FINANCING AGREEMENT
THIS FINANCING AGREEMENT ("Agreement"), dated as of May 19, 1999, is by and
between IMPERIAL WORLD, INC. an Illinois corporation ("Imperial"), and XXXXXXXXX
CORP., an Illinois corporation ("Xxxxxxxxx", and together with Imperial,
collectively referred to as "Borrowers") with their principal place of business
at 0000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx 00000, BUSINESS ALLIANCE
CAPITAL CORP., a Delaware corporation ("Lender"), with its main office at 000 X.
Xxxxx, Xxxxx 000, Xxxxxxxxxx, XX 00000-0000.
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms. As used in this Agreement the following terms
shall have the following respective meanings:
"Accounts", "Equipment", "General Intangibles", "Goods", "Instruments", and
"Inventory", shall have the meanings as given to them in the Uniform Commercial
Code as currently adopted in the State of Illinois.
"Affiliate" shall mean, when used with reference to any Person, (a) each
Person that, directly or indirectly, controls, is controlled by or is under
common control with, the Person referred to, (b) each Person which beneficially
owns or holds, directly or indirectly, five percent or more of any class of
voting stock of the Person referred to (or if the Person referred to is not a
corporation, five percent or more of the equity interest), (c) each Person, five
percent or more of the voting stock (or if such Person is not a corporation,
five percent or more of the equity interest) of which is beneficially owned or
held, directly or indirectly, by the Person referred to, and (d) each of such
Person's officers, directors, joint ventures and partners, the term control
(including the terms "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of the Person in question.
"Annual Fee" shall be as defined in Section 2.8.
"Borrowing Base Certificate" shall be as defined in Section 2.2.
"Business Day" shall mean any day other than a Saturday, Sunday or legal
banking holiday in the State where Lender is located.
"Change in Control" shall mean the failure of IWI Holding Limited to own,
directly or indirectly, 100% of the equity securities of Imperial entitled to
vote in the election of directors of the failure of Imperial to own, directly or
indirectly, one hundred percent (100%) of the equity securities of Xxxxxxxxx
entitled to vote in the election of directors.
"Closing Date" shall mean the date of this Agreement; provided, that all
the conditions precedent to the making of the initial loans or advances, as set
forth in Article VI, have been, or, on such Closing Date, will be, satisfied.
"Eligible Accounts" shall mean Accounts owned by either Borrower which
Lender, in its sole and absolute discretion, deems eligible for advances, but
which, at a minimum, are subject to a first priority perfected security interest
in favor of Lender and not subject to any assignment, claim or Lien other than
the Lien in favor of Lender and other Liens consented to by Lender in writing,
but specifically excluding: (a) Accounts which are not earned by performance;
(b) Accounts owed by an account debtor where 20% or more of the Accounts due
from such account debtor are otherwise ineligible; (d) Accounts representing
progress xxxxxxxx, or retainages, or for work covered by any payment or
performance bond; (e) Accounts owed by any of either Borrower's Affiliates; (f)
Accounts owed by account debtors not located in the United States, unless
supported by a letter of credit has been delivered and assigned to Lender and is
in form and substance satisfactory to Lender; (g) Accounts as to which any
warranty or representation contained in any security agreement or other
agreement of a Borrower with or given to Lender with respect to any such Account
is untrue in any material respect; (h) Accounts as to which the account debtor
has disputed liability, or made any claim with respect to any other Account due
from such account debtor to the Borrower to who such account is owed; (i)
Accounts subject to setoff or counterclaim; (j) Accounts owed by any
governmental or governmental agency; (k) Accounts evidenced by a promissory note
or other instrument; and (l) Accounts which are not due and payable within one
hundred twenty (120) days of the date of the original invoice therefore: (m)
Accounts as to which Lender believes, for any reason, that collection is
doubtful including, without limitation, because of the account debtor's
insolvency or financial inability to pay.
"Eligible Inventory" shall mean Inventory of either Borrower which Lender,
in its sole and absolute discretion, deems eligible for advances, but which
meets the following minimum requirements: (a) it is owned by a Borrower, is
subject to a first priority perfected security interest in favor of Lender, and
is not subject to any assignment, claim or Lien other than (i) a Lien in favor
of Lender and (ii) Liens consented to by Lender in writing; (b) it consists of
raw materials or finished product (not including work in process and supplies);
(c) if held for sale or lease or furnishing under contracts of service, it is
(except as Lender may otherwise consent in writing) new and unused; (d) except
as Lender may otherwise consent, it is not stored with a bailee, warehousemen or
similar party; if so stored with Lender's consent, such bailee, warehousemen of
similar party has issued and delivered to Lender's consent such bailee,
warehousemen or similar party; if so stored with Lender's consent, such bailee,
warehousemen or similar party; if so stored with Lender's consent, such bailee,
warehousemen or similar party has issued and delivered to Lender, in form and
substance acceptable to Lender, such documents and agreements as Lender may
require including, without limitation, warehouse receipts therefor in Lender's
name; (e) Lender has determined, in its sole and absolute discretion, that it is
not unacceptable due to age, type, category, quality and/or quantity; (f) it is
not held by either Borrower on consignment and is not subject to any other
repurchase or return agreement; (g) it is not held by a customer of either
Borrower or any other Person on consignment; (h) it complies with all standards
imposed by any governmental agency having regulatory authority over such goods
and/or their use, manufacture or sale; and (i) the warranties, representations
and covenants contained in the Security Agreement or any other security
agreement or other agreement of Borrowers with or given to Lender relating
directly or indirectly to Borrowers' Inventory are applicable to it without
exception and are not being breached or violated.
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"Event of Default" shall have the meaning set forth in the Security
Agreement.
"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of any date of
determination.
"Guarantor" shall mean Xxxxxx X. Xxx.
"Guaranty" shall mean that certain Guaranty of even date herewith executed
by Guarantor in favor of Lender, unconditionally guarantying the payment and
performance of Borrower's Obligations.
"Loan Documents" shall mean all agreements, instruments and documents
including, without limitation, guaranties, mortgages, trust deeds, pledges,
powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements and all other writings heretofore, now
or from time to time hereafter executed by or on behalf of either Borrower or
any other Person and delivered to Lender or to any parent, affiliate or
subsidiary of Lender in connection with the Obligations or the transactions
contemplated hereby.
"Lien" shall mean, with respect to any Person, any security interest,
mortgage, pledge, lien, charge, encumbrance, title retention agreement or
analogous instrument or device (including the interest of each lessor under any
capitalized lease), in, of or on any assets or properties of such Person, now
owned or hereafter acquired, whether arising by agreement or operation of law.
"Maximum Facility" shall be as defined in Section 2.1(a).
"Obligations" shall have the meaning as set forth in the Security Agreement
and shall include, without limitation, all Revolving Loans to Borrowers.
"Person" shall mean any natural person, corporation, partnership, limited
partnership, joint venture, firm, association, trust, unincorporated
organization, government or governmental agency or political subdivision or any
other entity, whether acting in an individual, fiduciary or other capacity.
"Reference Rate" shall mean the rate of interest announced or pubished from
time to time by First Union National Bank, Philadelphia, PA, as its prime or
equivalent rate of interest ("Reference Rate"), which is not necessarily the
lowest rate of interest charged by First Union National Bank to its commercial
borrowers. For purposes of determining any interest rate hereunder which is
based on the Reference Rate, such interest rate shall change as and when the
Reference Rate changes.
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"Revolving Loans" shall be as defined in Section 2.1(a).
"Security Agreement" shall mean that Security Agreement of even date
herewith executed by Borrowers in favor of Lender.
Section 1.2 Accounting Terms and Calculations. Except as may be expressly
provided to the contrary herein, all accounting terms used herein shall be
interpreted and all accounting determinations hereunder shall be made in
accordance with GAAP.
Section 1.3 Other Definitional Terms, Terms of Construction. Terms not
otherwise defined herein shall have the meanings as ascribed to them in the
Security Agreement, which is expressly adopted hereby and incorporated herein.
All other incorporations by reference of covenants, terms, definitions or other
provisions from other agreements are incorporated into this Agreement as if such
provisions were fully set forth herein and include all necessary definitions and
related provisions from such other agreements. References, to Sections,
Exhibits, Schedules and the like are references to this Agreement unless
otherwise expressly provided.
ARTICLE II
TERMS OF LENDING
Section 2.1 Loans and Advances. On the terms and subject to the conditions
hereof, at Imperial's request, Lender, in its absolute and sole discretion and
without any commitment to do so, may make the following loans and advances
available to Imperial on behalf of Borrowers:
(a) Revolving Loans and Advances. Lender, in its sole discretion, may
make loans and advances to Borrowers of up to sixty-five percent (65%) of
the net amount of Eligible Accounts which are listed in Borrower's most
current Borrowing Base Certificate delivered to Lender and which are deemed
eligible for advances by Lender, or such greater or lesser percentage at
Lender's sole and absolute discretion, not to exceed a maximum amount of
$2,500,000 outstanding at any time, and up to thirty percent (30%) of the
lower of cost or market value of Eligible Inventory which is listed in
Borrower's most current Borrowing Base Certificate and which is deemed
eligible for advances by Lender, or such greater or lessor percentage at
Lender's sole and absolute discretion, not to exceed a maximum amount of
$750,000 outstanding at any time, provided however, such limit shall be
increased, at Borrowers' election, to $900,000 outstanding at any time for
a period of not more than sixty (60) consecutive days during each calendar
year ("Seasonal Increase"), but in any case, subject to such reserves as
Lender elects to establish from time to time in its sole discretion of
effectuate the terms and conditions set forth herein (and collectively, the
"Revolving Loans"). In no event shall the maximum amount of Revolving Loans
outstanding at any time exceed $2,500,000 ("Maximum Facility"). Section 2.2
Procedure for Advances, Wire Transfer Fees. Any request by Borrowers for an
advance shall be in writing and must be given so as to be received by
Lender not later than 10:30 a.m. Chicago time on the requested advance
date, or such later time as may be acceptable to Lender in its sole
discretion. Each request for a Revolving Loan shall be irrevocable and
shall be deemed a representation by Borrowers that on the requested advance
date and after giving effect to such advance the applicable conditions
specified in Article III have been and will continue to be satisfied and
the representations and warranties set forth in Article IV will continue to
be true. Each request for an advance shall specify the request for an
advance shall be accompanied by a Borrowing Base Certificate signed by a
duly authorized officer of each Borrower in form and substance satisfactory
to Lender ("Borrowing Base Certificate"). If Lender determines, in its
absolute and sole discretion, to make the requested advance, Lender will
wire transfer to a bank account designated by Borrowers on the requested
advance date the amount of the requested advance. Borrowers will pay to
Lender a wire transfer fee of $20.00 per wire transfer of any advance to
Borrower's account. If Lender elects to make an advance based upon a
request by Borrowers after 10:30 a.m. Chicago time, Borrowers will pay an
additional wire transfer fee as specified by Lender from time to time.
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Section 2.3 Interest Rates and Interest Payments. Interest shall accrue on
the unpaid balance of the Obligations at a floating rate per annum equal to the
sum of the Reference Rate plus three percent (3%) (the "Applicable Rate") and
shall be due and payable monthly in arrears on the last day of each calendar
month; provided, however, that upon the occurrence and during the continuance of
any Event of Default, the unpaid balance of the loans and advances shall
thereafter bear interest at a floating rate equal to the sum of (a) the
Applicable Rate, plus (b) 2% and shall be due and payable on demand; and
provided further that the minimum amount of interest due and payable in any
month shall not be less than the sum of $1,000,000 multiplied by the Applicable
Rate during such period.
Section 2.4 Repayment and Prepayment.
ALL LOANS AND ADVANCES SHALL BE DUE AND PAYABLE ON DEMAND. NOTHING SET
FORTH IN THIS AGREEMENT, THE SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENTS
BETWEEN BORROWERS AND LENDER SHALL IN ANY WAY LIMIT LENDER'S RIGHT TO DEMAND
PAYMENT OF THE OBLIGATIONS IN WHOLE OR IN PART.
Section 2.5 Computation. Interest on the Obligations shall be computed on
the basis of actual days elapsed and a year of 360 days.
Section 2.6 Closing Fee. Borrowers shall pay to Lender a closing fee in an
amount equal to one percent (1%) of the Maximum Facility payable in advance on
the Closing Date.
Section 2.7 Monitoring Fee. Borrowers shall pay Lender a monitoring fee,
monthly, in arrears, commencing on the first day of the first full month
following the Closing Date and on the first day of each month thereafter, and on
the date of demand for payment of the Obligations, equal to one-quarter of one
percent (.25%) of the average outstanding amount of the Revolving Loans during
the immediately preceding month.
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Section 2.8 Annual Fee. Borrowers shall pay to Lender and annual fee in an
amount equal to one percent (1%) of the Maximum Facility per year ("Annual
Fee"), payable on the first anniversary of the Closing Date and on each
anniversary of the Closing Date thereafter.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Borrowers represent and warrant to Lender that:
Section 3.1 Organization, Standing, Etc. Each Borrower is a corporation
duly incorporated and validly existing and in good standing under the laws of
the jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now conducted, to enter into this
Agreement and to perform its obligations hereunder and thereunder. This
Agreement has been duly authorized by all necessary corporate action and when
executed and delivered will be the legal and binding obligation of each
borrower. The execution and delivery of this Agreement or other Loan Documents
will not violate either Borrower's Articles of Incorporation or Bylaws or any
law or agreement applicable to either Borrower. No governmental consent or
exemption is required in connection with either Borrower's execution and
delivery of this Agreement.
Section 3.2 Financial Statements and No Material Adverse Change. IWI
Holding Limited's ("Holding") consolidated financial statements as at December
31, 1998 and its financial statement as at March 31, 1999, as heretofore
furnished to Lender, have been prepared in accordance with GAAP. Holding and
Borrowes have no material obligation or liability not disclosed in such
financial statements and there has been no material adverse change in the
condition of either Borrower or Holding since the dates of such financial
statements.
Section 3.3 Litigation. Except as set forth in Schedule 3.3 hereof, there
are no actions, suits or proceedings pending or, to the knowledge of Borrowers,
threatened against or affecting Holding or either Borrower which, if determined
adversely to Holding or such Borrower, would have, a material adverse effect on
the financial condition, business or operations of Borrowers or their ability to
repay the Obligations. Borrowers are not in violation of any law or regulation
(including environmental laws and regulations and laws relating to employee
benefit plans) where such violation could reasonably be expected to impose a
material liability on either Borrower.
Section 3.4 Taxes. Holding and Borrower have filed all federal, state and
local tax returns required to be filed and has paid or made provision for the
payment of all taxes due and payable pursuant to such returns and pursuant to
any assessments made against it or any of its property (other than taxes, fees
or charges the amount or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which reserves in
accordance with GAAP have been provided on the books of Holding or Borrowers).
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Section 3.5 Subsidiaries. Except for Xxxxxxxxx, which is a subsidiary of
Imperial, neither Borrower has any subsidiaries.
ARTICLE IV
AFFIRMATIVE COVENANTS
Until this Agreement shall have expired or been terminated and all of
Borrowers' Obligations to Lender shall have been paid in full, unless Lender
shall otherwise consent in writing:
Section 4.1 Financial Statements and Reports. Borrowers will furnish to
Lender:
(a) As soon as available and in any event within ninety (90) days
after the end of each fiscal year of Holding, audited consolidated
financial statements of Holding consisting of at least statements of
income, cash flow and changes in stockholders' equity, and a balance sheet
as at the end of such year, setting forth in each case in comparative form
corresponding figures from the previous fiscal year of Holding, together
with a report and opinion of Xxxxxxxx, Kallick & Bartelstein, or such other
independent certified public accountants selected by Borrowers and
acceptable to Lender.
(b) As soon as available and in any event within fifteen (15) days
after the end of fiscal month, unaudited consolidated financial statements
of Holding for such month and for the period from the beginning of such
fiscal year to the end of such month, substantially similar to the annual
audited statements.
(c) Concurrently with each request for a loan or advance, and in any
event not less than weekly, a Borrowing Base Certificate.
(d) As soon as practicable and in any event within fifteen (15) days
after the end of each month, (i) a listing of all Accounts, together with
an aging of all Accounts and a reconciliation of such Accounts against the
listing submitted pursuant hereto for the immediately preceding month, (ii)
a list of all Inventory, setting forth the fair market value and cost of
such Inventory and all sales, returns and allowances and miscellaneous
charges, and (iii) a listing of all accounts payable, together with an
aging of all accounts payable all in form and substance satisfactory to
Lender.
(e) As soon as filed, copies of all state and federal tax returns
filed by Holding, Borrowers and Guarantor, together with an updated
personal financial statements of Guarantor in form and substance
satisfactory to Lender as required by the Guaranty.
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(f) Within five (5) days after the due date, proof of payment or
deposit, when due, of all withholding and F.I.C.A. taxes owing by Holding
or Borrowers from time to time, in form and substance satisfactory to
Lender by a payroll service satisfactory to Lender and whose services
Holding and Borrowers shall at all times retain.
(g) From time to time, such other information regarding the business,
operation and financial condition of Holding or Borrowers as Lender may
reasonably request.
Section 4.2 Corporate Existence. Borrowers will maintain their corporate
existence in good standing under the laws of their jurisdiction of incorporation
and their qualification to transact business in each jurisdiction where failure
so to qualify would preclude Borrowers from enforcing their rights with respect
to any material asset or would expose Borrowers to any material liability.
Section 4.3 Insurance. Borrowers will maintain with financially sound and
reputable insurance companies such insurance as may be required by law and such
other insurance in such amounts and against such hazards as is customary in the
case of reputable corporations engaged in the same or similar business and
similarly situated including, without limitation, such insurance as may be
required under the Security Agreement.
Section 4.4 Payment of Taxes and Claims. Borrowers will file and will cause
Holding to file all tax returns and reports which are required by law to be
filed by them or Holding and will pay before they become delinquent, all taxes,
assessments and governmental charges and levies imposed upon them or Holding or
Borrowers' or Holdings' property and all claims or demands of any kind
(including those of suppliers, mechanics, carriers, warehousemen, landlords and
other like Persons) which, if unpaid, might result in the creation of a Lien
upon its property.
Section 4.5 Inspection. Borrowers will permit any Person designated by
Lender to visit and inspect any of the properties, books and financial records
of Borrowers, to examine and to make copies of the books of accounts and other
financial records of Borrowers, and to discuss the affairs, finances and
accounts of Borrowers with their officers at such reasonable times and intervals
as Lender may designate. Borrowers shall also allow Lender and its agents to
conduct periodic collateral audits of Borrowers' assets at such intervals as
Lender may choose, and Borrowers shall pay to Lender a fee in the amount of
$650.00 per day, per auditor, plus out-of-pocket costs and expenses incurred in
connection with such collateral audits, (provided, that so long as no Event of
Default has occurred and is continuing, Borrowers shall not be required to pay
for more than four (4) collateral audits in any calendar year).
Section 4.6 Maintenance of Properties. Borrowers will maintain its
properties in good condition, repair and working order, and supplied with all
necessary equipment, and make all necessary repairs, renewals, replacements,
betterments and improvements thereto, all as may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.
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Section 4.7 Books and Records. Borrowers will keep adequate and proper
records and books of account in which full and correct entries will be made of
their dealings, business and affairs.
Section 4.8 Compliance. Borrowers will comply in all material respects with
all laws, rules and regulations to which they may be subject.
Section 4.9 Notice of Litigation. Borrowers will give prompt written notice
to Lender of the commencement of any action, suit or proceeding affecting
Borrowers.
Section 4.10 Plans. Borrowers will maintain any employee benefit plans in
compliance with all material requirements of applicable laws and regulations.
Section 4.11 Reaffirmation of Guaranties. When so requested by Lender from
time to time, Borrowers will promptly cause Guarantor or any other Persons who
have guaranteed the obligations of Borrowers hereunder or any part thereof to
execute and deliver to Lender reaffirmations of their respective guaranties in
such form as Lender may require.
Section 4.12 Special Agreements Regarding Accounts.
(a) Collection of Accounts and all other amounts due to Borrowers
shall be subject to the provisions of paragraphs 3 and 4 of the Security
Agreement concerning the Lockbox and Collateral Account (as those terms are
defined in the Security Agreement). Borrowers shall provide to Lender a
daily collection report of all Accounts collected. All collections received
in the Collateral Account and reported to Lender before 2:00 p.m. Chicago
time on any Business Day shall be applied to the payment of loans and
advances (in such order of application as Lender may determine) on the day
so received, or otherwise on the next Business Day; provided however, that
for purposes of determining the interest due and payable on the unpaid
balance of the loans and advances under Section 2.3, all collections
received in the Collateral Account shall be applied to the unpaid balance
of the loans and advances when such collections become finally collected
funds after allowing not less than three (3) Business Days for collection.
At Lender's request, Borrowers will deliver all customer billing statements
to Lender for examination and for mailing in Borrower's stamped and
addressed envelopes.
(b) All ledger sheets or cards, invoices, shipping records,
correspondence and other writings relating to accounts shall, until
delivered to Lender or removed by Lender from Borrower's premises, be kept
on Borrower's premises without cost to Lender in appropriate containers in
safe places.
(c) Upon Lender's demand for payment of the Obligations, Lender may
remove from Borrower's premises all books and records, correspondence,
documents and files relating to accounts; and Lender may without cost or
expense to Lender use such of Borrower's personnel, supplies, space and
equipment at Borrower's place of business as Lender may desire for the
handling of collections. Borrowers will pay and all out-of-pocket expenses
and cost of collection (including reasonable attorney fees) incurred by
Lender in Lender's handling of or effort to enforce collections.
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4.13 Subordinate Debt. Borrowers shall cause any shareholders to which
Borrowers are indebted to subordinate the repayment of such indebtedness to the
repayment of the Obligations by written agreement in form and substance
acceptable to Lender.
ARTICLE V
NEGATIVE COVENANTS
Until this Agreement shall have expired or been terminated and all of
Borrowers' Obligations to Lender shall have been paid in full, unless Lender
shall otherwise consent in writing:
Section 5.1 Merger. Borrower will not merge or consolidate or enter into
any analogous reorganization or transaction with any Person or liquidate, wind
up or dissolve itself (or suffer any liquidation or dissolution).
Section 5.2 Sale of Assets. Borrower will not sell, transfer, lease or
otherwise convey all or any substantial part of their assets except for sales of
Inventory in the ordinary course of business.
Section 5.3 Dividends. Borrower will not pay any dividends or otherwise
make any distributions on, or redemptions of, any of their outstanding stock;
provided, however, that if Borrower shall be eligible and shall have elected "S"
Corporation status in accordance with Sections 1361 et seg. of the Internal
Revenue Code of 1986, as amended, for any fiscal year, Borrowers may pay
dividends on its capital stock to enable its shareholders to pay income taxes on
income of Borrowers for such fiscal year that it is taxable to the shareholder.
Section 5.4 Investment. Borrowers will not make any loans, advances or
extensions to credit to any other Person (except for trade and customer accounts
receivable for Inventory sold or services rendered in the ordinary course of
business and payable in accordance with customary trade terms) or purchase or
acquire any stock or other debt or equity securities of or any interest in any
other Person or any integral part of any business or the assets comprising such
business or part thereof, except for (a) investments in readily marketable
direct obligations issued or unconditionally guaranteed by the United States
government or any agency thereof and supported by the full faith and credit of
the United States or (b) certificates of deposit or bankers' acceptances issued
by any commercial bank organized under the laws of the United States or any
State thereof which has (i) combined capital and surplus of at least
$100,000,000 and (ii) a credit rating with respect to its unsecured indebtedness
from a nationally recognized rating service that is satisfactory to Lender.
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Section 5.5 Indebtedness. Borrowers will not borrow any money or issue any
bonds, debentures or other debt securities or otherwise become obligated on any
interest bearing indebtedness except for the loans and advances under this
Agreement, subordinated debt provided for in Section 4.13 and existing
indebtedness as disclosed on the most recent financial statement of Holding
referred to in Section 4.1.
Section 5.6 Liens. Borrowers will not create, incur, assume or suffer to
exist any Lien, or enter into any arrangement for the acquisition of any
property through conditional sale, lease-purchase or other title retention
agreements except for (a) Liens granted to Lender, (b) Liens existing on the
date of this Agreement and disclosed in those UCC or other Lien searches
referred to in Section 6.1 (a) (iv) which are consented to by Lender, (c)
deposits or pledges to secure payment of workers' compensation, unemployment
insurance, old age pensions or other social security obligations arising in the
ordinary course of business of Borrowers, (d) Liens for taxes, fees, assessments
and governmental charges not delinquent, (e) Liens of carriers, warehousemen,
mechanics and material men, and other like Liens arising in the ordinary course
of business, for sums not due, (f) Liens incurred or deposits or pledges made or
given in connection with, or to secure payment of, indemnity, performance or
other similar bonds, or (g) encumbrances in the nature of zoning restrictions,
easements and rights or restrictions of record on the use of real property.
Section 5.7 Contingent Obligations. Borrowers will not guaranty or
otherwise become liable on the indebtedness of any other Person.
Section 5.8 Change in Control. Borrowers will not allow a Change in Control
to occur.
Section 5.9 Advance Ratio. Borrowers shall not permit the ratio of the
outstanding principal amount of the Obligations representing Revolving Loans
against Eligible Inventory to the outstanding principal amount of the
Obligations representing Revolving Loans against Eligible Accounts to exceed (i)
.9 to .10 at any time when the Seasonal Increase is not in effect, and (ii) 1.5
to 1.0 at any time when the Seasonal Increase is in effect.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1 Conditions Precedent.
(a) The obligation of Lender to fund the Revolving Loans is subject to
the satisfaction or waiver on or before the Closing Date of the following
conditions precedent:
(i) Lender shall have received executed originals of each of the
Loan Documents, agreement, opinions, reports, approvals, consents,
certificates and other documents set forth on the closing document
list attached hereto as Schedule 6.1(a) in form and substance
acceptable to it in its sole discretion;
(ii) Since December 31, 1998, no event shall have occurred which
has had or could reasonably be expected to have a material adverse
effect on Holding or Borrowers' financial condition, operations or
ability to pay and perform the Obligations ("Material Adverse
Effect"), as determined by Lender in its sole discretion;
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(iii) Lender shall have received all fees and other amounts due
and payable by Borrowers on or prior to the Closing Date, including
the reasonable fees and expenses of counsel to Lender payable pursuant
to Section 8.2;
(iv) The Security Agreement and/or any and all financing
statements with respect thereto shall have been appropriately filed to
the satisfaction of Lender; Lender shall have received UCC searches
and/or other Lien searches satisfactory to Lender; and the priority
and perfection of the Liens created by the Security Agreement in favor
of Lender shall have been established to the satisfaction of Lender;
and
(v) Borrowers shall have available borrowing capacity under the
advance formulas set forth in Section 2.1(a) of not less than $250,000
after application of loan proceeds required to repay in full all
outstanding indebtedness secured by a Lien senior to the Lien of
Lender and to retain all outstanding vendor obligations in excess of
their required payment terms.
(b) After the Closing Date, the obligation of Lender to make any
requested Revolving Loans is subject to the satisfaction of the conditions
precedent set forth below. Each such request shall constitute a
representation and warranty that such conditions are satisfied:
(i) All representations and warranties contained in this
Agreement and the Loan Documents shall be true and correct on and as
of the date of such request, as if then made, other than
representations and warranties that relate solely to an earlier date;
(ii) No Event of Default shall then exist or would exist as a
result of the making of the requested loan or advance; and
(iii) Since December 31, 1998, no event has occurred which has
had or could reasonably be expected to have a Material Adverse Effect.
ARTICLE VII
TERMINATION BY BORROWERS
This agreement shall continue in effect until terminated upon the earliest
of (i) occurrence of an Event of Default, (ii) not less than thirty (30) days
prior written notice delivered by Borrowers to Lender by certified mail, (iii)
Lender's demand for payment of the Obligations, or (iv) payment by Borrowers of
any accrued obligations due to Borrowers' Affiliate, Rhine Jewelry Limited.
Termination shall not impair or affect Lender's rights existing as of the time
notice of Termination is given. Borrowers' obligations with respect to payment
of any termination fee shall be fixed and owing as of date such notice is given
and not when such notice becomes effective.
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In the event that Borrowers give notice to Lender of the termination of this
Agreement under this Section VII at any time prior to the second anniversary of
the date of this Agreement, Borrowers will pay to Lender a payment charge, as
additional compensation for Lender's costs of entering into this Agreement, in
the amount of (i) five percent (5%) of the Maximum Facility, if notice of
termination occurs prior to the first anniversary of the date of this Agreement;
and (ii) two percent (2%) of the Maximum Facility, if notice of termination
occurs on or after the first anniversary, but prior to the second anniversary of
the date of this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Modifications. Notwithstanding any provisions to the contrary
herein, any term of this Agreement may be amended with the written consent of
Borrowers; provided that no amendment, modification or waiver of any provision
of this Agreement or consent to any departure by Borrowers therefrom shall in
any event be effective unless the same shall be in writing and signed by Lender,
and then such amendment, modification, waiver or consent shall be effective only
in the specific instance and for the purpose for which given.
Section 8.2 Costs and Expenses. Whether or not the transactions
contemplated hereby are consummated, Borrowers agree to reimburse Lender upon
demand for all reasonable out-of-pocket expenses paid or incurred by Lender
(including filing and recording costs and fees and the fees and expenses of
Jenner & Block, counsel to Lender) in connection with the negotiation,
preparation, approval, review, execution, delivery, amendment, modification,
interpretation, collection and enforcement of this Agreement, including all fees
due Lender incurred pursuant to this Agreement. The obligations of Borrowers
under this Section shall survive any termination of this Agreement. In the event
such costs, fees or expenses are not promptly paid by Borrowers on demand,
Lender may set off the amount of any such costs, fees or expenses from funds
avaiable to Borrowers. If Lender elects, Lender may treat the amount of any such
costs, fees or expenses as a loan or advance hereunder.
Section 8.3 Waivers, etc. No failure on the part of Lender to exercise and
no delay in exercising any power or right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any power or right preclude
any other or further exercise thereof or the exercise of any other power or
right. The right and remedies of Lender hereunder are cumulative and not
exclusive of any right or remedy Lender otherwise has.
Section 8.4 Notices. Except when telephonic or other notice is expressly
authorized by this Agreement, any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the first page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four (4) days after the date of mailing if mailed; provided however,
that any notice to Lender under Article VII hereof shall be deemed to have been
given only when received by Lender.
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Section 8.5 Successors and Assigns: Disposition of Loans. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that Borrowers may not assign their
rights or delegate its obligations hereunder without the prior written consent
of Lender. Lender may at any time sell, assign, transfer, grant participations
in, or otherwise dispose of any portion of the loans or advances to banks or
other financial institutions. Lender may disclose any information regarding
Borrowers in Lender's possession to any prospective buyer or participant;
provided, however, such parties agree to maintain any non-public information
confidential.
Section 8.6 Offset. Borrowers hereby irrevocably authorize Lender to set
off all sums owing by Borrowers to Lender against all deposits and credits of
Borrowers with, and any and all claims of Borrowers against, Lender. Borrowers
further agree that any bank participating with Lender in loans or advances
hereunder may exercise any and all rights of setoff with respect to such
participation as fully as if such participant had lent directly to Borrowers the
amount of such participation.
Section 8.7 Governing Law and Constitution. THE VALIDITY, CONSTRUCTION AND
ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF ILLINOIS, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF.
Section 8.8 Consent to Jurisdiction. AT THE OPTION OF LENDER, THIS
AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR ILLINOIS STATE COURT SITTING
IN XXXX COUNTY ILLINOIS; AND BORROWERS CONSENT TO THE JURISDICTION AND VENUE OF
ANY SUCH COURT AND WAIVES ANY AGRUMENT THAT VENUE IN SUCH FORUMS IS NOT
CONVENIENT. IN THE EVENT BORROWERS COMMENCE ANY ACTION IN ANOTHER JURISDICTION
OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM
THE RELATIONSHIP CREATED BY THIS AGREEMENT, LENDER AT ITS OPTION SHALL BE
ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES
ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE
LAW, TO HAVE SUCH CASE DISMISSED WITHOUTH PREJUDICE.
Section 8.9 Waiver of Jury Trial. EACH OF BORROWERS AND LENDER IRREVOCABLY
WAIVES AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OUR
RELATING TO THIS AGREEMENT, THE LOANS AND ADVANCES AND ANY OTHER LOAN DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
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Section 8.10 Indemnification. Borrowers hereby agree to defend, protect,
indemnify and hold harmless Lender and its affiliates and the directors,
officers, employees, attorneys and agents of Lender and its affiliates (each of
the foregoing being an "Indemnitee" and all of the foregoing being collectively
the "Indemnitees") from and against any and all claims, actions, damages,
liabilities, judgements, costs and expenses (including all reasonable fees and
disbursements of counsel which may be incurred in the investigation or defense
of any matter) imposed upon, incurred by or asserted against any Indemnitee,
whether direct, indirect or consequential and whether based on any federal,
state, local or foreign laws or regulations (including securities laws,
environmental laws, commercial laws and regulations), under common law or on
equitable cause, or on contract or otherwise: (a) by reason of, relating to or
in connection with the execution , delivery, performance or enforcement of any
Loan Documents; or (b) by reason of, relating thereto, in connection with any
credit extended or used under the Loan Documents or any act done or omitted by
any Person, or the exercise of any rights or remedies thereunder, including the
acquisition of any collateral by Lender by way of foreclosure of the Lien
thereon, deed or xxxx of sale in lieu of such foreclosure or otherwise;
provided, however, that Borrowers shall not be liable to any Indemnitee for any
portion of such claims, damages, liabilities and expenses resulting from such
Indemnitee's gross negligence or willful misconduct. In the event this indemnity
is unenforceable as a matter of law as to a particular matter or consequence
referred to herein, it shall be enforceable to the full extent permitted by law.
Section 8.11 Captions. The captions or headings herein and any table of
contents hereto are for convenience only and in no way define, limit or describe
the scope or intent of any provisio of this Agreement.
Section 8.12 Entire Agreement. This Agreement and the other Loan Documents
embody the entire agreement and understanding between Borrowers and Lender with
respect to teh subject matter hereof and thereof. This Agreement supercedes all
prior agreements and understandings relating to the subject matter hereof.
Section 8.13 Counterparts. This Agreement may be executed in any number of
counteparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
IMPERIAL WORLD, INC.
By: /s/
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Title:President & CEO
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XXXXXXXXX CORP.
By: /s/
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Title:President
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BUSINESS ALLIANCE CAPITAL CORP.
By: /s/
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Title:Senior Vice President
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