FINANCING AGREEMENT
THIS FINANCING AGREEMENT, dated as of October 12, 1998, is by
and between THRUSTMASTER, INC., an Oregon corporation ("Borrower"), and U.S.
BANCORP REPUBLIC COMMERCIAL FINANCE, INC., a Minnesota corporation (the
"Lender").
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 DEFINED TERMS. As used in this Agreement the following
terms shall have the following respective meanings:
"ACCOUNTS": Each and every right to payment of Borrower, whether
such right to payment arises out of a sale or lease of goods by Borrower, or
other disposition of goods or other property of Borrower, out of a rendering
of services by Borrower, out of a loan by Borrower, out of an assignment to
Borrower by Guarantor, out of damage to or loss of goods in the possession of
a railroad or other carrier or any other bailee, out of overpayment of taxes
or other liabilities of Borrower, or which otherwise arises under any contract
or agreement, or from any other cause, whether such right to payment now
exists or hereafter arises and whether such right to payment is or is not yet
earned by performance and howsoever such right to payment may be evidenced,
together with all other rights and interest (including all liens and security
interests) which Borrower may at any time have by law or agreement against any
account debtor (as defined in the Uniform Commercial Code in effect in the
State of Minnesota) or other obligor obligated to make any such payment or
against any of the property of such account debtor or other obligor;
specifically (but without limitation), the term includes all present and
future instruments, documents, chattel papers, accounts and contract rights of
Borrower.
"ACCOUNTS ADVANCE": As defined in Section 2.1(a).
"ADVANCE": An Accounts Advance, and/or an Inventory Advance, as the
context may require.
"AFFILIATE": When used with reference to any Person, (a) each Person
that, directly or indirectly, controls, is controlled by or is under common
control with, the Person referred to, (b) each Person which beneficially owns
or holds, directly or indirectly, five percent or more of any class of voting
stock of the Person referred to (or if the Person referred to is not a
corporation, five percent or more of the equity interest), (c) each Person,
five percent or more of the voting stock (or if such Person is not a
corporation, five percent or more of the equity interest) of which is
beneficially owned or held, directly or indirectly, by the Person referred to,
and (d) each of such Person's officers, directors, joint venturers and
partners. The
term control (including the terms "controlled by" and "under common control
with") means the possession, directly, of the power to direct or cause the
direction of the management and policies of the Person in question.
"BAILEE LETTERS": Those letters to be executed by Kamino
International Transport and Expeditors International/PDX.
"BANK": U.S. Bank National Association.
"BORROWING BASE CERTIFICATE": As defined in Section 2.2.
"BUSINESS DAY": Any day (other than a Saturday, Sunday or legal
holiday in the State of where the Lender is located).
"CLOSING DATE": The date of this Agreement; PROVIDED that all the
conditions precedent to the making of the initial Advance, as set forth in
Article III, have been, or, on such Closing Date, will be, satisfied. The
Borrower shall give the Lender not less than one Business Day's prior notice
of the day selected as the Closing Date.
"ELIGIBLE ACCOUNTS": Accounts owned by the Borrower which the
Lender, in its sole and absolute discretion, deems eligible for Advances, but
which, at a minimum, are subject to a first priority perfected security
interest in favor of the Lender and not subject to any assignment, claim or
Lien other than the Lien in favor of the Lender and other Liens consented to
by the Lender in writing, but specifically excluding (a) Accounts which are
not earned; (b) Accounts which are unpaid more than thirty (30) days after the
original due date; (c) Accounts owed by debtors 25% or more of whose Accounts
owed are otherwise ineligible; (d) Accounts owned by any debtor whose Accounts
owed to the Borrower constitute more than 25% of all Accounts owed to the
Borrower; (e) Accounts representing progress xxxxxxxx, or retainages, or for
work covered by any payment or performance bond; (f) Accounts owed by any of
the Borrower's Affiliates; (g) Accounts owed by debtors not located in the
United States, unless supported by a letter of credit issued by a U.S. bank in
favor of the Borrower which has been delivered to the Lender or are covered by
a credit insurance policy acceptable to Lender in its sole discretion; (h)
Accounts as to which any warranty or representation contained in any security
agreement or other agreement of the Borrower with or given to the Lender with
respect to any such Account is untrue in any material respect; (i) Accounts as
to which the account debtor has disputed liability, or made any claim with
respect to any other Account due from such account debtor to the Borrower,
other than cross credits and cross debits in the ordinary course of business;
(j) Accounts with respect to which the account debtor is also a creditor of
Borrower, but only to the extent of the amount owed by Borrower to such
account debtor if such amount is less than the amount of all Accounts with
respect to such account debtor if such amount is less than the amount of all
Accounts with respect to such account debtor that
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otherwise would be Eligible Accounts; (k) Accounts as to which the account
debtor has filed a petition for bankruptcy or any other petition for relief
under the Bankruptcy Code, assigned any assets for the benefit of creditors,
or if any petition or other application for relief under the Bankruptcy Code
has been filed against the account debtor, or if the account debtor has
failed, suspended business, become insolvent, or has had or suffered a
receiver or a trustee to be appointed for all or a significant portion of its
assets or affairs; (l) Accounts owed by any federal government or government
agency; (m) Accounts evidenced by a promissory note or other instrument; and
(n) Accounts as to which the Lender believes that collection of any such
Account is insecure or that any such Account may not be paid by reason of the
account debtor's financial inability to pay.
"ELIGIBLE FOREIGN ACCOUNTS": Accounts owned by the Borrower or which
have been assigned to the Borrower by the Guarantor, which the Lender, in its
sole and absolute discretion, deems eligible for Advances, but which, at a
minimum, are subject to a first priority perfected security interest in favor
of the Lender (by virtue of the filing of a Form 395, or otherwise) and not
subject to any assignment, claim or Lien other than the Lien in favor of the
Lender and other Liens consented to by the Lender in writing, but specifically
excluding (a) Accounts which are not earned; (b) Accounts which are unpaid
more than thirty (30) days after the original due date; (c) Accounts owed by
debtors 25% or more of whose Accounts owed are otherwise ineligible; (d)
Accounts owned by any debtor whose Accounts owed to the Borrower constitute
more than 25% of all Accounts owed to the Borrower; (e) Accounts representing
progress xxxxxxxx, or retainages, or for work covered by any payment or
performance bond; (f) Accounts owed by any of the Borrower's Affiliates; (g)
Accounts not supported by a letter of credit issued by a U.S. bank in favor of
the Borrower which has been delivered to the Lender or are covered by a credit
insurance policy acceptable to Lender in its sole discretion; (h) Accounts as
to which any warranty or representation contained in any security agreement,
debenture or other agreement of the Borrower with or given to the Lender with
respect to any such Account is untrue in any material respect; (i) Accounts
with respect to which the account debtor is also a creditor of Borrower, but
only to the extent of the amount owed by Borrower to such account debtor if
such amount is less than the amount of all Accounts with respect to such
account debtor if such amount is less than the amount of all Accounts with
respect to such account debtor that otherwise would be Eligible Foreign
Accounts; (j) Accounts as to which the account debtor has filed a petition for
bankruptcy or any other petition for relief under the Bankruptcy Code,
assigned any assets for the benefit of creditors, or if any petition or other
application for relief under the Bankruptcy Code has been filed against the
account debtor, or if the account debtor has failed, suspended business,
become insolvent, or has had or suffered a receiver or a trustee to be
appointed for all or a significant portion of its assets or affairs; (k)
Accounts owed by any federal government or government agency; (l) Accounts
evidenced by a promissory note or other instrument; and (m) Accounts as to
which the Lender believes that collection
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of any such Account is insecure or that any such Account may not be paid by
reason of the account debtor's financial inability to pay.
"ELIGIBLE INVENTORY": Inventory of the Borrower which the Lender, in
its sole and absolute discretion, deems eligible for Advances, but which meets
the following minimum requirements: (a) it is owned by the Borrower, is
subject to a first priority perfected security interest in favor of the
Lender, and is not subject to any assignment, claim or Lien other than (i) a
Lien in favor of the Lender and (ii) Liens consented to by the Lender in
writing; (b) it consists of finished product (not including work in process
and supplies); (c) if held for sale or lease or furnishing under contracts of
service, it is (except as the Lender may otherwise consent in writing) new and
unused; (d) except as the Lender may otherwise consent, it is not stored with
a bailee, warehouseman or similar party; if so stored with the Lender's
consent, such bailee, warehouseman or similar party has issued and delivered
to the Lender, in form and substance acceptable to the Lender, such documents
and agreements as the Lender may require, including, without limitation,
warehouse receipts therefor in the Lender's name; (e) it is not goods in
transit, except for goods in transit shipped ocean freight by a United States
based freight forwarding company for which Lender has received bills of
lading; (f) the Lender has determined, in its sole and absolute discretion,
that it is not unacceptable due to age, type, category, quality and/or
quantity; (g) it is not held by the Borrower on consignment and is not subject
to any other repurchase or return agreement; (h) it is not held by a customer
of the Borrower or any other Person on consignment; (i) it complies with all
standards imposed by any governmental agency having regulatory authority over
such goods and/or their use, manufacture or sale; and (j) the warranties,
representations and covenants contained in any security agreement or other
agreement of the Borrower with or given to the Lender relating directly or
indirectly to the Borrower's Inventory are applicable to it without exception.
"FACILITY AMOUNT": As defined in Section 2.1
"GAAP": Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of any date of
determination.
"GUARANTOR": ThrustMaster (Europe) Limited, a United Kingdom
corporation.
"GUARANTY": That Guaranty to be executed by the Guarantor in form
and substance satisfactory to the Lender.
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"INVENTORY": Any and all of the Borrower's goods, including, without
limitation, goods in transit, wherever located which are or may at any time be
leased by the Borrower to a lessee, held for sale or lease, furnished under
any contract of service or held as raw materials, work in process, or supplies
or materials used or consumed in the Borrower's business, or which are held
for use in connection with the manufacture, packing, shipping, advertising,
selling or finishing of such goods, and all goods, the sale or other
disposition of which has given rise to a Receivable, which are returned to
and/or repossessed and/or stopped in transit by the Borrower or the Lender, or
at any time hereafter in the possession or under the control of the Borrower
or the Lender, or any agent or bailee of either thereof, and all documents of
title or other documents representing the same.
"INVENTORY ADVANCE": As defined in Section 2.1(b).
"LANDLORD'S WAIVERS": Those Waivers to be executed by Evergreen
Business and Xxxxxxx Xxxxxx Warehouse in form and substance satisfactory to
the Lender.
"LOAN DOCUMENTS": This Agreement, the Security Agreement, the
Guaranty and any documents described in Section 3.1(a).
"LIEN": With respect to any Person, any security interest, mortgage,
pledge, lien, charge, encumbrance, title retention agreement or analogous
instrument or device (including the interest of each lessor under any
capitalized lease), in, of or on any assets or properties of such Person, now
owned or hereafter acquired, whether arising by agreement or operation of law.
"PERSON": Any natural person, corporation, partnership, limited
partnership, joint venture, firm, association, trust, unincorporated
organization, government or governmental agency or political subdivision or
any other entity, whether acting in an individual, fiduciary or other capacity.
"REFERENCE RATE": The rate of interest from time to time publicly
announced by U.S. Bank National Association as its "reference rate"; U.S. Bank
National Association may lend to its customers at rates that are at, above or
below the Reference Rate. For purposes of determining any interest rate
hereunder which is based on the Reference Rate, such interest rate shall
change as and when the Reference Rate changes.
"SECURITY AGREEMENT": That Security Agreement to be executed by the
Borrower in form and substance satisfactory to the Lender.
Section 1.2 ACCOUNTING TERMS AND CALCULATIONS. Except as may be
expressly provided to the contrary herein, all accounting terms used herein
shall be
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interpreted and all accounting determinations hereunder shall be made in
accordance with GAAP.
Section 1.3 OTHER DEFINITIONAL TERMS,TERMS OF CONSTRUCTION. The
words "hereof", "herein" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
Unless the context in which used herein otherwise clearly requires, "or" has
the inclusive meaning represented by the phrase "and/or". All incorporations
by reference of covenants, terms, definitions or other provisions from other
agreements are incorporated into this Agreement as if such provisions were
fully set forth herein, and include all necessary definitions and related
provisions from such other agreements. All covenants, terms, definitions and
other provisions from other agreements incorporated into this Agreement by
reference shall survive any termination of such other agreements until the
obligations of the Borrower under this Agreement are irrevocably paid in full.
ARTICLE II
TERMS OF LENDING
Section 2.1 THE ADVANCES. On the terms and subject to the conditions
hereof, at the Borrower's request, the Lender, in its absolute and sole
discretion and without any commitment to do so, may make the following
Advances available to the Borrower:
2.1(a) up to sixty-five percent (65%) of the net amount of
Eligible Accounts and Eligible Foreign Accounts which are listed in the
Borrower's most current Borrowing Base Certificate and which are deemed
eligible for advances by the Lender, or such greater or lesser percentage at
the Lender's sole and absolute discretion, not to exceed a maximum amount of
$16,000,000 (the "Accounts Advances");
In addition, at Borrower's request, and subject to Lender's
authorization in its sole discretion, U.S. Bank National Association (the
"Bank") may issue letters of credit for Borrower's account ("Letter of
Credit") in an aggregate amount not to exceed $1,500,000 ("Letter of Credit
Amount"). Upon the occurrence of any draw under any Letter of Credit that the
Lender has in writing guaranteed, the Lender will pay to the Bank 100% of such
draw and treat such payment as an advance against Eligible Accounts and/or
Eligible Foreign Accounts by Lender to Borrower hereunder and a reimbursement
by Borrower in full of such draw, whether or not Lender has determined for all
other purposes to cease making loans to Borrower hereunder. The amount of any
unreimbursed draw and the amount available to be drawn under any Letter of
Credit shall both be treated as an
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outstanding advance against Eligible Accounts and/or Eligible Foreign Accounts
hereunder for the purpose of determining the amount which may be advanced
under this Section 2.1 against Eligible Accounts and/or Eligible Foreign
Accounts.
In the event that the Lender exercises its discretion to make
demand for payment of the amounts advanced hereunder, or this Agreement is
terminated in accordance with the provisions of Article VII, while there
remains any amount available to be drawn under any Letter of Credit, Borrower
will pay to Lender the amount available to be drawn under the Letter of
Credit, which amount shall be held by Lender as security for Borrower's
obligation to reimburse Lender for any draw on any Letter of Credit for which
Lender reimburses the Bank. Said amount shall be applied as reimbursement of
any draw under any Letter of Credit for which Lender reimburses the Bank with
any balance, if any, to be returned to Borrower upon the expiration of all
Letters of Credit and at such time that no amount is available to be drawn
under any Letter of Credit.
2.1(b) up to fifty percent (50%) of the net amount of Eligible
Inventory which is listed in the Borrower's most current Borrowing Base
Certificate and which is deemed eligible for advances by the Lender, or such
greater or lesser percentage at the Lender's sole and absolute discretion, not
to exceed a maximum amount of (i) $2,500,000 from August 1 through January 30
of each year and (ii) $1,500,000 from January 31 through July 31 of each year
(the "Inventory Advances");
The total amounts advanced under sections 2.1 (a) through (b) hereof is the
"Facility Amount."
Loans for additional sums requested by the Borrower may be made at the
Lender's sole discretion based upon the Lender's valuation of the Borrower's
collateral or other factors. The Borrower acknowledges and agrees that the
Lender may from time to time, for the Lender's convenience, segregate or
apportion the Borrower's collateral for purposes of determining the amounts
and maximum amounts of Advances which may be made hereunder. Nevertheless, the
Lender's security interest in all such collateral, and any other collateral
rights, interests and properties which may now or hereafter be available to
the Lender, shall secure and may be applied to the payment of any and all
Advances and other indebtedness secured by the Lender's security interest, in
any order or manner of application and without regard to the method by which
the Lender determines to make Advances hereunder.
Section 2.2 PROCEDURE FOR ADVANCES; WIRE TRANSFER FEES. Any request
by the Borrower for an Advance shall be in writing and must be given so as to
be received by the Lender not later than 10:30 a.m. Pacific time on the
requested Advance date, or such later time as may be acceptable to the Lender
in its sole discretion. Each request for an Advance shall be irrevocable and
shall be deemed a
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representation by the Borrower that on the requested Advance date and after
giving effect to such Advance the applicable conditions specified in Article
III have been and will continue to be satisfied and the representations and
warranties set forth in Article IV will continue to be true. Each request for
an Advance shall specify the requested Advance date (which must be a Business
Day) and the amount of such Advance. Each request for an Advance shall be
accompanied by a Borrowing Base Certificate signed by a duly authorized
officer of the Borrower in form and substance satisfactory to the Lender (the
"Borrowing Base Certificate"). If the Lender determines, in its absolute and
sole discretion, to make the requested Advance, the Lender will wire transfer
to the Borrower's Account on the requested Advance date the amount of the
requested Advance. The Borrower will pay to the Lender a wire transfer fee of
$20 per wire transfer of any Advance to the Borrower's account if the request
for an Advance.
Section 2.3 INTEREST RATES AND INTEREST PAYMENTS. Interest shall
accrue on the unpaid balance of the Advances at a floating rate per annum
equal to the sum of the Reference Rate plus 2.0% (the "Blended Rate"), which
Blended Rate Borrower acknowledges to be a combination of the interest rates
charged by Lender (equal to the sum of the Reference Rate plus 2.5%) and the
Bank (equal to the sum of the Reference Rate plus 1.5%) with both Lender and
the Bank participating equally in the Advances, and shall be due and payable
monthly in arrears on the last day of each calendar month; PROVIDED, HOWEVER,
that (i) upon the occurrence and during the continuance of any failure by the
Borrower to comply with any agreement or covenant of the Borrower under any
Loan Document or (ii) the inability or unwillingness of the Bank to continue
providing funding for fifty percent (50%) of the Advances due to the Bank's
determination, in its sole and absolute discretion of an increased credit risk
or a materially adverse change in the Borrower's business, the unpaid balance
of the Advances shall thereafter bear interest at a floating rate equal to the
sum of (a) the Blended Rate, plus (b) 2% and shall be due and payable on
demand; AND PROVIDED FURTHER that the minimum amount of interest due and
payable in any calendar year shall not be less than $250,000 prorated monthly.
For example the minimum interest for calendar year 1998 due and payable on
January 2, 1999 shall be $62,500. For example the minimum interest for
calendar year 1999, assuming this Agreement is terminated as of September 30,
1999 shall be $187,500 due and payable on October 1, 1999.
Section 2.4 REPAYMENT AND PREPAYMENT.
ALL ADVANCES SHALL BE DUE AND PAYABLE ON DEMAND; NOTHING SET FORTH IN
THIS AGREEMENT, THE SECURITY AGREEMENT OR ANY OTHER AGREEMENT BETWEEN THE
BORROWER AND THE LENDER SHALL IN ANY WAY LIMIT THE LENDER'S RIGHT TO DEMAND
PAYMENT OF THE ADVANCES IN WHOLE OR IN PART.
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Section 2.5 COMPUTATION. Interest on the Advances shall be
computed on the basis of actual days elapsed and a year of 360 days.
Section 2.6 ANNUAL FEE. The Borrower shall pay to the Lender an
annual fee in an amount equal to one-half percent (.50%) of the Facility
Amount (the "Annual Fee"). The Annual Fee shall be payable in advance on the
Closing Date and on each anniversary of the date of this Agreement.
Section 2.7 LETTER OF CREDIT FEE. The Borrower shall pay to the
Lender an annual fee in an amount equal to one and one-fourth percent (1.25%)
of the amount of any Letters of Credit issued pursuant to Section 2.1 (the
"Letter of Credit Fee"). The Letter of Credit Fee shall be payable upon the
issuance of any Letter of Credit and on each anniversary date of the issuance
of any Letter of Credit so long as the Letter of Credit remains outstanding.
The Letter of Credit Fee is in addition to any usual and customary charges of
the Bank relating to the issuance of Letters of Credit, which charges shall be
borne solely by the Borrower.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT. No Advances shall be made
hereunder except upon the prior or simultaneous fulfillment of each of the
following conditions:
3.1(a) DOCUMENTS. The Lender shall have received the following:
(i) This Agreement executed by a duly authorized
officer (or officers) of the Borrower and dated the Closing
Date.
(ii) A copy of the corporate resolutions of
Borrower authorizing the execution, delivery and performance
of this Agreement and containing an incumbency certificate
showing the names and titles, and bearing the signatures of,
the officers of the Borrower authorized to execute this
Agreement, certified as of the Closing Date by the Secretary
or an Assistant Secretary of Borrower.
(iii) A copy of the Articles of Incorporation of
Borrower with all amendments thereto, certified by the
appropriate governmental official of the jurisdiction of its
incorporation as of a recent date acceptable to Lender and its
counsel.
(iv) A certificate of good standing for Borrower in
the jurisdiction of its incorporation, certified by the
appropriate
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governmental officials of a recent date acceptable to Lender
and its counsel.
(v) A copy of the bylaws of Borrower, certified as of
the Closing Date by the Secretary or an Assistant Secretary of
the Borrower.
(vi) A copy of the articles of organization or other
organizational documents and bylaws, if any, of Guarantor,
including all amendments thereto, certified as of the Closing
Date by the Secretary or an Assistant Secretary of Guarantor.
(vii) A copy of the resolutions of the governing
board of the Guarantor authorizing the execution, delivery and
performance of the Agreement and Loan Documents and containing
an incumbency certificate showing the names and titles, and
bearing the signatures of, the officers of Guarantor
authorized to execute the Agreement and Loan Documents,
certified as of the Closing Date by the Secretary or an
Assistant Secretary of Guarantor.
(viii) The Security Agreement, duly executed by
Borrower.
(ix) An initial Borrowing Base Certificate.
(x) An Opinion of Counsel acceptable to Lender
and its counsel.
(xi) The Guaranty duly executed by the Guarantor.
(xii) Evidence of insurance required to be
maintained under Section 5.3, naming the Lender as loss payee
in form and substance satisfactory to the Lender.
(xiii) The Landlord Waivers, duly executed.
(xiv) Collateral Assignment of Trademarks.
(xv) Assignment of Trademarks executed in blank.
(xvi) Collateral Assignment of Patents.
(xvii) Assignment of Patents executed in blank.
(xviii) A Debenture executed by Guarantor.
(xix) The Bailee's Letters.
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(xx) An Assignment of Accounts Agreement in form and
substance satisfactory to Lender.
(xxi) Such other documents as Lender may require.
3.1(b) OTHER MATTERS. All organizational and legal
proceedings relating to the Borrower and all instruments and agreements in
connection with the transactions contemplated by this Agreement shall be
satisfactory in scope, form and substance to the Lender and its counsel, and
the Lender shall have received all information and copies of all documents,
including records of corporate proceedings, which it may reasonably have
requested in connection therewith, such documents where appropriate to be
certified by proper Borrower or governmental authorities.
3.1(c) FEES AND EXPENSES. The Lender shall have received all
fees and other amounts due and payable by the Borrower on or prior to the
Closing Date, including the reasonable fees and expenses of counsel to the
Lender payable pursuant to Section 8.2.
3.1(d) PERFECTION. The Security Agreement and/or any and all
financing statements with respect thereto shall have been appropriately filed
to the satisfaction of the Lender; the Lender shall have received UCC searches
and/or other Lien searches satisfactory to the Lender; and the priority and
perfection of the Lien created thereby shall have been established to the
satisfaction of the Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender:
Section 4.1 ORGANIZATION, STANDING, ETC. The Borrower is a
corporation duly incorporated and validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to carry on its business as now conducted, to
enter into this Agreement and to perform its obligations hereunder and
thereunder. This Agreement has been duly authorized by all necessary corporate
action and when executed and delivered will be the legal and binding
obligations of the Borrower. The execution and delivery of this Agreement will
not violate the Borrower's Articles of Incorporation or bylaws or any law
applicable to the Borrower. No governmental consent or exemption is required
in connection with the Borrower's execution and delivery of this Agreement.
Section 4.2 FINANCIAL STATEMENTS AND NO MATERIAL ADVERSE CHANGE. The
Borrower's audited financial statements as at December 31, 1997 and its
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unaudited financial statements as at August 31, 1998, as heretofore furnished
to the Lender, have been prepared in accordance with GAAP. The Borrower has no
material obligation or liability not disclosed in such financial statements,
and there has been no material adverse change in the condition of the Borrower
since the dates of such financial statements.
Section 4.3 LITIGATION. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower which, if determined adversely to the Borrower, would have, a
material adverse effect on the condition of the Borrower. The Borrower is not
in violation of any law or regulation (including environmental laws and
regulations and laws relating to employee benefit plans) where such violation
could reasonably be expected to impose a material liability on the Borrower.
Section 4.4 TAXES. The Borrower has filed all federal, state and
local tax returns required to be filed and has paid or made provision for the
payment of all taxes due and payable pursuant to such returns and pursuant to
any assessments made against it or any of its property (other than taxes, fees
or charges the amount or validity of which is currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
accordance with GAAP have been provided on the books of the Borrower).
Section 4.5 SUBSIDIARIES. The Borrower has no subsidiaries except
Guarantor and ThrustMaster GmbH.
ARTICLE V
AFFIRMATIVE COVENANTS
Until this Agreement shall have expired or been terminated and all
of the Borrower's other obligations to the Lender under this Agreement shall
have been paid in full, unless the Lender shall otherwise consent in writing:
Section 5.1 FINANCIAL STATEMENTS AND REPORTS. The Borrower will
furnish to the Lender:
5.1(a) As soon as available and in any event within 120 days
after the end of each fiscal year of the Borrower, financial statements of the
Borrower consisting of at least statements of income, cash flow and changes in
stockholders' equity, and a balance sheet as at the end of such year, setting
forth in each case in comparative form corresponding figures from the previous
annual audit, certified without qualification by independent certified public
accountants selected by the Borrower and acceptable to the Lender.
5.1(b) As soon as available and in any event within 30 days
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after the end of each fiscal month, unaudited financial statements for the
Borrower for such month and for the period from the beginning of such fiscal
year to the end of such month, substantially similar to the annual audited
statements.
5.1(c) Concurrently with each request for an Advance, and in
any event not less than weekly, a Borrowing Base Certificate.
5.1(d) As soon as practicable and in any event within fifteen
days of the end of each month, (i) a listing of all accounts, together with an
aging of all accounts and a reconciliation of such accounts against the
listing submitted pursuant hereto for the immediately preceding month
(including addresses and phone numbers of each account debtor submitted on a
quarterly bassi), (ii) a list of all inventory, setting forth the cost of such
inventory and all sales, returns and allowances and miscellaneous charges, and
(iii) a listing of all accounts payable, together with an aging of all
accounts payable all in form and substance satisfactory to the Lender.
5.1(e) Projected quarterly market development funds credit
report with respect to the succeeding quarter to be received by March 31, June
30, September 30 and December 31 of each year and actual quarterly market
development funds credit report with respect to the preceding quarter to be
received by January 31, April 30, July 31 and October 30 of each year.
5.1(f) Subject to customer imposed limitations, retailer
stock status reports and retailer sell through reports upon request by Lender,
and in any event not less than bi-monthly.
5.1(g) Within five days after the due date, proof of payment or
deposit, when due, of all withholding and F.I.C.A. taxes owing by the Borrower
from time to time, in form and substance satisfactory to the Lender by a
payroll service satisfactory to the Lender and whose services the Borrower
shall at all times retain.
5.1(h) From time to time, such other information regarding the
business, operation and financial condition of the Borrower as the Lender may
reasonably request.
Section 5.2 CORPORATE EXISTENCE. The Borrower will maintain its
corporate existence in good standing under the laws of its jurisdiction of
incorporation and its qualification to transact business in each jurisdiction
where failure to qualify would permanently preclude the Borrower from
enforcing its rights with respect to any material asset or would expose the
Borrower to any material liability.
Section 5.3 INSURANCE. The Borrower will maintain with financially
sound and reputable insurance companies such insurance as may be required by
law
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and such other insurance in such amounts and against such hazards as is
customary in the case of reputable corporations engaged in the same or similar
business and similarly situated, including without limitation such insurance
as may be required under the Security Agreement.
Section 5.4 PAYMENT OF TAXES AND CLAIMS. The Borrower will file all
tax returns and reports which are required by law to be filed by it and will
pay before they become delinquent, all taxes, assessments and governmental
charges and levies imposed upon it or its property and all claims or demands
of any kind (including those of suppliers, mechanics, carriers, warehousemen,
landlords and other like Persons) which, if unpaid, might result in the
creation of a Lien upon its property; provided that the foregoing items need
not be paid if they are being contested in good faith by appropriate
proceedings, and as long as the Borrower's title to its property is not
materially adversely affected, its use of such property in the ordinary course
of its business is not materially interfered with and adequate reserves with
respect thereto have been set aside on the Borrower's books in accordance with
GAAP.
Section 5.5 INSPECTION. The Borrower will permit any Person
designated by the Lender to visit and inspect any of the properties, books and
financial records of the Borrower, to examine and to make copies of the books
of accounts and other financial records of the Borrower, and to discuss the
affairs, finances and accounts of the Borrower with its officers at such
reasonable times and intervals as the Lender may designate. The Borrower shall
also allow the Lender and its agents to conduct periodic collateral audits of
the Borrower's assets at such intervals as the Lender may choose, and the
Borrower shall pay to Lender a fee in the amount of $750 per day per
collateral audit, plus out-of-pocket costs and expenses incurred in connection
with such collateral audits, (provided that so long as no Event of Default (as
that term is defined in the Security Agreement) has occurred under the
Security Agreement and is continuing, the Borrower shall not be require to pay
for more than four (4) collateral audits in any calendar year).
Section 5.6 MAINTENANCE OF PROPERTIES. The Borrower will maintain
its properties in good condition, repair and working order, and supplied with
all necessary equipment, and make all necessary repairs, renewals,
replacements, betterments and improvements thereto, all as may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
Section 5.7 BOOKS AND RECORDS. The Borrower will keep adequate and
proper records and books of account in which full and correct entries will be
made of its dealings, business and affairs.
Section 5.8 COMPLIANCE. The Borrower will comply in all material
respects with all laws, rules and regulations to which it may be subject.
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Section 5.9 NOTICE OF LITIGATION. The Borrower will give prompt
written notice to the Lender of the commencement of any action, suit or
proceeding that could have a material adverse effect on the Borrower.
Section 5.10 PLANS. The Borrower will maintain any employee benefit
plans in compliance with all material requirements of applicable laws and
regulations.
Section 5.11 SPECIAL AGREEMENTS REGARDING ACCOUNTS.
5.11(a) Collection of Accounts and all other amounts due to
the Borrower shall be subject to the provisions of paragraphs 5 and 6 of the
Security Agreement concerning the Lockbox and Collateral Account (as those
terms are defined in the Security Agreement). The Borrower shall provide to
the Lender a daily Collection Report of all Accounts collected. All
collections received in the Collateral Account and reported to Lender on a
Collection Report on a form furnished by Lender before 8:00 a.m. (Pacific
Time) on any Business Day that is a Monday through Thursday and 12:00 p.m.
Fridays (Pacific Time), shall be applied to the payment of the Advances (in
such order of application as the Lender may determine) on the day so received;
PROVIDED HOWEVER, that for purposes of determining the interest due and
payable on the unpaid balance of the Advances under Section 2.3, all
collections received in the Collateral Account shall be applied to the unpaid
balance of the Advances upon receipt of the daily Collection Report from
Borrower evidencing deposits actually made and after allowing two (2) Business
Days for collection.
5.11(b) Subject to the rights granted to the Lender in
paragraph 5 of the Security Agreement, all ledger sheets or cards, invoices,
shipping records, correspondence, and other writings relating to accounts
shall, until delivered to the Lender or removed by the Lender from the
Borrower's premises, be kept on the Borrower's premises without cost to the
Lender in appropriate containers in safe places.
5.11(c) Upon the Lender's demand for payment, the Lender may
remove from the Borrower's premises all books and records, correspondence,
documents and files relating to accounts; and the Lender may without cost or
expense to the Lender use such of the Borrower's personnel, supplies, space
and equipment at the Borrower's place of business as the Lender may desire for
the handling of collections. The Borrower will pay any and all out of pocket
expenses and cost of collection (including reasonable attorney fees) incurred
by the Lender in the Lender's handling of or effort to enforce collections.
5.11(d) The Borrower warrants that, except as may be disclosed
in the lists of Accounts furnished to the Lender: each customer billing
statement
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correctly states the subject matter and terms of sale; the merchandise
conforms thereto and is in all respects acceptable to the customer; the date
of the billing statement is not prior to the date of shipment; the Account is
not subject to any dispute, defense, offset or counterclaim; the account
debtor is not a subsidiary or affiliated company; and the Borrower has no
reason to believe the Account will not be paid in the regular course of
business. The Borrower will notify the Lender promptly of any event,
circumstance or communication with respect to any Account that is inconsistent
with the foregoing representation.
Section 5.12 REAFFIRMATION OF GUARANTIES. When so requested by the
Lender from time to time, the Borrower will promptly cause the Guarantor or
any other Persons who have guaranteed the obligations of the Borrower
hereunder or any part thereof to execute and deliver to the Lender
reaffirmations of their respective guaranties in such form as the Lender may
require.
Section 5.13 YEAR 2000. The Borrower will (a) review and assess its
business operations and computer systems and applications to address any "year
2000 problem" (that is, that computer applications and equipment used by the
Borrower, directly or indirectly through third parties, may be unable to
perform properly date-sensitive functions before, during and after January 1,
2000); (b) develop a plan which will include expense estimates to address any
year 2000 problem and to remediate any such problem by December 31, 1999.
ARTICLE VI
NEGATIVE COVENANTS
Until this Agreement shall have expired or been terminated and all
of the Borrower's other obligations to the Lender under this Agreement shall
have been paid in full, unless the Lender shall otherwise consent in writing:
Section 6.1 MERGER. The Borrower will not liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution).
Section 6.2 SALE OF ASSETS. The Borrower will not sell, transfer,
lease or otherwise convey all or any substantial part of its assets except for
sales and leases of Inventory in the ordinary course of business.
Section 6.3 DIVIDENDS. The Borrower will not pay any dividends or
otherwise make any distributions on, or redemptions of, any of its outstanding
stock.
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Section 6.4 INVESTMENTS. The Borrower will not make any loans,
advances or extensions of credit to any other Person (except for trade and
customer accounts receivable for inventory sold or services rendered in the
ordinary course of business and payable in accordance with customary trade
terms) or purchase or acquire any stock or other debt or equity securities of
or any interest in any other Person or any integral part of any business or
the assets comprising such business or part thereof, except for:
6.4(a) Readily marketable investments in debt securities
which are reasonably acceptable to the Lender.
6.4(b) Travel advances to officers and employees in the
ordinary course of business.
Section 6.5 INDEBTEDNESS. The Borrower will not borrow any money or
issue any bonds, debentures or other debt securities or otherwise become
obligated on any interest-bearing indebtedness except for (i) the Advances
under this Agreement (ii) existing indebtedness as disclosed on the most
recent financial statement of the Borrower referred to in Section 4.1, and
(iii) purchase money Liens as set forth in Section 6.6(h).
Section 6.6 LIENS. The Borrower will not create, incur, assume or
suffer to exist any Lien, or enter into any arrangement for the acquisition of
any property through conditional sale, lease-purchase or other title retention
agreements except:
6.6(a) Liens granted to the Lender.
6.6(b) Liens existing on the date of this Agreement and
disclosed in those UCC or other Lien searches referred to in Section 3.1(d).
6.6(c) Deposits or pledges to secure payment of workers'
compensation, unemployment insurance, old age pensions or other social
security obligations arising in the ordinary course of business of the
Borrower.
6.6(d) Liens for taxes, fees, assessments and governmental
charges not delinquent.
6.6(e) Liens of carriers, warehousemen, mechanics and
materialmen, and other like Liens arising in the ordinary course of business,
for sums not due.
6.6(f) Liens incurred or deposits or pledges made or given in
connection with, or to secure payment of, indemnity, performance or other
similar bonds.
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6.6(g) Encumbrances in the nature of zoning restrictions,
easements and rights or restrictions of record on the use of real property and
landlord's Liens under leases on the premises rented, which do not materially
detract from the value of such property or impair the use thereof in the
business of the Borrower.
6.6(h) Purchase money Liens on property acquired after the
Closing Date, provided that, (i) the indebtedness secured thereby is permitted
by Section 6.7 and (ii) such liens are limited to the property acquired and do
not secure indebtedness other than the purchase price of such property.
Section 6.7 CAPITAL EXPENDITURES. Borrower will not make Capital
Expenditures in an amount exceeding $750,000 in any fiscal year.
Section 6.8 CONTINGENT OBLIGATIONS. The Borrower will not guarantee
or otherwise become liable on the indebtedness of any other Person in an
amount in excess of $250,000 in the aggregate.
ARTICLE VII
TERMINATION BY BORROWER
This agreement shall continue in effect until terminated upon
written notice delivered by the Borrower to Lender by certified mail.
Termination shall not impair or affect, the Lender's rights existing as of the
time notice of Termination is given.
In the event that the Borrower gives notice to the Lender of the
termination of this Agreement under Article VII hereof at any time prior to
the first anniversary of the date of this Agreement, the Borrower will pay to
the Lender a prepayment charge, as additional compensation for the Lender's
costs of entering into this Agreement, in the amount of one percent (1%) of
the Facility Amount unless the outstanding amount of the Borrower's
obligations hereunder are (i) refinanced in full by an affiliate of U.S.
Bancorp or (ii) if paid from public or private capital markets.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 MODIFICATIONS. Notwithstanding any provisions to the
contrary herein, any term of this Agreement may be amended with the written
consent of the Borrower; PROVIDED that no amendment, modification or waiver of
any provision of this Agreement or consent to any departure by the Borrower
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therefrom shall in any event be effective unless the same shall be in writing
and signed by the Lender, and then such amendment, modifications, waiver or
consent shall be effective only in the specific instance and for the purpose
for which given.
Section 8.2 COSTS AND EXPENSES. Whether or not the transactions
contemplated hereby are consummated, the Borrower agrees to reimburse the
Lender upon demand for all reasonable out-of-pocket expenses paid or incurred
by the Lender (including filing and recording costs and reasonable fees and
expenses of Xxxxxx & Xxxxxxx LLP, counsel to the Lender) in connection with
the negotiation, preparation, approval, review, execution, delivery,
amendment, modification, interpretation, collection and enforcement of this
Agreement, including all fees due Lender incurred pursuant to this Agreement.
The obligations of the Borrower under this Section shall survive any
termination of this Agreement. In the event such costs, fees or expenses are
not promptly paid by Borrower on demand, Lender may set off the amount of any
such costs, fees or expenses from funds available to Borrower. If the Borrower
elects, the Borrower may treat the amount of any such costs, fees or expenses
as an Advance hereunder.
Section 8.3 WAIVERS, ETC. No failure on the part of the Lender to
exercise and no delay in exercising any power or right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any power or
right preclude any other or further exercise thereof or the exercise of any
other power or right. The rights and remedies of the Lender hereunder are
cumulative and not exclusive of any right or remedy the Lender otherwise has.
Section 8.4 NOTICES. Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party
in connection with this Agreement shall be in writing and shall be sent by
manual delivery, telegram, telex, facsimile transmission, overnight courier or
United States mail (postage prepaid) addressed to such party at the address
specified on the signature page hereof, or at such other address as such party
shall have specified to the other party hereto in writing. All periods of
notice shall be measured from the date of delivery thereof if manually
delivered, from the date of sending thereof if sent by telegram, telex or
facsimile transmission, from the first Business Day after the date of sending
if sent by overnight courier, or from four days after the date of mailing if
mailed; PROVIDED, HOWEVER, that any notice to the Lender under Article II
hereof shall be deemed to have been given only when received by the Lender.
Section 8.5 SUCCESSORS AND ASSIGNS; DISPOSITION OF LOANS. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign its rights or delegate its obligations hereunder without the prior
written consent of the Lender. The Lender may at any time sell, assign,
transfer, grant participations in, or otherwise dispose of any portion of the
Advances to banks or other financial institutions. The Lender may disclose any
information regarding the Borrower in
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the Lender's possession to any prospective buyer or participant provided the
prospective buyer or participant executes a non-disclosure agreement.
Section 8.6 OFFSET. The Borrower hereby irrevocably authorizes the
Lender to set off all sums owing by the Borrower to the Lender against all
deposits and credits of the Borrower with, and any and all claims of the
Borrower against, the Lender. The Borrower further agrees that any bank
participating with the Lender in Advances hereunder may exercise any and all
rights of setoff with respect to such participation as fully as if such
participant had lent directly to the Borrower the amount of such participation.
SECTION 8.7 GOVERNING LAW AND CONSTRUCTION. THE VALIDITY,
CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF
LAWS PRINCIPLES THEREOF.
SECTION 8.8 CONSENT TO JURISDICTION. AT THE OPTION OF THE LENDER,
THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT
SITTING IN HENNEPIN COUNTY, MINNESOTA; AND THE BORROWER CONSENTS TO THE
JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN
SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER COMMENCES ANY ACTION
IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING
DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE
LENDER AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF
THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
SECTION 8.9 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE
LENDER IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ADVANCES AND ANY
OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 8.10 INDEMNIFICATION. The Borrower hereby agrees to defend,
protect, indemnify and hold harmless the Lender and its affiliates and the
directors, officers, employees, attorneys and agents of the Lender and its
affiliates (each of the foregoing being an "Indemnitee" and all of the
foregoing being collectively the "Indemnitees") from and against any and all
claims, actions, damages, liabilities, judgments, costs and expenses
(including all reasonable fees and disbursements of counsel which may be
incurred in the investigation or defense of any matter) imposed upon, incurred
by or asserted against any Indemnitee, whether direct, indirect or
consequential and whether based on any federal, state, local or foreign
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laws or regulations (including securities laws, environmental laws, commercial
laws and regulations), under common law or on equitable cause, or on contract
or otherwise: (a) by reason of, relating to or in connection with the
execution, delivery, performance or enforcement of any Loan Document, any
commitments relating thereto, or any transaction contemplated by any Loan
Document; or (b) by reason of, relating to or in connection with any credit
extended or used under the Loan Documents or any act done or omitted by any
Person, or the exercise of any rights or remedies thereunder, including the
acquisition of any collateral by the Lender by way of foreclosure of the Lien
thereon, deed or xxxx of sale in lieu of such foreclosure or otherwise;
provided, however, that the Borrower shall not be liable to any Indemnitee for
any portion of such claims, damages, liabilities and expenses resulting from
such Indemnitee's negligence or willful misconduct. In the event this
indemnity is unenforceable as a matter of law as to a particular matter or
consequence referred to herein, it shall be enforceable to the full extent
permitted by law.
Section 8.11 CAPTIONS. The captions or headings herein and any table
of contents hereto are for convenience only and in no way define, limit or
describe the scope or intent of any provision of this Agreement.
Section 8.12 ENTIRE AGREEMENT. This Agreement and the other Loan
Documents embody the entire agreement and understanding between the Borrower
and the Lender with respect to the subject matter hereof and thereof. This
Agreement supersedes all prior agreements and understandings relating to the
subject matter hereof.
Section 8.13 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument, and either of the parties hereto may execute this
Agreement by signing any such counterpart.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
THRUSTMASTER, INC.
By /s/ X. X. Xxxxxxxx Xx.
-----------------------------------
Print Name X. X. Xxxxxxxx Xx.
---------------------------
Title President and CEO
--------------------------------
Address:
0000 XX Xxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxx 00000
U.S. BANCORP REPUBLIC COMMERCIAL
FINANCE, INC.
By
---------------------------------
Print Name
-------------------------
Title
------------------------------
Lender's Address:
0000 Xxxxxxx Xxxxxx XX, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
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