which there is a default existing or with respect to which the
maturity has been or will be accelerated, and the amount of such Indebtedness;
and (e) any other development in the business or affairs of Borrower which
could reasonably be expected to have a Materially Adverse Effect; in each case
describing the nature thereof and the action Borrower proposes to take with
respect thereto.
9.6. Government Receivables. Notify Lender immediately
if any of its Receivables arise out of contracts between Borrower and the
United States of America, any state, or any department, agency or
instrumentality of any of them.
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9.7. Annual Financial Statements. Furnish Lender within
ninety (90) days after the end of each fiscal year of Borrower, financial
statements of Borrower including, but not limited to, statements of income and
stockholders' equity and cash flows from the beginning of the current fiscal
year to the end of such fiscal year and the balance sheet as at the end of such
fiscal year, all prepared in accordance with GAAP applied on a basis consistent
with prior practices, and in reasonable detail and reported upon without
qualification by Ernst & Young LLP or another independent certified public
accounting firm selected by Borrower and satisfactory to Lender (the
"Accountants"). The report of such Accountants shall be accompanied by a
statement of such Accountants certifying that (i) they have caused this
Agreement to be reviewed, (ii) in making the examination upon which such report
was based either no information came to their attention which to their
knowledge constituted an Event of Default or a Default under this Agreement or
any Other Document or, if such information came to their attention, specifying
any such Default or Event of Default, its nature, when it occurred and whether
it is continuing, and such report shall contain or have appended thereto
calculations which set forth Borrower's compliance with the requirements or
restrictions imposed by Sections 6.5, 6.6, 6.7, 7.6 and 7.11. In addition, the
reports shall be accompanied by a certificate of Borrower's President and/or
Vice President - Finance which shall state that, based on an examination
sufficient to permit him to make an informed statement, a Default or Event of
Default exists, or, if such is not the case, specifying such Default or Event
of Default, its nature, when it occurred, whether it is continuing and the
steps being taken by Borrower with respect to such Default and, such
certificate shall have appended thereto calculations which set forth Borrower's
compliance with the requirements or restrictions imposed by Sections 6.5, 6.6,
6.7, 7.6 and 7.11 hereof.
9.8. Quarterly Financial Statements. Furnish Lender
within forty-five (45) days after the end of each of the first three fiscal
quarters, an unaudited balance sheet of Borrower and unaudited statements of
income and cash flow of Borrower from the beginning of the fiscal year to the
end of such quarter and for such quarter and unaudited statements of cash flows
of Borrower reflecting results of operations from the beginning of the fiscal
year to the end of such quarter and for such quarter, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal year end adjustments. The reports shall be
accompanied by a certificate of Borrower's President and/or Vice President -
Finance which shall state that, based on an examination sufficient to permit
him to make an informed statement, no Default or Event of Default exists, or,
if such is not the case, specifying such Default or Event of Default, its
nature, when it occurred, whether it is continuing and the steps being taken by
Borrower with respect to such default, and, such certificate shall have
appended thereto calculations which set forth Borrower's compliance with the
requirements or restrictions imposed by Sections 6.5, 6.6 and 6.7 hereof.
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9.9. Monthly Financial Statements. Furnish Lender within
thirty (30) days after the end of each month other than fiscal quarter end
months, an unaudited balance sheet of Borrower and unaudited statements of
income of Borrower from the beginning of the fiscal year to the end of such
month and for such month and stockholders' equity and cash flows of Borrower
reflecting results of operations from the beginning of the fiscal year to the
end of such month and for such month, prepared on a basis consistent with prior
practices and complete and correct in all material respects, subject to normal
year end adjustments. The reports shall be accompanied by a certificate of
Borrower's President and/or Vice President - Finance which shall state that,
based on an examination sufficient to permit him to make an informed statement,
no Default or Event of Default exists, or, if such is not the case, specifying
such Default or Event of Default, its nature, when it occurred, whether it is
continuing, and the steps being taken by Borrower with respect to such Default.
Such certificate shall specifically confirm that with respect to (a) the Kent
Lease, Borrower has (i) prepaid at least three (3) months with respect to Base
Rent in advance all amounts due or arising under the Kent Lease (excluding any
security deposit that the Kent Landlord may possess) and (ii) promptly paid,
when requested by the Kent Landlord, any other Rent that may be due and owing
and (b) any Leasehold Interest (other than the Kent Property), all required
lease payments have been timely paid by Borrower.
9.10. Other Reports. Furnish Lender as soon as available,
but in any event within ten (10) days after the issuance thereof, with copies
of such financial statements, reports and returns as Borrower shall send to its
stockholders.
9.11. Additional Information. Furnish Lender with such
additional information as Lender shall reasonably request in order to enable
Lender to determine whether the terms, covenants, provisions and conditions of
this Agreement and the Note have been complied with by Borrower including,
without limitation and without the necessity of any request by Lender, (a)
copies of all environmental audits and reviews, (b) at least thirty (30) days
prior thereto, notice of Borrower's opening of any new office or place of
business or Borrower's closing of any existing office or place of business, and
(c) promptly upon Borrower's learning thereof, notice of any labor dispute to
which Borrower may become a party, any strikes or walkouts relating to any of
its plants or other facilities, and the expiration of any labor contract to
which Borrower is a party or by which Borrower is bound.
9.12. Projected Operating Budget. Furnish Lender, no
later than thirty (30) days prior to the beginning of each of Borrower's fiscal
years commencing with fiscal year 1998, a month by month projected operating
budget and cash flow of Borrower for such fiscal year (including an income
statement for each month and a balance sheet as at the end of the last month in
each fiscal quarter), such projections to be accompanied by a certificate
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signed by Borrower's President or Vice President - Finance to the effect that
such projections have been prepared on the basis of sound financial planning
practice consistent with past budgets and financial statements and that such
officer has no reason to question the reasonableness of any material
assumptions on which such projections were prepared.
9.13. Variances From Operating Budget. Furnish Lender,
concurrently with the delivery of the financial statements referred to in
Sections 9.7, 9.8 and 9.9, a written report summarizing all material variances
from budgets submitted by Borrower pursuant to Section 9.12 and a discussion
and analysis by management with respect to such variances.
9.14. Notice of Suits, Adverse Events. Furnish Lender
with prompt notice of (i) any lapse or other termination of any Consent issued
to Borrower by any Governmental Body or any other Person that is material to
the operation of Borrower's business, (ii) any refusal by any Governmental Body
or any other Person to renew or extend any such Consent; and (iii) copies of
any periodic or special reports filed by Borrower with any Governmental Body or
Person, if such reports indicate any material change in the business,
operations, affairs or condition of Borrower, or if copies thereof are
requested by Lender, and (iv) copies of any material notices and other
communications from any Governmental Body or Person which specifically relate
to Borrower.
9.15. ERISA Notices and Requests. Furnish Lender with
prompt written notice after the occurrence thereof in the event that (i)
Borrower or any member of the Controlled Group knows or has reason to know that
a Termination Event has occurred, together with a written statement describing
such Termination Event and the action, if any, which Borrower or member of the
Controlled Group has taken, is taking, or proposes to take with respect thereto
and, when known, any action taken or threatened by the Internal Revenue
Service, Department of Labor or PBGC with respect thereto, (ii) Borrower or any
member of the Controlled Group knows or has reason to know that a non-exempt
prohibited transaction (as defined in Sections 406 of ERISA and 4975 of the
Code) has occurred together with a written statement describing such
transaction and the action which Borrower or any member of the Controlled Group
has taken, is taking or proposes to take with respect thereto, (iii) a funding
waiver request has been filed with respect to any Plan together with all
material communications received by either Borrower or any member of the
Controlled Group with respect to such request, (iv) any increase in the
benefits of any existing Plan or the establishment of any new Plan or the
commencement of contributions to any Plan to which either Borrower or any
member of the Controlled Group was not previously contributing shall occur,
(v) Borrower or any member of the Controlled Group shall receive from the
PBGC a notice of intention to terminate a Plan or to have a trustee appointed
to administer a Plan, together with copies of each such notice, (vi) Borrower
or any member of the Controlled Group shall receive any
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unfavorable determination letter from the Service regarding the qualification
of a Plan under Section 401(a) of the Code, together with copies of each such
letter; (vii) Borrower or any member of the Controlled Group shall receive a
notice regarding the imposition of withdrawal liability, together with copies
of each such notice; (viii) Borrower or any member of the Controlled Group
shall fail to make a required installment or any other required payment under
Section 412 of the Code on or before the due date for such installment or
payment; (ix) Borrower or any member of the Controlled Group knows that (a) a
Multiemployer Plan has been terminated, (b) the administrator or plan sponsor
of a Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the
PBGC has instituted or will institute proceedings under Section 4042 of ERISA
to terminate a Multiemployer Plan if any such event in clauses (i) through (ix),
such event is reasonably likely to result in a material liability to Borrower.
9.16. Additional Documents. Execute and deliver to
Lender, upon request, such documents and agreements as Lender may, from time to
time, reasonably request to carry out the purposes, terms or conditions of this
Agreement.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
10.1. failure by Borrower to pay any principal or interest
on the monetary Obligations when due, whether at maturity or by reason of
acceleration pursuant to the terms of this Agreement or by notice of intention
to prepay, or by required prepayment; or failure by Borrower to pay any other
liabilities or make any other payment, fee or charge provided for herein or in
any Other Document when due;
10.2. any representation or warranty made or deemed made
by Borrower in this Agreement or any Other Document to which it is a party or
in any certificate, document or financial or other statement furnished at any
time in connection herewith or therewith shall prove to have been misleading in
any material respect on the date when made or deemed to have been made;
10.3. failure by Borrower to (i) furnish financial
information or any certificate which is required to be delivered with such
financial information (x) when due or (y) as soon as available but in no event
later than ten (10) Business Days following any request for additional
information hereunder, or (ii) permit the inspection of its books or records;
10.4. issuance of a notice of Lien, levy, assessment,
injunction or attachment against a material portion of Borrower's
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property and such issuance, levy, assessment, injunction or attachment shall
not have been removed within thirty (30) days;
10.5. (a) except with respect to the matters covered by clause (b)
below, failure or neglect of Borrower to perform, keep or observe any term,
provision, condition, covenant herein contained, or contained in any Other
Documents to which it is a party, or (b) a failure or neglect of Borrower to
perform, keep or observe any term, provision, condition or covenant, contained
in Sections 4.1 (as to the last sentence thereof), 4.6, 4.7, 4.9, 4.11, 6.1,
6.2 (as to maintenance of property), 6.10 (as to financial statements being
prepared in reasonable detail) 9.4 or 9.6 hereof which failure or neglect under
this clause (b) is cured within the earlier of (x) with respect to
circumstances where Borrower is obligated to take action and fails to do so (as
opposed to circumstances where Borrower takes action but fails to do so in a
manner which is satisfactory to Lender), thirty (30) days from the occurrence
of such failure or neglect or (y) with respect to circumstances (i) where
Borrower takes action but fails to do so in a manner which is satisfactory to
Lender or (ii) where Borrower becomes aware of its failure or neglect to take
action at all, twenty (20) days from the date on which Borrower becomes aware
of such failure or neglect;
10.6. any judgment is rendered or judgment liens filed
against Borrower for an amount in excess of $25,000 which within thirty (30)
days of such rendering or filing is not either satisfied, stayed or discharged
of record;
10.7. Borrower shall (i) apply for, consent to or suffer
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, liquidator or similar fiduciary of itself or of all or a substantial
part of its property, (ii) make a general assignment for the benefit of
creditors, (iii) commence a voluntary case under any state or federal
bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt
or insolvent, (v) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vi) acquiesce to, or fail to have
dismissed, within forty-five (45) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) take any action for the
purpose of effecting any of the foregoing;
10.8. Borrower shall admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease
operations of its present business;
10.9. the Guarantor shall (i) apply for, consent to or
suffer the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar fiduciary of itself or of all or a
substantial part of its property, (ii) admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of
its present business,
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(iii) make a general assignment for the benefit of creditors, (iv) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vii) acquiesce to, or fail to have dismissed, within forty-five (45) days, any
petition filed against it in any involuntary case under such bankruptcy laws,
or (viii) take any action for the purpose of effecting any of the foregoing;
10.10. any change in Borrower's condition or affairs
(financial or otherwise) which in Lender's reasonable opinion materially
impairs the Collateral or the ability of Borrower to perform its Obligations to
pay money under this Agreement;
10.11. any Lien created hereunder or provided for hereby or
under any Other Document for any reason ceases to be or is not a
valid and perfected Lien having a first priority interest;
10.12. a default of the obligations of Borrower under any
other agreement to which it is a party shall occur which materially adversely
affects its condition, affairs or prospects (financial or otherwise) which
default is not cured within any applicable grace period;
10.13. termination or breach of the Guaranty or similar
agreement executed and delivered to Lender in connection with the Obligations
of Borrower, or if the Guarantor attempts to terminate, challenges the validity
of, or its liability under, the Guaranty or similar agreement;
10.14. any Change of Ownership or Change of Control shall
occur;
10.15. any material provision of this Agreement shall, for
any reason, cease to be valid and binding on Borrower, or Borrower
shall so claim in writing to Lender;
10.16. if (i) any Governmental Body shall (A) revoke,
terminate, suspend or adversely modify any material license, permit, patent,
trademark or tradename of Borrower, or (B) commence proceedings to suspend,
revoke, terminate or adversely modify any such material license, permit,
trademark, tradename or patent and such proceedings shall not be dismissed or
discharged within sixty (60) days, or (c) schedule or conduct a hearing on the
renewal of any material license, permit, trademark, tradename or patent
necessary for the continuation of Borrower's business and the staff of such
Governmental Body issues a report recommending the termination, revocation,
suspension or material, adverse modification of such material license, permit,
trademark, tradename or patent; (ii) any agreement which is necessary or
material to the operation of Borrower's business shall be revoked or terminated
and not replaced by a substitute reasonably acceptable to Lender within
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thirty (30) days after the date of such revocation or termination, and such
revocation or termination and non-replacement could reasonably be expected to
have a Material Adverse Effect;
10.17. any material portion of the Collateral shall be
seized or taken by a Governmental Body, or Borrower or the title and rights of
Borrower or any Original Owner which is the owner of any material portion of
the Collateral shall have become the subject matter of litigation which might,
in the reasonable opinion of Lender, upon final determination, result in
material impairment or loss of the security provided by this Agreement or the
Other Documents;
10.18. the operations of Borrower's manufacturing facility
are interrupted at any time for more than thirty-six (36) hours during any
period of five (5) consecutive Business Days, unless Borrower shall (i) be
entitled to receive for such period of interruption, proceeds of business
interruption insurance sufficient to assure that its per diem cash needs during
such period is at least equal to its average per diem cash needs for the
consecutive three month period immediately preceding the initial date of
interruption and (ii) receive such proceeds in the amount described in clause
(i) preceding not later than thirty (30) days following the initial date of any
such interruption; provided, however, that notwithstanding the provisions of
clauses (i) and (ii) of this section, an Event of Default shall be deemed to
have occurred if Borrower shall be receiving the proceeds of business
interruption insurance for a period of thirty (30) consecutive days;
10.19. an event or condition specified in Sections 7.16 or
9.15 hereof shall occur or exist and, as a result of such event or condition,
together with all other such events or conditions, Borrower or any member of
the Controlled Group shall incur, or in the opinion of Lender be reasonably
likely to incur, a liability to a Plan or the PBGC (or both) which, in the
reasonable judgment of Lender, could reasonably be expected to have a Material
Adverse Effect; or
10.20. Meridian fails to make the Net Worth Adjustment.
XI. LENDER'S RIGHTS AND REMEDIES AFTER DEFAULT.
11.1. Rights and Remedies. Upon the occurrence of (i) an
Event of Default pursuant to Section 10.7 all monetary Obligations shall be
immediately due and payable and this Agreement and the obligation of Lender to
make or issue Advances shall be deemed terminated; and (ii) any of the other
Events of Default and at any time thereafter (such default not having
previously been cured), at the option of Lender all monetary Obligations shall
be immediately due and payable and Lender shall have the right to terminate
this Agreement and to terminate the obligation of Lender to make or issue
Advances and (iii) a filing of a petition against Borrower in
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any involuntary case under any state or federal bankruptcy laws, the
obligations of Lender to make or issue Advances hereunder shall be terminated
other than as may be required by an appropriate order of the bankruptcy court
having jurisdiction over Borrower. Upon the occurrence of any Event of Default,
Lender shall have the right to exercise any and all other rights and remedies
provided for herein, under the Uniform Commercial Code and at law or equity
generally, including, without limitation, the right to foreclose the security
interests granted herein and to realize upon any Collateral by any available
judicial procedure and/or to take possession of and sell any or all of the
Collateral with or without judicial process. Lender may enter any of Borrower's
premises or other premises without legal process and without incurring
liability to Borrower therefor, and Lender may thereupon, or at any time
thereafter, in its discretion without notice or demand, take the Collateral and
remove the same to such place as Lender may deem advisable and Lender may
require Borrower to make the Collateral available to Lender at a convenient
place. With or without having the Collateral at the time or place of sale,
Lender may sell the Collateral, or any part thereof, at public or private sale,
at any time or place, in one or more sales, at such price or prices, and upon
such terms, either for cash, credit or future delivery, as Lender may elect.
Except as to that part of the Collateral which is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, Lender shall give Borrower reasonable notification of such sale or
sales, it being agreed that in all events written notice mailed to Borrower at
least five (5) days prior to such sale or sales is reasonable notification. At
any public sale Lender may bid for and become the purchaser, and Lender or any
other purchaser at any such sale thereafter shall hold the Collateral sold
absolutely free from any claim or right of whatsoever kind, including any
equity of redemption and such right and equity are hereby expressly waived and
released by Borrower. In connection with the exercise of the foregoing
remedies, Lender is granted permission, without charge, to use all of
Borrower's trademarks, trade styles, trade names, patents, patent applications,
licenses, franchises and other proprietary rights which are used in connection
with (a) Inventory for the purpose of disposing of such Inventory and (b)
Equipment for the purpose of completing the manufacture of unfinished goods.
The proceeds realized from the sale of any Collateral shall be applied as
follows: first, to the reasonable costs, expenses and attorneys' fees and
expenses incurred by Lender for collection and for acquisition, completion,
protection, removal, storage, sale and delivery of the Collateral; second, to
interest due upon any of the Obligations; and, third, to the principal of the
Obligations. If any deficiency shall arise because any monetary Obligations
shall remain outstanding after the application of such proceeds pursuant to
this Section 11.1, Borrower shall remain liable to Lender therefor until Fully
Satisfied.
Following the occurrence and during the continuation
of an Event of Default and upon termination of this Agreement
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pursuant to this Section 11.1, Borrower will cause cash to be deposited and
maintained in an account with Lender, as cash collateral, in an amount equal to
one hundred and five (105%) percent of the then outstanding Letters of Credit,
and Borrower hereby irrevocably authorizes Lender, in its discretion, on
Borrower's behalf and in Borrower's name, to open such an account and to make
and maintain deposits therein, or in an account opened by Borrower, in the
amounts required to be made by Borrower, out of the proceeds of Receivables or
other Collateral or out of any other funds of Borrower coming into Lender's
possession at any time. Lender will invest such cash collateral (less
applicable reserves) in such short-term money-market items as to which Lender
and Borrower mutually agree and the net return on such investments shall be
credited to such account and constitute additional cash collateral. Borrower
may not withdraw amounts credited to any such account except upon the
termination or expiration of all Letters of Credit and payment and performance
in full of all remaining Obligations relating to Letters of Credit.
11.2. Lender's Discretion. Lender shall have the right in
its sole discretion to determine which rights, Liens, security interests or
remedies Lender may at any time pursue, relinquish, subordinate, or modify or
to take any other action with respect thereto and such determination will not
in any way modify or affect any of Lender's rights hereunder.
11.3. Setoff. In addition to any other rights which
Lender may have under applicable law, upon the occurrence of an Event of
Default hereunder, Lender shall have a right to apply any of Borrower's
property held by Lender or by the Bank to reduce the Obligations.
11.4. Rights and Remedies not Exclusive. The enumeration
of the foregoing rights and remedies is not intended to be exhaustive and the
exercise of any right or remedy shall not preclude the exercise of any other
right or remedies provided for herein or otherwise provided by law, all of
which shall be cumulative and not alternative.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. Waiver of Notice. Borrower hereby waives notice of
non-payment of any of the Receivables, demand, presentment, protest and notice
thereof with respect to any and all instruments, notice of acceptance hereof,
notice of loans or advances made, credit extended, Collateral received or
delivered, or any other action taken in reliance hereon, and all other demands
and notices of any description, except such as are expressly provided for
herein.
12.2. Delay. No delay or omission on Lender's part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.
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12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND
EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1. Term. This Agreement, which shall inure to the
benefit of and shall be binding upon the respective successors and permitted
assigns of each of Borrower and Lender, shall become effective on the date
hereof and shall continue in full force and effect until the last day of the
Term unless sooner terminated as herein provided. The Term shall be
automatically extended for successive periods of one (1) year each unless
terminated by either party at the end of such Initial Term or any successive
Term by giving the other party ninety (90) days prior written notice. Borrower
may terminate this Agreement at any time upon ninety (90) days' prior written
notice upon the Obligations being Fully Satisfied. In the event the Obligations
are prepaid in full prior to the last day of the Term, Borrower shall pay an
early termination fee in an amount equal to 1% of the Maximum Revolving Advance
Amount; provided, that, if such prepayment is made in connection with the sale
of all or substantially all of the Borrower's assets, then Borrower shall pay
an early termination fee in an amount equal to 0.5% of the Maximum Revolving
Advance Amount.
13.2. Termination. The termination of this Agreement
shall not affect any of Borrower's or Lender's rights, or any of the
Obligations having their inception prior to the effective date of such
termination, and the provisions hereof shall continue to be fully operative
until all Obligations have been Fully Satisfied. The Liens and rights granted
to Lender hereunder and the financing statements filed hereunder shall continue
in full force and effect, notwithstanding the termination of this Agreement or
the fact that Borrower's Account may from time to time be temporarily in a zero
or credit position, until all of the Obligations are Fully Satisfied. At such
time as the Obligations are Fully Satisfied, (a) the Liens and rights granted
to Lender hereunder and the financing statements hereunder shall automatically
terminate and no longer be in effect, (b) the Collateral shall automatically be
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released from the Liens created hereby, and all rights to the Collateral shall
automatically revert to Borrower and (c) Lender shall execute and deliver, at
Borrower's expense, all such termination statements, releases and other
instruments as may be necessary or proper to effect the termination and release
of the Liens on the Collateral and (d) subject to Section 14.7 hereof, all
representations, warranties and covenants shall cease to apply and this
Agreement shall automatically terminate. Accordingly, solely to the extent that
any Obligations have not been Fully Satisfied, Borrower waives any rights which
it may have under Section 9-404(1) of the Uniform Commercial Code to demand the
filing of termination statements with respect to the Collateral, and Lender
shall not be required to send such termination statements to Borrower, or to
file them with any filing office, unless and until the Obligations are Fully
Satisfied. All representations, warranties, covenants, waivers and agreements
contained herein shall continue until all Obligations have been Fully
Satisfied.
XIV. MISCELLANEOUS.
14.1. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applied to
contracts to be performed wholly within the State of New York. Any judicial
proceeding brought by or against Borrower with respect to any of the
Obligations, this Agreement or any Other Document to which it is party may be
brought in any court of competent jurisdiction in the State of New York, United
States of America, except enforcement of the Mortgage which shall be brought in
the State of Washington, and, by execution and delivery of this Agreement,
Borrower accepts for itself and in connection with its properties, generally
and unconditionally, the non-exclusive jurisdiction of the aforesaid courts,
and irrevocably agrees to be bound by any judgment rendered thereby in
connection with this Agreement. Borrower hereby waives personal service of any
and all process upon it and consents that all such service of process may be
made by registered mail (return receipt requested) directed to Borrower at its
address set forth in Section 14.6 and service so made shall be deemed completed
five (5) days after the same shall have been so deposited in the mails of the
United States of America. Nothing herein shall affect the right to serve
process in any manner permitted by law or shall limit the right of Lender to
bring proceedings against Borrower in the courts of any other jurisdiction.
Borrower waives any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens. Any judicial
proceeding by Borrower against Lender involving, directly or indirectly, any
matter or claim in any way arising out of, related to or connected with this
Agreement or any related agreement, shall be brought only in a federal or state
court located in the City of New York, State of New York.
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14.2. Entire Understanding. This Agreement and the
documents executed concurrently herewith contain the entire understanding
between Borrower and Lender and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof. Any promises,
representations, warranties or guarantees not herein contained and hereinafter
made shall have no force and effect unless in writing, and executed by the
party making such representations, warranties or guarantees. Neither this
Agreement nor any portion or provisions hereof may be changed, modified,
amended, waived, supplemented, discharged, cancelled or terminated orally or by
any course of dealing, or in any manner other than by an agreement in writing,
signed by the party to be charged. Borrower acknowledges that it has been
advised by counsel in connection with the execution of this Agreement and Other
Documents to which it is a party and is not relying upon oral representations
or statements inconsistent with the terms and provisions of this Agreement.
14.3. Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure
to the benefit of Borrower, Lender and their respective successors and assigns,
except that Borrower may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of Lender.
(b) Lender may sell, assign or transfer all or any
part of its rights under this Agreement and the Note and all Other Documents to
one or more banks or financial institutions that have an office in the United
States of America provided Borrower is given prior notice of such sale and the
transferee agrees to perform the obligations of the transferor and become a
Lender hereunder; in addition to the foregoing, Borrower acknowledges that in
the regular course of commercial banking business Lender may at any time and
from time to time sell participating interests in the Advances to other
financial institutions (each such transferee or purchaser of a participating
interest, a "Transferee"). Each Transferee (other than a participant not known
to Borrower) may exercise all rights of payment (including without limitation
rights of set-off) with respect to the portion of such Advances held by it or
other Obligations payable hereunder as fully as if such Transferee were the
direct holder thereof provided, that, Borrower shall not be required to pay to
any Transferee more than the amount which it would have been required to pay to
Lender which granted an interest in its Advances or other Obligations payable
hereunder to such Transferee had such Lender retained such interest in the
Advances hereunder or other Obligations payable hereunder and in no event shall
Borrower be required to pay any such amount arising from the same circumstances
and with respect to the same Advances or other Obligations payable hereunder to
both Lender and such Transferee. Borrower hereby grants to any Transferee
(other than a participant not known to Borrower) a continuing security interest
in any deposits, moneys or other property actually or
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constructively held by such Transferee as security for the Transferee's
interest in the Advances.
14.4. Application of Payments. Lender shall have the
continuing and exclusive right to apply or reverse and re-apply any payment and
any and all proceeds of Collateral to any portion of the Obligations. To the
extent that Borrower makes a payment or Lender receives any payment or proceeds
of the Collateral for Borrower's benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid
to a trustee, debtor in possession, receiver, custodian or any other party
under any bankruptcy law, common law or equitable cause, then, to such extent,
the Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Lender.
14.5. Indemnity. Borrower shall indemnify Lender, and its
officers, employees and agents from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind or nature whatsoever (including, without
limitation, reasonable fees and disbursements of counsel) which may be imposed
on, incurred by, or asserted against Lender in any litigation, proceeding or
investigation instituted or conducted by any governmental agency or
instrumentality or any other Person with respect to any aspect of, or any
transaction contemplated by, or referred to in, or any matter related to, this
Agreement or the Other Documents, whether or not Lender is a party thereto,
except to the extent that any of the foregoing arises out of the willful
misconduct or gross (not mere) negligence of Lender.
14.6. Notice. Any notice or request hereunder may be
given to Borrower or to Lender at their respective addresses set forth below or
at such other address as may hereafter be specified in a notice designated as a
notice of change of address under this Section. Any notice or request hereunder
shall be given by (a) hand delivery, (b) overnight courier, (c) registered or
certified mail, return receipt requested or (d) telecopy to the number set out
below (or such other number as may hereafter be specified in a notice
designated as a notice of change of address) with electronic confirmation of
its receipt. Any notice or other communication required or permitted pursuant
to this Agreement shall be deemed given (a) when personally delivered to any
officer of the party to whom it is addressed, (b) on the earlier of actual
receipt thereof or three (3) days following posting thereof by certified or
registered mail, postage prepaid, or (c) upon actual receipt thereof when sent
by a recognized overnight delivery service or (d) upon actual receipt thereof
when sent by telecopier to the number set forth below with telephone
communication confirming receipt and subsequently confirmed by registered,
certified or overnight mail to the address set forth below, in each case
addressed to each party at its address set forth below or at such other address
as
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has been furnished in writing by a party to the other by like notice:
(A) If to Lender, at: The Bank of New York
Commercial Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to: Xxxx & Hessen LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(B) If to Borrower, at: O'Brien International, Inc.
Box 97020, 00000 XX 00xx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
and a copy to: Meridian Sports Incorporated
c/o MacAndrews & Forbes Holdings Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
14.7. Survival. The obligations of Borrower under
Sections 3.8, 3.9, 4.19(h) and 14.5 shall survive termination of this Agreement
and the Other Documents to which it is party and payment in full of the
Obligations.
14.8. Severability. If any part of this Agreement is
contrary to, prohibited by, or deemed invalid under applicable laws or
regulations, such provision shall be inapplicable and deemed omitted to the
extent so contrary, prohibited or invalid, but the remainder hereof shall not
be invalidated thereby and shall be given effect so far as possible.
14.9. Expenses. All costs and expenses including, without
limitation, reasonable attorneys' fees and disbursements incurred by Lender (a)
in all efforts made to enforce payment of any monetary Obligation or effect
collection of any Collateral, or (b) in connection with the entering into,
modification, amendment, administration and enforcement of this Agreement or
any consents or waivers hereunder and all Other Documents, or (c) in
instituting, maintaining, preserving, enforcing and foreclosing on Lender's
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security interest in or Lien on any of the Collateral, whether through judicial
proceedings or otherwise, or (d) in defending or prosecuting any actions or
proceedings arising out of or relating to Lender's transactions with Borrower,
or (e) in connection with any advice given to Lender with respect to its rights
and obligations under this Agreement and all Other Documents, may be charged to
Borrower's Account and shall be part of the Obligations.
14.10. Injunctive Relief. Borrower recognizes that, in the
event Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to Lender; therefore, Lender, if Lender so requests, shall be entitled
to temporary and permanent injunctive relief in any such case without the
necessity of proving that actual damages are not an adequate remedy.
14.11. Consequential Damages. Neither Lender nor any agent
or attorney for Lender shall be liable to Borrower for consequential damages
arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.
14.12. Captions. The captions at various places in this
Agreement are intended for convenience only and do not constitute and shall not
be interpreted as part of this Agreement.
14.13. Counterparts; Telecopied Signatures. This Agreement
may be executed in any number of and by different parties hereto on separate
counterparts, all of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any
signature delivered by a party by facsimile transmission shall be deemed to be
an original signature hereto.
14.14. Construction. The parties acknowledge that each
party and its counsel have reviewed this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments, schedules or exhibits thereto.
14.15. Confidentiality. Lender and each Transferee shall
hold all non-public information obtained by Lender or such Transferee pursuant
to the requirements of this Agreement in accordance with its customary
procedures for handling confidential information of this nature; provided,
however, Lender and each Transferee may disclose such confidential information
(a) to its examiners, affiliates, outside auditors, counsel and other
professional advisors, (b) to any prospective Transferees who agree to be bound
by this confidentiality provision, and (c) as required by any Governmental Body
or representative thereof or pursuant to legal process; provided, further, that
(i) unless specifically prohibited by applicable law or court order, Lender and
each
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Transferee shall use its best efforts prior to disclosure thereof, to notify
Borrower of the applicable request for disclosure of such non-public
information (A) by a Governmental Body or representative thereof (other than
any such request in connection with an examination of the financial condition
of Lender or a Transferee by such Governmental Body) or (B) pursuant to legal
process and (ii) in no event shall Lender or any Transferee be obligated to
return any materials furnished by any Borrower other than those documents and
instruments in possession of Lender in order to perfect its Lien on the
Collateral once the Obligations have been Fully Satisfied.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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Each of the parties has signed this Agreement as of the day and
year first above written.
O'BRIEN INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President
Box 97020
00000 XX 00xx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
By: /s/ Xxxxxx Xxxxxxxx
-----------------------------
Name: Xxxxxx Xxxxxxxx
Title: Vice President
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
AGREED AND CONSENTED TO SECTIONS
6.11, 6.13, 7.8(v) and 7.17
MERIDIAN SPORTS INCORPORATED
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President and Controller
-00-
XXXXX XX XXX XXXX )
) ss.
COUNTY OF NEW YORK )
On this 17th day of March, 1997, before me personally came Xxxxxx X.
Xxxxx, to me known, who, being by me duly sworn, did depose and say that he is
the Vice President of O'Brien International, Inc., the corporation described in
and which executed the foregoing instrument and that he signed his name thereto
by order of the board of directors of said corporation.
/s/ Xxxxxx X. Xxxxxxx
------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 17th day of March, 1997, before me personally came Xxxxxx
Xxxxxxxx, to me known, who, being by me duly sworn, did depose and say that he
is a Vice President of The Bank of New York Commercial Corporation, the
corporation described in and which executed the foregoing instrument and that
he signed his name thereto by order of the board of directors of said
corporation.
/s/ Xxxxxx X. Xxxxxxx
------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 17th day of March, 1997, before me personally came Xxxxxx X.
Xxxxx, to me known, who, being by me duly sworn, did depose and say that he is
the Vice President and Controller of Meridian Sports Incorporated, the
corporation described in and which executed the foregoing instrument and that
he signed his name thereto by order of the board of directors of said
corporation.
/s/ Xxxxxx X. Xxxxxxx
------------------------------
NOTARY PUBLIC
Exhibits and Schedules
(a) Exhibits
Exhibit 1.1 Kent Landlord Waiver
Exhibit 2.1 Note
Exhibit 2.8 Letter of Credit and Security Agreement
Exhibit 5.5(b) Cash Flow Projections and Balance Sheet
Exhibit 8.1(i) Financial Condition Certificate
(b) Schedules
Schedule 1.2 Permitted Encumbrances
Schedule 4.5 Locations of Equipment and Inventory
Schedule 4.19 Real Property
Schedule 5.2(a) Formation, Good Standing and Qualification
Schedule 5.2(b) Subsidiaries
Schedule 5.6 Trade Names
Schedule 5.7 Environmental Compliance
Schedule 5.8(b) Pending or Threatened Litigation
Schedule 5.8(d) Employee Plans
Schedule 5.9 Trademarks, Patents, Copyrights and Licenses
Schedule 5.10 Noncompliance with Licenses and Permits
Schedule 5.14 Labor Disputes
Schedule 7.8 Permitted Indebtedness
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