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EXHIBIT
10.47
Loan Agreement, dated January 9, 1998, by and between
Congress Financial Corporation (Western), Angeles
Metal Trim Co. and Angeles Acquisition Corp.
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LOAN AND SECURITY AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION (WESTERN)
As Lender
And
ANGELES METAL TRIM CO.
AND
ANGELES ACQUISITION CORP.
As Borrower
Dated: January 9, 1998
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TABLE OF CONTENTS
PAGE(S)
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SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. CREDIT FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Revolving Loans . . . . . . . . . . . . . . . . . . . . . 11
2.2 Letter of Credit Accommodations . . . . . . . . . . . . . 13
2.3 Term Loan . . . . . . . . . . . . . . . . . . . . . . . . 15
2.4 Cap Ex Loans . . . . . . . . . . . . . . . . . . . . . . . 16
2.5 Separate Loans to Each Borrower . . . . . . . . . . . . . 16
SECTION 3. INTEREST AND FEES . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2 Closing Fee . . . . . . . . . . . . . . . . . . . . . . . 18
3.3 Servicing Fee . . . . . . . . . . . . . . . . . . . . . . 18
3.4 Compensation Adjustment . . . . . . . . . . . . . . . . . 18
3.5 Changes in Laws and Increased Costs of Loans . . . . . . . 19
SECTION 4. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . 20
4.1 Conditions Precedent to Initial Loans and Letter
of Credit Accommodations . . . . . . . . . . . . . . . . . 20
4.2 Conditions Precedent to All Loans and Letter
of Credit Accommodations . . . . . . . . . . . . . . . . . 24
SECTION 5. GRANT OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . 24
SECTION 6. COLLECTION AND ADMINISTRATION . . . . . . . . . . . . . . . . . . 25
6.1 Borrower's Loan Account . . . . . . . . . . . . . . . . . 25
6.2 Statements . . . . . . . . . . . . . . . . . . . . . . . . 25
6.3 Collection of Accounts . . . . . . . . . . . . . . . . . . 26
6.4 Payments . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.5 Authorization to Make Loans . . . . . . . . . . . . . . . 27
6.6 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7. COLLATERAL REPORTING AND COVENANTS . . . . . . . . . . . . . . . 28
7.1 Collateral Reporting . . . . . . . . . . . . . . . . . . . 28
7.2 Accounts Covenants . . . . . . . . . . . . . . . . . . . . 28
7.3 Inventory Covenants . . . . . . . . . . . . . . . . . . . 30
7.4 Equipment Covenants . . . . . . . . . . . . . . . . . . . 30
7.5 Power of Attorney . . . . . . . . . . . . . . . . . . . . 31
7.6 Right to Cure . . . . . . . . . . . . . . . . . . . . . . 32
7.7 Access to Premises . . . . . . . . . . . . . . . . . . . . 32
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TABLE OF CONTENTS
(continued)
PAGE(S)
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SECTION 8. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 32
8.1 Corporate Existence, Power and Authority . . . . . . . . 32
8.2 Financial Statements; No Material Adverse Change . . . . 33
8.3 Chief Executive Office; Collateral Locations . . . . . . 33
8.4 Priority of Liens; Title to Properties . . . . . . . . . 33
8.5 Tax Returns . . . . . . . . . . . . . . . . . . . . . . 33
8.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . 34
8.7 Compliance with Other Agreements and
Applicable Laws . . . . . . . . . . . . . . . . . . . . 34
8.8 Environmental Compliance . . . . . . . . . . . . . . . . 34
8.9 Employee Benefits . . . . . . . . . . . . . . . . . . . 35
8.10 Acquisition of Purchased Assets . . . . . . . . . . . . 35
8.11 Capitalization . . . . . . . . . . . . . . . . . . . . . 36
8.12 Accuracy and Completeness of Information . . . . . . . . 37
8.13 Survival of Warranties; Cumulative . . . . . . . . . . . 37
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS . . . . . . . . . . . . . . 37
9.1 Maintenance of Existence . . . . . . . . . . . . . . . . 37
9.2 New Collateral Locations . . . . . . . . . . . . . . . . 37
9.3 Compliance with Laws, Regulations . . . . . . . . . . . 38
9.4 Payment of Taxes and Claims . . . . . . . . . . . . . . 39
9.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . 39
9.6 Financial Statements and Other Information . . . . . . . 40
9.7 Sale of Assets, Consolidation, Merger,
Dissolution, Etc. . . . . . . . . . . . . . . . . . . . 41
9.8 Encumbrances . . . . . . . . . . . . . . . . . . . . . . 41
9.9 Indebtedness . . . . . . . . . . . . . . . . . . . . . . 42
9.10 Loans, Investments, Guarantees, Etc. . . . . . . . . . . 42
9.11 Dividends and Redemptions . . . . . . . . . . . . . . . 43
9.12 Transactions with Affiliates . . . . . . . . . . . . . . 43
9.13 Adjusted Net Worth . . . . . . . . . . . . . . . . . . . 43
9.14 Compliance with ERISA . . . . . . . . . . . . . . . . . 43
9.15 Costs and Expenses . . . . . . . . . . . . . . . . . . . 44
9.16 Further Assurances . . . . . . . . . . . . . . . . . . . 45
SECTION 10. EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . 45
10.1 Events of Default . . . . . . . . . . . . . . . . . . . 45
10.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND
CONSENTS; GOVERNING LAW . . . . . . . . . . . . . . . . . . . . 48
11.1 Governing Law; Choice of Forum; Service of
Process; Jury Trial Waiver . . . . . . . . . . . . . . . 48
11.2 Waiver of Notices . . . . . . . . . . . . . . . . . . . 49
11.3 Amendments and Waivers . . . . . . . . . . . . . . . . . 49
11.4 Waiver of Counterclaims . . . . . . . . . . . . . . . . 50
11.5 Indemnification . . . . . . . . . . . . . . . . . . . . 50
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TABLE OF CONTENTS
(continued)
PAGE(S)
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SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS . . . . . . . . . . . . . . . 50
12.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . 51
12.3 Partial Invalidity . . . . . . . . . . . . . . . . . . . 52
12.4 Successors . . . . . . . . . . . . . . . . . . . . . . . 52
12.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . 53
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Exhibit A Information Certificate
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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated January 9, 1998 is entered into by and
between CONGRESS FINANCIAL CORPORATION (WESTERN), a California corporation
("Lender") and ANGELES METAL TRIM CO. ("Angeles"), a California corporation,
and ANGELES ACQUISITION CORP. ("Acquisition Corp."), a Delaware corporation.
(Angeles and Acquisition Corp. are referred to herein jointly and severally as
"Borrower".)
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS.
All terms used herein which are defined in Article 1 or Article 9 of the
California Uniform Commercial Code shall have the respective meanings given
therein unless otherwise defined in this Agreement. All references to the
plural herein shall also mean the singular and to the singular shall also mean
the plural. All references to Borrower and Lender pursuant to the definitions
set forth in the recitals hereto, or to any other person herein, shall include
their respective successors and assigns. The words "hereof", "herein",
"hereunder", "this Agreement" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced.
An Event of Default shall exist or continue or be continuing until such Event
of Default is waived in accordance with Section 11.3. Any accounting term used
herein unless otherwise defined in this Agreement shall have the meaning
customarily given to such term in accordance with GAAP. For purposes of this
Agreement, the following terms shall have the respective meanings given to them
below:
1.A. "$3,500,000 Equity Condition" has the meaning set forth in
Section 1.28 below.
1.B. "Angeles Equity Contribution" has the meaning set forth in
Section 4.1(q) below.
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1.C. "Acquisition Equity Contribution" has the meaning set forth in
Section 4.1(q) below.
1.1 "Accounts" shall mean all present and future rights of Borrower
to payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b)
a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For
purposes hereof, "Reserve Percentage" shall mean the reserve percentage,
expressed as a decimal, prescribed by any United States or foreign banking
authority for determining the reserve requirement which is or would be
applicable to deposits of United States dollars in a non-United States or an
international banking office of Reference Bank used to fund a Eurodollar Rate
Loan or any Eurodollar Rate Loan made with the proceeds of such deposit,
whether or not the Reference Bank actually holds or has made any such deposits
or loans. The Adjusted Eurodollar Rate shall be adjusted on and as of the
effective day of any change in the Reserve Percentage.
1.3 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: (a) the difference between: (i) the aggregate net book value of all
assets of such Person and its subsidiaries, calculating the book value of
inventory for this purpose on a (x) first-in-first-out basis with respect to
Angeles and (y) an average cost basis with respect to Acquisition Corp. until
March 31, 1998 and on a first-in-first-out basis commencing April 1, 1998,
after deducting from such book values all appropriate reserves in accordance
with GAAP (including all reserves for doubtful receivables, obsolescence,
depreciation and amortization) and (ii) the aggregate amount of the
indebtedness and other liabilities of such Person and its subsidiaries
(including tax and other proper accruals) plus (b) indebtedness of such Person
and its subsidiaries which is subordinated in right of payment to the full and
final payment of all of the Obligations on terms and conditions acceptable to
Lender.
1.4 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time establish and
revise in good faith reducing the amount of Revolving Loans and Letter of
Credit Accommodations which would otherwise be available to Borrower under the
lending formula(s) provided for herein: (a) to reflect events, conditions,
contingencies or risks which, as determined by Lender in good faith, do or may
affect either (i) the Collateral or any other property which is security for
the Obligations or its value, (ii) the assets, business or prospects of
Borrower or any Obligor or (iii) the security interests and other rights of
Lender in the Collateral (including the enforceability, perfection and priority
thereof) or (b) to reflect
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Lender's good faith belief that any collateral report or financial information
furnished by or on behalf of Borrower or any Obligor to Lender is or may have
been incomplete, inaccurate or misleading in any material respect or (c) to
reflect any state of facts which Lender determines in good faith constitutes an
Event of Default or may, with notice or passage of time or both, constitute an
Event of Default. Without limiting the generality of the foregoing, Lender (i)
shall establish on the date hereof and maintain throughout the term of this
Agreement and throughout any renewal term an Availability Reserve for an amount
equal to three (3) months of Borrower's gross rent and other obligations as
lessee for each leased premises of Borrower which is located in a state where a
landlord may be entitled to a priority lien on Collateral to secure unpaid rent
and with respect to each such property the landlord has not executed a form of
waiver and consent acceptable to Lender, (ii) may establish an additional
Availability Reserve on the date hereof, and from time to time hereafter, and
maintain such reserve throughout the term of this Agreement and throughout any
renewal term in an amount determined by Lender in its discretion to be
sufficient to cover the anticipated moving expenses and other costs associated
with the transfer of Inventory from each of Borrower's locations to another
location acceptable to Lender, and (iii) may establish and maintain an
additional Availability Reserve from time to time to compensate for any
increase in the percentage of Inventory represented by slow moving Inventory.
1.5 "Blocked Account" shall have the meaning set forth in Section 6.3
hereof.
1.6 "Business Day" shall mean any day other than a Saturday, Sunday,
or other day on which commercial banks are authorized or required to close
under the laws of the State of New York or the Commonwealth of Pennsylvania,
and a day on which the Reference Bank and Lender are open for the transaction
of business, except that if a determination of a Business Day shall relate to
any Eurodollar Rate Loans, the term Business Day shall also exclude any day on
which banks are closed for dealings in dollar deposits in the London interbank
market or other applicable Eurodollar Rate market.
1.7 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.8 "Collateral" shall have the meaning set forth in Section 5
hereof.
1.9 "Eligible Accounts" shall mean Accounts created by Borrower which
are and continue to be acceptable to Lender based on the criteria set forth
below. In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
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(b) such Accounts are not unpaid more than ninety (90) days
after the date of the original invoice for them or more than sixty (60) days
after the original due date thereof;
(c) such Accounts comply with the terms and conditions
contained in Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with
respect to such Accounts is located in the United States of America or Canada,
or, at Lender's option, if either: (i) the account debtor has delivered to
Borrower an irrevocable letter of credit issued or confirmed by a bank in the
United States satisfactory to Lender, sufficient to cover such Account, payable
in the United States of America and in U.S. Dollars, in form and substance
satisfactory to Lender and, if required by Lender, the original of such letter
of credit has been delivered to Lender or Lender's agent and the issuer thereof
notified of the assignment of the proceeds of such letter of credit to Lender,
or (ii) such Account is subject to credit insurance payable to Lender issued by
an insurer and on terms and in an amount acceptable to Lender, or (iii) such
Account is otherwise acceptable in all respects to Lender including, but not
limited to, the creditworthiness of the account debtor and the political risk
associated therewith, and the ability of the Lender to collect the foreign
Account, subject to such lending formulas with respect to each foreign Account
as Lender may determine, and each such foreign Account is payable to Borrower
at a location in the United States of America and in U.S. Dollars;
(f) such Accounts do not consist of progress xxxxxxxx, xxxx
and hold invoices or retainage invoices, except as to xxxx and hold invoices,
if Lender shall have received an agreement in writing from the account debtor,
in form and substance satisfactory to Lender, confirming the unconditional
obligation of the account debtor to take the goods related thereto and pay such
invoice;
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff against such
Accounts;
(h) there are no facts, events or occurrences which would
impair the validity, enforceability or collectability of such Accounts or
reduce the amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are
not, and were not at the time of the sale thereof, subject to any liens except
those permitted in this Agreement;
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(j) neither the account debtor nor any officer, director or
10% or more shareholder of the account debtor with respect to such Accounts is
an officer, employee or agent of or affiliated with Borrower directly or
indirectly by virtue of family membership, ownership, control, management or
otherwise;
(k) the account debtors with respect to such Accounts are not
any foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any
similar State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(l) there are no proceedings or actions which are threatened
or pending against the account debtors with respect to such Accounts which
might result in any material adverse change in any such account debtor's
financial condition;
(m) such Accounts of a single account debtor or its affiliates
do not constitute more than twenty (20%) percent of all otherwise Eligible
Accounts (but the portion of the Accounts not in excess of such percentage may
be deemed Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has
Accounts unpaid more than ninety (90) days after the date of the original
invoice for them or more than sixty (60) days after the original due date
thereof, which constitute more than fifty percent (50%) of the total Accounts
of such account debtor;
(o) such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the credit limit with respect to such
account debtors as determined by Lender from time to time (but the portion of
the Accounts not in excess of such credit limit may still be deemed Eligible
Accounts); and
(p) such Accounts are owed by account debtors deemed
creditworthy at all times by Lender, as determined by Lender.
General criteria for Eligible Accounts may be established and
revised from time to time by Lender in good faith. Any Accounts which are not
Eligible Accounts shall nevertheless be part of the Collateral.
1.10 "Eligible Inventory" shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of Borrower and
raw materials for such finished goods which are acceptable to Lender based on
the criteria set forth below. In general, Eligible Inventory shall not include
(a) work-in-process (except that Unprocessed WIP Raw Materials (as defined in
Section 2.1(a)) may be included in Eligible Inventory, but Revolving Loans with
respect to the same shall be limited as set forth in Section 2.1(a)); (b)
components which are not part of finished goods; (c) spare
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parts for equipment; (d) packaging and shipping materials; (e) supplies used or
consumed in Borrower's business; (f) Inventory at premises other than those
owned and controlled by Borrower, except if Lender shall have received an
agreement in writing from the person in possession of such Inventory and/or the
owner or operator of such premises in form and substance satisfactory to Lender
acknowledging Lender's first priority security interest in the Inventory,
waiving security interests and claims by such person against the Inventory and
permitting Lender access to, and the right to remain on, the premises so as to
exercise Lender's rights and remedies and otherwise deal with the Collateral;
(g) Inventory in-transit (other than Inventory located in the United States to
which Borrower has title); (h) Inventory subject to a security interest or lien
in favor of any person other than Lender except those permitted in this
Agreement; (i) xxxx and hold goods; (j) unserviceable, obsolete or slow moving
Inventory; (k) Inventory which is not subject to the first priority, valid and
perfected security interest of Lender; (l) damaged and/or defective Inventory;
(m) Inventory purchased or sold on consignment; or (n) remnants or scrap metal
or customized inventory. General criteria for Eligible Inventory may be
established and revised from time to time by Lender in good faith. Any
Inventory which is not Eligible Inventory shall nevertheless be part of the
Collateral.
1.11 "Environmental Laws" shall mean all federal, state, district,
local and foreign laws, rules, regulations, ordinances, and consent decrees
relating to health, safety, hazardous substances, pollution and environmental
matters, as now or at any time hereafter in effect, applicable to Borrower's
business and facilities (whether or not owned by it), including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contamination, chemicals, or hazardous, toxic or dangerous substances,
materials or wastes into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata) or
otherwise relating to the generation, manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals, or hazardous, toxic or dangerous substances, materials
or wastes.
1.12 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used
in connection therewith, and substitutions and replacements thereof, wherever
located.
1.13 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.14 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its affiliates under Sections 414(b), 414(c), 414(m) or
414(o) of the Code.
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1.15 "Eurodollar Rate Loans" shall mean any Loans or portion thereof
on which interest is payable based on the Adjusted Eurodollar Rate in
accordance with the terms hereof.
1.16 "Eurodollar Rate" shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to Borrower in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrower.
1.17 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.18 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of: (i) the amount of
the Revolving Loans available to Borrower as of such time based on the
applicable lender formulas multiplied by the Net Amount of Eligible Accounts
and the Value of Eligible Inventory, as determined by Lender, and subject to
the sublimits and Availability Reserves from time to time established by Lender
hereunder, and (ii) the Maximum Credit (less the then outstanding principal
amount of the Term Loans), minus (b) the sum of: (i) the amount of all then
outstanding and unpaid Obligations (but not including for this purpose the then
outstanding principal amount of the Term Loans), (ii) the aggregate amount of
all then outstanding and unpaid trade payables of Borrower which are more than
sixty (60) days past due as of such time, (iii) the aggregate amount of
Borrower's book overdrafts, and (iv) the aggregate amount of payments 30 days
or more past due on Borrower's lease and notes payable.
1.19 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by
Borrower or any Obligor in connection with this Agreement, as the same now
exist or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.20 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except
that, for purposes of Section 9.13 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof
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and consistent with those used in the preparation of the audited financial
statements delivered to Lender prior to the date hereof.
1.21 "Hazardous Materials" shall mean any hazardous, toxic or
dangerous substances, materials and wastes, including, without limitation,
hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, biological substances, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants (including, without limitation, materials which include hazardous
constituents), sewage, sludge, industrial slag, solvents and/or any other
similar substances, materials, or wastes and including any other substances,
materials or wastes that are or become regulated under any Environmental Law
(including, without limitation any that are or become classified as hazardous
or toxic under any Environmental Law).
1.22 "Information Certificate" shall mean the Information Certificate
of Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.23 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as
Borrower may elect, the exact duration to be determined in accordance with the
customary practice in the applicable Eurodollar Rate market; provided, that,
Borrower may not elect an Interest Period which will end after the last day of
the then-current term of this Agreement.
1.24 "Interest Rate" shall mean, as to Prime Rate Loans, a rate of
three quarters of one percent (0.75%) per annum in excess of the Prime Rate
and, as to Eurodollar Rate Loans, a rate of two and three quarters percent
(2.75%) per annum in excess of the Adjusted Eurodollar Rate (based on the
Eurodollar Rate applicable for the Interest Period selected by Borrower as in
effect three (3) Business Days after the date of receipt by Lender of the
request of Borrower for such Eurodollar Rate Loans in accordance with the terms
hereof, whether such rate is higher or lower than any rate previously quoted to
Borrower); provided, that, the Interest Rate shall mean the rate of 2.75% per
annum in excess of the Prime Rate as to all Loans (whether a Prime Rate Loan or
a Eurodollar Rate Loan), at Lender's option, without notice, (a) for the period
(i) from and after the date of termination or non-renewal hereof until Lender
has received full and final payment of all obligations (notwithstanding entry
of a judgment against Borrower) and (ii) from and after the date of the
occurrence of an Event of Default for so long as such Event of Default is
continuing as determined by Lender, and (b) on the Revolving Loans at any time
outstanding in excess of the amounts available to Borrower under Section 2
(whether or not such excess(es), arise or are made with or without Lender's
knowledge or consent and whether made before or after an Event of Default).
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1.25 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.26 "Letter of Credit Accommodations" shall mean the letters of
credit, merchandise purchase or other guaranties which are from time to time
either (a) issued, opened or provided by Lender for the account of Borrower or
any Obligor or (b) with respect to which Lender has agreed to indemnify the
issuer or guaranteed to the issuer the performance by Borrower of its
obligations to such issuer.
1.27 "Loans" shall mean the Revolving Loans, the Cap Ex Loans and the
Term Loans.
1.28 "Maximum Credit" shall mean the amount of $15,000,000; provided
that at such time as Borrower receives net cash proceeds of the issuance of
equity securities by Borrower after the date hereof in an amount not less than
$3,500,000 (in addition to the sums referred to in Section 4.1(q) below) and
provides Lender with evidence of the same satisfactory to Lender in its
discretion (the "$3,500,000 Equity Condition"), the "Maximum Credit" shall be
increased to $20,000,000. Borrower shall cause the $3,500,000 Equity Condition
to be satisfied within 12 months after the date hereof.
1.29 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the
amount thereof and (b) returns, discounts, claims, credits and allowances of
any nature at any time issued, owing, granted, outstanding, available or
claimed with respect thereto.
1.30 "Obligations" shall mean any and all Revolving Loans, the Cap Ex
Loans, the Term Loans, Letter of Credit Accommodations and all other
obligations, liabilities and indebtedness of every kind, nature and description
owing by Borrower to Lender and/or its affiliates, including principal,
interest, charges, fees, costs and expenses, however evidenced, whether as
principal, surety, endorser, guarantor or otherwise, whether arising under this
Agreement or otherwise, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of this
Agreement or after the commencement of any case with respect to Borrower under
the United States Bankruptcy Code or any similar statute (including, without
limitation, the payment of interest and other amounts which would accrue and
become due but for the commencement of such case), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or unsecured, and however acquired by
Lender.
1.31 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner
of any property which is security for the Obligations, other than Borrower.
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1.32 "Participant" shall mean any person which at any time
participates with Lender in respect of the Loans, the Letter of Credit
Accommodations or other Obligations or any portion thereof.
1.33 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.34 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including, without limitation, any
corporation which elects subchapter S status under the Internal Revenue Code of
1986, as amended), business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.35 "Prime Rate" shall mean the rate from time to time publicly
announced by CoreStates Bank, N.A., or its successors, at its office in
Philadelphia, Pennsylvania, as its prime rate, whether or not such announced
rate is the best rate available at such bank.
1.36 "Prime Rate Loans" any Loans or portion thereof on which interest
is payable based on the Prime Rate in accordance with the terms hereof. All
Loans shall be Prime Rate Loans until changed to Eurodollar Loans in accordance
with the terms hereof.
1.37 "Purchase Agreements" shall mean, individually and collectively,
the Asset Purchase Agreement, dated as of January 9, 1998, among Acquisition
Corp., Seller, and certain other parties, together with bills of sale,
quitclaim deeds, assignment and assumption agreements and such other
instruments of transfer as are referred to therein and all side letters with
respect thereto, and all agreements, documents and instruments executed and/or
delivered in connection therewith, as all of the foregoing now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced; provided, that, the term "Purchase Agreements" as used herein shall
not include any of the "Financing Agreements" as such term is defined herein.
1.38 "Purchased Assets" shall mean all of the assets and properties
acquired by Acquisition Corp. from Seller pursuant to the Purchase Agreements.
1.39 "Records" shall mean all of Borrower's present and future books
of account of every kind or nature, purchase and sale agreements, invoices,
ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of Borrower with
respect to the foregoing maintained with or by any other person).
1.39 "Reference Bank" shall mean CoreStates Bank, N.A., or such other
bank as Lender may from time to time designate.
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1.40 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.41 "Seller" shall mean Capitol Metals Co., Inc., a California
corporation, and its successors and assigns.
1.42 "Tangible Net Worth" shall mean Adjusted Net Worth, excluding
however all assets which would be classified as intangible assets under GAAP,
including without limitation goodwill, licenses, patents, trademarks, trade
names, copyrights, capitalized software and organizational costs, licences and
franchises.
1.43 "Term Loans" shall mean the term loans made by Lender to Borrower
as provided for in Section 2.3 hereof, and the $150,000 term loan referred to
in Section 2.0(c) below.
1.44 "Unprocessed WIP Raw Materials" has the meaning set forth in
Section 2.1(a) below.
1.45 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a (x) first-in-first-
out basis with respect to Angeles and (y) an average cost basis with respect
to Acquisition Corp. until December 31, 1997 and on a first-in-first-out basis
commencing January 1, 1998, in accordance with GAAP or (b) market value.
SECTION 2. CREDIT FACILITIES.
2.0 Assumption.
(a) Concurrently, Acquisition Corp. is purchasing all of the
assets of the Seller as set forth in the Purchase Agreements. Acquisition
Corp. hereby assumes and agrees to pay and perform when due for the benefit of
Lender the entire unpaid principal balance of all indebtedness, liabilities and
obligations of the Seller to Lender, including without limitation all accrued
and unpaid interest thereon and all costs and expenses incurred in connection
therewith. Acquisition Corp. acknowledges that the present unpaid principal
balance of the said indebtedness, including interest accrued through January
12, 1998, is $4,700,043.61 (which figure is subject to change), plus fees,
costs and expenses including without limitation attorneys' fees in accordance
with the Loan Agreement and other documents between Seller and Lender
(collectively, the "Assumed Indebtedness").
(b) As used herein, "Overadvance" means the amount of the
Assumed Indebtedness in excess of the total of (i) the Loans available to
Acquisition Corp. under Section 2.1 below plus (ii) the Term Loan to
Acquisition Corp. under Section 2.3 below (less the "Omitted Equipment Reserve"
as defined therein), plus (iii) the attorneys fees
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incurred by Lender for the months of December, 1997 and January, 1998 and
included in the Assumed Indebtedness (the "Deferred Costs").
(c) Concurrently, Acquisition Corp. shall (i) pay Lender an
amount sufficient to reduce the Overadvance to $200,000 and (ii) execute and
deliver to Lender a promissory note in the amount of said $200,000, payable
$20,000 per month principal plus interest, in such form as Lender shall
specify.
(d) Acquisition Corp. shall pay the Deferred Costs to Lender
(plus accrued interest thereon from the date incurred) on November 9, 1998.
(e) The balance of the Assumed Indebtedness shall constitute
the opening balance of the Loans to Acquisition Corp. under Section 2.1 below
and the Term Loan to Acquisition Corp. under Section 2.3 below.
2.1 Revolving Loans.
(a) Subject to, and upon the terms and conditions contained
herein, Lender agrees to make Revolving Loans to Borrower from time to time in
amounts requested by Borrower up to the amount equal to the sum of:
(i) 85% percent of the Net Amount of Eligible Accounts,
plus
(ii) the lesser of:
(A) the following percentages (the "Inventory
Advance Rates"): sum of 67% of the Value of Eligible Inventory in the case of
Acquisition Corp., or 57% of the Value of Eligible Inventory in the case of
Angeles; provided that in all cases the Inventory Advance Rate with respect to
unprocessed raw materials included in work in process ("Unprocessed WIP Raw
Materials") shall be 30%; or
(B) 85% of the orderly liquidation value of
Eligible Inventory as determined by an independent appraisal firm acceptable to
Lender, net of expenses which would be incurred in such a liquidation as
determined by Lender; or
(C) the amount equal to: (1) $10,000,000 minus (2)
the applicable Inventory Advance Rate multiplied by the then undrawn amounts of
the outstanding Letter of Credit Accommodations for the purpose of purchasing
goods, less
(iii) any Availability Reserves, and less
(iv) the $750,000 Reserve under Section 4.1(s) (if
applicable).
Notwithstanding the foregoing, Revolving Loans with respect to Unprocessed WIP
Raw Materials shall not exceed $100,000 at any time outstanding. Borrower
shall separately report to Lender Unprocessed WIP Raw Materials on all
Inventory reports to Lender in a manner acceptable to Lender in its discretion.
Notwithstanding anything
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herein to the contrary, Unprocessed WIP Raw Materials shall not be considered
Eligible Inventory, and Loans will not be made with respect thereto, until
Borrower as put in place a perpetual inventory system acceptable to Lender in
its discretion.
The Inventory Advance Rate with respect to Acquisition Corp. shall be reduced
by one percentage point per month, commencing one month after the date hereof,
until it is reduced to 61%.
Borrower may request an appraisal of the orderly liquidation value of Eligible
Inventory, as provided above in Section 2.1(a)(ii)(B) no more frequently than
semi-annually.
(b) Lender may, in its discretion, from time to time, upon not
less than five (5) days prior notice to Borrower, (i) reduce the lending
formula with respect to Eligible Accounts to the extent that Lender determines
in good faith that: (A) the dilution with respect to the Accounts for any
period (based on the ratio of (1) the aggregate amount of reductions in
Accounts other than as a result of payments in cash to (2) the aggregate amount
of total sales) has increased in any material respect or may be reasonably
anticipated to increase in any material respect above historical levels, or (B)
the general creditworthiness of account debtors has declined or (ii) reduce the
lending formula(s) with respect to Eligible Inventory to the extent that Lender
determines that: (A) the number of days of the turnover, or the mix, of the
Inventory for any period has changed in any material respect or (B) the
liquidation value of the Eligible Inventory, or any category thereof, has
decreased, or (C) the nature and quality of the Inventory has deteriorated in
any material respect. In determining whether to reduce the lending formula(s),
Lender may consider events, conditions, contingencies or risks which are also
considered in determining Eligible Accounts, Eligible Inventory or in
establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the
Loans, the Letter of Credit Accommodations and other Obligations outstanding at
any time shall not exceed the Maximum Credit. In the event that the
outstanding amount of any component of the Loans, or the aggregate amount of
the outstanding Loans, Letter of Credit Accommodations and other Obligations
exceed the amounts available under the lending formulas set forth in Section
2.1(a) hereof, the sublimits for Letter of Credit Accommodations set forth in
Section 2.2(c) or the Maximum Credit, as applicable, such event shall not
limit, waive or otherwise affect any rights of Lender in that circumstance or
on any future occasions and Borrower shall, upon demand by Lender, which may be
made at any time or from time to time, immediately repay to Lender the entire
amount of any such excess(es) for which payment is demanded.
2.2 Letter of Credit Accommodations.
(a) Subject to, and upon the terms and conditions contained
herein, at the request of Borrower, Lender agrees to provide or arrange for
Letter of Credit Accommodations for the account of Borrower containing terms
and conditions
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acceptable to Lender and the issuer thereof. Any payments made by Lender to
any issuer thereof and/or related parties in connection with the Letter of
Credit Accommodations shall constitute additional Revolving Loans to Borrower
pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by
any bank or issuer in connection with the Letter of Credit Accommodations,
Borrower shall pay to Lender a letter of credit fee at a rate equal to one
percent (1%) per annum on the daily outstanding balance of the Letter of Credit
Accommodations for the immediately preceding month (or part thereof), payable
in arrears as of the first day of each succeeding month; provided, however,
that such letter of credit fee shall be increased, at Lender's option, without
notice, to three percent (3%) per annum for the period on or after the date of
termination or non-renewal of this Agreement, or the date of the occurrence of
an Event of Default. Such letter of credit fee shall be calculated on the
basis of a three hundred sixty (360) day year and actual days elapsed and the
obligation of Borrower to pay such fee shall survive the termination or non-
renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available
unless on the date of the proposed issuance of any Letter of Credit
Accommodations, the Revolving Loans available to Borrower (subject to the
Maximum Credit and any Availability Reserves) are equal to or greater than: (i)
if the proposed Letter of Credit Accommodation is for the purpose of purchasing
Eligible Inventory, the sum of (A) the product of the Value of such Eligible
Inventory multiplied by an amount equal to one minus the then applicable
Inventory Advance Rate under Section 2.1(a)(ii)(A), plus (B) freight, taxes,
duty and other amounts which Lender estimates must be paid in connection with
such Inventory upon arrival and for delivery to one of Borrower's locations for
Eligible Inventory within the United States of America and (ii) if the proposed
Letter of Credit Accommodation is for standby letters of credit guaranteeing
the purchase of Eligible Inventory or for any other purpose, an amount equal to
one hundred (100%) percent of the face amount thereof and all other commitments
and obligations made or incurred by Lender with respect thereto. Effective on
the issuance of each Letter of Credit Accommodation, the amount of Revolving
Loans which might otherwise be available to Borrower shall be reduced by the
applicable amount set forth in Section 2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, (i) the amount of all
outstanding Letter of Credit Accommodations and all other commitments and
obligations made or incurred by Lender in connection therewith, shall not at
any time exceed $2,000,000 and (ii) the amount of all outstanding Letter of
Credit Accommodations for the purpose of purchasing Eligible Inventory and all
other commitments and obligations made or incurred by Lender in connection
therewith shall not at any time exceed: (A) $10,000,000 minus (B) the amount of
the then outstanding Revolving Loans based on Eligible Inventory pursuant to
Section 2.1(a)(ii) hereof. At any time an Event of Default exists or has
occurred and is continuing, upon Lender's request, Borrower will either furnish
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cash collateral to secure the reimbursement obligations to the issuer in
connection with any Letter of Credit Accommodations or furnish cash collateral
to Lender for the Letter of Credit Accommodations, and in either case, the
Revolving Loans otherwise available to Borrower shall not be reduced as
provided in Section 2.2(c) to the extent of such cash collateral.
(e) Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, any losses, claims, damages, liabilities, costs
and expenses due to any action taken by any issuer or correspondent with
respect to any Letter of Credit Accommodation. Borrower assumes all risks with
respect to the acts or omissions of the drawer under or beneficiary of any
Letter of Credit Accommodation and for such purposes the drawer or beneficiary
shall be deemed Borrower's agent. Borrower assumes all risks for, and agrees
to pay, all foreign, Federal, State and local taxes, duties and levies relating
to any goods subject to any Letter of Credit Accommodations or any documents,
drafts or acceptances thereunder. Borrower hereby releases and holds Lender
harmless from and against any acts, waivers, errors, delays or omissions,
whether caused by Borrower, by any issuer or correspondent or otherwise, unless
caused by the gross negligence or wilful misconduct of Lender, with respect to
or relating to any Letter of Credit Accommodation. The provisions of this
Section 2.2(e) shall survive the payment of Obligations and the termination or
non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to
grant Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter
of Credit Accommodation provided by an issuer other than Lender unless Lender
has duly executed and delivered to such issuer the application or a guarantee
or indemnification in writing with respect to such Letter of Credit
Accommodation. Borrower shall be bound by any interpretation made in good
faith by Lender, or any other issuer or correspondent under or in connection
with any Letter of Credit Accommodation or any documents, drafts or acceptances
thereunder, notwithstanding that such interpretation may be inconsistent with
any instructions of Borrower. Lender shall have the sole and exclusive right
and authority to, and Borrower shall not: (i) at any time an Event of Default
exists or has occurred and is continuing, (A) approve or resolve any questions
of non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or
time of presentation of, any drafts, acceptances, or documents, and (B) agree
to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letter of Credit Accommodations, or documents, drafts or acceptances thereunder
or any letters of credit included in the Collateral. Lender may take such
actions either in its own name or in Borrower's name.
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(g) Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for
any Letter of Credit Accommodation, or any other agreement in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall
be deemed to have been granted or undertaken by Borrower to Lender. Any duties
or obligations undertaken by Lender to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Lender in favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by Borrower to Lender
and to apply in all respects to Borrower.
2.3 Term Loans.
(a) Lender is making a Term Loan to Acquisition Corp. in the
original principal amount of $1,500,000 and a Term Loan to Angeles in the
original principal amount of $1,943,000.
(b) The Term Loan to Acquisition Corp. is being made
concurrently herewith, provided that Lender shall have the right to withhold
from the proceeds thereof the sum of $137,000 (the "Omitted Equipment
Reserve"). The Omitted Equipment Reserve takes into account that certain
cranes and other equipment were excluded from the assets being purchased by
Acquisition from the Seller (the "Omitted Equipment"). In the event title to
the Omitted Equipment, free and clear of all liens and security interests and
adverse claims, is later transferred to Acquisition pursuant to documentation
acceptable to Lender in its sole discretion and the Omitted Equipment is
acceptable to Lender in its sole discretion, then Lender may, in its sole
discretion, release the Omitted Equipment Reserve (provided no Event of Default
and no event which, with notice or passage of time or both, would constitute an
Event of Default, has occurred and is continuing).
(c) The Term Loan to Angeles shall be made when the Angeles
Equity Contribution (as defined in Section 4.1(q)) has been made, provided
that, at the date the Term Loan is to be made, all other conditions precedent
have been satisfied and no Event of Default and no event which, with notice or
passage of time or both, would constitute an Event of Default, has occurred and
is continuing. The Term Loans are (a) evidenced by Term Promissory Notes in
such original principal amounts duly executed and delivered by Acquisition
Corp. and Angeles to Lender concurrently herewith; (b) to be repaid, together
with interest and other amounts, in accordance with this Agreement, the Term
Promissory Notes, and the other Financing Agreements and (c) secured by all of
the Collateral.
2.4 Cap Ex Loans.
Subject to, and upon the terms and conditions contained herein, Lender
agrees to make loans (the "Cap Ex Loans") to Borrower from time to time in
amounts requested by Borrower up to 75% of the net purchase price of new
Equipment purchased and installed after the date hereof and acceptable to
Lender in its discretion (provided that
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not more than $1,000,000 in Cap Ex Loans shall be made hereunder). Cap Ex
Loans may not be re-borrowed after being repaid. The net purchase price of
Equipment means the purchase price thereof, as shown on the applicable invoice,
net of all charges for taxes, freight, delivery, insurance, installation, set-
up, training, manuals, fees, service charges and other similar items. Cap Ex
Loans shall be made in disbursements of not less than $200,000 each and the
proceeds of Cap Ex Loans shall be used exclusively to purchase the applicable
Equipment. Each Cap Ex Loan shall be repaid by the Borrower to Lender in 60
equal monthly payments of principal, commencing on the first day of the first
month after such Cap Ex Loan was disbursed and continuing until the earlier of
the date such Cap Ex Loan has been paid in full or the date this Agreement
terminates by its terms or is terminated, at which date the entire unpaid
principal balance of the Cap Ex Loans, plus all accrued and unpaid interest
thereon, shall be due and payable.
2.5 Separate Loans to Each Borrower.
Loans will be disbursed separately to each Borrower, based on the
Collateral of each Borrower, but nothing herein limits the fact that the
Borrowers are jointly and severally liable for all Loans and all other
Obligations and that all Collateral of each Borrower secures all Loans and all
other Obligations of both Borrowers.
SECTION 3. INTEREST AND FEES.
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the Interest Rate.
Obligations to reimburse Lender for the amount of undrawn Letters of Credit are
contingent, until they become payable to Lender. All interest accruing
hereunder on and after the date of any Event of Default or termination or non-
renewal hereof shall be payable on demand.
(b) From and after the date the $3,500,000 Equity Condition
has been satisfied, the following provisions of this Section 3.1(b) shall
apply: Borrower may from time to time request that Prime Rate Loans be
converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans
continue for an additional Interest Period. Such request from Borrower shall
specify the amount of the Prime Rate Loans which will constitute Eurodollar
Rate Loans (subject to the limits set forth below) and the Interest Period to
be applicable to such Eurodollar Rate Loans. Subject to the terms and
conditions contained herein, three (3) Business Days after receipt by Lender of
such a request from Borrower, such Prime Rate Loans shall be converted to
Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case
may be, provided, that, (i) no Event of Default, or event which with notice or
passage of time or both would constitute an Event of Default exists or has
occurred and is continuing, (ii) no party hereto shall have sent any notice of
termination or non-renewal of this Agreement, (iii) Borrower shall have
complied with such customary procedures as are established by Lender and
specified by Lender to Borrower from time to time for requests by Borrower
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for Eurodollar Rate Loans, (iv) no more than three (3) Interest Periods may be
in effect at any one time, (v) the aggregate amount of the Eurodollar Rate
Loans must be in an amount not less than $5,000,000 or an integral multiple of
$1,000,000 in excess thereof, (vi) the maximum amount of the Eurodollar Rate
Loans at any time requested by Borrower shall not exceed the amount equal to
eighty (80%) percent of the daily average of the principal amount of the
Revolving Loans which it is anticipated will be outstanding during the
applicable Interest Period (but with no obligation of Lender to make such
Revolving Loans), and (vii) Lender shall have determined that the Interest
Period or Adjusted Eurodollar Rate is available to Lender through the Reference
Bank and can be readily determined as of the date of the request for such
Eurodollar Rate Loan by Borrower. Any request by Borrower to convert Prime
Rate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate
Loans shall be irrevocable. Notwithstanding anything to the contrary contained
herein, Lender and Reference Bank shall not be required to purchase United
States Dollar deposits in the London interbank market or other applicable
Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions
hereof shall be deemed to apply as if Lender and Reference Bank had purchased
such deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest Period, unless
Lender has received and approved a request to continue such Eurodollar Rate
Loan at least three (3) Business Days prior to such last day in accordance with
the terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon
notice by Lender to Borrower, convert to Prime Rate Loans in the event that (i)
an Event of Default or event which with notice or passage of time or both would
constitute an Event of Default, shall exist, (ii) this Agreement shall
terminate or not be renewed, or (iii) the aggregate principal amount of the
Prime Rate Loans which have previously been converted to Eurodollar Rate Loans
or existing Eurodollar Rate Loans continued, as the case may be, at the
beginning of an Interest Period shall at any time during such Interest Period
exceed either (A) the aggregate principal amount of the Loans then outstanding,
or (B) the then outstanding principal amount of the Revolving Loans then
available to Borrower under Section 2 hereof. Borrower shall pay to Lender,
upon demand by Lender (or Lender may, at its option, charge any loan account of
Borrower) any amounts required to compensate Lender, the Reference Bank or any
participant with Lender for any loss (not including loss of anticipated
profits), cost or expense incurred by such person, as a result of the
conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the
foregoing.
(d) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on non-contingent Obligations (other than
Eurodollar Rate Loans) shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the first day of the month
after any change in such Prime Rate is announced based on the Prime Rate in
effect on the last day of the month in which any such change occurs. In no
event
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shall charges constituting interest payable by Borrower to Lender exceed the
maximum amount or the rate permitted under any applicable law or regulation,
and if any such part or provision of this Agreement is in contravention of any
such law or regulation, such part or provision shall be deemed amended to
conform thereto.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee the
amount of $100,000, which shall be fully earned as of and payable on the date
hereof.
3.3 Servicing Fee. Borrower shall pay to Lender annually a servicing
fee in an amount equal to $42,000 in respect of Lender's services for each year
(or part thereof) while this Agreement remains in effect and for so long
thereafter as any of the Obligations are outstanding, which fee shall be fully
earned in advance as of the date hereof and on each annual anniversary
hereafter, such annual servicing fee to be payable on a monthly basis, in
advance, with the first such monthly payment payable on the date hereof
(without proration) and on the first day of each month hereafter.
3.4 Compensation Adjustment.
(a) If after the date of this Agreement the introduction of,
or any change in, any law or any governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law), or any
interpretation thereof, or compliance by Lender or any Participant therewith:
(i) subjects Lender to any tax, duty, charge or
withholding on or from payments due from Borrower (excluding franchise taxes
imposed upon, and taxation of the overall net income of, Lender or any
Participant), or changes the basis of taxation of payments, in either case in
respect of amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve
requirement or other reserve, assessment, insurance charge, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by Lender or any Participant, or
(iii) imposes any other condition the result of which
is to increase the cost to Lender or any Participant of making, funding or
maintaining the Revolving Loans or Letter of Credit Accommodations or reduces
any amount receivable by Lender or any Participant in connection with the Loans
or Letter of Credit Accommodations, or requires Lender or any Participant to
make payment calculated by references to the amount of loans held or interest
received by it, by an amount deemed material by Lender or any Participant, or
(iv) imposes or increases any capital requirement or
affects the amount of capital required or expected to be maintained by Lender
or any Participant or any corporation controlling Lender or any Participant,
and Lender or any Participant determines that such imposition or increase in
capital requirements or increase in the amount of capital expected to be
maintained is based upon the existence of this
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Agreement or the Loans or Letter of Credit Accommodations hereunder, all of
which may be determined by Lender's reasonable allocation of the aggregate of
its impositions or increases in capital required or expected to be maintained,
and the result of any of the foregoing is to increase the cost to Lender or any
Participant of making, renewing or maintaining the Loans or Letter of Credit
Accommodations, or to reduce the rate of return to Lender or any Participant on
the Loans or Letter of Credit Accommodations, then upon demand by Lender,
Borrower shall pay to Lender, and continue to make periodic payments to Lender
or any Participant, such additional amounts as may be necessary to compensate
Lender or any Participant for any such additional cost incurred or reduced rate
of return realized.
(b) A certificate of Lender claiming entitlement to
compensation as set forth above will be conclusive in the absence of manifest
error. Such certificate will set forth the nature of the occurrence giving
rise to such compensation, the additional amount or amounts to be paid and the
compensation and the method by which such amounts were determined. In
determining any additional amounts due from Borrower under this Section, Lender
shall act reasonably and in good faith and will, to the extent that the
increased costs, reductions, or amounts received or receivable relate to the
Lender's or a Participant's loans or commitments generally and are not
specifically attributable to the Loans and commitments hereunder, use averaging
and attribution methods which are reasonable and equitable and which cover all
loans and commitments under this Agreement by the Lender or such Participant,
as the case may be, whether or not the loan documentation for such other loans
and commitments permits the Lender or such Participant to receive compensation
costs of the type described in this Section.
3.5 Changes in Laws and Increased Costs of Loans.
(a) Notwithstanding anything to the contrary contained herein,
all Eurodollar Rate Loans shall, upon notice by Lender to Borrower, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for Lender, Reference Bank or any participant to make or
maintain Eurodollar Rate Loans or to comply with the terms hereof in connection
with the Eurodollar Rate Loans, or (B) shall result in the material increase in
the costs to Lender, Reference Bank or any participant of making or maintaining
any Eurodollar Rate Loans or (C) reduce the amounts received or receivable by
Lender in respect thereof, by an amount deemed by Lender to be material or (ii)
the cost to Lender, Reference Bank or any participant of making or maintaining
any Eurodollar Rate Loans shall otherwise increase by an amount deemed by
Lender to be material. Borrower shall pay to Lender, upon demand by Lender (or
Lender may, at its option, charge any loan account of Borrower) any amounts
required to compensate Lender, the Reference Bank or any participant with
Lender for any loss (not including loss of anticipated profits), cost or
expense incurred by such person as a result of the foregoing, including,
without limitation, any such loss, cost or expense incurred by reason of the
liquidation or re-employment of deposits or other funds
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acquired by such person to make or maintain the Eurodollar Rate Loans or any
portion thereof. A certificate of Lender setting forth the basis for the
determination of such amount necessary to compensate Lender as aforesaid shall
be delivered to Borrower and shall be conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the
Eurodollar Rate Loans are received by Lender other than on the last day of the
applicable Interest Period (whether pursuant to acceleration, upon maturity or
otherwise), including any payments pursuant to the application of collections
under Section 6.3 or any other payments made with the proceeds of Collateral,
Borrower shall pay to Lender upon demand by Lender (or Lender may, at its
option, charge any loan account of Borrower) any amounts required to compensate
Lender, the Reference Bank or any participant with Lender for any additional
loss (not including loss of anticipated profits), cost or expense incurred by
such person as a result of such prepayment or payment, including, without
limitation, any loss, cost or expense incurred by reason of the liquidation or
re-employment of deposits or other funds acquired by such person to make or
maintain such Eurodollar Rate Loans or any portion thereof.
SECTION 4. CONDITIONS PRECEDENT.
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender
making the initial Loans and providing the initial Letter of Credit
Accommodations hereunder. If any of the following conditions are not satisfied
by January 9, 1998, Lender shall have no further obligation hereunder. Any of
the following conditions may be waived by Lender, but only in a written waiver
signed by a duly-authorized officer of Lender.
(a) Lender shall have received, in form and substance
satisfactory to Lender, all releases, terminations and such other documents as
Lender may request to evidence and effectuate the termination of any interest
in and to any assets and properties of Borrower, duly authorized, executed and
delivered by it or each of them, including, but not limited to, UCC termination
statements for all UCC financing statements and Lender shall have satisfied
itself that it has valid, perfected and first priority security interests in
and liens upon the Collateral and any other property which is intended as
security for the Obligations, or the liability of any Obligor in respect
thereto, subject only to the security interests and liens permitted herein or
in the other Financing Agreements;
(b) all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received
all information and copies of all documents, including, without limitation,
records of requisite corporate action and proceedings which Lender may have
requested in connection therewith, such documents where requested by Lender or
its counsel to be certified by appropriate corporate officers or governmental
authorities;
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(c) no material adverse change shall have occurred in the
assets, business or prospects of Borrower since the date of Lender's latest
field examination and no change or event shall have occurred which would impair
the ability of Borrower or any Obligor to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce the Obligations or realize upon the Collateral;
(d) Lender shall have completed a field review of the Records
and of such other financial information, projections, budgets, business plans
and cash flows as Lender shall reasonably request from time to time, including,
but not limited to, current agings of receivables, current perpetual inventory
records and/or rollforwards of Accounts and Inventory through the date of
closing (including a physical count of the Inventory by a third party
acceptable to Lender), together with supporting documentation, including
documentation with respect to Inventory in-transit, goods in bonded warehouses
or at other third-party locations, that will enable Lender to accurately
identify and verify the eligible Collateral at or before closing in a manner
satisfactory to Lender, the results of which shall be satisfactory to Lender;
(e) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement
and the other Financing Agreements, including, without limitation,
acknowledgments by lessors, mortgagees and warehousemen of Lender's security
interests in the Collateral, waivers by such persons of any security interests,
liens or other claims by such persons to the Collateral and agreements
permitting Lender access to, and the right to remain on, the premises to
exercise its rights and remedies and otherwise deal with the Collateral;
(f) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(g) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrower with
respect to the Financing Agreements and such other matters as Lender may
request;
(h) the Excess Availability as determined by Lender as of the
date hereof, and as of the date the initial Loans and the initial Letter of
Credit Accommodations are to be provided hereunder, shall be not less than
$500,000 for Acquisition Corp. and $250,000 for Angeles, respectively, in each
case after giving effect to the initial Loans made or to be made hereunder and
the payment of all fees and expenses payable upon the consummation of the
initial transactions contemplated by this Agreement;
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(i) Lender shall have received, in form and substance
satisfactory to Lender and its counsel, the assignment of all of Borrower's
rights in registered patents, trademarks, service marks and copyrights, as
Collateral hereunder, on Lender's standard forms of Collateral Assignments;
(j) Lender shall have received, in form and substance
satisfactory to Lender, an executed copy of a Blocked Account Agreement,
pursuant to Section 6.3(a) hereof, among Lender, Borrower and Union Bank
(except that Angeles may defer providing said Blocked Account Agreement until
two Business Days prior to the date the first Loan or Letter of Credit
Accommodation is to be made to Angeles); and
(k) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender; and
(l) Any holders of a security interest in Borrower's assets
including, without limitation, vendors of Inventory to Borrower, the Seller,
and the Estate of Xxx Xxxxxx, shall have executed such intercreditor and
security interest and debt subordination agreements in form and substance
satisfactory to Lender.
(m) Consolidated Capital of North America, Inc. (the "Parent")
and California Building Systems, Inc. ("CBS") shall have executed and delivered
a Continuing Guaranty in favor of Lender with respect to the Obligations, on
Lender's standard form, and the Parent and CBS shall have executed and
delivered to Lender a security agreement with respect to all of their assets,
on Lender's standard form, granting Lender a first-priority security interest
therein, together with all appropriate UCC-1 Financing Statements and other
documentation satisfactory to Lender in its discretion.
(n) Lender shall have received, in form and substance
satisfactory to Lender, evidence that the Purchase Agreements have been duly
executed and delivered by and to the appropriate parties thereto, and the same
shall be satisfactory to Lender in its sole discretion, and the transactions
contemplated by the Purchase Agreements shall have been consummated prior to or
contemporaneously with the execution of this Agreement, in a manner
satisfactory to Lender in its sole discretion and in compliance with all
applicable laws, rules and regulations and all agreements binding on Borrower,
Seller or their assets, and with all necessary consents, and Lender shall have
received evidence of the same, including an opinion of counsel, in form and
substance satisfactory to Lender in its sole discretion. Without limiting the
generality of the foregoing, the sale of the Seller's assets pursuant to the
Purchase Agreements shall be approved by a final order of the United States
Bankruptcy Court, such order shall not have been stayed, and no appeal shall
have been taken therefrom.
(o) Lender shall have received, in form and substance
satisfactory to Lender, the opinion letter of counsel(s) to Borrower with
respect to the Purchase
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Agreements, the Financing Agreements and the security interests and liens of
Lender with respect to the Collateral and such other matters as Lender may
request;
(p) Lender shall have received, in form and substance
satisfactory to Lender, a pro-forma balance sheet of Borrower reflecting the
initial transactions contemplated hereunder, including, but not limited to, (i)
the consummation of the acquisition of the Purchased Assets by Borrower from
Seller and the other transactions contemplated by the Purchase Agreements and
(ii) the Loans and Letter of Credit Accommodations provided by Lender to
Borrower on the date hereof and the use of the proceeds of the initial Loans as
provided herein, accompanied by a certificate, dated of even date herewith, of
the chief financial officer of Borrower stating that such pro-forma balance
sheet represents the reasonable, good faith opinion of such officer as to the
subject matter thereof as of the date of such certificate;
(q) Equity Contributions.
(1) Lender shall have received, in form and substance
satisfactory to Lender, evidence that Acquisition has received net cash
proceeds from a cash equity capital contribution to Acquisition after the date
hereof of not less than $1,000,000 (the "Acquisition Equity Contribution") and
Angeles has received net cash proceeds from a cash equity capital contribution
to Angeles after the date hereof of not less than $1,500,000 minus the amount
of the Acquisition Equity Contribution (the "Angeles Equity Contribution").
(2) Angeles may defer making the Angeles Equity
Contribution for not more than 10 days after the date hereof. Notwithstanding
anything in this Agreement to the contrary, no Loans or Letter of Credit
Accommodations will be made to Angeles until the Angeles Equity Contribution
has been made. At the date the Angeles Equity Contribution has been made and
Loans and Letter of Credit Accommodations are to be made to Angeles, all
conditions precedent set forth in this Section 4.1 must be met again before
Loans and Letter of Credit Accommodations will be made to Angeles. Angeles
shall give Lender at least five Business Days advance written notice prior to
the date Angeles wishes to obtain the first Loan or Letter of Credit
Accommodation hereunder. If Angeles fails to make the Angeles Equity
Contribution within 10 days after the date hereof, such failure shall
constitute an Event of Default under this Agreement.
(3) Prior to the date the first Loan or Letter of
Credit Accommodation is made to Angeles, Angeles shall not be required to meet
the requirements of Sections 6.3 (relating to collection of Accounts), 7.1
(relating to collateral reporting, except that Borrower shall comply with the
requirement of Section 7.1 relating to a fully integrated perpetual inventory
system acceptable to Lender), 7.2 (a)-(e) (relating to Accounts covenants).
After the date the first Loan or Letter of Credit Accommodation is made to
Angeles, Angeles shall meet all such requirements.
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(4) Prior to the date the first Loan or Letter of
Credit Accommodation is made to Angeles, Lender acknowledges that security
interests in Angeles' assets will be held by General Electric Credit
Corporation and Union Bank. Any event of default under the obligations secured
by said security interests shall constitute an Event of Default hereunder
(unless cured within any cure period provided in the agreements between Angeles
and said lenders or waived in writing by said lenders). Prior to the date the
first Loan or Letter of Credit Accommodation is made to Angeles, said other
security interests shall be terminated.
(r) [omitted];
(s) A certificate of deposit in the amount of $250,000 issued
by a bank and payable on terms satisfactory to Lender in its sole discretion,
shall have been pledged to the Lender to secure all of the Obligations,
pursuant to a pledge agreement in such form as Lender shall specify (the
"Collateral CD"). $1,000,000 of the Acquisition Equity Contribution provided
for in Section 4.1 (q)(1) may not be utilized, directly or indirectly for the
Collateral CD. Lender shall release the Collateral CD at such time as all of
the following conditions have satisfied: (i) the $3,500,000 Equity Condition
has been satisfied, (ii) no Event of Default and no event which, with notice or
passage of time or both, would constitute an Event of Default, has occurred and
is continuing, (iii) Borrower has Excess Availability of at least $750,000.
From and after the date the Collateral CD is so released, Lender shall have the
right to withhold and maintain a reserve against Loans which would otherwise be
available to the Borrower in the amount of $750,000 (the "$750,000 Reserve").
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrower, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the making of
such Loan or providing each such Letter of Credit Accommodation and after
giving effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST.
To secure payment and performance of all Obligations, Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right of
set off against,
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and hereby assigns to Lender as security, the following property and interests
in property, whether now owned or hereafter acquired or existing, and wherever
located (collectively, the "Collateral"):
5.1 Accounts;
5.2 All present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee, choses
in action and other claims and existing and future leasehold interests in
equipment, real estate and fixtures), chattel paper, documents, instruments,
investment property, letters of credit, bankers' acceptances and guaranties;
5.3 All present and future monies, securities, credit balances,
deposits, deposit accounts and other property of Borrower now or hereafter held
or received by or in transit to Lender or its affiliates or at any other
depository or other institution from or for the account of Borrower, whether
for safekeeping, pledge, custody, transmission, collection or otherwise, and
all present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including,
without limitation, (a) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (b) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (c) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing,
Accounts or other Collateral, including, without limitation, returned,
repossessed and reclaimed goods, and (d) deposits by and property of account
debtors or other persons securing the obligations of account debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Records; and
5.7 All products and proceeds of the foregoing, in any form,
including, without limitation, insurance proceeds and all claims against third
parties for loss or damage to or destruction of any or all of the foregoing.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, all Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all
payments made by or on behalf of Borrower and (c) all other appropriate debits
and credits as provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and
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interest. All entries in the loan account(s) shall be made in accordance with
Lender's customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower each month a
statement setting forth the balance in the Borrower's loan account(s)
maintained by Lender for Borrower pursuant to the provisions of this Agreement,
including principal, interest, fees, costs and expenses. Each such statement
shall be subject to subsequent adjustment by Lender but shall, absent manifest
errors or omissions, be considered correct and deemed accepted by Borrower and
conclusively binding upon Borrower as an account stated except to the extent
that Lender receives a written notice from Borrower of any specific exceptions
of Borrower thereto within thirty (30) days after the date such statement has
been mailed by Lender. Until such time as Lender shall have rendered to
Borrower a written statement as provided above, the balance in Borrower's loan
account(s) shall be presumptive evidence of the amounts due and owing to Lender
by Borrower.
6.3 Collection of Accounts.
(a) Borrower shall establish and maintain, at its expense,
blocked accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts"), as Lender may specify, with such banks as are acceptable
to Lender into which Borrower shall promptly deposit and direct its account
debtors to directly remit all payments on Accounts and all payments
constituting proceeds of Inventory or other Collateral in the identical form in
which such payments are made, whether by cash, check or other manner. The
banks at which the Blocked Accounts are established shall enter into an
agreement, in form and substance satisfactory to Lender, providing that all
items received or deposited in the Blocked Accounts are the property of Lender,
that the depository bank has no lien upon, or right to setoff against, the
Blocked Accounts, the items received for deposit therein, or the funds from
time to time on deposit therein and that the depository bank will wire, or
otherwise transfer, in immediately available funds, on a daily basis, all funds
received or deposited into the Blocked Accounts to such bank account of Lender
as Lender may from time to time designate for such purpose ("Payment Account").
Borrower agrees that all payments made to such Blocked Accounts or other funds
received and collected by Lender, whether on the Accounts or as proceeds of
Inventory or other Collateral or otherwise shall be the property of Lender.
(b) For purposes of calculating interest on the Obligations,
such payments or other funds received will be applied (conditional upon final
collection) to the Obligations one (1) Business Day following the date of
receipt of immediately available funds by Lender in the Payment Account, or two
(2) Business Days following the date of receipt of funds that are not
immediately available to Lender in the Payment Account, as applicable. For
purposes of calculating the amount of the Revolving Loans available to Borrower
such payments will be applied (conditional upon final collection) to the
Obligations on the Business Day of receipt by Lender in the Payment Account, if
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such payments are received within sufficient time (in accordance with Lender's
usual and customary practices as in effect from time to time) to credit
Borrower's loan account on such day, and if not, then on the next Business Day.
In the event that there are no outstanding monetary Obligations at the time
such payments or other funds are received, Borrower shall pay a Lender a charge
(the "Float Charge") in an amount equal to interest at the Prime Rate on the
amount of such payment or other funds, for one (1) Business Day following the
date of receipt of immediately available funds by Lender in the Payment
Account, or two (2) Business Days following the date of receipt of funds that
are not immediately available to Lender in the Payment Account, as applicable.
(c) Borrower and all of its affiliates, subsidiaries,
shareholders, directors, employees or agents shall, acting as trustee for
Lender, receive, as the property of Lender, any monies, checks, notes, drafts
or any other payment relating to and/or proceeds of Accounts or other
Collateral which come into their possession or under their control and
immediately upon receipt thereof, shall deposit or cause the same to be
deposited in the Blocked Accounts, or remit the same or cause the same to be
remitted, in kind, to Lender. In no event shall the same be commingled with
Borrower's own funds. Borrower agrees to reimburse Lender on demand for any
amounts owed or paid to any bank at which a Blocked Account is established or
any other bank or person involved in the transfer of funds to or from the
Blocked Accounts arising out of Lender's payments to or indemnification of such
bank or person, unless such payment or indemnification obligation of Lender was
a result of Lender's gross negligence or wilful misconduct. The obligation of
Borrower to reimburse Lender for such amounts pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment
Account as provided in Section 6.3 or such other place as Lender may designate
from time to time. Lender may apply payments received or collected from
Borrower or for the account of Borrower (including, without limitation, the
monetary proceeds of collections or of realization upon any Collateral) to such
of the Obligations, whether or not then due, in such order and manner as Lender
determines. At Lender's option, all principal, interest, fees, costs, expenses
and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of Borrower.
Borrower shall make all payments to Lender on the Obligations free and clear
of, and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Lender is required to surrender or return such payment or proceeds
to any Person for any reason, then the Obligations intended to be satisfied by
such payment or proceeds shall be reinstated and continue and this Agreement
shall continue in full force and effect as if such payment or proceeds had not
been received by Lender. Borrower shall be liable to pay to Lender, and does
hereby indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.4 shall remain effective
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notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the
Loans and provide the Letter of Credit Accommodations based upon telephonic or
other instructions received from anyone purporting to be an officer of Borrower
or other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of
Credit Accommodations hereunder shall specify the date on which the requested
advance is to be made or Letter of Credit Accommodations established (which day
shall be a Business Day) and the amount of the requested Loan. Requests
received after 10:30 a.m. (Los Angeles time) on any day shall be deemed to have
been made as of the opening of business on the immediately following Business
Day. All Loans and Letter of Credit Accommodations under this Agreement shall
be conclusively presumed to have been made to, and at the request of and for
the benefit of, Borrower when deposited to the credit of Borrower or otherwise
disbursed or established in accordance with the instructions of Borrower or in
accordance with the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the
Loans provided by Lender to Borrower hereunder only for: (a) payments to each
of the persons listed in the disbursement direction letter furnished by
Borrower to Lender on or about the date hereof and (b) costs, expenses and fees
in connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter
of Credit Accommodations provided by Lender to Borrower pursuant to the
provisions hereof shall be used by Borrower only for general operating, working
capital and other proper corporate purposes of Borrower not otherwise
prohibited by the terms hereof. None of the proceeds will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security or
for the purposes of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose
which might cause any of the Loans to be considered a "purpose credit" within
the meaning of Regulation G of the Board of Governors of the Federal Reserve
System, as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS.
7.1 Collateral Reporting. Borrower shall provide Lender with the
following documents in a form satisfactory to Lender: (a) on a regular basis as
required by Lender, a schedule of Accounts; (b) on a weekly basis or more
frequently as Lender may request, (i) perpetual inventory reports, (ii)
inventory reports by category and (iii) agings of accounts payable, (c) upon
Lender's request, (i) copies of customer statements and credit memos,
remittance advices and reports, and copies of deposit slips and bank
statements, (ii) copies of shipping and delivery documents, and (iii) copies of
purchase orders, invoices and delivery documents for Inventory and Equipment
acquired by
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Borrower; (d) agings of accounts receivable on a monthly basis or more
frequently as Lender may request; and (e) such other reports as to the
Collateral as Lender shall reasonably request from time to time. Within 120
days after the date hereof, Borrower shall establish and maintain a fully
integrated perpetual inventory system acceptable to Lender. If any of
Borrower's records or reports of the Collateral are prepared or maintained by
an accounting service, contractor, shipper or other agent, Borrower hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Lender and to follow Lender's
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrower shall notify Lender promptly of: (i) any material
delay in Borrower's performance of any of its obligations to any account debtor
or the assertion of any claims, offsets, defenses or counterclaims by any
account debtor, or any disputes with account debtors, or any settlement,
adjustment or compromise thereof, (ii) all material adverse information
relating to the financial condition of any account debtor and (iii) any event
or circumstance which, to Borrower's knowledge would cause Lender to consider
any then existing Accounts as no longer constituting Eligible Accounts. No
credit, discount, allowance or extension or agreement for any of the foregoing
shall be granted to any account debtor without Lender's consent, except in the
ordinary course of Borrower's business in accordance with practices and
policies previously disclosed in writing to Lender. So long as no Event of
Default exists or has occurred and is continuing, Borrower shall settle, adjust
or compromise any claim, offset, counterclaim or dispute with any account
debtor. At any time that an Event of Default exists or has occurred and is
continuing, Lender shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with account
debtors or grant any credits, discounts or allowances.
(b) Borrower shall promptly report to Lender any return of
Inventory by an account debtor having a sales price in excess of $20,000. At
any time that Inventory is returned, reclaimed or repossessed, the related
Account shall not be deemed an Eligible Account. In the event any account
debtor returns Inventory when an Event of Default exists or has occurred and is
continuing, Borrower shall, upon Lender's request, (i) hold the returned
Inventory in trust for Lender, (ii) segregate all returned Inventory from all
of its other property, (iii) dispose of the returned Inventory solely according
to Lender's instructions, and (iv) not issue any credits, discounts or
allowances with respect thereto without Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any
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account debtor except as reported to Lender in accordance with this Agreement
and except for credits, discounts, allowances or extensions made or given in
the ordinary course of Borrower's business in accordance with practices and
policies previously disclosed to Lender, (iv) there shall be no setoffs,
deductions, contras, defenses, counterclaims or disputes existing or asserted
with respect thereto except as reported to Lender in accordance with the terms
of this Agreement, (v) none of the transactions giving rise thereto will
violate any applicable State or Federal laws or regulations, all documentation
relating thereto will be legally sufficient under such laws and regulations and
all such documentation will be legally enforceable in accordance with its
terms.
(d) Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Account or other Collateral, by
mail, telephone, facsimile transmission or otherwise.
(e) Borrower shall deliver or cause to be delivered to Lender,
with appropriate endorsement and assignment, with full recourse to Borrower,
all chattel paper and instruments which Borrower now owns or may at any time
acquire immediately upon Borrower's receipt thereof, except as Lender may
otherwise agree.
(f) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account debtors
that the Accounts have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors to make
payment of Accounts directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable for its failure to collect or enforce
the payment thereof nor for the negligence of its agents or attorneys with
respect thereto and (iv) take whatever other action Lender may deem necessary
or desirable for the protection of its interests. At any time that an Event of
Default exists or has occurred and is continuing, at Lender's request, all
invoices and statements sent to any account debtor shall state that the
Accounts and such other obligations have been assigned to Lender and are
payable directly and only to Lender and Borrower shall deliver to Lender such
originals of documents evidencing the sale and delivery of goods or the
performance of services giving rise to any Accounts as Lender may require.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to
Lender, keeping correct and accurate records itemizing and describing the kind,
type, quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions
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thereto; (b) Borrower shall conduct a physical count of the Inventory at least
once each year, but at any time or times as Lender may request on or after an
Event of Default which is continuing, and promptly following such physical
inventory shall supply Lender with a report in the form and with such
specificity as may be reasonably satisfactory to Lender concerning such
physical count; (c) Borrower shall not remove any Inventory from the locations
set forth or permitted herein, without the prior written consent of Lender,
except for sales of Inventory in the ordinary course of Borrower's business and
except to move Inventory directly from one location set forth or permitted
herein to another such location; (d) upon Lender's request, Borrower shall, at
its expense, no more than once in any twelve (12) month period, but at any time
or times as Lender may request on or after an Event of Default which is
continuing, deliver or cause to be delivered to Lender written reports or
appraisals as to the Inventory in form, scope and methodology acceptable to
Lender and by an appraiser acceptable to Lender, addressed to Lender or upon
which Lender is expressly permitted to rely; (e) Borrower shall produce, use,
store and maintain the Inventory, with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity with
applicable laws (including, but not limited to, the requirements of the Federal
Fair Labor Standards Act of 1938, as amended and all rules, regulations and
orders related thereto); (f) Borrower assumes all responsibility and liability
arising from or relating to the production, use, sale or other disposition of
the Inventory; (g) Borrower shall not sell Inventory to any customer on
approval, or any other basis which entitles the customer to return or may
obligate Borrower to repurchase such Inventory; (h) Borrower shall keep the
Inventory in good and marketable condition; and (i) Borrower shall not, without
prior written notice to Lender, acquire or accept any Inventory on consignment
or approval.
7.4 Equipment Covenants. With respect to the Equipment: (a) upon
Lender's request, Borrower shall, at its expense, at any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written reports or appraisals as to the Equipment in form,
scope and methodology acceptable to Lender and by an appraiser acceptable to
Lender; (b) Borrower shall keep the Equipment in good order, repair, running
and marketable condition (ordinary wear and tear excepted); (c) Borrower shall
use the Equipment with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with all applicable
laws; (d) the Equipment is and shall be used in Borrower's business and not for
personal, family, household or farming use; (e) Borrower shall not remove any
Equipment from the locations set forth or permitted herein, except to the
extent necessary to have any Equipment repaired or maintained in the ordinary
course of the business of Borrower or to move Equipment directly from one
location set forth or permitted herein to another such location and except for
the movement of motor vehicles used by or for the benefit of Borrower in the
ordinary course of business; (f) the Equipment is now and shall remain personal
property and Borrower shall not permit any of the Equipment to be or become a
part of or affixed to real property, unless a landlord and mortgagee waiver in
such form as Lender shall specify has been executed
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and delivered to Lender with respect to such real property; and (g) Borrower
assumes all responsibility and liability arising from the use of the Equipment.
7.5 Power of Attorney. Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name,
to: (a) at any time an Event of Default or event which with notice or passage
of time or both would constitute an Event of Default exists or has occurred and
is continuing (i) demand payment on Accounts or other proceeds of Inventory or
other Collateral, (ii) enforce payment of Accounts by legal proceedings or
otherwise, (iii) exercise all of Borrower's rights and remedies to collect any
Account or other Collateral, (iv) sell or assign any Account upon such terms,
for such amount and at such time or times as the Lender deems advisable, (v)
settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, (vii) prepare, file and sign Borrower's name on any proof
of claim in bankruptcy or other similar document against an account debtor,
(viii) notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender, and open and, without
assuming any liability whatsoever to Borrower, make available to Borrower, to
the extent not necessary to be utilized by Lender in the exercise of any of its
rights under this Agreement, all mail addressed to Borrower, and (ix) do all
acts and things which are necessary, in Lender's determination, to fulfill
Borrower's obligations under this Agreement and the other Financing Agreements
and (b) at any time to (i) take control in any manner of any item of payment or
proceeds thereof, (ii) have access to any lockbox or postal box into which
Borrower's mail is deposited, (iii) endorse Borrower's name upon any items of
payment or proceeds thereof and deposit the same in the Lender's account for
application to the Obligations, (iv) endorse Borrower's name upon any chattel
paper, document, instrument, invoice, or similar document or agreement relating
to any Account or any goods pertaining thereto or any other Collateral, (v)
sign Borrower's name on any verification of Accounts and notices thereof to
account debtors and (vi) execute in Borrower's name and file any UCC financing
statements or amendments thereto. Borrower hereby releases Lender and its
officers, employees and designees from any liabilities arising from any act or
acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of Lender's own gross negligence or
wilful misconduct as determined pursuant to a final non-appealable order of a
court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, (a) cure any default
by Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (c) pay any amount, incur any expense or perform any act
which, in Lender's judgment, is necessary or appropriate to preserve, protect,
insure or maintain the Collateral and the rights of Lender with respect
thereto. Lender may add any amounts so expended to the Obligations and charge
Borrower's account therefor, such amounts to be repayable by Borrower on
demand. Lender shall be under no obligation to effect such cure, payment
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or bonding and shall not, by doing so, be deemed to have assumed any obligation
or liability of Borrower. Any payment made or other action taken by Lender
under this Section shall be without prejudice to any right to assert an Event
of Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Lender by
one day's notice to Borrower, at the cost and expense of Borrower, (a) Lender
or its designee shall have complete access to all of Borrower's premises during
normal business hours and after notice to Borrower, or at any time and without
notice to Borrower if an Event of Default exists or has occurred and is
continuing, for the purposes of inspecting, verifying and auditing the
Collateral and all of Borrower's books and records, including, without
limitation, the Records, and (b) Borrower shall promptly furnish to Lender such
copies of such books and records or extracts therefrom as Lender may request,
and (c) use during normal business hours such of Borrower's personnel,
equipment, supplies and premises as may be reasonably necessary for the
foregoing and if an Event of Default exists or has occurred and is continuing
for the collection of Accounts and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES.
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and the
providing of Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower
is a corporation duly organized and in good standing under the laws of its
state of incorporation and is duly qualified as a foreign corporation and in
good standing in all states or other jurisdictions where the nature and extent
of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify would not have a material adverse effect on Borrower's financial
condition, results of operation or business or the rights of Lender in or to
any of the Collateral. The execution, delivery and performance of this
Agreement, the other Financing Agreements and the transactions contemplated
hereunder and thereunder are all within Borrower's corporate powers, have been
duly authorized and are not in contravention of law or the terms of Borrower's
certificate of incorporation, by-laws, or other organizational documentation,
or any indenture, agreement or undertaking to which Borrower is a party or by
which Borrower or its property are bound. This Agreement and the other
Financing Agreements constitute legal, valid and binding obligations of
Borrower enforceable in accordance with their respective terms. Borrower does
not have any subsidiaries except that Angeles has one wholly-owned subsidiary,
California Building Systems, Inc., which is an inactive corporation and has no
assets or liabilities. Borrower shall cause California Building Systems, Inc.
to continue to be an inactive corporation with no assets or liabilities, unless
Lender shall give its prior written consent to a change thereto.
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All financial statements relating to Borrower which have been or may
hereafter be delivered by Borrower to Lender have been prepared in accordance
with GAAP and fairly present the financial condition and the results of
operations of Borrower as at the dates and for the periods set forth therein.
Except as disclosed in any interim financial statements furnished by Borrower
to Lender prior to the date of this Agreement, there has been no material
adverse change in the assets, liabilities, properties and condition, financial
or otherwise, of Borrower, since the date of the most recent audited financial
statements furnished by Borrower to Lender prior to the date of this Agreement.
The chief executive office of Borrower and Borrower's Records
concerning Accounts are located only at the address set forth below and its
only other places of business and the only other locations of Collateral, if
any, are the addresses set forth in the Information Certificate, subject to the
right of Borrower to establish new locations in accordance with Section 9.2
below. The Information Certificate correctly identifies any of such locations
which are not owned by Borrower and sets forth the owners and/or operators
thereof and to the best of Borrower's knowledge, the holders of any mortgages
on such locations.
The security interests and liens granted to Lender under this Agreement
and the other Financing Agreements constitute valid and perfected first
priority liens and security interests in and upon the Collateral subject only
to liens permitted under Section 9.8 hereof. Borrower has good and marketable
title to all of its properties and assets subject to no liens, mortgages,
pledges, security interests, encumbrances or charges of any kind, except those
granted to Lender and such others as are permitted under Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to
be filed by it (without requests for extension except as previously disclosed
in writing to Lender). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Borrower has
paid or caused to be paid all taxes due and payable or claimed due and payable
in any assessment received by it, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Adequate provision has been made for the payment of all
accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate,
there is no present investigation by any governmental agency pending, or to the
best of Borrower's knowledge threatened, against or affecting Borrower, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Borrower's knowledge threatened, against
Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against Borrower
would result in any material adverse change in the assets,
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business or prospects of Borrower or would impair the ability of Borrower to
perform its obligations hereunder or under any of the other Financing
Agreements to which it is a party or of Lender to enforce any Obligations or
realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws. Borrower
is not in default in any material respect under, or in violation in any
material respect of any of the terms of, any agreement, contract, instrument,
lease or other commitment to which it is a party or by which it or any of its
assets are bound and Borrower is in compliance in all material respects with
all applicable provisions of laws, rules, regulations, licenses, permits,
approvals and orders of any foreign, Federal, State or local governmental
authority.
8.8 Environmental Compliance.
(a) Borrower has not generated, used, stored, treated,
transported, manufactured, handled, produced or disposed of any Hazardous
Materials, on or off its premises (whether or not owned by it) in any manner
which at any time violates any applicable Environmental Law or any license,
permit, certificate, approval or similar authorization thereunder and the
operations of Borrower complies in all material respects with all Environmental
Laws and all licenses, permits, certificates, approvals and similar
authorizations thereunder.
(b) There has been no investigation, proceeding, complaint,
order, directive, claim, citation or notice by any governmental authority or
any other person nor is any pending or to the best of Borrower's knowledge
threatened, with respect to any non-compliance with or violation of the
requirements of any Environmental Law by Borrower or the release, spill or
discharge, threatened or actual, of any Hazardous Material or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or any other environmental, health or
safety matter, which affects Borrower or its business, operations or assets or
any properties at which Borrower has transported, stored or disposed of any
Hazardous Materials.
(c) Borrower has no material liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
(d) Borrower has all licenses, permits, certificates,
approvals or similar authorizations required to be obtained or filed in
connection with the operations of Borrower under any Environmental Law and all
of such licenses, permits, certificates, approvals or similar authorizations
are valid and in full force and effect.
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8.9 Employee Benefits.
(a) Borrower has not engaged in any transaction in connection
with which Borrower or any of its ERISA Affiliates could be subject to either a
civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code, including any accumulated funding deficiency
described in Section 8.9(c) hereof and any deficiency with respect to vested
accrued benefits described in Section 8.9(d) hereof.
(b) No liability to the Pension Benefit Guaranty Corporation
has been or is expected by Borrower to be incurred with respect to any employee
pension benefit plan of Borrower or any of its ERISA Affiliates. There has
been no reportable event (within the meaning of Section 4043(b) of ERISA) or
any other event or condition with respect to any employee pension benefit plan
of Borrower or any of its ERISA Affiliates which presents a risk of termination
of any such plan by the Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which Borrower
or any of its ERISA Affiliates is required under Section 302 of ERISA and
Section 412 of the Code to have paid under the terms of each employee pension
benefit plan as contributions to such plan as of the last day of the most
recent fiscal year of such plan ended prior to the date hereof, and no
accumulated funding deficiency (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, exists with respect to any employee
pension benefit plan, including any penalty or tax described in Section 8.9(a)
hereof and any deficiency with respect to vested accrued benefits described in
Section 8.9(d) hereof.
(d) The current value of all vested accrued benefits under all
employee pension benefit plans maintained by Borrower that are subject to Title
IV of ERISA does not exceed the current value of the assets of such plans
allocable to such vested accrued benefits, including any penalty or tax
described in Section 8.9(a) hereof and any accumulated funding deficiency
described in Section 8.9(c) hereof. The terms "current value" and "accrued
benefit" have the meanings specified in ERISA.
(e) Neither Borrower nor any of its ERISA Affiliates is or has
ever been obligated to contribute to any "multiemployer plan" (as such term is
defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.
8.10 Acquisition of Purchased Assets.
(a) The Purchase Agreements and the transactions contemplated
thereunder have been duly executed, delivered and performed in accordance with
their terms by the respective parties thereto in all respects, including the
fulfillment (not merely the waiver, except as may be disclosed to Lender and
consented to in writing by Lender) of all conditions precedent set forth
therein and giving effect to the terms of the Purchase Agreements and the
assignments to be executed and delivered by Seller (or
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any of its affiliates or subsidiaries) thereunder, Borrower acquired and has
good and marketable title to the Purchased Assets, free and clear of all
claims, liens, pledges and encumbrances of any kind, except as permitted
hereunder. Borrower acknowledges that the Purchased Assets are being purchased
subject to the security interest in them granted to Lender by the Seller. The
outstanding balance of the Obligations of the Seller to Lender are being
assumed by Borrower and shall be included in the opening balance of the Loans
made pursuant hereto and shall be subject to all of the terms and provisions
hereof.
(b) All actions and proceedings, required by the Purchase
Agreements, applicable law or regulation (including, but not limited to,
compliance with the Xxxx-Xxxxx-Xxxxxx Anti-Trust Improvements Act of 1976, as
amended) have been taken and the transactions required thereunder have been
duly and validly taken and consummated.
(c) No court of competent jurisdiction has issued any
injunction, restraining order or other order which prohibits consummation of
the transactions described in the Purchase Agreements and no governmental or
other action or proceeding has been threatened or commenced, seeking any
injunction, restraining order or other order which seeks to void or otherwise
modify the transactions described in the Purchase Agreements.
(d) Borrower has delivered, or caused to be delivered, to
Lender, true, correct and complete copies of the Purchase Agreements.
8.11 Capitalization.
(a) All of the issued and outstanding shares of capital stock
of Borrower are directly and beneficially owned and held by the Parent and all
of such shares have been duly authorized and are fully paid and non-assessable,
free and clear of all claims, liens, pledges and encumbrances of any kind,
except as disclosed in writing to Lender.
(b) Borrower is solvent and will continue to be solvent after
the creation of the Obligations, the security interests of Lender and the other
transaction contemplated hereunder, is able to pay its debts as they mature and
has (and has reason to believe it will continue to have) sufficient capital
(and not unreasonably small capital) to carry on its business and all
businesses in which it is about to engage. The assets and properties of
Borrower at a fair valuation and at their present fair salable value are, and
will be, greater than the Indebtedness of Borrower, and including subordinated
and contingent liabilities computed at the amount which, to the best of
Borrower's knowledge, represents an amount which can reasonably be expected to
become an actual or matured liability.
(c) The Parent has, on or before the date hereof, made the
cash equity capital contributions called for by Section 4.1(q) above, except
that Angeles may defer
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meeting the Angeles Equity Contribution for not more than 10 days after the
date hereof, as provided above in Section 4.1(q).
8.12 Accuracy and Completeness of Information. All information
furnished by or on behalf of Borrower in writing to Lender in connection with
this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including, without limitation, all information
on the Information Certificate is true and correct in all material respects on
the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading.
No event or circumstance has occurred which has had or could reasonably be
expected to have a material adverse affect on the business, assets or prospects
of Borrower, which has not been fully and accurately disclosed to Lender in
writing.
All representations and warranties contained in this Agreement or any
of the other Financing Agreements shall survive the execution and delivery of
this Agreement and shall be deemed to have been made again to Lender on the
date of each additional borrowing or other credit accommodation hereunder and
shall be conclusively presumed to have been relied on by Lender regardless of
any investigation made or information possessed by Lender. The representations
and warranties set forth herein shall be cumulative and in addition to any
other representations or warranties which Borrower shall now or hereafter give,
or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS.
9.1 Maintenance of Existence. Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, trade names, approvals, authorizations, leases
and contracts necessary to carry on the business as presently or proposed to be
conducted. Within thirty days of the date hereof, Acquisition Corp. shall
change its corporate name to "Capital Metals Co." and deliver to Lender (i) a
copy of the amendment to the Certificate of Incorporation of Acquisition Corp.
providing for such name change certified by the Secretary of State of
California as soon as it is available and any other jurisdiction where
Acquisition Corp is registered as a foreign corporation to do business.
Borrower shall give Lender thirty (30) days prior written notice of any
proposed additional change in its corporate name, which notice shall set forth
the new name and Borrower shall deliver to Lender a copy of the amendment to
the Certificate of Incorporation of Borrower providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation of
Borrower as soon as it is available.
9.2 New Collateral Locations. Borrower may open any new location
within the continental United States provided Borrower (a) gives Lender thirty
(30) days prior written notice of the intended opening of any such new location
and (b) executes and delivers, or causes to be executed and delivered, to
Lender such agreements, documents, and instruments as Lender may deem
reasonably necessary or desirable to
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protect its interests in the Collateral at such location, including, without
limitation, UCC financing statements and, if Borrower leases such new location,
provides a favorable landlord waiver or subordination, or, in the alternative,
Lender may apply an Availability Reserve in an amount equal to three (3) months
gross rent in a manner consistent with the Availability Reserve established to
cover rent as defined in Section 1.4 hereof.
9.3 Compliance with Laws, Regulations.
(a) Borrower shall, at all times, comply in all material
respects with all laws, rules, regulations, licenses, permits, approvals and
orders applicable to it and duly observe all requirements of any Federal, State
or local governmental authority, including, without limitation, the Employee
Retirement Security Act of 1974, as amended, the Occupational Safety and Hazard
Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, and
all statutes, rules, regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including, without
limitation, all of the Environmental Laws.
(b) Borrower shall establish and maintain, at its expense, a
system to assure and monitor its continued compliance with all Environmental
Laws in all of its operations, which system shall include annual reviews of
such compliance by employees or agents of Borrower who are familiar with the
requirements of the Environmental Laws. Copies of all environmental surveys,
audits, assessments, feasibility studies and results of remedial investigations
shall be promptly furnished, or caused to be furnished, by Borrower to Lender.
Borrower shall take prompt and appropriate action to respond to any non-
compliance with any of the Environmental Laws and shall regularly report to
Lender on such response.
(c) Borrower shall give both oral and written notice to Lender
immediately upon Borrower's receipt of any notice of, or Borrower's otherwise
obtaining knowledge of, (i) the occurrence of any event involving the release,
spill or discharge, threatened or actual, of any Hazardous Material or (ii) any
investigation, proceeding, complaint, order, directive, claims, citation or
notice with respect to: (A) any non-compliance with or violation of any
Environmental Law by Borrower or (B) the release, spill or discharge,
threatened or actual, of any Hazardous Material or (C) the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or (D) any other environmental, health or
safety matter, which affects Borrower or its business, operations or assets or
any properties at which Borrower transported, stored or disposed of any
Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever
Lender reasonably determines that there is non-compliance, or any condition
which requires any action by or on behalf of Borrower in order to avoid any
material non-compliance, with any Environmental Law, Borrower shall, at
Lender's request and Borrower's expense: (i) cause an independent environmental
engineer acceptable to Lender to conduct such tests of the site where
Borrower's non-compliance or alleged
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non-compliance with such Environmental Laws has occurred as to such non-
compliance and prepare and deliver to Lender a report as to such non-compliance
setting forth the results of such tests, a proposed plan for responding to any
environmental problems described therein, and an estimate of the costs thereof
and (ii) provide to Lender a supplemental report of such engineer whenever the
scope of such non-compliance, or Borrower's response thereto or the estimated
costs thereof, shall change in any material respect.
(e) Borrower shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including attorneys' fees and legal expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including, without limitation, the costs
of any required or necessary repair, cleanup or other remedial work with
respect to any property of Borrower and the preparation and implementation of
any closure, remedial or other required plans. All representations,
warranties, covenants and indemnifications in this Section 9.3 shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
9.4 Payment of Taxes and Claims. Borrower shall duly pay and
discharge all taxes, assessments, contributions and governmental charges upon
or against it or its properties or assets, except for taxes the validity of
which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower and with respect to which adequate reserves
have been set aside on its books. Borrower shall be liable for any tax or
penalties imposed on Lender as a result of the financing arrangements provided
for herein and Borrower agrees to indemnify and hold Lender harmless with
respect to the foregoing, and to repay to Lender on demand the amount thereof,
and until paid by Borrower such amount shall be added and deemed part of the
Loans, provided, that, nothing contained herein shall be construed to require
Borrower to pay any income or franchise taxes attributable to the income of
Lender from any amounts charged or paid hereunder to Lender. The foregoing
indemnity shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
9.5 Insurance. Borrower shall, at all times, maintain with
financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in
the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. Said policies of insurance shall be satisfactory to Lender as to
form, amount and insurer. Borrower shall furnish certificates, policies or
endorsements to Lender as Lender shall require as proof of such insurance, and,
if Borrower fails to do so, Lender is authorized, but not required, to obtain
such insurance at the expense of Borrower. All policies shall provide for at
least thirty (30) days prior written notice to Lender of any cancellation or
reduction of coverage and that Lender may act as attorney for Borrower in
obtaining, and at any time an Event of Default
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exists or has occurred and is continuing, adjusting, settling, amending and
canceling such insurance. Borrower shall cause Lender to be named as a loss
payee and an additional insured (but without any liability for any premiums)
under such insurance policies and Borrower shall obtain non-contributory
lender's loss payable endorsements to all insurance policies in form and
substance satisfactory to Lender. Such lender's loss payable endorsements
shall specify that the proceeds of such insurance shall be payable to Lender as
its interests may appear and further specify that Lender shall be paid
regardless of any act or omission by Borrower or any of its affiliates. At its
option, Lender may apply any insurance proceeds received by Lender at any time
to the cost of repairs or replacement of Collateral and/or to payment of the
Obligations, whether or not then due, in any order and in such manner as Lender
may determine or hold such proceeds as cash collateral for the Obligations.
9.6 Financial Statements and Other Information.
(a) Borrower shall keep proper books and records in which true
and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of Borrower and its subsidiaries
(if any) in accordance with GAAP and Borrower shall furnish or cause to be
furnished to Lender: (i) within forty (40) days after the end of each fiscal
month, monthly unaudited consolidated financial statements, and, if Borrower
has any subsidiaries, unaudited consolidating financial statements (including
in each case balance sheets, statements of income and loss and statements of
shareholders' equity), all in reasonable detail, fairly presenting the
financial position and the results of the operations of Borrower and its
subsidiaries as of the end of and through such fiscal month and (ii) within one
hundred twenty (120) days after the end of each fiscal year, audited
consolidated financial statements and, if Borrower has any subsidiaries,
audited consolidating financial statements of Borrower and its subsidiaries
(including in each case balance sheets, statements of income and loss,
statements of cash flow and statements of shareholders' equity), and the
accompanying notes thereto, all in reasonable detail, fairly presenting the
financial position and the results of the operations of Borrower and its
subsidiaries as of the end of and for such fiscal year, together with the
opinion of independent certified public accountants, which accountants shall be
an independent accounting firm selected by Borrower and reasonably acceptable
to Lender, that such financial statements have been prepared in accordance with
GAAP, and present fairly the results of operations and financial condition of
Borrower and its subsidiaries as of the end of and for the fiscal year then
ended.
(b) Borrower shall promptly notify Lender in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for
the Obligations or which would result in any material adverse change in
Borrower's business, properties, assets, goodwill or condition, financial or
otherwise and (ii) the occurrence of any Event of Default or event which, with
the passage of time or giving of notice or both, would constitute an Event of
Default.
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(c) Borrower shall promptly after the sending or filing
thereof furnish or cause to be furnished to Lender copies of all financial
reports which Borrower sends to its stockholders generally and copies of all
reports and registration statements which Borrower files with the Securities
and Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc.
(d) Borrower shall furnish or cause to be furnished to Lender
such budgets, forecasts, projections and other information in respect of the
Collateral and the business of Borrower, as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrower to any court or other government agency or to any participant or
assignee or prospective participant or assignee. Borrower hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Lender, at
Borrower's expense, copies of the financial statements of Borrower and any
reports or management letters prepared by such accountants or auditors on
behalf of Borrower and to disclose to Lender such information as they may have
regarding the business of Borrower. Any documents, schedules, invoices or
other papers delivered to Lender may be destroyed or otherwise disposed of by
Lender one (1) year after the same are delivered to Lender, except as otherwise
designated by Borrower to Lender in writing.
(e) Borrower shall deliver, or cause to be delivered, to
Lender, within ninety (90) days from the date hereof, opening balance sheets
prepared by independent certified public accountants, which accountants shall
be a nationally recognized independent accounting firm selected by Borrower and
reasonably acceptable to Lender, and certified by such accountants to the
effect that such opening balance sheets have been prepared in accordance with
GAAP and present fairly the financial condition of Borrower as of such date.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.
Borrower shall not, directly or indirectly, (a) merge into or with or
consolidate with any other Person or permit any other Person to merge into or
with or consolidate with it, or (b) sell, assign, lease, transfer, abandon or
otherwise dispose of any stock or indebtedness to any other Person or any of
its assets to any other Person (except for (i) sales of Inventory in the
ordinary course of business and (ii) the disposition of worn-out or obsolete
Equipment or Equipment no longer used in the business of Borrower so long as
(A) if an Event of Default exists or has occurred and is continuing, any
proceeds are paid to Lender and (B) such sales do not involve Equipment having
an aggregate fair market value in excess of $25,000 for all such Equipment
disposed of in any fiscal year of Borrower), or (c) form or acquire any
subsidiaries, or (d) wind up, liquidate or dissolve or (e) agree to do any of
the foregoing.
9.8 Encumbrances. Borrower shall not create, incur, assume or suffer
to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including, without limitation, the Collateral, except: (a) liens and security
interests of Lender; (b) liens securing the
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payment of taxes, either not yet overdue or the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books; (c) non-consensual statutory liens (other than liens
securing the payment of taxes) arising in the ordinary course of Borrower's
business to the extent: (i) such liens secure indebtedness which is not overdue
or (ii) such liens secure indebtedness relating to claims or liabilities which
are fully insured and being defended at the sole cost and expense and at the
sole risk of the insurer or being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower, in each case prior to
the commencement of foreclosure or other similar proceedings and with respect
to which adequate reserves have been set aside on its books; (d) zoning
restrictions, easements, licenses, covenants and other restrictions affecting
the use of real property which do not interfere in any material respect with
the use of such real property or ordinary conduct of the business of Borrower
as presently conducted thereon or materially impair the value of the real
property which may be subject thereto; (e) purchase money security interests in
Equipment (including capital leases) and purchase money mortgages on real
estate not to exceed $50,000 in the aggregate at any time outstanding so long
as such security interests and mortgages do not apply to any property of
Borrower other than the Equipment or real estate so acquired, and the
indebtedness secured thereby does not exceed the cost of the Equipment or real
estate so acquired, as the case may be and (f) security interests in favor of
the Seller, and the Estate of Xxx Xxxxxx, which shall be subordinated in all
respects to the security interest in favor of Lender.
9.9 Indebtedness. Borrower shall not incur, create, assume, become
or be liable in any manner with respect to, or permit to exist, any obligations
or indebtedness, except (a) the Obligations; (b) trade obligations and normal
accruals in the ordinary course of business not yet due and payable, or with
respect to which the Borrower is contesting in good faith the amount or
validity thereof by appropriate proceedings diligently pursued and available to
Borrower, and with respect to which adequate reserves have been set aside on
its books; (c) purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including capital leases) in violation
of any other provision of this Agreement; and (d) obligations or indebtedness
set forth on the Information Certificate; provided, that, (i) Borrower may only
make regularly scheduled payments of principal and interest in respect of such
indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such indebtedness as in effect on the date hereof,
(ii) Borrower shall not, directly or indirectly, (A) amend, modify, alter or
change the terms of such indebtedness or any agreement, document or instrument
related thereto as in effect on the date hereof, or (B) except as otherwise
permitted under this Agreement, redeem, retire, defease, purchase or otherwise
acquire such indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose, and (iii) Borrower shall furnish to Lender all notices or
demands in connection with such indebtedness either received by Borrower or on
its behalf, promptly after the receipt thereof, or sent by Borrower or on its
behalf, concurrently with the sending thereof, as the case may be.
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9.10 Loans, Investments, Guarantees, Etc. Borrower shall not,
directly or indirectly, make any loans or advance money or property to any
person, or invest in (by capital contribution, dividend or otherwise) or
purchase or repurchase the stock or indebtedness or all or a substantial part
of the assets or property of any person, or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the indebtedness,
performance, obligations or dividends of any Person or agree to do any of the
foregoing, except: (a) the endorsement of instruments for collection or deposit
in the ordinary course of business; (b) investments in: (i) short-term direct
obligations of the United States Government, (ii) negotiable certificates of
deposit issued by any bank satisfactory to Lender, payable to the order of the
Borrower or to bearer and delivered to Lender, and (iii) commercial paper rated
A1 or P1; provided, that, as to any of the foregoing, unless waived in writing
by Lender, Borrower shall take such actions as are deemed necessary by Lender
to perfect the security interest of Lender in such investments and (c) the
guarantees set forth in the Information Certificate.
9.11 Dividends and Redemptions. Borrower shall not do any of the
following, and Borrower shall not permit Parent to any of the following:
directly or indirectly, declare or pay any dividends on account of any shares
of any class of capital stock of Borrower or Parent now or hereafter
outstanding, or set aside or otherwise deposit or invest any sums for such
purpose, or redeem, retire, defease, purchase or otherwise acquire any shares
of any class of capital stock (or set aside or otherwise deposit or invest any
sums for such purpose) for any consideration other than common stock or apply
or set apart any sum, or make any other distribution (by reduction of capital
or otherwise) in respect of any such shares or agree to do any of the
foregoing; provided that (i) Borrower may pay dividends to Parent if no Event
of Default and no event which, with notice or passage of time or both, would
constitute an Event of Default, has occurred and is continuing or would occur
after giving effect to any such dividend, and if, after giving effect to such
dividend Borrower would have Excess Availability of not less than $750,000, and
(ii) Parent may declare and pay dividends on any class of preferred shares of
Parent, provided such dividends are in an amount not to exceed 10% per annum on
a non-cumulative basis, and provided no Event of Default and no event which,
with notice or passage of time or both, would constitute an Event of Default,
has occurred and is continuing or would occur after giving effect to any such
dividend, and provided that, after giving effect to such dividend Borrower
would have Excess Availability of not less than $750,000.
9.12 Transactions with Affiliates. Borrower shall not enter into any
transaction for the purchase, sale or exchange of property or the rendering of
any service to or by any affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's business and upon fair
and reasonable terms no less favorable to the Borrower than Borrower would
obtain in a comparable arm's length transaction with an unaffiliated person.
9.13 Net Worth. Acquisition Corp. shall, at all times, maintain a
net worth of not less than $810,000 (determined in accordance with GAAP), and
Angeles shall at all
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times maintain a net worth of not less than a negative $1,270,000 (determined
in accordance with GAAP, provided that in determining the net worth of
Angeles, the notes and obligations owing to Angeles from Parent and accrued
interest thereon shall not be counted as assets). The foregoing amounts may be
revised by Lender, in consultation with the Borrower, following Lender's
receipt of audited financial statements of Acquisition Corp. prepared as of the
date of the closing of the acquisition of the Purchased Assets, which Borrower
shall provide to Lender within 120 days after the date hereof.
9.14 Compliance with ERISA. Borrower shall not with respect to any
"employee pension benefit plan" maintained by Borrower or any of its ERISA
Affiliates:
(a) (i) terminate any of such employee pension benefit
plans so as to incur any liability to the Pension Benefit Guaranty Corporation
established pursuant to ERISA, (ii) allow or suffer to exist any prohibited
transaction involving any of such employee pension benefit plans or any trust
created thereunder which would subject Borrower or such ERISA Affiliate to a
tax or penalty or other liability on prohibited transactions imposed under
Section 4975 of the Code or ERISA, (iii) fail to pay to any such employee
pension benefit plan any contribution which it is obligated to pay under
Section 302 of ERISA, Section 412 of the Code or the terms of such plan, (iv)
allow or suffer to exist any accumulated funding deficiency, whether or not
waived, with respect to any such employee pension benefit plan, (v) allow or
suffer to exist any occurrence of a reportable event or any other event or
condition which presents a material risk of termination by the Pension Benefit
Guaranty Corporation of any such employee pension benefit plan that is a single
employer plan, which termination could result in any liability to the Pension
Benefit Guaranty Corporation or (vi) incur any withdrawal liability with
respect to any multiemployer pension plan.
(b) As used in this Section 9.14, the term "employee pension
benefit plans," "employee benefit plans", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in
ERISA, and the term "prohibited transaction" shall have the meaning assigned to
it in Section 4975 of the Code and ERISA.
9.15 Costs and Expenses. Borrower shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and
all other documents related hereto or thereto, including any amendments,
supplements or consents which may hereafter be contemplated (whether or not
executed) or entered into in respect hereof and thereof, including, but not
limited to: (a) all costs and expenses of filing or recording (including
Uniform Commercial Code financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees, if applicable);
(b) costs and expenses and fees for title insurance and other insurance
premiums, environmental
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audits, surveys, assessments, engineering reports and inspections, appraisal
fees and search fees; (c) costs and expenses of remitting loan proceeds,
collecting checks and other items of payment, and establishing and maintaining
the Blocked Accounts, together with Lender's customary charges and fees with
respect thereto; (d) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations; (e) costs and expenses of
preserving and protecting the Collateral; (f) costs and expenses paid or
incurred in connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Lender arising out of the transactions contemplated hereby and thereby
(including, without limitation, preparations for and consultations concerning
any such matters); (g) all out-of-pocket expenses and costs heretofore and from
time to time hereafter incurred by Lender during the course of periodic field
examinations of the Collateral and Borrower's operations, plus a per diem
charge at the rate of $650 per person per day for Lender's examiners in the
field and office; and (h) the reasonable fees and disbursements of counsel
(including legal assistants) to Lender in connection with any of the foregoing.
9.16 Further Assurances. At the request of Lender at any time and
from time to time, Borrower shall, at its expense, duly execute and deliver, or
cause to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary
or proper to evidence, perfect, maintain and enforce the security interests and
the priority thereof in the Collateral and to otherwise effectuate the
provisions or purposes of this Agreement or any of the other Financing
Agreements. Lender may at any time and from time to time request a certificate
from an officer of Borrower representing that all conditions precedent to the
making of Loans and providing Letter of Credit Accommodations contained herein
are satisfied. In the event of such request by Lender, Lender may, at its
option, cease to make any further Loans or provide any further Letter of Credit
Accommodations until Lender has received such certificate and, in addition,
Lender has determined that such conditions are satisfied. Where permitted by
law, Borrower hereby authorizes Lender to execute and file one or more UCC
financing statements signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.
10.1 Events of Default. The occurrence or existence of any one or
more of the following events are referred to herein individually as an "Event
of Default", and collectively as "Events of Default":
(a) Borrower fails to pay when due any of the Obligations
which failure is not cured within two Business Days after the same became due
and payable, or Borrower fails to perform any of the other terms, covenants,
conditions or provisions contained in this Agreement or any of the other
Financing Agreements, which failure is not cured within five calendar days
after the performance was due, provided that such
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five-day cure period shall not apply to (i) a failure to perform which cannot
be cured within such five-day period, or (ii) a failure which has been the
subject of a prior failure within the prior six months, or (iii) a failure
which is an intentional breach by the Borrower, or (iv) a breach of any of
Sections 6.1, 6.3, 6.4, 6.6, 7.2, 7.3, 7.4, 7.7, 9.4, 9.5, 9.7-9.13, or any
covenants or agreements covering substantially the same matters;
(b) Any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(c) Any Obligor revokes, terminates or fails to perform any of
the terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) Any judgment for the payment of money which is not fully
covered by insurance (as demonstrated to Congress' reasonable satisfaction) is
rendered against Borrower or any Obligor in excess of $50,000 in any one case
or in excess of $100,000 in the aggregate and shall remain undischarged or
unvacated for a period in excess of thirty (30) days or execution shall at any
time not be effectively stayed, or any judgment other than for the payment of
money, or injunction, attachment, garnishment or execution is rendered against
Borrower or any Obligor or any of their assets;
(e) Any Obligor (being a natural person or a general partner
of an Obligor which is a partnership) dies or Borrower or any Obligor, which is
a partnership, limited liability company or corporation, dissolves or suspends
or discontinues doing business;
(f) Borrower or any Obligor becomes insolvent (however defined
or evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
(g) A case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law
or in equity) is filed against Borrower or any Obligor or all or any part of
its properties and such petition or application is not dismissed within forty-
five (45) days after the date of its filing or Borrower or any Obligor shall
file any answer admitting or not contesting such petition or application or
indicates its consent to, acquiescence in or approval of, any such action or
proceeding or the relief requested is granted sooner;
(h) A case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any
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jurisdiction now or hereafter in effect (whether at a law or equity) is filed
by Borrower or any Obligor or for all or any part of its property; or
(i) Any default by Borrower or any Obligor under any
agreement, document or instrument relating to any indebtedness for borrowed
money owing to any person other than Lender, or any capitalized lease
obligations, contingent indebtedness in connection with any guarantee, letter
of credit, indemnity or similar type of instrument in favor of any person other
than Lender, in any case in an amount in excess of $50,000, which default
continues for more than the applicable cure period, if any, with respect
thereto, or any default by Borrower or any Obligor under any material contract,
lease, license or other obligation to any person other than Lender, which
default continues for more than the applicable cure period, if any, with
respect thereto;
(j) any transfer or sale of any of the equity securities of
Borrower;
(k) the indictment or threatened indictment of Borrower or any
Obligor under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against Borrower or any Obligor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of Borrower or such Obligor;
(l) there shall be a material adverse change in the business,
assets or prospects of Borrower or any Obligor after the date hereof; or
(m) there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
(a) at any time an Event of Default exists or has occurred and
is continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and
other applicable law, all of which rights and remedies may be exercised without
notice to or consent by Borrower or any Obligor, except as such notice or
consent is expressly provided for hereunder or required by applicable law. All
rights, remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
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(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation, (i) accelerate the payment of all Obligations and
demand immediate payment thereof to Lender (provided, that, upon the occurrence
of any Event of Default described in Sections 10.1(g) and 10.1(h), all
Obligations shall automatically become immediately due and payable), (ii) with
or without judicial process or the aid or assistance of others, enter upon any
premises on or in which any of the Collateral may be located and take
possession of the Collateral or complete processing, manufacturing and repair
of all or any portion of the Collateral, (iii) require Borrower, at Borrower's
expense, to assemble and make available to Lender any part or all of the
Collateral at any place and time designated by Lender, (iv) collect, foreclose,
receive, appropriate, setoff and realize upon any and all Collateral, (v)
remove any or all of the Collateral from any premises on or in which the same
may be located for the purpose of effecting the sale, foreclosure or other
disposition thereof or for any other purpose, (vi) sell, lease, transfer,
assign, deliver or otherwise dispose of any and all Collateral (including,
without limitation, entering into contracts with respect thereto, public or
private sales at any exchange, broker's board, at any office of Lender or
elsewhere) at such prices or terms as Lender may deem reasonable, for cash,
upon credit or for future delivery, with the Lender having the right to
purchase the whole or any part of the Collateral at any such public sale, all
of the foregoing being free from any right or equity of redemption of Borrower,
which right or equity of redemption is hereby expressly waived and released by
Borrower and/or (vii) terminate this Agreement. If any of the Collateral is
sold or leased by Lender upon credit terms or for future delivery, the
Obligations shall not be reduced as a result thereof until payment therefor is
finally collected by Lender. If notice of disposition of Collateral is
required by law, ten (10) days prior notice by Lender to Borrower designating
the time and place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be made, shall be deemed to
be reasonable notice thereof and Borrower waives any other notice. In the
event Lender institutes an action to recover any Collateral or seeks recovery
of any Collateral by way of prejudgment remedy, Borrower waives the posting of
any bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of
the Collateral to payment of the Obligations, in whole or in part and in such
order as Lender may elect, whether or not then due. Borrower shall remain
liable to Lender for the payment of any deficiency with interest at the highest
rate provided for herein and all costs and expenses of collection or
enforcement, including reasonable attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to
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Borrower and/or (ii) terminate any provision of this Agreement providing for
any future Loans or Letter of Credit Accommodations to be made by Lender to
Borrower.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of California
(without giving effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the state courts of the County of Los Angeles,
State of California and of the United States District Court for the Central
District of California and waive any objection based on venue or forum non
conveniens with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Lender shall have the right to bring any action or
proceeding against Borrower or its property in the courts of any other
jurisdiction which Lender deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against Borrower or its
property).
(c) Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails,
or, at Lender's option, by service upon Borrower in any other manner provided
under the rules of any such courts.
(D) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (II) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND
LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
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DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY AND THAT BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether
in tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and non-
appealable judgment or court order binding on Lender, that the losses were the
result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit of
the rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the
Collateral and this Agreement, except such as are expressly provided for
herein. No notice to or demand on Borrower which Lender may elect to give
shall entitle Borrower to any other or further notice or demand in the same,
similar or other circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically
set forth therein. A waiver by Lender of any right, power and/or remedy on any
one occasion shall not be construed as a bar to or waiver of any such right,
power and/or remedy which Lender would otherwise have on any future occasion,
whether similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other than
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Lender, and
its directors, agents, employees and counsel, harmless from and against any and
all losses, claims, damages, liabilities, costs or expenses imposed on,
incurred by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery,
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enforcement, performance or administration of this Agreement, any other
Financing Agreements, or any undertaking or proceeding related to any of the
transactions contemplated hereby or any act (other than Lender's own gross
negligence or willful misconduct), omission, event or transaction related or
attendant thereto, including, without limitation, amounts paid in settlement,
court costs, and the reasonable fees and expenses of counsel. To the extent
that the undertaking to indemnify, pay and hold harmless set forth in this
Section may be unenforceable because it violates any law or public policy,
Borrower shall pay the maximum portion which it is permitted to pay under
applicable law to Lender in satisfaction of indemnified matters under this
Section. The foregoing indemnity shall survive the payment of the Obligations
and the termination or non-renewal of this Agreement.
12.1 Term.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date two (2) years
from the date hereof (the "Renewal Date"), and from year to year thereafter,
unless sooner terminated pursuant to the terms hereof. Lender or Borrower
(subject to Lender's right to extend the Renewal Date as provided above) may
terminate this Agreement and the other Financing Agreements effective on the
Renewal Date or on the anniversary of the Renewal Date in any year by giving to
the other party at least sixty (60) days prior written notice. Borrower may
terminate this Agreement prior to the end of the then current term, including
any renewal term, for any reason upon sixty (60) days prior written notice to
Lender, and in such case Borrower agrees to pay to Lender the applicable early
termination fee provided for in Section 12.1(c) hereof. Regardless of the
timing of termination, this Agreement and all other Financing Agreements must
be terminated simultaneously. Upon the effective date of termination or non-
renewal of the Financing Agreements, Borrower shall pay to Lender, in full, all
outstanding and unpaid Obligations and shall furnish cash collateral to Lender
in such amounts as Lender determines are reasonably necessary to secure Lender
from loss, cost, damage or expense, including attorneys' fees and legal
expenses, in connection with any contingent Obligations, including issued and
outstanding Letter of Credit Accommodations and checks or other payments
provisionally credited to the Obligations and/or as to which Lender has not yet
received final and indefeasible payment. Such cash collateral shall be
remitted by wire transfer in Federal funds to such bank account of Lender, as
Lender may, in its discretion, designate in writing to Borrower for such
purpose. Interest shall be due until and including the next Business Day, if
the amounts so paid by Borrower to the bank account designated by Lender are
received in such bank account later than 10:30 a.m., Los Angeles time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and
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covenants under this Agreement or the other Financing Agreements until all
Obligations have been fully and finally discharged and paid, and Lender's
continuing security interest in the Collateral and the rights and remedies of
Lender hereunder, under the other Financing Agreements and applicable law,
shall remain in effect until all such Obligations have been fully and finally
discharged and paid.
(c) If for any reason this Agreement is terminated prior to
the end of the then current term or renewal term of this Agreement, Borrower
agrees to pay to Lender, upon the effective date of such termination, an early
termination fee in the amount set forth below if such termination is effective
in the period indicated:
Amount Period
------ ------
(i) 1% of the Maximum Credit From the date of this Agreement to and
including the day preceding the first
anniversary of this Agreement
(ii) 0.50% of the Maximum Credit from the first anniversary of this
Agreement to and including the day
preceding the second anniversary of this
Agreement
The early termination fee provided for in this Section 12.1 shall be deemed
included in the Obligations. Lender agrees to waive the early termination fee
if Borrower requests financing for a business acquisition in the United States,
Lender declines to provide such financing on the terms requested by Borrower,
and Borrower consummates the acquisition with financing from another
institutional lender on such terms within 60 days after Lender has declined to
provide the financing. Any request for such financing shall be in writing.
12.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrower
at its chief executive office set forth below, or to such other address as
either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver
the next Business Day, one (1) Business Day after sending; and if by certified
mail, return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held
to be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and
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obligations of the parties shall be construed and enforced only to such extent
as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and
any other document referred to herein or therein shall be binding upon and
inure to the benefit of and be enforceable by Lender, Borrower and their
respective successors and assigns, except that Borrower may not assign its
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Lender. Lender may, after notice to Borrower, assign its rights and delegate
its obligations under this Agreement and the other Financing Agreements and
further may assign, or sell participations in, all or any part of the Loans,
the Letter of Credit Accommodations or any other interest herein to another
financial institution or other person, in which event, the assignee or
participant shall have, to the extent of such assignment or participation, the
same rights and benefits as it would have if it were the Lender hereunder,
except as otherwise provided by the terms of such assignment or participation.
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12.5 Entire Agreement. This Agreement, the other Financing
Agreements, any supplements hereto or thereto, and any instruments or documents
delivered or to be delivered in connection herewith or therewith represents the
entire agreement and understanding concerning the subject matter hereof and
thereof between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
BORROWER: BORROWER:
ANGELES METAL TRIM CO. ANGELES ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxxxxx X. Xxxx
----------------------------- ----------------------------
Title: President Title: Chief Executive Officer
----------------------- ------------------------
Chief Executive Office: Chief Executive Office:
0000 Xxxx Xxxxxx Xx. 00000 Xxxxx Xxxxxxx Xxx.
Xxx Xxxxxxx, Xxxxxxxxxx 00000 Xxxxxxxx, XX 00000
LENDER:
CONGRESS FINANCIAL CORPORATION (WESTERN)
By: /s/ Xxxxxxx Xxxxxx
---------------------------
Title: Vice President
--------------------------
Address:
000 Xxxxx Xxxx Xxxxxx
Xxxxx 0000
Xxxxxxxx, Xxxxxxxxxx 00000
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