EXHIBIT 10(u)
LOAN AND SECURITY AGREEMENT
DATED AS OF FEBRUARY 6, 2004
AMONG
GENERAL ELECTRIC CAPITAL CORPORATION
AS LENDER
AND
SPARKS EXHIBITS & ENVIRONMENTS CORP.
SPARKS EXHIBITS & ENVIRONMENTS, LTD.
SPARKS EXHIBITS & ENVIRONMENTS, inc.
and
dms store fixtures llc
AS BORROWERS
INDEX OF EXHIBITS AND SCHEDULES
Schedule A - Definitions
Schedule B - Lender's and Borrowers' Addresses for Notices
Schedule C - Letters of Credit
Schedule D - Cash Management System
Schedule E - Fees and Expenses
Schedule F - Schedule of Documents
Schedule G - Financial Covenants
Disclosure Schedule (3.2) - Places of Business; Corporate Names
Disclosure Schedule (3.6) - Real Estate
Disclosure Schedule (3.7) - Stock; Affiliates
Disclosure Schedule (3.9) - Taxes
Disclosure Schedule (3.11) - ERISA
Disclosure Schedule (3.12) - Litigation
Disclosure Schedule (3.13) - Intellectual Property
Disclosure Schedule (3.15) - Environmental Matters
Disclosure Schedule (3.16) - Insurance
Disclosure Schedule (3.18) - Contracts (Offset Risk)
Disclosure Schedule (5(b)) - Indebtedness
Disclosure Schedule (5(e)) - Liens
Disclosure Schedule (6.1) - Actions to Perfect Liens
Exhibit A - Form of Notice of Revolving Credit Advance
Exhibit B - Other Reports and Information
Exhibit C - Form of Borrowing Base Certificate
Exhibit C-1 - Form of Inventory Rollforward and Reconciliation
Exhibit D - Form of Accounts Payable Analysis
Exhibit E - Form of Accounts Receivable Rollforward Analysis
Exhibit F - Form of Revolving Credit Note
Exhibit G - Form of Term Note (Not Used)
Exhibit H - Form of Secretarial Certificate
Exhibit I - Form of Power of Attorney
Exhibit J - Form of Certificate of Compliance
Exhibit K - Form of Intercreditor and Subordination Agreement
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GE Capital
TRANSACTION SUMMARY AS OF THE DATE OF THIS AGREEMENT
REVOLVING CREDIT LOAN
Maximum Amount: $12,000,000
Term: Three (3) years
Revolving Credit Rate: Index Rate plus 4.50% (subject to adjustment as set forth herein)
Letter of Credit Subfacility: $3,000,000
Borrowing Base: (i) up to 85% of the value (as determined by Lender in accordance
with this Agreement) of each Borrower's Eligible Accounts; provided,
that Lender shall reduce the foregoing percentage by one percentage
point for each percentage point that the dilution of such Borrower's
Accounts (calculated by Lender as the average dilution over the most
recent three months) exceeds 5%, plus (ii) 80% of the value (as
determined by Lender in accordance with this Agreement) of each
Borrower's Eligible Shipped/Unbilled Assets; provided however that
the aggregate amount of advances outstanding at any time against all
Borrowers' Eligible Shipped/Unbilled Assets shall not exceed
$2,500,000, plus (iii) the sum of (a) 50% of the value of each
Borrower's Eligible Inventory consisting of raw materials, in each
case as determined by Lender in accordance with this Agreement,
valued on a first-in, first-out basis (at the lower of cost or
market); provided however, that the aggregate amount of advances
outstanding at any time against all Borrowers' Eligible Inventory
consisting of raw materials shall not exceed $500,000, and (b) 60% of
the value of each Borrower's Eligible Inventory consisting of
finished goods, in each case as determined by Lender in accordance
with this Agreement, valued on a first-in, first-out basis (at the
lower of cost or market); provided however, that the aggregate amount
of advances outstanding at any time against all Borrowers' Eligible
Inventory consisting of finished goods designated for (1) any single
customer shall not exceed $2,000,000, and (2) all customers shall not
exceed $3,000,000.
FEES
Closing Fee: $45,000
Collateral Monitoring Fee: $24,000 per annum (subject to adjustment as set forth herein)
Unused Line Fee: 0.25% per annum
Letter of Credit Fee: 4.50% per annum
Prepayment Fee: 3.00% in year one; 1.50% in year two; and 0.50% in year three
(subject to adjustment as set forth herein).
The Loans described generally here are established and governed by the terms and
conditions set forth below in this Agreement and the other Loan Documents, and
if there is any conflict between this general description and the express terms
and conditions below or elsewhere in the Loan Documents, such other express
terms and conditions shall control.
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This LOAN AND SECURITY AGREEMENT is dated as of February ____, 2004, and agreed
to by and among SPARKS EXHIBITS & ENVIRONMENTS CORP., a Pennsylvania corporation
("Leading Borrower"), SPARKS EXHIBITS & ENVIRONMENTS, LTD., a California
corporation ("Second Borrower"), SPARKS EXHIBITS & ENVIRONMENTS, INC., a Georgia
corporation ("Third Borrower"), DMS STORE FIXTURES LLC, a Pennsylvania limited
liability company ("Fourth Borrower"; Leading Borrower, Second Borrower, Third
Borrower, and Fourth Borrower, being collectively referred to herein as
"Borrowers" and each a "Borrower"), any other Credit Party executing this
Agreement, and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation
("Lender").
Recitals
A. Borrowers desire to obtain the Loans and other financial accommodations from
Lender and Lender is willing to provide the Loans and accommodations all in
accordance with the terms of this Agreement.
B. Capitalized terms used herein shall have the meanings assigned to them in
Schedule A and, for purposes of this Agreement and the other Loan Documents, the
rules of construction set forth in Schedule A shall govern. All Schedules,
attachments, addenda and exhibits hereto, or expressly identified to this
Agreement, are incorporated herein by reference, and taken together with this
Agreement, constitute but a single agreement.
Agreement
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
1. Amount and Terms of Credit
1.1 Loans. (a) Subject to the terms and conditions of this Agreement, from the
Closing Date and until the Commitment Termination Date (i) Lender agrees (A) to
make available to Borrowers advances (each, a "Revolving Credit Advance") and
(B) to incur Letter of Credit Obligations, in an aggregate outstanding amount
for any Borrower not to exceed the Borrowing Availability of such Borrower, and
(ii) any Borrower may at the request of Leading Borrower as agent for such
Borrower from time to time borrow, repay and reborrow, and may cause Lender to
incur Letter of Credit Obligations, under this Section 1.1. The Revolving Credit
Loan shall be evidenced by, and be repayable in accordance with the terms of,
the Revolving Credit Note and this Agreement.
(b) Borrower shall request each Revolving Credit Advance by written
notice to Lender substantially in the form of Exhibit A (each a "Notice of
Revolving Credit Advance") given no later than 1:00 P.M. (New York City time) on
the Business Day of the proposed advance. Lender shall be fully protected under
this Agreement in relying upon, and shall be entitled to rely upon, (i) any
Notice of Revolving Credit Advance believed by Lender to be genuine, and (ii)
the assumption that the Persons making or executing and delivering (or purported
to be so acting) a Notice of Revolving Credit Advance were duly authorized,
unless the responsible individual acting thereon for Lender shall have actual
knowledge to the contrary. As an accommodation to Borrowers, Lender may permit
telephonic or facsimile requests or Electronic Transmissions (as defined in
Section 1.1(e) below) for a Revolving Credit Advance and Electronic Transmission
or facsimile transmittal of instructions, authorizations, agreements or reports
to Lender by any Borrower; Electronic Transmission authorization shall be
subject to Section 1.1(e) below. If Lender permits any such means of
communication by Borrowers, unless Borrowers specifically direct Lender in
writing not to accept or act upon telephonic or facsimile communications or
Electronic Transmission from any Borrower, Lender shall have no liability to any
Borrower for any loss or damage suffered by any Borrower as a result of Lender's
honoring of any requests, execution of any instructions, authorizations or
agreements or reliance on any reports communicated to it telephonically, by
facsimile or by Electronic Transmission and purporting to have been sent to
Lender by any Borrower and Lender shall have no duty to verify the origin of any
such communication or the identity or authority of the Person sending it.
(c) In making any Loan hereunder Lender shall be entitled to rely upon
the most recent Borrowing Base Certificate delivered to Lender by such Borrower
and other information available to Lender. Lender shall be under no obligation
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to make any further Revolving Credit Advance to any Borrower or incur any other
Obligation if any Borrower shall have failed to deliver a Borrowing Base
Certificate to Lender by the time specified in Section 4.1(b).
(d) Letters of Credit. Subject to the terms and conditions of this
Agreement, including Schedule C, each Borrower shall have the right to request,
and Lender agrees to incur, the Letter of Credit Obligations for the account of
such Borrower in accordance with Schedule C.
(e) Electronic Transmission. Lender may authorize Borrower to send to
Lender or receive from Lender instructions, notices, communications, requests,
authorizations, agreements and reports to be delivered to or transmitted by
Lender under this Agreement by electronic means (each, an "Electronic
Transmission"). Any documents authorized by Lender to be sent by Electronic
Transmission shall be deemed: (a) to have been transmitted by the person
indicated on or reflected by the Electronic Transmission as the sender; (b) to
have been transmitted by a person duly authorized to do so, and (c) to have been
received by the person for whom such documents were intended on the actual date
of receipt of such documents, unless such day is not a Business Day, in which
event such documents shall be deemed to have been received on the first Business
Day following actual receipt. Each party may rely upon, and assume the
authenticity of, any signatures contained in any documents Lender authorizes to
be transmitted by Electronic Transmission, and such signatures shall have the
same effect and weight as original signatures and shall be sufficient to satisfy
the requirements of the UCC or any applicable statute, rule of law, or rule of
evidence. Electronic Transmissions which are not readily capable of bearing
either a signature or a reproduction of a signature shall be deemed signed, for
purposes of the UCC and all other rules of law and evidence, if an electronic
symbol, encryption, or process (including, without limitation, the name or an
abbreviation of the name of the party sending the Electronic Transmission) has
been attached to or logically associated with the Electronic Transmission with
the intent to sign, authenticate, adopt, or accept the Electronic Transmission.
The parties agree not to contest the validity or enforceability of an Electronic
Transmission under the provisions of any applicable law relating to whether
certain agreements are to be in a writing or signed by the party to be bound
thereby. However, nothing herein shall limit a party's right to contest whether
an Electronic Transmission maintained hereunder has been altered after receipt.
On the request of the sender, the receiving party shall immediately confirm the
receipt of any Electronic Transmission. If any Electronic Transmission is
received in an unintelligible or garbled form, the receiving party shall notify
the transmitting party in a reasonable manner promptly and in any event within
one (1) Business Day after the receiving party first detects the error. Upon
receipt of such notice, the transmitting party shall retransmit the Electronic
Transmission. If the receiving party fails timely to inform the transmitting
party of an error in the received, but garbled Electronic Transmission, the
transmitting party's record of the contents of such Electronic Transmission
shall control. The sender of any documents transmitted by Electronic
Transmission shall maintain backup paper documents for such documents until at
least the third anniversary of the date of the termination of this Agreement and
shall, on request of the receiving party, furnish such backup paper documents
within two Business Days of the receipt of a request therefor; provided,
however, that the absence of any such backup documentation with respect to a
request for a Revolving Credit Advance by any Borrower shall not affect the
validity of any request for a Revolving Credit Advance transmitted to Lender,
whether by Electronic Transmission or otherwise. Each party may rely upon
documents authorized by Lender to be sent by Electronic Transmission to the same
extent as if original documents had been personally delivered.
1.2 Term and Prepayment. (a) Upon the Commitment Termination Date the obligation
of Lender to make Revolving Credit Advances and extend other credit hereunder
shall immediately terminate and Borrowers shall pay to Lender in full, in cash:
(i) all outstanding Revolving Credit Advances and all accrued but unpaid
interest thereon; (ii) an amount sufficient to enable Lender to hold cash
collateral as specified in Schedule C; and (iii) all other non-contingent
Obligations due to or incurred by Lender.
(b) If the Revolving Credit Loan attributable to any Borrower shall at
any time exceed such Borrower's Borrowing Availability, then such Borrower
shall, within two (2) Business Days thereafter, repay the Revolving Credit Loan
in the amount of such excess; provided that any such excess outstanding shall
nevertheless constitute Obligations that are evidenced by the Revolving Credit
Notes, secured by the Collateral and entitled to all of the benefits of the Loan
Documents.
(c) Each Borrower shall have the right, at any time upon thirty (30)
days' prior written notice to Lender to (i) terminate voluntarily Borrowers'
right to receive or benefit from, and Lender's obligation to make and to incur,
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Revolving Credit Advances and Letter of Credit Obligations and (ii) prepay all
of the Obligations. The effective date of termination of the Revolving Credit
Loan specified in such notice shall be the Commitment Termination Date. If any
Borrower exercises the right of termination and prepayment, or if Lender's
obligation to make Loans is terminated for any reason prior to the Stated Expiry
Date (including as a result of the occurrence of a Default), Borrowers shall pay
to Lender the applicable Prepayment Fee.
1.3 Use of Proceeds. Borrowers shall use the proceeds of the Loans to refinance
on the Closing Date certain outstanding Indebtedness as provided in Section
2.1(b) and for working capital and other general corporate purposes.
1.4 Single Loan. The Loans and all of the other Obligations of any Borrower to
Lender shall constitute one general obligation of such Borrower secured by all
of the Collateral.
1.5 Interest. (a) Each Borrower shall pay interest to Lender on the aggregate
outstanding Revolving Credit Advances attributable to such Borrower at a
floating rate equal to the Index Rate plus four and one-half percent (4.50%) per
annum (the "Revolving Credit Rate"). The Revolving Credit Rate shall be subject
to adjustment (up or down) prospectively on an annual basis as determined by the
Borrowers' consolidated financial performance, commencing with the first day of
the first calendar month that occurs more than five days after delivery to
Lender of Borrowers' annual audited Financial Statements for the Fiscal Year
ending December 31, 2004 (the "First Adjustment Date"). Adjustments to the
Revolving Credit Rate shall be in accordance with the following grid:
---------------------------------------- --------------------------------------
If the Fixed Charge Coverage Ratio for Then the Revolving Credit Rate shall
the Immediately Preceding Fiscal Year be:
is:
---------------------------------------- --------------------------------------
Less than or equal to 1.25 : 1.0 Index Rate + 4.50%
---------------------------------------- --------------------------------------
Greater than 1.25 : 1.0, but less than Index Rate + 4.00%
1.50 : 1.0
---------------------------------------- --------------------------------------
Greater than or equal to 1.50 : 1.0 Index Rate + 3.50%
---------------------------------------- --------------------------------------
All adjustments in the Revolving Credit Rate after the First Adjustment Date
shall be implemented annually on a prospective basis, for each calendar month
commencing at least five days after the date of delivery to Lender of the
Borrowers' annual audited Financial Statements evidencing the need for an
adjustment. Concurrently with the delivery of such Financial Statements, each
Borrower shall deliver to Lender a certificate, signed by its chief financial
officer, setting forth in reasonable detail the basis for the continuance of, or
any change in, the Revolving Credit Rate. Failure to timely deliver such
Financial Statements shall result in an increase in the Revolving Credit Rate to
the highest level set forth in the foregoing grid, until the first day of the
first calendar month following the delivery of those Financial Statements
demonstrating that such an increase is not required. If an Event of Default has
occurred and is continuing at the time any reduction in the Revolving Credit
Rate is to be implemented, that reduction shall be deferred until the first day
of the first calendar month following the date on which such Event of Default is
waived in writing by Lender. Additionally, if at any time any other Event of
Default shall have occurred and be continuing, the Revolving Credit Rate shall
be automatically increased to the highest level set forth in the foregoing grid
until the first day of the first calendar month following the date on which such
Event of Default is waived in writing by Lender. The increase in the Revolving
Credit Rate provided for in the preceding two sentences shall be in addition to
any other remedy provided for in this Agreement (including Lender's right to
charge the Default Rate).
All computations of interest, and all calculations of the Letter of Credit Fee,
shall be made by Lender on the basis of a three hundred and sixty (360) day
year, in each case for the actual number of days occurring in the period for
which such interest or fee is payable. Each determination by Lender of an
interest rate hereunder shall be conclusive and binding for all purposes, absent
manifest error. In no event will Lender charge interest at a rate that exceeds
the highest rate of interest permissible under any law that a court of competent
jurisdiction shall, in a final determination, deem applicable.
(b) Interest shall be payable on the outstanding Revolving Credit
Advances (i) in arrears for the preceding calendar month on the first day of
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each calendar month, (ii) on the Commitment Termination Date, and (iii) if any
interest accrues or remains payable after the Commitment Termination Date, upon
demand by Lender.
(c) Effective upon the occurrence of any Event of Default and for so
long as any Event of Default shall be continuing, the Revolving Credit Rate and
the Letter of Credit Fee shall automatically be increased by three percentage
points (3.00%) per annum (such increased rate, the "Default Rate"), and all
outstanding Obligations, including unpaid interest and Letter of Credit Fees,
shall continue to accrue interest from the date of such Event of Default at the
Default Rate applicable to such Obligations.
(d) If any interest or any other payment (including Unused Line Fees
and Collateral Monitoring Fees) to Lender under this Agreement becomes due and
payable on a day other than a Business Day, such payment date shall be extended
to the next succeeding Business Day and interest thereon shall be payable at the
then applicable rate during such extension.
1.6 Cash Management System. On or prior to the Closing Date and until the
Termination Date, each Borrower will establish and maintain the cash management
system described in Schedule D. All payments in respect of the Collateral shall
be made to or deposited in the blocked or lockbox accounts described in Schedule
D in accordance with the terms thereof.
1.7 Fees. Each Borrower agrees to pay to Lender the Fees set forth in
Schedule E.
1.8 Receipt of Payments. Each Borrower shall make each payment under this
Agreement (not otherwise made pursuant to Section 1.9) without set-off,
counterclaim or deduction and free and clear of all Taxes not later than 1:00
P.M. (New York City time) on the day when due in lawful money of the United
States of America in immediately available funds to the Collection Account. If
any Borrower shall be required by law to deduct any Taxes from any payment to
Lender under any Loan Document, then the amount payable to Lender shall be
increased so that, after making all required deductions, Lender receives an
amount equal to that which it would have received had no such deductions been
made. For purposes of computing interest and Fees, all payments shall be deemed
received by Lender two (2) Business Days following receipt of immediately
available funds in the Collection Account. For purposes of determining the
Borrowing Availability, payments shall be deemed received by Lender upon receipt
of immediately available funds in the Collection Account.
1.9 Application and Allocation of Payments. Each Borrower irrevocably agrees
that Lender shall have the continuing and exclusive right to apply any and all
payments against the then due and payable Obligations in such order as Lender
may deem advisable. Lender is authorized to, and at its option may (without
prior notice or precondition and at any time or times), but shall not be
obligated to, make or cause to be made Revolving Credit Advances on behalf of
any Borrower for: (a) payment of all Fees, expenses, indemnities, charges,
costs, principal, interest, or other Obligations owing by such Borrower under
this Agreement or any of the other Loan Documents, (b) the payment, performance
or satisfaction of any of such Borrower's obligations with respect to
preservation of the Collateral, or (c) any premium in whole or in part required
in respect of any of the policies of insurance required by this Agreement, even
if the making of any such Revolving Credit Advance causes the outstanding
balance of the Revolving Credit Loan attributable to any Borrower to exceed such
Borrower's Borrowing Availability, and each Borrower agrees to repay
immediately, in cash, any amount by which the Revolving Credit Loan attributable
to such Borrower exceeds its Borrowing Availability.
1.10 Accounting. Lender is authorized to record on its books and records the
date and amount of each Loan and each payment of principal thereof and such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded. Lender shall provide Borrowers on a monthly basis a
statement and accounting of such recordations but any failure on the part of the
Lender to keep any such recordation (or any errors therein) or to send a
statement thereof to any Borrower shall not in any manner affect the obligation
of any Borrower to repay any of the Obligations. Except to the extent that any
Borrower shall, within ninety (90) days after such statement and accounting is
sent, notify Lender in writing of any objection such Borrower may have thereto
(stating with particularity the basis for such objection), such statement and
accounting shall be deemed final, binding and conclusive upon such Borrower,
absent manifest error.
1.11 Indemnity. Each Borrower and each other Credit Party executing this
Agreement jointly and severally agree to indemnify and hold Lender and its
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Affiliates, and their respective employees, attorneys and agents (each, an
"Indemnified Person"), harmless from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses of any kind or
nature whatsoever (including attorneys' fees and disbursements and other costs
of investigation or defense, including those incurred upon any appeal) that may
be instituted or asserted against or incurred by any such Indemnified Person as
the result of credit having been extended, suspended or terminated under this
Agreement and the other Loan Documents or with respect to the execution,
delivery, enforcement, performance and administration of, or in any other way
arising out of or relating to, this Agreement and the other Loan Documents or
any other documents or transactions contemplated by or referred to herein or
therein and any actions or failures to act with respect to any of the foregoing,
including any and all product liabilities, Environmental Liabilities, Taxes and
legal costs and expenses arising out of or incurred in connection with disputes
between or among any parties to any of the Loan Documents (collectively,
"Indemnified Liabilities"), except to the extent that any such Indemnified
Liability is finally determined by a court of competent jurisdiction to have
resulted solely from such Indemnified Person's gross negligence or willful
misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY CREDIT
PARTY, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON
ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR ANY ACT OR FAILURE TO ACT
UNDER ANY POWER OF ATTORNEY OR FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES THAT MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR
THEREUNDER.
1.12 Borrowing Base; Reserves. The Borrowing Base of each Borrower shall be
determined by Lender (including the eligibility of Accounts and Inventory) based
on the most recent Borrowing Base Certificate delivered to Lender in accordance
with Section 4.1(b) and such other information available to Lender. The
Revolving Credit Loan shall be subject to Lender's continuing right to withhold
from any Borrower's Borrowing Availability reserves (including, without
limitation, the Special Reserve), and to increase and decrease such reserves
from time to time, if and to the extent that in Lender's good faith credit
judgment such reserves are necessary, including to protect Lender's interest in
the Collateral or to protect Lender against possible non-payment of Accounts for
any reason by Account Debtors or possible diminution of the value of any
Collateral or possible non-payment of any of the Obligations or for any Taxes or
in respect of any state of facts that could constitute a Default. Lender may, at
its option, in Lender's good faith credit judgment, implement reserves
(including, without limitation, the Special Reserve) by designating as
ineligible a sufficient amount of Accounts or Inventory that would otherwise be
Eligible Accounts or Eligible Inventory, as the case may be, so as to reduce any
Borrower's Borrowing Base by the amount of the intended reserves.
2. Conditions Precedent
2.1 Conditions to the Initial Loans. Lender shall not be obligated to make any
of the Loans or to perform any other action hereunder, until the following
conditions have been satisfied in a manner satisfactory to Lender in its sole
discretion, or waived in writing by Lender, which conditions shall not survive
the Closing unless specifically set forth in a post-closing obligations letter
signed by Borrowers and Lender:
(a) the Loan Documents to be delivered on or before the Closing Date
shall have been duly executed and delivered by the appropriate parties, all as
set forth in the Schedule of Documents (Schedule F);
(b) all of the obligations of Borrowers to Wachovia Bank under their
financing documentation as in effect immediately prior to the Closing Date will
be performed and paid in full from the proceeds of the initial Loans and all
Liens upon any of the property of any Borrower or any other Credit Party in
respect thereof shall have been terminated immediately upon such payment;
(c) Lender shall have received evidence satisfactory to it that the
insurance policies provided for in Section 3.16 are in full force and effect,
together with appropriate evidence showing loss payable or additional insured
clauses or endorsements in favor of Lender as required under such Section;
(d) Lender shall have received an opinion(s) of counsel to the
Borrowers and the Guarantors with respect to the Loan Documents in form and
substance satisfactory to Lender;
(e) as of the Closing Date, Net Borrowing Availability for all
Borrowers combined shall be not less than $500,000 after giving effect to the
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initial Revolving Credit Advance and Letter of Credit Obligations (on a pro
forma basis, with trade payables and taxes no more than 60 days past due, and
expenses and liabilities (other than the El Cajon Lease) being paid in the
ordinary course of business and without acceleration of sales); provided,
however, that the Stockholders of Marlton (or any one of them) may, in such
Stockholder's sole discretion, make loans to the Borrowers (the "Closing Date
Stockholder Loans") in order to achieve the above-referenced minimum Net
Borrowing Availability; provided, further, in order for such loans to count
towards such Net Borrowing Availability, each Stockholder who makes such a loan
shall execute and deliver to Lender an Intercreditor and Subordination Agreement
in favor of Lender in the form attached hereto as Exhibit K (each such Agreement
shall contain the repayment provisions described in Section 3.22);
(f) Lender shall have verified the Accounts of Borrowers, such
verification to be in form and substance satisfactory to Lender;
(g) payment by Borrowers of all fees, costs and expenses payable by
Borrowers hereunder that have accrued as of the Closing Date;
(h) Lender shall have completed its business and legal due diligence of
Borrowers and their operations, including, but not limited to, pre-closing
collateral audit, review of the significant customer contracts of each Borrower
and background and reference checks on (i) Borrowers, (ii) their respective
shareholders, officers and directors, (iii) each Guarantor and (iv) all other
Credit Parties;
(i) Lender shall have obtained and investigated references with respect
to each Borrower's vendors in form and substance satisfactory to Lender in its
sole discretion; and
(j) Borrowers shall have complied, to the satisfaction of Lender, with
all of the other terms and conditions set forth in that certain Commitment
Letter dated October 31, 2003 (the "Commitment Letter"), from Lender to
Borrowers, Marlton and Sparks Holding.
2.2 Further Conditions to the Loans. Lender shall not be obligated to
fund any Loan (including the initial Loans), if, as of the date thereof:
(a) any representation or warranty by any Credit Party contained herein
or in any of the other Loan Documents shall be untrue or in any material respect
incorrect as of such date, except to the extent that any such representation or
warranty is expressly stated to relate to a specific earlier date, in which
case, such representation and warranty shall be true and in all material
respects correct as of such earlier date; or
(b) any event or circumstance that has had or reasonably could be
expected to have a Material Adverse Effect shall have occurred since the Closing
Date; or
(c) any Default shall have occurred and be continuing or would result
after giving effect to such Loan; or
(d) after giving effect to such Loan, the Revolving Credit Loan
attributable to any Borrower would exceed the Borrowing Availability of such
Borrower.
2.3 Agent. The request and acceptance by Leading Borrower, as agent for each
Borrower, of the proceeds of any Loan, and the request by Leading Borrower, as
agent for each Borrower, for the incurrence by Lender of any Letter of Credit
Obligations, as the case may be, shall be deemed to constitute, as of the date
of such request and the date of such acceptance, (i) a representation and
warranty by each Borrower that the conditions in Section 2.2 have been satisfied
and (ii) a restatement by each Borrower of each of the representations and
warranties made by such Borrower in any Loan Document and a reaffirmation by
each Borrower of the granting and continuance of Lender's Liens pursuant to the
Loan Documents.
3. Representations, warranties and affirmative covenants
To induce Lender to enter into this Agreement and to make the Loans, each
Borrower and each other Credit Party executing this Agreement represent and
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warrant to Lender (each of which representations and warranties shall survive
the execution and delivery of this Agreement), and promise to and agree with
Lender until the Termination Date as follows:
3.1 Corporate Existence; Compliance with Law. Each Corporate Credit Party: (a)
is, as of the Closing Date, and will continue to be (i) a corporation, limited
liability company or limited partnership, as applicable, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, (ii) duly qualified to do business and in good
standing in each other jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification, except where the
failure to be so qualified could not reasonably be expected to have a Material
Adverse Effect, and (iii) in compliance with all Requirements of Law and
Contractual Obligations, except to the extent failure to comply therewith could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; and (b) has and will continue to have (i) the requisite
corporate power and authority and the legal right to execute, deliver and
perform its obligations under the Loan Documents, and to own, pledge, mortgage
or otherwise encumber and operate its properties, to lease the property it
operates under lease, and to conduct its business as now, heretofore or proposed
to be conducted, and (ii) all licenses, permits, franchises, rights, powers,
consents or approvals from or by all Persons or Governmental Authorities having
jurisdiction over such Corporate Credit Party that are necessary or appropriate
for the conduct of its business, except to the extent the failure to obtain such
license, permit, franchise, right, power, consent or approval could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Notwithstanding any other representation or warranty providing a
lesser or greater standard, there is no provision of any Corporate Credit
Party's articles or certificate of incorporation or other creating instrument or
by-laws or operating agreement limiting or contravening the Resolutions attached
as Attachment 5 to such Credit Party's Secretarial Certificate.
3.2 Executive Offices; Corporate or Other Names. (a) Each Corporate Credit
Party's name as it appears in official filings in the state of its incorporation
or organization, (b) the type of entity of each Corporate Credit Party, (c) the
organizational identification number issued by each such Credit Party's state of
incorporation or organization or a statement that no such number has been
issued, (d) each Corporate Credit Party's state of organization or
incorporation, and (e) the location of each Corporate Credit Party's chief
executive office, corporate offices, warehouses, other locations of Collateral
and locations where records with respect to Collateral are kept (including in
each case the county of such locations) are as set forth in Disclosure Schedule
(3.2) and, except as set forth in such Disclosure Schedule, such locations have
not changed during the preceding twelve months. As of the Closing Date, during
the prior five years, except as set forth in Disclosure Schedule (3.2), no
Corporate Credit Party has been known as or conducted business in any other name
(including trade names). Each Corporate Credit Party has only one state of
incorporation or organization.
3.3 Corporate Power; Authorization; Enforceable Obligations. The execution,
delivery and performance by each Credit Party of the Loan Documents to which it
is a party, and the creation of all Liens provided for herein and therein: (a)
are and will continue to be within such Credit Party's power and authority; (b)
have been and will continue to be duly authorized by all necessary or proper
action; (c) are not and will not be in violation of any Requirement of Law or
material Contractual Obligation of such Credit Party; (d) do not and will not
result in the creation or imposition of any Lien (other than Permitted
Encumbrances) upon any of the Collateral; and (e) do not and will not require
the consent or approval of any Governmental Authority or any other Person. As of
the Closing Date, each Loan Document shall have been duly executed and delivered
on behalf of each Credit Party signatory thereto, and each such Loan Document
upon such execution and delivery shall be and will continue to be a legal, valid
and binding obligation of such Credit Party, enforceable against it in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency and other similar laws affecting creditors' rights
generally and the application of equitable principles.
3.4 Financial Statements and Projections; Books and Records. (a) The Financial
Statements delivered by Marlton and its Subsidiaries to Lender for its most
recently ended Fiscal Year and Fiscal Month, are true, correct and complete and
reflect fairly and accurately the financial condition of Marlton and its
Subsidiaries as of the date of each such Financial Statement in accordance with
GAAP (consolidated portions only). The Projections most recently delivered by
Marlton and its Subsidiaries to Lender have been prepared in good faith, with
care and diligence and use assumptions that are reasonable under the
circumstances at the time such Projections were prepared and as of the date
delivered to Lender, and all such material assumptions are disclosed in the
Projections.
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(b) Each Borrower and each other Corporate Credit Party shall keep
adequate Books and Records with respect to the Collateral and its business
activities in which proper entries, reflecting all consolidated and
consolidating financial transactions, and payments and credits received on, and
all other dealings with, the Collateral, will be made in accordance with GAAP
and all Requirements of Law and on a basis consistent with the Financial
Statements.
3.5 Material Adverse Change. Between the date of Marlton and its Subsidiaries'
(on a consolidated basis) most recently audited Financial Statements delivered
to Lender and the Closing Date: (a) no Corporate Credit Party has incurred any
obligations, contingent or non-contingent liabilities, or liabilities for
Charges, long-term leases or unusual forward or long-term commitments that are
not reflected in the Projections delivered on the Closing Date and which could,
alone or in the aggregate, reasonably be expected to have a Material Adverse
Effect; (b) there has been no material deviation from such Projections; and (c)
no events have occurred that alone or in the aggregate has had or could
reasonably be expected to have a Material Adverse Effect. No Requirement of Law
or Contractual Obligation of any Credit Party has or have had or could
reasonably be expected to have a Material Adverse Effect. No Credit Party is in
default, and to such Credit Party's knowledge no third party is in default,
under or with respect to any of its Contractual Obligations, that alone or in
the aggregate has had or could reasonably be expected to have a Material Adverse
Effect.
3.6 Real Estate; Property. The real estate listed in Disclosure Schedule (3.6)
constitutes all of the real property owned, leased, or used by each Corporate
Credit Party in its business, and such Credit Party will not execute any
material agreement or contract in respect of such real estate after the date of
this Agreement without giving Lender prompt prior written notice thereof. Each
Corporate Credit Party holds and will continue to hold good and marketable fee
simple title to all of its owned real estate, and good and marketable title to
all of its other properties and assets, and valid and insurable leasehold
interests in all of its leases (both as lessor and lessee, sublessee or
assignee), and none of the properties and assets of any Corporate Credit Party
are or will be subject to any Liens, except Permitted Encumbrances. With respect
to the Philadelphia, Pennsylvania, Austell, Georgia and Santa Fe, California
premises identified in Disclosure Schedule (3.2), on or prior to the Closing
Date a bailee, landlord or mortgagee agreement acceptable to Lender has been
obtained. The Borrowers will, before March 1, 2004, obtain and deliver to Lender
a bailee agreement acceptable to Lender with respect to the warehouse located at
00000 Xxxxxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx, unless the Borrowers have
vacated such warehouse on or before February 29, 2004.
3.7 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.
Except as set forth in Disclosure Schedule (3.7), as of the Closing Date no
Corporate Credit Party has any Subsidiaries, is engaged in any joint venture or
partnership with any other Person, or is an Affiliate of any other Person. All
of the issued and outstanding Stock of each Corporate Credit Party (including
all rights to purchase, options, warrants or similar rights or agreements
pursuant to which any Corporate Credit Party may be required to issue, sell,
repurchase or redeem any of its Stock) as of the Closing Date is owned by each
of the Stockholders (and in the amounts) set forth in Disclosure Schedule (3.7);
provided, however, that with respect to Marlton, such Disclosure Schedule will
only list the shares owned by Xxxxxxx Xxxxxx, Xxxxx Xxxxx, Xxxxxx Xxxxxxxx and
Xxxx Xxxxxxxx. All outstanding Indebtedness of each Corporate Credit Party as of
the Closing Date is described in Disclosure Schedule (5(b)).
3.8 Government Regulation; Margin Regulations. No Corporate Credit Party is
subject to or regulated under any Federal or state statute, rule or regulation
that restricts or limits such Person's ability to incur Indebtedness, pledge its
assets, or to perform its obligations under the Loan Documents. The making of
the Loans, the application of the proceeds and repayment thereof, and the
consummation of the transactions contemplated by the Loan Documents do not and
will not violate any Requirement of Law applicable to a Corporate Credit Party.
No Corporate Credit Party is engaged, nor will it engage in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
security" as such terms are defined in Regulation U of the Federal Reserve Board
as now and hereafter in effect (such securities being referred to herein as
"Margin Stock"). No Corporate Credit Party owns any Margin Stock, and none of
the proceeds of the Loans or other extensions of credit under this Agreement
will be used, directly or indirectly, for the purpose of purchasing or carrying
any Margin Stock or reducing or retiring any Indebtedness that was originally
incurred to purchase or carry any Margin Stock. No Corporate Credit Party will
take or permit to be taken any action that might cause any Loan Document to
violate any regulation of the Federal Reserve Board.
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3.9 Taxes; Charges. Except as disclosed in Disclosure Schedule (3.9) all tax
returns, reports and statements required by any Governmental Authority to be
filed by Borrower or any other Credit Party have, as of the Closing Date, been
filed and will, until the Termination Date, be filed with the appropriate
Governmental Authority and no tax Lien has been filed against any Credit Party
or any Credit Party's property. Proper and accurate amounts have been and will
be withheld by Borrower and each other Credit Party from their respective
employees for all periods in compliance with all Requirements of Law and such
withholdings have and will be timely paid to the appropriate Governmental
Authorities. Disclosure Schedule (3.9) sets forth as of the Closing Date those
taxable years for which any Credit Party's tax returns are currently being
audited by the IRS or any other applicable Governmental Authority and any
assessments or threatened assessments in connection with such audit, or
otherwise currently outstanding. Except as described on Disclosure Schedule
(3.9), none of the Credit Parties or their respective predecessors are liable
for any Charges in excess of $10,000 in the aggregate at any time: (a) under any
agreement (including any tax sharing agreements or agreement extending the
period of assessment of any Charges) or (b) to each Credit Party's knowledge, as
a transferee. As of the Closing Date, no Credit Party has agreed or been
requested to make any adjustment under IRC Section 481(a), by reason of a change
in accounting method or otherwise, which could reasonably be expected to have a
Material Adverse Effect.
3.10 Payment of Obligations. Each Credit Party will pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all of its Charges and other obligations of whatever nature, except where
the amount or validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with respect
thereto have been provided on the books of such Credit Party or such Charges are
not in excess of $10,000 in the aggregate at any time, and none of the
Collateral is or could reasonably be expected to become subject to any Lien or
forfeiture or loss as a result of such contest.
3.11 ERISA. No ERISA Event has occurred or is reasonably expected to occur that,
when taken together with all other existing ERISA Events, could reasonably be
expected to result in a liability of any Credit Party of more than the Minimum
Actionable Amount. Except as disclosed in Disclosure Schedule (3.11), the
present value of all accumulated benefit obligations of the Credit Parties under
each Plan (based on the assumptions used for purposes of Statement of Financial
Accounting Standards No. 87) did not, as of the date of the most recent
Financial Statements reflecting such amounts, exceed the fair market value of
the assets of such Plan by more than the Minimum Actionable Amount, and the
present value of all accumulated benefit obligations of all underfunded Plans
(based on the assumptions used for purposes of Statement of Financial Account
Standards No. 87) did not, as of the date of the most recent Financial
Statements reflecting such amounts, exceed the fair market value of the assets
of such underfunded Plans by more than the Minimum Actionable Amount. No Credit
Party or ERISA Affiliate has incurred or reasonably expects to incur any
Withdrawal Liability in excess of the Minimum Actionable Amount.
3.12 Litigation. No Litigation is pending or, to the knowledge of any Credit
Party, threatened by or against any Credit Party or against any Credit Party's
properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby, or (b) that could reasonably be
expected to have a Material Adverse Effect. Except as set forth in Disclosure
Schedule (3.12), as of the Closing Date there is no Litigation pending or
threatened against any Credit Party that seeks damages in excess of $50,000 or
injunctive relief or alleges criminal misconduct of any Credit Party. Each
Credit Party shall notify Lender promptly in writing upon learning of the
existence, threat or commencement of any Litigation (i) that seeks damages in
excess of $50,000 or injunctive relief against any Credit Party, ERISA Affiliate
or any Plan, or (ii) that alleges any criminal misconduct against any Credit
Party.
3.13 Intellectual Property. As of the Closing Date, all material Intellectual
Property owned or used by any Corporate Credit Party is listed, together with
application or registration numbers, where applicable, in Disclosure Schedule
(3.13). Each Corporate Credit Party owns, or is licensed to use, all
Intellectual Property necessary to conduct its business as currently conducted
except for such Intellectual Property the failure of which to own or license
could not reasonably be expected to have a Material Adverse Effect. Each
Corporate Credit Party will maintain the patenting and registration of all
Intellectual Property with the United States Patent and Trademark Office, the
United States Copyright Office, or other appropriate Governmental Authority and
each Corporate Credit Party will promptly patent or register, as the case may
be, all new Intellectual Property material to the business of such Corporate
Credit Party and notify Lender in writing five (5) Business Days prior to filing
any such new patent or registration.
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3.14 Full Disclosure. No information contained in any Loan Document, the
Financial Statements or any written statement furnished by or on behalf of any
Credit Party under any Loan Document, or to induce Lender to execute the Loan
Documents, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made.
3.15 Hazardous Materials. Except as set forth in Disclosure Schedule (3.15), as
of the Closing Date, (a) each real property location owned, leased or occupied
by each Corporate Credit Party (the "Real Property") is maintained free of
contamination from any Hazardous Material, (b) no Corporate Credit Party is
subject to any Environmental Liabilities or, to any Credit Party's knowledge,
potential Environmental Liabilities, in excess of the Minimum Actionable Amount
in the aggregate, (c) no notice has been received by any Corporate Credit Party
identifying it as a "potentially responsible party" or requesting information
under CERCLA or analogous state statutes, and to the knowledge of any Credit
Party, there are no facts, circumstances or conditions that may result in any
Corporate Credit Party being identified as a "potentially responsible party"
under CERCLA or analogous state statutes; and (d) each Corporate Credit Party
has provided to Lender copies of all existing environmental reports, reviews and
audits and all written information pertaining to actual or potential
Environmental Liabilities, in each case relating to any Corporate Credit Party.
Each Corporate Credit Party: (i) shall comply in all material respects with all
applicable Environmental Laws and environmental permits; (ii) shall notify
Lender in writing within seven (7) days if and when it becomes aware of any
Release, on, at, in, under, above, to, from or about any of its Real Property;
and (iii) shall promptly forward to Lender a copy of any order, notice, permit,
application, or any communication or report received by it or any other Credit
Party in connection with any such Release.
3.16 Insurance. As of the Closing Date, Disclosure Schedule (3.16) lists all
insurance of any nature maintained for current occurrences by Borrowers and each
other Corporate Credit Party, as well as a summary of the terms of such
insurance. Each Corporate Credit Party shall deliver to Lender certified copies
and endorsements to all of its and those of its Subsidiaries (a) "All Risk" and
business interruption insurance policies naming Lender loss payee, and (b)
general liability and other liability policies naming Lender as an additional
insured. All policies of insurance on real and personal property will contain an
endorsement, in form and substance acceptable to Lender, showing loss payable to
Lender (Form 438 BFU or equivalent) and extra expense and business interruption
endorsements. Such endorsement, or an independent instrument furnished to
Lender, will provide that the insurance companies will give Lender at least
thirty (30) days prior written notice before any such policy or policies of
insurance shall be altered or canceled and that no act or default of any
Borrower or any other Person shall affect the right of Lender to recover under
such policy or policies of insurance in case of loss or damage. Each Corporate
Credit Party shall direct all present and future insurers under its "All Risk"
policies of insurance to pay all proceeds payable thereunder directly to Lender.
If any insurance proceeds are paid by check, draft or other instrument payable
to any Credit Party and Lender jointly, Lender may endorse such Credit Party's
name thereon and do such other things as Lender may deem advisable to reduce the
same to cash. Lender reserves the right at any time in its reasonable
discretion, upon review of each Credit Party's risk profile, to require
additional forms and limits of insurance. Each Corporate Credit Party shall, (i)
on each anniversary of the Closing Date and from time to time at Lender's
request, deliver to Lender copies of its insurance policies and endorsements and
certificates of insurance certified by an authorized officer of such Corporate
Credit Party, all in compliance with the provisions set forth above, and (ii) at
Lender's request, but not more frequently than annually, a report by a reputable
insurance broker, reasonably satisfactory to Lender, with respect to such
Person's insurance policies.
3.17 Deposit and Disbursement Accounts. Attachment I to Schedule D lists all
banks and other financial institutions at which any Borrower or any other
Corporate Credit Party, maintains deposits and/or other accounts, including the
Disbursement Accounts, and such Attachment correctly identifies the name,
address and telephone number of each such depository, the name in which the
account is held, a description of the purpose of the account, and the complete
account number.
3.18 Accounts and Inventory. As of the date of each Borrowing Base Certificate
delivered to Lender, each Account listed thereon as an Eligible Account shall be
an Eligible Account and all Inventory listed thereon as Eligible Inventory shall
be Eligible Inventory. No Borrower has made, nor will any Borrower make, any
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agreement with any Account Debtor for any extension of time for the payment of
any Account, any compromise or settlement for less than the full amount thereof,
any release of any Account Debtor from liability therefor, or any deduction
therefrom except a discount or allowance for (a) prompt or early payment allowed
by Borrowers in the ordinary course of their business consistent with historical
practice and as previously disclosed to Lender, (b) nonconforming goods or
services in the ordinary course of their business consistent with historical
practice, and (c) returned goods in the ordinary course of their business
consistent with historical practice not to exceed $250,000 in the aggregate in
any Fiscal Month and $500,000 in the aggregate in any Fiscal Year; provided,
however, that Borrowers shall disclose to Lender any such discount or allowance
at the earlier of (i) two (2) Business Days after issuance thereof, or (ii) in
the next Notice of Revolving Credit Advance delivered to Lender after issuance
thereof. Disclosure Schedule (3.18) sets forth each Contract of any Borrower
with any Account Debtor that gives such Account Debtor the right (under such
Contract, under common law or otherwise) to offset any Accounts for such
Borrower's failure to perform under such Contract and each Borrower has obtained
an offset waiver for each such contract in form and substance satisfactory to
Lender. With respect to the Accounts pledged as collateral pursuant to any Loan
Document (a) the amounts shown on all invoices, statements and reports that may
be delivered to the Lender with respect thereto are actually and absolutely
owing to the relevant Credit Party as indicated thereon and are not in any way
contingent; (b) no payments have been or shall be made thereon except payments
immediately delivered to the applicable accounts described in paragraph 1 to
Schedule D or the Lender as required hereunder; and (c) to each Borrower's
knowledge all Account Debtors have the capacity to contract. Each Borrower shall
notify Lender promptly of any event or circumstance that to such Borrower's
knowledge would cause Lender to consider any then existing Account or Inventory
as no longer constituting an Eligible Account or Eligible Inventory, as the case
may be.
3.19 Conduct of Business. Each Corporate Credit Party (a) shall conduct its
business substantially as now conducted or as otherwise permitted hereunder, and
(b) shall at all times maintain, preserve and protect all of the Collateral and
such Credit Party's other property, used or useful in the conduct of its
business and keep the same in good repair, working order and condition and make,
or cause to be made, all necessary or appropriate repairs, replacements and
improvements thereto consistent with industry practices.
3.20 Further Assurances. At any time and from time to time, upon the written
request of Lender and at the sole expense of Borrowers, Borrowers and each other
Credit Party shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further action as Lender may
reasonably deem desirable (a) to obtain the full benefits of this Agreement and
the other Loan Documents, (b) to protect, preserve and maintain Lender's rights
in any Collateral, or (c) to enable Lender to exercise all or any of the rights
and powers herein granted.
3.21 Solvency. Each Borrower is Solvent both before and after giving effect to
(a) the Loans and Letter of Credit Obligations to be made or extended on the
Closing Date or such other date as Loans and Letter of Credit Obligations
requested hereunder are made or extended, (b) the disbursement of the proceeds
of such Loans pursuant to the instructions of the Leading Borrower, and (c) the
payment and accrual of all transaction costs in connection with the foregoing.
3.22 Stockholder Loans. In the event that the Borrowers have Net Borrowing
Availability on a combined basis of zero or less at the end of any month between
the Closing Date and March 31, 2004, the Stockholders of Marlton (or any one of
them) shall make a loan to the Borrowers (the "Additional Stockholder Loans") in
an amount equal to the amount necessary to increase Borrowers' Net Borrowing
Availability on a combined basis to at least $200,000, and such Stockholders
shall execute and deliver to Lender an Intercreditor and Subordination Agreement
in favor of Lender in the form attached hereto as Exhibit K; provided, however,
that the aggregate amount of the Closing Date Stockholders Loans and the
Additional Stockholder Loans (collectively, the "Stockholders Loans") shall not
exceed $500,000; provided, further, that the Borrowers may repay the
Stockholders Loans at the end of any Fiscal Quarter so long as and to the extent
that (a) no Event of Default has occurred and is continuing, or would occur as a
result of any such payment, and (b) after giving effect to any such payment,
Borrowers' Net Borrowing Availability on a combined basis is greater than
$500,000. For purposes of this Section 3.22, Net Borrowing Availability shall be
calculated on a pro forma basis, with trade payables and taxes no more than 60
days past due, and expenses and liabilities being paid in the ordinary course of
business and without acceleration of sales. The provisions of this Section 3.22
do not in any way limit the obligations of each Borrower to immediately repay an
overadvance pursuant to Section 1.2(b). Notwithstanding anything contained
herein to the contrary, this Section 3.22 shall be null and void in the event
that Net Borrowing Availability for all Borrowers as of the Closing Date
(calculated in accordance with Section 2.1(e)) is greater than $700,000.
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3.23 Vendor Searches. Lender will conduct, at the sole cost and expense of
Borrowers, UCC searches against Borrowers' vendors. So long as no Event of
Default has occurred, Lender will conduct such searches not more often than
semi-annually, and will limit the scope of such searches to those vendors which
store Borrowers' Inventory consisting of finished goods with an aggregate value
(on a first-in, first-out basis at the lower of cost or market) in excess of
$350,000. After the occurrence and during the continuance of an Event of
Default, Lender will conduct such searches as frequently as it deems necessary,
and may search all vendors without regard to the value of finished goods stored
by such vendors. Borrowers will also use its reasonable commercial efforts to
ascertain if any vendor has added a lender or changed its existing lender, and
if it ascertains such an addition and/or change has or will occur, Borrowers
will immediately notify Lender of same.
4. FINANCIAL MATTERS; REPORTS
4.1 Reports and Notices. From the Closing Date until the Termination Date,
each Borrower shall deliver to Lender:
(a) within fifteen (15) days following the end of each Fiscal Month, an
aged trial balance by Account Debtor and an Inventory perpetual or physical (as
requested by Lender) and as soon as available but in no event later than 30 days
following the end of each Fiscal Month, a reconciliation of the aged trial
balance and the Inventory perpetual or physical (as the case may be) to such
Borrower's general ledger and from the general ledger to the Financial
Statements for such Fiscal Month accompanied by supporting detail and
documentation as Lender may request;
(b) as frequently as Lender may request and in any event no later than
fifteen (15) days following the end of each Fiscal Month, a Borrowing Base
Certificate in the form of Exhibit C as of the last day of the previous Fiscal
Month detailing ineligible Accounts and Inventory for adjustment to the
Borrowing Base, certified as true and correct by the Chief Financial Officer of
such Borrower or such other officer as is acceptable to Lender;
(c) within fifteen (15) days following the end of each Fiscal Month, an
Accounts Payable Analysis in the Form of Exhibit D (together with an accounts
payable aging) and an Accounts Receivable Roll Forward Analysis in the Form of
Exhibit E, each certified as true and correct by the Chief Financial Officer of
such Borrower or such other officer as is acceptable to Lender;
(d) within thirty (30) days following the end of each Fiscal Month
(subject to a 15-day extension for the last Fiscal Month of each Fiscal Quarter
if Marlton files a Form 12b-25 with the SEC and simultaneously therewith
delivers a copy of such extension request to Lender), the Financial Statements
for such Fiscal Month, which shall provide comparisons to budget and actual
results for the corresponding period during the prior Fiscal Year, both on a
monthly and year-to-date basis, and accompanied by a certification in the form
of Exhibit J by the Chief Executive Officer or Chief Financial Officer of such
Borrower (i) that such Financial Statements are complete and correct, subject
only to accountant-recommended adjustments for the Fiscal Months in a particular
Fiscal Quarter, as reported within forty five (45) days after the end of such
Fiscal Quarter, except with respect to the last Fiscal Quarter of the Fiscal
Year, which shall be reported within ninety (90) days after the end of such
Fiscal Quarter, (ii) that there was no Default (or specifying those Defaults of
which he or she was aware), and (iii) showing in reasonable detail the
calculations used in determining compliance with the financial covenants
hereunder;
(e) within ninety (90) days following the close of each Fiscal Year
(subject to a 15-day extension if Marlton files a Form 12b-25 with the SEC and
simultaneously therewith delivers a copy of such extension request to Lender),
the Financial Statements for such Fiscal Year certified without qualification by
an independent certified accounting firm reasonably acceptable to Lender (Lender
acknowledges that McGlandrey & Xxxxxx, LLC is acceptable to it as of the Closing
Date), which shall provide comparisons to the prior Fiscal Year, and shall be
accompanied by (i) a statement of Borrowers in reasonable detail showing the
calculations used in determining compliance with the financial covenants
hereunder, (ii) a report from such Borrower's accountants to the effect that in
connection with their audit examination nothing has come to their attention to
cause them to believe that a Default has occurred or specifying those Defaults
of which they are aware, and (iii) any management letter that may be issued;
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(f) not less than thirty (30) days prior to the close of each Fiscal
Year, the Projections, which will be prepared by such Borrower in good faith,
with care and diligence, and using assumptions that are reasonable under the
circumstances at the time such Projections are delivered to Lender and disclosed
therein when delivered;
(g) all the reports and other information set forth in Exhibit B in the
time frames set forth therein;
(h) tax returns of each Guarantor filed with the Internal Revenue
Service ("IRS"), together with all schedules thereto, within ten (10) days after
the date on which the same are filed with the IRS each year. If Guarantor
applies for an extension of time to file the tax return, a copy of such
extension request, as filed with the IRS shall be delivered to Lender within ten
(10) days after the date on which the same is filed; and
(i) promptly upon their becoming available to the Borrowers, the
Borrowers shall deliver to Lender a copy of (a) all regular or special reports
(including those on Form 10-K and Form 10-Q) or effective registration
statements which Marlton or any Borrower shall file with the Securities and
Exchange Commission (or any successor thereto) or any securities exchange, (b)
all reports, proxy statements, financial statements, management letters and
other information distributed by Marlton to its shareholders or the financial
community in general, and (c) any reports submitted to Marlton or any Borrower
by independent accountants in connection with any annual, interim or special
audit.
4.2 Financial Covenants. Marlton and its Subsidiaries shall not breach any of
the financial covenants set forth in Schedule G. For purposes of Section 7.1, a
breach of a financial covenant set forth in Schedule G shall be deemed to have
occurred as of any date of determination by Lender or as of the last day of any
specified measurement period, regardless of when the Financial Statements
reflecting such breach are delivered to Lender.
4.3 Other Reports and Information. Each Borrower shall advise Lender promptly,
in reasonable detail, of: (a) any Lien, other than Permitted Encumbrances,
attaching to or asserted against any of the Collateral or any occurrence causing
a material loss or decline in value of any Collateral and the estimated (or
actual, if available) amount of such loss or decline; (b) any material change in
the composition of the Collateral; and (c) the occurrence of any Default or
other event that has had or could reasonably be expected to have a Material
Adverse Effect. Each Borrower shall, upon request of Lender, furnish to Lender
such other reports and information in connection with the affairs, business,
financial condition, operations, prospects or management of such Borrower or any
other Credit Party or the Collateral as Lender may reasonably request, all in
reasonable detail.
5. NEGATIVE COVENANTS
Each Borrower and each Credit Party executing this Agreement covenants and
agrees (for itself and each other Credit Party) that, without Lender's prior
written consent, from the Closing Date until the Termination Date, neither any
Borrower nor any other Corporate Credit Party shall, directly or indirectly, by
operation of law or otherwise:
(a) form any Subsidiary or merge with, consolidate with, acquire all or
substantially all of the assets or Stock of, or otherwise combine with or make
any investment in excess of the Minimum Actionable Amount in or, except as
provided in Section 5(c) below, loan or advance to, any Person;
(b) cancel any debt owing to it (other than as permitted under Section
3.18) or create, incur, assume or permit to exist any Indebtedness, except: (i)
the Obligations, (ii) Indebtedness existing as of the Closing Date set forth in
Disclosure Schedule 5(b), (iii) deferred taxes, (iv) by endorsement of
Instruments or items of payment for deposit to the general account of such
Credit Party, (v) for Guaranteed Indebtedness incurred for the benefit of
Borrower if the primary obligation is permitted by this Agreement; (vi)
additional Indebtedness (including Purchase Money Indebtedness) incurred after
the Closing Date in an aggregate outstanding amount for all such Corporate
Credit Parties combined not exceeding $500,000 at any time, and (vii)
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Indebtedness consisting of intercompany loans and advances made by any Borrower
to any other Borrower and SEEI and SEEC, provided that (A) each Borrower, SEEI
and SEEC shall have executed and delivered to each other Borrower, on the
Closing Date, a demand note (collectively, the "Intercompany Notes") to evidence
any such intercompany Indebtedness owing at any time by such Borrower, SEEI and
SEEC to the other Borrowers, which Intercompany Notes shall be in form and
substance satisfactory to Lender; (B) each Borrower and SEEI and SEEC shall
record all intercompany transactions on its books and records in a manner
satisfactory to Lender; (C) the obligations of each Borrower under any such
Intercompany Notes shall be subordinated to the Obligations of such Borrower
hereunder in a manner satisfactory to Lender; (D) at the time any such
intercompany loan or advance is made by any Borrower to any other Borrower, SEEI
or SEEC and after giving effect thereto, each such Borrower shall be Solvent;
(E) no Default or Event of Default would occur and be continuing after giving
effect to any such proposed intercompany loan; (F) the Borrower advancing such
funds shall have Net Borrowing Availability under its separate Borrowing Base of
not less than $150,000 after giving effect to such intercompany loan, (G) no
Borrower shall make loans and advances to any one or more of the Borrowers, SEEI
and SEEC such that the outstanding amount thereof to such Persons exceeds
$500,000 in the aggregate, and (H) no Borrower shall owe in excess of $500,000
in the aggregate to any one or more of Borrowers and neither SEEI nor SEEC shall
owe in excess of $50,000 in the aggregate to any Borrowers in the aggregate;
(c) enter into any lending, borrowing or other commercial transaction
with any of its employees, directors, Affiliates or any other Credit Party
(including upstreaming and downstreaming of cash and intercompany advances and
payments by a Credit Party on behalf of another Credit Party that are not
otherwise permitted hereunder) other than (i) loans or advances (A) to employees
in the ordinary course of business in an aggregate outstanding amount not
exceeding $50,000, and (B) consisting of Stockholder Loans, or (ii) issuance of
shares of capital stock and options to purchase capital stock of Marlton;
(d) make any changes in any of its business objectives, purposes, or
operations that could reasonably be expected to adversely affect repayment of
the Obligations or could reasonably be expected to have a Material Adverse
Effect or engage in any business other than that presently engaged in or
proposed to be engaged in the Projections delivered to Lender on the Closing
Date or amend its charter or by-laws or other organizational documents, if such
amendment could reasonably be expected to have an adverse effect on Lender's
interests, rights and/or remedies;
(e) create or permit any Lien on any of its properties or assets,
except for Permitted Encumbrances;
(f) sell, transfer, issue, convey, assign or otherwise dispose of any
of its assets or properties, including its Accounts or any shares of its Stock
(other than shares or options to purchase shares of Marlton's Stock) or engage
in any sale-leaseback, synthetic lease or similar transaction (provided, that
the foregoing shall not prohibit the sale of Inventory or obsolete or
unnecessary Equipment in the ordinary course of its business);
(g) change (i) its name as it appears in official filings in the state
of its incorporation or organization, (ii) its chief executive office, corporate
offices, warehouses or other Collateral locations, or location of its records
concerning the Collateral, (iii) the type of legal entity that it is, (iv) its
organization identification number, if any, issued by its state of incorporation
or organization, or (v) its state of incorporation or organization, or acquire,
lease or use any real estate after the Closing Date; without such Person, in
each instance, giving thirty (30) days prior written notice thereof to Lender
and taking all actions deemed necessary or appropriate by Lender to continuously
protect and perfect Lender's Liens upon the Collateral;
(h) establish any depository or other bank account of any kind with any
financial institution (other than the accounts set forth in Attachment 1 to
Schedule D) without Lender's prior written consent; provided, however, that with
respect to any such account established and maintained in an amount less than
$2,500, Lender's consent shall not be unreasonably withheld or delayed; or
(i) make or permit any Restricted Payment; provided, however, that each
Borrower shall be entitled to make monthly distributions to Sparks Holding
and/or Marlton for general administrative expenses consistent with its
historical practices in a monthly amount not to exceed $250,000 in the aggregate
for all Borrowers, so long as and to the extent that at the time of and after
giving effect to such distribution, the Borrower making such distribution has
positive Net Borrowing Availability under its separate Borrowing Base. For
purposes of this Section 5(i), Net Borrowing Availability shall be calculated on
a pro forma basis, with trade payables not more than 60 days past due, taxes
being paid currently, and expenses and liabilities being paid in the ordinary
course of business and without acceleration of sales.
6. SECURITY INTEREST
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6.1 Grant of Security Interest. (a) As collateral security for the prompt and
complete payment and performance of the Obligations, each of the Borrowers and
each other Credit Party executing this Agreement hereby grants to the Lender a
security interest in and Lien upon all of its property and assets, whether real
or personal, tangible or intangible, and whether now owned or hereafter
acquired, or in which it now has or at any time in the future may acquire any
right, title, or interest, including all of the following property in which it
now has or at any time in the future may acquire any right, title or interest:
all Accounts; all Deposit Accounts, all other bank accounts and all funds on
deposit therein; all money, cash and cash equivalents; all Investment Property;
all Stock; all Goods (including Inventory, Equipment and Fixtures); all Chattel
Paper, Documents and Instruments; all Books and Records; all General Intangibles
(including all Intellectual Property, contract rights, choses in action, Payment
Intangibles and Software); all letters of credit and Letter-of-Credit Rights;
all Supporting Obligations; and to the extent not otherwise included, all
Proceeds, tort claims, insurance claims and other rights to payment not
otherwise included in the foregoing and products of all and any of the foregoing
and all accessions to, substitutions and replacements for, and rents and profits
of, each of the foregoing, but excluding in all events Hazardous Waste (all of
the foregoing, together with any other collateral pledged to the Lender pursuant
to any other Loan Document, collectively, the "Collateral").
(b) Each Borrower, Lender and each other Credit Party executing this
Agreement agree that this Agreement creates, and is intended to create, valid
and continuing Liens upon the Collateral in favor of Lender. Each Borrower and
each other Credit Party executing this Agreement represents, warrants and
promises to Lender that: (i) each Borrower and each other Credit Party granting
a Lien in Collateral has rights in and the power to transfer each item of the
Collateral upon which it purports to xxxxx x Xxxx pursuant to the Loan
Documents, free and clear of any and all Liens or claims of others, other than
Permitted Encumbrances; (ii) the security interests granted pursuant to this
Agreement, upon completion of the filings and other actions listed on Disclosure
Schedule 6.1 (which, in the case of all filings and other documents referred to
in said Schedule, have been delivered to the Lender in duly executed or
authorized form) will constitute valid perfected security interests in all of
the Collateral in favor of the Lender as security for the prompt and complete
payment and performance of the Obligations, enforceable in accordance with the
terms hereof against any and all creditors of and purchasers from any Credit
Party (other than purchasers of Inventory in the ordinary course of business)
and such security interests are prior to all other Liens on the Collateral in
existence on the date hereof except for Permitted Encumbrances that have
priority by operation of law; and (iii) no effective security agreement,
mortgage, deed of trust, financing statement, equivalent security or Lien
instrument or continuation statement covering all or any part of the Collateral
is or will be on file or of record in any public office, except those relating
to Permitted Encumbrances. Each Borrower and each other Credit Party executing
this Agreement promise to defend the right, title and interest of Lender in and
to the Collateral against the claims and demands of all Persons whomsoever, and
each shall take such actions, including (A) all actions necessary to grant
Lender "control" of any Investment Property, Deposit Accounts, Letter-of-Credit
Rights or electronic Chattel Paper owned by such Credit Party, with any
agreements establishing control to be in form and substance satisfactory to
Lender, (B) the prompt delivery of all original Instruments, Chattel Paper and
certificated Stock owned by such Borrower and each other Credit Party granting a
Lien on Collateral to Lender, (C) notification of Lender's interest in
Collateral at Lender's request, and (D) the institution of litigation against
third parties as shall be prudent in order to protect and preserve each Credit
Party's and Lender's respective and several interests in the Collateral. Each
Borrower (and any other Credit Party granting a Lien in Collateral) shall xxxx
its Books and Records pertaining to the Collateral to evidence the Loan
Documents and the Liens granted under the Loan Documents. If any Credit Party
retains possession of any Chattel Paper or Instrument with Lender's consent,
such Chattel Paper and Instruments shall be marked with the following legend:
"This writing and the obligations evidenced or secured hereby are subject to the
security interest of General Electric Capital Corporation." Each Credit Party
executing this Agreement shall promptly, and in any event within two (2)
Business Days after the same is acquired by it, notify Lender of any commercial
tort claim (as defined in the Code) acquired by it and unless otherwise
consented by Lender, such Credit Party shall enter into a supplement to this
Loan Agreement granting to Lender a Lien in such commercial tort claim.
6.2 Lender's Rights. (a) Lender may, (i) at any time in Lender's own name or in
the name of any Borrower, communicate with Account Debtors, parties to
Contracts, and obligors in respect of Instruments, Chattel Paper or other
Collateral to verify to Lender's satisfaction, the existence, amount and terms
of, and any other matter relating to, Accounts, Payment Intangibles,
Instruments, Chattel Paper or other Collateral, and (ii) at any time after a
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Default has occurred and is continuing and without prior notice to any Borrower
or any other Credit Party, notify Account Debtors and other Persons obligated on
any Collateral that Lender has a security interest therein and that payments
shall be made directly to Lender. Upon the request of Lender, each Borrower
shall so notify such Account Debtors and other Persons obligated on any
Collateral. Once any such notice has been given to any Account Debtor or other
Person obligated on any Collateral, the affected Credit Party shall not give any
contrary instructions to such Account Debtor or such other Person without
Lender's prior written consent. Each Borrower hereby constitutes Lender or
Lender's designee as such Borrower's attorney with power to endorse such
Borrower's name upon any notes, acceptance drafts, money orders or other
evidences of payment or Collateral. So long as no Event of Default has occurred
and is continuing, Lender will use reasonable efforts to notify Leading Borrower
twenty four (24) hours in advance of communicating with Accounts Debtors in
connection with clause (a)(i) above; provided, however, that Lender's failure to
provide such notice in advance or at all shall not be deemed a breach by Lender
of any obligation to any Credit Party, and no Credit Party shall have a claim,
cause of action or remedy as a result thereof.
(b) Each Borrower shall remain liable under each Contract, Instrument
and License to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, and Lender shall have no obligation or
liability whatsoever to any Person under any Contract, Instrument or License
(between any Borrower or any other Credit Party and any Person other than
Lender) by reason of or arising out of the execution, delivery or performance of
this Agreement, and Lender shall not be required or obligated in any manner (i)
to perform or fulfill any of the obligations of any Borrower, (ii) to make any
payment or inquiry, or (iii) to take any action of any kind to collect,
compromise or enforce any performance or the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or times
under or pursuant to any Contract, Instrument or License.
(c) Each Borrower and each other Credit Party shall, with respect to
each owned, leased, or controlled property, during normal business hours and
upon reasonable advance notice (unless a Default shall have occurred and be
continuing, in which event no notice shall be required and Lender shall have
access at any and all times): (i) provide access to such property to Lender and
any of its officers, employees and agents, as frequently as Lender determines to
be appropriate; (ii) permit Lender and any of its officers, employees and agents
to inspect, audit and make extracts and copies (or take originals if reasonably
necessary) from all of such Borrower's and such Credit Party's Books and
Records; and (iii) permit Lender to inspect, review, evaluate and make physical
verifications and appraisals of the Inventory and other Collateral in any manner
and through any medium that Lender considers reasonably advisable, and each
Borrower and such Credit Party agree to render to Lender, at such Borrower's and
such Credit Party's cost and expense, such clerical and other assistance as may
be reasonably requested with regard thereto.
(d) After the occurrence and during the continuance of a Default, each
Borrower at its own expense, shall cause the independent certified public
accountant then engaged by such Borrower to prepare and deliver to Lender at any
time and from time to time, promptly upon Lender's request, the following
reports: (i) a reconciliation of all Accounts; (ii) an aging of all Accounts;
(iii) trial balances; and (iv) test verifications of such Accounts as Lender may
request. Each Borrower, at its own expense, shall cause its certified
independent public accountants to deliver to Lender the results of any physical
verifications of all or any portion of the Inventory made or observed by such
accountants when and if such verification is conducted. Lender shall be
permitted to observe and consult with each Borrower's accountants in the
performance of these tasks.
6.3 Lender's Appointment as Attorney-in-Fact. On the Closing Date, each Borrower
and each other Credit Party executing this Agreement shall execute and deliver a
Power of Attorney in the form attached as Exhibit I. The power of attorney
granted pursuant to the Power of Attorney and all powers granted under any Loan
Document are powers coupled with an interest and shall be irrevocable until the
Termination Date. The powers conferred on Lender under the Power of Attorney are
solely to protect Lender's interests in the Collateral and shall not impose any
duty upon it to exercise any such powers. Lender agrees not to exercise any
power or authority granted under the Power of Attorney unless an Event of
Default has occurred and is continuing. Each Borrower and each other Credit
Party executing this Agreement also hereby (i) authorizes Lender to file any
financing statements, continuation statements or amendments thereto that (x)
indicate the Collateral (1) as all assets of such Credit Party (or any portion
of such Credit Party's assets) or words of similar effect, regardless of whether
any particular asset comprised in the Collateral falls within the scope of
Article 9 of the Code of such jurisdiction, or (2) as being of an equal or
lesser scope or with greater detail, and (y) contain any other information
required by Part 5 of Article 9 of the Code for the sufficiency or filing office
acceptance of any financing statement, continuation statement or amendment and
(ii) ratifies its authorization for Lender to have filed any initial financial
statements, or amendments thereto if filed prior to the date hereof. Each
Borrower and each other Credit Party executing this Agreement acknowledges that
it is not authorized to file any financing statement or amendment or termination
statement with respect to any financing statement without the prior written
consent of Lender and agrees that it will not do so without the prior written
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consent of Lender, subject to such Credit Party's rights under Section
9-509(d)(2) of the Code.
6.4 Grant of License to Use Intellectual Property Collateral. Each Borrower and
each other Credit Party executing this Agreement hereby grants to Lender an
irrevocable, non-exclusive license (exercisable upon the occurrence and during
the continuance of an Event of Default without payment of royalty or other
compensation to any Borrower or such Credit Party) to use, transfer, license or
sublicense any Intellectual Property now owned, licensed to, or hereafter
acquired by such Borrower or such Credit Party, and wherever the same may be
located, and including in such license access to all media in which any of the
licensed items may be recorded or stored and to all computer and automatic
machinery software and programs used for the compilation or printout thereof,
and represents, promises and agrees that any such license or sublicense is not
and will not be in conflict with the contractual or commercial rights of any
third Person; provided, that such license will terminate on the Termination
Date.
7. EVENTS OF DEFAULT: RIGHTS AND REMEDIES
7.1 Events of Default. The occurrence of any one or more of the following events
(regardless of the reason therefor) shall constitute an "Event of Default"
hereunder which shall be deemed to be continuing until waived in writing by
Lender in accordance with Section 10.3:
(a) any Borrower shall fail to make any payment in respect of any
Obligations when due and payable or declared due and payable; or
(b) (i) any Borrower or any other Credit Party (whether or not such
Credit Party has signed this Agreement) shall fail or neglect to perform, keep
or observe any of the covenants, promises, agreements, requirements, conditions
or other terms or provisions contained in Section 1, Sections 3.1, 3.2, 3.17,
3.18, 3.19, 3.20, 3.21, 3.22, 4.2 or Section 5 of this Agreement; or (ii) any
Borrower or any other Credit Party (whether or not such Credit Party has signed
this Agreement) shall fail or neglect to perform, keep or observe any of the
covenants, promises, agreements, requirements, conditions or other terms or
provisions contained in this Agreement (other than those set forth in the
Sections referred to in clause (i) immediately above) or any of the other Loan
Documents, and such breach is not remediable or, if remediable, continues
unremedied for a period of the earlier to occur of (x) ten (10) Business Days
after the date on which such breach is known or reasonably should have become
known to any officer of such Borrower or such Credit Party and (y) five (5)
Business Days after the date on which Lender shall have notified such Borrower
or such other Credit Party of such breach; or
(c) an event of default shall occur under any Contractual Obligation
(other than the El Cajon Lease) of any Borrower or any other Credit Party (other
than this Agreement and the other Loan Documents), and such event of default (i)
involves the failure to make any payment (whether or not such payment is blocked
pursuant to the terms of an intercreditor agreement or otherwise), whether of
principal, interest or otherwise, and whether due by scheduled maturity,
required prepayment, acceleration, demand or otherwise, in respect of any
Indebtedness (other than the Obligations) of such Person in an aggregate amount
exceeding the Minimum Actionable Amount, or (ii) causes (or permits any holder
of such Indebtedness or a trustee to cause) such Indebtedness, or a portion
thereof, in an aggregate amount exceeding the Minimum Actionable Amount to
become due prior to its stated maturity or prior to its regularly scheduled date
of payment; or
(d) any representation or warranty in this Agreement or any other Loan
Document, or in any written statement pursuant hereto or thereto, or in any
report, financial statement or certificate made or delivered to Lender by any
Borrower or any other Credit Party shall be untrue or incorrect as of the date
when made or deemed made, regardless of whether such breach involves a
representation or warranty with respect to a Credit Party that has not signed
this Agreement; or
(e) there shall be commenced against any Borrower or any other Credit
Party any Litigation seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its assets
that results in the entry of an order for any such relief that remains unstayed,
unbonded or undismissed for thirty (30) consecutive days; or any Borrower or any
other Credit Party shall have concealed, removed or permitted to be concealed or
removed, any part of its property with intent to hinder, delay or defraud any of
20
its creditors or made or suffered a transfer of any of its property or the
incurring of an obligation that may be fraudulent under any bankruptcy,
fraudulent transfer or other similar law; or
(f) a case or proceeding shall have been commenced involuntarily
against any Borrower or any other Credit Party in a court having competent
jurisdiction seeking a decree or order: (i) under the United States Bankruptcy
Code or any other applicable Federal, state or foreign bankruptcy or other
similar law, and seeking either (A) the appointment of a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) for such
Person or of any substantial part of its properties, or (B) the reorganization
or winding up or liquidation of the affairs of any such Person, and such case or
proceeding shall remain undismissed or unstayed for sixty (60) consecutive days
or such court shall enter a decree or order granting the relief sought in such
case or proceeding; or (ii) invalidating or denying any Person's right, power,
or competence to enter into or perform any of its obligations under any Loan
Document or invalidating or denying the validity or enforceability of this
Agreement or any other Loan Document or any action taken hereunder or
thereunder; or
(g) any Borrower or any other Credit Party shall (i) commence any case,
proceeding or other action under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization,
conservatorship or relief of debtors, seeking to have an order for relief
entered with respect to it or seeking appointment of a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) for it or
any substantial part of its properties, (ii) make a general assignment for the
benefit of creditors, (iii) consent to or take any action in furtherance of, or,
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in paragraphs (e) or (f) of this Section 7.1 or clauses (i) and (ii) of
this paragraph (g), or (iv) shall admit in writing its inability to, or shall be
generally unable to, pay its debts as such debts become due; or
(h) a final judgment or judgments for the payment of money in excess of
the Minimum Actionable Amount in the aggregate shall be rendered against any
Borrower or any other Credit Party, unless (i) the excess shall be fully covered
by insurance and the issuer(s) of the applicable policies shall have
acknowledged full coverage in writing within fifteen (15) days of judgment, or
(ii) the same shall be vacated, stayed, bonded, paid or discharged within a
period of fifteen (15) days from the date of such judgment; or
(i) any other event shall have occurred that has had or could
reasonably be expected to have a Material Adverse Effect; or
(j) any provision of any Loan Document shall for any reason cease to be
valid, binding and enforceable in accordance with its terms, or any Lien
granted, or intended by the Loan Documents to be granted, to Lender shall cease
to be a valid and perfected Lien having the first priority (or a lesser priority
if expressly permitted in the Loan Documents) in any of the Collateral (or any
Credit Party shall so assert any of the foregoing); or
(k) a Change of Control shall have occurred with respect to any
Corporate Credit Party; or
(l) an ERISA Event shall have occurred that, in the opinion of the
Lender, when taken together with all other ERISA Events that have occurred and
are then continuing, could reasonably be expected to result in liability of any
Credit Party in an aggregate amount exceeding the Minimum Actionable Amount.
7.2 Remedies. (a) If any Default shall have occurred and be continuing, then
Lender may terminate or suspend its obligation to make further Revolving Credit
Advances and to incur additional Letter of Credit Obligations. In addition, if
any Event of Default shall have occurred and be continuing, Lender may, without
notice, take any one or more of the following actions: (i) declare all or any
portion of the Obligations to be forthwith due and payable, including contingent
liabilities with respect to Letter of Credit Obligations, whereupon such
Obligations shall become and be due and payable; (ii) require that all Letter of
Credit Obligations be fully cash collateralized pursuant to Schedule C; or (iii)
exercise any rights and remedies provided to Lender under the Loan Documents or
at law or equity, including all remedies provided under the Code; provided, that
upon the occurrence of any Event of Default specified in Sections 7.1 (e), (f)
or (g), the Obligations shall become immediately due and payable (and any
obligation of Lender to make further Loans, if not previously terminated, shall
immediately be terminated) without declaration, notice or demand by Lender.
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(b) Without limiting the generality of the foregoing, each Borrower and
each other Credit Party executing this Agreement expressly agrees that upon the
occurrence of any Event of Default, Lender may collect, receive, assemble,
process, appropriate and realize upon the Collateral, or any part thereof, and
may forthwith sell, lease, assign, give an option or options to purchase or
otherwise dispose of and deliver said Collateral (or contract to do so), or any
part thereof, in one or more parcels at public or private sale or sales, at any
exchange at such prices as it may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. Lender shall have the right upon
any such public sale, to the extent permitted by law, to purchase for the
benefit of Lender the whole or any part of said Collateral so sold, free of any
right of equity of redemption, which right each Borrower and each other Credit
Party executing this Agreement hereby releases. Such sales may be adjourned, or
continued from time to time with or without notice. Lender shall have the right
to conduct such sales on any Credit Party's premises or elsewhere and shall have
the right to use any Credit Party's premises without rent or other charge for
such sales or other action with respect to the Collateral for such time as
Lender deems necessary or advisable.
(c) Upon the occurrence and during the continuance of an Event of
Default and at Lender's request, each Borrower and each other Credit Party
executing this Agreement further agrees to assemble the Collateral and make it
available to Lender at places that Lender shall reasonably select, whether at
its premises or elsewhere. Until Lender is able to effect a sale, lease, or
other disposition of the Collateral, Lender shall have the right to complete,
assemble, use or operate the Collateral or any part thereof, to the extent that
Lender deems appropriate, for the purpose of preserving such Collateral or its
value or for any other purpose. Lender shall have no obligation to any Credit
Party to maintain or preserve the rights of such Credit Party as against third
parties with respect to any Collateral while such Collateral is in the
possession of Lender. Lender may, if it so elects, seek the appointment of a
receiver or keeper to take possession of any Collateral and to enforce any of
Lender's remedies with respect thereto without prior notice or hearing. To the
maximum extent permitted by applicable law, each Borrower and each other Credit
Party executing this Agreement waives all claims, damages, and demands against
Lender, its Affiliates, agents, and the officers and employees of any of them
arising out of the repossession, retention or sale of any Collateral except such
as are determined in a final judgment by a court of competent jurisdiction to
have arisen solely out of the gross negligence or willful misconduct of such
Person. Each Borrower and each other Credit Party executing this Agreement
agrees that ten (10) days' prior notice by Lender to such Credit Party of the
time and place of any public sale or of the time after which a private sale may
take place is reasonable notification of such matters. Each Borrower and each
other Credit Party shall remain liable for any deficiency if the proceeds of any
sale or disposition of the Collateral are insufficient to pay all amounts to
which Lender is entitled.
(d) Lender's rights and remedies under this Agreement shall be
cumulative and nonexclusive of any other rights and remedies that Lender may
have under any Loan Document or at law or in equity. Recourse to the Collateral
shall not be required. All provisions of this Agreement are intended to be
subject to all applicable mandatory provisions of law that may be controlling
and to be limited, to the extent necessary, so that they do not render this
Agreement invalid or unenforceable, in whole or in part.
7.3 Waivers by Credit Parties. Except as otherwise provided for in this
Agreement and to the fullest extent permitted by applicable law, each Borrower
and each other Credit Party executing this Agreement waives: (a) presentment,
demand and protest, and notice of presentment, dishonor, intent to accelerate,
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all Loan Documents, the Notes or any
other notes, commercial paper, Accounts, Contracts, Documents, Instruments,
Chattel Paper and guaranties at any time held by Lender on which such Credit
Party may in any way be liable, and hereby ratifies and confirms whatever Lender
may do in this regard; (b) all rights to notice and a hearing prior to Lender's
taking possession or control of, or to Lender's replevy, attachment or levy
upon, any Collateral or any bond or security that might be required by any court
prior to allowing Lender to exercise any of its remedies; and (c) the benefit of
all valuation, appraisal and exemption laws. Each Borrower and each other Credit
Party executing this Agreement acknowledges that it has been advised by counsel
of its choices and decisions with respect to this Agreement, the other Loan
Documents and the transactions evidenced hereby and thereby.
7.4 Proceeds. The Proceeds of any sale, disposition or other realization upon
any Collateral shall be applied by Lender upon receipt to the Obligations in
such order as Lender may deem advisable in its sole discretion (including the
cash collateralization of any Letter of Credit Obligations), and after the
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indefeasible payment and satisfaction in full in cash of all of the Obligations,
and after the payment by Lender of any other amount required by any provision of
law, including Sections 9-608(a)(1) and 9-615(a)(3) of the Code (but only after
Lender has received what Lender considers reasonable proof of a subordinate
party's security interest), the surplus, if any, shall be paid to Borrowers or
their representatives or to whomsoever may be lawfully entitled to receive the
same, or as a court of competent jurisdiction may direct.
8. Successors and Assigns
Each Loan Document shall be binding on and shall inure to the benefit of each
Borrower and each other Credit Party executing such Loan Document, Lender, and
their respective successors and assigns, except as otherwise provided herein or
therein. Neither any Borrower nor any other Credit Party may assign, transfer,
hypothecate, delegate or otherwise convey its rights, benefits, obligations or
duties under any Loan Document without the prior express written consent of
Lender. Any such purported conveyance by such Borrower or such Credit Party
without the prior express written consent of Lender shall be void. There shall
be no third party beneficiaries of any of the terms and provisions of any of the
Loan Documents. Lender reserves the right at any time to create and sell
participations in the Loans and the Loan Documents and to sell, transfer or
assign any or all of its rights in the Loans and under the Loan Documents.
9. Guarantor Waivers by Borrowers
IF AND TO THE EXTENT THAT ANY OBLIGATION OF ANY BORROWER TO LENDER SHALL BE
CONSIDERED AN OBLIGATION OF GUARANTY OR SURETYSHIP, THEN THE FOLLOWING
PROVISIONS OF THIS SECTION 9 SHALL APPLY WITH RESPECT TO EACH SUCH BORROWER
SOLELY TO THE EXTENT THAT SUCH BORROWER IS DEEMED TO ACT IN THE CAPACITY OF A
GUARANTOR AND SHALL NOT EFFECT A WAIVER OF RIGHTS IN SUCH PERSON'S CAPACITY AS A
BORROWER:
(A) SUCH BORROWER EXPRESSLY WAIVES THE RIGHT TO REQUIRE LENDER FIRST TO
PURSUE ANY OTHER PERSON, THE COLLATERAL, OR ANY OTHER SECURITY OR GUARANTY THAT
MAY BE HELD FOR THE OBLIGATIONS, OR TO APPLY ANY SUCH SECURITY OR GUARANTY TO
THE OBLIGATIONS BEFORE SEEKING FROM SUCH BORROWER PAYMENT IN FULL OF ITS
LIABILITIES TO LENDER OR PROCEEDING AGAINST SUCH BORROWER FOR SAME.
(B) SUCH BORROWER ACKNOWLEDGES THAT IF LENDER MAY, UNDER APPLICABLE
LAW, PROCEED TO REALIZE ITS BENEFITS UNDER ANY OF THE LOAN DOCUMENTS GIVING
LENDER A LIEN UPON ANY COLLATERAL, WHETHER OWNED BY ANY BORROWER OR BY ANY OTHER
PERSON, EITHER BY JUDICIAL FORECLOSURE OR BY NON-JUDICIAL SALE OR ENFORCEMENT,
LENDER MAY, AT ITS SOLE OPTION, DETERMINE WHICH OF ITS REMEDIES OR RIGHTS IT MAY
PURSUE WITHOUT AFFECTING ANY OF ITS RIGHTS AND REMEDIES. IF, IN THE EXERCISE OF
ANY OF ITS RIGHTS AND REMEDIES, LENDER SHALL FORFEIT ANY OF ITS RIGHTS OR
REMEDIES, INCLUDING ITS RIGHT TO ENTER A DEFICIENCY JUDGMENT AGAINST ANY
BORROWER OR ANY OTHER PERSON, WHETHER BECAUSE OF ANY APPLICABLE LAWS PERTAINING
TO "ELECTION OF REMEDIES" OR THE LIKE, SUCH BORROWER HEREBY CONSENTS TO SUCH
ACTION BY LENDER AND WAIVES ANY CLAIM BASED UPON SUCH ACTION, EVEN IF SUCH
ACTION BY LENDER SHALL RESULT IN A FULL OR PARTIAL LOSS OF ANY RIGHTS OF
SUBROGATION WHICH SUCH BORROWER MIGHT OTHERWISE HAVE HAD BUT FOR SUCH ACTION BY
LENDER. ANY ELECTION OF REMEDIES THAT RESULTS IN THE DENIAL OR IMPAIRMENT OF THE
RIGHT OF LENDER TO SEEK A DEFICIENCY JUDGMENT AGAINST ANY BORROWER SHALL NOT
IMPAIR ANY OTHER BORROWER'S OBLIGATION TO PAY THE FULL AMOUNT OF THE
OBLIGATIONS. IN THE EVENT LENDER SHALL BID AT ANY FORECLOSURE OR TRUSTEE'S SALE
OR AT ANY PRIVATE SALE PERMITTED BY LAW OR THE LOAN DOCUMENTS, LENDER MAY BID
ALL OR LESS THAN THE AMOUNT OF THE OBLIGATIONS AND THE AMOUNT OF SUCH BID NEED
NOT BE PAID BY LENDER BUT SHALL BE CREDITED AGAINST THE OBLIGATIONS. THE AMOUNT
OF THE SUCCESSFUL BID AT ANY SUCH SALE, WHETHER LENDER OR ANY OTHER PARTY IS THE
SUCCESSFUL BIDDER, SHALL BE CONCLUSIVELY DEEMED TO BE THE FAIR MARKET VALUE OF
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THE COLLATERAL AND THE DIFFERENCE BETWEEN SUCH BID AMOUNT AND THE REMAINING
BALANCE OF THE OBLIGATIONS SHALL BE CONCLUSIVELY DEEMED TO BE THE AMOUNT OF THE
OBLIGATIONS GUARANTEED BY SUCH BORROWER, NOTWITHSTANDING THAT ANY PRESENT OR
FUTURE LAW OR COURT DECISION OR RULING MAY HAVE THE EFFECT OF REDUCING THE
AMOUNT OF ANY DEFICIENCY CLAIM TO WHICH LENDER MIGHT OTHERWISE BE ENTITLED BUT
FOR SUCH BIDDING AT ANY SUCH SALE.
(C) SUCH BORROWER AGREES THAT LENDER SHALL BE UNDER NO OBLIGATION TO
(I) MARSHAL ANY ASSETS IN FAVOR OF SUCH BORROWER, (II) PROCEED FIRST AGAINST ANY
OTHER BORROWER OR PERSON OR ANY PROPERTY OF ANY OTHER BORROWER OR PERSON OR
AGAINST ANY COLLATERAL, (III) ENFORCE FIRST ANY OTHER GUARANTY OBLIGATIONS WITH
RESPECT TO, OR SECURITY FOR, THE OBLIGATIONS, OR (IV) PURSUE ANY OTHER REMEDY IN
LENDER'S POWER THAT SUCH BORROWER MAY NOT BE ABLE TO PURSUE ITSELF AND THAT MAY
LIGHTEN SUCH BORROWER'S BURDEN, ANY RIGHT TO WHICH SUCH BORROWER HEREBY
EXPRESSLY WAIVES.
(D) EACH BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A
MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS
RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH SUCH BORROWER.
EACH BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS
WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION,
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
10. Miscellaneous
10.1 Complete Agreement; Modification of Agreement. This Agreement and the other
Loan Documents constitute the complete agreement between the parties with
respect to the subject matter hereof and thereof, supersede all prior
agreements, commitments, understandings or inducements (oral or written,
expressed or implied). No Loan Document may be modified, altered or amended
except by a written agreement signed by Lender, and each other Credit Party a
party to such Loan Document. Each Borrower and each other Credit Party executing
this Agreement or any other Loan Document shall have all duties and obligations
under this Agreement and such other Loan Document from the date of its execution
and delivery, regardless of whether the initial Loan has been funded at that
time.
10.2 Expenses. Borrowers agree to pay or reimburse Lender for all costs and
expenses (including the fees and expenses of all external counsel, advisors,
consultants (including environmental and management consultants) and auditors
retained in connection therewith), incurred in connection with: (a) the
preparation, negotiation, execution, delivery, performance and enforcement of
the Loan Documents and the preservation of any rights thereunder; provided,
however, that Borrowers' obligation to pay or reimburse Lender for external
counsel's fees through the Closing Date is limited to 100% of external counsel's
fees through and including $37,500, and 50% of external counsel's fees above
$37,500; (b) collection, including deficiency collections; (c) the forwarding to
any Borrower or any other Person on behalf of any Borrower by Lender of the
proceeds of any Loan (including a wire transfer fee of $25 per wire transfer
(or, upon notice from Lender, such other rate as in effect from time to time));
(d) any amendment, waiver or other modification with respect to any Loan
Document or advice in connection with the administration of the Loans or the
rights thereunder; (e) any litigation, dispute, suit, proceeding or action
(whether instituted by or between any combination of Lender, any Borrower or any
other Person), and an appeal or review thereof, in any way relating to the
Collateral, any Loan Document, or any action taken or any other agreements to be
executed or delivered in connection therewith, whether as a party, witness or
otherwise; and (f) any effort (i) to monitor the Loans, (ii) to evaluate,
observe or assess any Borrower or any other Credit Party or the affairs of such
Person, and (iii) to verify, protect, evaluate, assess, appraise, collect, sell,
liquidate or otherwise dispose of the Collateral. Lender acknowledges that (A)
the initial field audit expenses are capped at $15,000, and (B) Borrowers have
deposited $82,500 with Lender in connection with payment of the fees and
expenses referenced above, in each case as set forth in the Commitment Letter.
10.3 No Waiver. Neither Lender's failure, at any time, to require strict
performance by any Borrower or any other Credit Party of any provision of any
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Loan Document, nor Lender's failure to exercise, nor any delay in exercising,
any right, power or privilege hereunder, shall operate as a waiver thereof or
waive, affect or diminish any right of Lender thereafter to demand strict
compliance and performance therewith. No single or partial exercise of any
right, power or privilege hereunder shall preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. Any suspension
or waiver of a Default or other provision under the Loan Documents shall not
suspend, waive or affect any other Default or other provision under any Loan
Document, and shall not be construed as a bar to any right or remedy that Lender
would otherwise have had on any future occasion. None of the undertakings,
indemnities, agreements, warranties, covenants and representations of any
Borrower or any other Credit Party to Lender contained in any Loan Document and
no Default by any Borrower or any other Credit Party under any Loan Document
shall be deemed to have been suspended or waived by Lender, unless such waiver
or suspension is by an instrument in writing signed by an officer or other
authorized employee of Lender and directed to such Borrower specifying such
suspension or waiver (and then such waiver shall be effective only to the extent
therein expressly set forth), and Lender shall not, by any act (other than
execution of a formal written waiver), delay, omission or otherwise, be deemed
to have waived any of its rights or remedies hereunder.
10.4 Severability; Section Titles. Wherever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of any Loan Document shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of such Loan Document. Except as
otherwise expressly provided for in the Loan Documents, no termination or
cancellation (regardless of cause or procedure) of any financing arrangement
under the Loan Documents shall in any way affect or impair the Obligations,
duties, covenants, representations and warranties, indemnities, and liabilities
of any Borrower or any other Credit Party or the rights of Lender relating to
any unpaid Obligation (due or not due, liquidated, contingent or unliquidated),
or any transaction or event occurring prior to such termination, or any
transaction or event, the performance of which is not required until after the
Commitment Termination Date, all of which shall not terminate or expire, but
rather shall survive such termination or cancellation and shall continue in full
force and effect until the Termination Date; provided, that all indemnity
obligations of the Credit Parties under the Loan Documents shall survive the
Termination Date. The Section titles contained in any Loan Document are and
shall be without substantive meaning or content of any kind whatsoever and are
not a part of the agreement between the parties hereto.
10.5 Authorized Signature. Until Lender shall be notified in writing by any
Borrower or any other Credit Party to the contrary, the signature upon any
document or instrument delivered pursuant hereto and believed by Lender or any
of Lender's officers, agents, or employees to be that of an officer of such
Borrower or such other Credit Party shall bind such Borrower and such other
Credit Party and be deemed to be the act of such Borrower or such other Credit
Party affixed pursuant to and in accordance with resolutions duly adopted by
such Borrower's or such other Credit Party's Board of Directors, and Lender
shall be entitled to assume the authority of each signature and authority of the
person whose signature it is or appears to be unless the person acting in
reliance thereon shall have actual knowledge to the contrary.
10.6 Notices. Except as otherwise provided herein, whenever any notice, demand,
request or other communication shall or may be given to or served upon any party
by any other party, or whenever any party desires to give or serve upon any
other party any communication with respect to this Agreement, each such
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and three (3)
days after deposit in the United States Mail, registered or certified mail,
return receipt requested, with proper postage prepaid, (b) upon transmission,
when sent by telecopy or other similar facsimile transmission (with such
telecopy or facsimile promptly confirmed by delivery of a copy by personal
delivery or United States Mail as otherwise provided in this Section 10.6), (c)
one (1) Business Day after deposit with a reputable overnight courier with all
charges prepaid or (d) when hand-delivered, all of which shall be addressed to
the party to be notified and sent to the address or facsimile number indicated
in Schedule B or to such other address (or facsimile number) as may be
substituted by notice given as herein provided.. Failure or delay in delivering
copies of such communication to any Person (other than any Borrower or Lender)
designated in Schedule B to receive copies shall in no way adversely affect the
effectiveness of such communication.
10.7 Counterparts. Any Loan Document may be executed or otherwise authenticated
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in any number of separate counterparts by any one or more of the parties
thereto, and all of said counterparts taken together shall constitute one and
the same instrument. Any Loan Document may be executed or otherwise
authenticated by manual signature, facsimile or, if approved in writing by
Lender, electronic means, all of which shall be equally valid.
10.8 Time of the Essence. Time is of the essence for performance of the
Obligations under the Loan Documents.
10.9 GOVERNING LAW. THE LOAN DOCUMENTS AND THE OBLIGATIONS ARISING UNDER THE
LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING
CONFLICTS OF LAWS, provided, however, that EACH Borrower specifically consents
to the applicability of the law of the state in which such borrower has assets
(without regard to such state's conflicts of laws principles) with respect to
Lender's exercise and enforcement of the remedy of confession of judgment set
forth herein and EACH BORROWER PARTY expressly waives any defense which SUCH
Borrower may have against the enforcement by Lender of the confession of
judgment remedy, based upon any theory of law or equitable principle whatsoever,
including, without limitation, any claim by SUCH Borrower that the governing
laws of the State of New York may not permit the entry of judgment by
confession.
10.10 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. (A) EACH BORROWER AND
EACH OTHER CREDIT PARTY EXECUTING THIS AGREEMENT HEREBY CONSENT AND AGREE THAT
THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN SUCH BORROWER
AND SUCH CREDIT PARTY AND LENDER PERTAINING TO THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT LENDER, SUCH
BORROWER AND SUCH CREDIT PARTY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS
MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK; AND FURTHER
PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE
LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION
TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY
FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
LENDER. SUCH BORROWER AND EACH OTHER CREDIT PARTY EXECUTING THIS AGREEMENT
EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND SUCH BORROWER AND SUCH CREDIT PARTY HEREBY
WAIVE ANY OBJECTION THAT IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS. EACH BORROWER AND EACH OTHER CREDIT
PARTY EXECUTING THIS AGREEMENT HEREBY WAIVE PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREE THAT
SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL ADDRESSED TO SUCH BORROWER OR SUCH CREDIT PARTY AT THE ADDRESS
SET FORTH IN SCHEDULE B OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE
DEEMED COMPLETED UPON THE EARLIER OF SUCH BORROWER'S OR SUCH CREDIT PARTY'S
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID.
(B) THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT,
TORT, OR OTHERWISE BETWEEN LENDER, ANY BORROWER AND ANY CREDIT PARTY ARISING OUT
OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED
THERETO.
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10.11 Press Releases. Neither any Credit Party nor any of its Affiliates will in
the future issue any press release or other public disclosure using the name of
General Electric Capital Corporation or its affiliates or referring to this
Agreement or the other Loan Documents without at least two (2) Business Days'
prior notice to Lender and without the prior written consent of Lender unless
(and only to the extent that) such Credit Party or Affiliate is required to do
so under law and then, in any event, such Credit Party or Affiliate will consult
with Lender before issuing such press release or other public disclosure. Each
Credit Party consents to the publication by Lender of a tombstone or similar
advertising material relating to the financing transactions contemplated by this
Agreement. Lender reserves the right to provide to industry trade organizations
information necessary and customary for inclusion in league table measurements
with each Borrower's consent which shall not be unreasonably withheld or
delayed.
10.12 Reinstatement. This Agreement shall continue to be effective, or be
reinstated, as the case may be, if at any time payment of all or any part of the
Obligations is rescinded or must otherwise be returned or restored by Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
any Borrower or any other Credit Party, or otherwise, all as though such
payments had not been made.
10.13 CONFESSION OF JUDGMENT. EACH BORROWER HEREBY IRREVOCABLY AUTHORIZES AND
EMPOWERS LENDER, BY ITS ATTORNEY OR BY THE PROTHONOTARY OR CLERK OF ANY COURT OF
RECORD IN COMMONWEALTH OF PENNSYLVANIA OR IN ANY JURISDICTION WHERE PERMITTED BY
LAW, UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, OR AT ANY TIME THEREAFTER, TO
APPEAR FOR SUCH BORROWER AND CONFESS AND ENTER JUDGMENT AGAINST SUCH BORROWER IN
FAVOR OF LENDER IN ANY JURISDICTION WHERE SUCH BORROWER OR ANY OF ITS PROPERTY
IS LOCATED FOR THE AMOUNT OF ALL OBLIGATIONS AND OTHER SUMS DUE OR TO BECOME DUE
BY SUCH BORROWER TO LENDER UNDER THIS AGREEMENT, TOGETHER WITH COSTS OF SUIT AND
WITH ACTUAL COLLECTION COSTS (INCLUDING ATTORNEYS' FEES), WITH OR WITHOUT
DECLARATION, WITHOUT STAY OF EXECUTION AND WITH RELEASE OF ALL ERRORS AND THE
RIGHT TO ISSUE EXECUTION FORTHWITH, AND FOR DOING SO THIS AGREEMENT OR A COPY
HEREOF VERIFIED BY AFFIDAVIT SHALL BE SUFFICIENT WARRANT. EACH BORROWER HEREBY
WAIVES ALL RELIEF FROM ANY APPRAISEMENT, STAY OR EXEMPTION LAWS OF ANY STATE NOW
IN FORCE OR HEREAFTER ENACTED. THIS AUTHORITY AND POWER SHALL NOT BE EXHAUSTED
BY ANY EXERCISE THEREOF, AND JUDGMENT MAY BE CONFESSED AS AFORESAID FROM TIME TO
TIME AS OFTEN AS THERE IS OCCASION THEREFOR UNTIL ALL SUMS DUE AND OWING
HEREUNDER ARE FULLY PAID, PERFORMED, DISCHARGED AND SATISFIED.
EACH BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS LENDER, BY ITS
ATTORNEY OR BY THE PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN THE
COMMONWEALTH OF PENNSYLVANIA OR IN ANY JURISDICTION WHERE PERMITTED BY LAW, UPON
THE OCCURRENCE OF AN EVENT OF DEFAULT, OR AT ANY TIME THEREAFTER, TO APPEAR FOR
SUCH BORROWER, AS WELL AS FOR ANY PERSONS CLAIMING UNDER, BY OR THROUGH SUCH
BORROWER, IN AN ACTION OR ACTIONS FOR REPLEVIN OR OTHER APPROPRIATE ACTION
AGAINST SUCH BORROWER TO CONFESS AND ENTER JUDGMENT AGAINST SUCH BORROWER, FOR
RECOVERY OF POSSESSION OF ANY OR ALL COLLATERAL AND/OR THE PROCEEDS THEREOF,
TOGETHER WITH COSTS OF SUIT AND WITH ACTUAL COLLECTION COSTS (INCLUDING
ATTORNEYS' FEES), WITHOUT THE NECESSITY OF FILING ANY BOND AND WITHOUT STAY OF
EXECUTION OR APPEAL AND WITH RELEASE OF ALL ERRORS AND FOR DOING SO THIS
AGREEMENT OR A COPY HEREOF VERIFIED BY AFFIDAVIT SHALL BE SUFFICIENT WARRANT,
WHEREUPON A JUDGMENT AND/OR WRIT OF POSSESSION AND/OR REPLEVIN OR OTHER
APPROPRIATE PROCESS TO OBTAIN POSSESSION OF SUCH COLLATERAL MAY BE ISSUED
FORTHWITH, WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER. THIS AUTHORITY AND
POWER SHALL NOT BE EXHAUSTED BY ANY EXERCISE THEREOF, AND JUDGMENT MAY BE
CONFESSED AS AFORESAID FROM TIME TO TIME AS OFTEN AS THERE IS OCCASION THEREFOR
UNTIL ALL SUMS DUE AND OWING HEREUNDER ARE FULLY PAID, PERFORMED, DISCHARGED AND
SATISFIED.
11. Cross-Guaranty
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11.1 Cross-Guaranty. Each Borrower hereby absolutely and unconditionally
guarantees to Lender and its successors and assigns the full and prompt payment
(whether at stated maturity, by acceleration or otherwise) and performance of
all Obligations owed or hereafter owing to Lender by each other Borrower,
including that portion of the Revolving Credit Loan attributable to each other
Borrower. Each Borrower agrees that its guaranty obligation hereunder is a
continuing guaranty of payment and performance and not of collection, and that
its obligations under this Section 11 shall be absolute and unconditional,
irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability or any future
amendment of, or change in, this Agreement, any other Loan Document or any other
agreement, document or instrument to which any Borrower is or may become a
party;
(b) the absence of any action to enforce this Agreement (including this
Section 11) or any other Loan Document or the waiver or consent by Lender with
respect to any of the provisions hereof or thereof;
(c) the existence, value or condition of, or failure to perfect its
Lien against, any security for the Obligations or any action, or the absence of
any action, by Lender in respect thereof (including the release of any such
security);
(d) the insolvency of any Credit Party; or
(e) any other action or circumstances that might otherwise constitute a
legal or equitable discharge or defense of a surety or guarantor, it being
agreed by each Borrower that its obligations under this Section 11 shall not be
discharged until the payment and performance, in full, of the Obligations has
occurred. Each Borrower shall be regarded, and shall be in the same position, as
principal debtor with respect to the Obligations guaranteed hereunder.
11.2 Waivers by Borrowers. Each Borrower expressly waives all rights it may have
now or in the future under any statute, or at common law, or at law or in
equity, or otherwise, to compel Lender to marshal assets or to proceed in
respect of the Obligations guaranteed hereunder against any other Credit Party,
any other party or against any security for the payment and performance of the
Obligations before proceeding against, or as a condition to proceeding against,
such Borrower. It is agreed among each Borrower and Lender that the foregoing
waivers are of the essence of the transactions contemplated by this Agreement
and the other Loan Documents and that, but for the provisions of this Section 11
and such waivers, Lender would decline to enter into this Agreement.
11.3 Benefit of Guaranty. Each Borrower agrees that the provisions of this
Section 11 are for the benefit of Lender and its successors, transferees,
endorsees and assigns, and nothing herein contained shall impair, as between any
other Borrower and Lender, the obligations of such other Borrower under the Loan
Documents.
11.4 Subordination of Subrogation. Notwithstanding anything to the contrary in
this Agreement or in any other Loan Document, and except as set forth in Section
11.7, each Borrower hereby expressly and irrevocably subordinates to payment of
the Obligations any and all rights at law or in equity to subrogation,
reimbursement, exoneration, contribution, indemnification or set off and any and
all defenses available to a surety, guarantor or accommodation co-obligor until
the Obligations are indefeasibly paid in full in cash. Each Borrower
acknowledges and agrees that this waiver is intended to benefit Lender and shall
not limit or otherwise affect such Borrower's liability hereunder or the
enforceability of this Section 11, and that Lender and its successors and
assigns are intended third party beneficiaries of the waivers and agreements set
forth in this Section 11.4.
11.5 Election of Remedies. If Lender may, under applicable law, proceed to
realize its benefits under any of the Loan Documents giving Lender a Lien upon
any Collateral, whether owned by any Borrower or by any other Person, either by
judicial foreclosure or by non-judicial sale or enforcement, Lender may, at its
sole option, determine which of its remedies or rights it may pursue without
affecting any of its rights and remedies under this Section 11. If, in the
exercise of any of its rights and remedies, Lender shall forfeit any of its
rights or remedies, including its right to enter a deficiency judgment against
any Borrower or any other Person, whether because of any applicable laws
pertaining to "election of remedies" or the like, each Borrower hereby consents
to such action by Lender and waives any claim based upon such action, even if
such action by Lender shall result in a full or partial loss of any rights of
subrogation which such Borrower might otherwise have had but for such action by
Lender. Any election of remedies that results in the denial or impairment of the
right of Lender to seek a deficiency judgment against any Borrower shall not
impair any other Borrower's obligation to pay the full amount of the
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Obligations. In the event Lender shall bid at any foreclosure or trustee's sale
or at any private sale permitted by law or the Loan Documents, Lender may bid
all or less than the amount of the Obligations and the amount of such bid need
not be paid by Lender but may be credited against the Obligations. The amount of
the successful bid at any such sale, whether Lender or any other party is the
successful bidder, shall be conclusively deemed to be the fair market value of
the Collateral and the difference between such bid amount and the remaining
balance of the Obligations shall be conclusively deemed to be the amount of the
Obligations guaranteed under this Section 11, notwithstanding that any present
or future law or court decision or ruling may have the effect of reducing the
amount of any deficiency claim to which Lender might otherwise be entitled but
for such bidding at any such sale. In addition, each Borrower waives all rights
and defenses arising out of an election of remedies by Lender, even though the
election of remedies, such as a non-judicial foreclosure with respect to
security for the Obligations, has destroyed any Borrower's rights of subrogation
and reimbursement against the principal by the operation of Section 580d of the
California Code of Civil Procedure or otherwise.
11.6 Limitation. Notwithstanding any provision herein contained to the contrary,
each Borrower's liability under this Section 11 (which liability is in any event
in addition to amounts for which such Borrower is primarily liable under Section
1) shall be limited to an amount not to exceed as of any date of determination
the greater of:
(a) the net amount of all Loans advanced to any other Borrower under
this Agreement and then re-loaned or otherwise transferred to, or for the
benefit of, such Borrower; and
(b) the amount which could be claimed by Lender from such Borrower
under this Section 11 without rendering such claim voidable or avoidable under
Section 548 of Chapter 11 of the United States Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law after taking into account, among other
things, such Borrower's right of contribution and indemnification from each
other Borrower under Section 11.7.
11.7 Contribution with Respect to Guaranty Obligations. (a) To the extent that
any Borrower shall make a payment under this Section 11 of all or any of the
Obligations (other than Loans made to that Borrower for which it is primarily
liable) (a "Guarantor Payment") which, taking into account all other Guarantor
Payments then previously or concurrently made by any other Borrower, exceeds the
amount which such Borrower would otherwise have paid if each Borrower had paid
the aggregate Obligations satisfied by such Guarantor Payment in the same
proportion that such Borrower's "Allocable Amount" (as defined below) (as
determined immediately prior to such Guarantor Payment) bore to the aggregate
Allocable Amounts of each of the Borrowers as determined immediately prior to
the making of such Guarantor Payment, then, following indefeasible payment in
full in cash of the Obligations and termination of the Commitments, such
Borrower shall be entitled to receive contribution and indemnification payments
from, and be reimbursed by, each other Borrower for the amount of such excess,
pro rata based upon their respective Allocable Amounts in effect immediately
prior to such Guarantor Payment.
(b) As of any date of determination, the "Allocable Amount" of any
Borrower shall be equal to the maximum amount of the claim which could then be
recovered from such Borrower under this Section 11 without rendering such claim
voidable or avoidable under Section 548 of Chapter 11 of the United States
Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act,
Uniform Fraudulent Conveyance Act or similar statute or common law.
(c) This Section 11.7 is intended only to define the relative rights of
Borrowers and nothing set forth in this Section 11.7 is intended to or shall
impair the obligations of each Borrower to pay any amounts as and when the same
shall become due and payable in accordance with the terms of this Agreement,
including Section 11.1. Nothing contained in this Section 11.7 shall limit the
liability of any Borrower to pay the Loans made directly or indirectly to that
Borrower and accrued interest, Fees and expenses with respect thereto for which
such Borrower shall be primarily liable.
(d) The parties hereto acknowledge that the rights of contribution and
indemnification hereunder shall constitute assets of Borrower to which such
contribution and indemnification is owing.
29
(e) The rights of the indemnifying Borrowers against other Credit
Parties under this Section 11.7 shall be exercisable upon the full and
indefeasible payment of the Obligations and the termination of Lender's
obligation to extend any credit under this Agreement.
11.8 Liability Cumulative. The liability of Borrowers under this Section 11 is
in addition to and shall be cumulative with all liabilities of each Borrower to
Lender under this Agreement and the other Loan Documents to which such Borrower
is a party or in respect of any Obligations or obligation of the other
Borrowers, without any limitation as to amount, unless the instrument or
agreement evidencing or creating such other liability specifically provides to
the contrary.
[Remainder of page intentionally left blank]
30
IN WITNESS WHEREOF, this Loan and Security Agreement has been duly executed as
of the date first written above.
SPARKS EXHIBITS & ENVIRONMENTS CORP.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
SPARKS EXHIBITS & ENVIRONMENTS, LTD.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
SPARKS EXHIBITS & ENVIRONMENTS, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
DMS STORE FIXTURES LLC
By: /s/ Xxxxxx X. Xxxxxxxx
------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx
------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Duly Authorized Signatory
31
Each of the undersigned is a Credit Party and a guarantor of the Obligations and
hereby intervenes to confirm and acknowledge that it has read and understands
the foregoing agreement, and consents to and agrees to be bound by all
provisions contained therein applicable to such undersigned.
MARLTON TECHNOLOGIES, INC.
By:/s/ Xxxxxx X. Xxxxxxxx
------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chief Executive Officer
SPARKS EXHIBITS HOLDING CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx
------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
SPARKS EXHIBITS & ENVIRONMENTS INCORPORATED
By:/s/ Xxxxxx X. Xxxxxxxx
------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
SPARKS EXHIBITS & ENVIRONMENTS COMPANY
By: /s/ Xxxxxx X. Xxxxxxxx
------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
32
Schedule A - Definitions
Capitalized terms used in this Agreement and the other Loan Documents shall have
(unless otherwise provided elsewhere in this Agreement or in the other Loan
Documents) the following respective meanings:
"Account Debtor" means any Person who is or may become obligated with respect
to, or on account of, an Account, Chattel Paper or General Intangible (including
a Payment Intangible).
"Accounts" means all "accounts," as such term is defined in the Code, now owned
or hereafter acquired by any Person, including: (i) all accounts receivable,
other receivables, book debts and other forms of obligations (other than forms
of obligations evidenced by Chattel Paper or Instruments) (including any such
obligations that may be characterized as an account or contract right under the
Code); (ii) all of such Person's rights in, to and under all purchase orders or
receipts for goods or services; (iii) all of such Person's rights to any goods
represented by any of the foregoing (including unpaid sellers' rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods); (iv) all rights to payment due to
such Person under all purchase orders and contracts for the sale of goods or the
performance of services or both for Goods or other property sold, leased,
licensed, assigned or otherwise disposed of, for a policy of insurance issued or
to be issued, for a secondary obligation incurred or to be incurred, for energy
provided or to be provided, for the use or hire of a vessel under a charter or
other contract, arising out of the use of a credit card or charge card, or for
services rendered or to be rendered by such Person or in connection with any
other transaction (whether or not yet earned by performance on the part of such
Person); and (v) all health care insurance receivables; and (vi) all collateral
security of any kind given by any Account Debtor or any other Person with
respect to any of the foregoing.
"Accounts Payable Analysis" means a certificate in the form of Exhibit D.
"Accounts Receivable Roll Forward Analysis" means a certificate in the form of
Exhibit E.
"Additional Stockholder Loan" has the meaning assigned to it in Section 3.22.
"Affiliate" means, with respect to any Person: (i) each other Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, twenty percent (20%) or more of the Stock having
ordinary voting power for the election of directors of such Person; (ii) each
other Person that controls, is controlled by or is under common control with
such Person or any Affiliate of such Person; or (iii) each of such Person's
officers, directors, joint venturers (limited to those joint ventures in which
such Person, directly or indirectly, owns or controls twenty percent (20%) or
more of the Stock thereof) and partners. For the purpose of this definition,
"control" of a Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Agreement including all appendices, exhibits or schedules
attached or otherwise identified thereto, restatements and modifications and
supplements thereto, and any appendices, exhibits or schedules to any of the
foregoing, each as in effect at the time such reference becomes operative;
provided, that except as specifically set forth in this Agreement, any reference
to the Disclosure Schedules to this Agreement shall be deemed a reference to the
Disclosure Schedules as in effect on the Closing Date or in a written amendment
thereto executed by Borrower and Lender.
"Blocked Account" and "Blocked Account Agreement" have the meanings assigned to
such terms in Schedule D.
"Books and Records" means all books, records, board minutes, contracts,
licenses, insurance policies, environmental audits, business plans, files,
computer files, computer discs and other data and software storage and media
devices, accounting books and records, financial statements (actual and pro
forma), filings with Governmental Authorities and any and all records and
instruments relating to the Collateral or any Borrower's business.
"Borrower" and "Borrowers" has the meanings assigned to them in the preamble of
this Agreement.
"Borrowing Availability" means, at any time with respect to any Borrower, the
lesser of (i) the Maximum Amount less the sum of the aggregate Revolving Credit
Loans attributable to the other Borrowers or (ii) such Borrower's Borrowing
33
Base, in each case less reserves (including, without limitation, the Special
Reserve) established by Lender from time to time in its good faith credit
judgment.
"Borrowing Base" means at any time with respect to any Borrower, an amount equal
to the sum at such time of:
(a) up to 85% of the value (as determined by Lender in accordance with
this Agreement) of each Borrower's Eligible Accounts; provided, that Lender
shall reduce the foregoing percentage by one percentage point for each
percentage point that the dilution of such Borrower's Accounts (calculated by
Lender as the average dilution over the most recent 3 months) exceeds 5%; plus
(b) 80% of the value (as determined by Lender in accordance with this
Agreement) of each Borrower's Eligible Shipped/Unbilled Assets, provided
however, that the aggregate amount of advances outstanding at any time against
all Borrowers' Eligible Shipped/Unbilled Assets shall not exceed $2,500,000,
plus
(c) the sum of (i) 50% of the value of each Borrower's Eligible
Inventory consisting of raw materials, in each case as determined by Lender in
accordance with this Agreement, valued on a first-in, first-out basis (at the
lower of cost or market), provided however, that the aggregate amount of
advances outstanding at any time against all Borrowers' Eligible Inventory
consisting of raw materials shall not exceed $500,000, and (ii) 60% of the value
of each Borrower's Eligible Inventory consisting of finished goods, in each case
as determined by Lender in accordance with this Agreement, valued on a first-in,
first-out basis (at the lower of cost or market), provided however, that the
aggregate amount of advances outstanding at any time against all Borrowers'
Eligible Inventory consisting of finished goods designated for (A) any single
customer shall not exceed $2,000,000, and (B) all customers shall not exceed
$3,000,000.
"Borrowing Base Certificate" means a certificate in the form of Exhibit C.
"Business Day" means any day that is not a Saturday, a Sunday or a day on which
banks are required or permitted to be closed in the State of New York.
"Capital Expenditures" means all payments or accruals (including Capital Lease
Obligations) for any fixed assets or improvements (excluding the acquisition of
Exhibit Crafts, Inc. completed on August 1, 2003) or for replacements,
substitutions or additions thereto, that have a useful life of more than one
year and that are required to be capitalized under GAAP.
"Capital Lease" means, with respect to any Person, any lease of any property
(whether real, personal or mixed) by such Person as lessee that, in accordance
with GAAP, either would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person or otherwise would be disclosed
as such in a note to such balance sheet, other than, in the case of any
Borrower, any such lease under which such Borrower is the lessor.
"Capital Lease Obligation" means, with respect to any Capital Lease, the amount
of the obligation of the lessee thereunder that, in accordance with GAAP, would
appear on a balance sheet of such lessee in respect of such Capital Lease or
otherwise be disclosed in a note to such balance sheet.
"Cash Collateral Account" has the meaning assigned to it in Schedule C.
"Change of Control" means (a) any event, transaction or occurrence as a result
of which (i) Xxxxxxx Xxxxxx, Xxxxx Xxxxx and Xxxxxx Xxxxxxxx cease to own and
control all of the economic and voting rights associated with (A) at least
seventy five percent (75%) of the outstanding capital Stock of Marlton owned by
them as of the Closing Date, provided that they may transfer Stock among
themselves, and (B) ownership of at least thirty percent (30%) of the
outstanding capital Stock of all classes of Marlton on a fully diluted basis,
(ii) Marlton shall cease to own and control all of the economic and voting
rights associated with all of the outstanding capital Stock of Sparks Holding,
(iii) Sparks Holding shall cease to own and control all of the economic and
voting rights associated with all of the outstanding capital Stock of Leading
Borrower, (iv) Leading Borrower shall cease to own and control all of the
economic and voting rights associated with all of the outstanding capital Stock
of Third Borrower and Fourth Borrower, or (v) Leading Borrower shall cease to
own and control all of the economic and voting rights associated with eighty
percent (80%) of the outstanding capital Stock of Second Borrower, (b) at least
two (2) of Xxxxxxx Xxxxxx, Xxxxx Xxxxx and Xxxxxx Xxxxxxxx shall cease to be the
34
executive officers (in either form or substance) of each of the Borrowers,
Sparks Holding and Marlton, and replacement executive officers satisfactory to
Lender in its reasonable discretion are not elected within six weeks after the
date such officer no longer holds such office, or (c) at least two (2) of
Xxxxxxx Xxxxxx, Xxxxx Xxxxx and Xxxxxx Xxxxxxxx shall cease to be members of the
Board of Directors of each of the Borrowers, Sparks Holding and Marlton, and
replacement directors satisfactory to Lender in its reasonable discretion are
not elected within six weeks after the date such director no longer holds such
office.
"Charges" means all Federal, state, county, city, municipal, local, foreign or
other governmental taxes (including taxes owed to PBGC at the time due and
payable), levies, customs or other duties, assessments, charges, liens, and all
additional charges, interest, penalties, expenses, claims or encumbrances upon
or relating to (i) the Collateral, (ii) the Obligations, (iii) the employees,
payroll, income or gross receipts of any Credit Party, (iv) the ownership or use
of any assets by any Credit Party, or (v) any other aspect of any Credit Party's
business.
"Chattel Paper" means all "chattel paper," as such term is defined in the Code,
including electronic chattel paper, now owned or hereafter acquired by any
Person.
"Closing Date" means the Business Day on which the conditions precedent set
forth in Section 2 have been satisfied or specifically waived in writing by
Lender, and the initial Loan has been made.
"Closing Date Stockholder Loan" has the meaning assigned to it in Section
2.1(e).
"Closing Fee" has the meaning assigned to it in Schedule E.
"Code" means the Uniform Commercial Code as the same may, from time to time, be
in effect in the State of New York; provided, that in the event that, by reason
of mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Lender's Lien on any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, the term "Code" means the Uniform Commercial Code as
in effect in such other jurisdiction for purposes of the provisions of this
Agreement relating to such attachment, perfection, priority or remedies and for
purposes of definitions related to such provisions; provided further, that to
the extent that the Code is used to define any term herein or in any Loan
Document and such term is defined differently in different Articles or Divisions
of the Code, the definition of such term contained in Article or Division 9
shall govern.
"Collateral" has the meaning assigned to it in Section 6.1.
"Collection Account" means that certain account of Lender, account number
00-000-000 in the name of GECC-CAF Depository at Deutsche Bank Trust Company
Americas, 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, XXX number 000-000-000.
"Commitment Letter" has the meaning assigned to it in Section 2.1(j).
"Commitment Termination Date" means the earliest of (i) the Stated Expiry Date,
(ii) the date Lender's obligation to advance funds is terminated pursuant to
Section 7.2, and (iii) the date of indefeasible prepayment in full by Borrowers
of the Obligations in accordance with the provisions of Section 1.2(c).
"Contracts" means all the contracts, undertakings, or agreements (other than
rights evidenced by Chattel Paper, Documents or Instruments) in or under which
any Person may now or hereafter have any right, title or interest, including any
agreement relating to the terms of payment or the terms of performance of any
Account.
"Contractual Obligation" means as to any Person, any provision of any security
issued by such Person or of any agreement, instrument, or other undertaking to
which such Person is a party or by which it or any of its property is bound.
"Copyright License" means rights under any written agreement now owned or
hereafter acquired by any Person granting the right to use any Copyright or
Copyright registration.
35
"Copyrights" means all of the following now owned or hereafter adopted or
acquired by any Person: (i) all copyrights in any original work of authorship
fixed in any tangible medium of expression, now known or later developed, all
registrations and applications for registration of any such copyrights in the
United States or any other country, including registrations, recordings and
applications, and supplemental registrations, recordings, and applications in
the United States Copyright Office; and (ii) all Proceeds of the foregoing,
including license royalties and proceeds of infringement suits, the right to xxx
for past, present and future infringements, all rights corresponding thereto
throughout the world and all renewals and extensions thereof.
"Corporate Credit Party" means any Credit Party that is a corporation,
partnership or limited liability company.
"Credit Party" means each Borrower, and each other Person (other than Lender)
that is or may become a party to this Agreement or any other Loan Document.
"Default" means any Event of Default or any event that, with the passage of time
or notice or both, would, unless cured or waived, become an Event of Default.
"Default Rate" has the meaning assigned to it in Section 1.5(c).
"Deposit Accounts" means all "deposit accounts" as such term is defined in the
Code, now or hereafter held in the name of any Person, including, without
limitation, all bank accounts and funds on deposit therein.
"Documents" means all "documents," as such term is defined in the Code, now
owned or hereafter acquired by any Person, wherever located, including all bills
of lading, dock warrants, dock receipts, warehouse receipts, and other documents
of title, whether negotiable or non-negotiable.
"EBITDA" means, for any period, the Net Income (Loss) of Borrowers and their
Subsidiaries on a consolidated basis for such period, plus interest expense,
income tax expense, amortization expense, depreciation expense and extraordinary
losses and minus extraordinary gains, in each case, of Borrowers and their
Subsidiaries on a consolidated basis for such period determined in accordance
with GAAP to the extent included in the determination of such Net Income (Loss).
For purposes of calculating the Fixed Charge Coverage Ratio through December 31,
2004, (a) the following amounts shall be added to EBITDA: (i) up to $267,000 for
non-recurring going private costs incurred in the Fiscal Quarter ending June 30,
2003, (ii) up to $434,000 for actual cash expenditures for non-recurring
California relocation expenses incurred through September 30, 2003, (iii) all
accruals for non-recurring California relocation expenses, and (iv) up to
$259,000 for non-recurring write-offs of the investment in Sparks Europe B.V.,
and (b) the following amount shall be subtracted from EBITDA: all actual cash
expenditures made with respect to such accruals for non-recurring California
relocation expenses made after September 30, 2003.
"El Cajon Lease" means that certain Lease Agreement dated on or about June 29,
1998 between Xxxxxxxxx Field Partners, LLC and Second Borrower, as amended by
that certain First Amendment to Lease Agreement dated October 31, 2003, for the
premises located at 0000 Xxxxxxxxx Xxx, Xx Xxxxx, Xxxxxxxxxx 00000.
"Eligible Accounts" means as at the date of determination with respect to any
Borrower, all Accounts of such Borrower except any Account:
(a) that does not arise from the sale of goods or the performance of
services by such Borrower in the ordinary course of such Borrower's business;
(b) upon which (i) such Borrower's right to receive payment is not
absolute or is contingent upon the fulfillment of any condition whatsoever or
(ii) such Borrower is not able to bring suit or otherwise enforce its remedies
against the Account Debtor through judicial process;
(c) against which any defense, counterclaim or setoff, whether
well-founded or otherwise, is asserted or which is a "contra" Account;
36
(d) that is not a true and correct statement of a bona fide
indebtedness incurred in the amount of the Account for merchandise sold or
services performed and accepted by the Account Debtor obligated upon such
Account;
(e) with respect to which an invoice, acceptable to Lender in form and
substance, has not been sent;
(f) that is not owned by such Borrower or is subject to any right,
claim, or interest of another Person, other than the Lien in favor of Lender;
(g) that arises from a sale to or performance of services for an
employee, Affiliate, Subsidiary or Stockholder of any Borrower or any other
Credit Party, or an entity which has common officers or directors with any
Borrower or any other Credit Party;
(h) that is the obligation of an Account Debtor that is the Federal (or
local) government or a political subdivision thereof, unless Lender has agreed
to the contrary in writing and such Borrower has complied with the Federal
Assignment of Claims Act of 1940 (or the state equivalent thereof, if any) with
respect to such obligation;
(i) that is the obligation of an Account Debtor located in a foreign
country unless such Account is supported by a letter of credit in which Lender
has a first priority perfected security interest by control or credit insurance
acceptable to Lender (and naming Lender as loss payee);
(j) that is the obligation of an Account Debtor to whom any Borrower is
or may become liable for goods sold or services rendered by the Account Debtor
to any Borrower, to the extent of any Borrower's liability to such Account
Debtor;
(k) that arises with respect to goods which are delivered on a
cash-on-delivery basis or placed on consignment, guaranteed sale or other terms
by reason of which the payment by the Account Debtor may be conditional;
(l) that is an obligation for which the total unpaid Accounts of the
Account Debtor exceed 20% of the aggregate of all Accounts, to the extent of
such excess;
(m) that is not paid within 60 days from its due date or 120 days from
its invoice date or that are Accounts of an Account Debtor if 50% or more of the
Accounts owing from such Account Debtor remain unpaid within such time periods;
(n) is an obligation of an Account Debtor that has suspended business,
made a general assignment for the benefit of creditors, is unable to pay its
debts as they become due or as to which a petition has been filed (voluntary or
involuntary) under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors;
(o) that arises from any xxxx-and-hold or other sale of goods which
remain in any Borrower's possession or under any Borrower's control, unless
Lender receives a xxxx-and-hold letter or other agreement from the Account
Debtor in form and substance satisfactory to Lender in its sole discretion;
(p) as to which Lender's interest therein is not a first priority
perfected security interest;
(q) to the extent that such Account exceeds any credit limit
established by Lender in Lender's good faith credit judgment;
(r) as to which any of such Borrower's representations or warranties
pertaining to Accounts are untrue;
(s) that represents interest payments, late or finance charges, or
service charges owing to such Borrower; or
37
(t) that is not otherwise acceptable in the good faith discretion of
Lender, provided, that Lender shall have the right to create and adjust
eligibility standards and related reserves from time to time in its good faith
credit judgment.
"Eligible Inventory" means as at the date of determination as to any Borrower,
all Inventory of such Borrower, except any Inventory that:
(a) is not subject to a first priority perfected security interest of
Lender or is not owned by such Borrower free and clear of all Liens and rights
of others (except the Liens in favor of Lender);
(b) is not located on premises (i) owned or operated by such Borrower
and referenced in Disclosure Schedule (3.2) or (ii) of a vendor which has,
together with such vendor's lender, signed a vendor letter in form and substance
satisfactory to Lender in its sole discretion; provided, however, that Lender
acknowledges that the seven (7) vendor's letters received by Lender as of the
Closing Date are all satisfactory;
(c ) is not located on premises where the aggregate amount of all
Inventory (valued at cost) of such Borrower located thereon is greater than
$50,000;
(d) is located on premises with respect to which Lender has not
received a landlord, vendor or mortgagee letter acceptable in form and substance
to Lender;
(e) is in transit;
(f) is covered by a negotiable document of title, unless such document
and evidence of acceptable insurance covering such Inventory has been delivered
to Lender,
(g) in Lender's good faith credit judgment, is obsolete, unsalable,
shopworn, damaged, unfit for further processing, is of substandard quality or is
not of good and merchantable quality, free from any defects;
(h) consists of (i) discontinued items, (ii) slow-moving or excess
items held in inventory, or (iii) used items held for resale;
(i) does not consist of (i) raw materials or (ii) finished goods that
(A) are backed by purchase orders and/or contracts with "take or pay" provisions
satisfactory to Lender in its sole discretion, and (B) have shipping orders for
delivery fewer than 120 days from the date such finished goods were completed;
(j) does not meet all standards imposed by any Governmental Authority,
including with respect to its production, acquisition or importation (as the
case may be);
(k) is placed by such Borrower on consignment or held by such Borrower
on consignment from another Person;
(l) is held for rental or lease by or on behalf of such Borrower;
(m) is produced in violation of the Fair Labor Standards Act and
subject to the "hot goods" provisions contained in 29 U.S.C. ss. 215 or any
successor statute or section;
(n) in any way fails to meet or violates any warranty, representation
or covenant contained in this Agreement or any other Loan Document;
(o) is subject to any licensing, patent, royalty, trademark, trade name
or copyright agreement with any third parties, unless subject to a purchase
order from a customer that owns, or has the right to use, such patent,
trademark, trade name or copyright;
(p) requires the consent of any Person for the completion of
manufacture, sale or other disposition of such Inventory by Lender following an
Event of Default and such completion, manufacture or sale constitutes a breach
38
or default under any contract or agreement to which such Borrower is a party or
to which such Inventory is or may become subject; or
(q) is not otherwise acceptable in the good faith discretion of Lender,
provided, that Lender shall have the right to create and adjust eligibility
standards and related reserves from time to time in its good faith credit
judgment.
"Eligible Shipped/Unbilled Assets" means as at the date of determination with
respect to any Borrower, all Shipped/Unbilled Assets which would be Eligible
Accounts but for clause (e), but only to the extent that an invoice, acceptable
to Lender in form and substance, has been sent within forty (40) days of the
applicable shipping date.
"Environmental Laws" means all Federal, state and local laws, statutes,
ordinances and regulations, now or hereafter in effect, and in each case as
amended or supplemented from time to time, and any applicable judicial or
administrative interpretation thereof relating to the regulation and protection
of human health, safety, the environment and natural resources (including
ambient air, surface water, groundwater, wetlands, land surface or subsurface
strata, wildlife, aquatic species and vegetation).
"Environmental Liabilities" means all liabilities, obligations,
responsibilities, remedial actions, removal costs, losses, damages of whatever
nature, costs and expenses (including all reasonable fees, disbursements and
expenses of counsel, experts and consultants and costs of investigation and
feasibility studies), fines, penalties, sanctions and interest incurred as a
result of any claim, suit, action or demand of whatever nature by any Person,
and which relate to any health or safety condition regulated under any
Environmental Law, environmental permits or in connection with any Release,
threatened Release, or the presence of a Hazardous Material.
"Equipment" means all "equipment" as such term is defined in the Code, now owned
or hereafter acquired by any Person, wherever located, including any and all
machinery, apparatus, equipment, fittings, furniture, fixtures, motor vehicles
and other tangible personal property (other than Inventory) of every kind and
description that may be now or hereafter used in such Person's operations or
that are owned by such Person or in which such Person may have an interest, and
all parts, accessories and accessions thereto and substitutions and replacements
therefore.
"ERISA" means the Employee Retirement Income Security Act of 1974 (or any
successor legislation thereto), as amended from time to time, and any
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
that, together with any Credit Party, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the IRC, or, solely for the purposes of
Section 302 of ERISA and Section 412 of the IRC, is treated as a single employer
under Section 414 of the IRC.
"ERISA Event" means (a) any "reportable event," as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the IRC or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(b) of the IRC or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by any Credit Party or any ERISA Affiliate of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by any Credit Party or any ERISA Affiliate from the PBGC or a
plan administrator of any notice relating to an intention to terminate any Plan
or to appoint a trustee to administer any Plan; (f) the incurrence by any Credit
Party or any ERISA Affiliate of any liability with respect to any withdrawal or
partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by
any Credit Party or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from any Credit Party or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Event of Default" has the meaning assigned to it in Section 7.1.
"Fees" means the fees due to Lender as set forth in Schedule E.
39
"Financial Statements" means the (a) consolidated and consolidating income
statement, balance sheet and statement of cash flows of Marlton and its
Subsidiaries, internally prepared for each Fiscal Month in accordance with GAAP
(except for the absence of footnotes and accountant-recommended adjustments),
and (b) consolidated income statement, balance sheet and statement of cash flows
of Marlton and its Subsidiaries, audited for each Fiscal Year (including any
management letter), together with internally-prepared consolidating back-up, all
prepared in accordance with GAAP.
"First Adjustment Date" has the meaning assigned to it in Section 1.5(a).
"Fiscal Month" means any of the monthly accounting periods of Borrowers.
"Fiscal Quarter" means any of the quarterly accounting periods of Borrowers.
"Fiscal Year" means the 12-month period of Borrowers ending December 31 of each
year. Subsequent changes of the fiscal year of Borrowers shall not change the
term "Fiscal Year" unless Lender shall consent in writing to such change.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of the following
for Marlton and its Subsidiaries on a consolidated basis determined in
accordance with GAAP: (a) EBITDA for such period less Capital Expenditures for
such period which are not financed through the incurrence of any Indebtedness
(excluding the Revolving Credit Loan) to (b) the sum of, without duplication,
(i) interest expense paid or accrued in respect of any Indebtedness during such
period, plus (ii) taxes to the extent payable with respect to such period plus
(iii) regularly scheduled payments of principal paid or that were required to be
paid on Funded Debt (excluding the Revolving Credit Loan and permitted
repayments of Stockholder Loans) during such period plus (iv) dividends or other
distributions paid to Stockholders during such period.
"Fixtures" means all "fixtures" as such term is defined in the Code, now owned
or hereafter acquired by any Person.
"Funded Debt" means, for any Person, all of such Person's Indebtedness which by
the terms of the agreement governing or instrument evidencing such Indebtedness
matures more than one year from, or is directly or indirectly renewable or
extendible at the option of such Person under a revolving credit or similar
agreement obligating the lender or lenders to extend credit over a period of
more than one year from, the date of creation thereof, including current
maturities of long-term debt, revolving credit, and short-term debt extendible
beyond one year at the option of such Person.
"GAAP" means generally accepted accounting principles in the United States of
America as in effect from time to time, consistently applied.
"General Intangibles" means all "general intangibles," as such term is defined
in the Code, now owned or hereafter acquired by any Person, including all right,
title and interest that such Person may now or hereafter have in or under any
Contract, all Payment Intangibles, customer lists, Licenses, Intellectual
Property, interests in partnerships, joint ventures and other business
associations, permits, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials, Books and Records, Goodwill
(including the Goodwill associated with any Intellectual Property), all rights
and claims in or under insurance policies (including insurance for fire, damage,
loss, and casualty, whether covering personal property, real property, tangible
rights or intangible rights, all liability, life, key-person, and business
interruption insurance, and all unearned premiums), uncertificated securities,
choses in action, deposit accounts, rights to receive tax refunds and other
payments, rights to received dividends, distributions, cash, Instruments and
other property in respect of or in exchange for pledged Stock and Investment
Property, and rights of indemnification.
"Goods" means all "goods," as such term is defined in the Code, now owned or
hereafter acquired by any Person, wherever located, including embedded software
to the extent included in "goods" as defined in the Code, manufactured homes,
standing timber that is cut and removed for sale and unborn young of animals.
40
"Goodwill" means all goodwill, trade secrets, proprietary or confidential
information, technical information, procedures, formulae, quality control
standards, designs, operating and training manuals, customer lists, and
distribution agreements now owned or hereafter acquired by any Person.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranteed Indebtedness" means, as to any Person, any obligation of such Person
guaranteeing any indebtedness, lease, dividend, or other obligation ("primary
obligations") of any other Person (the "primary obligor") in any manner,
including any obligation or arrangement of such guaranteeing Person (whether or
not contingent): (i) to purchase or repurchase any such primary obligation; (ii)
to advance or supply funds (a) for the purchase or payment of any such primary
obligation or (b) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor; (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation; or (iv) to indemnify the owner of such primary obligation against
loss in respect thereof.
"Guarantor" means each Person that executes a guaranty or a support, put or
other similar agreement in favor of Lender in connection with the transactions
contemplated by this Agreement.
"Guaranty" means any agreement to perform all or any portion of the Obligations
on behalf of Borrowers or any other Credit Party, in favor of, and in form and
substance satisfactory to, Lender, together with all amendments, modifications
and supplements thereto, and shall refer to such Guaranty as the same may be in
effect at the time such reference becomes operative.
"Hazardous Material" means any substance, material or waste that is regulated by
or forms the basis of liability now or hereafter under, any Environmental Laws,
including any material or substance that is (a) defined as a "solid waste,"
"hazardous waste," "hazardous material," "hazardous substance," "extremely
hazardous waste," "restricted hazardous waste," "pollutant," "contaminant,"
"hazardous constituent," "special waste," "toxic substance" or other similar
term or phrase under any Environmental Laws, (b) petroleum or any fraction or
by-product thereof, asbestos, polychlorinated biphenyls (PCB's), or any
radioactive substance.
"Hazardous Waste" has the meaning ascribed to such term in the Resource
Conservation and Recovery Act (42 U.S.C. xx.xx. 6901 et. seq.).
"Indebtedness" of any Person means: (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services
(including reimbursement and all other obligations with respect to surety bonds,
letters of credit and bankers' acceptances, whether or not matured, but not
including obligations to trade creditors incurred in the ordinary course of
business and not more than sixty (60) days past due); (ii) all obligations
evidenced by notes, bonds, debentures or similar instruments; (iii) all
indebtedness created or arising under any conditional sale or other title
retention agreements with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property); (iv)
all Capital Lease Obligations; (v) all Guaranteed Indebtedness; (vi) all
Indebtedness referred to in clauses (i), (ii), (iii), (iv) or (v) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness;
(vii) the Obligations; and (viii) all liabilities under Title IV of ERISA.
"Indemnified Liabilities" and "Indemnified Person" have the respective meaning
assigned to them in Section 1.11.
"Index Rate" means the latest rate for 30-day dealer placed commercial paper
(which for purposes hereof shall mean high grade unsecured notes sold through
dealers by major corporations in multiples of $1,000), which normally is
published in the "Money Rates" section of The Wall Street Journal (or if such
41
rate ceases to be so published, as quoted from such other generally available
and recognizable source as Lender may select). The Index Rate shall be
determined (i) on the first Business Day immediately prior to the Closing Date
and (ii) thereafter, on the last Business Day of each calendar month for
calculation of interest for the following month.
"Instruments" means all "instruments," as such term is defined in the Code, now
owned or hereafter acquired by any Person, wherever located, including all
certificated securities and all promissory notes and other evidences of
indebtedness, other than instruments that constitute, or are a part of a group
of writings that constitute, Chattel Paper.
"Intellectual Property" means any and all Licenses, Patents, Copyrights,
Trademarks, trade secrets and customer lists.
"Inventory" means all "inventory," as such term is defined in the Code, now
owned or hereafter acquired by any Person, wherever located, including all
inventory, merchandise, goods and other personal property that are held by or on
behalf of such Person for sale or lease or are furnished or are to be furnished
under a contract of service or that constitute raw materials, work in process,
finished goods, returned goods, or materials or supplies of any kind, nature or
description used or consumed or to be used or consumed in such Person's business
or in the processing, production, packaging, promotion, delivery or shipping of
the same, including all supplies and embedded software.
"Investment Property" means all "investment property," as such term is defined
in the Code, now owned or hereafter acquired by any Person, wherever located.
"IRC" and "IRS" mean respectively, the Internal Revenue Code of 1986 and the
Internal Revenue Service, and any successors thereto.
"Lender" means General Electric Capital Corporation and, if at any time Lender
shall decide to assign or syndicate all or any of the Obligations, such term
shall include such assignee or such other members of the syndicate.
"Letters of Credit" means any and all documentary or standby letters of credit
issued at the request and for the account of any Borrower for which Lender has
incurred Letter of Credit Obligations.
"Letter of Credit Fee" has the meaning assigned to it in Schedule E.
"Letter of Credit Obligations" means all outstanding obligations (including all
duty, freight, taxes, costs, insurance and any other charges and expenses)
incurred by Lender, whether direct or indirect, contingent or otherwise, due or
not due, in connection with the issuance or guarantee, by Lender or arranged by
Lender, of Letters of Credit, all as further set forth in Schedule C.
"Letter-of-Credit Rights" means "letter-of-credit rights" as such term is
defined in the Code, now owned or hereafter acquired by any Person, including
rights to payment or performance under a letter of credit, whether or not such
Person, as beneficiary, has demanded or is entitled to demand payment or
performance.
"License" means any Copyright License, Patent License, Trademark License or
other license of rights or interests now held or hereafter acquired by any
Person.
"Lien" means any mortgage, security deed or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, security title, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Code or comparable law of any jurisdiction).
"Litigation" means any claim, lawsuit, litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority.
"Loan Documents" means this Agreement, the Notes, the Financial Statements, each
Guaranty, the Powers of Attorney, the Blocked Account Agreements, and the other
42
documents and instruments listed in Schedule F, and all security agreements,
mortgages and all other documents, instruments, certificates, and notices at any
time delivered by any Person (other than Lender) in connection with any of the
foregoing.
"Loans" means the Revolving Credit Loan including the Letter of Credit
Obligations.
"Lock Box" has the meanings assigned to such term in Schedule D.
"Marlton" means Marlton Technologies, Inc.
"Material Adverse Effect" means: (i) a material adverse effect on (a) the
business, assets, operations, prospects or financial or other condition of the
Borrowers and the other Credit Parties signatory to this Agreement, taken as a
whole, or the industry within which the Borrowers and such Credit Parties, taken
as a whole, operates, (b) the Borrowers' and such Credit Parties' ability, taken
as a whole, to pay or perform the Obligations under the Loan Documents to which
such Credit Parties are a signatory in accordance with the terms thereof, (c)
the Collateral or Lender's Liens on the Collateral or the priority of any such
Lien, or (d) Lender's rights and remedies under this Agreement and the other
Loan Documents.
"Maximum Amount" means $12,000,000.
"Minimum Actionable Amount" means $150,000.
"Multiemployer Plan" means a "multiemployer plan," as defined in Section 4001(a)
(3) of ERISA, to which Borrower, any other Credit Party or any ERISA Affiliate
is making, is obligated to make, has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.
"Net Borrowing Availability" means at any time with respect to any Borrower,
such Borrower's Borrowing Availability less the Revolving Credit Loan
attributable to such Borrower.
"Net Income (Loss)" means with respect to any Person and for any period, the
aggregate net income (or loss) after taxes of such Person for such period,
determined in accordance with GAAP.
"Notes" means the Revolving Credit Notes.
"Notice of Revolving Credit Advance" has the meaning assigned to it in Section
1.1(b).
"Obligations" means all loans, advances, debts, expense reimbursement, fees,
liabilities, and obligations for the performance of covenants, tasks or duties
or for payment of monetary amounts (whether or not such performance is then
required or contingent, or amounts are liquidated or determinable) owing by any
Borrower and any other Credit Party to Lender, of any kind or nature, present or
future, whether or not evidenced by any note, agreement or other instrument
arising under any of the Loan Documents, and all covenants and duties regarding
such amounts. This term includes all principal, interest (including interest
accruing at the then applicable rate provided in this Agreement after the
maturity of the Loans and interest accruing at the then applicable rate provided
in this Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, whether or
not a claim for post-filing or post-petition interest is allowed in such
proceeding), Fees, Charges, expenses, attorneys' fees and any other sum
chargeable to any Borrower under any of the Loan Documents, and all principal
and interest due in respect of the Loans and all obligations and liabilities of
any Guarantor under any Guaranty.
"Patent License" means rights under any written agreement now owned or hereafter
acquired by any Person granting any right with respect to any invention on which
a Patent is in existence.
"Patents" means all of the following in which any Person now holds or hereafter
acquires any interest: (i) all letters patent of the United States or any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
43
State or Territory thereof, or any other country; and (ii) all reissues,
continuations, continuations-in-part or extensions thereof.
"Payment Intangibles" means all "payment intangibles" as such term is defined in
the Code, now owned or hereafter acquired by any Person.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto.
"Permitted Encumbrances" means the following encumbrances: (i) Liens for taxes
or assessments or other governmental Charges or levies, either not yet due and
payable or to the extent that nonpayment thereof is permitted by the terms of
Section 3.10; (ii) pledges or deposits securing obligations under worker's
compensation, unemployment insurance, social security or public liability laws
or similar legislation; (iii) pledges or deposits securing bids, tenders,
contracts (other than contracts for the payment of money) or leases to which any
Credit Party is a party as lessee made in the ordinary course of business; (iv)
deposits securing public or statutory obligations of any Credit Party; (v)
inchoate and unperfected workers', mechanics', or similar liens arising in the
ordinary course of business so long as such Liens attach only to Equipment,
fixtures or real estate; (vi) carriers', warehouseman's', suppliers' or other
similar possessory liens arising in the ordinary course of business and securing
indebtedness not yet due and payable in an outstanding aggregate amount not in
excess of $100,000 at any time so long as such Liens attach only to Inventory;
(vii) deposits of money securing, or in lieu of, surety, appeal or customs bonds
in proceedings to which any Credit Party is a party; (viii) zoning restrictions,
easements, licenses, or other restrictions on the use of real property or other
minor irregularities in title (including leasehold title) thereto, so long as
the same do not materially impair the use, value, or marketability of such real
estate; (ix) Purchase Money Liens securing Purchase Money Indebtedness (or rent)
to the extent permitted under Section 5(b)(vi); (x) Liens in existence on the
Closing Date as disclosed on Disclosure Schedule 5(e) provided that no such Lien
covers additional property after the Closing Date and the amount of Indebtedness
secured thereby is not increased; and (xi) Liens in favor of Lender securing the
Obligations.
"Person" means any individual, sole proprietorship, partnership, limited
liability partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, public benefit
corporation, entity or government (whether Federal, state, county, city,
municipal or otherwise, including any instrumentality, division, agency, body or
department thereof), and shall include such Person's successors and assigns.
"Plan" means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the IRC or
Section 302 of ERISA, and in respect of which any Credit Party or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Prepayment Fee" means the prepayment fee specified in Schedule E.
"Proceeds" means "proceeds," as such term is defined in the Code and, in any
event, shall include: (i) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to any Borrower or any other Credit Party from time
to time with respect to any Collateral; (ii) any and all payments (in any form
whatsoever) made or due and payable to any Borrower or any other Credit Party
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of any Collateral by any governmental body,
authority, bureau or agency (or any person acting under color of governmental
authority); (iii) any claim of any Borrower or any other Credit Party against
third parties (a) for past, present or future infringement of any Intellectual
Property or (b) for past, present or future infringement or dilution of any
Trademark or Trademark License or for injury to the goodwill associated with any
Trademark, Trademark registration or Trademark licensed under any Trademark
License; (iv) any recoveries by any Borrower or any other Credit Party against
third parties with respect to any litigation or dispute concerning any
Collateral, including claims arising out of the loss or nonconformity of,
interference with the use of, defects in, or infringement of rights in, or
damage to, Collateral; (v) all amounts collected on, or distributed on account
of, other Collateral, including dividends, interest, distributions and
Instruments with respect to Investment Property and pledged Stock; and (vi) any
and all other amounts, rights to payment or other property acquired upon the
sale, lease, license, exchange or other disposition of Collateral and all rights
arising out of Collateral.
44
"Projections" means as of any date the consolidated and consolidating balance
sheet, statements of income and cash flow for Marlton and its Subsidiaries
(including forecasted Capital Expenditures and Net Borrowing Availability) by
quarter for the next Fiscal Year, in each case prepared in a manner consistent
with the initial Projections delivered to Lender on or before the Closing Date
and accompanied by senior management's discussion and analysis of such plan.
"Purchase Money Indebtedness" means (i) any Indebtedness incurred for the
payment of all or any part of the purchase price of any fixed asset, (ii) any
Indebtedness incurred for the sole purpose of financing or refinancing all or
any part of the purchase price of any fixed asset, and (iii) any renewals,
extensions or refinancings thereof (but not any increases in the principal
amounts thereof outstanding at that time).
"Purchase Money Lien" means any Lien upon any fixed assets that secures the
Purchase Money Indebtedness related thereto but only if such Lien shall at all
times be confined solely to the asset the purchase price of which was financed
or refinanced through the incurrence of the Purchase Money Indebtedness secured
by such Lien and only if such Lien secures only such Purchase Money
Indebtedness.
"Real Property" has the meaning assigned to it in Section 3.15.
"Release" means, as to any Person, any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials in the indoor or outdoor environment by such
Person, including the movement of Hazardous Materials through or in the air,
soil, surface water, ground water or property.
"Requirement of Law" means as to any Person, the Certificate or Articles of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case binding upon
such Person or any of its property or to which such Person or any of its
property is subject.
"Restricted Payment" means: (i) the declaration or payment of any dividend or
the incurrence of any liability to make any other payment or distribution of
cash or other property or assets on or in respect of any Borrower's or any other
Credit Party's Stock; (ii) any payment or distribution made in respect of any
subordinated Indebtedness of any Borrower or any other Credit Party in violation
of any subordination or other agreement made in favor of Lender; (iii) any
payment on account of the purchase, redemption, defeasance or other retirement
of any Borrower's or any other Credit Party's Stock or Indebtedness or any other
payment or distribution made in respect of any thereof, either directly or
indirectly; other than (a) that arising under this Agreement or (b) interest and
principal, when due without acceleration or modification of the amortization as
in effect on the Closing Date, under Indebtedness (not including subordinated
Indebtedness, payments of which shall be permitted only in accordance with the
terms of the relevant subordination agreement made in favor of Lender) described
in Disclosure Schedule (5(b)) or otherwise permitted under Section 5(b)(vi); or
(iv) any payment, loan, contribution, or other transfer of funds or other
property to any Stockholder of such Person which is not expressly and
specifically permitted in this Agreement; provided, that no payment to Lender
shall constitute a Restricted Payment.
"Revolving Credit Advance" has the meaning assigned to it in Section 1.1(a).
"Revolving Credit Loan" means at any time the sum of (i) the aggregate amount of
Revolving Credit Advances then outstanding, plus (ii) the total Letter of Credit
Obligations incurred by Lender and outstanding at such time, plus (iii) the
amount of accrued but unpaid interest thereon and Letter of Credit Fees with
respect thereto.
"Revolving Credit Note" means each promissory note dated the Closing Date,
executed by a Borrower substantially in the form of Exhibit F.
"Revolving Credit Rate" has the meaning assigned to it in Section 1.5(a).
"SEC" means the Securities and Exchange Commission.
"SEEC" means Sparks Exhibits & Environments Company, an Illinois corporation.
45
"SEEI" means Sparks Exhibits & Environments Incorporated, a Florida corporation.
"Shipped/Unbilled Assets" means all assets consisting of trade show exhibits
that have been shipped and used at trade shows, and all services related
thereto, but which have not yet been billed.
"Software" means all "software" as such term is defined in the Code, now owned
or hereafter acquired by any Person, including all computer programs and all
supporting information provided in connection with a transaction related to any
program.
"Solvent" means, with respect to any Person on a particular date, that on such
date (a) the fair value of the tangible and intangible property of such Person
is greater than the total amount of liabilities, including contingent
liabilities, of such Person; (b) the present fair salable value of the tangible
and intangible assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured; (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person' s ability
to pay as such debts and liabilities mature; and (d) such Person is not engaged
in a business or transaction, and is not about to engage in a business or
transaction, for which such Person's property would constitute an unreasonably
small capital. The amount of contingent liabilities (such as litigation,
guarantees and pension plan liabilities) at any time shall be computed as the
amount which, in light of all the facts and circumstances existing at the time,
represents the net present value of the amount which can be reasonably be
expected to become an actual or matured liability.
"Sparks Holding" shall mean Sparks Exhibits Holding Corporation.
"Special Reserve" shall mean that certain reserve established against Borrowing
Availability on the Closing Date in the amount of $500,000; provided, however,
that for each Fiscal Quarter, commencing with the Fiscal Quarter ending March
31, 2004, in which (a) no Event of Default has occurred and is continuing, and
(b) Marlton and its Subsidiaries on a consolidated basis have a Fixed Charge
Coverage Ratio for such Fiscal Quarter of not less than 1.10:1.0 on a Fiscal
Year-to-date basis, Lender will release $100,000 from the Special Reserve for
such Fiscal Quarter, such release to occur within fifteen (15) days of Lender's
receipt from Borrowers of the Financial Statements and the covenant compliance
certification required under Section 4.1(d) for the last month of such Fiscal
Quarter.
"Stated Expiry Date" means February 6, 2007.
"Stock" means all certificated and uncertificated shares, options, warrants,
membership interests, general or limited partnership interests, participation or
other equivalents (regardless of how designated) of or in a corporation,
partnership, limited liability company or equivalent entity whether voting or
nonvoting, including common stock, preferred stock, or any other "equity
security" (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934).
"Stockholder" means each holder of Stock of any Borrower or any other Credit
Party.
"Stockholder Loans" has the meaning assigned to it in Section 3.22.
"Subsidiary" means, with respect to any Person, (i) any corporation of which an
aggregate of more than 50% of the outstanding Stock having ordinary voting power
to elect a majority of the board of directors of such corporation (irrespective
of whether, at the time, Stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned legally or
beneficially by such Person and/or one or more Subsidiaries of such Person, or
with respect to which any such Person has the right to vote or designate the
vote of 50% or more of such Stock whether by proxy, agreement, operation of law
or otherwise, and (ii) any partnership or limited liability company in which
such Person or one or more Subsidiaries of such Person has an equity interest
(whether in the form of voting or participation in profits or capital
contribution) of more than 50% or of which any such Person is a general partner
or manager or may exercise the powers of a general partner or manager.
46
"Supporting Obligations" means all "supporting obligations" as such term is
defined in the Code, including letters of credit and guaranties issued in
support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments,
or Investment Property.
"Taxes" means taxes, levies, imposts, deductions, Charges or withholdings, and
all liabilities with respect thereto, excluding taxes imposed on or measured by
the net income of Lender.
"Termination Date" means the date on which all Obligations under this Agreement
are indefeasibly paid in full, in cash (other than amounts in respect of Letter
of Credit Obligations if any, then outstanding, provided that Borrowers shall
have funded such amounts in cash in full into the Cash Collateral Account), and
Borrowers shall have no further right to borrow any moneys or obtain other
credit extensions or financial accommodations under this Agreement.
"Trademark License" means rights under any written agreement now owned or
hereafter acquired by any Person granting any right to use any Trademark or
Trademark registration.
"Trademarks" means all of the following now owned or hereafter adopted or
acquired by any Person: (i) all trademarks, trade names, corporate names,
business names, trade styles, service marks, logos, other source or business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature (whether registered or
unregistered), all registrations and recordings thereof, and all applications in
connection therewith, including all registrations, recordings and applications
in the United States Patent and Trademark Office or in any similar office or
agency of the United States, any State or Territory thereof, or any other
country or any political subdivision thereof; and (ii) all reissues, extensions
or renewals thereof; and (iii) all goodwill associated with or symbolized by any
of the foregoing.
"Unused Line Fee" has the meaning assigned to it in Schedule E.
"Withdrawal Liability" means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.
Any accounting term used in this Agreement or the other Loan Documents shall
have, unless otherwise specifically provided therein, the meaning customarily
given such term in accordance with GAAP, and all financial computations
thereunder shall be computed, unless otherwise specifically provided therein, in
accordance with GAAP consistently applied; provided, that all financial
covenants and calculations in the Loan Documents shall be made in accordance
with GAAP as in effect on the Closing Date unless Borrower and Lender shall
otherwise specifically agree in writing herein or hereafter. That certain items
or computations are explicitly modified by the phrase "in accordance with GAAP"
shall in no way be construed to limit the foregoing. All other undefined terms
contained in this Agreement or the other Loan Documents shall, unless the
context indicates otherwise, have the meanings provided for by the Code. The
words "herein," "hereof" and "hereunder" or other words of similar import refer
to this Agreement as a whole, including the exhibits and schedules thereto, as
the same may from time to time be amended, modified or supplemented, and not to
any particular section, subsection or clause contained in this Agreement.
For purposes of this Agreement and the other Loan Documents, the following
additional rules of construction shall apply, unless specifically indicated to
the contrary: (a) wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural; (b) the term "or" is not exclusive; (c) the term "including" (or any
form thereof) shall not be limiting or exclusive; (d) all references to statutes
and related regulations shall include any amendments of same and any successor
statutes and regulations; and (e) all references to any instruments or
agreements, including references to any of the Loan Documents, shall include any
and all modifications or amendments thereto and any and all extensions or
renewals thereof.
47
SCHEDULE B
Lender's And Borrowers' Addresses For Notices
Lender's Address:
Name: General Electric Capital Corporation
Address: 00 Xxxxxxx Xxxxxxx Xxxx
Xxxxxxx, XX 00000
Att'n: Marlton Technologies, Inc. - Account Manager
Telephone: 000-000-0000
Facsimile: 000-000-0000
Leading Borrower's Address (as Agent for each Borrower):
Name: Sparks Exhibits & Environments Corp.
Address: 0000 Xxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
Att'n: Xxxxxxx Xxxx, Treasurer
Telephone: 000-000-0000
Facsimile: 000-000-0000
48
Schedule C
Letters of Credit
1. Lender agrees, subject to the terms and conditions hereinafter set forth, to
incur Letter of Credit Obligations in respect of the issuance of Letters of
Credit issued on the issuing bank's usual and customary terms and otherwise
reasonably acceptable to Lender and supporting obligations of each Borrower
incurred in the ordinary course of such Borrower's business, in order to support
the payment of such Borrower's inventory purchase obligations, insurance
premiums, security deposits, or utility or other operating expenses and
obligations, as Leading Borrower shall request as agent for such Borrower by
written notice to Lender that is received by Lender not less than five Business
Days prior to the requested date of issuance of any such Letter of Credit;
provided, that: (a) that the aggregate amount of all Letter of Credit
Obligations in favor of the Borrowers at any one time outstanding (whether or
not then due and payable) shall not exceed $3,000,000; (b) no Letter of Credit
shall have an expiry date which is later than the Stated Expiry Date or one year
following the date of issuance thereof; and (c) Lender shall be under no
obligation to incur any Letter of Credit Obligation for the account of any
Borrower if after giving effect to the incurrence of such Letter of Credit
Obligation, the Net Borrowing Availability of such Borrower would be less than
zero. The maximum amount payable in respect of each Letter of Credit requested
by any Borrower will be guaranteed by Lender in favor of the issuing bank under
terms of a separate agreement between Lender and the issuing bank. Each Borrower
will enter into an application and agreement for such Letter of Credit with the
issuing bank selected by Lender (which may be an Affiliate of Lender). The bank
that issues any Letter of Credit pursuant to this Agreement shall be determined
by Lender in its sole discretion.
2. The notice to be provided to Lender requesting that Lender incur Letter of
Credit Obligations shall be in the form of a Letter of Credit application in the
form customarily employed by the issuing bank, together with a written request
by the applicable Borrower and the bank that Lender approve such Borrower's
application. Upon receipt of such notice Lender shall establish a reserve
against such Borrower's Borrowing Availability in the amount of 100% of the face
amount of the Letter of Credit Obligation to be incurred. Approval by Lender in
the written form agreed upon between Lender and the issuing bank (a) will
authorize the bank to issue the requested Letter of Credit, and (b) will
conclusively establish the existence of the Letter of Credit Obligation as of
the date of such approval.
3. In the event that Lender shall make any payment on or pursuant to any Letter
of Credit Obligation, Borrowers shall be unconditionally obligated to reimburse
Lender therefor, and such payment shall then be deemed to constitute a Revolving
Credit Advance in favor of such Borrower. For purposes of computing interest
under Section 1.5, a Revolving Credit Advance made in satisfaction of a Letter
of Credit Obligation shall be deemed to have been made as of the date on which
the issuer or endorser makes the related payment under the underlying Letter of
Credit.
4. In the event that any Letter of Credit Obligations, whether or not then due
or payable, shall for any reason be outstanding on the Commitment Termination
Date, the applicable Borrower will either (a) cause the underlying Letter of
Credit to be returned and canceled and each corresponding Letter of Credit
Obligation to be terminated, or (b) pay to Lender, in immediately available
funds, an amount equal to 105% of the maximum amount then available to be drawn
under all Letters of Credit in favor of such Borrower not so returned and
canceled to be held by Lender as cash collateral in an account under the
exclusive dominion and control of Lender (the "Cash Collateral Account").
5. In the event that Lender shall incur any Letter of Credit Obligations in
favor of any Borrower, such Borrower agrees to pay the Letter of Credit Fee to
Lender as compensation to Lender for incurring such Letter of Credit
Obligations. In addition, such Borrower shall reimburse Lender for all
administrative and/or processing fees and charges paid by Lender on account of
any such Letters of Credit or Letter of Credit Obligations to the issuing bank.
6. Each Borrower's Obligations to lender with respect to any Letter of Credit or
Letter of Credit Obligation shall be evidenced by Lender's records and shall be
absolute, unconditional and irrevocable and shall not be affected, modified or
impaired by (a) any lack of validity or enforceability of the transactions
contemplated by or related to such Letter of Credit or Letter of Credit
Obligation; (b) any amendment or waiver of or consent to depart from all or any
of the terms of the transactions contemplated by or related to such Letter of
Credit or Letter of Credit Obligation; (c) the existence of any claim, set-off,
defense or other right which any Borrower or any other Credit Party may have
against Lender, the issuer or beneficiary of such Letter of Credit, or any other
Person, whether in connection with this Agreement, any other Loan Document or
such Letter of Credit or the transactions contemplated thereby or any unrelated
transactions; or (d) the fact that any draft, affidavit, letter, certificate,
49
invoice, xxxx of lading or other document presented under or delivered in
connection with such Letter of Credit or any other Letter of Credit proves to
have been forged, fraudulent, invalid or insufficient in any respect or any
statement therein proves to have been untrue or incorrect in any respect.
7. In addition to any other indemnity obligations which any Borrower may have to
Lender under this Agreement and without limiting such other indemnification
provisions, each Borrower hereby agrees to indemnify Lender from and to hold
Lender harmless against any and all claims, liabilities, losses, costs and
expenses (including, attorneys' fees and expenses) which Lender may (other than
as a result of its own gross negligence or willful misconduct) incur or be
subject to as a consequence, directly or indirectly, of (a) the issuance of or
payment of or failure to pay under any Letter of Credit or Letter of Credit
Obligation or (b) any suit, investigation or proceeding as to which Lender is or
may become a party as a consequence, directly or indirectly, of the issuance of
any Letter of Credit, the incurring of any Letter of Credit Obligation or any
payment of or failure to pay under any Letter of Credit or Letter of Credit
Obligation. The obligations of each Borrower under this paragraph shall survive
any termination of this Agreement and the payment in full of the Obligations.
8. Each Borrower hereby assumes all risks of the acts, omissions or misuse of
each Letter of Credit by the beneficiary or issuer thereof and, in connection
therewith, Lender shall not be responsible (a) for the validity, sufficiency,
genuineness or legal effect of any document submitted in connection with any
drawing under any Letter of Credit even if it should in fact prove in any
respect to be invalid, insufficient, inaccurate, untrue, fraudulent or forged;
(b) for the validity or sufficiency of any instrument transferring or assigning
or purporting to transfer or assign any Letter of Credit or any rights or
benefits thereunder or any proceeds thereof, in whole or in part, even if it
should prove to be invalid or ineffective for any reason; (c) for the failure of
any issuer or beneficiary of any Letter of Credit to comply fully with the terms
thereof, including the conditions required in order to effect or pay a drawing
thereunder; (d) for any errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, telecopy, telex or otherwise;
(e) for any loss or delay in the transmission or otherwise of any document or
draft required in order to make a drawing under any Letter of Credit; or (f) for
any consequences arising from causes beyond the direct control of Lender.
50
Schedule D
Cash Management
Borrowers agree to establish, and to maintain, until the Termination Date, the
cash management system described below:
1. No Corporate Credit Party: (i) shall (nor shall it permit any of its
Subsidiaries to) open or maintain any deposit, checking, operating or other bank
account, or similar money handling account, with any bank or other financial
institution except for those accounts identified in Attachment I hereto (to
include a xxxxx cash account not to exceed $20,000 in the aggregate for all
Borrowers during any Fiscal Month, and a payroll account not to exceed an amount
equal to one regular payroll at any time); and (ii) shall close or permit to be
closed any of the accounts listed in Attachment I hereto, in each case without
Lender's prior written consent, and then only after such Credit Party has
implemented agreements with such bank or financial institution and Lender
acceptable to Lender.
2. Commencing on the Closing Date and until the Termination Date, each Corporate
Credit Party shall cause to be deposited directly all cash, checks, notes,
drafts or other similar items relating to or constituting proceeds of or
payments made in respect of any and all Collateral (a) prior to the occurrence
of an Event of Default, into blocked accounts (collectively, the "Blocked
Accounts") in such Credit Party's name set forth in paragraph 1 of Attachment I
hereto, and (b) after the occurrence of an Event of Default, into lock boxes in
Lender's name (collectively, the "Lock Boxes") .
3. On or before the Closing Date, each bank at which the Blocked Accounts are
held shall have entered into tri-party blocked account agreements (the "Blocked
Account Agreements") with Lender and the applicable Credit Party, in form and
substance acceptable to Lender. Each such Blocked Account Agreement shall
provide, among other things, (a) the terms and conditions under which the
applicable Credit Party and the bank shall after the occurrence of an Event of
Default enter into a lockbox agreement though which payments into the lockbox
shall be processed by the bank for deposit into the Blocked Account, (b) that
such bank executing such agreement has no rights of setoff or recoupment or any
other claim against such Block Account or Lock Box, other than for payment of
its service fees and other charges directly related to the administration of
such account, and (c) that such bank agrees to sweep on a daily basis all
amounts in the Blocked Account to the Collection Account. After the occurrence
of an Event of Default, each bank at which a Blocked Account referred to in
Section 2(a) above is established shall also execute a Lock Box Agreement with
the applicable Credit Party which will establish a Lock Box as required under
Section 2(b) above, which Lock Box shall become effective immediately upon
execution thereof. In connection therewith, the applicable Credit Party shall,
immediately upon notice from Lender, instruct all Account Debtors to remit all
cash, checks, notes, drafts or other similar items relating to or constituting
proceeds of or payments made in respect of any and all Collateral directly to
the Lock Box, as required under Section 2(b) above.
4. On the Closing Date, (a) the blocked account and springing lock box
arrangements shall immediately become operative at the banks at which the
Blocked Accounts are maintained, and (b) amounts outstanding under the Revolving
Credit Loan (for purposes of the Borrowing Availability) shall be reduced
through daily sweeps, by wire transfer, of the Blocked Accounts into the
Collection Account. Borrowers acknowledge that they shall have no right to gain
access to any of the moneys in the Blocked Accounts until after the Termination
Date.
5. Each Borrower may maintain, in its name, accounts (the "Disbursement
Accounts") at a bank or banks reasonably acceptable to Lender into which Lender
shall, from time to time, deposit proceeds of Revolving Credit Advances made
pursuant to Section 1.1 for use solely in accordance with the provisions of
Section 1.3. All of the Disbursement Accounts as of the Closing Date are listed
in paragraph 2 of Attachment I hereto.
6. Upon the request of Lender, each Corporate Credit Party shall forward to
Lender, on a daily basis, evidence of the deposit of all items of payment
received by such Credit Party into the Blocked Accounts and copies of all such
checks and other items, together with a statement showing the application of
those items relating to payments on Accounts to outstanding Accounts and a
collection report with regard thereto in form and substance satisfactory to
Lender.
[Attachment 1 intentionally omitted]
51
SCHEDULE E - FEES
1. UNUSED LINE FEE: For each day from the Closing Date, and through and
including the Termination Date, an amount equal to (a) the Maximum Amount less,
provided that no Event of Default has occurred and is continuing, the Special
Reserve and all other reserves established by Lender, less (b) the Revolving
Credit Loan for such day multiplied by 0.25%, the product of which is then
divided by 360. The Unused Line Fee for each month (except for the month in
which the Termination Date occurs) is payable on the first day of each
subsequent calendar month following the Closing Date; the final monthly
installment of the Unused Line Fee is payable on the Termination Date.
Notwithstanding the foregoing, any unpaid Unused Line Fee is immediately due and
payable on the Commitment Termination Date.
2. LETTER OF CREDIT FEE: For each day for which Lender maintains Letter of
Credit Obligations outstanding, an amount equal to the amount of the Letter of
Credit Obligations outstanding on such day, multiplied by 4.50%, the product of
which is then divided by 360. The Letter of Credit Fee incurred for each month
is payable at the same time each payment of the Unused Line Fee is due.
Notwithstanding the foregoing, any unpaid Letter of Credit Fee is immediately
due and payable on the Commitment Termination Date.
3. CLOSING FEE; COLLATERAL MONITORING FEE: A non-refundable closing fee of
$45,000, payable and fully earned at closing (the "Closing Fee") (Lender
acknowledges that Borrowers have previously paid a commitment fee in the amount
of $45,000). A fully earned and non-refundable collateral monitoring fee of
$24,000 per annum, payable in equal monthly installments commencing on the
Closing Date and on the first day of each month thereafter; provided, however,
that any unpaid Collateral Monitoring Fee shall be immediately due and payable
on the Commitment Termination Date. The Collateral Monitoring Fee shall be
subject to adjustment (up or down) prospectively on an annual basis as
determined by the Borrowers' consolidated financial performance, commencing on
the First Adjustment Date. Adjustments to the Collateral Monitoring Fee shall be
in accordance with the following grid
---------------------------------------- --------------------------------------
If the Fixed Charge Coverage Ratio for Then the annual Collateral
the Immediately Preceding Fiscal Year Monitoring Fee shall be:
is:
---------------------------------------- --------------------------------------
Less than or equal to 1.25 : 1.0 $24,000
---------------------------------------- --------------------------------------
Greater than 1.25 : 1.0, but less than $18,000
1.50 : 1.0
---------------------------------------- --------------------------------------
Greater than or equal to 1.50 : 1.0 $12,000
---------------------------------------- --------------------------------------
All adjustments in the Collateral Monitoring Fee after the First Adjustment Date
shall be implemented annually on a prospective basis, for each calendar month
commencing at least five days after the date of delivery to Lender of the
Borrowers' annual audited Financial Statements evidencing the need for an
adjustment. Concurrently with the delivery of such Financial Statements,
Borrowers shall deliver to Lender a certificate, signed by their chief financial
officer, setting forth in reasonable detail the basis for the continuance of, or
any change in, the Collateral Monitoring Fee. Failure to timely deliver such
Financial Statements shall result in an increase in the Collateral Monitoring
Fee to the highest level set forth in the foregoing grid, until the first day of
the first calendar month following the delivery of those Financial Statements
demonstrating that such an increase is not required. If a Default or Event of
Default has occurred and is continuing at the time any reduction in the
Collateral Monitoring Fee is to be implemented, that reduction shall be deferred
until the first day of the first calendar month following the date on which such
Default is cured to Lender's satisfaction or Event of Default is waived in
writing by Lender. Additionally, if at any time any other Default or Event of
Default shall have occurred and be continuing, the Collateral Monitoring Fee
shall be automatically increased to the highest level set forth in the foregoing
grid until the first day of the first calendar month following the date on which
such Default is cured to Lender's satisfaction or Event of Default is waived in
writing by Lender. The increase in the Collateral Monitoring Fee provided for in
the preceding two sentences shall be in addition to any other remedy provided
for in this Agreement (including Lender's right to charge the Default Rate). Any
increase or decrease in the Collateral Monitoring Fee shall be done on a pro
rata basis.
52
4. PREPAYMENT FEE: An amount equal to the Maximum Amount multiplied by:
3.00% if Lender's obligation to make further Revolving Credit Advances
or incur additional Letter of Credit Obligations is terminated (voluntarily by
Borrowers, upon Default or otherwise) on or after the Closing Date and on or
before the first anniversary of the Closing Date, payable on the Commitment
Termination Date;
1.50% if Lender's obligation to make further Revolving Credit Advances
or incur additional Letter of Credit Obligations is terminated (voluntarily by
Borrowers, upon Default or otherwise) after the first anniversary of the Closing
Date and on or before the second anniversary of the Closing Date, payable on the
Commitment Termination Date; or
0.50% if Lender's obligation to make further Revolving Credit Advances
or incur additional Letter of Credit Obligations is terminated (voluntarily by
Borrowers, upon Default or otherwise) after the second anniversary of the
Closing Date and on or before the third anniversary of the Closing Date, payable
on the Commitment Termination Date.
Each Borrower acknowledges and agrees that (i) it would be difficult or
impractical to calculate Lender's actual damages from early termination of
Lender's obligation to make further Revolving Credit Advances and incur
additional Letter of Credit Obligations for any reason pursuant to Section
1.2(c) or Section 7.2, (ii) the Prepayment Fees provided above are intended to
be fair and reasonable approximations of such damages, and (iii) the Prepayment
Fees are not intended to be penalties.
Notwithstanding the foregoing, if the Borrowers repay the Obligations in full as
a result of a Change of Control, the above-referenced percentages for the
Prepayment Fee shall be 2.00%, 1.00% and 0.50%, respectively.
5. AUDIT FEES: Reimburse Lender at the prevailing rate (currently $750) per
person per day, plus out of pocket expenses, for the audit reviews, field
examinations and collateral examinations conducted by Lender. Absent the
occurrence of an Event of Default, Lender shall conduct no more than five (5)
audits per Fiscal Year.
53
Schedule F
Schedule of Documents
The obligation of Lender to make the initial Revolving Credit Advances and
extend other credit is subject to satisfaction of the condition precedent that
Lender shall have received the following, each, unless otherwise specified below
or the context otherwise requires, dated the Closing Date, in form and substance
as provided in the Agreement or otherwise satisfactory to Lender and its
counsel:
PRINCIPAL LOAN DOCUMENTS
1. Agreement. The Loan and Security Agreement duly executed by each Borrower.
2. Notes. Duly executed Notes from each Borrower to the order of Lender
evidencing the Loans.
3. Borrowing Base Certificate. An original Borrowing Base Certificate duly
executed by a responsible officer of each Borrower.
4. Notice of Revolving Credit Advance. An original Notice of Revolving Credit
Advance duly executed by a responsible officer of each Borrowers.
COLLATERAL DOCUMENTS.
1. Acknowledgment Copies of Financing Statements. Acknowledgment copies of
proper Financing Statements (Form UCC-l) (the "Financing Statements") duly
filed under the Code in all jurisdictions as may be necessary or, in the
opinion of Lender, desirable to perfect Lender's Lien on the Collateral.
2. UCC Searches. Certified copies of UCC Searches, or other evidence
satisfactory to Lender, listing all effective financing statements which
name each Credit Party (under present name, any previous name or any trade
or doing business name) as debtor and covering all jurisdictions referred
to in paragraph (1) immediately above, together with copies of such other
financing statements.
3. Intellectual Property Documents. Agreements relating to the granting to
Lender of a security interest in Intellectual Property of each Credit Party
to the extent applicable in a form suitable for filing with the appropriate
Federal filing office.
4. Pledge Agreements. Agreements relating to the pledge in favor of Lender of
stock and membership interests owned by Marlton, Sparks Holding and Leading
Borrower.
5. Other Recordings and Filings. Evidence of the completion of all other
recordings and filings (including UCC-3 termination statements and other
Lien release documentation) as may be necessary or, in the opinion of and
at the request of Lender, desirable to perfect Lender's Lien on the
Collateral and ensure such Collateral is free and clear of other Liens..
6. Power of Attorney. Powers of Attorney duly executed by each Credit Party
executing the Agreement.
THIRD PARTY AGREEMENTS.
1. Landlord, Vendor, Warehouseman and Mortgagee Consents. Unless otherwise
agreed to in writing by Lender, duly executed landlord, vendor,
warehouseman and mortgagee waivers and consents from the landlords,
vendors, warehouseman and mortgagees of each Borrower's leased or owned
locations where Collateral is held, in each case, in form and substance
satisfactory to Lender.
2. Cash Management System. Duly executed Blocked Account Agreements.
54
3. Guarantees. Guarantees executed by the following Persons: (a) Marlton
Technologies, Inc., (b) Sparks Exhibits Holding Corporation, (c) Sparks
Exhibits & Environments Incorporated, and (d) Sparks Exhibits &
Environments Company.
4 Intercreditor Agreements. Intercreditor and Subordination Agreements
executed by the following Persons: N/A
5. Performance Agreement. Performance Agreement executed by the following
person: Xxxxxx X. Xxxxxxxx.
6. Assignment of Accounts Receivable Letters. Assignment of Accounts
Receivable Letters duly executed in blank by each Borrower.
7. Intercompany Notes. Intercompany Notes duly executed by each Borrower, SEEC
and SEEI in favor of each Borrower, in each case duly endorsed to Lender.
OTHER DOCUMENTS.
1. Secretary Certificate. A Secretary Certificate in the form of Exhibit H to
the Agreement duly completed and executed by the Secretary of each Credit
Party executing the Agreement, together with all attachments thereto.
2. Explanation and Waiver of Rights Regarding Confession of Judgment.
Explanations and Waivers of Rights Regarding Confession of Judgment duly
executed by each Credit Party.
3. Environmental Audit. Copies of all existing environmental reviews and
audits and other information pertaining to actual or potential
environmental claims relating to the Collateral and each Borrower, as
Lender may require.
4. Financial Statements and Projections. Copies of the Financial Statements
and Projections, which Projections shall include a capital expenditures
budget for each Borrower in form and substance reasonably satisfactory to
Lender.
5. Insurance Policies. Certified copies of insurance policies described in
Section 3.16, together with evidence showing loss payable or additional
insured clauses or endorsements in favor of Lender.
6. Collateral Assignment of Business Interruption Insurance. A duly executed
collateral assignment in favor of Lender of the proceeds of each Borrower's
business interruption insurance policy.
7. Existing Lease Agreements. Copies of any existing real property leases and
equipment leases to which each Borrower is a party and any other document
or instrument evidencing or relating to existing Indebtedness of each
Borrower, together with all certificates, opinions, instruments, security
documents and other documents relating thereto, all of which shall be
reasonably satisfactory in form and substance to Lender, certified by an
authorized officer of each Borrower as true, correct and complete copies
thereof.
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Schedule G
FINANCIAL COVENANTS
1. Fixed Charge Coverage Ratio. Marlton and its Subsidiaries on a consolidated
basis shall have at the end of each Fiscal Quarter (commencing with the Fiscal
Quarter ending March 31, 2004) a Fixed Charge Coverage Ratio of not less than
1.25:1.0 for the 12-month period then ended.
2. Capital Expenditures. Marlton and its Subsidiaries on a consolidated basis
shall not make aggregate Capital Expenditures, other than Capital Expenditures
financed through the incurrence of Indebtedness (excluding the Revolving Credit
Loan) in excess of (a) $1,000,000 for Fiscal Year ending December 31, 2004, and
(b) $1,250,000 for Fiscal Year ending December 31, 2005 and each Fiscal Year
thereafter.
56
