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REVOLVING CREDIT
AND
SECURITY AGREEMENT
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GMAC COMMERCIAL CREDIT LLC
(AS LENDER AND AS AGENT)
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WITH
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CYGNE DESIGNS, INC.
(BORROWER)
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May 11, 2001
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TABLE OF CONTENTS
I. DEFINITIONS..............................................................................................1
1.1. Accounting Terms................................................................................1
1.2. General Terms...................................................................................1
1.3. Uniform Commercial Code Terms..................................................................15
1.4. Certain Matters of Construction................................................................15
II. ADVANCES, PAYMENTS......................................................................................16
2.1. (a) Revolving Advances........................................................................16
(b) Discretionary Rights......................................................................16
2.2. Procedure for Borrowing Revolving Advances.....................................................16
2.3. Disbursement of Advance Proceeds...............................................................17
2.4. Intentionally Omitted..........................................................................17
2.5. Maximum Advances...............................................................................17
2.6. Repayment of Advances..........................................................................17
2.7. Repayment of Overadvances......................................................................18
2.8. Statement of Account...........................................................................18
2.9. Letters of Credit..............................................................................18
2.10. Issuance of Letters of Credit..................................................................19
2.11. Requirements For Issuance of Letters of Credit.................................................19
2.12. Additional Payments............................................................................20
2.13. Manner of Borrowing and Payment................................................................20
2.14. Mandatory Prepayments..........................................................................22
2.15. Use of Proceeds................................................................................22
2.16. Defaulting Lender..............................................................................22
III. INTEREST AND FEES.......................................................................................23
3.1. Interest.......................................................................................23
3.2. Letter of Credit Fees..........................................................................24
3.3. Facility Fee...................................................................................24
3.4. Closing Fee....................................................................................25
3.5. Collateral Monitoring Fee......................................................................25
3.6. Computation of Interest and Fees...............................................................25
3.7. Maximum Charges................................................................................25
3.8. Increased Costs................................................................................25
3.9. Capital Adequacy...............................................................................26
IV. COLLATERAL: GENERAL TERMS..............................................................................26
4.1. Security Interest in the Collateral............................................................27
4.2. Perfection of Security Interest................................................................27
4.3. Disposition of Collateral......................................................................27
4.4. Preservation of Collateral.....................................................................27
4.5. Ownership of Collateral........................................................................28
4.6. Defense of Agent's and Lenders' Interests......................................................28
4.7. Books and Records..............................................................................29
4.8. Financial Disclosure...........................................................................29
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4.9. Compliance with Laws...........................................................................29
4.10. Inspection of Premises.........................................................................29
4.11. Insurance......................................................................................30
4.12. Failure to Pay Insurance.......................................................................30
4.13. Payment of Taxes...............................................................................31
4.14. Payment of Leasehold Obligations...............................................................31
4.15. Receivables....................................................................................31
(a) Nature of Receivables.................................................................31
(b) Solvency of Customers.................................................................31
(c) Locations of Borrower.................................................................32
(d) Collection of Receivables.............................................................32
(e) Notification of Assignment of Receivables.............................................32
(f) Power of Agent to Act on Borrower's Behalf............................................32
(g) No Liability..........................................................................33
(h) Establishment of a Lockbox Account, Dominion Account..................................33
(i) Adjustments...........................................................................34
4.16. Inventory......................................................................................34
4.17. Maintenance of Equipment.......................................................................34
4.18. Exculpation of Liability.......................................................................34
4.19. Environmental Matters..........................................................................34
4.20. Financing Statements...........................................................................36
V. REPRESENTATIONS AND WARRANTIES..........................................................................36
5.1. Authority......................................................................................36
5.2. Formation and Qualification....................................................................37
5.3. Survival of Representations and Warranties.....................................................37
5.4. Tax Returns....................................................................................37
5.5. Financial Statements...........................................................................37
5.6. Corporate Name.................................................................................38
5.7. O.S.H.A. and Environmental Compliance..........................................................38
5.8. Solvency; No Litigation, Violation, Indebtedness or Default....................................38
5.9. Patents, Trademarks, Copyrights and Licenses...................................................40
5.10. Licenses and Permits...........................................................................40
5.11. Default of Indebtedness........................................................................40
5.12. No Default.....................................................................................40
5.13. No Burdensome Restrictions.....................................................................41
5.14. No Labor Disputes..............................................................................41
5.15. Margin Regulations.............................................................................41
5.16. Investment Company Act.........................................................................41
5.17. Disclosure.....................................................................................41
5.18. Swaps..........................................................................................41
5.19. Conflicting Agreements.........................................................................41
5.20. Application of Certain Laws and Regulations....................................................41
5.21. Business and Property of Borrower..............................................................42
VI. AFFIRMATIVE COVENANTS...................................................................................42
6.1. Payment of Fees................................................................................42
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6.2. Conduct of Business and Maintenance of Existence and Assets....................................42
6.3. Violations.....................................................................................42
6.4. Government Receivables.........................................................................42
6.5. Tangible Net Worth.............................................................................42
6.6. Fixed Charge Coverage Ratio....................................................................43
6.7. Working Capital................................................................................43
6.8. Execution of Supplemental Instruments..........................................................43
6.9. Payment of Indebtedness........................................................................43
6.10. Standards of Financial Statements..............................................................43
VII. NEGATIVE COVENANTS......................................................................................43
7.1. Merger, Consolidation, Acquisition and Sale of Assets..........................................43
7.2. Creation of Liens..............................................................................44
7.3. Guarantees.....................................................................................44
7.4. Investments....................................................................................44
7.5. Loans..........................................................................................44
7.6. Capital Expenditures...........................................................................44
7.7. Dividends......................................................................................44
7.8. Indebtedness...................................................................................44
7.9. Nature of Business.............................................................................44
7.10. Transactions with Affiliates...................................................................45
7.11. Leases.........................................................................................45
7.12. Subsidiaries...................................................................................45
7.13. Fiscal Year and Accounting Changes.............................................................45
7.14. Pledge of Credit...............................................................................45
7.15. Amendment of Articles of Incorporation, By-Laws................................................45
7.16. Compliance with ERISA..........................................................................45
7.17. Prepayment of Indebtedness.....................................................................46
VIII. CONDITIONS PRECEDENT....................................................................................46
8.1. Conditions to Initial Advances.................................................................46
(a) Revolving Credit Note.................................................................46
(b) Filings, Registrations and Recordings.................................................46
(c) Corporate Proceedings of Borrower.....................................................46
(d) Incumbency Certificates of Borrower...................................................46
(e) Certificates..........................................................................47
(f) Good Standing Certificates............................................................47
(g) Legal Opinion.........................................................................47
(h) No Litigation.........................................................................47
(i) Financial Condition Certificates......................................................47
(j) Collateral Examination................................................................47
(k) Fees..................................................................................47
(l) Projections...........................................................................47
(m) Pledge Agreement and Other Documents..................................................48
(n) Insurance.............................................................................48
(o) Payment Instructions..................................................................48
(p) Customer Invoices; Blocked Accounts...................................................48
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(q) Consents..............................................................................48
(r) No Adverse Material Change............................................................48
(s) Leasehold Agreements..................................................................48
(u) Contract Review.......................................................................48
(v) Closing Certificate...................................................................49
(w) Borrowing Base........................................................................49
(x) Other.................................................................................49
8.2. Conditions to Each Advance.....................................................................49
(a) Representations and Warranties........................................................49
(b) No Default............................................................................49
(c) Maximum Advances......................................................................49
IX. INFORMATION AS TO BORROWER..............................................................................49
9.1. Disclosure of Material Matters.................................................................50
9.2. Schedules......................................................................................50
9.3. Environmental Reports..........................................................................50
9.4. Litigation.....................................................................................50
9.5. Material Occurrences...........................................................................50
9.6. Government Receivables.........................................................................51
9.7. Annual Financial Statements....................................................................51
9.8. Quarterly Financial Statements.................................................................51
9.9. Monthly Financial Statements...................................................................52
9.10. Other Reports..................................................................................52
9.11. Additional Information.........................................................................52
9.12. Projected Operating Budget.....................................................................52
9.13. Variances From Operating Budget................................................................53
9.14. Notice of Suits, Adverse Events................................................................53
9.15. ERISA Notices and Requests.....................................................................53
9.16. Additional Documents...........................................................................53
X. EVENTS OF DEFAULT.......................................................................................54
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT..............................................................56
11.1. Rights and Remedies............................................................................56
11.2. Agent's Discretion.............................................................................57
11.3. Setoff.........................................................................................57
11.4. Rights and Remedies not Exclusive..............................................................57
XII. WAIVERS AND JUDICIAL PROCEEDINGS........................................................................57
12.1. Waiver of Notice...............................................................................57
12.2. Delay..........................................................................................58
12.3. Jury Waiver....................................................................................58
XIII. EFFECTIVE DATE AND TERMINATION..........................................................................58
13.1. Term...........................................................................................58
13.2. Termination....................................................................................58
XIV. REGARDING AGENT.........................................................................................59
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14.1. Appointment....................................................................................59
14.2. Nature of Duties...............................................................................59
14.3. Lack of Reliance on Agent and Resignation......................................................60
14.4. Certain Rights of Agent........................................................................60
14.5. Reliance.......................................................................................60
14.6. Notice of Default..............................................................................61
14.7. Indemnification................................................................................61
14.8. Agent in its Individual Capacity...............................................................61
14.9. Delivery of Documents..........................................................................61
14.10. Borrower's Undertaking to Agent................................................................62
XV. MISCELLANEOUS...........................................................................................62
15.1. Governing Law..................................................................................62
15.2. Entire Understanding...........................................................................62
15.3. Successors and Assigns; Participations; New Lenders............................................63
15.4. Application of Payments........................................................................65
15.5. Indemnity......................................................................................65
15.6. Notice.........................................................................................65
15.7. Survival.......................................................................................66
15.8. Severability...................................................................................66
15.9. Expenses.......................................................................................66
15.10. Injunctive Relief..............................................................................67
15.11. Consequential Damages..........................................................................67
15.12. Captions.......................................................................................67
15.13. Counterparts; Telecopied Signatures............................................................67
15.14. Construction...................................................................................67
15.15. Confidentiality................................................................................67
15.16. Factoring Agreement............................................................................68
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REVOLVING CREDIT
AND
SECURITY AGREEMENT
Revolving Credit and Security Agreement dated May 11, 2001 among CYGNE
DESIGNS, INC., a corporation organized under the laws of the State of Delaware
("Borrower"), the financial institutions which are now or which become a party
hereto (collectively, the "Lenders" and individually a "Lender") and GMAC
COMMERCIAL CREDIT LLC ("GMACCC"), a limited liability company organized under
the laws of the State of New York, as agent for the Lenders (GMACCC, in such
capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings herein contained,
Borrower, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, the Note, or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP applied in preparation of the audited
financial statements of Borrower for the fiscal year ended February 3, 2001.
1.2. GENERAL TERMS. For purposes of this Agreement the following terms
shall have the following meanings:
"ADVANCES" shall mean and include the Revolving Advances and Letters
of Credit.
"ADVANCE RATES" shall mean, collectively, the Receivables Advance Rate
and the Inventory Advance Rate.
"AFFILIATE" of any Person shall mean (a) any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person, or (b) any Person who is a director or officer (i) of such Person,
(ii) of any Subsidiary of such Person or (iii) of any Person described in clause
(a) above. For purposes of this definition, control of a Person shall mean the
power, direct or indirect, (x) to vote 10% or more of the securities having
ordinary voting power for the election of directors of such Person, or (y) to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"AGENT" shall have the meaning set forth in the preamble to this
Agreement and shall include its successors and assigns.
"AGREEMENT" shall mean this Revolving Credit and Security Agreement as
it may be amended, restated, supplemented or otherwise modified from time to
time.
"ALTERNATE BASE RATE" shall mean, for any day, a rate per annum equal
to the higher of (i) the Prime Rate in effect of such day and (ii) the Federal
Funds Rate in effect on such day plus 1/2 of 1%.
"AUTHORITY" shall have the meaning set forth in Section 4.19(d).
"AVERAGE LIBOR RATE" shall mean a calculation based on the average 30
days London Interbank Offered Rate as published in the Wall Street Journal,
averaged monthly on a calendar month basis.
"BANK" shall mean The Bank of New York and any successor thereto.
"BLOCKED ACCOUNTS" shall have the meaning set forth in Section
4.15(h).
"BORROWER" shall mean Cygne Designs, Inc., a Delaware corporation, and
all permitted successors and assigns.
"BORROWER'S ACCOUNT" shall have the meaning set forth in Section 2.8.
"BORROWER ON A CONSOLIDATED BASIS" shall mean the consolidation in
accordance with GAAP of the accounts or other items of Borrower and its
subsidiaries.
"Borrowing Base Certificate" shall mean a certificate duly executed by
an officer of Borrower appropriately completed and in substantially the form of
Exhibit 1.2 hereto.
"BUSINESS DAY" shall mean any day other than a day on which commercial
banks in New York are authorized or required by law to close.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.ss.9601 et seq.
"CFC" shall mean a controlled foreign corporation within the meaning
of Section 957 of the Code of which Borrower is a United States shareholder
within the meaning of Section 951(B) of the Code.
"CHANGE OF OWNERSHIP" shall mean the occurrence of one or more of the
following events:
(a) the direct or indirect sale, lease, exchange or other
transfer of all or substantially all of the assets of Borrower to any Person or
entity or group of Persons or entities acting in concert as a partnership or
other group (a "Group of Persons") other than a Person described in clause (a)
of the definition of Affiliate;
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(b) the consummation of any consolidation or merger of Borrower
with or into another corporation with the effect that the stockholders of
Borrower immediately prior to the date of the consolidation or merger hold
immediately after such merger or consolidation less than 51% of the combined
voting power of the outstanding voting securities of the surviving entity of
such merger, or the corporation resulting from such consolidation, ordinarily
having the right to vote in the election of directors (apart from rights
accruing under special circumstances) immediately after such merger or
consolidation;
(c) the stockholders of Borrower shall approve any plan or
proposal for the liquidation or dissolution of Borrower;
(d) a Person or Group of Persons acting in concert as a
partnership, limited partnership, syndicate or other group shall at any time
after the Closing Date, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, have become the direct
or indirect beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act of 1934, as amended) of securities of Borrower representing 30% or
more of the combined voting power of the then outstanding securities of Borrower
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of the directors; and
(e) a Person or Group of Persons, together with any Affiliates
thereof, shall over the opposition of management of Borrower succeed in having a
sufficient number of its nominees elected to the Board of Directors of Borrower
such that such nominees, when added to any existing directors remaining on the
Board of Directors of Borrower after such election who are Affiliates of such
Person or Group of Persons, will constitute a majority of the Board of Directors
of Borrower.
"CHARGES" shall mean all taxes, charges, fees, imposts, levies or
other assessments, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll, employment,
social security, unemployment, excise, severance, stamp, occupation and property
taxes, custom duties, fees, assessments, liens, claims and charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts, imposed by any taxing or other authority, domestic or
foreign (including, without limitation, the Pension Benefit Guaranty Corporation
or any environmental agency or superfund), upon the Collateral, Borrower or any
of its Affiliates.
"CLOSING DATE" shall mean May 11, 2001 or such other date as may be
agreed to by the parties hereto.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time and the regulations promulgated thereunder.
"COLLATERAL" shall mean and include:
(a) all Receivables;
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(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Investment Property (other than Subsidiary Stock);
(f) all Subsidiary Stock (other than Subsidiary Stock of a CFC)
and 65% of the Subsidiary Stock of a CFC owned by Borrower;
(g) all of Borrower's right, title and interest in and to (i) its
goods and other property including, but not limited to, all merchandise returned
or rejected by Customers, relating to or securing any of the Receivables; (ii)
all of Borrower's rights as a consignor, a consignee, an unpaid vendor,
mechanic, artisan, or other lienor, including stoppage in transit, setoff,
detinue, replevin, reclamation and repurchase; (iii) all additional amounts due
to Borrower from any Customer relating to the Receivables; (iv) other property,
including warranty claims, relating to any goods securing this Agreement; (v)
all of Borrower's contract rights, rights of payment which have been earned
under a contract right, instruments, documents, chattel paper, warehouse
receipts, deposit accounts and money; (vi) if and when obtained by Borrower, all
real and personal property of third parties in which Borrower has been granted a
lien or security interest as security for the payment or enforcement of
Receivables; and (vii) any other goods, personal property or real property now
owned or hereafter acquired in which Borrower has expressly granted a security
interest or may in the future grant a security interest to Agent hereunder, or
in any amendment or supplement hereto or thereto, or under any other agreement
between Agent and Borrower;
(h) all of Borrower's ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computers, computer
software (whether owned by Borrower or in which it has an interest), computer
programs, tapes, disks and documents relating to (a), (b), (c), (d), (e), (f),
(g) or (h) of this Paragraph; and
(i) all proceeds and products of (a), (b), (c), (d), (e), (f),
(g) and (h) in whatever form, including, but not limited to: cash, deposit
accounts (whether or not comprised solely of proceeds), certificates of deposit,
insurance proceeds (including hazard, flood and credit insurance), negotiable
instruments and other instruments for the payment of money, chattel paper,
security agreements, documents, eminent domain proceeds, condemnation proceeds
and tort claim proceeds.
"COMMITMENT PERCENTAGE" of any Lender shall mean the percentage set
forth below such Lender's name on the signature page hereof as same may be
adjusted upon any assignment by a Lender pursuant to Section 15.3(b) hereof.
"COMMITMENT TRANSFER SUPPLEMENT" shall mean a document in the form of
Exhibit 15.3 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.
4
"CONSENTS" shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and other third parties, domestic or foreign, necessary to carry on Borrower's
business, including, without limitation, any Consents required under all
applicable federal, state or other applicable law.
"CONTROLLED GROUP" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Borrower, are treated as a single employer
under Section 414 of the Code.
"CREDIT BALANCE" shall mean the amount from time to time owing to
Borrower from GMACCC under the Factoring Agreement, net of all commissions,
interest, taxes and reserves.
"CURRENT ASSETS" at a particular date, shall mean all cash, cash
equivalents, accounts and inventory of Borrower on a Consolidated Basis and all
other items which would, in conformity with GAAP, be included under current
assets on a balance sheet of Borrower on a Consolidated Basis as at such date;
provided, however, that such amounts shall not include (a) any amounts for any
Indebtedness owing by an Affiliate of Borrower, unless such Indebtedness arose
in connection with the sale of goods or rendition of services in the ordinary
course of business and would otherwise constitute current assets in conformity
with GAAP, (b) any shares of stock issued by an Affiliate of Borrower, or (c)
the cash surrender value of any life insurance policy.
"CURRENT LIABILITIES" at a particular date, shall mean all amounts
which would, in conformity with GAAP, be included under current liabilities on a
balance sheet of Borrower on a Consolidated Basis, as at such date, but in any
event including, without limitation, the amounts of (a) all Indebtedness of
Borrower on a Consolidated Basis payable on demand, or, at the option of the
Person to whom such Indebtedness is owed, not more than twelve (12) months after
such date, (b) any payments in respect of any Indebtedness of Borrower (whether
installment, serial maturity, sinking fund payment or otherwise) required to be
made not more than twelve (12) months after such date, (c) all reserves in
respect of liabilities or Indebtedness payable on demand or, at the option of
the Person to whom such Indebtedness is owed, not more than twelve (12) months
after such date, the validity of which is not contested at such date, and (d)
all accruals for federal or other taxes measured by income payable within a
twelve (12) month period.
"CUSTOMER" shall mean and include the account debtor with respect to
any Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with Borrower, pursuant
to which Borrower is to deliver any personal property or perform any services.
"DEFAULT" shall mean an event which, with the giving of notice or
passage of time or both, would constitute an Event of Default.
"DEFAULT RATE" shall have the meaning set forth in Section 3.1 hereof.
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"DEFAULTING LENDER" shall have the meaning set forth in Section
2.16(a) hereof.
"DEPOSITORY ACCOUNTS" shall have the meaning set forth in Section
4.15(h) hereof.
"DESIGNATED DILLARD RECEIVABLES" shall mean Receivables due from
Dillard's the invoices for which were issued from and including February 1, 2001
through and including April 30, 2001.
"DILUTION" shall mean a reduction, as determined by Agent in its
reasonable discretion, in the value of Receivables caused by returns,
allowances, discounts, rebills, credits, write-offs, coop advertising and/or any
other offsets asserted or assertable by Customers which could reasonably be
expected to have the effect of reducing collections received with respect to
such Receivables.
"DILUTION RESERVE" shall mean a reserve against the Formula Amount for
Dilution as may be determined by Agent in its reasonable discretion.
"DOCUMENTS" shall have the meaning set forth in Section 8.1(c) hereof.
"DOLLARS" and the sign "$" shall mean lawful money of the United
States of America.
"DOMESTIC RATE LOAN" shall mean any Advance that bears interest based
upon the Alternate Base Rate.
"EARNINGS BEFORE INTEREST AND TAXES" shall mean for any period the sum
of (i) net income (or loss) of Borrower on a Consolidated Basis for such period
(excluding extraordinary gains and losses), plus (ii) all interest expense of
Borrower on a Consolidated Basis for such period, plus (iii) all charges against
Borrower's income of Borrower on a Consolidated Basis for such period for
federal, state and local taxes actually paid.
"EBITDA" shall mean for any period the sum of (i) Earnings Before
Interest and Taxes for such period, plus (ii) depreciation expenses for such
period, plus (iii) amortization expenses for such period.
"ELIGIBLE INVENTORY" shall mean and include Inventory, excluding work
in process, valued at the lower of cost or market value, determined on a
first-in-first-out basis, which is not, in Agent's opinion, obsolete, slow
moving or unmerchantable and which Agent, in its reasonable discretion, shall
not deem ineligible Inventory, based on such considerations as Agent may from
time to time deem appropriate including, without limitation, whether the
Inventory is subject to a perfected, first priority security interest in favor
of Agent and whether the Inventory conforms to all standards imposed by any
governmental agency, division or department thereof which has regulatory
authority over such goods or the use or sale thereof. Eligible Inventory shall
include all Inventory in-transit for which title has passed to Borrower, which
is insured to the full value thereof (subject to applicable deductibles which
are satisfactory to Agent), is in route to, or located within, the United States
of America, and for which Agent
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shall have in its possession (a) all negotiable bills of lading properly
endorsed and (b) all non-negotiable bills of lading issued in Agent's name.
"ELIGIBLE XXXXXX RECEIVABLES" shall mean Eligible Receivables due from
Xxxxxxx New York.
"ELIGIBLE RECEIVABLES" shall mean each Receivable arising in the
ordinary course of Borrower's business and which Agent, in its reasonable credit
judgment, shall deem to be an Eligible Receivable, based on such considerations
as Agent may from time to time deem appropriate. A Receivable shall not be
deemed eligible unless such Receivable is subject to Agent's first priority
perfected security interest and no other Lien (other than Permitted
Encumbrances), and is evidenced by an invoice, xxxx of lading or other
documentary evidence satisfactory to Agent. In addition, no Receivable shall be
an Eligible Receivable if:
(a) it arises out of a sale made by Borrower to an Affiliate of
Borrower or to a Person controlled by an Affiliate of Borrower;
(b) it is due or unpaid more than (i) sixty (60) days after the
original due date with respect to Receivables other than Designated Dillard
Receivables or (ii) ninety (90) days after the original due date with respect to
Designated Dillard Receivables;
(c) twenty-five percent (25%) or more of the Receivables from the
Customer are not deemed Eligible Receivables hereunder;
(d) any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached;
(e) the Customer shall (i) apply for, suffer, or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property or call
a meeting of its creditors, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business, (iii) make a general assignment for the benefit of creditors, (iv)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is
filed against it in any involuntary case under such bankruptcy laws, or (viii)
take any action for the purpose of effecting any of the foregoing;
(f) the sale is to a Customer outside the continental United
States of America, unless the sale is on letter of credit, guaranty or
acceptance terms, in each case acceptable to Agent in its sole discretion;
(g) the sale to the Customer is on a xxxx-and-hold, guaranteed
sale, sale-and-return, sale on approval, consignment or any other repurchase or
return basis or is evidenced by chattel paper;
7
(h) Agent believes, in its reasonable credit judgment, that
collection of such Receivable is insecure or that such Receivable may not be
paid by reason of the Customer's financial inability to pay;
(i) the Customer is the United States of America, any state or
any department, agency or instrumentality of any of them, unless Borrower
effectuates an assignment of its right to payment of such Receivable to Agent
pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C.
Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise
complied with other applicable statutes or ordinances;
(j) the goods giving rise to such Receivable have not been
shipped and delivered to and accepted by the Customer or the services giving
rise to such Receivable have not been performed by Borrower and accepted by the
Customer or the Receivable otherwise does not represent a final sale;
(k) the Receivables of the Customer exceed a credit limit
determined by Agent, in its reasonable discretion, to the extent such Receivable
exceeds such limit;
(l) the Receivable is subject to any offset, deduction, defense,
dispute, or counterclaim, the Customer is also a creditor or supplier of
Borrower or the Receivable is contingent in any respect or for any reason, but
only to the extent of any such offset, deduction, defense, dispute or
counterclaim;
(m) Borrower has made any agreement with any Customer for any
deduction therefrom (except for discounts or allowances made in the ordinary
course of business for prompt payment, all of which discounts or allowances are
reflected in the calculation of the face value of each respective invoice
related thereto), but only to the extent of any such deduction therefrom;
(n) any return, rejection or repossession of the merchandise has
occurred, but only to the extent of such return, rejection or repossession;
(o) such Receivable is not payable to Borrower;
(p) such Receivable is not a Factored Account; or
(q) such Receivable is not otherwise satisfactory to Agent as
determined in good faith by Agent in the exercise of its discretion in a
reasonable manner.
"ENVIRONMENTAL COMPLAINT" shall have the meaning set forth in Section
4.19(d) hereof.
"ENVIRONMENTAL LAWS" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances
8
and the rules, regulations, policies, guidelines, interpretations, decisions,
orders and directives of federal, state and local governmental agencies and
authorities with respect thereto.
"EQUIPMENT" shall mean and include all of Borrower's goods (excluding
Inventory) whether now owned or hereafter acquired and wherever located
including, without limitation, all equipment, machinery, apparatus, motor
vehicles, fittings, furniture, furnishings, fixtures, parts, accessories and all
replacements and substitutions therefor or accessions thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and the rules and regulations promulgated
thereunder.
"EURODOLLAR RATE LOAN" shall mean an Advance at any time that bears
interest based on the Average LIBOR Rate.
"EVENT OF DEFAULT" shall mean the occurrence of any of the events set
forth in Article X hereof.
"FACTORED ACCOUNT" shall mean those Receivables which have been
assigned by Borrower to GMACCC and which have been credit approved by GMACCC
under the Factoring Agreement.
"FACTORING AGREEMENT" shall mean the Factoring Agreement dated as of
the Closing Date by and between Borrower and GMACCC, as amended, modified and
supplemented from time to time.
"FEDERAL FUNDS RATE" shall mean, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of quotations for such day on such
transactions received by the Bank from three Federal funds brokers of recognized
standing selected by the Bank.
"FIXED ASSETS" shall mean Equipment and Real Property.
"FIXED CHARGE COVERAGE" shall mean and include, with respect to any
fiscal period, the ratio of (a) EBITDA plus capitalized lease payments during
such period to (b) all Senior Debt Payments.
"FORMULA AMOUNT" shall have the meaning set forth in Section 2.1(a).
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"GENERAL INTANGIBLES" shall mean and include all of Borrower's general
intangibles, whether now owned or hereafter acquired including, without
limitation, all choses in action, causes of action, corporate or other business
records, inventions, designs, patents, patent
9
applications, equipment formulations, manufacturing procedures, quality control
procedures, trademarks, service marks, trade secrets, goodwill, copyrights,
design rights, registrations, licenses, franchises, customer lists, tax refunds,
tax refund claims, computer programs, all claims under guaranties, security
interests or other security held by or granted to Borrower to secure payment of
any of the Receivables by a Customer, all rights of indemnification, all Credit
Balances and all other intangible property of every kind and nature (other than
Receivables).
"GMACCC" shall have the meaning set forth in the preamble to this
Agreement and shall include its successors and assigns.
"GOVERNMENTAL BODY" shall mean any nation or government, any state or
other political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.
"GUARANTOR" shall mean any Person that becomes obligated under a
Guaranty.
"GUARANTY" shall mean any guaranty of the obligations of Borrower
executed in favor of Agent for the ratable benefit of Lenders.
"HAZARDOUS DISCHARGE" shall have the meaning set forth in Section
4.19(d) hereof.
"HAZARDOUS SUBSTANCE" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or toxic substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New York State Environmental Conservation Law or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
"HAZARDOUS WASTES" shall mean all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous
waste disposal.
"INDEBTEDNESS" of a Person at a particular date shall mean all
obligations of such Person which in accordance with GAAP would be classified
upon a balance sheet as liabilities (except capital stock and surplus earned or
otherwise) and in any event, without limitation by reason of enumeration, shall
include all indebtedness, debt and other similar monetary obligations of such
Person whether direct or guaranteed, and all premiums, if any, due at the
required prepayment dates of such indebtedness, and all indebtedness secured by
a Lien on assets owned by such Person, whether or not such indebtedness actually
shall have been created, assumed or incurred by such Person. Any indebtedness of
such Person resulting from the acquisition by such Person of any assets subject
to any Lien shall be deemed, for the purposes hereof, to be the equivalent of
the creation, assumption and incurring of the indebtedness secured thereby,
whether or not actually so created, assumed or incurred.
"INVENTORY" shall mean all of Borrower's now owned or hereafter
acquired goods, merchandise and other personal property, wherever located, to be
furnished under any contract of
10
service or held for sale or lease, all raw materials, work in process, finished
goods and materials and supplies of any kind, nature or description which are or
might be used or consumed in Borrower's business or used in selling or
furnishing such goods, merchandise and other personal property, and all
documents of title or other documents representing them.
"INVENTORY ADVANCE RATE" shall have the meaning set forth in Section
2.1(a)(ii) hereof.
"INVESTMENT PROPERTY" shall mean and include all of Borrower's now
owned or hereafter acquired securities (whether certificated or uncertificated),
securities entitlements, securities accounts, commodities contracts and
commodities accounts.
"LENDER" AND "LENDERS" shall have the meaning ascribed to such term in
the preamble to this Agreement, and shall include each Person which is a
transferee, successor or assign of any Lender.
"LETTERS OF CREDIT" shall have the meaning set forth in Section 2.9.
"LETTER OF CREDIT FEES" shall have the meaning set forth in Section
3.2.
"LIEN" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), claim or
encumbrance, or preference, priority or other security agreement or preferential
arrangement held or asserted in respect of any asset of any kind or nature
whatsoever including, without limitation, any conditional sale or other title
retention agreement, any lease having substantially the same economic effect as
any of the foregoing, and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (i)
the condition, operations, assets, business or prospects of the applicable
Person or Persons, (ii) Borrower's ability to pay the Obligations in accordance
with the terms thereof, (iii) the value of the Collateral, or the Liens on the
Collateral or the priority of any such Lien, or (iv) the practical realization
of the benefits of Agent's and Lenders' rights and remedies under this Agreement
and the Other Documents.
"MAXIMUM REVOLVING ADVANCE AMOUNT" shall mean $8,000,000.
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as defined in
Sections 3(37) and 4001 (a)(3) of ERISA.
"NET WORTH" at a particular date, shall mean all amounts which would
be included under shareholders' equity on a balance sheet of Borrower determined
in accordance with GAAP as at such date.
"OBLIGATIONS" shall mean and include any and all of Borrower's
Indebtedness and/or liabilities to Agent or the Lenders or any corporation that
directly or indirectly controls or is controlled by or is under common control
with Agent or any Lender of every kind, nature and
11
description, direct or indirect, secured or unsecured, joint, several, joint and
several, absolute or contingent, due or to become due, now existing or hereafter
arising, contractual or tortious, liquidated or unliquidated, regardless of how
such indebtedness or liabilities arise or by what agreement or instrument they
may be evidenced or whether evidenced by any agreement or instrument, including,
but not limited to, any and all of Borrower's Indebtedness and/or liabilities
under this Agreement, the Other Documents or under any other agreement between
Agent or the Lenders and Borrower and all obligations of Borrower to Agent or
the Lenders to perform acts or refrain from taking any action.
"OTHER DOCUMENTS" shall mean the Factoring Agreement, the Note, the
Questionnaire and any and all other agreements, instruments and documents,
including, without limitation, guaranties, pledges, powers of attorney,
consents, and all other writings heretofore, now or hereafter executed by
Borrower and delivered to Agent or any Lender in respect of the transactions
contemplated by this Agreement.
"OVERADVANCE" shall have the meaning set forth in Section 2.7 hereof.
"PARENT" of any Person shall mean a corporation or other entity
owning, directly or indirectly at least 50% of the shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
directors of the Person, or other Persons performing similar functions for any
such Person.
"PARTICIPANT" shall mean each Person who shall be granted the right by
any Lender to participate in any of the Advances and who shall have entered into
a participation agreement in form and substance satisfactory to such Lender.
"PAYMENT OFFICE" shall mean initially 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx
Xxxx, Xxx Xxxx 00000; thereafter, such other office of Agent, if any, which it
may designate by notice to Borrower and each Lender to be the Payment Office.
"PERMITTED ENCUMBRANCES" shall mean (a) Liens in favor of Agent for
the benefit of Agent and Lenders; (b) Liens for taxes, assessments or other
governmental charges not delinquent or being contested in good faith and by
appropriate proceedings and with respect to which proper reserves have been
taken by Borrower; provided, that, the Lien shall have no effect on the priority
of the Liens in favor of Agent or the value of the assets in which Agent has
such a Lien and a stay of enforcement of any such Lien shall be in effect; (c)
Liens disclosed in the financial statements referred to in Section 5.5, the
existence of which Agent has consented to in writing; (d) deposits or pledges to
secure obligations under worker's compensation, social security or similar laws,
or under unemployment insurance; (e) deposits or pledges to secure bids,
tenders, contracts (other than contracts for the payment of money), leases,
statutory obligations, surety and appeal bonds and other obligations of like
nature arising in the ordinary course of Borrower's business; (f) judgment Liens
that have been stayed or bonded and mechanics', workers', materialmen's or other
like Liens arising in the ordinary course of Borrower's business with respect to
obligations which are not due or which are being contested in good faith by
Borrower; (g) Liens placed upon fixed assets hereafter acquired to secure a
portion of the purchase price thereof, provided that (x) any such lien shall not
encumber any other property of Borrower and (y) the aggregate amount of
Indebtedness secured by such Liens
12
incurred as a result of such purchases during any fiscal year shall not exceed
the amount provided for in Section 7.6; (h) Liens disclosed on Schedule 1.2.;
(i) zoning restrictions, easements, licenses or other restrictions on the use of
any 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 Property; and (j) any interest or title of a lessor
under any lease (other than a capital lease) or licensor under any license
covering only the asset so leased or licensed.
"PERSON" shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, institution, public
benefit corporation, joint venture, entity or government (whether Federal,
state, county, city, municipal or otherwise, including any instrumentality,
division, agency, body or department thereof).
"PLAN" shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA, maintained for employees of Borrower or any member of the
Controlled Group or any such Plan to which Borrower or any member of the
Controlled Group is required to contribute on behalf of any of its employees.
"PREPAYMENT DATE" shall have the meaning set forth in Section 13.1
hereof.
"PRIME RATE" shall mean the prime commercial lending rate of the Bank
as publicly announced to be in effect from time to time, such rate to be
adjusted automatically, without notice, on the effective date of any change in
such rate. This rate of interest is determined from time to time by the Bank as
a means of pricing some loans to its customers and is neither tied to any
external rate of interest or index nor does it necessarily reflect the lowest
rate of interest actually charged by the Bank to any particular class or
category of customers of the Bank.
"PROJECTIONS" shall have the meaning set forth in Section 5.5(a)
hereof.
"PURCHASING LENDER" shall have the meaning set forth in Section 15.3
hereof.
"QUESTIONNAIRE" shall mean the Documentation Information Questionnaire
and the responses thereto provided by Borrower and delivered to Agent.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42
U.S.C.ss.ss.6901 et seq., as same may be amended from time to time.
"REAL PROPERTY" shall have the meaning set forth in Section 4.19(i)
hereof.
"RECEIVABLES" shall mean and include all of Borrower's accounts,
contract rights, instruments (including those evidencing indebtedness owed to
Borrower by its Affiliates), documents, chattel paper, general intangibles
relating to accounts, drafts and acceptances, and all other forms of obligations
owing to Borrower arising out of or in connection with the sale or lease of
Inventory or the rendition of services, all guarantees and other security
therefor, whether
13
secured or unsecured, now existing or hereafter created, and whether or not
specifically sold or assigned to the Agent hereunder.
"RECEIVABLES ADVANCE RATE" shall have the meaning set forth in Section
2.1(a)(ii) hereof.
"RELEASE" shall have the meaning set forth in Section 5.7(c)(i)
hereof.
"REPORTABLE EVENT" shall mean a reportable event described in Section
4043(b) of ERISA or of the regulations promulgated thereunder.
"REQUIRED LENDERS" shall mean Lenders holding at least fifty-one
percent (51%) of the Advances.
"REVOLVING ADVANCES" shall mean Advances made other than Letters of
Credit.
"REVOLVING CREDIT NOTE" shall mean the promissory note referred to in
Section 2.1(a) hereof.
"REVOLVING INTEREST RATE" shall mean an interest rate per annum equal
to (a) the sum of the Average LIBOR Rate plus three (3%) percent with respect to
Eurodollar Rate Loans, and (b) the sum of the Alternate Base Rate plus one
(1.00%) percent with respect to Domestic Rate Loans.
"SENIOR DEBT PAYMENTS" shall mean and include all cash actually
expended by Borrower to make (a) interest payments on any Advances hereunder,
plus, (b) payments for all fees, commissions and charges set forth herein and
with respect to any Advances, plus (c) capitalized lease payments, plus (d)
scheduled principal payments with respect to all Indebtedness for borrowed money
(other than principal repayments of Revolving Advances).
"SETTLEMENT DATE" shall mean the Closing Date and thereafter Wednesday
of each week unless such day is not a Business Day in which case it shall be the
next succeeding Business Day.
"SUBSIDIARY" shall mean a corporation or other entity of whose shares
of stock or other ownership interests having ordinary voting power (other than
stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"SUBSIDIARY STOCK" shall mean all of the issued and outstanding shares
of stock owned by Borrower of the Subsidiaries listed on Schedule 5.2 hereof.
"TANGIBLE NET WORTH" shall mean, at a particular date, (a) the
aggregate amount of all assets of Borrower on a Consolidated Basis as may be
properly classified as such in accordance with GAAP consistently applied
excluding such other assets as are properly classified as intangible assets
under GAAP, less (b) the aggregate amount of all liabilities of
14
Borrower on a Consolidated Basis, plus (c) indebtedness which is subordinated to
the Obligations in a manner reasonably satisfactory to Agent.
"TERM" shall mean the Closing Date through May 10 2004.
"TERMINATION EVENT" shall mean (i) a Reportable Event with respect to
any Plan or Multiemployer Plan; (ii) the withdrawal of Borrower or any member of
the Controlled Group from a Plan or Multiemployer Plan during a plan year in
which such entity was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; (iii) the providing of notice of intent to terminate a Plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the institution
by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any
event or condition (a) which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan or Multiemployer Plan, or (b) that may result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of
Borrower or any member of the Controlled Group from a Multiemployer Plan.
"TOXIC SUBSTANCE" shall mean and include any material present on the
Real Property or the Leasehold Interests which has been shown to have
significant adverse effect on human health or which is subject to regulation
under the Toxic Substances Control Act (TSCA), 15 U.S.C. xx.xx. 2601 et seq.,
applicable state law, or any other applicable Federal or state laws now in force
or hereafter enacted relating to toxic substances. "Toxic substance" includes
but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based
paints.
"TRANSFEREE" shall have the meaning set forth in Section 15.3(b)
hereof.
"UNDRAWN AVAILABILITY" at a particular date shall mean an amount equal
to (a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving
Advance Amount, minus (b) the sum of (i) the outstanding amount of Advances plus
(ii) all amounts due and owing to Borrower's trade creditors which are
outstanding beyond normal trade terms plus (iii) fees and expenses for which
Borrower is liable but which have not been paid or charged to Borrower's
Account.
"WEEK" shall mean the time period commencing with the opening of
business on a Wednesday and ending on the end of business the following Tuesday.
"WORKING CAPITAL" at a particular date, shall mean the excess, if any,
of Current Assets minus Current Liabilities at such date.
1.3. Uniform Commercial Code Terms. All terms used herein and defined in
the Uniform Commercial Code as adopted in the State of New York shall have the
meaning given therein unless otherwise defined herein.
1.4 Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and
15
vice versa. All references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations. All references to
any instruments or agreements to which Agent is a party, including, without
limitation, references to any of the Other Documents, shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.
II. ADVANCES, PAYMENTS.
2.1. (a) REVOLVING ADVANCES. Subject to the terms and conditions set forth
in this Agreement, each Lender, severally and not jointly, will make Revolving
Advances to Borrower in aggregate amounts outstanding at any time not greater
than such Lender's Commitment Percentage of the lesser of (x) the Maximum
Revolving Advance Amount less the aggregate amount of outstanding Letters of
Credit or (y) an amount equal to the sum of:
(i) up to 90%, subject to the provisions of Section 2.1(b) hereof
("Xxxxxx Receivables Advance Rate"), of Eligible Xxxxxx Receivables,
plus
(ii) up to 80%, subject to the provisions of Section 2.1(b)
hereof (the "General Receivable Advance Rate" and collectively with
the Xxxxxx Receivables Advance Rate, the "Receivable Advance Rate") of
Eligible Receivables other than Eligible Xxxxxx Receivables, plus
(iii) up to the lesser of (A) 60%, subject to the provisions of
Section 2.1(b) hereof ("Inventory Advance Rate"), of the value of the
Eligible Inventory or (B) $2,000,000 in the aggregate at any one time,
minus
(iv) the aggregate amount of outstanding Letters of Credit, minus
(v) such reserves as Agent may deem proper and necessary from
time to time in its sole discretion, including, without limitation,
the Dilution Reserve.
The amount derived from the sum of (x) Sections 2.1(a)(y)(i), (ii) and
(iii) minus (y) Section 2.1 (a)(y)(v) at any time and from time to time shall be
referred to as the "Formula Amount". The Revolving Advances shall be evidenced
by the secured promissory note ("Revolving Credit Note") substantially in the
form attached hereto as EXHIBIT 2.1(A).
(b) DISCRETIONARY RIGHTS. The Advance Rates may be increased or
decreased by Agent at any time and from time to time in the exercise of its
reasonable discretion. Borrower consents to any such increases or decreases and
acknowledges that decreasing the Advance Rates or increasing the reserves may
limit or restrict Advances requested by Borrower. Agent shall give Borrower five
(5) days prior written notice of its intention to decrease the Advance Rates.
2.2. PROCEDURE FOR BORROWING REVOLVING ADVANCES. (a) Borrower may notify
Agent prior to 11:00 a.m. on a Business Day of its request to incur, on that
day, a Revolving Advance hereunder. Should any amount required to be paid as
interest hereunder, or as fees or other charges under this Agreement or any
other agreement with Agent or Lenders, or with respect to
16
any other Obligation, become due, same shall be deemed a request for a Revolving
Advance as of the date such payment is due, in the amount required to pay in
full such interest, fee, charge or Obligation under this Agreement or any other
agreement with Agent or Lenders, and such request shall be irrevocable.
Notwithstanding the foregoing, Lenders will not make any Revolving Advance
pursuant to any notice unless Agent has received the most recent Borrowing Base
Certificate required under Section 9.2 hereof.
(b) Provided that no Event of Default shall have occurred and be
continuing, Borrower may convert any loan into a loan of another type in the
same aggregate principal amount. If Borrower desires to convert a loan, it shall
give Agent not less than one (1) Business Day's prior written notice, specifying
the date of such conversion, the loans to be converted and if the conversion is
from a Domestic Rate Loan or from a Eurodollar Rate Loan.
2.3. DISBURSEMENT OF ADVANCE PROCEEDS. All Advances shall be disbursed from
whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrower to Agent or Lenders,
shall be charged to Borrower's Account on Agent's books. During the Term,
Borrower may use the Revolving Advances by borrowing, prepaying and reborrowing,
all in accordance with the terms and conditions of this Agreement. The proceeds
of each Revolving Advance requested by Borrower or deemed to have been requested
by Borrower under Section 2.2(a) hereof shall, with respect to requested
Revolving Advances to the extent the Lenders make such Revolving Advances, be
made available to Borrower on the day so requested by way of credit to
Borrower's operating account at Bank, or such other bank as Borrower may
designate following notification to Agent, in immediately available federal
funds or other immediately available funds or, with respect to Revolving
Advances deemed to have been requested, be disbursed to Agent to be applied to
the outstanding Obligations giving rise to such deemed request.
2.4. INTENTIONALLY OMITTED.
2.5. MAXIMUM ADVANCES. The aggregate balance of Advances outstanding at any
time shall not exceed the lesser of (a) Maximum Revolving Advance Amount or (b)
the Formula Amount.
2.6. REPAYMENT OF ADVANCES.
(a) The Advances shall be due and payable in full on the last day of
the Term subject to earlier prepayment as herein provided.
(b) Borrower recognizes that the amounts evidenced by checks, notes,
drafts or any other items of payment relating to and/or proceeds of Collateral
may not be collectible by Agent on the date received. In consideration of
Agent's agreement to conditionally credit Borrower's account as of the Business
Day on which Agent receives those items of payment, Borrower agrees that, in
computing the charges under this Agreement, all items of payment shall be deemed
applied by Agent on account of the Obligations two (2) Business Days after
confirmation to Agent by the Blocked Account bank or the Depositary Account
bank, as provided for in Section 4.15(h) hereof, that such items of payment have
been collected in good funds and finally credited to Agent's account. Agent is
not, however, required to credit
17
Borrower's Account for the amount of any item of payment which is unsatisfactory
to Agent and Agent may charge Borrower's Account for the amount of any item of
payment which is returned to Agent unpaid.
(c) All payments of principal, interest and other amounts payable
hereunder, or under any of the related agreements shall be made to Agent at the
Payment Office not later than 1:00 P.M. (New York Time) on the due date therefor
in lawful money of the United States of America in federal funds or other funds
immediately available to Agent. Agent shall have the right to effectuate payment
on any and all Obligations due and owing hereunder by charging Borrower's
Account or by making Advances as provided in Section 2.2 hereof.
(d) Borrower shall pay principal, interest, and all other amounts
payable hereunder, or under any Other Documents, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
2.7. REPAYMENT OF OVERADVANCES. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder (any such excess an "Overadvance") shall be immediately due and
payable without the necessity of any demand, at the Payment Office, whether or
not a Default or Event of Default has occurred; provided, however,
notwithstanding the foregoing, any Overadvance resulting from Agent's decrease
of the Advance Rates in the exercise of its discretion pursuant to section
2.1(b) hereof shall be due and payable only upon Agent making demand.
2.8. STATEMENT OF ACCOUNT. Agent shall maintain, in accordance with its
customary procedures, a loan account ("Borrower's Account") in the name of
Borrower in which shall be recorded the date and amount of each Advance made by
Lenders and the date and amount of each payment in respect thereof; provided,
however, the failure by Agent to record the date and amount of any Advance shall
not adversely affect Agent or any Lender. Each month, Agent shall send to
Borrower a statement showing the accounting for the Advances made, payments made
or credited in respect thereof, and other transactions between Lenders and
Borrower, during such month. The monthly statements shall be deemed correct and
binding upon Borrower in the absence of manifest error and shall constitute an
account stated between Lenders and Borrower unless Agent receives a written
statement of Borrower's specific exceptions thereto within thirty (30) days
after such statement is received by Borrower. The records of Agent with respect
to the loan account shall be prima facie evidence of the amounts of Advances and
other charges thereto and of payments applicable thereto.
2.9. LETTERS OF CREDIT. Subject to the terms and conditions hereof, Agent
shall issue or cause the issuance of Letters of Credit ("Letters of Credit") on
behalf of Borrower; provided, however, that Agent will not be required to issue
or cause to be issued any Letters of Credit to the extent that the face amount
of such Letters of Credit would then cause the sum of (i) the outstanding
Revolving Advances plus (ii) outstanding Letters of Credit (with the requested
Letter of Credit being deemed to be outstanding for purposes of this
calculation) to exceed the lesser of (x) the Maximum Revolving Advance Amount or
(y) the Formula Amount which is calculated as if the requested Letter of Credit
has been issued. The maximum amount of outstanding Letters of Credit shall not
exceed $5,000,000 in the aggregate at any time. All disbursements or payments
related to Letters of Credit shall be deemed to be Revolving Advances and shall
bear
18
interest at the Revolving Interest Rate; Letters of Credit that have not been
drawn upon shall not bear interest. Letters of Credit shall be subject to the
terms and conditions set forth in the Letter of Credit and Security Agreement
attached hereto as Exhibit 2.9.
2.10. ISSUANCE OF LETTERS OF CREDIT.
(a) Borrower may request Agent to issue or cause the issuance of a
Letter of Credit by delivering to Agent at the Payment Office, Agent's standard
form of Letter of Credit and Security Agreement together with Bank's standard
form of Letter of Credit Application (collectively, the "Letter of Credit
Application") completed to the satisfaction of Agent; and, such other
certificates, documents and other papers and information as Agent may reasonably
request.
(b) Each Letter of Credit shall, among other things, (i) provide for
the payment of sight drafts when presented for honor thereunder in accordance
with the terms thereof and when accompanied by the documents described therein
and (ii) have an expiry date not later than six (6) months after such Letter of
Credit's date of issuance and in no event later than the last day of the Term.
Each Letter of Credit Application and each Letter of Credit shall be subject to
the Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500, and any amendments or
revision thereof and, to the extent not inconsistent therewith, the laws of the
State of New York.
2.11. REQUIREMENTS FOR ISSUANCE OF LETTERS OF CREDIT.
(a) In connection with the issuance of any Letter of Credit, Borrower
shall indemnify, save and hold Agent and each Lender harmless from any loss,
cost, expense or liability, including, without limitation, payments made by
Agent and any Lender, and expenses and reasonable attorneys' fees incurred by
Agent or any Lender arising out of, or in connection with, any Letter of Credit
to be issued or created for Borrower. Borrower shall be bound by Agent's or any
issuing or accepting bank's regulations and good faith interpretations of any
Letter of Credit issued or created for Borrower's Account, although this
interpretation may be different from its own; and, neither Agent nor any Lender,
the bank which opened the Letter of Credit, nor any of its correspondents shall
be liable for any error, negligence, or mistakes, whether of omission or
commission, in following Borrower's instructions or those contained in any
Letter of Credit or of any modifications, amendments or supplements thereto or
in issuing or paying any Letter of Credit except for Agent's or any Lender's or
such correspondents' willful misconduct.
(b) Borrower shall authorize and direct any bank which issues a Letter
of Credit to name Borrower as the "Account Party" therein and to accept and rely
upon Agent's instructions and agreements with respect to all matters arising in
connection with the Letter of Credit, the application therefor or any acceptance
therefor and, in connection with documentary Letters of Credit, to deliver to
Agent all instruments, documents, and other writings and property received by
the bank pursuant to the Letter of Credit; provided, however, with respect to
goods to be delivered to Borrower or a Subsidiary of Borrower outside of the
United States, until Agent provides the issuer bank with contrary instructions
following and during the continuation of an Event of Default, the issuer bank
shall deliver to Borrower, or a Subsidiary of Borrower, all
19
instruments, documents and other writings and property received by the bank
pursuant to such Letter of Credit.
(c) In connection with all documentary Letters of Credit issued or
caused to be issued by Agent under this Agreement, Borrower hereby appoints
Agent, or its designee, as its attorney, with full power and authority (i) to
sign and/or endorse Borrower's name upon any warehouse or other receipts, letter
of credit applications and acceptances; (ii) to sign Borrower's name on bills of
lading; (iii) to clear Inventory through the United States of America Customs
Department ("Customs") in the name of Borrower or Agent or Agent's designee, and
to sign and deliver to Customs officials powers of attorney in the name of
Borrower for such purpose; and (iv) to complete in Borrower's name or Agent's,
or in the name of Agent's designee, any order, sale or transaction, obtain the
necessary documents in connection therewith, and collect the proceeds thereof.
Neither Agent nor its attorneys will be liable for any acts or omissions nor for
any error of judgment or mistakes of fact or law, except for Agent's or its
attorney's willful misconduct. This power, being coupled with an interest, is
irrevocable as long as any Letters of Credit remain outstanding.
(d) Each Lender shall be deemed to have irrevocably purchased an
undivided participation in Agent's credit support enhancement provided to the
issuing bank of any Letter of Credit and each Revolving Advance made as a
consequence of the issuance of a Letter of Credit and all disbursements
thereunder in an amount equal to such Lender's applicable Commitment Percentage
times the outstanding amount of the Letters of Credit and disbursements
thereunder. In the event that at the time a disbursement is made the unpaid
balance of Revolving Advances exceeds or would exceed, with the making of such
disbursement, the lesser of the Maximum Revolving Advance Amount or the Formula
Amount, and such disbursement is not reimbursed by Borrower within two (2)
Business Days, Agent shall promptly notify each Lender and upon Agent's demand
each Lender shall pay to Agent such Lender's proportionate share of such
unreimbursed disbursement together with such Lender's proportionate share of
Agent's unreimbursed costs and expenses relating to such unreimbursed
disbursement. Upon receipt by Agent of a repayment from Borrower of any amount
disbursed by Agent for which Agent had already been reimbursed by the Lenders,
Agent shall deliver to each Lender that Lender's pro rata share of such
repayment. Each Lender's participation commitment shall continue until the last
to occur of any of the following events: (A) Agent ceases to be obligated to
issue Letters of Credit hereunder; (B) no Letter of Credit issued hereunder
remains outstanding and uncancelled or (C) all Persons (other than Borrower)
have been fully reimbursed for all payments made under or relating to Letters of
Credit.
2.12. ADDITIONAL PAYMENTS. Any sums expended by Agent or any Lender due to
Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document including, without limitation, Borrower's
obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be
charged to Borrower's Account as a Revolving Advance and added to the
Obligations.
2.13. MANNER OF BORROWING AND PAYMENT.
(a) Each borrowing of Revolving Advances shall be advanced according
to the Commitment Percentages of the Lenders.
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(b) Each payment (including each prepayment) by Borrower on account of
the principal of and interest on the Revolving Credit Note, shall be applied to
the Revolving Advances pro rata according to the Commitment Percentages of the
Lenders. Except as expressly provided herein, all payments (including
prepayments) to be made by Borrower on account of principal, interest and fees
shall be made without set-off or counterclaim and shall be made to Agent on
behalf of the Lenders to the Payment Office, in each case on or prior to 1:00
P.M., New York time, in Dollars and in immediately available funds.
(c) (i) Notwithstanding anything to the contrary contained in Sections
2.13(a) and (b) hereof, commencing with the first Business Day following the
Closing Date, each borrowing of Revolving Advances shall be advanced by Agent
and each payment by Borrower on account of Revolving Advances shall be applied
first to those Revolving Advances made by Agent. On or before 1:00 P.M., New
York time, on each Settlement Date commencing with the first Settlement Date
following the Closing Date, Agent and the Lenders shall make certain payments as
follows: (I) if the aggregate amount of new Revolving Advances made by Agent
during the preceding Week (if any) exceeds the aggregate amount of repayments
applied to outstanding Revolving Advances during such preceding Week, then each
Lender shall provide Agent with funds in an amount equal to its applicable
Commitment Percentage of the difference between (w) such Revolving Advances and
(x) such repayments and (II) if the aggregate amount of repayments applied to
outstanding Revolving Advances during such Week exceeds the aggregate amount of
new Revolving Advances made during such Week, then Agent shall provide each
Lender with its Commitment Percentage of the difference between (y) such
repayments and (z) such Revolving Advances.
(ii) Each Lender shall be entitled to earn interest at the
applicable Revolving Interest Rate on outstanding Advances which it has funded.
(iii) Promptly following each Settlement Date, Agent shall submit
to each Lender a certificate with respect to payments received and Advances made
during the Week immediately preceding such Settlement Date. Such certificate of
Agent shall be conclusive in the absence of manifest error.
(d) If any Lender or Transferee (a "benefited Lender") shall at any
time receive any payment of all or part of its Advances, or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender's
Advances, or interest thereon, and such greater proportionate payment or receipt
of Collateral is not expressly permitted hereunder, such benefited Lender shall
purchase for cash from the other Lenders a participation in such portion of each
such other Lender's Advances, or shall provide such other Lender with the
benefits of any such Collateral, or the proceeds thereof, as shall be necessary
to cause such benefited Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of the Lenders; provided, however, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such benefited Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest. Each Lender so purchasing a portion of another Lender's
21
Advances may exercise all rights of payment (including, without limitation,
rights of set-off) with respect to such portion as fully as if such Lender were
the direct holder of such portion.
(e) Unless Agent shall have been notified by telephone, confirmed in
writing, by any Lender that such Lender will not make the amount which would
constitute its applicable Commitment Percentage of the Advances available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent and, in reliance upon such assumption, make
available to Borrower a corresponding amount. Agent will promptly notify
Borrower of its receipt of any such notice from a Lender. If such amount is made
available to Agent on a date after a Settlement Date, such Lender shall pay to
Agent on demand an amount equal to the product of (i) the daily average Federal
Funds Rate (computed on the basis of a year of 360 days) during such period as
quoted by Agent, times (ii) such amount, times (iii) the number of days from and
including such Settlement Date to the date on which such amount becomes
immediately available to Agent. A certificate of Agent submitted to any Lender
with respect to any amounts owing under this paragraph (e) shall be conclusive,
in the absence of manifest error. If such amount is not in fact made available
to Agent by such Lender within three (3) Business Days after such Settlement
Date, Agent shall be entitled to recover such an amount, with interest thereon
at the rate per annum then applicable to such Revolving Advances hereunder, on
demand from Borrower; provided, however, that Agent's right to such recovery
shall not prejudice or otherwise adversely affect Borrower's rights (if any)
against such Lender.
2.14. MANDATORY PREPAYMENTS.
(a) When Borrower sells or otherwise disposes of any Collateral (other
than Inventory in the ordinary course of business), in one or more transactions
in an aggregate amount in excess of $250,000, Borrower shall repay the Advances
in an amount equal to the net proceeds of such sales (i.e., gross proceeds less
the reasonable costs of such sales or other dispositions, including, without
limitation, (i) sales, transfer and similar taxes, and (ii) any amounts required
to be placed in escrow to the extent such amounts continue to be held in escrow
or shall have been paid to the purchaser of such asset), such repayments to be
made promptly but in no event more than one (1) Business Day following receipt
of such net proceeds, and until the date of payment, such proceeds shall be held
in trust for Agent. The foregoing shall not be deemed to be implied consent to
any such sale otherwise prohibited by the terms and conditions hereof. Such
repayments shall be applied to the Obligations, subject to Borrower's ability to
reborrow Revolving Advances in accordance with the terms hereof.
(b) In the event Borrower issues any publicly held debt or additional
equity securities for cash, the net proceeds thereof shall be applied first to
repay the Obligations, subject to Borrower's ability to reborrow Revolving
Advances in accordance with the terms hereof.
2.15. USE OF PROCEEDS. Borrower shall apply the proceeds of Advances to (i)
pay fees and expenses relating to this transaction and (ii) to provide for its
working capital needs.
2.16. DEFAULTING LENDER.
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(a) Notwithstanding anything to the contrary contained herein, in the
event any Lender (x) has refused (which refusal constitutes a breach by such
Lender of its obligations under this Agreement) to make available its portion of
any Advance or (y) notifies either Agent or Borrower that it does not intend to
make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement)
(each, a "Lender Default"), all rights and obligations hereunder of such Lender
(a "Defaulting Lender") as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.16 while such Lender Default remains in effect.
(b) Advances shall be incurred pro rata from Lenders (the
"Non-Defaulting Lenders") which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender pro rata based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that, the aggregate amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage
of all Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to give instructions to
Agent or to approve, disapprove, consent to or vote on any matters relating to
this Agreement and the Other Documents. All amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of "Required
Lenders", a Defaulting Lender shall be deemed not to be a Lender and not to have
Advances outstanding.
(d) Other than as expressly set forth in this Section 2.16, the rights
and obligations of a Defaulting Lender (including the obligation to indemnify
Agent) and the other parties hereto shall remain unchanged. Nothing in this
Section 2.16 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which Borrower, Agent or any Lender may
have against any Defaulting Lender as a result of any default by such Defaulting
Lender hereunder.
(e). In the event a Defaulting Lender retroactively cures to the
satisfaction of Agent the breach which caused a Lender to become a Defaulting
Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement.
III. INTEREST AND FEES.
3.1. INTEREST. (a) Interest on Advances shall be payable in arrears on the
last day of each month. Interest charges shall be computed on the actual
principal amount of Revolving Advances outstanding during the month at a rate
per annum equal to the applicable Revolving Interest Rate. Whenever, subsequent
to the date of this Agreement, the Average LIBOR Rate is increased or decreased,
the Revolving Interest Rate shall be similarly changed without notice or
23
demand of any kind by an amount equal to the amount of such change in the
Average LIBOR Rate during the time such change or changes remain in effect. Upon
and after the occurrence of an Event of Default, and during the continuation
thereof, the Obligations shall bear interest at the Revolving Interest Rate plus
two (2%) percent per annum (the "Default Rate").
(b) In the event Agent, in its sole discretion, permits the aggregate
amount of outstanding Advances to exceed the amount permitted to be outstanding
under Section 2.1(a) hereof, and such condition exists for a total of five (5)
days or more during any month then an additional charge of one-half of one
percent (.50%) per annum shall be paid on the monthly average of outstanding
Advances for such month.
3.2. LETTER OF CREDIT FEES.
Borrower shall pay Agent (i) for the ratable benefit of the Lenders
(A) for issuing or causing the issuance of a Letter of Credit, a fee computed at
a rate per annum of three percent (3.0%) on the outstanding amount thereof from
time to time, "Letter of Credit Fees"), and (ii) Bank's other customary charges
payable in connection with Letters of Credit as in effect from time to time.
Such fees and charges shall be payable (i) in the case of any Letter of Credit,
on its opening, (ii) in the case of a standby Letter of Credit, (A) monthly
thereafter in advance and (B) upon each increase in the outstanding amount
thereof, and (iii) in the case of any Letter of Credit that is not a standby
Letter of Credit, at the time of each increase in face amount thereof. Any such
charge in effect at the time of a particular transaction shall be the charge for
that transaction, notwithstanding any subsequent change in Bank's prevailing
charges for that type of transaction. All Letter of Credit Fees payable
hereunder shall be deemed earned in full on the date when the same are due and
payable hereunder and shall not be subject to rebate or proration upon the
termination of this Agreement for any reason. Upon and after the occurrence of
an Event of Default, and during the continuation thereof, the Letter of Credit
Fees shall be increased by 1/6 of 1% for each month or part thereof.
Following the occurrence and during the continuance of an Event of
Default, Borrower will, upon Agent's request, cause cash to be deposited and
maintained in an account with Agent, as cash collateral, in an amount equal to
one hundred and five percent (105%) of the outstanding Letters of Credit and
Borrower hereby irrevocably authorizes Agent, in its discretion, on Borrower's
behalf and in Borrower's name, to open such an account and to make and maintain
deposits therein, or in an account opened by Borrower, in the amounts required
to be made by Borrower, out of the proceeds of Receivables or other Collateral
or out of any other funds of Borrower coming into any Lender's possession at any
time. Agent will invest such cash collateral (less applicable reserves) in such
short-term money-market items as to which Agent and Borrower mutually agree and
the net return on such investments shall be credited to such account and
constitute additional cash collateral. Borrower may not withdraw amounts
credited to any such account except upon the earlier of (i) payment and
performance in full of all Obligations and termination of this Agreement, (ii)
the cure of all Events of Default giving rise to such cash collateral obligation
or (iii) the expiration of all outstanding Letters of Credit and the termination
of Agent's and Lenders' obligation to issue Letters of Credit.
3.3. FACILITY FEE. If, for any month during the Term, the average daily
unpaid balance of the Revolving Advances for each day of such month does not
equal the Maximum Revolving
24
Advance Amount, then Borrower shall pay to Agent for the ratable benefit of the
Lenders a fee at a rate equal to one half of one percent (.50%) per annum on the
amount by which the Maximum Revolving Advance Amount exceeds such average daily
unpaid balance. Such fee shall be payable to Agent in arrears on the last day of
each month and on the last day of the Term.
3.4. CLOSING FEE. Upon execution of this Agreement, Borrower shall pay to
Agent, for the ratable benefit of Lenders, a closing fee in the aggregate amount
of $60,000, which such amount may, at Agent's option, be charged by Agent to
Borrower's Account.
3.5. COLLATERAL MONITORING FEE. Borrower shall pay to Agent on the first
day of each month following any month in which Agent performs any collateral
monitoring - namely any field examination, collateral analysis or other business
analysis, the need for which is to be determined by Agent and which monitoring
is undertaken by Agent or for Agent's benefit - a collateral monitoring fee in
an amount equal to Agent's then standard rates per day for each person employed
by Agent who performs such monitoring and in an amount equal to the amount
billed to Agent by outside examiners or auditors performing such monitoring,
plus all out of pocket costs and disbursements incurred by Agent in the
performance of such examination or analysis. So long as no Event of Default has
occurred the collateral monitoring fee in any calendar year shall not exceed
$40,000 plus travel related expenses.
3.6. COMPUTATION OF INTEREST AND FEES. Interest and fees hereunder shall be
computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the Revolving
Interest Rate during such extension.
3.7. MAXIMUM CHARGES. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law which a
court of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that Agent or any Lender has received interest and other
charges hereunder in excess of the highest rate permissible hereto, such excess
amount shall be first applied to any unpaid principal balance owed by Borrower,
and if the then remaining excess amount is greater than the previously unpaid
principal balance, the Lenders shall promptly refund such excess amount to
Borrower and the provisions hereof shall be deemed amended to provide for such
permissible rate.
3.8. INCREASED COSTS. In the event that any applicable law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of this Section
3.8, the term "Lender" shall include Agent or any Lender and any corporation or
bank controlling Agent or any Lender) with any request or directive (whether or
not having the force of law) from any central bank or other financial, monetary
or other authority, shall:
(a) subject Agent or any Lender to any tax of any kind whatsoever with
respect to this Agreement or change the basis of taxation of payments to Agent
or any Lender of principal, fees, interest or any other amount payable hereunder
or under any Other Documents (except, as applicable, for a tax on or changes in
the rate of tax on the overall net income of Agent or any Lender by the
jurisdiction in which it maintains its principal office);
25
(b) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by, any office of
Agent or any Lender, including (without limitation) pursuant to Regulation D of
the Board of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender any other condition with respect to
this Agreement or any Other Documents;
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material, then, in
any case Borrower shall promptly pay Agent or such Lender, upon its demand, such
additional amount as will compensate Agent or such Lender for such additional
cost or such reduction, as the case may be. Agent or such Lender shall certify
the amount of such additional cost or reduced amount to Borrower, and such
certification shall be conclusive absent manifest error.
3.9. CAPITAL ADEQUACY.
(a) In the event that Agent or any Lender shall have determined that
any applicable law, rule, regulation or guideline regarding capital adequacy, or
any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by Agent or any
Lender (for purposes of this Section 3.9, the term "Lender" shall include Agent
or any Lender and any corporation or bank controlling Agent or any Lender) with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on Agent or any Lender's
capital as a consequence of its obligations hereunder to a level below that
which Agent or such Lender could have achieved but for such adoption, change or
compliance (taking into consideration Agent's and each Lender's policies with
respect to capital adequacy) by an amount deemed by Agent or any Lender to be
material, then, from time to time, Borrower shall pay upon demand to Agent or
such Lender such additional amount or amounts as will compensate Agent or such
Lender for such reduction. In determining such amount or amounts, Agent or such
Lender may use any reasonable averaging or attribution methods. The protection
of this Section 3.9 shall be available to Agent and each Lender regardless of
any possible contention of invalidity or inapplicability with respect to the
applicable law, regulation or condition.
(b) A certificate of Agent or such Lender setting forth such amount or
amounts as shall be necessary to compensate Agent or such Lender with respect to
Section 3.9(a) hereof when delivered to Borrower shall be conclusive absent
manifest error.
IV. COLLATERAL: GENERAL TERMS.
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4.1. SECURITY INTEREST IN THE COLLATERAL. To secure the prompt payment and
performance to Agent and each Lender of the Obligations, Borrower hereby
assigns, pledges and grants to Agent for its benefit and for the ratable benefit
of each Lender a continuing security interest in and to all of its Collateral,
whether now owned or existing or hereafter acquired or arising and wheresoever
located. Borrower shall xxxx its books and records as may be necessary or
appropriate to evidence, protect and perfect Agent's security interest and shall
cause its financial statements to reflect such security interest.
4.2. PERFECTION OF SECURITY INTEREST. Borrower shall take all action that
may be necessary or desirable, or that Agent may request, so as at all times to
maintain the validity, perfection, enforceability and priority of Agent's
security interest in the Collateral (to the extent such Collateral can be
perfected pursuant to the laws of the United States or any subdivision thereof)
or to enable Agent to protect, exercise or enforce its rights hereunder and in
the Collateral, including, but not limited to, (i) immediately discharging all
Liens other than Permitted Encumbrances, (ii) using commercially reasonable
efforts to obtaining landlords' or mortgagees' lien waivers, (iii) delivering to
Agent, endorsed or accompanied by such instruments of assignment as Agent may
specify, and stamping or marking, in such manner as Agent may specify, any and
all chattel paper, instruments, letters of credits and advices thereof and
documents evidencing or forming a part of the Collateral, (iv) entering into
warehousing, lockbox and other custodial arrangements satisfactory to Agent, and
(v) executing and delivering financing statements, instruments of pledge,
mortgages, notices and assignments, in each case in form and substance
satisfactory to Agent, relating to the creation, validity, perfection,
maintenance or continuation of Agent's security interest under the Uniform
Commercial Code or other applicable law. Agent is hereby authorized to file
financing statements signed by Agent instead of Borrower in accordance with
Section 9-402(2) of the Uniform Commercial Code as adopted in the State of New
York. All charges, expenses and fees Agent may incur in doing any of the
foregoing, and any local taxes relating thereto, shall be charged to Borrower's
Account as a Revolving Advance and added to the Obligations, or, at Agent's
option, shall be paid to Agent for the ratable benefit of the Lenders
immediately upon demand.
4.3. DISPOSITION OF COLLATERAL. Borrower will safeguard and protect all
Collateral for Agent's general account and make no disposition thereof whether
by sale, lease or otherwise except (a) the sale of Inventory in the ordinary
course of business and (b) the disposition or transfer of obsolete and worn-out
Equipment in the ordinary course of business during any fiscal year having an
aggregate fair market value of not more than $100,000 and only to the extent
that (i) the proceeds of any such disposition are used to acquire replacement
Equipment which is subject to Agent's first priority security interest or (ii)
the proceeds of which are remitted to Agent as a prepayment of the Obligations.
4.4. PRESERVATION OF COLLATERAL. Following the occurrence of a Default or
Event of Default and the demand by Agent for payment of all Obligations due and
owing, in addition to the rights and remedies set forth in Section 11.1 hereof,
Agent: (a) may at any time take such steps as Agent deems necessary to protect
and preserve the Collateral or the exercise of Agent's interest in and to
preserve the Collateral, including the hiring of such security guards or the
placing of other security protection measures as Agent may deem appropriate; (b)
may employ and maintain at any of Borrower's premises a custodian who shall have
full authority to do all
27
acts necessary to protect Agent's interests in the Collateral; (c) may lease
warehouse facilities to which Agent may move all or part of the Collateral; (d)
may use Borrower's owned or leased lifts, hoists, trucks and other facilities or
equipment for handling or removing the Collateral; and (e) subject to the
provisions of any lease to which Borrower is a party shall have, and is hereby
granted, a right of ingress and egress to the places where the Collateral is
located, and may proceed over and through any of Borrower's owned or leased
property. Borrower shall cooperate fully with all of Agent's efforts to preserve
the Collateral and will take such actions to preserve the Collateral as Agent
may direct. All of Agent's expenses of preserving the Collateral, including any
expenses relating to the bonding of a custodian, shall be charged to Borrower's
Account as a Revolving Advance and added to the Obligations.
4.5. OWNERSHIP OF COLLATERAL. With respect to the Collateral, at the time
the Collateral becomes subject to Agent's security interest: (a) Borrower shall
be the sole owner of and fully authorized and able to sell, transfer, pledge
and/or grant a first priority security interest in each and every item of the
Collateral to Agent; and, except for Permitted Encumbrances the Collateral shall
be free and clear of all Liens and encumbrances whatsoever; (b) each document
and agreement executed by Borrower or delivered to Agent or any Lender in
connection with this Agreement shall be true and correct in all material
respects; (c) all signatures and endorsements of Borrower that appear on such
documents and agreements shall be genuine and Borrower shall have full capacity
to execute same; and (d) Borrower's Equipment and Inventory shall be located as
set forth on Schedule 4.5 (other than Inventory in transit) and shall not be
removed from such location(s) without the prior written consent of Agent except
with respect to the sale of Inventory in the ordinary course of business and
Equipment to the extent permitted in Section 4.3 hereof.
4.6. DEFENSE OF AGENT'S AND LENDERS' INTERESTS. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. During such period Borrower shall not, without Agent's prior written
consent, pledge, sell (except Inventory in the ordinary course of business and
Equipment to the extent permitted in Section 4.3 hereof), assign, transfer,
create or suffer to exist a Lien upon or encumber or allow or suffer to be
encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. Borrower shall defend Agent's interests in the Collateral against
any and all Persons whatsoever. At any time following demand by Agent for
payment of all Obligations, Agent shall have the right to take possession of the
indicia of the Collateral and the Collateral in whatever physical form
contained, including without limitation: labels, stationery, documents,
instruments and advertising materials. If Agent exercises this right to take
possession of the Collateral, Borrower shall, upon demand, assemble it in the
best manner possible and make it available to Agent at a place reasonably
convenient to Agent. In addition, with respect to all Collateral, Agent and the
Lenders shall be entitled to all of the rights and remedies set forth herein and
further provided by the Uniform Commercial Code or other applicable law.
Borrower shall, and Agent may, at its option, instruct all suppliers, carriers,
forwarders, warehouses or others receiving or holding cash, checks, Inventory,
documents or instruments in which Agent holds a security interest to deliver
same to Agent and/or subject to Agent's order and if they shall come into
Borrower's possession, they, and each of them, shall be held by Borrower in
trust as Agent's trustee, and Borrower will immediately deliver them to Agent in
their original form together with any necessary endorsement.
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4.7. BOOKS AND RECORDS. Borrower shall (a) keep proper books of record and
account in which full, true and correct entries will be made of all dealings or
transactions of or in relation to its business and affairs; (b) set up on its
books accruals with respect to all taxes, assessments, charges, levies and
claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including without limitation by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties), which
should be set aside from such earnings in connection with its business. All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by Borrower.
4.8. FINANCIAL DISCLOSURE. Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by Borrower at any time during the
Term to exhibit and deliver to Agent and each Lender copies of Borrower's
financial statements, trial balances or other accounting records of any sort in
the accountant's or auditor's possession, and to disclose to Agent and each
Lender any information such accountants may have concerning Borrower's financial
status and business operations. Borrower hereby authorizes all federal, state
and municipal authorities to furnish to Agent and each Lender copies of reports
or examinations relating to Borrower, whether made by Borrower or otherwise;
however, Agent and each Lender will attempt to obtain such information or
materials directly from Borrower prior to obtaining such information or
materials from such accountants or such authorities.
4.9. COMPLIANCE WITH LAWS. Borrower shall comply in all material respects
with all acts, rules, regulations and orders of any legislative, administrative
or judicial body or official applicable to its respective Collateral or any part
thereof or to the operation of Borrower's business the non-compliance with which
could reasonably be expected to have a Material Adverse Effect on Borrower.
Borrower may, however, contest or dispute any acts, rules, regulations, orders
and directions of those bodies or officials in any reasonable manner, provided
that any related Lien is inchoate or stayed and sufficient reserves are
established to the reasonable satisfaction of Agent to protect Agent's Lien on
or security interest in the Collateral. The assets of Borrower at all times
shall be maintained in all material respects in accordance with the requirements
of all insurance carriers which provide insurance with respect to the assets of
Borrower so that such insurance shall remain in full force and effect.
4.10. INSPECTION OF PREMISES. At all reasonable times (upon reasonable
advance notice at all times when no Event of Default has occurred and is
continuing, except that no such notice shall be required in the event Agent
believes in the exercise of its good faith discretion access and/or entry are
necessary to protect Agent's or Lender's rights and remedies hereunder) Agent
and any Lender shall have full access to and the right to audit, check, inspect
and make abstracts and copies from Borrower's books, records, audits,
correspondence and all other papers relating to the Collateral and the operation
of Borrower's business. Agent, any Lender and their agents may enter upon any of
Borrower's premises at any time (upon reasonable advance notice at all times
when no Event of Default has occurred and is continuing, except that no such
notice shall be required in the event Agent believes in the exercise of its good
faith discretion access and/or entry are necessary to protect and preserve the
Collateral or the exercise of Agent's or Lender's rights and remedies hereunder)
during business hours and at any other reasonable time, and from
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time to time, for the purpose of inspecting the Collateral and any and all
records pertaining thereto and the operation of Borrower's business.
4.11. INSURANCE. Borrower shall bear the full risk of any loss of any
nature whatsoever with respect to the Collateral. At Borrower's own cost and
expense in amounts and with carriers reasonably acceptable to Agent, Borrower
shall (a) keep all its insurable properties and properties in which Borrower has
an interest insured against the hazards of fire, flood, sprinkler leakage, those
hazards covered by extended coverage insurance and such other hazards, and for
such amounts, as is customary in the case of companies engaged in businesses
similar to Borrower's including, without limitation, business interruption
insurance; (b) maintain public and product liability insurance against claims
for personal injury, death or property damage suffered by others; (c) maintain
all such worker's compensation or similar insurance as may be required under the
laws of any state or jurisdiction in which Borrower is engaged in business; and
(d) furnish Agent with (i) copies of all policies and evidence of the
maintenance of such policies by the renewal thereof at least thirty (30) days
before any expiration date, and (ii) appropriate loss payable endorsements in
form and substance satisfactory to Agent, naming Agent as a loss payee as its
interests may appear with respect to all insurance coverage referred to in
clause (a) above and as a co-insured with respect to all insurance coverage
referred to in clause (b) above, and providing (A) that all proceeds thereunder
shall be payable to Agent, (B) no such insurance shall be affected by any act or
neglect of the insured or owner of the property described in such policy, and
(C) that such policy and loss payable clauses may not be cancelled, amended or
terminated unless at least thirty (30) days' prior written notice is given to
Agent. In the event of any loss thereunder, the carriers named therein hereby
are directed by Agent and Borrower to make payment for such loss to Agent and
not to Borrower and Agent jointly. If any insurance losses are paid by check,
draft or other instrument payable to Borrower and Agent jointly, Agent may
endorse Borrower's name thereon and do such other things as Agent may deem
advisable to reduce the same to cash. Following the occurrence and during the
continuance of an Event of Default, Agent is hereby authorized to adjust and
compromise claims under insurance coverage referred to in clause (a) above. All
loss recoveries received by Agent upon any insurance relating to Collateral
other than Fixed Assets may be applied to the Obligations, in such order as
Agent in its sole discretion shall determine. To the extent loss recoveries
received by Agent relate to Collateral consisting of Fixed Assets, the Agent
shall permit or require the Borrower to use such proceeds, or any part thereof,
to replace, repair, restore or rebuild the relevant Fixed Assets in a diligent
and expeditious manner with materials and workmanship of substantially the same
quality as existed before the loss, damage or destruction so long as (1) no
Default or Event of Default has occurred and is continuing, (2) the aggregate
proceeds do not exceed $100,000 and (3) the Borrower first (i) provides the
Agent with plans and specifications for any such repair or restoration which
shall be reasonably satisfactory to the Agent and (ii) demonstrates to the
reasonable satisfaction of the Agent that the funds available to it will be
sufficient to complete such project in the manner provided therein. In all other
circumstances, Agent shall apply such proceeds to the Obligations in accordance
with this Agreement. Any surplus shall be paid by Agent to Borrower or applied
as may be otherwise required by law.
4.12. FAILURE TO PAY INSURANCE. If Borrower fails to obtain insurance as
hereinabove provided, or to keep the same in force, Agent, if Agent so elects,
may obtain such insurance and
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pay the premium therefor for Borrower's Account, and charge Borrower's Account
therefor and such expenses so paid shall be part of the Obligations.
4.13. PAYMENT OF TAXES. Borrower will pay, when due, all taxes, assessments
and other Charges lawfully levied or assessed upon Borrower or any of the
Collateral including, without limitation, real and personal property taxes,
assessments and charges and all franchise, income, employment, social security
benefits, withholding, and sales taxes. If any Charge by any governmental
authority is or may be imposed on or as a result of any transaction between
Borrower and Agent or any Lender which Agent or any Lender may be required to
withhold or pay or if any Charges remain unpaid after the date fixed for their
payment, or if any claim shall be made which, in Agent's or any Lender's
opinion, could reasonably be expected to create a valid Lien on the Collateral,
Agent may without notice to Borrower pay the Charges and Borrower hereby
indemnifies and holds Agent and each Lender harmless in respect thereof. Agent
will not pay any Charges to the extent that Borrower has contested or disputed
those Charges in good faith, by expeditious protest, administrative or judicial
appeal or similar proceeding provided that any related Lien is stayed and
sufficient reserves are established to the reasonable satisfaction of Agent to
protect Agent's security interest in or Lien on the Collateral. The amount of
any payment by Agent under this Section 4.13 shall be charged to Borrower's
Account as a Revolving Advance and added to the Obligations and, until Borrower
shall furnish Agent with an indemnity therefor (or supply Agent with evidence
satisfactory to Agent that due provision for the payment thereof has been made),
Agent may hold without interest any balance standing to Borrower's credit and
Agent shall retain its security interest in any and all Collateral held by
Agent.
4.14. PAYMENT OF LEASEHOLD OBLIGATIONS. Borrower shall at all times pay,
when and as due, its rental obligations under all leases under which it is a
tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect and, at Agent's
request, will provide evidence of having done so.
4.15. RECEIVABLES.
(a) NATURE OF RECEIVABLES. Each of the Receivables shall be a bona
fide and valid account representing a bona fide indebtedness incurred by the
Customer therein named, for a fixed sum as set forth in the invoice relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of Borrower, or work, labor or services theretofore
rendered by Borrower as of the date each Receivable is created. Same shall be
due and owing in accordance with Borrower's standard terms of sale without
dispute, setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by Borrower to Agent.
(b) SOLVENCY OF CUSTOMERS. Each Customer, to the best of Borrower's
knowledge, as of the date each Receivable is created, is and will be solvent and
able to pay all Receivables on which the Customer is obligated in full when due
or with respect to such Customers of Borrower who are not solvent Borrower has
set up on its books and in its financial records bad debt reserves to cover such
Receivables as required by GAAP.
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(c) LOCATIONS OF BORROWER. Borrower's chief executive office is
located at 0000 Xxxxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000. Until written
notice is given to Agent by Borrower of any other office at which Borrower keeps
its records pertaining to Receivables, all such records shall be kept at such
executive office.
(d) COLLECTION OF RECEIVABLES. Until Borrower's authority to do so is
terminated by Agent (which notice Agent may give at any time following the
occurrence of an Event of Default or a Default) or except as otherwise provided
in the Factoring Agreement with respect to Factored Accounts, Borrower will, at
Borrower's sole cost and expense, but on Agent's behalf and for Agent's account,
collect as Agent's property and in trust for Agent all amounts received on
Receivables, and shall not commingle such collections with Borrower's funds or
use the same except to pay Obligations. All Customer invoices issued after the
Closing Date shall be marked payable to Agent in a manner satisfactory to Agent.
Borrower shall, upon request, deliver to Agent, the Blocked Account or the
Depositary Account in original form and on the date of receipt thereof, all
checks, drafts, notes, money orders, acceptances, cash and other evidences of
Indebtedness.
(e) NOTIFICATION OF ASSIGNMENT OF RECEIVABLES. Subject to the last
sentence of this Section 4.15(e), at any time following the occurrence of, and
during the continuance of, an Event of Default or a Default, Agent shall have
the right to send notice of the assignment of, and Agent's security interest in,
the Receivables to any and all Customers or any third party holding or otherwise
concerned with any of the Collateral. Thereafter, until such Event of Default or
Default shall have been cured Agent shall have the sole right to collect the
Receivables, take possession of the Collateral, or both. Agent's actual
collection expenses, including, but not limited to, stationery and postage,
telephone and telegraph, secretarial and clerical expenses and the salaries of
any collection personnel used for collection, may be charged to Borrower's
Account and added to the Obligations. Nothing in this Section 4.15(e) shall
restrict the right of GMACCC to send notices of assignment of, or to collect,
Factored Accounts as set forth in the Factoring Agreement.
(f) POWER OF AGENT TO ACT ON BORROWER'S BEHALF. Agent shall have the
right to receive, endorse, assign and/or deliver in the name of Agent or
Borrower any and all checks, drafts and other instruments for the payment of
money relating to the Receivables, and Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Borrower
hereby constitutes Agent or Agent's designee as Borrower's attorney with power
(i) to endorse Borrower's name upon any notes, acceptances, checks, drafts,
money orders or other evidences of payment or Collateral; (ii) to sign
Borrower's name on any invoice or xxxx of lading relating to any of the
Receivables, drafts against Customers, assignments and verifications of
Receivables; (iii) to send verifications of Receivables to any Customer; (iv) to
sign Borrower's name on all financing statements or any other documents or
instruments deemed necessary or appropriate by Agent to preserve, protect, or
perfect Agent's interest in the Collateral and to file same; (v) if an Event of
Default has occurred and is continuing, to demand payment of the Receivables;
(vi) if an Event of Default has occurred and is continuing, to enforce payment
of the Receivables by legal proceedings or otherwise; (vii) if an Event of
Default has occurred and is continuing, to exercise all of Borrower's rights and
remedies with respect to the collection of the Receivables and any other
Collateral; (viii) if an Event of Default has occurred and is continuing, to
settle, adjust, compromise, extend or renew the Receivables; (ix) if an Event of
32
Default has occurred and is continuing, to settle, adjust or compromise any
legal proceedings brought to collect Receivables; (x) if an Event of Default has
occurred and is continuing, to prepare, file and sign Borrower's name on a proof
of claim in bankruptcy or similar document against any Customer; (xi) to
prepare, file and sign Borrower's name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with the Receivables; and
(xii) to do all other acts and things necessary to carry out this Agreement. All
acts of said attorney or designee are hereby ratified and approved, and said
attorney or designee shall not be liable for any acts of omission or commission
nor for any error of judgment or mistake of fact or of law, unless done
maliciously or with gross (not mere) negligence; this power being coupled with
an interest is irrevocable while any of the Obligations remain unpaid. Agent
shall have the right at any time following the occurrence of an Event of Default
or Default, to change the address for delivery of mail addressed to Borrower to
such address as Agent may designate and to receive, open and dispose of all mail
addressed to Borrower. Notwithstanding the foregoing, with respect to Factored
Accounts for which GMACCC has assumed the Credit Risk the powers of attorney
granted in subsections (v) through (x) may be exercised at any time and shall
not be restricted to the occurrence and continuance of an Event of Default.
(g) NO LIABILITY. Neither Agent nor any Lender shall, under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Receivables or any instrument received in payment thereof, or for
any damage resulting therefrom. Except as otherwise provided in the Factoring
Agreement with respect to Factored Accounts, following the occurrence of an
Event of Default or Default Agent may, without notice or consent from Borrower,
(i) xxx upon or otherwise collect, extend the time of payment of, compromise or
settle for cash, credit or upon any terms any of the Receivables or any other
securities, instruments or insurance applicable thereto and/or release any
obligor thereof. Agent is authorized and empowered to accept at all times with
respect to Factored Accounts and following the occurrence of an Event of Default
or Default with respect to other Receivables, the return of the goods
represented by any of the Receivables, without notice to or consent by Borrower,
all without discharging or in any way affecting Borrower's liability hereunder.
(h) ESTABLISHMENT OF A LOCKBOX ACCOUNT, DOMINION ACCOUNT. All proceeds
of Collateral shall, at the direction of Agent, be deposited by Borrower into a
lockbox account, dominion account or such other blocked account ("Blocked
Accounts") as Agent may require pursuant to an arrangement with such bank as may
be selected by Borrower and be reasonably acceptable to Agent. Borrower shall
issue to any such bank, an irrevocable letter of instruction directing said bank
to transfer such funds so deposited to Agent, either to any account maintained
by Agent at said bank or by wire transfer to appropriate account(s) of Agent.
All funds deposited in such Blocked Account shall immediately become the
property of Agent and Borrower shall obtain the agreement by such bank to waive
any offset rights against the funds so deposited. Agent assumes no
responsibility for such Blocked Account arrangement, including without
limitation, any claim of accord and satisfaction or release with respect to
deposits accepted by any bank thereunder. Alternatively, Agent may establish
depository accounts ("Depository Accounts") in the name of Agent at a bank or
banks for the deposit of such funds and Borrower shall deposit all proceeds of
Collateral or cause same to be deposited, in kind, in such Depository Accounts
of Agent in lieu of depositing same to the Blocked Accounts.
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(i) ADJUSTMENTS. Borrower will not, without Agent's consent,
compromise or adjust any material amount of the Receivables (or extend the time
for payment thereof) or accept any material returns of merchandise or grant any
additional discounts, allowances or credits thereon except for those
compromises, adjustments, returns, discounts, credits and allowances as have
been heretofore customary in the business of Borrower.
4.16. INVENTORY. All Inventory manufactured in the United States has been,
and will be, produced by Borrower in all material respects in accordance with
the Federal Fair Labor Standards Act of 1938, as amended, and all rules,
regulations and orders thereunder.
4.17. MAINTENANCE OF EQUIPMENT. The Equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved.
Borrower shall not use or operate the Equipment in violation of any law,
statute, ordinance, code, rule or regulation. Borrower shall have the right to
sell Equipment to the extent set forth in Section 4.3 hereof.
4.18. EXCULPATION OF LIABILITY. Nothing herein contained shall be construed
to constitute Agent or any Lender as Borrower's agent for any purpose
whatsoever, nor shall Agent or any Lender be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof, unless
caused by the gross (not mere) negligence or willful misconduct of Agent or any
Lender. Neither Agent nor any Lender, whether by anything herein or in any
assignment or otherwise, assume any of Borrower's obligations under any contract
or agreement assigned to Agent or such Lender, and neither Agent nor any Lender
shall be responsible in any way for the performance by Borrower of any of the
terms and conditions thereof.
4.19. ENVIRONMENTAL MATTERS. (a) Borrower shall ensure that the Real
Property remains in compliance in all material respects with all Environmental
Laws and it will not place or permit to be placed any Hazardous Substances on
any Real Property except as not prohibited by applicable law or appropriate
governmental authorities.
(b) Borrower shall establish and maintain a system to assure and
monitor continued compliance with all applicable Environmental Laws which system
shall include periodic reviews of such compliance.
(c) Borrower shall (i) employ in connection with the use of the Real
Property appropriate technology necessary to maintain compliance with any
applicable Environmental Laws and (ii) dispose of any and all Hazardous Waste
generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrower shall use its best efforts to obtain certificates of disposal, such as
hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrower in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.
(d) In the event Borrower obtains, gives or receives notice of any
Release or threat of Release of a reportable quantity of any Hazardous
Substances at the Real Property (any
34
such event being hereinafter referred to as a "Hazardous Discharge") or receives
any notice of violation, request for information or notification that it is
potentially responsible for investigation or cleanup of environmental conditions
at the Real Property, demand letter or complaint, order, citation, or other
written notice with regard to any Hazardous Discharge or violation of
Environmental Laws affecting the Real Property or Borrower's interest therein
(any of the foregoing is referred to herein as an "Environmental Complaint")
from any Person or entity, including any state agency responsible in whole or in
part for environmental matters in the state in which the Real Property is
located or the United States Environmental Protection Agency (any such person or
entity hereinafter the "Authority"), then Borrower shall, within five (5)
Business Days, give written notice of same to Agent detailing facts and
circumstances of which Borrower is aware giving rise to the Hazardous Discharge
or Environmental Complaint. Such information is to be provided to allow Agent to
protect its security interest in the Real Property and is not intended to create
nor shall it create any obligation upon Agent or any Lender with respect
thereto.
(e) Borrower shall promptly forward to Agent copies of any request for
information, notification of potential liability, demand letter relating to
potential responsibility with respect to the investigation or cleanup of
Hazardous Substances at any other site owned, operated or used by Borrower to
dispose of Hazardous Substances and shall continue to forward copies of
correspondence between Borrower and the Authority regarding such claims to Agent
until the claim is settled. Borrower shall promptly forward to Agent copies of
all documents and reports concerning a Hazardous Discharge at the Real Property
that Borrower is required to file under any Environmental Laws. Such information
is to be provided solely to allow Agent to protect Agent's security interest in
the Real Property and the Collateral.
(f) Borrower shall respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral or Real Property to
any Lien. If Borrower shall fail to respond promptly to any Hazardous Discharge
or Environmental Complaint or Borrower shall fail to comply with any of the
requirements of any Environmental Laws, Agent on behalf of the Lenders may, but
without the obligation to do so, for the sole purpose of protecting Agent's
interest in Collateral: (A) give such notices or (B) enter onto the Real
Property (or authorize third parties to enter onto the Real Property) and take
such actions as Agent (or such third parties as directed by Agent) deem
reasonably necessary or advisable, to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Agent and the Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Revolving Advances shall be paid upon demand by Borrower,
and until paid shall be added to and become a part of the Obligations secured by
the Liens created by the terms of this Agreement or any other agreement between
Agent, any Lender and Borrower.
(g) Promptly upon the written request of Agent from time to time,
Borrower shall provide Agent, at Borrower's expense, with an environmental site
assessment or environmental audit report prepared by an environmental
engineering firm acceptable in the reasonable opinion of Agent, to assess with a
reasonable degree of certainty the existence of a
35
Hazardous Discharge and the potential costs in connection with abatement,
cleanup and removal of any Hazardous Substances found on, under, at or within
the Real Property. Any report or investigation of such Hazardous Discharge
proposed and acceptable to an appropriate Authority that is charged to oversee
the clean-up of such Hazardous Discharge shall be acceptable to Agent. If such
estimates, individually or in the aggregate, exceed $500,000, Agent shall have
the right to require Borrower to post a bond, letter of credit or other security
reasonably satisfactory to Agent to secure payment of these costs and expenses.
(h) Borrower shall defend and indemnify Agent and Lenders and hold
Agent, Lenders and their respective employees, agents, Affiliates, directors and
officers harmless from and against all loss, liability, damage and expense,
claims, costs, fines and penalties, including attorney's fees, suffered or
incurred by Agent or the Lenders under or on account of any Environmental Laws,
including, without limitation, the assertion of any Lien thereunder, with
respect to any Hazardous Discharge, the presence of any Hazardous Substances
affecting the Real Property, whether or not the same originates or emerges from
the Real Property or any contiguous real estate, except to the extent such loss,
liability, damage and expense is attributable to any Hazardous Discharge
resulting from actions on the part of Agent or any Lender. Borrower's
obligations under this Section 4.19 shall arise upon the discovery of the
presence of any Hazardous Substances at the Real Property, whether or not any
federal, state, or local environmental agency has taken or threatened any action
in connection with the presence of any Hazardous Substances. Borrower's
obligation and the indemnifications hereunder shall survive the termination of
this Agreement.
(i) For purposes of Section 4.19 and 5.7, all references to Real
Property shall be deemed to include all of Borrower's right, title and interest
in and to its owned and leased premises located in the United States.
4.20. FINANCING STATEMENTS. Except as respects the financing statements
filed by Agent and the financing statements described on Schedule 1.2, no
financing statement covering any of the Collateral or any proceeds thereof is on
file in any public office.
V. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1. AUTHORITY. Borrower has full power, authority and legal right to enter
into this Agreement and the Other Documents and to perform all its respective
Obligations hereunder and thereunder. The execution, delivery and performance by
Borrower of this Agreement and of the Other Documents (a) are within Borrower's
corporate powers, have been duly authorized, are not in contravention of law or
the terms of Borrower's by-laws, certificate of incorporation or other
applicable documents relating to Borrower's formation or to the conduct of
Borrower's business or of any material agreement or undertaking to which
Borrower is a party or by which Borrower is bound, and (b) will not conflict
with nor result in any breach in any of the provisions of or constitute a
default under or result in the creation of any Lien except Permitted
Encumbrances upon any asset of Borrower under the provisions of any agreement,
charter document,
36
instrument, by-law, or other instrument to which Borrower is a party or by which
it or its property may be bound.
5.2. FORMATION AND QUALIFICATION. (a) Borrower is duly incorporated and in
good standing under the laws of the State of Delaware and is qualified to do
business and is in good standing in the states listed on Schedule 5.2 which
constitute all states in which qualification and good standing are necessary for
Borrower to conduct its business and own its property except where the failure
to so qualify could not have a Material Adverse Effect on Borrower. Borrower has
delivered to Agent true and complete copies of its certificate of incorporation
and by-laws and will promptly notify Agent of any amendment or changes thereto.
(b) The only Subsidiaries of Borrower are listed on Schedule 5.2. None
of the Subsidiaries listed on Schedule 5.2(b) have or propose to have any
business activities, nor do any of them have or propose to have any material
assets.
5.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Borrower contained in this Agreement and the Other Documents shall
be true at the time of Borrower's execution of this Agreement and the Other
Documents, and shall survive the execution, delivery and acceptance thereof by
the parties thereto and the closing of the transactions described therein or
related thereto.
5.4. TAX RETURNS. Borrower's federal tax identification number is
00-0000000. Borrower has filed all federal, state and local tax returns and
other reports it is required by law to file and has paid all taxes, assessments,
fees and other governmental charges that are due and payable. Federal, state and
local income tax returns of Borrower have been examined and reported upon by the
appropriate taxing authority or closed by applicable statute and satisfied for
all fiscal years as set forth on Schedule 5.4. The provision for taxes on the
books of Borrower is adequate for all years not closed by applicable statutes,
and for its current fiscal year, and, except as disclosed on Schedule 5.5, no
Borrower has no knowledge of any deficiency or additional assessment in
connection therewith not provided for on its books.
5.5. FINANCIAL STATEMENTS.
(a) The twelve-month cash flow projections of Borrower on a
Consolidated Basis and their projected balance sheets as of the Closing Date,
copies of which are annexed hereto as Exhibit 5.5(a) (the "Projections") were
prepared by the Chief Financial Officer of Borrower, are based on underlying
assumptions which provide a reasonable basis for the projections contained
therein and reflect Borrower's judgment based on present circumstances of the
most likely set of conditions and course of action for the projected period, it
being recognized by the Lenders that such financial information as it relates to
future events is not to be viewed as fact and that actual results during the
period or periods covered by such projections may differ from the projected
results set forth therein by a material amount.
(b) The consolidated balance sheets of Borrower on a Consolidated
Basis and such other Persons described therein (including the accounts of all
Subsidiaries for the respective periods during which a subsidiary relationship
existed) as of February 3, 2001 and the related statements of income, changes in
stockholder's equity, and cash flows for the period ended on
37
such date, all accompanied by a report thereon containing an opinion without
qualification by independent certified public accountants, copies of which have
been delivered to Agent, have been prepared in accordance with GAAP,
consistently applied (except for changes in application in which such
accountants concur) and present fairly the financial position of Borrower and
its Subsidiaries at such date and the results of their operations for such
period. Since February 3, 2001 there has been no change in the condition,
financial or otherwise, of Borrower or its Subsidiaries as shown on the
consolidated balance sheet as of such date and no change in the aggregate value
of machinery, equipment and Real Property owned by Borrower and its
Subsidiaries, except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse.
(c) The draft preliminary balance sheet of Borrower on a Consolidated
Basis as of April 7, 2001 furnished to Agent on the Closing Date fairly presents
the financial position of Borrower and its Subsidiaries at such date.
5.6. CORPORATE NAME. Borrower has not been known by any other corporate
name in the past five years and does not sell Inventory under any other name
except as set forth on Schedule 5.6, nor, except as set forth on Schedule 5.6,
has Borrower been the surviving corporation of a merger or consolidation or
acquired all or substantially all of the assets of any Person during the
preceding five (5) years.
5.7. O.S.H.A. AND ENVIRONMENTAL COMPLIANCE.
(a) Borrower has duly complied with, and its facilities, business,
assets, property, leaseholds and Equipment are in compliance, in each case, in
all material respects with, the provisions of the Federal Occupational Safety
and Health Act, the Environmental Protection Act, RCRA and all other
Environmental Laws; there have been no outstanding citations, notices or orders
of non-compliance issued to Borrower or relating to its business, assets,
property, leaseholds or Equipment under any such laws, rules or regulations.
(b) Borrower has been issued all required federal, state and local
licenses, certificates or permits relating to all applicable Environmental Laws
except where the failure to have such licenses, certificates or permits could
not reasonably be expected to have a Material Adverse Effect.
(c) (i) There are no visible signs of releases, spills, discharges,
leaks or disposal (collectively referred to as "Releases") of Hazardous
Substances at, upon, under or within any Real Property; (ii) there are no
underground storage tanks or polychlorinated biphenyls on the owned Real
Property; (iii) the owned Real Property of Borrower has never been used as a
treatment, storage or disposal facility of Hazardous Waste; and (iv) to
Borrower's knowledge, no Hazardous Substances are present on the owned Real
Property or any other premises leased by Borrower, excepting such quantities as
are handled in accordance with all applicable manufacturer's instructions and
governmental regulations and in proper storage containers and as are necessary
for the operation of the commercial business of Borrower or of its tenants.
5.8. SOLVENCY; NO LITIGATION, VIOLATION, INDEBTEDNESS OR DEFAULT.
38
(a) Borrower is solvent, able to pay its debts as they mature, has
capital sufficient to carry on their business and all businesses in which it is
about to engage, and (i) as of the Closing Date, the fair present saleable value
of its assets, calculated on a going concern basis, is in excess of the amount
of its liabilities and (ii) subsequent to the Closing Date, the fair saleable
value of its assets (calculated on a going concern basis) will be in excess of
the amount of its liabilities.
(b) Except as disclosed in Schedule 5.8(b), Borrower has (i) no
pending or to Borrower's knowledge threatened litigation, arbitration, actions
or proceedings which involve the reasonable possibility of having a Material
Adverse Effect, and (ii) no liabilities nor indebtedness (in each case other
than liabilities incurred in the ordinary course of business) other than the
Obligations.
(c) Borrower is not in violation of any applicable statute, regulation
or ordinance in any respect which could reasonably be expected to have a
Material Adverse Effect on Borrower, nor is Borrower in violation of any order
of any court, governmental authority or arbitration board or tribunal.
(d) Neither Borrower nor any member of the Controlled Group maintains
or contributes to any Plan other than those listed on Schedule 5.8(d) hereto.
Except as set forth in Schedule 5.8(d), (i) no Plan has incurred any
"accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA and
Section 412(a) of the Code, whether or not waived, and Borrower and each member
of the Controlled Group has met all applicable minimum funding requirements
under Section 302 of ERISA in respect of each Plan, (ii) each Plan which is
intended to be a qualified plan under Section 401(a) of the Code as currently in
effect has been determined by the Internal Revenue Service to be qualified under
Section 401(a) of the Code and the trust related thereto is exempt from federal
income tax under Section 501(a) of the Code, (iii) neither Borrower nor any
member of the Controlled Group has incurred any liability to the PBGC other than
for the payment of premiums, and there are no premium payments which have become
due which are unpaid, (iv) no Plan has been terminated by the plan administrator
thereof nor by the PBGC, and there is no occurrence which would cause the PBGC
to institute proceedings under Title IV of ERISA to terminate any Plan, (v) at
this time, the current value of the assets of each Plan exceeds the present
value of the accrued benefits and other liabilities of such Plan and neither
Borrower nor any member of the Controlled Group knows of any facts or
circumstances which would materially change the value of such assets and accrued
benefits and other liabilities, (vi) neither Borrower nor any member of the
Controlled Group has breached any of the responsibilities, obligations or duties
imposed on it by ERISA with respect to any Plan, (vii) neither Borrower nor any
member of a Controlled Group has incurred any liability for any excise tax
arising under Section 4972 or 4980B of the Code, and no fact exists which could
give rise to any such liability, (viii) neither Borrower nor any member of the
Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has engaged
in a "prohibited transaction" described in Section 406 of the ERISA or Section
4975 of the Code nor taken any action which would constitute or result in a
Termination Event with respect to any such Plan which is subject to ERISA, (ix)
Borrower and each member of the Controlled Group has made all contributions due
and payable with respect to each Plan, (x) there exists no event described in
Section 4043(b) of ERISA, for which the thirty (30) day notice period contained
in 29 CFR ss.2615.3 has not been
39
waived, (xi) neither Borrower nor any member of the Controlled Group has any
fiduciary responsibility for investments with respect to any plan existing for
the benefit of persons other than employees or former employees of Borrower and
any member of the Controlled Group, and (xii) neither Borrower nor any member of
the Controlled Group has withdrawn, completely or partially, from any
Multiemployer Plan so as to incur liability under the Multiemployer Pension Plan
Amendments Act of 1980.
5.9. PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. All patents, patent
applications, trademarks, trademark applications, service marks, service xxxx
applications, copyrights, copyright applications, design rights, tradenames,
assumed names, trade secrets and licenses owned or utilized by Borrower is set
forth on Schedule 5.9, are valid and have been duly registered or filed with all
appropriate governmental authorities and constitute all of the intellectual
property rights which are necessary for the operation of its business; there is
no objection to or to Borrower's knowledge pending challenge to the validity of
any such patent, trademark, copyright, design right, tradename, trade secret or
license and Borrower is not aware of any grounds for any challenge, except as
set forth in Schedule 5.9 hereto. Each patent, patent application, patent
license, trademark, trademark application, trademark license, service xxxx,
service xxxx application, service xxxx license, design right, copyright,
copyright application and copyright license owned or held by Borrower and all
trade secrets used by Borrower consists of original material or property
developed by Borrower or was lawfully acquired by Borrower from the proper and
lawful owner thereof. Each of such items has been maintained so as to preserve
the value thereof from the date of creation or acquisition thereof except where
such failure to maintain could not reasonably be expected to have a Material
Adverse Effect on Borrower. With respect to all proprietary software used by
Borrower, Borrower is in possession of all source and object codes related to
each piece of software or is the beneficiary of a source code escrow agreement,
each such source code escrow agreement being listed on Schedule 5.9 hereto.
5.10. LICENSES AND PERMITS. Except as set forth in Schedule 5.10, Borrower
(a) is in compliance with and (b) has procured and is now in possession of, all
material licenses or permits required by any applicable federal, state or local
law or regulation for the operation of its business in each jurisdiction wherein
it is now conducting or proposes to conduct business and where the failure to be
in compliance with or to procure such licenses or permits could reasonably be
expected to have a Material Adverse Effect on Borrower.
5.11. DEFAULT OF INDEBTEDNESS. Borrower is not in default in the payment of
the principal of or interest on any Indebtedness or under any instrument or
agreement under or subject to which any Indebtedness has been issued and no
event has occurred under the provisions of any such instrument or agreement
which with or without the lapse of time or the giving of notice, or both,
constitutes or would constitute an event of default thereunder and which event
of default could reasonably be expected to have a Material Adverse Effect on
Borrower.
5.12. NO DEFAULT. Borrower is not in default in the payment or performance
of any of its contractual obligations which default could reasonably be expected
to have a Material Adverse Effect on Borrower and no Default has occurred.
40
5.13. NO BURDENSOME RESTRICTIONS. Borrower is not party to any contract or
agreement the performance of which could reasonably be expected to have a
Material Adverse Effect on Borrower. Borrower has not agreed or consented to
cause or permit in the future (upon the happening of a contingency or otherwise)
any of its property, whether now owned or hereafter acquired, to be subject to a
Lien which is not a Permitted Encumbrance.
5.14. NO LABOR DISPUTES. Borrower is not involved in any labor dispute that
could reasonably be expected to have a Material Adverse Effect on Borrower;
there are no strikes or walkouts or union organization of Borrower's employees
threatened or in existence and no labor contract is scheduled to expire during
the Term other than as set forth on Schedule 5.14 hereto.
5.15. MARGIN REGULATIONS. Borrower is not engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. No part of the proceeds of any Advance will be used for
"purchasing" or "carrying" "margin stock" as defined in Regulation U of such
Board of Governors.
5.16. INVESTMENT COMPANY ACT. Borrower is not an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.17. DISCLOSURE. No representation or warranty made by Borrower in this
Agreement or in any financial statement, report, certificate or any other
document furnished in connection herewith or therewith contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements herein or therein not misleading. There is no fact known to
Borrower (other than with respect to general economic conditions) which Borrower
has not disclosed to Agent in writing with respect to the transactions
contemplated by this Agreement which could reasonably be expected to have a
Material Adverse Effect on Borrower.
5.18. SWAPS. Borrower is not a party to, nor will it be a party to, any
swap agreement whereby Borrower has agreed or will agree to swap interest rates
or currencies unless same provides that damages upon termination following an
event of default thereunder are payable on an unlimited "two-way basis" without
regard to fault on the part of either party.
5.19. CONFLICTING AGREEMENTS. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on Borrower or affecting
the Collateral conflicts with, or requires any Consent which has not already
been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.
5.20. APPLICATION OF CERTAIN LAWS AND REGULATIONS. Neither Borrower nor any
Affiliate of Borrower is subject to any statute, rule or regulation which
regulates the incurrence of any Indebtedness, including without limitation,
statutes or regulations relative to common or interstate carriers or to the sale
of electricity, gas, steam, water, telephone, telegraph or other public utility
services.
41
5.21. BUSINESS AND PROPERTY OF BORROWER. Upon and after the Closing Date,
Borrower does not propose to engage in any business other than the manufacture,
importation, design and marketing of women's, men's and children's apparel and
activities necessary to conduct the same. On the Closing Date, Borrower will own
or have rights to use all the property and possess all of the rights and
Consents necessary for the conduct of the business of Borrower.
VI. AFFIRMATIVE COVENANTS.
Borrower shall, until payment in full of the Obligations and termination of
this Agreement:
6.1. PAYMENT OF FEES. Pay to Agent on demand all usual and customary fees
and expenses which Agent incurs in connection with (a) the forwarding of Advance
proceeds and (b) the establishment and maintenance of any Blocked Accounts or
Depository Accounts as provided for in Section 4.15(h). Agent may, without
making demand, charge the account of Borrower for all such fees and expenses.
6.2. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties necessary in its business
in good working order and condition (reasonable wear and tear excepted and
except as may be disposed of in accordance with the terms of this Agreement),
including, without limitation, all licenses, patents, copyrights, design rights,
tradenames, trade secrets and trademarks and take all actions necessary to
enforce and protect the validity of any intellectual property right or other
right included in the Collateral which is necessary to its business; (b) keep in
full force and effect its existence and comply in all material respects with the
laws and regulations governing the conduct of its business where the failure to
do so could reasonably be expected to have a Material Adverse Effect on
Borrower; and (c) make all such reports and pay all such franchise and other
taxes and license fees and do all such other acts and things as may be lawfully
required to maintain its rights, licenses, leases, powers and franchises under
the laws of the United States or any political subdivision thereof where the
failure to do so could reasonably be expected to have a Material Adverse Effect
on Borrower.
6.3. VIOLATIONS. Promptly notify Agent in writing of any violation of any
law, statute, regulation or ordinance of any Governmental Body, or of any agency
thereof, applicable to Borrower which could have a Material Adverse Effect on
Borrower.
6.4. GOVERNMENT RECEIVABLES. Take all steps necessary to protect Agent's
interest in the Collateral under the Federal Assignment of Claims Act or other
applicable state or local statutes or ordinances and deliver to Agent
appropriately endorsed, any instrument or chattel paper connected with any
Receivable arising out of contracts between Borrower and the United States, any
state or any department, agency or instrumentality of any of them.
6.5. TANGIBLE NET WORTH. Maintain at the end of each fiscal quarter of
Borrower a Tangible Net Worth in an amount not less than (i) $4,200,000 at the
end of fiscal quarter ending May 5, 2001 and as at the end of each fiscal
quarter thereafter through and including the fiscal
42
quarter ending November 3, 2001 and (ii) $4,700,000 at the end of fiscal quarter
ending February 2, 2002 and as at the end of each fiscal quarter thereafter
during the Term.
6.6. FIXED CHARGE COVERAGE RATIO. Maintain at the end of each fiscal
quarter of Borrower, beginning with the fiscal quarter ending May 5, 2001, with
respect to the immediately preceding four fiscal quarters (ending on the last
day of such fiscal quarter) a Fixed Charge Coverage ratio of not less than 2 to
1.0.
6.7. WORKING CAPITAL. Maintain as of the end of each fiscal quarter of
Borrower beginning with the fiscal quarter ending May 5, 2001, Working Capital
in an amount not less than $1,000,000.
6.8. EXECUTION OF SUPPLEMENTAL INSTRUMENTS. Execute and deliver to Agent
from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may reasonably request, in order
that the full intent of this Agreement may be carried into effect.
6.9. PAYMENT OF INDEBTEDNESS. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the amount or validity thereof
is currently being contested in good faith by appropriate proceedings and
Borrower shall have provided for such reserves as Agent may reasonably deem
proper and necessary, subject at all times to any applicable subordination
arrangement in favor of Lenders.
6.10. STANDARDS OF FINANCIAL STATEMENTS. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12 and 9.13 as to which
GAAP is applicable to be complete and correct in all material respects (subject,
in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).
VII. NEGATIVE COVENANTS
Borrower shall not, until satisfaction in full of the Obligations and
termination of this Agreement:
7.1. MERGER, CONSOLIDATION, ACQUISITION AND SALE OF ASSETS.
(a) Enter into any merger, consolidation or other reorganization with
or into any other Person or acquire all or a substantial portion of the assets
or stock of any Person or permit any other Person to consolidate with or merge
with it.
(b) Sell, lease, transfer or otherwise dispose of any of its
properties or assets, except in the ordinary course of its business.
43
7.2. CREATION OF LIENS. Create or suffer to exist any Lien or transfer upon
or against any of its property or assets now owned or hereafter acquired, except
Permitted Encumbrances.
7.3. GUARANTEES. Become liable upon the obligations of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders)
except the endorsement of checks in the ordinary course of business.
7.4. INVESTMENTS. Purchase or acquire obligations or stock of, or any other
interest in, any Person, except (a) obligations issued or guaranteed by the
United States of America or any agency thereof; (b) commercial paper with
maturities of not more than 180 days and a published rating of not less than A-1
or P-1 (or the equivalent rating); (c) certificates of time deposit and bankers'
acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency; and (d) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency thereof.
7.5. LOANS. Make advances, loans or extensions of credit to any Person,
including without limitation, any Parent, Subsidiary or Affiliate except with
respect to (a) the extension of commercial trade credit in connection with the
sale of Inventory in the ordinary course of its business, (b) loans to its
employees in the ordinary course of business not to exceed the aggregate amount
of $250,000 at any time outstanding and (iii) loans to Subsidiaries in the
ordinary course of business consistent with past practices and on terms no less
favorable to Borrower than would be obtained in a comparable arm's-length
transaction for the purpose of funding the manufacture of Inventory and to pay
operating expenses relating thereto.
7.6. CAPITAL EXPENDITURES. Contract for, purchase or make any expenditure
or commitments for fixed or capital assets (including capitalized leases) in any
fiscal year in an amount in excess of $300,000.
7.7. DIVIDENDS. Declare, pay or make any dividend or distribution on any
shares of the common stock or preferred stock of Borrower (other than dividends
or distributions payable in its stock, or split-ups or reclassifications of its
stock) or apply any of its funds, property or assets to the purchase, redemption
or other retirement of any common or preferred stock, or of any options to
purchase or acquire any such shares of common or preferred stock of Borrower.
7.8. INDEBTEDNESS. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade payables and other ordinary course liabilities
consistent with past practices) except in respect of (i) Indebtedness to Lenders
and (ii) Indebtedness incurred for capital expenditures permitted under Section
7.6 hereof.
7.9. NATURE OF BUSINESS. Substantially change the nature of the business in
which it is presently engaged, nor except as specifically permitted herein
purchase or invest, directly or indirectly, in any assets or property other than
in the ordinary course of business for assets or
44
property which are useful in, necessary for and are to be used in its business
as presently conducted.
7.10. TRANSACTIONS WITH AFFILIATES. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, any Affiliate, except transactions disclosed in the
ordinary course of business, on an arm's-length basis on terms no less favorable
than terms which would have been obtainable from a Person other than an
Affiliate.
7.11. LEASES. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 7.6 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $500,000 in any one fiscal year.
7.12. SUBSIDIARIES.
(a) Form any Subsidiary.
(b) Enter into any partnership, joint venture or similar arrangement.
7.13. FISCAL YEAR AND ACCOUNTING CHANGES. Change its fiscal year from the
Saturday closest to January 31 or make any significant change (i) in accounting
treatment and reporting practices except as required by GAAP or (ii) in tax
reporting treatment except as required by law.
7.14. PLEDGE OF CREDIT. Now or hereafter pledge Agent's or any Lender's
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than Borrower's business as conducted on
the date of this Agreement (including for this purpose the business of
Borrower's Subsidiaries).
7.15. AMENDMENT OF ARTICLES OF INCORPORATION, BY-LAWS. Amend, modify or
waive any term or material provision of its Articles of Incorporation or By-Laws
unless required by law.
7.16. COMPLIANCE WITH ERISA. (i) (x) Maintain, or permit any member of the
Controlled Group to maintain, or (y) become obligated to contribute, or permit
any member of the Controlled Group to become obligated to contribute, to any
Plan, other than those Plans disclosed on Schedule 5.8(d); (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
"prohibited transaction", as that term is defined in section 406 of ERISA and
Section 4975 of the Code; (iii) incur, or permit any member of the Controlled
Group to incur, any "accumulated funding deficiency", as that term is defined in
Section 302 of ERISA or Section 412 of the Code; (iv) terminate, or permit any
member of the Controlled Group to terminate, any Plan where such event could
result in any liability of Borrower or any member of the Controlled Group or the
imposition of a lien on the property of Borrower or any member of the Controlled
Group pursuant to Section 4068 of ERISA; (v) assume, or permit any member of the
Controlled Group to assume, any obligation to contribute to any Multiemployer
Plan not disclosed on Schedule 5.8(d); (vi) incur, or permit any member of the
Controlled Group to incur, any withdrawal liability to any Multiemployer Plan;
(vii) fail promptly to notify Agent of the
45
occurrence of any Termination Event; (viii) fail to comply, or permit a member
of the Controlled Group to fail to comply, with the requirements of ERISA or the
Code or other applicable laws in respect of any Plan; (ix) fail to meet, or
permit any member of the Controlled Group to fail to meet, all minimum funding
requirements under ERISA or the Code or postpone or delay or allow any member of
the Controlled Group to postpone or delay any funding requirement with respect
of any Plan.
7.17. PREPAYMENT OF INDEBTEDNESS. At any time, directly or indirectly,
prepay any Indebtedness (other than to Lenders and other than trade payables),
or repurchase, redeem, retire or otherwise acquire any Indebtedness of Borrower.
VIII. CONDITIONS PRECEDENT.
8.1. CONDITIONS TO INITIAL ADVANCES. The agreement of Lenders to make the
initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Lenders, immediately prior to or concurrently with
the making of such Advances, of the following conditions precedent:
(a) REVOLVING CREDIT NOTE. Agent shall have received the Revolving
Credit Note duly executed and delivered by an authorized officer of Borrower;
(b) FILINGS, REGISTRATIONS AND RECORDINGS. Each document (including,
without limitation, any Uniform Commercial Code financing statement) required by
this Agreement, any Other Document or under law or reasonably requested by the
Agent to be filed, registered or recorded in order to create, in favor of Agent,
a perfected security interest in or lien upon the Collateral shall have been
properly filed, registered or recorded in each jurisdiction in which the filing,
registration or recordation thereof is so required or requested, and Agent shall
have received an acknowledgment copy, or other evidence satisfactory to it, of
each such filing, registration or recordation and satisfactory evidence of the
payment of any necessary fee, tax or expense relating thereto;
(c) CORPORATE PROCEEDINGS OF BORROWER. Agent shall have received a
copy of the resolutions in form and substance reasonably satisfactory to Agent,
of the Board of Directors of Borrower authorizing (i) the execution, delivery
and performance of this Agreement, the Factoring Agreement, the Revolving Credit
Note and any related agreements (collectively the "Documents") and (ii) the
granting by Borrower of the security interests in and liens upon the Collateral
in each case certified by the Secretary or an Assistant Secretary of Borrower as
of the Closing Date; and, such certificate shall state that the resolutions
thereby certified have not been amended, modified, revoked or rescinded as of
the date of such certificate;
(d) INCUMBENCY CERTIFICATES OF BORROWER. Agent shall have received a
certificate of the Secretary or an Assistant Secretary of Borrower, dated the
Closing Date, as to the incumbency and signature of the officers of Borrower
executing this Agreement, any certificate or other documents to be delivered by
it pursuant hereto, together with evidence of the incumbency of such Secretary
or Assistant Secretary;
46
(e) CERTIFICATES. Agent shall have received a copy of the Articles or
Certificate of Incorporation of Borrower, and all amendments thereto, certified
by the Secretary of State or other appropriate official of its jurisdiction of
incorporation together with copies of the By-Laws of Borrower and all agreements
of Borrower's shareholders to which Borrower is a party relating to the voting
or transfer of Borrower's capital stock certified as accurate and complete by
the Secretary of Borrower;
(f) GOOD STANDING CERTIFICATES. Agent shall have received good
standing certificates for Borrower dated not more than 30 days prior to the
Closing Date, issued by the Secretary of State or other appropriate official of
Borrower's jurisdiction of incorporation and each jurisdiction where the conduct
of Borrower's business activities or the ownership of its properties
necessitates qualification;
(g) LEGAL OPINION. Agent shall have received (i) the executed legal
opinion of Fulbright & Xxxxxxxx LLP in form and substance satisfactory to Agent
which shall cover such matters incident to the transactions contemplated by this
Agreement, the Factoring Agreement, the Revolving Credit Note, and related
agreements as Agent may reasonably require and (ii) a reasonably detailed
explanation as to the circumstances giving rise to the tax liability shown on
the latest year-end audited financial statements of Borrower and what action is
currently being taken by Borrower to satisfy and/or contest such liability from
the Law Offices of Xxxxxxx X. Xxxxxxx and Borrower hereby authorizes and directs
such counsel to deliver such opinion and explanation, respectively, to Agent and
the Lenders;
(h) NO LITIGATION. (i) No litigation, investigation or proceeding
before or by any arbitrator or Governmental Body shall be continuing or
threatened against Borrower or against the officers or directors of Borrower (in
their capacity as such) (A) in connection with the Documents or any of the
transactions contemplated thereby and which, in the reasonable opinion of Agent,
is deemed material or (B) which if adversely determined, could, in the
reasonable opinion of Agent, have a Material Adverse Effect on Borrower; and
(ii) no injunction, writ, restraining order or other order of any nature
materially adverse to Borrower or the conduct of its business shall have been
issued by any Governmental Body;
(i) FINANCIAL CONDITION CERTIFICATES. Agent shall have received an
executed Financial Condition Certificate in the form of Exhibit 8.1(i);
(j) COLLATERAL EXAMINATION. Agent shall have completed Collateral
examinations and received appraisals, the results of which shall be satisfactory
in form and substance to the Agent, of the Receivables, Inventory, General
Intangibles, and Equipment of Borrower and all books and records in connection
therewith;
(k) FEES. Agent shall have received all fees payable to Agent and the
Lenders on or prior to the Closing Date pursuant to Article III hereof;
(l) PROJECTIONS. Agent shall have received a copy of the Projections
which shall be satisfactory in all respects to Agent;
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(m) PLEDGE AGREEMENT AND OTHER DOCUMENTS. Agent shall have received
executed Pledge Agreements regarding the pledge to Agent of 100% of the
outstanding stock of each Subsidiary organized under the laws of the United
States (or any subdivision thereof) and 65% of the outstanding stock of each CFC
owned by Borrower and all Other Documents, each in form and substance
satisfactory to Lenders;
(n) INSURANCE. Agent shall have received in form and substance
satisfactory to Agent, certified copies of Borrower's casualty insurance
policies, together with loss payable endorsements on Agent's standard form of
loss payee endorsement naming Agent as loss payee, and certified copies of
Borrower's liability insurance policies, together with endorsements naming Agent
as a co-insured;
(o) PAYMENT INSTRUCTIONS. Agent shall have received written
instructions from Borrower directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(p) CUSTOMER INVOICES; BLOCKED ACCOUNTS. Borrower's invoices issued
after the Closing Date to its Customers shall be marked payable to Agent in a
manner satisfactory to Agent and all Customers shall be notified to direct
payment to Agent or, if requested by Agent, the Blocked Account or the
Depository Account. If requested by Agent, Agent shall have received duly
executed agreements establishing the Blocked Accounts or Depository Accounts
with financial institutions acceptable to Agent for the collection or servicing
of the Receivables and proceeds of the Collateral;
(q) CONSENTS. Agent shall have received any and all Consents necessary
to permit the effectuation of the transactions contemplated by this Agreement
and the Other Documents; and, Agent shall have received such Consents and
waivers of such third parties as might assert claims with respect to the
Collateral, as Agent and its counsel shall deem necessary;
(r) NO ADVERSE MATERIAL CHANGE. (i) Since February 3, 2001, there
shall not have occurred (x) any material adverse change in the condition,
financial or otherwise, operations, properties or prospects of Borrower, (y) any
material damage or destruction to any of the Collateral nor any material
depreciation in the value thereof and (z) no event, condition or state of facts
which could reasonably be expected to have a Material Adverse Effect and (ii) no
representations made or information supplied to Agent or any Lender shall have
been proven to be inaccurate or misleading in any material respect;
(s) LEASEHOLD AGREEMENTS. Agent shall have received landlord,
mortgagee or warehouseman agreements satisfactory to Agent with respect to all
premises located in the United States of America leased by Borrower at which
Inventory is located;
(t) CONTRACT REVIEW. Agent shall have reviewed all material contracts
of Borrower including, without limitation, leases, union contracts, labor
contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be satisfactory in all
respects to Agent;
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(u) CLOSING CERTIFICATE. Agent shall have received a closing
certificate signed by the Chief Financial Officer of Borrower dated as of the
date hereof, stating that (i) all representations and warranties set forth in
this Agreement and the Other Documents (1) that are qualified as to Material
Adverse Effect are true and correct on and as of such date and (2) that are not
qualified as to Material Adverse Effect are true and correct in all material
respects on and as of such date, (ii) Borrower is on such date in compliance
with all the terms and provisions set forth in this Agreement and the other
Documents and (iii) on such date no Default or Event of Default has occurred or
is continuing; and
(v) BORROWING BASE. Agent shall have received a Borrowing Base
Certificate from Borrower evidencing that the aggregate amount of Eligible
Receivables and Eligible Inventory is sufficient in value and amount to support
Advances in the amount requested by Borrower on the Closing Date; and
(w) OTHER. All corporate and other proceedings, and all documents,
instruments and other legal matters shall be satisfactory in form and substance
to Agent, the Lenders and their counsel.
8.2. CONDITIONS TO EACH ADVANCE. The agreement of Lenders to make any
Advance requested to be made on any date (including, without limitation, its
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by Borrower in or pursuant to this Agreement and any related
agreements to which it is a party, and each of the representations and
warranties contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this Agreement or
any related agreement shall be true and correct in all material respects on and
as of such date as if made on and as of such date;
(b) NO DEFAULT. No Event of Default or Default shall have occurred and
be continuing on such date, or would exist after giving effect to the Advances
requested to be made, on such date and, in the case of the initial Advance;
provided, however that Required Lenders in their sole discretion, may continue
to make Advances notwithstanding the existence of an Event of Default or Default
and that any Advances so made shall not be deemed a waiver of any such Event of
Default or Default; and
(c) MAXIMUM ADVANCES. In the case of any Advances requested to be
made, after giving effect thereto, the aggregate Advances shall not exceed the
maximum amount of Advances permitted under Section 2.1 hereof.
Each request for an Advance by Borrower hereunder shall constitute a
representation and warranty by Borrower as of the date of such Advance that the
conditions contained in this subsection shall have been satisfied.
IX. INFORMATION AS TO BORROWER.
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Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
9.1. DISCLOSURE OF MATERIAL MATTERS. Immediately upon learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectability of any portion of the Collateral including, without limitation,
Borrower's reclamation or repossession of, or the return to Borrower of, a
material amount of goods or claims or disputes asserted by any Customer or other
obligor.
9.2. SCHEDULES. Deliver to Agent (a) on the third Business Day of each week
as and for the immediately preceding week (i) a report, in form and substance
satisfactory to Agent, detailing all sales, credits and cash applications of
Borrower, (ii) Inventory reports and (iii) a Borrowing Base Certificate and (b)
on or before the fifteenth (15th) Business Day of each month as and for the
prior month (a) accounts receivable ageings, (b) accounts payable schedules and
(c) copies of all of Borrower's bank statements. In addition, Borrower will
deliver to Agent at such intervals as Agent may reasonably require: (i)
confirmatory assignment schedules, (ii) copies of Customer's invoices, (iii)
evidence of shipment or delivery and (iv) such further schedules, documents
and/or information regarding the Collateral as Agent may require including,
without limitation, trial balances and test verifications. Agent shall have the
right to confirm and verify all Receivables by any manner and through any medium
it considers advisable and do whatever it may deem reasonably necessary to
protect its interests hereunder. The items to be provided under this Section are
to be in form satisfactory to Agent and executed by Borrower and delivered to
Agent from time to time solely for Agent's convenience in maintaining records of
the Collateral, and Borrower's failure to deliver any of such items to Agent
shall not affect, terminate, modify or otherwise limit Agent's Lien with respect
to the Collateral.
9.3. ENVIRONMENTAL REPORTS. Furnish Agent, concurrently with the delivery
of the financial statements referred to in Sections 9.7 and 9.8, with a
certificate signed by the Chief Financial Officer of Borrower stating, to the
best of his knowledge, that Borrower is in compliance in all material respects
with all federal, state and local laws relating to environmental protection and
control and occupational safety and health. To the extent Borrower is not in
compliance with the foregoing laws, the certificate shall set forth with
specificity all areas of non-compliance and the proposed action Borrower will
implement in order to achieve full compliance.
9.4. LITIGATION. Promptly notify Agent in writing of any litigation, suit
or administrative proceeding affecting Borrower, whether or not the claim is
covered by insurance, and of any suit or administrative proceeding, which could
reasonably be expected to have a Material Adverse Effect on Borrower.
9.5. MATERIAL OCCURRENCES. Promptly notify Agent in writing upon the
occurrence of (a) any Event of Default or Default; (b) any event, development or
circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of Borrower
as of the date of such statements; (c) any accumulated retirement plan funding
deficiency which, if such deficiency continued for two plan years and was not
corrected as provided in Section 4971 of the Code, could subject Borrower to a
tax imposed by Section 4971
50
of the Code; (d) each and every default by Borrower which could reasonably be
expected to result in the acceleration of the maturity of any Indebtedness
having a principal amount outstanding in excess of $100,000, including the names
and addresses of the holders of such Indebtedness with respect to which there is
a default existing or with respect to which the maturity has been or could
reasonably be expected to be accelerated, and the amount of such Indebtedness;
and (e) any other development in the business or affairs of Borrower which could
reasonably be expected to have a Material Adverse Effect on Borrower; in each
case describing the nature thereof and the action Borrower proposes to take with
respect thereto.
9.6. GOVERNMENT RECEIVABLES. Notify Agent immediately if any of its
Receivables arise out of contracts between Borrower and the United States, any
state, or any department, agency or instrumentality of any of them.
9.7. ANNUAL FINANCIAL STATEMENTS. Furnish Agent within ninety (90) days
after the end of each fiscal year of Borrower, financial statements of Borrower
on a Consolidated Basis including, but not limited to, statements of income,
stockholders' equity and cash flow from the beginning of the current fiscal year
to the end of such fiscal year and the balance sheet as at the end of such
fiscal year, all prepared in accordance with GAAP applied on a basis consistent
with prior practices, and in reasonable detail and, in the case of consolidated
financial statements, reported upon without qualification by an independent
certified public accounting firm selected by Borrower and reasonably
satisfactory to Agent (the "Accountants"). The report of the Accountants shall
be accompanied by a statement of the Accountants certifying that (i) they have
caused the Loan Agreement to be reviewed, (ii) in making the examination upon
which such report was based either no information came to their attention which
to their knowledge constituted an Event of Default or a Default under this
Agreement or any Other Document or, if such information came to their attention,
specifying any such Default or Event of Default, its nature, when it occurred
and whether it is continuing, and such report shall contain or have appended
thereto calculations which set forth Borrower's compliance with the requirements
or restrictions imposed by Sections 6.5, 6.6, 6.7, 7.6 and 7.11 hereof. In
addition, the reports shall be accompanied by a certificate of the President
and/or Chief Financial Officer of Borrower which shall state that, based on an
examination sufficient to permit him to make an informed statement, no Default
or Event of Default exists, or, if such is not the case, specifying such Default
or Event of Default, its nature, when it occurred, whether it is continuing and
the steps being taken by Borrower with respect to such default and, such
certificate shall have appended thereto calculations which set forth Borrower's
compliance with the requirements or restrictions imposed by Sections 6.5, 6.6,
6.7, 7.6 and 7.11 hereof.
9.8. QUARTERLY FINANCIAL STATEMENTS. Furnish Agent within forty-five (45)
days after the end of each fiscal quarter, an unaudited balance sheet of
Borrower on a Consolidated Basis and unaudited statements of income and
stockholders' equity and cash flow of Borrower reflecting results of operations
from the beginning of the fiscal year to the end of such quarter and for such
quarter, prepared on a basis consistent with prior practices and complete and
correct in all material respects, subject to normal year end adjustments. The
reports shall be accompanied by a certificate of Borrower's Chief Financial
Officer which shall state that, based on an examination sufficient to permit him
to make an informed statement, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default, its nature,
when it occurred, whether it is continuing and the steps being taken by Borrower
with
51
respect to such default and, such certificate shall have appended thereto
calculations which set forth Borrower's compliance with the requirements or
restrictions imposed by Sections 6.5, 6.6, 6.7, 7.6 and 7.11 hereof.
9.9. MONTHLY FINANCIAL STATEMENTS. Furnish Agent within thirty (30) days
after the end of each month (other than the last month of the first, second,
third and fourth quarters of each fiscal year), an unaudited balance sheet of
Borrower and unaudited statements of income and stockholders' equity and cash
flow of Borrower on a Consolidated Basis reflecting results of operations from
the beginning of the fiscal year to the end of such month and for such month,
prepared on a basis consistent with prior practices and complete and correct in
all material respects, subject to normal year end adjustments. The reports shall
be accompanied by a certificate of Borrower's Chief Financial Officer which
shall state that, based on an examination sufficient to permit him to make an
informed statement, no Default or Event of Default exists, or, if such is not
the case, specifying such Default or Event of Default, its nature, when it
occurred, whether it is continuing and the steps being taken by Borrower with
respect to such default, and such certificate shall have appended thereto
calculations which set forth Borrower's compliance with the requirements or
restrictions imposed by Sections 6.5, 6.6, 6.7, 7.6 and 7.11 hereof.
9.10. OTHER REPORTS. Furnish Agent as soon as available, but in any event
within ten (10) days after the issuance thereof, with copies of such financial
statements, reports and returns as Borrower shall send to its stockholders.
9.11. ADDITIONAL INFORMATION. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent and
Lenders to determine whether the terms, covenants, provisions and conditions of
this Agreement and the Revolving Credit Note have been complied with by Borrower
including, without limitation and without the necessity of any request by Agent,
(a) copies of all environmental audits and reviews, (b) at least thirty (30)
days prior thereto, notice of Borrower's opening of any new office or place of
business or Borrower's closing of any existing office or place of business, and
(c) promptly upon Borrower's learning thereof, notice of any labor dispute to
which Borrower may become a party, any strikes or walkouts relating to any of
its plants or other facilities, and the expiration of any labor contract to
which Borrower is a party or by which Borrower is bound.
9.12. PROJECTED OPERATING BUDGET. Furnish Agent, no later than thirty (30)
days prior to the beginning of Borrower's fiscal years commencing with fiscal
year 2002, a month by month projected operating budget and cash flow of Borrower
on a Consolidated Basis for such fiscal year (including an income statement for
each month and a balance sheet as at the end of the last month in each fiscal
quarter), such projections to be accompanied by a certificate signed by
Borrower's Chief Financial Officer to the effect that such projections have been
prepared on the basis of sound financial planning practice consistent with past
budgets and financial statements and that such officer has no reason to question
the reasonableness of any material assumptions on which such projections were
prepared, it being recognized by the Lenders that such financial information as
it relates to future events is not to be viewed as fact and that actual results
during the period or periods covered by such projections may differ from the
projected results set forth therein by a material amount.
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9.13. VARIANCES FROM OPERATING BUDGET. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Section 9.7 and each
quarterly report, a written report summarizing all material variances from
budgets submitted by Borrower pursuant to Section 9.12 and a discussion and
analysis by management with respect to such variances.
9.14. NOTICE OF SUITS, ADVERSE EVENTS. Furnish Agent with prompt notice of
(i) any lapse or other termination of any Consent issued to Borrower by any
Governmental Body or any other Person that is material to the operation of
Borrower's business, (ii) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (iii) copies of any periodic or
special reports filed by Borrower with any Governmental Body or Person, if such
reports indicate any material change in the business, operations, affairs or
condition of Borrower, or if copies thereof are requested by Agent, and (iv)
copies of any material notices and other communications from any Governmental
Body or Person which specifically relate to Borrower.
9.15. ERISA NOTICES AND REQUESTS. Furnish Agent with immediate written
notice in the event that (i) Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which Borrower or member of the Controlled Group has taken, is taking, or
proposes to take with respect thereto and, when known, any action taken or
threatened by the Service, Department of Labor or PBGC with respect thereto,
(ii) Borrower or any member of the Controlled Group knows or has reason to know
that a prohibited transaction (as defined in Sections 406 of ERISA and 4975 of
the Code) has occurred together with a written statement describing such
transaction and the action which Borrower or any member of the Controlled Group
has taken, is taking or proposes to take with respect thereto, (iii) a funding
waiver request has been filed with respect to any Plan together with all
communications received by Borrower or any member of the Controlled Group with
respect to such request, (iv) any increase in the benefits of any existing Plan
or the establishment of any new Plan or the commencement of contributions to any
Plan to which Borrower or any member of the Controlled Group was not previously
contributing shall occur, (v) Borrower or any member of the Controlled Group
shall receive from the PBGC a notice of intention to terminate a Plan or to have
a trustee appointed to administer a Plan, together with copies of each such
notice, (vi) Borrower or any member of the Controlled Group shall receive any
favorable or unfavorable determination letter from the Service regarding the
qualification of a Plan under Section 401(a) of the Code, together with copies
of each such letter; (vii) Borrower or any member of the Controlled Group shall
receive a notice regarding the imposition of withdrawal liability, together with
copies of each such notice; (viii) Borrower or any member of the Controlled
Group shall fail to make a required installment or any other required payment
under Section 412 of the Code on or before the due date for such installment or
payment; (ix) Borrower or any member of the Controlled Group knows that (a) a
Multiemployer Plan has been terminated, (b) the administrator or plan sponsor of
a Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC
has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
9.16. ADDITIONAL DOCUMENTS. Execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
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X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall constitute
an "Event of Default":
10.1. failure by Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein or in any Other Document when due;
10.2. any representation or warranty made or deemed made by Borrower in
this Agreement or any related agreement or in any certificate, document or
financial or other statement furnished at any time in connection herewith or
therewith shall prove to have been misleading in any material respect on the
date when made or deemed to have been made;
10.3. failure by Borrower to (i) furnish financial information when due or
when requested which is unremedied for a period of fifteen (15) days, or (ii)
permit the inspection of its books or records;
10.4. issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of Borrower's property which is not stayed
or lifted within thirty (30) days;
10.5. failure or neglect of Borrower to perform, keep or observe any term,
provision, condition or covenant herein contained, or contained in any other
agreement or arrangement, now or hereafter entered into between Borrower and any
Lender other than for a failure or neglect of Borrower to perform, keep or
observe any term, provision, condition or covenant, contained in Sections 4.6,
4.7, 4.9, 6.1, 6.3, 6.4, 9.4 or 9.6 hereof which is cured within 30 days from
the occurrence of such failure or neglect;
10.6. any judgment is rendered or judgment liens filed against Borrower for
an amount in excess of $250,000, which within thirty (30) days of such rendering
or filing is not either satisfied, stayed or discharged of record;
10.7. Borrower shall (i) apply for, consent to or suffer the appointment
of, or the taking of possession by, a receiver, custodian, trustee, liquidator
or similar fiduciary of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within forty-five (45) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing;
10.8. Borrower shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business;
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10.9. any Affiliate or any Subsidiary of Borrower, or any Guarantor, shall
(i) apply for, consent to or suffer the appointment of, or the taking of
possession by, a receiver, custodian, trustee, liquidator or similar fiduciary
of itself or of all or a substantial part of its property, (ii) admit in writing
its inability, or be generally unable, to pay its debts as they become due or
cease operations of its present business, (iii) make a general assignment for
the benefit of creditors, (iv) commence a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a
bankrupt or insolvent, (vi) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vii) acquiesce to, or fail to
have dismissed, within forty-five (45) days, any petition filed against it in
any involuntary case under such bankruptcy laws, or (viii) take any action for
the purpose of effecting any of the foregoing;
10.10. any change in Borrower's condition or affairs (financial or
otherwise) which in Lenders' opinion materially impairs the Collateral or the
ability of Borrower to perform its Obligations under this Agreement;
10.11. any Lien created hereunder or provided for hereby or under any
related agreement for any reason ceases to be or is not a valid and perfected
Lien having a first priority interest;
10.12. the Factoring Agreement shall be terminated in accordance with the
terms thereof;
10.13. a default of the obligations of Borrower under any other agreement
to which it is a party shall occur which materially adversely affects its
condition, affairs or prospects (financial or otherwise) which default is not
cured within any applicable grace period;
10.14. termination or breach of any Guaranty or similar agreement executed
and delivered to Agent in connection with the Obligations of Borrower, or if any
Guarantor attempts to terminate, challenges the validity of, or its liability
under, any such Guaranty or similar agreement;
10.15. any Change of Ownership shall occur;
10.16. any material provision of this Agreement shall, for any reason,
cease to be valid and binding on Borrower, or Borrower shall so claim in writing
to Agent;
10.17. if (i) any Governmental Body shall (A) revoke, terminate, suspend or
adversely modify any license, permit, patent, trademark or tradename of
Borrower, the continuation of which is material to the continuation of
Borrower's business, or (B) commence proceedings to suspend, revoke, terminate
or adversely modify any such license, permit, trademark, tradename or patent and
such proceedings shall not be dismissed or discharged within sixty (60) days, or
(C) schedule or conduct a hearing on the renewal of any license, permit,
trademark, tradename or patent necessary for the continuation of Borrower's
business and the staff of such Governmental Body issues a report recommending
the termination, revocation, suspension or material, adverse modification of
such license, permit, trademark, tradename or patent; (ii) any agreement which
is necessary or material to the operation of Borrower's business shall be
revoked or terminated and not replaced by a substitute acceptable to Agent
within thirty (30) days after the date of such revocation or termination, and
such revocation or termination and non-replacement could reasonably be expected
to have a Material Adverse Effect;
55
10.18. any portion of the Collateral shall be seized or taken by a
Governmental Body, or Borrower or the title and rights of Borrower in the
Collateral shall have become the subject matter of litigation which could
reasonably be expected to, in the opinion of Agent, upon final determination,
result in impairment or loss of the security provided by this Agreement or the
Other Documents;
10.19. the operations of Borrower's or any Subsidiary's manufacturing
facility are interrupted at any time for more than five consecutive days, unless
Borrower shall (i) be entitled to receive for such period of interruption,
proceeds of business interruption insurance sufficient to assure that its per
diem cash needs during such period is at least equal to its average per diem
cash needs for the consecutive three month period immediately preceding the
initial date of interruption and (ii) receive such proceeds in the amount
described in clause (i) preceding not later than thirty (30) days following the
initial date of any such interruption; provided, however, that notwithstanding
the provisions of clauses (i) and (ii) of this section, an Event of Default
shall be deemed to have occurred if Borrower shall be receiving the proceeds of
business interruption insurance for a period of thirty (30) consecutive days; or
10.20. an event or condition specified in Sections 7.16 or 9.15 hereof
shall occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, Borrower or any
member of the Controlled Group shall incur, or in the opinion of Agent be
reasonably likely to incur, a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of Agent, could have a Material Adverse Effect on
Borrower.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1. RIGHTS AND REMEDIES. Upon the occurrence of (i) an Event of Default
pursuant to Section 10.7 all Obligations shall be immediately due and payable
and this Agreement and the obligation of Lenders to make Advances shall be
deemed terminated; and, (ii) any of the other Events of Default and at any time
thereafter (such default not having previously been cured), at the option of
Required Lenders all Obligations shall be immediately due and payable and
Lenders shall have the right to terminate this Agreement and to terminate the
obligation of Lenders to make Advances and (iii) a filing of a petition against
Borrower in any involuntary case under any state or federal bankruptcy laws, the
obligation of Lenders to make Advances hereunder shall be terminated other than
as may be required by an appropriate order of the bankruptcy court having
jurisdiction over Borrower. Upon the occurrence of any Event of Default, Agent
shall have the right to exercise any and all other rights and remedies provided
for herein, under the Uniform Commercial Code and at law or equity generally,
including, without limitation, the right to foreclose the security interests
granted herein and to realize upon any Collateral by any available judicial
procedure and/or to take possession of and sell any or all of the Collateral
with or without judicial process. Agent may enter Borrower's premises or other
premises without legal process and without incurring liability to Borrower
therefor, and Agent may thereupon, or at any time thereafter, in its discretion
without notice or demand, take the Collateral and remove the same to such place
as Agent may deem advisable and Agent may require Borrower to make the
Collateral available to Lenders at a convenient place. With or without having
the Collateral at the time or place of sale, Agent may sell the Collateral, or
any
56
part thereof, at public or private sale, at any time or place, in one or more
sales, at such price or prices, and upon such terms, either for cash, credit or
future delivery, as Agent may elect. Except as to that part of the Collateral
which is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Agent shall give Borrower reasonable
notification of such sale or sales, it being agreed that in all events written
notice mailed to Borrower at least ten (10) days prior to such sale or sales is
reasonable notification. At any public sale Agent or any Lender may bid for and
become the purchaser, and Agent, any Lender or any other purchaser at any such
sale thereafter shall hold the Collateral sold absolutely free from any claim or
right of whatsoever kind, including any equity of redemption and such right and
equity are hereby expressly waived and released by Borrower. In connection with
the exercise of the foregoing remedies, Agent is granted permission, without
charge, to use all of Borrower's trademarks, trade styles, trade names, patents,
patent applications, licenses, franchises and other proprietary rights which are
used in connection with (a) Inventory for the purpose of disposing of such
Inventory and (b) Equipment for the purpose of completing the manufacture of
unfinished goods. The proceeds realized from the sale of any Collateral shall be
applied as follows: first, to the reasonable costs, expenses and attorneys' fees
and expenses incurred by Agent and Lenders for collection and for acquisition,
completion, protection, removal, storage, sale and delivery of the Collateral;
second, to interest due upon any of the Obligations; and, third, to the
principal of the Obligations. If any deficiency shall arise, Borrower shall
remain liable to Agent and the Lenders therefor.
11.2. AGENT'S DISCRETION. Agent shall have the right in its sole discretion
to determine which rights, Liens, security interests or remedies Agent may at
any time pursue, relinquish, subordinate, or modify or to take any other action
with respect thereto and such determination will not in any way modify or affect
any of Agent's or Lenders' rights hereunder.
11.3. SETOFF. In addition to any other rights which Agent or any Lender may
have under applicable law, upon the occurrence of an Event of Default hereunder,
Agent and such Lender shall have a right to apply Borrower's property held by
Agent and such Lender or by the Bank to reduce the Obligations.
11.4. RIGHTS AND REMEDIES NOT EXCLUSIVE. The enumeration of the foregoing
rights and remedies is not intended to be exhaustive and the exercise of any
right or remedy shall not preclude the exercise of any other right or remedies
provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. WAIVER OF NOTICE. Borrower hereby waives notice of non-payment of any
of the Receivables, demand, presentment, protest and notice thereof with respect
to any and all instruments, notice of acceptance hereof, notice of loans or
advances made, credit extended, Collateral received or delivered, or any other
action taken in reliance hereon, and all other demands and notices of any
description, except such as are expressly provided for herein.
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12.2. DELAY. No delay or omission on Agent's or any Lender's part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.
12.3. JURY WAIVER. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1. TERM. This Agreement, which shall inure to the benefit of and shall
be binding upon the respective successors and permitted assigns of Borrower,
Agent and each Lender, shall become effective on the date hereof and shall
continue in full force and effect until the last day of the Term unless sooner
terminated as herein provided. Borrower may terminate this Agreement at any time
upon thirty (30) days' prior written notice upon payment in full of the
Obligations. In the event the Obligations are prepaid in full prior to the last
day of the Term and Lenders' commitment to make Advances hereunder is terminated
(the date of such prepayment hereinafter referred to as the "Prepayment Date"),
Borrower shall pay an early termination fee in an amount equal to (x) $240,000
if the Prepayment Date occurs from the Closing Date to and including the date
immediately preceding the first anniversary of the Closing Date, (y) $160,000 if
the Prepayment Date occurs on or after the first anniversary of the Closing Date
to and including the date immediately preceding the second anniversary of the
Closing Date and (z) $80,000 if the Prepayment Date occurs on or after the
second anniversary of the Closing Date to and including the date immediately
preceding the third anniversary of the Closing Date.
13.2. TERMINATION. The termination of the Agreement shall not affect
Borrower's, Agent's or any Lender's rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The Liens and rights granted to Agent and
Lenders hereunder and the financing statements filed hereunder shall continue in
full force and effect, notwithstanding the termination of this Agreement or the
fact that Borrower's Account may from time to time be temporarily in a zero or
credit position, until all of the Obligations of Borrower
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have been paid or performed in full after the termination of this Agreement or
Borrower has furnished Agent and the Lenders with an indemnification
satisfactory to Agent and the Lenders with respect thereto. Accordingly,
Borrower waives any rights which it may have under Section 9-404(1) of the
Uniform Commercial Code to demand the filing of termination statements with
respect to the Collateral, and Agent shall not be required to send such
termination statements to Borrower, or to file them with any filing office,
unless and until this Agreement shall have been terminated in accordance with
its terms and all Obligations paid in full in immediately available funds. All
representations, warranties, covenants, waivers and agreements contained herein
shall survive termination hereof until all Obligations are paid or performed in
full.
XIV. REGARDING AGENT.
14.1. APPOINTMENT. Each Lender hereby designates GMACCC to act as Agent for
such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Sections
3.4), charges and collections (without giving effect to any collection days)
received pursuant to this Agreement, for the ratable benefit of Lenders. Agent
may perform any of its duties hereunder by or through its agents or employees.
As to any matters not expressly provided for by this Agreement (including
without limitation, collection of the Revolving Credit Note) Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding; provided, however, that Agent shall not be
required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the Other Documents or applicable law unless Agent
is furnished with an indemnification reasonably satisfactory to Agent with
respect thereto.
14.2. NATURE OF DUTIES. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by Borrower or any officer
thereof contained in this Agreement, or in any of the Other Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any of the
Other Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any of the Other Documents
or for any failure of Borrower to perform its obligations hereunder. Agent shall
not be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any of the Other Documents, or to inspect the properties,
books or records of Borrower. The duties of Agent as respects the Advances to
Borrower shall be mechanical and administrative in nature; Agent shall not have
by reason of this Agreement a fiduciary relationship in respect of any Lender;
and nothing in this Agreement,
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expressed or implied, is intended to or shall be so construed as to impose upon
Agent any obligations in respect of this Agreement except as expressly set forth
herein.
14.3. LACK OF RELIANCE ON AGENT AND RESIGNATION. Independently and without
reliance upon Agent or any other Lender, each Lender has made and shall continue
to make (i) its own independent investigation of the financial condition and
affairs of Borrower in connection with the making and the continuance of the
Advances hereunder and the taking or not taking of any action in connection
herewith, and (ii) its own appraisal of the creditworthiness of Borrower. Agent
shall have no duty or responsibility, either initially or on a continuing basis,
to provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before making of the Advances or at any time
or times thereafter except as shall be provided by Borrower pursuant to the
terms hereof. Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
agreement, document, certificate or a statement delivered in connection with or
for the execution, effectiveness, genuineness, validity, enforceability,
collectability or sufficiency of this Agreement or any Other Document, or of the
financial condition of Borrower, or be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of this Agreement, the Revolving Credit Note, the Other Documents or
the financial condition of Borrower, or the existence of any Event of Default or
any Default.
Agent may resign on sixty (60) days' written notice to each of Lenders and
Borrower and upon such resignation, the Required Lenders will promptly designate
a successor Agent reasonably satisfactory to Borrower.
Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term "Agent" shall mean such successor agent effective upon its
appointment, and the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent. After any Agent's resignation as Agent, the provisions of this Article
XIV shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
14.4. CERTAIN RIGHTS OF AGENT. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
14.5. RELIANCE. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
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14.6. NOTICE OF DEFAULT. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or Borrower
referring to this Agreement or the Other Documents, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that Agent receives such a notice, Agent shall give notice thereof to
Lenders. Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Lenders; provided, that,
unless and until Agent shall have received such directions, Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of Lenders.
14.7. INDEMNIFICATION. To the extent Agent is not reimbursed and
indemnified by Borrower, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; provided that, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
(not mere) negligence or willful misconduct.
14.8. AGENT IN ITS INDIVIDUAL CAPACITY. With respect to the obligation of
Agent to lend under this Agreement, the Advances made by it shall have the same
rights and powers hereunder as any other Lender and as if it were not performing
the duties as Agent specified herein; and the term "Lender" or any similar term
shall, unless the context clearly otherwise indicates, include Agent in its
individual capacity as a Lender. Agent may engage in business with Borrower as
if it were not performing the duties specified herein, and may accept fees and
other consideration from Borrower for services in connection with this Agreement
or otherwise without having to account for the same to Lenders.
14.9. DELIVERY OF DOCUMENTS. To the extent Agent receives financial
statements required under Sections 9.7, 9.8 and 9.9 from Borrower pursuant to
the terms of this Agreement, Agent will promptly furnish such documents and
information to Lenders.
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14.10. BORROWER'S UNDERTAKING TO AGENT. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or the Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy Borrower's obligations to make payments for the account of the Lenders
or the relevant one or more of them pursuant to this Agreement.
XV. MISCELLANEOUS.
15.1. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applied to contracts to be
performed wholly within the State of New York. Any judicial proceeding brought
by or against Borrower with respect to any of the Obligations, this Agreement or
any related agreement may be brought in any court of competent jurisdiction in
the State of New York, United States of America, and, by execution and delivery
of this Agreement, Borrower accepts for itself and in connection with its
properties, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement. Borrower hereby waives personal
service of any and all process upon it and consents that all such service of
process may be made by registered mail (return receipt requested) directed to
Borrower at its address set forth in Section 15.6 and service so made shall be
deemed completed five (5) days after the same shall have been so deposited in
the mails of the United States of America. Nothing herein shall affect the right
to serve process in any manner permitted by law or shall limit the right of
Agent or any Lender to bring proceedings against Borrower in the courts of any
other jurisdiction. Borrower waives any objection to jurisdiction and venue of
any action instituted hereunder and shall not assert any defense based on lack
of jurisdiction or venue or based upon forum non conveniens. Any judicial
proceeding by Borrower against Agent or any Lender involving, directly or
indirectly, any matter or claim in any way arising out of, related to or
connected with this Agreement or any related agreement, shall be brought only in
a federal or state court located in the City of New York, State of New York.
15.2. ENTIRE UNDERSTANDING. (a) This Agreement and the documents executed
concurrently herewith contain the entire understanding between Borrower, Agent
and each Lender and supersedes all prior agreements and understandings, if any,
relating to the subject matter hereof. Any promises, representations, warranties
or guarantees not herein contained and hereinafter made shall have no force and
effect unless in writing, and executed by the party or parties making such
representations, warranties or guarantees. Neither this Agreement nor any
portion or provisions hereof may be changed, modified, amended, waived,
supplemented, discharged, cancelled or terminated orally or by any course of
dealing, or in any manner other than by an agreement in writing, signed by the
party to be charged. Borrower acknowledges that it has been advised by counsel
in connection with the execution of this Agreement and Other Documents and is
not relying upon oral representations or statements inconsistent with the terms
and provisions of this Agreement.
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(b) The Required Lenders, Agent with the consent in writing of the
Required Lenders, and Borrower may, subject to the provisions of this
Section 15.2 (b), from time to time enter into written supplemental
agreements to this Agreement, any Revolving Credit Note or the Other
Documents executed by Borrower, for the purpose of adding or deleting any
provisions or otherwise changing, varying or waiving in any manner the
rights of the Lenders, Agent or Borrower thereunder or the conditions,
provisions or terms thereof of waiving any Event of Default thereunder, but
only to the extent specified in such written agreements; provided, however,
that no such supplemental agreement shall, without the consent of all the
Lenders:
(i) increase the Commitment Percentage of any Lender.
(ii) increase the Maximum Revolving Advance Amount;
(iii) extend the maturity of any Revolving Credit Note or the due
date for any amount payable hereunder, or decrease the rate of
interest or reduce any fee payable by Borrower to Lenders pursuant to
this Agreement;
(iv) alter the definition of the term Required Lenders or alter,
amend or modify this Section 15.2(b);
(v) release any Collateral during any calendar year having an
aggregate value in excess of $100,000; or
(vi) change the rights and duties of Agent.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrower, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrower, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
15.3. SUCCESSORS AND ASSIGNS; PARTICIPATIONS; NEW LENDERS.
(a) This Agreement shall be binding upon and inure to the benefit of
Borrower, Agent, each Lender, all future holders of the Obligations and
their respective successors and assigns, except that Borrower may not
assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of Agent and each Lender.
(b) Borrower acknowledges that in the regular course of commercial
banking business one or more Lenders may at any time and from time to time
sell participating interests in the Advances to other financial
institutions (each such transferee or purchaser of a participating
interest, a "Transferee"). Each Transferee may exercise all rights of
payment (including without limitation rights of set-off) with respect to
the portion of such Advances held by it or other Obligations payable
hereunder as fully as if such Transferee were the direct holder
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thereof provided that Borrower shall not be required to pay to any
Transferee more than the amount which it would have been required to pay to
Lender which granted an interest in its Advances or other Obligations
payable hereunder to such Transferee had such Lender retained such interest
in the Advances hereunder or other Obligations payable hereunder and in no
event shall Borrower be required to pay any such amount arising from the
same circumstances and with respect to the same Advances or other
Obligations payable hereunder to both such Lender and such Transferee.
Borrower hereby grants to any Transferee a continuing security interest in
any deposits, moneys or other property actually or constructively held by
such Transferee as security for the Transferee's interest in the Advances.
(c) Any Lender, with the consent of Agent, may sell, assign or
transfer all or any part of its rights under this Agreement and the Other
Documents to one or more additional banks or financial institutions and one
or more additional banks or financial institutions may commit to make
Advances hereunder (each a "Purchasing Lender"), in minimum amounts of not
less than $5,000,000, pursuant to a Commitment Transfer Supplement,
executed by a Purchasing Lender, the transferor Lender, and Agent and
delivered to Agent for recording. Upon such execution, delivery, acceptance
and recording, from and after the transfer effective date determined
pursuant to such Commitment Transfer Supplement, (i) Purchasing Lender
thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Commitment Percentage as set forth therein, and (ii) the
transferor Lender thereunder shall, to the extent provided in such
Commitment Transfer Supplement, be released from its obligations under this
Agreement, the Commitment Transfer Supplement creating a novation for that
purpose. Such Commitment Transfer Supplement shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the purchase by such Purchasing Lender
of all or a portion of the rights and obligations of such transferor Lender
under this Agreement and the Other Documents. Borrower hereby consents to
the addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the purchase by such Purchasing Lender
of all or a portion of the rights and obligations of such transferor Lender
under this Agreement and the Other Documents. Borrower shall execute and
deliver such further documents and do such further acts and things in order
to effectuate the foregoing.
(d) Agent shall maintain at its address a copy of each Commitment
Transfer Supplement delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Advances owing to each Lender
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and Borrower, Agent and Lenders may treat each
Person whose name is recorded in the Register as the owner of the Advance
recorded therein for the purposes of this Agreement. The Register shall be
available for inspection by Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice. Agent shall receive a
fee in the amount of $3500 payable by the applicable Purchasing Lender upon
the effective date of each transfer or assignment to such Purchasing
Lender.
(e) Borrower authorizes each Lender to disclose to any Transferee or
Purchasing Lender and any prospective Transferee or Purchasing Lender any
and all financial information in such Lender's possession concerning
Borrower which has been delivered to such
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Lender by or on behalf of Borrower pursuant to this Agreement or in
connection with such Lender's credit evaluation of Borrower.
15.4. APPLICATION OF PAYMENTS. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for Borrower's benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Agent or such
Lender.
15.5. INDEMNITY. Borrower shall indemnify Agent, each Lender and each of
their respective officers, directors, Affiliates, employees and agents from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, fees and disbursements of
counsel) which may be imposed on, incurred by, or asserted against Agent or any
Lender in any litigation, proceeding or investigation instituted or conducted by
any governmental agency or instrumentality or any other Person with respect to
any aspect of, or any transaction contemplated by, or referred to in, or any
matter related to, this Agreement or the Other Documents, whether or not Agent
or any Lender is a party thereto, except to the extent that any of the foregoing
arises out of the willful misconduct or gross (not mere) negligence of the party
being indemnified.
15.6. NOTICE. Any notice or request hereunder may be given to Borrower or
to Agent or any Lender at their respective addresses set forth below or at such
other address as may hereafter be specified in a notice designated as a notice
of change of address under this Section. Any notice or request hereunder shall
be given by (a) hand delivery, (b) overnight courier, (c) registered or
certified mail, return receipt requested, (d) telex or telegram, subsequently
confirmed by registered or certified mail, or (e) telecopy to the number set out
below (or such other number as may hereafter be specified in a notice designated
as a notice of change of address) with electronic confirmation of its receipt.
Except as otherwise expressly set forth herein, any notice or other
communication required or permitted pursuant to this Agreement shall be deemed
given (a) when personally delivered to any officer of the party to whom it is
addressed, (b) on the earlier of actual receipt thereof or three (3) days
following posting thereof by certified or registered mail, postage prepaid, or
(c) upon actual receipt thereof when sent by a recognized overnight delivery
service or (d) upon actual receipt thereof when sent by telecopier to the number
set forth below with electronic confirmation of its receipt, in each case
addressed to each party at its address set forth below or at such other address
as has been furnished in writing by a party to the other by like notice:
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(A) If to Agent at: GMAC COMMERCIAL CREDIT LLC
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Account Manager
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to: Xxxx & Hessen LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(B) If to Lender other than Agent, as specified on the signature pages
hereof
(C) If to Borrower, at: CYGNE DESIGNS, INC.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx Xxxxx, Vice President Finance
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to (which
(shall not constitute notice): Fulbright & Xxxxxxxx L.L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxx, Esq.
Telephone: 000-000-0000
Telecopier: 000-000-0000
15.7. SURVIVAL. The obligations of Borrower under Sections 3.8, 3.9,
4.19(h), 14.7 and 15.5 shall survive termination of this Agreement and the Other
Documents and payment in full of the Obligations.
15.8. SEVERABILITY. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
15.9. EXPENSES. All costs and expenses including, without limitation,
reasonable attorneys' fees and disbursements incurred by Agent, Agent on behalf
of the Lenders and the Lenders (a) in all efforts made to enforce payment of any
Obligation or effect collection of any Collateral, or (b) in connection with the
entering into, modification, amendment, administration and enforcement of this
Agreement or any consents or waivers hereunder and all related agreements,
documents and instruments, or (c) in instituting, maintaining, preserving,
enforcing and foreclosing on Agent's security interest in or Lien on any of the
Collateral, whether through
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judicial proceedings or otherwise, or (d) in defending or prosecuting any
actions or proceedings arising out of or relating to Agent's or any Lender's
transactions with Borrower, or (e) in connection with any advice given to Agent
or any Lender with respect to its rights and obligations under this Agreement
and all related agreements, may be charged to Borrower's Account and shall be
part of the Obligations.
15.10. INJUNCTIVE RELIEF. Borrower recognizes that, in the event Borrower
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement, any remedy at law may prove to be inadequate relief to the
Lenders; therefore, each Lender, if such Lender so requests, shall be entitled
to temporary and permanent injunctive relief in any such case without the
necessity of proving that actual damages are not an adequate remedy.
15.11. CONSEQUENTIAL DAMAGES. Neither Agent, any Lender nor any agent or
attorney for any of them shall be liable to Borrower for consequential damages
arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.
15.12. CAPTIONS. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
15.13. COUNTERPARTS; TELECOPIED SIGNATURES. This Agreement may be executed
in any number of and by different parties hereto on separate counterparts, all
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
15.14. CONSTRUCTION. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
15.15. CONFIDENTIALITY. Agent, each Lender and each Transferee shall hold
all non-public information obtained by Agent, such Lender or such Transferee
pursuant to the requirements of this Agreement in accordance with its customary
procedures for handling confidential information of this nature; provided,
however, Agent, each Lender and each Transferee may disclose such confidential
information (a) to its examiners, affiliates, outside auditors, counsel and
other professional advisors, (b) to Agent, any Lender or to any prospective
Transferees and Purchasing Lenders, and (c) as required or requested by any
Governmental Body or representative thereof or pursuant to legal process;
provided, further that (i) unless specifically prohibited by applicable law or
court order, Agent, each Lender and each Transferee shall use its best efforts
prior to disclosure thereof, to notify Borrower of the applicable request for
disclosure of such non-public information (A) by a Governmental Body or
representative thereof (other than any such request in connection with an
examination of the financial condition of a Lender or a Transferee by such
Governmental Body) or (B) pursuant to legal process and (ii) in no event shall
Agent, any Lender or any Transferee be obligated to return any materials
furnished by Borrower other than those documents and instruments in possession
of Agent or any Lender in
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order to perfect its Lien on the Collateral once the Obligations have been paid
in full and this Agreement has been terminated.
15.16. FACTORING AGREEMENT. In the event of any inconsistency between this
Agreement and the Factoring Agreement, the Factoring Agreement shall control
with respect to the Factored Accounts and this Agreement shall control with
respect to all other matters.
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IN WITNESS WHEREOF, each of the parties has signed this Agreement as of the
day and year first above written.
CYGNE DESIGNS, INC.
By:________________________________
Its:_______________________________
GMAC COMMERCIAL CREDIT LLC, as Lender
and as Agent
By:_______________________________
Its:______________________________
Commitment Percentage: 100%
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EXHIBIT 1.2
FORM OF BORROWING BASE CERTIFICATE
TO: GMAC Commercial Credit LLC, as Agent Date:_______________________
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
SUBJECT: Cygne Designs, Inc. ("Borrower")
Borrowing Base Certificate # ____________________
All capitalized terms used in this certificate which are not defined herein
shall have the meanings given to them in that certain Revolving Credit and
Security Agreement dated as of May __, 2001 among Borrower, GMAC COMMERCIAL
CREDIT LLC ("GMACCC") and the other financial institutions named therein
(collectively, "Lenders") and GMACCC as agent for the Lenders (in such capacity,
the "Agent").
We hereby certify the following information:
I. RECEIVABLES:
A. Balance of Receivables as of _________________, __________ $_________________
B. Adjustments:
Add: Sales $_________________
Less: Collections $_________________
Less: Adjustments to A/R $_________________
Receivables as of _________________, __________ $_________________
X. Xxxxx Receivables $_________________
D. Less: Ineligibles:
Receivables from subsidiaries/affiliates $(________________)
Receivables 60 days past the due date $(________________)
Designated Xxxxxxx Receivables 90 days past the due date $(________________)
Cross-aged Receivable at 25% not insured $(________________)
Receivables from insolvent customers $(________________)
Foreign Receivables not insured $(________________)
Unbilled or Xxxx and Hold $(________________)
Credits, Chargebacks & Disputes $(________________)
Government Receivables $(________________)
Goods not shipped $(________________)
Contras, offsets, etc. $(________________)
Non-Factored Accounts $(________________)
Other:_________________ $(________________)
Total Ineligibles $(________________)
E. Net Eligible Receivables (other than Xxxxxx Receivables) $_________________
F. Availability at 80% (subject to revision) (1) $_________________
G. Net Eligible Xxxxxx Receivables $_________________
H. Availability at 90% (subject to revision) (2) $_________________
II. INVENTORY:
X. Xxxxx Inventory $_________________
B. Less: Ineligibles
Slow moving $(________________)
Inactive, Obsolete or Discontinued $(________________)
Returned or damaged $(________________)
Inventory off premise (without a landlord waiver, warehouse letter or bailee $(________________)
letter in place)
Inventory not covered by licensor consent letter $(________________)
Inventory on consignment (without an access agreement and $(________________)
UCC filings in place)
Other $(________________)
Total Ineligibles $(________________)
C. Net Inventory $_________________
D. Availability at 60% $_________________
E. Lesser of (II.D.) or $2,000,000 (3) $_________________
III. TOTAL AVAILABILITY (1 + 2 + 3) = (A) $_________________
Total Loans Outstanding (4) $(________________)
Outstanding balance of Letters of Credit (5) $(________________)
Amount Requested for Borrowing or Repayment (6) $(________________)
Total Revolving Credit Exposure (4 + 5 +/- 6) = (B) $(________________)
IV. UNDRAWN AVAILABILITY
Lesser of $8,000,000 or (Line III) = (C) $_________________
Less: Liabilities
Total Revolving Credit Exposure (B) $(________________)
Trade Payables past due $(________________)
Fees and Expenses Due to GMACCC $(________________)
Total Liabilities (D) $(________________)
Undrawn Availability (C-D) $_________________
Minimum Undrawn Availability $0
The undersigned hereby represents and warrants that this is a correct statement
regarding the status of it accounts receivable and inventory assigned to GMAC
Commercial Credit, LLC, as Agent and that the figures set forth herein are
accurate. The undersigned further warrants and represents that Borrower is in
complete compliance with all the terms and conditions contained in the
agreements between us. The undersigned further understands that the loans to
Borrower will be based upon reliance on the information contained herein.
ATTEST: CYGNE DESIGNS, INC.
----------------------------------- ------------------------------------
Name: Name:
Title: Title:
EXHIBIT 2.1(A)
REVOLVING CREDIT NOTE
$8,000,000 New York, New York
May __, 2001
This Revolving Credit Note (this "Note") is executed and delivered under
and pursuant to the terms of that certain Revolving Credit and Security
Agreement dated as of the date hereof (as amended, modified, supplemented or
restated from time to time, the "Loan Agreement") by and among CYGNE DESIGNS,
INC., a Delaware corporation ("Borrower"), GMAC COMMERCIAL CREDIT LLC
("GMACCC"), the various other financial institutions named therein or which
hereafter become a party thereto (together with GMACCC, collectively, the
"Lenders") and GMACCC as agent for the Lenders (GMACCC, in such capacity,
"Agent"). Capitalized terms not otherwise defined herein shall have the meanings
ascribed thereto in the Loan Agreement.
FOR VALUE RECEIVED, Borrower promises to pay to the order of GMACCC at
Agent's offices located at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000 or at
such other place as the holder hereof may from time to time designate to
Borrower in writing:
(i) the principal sum of EIGHT MILLION DOLLARS ($8,000,000), or if
different from such amount, GMACCC's Commitment Percentage of the unpaid
principal balance of Revolving Advances as may be due and owing from time
to time under the Loan Agreement, payable in accordance with the provisions
of the Loan Agreement, subject to acceleration upon the occurrence of an
Event of Default under the Loan Agreement, or earlier termination of the
Loan Agreement pursuant to the terms thereof; and
(ii) interest on the principal amount of this Note from time to time
outstanding, payable at the applicable Revolving Interest Rate in
accordance with the provisions of the Loan Agreement. Upon and after the
occurrence of an Event of Default, and during the continuation thereof,
interest shall be payable at the applicable Default Rate. In no event,
however, shall interest hereunder exceed the maximum interest rate
permitted by law.
This Note is one of the Revolving Credit Notes referred to in the Loan
Agreement and is secured, inter alia, by the liens granted pursuant to the Loan
Agreement and the Other Documents, is entitled to the benefits of the Loan
Agreement and the Other Documents, and is subject to all of the agreements,
terms and conditions therein contained.
This Note may be voluntarily prepaid, in whole or in part, on the terms and
conditions set forth in the Loan Agreement.
If an Event of Default under Section 10.7 of the Loan Agreement shall
occur, then this Note shall immediately become due and payable, without notice,
together with attorneys' fees if the collection hereof is placed in the hands of
an attorney to obtain or enforce payment hereof. If any other Event of Default
shall occur under the Loan Agreement or any of the Other Documents which is not
cured within any applicable grace period, then this Note may, as provided in the
Loan Agreement, be declared to be immediately due and payable, without notice,
together with attorneys' fees, if the collection hereof is placed in the hands
of an attorney to obtain or enforce payment hereof.
This Note shall be governed by and construed in accordance with the laws of
the State of New York.
Borrower expressly waives any presentment, demand, protest, notice of
protest, or notice of any kind except as expressly provided in the Loan
Agreement.
CYGNE DESIGNS, INC.
By:__________________________
Name: Xxx X. Xxxxx
Title: SVP, CFO, Treasurer and Secretary
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the ____ day of May, 2001, before me personally came ______________, to
me known, who being by me duly sworn, did depose and say that he is the Senior
Vice President, Chief Financial Officer, Treasurer and Secretary of CYGNE
DESIGNS, INC., the corporation described in and which executed the foregoing
instrument; and that he was authorized to sign his name thereto by order of the
board of directors of said corporation.
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Notary Public
