Exhibit 10.1
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LOAN AGREEMENT
Dated as of May 28, 2004
between
XXXX XXXXXXX AUCTIONS, INC.
as the Borrower,
and
PNC BANK, NATIONAL ASSOCIATION
as the Bank
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Table of Contents
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1. DEFINITIONS............................................................1
1.1 Defined Terms....................................................1
1.2 Rules of Interpretation.........................................12
2. LINE OF CREDIT........................................................13
2.1 (a) Revolving Advances..........................................13
2.2 Procedure for Advances Borrowing................................14
2.3 Disbursement of Advance Proceeds................................14
2.4 Repayment of Advances...........................................14
2.5 Repayment of Excess Advances....................................15
2.6 Statement of Account............................................15
2.7 Letters of Credit...............................................15
2.8 Issuance of Letters of Credit...................................15
2.9 Additional Payments.............................................15
2.10 Use of Proceeds.................................................16
3. INTEREST, PAYMENTS AND MISCELLANEOUS CREDIT PROVISIONS................16
3.1 Interest Rates..................................................16
3.2 Interest Payments...............................................17
3.3 Manner of Payment; Maintenance of Demand Deposit Account........17
3.4 Actions on Non-Business Days....................................17
3.5 No Setoff.......................................................17
3.6 Application of Payments.........................................17
3.7 Indemnity.......................................................17
3.8 LIBOR Rate Unavailable..........................................17
3.9 LIBOR Rate Illegal..............................................18
3.10 Breakage Fee....................................................18
3.11 Taxes...........................................................18
3.12 Increased Costs.................................................19
3.13 Usury...........................................................19
3.14 Late Charges....................................................19
3.15 Default Rate....................................................19
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TABLE OF CONTENTS
(continued)
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3.16 Fees............................................................20
4. CONDITIONS PRECEDENT..................................................20
4.1 Conditions to the Bank's Obligations Under this Agreement.......20
4.2 Conditions to Each Advance and Each Letter of Credit
Obligation......................................................22
5. REPRESENTATIONS AND WARRANTIES........................................22
5.1 Corporate Existence; Compliance with Law........................22
5.2 Executive Offices...............................................23
5.3 Subsidiaries....................................................23
5.4 Corporate Power: Authorization; Enforceable Obligations.........23
5.5 Financial Statements............................................23
5.6 Ownership of Property, Liens....................................24
5.7 Labor Matters...................................................24
5.8 Other Ventures..................................................25
5.9 Investment Company Act..........................................25
5.10 Margin Regulations..............................................25
5.11 Taxes...........................................................26
5.12 ERISA...........................................................26
5.13 Brokers.........................................................26
5.14 Intellectual Property...........................................26
5.15 Full Disclosure.................................................27
5.16 Environmental Protection........................................27
5.17 Inventory.......................................................27
5.18 Capital Stock...................................................27
5.19 Litigation......................................................28
5.20 Solvency........................................................28
6. FINANCIAL STATEMENTS AND INFORMATION..................................28
6.1 Reports and Notices.............................................28
6.2 Communication with Accountants..................................29
6.3 Access to Records and Property..................................30
7. AFFIRMATIVE COVENANTS.................................................30
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TABLE OF CONTENTS
(continued)
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7.1 Maintenance of Existence and Conduct of Business................30
7.2 Books and Records...............................................30
7.3 Compliance with Law.............................................30
7.4 Employee Plans..................................................30
7.5 Environmental Matters...........................................31
7.6 Insurance.......................................................31
7.7 Condition of Collateral; No Liens...............................32
7.8 Working Capital Facility; Operating Account.....................32
8. NEGATIVE COVENANTS....................................................32
8.1 Mergers, Etc....................................................32
8.2 Maintenance of Business.........................................33
8.3 Sales of Assets.................................................33
8.4 Transaction with Affiliates.....................................33
8.5 Accounting Changes..............................................33
8.6 Indebtedness....................................................33
8.7 Books, Records and Collateral...................................34
8.8 Investments.....................................................34
8.9 Continuous Perfection...........................................34
8.10 Limitation on Capital Expenditures and Acquisition of Fixed
Assets..........................................................34
8.11 Ratio of Funded Debt to EBITDA..................................34
8.12 Fixed Charge Coverage Ratio.....................................34
8.13 Minimum Liquidity...............................................34
8.14 Distributions...................................................35
9. TERMINATION OF FINANCING..............................................35
10. EVENTS OF DEFAULT: RIGHTS AND REMEDIES................................35
10.1 Events of Default...............................................35
10.2 Consequences of Default.........................................37
10.3 Right of Setoff.................................................37
10.4 Waivers by the Borrower.........................................38
11. MISCELLANEOUS.........................................................38
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TABLE OF CONTENTS
(continued)
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11.1 Complete Agreement..............................................38
11.2 Sale of Interests...............................................38
11.3 Amendments; Waiver; Consent.....................................38
11.4 Fees and Expenses...............................................39
11.5 No Waiver by the Bank...........................................39
11.6 Additional Remedies.............................................39
11.7 Severability....................................................40
11.8 Parties.........................................................40
11.9 Conflict of Terms...............................................40
11.10 Security for Cleanup............................................40
11.11 Governing Law; Litigation.......................................40
11.12 Notices.........................................................41
11.13 Limitation of Consequential Damages.............................42
11.14 Reversal of Payments............................................42
11.15 Survival........................................................42
11.16 Section Titles..................................................42
11.17 Counterparts....................................................42
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INDEX OF EXHIBITS AND SCHEDULES
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Exhibit A- Form of Line of Credit Note
Exhibit B- Form of Conversion/Continuation
Exhibit C- Form of Borrowing Base Certificate
Exhibit D- Form of Compliance Certificate
Schedule 5.2-Locations of Business and Collateral
Schedule 5.6(a)-Leased Premises
Schedule 5.6(b)-Existing Liens
Schedule 5.7-Labor Matters
Schedule 5.8-Other Ventures
Schedule 5.11-Taxes
Schedule 5.14-Trademarks and Copyrights
Schedule 5.16-Environmental Protection
Schedule 8.1-Mergers, Etc.
Schedule 8.4-Transactions with Affiliates
Schedule 8.8-Investments
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of May 28, 2004, between XXXX XXXXXXX
AUCTIONS, INC., a Delaware corporation (the "Borrower") and PNC BANK, NATIONAL
ASSOCIATION, a national banking association (the "Bank").
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, the Borrower and the Bank hereby agree as follows:
1. DEFINITIONS
1.1 Defined Terms. Capitalized terms used in this Agreement shall have
(unless otherwise expressly provided elsewhere herein) the following respective
meanings:
"Accounts" shall mean any "account," as such term is defined in section
9-102(a)(2) of the UCC, now owned or hereafter acquired by the Obligor. Amounts
due in respect of Consignor Advances are not Accounts.
"Advances" shall mean extensions of credit under the Line of Credit.
"Affiliate" shall mean with respect to any Person (i) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, 25% or more of the Stock having ordinary voting
power for the election of directors or the like of such Person, (ii) each Person
that controls, is controlled by or is under common control with such Person or
any Affiliate of such Person, or (iii) each of such Person's officers,
directors, joint venturers and partners. For the purpose of this definition,
"control" of a Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.
"Afinsa" shall mean Afinsa Bienes Tangibles, S.A., a corporation organized
under the laws of Spain.
"Agreement" shall mean this Loan Agreement, including all amendments,
modifications and supplements from time to time hereto and any appendices,
exhibits or schedules to any of the foregoing.
"Banco Santander" shall mean Banco Santander Central Hispano, S.A., acting
through its New York branch.
"Bankruptcy Code" shall mean title 11 of the United States Code, as the
same may be amended from time to time, or any successor statute thereto.
"Bank" shall mean PNC Bank, National Association, a national banking
association, and its successors and assigns.
"Borrower" shall mean the Xxxx Xxxxxxx Auctions, Inc., a Delaware
corporation.
"Borrowing Base Certificate" shall mean a certificate substantially in the
form of Exhibit D hereto.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
legal holiday on which commercial banks are authorized or required to be closed
for business in West Paterson, New Jersey and, if the applicable Business Day
relates to any portion of the Line of Credit to which the LIBOR Rate Option
applies, such day must also be a day on which dealings are carried on in the
London interbank market.
"Capital Coin Fund" shall mean Capital Coin Fund Limited II, LLC, an Ohio
limited liability company.
"Capital Expenditures" shall mean all payments for any fixed assets or
improvements or for replacements, substitutions or additions thereto, that have
a useful life of more than one year and which are required to be capitalized
under GAAP.
"Capital Lease" shall mean, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person or otherwise be disclosed as
such in a note to such balance sheet, other than, in the case of the Borrower,
any such lease under which the Borrower is the lessor.
"Capital Lease Obligation" shall mean, with respect to any Capital Lease,
the amount of the obligation of the lessee thereunder that, in accordance with
GAAP, would appear on a balance sheet of such lessee in respect of such Capital
Lease or otherwise be disclosed in a note to such balance sheet.
"Closing Date" shall mean the date as of which this Agreement is executed
and delivered by the parties hereto.
"Collateral" shall mean the collateral securing the Obligations granted to
the Bank pursuant to the Security Documents.
"Commitment" shall have the meaning set forth in Section 2.1.
"Consignor Advance Obligation" shall mean an amount due in respect of a
loan by an Obligor to a Customer in respect of coins, stamps or other
collectibles of the Customer which have been placed with the Obligor for purpose
of sale on behalf of the Customer.
"Contaminant" shall mean, without limitation, any toxic substance,
hazardous waste, pollution, pollutant or contaminant, as defined or referred to
in: the New Jersey Environmental Rights Act, N.J.S.A. 2A:35A-1 et seq. (the
"Rights Act"); the New Jersey Spill Compensation and Control Act, N.J.S.A.
58:10-23.11 et seq. (the "Spill Act"); the New Jersey Air Pollution Control Act,
N.J.S.A. 26:2C-1 et seq. (the "Control Act"); the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. Section 6901 et seq. ("RECRA"); the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. Section 9601 et seq. ("CERCLA"); the Water Pollution Control
Act, 33 U.S.C. Section 1251 et seq. (the "Water Act"); the Contaminant Discharge
Reports and Notices Act, N.J.S.A. 13:1K-15 et seq.
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(the "Notices Act"); the Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq.
("ISRA"), and the regulations promulgated and rulings issued thereunder, all as
amended from time to time; as well as words of similar meaning referred to in
any other federal, state or local environmental statute, ordinance, rule or
regulation, that is applicable to the Obligors or their business.
"Customer" shall mean the account debtor with respect to any Account, the
debtor with respect to any Consignor Advance Obligation, or any party who enters
into or proposes to enter into any contract or other arrangement with an
Obligor, pursuant to which an Obligor is to deliver any personal property or to
perform any services.
"Current Maturities" shall mean the scheduled principal payments of all
Funded Debt (including, but not limited to, amortization of Capital Lease
Obligations) having an original term of more than one year, as shown on the
Borrower's balance sheet as of the end of the most recently concluded Fiscal
Year, together with any prepayments of such Indebtedness, made during the prior
12 month period.
"Default" shall mean any event which, with the passage of time or notice
or both, would, unless cured or waived, become an Event of Default.
"Default Rate" shall mean an interest rate per annum equal to the Prime
Rate in effect from time to time plus 3.00%.
"Discharge" shall mean, without limitation, the releasing, spilling,
leaking, leaching, disposing, pumping, pouring, emitting, emptying or dumping of
a Contaminant into, onto, or from any real property, in violation of
Environmental Laws, regardless of whether the result of an intentional or
unintentional action or omission.
"Distributions" shall mean (i) a payment or distribution in respect of, or
the incurrence of any liability for the purchase, acquisition, redemption or
retirement of a shareholder's capital stock interest in the Borrower, or (ii) a
payment in respect of any Indebtedness to a shareholder.
"EBIT" shall mean earnings before interest expense and income tax,
determined in accordance with GAAP.
"EBITDA" shall mean earnings before interest expense, income tax,
depreciation and amortization determined in accordance with GAAP.
"Eligible Accounts" shall mean each Account, exclusive of amounts due in
respect of finance charges, of an Obligor arising in the ordinary course of the
Obligor's business and which the Bank, in its sole, but reasonable, credit
judgment, shall deem to be an Eligible Account based on such considerations as
the Bank may from time to time deem appropriate. An Account shall not be deemed
eligible unless such Account is subject to the Bank'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 reasonably
satisfactory to the Bank. All accounts of Afinsa are excluded from Eligible
Accounts. In addition, no Account shall be an Eligible Account if:
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(a) it rises out of a sale made by an Obligor to an Affiliate of the
Obligor or to a Person controlled by an Affiliate of the Obligor;
(b) it is unpaid more than ninety (90) days after the invoice date;
(c) fifty (50%) percent or more of the Accounts from the applicable
Customer are not deemed Eligible Accounts hereunder by reason of (b) above. Such
percentage may, in the Bank's sole discretion, be increased or decreased from
time to time;
(d) any covenant, representation or warranty contained in this Agreement
with respect to such Account has been breached in any material respect;
(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, (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 United States of America, unless
the sale is on a documentary letter of credit assigned to and in the possession
of Bank, from a financial institution reasonably acceptable to the Bank,
guaranty of acceptance terms, or the Account is credit insured by a credit
insurance company acceptable to the Bank, in each case acceptable to the Bank in
its sole reasonable discretion;
(g) the sale to the Customer is on a xxxx-and-hold, guaranteed sale,
sale-and-return, COD sale on approval, consignment or any other repurchase or
return basis or is evidenced by chattel paper;
(h) the Customer is the United States of America or any department, agency
or instrumentality thereof, unless the Borrower effectuates an assignment of its
right to payment of such Account to the Bank pursuant to the Assignment of
Claims Act of 1940, as amended or has otherwise complied with other applicable
statutes or ordinances;
(i) the Customer is an individual;
(j) the goods giving rise to such Account have not been shipped and
delivered to and accepted by the Customer or the services giving rise to such
Account have not been performed by the Obligor and accepted by the Customer or
the Account otherwise does not represent a final sale;
(k) the Account is subject to any offset, deduction, defense, dispute, or
counterclaim (but only to the extent of such offset, deduction, defense, dispute
or counterclaim); the Customer
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is also a creditor or supplier of the Obligor or the obligation of the Customer
to pay or the Account is contingent in any respect or for any reason;
(l) the Obligor has made any agreement with a Customer for any deduction
therefrom, except for discount 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;
(m) shipment of the merchandise or the rendition of services has not been
completed;
(n) any return, rejection or repossession of the merchandise has occurred
(but only to the extent of such return, rejection or repossession); or
(o) such Account is not payable to the Obligor.
If at any time the aggregate sum of the otherwise Eligible Accounts of a
single Customer exceed 20% of the Obligors' total Eligible Accounts at the time
outstanding on an aggregate basis, that portion in excess of 20% will be
ineligible.
"Eligible Afinsa Accounts" shall mean each Account (exclusive of amounts
due in respect of finance charges) of an Obligor in which Afinsa is the
Customer, which the Bank, in its sole, but reasonable credit judgment, shall
deem to be an Eligible Afinsa Account based on such considerations as the Bank
may from time to time deem appropriate. An Afinsa Account shall not be deemed
eligible unless such Account is subject to the Bank's first priority perfected
security interest and no other Lien, and is evidenced by an invoice, xxxx of
lading or other documentary evidence satisfactory to the Bank. In addition, no
Afinsa Account shall be an Eligible Afinsa Account
(a) if Afinsa has declared a default under Section 12.1 or 12.2 of the
agreement between Afinsa and the Borrower dated August 1, 2003;
(b) to the extent that the Account would be excluded under clauses (b),
(c), (d), (e), (g), (h), (j), (k), (l), (m), (n) or (o) of the definition of
"Eligible Accounts."
"Eligible Consignor Advance Obligations" shall mean the principal amount
due an Obligor in respect of a Consignor Advance, which the Bank, in its sole,
but reasonable credit judgment, shall deem to be an Eligible Consignor Advance
Obligation based on such considerations as the Bank may from time to time deem
appropriate. A Consignor Advance Obligation shall not be deemed eligible unless
such Consignor Advance Obligation is subject to the Bank's first priority
perfected security interest and no other Lien, and is evidenced by a promissory
note payable to the Obligor in form satisfactory to the Bank. In addition, no
Consignor Advance Obligation shall be an Eligible Consignor Advance Obligation:
(a) if it is unpaid more than one hundred fifty (150) days after the date
it is created;
(b) if the Customer is an Account debtor of an Obligor and its Accounts
would not be Eligible Accounts;
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(c) 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, (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; and
(d) the Customer is outside the United States of America.
"Eligible Inventory" shall mean only that Inventory (excluding packaging
and supplies) of the Obligors that is and at all times continues to be,
acceptable to the Bank in all respects in its sole but reasonable discretion.
Standards of eligibility may be fixed and revised by the Bank in the Bank's
reasonable discretion. In general, the Bank will deem Inventory to be eligible
if it:
(A) is owned solely by an Obligor, subject to a perfected Lien in favor of
the Bank, and free from any other Lien with the exception of a Lien constituting
a Permitted Encumbrance, provided, that, in no event will Inventory of Spectrum
or Teletrade consisting of coins or other money be Eligible Inventory while it
is subject to a Lien in favor of Capital Coin Fund;
(B) can be sold in the ordinary course of business through normal business
channels and does not constitute damaged items;
(C) has been adequately described on certificates or other disclosure
statements given to the Bank;
(D) f any of the goods is represented or covered by documents of title,
instruments or chattel paper, the Obligor is the owner, and has possession of,
those documents, instruments or chattel paper, and none of such goods, documents
of title, instruments or chattel paper has been transferred nor has any security
interest been granted therein to any other Person; and
(E) is under the direct control of the Obligor at a location within the
United States.
"Environmental Laws" shall mean any and all present and future federal,
state or local statutes, ordinances, rules, regulations, orders or requirements,
together with all successor statutes, ordinances, rules, regulations, orders and
requirements, of any Governmental Authority, as in effect from time to time,
dealing with Contaminants.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974 (or
any successor legislation thereto) and any regulations promulgated thereunder,
all as amended from time to time.
"ERISA Affiliate" shall mean, with respect to the Borrower, any trade or
business (whether or not incorporated) under common control with the Borrower
within the meaning of Section 414 (b), (c), (m) or (o) of the IRC.
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"Event of Default" shall have the meaning set forth in Section 10.1.
"Expiration Date" shall mean May 27, 2005, or such later Expiration Date
designated by the Bank by written notice from the Bank to the Borrower.
"Federal Reserve Board" shall have the meaning set forth in Section 5.10.
"Financial Statements" shall mean the financial statements referred to in
Section 5.5(a).
"Fiscal Year" shall mean the twelve month period ending on June 30.
Subsequent changes of the fiscal year of the Borrower shall not change the term
"Fiscal Year," unless the Bank shall consent in writing to such changes.
"Formula Amount" shall have the meaning set forth in Section 2.1(a).
"Funded Debt" shall mean all Indebtedness for borrowed money (including,
without limitation, all Capital Lease Obligations).
"GAAP" shall mean generally accepted accounting principles in the United
States of America or Canada, as applicable, as in effect from time to time.
"Governmental Authority" shall mean any governmental department,
commission, board, bureau, agency or instrumentality of the United States or of
any state, commonwealth, nation, territory, possession, county, parish or
municipality, whether now or hereafter constituted or existing, having
jurisdiction over the Obligors or their business.
"Guarantor" shall mean each of Spectrum Numismatics International, Inc., a
California corporation ("Spectrum"), Spectrum Auction Services, LLC, a Delaware
limited liability company, Teletrade, Inc., a Delaware corporation ("Teletrade")
Spectrum Numismatic Auctions, Inc., a California corporation, Ivy & Xxxxx
Philatelic Auctions, Inc., a Texas corporation, Xxxx Xxxxxxx Galleries, Inc., a
New York corporation, Kensington Associates, LLC, a California limited liability
company, North American Certified Trading, LLC, a California limited liability
company, Kingswood Coin Auctions, LLC, a Delaware limited liability company,
Superior Sports Auctions, LLC, a Delaware limited liability company, Xxxxxx &
Xxxxxx Auctions, LLC, a Delaware limited liability company and Xxxx Xxxxxxx
Nutmeg Auctions, Inc., a Delaware corporation.
"Guaranty" shall mean the Guaranty and Suretyship Agreement of the
Guarantors dated the date hereof.
"Indebtedness" of any Person shall mean (i) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (including, without limitation, reimbursement and all other obligations
with respect to surety bonds, letters of credit and bankers' acceptances,
whether or not matured, but not including obligations to trade creditors
incurred in the ordinary course of business), (ii) all obligations evidenced by
notes, bonds, debentures or similar instruments, (iii) all indebtedness created
or arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or agent under such agreement in the
7
event of default are limited to repossession or sale of such property), (iv) all
Capital Lease Obligations, (v) all liabilities under any agreement of guarantee,
(vi) all Indebtedness referred to in clauses (i), (ii), (iii), (iv) or (v) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness, (vii) the Obligations, and (viii) all liabilities
under Title IV of ERISA.
"Intellectual Property" shall mean patents, patent applications,
trademarks, whether registered or not, inventions, trade names, service marks,
logos, copyrights, proprietary rights and data, trade secrets, confidential
information, know-how, processes, formulae, research notebooks, and all records
relating to all the foregoing.
"Interest Payment Date" shall mean (i) as to the outstanding principal
amount of the Line of Credit bearing interest based upon Prime Rate, the first
day of each calendar month, and (ii) as to the outstanding principal amount of
the Line of Credit constituting LIBOR Rate Loans, the last day of the LIBOR Rate
Interest Period with respect thereto.
"Inventory" shall mean any "inventory," as such term is defined in the
UCC, now owned or hereafter acquired by an Obligor.
"IRC" shall mean the Internal Revenue Code of 1986 (or any successor
legislation thereto) and the regulations thereunder, as amended from time to
time.
"IRS" shall mean the Internal Revenue Service, or any successor thereto.
"ISP98" shall mean the International Standby Practices 1998, and any
subsequent official revision thereof.
"Letters of Credit" shall mean documentary and standby letters of credit
issued by the Bank at the request and for the account of the Borrower.
"Letter of Credit Maximum" shall mean $1,500,000 maximum face amount of
Letters of Credit that may be outstanding for the Borrower at any time.
"LIBOR" shall mean, with respect to any obligation to which the LIBOR Rate
Option applies for any LIBOR Rate Interest Period, the interest rate per annum
determined by the Bank by dividing (the resulting quotient rounded upwards, if
necessary, to the nearest 1/16th of 1% per annum) (i) the rate of interest
determined by the Bank in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) to be the eurodollar
rate two (2) Business Days prior to the first day of such LIBOR Rate Interest
Period by (ii) a number equal to 1.00 minus the LIBOR Reserve Percentage. The
LIBOR rate shall be adjusted with respect to any Obligation to which the LIBOR
Rate Option applies that is outstanding on the effective date of any change in
the LIBOR Reserve Percentage as of such effective date. The Bank shall give
prompt notice to the Borrower of the LIBOR rate as determined or adjusted in
accordance herewith, which determination shall be conclusive absent manifest
error.
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"LIBOR Rate Interest Period" shall mean the period of one, two, three or
six months selected by the Borrower commencing on the date of the exercise of
the LIBOR Rate Option as to any portion of the Line of Credit and each
successive period selected by the Borrower thereafter; provided, that (i) if a
LIBOR Rate Interest Period would end on a day which is not a Business Day, it
shall end on the next succeeding Business Day; unless such day falls in the
succeeding calendar month in which case the LIBOR Rate Interest Period shall end
on the next preceding Business Day; (ii) the Borrower may not select a LIBOR
Rate Interest Period that would end on a day after the end of the Line of Credit
Term, and; (iii) any LIBOR Rate Interest Period that begins on the last business
day of a calendar month (or a day for which there is no numerically
corresponding day in the last calendar month of such LIBOR Rate Interest Period)
shall end in the last business day of the last calendar month of such LIBOR Rate
Interest Period.
"LIBOR Rate Loan" shall mean the portions of the outstanding Line of
Credit as to which the LIBOR Rate Option is exercised.
"LIBOR Rate Option" shall have the meaning set forth in Section 3.1(b).
"LIBOR Reserve Percentage" shall mean the maximum effective percentage in
effect on such day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including, without limitation, supplemental, marginal and emergency reserve
requirements) with respect to eurocurrency funding (currently referred to as
"Eurocurrency liabilities").
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, claim, security interest, easement or
encumbrance, or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
lease or title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the UCC or
comparable law of any jurisdiction).
"Line of Credit" shall mean the credit facility extended by the Bank to
the Borrower under Article 2 of this Agreement.
"Line of Credit Note" shall have the meaning set forth in Section 2.1(a).
"Line of Credit Term" shall mean the Closing Date through May 27, 2005, or
such later Expiration Date designated by the Bank by written notice from the
Bank to the Borrower.
"Loan Documents" shall mean this Agreement, any note memorializing
indebtedness under this Agreement, the Security Documents and any other
documents executed in conjunction with this Agreement.
"Material Adverse Effect" shall mean material adverse effect on (i) the
business, assets, operations or financial condition of the Obligors in the
aggregate, (ii) the Borrower's ability to pay the Obligations in accordance with
the terms thereof or (iii) the Collateral or the Bank's Liens on the Collateral
or the priority of any such Lien.
9
"Material Obligor" shall mean the Borrower and any other Obligor the
operations of which contribute 5% or greater to the consolidated revenues of the
Borrower.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001 (a) (3) of ERISA, and to which the Borrower or any ERISA Affiliate
is making, is obligated to make, has made or been obligated to make
contributions on behalf of participants who are or were employed by any of them.
"Obligations" shall mean all loans, advances, debts, liabilities,
obligations, covenants and duties owing from the Borrower to the Bank or to any
other direct or indirect subsidiary of The PNC Financial Services Group, Inc. of
any kind or nature, present or future (including any interest accruing thereon
after maturity, or after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding relating to
the Borrower, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding), whether or not evidenced by any note, guaranty
or other instrument, whether arising under any agreement, instrument or
document, whether or not for the payment of money, whether arising by reason of
an extension of credit, opening of a letter of credit, loan, equipment lease or
guarantee, under any interest or currency swap, future, option or other interest
rate protection or similar agreement, or in any other manner, whether arising
out of overdrafts on deposit or other accounts or electronic funds transfers
(whether through automated clearing houses or otherwise) or out of the Bank's
non-receipt of or inability to collect funds or otherwise not being made whole
in connection with depository transfer check or other similar arrangements,
whether direct or indirect (including those acquired by assignment or
participation), absolute or contingent, joint or several, due or to become due,
now existing or hereafter arising, and any amendments, extensions, renewals or
increases and all costs and expenses of the Bank incurred in the documentation,
negotiation, modification, enforcement, collection or otherwise in connection
with any of the foregoing, including reasonable attorneys' fees and expenses.
Without limitation, the Obligations shall include the indebtedness, obligations,
liabilities, covenants and duties owing by the Borrower to the Bank under and
pursuant to the Loan Documents.
"Obligor" shall mean the Borrower and each Guarantor.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Permitted Encumbrances" shall mean the following encumbrances: (i) Liens
for taxes or assessments or other governmental charges or levies, either not yet
due and payable, or, if due and payable, to the extent payment thereof is being
contested in good faith, by proper proceedings diligently pursued, if adequate
reserves therefor have been established on the books of the an Obligor in
conformity with GAAP; (ii) pledges or deposits securing obligations under
worker's compensation, unemployment insurance, social security or public
liability laws or similar legislation; (iii) pledges or deposits securing bids,
tenders, contracts (other than for Indebtedness), statutory obligations, surety
and appeal bonds or leases, or other obligations of like nature, to which an
Obligor is a party as lessee made in the ordinary course of business; (iv)
deposits securing public or statutory obligations of an Obligor; (v) workers',
mechanics', suppliers', carriers', warehousemen's or other similar liens arising
in the ordinary course of business and securing indebtedness aggregating not in
excess of $100,000 at any time outstanding, not yet due and payable; (vi)
deposits securing, or in lieu of, surety, appeal or
10
customs bonds in proceedings to which an Obligor is a party; (vii) any
attachment or judgment Lien, unless the judgment it secures shall not, within 30
days after the entry thereof, have been discharged or execution thereof stayed
pending appeal, or shall not have been discharged within 30 days after the
expiration of any such stay; (viii) Liens securing Indebtedness subject to a
subordination agreement in form and substance reasonably satisfactory to the
Bank and its counsel; (ix) Liens securing Indebtedness of Spectrum and Teletrade
to Capital Coin Fund (x) Liens of a depository institution arising by virtue of
statutory or common law relating to banker's Liens, rights of setoff or similar
rights and remedies as to deposit accounts or other funds maintained with such
institution; (xi) purchase money Liens upon or in any property (other than real
property) of Borrower and Liens to secure Capital Lease Obligations and any
related payment and performance obligations thereunder; (xii) Liens in favor of
customs and revenue authorities arising from the importation of goods. ; (xiii)
zoning restrictions, easements, licenses, or other restrictions on the use of
real property or other minor irregularities in title thereto, so long as the
same do not materially impair the use, value, or marketability of such real
property, leases or leasehold estates and (xiv) Liens in favor of the Bank.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, entity,
court or Governmental Authority.
"Plan" shall mean any pension plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the IRC and
which is maintained for employees of the Borrower or any ERISA Affiliate.
"Prime-based Rate" shall mean the Prime Rate.
"Prime Rate" shall mean the rate publicly announced by the Bank from time
to time as its prime rate. The Prime Rate is not tied to any external rate of
interest or index and does not necessarily reflect the lowest rate of interest
actually charged at any given time by the Bank to any particular class or
category of customers of the Bank. Any change in the Prime Rate shall take
effect immediately without prior notice to the Borrower.
"Prime Rate Loan" shall mean the portion of the outstanding principal
balance of the Line of Credit which, at anytime, bears interest at the
Prime-based Rate.
"Purchase Money Loan" shall mean any loan obtained by the Borrower from
any supplier of Equipment, the proceeds of which are used exclusively to pay the
purchase price of that Equipment.
"Security Agreement" shall mean each of the Security Agreement dated the
date hereof between (i) the Borrower and the Bank, (ii) the Guarantors
(exclusive of Spectrum and Teletrade) and the Bank and (iii) Spectrum and
Teletrade and the Bank.
"Solvent" shall mean as to any Person, that (i) the sum the assets of such
Person, both at a fair valuation and at present salable value, will exceed its
liabilities, including contingent liabilities, (ii) such Person will have
sufficient capital with which to conduct its business as presently conducted and
as proposed to be conducted and (iii) such Person has not incurred liabilities,
and does not intend to incur liabilities, beyond its ability to pay such
liabilities as they
11
mature. With respect to any contingent liabilities, such liabilities shall be
computed at the amount which, in light of all facts and circumstances existing
at the time, represents the amount which could become an actual or matured
liability.
"Subsidiary" shall mean, with respect to any Person, (a) any corporation
of which an aggregate of more than 50% of the outstanding Stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person or one or more subsidiaries of such
Person, and (b) any partnership or limited liability company in which such
Person or one or more Subsidiaries of such Person shall have an interest
(whether in the form of voting or participation in profits or capital
contribution) of more than 50%.
"Taxes" shall mean all federal, state, county, city, municipal, local,
foreign or other governmental (including, without limitation, PBGC) taxes at the
time due and payable, levies, assessments, charges, liens, claims or
encumbrances, upon or relating to (i) the Collateral, (ii) the Obligations,
(iii) the Borrower's employees, payroll, income or gross receipts, (iv) the
Borrower's ownership or use of any of its assets, or (v) any other part of the
Borrower's businesses.
"Tax Returns" shall have the meaning set forth in Section 5.11.
"UCC" shall mean the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of New Jersey or such other jurisdiction, as may
be required by applicable law.
1.2 Rules of Interpretation. (a) Any accounting term used in this
Agreement shall have, unless otherwise specifically provided herein, the meaning
customarily given such term in accordance with GAAP, and all financial
computations hereunder shall be computed, unless otherwise specifically provided
herein, in accordance with GAAP consistently applied. That certain terms or
computations are explicitly modified by the phrase "in accordance with GAAP"
shall in no way be construed to limit the foregoing.
(b) All other undefined terms contained in this Agreement shall,
unless the context indicates otherwise, have the meanings provided for by the
UCC to the extent the same are used or defined therein.
(c) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole, including the Exhibits and
Schedules hereto, as the same may from time to time be amended, modified or
supplemented and not to any particular section, subsection or clause contained
in this Agreement.
(d) Each reference to a Section, Schedule or Exhibit is to a Section,
Schedule or Exhibit, respectively, of or to this Agreement, unless otherwise
specified or the context otherwise requires.
12
(e) Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter.
2. LINE OF CREDIT
2.1 (a) Revolving Advances. Subject to the terms and conditions set forth
in this Agreement, the Bank will make Advances to the Borrower in aggregate
amounts outstanding at any time not to exceed the lesser of (x) $10,000,000 (the
"Commitment") less the aggregate amount of outstanding Letters of Credit or (y)
an amount equal to the sum of:
(i) 85%, of the value of the Eligible Accounts, plus
(ii) 60% of the value of the Eligible Afinsa Accounts, to a
maximum of $5,000,000 plus
(iii) 50% of the value of the Eligible Inventory to a maximum of
$5,000,000 plus
(iv) 70% of the value of Eligible Consignor Advance Obligations,
provided, that (A) the limit for any single Consignor Advance Obligation shall
be $1,750,000 (after application of the 70% Advance percentage) and (B) at no
time shall the amount under this clause (iv) exceed the lesser of $3,000,000, or
35% of the aggregate value of the collectibles pledged to Obligors in respect of
the Eligible Consignor Advance Obligations, as reasonably determined by
management, minus
(v) such reserves as the Bank may reasonably deem proper and
necessary from time to time, including, without limitation, a reserve for
Inventory remaining unsold after 364 days.
The amount derived from (x) the sum of Sections 2.1(a)(i),(ii), (iii) and
(iv) minus (y) Section 2.1(a)(v) at any time and from time to time shall be
referred to as the "Formula Amount". The Advances shall be evidenced by a
promissory note (the "Line of Credit Note") substantially in the form attached
hereto as Exhibit A.
(b) Discretionary Rights. The Advance rates specified in Section
2.1(a) above may be increased or decreased by the Bank at any time and from time
to time in the exercise of its reasonable discretion. The 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 the
Borrower.
2.2 Procedure for Advances Borrowing. The Borrower may notify the Bank
prior to 11:00 a.m. on a Business Day of the Borrower's request to incur, on
that day, an 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 the Bank, or with respect to any other Obligation, become
due, same shall be deemed a request for an Advance as of the date such payment
is due, in the amount required to pay in full such interest fee, charge or
Obligation
13
under this Agreement or any other agreement with the Bank, and such request
shall be irrevocable.
2.3 Disbursement of Advance Proceeds. All Advances shall be disbursed from
whichever office or other place the Bank may designate from time to time and,
together with any and all other Obligations of the Borrower or the Bank, shall
be charged to the Borrower's operating account with Bank. During the Line of
Credit Term, the Borrower may use the Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions of this Agreement.
The proceeds of each Advance requested by the Borrower or deemed to have been
requested by the Borrower under Section 2.2(a) hereof shall, with respect to
requested Advances, be made available to the Borrower on the day so requested by
way of credit to the Borrower's operating account with the Bank, in immediately
available funds or, with respect to Advances deemed to have been requested by
the Borrower, be applied by the Bank to the outstanding Obligations giving rise
to such deemed request.
2.4 Repayment of Advances.
(a) The Advances shall be due and payable in full on the last day of
the Line of Credit Term subject to earlier prepayment as provided in paragraph
(b) below and as otherwise provided in this Agreement.
(b) The aggregate amount of outstanding Advances must be reduced to a
maximum of $5,000,000 for a period of 60 consecutive days annually.
(c) The 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 the Bank on the date received. In
consideration of the Bank's agreement to conditionally credit the Borrower's
operating account as of the Business Day on which the Bank receives those items
of payment, the Borrower agrees that, in computing the charges under this
Agreement, all items of payment shall be deemed applied by Bank on account of
the Obligations with respect to the Line of Credit one (1) Business Day after
the Business Day the Bank receives such payments via wire transfer or electronic
depository check. The Bank is not, however, required to credit the Borrower's
account for the amount of any item of payment which is unsatisfactory to the
Bank and the Bank may charge the Borrower's account for the amount of any item
of payment which is returned to the Bank unpaid.
2.5 Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall, immediately after the Borrower becomes aware of same, be due
and payable without the necessity of any demand, whether or not a Default or
Event of Default has occurred.
2.6 Statement of Account. The Bank shall maintain, in accordance with its
customary procedures, a loan account in the name of the Borrower in which shall
be recorded the date and amount of each Advance made by the Bank and the date
and amount of each payment in respect thereof; provided, however, the failure by
the Bank to record the date and amount of any Advance shall not adversely affect
the Bank. For each month, the Bank shall send to the Borrower a statement
showing the accounting for the Advances made and payments made or
14
credited in respect thereof. The monthly statements shall be deemed correct and
binding upon the Borrower in the absence of manifest error and shall constitute
an account stated between the Bank and the Borrower as to the Line of Credit
unless the Bank receives a written statement of the Borrower's specific
exceptions thereto within forty-five (45) days after such statement is received
by the Borrower. The records of the Bank 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.
2.7 Letters of Credit. Subject to the terms and conditions of this
Agreement and the (i) Reimbursement Agreement for Commercial Letter of Credit
and (ii) Reimbursement Agreement for Standby Letters of Credit which are being
executed contemporaneously herewith, the Bank shall issue or cause the issuance
of Letters of Credit on behalf of the Borrower; provided, however, that the Bank
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 Advances plus (ii) outstanding Letters of Credit to
exceed the lesser of (x) the Commitment or (y) the Formula Amount or, in the
case of Letters of Credit, to exceed the Letter of Credit Maximum. All
disbursements or payments related to Letters of Credit shall be charged to the
Borrower's operating account with the Bank, and if the funds available are not
sufficient, shall be deemed to be Advances. Letters of Credit that have not been
drawn upon shall not bear interest.
2.8 Issuance of Letters of Credit. Each Letter of Credit shall, among
other things, (i) provide for the payment of sight drafts or acceptances of 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 180 days after such Letter of Credit's date of issuance, in the case
of documentary Letters of Credit, and in all cases having an expiry date no
later than the last day of the Line of Credit Term.
2.9 Additional Payments. Any reasonable sum expended by the Bank due to
the Borrower's failure to perform or comply with its obligations under this
Agreement or any other Loan Document may be charged to the Borrower's operating
account with the Bank, and if the funds available are not sufficient, shall be
deemed to be an Advance.
2.10 Use of Proceeds. Advances under the Line of Credit shall be used for
the Borrower's working capital purposes and in payment of reimbursement
obligations in respect of Letters of Credit.
3. INTEREST, PAYMENTS AND MISCELLANEOUS CREDIT PROVISIONS
3.1 Interest Rates.
(a) Prime Rate. The outstanding principal amount under the Line of
Credit shall bear interest at a rate per annum equal to the Prime-based Rate,
determined on the basis of a year of 360 days for the actual number of days
elapsed, unless, as to a portion thereof, the Borrower elects the LIBOR Rate
Option provided for in paragraph (b) below.
(b) LIBOR Rate Option. The Borrower shall have the option to elect,
from time to time, that interest on a portion of the outstanding principal
amount under the Line of
15
Credit be calculated on the basis of the LIBOR rate (the "LIBOR Rate Option").
Each LIBOR Rate Loan shall bear interest at a rate of interest per annum
(computed on the basis of a year of 360 days and the actual number of days
elapsed) equal to the sum of (A) the LIBOR rate plus (B) 250 basis points
(2.50%) per annum, for the LIBOR Rate Interest Period in an amount equal to the
principal amount of the LIBOR Rate Loan and having a comparable maturity as
determined at or about 11:00 a.m. (London time) two Business Days prior to the
commencement of the LIBOR Rate Interest Period. In order to exercise the LIBOR
Rate Option, the Borrower shall supply to the Bank, by 10:00 a.m. (Eastern
time), at least two (2) Business Days prior to the date of a desired LIBOR Rate
Loan or any renewal or conversion of a LIBOR Rate Interest Period, a completed
and signed Notice of Conversion / Continuation substantially in the form of
Exhibit B attached hereto, subject in each case to the following:
(i) a LIBOR Rate Loan may not be converted into a Prime Rate Loan
or continued as a new LIBOR Rate Loan at a time other than the last day of the
LIBOR Rate Interest Period applicable thereto;
(ii) no LIBOR Rate Loan may be continued as a new LIBOR Rate Loan
and no Prime Rate Loan may be converted to a LIBOR Rate Loan when any Event of
Default has occurred and is continuing;
(iii) any portion of a LIBOR Rate Loan that cannot be converted
into or continued as a LIBOR Rate Loan by reason of a provision of this
Agreement or otherwise, automatically shall be converted at the end of the LIBOR
Rate Interest Period in effect for such LIBOR Rate Loan to a Prime Rate Loan;
(iv) on the last day of any LIBOR Rate Interest Period for a
LIBOR Rate Loan, if the Borrower has failed to give notice of conversion or
continuation as described in this section, such LIBOR Rate Loan shall
automatically be converted to a Prime Rate Loan on the last day of such then
expiring LIBOR Rate Interest Period;
(v) a LIBOR Rate Loan must be at least $500,000 or a whole
multiple of $10,000 in excess thereof; and
(vi) at no time shall more than four (4) LIBOR Rate Loans be
outstanding.
3.2 Interest Payments. Interest on the outstanding principal amount of the
Line of Credit shall be payable in arrears on each applicable Interest Payment
Date.
3.3 Manner of Payment; Maintenance of Demand Deposit Account. All payments
due or payable under this Agreement or under any other Loan Document shall be
made not later than 2:00 p.m. (prevailing Eastern Time) on the date when due, in
lawful money of the United States of America and in funds immediately available,
to the Bank at its offices at Xxx Xxxxxx Xxxxxxxx Xxxxx, Xxxx Xxxxxxxx, Xxx
Xxxxxx 00000, or by deposit at a local branch of the Bank with telecopy
notification by 2:00 p.m. (prevailing Eastern Time) to the Bank at the foregoing
office. Any payment received after such time shall be deemed to be received on
the next Business Day. The Borrower shall be required to maintain a demand
deposit account with the Bank during the term of this Agreement and the Bank is,
without any further authorization or
16
notice, hereby irrevocably authorized at any time and from time to time to
charge such account, or any other account maintained by the Borrower with the
Bank for the full amount of any principal, interest or other sum when due.
3.4 Actions on Non-Business Days. Whenever any payment or delivery of any
financial statement or report shall be due on a day that is not a Business Day,
that payment or delivery may be made on the next succeeding Business Day but in
the computation of interest on payments there shall be a charge for each day of
extension.
3.5 No Setoff. The Borrower shall pay principal, interest and all other
amounts payable under this Agreement or under any other Loan Documents without
any deduction whatsoever, including, without limitation, any deduction for any
setoff or counterclaim.
3.6 Application of Payments. In the event any payment received by the Bank
is less than the total Obligations then due and owing, application of such
payment shall be made first to fees payable under this Agreement, then to
interest and thereafter to principal.
3.7 Indemnity. The Borrower shall indemnify and hold the Bank harmless
from and against any and all suits, actions, proceedings, claims, damages,
losses, liabilities and expenses (including, without limitation, attorneys' fees
and disbursements, including those incurred upon any appeal) which may be
instituted or asserted against or incurred by the Bank as the result of its
having entered into any of the Loan Documents or having extended credit
hereunder; provided, however, that the Borrower shall not be liable for such
indemnification to the extent that any such suit, action, proceeding, claim,
damage, loss, liability or expense results from the gross negligence or willful
misconduct of the Bank.
3.8 LIBOR Rate Unavailable. If the Bank determines (which determination
shall be final and conclusive) that, by reason of circumstances affecting the
interbank LIBOR market generally, deposits in dollars (in the applicable
amounts) are not being offered to banks in the interbank LIBOR market for the
selected term, or adequate means do not exist for ascertaining the LIBOR Rate,
then the Bank shall give notice thereof to the Borrower. Thereafter, until the
Bank notifies the Borrower that the circumstances giving rise to such suspension
no longer exist, (i) the availability of the LIBOR Rate Option shall be
suspended, and (ii) the interest rate on the entire outstanding principal
balance of the Line of Credit shall be converted to the Prime-based Rate at the
expiration of the then current LIBOR Rate Interest Period.
3.9 LIBOR Rate Illegal. In addition, if the Bank shall determine (which
determination shall be final and conclusive) that any enactment, promulgation or
adoption of or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by a Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank with any guideline, request or
directive (whether or not having the force of law) of any such Governmental
Authority, central bank or comparable agency shall make it unlawful or
impossible for the Bank to make or maintain or fund loans under the LIBOR Rate
Option, the Bank shall give notice thereof to the Borrower. Thereafter, until
the Bank notifies the Borrower that the circumstances giving rise to such
determination no longer apply, (i) the availability of the LIBOR Rate Option
shall be suspended, and (ii) the interest rate on the Line of Credit shall be
converted to the Prime-based Rate either (x) on the last day of the then current
LIBOR Rate Interest Period(s) if the Bank may lawfully continue to maintain
loans under the LIBOR Rate Option to such day, or (y) immediately if the Bank
may not lawfully maintain loans under such LIBOR Rate Option. If, as a result of
such determination, the interest rate is converted to the Prime-
17
based Rate, the Borrower shall pay to the Bank, on demand, an amount equal to
the breakage fee (calculated in accordance with Section 3.10(b)) which would
have been due if such LIBOR Rate Loan had been prepaid on the date the interest
rate was converted to the Prime-based Rate.
3.10 Breakage Fee. (a) The Borrower may prepay any LIBOR Rate Loan in
whole at any time, with accrued interest on the principal being prepaid to the
date of repayment. In the event that any prepayment of a LIBOR Rate Loan is
required or permitted on a date other than the last Business Day of the then
current LIBOR Rate Interest Period with respect thereto, the Borrower shall
indemnify the Bank therefor in accordance with Section 3.10(b) hereof.
(b) The Borrower agrees to indemnify the Bank against any
liabilities, losses or expenses (including, without limitation, loss or margin,
any loss or expense sustained or incurred in liquidating or employing deposits
from third parties, and any loss or expense incurred in connection with funds
acquired to effect, fund or maintain any advance (or any part thereof) bearing
interest under the LIBOR Rate Option which the Bank sustains or incurs as a
consequence of either (i) the Borrower's failure to make a payment on the due
date thereof, (ii) the Borrower's revocation (expressly, by later inconsistent
notices or otherwise) in whole or in part of any notice give to Bank to request,
convert, renew or prepay any advance bearing interest under the LIBOR Rate
Option on a day other than the last day of the applicable LIBOR Rate Interest
Period. A notice as to any amounts payable pursuant to this paragraph give to
the Borrower by the Bank shall, in the absence of manifest error, be conclusive
and shall be payable upon demand. The Borrower's indemnification obligations
hereunder shall survive the payment in full of the Advances and all other
amounts payable hereunder.
3.11 Taxes. In the event that any Tax (other than any income, gross
receipts or similar tax)is imposed upon (i) the Bank in connection with the
execution, delivery or implementation of this Agreement and any of the
transactions contemplated by this Agreement or (ii)the payments to be made by
the Borrower to the Bank, and the result is that the Bank's effective rate of
return is thereby reduced, the Bank shall notify the Borrower promptly after
becoming aware of same. The Borrower shall have a period of sixty (60) days to
either (i) agree to make the Bank whole for the amount of the Taxes in
questions, or (ii) repay the Obligations in full, in which case this Agreement
and obligation of the Bank to make advances under the Line of Credit shall
terminate. Failure of the Borrower to elect within the sixty (60) day period
shall be deemed to constitute an election of option (i).
3.12 Increased Costs. (a) In the event that the adoption of any applicable
law, rule, regulation or guideline regarding capital adequacy affecting the
banking industry generally, or any change therein or in the interpretation or
application thereof by any Governmental Authority charged with the
administration or interpretation thereof or compliance by the Bank with any
request or directive regarding capital adequacy (whether or not having the force
of law) from any central bank or Governmental Authority including, without
limitation, the issuance of any final rule, regulation or guideline, does or
shall have the effect of reducing the rate of return on the Bank's capital as a
consequence of its obligations hereunder to a level below that which the Bank
18
could have achieved but for the adoption, change or compliance by any material
amount, then from time to time, within 15 days after demand by the Bank, the
Borrower shall pay to the Bank such additional amount or amounts as will
compensate the Bank for the reduction.
(b) If the Bank becomes entitled to claim any additional amounts
pursuant to this Section 3.12, it shall promptly notify the Borrower thereof. A
certificate as to any additional amounts payable pursuant to this Section 3.12
submitted by the Bank to the Borrower shall be conclusive absent manifest error.
The covenants contained in this Section 3.12 shall survive the termination of
this Agreement and payment of the Obligations.
3.13 Usury. If, at any time, the rate of interest payable on any
Obligation shall be deemed by any Governmental Authority to exceed the maximum
rate of interest permitted by applicable law, then, for such time as such rate
would be deemed excessive, its application shall be suspended and there shall be
charged instead the maximum rate of interest permissible under law on such
Obligation.
3.14 Late Charges. If the Borrower fails to make any payment of principal,
interest or other amount coming due pursuant to the provisions of this Agreement
within 15 calendar days of the date due and payable, the Borrower also shall pay
to the Bank a late charge equal to the lesser of five percent (5.00%) of the
amount of such payment or $500.00. Such 15 day period shall not be construed in
any way to extend the due date of any such payment. The late charge is imposed
for the purpose of defraying the Bank's expenses incident to the handling of
delinquent payments and is in addition to, and not in lieu of, the exercise by
the Bank of any rights and remedies hereunder, under the other Loan Documents or
under applicable laws, and any fees and expenses of any agents or attorneys
which the Bank may employ.
3.15 Default Rate. Upon the occurrence and during the continuance of any
Event of Default, at the Bank's option, the Obligations shall bear interest at
the Default Rate.
3.16 Fees.
(a) The Borrower shall pay to the Bank for Letters of Credit its
applicable standard fees for commercial and standby credits, as the case may be,
plus all other customary and usual charges and commissions, as all of the same
may be adjusted from time to time.
(b) The Borrower shall pay a closing fee of $50,000 to the Bank on
the Closing Date.
(c) The Borrower shall pay to the Bank 0.25% per annum on the unused
portion of the Line of Credit, payable quarterly in arrears. This fee shall be
calculated on the basis of a 360 day year for the actual number of days elapsed.
The first such quarterly payment shall be due on June 30, 2004.
(d) The Borrower shall pay all reasonable charges and expenses paid
or incurred by the Bank in connection with this Agreement, including all
reasonable legal fees and expenses, whether internal or external counsel to the
Bank.
4. CONDITIONS PRECEDENT
19
4.1 Conditions to the Bank's Obligations Under this Agreement.
Notwithstanding any other provision of this Agreement, the Bank shall have no
obligations under this Agreement unless and until the events set forth in
Section 4.1(a) shall have occurred and the Borrower shall have delivered to the
Bank in form and substance satisfactory to the Bank and its counsel, the
documents set forth in Section 4.1(b), each dated as of the Closing Date unless
otherwise indicated.
(a) Events.
(i) All proceedings taken in connection with the execution of this
Agreement and the execution and delivery of all other Loan Documents and all
documents and papers relating thereto shall be reasonably satisfactory to the
Bank and its counsel;
(ii) The Bank shall have received all reasonable fees and
out-of-pocket expenses which are payable to the Bank or its counsel; and
(iii) The Bank and its counsel shall have received such documents
and papers as the Bank or counsel may reasonably request in connection
therewith, all in form and substance satisfactory to the Bank and its counsel.
(b) Closing Documents.
(i) The Line of Credit Note, the Guaranty and the Security
Agreements, duly executed by the applicable Obligor or Obligors.
(ii) Resolutions of the board of directors of each corporate
Obligor certified by the Secretary or Assistant Secretary of the Obligor as of
the Closing Date, to be duly adopted and in full force and effect on such date,
authorizing (a) the consummation of each of the transactions (including, without
limitation, the incurrence of the Obligations and the grant of the Liens)
contemplated by the Loan Documents and (b) authorized officers to execute and
deliver, as applicable, this Agreement and the other Loan Documents.
(iii) Evidence of limited liability company authorization,
certified by an appropriate person on behalf of each limited liability company
Obligor as of the Closing Date, as being in full force and effect on such date,
authorizing (a) the consummation of each of the transactions (including, without
limitation, the incurrence of the Obligations and the grant of the Liens)
contemplated by the Loan Documents and (b) specific officers to execute and
deliver, as applicable, this Agreement and the other Loan Documents.
(iv) Certificates of the appropriate Governmental Authorities,
dated the most recent practicable date prior to the Closing Date, showing that
the Borrower and each of the Guarantors is organized and in good standing in its
jurisdiction of organization and is qualified as a foreign corporation and in
good standing in all other jurisdictions in which the applicable Obligor is
qualified to transact business.
(v) Copies of the certificate of incorporation and all amendments
thereto and the by-laws of the Borrower and each corporate Obligor, certified by
the Secretary or Assistant Secretary of the applicable Obligor as true and
complete as of the Closing Date.
20
(vi) Copies of the Certificate of Formation and operating
agreement of each limited liability company Obligor, certified by an appropriate
person as true and complete as of the Closing Date.
(vii) Evidence that the insurance policies provided for in Section
7.6 are in full force and effect, with an appropriate loss payable clause in
favor of the Bank.
(viii) Opinions of Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx, LLP and Xxxx &
Xxxxx, LLP, counsel to the Obligors.
(ix) Results of UCC, judgment and tax lien searches on the
Obligors disclosing no Liens other than Permitted Encumbrances, or Liens for
which termination statements or discharges have been obtained.
(x) A negative pledge agreement of Afinsa with respect to its
common stock of the Borrower.
(xi) A Borrowing Base Certificate of the Borrower showing a
minimum availability of $2,500,000 on the Closing Date.
(xii) A consent and covenant waiver agreement from Capital Coin
Fund.
(xiii) An amendment to Borrower's credit agreement with Banco
Santander Central Hispano, S.A., permitting a grant of security interests by the
Borrower in favor of the Bank.
(xiv) Evidence, reasonably satisfactory to the Bank, that the
Obligors are in compliance with all applicable federal, state and local
environmental and occupational health and safety rules, laws and regulations and
that no environmental hazards exist on any property granted by an Obligor.
(xv) Such additional information and documents as the Bank may
reasonably request.
4.2 Conditions to Each Advance and Each Letter of Credit Obligation. It
shall be a further condition to the funding of each Advance or the issuance of
each Letter of Credit that the following statements shall be true on the date of
each such funding in issuance:
(a) All of the representations and warranties of the Obligors
contained herein or in any of the other Loan Documents shall be correct in all
material respects on and as of the Closing Date and the date of funding of each
such Advance or the issuance of a Letter of Credit as though made on and as of
such date (except for any representation or warranty made or deemed to be made
as of a specified date which shall be correct in all material respects as of
such date).
21
(b) No event shall have occurred and be continuing, or would result
from the funding of any Advance, the issuance of a Letter of Credit, which
constitutes or would constitute a Default or Event of Default.
5. REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and to make available the
Line of Credit, the Borrower makes the following representations and warranties
to the Bank regarding itself and each Guarantor, each and all of which shall
survive the execution and delivery of this Agreement:
5.1 Corporate Existence; Compliance with Law. Each Obligor (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation; (ii) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification (except for jurisdictions in which such failure so to qualify or
to be in good standing would not have a Material Adverse Effect); (iii) has the
requisite corporate power and authority and the legal right to own, pledge,
mortgage or otherwise encumber and operate its properties, to lease the property
it operates under lease, and to conduct its business as now, heretofore and
proposed to be conducted; (iv) has all material licenses, permits, consents or
approvals from or by, and has made all material filings with, and has given all
material notices to, all Governmental Authorities having jurisdiction, to the
extent required for such ownership, operation and conduct; (v) is in compliance
with its certificate of incorporation and by-laws or certificate of formation
and operating agreement, as applicable; and (vi) is in compliance with all
applicable provisions of law and all of its contracts with third parties where
the failure to comply would have a Material Adverse Effect.
5.2 Executive Offices. The current location of the Borrower's chief
executive offices and principal place of business is 000 Xxxxxxx Xxxxxx, Xxxx
Xxxxxxxx, Xxx Xxxxxx 00000. The current location of each Guarantor's chief
executive offices and principal place of business are set forth in Schedule 5.2.
All Inventory and Equipment, all records of the Accounts and all other
Collateral are at all times maintained, and for the past six months have at all
times been maintained at the locations set forth in Schedule 5.2. Except as
disclosed on Schedule 5.2, the Obligors have not within the five years preceding
the date of this Agreement, (a) changed its name, (b) used any name other than
the name stated at the beginning of this Agreement, or (c) merged or
consolidated with, or acquired the assets of, any other Person.
5.3 Subsidiaries. The Obligors have no Subsidiaries, except for
Subsidiaries that are the Guarantors and additional Subsidiaries, all organized
under the laws of a jurisdiction other than the United States.
5.4 Corporate Power: Authorization; Enforceable Obligations. The
execution, delivery and performance by the Obligors of the Loan Documents and
all instruments and documents to be delivered by each Obligor, to the extent it
is party thereto, hereunder and the creation and continuation, as applicable of
all Liens provided for herein and therein: (i) are within the Obligor's
corporate or limited liability company power; (ii) have been duly authorized by
all necessary or proper corporate or limited liability company action; (iii) are
not in
22
contravention of any provision of the Obligor's certificate of incorporation or
by-laws, or certificate of formation and operating agreement as applicable; (iv)
will not violate any law or regulation, or any order or decree of any court or
Governmental Authority; (v) will not conflict with or result in the breach or
termination of, constitute a default under or accelerate any performance
required by, any material indenture, mortgage, deed of trust, lease, agreement
or other instrument to which the Obligor is a party or by which the Obligor or
any of its property is bound; (vi) will not result in the creation or imposition
of any Lien upon any of the property of the Obligor other than those in favor of
the Bank pursuant to the Loan Documents; and (vii) do not require the consent or
approval of any court, Governmental Authority or any other Person. Each of the
Loan Documents has been duly executed and delivered for the benefit of or on
behalf of the Obligor, as applicable, and each, as applicable, constitutes a
legal, valid and binding obligation of the Obligor, enforceable against the
Obligor in accordance with its terms.
5.5 Financial Statements. (a) All of the following balance sheets of the
Obligors and the related statements of income and cash flows, copies of which
have been furnished to the Bank prior to the date of this Agreement, have been
prepared in accordance with GAAP consistently applied throughout the periods
involved, present fairly the financial position of the Obligors, in each case as
at the dates thereof, and the results of operations and cash flows of the
Borrower for the periods then ended (subject to year-end adjustments) (the
"Financial Statements"):
(i) the consolidated balance sheet of the Borrower as at June 30,
2003, and the related consolidated statements of income and cash flows for the
year ended as at such date, audited by Amper, Politziner & Xxxxxx, P.C.,
certified public accountants; and
(ii) the consolidated balance sheet of the Borrower as at each of
September 30, 2003, December 31, 2003 and March 31, 2004 and the related
consolidated statements of income and cash flows for the interim periods then
ended.
(iii) the management-prepared consolidating balance sheet of the
Obligors as of March 31, 2004 and the related consolidating statement of income
for the interim period then ended.
(b) The Obligors have no material obligations, or liabilities for
Taxes, long-term leases or unusual forward or long-term commitments which are
not reflected in the financial statements referred to in Section 5.5(a) (i) or
(ii) or otherwise disclosed to the Bank, and which would have a Material Adverse
Effect.
(c) No shares of capital Stock of an Obligors have been redeemed,
retired, purchased or otherwise acquired for value by an Obligor since June 30,
2003.
(d) Since June 30, 2003, there has been no material adverse change in
the financial condition, operations or business taken as a whole of the Borrower
and its Subsidiaries from that set forth in said financial statements as of said
date.
5.6 Ownership of Property, Liens. (a) Each Obligor has good, valid and
marketable leasehold interests in the Leases described in Schedule 5.6(a) hereto
under the name
23
of the Obligor, and good and marketable title to, or valid leasehold interests
in, all of its other properties and assets; and none of the properties and
assets of each Obligor is subject to any Liens, except (i) Permitted
Encumbrances, (ii) those set forth on Schedule 5.6(b) hereto, and (iii) the
Liens in favor of the Bank pursuant to the Loan Documents; and each Obligor has
received all deeds, assignments, waivers, consents, non-disturbance and
recognition or similar agreements, bills of sale and other documents, and duly
effected all recordings, filings and other actions necessary to establish,
protect and perfect each Obligor right, title and interest in and to all such
property except where the failure to have received such documents or effected
such actions will not, in the aggregate, have a Material Adverse Effect.
(b) Obligors do not own or lease any real property except as set
forth in Schedule 5.6(a). Each of the leases set forth in Schedule 5.6(a) is
valid and enforceable in accordance with its terms and is in full force. Except
as indicated on Schedule 5.6(a) hereto, neither the Obligor nor any other party
to any such lease is in default of its obligations thereunder or has delivered
or received any notice of default under any such lease, nor has any event
occurred which, with the giving of notice, the passage of time or both, would
constitute a default under any such lease, except for any default which would
not have a Material Adverse Effect.
5.7 Labor Matters. Except as disclosed in Schedule 5.7:
(a) There are no strikes, material work stoppages or slowdowns or
lockouts pending or threatened against or involving an Obligor with respect to
employees of an Obligor.
(b) There are no material arbitration proceedings or material
grievances pending against or involving an Obligor, nor are there any material
arbitrations or, to the Obligor's knowledge, material grievances threatened.
(c) Neither Obligor is a party to, or has any obligations under, any
collective bargaining agreement.
(d) There are no representation proceedings pending or threatened
with the National Labor Relations Board, and no labor organization or group of
employees of an Obligor has made a pending demand for recognition.
(e) There are no unfair labor practice charges or material complaints
pending or in process or, to the Borrower's knowledge, threatened by or on
behalf of any employee or group of employees of either Obligor.
(f) There are no material complaints or charges against an Obligor
pending or threatened to be filed with any federal, state or local court,
governmental agency or arbitrator based on, arising out of, in connection with,
or otherwise relating to the employment by the Obligors of any individual.
(g) The Obligors are in compliance with all material laws, and all
orders of any court, governmental agency or arbitrator, relating to the
employment of labor, including all such laws relating to wages, hours,
collective bargaining, discrimination, civil rights, and the payment of
withholding and/or Social Security and similar Taxes.
24
5.8 Other Ventures. Except as disclosed in Schedule 5.8, neither Obligor
is engaged in any joint venture or partnership with any other Person.
5.9 Investment Company Act. The Borrower is not an "investment company" or
an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended. The making of any Advance, or the application of the proceeds
and repayment thereof by the Borrower and the consummation of the transactions
contemplated by this Agreement and the Loan Documents will not violate any
provision of such Act or any rule, regulation or order issued by the Securities
and Exchange Commission thereunder.
5.10 Margin Regulations. The Borrower does not own any "margin security,"
as that term is defined in Regulations G and U of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"), and the proceeds of the
Mortgage Loan and the Advances will be used only for the purposes contemplated
in Section 2.12. None of the proceeds of the Advances will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security, for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the loans under this Agreement to be considered a "purpose
credit" within the meaning of Regulations G, T, U or X of the Federal Reserve
Board. The Borrower will not knowingly take or permit any action which might
cause this Agreement or any document or instrument delivered pursuant hereto to
violate any regulation of the Federal Reserve Board.
5.11 Taxes. Except as disclosed in Schedule 5.11: all material federal,
state, local and foreign tax returns, reports and statements required to be
filed by or on behalf of each Obligor or any affiliated combined or unitary
group with respect to periods in which the Obligor is or was a member of such
group (collectively, the "Tax Returns") have been timely filed with the
appropriate governmental agencies (on the scheduled due date or by extension)
and all Taxes and other impositions shown thereon to be due and payable have
been paid prior to the date on which any fine, penalty, interest or late charge
may be added thereto for nonpayment thereof, or, if later than such date, any
such fine, penalty, interest, late charge or loss has been paid. Each Obligor
has paid when due and payable all material Taxes required to be paid by it,
other than Taxes being contested in good faith for which adequate reserves have
been established. Proper and accurate amounts have been withheld by each Obligor
from its employees for all periods in full and complete compliance with the tax,
social security and unemployment withholding provisions of applicable federal,
state, local and foreign law and such withholdings have been timely paid to the
respective governmental agencies. No material adjustments have been raised by
the IRS or any other Governmental Authority in connection with either Obligor's
Tax Returns. Neither Obligor has executed or filed with the IRS or any other
governmental authority any agreement or other document extending, or having the
effect of extending, the period for assessment or collection of any Taxes.
5.12 ERISA. The Borrower is in compliance in all material respects with
ERISA, and the related provisions of the IRC, and with the regulations and
published interpretations thereunder. Neither a reportable event as defined in
Section 4043 of ERISA, nor a prohibited transaction as defined in Section 406 of
ERISA or Section 4975 of the IRC, has occurred and is continuing with respect to
any Plan established or maintained, or to which contributions have
25
been or may be made by the Borrower or an ERISA Affiliate. No notice of
intention to terminate a Plan has been filed nor has any Plan been terminated;
the PBGC has not instituted proceedings to terminate, or to appoint a trustee to
administer, any Plan, nor do circumstances exist that constitute grounds for any
such proceedings; and neither the Borrower nor any ERISA Affiliate has
completely or partially withdrawn from any Multiemployer Plan. The Borrower and
each ERISA Affiliate has met the minimum funding standards under ERISA with
respect to each of its Plans; no Plan of either the Borrower or any ERISA
Affiliate has, or will have, an accumulated funding deficiency or waived funding
deficiency within the meaning of ERISA; and no material liability to the PBGC
has been incurred by the Borrower or any ERISA Affiliate.
5.13 Brokers. No broker or finder acting on behalf of the Borrower brought
about the obtaining, making or closing of the loans contemplated by this
Agreement and the Borrower has no obligation to any Person in respect of any
finder's or brokerage fees in connection with the loans or other transactions
contemplated by this Agreement.
5.14 Intellectual Property. Each Obligor either owns or has a license for
all material copyrights, service marks, trademarks, trademark applications, and
trade names necessary to continue to conduct its business as heretofore
conducted by it, now conducted by it and proposed to be conducted by it. The
patents and trademarks owned by the Borrower are listed, together with Patent
and Trademark Office application or registration numbers, where applicable, on
Schedule 5.14 hereto. Each Obligor conducts its business without infringement or
claim of infringement of any Intellectual Property right of others, except where
such infringement or claim of infringement would not have a Material Adverse
Effect. Except as disclosed on Schedule 5.14, to the Borrower's knowledge there
is no infringement or claim of infringement by others of any Intellectual
Property right of an Obligor.
5.15 Full Disclosure. No information contained in this Agreement, the
other Loan Documents, the Financial Statements or any written statement
furnished by or on behalf of the Borrower pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement, contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein, in light of the
circumstances under which furnished, not misleading (it being recognized that
the projections and forecasts provided by the Borrower are not to be viewed as
facts and that actual results during the period covered by any such projections
and forecasts may differ from the projected or forecasted results).
5.16 Environmental Protection. None of the real property owned by an
Obligor or occupied by an Obligor pursuant to a lease is in material violation
of any Environmental Laws nor, to the best of the Borrower's knowledge, has ever
been used by previous owners or operators to generate, manufacture, refine,
produce, treat, store, handle, dispose of, transfer, process or transport
Contaminants; to the Borrower's knowledge, other than those Contaminants
customarily used, stored handled or disposed of in the course of such Obligor's
business and only in material compliance with Environmental Laws, none of the
real property owned or occupied by the Borrower has or is now being used as a
"Major Facility", as such term is defined in N.J.S.A. 58:10-23.11(b)(1), nor
will be used as a "Major Facility" as long as the Obligations are outstanding
and not indefeasibly satisfied in full. No Lien has been attached to any
revenues or any real or personal property owned by the Borrower under the
Discharge Act, CERCLA or any other Environmental Laws. Except as disclosed in
Schedule 5.16, the Borrower has not
26
received notice that it has been identified in any action, administrative or
arbitrative proceeding or investigation as a responsible party for any liability
under any Environmental Laws. No Discharge of a Contaminant has occurred on any
real property owned or occupied by an Obligor. There has been no federally
funded removal or remedial action at any of the real property owned or occupied
by the Borrower and there is no reasonably foreseeable basis for any federally
funded removal or remedial action at any of such property.
5.17 Inventory. All Inventory, other than Inventory used for display, is
currently saleable in the normal course of each Obligor's business, subject to
defects which, in the aggregate, are not material in relation to the Inventory
taken as a whole.
5.18 Capital Stock. The Borrower's authorized capital stock, as of the
date hereof, consists of 10,000,000 shares of preferred stock of which no shares
are issued and outstanding and 40,000,000 shares of common stock of which
26,690,000 shares are issued and outstanding, 19,070,398 of which are owned by
Afinsa directly or beneficially through its wholly-owned subsidiary. As of the
date hereof, there are no outstanding options, warrants or other rights of any
kind whatsoever to acquire shares of the common stock of the Borrower, other
than options outstanding to officers and key employees that were granted in the
ordinary course of business.
5.19 Litigation. There are no pending or threatened claims, actions,
proceedings or investigations before any Governmental Authority involving an
Obligor that may, singly or in the aggregate, have a Material Adverse Effect.
5.20 Solvency. Both before and after giving effect to the transactions
contemplated hereunder, the Borrower is Solvent.
6. FINANCIAL STATEMENTS AND INFORMATION
6.1 Reports and Notices. The Borrower covenants and agrees that from and
after the Closing Date and until the payment of the Obligations in full, it
shall deliver to the Bank:
(a) On or before the 20th day of each month, as at the close of the
preceding month, (A) a Borrowing Base Certificate, and (B) such additional
back-up documentation reasonably requested by the Bank, including, without
limitation, an accounts receivable aging report, a report on outstanding
Consignor Advance Obligations together with copies of promissory notes and
security agreements held by the Obligors in connection therewith, and inventory
report (by product category and location), and all in such form as the Bank
shall require and certified by the President or Chief Financial Officer of the
Borrower;
(b) Within 45 days after the close of each fiscal quarter, the
unaudited consolidated balance sheet of the Borrower as at the close of such
fiscal quarter and the related consolidated statement of income and cash flows
for such quarter setting forth in comparative form in each case the figures for
such fiscal quarter of the previous year accompanied by a certification of the
President or Chief Financial Officer of the Borrower that such financial
statements are complete and correct and present fairly in accordance with GAAP
(subject to normal year end adjustments and footnotes need not be included) the
financial position and the results of operation and cash flows of the Borrower
as of the end of such quarter and for the period then ended,
27
(c) Within 90 days after the close of each Fiscal Year, a copy of the
annual financial statements of the Borrower, consisting of a consolidated
balance sheet and consolidated statement of income and cash flows, for such
fiscal year setting forth in comparative form in each case the figures for the
previous fiscal year, which financial statements shall be prepared in accordance
with GAAP, certified by the President or Chief Financial Officer of the Borrower
and audited by Amper, Xxxxxxxx & Xxxxxx, P.C. or other firm of independent
certified public accountants of recognized standing selected by the Borrower and
acceptable to the Bank, accompanied by a report from such accountants to the
effect that in connection with their review, nothing has come to their attention
to cause them to believe that a Default or Event of Default had occurred;
(d) Within 60 days after the close of each fiscal quarter and within
120 days after the close of each Fiscal Year, the management-prepared
consolidating balance sheet of the Borrower and the Obligors and the related
consolidating statement of income,
(e) Simultaneously with the delivery of each annual and quarterly
financial statement referred to in paragraph (d), a completed certificate in
form and substance acceptable to Bank, a copy of which is attached hereto as
Exhibit D ("Compliance Certificate"), executed by the chief financial officer of
the Borrower, and containing such additional information as Bank may request
from time to time, (i) certifying that the financial statements being delivered
with such Compliance Certificate are true, complete and correct, in all material
respects, (ii) setting forth in reasonable detail the calculations required to
establish whether the Borrower was in compliance with all financial covenants
for the fiscal period in question, (iii) stating whether any Event of Default or
Default has occurred or is continuing since the date of the previously delivered
Compliance Certificate and the details of same, and (iv) containing such other
information as Bank may from time to time reasonably require to be included in
the Compliance Certificate.
(f) By July 30 of each year, copies of the annual audited financial
statements of Afinsa.
(g) Immediately after the Borrower becomes aware of the existence of
(i) any Default or Event of Default, or any development or other information
which would have a Material Adverse Effect, (ii) any material claim, action,
proceeding or investigation filed or instituted against an Obligor, or any
adverse determination in any material pending action, proceeding or
investigation affecting it, (iii) any loss from casualty or theft in excess of
$250,000 whether or not insured, affecting property of the Borrower or (iv) any
representation or warranty in any Loan Document ceasing to be true, correct and
complete in any material respect, or telephonic or telegraphic notice specifying
the nature of such Default or Event of Default or development or information,
including the anticipated effect thereof, which notice shall be promptly
confirmed by the Borrower in writing within five (5) Business Days;
(g) Promptly after the same are received by the Borrower, management
letters provided to the Borrower by its independent certified public
accountants;
(h) When filed, copies of all federal tax returns and reports filed
by the Borrower and the Guarantors in respect of Taxes measured by income;
28
(i) A collateral audit, at the Borrower's expense, 90 days prior to
the end of the Line of Credit Term and, if the Line of Credit is reviewed,
annually thereafter;
(j) Within thirty days following the Closing Date, a "privity letter"
from Borrower's certified public accountants stating that the Bank may rely on
the Borrower's audited annual financial statements; and
(k) Such other information respecting the Obligors' business or
financial condition as Bank may, from time to time, reasonably request.
6.2 Communication with Accountants. Provided that the Bank provides the
Borrower with an appropriate confidentiality agreement, the Borrower authorizes
the Bank to communicate directly with its independent certified public
accountants and authorizes those accountants to discuss with and, if requested,
disclose to the Bank any and all financial statements and other supporting
financial documents and schedules, including any management letter with respect
to the business, financial condition and other affairs of the Borrower.
6.3 Access to Records and Property. At any time and from time to time,
upon request by the Bank which, in the absence of a Default or an emergency
situation, shall be made not less than three Business Days' prior to the
requested access, and at the Borrower's expense, give any representative of the
Bank access during normal business hours to inspect and audit the Collateral and
the Borrower's other property and to examine, copy and make extracts from the
Borrower's books and records, and provided further, as long as no Default has
occurred and is continuing, the Bank shall limit such requests to twice in any
Fiscal Year.
7. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, unless the Bank shall otherwise
consent in writing, from and after the date hereof and until the full and final
payment and performance of all the Obligations:
7.1 Maintenance of Existence and Conduct of Business. Each Obligor shall
(a) do or cause to be done all things reasonably necessary to preserve and keep
in full force and effect its corporate or limited liability company existence,
and its rights and franchises; (b) continue to conduct its business
substantially as now conducted or as otherwise permitted hereunder; (c) at all
times maintain, preserve and protect all of its Intellectual Property that is
material to the operation of its business; and (d) preserve all the remainder of
its property, in use or useful in the conduct of its business and keep the same
in good repair, working order and condition (taking into consideration ordinary
wear and tear) and from time to time make, or cause to be made, all needed and
proper repairs, renewals and replacements, betterments and improvements thereto
consistent with industry practices, so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.
7.2 Books and Records. Each Obligor shall keep adequate records and books
of account with respect to its business activities, in which proper entries,
reflecting all of its financial transactions, are made in accordance with GAAP
and on a basis consistent with the Financial Statements referred to in Section
5.5(a) hereof.
29
7.3 Compliance with Law. Each Obligor shall comply with all federal, state
and local laws and regulations applicable to it, including, without limitation,
ERISA, those regarding the collection, payment and deposit of employees' income,
unemployment and social security taxes, and Environmental Laws, where the
failure to comply with any such laws or regulations would have a Material
Adverse Effect.
7.4 Employee Plans. Each Obligor shall maintain each Plan in compliance in
all material respects with the provisions of ERISA and the related provisions of
the IRC (or the Canadian equivalents) and with the regulations and published
interpretations thereunder.
7.5 Environmental Matters. (a) Each Obligor shall (i) comply in all
material respects with the Environmental Laws applicable to it, (ii) notify the
Bank promptly in the event of any Discharge occurring at or Contaminant (other
than de minimis non-reportable amounts of such substances ordinarily present on
the Obligor's premises and used in the conduct of the Obligor's business as
currently conducted) being found in, at or under any premises owned or occupied
by the Obligor, and (iii) promptly forward to the Bank a copy of any order,
notice, permit, application, claim or any other communication or report received
by the Obligor in connection with any such Discharge or Contaminant or any other
matter relating to the Environmental Laws as they may affect such premises.
(b) The Borrower shall indemnify the Bank and hold the Bank harmless
from and against any loss, liability, damage, or expense, including attorneys'
fees, suffered or incurred by the Bank, whether as successor in interest to an
Obligor as lessee of any premises by virtue of foreclosure or in lieu of
foreclosure or otherwise, (i) under or on account of the Environmental Laws,
including the assertion of any Lien thereunder; (ii) with respect to any
Discharge or Contaminant affecting such premises, whether or not the same
originates or emanates from such premises or any contiguous real estate,
including any loss of value of such premises as a result of a Discharge or
Contaminant; and (iii) with respect to any other matter affecting such premises
within the jurisdiction of any federal, state, or municipal official
administering the Environmental Laws.
(c) In the event of any Discharge or Contaminant affecting any
premises now or hereafter occupied by an Obligor, whether or not the same
originated or emanates from such premises or any contiguous real estate, and if
an Obligor shall fail to comply with any of the requirements of the
Environmental Laws, where required to do so under any applicable lease or other
agreement, the Bank may, but shall not be obligated to, give such notices or
cause such work to be performed or take any and all actions deemed necessary or
desirable to remedy such Discharge or Contaminant or cure such failure to comply
and any amounts paid as a result thereof, together with interest thereon at the
Default Rate, shall be immediately due and payable by the Borrower and, until
paid, shall be part of the Obligations.
7.6 Insurance.
(a) Liability and Property Insurance. The Obligors shall maintain at
their expense (with such insurers, in such amounts and with such deductibles as
is reasonably satisfactory to the Bank) public liability and third party
property damage insurance and insurance on the Collateral (including, without
limitation, insurance against fire, explosion, boiler damage,
30
theft, burglary, spoilage, pilferage, loss in transit and all other hazards and
risks ordinarily insured against by other owners or users of such properties in
similar businesses), and as otherwise provided in the Loan Documents, which
insurance shall be evidenced by policies and an "Accord 27 Form" (i) in form and
substance reasonably satisfactory to the Bank, (ii) designating the Bank and its
successors and assigns as additional co-insureds and loss payees as their
interests may appear from time to time, (iii) requiring at least thirty (30)
days' prior written notice to the Bank and its assigns before cancellation or
any material change shall be effective. The amount of insurance coverage shall
be sufficient to cover the total loss of Inventory and stamps, coins and other
collectibles delivered to an Obligor in respect of Consignor Advance
Obligations, at any location.
(b) Copies of Policies. Upon demand, the Borrower shall deliver to
the Bank the original of each policy evidencing insurance required by this
Section 7.6, together with evidence of payment of all premiums therefor.
(c) Notice and Proof of Loss. In the event of loss or damage, the
Borrower shall forthwith notify the Bank and file proofs of loss satisfactory to
the Bank with the appropriate insurer.
(d) Proceeds. Forthwith upon receipt of insurance proceeds (for any
loss or damage to any obligors' property, both real and personal) in excess of
Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate, at the option
of Bank, the Borrower shall (i) utilize same to replace, repair, reconstruct,
improve and restore the damaged property to substantially the same or an
improved condition or utility value as existed prior to such event, or (ii) pay
same to the Bank to be credited against the Obligations.
(e) No Duty for the Bank. In no event shall the Bank be required
either to (i) ascertain the existence of or examine any insurance policy, or
(ii) advise the Borrower in the event such insurance coverage shall not comply
with the requirements of this Agreement.
(f) Other Insurance Provisions. The specific insurance covenants
contained in any of the Loan Documents shall be in addition to the provisions
contained in this Section 7.6.
7.7 Condition of Collateral; No Liens. The Obligors shall maintain the
Collateral and all of its other assets and properties in good condition and
repair at all times, preserve the Collateral and all its other assets and
properties from loss, damage, or destruction of any nature whatsoever (ordinary
wear and tear and obsolescence excepted), and keep the Collateral and all its
other assets and properties free and clear of any Encumbrance, except Permitted
Encumbrances.
7.8 Working Capital Facility; Operating Account. During the term of the
Line of Credit, the Borrower shall maintain its working capital facility with
the Bank. At all times, the Borrower shall maintain its primary operating
account and treasury management services with the Bank.
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8. NEGATIVE COVENANTS
The Borrower covenants and agrees that, without the prior written consent
of the Bank from and after the date hereof and until the full and final payment
and performance of all the Obligations:
8.1 Mergers, Etc. Except as provided in Schedule 8.1, no Obligor shall,
directly or indirectly, by operation of law or otherwise, merge with,
consolidate with, acquire all or substantially all of the assets or capital
stock of, or otherwise combine with, any Person or form any Subsidiary, except
that any Guarantor may merge with and into any other Guarantor or with and into
the Borrower.
8.2 Maintenance of Business. No Obligor shall materially alter the nature
of its business.
8.3 Sales of Assets. No Obligor shall sell, lease, transfer, convey or
otherwise dispose of any of its assets or properties, including, without
limitation, any equity interest in any other Obligor, or attempt or contract to
do so, except that it may engage in (i) the sale of Inventory in the ordinary
course of business, (ii) the sale of surplus, obsolete or unnecessary assets,
equipment and fixtures, and (iii) transfers resulting from any casualty or
condemnation of assets or properties.
8.4 Transaction with Affiliates. Except as disclosed in Schedule 8.4:
(a) No Obligor shall enter into or be a party to any transaction with
any Affiliate of the Borrower, except as otherwise expressly permitted herein or
pursuant to the reasonable requirements of the Obligor's business and upon fair
and reasonable terms that are fully disclosed to the Bank and are no less
favorable to the Obligor than would be obtained in a comparable arm's length
transaction with a Person not an Affiliate of the Obligor.
(b) No Obligor shall enter into any agreement or transaction to pay
to any Person any management or similar fee, except for investment banking or
consulting services rendered in the ordinary course of business, nor pay any
management or similar fee to or for an Affiliate of it.
8.5 Accounting Changes. No Obligor shall change its fiscal year or make
any significant change (i) in accounting treatment and reporting practices
except as permitted by GAAP and disclosed to the Bank or (ii) in tax reporting
treatment except as permitted by law and disclosed to the Bank.
8.6 Indebtedness. Except as otherwise permitted by this Section 8.6, no
Obligor shall create, incur, assume or permit to exist any Indebtedness, whether
recourse or nonrecourse, and whether superior or junior, resulting from
borrowings, loans, advances, the granting of credit, whether secured or
unsecured, except (i) Indebtedness secured by Permitted Encumbrances, (ii)
Indebtedness of the Borrower to the Bank arising under or as a consequence of
this Agreement or the other Loan Documents, (iii) Indebtedness of Spectrum
Numismatics International, Inc. and Teletrade, Inc., in the maximum principal
amount of $5,000,000 in favor of Capital Coin Fund Limited II, LLC and
Indebtedness of the Borrower in the maximum
32
principal amount of $2,500,000 in favor of Banco Santander Central Hispano,
S.A., acting through its New York branch, (iv) Indebtedness in respect of
Capital Leases having an aggregate obligation of $500,000; (v) trade debt
incurred in the ordinary course of business, and (vi) all unfunded pension fund
and other employee benefit plan obligations and liabilities but only to the
extent that they are permitted to remain unfunded under applicable law. No
Obligor shall incur, assume or permit to exist liabilities under operating
leases which have aggregate outstanding obligations in excess of $500,000 at any
time (exclusive of obligations to landlords of leased premises).
8.7 Books, Records and Collateral. No Obligor shall, other than in the
ordinary course of the Obligor's business, (a) remove its books and records or
any Collateral (other than vehicles) from the locations set forth on Schedule
5.2, (b) keep any of such books and records or the Collateral at any other
offices or locations not set forth on Schedule 5.2 unless, with respect to any
of the foregoing (i) the Borrower gives the Bank written notice thereof and of
the new location of said books and records or the Collateral, as the case may
be, at least twenty (20) days prior thereto and (ii) the other office or
location is within the continental United States of America. 8.8 Investments.
Except as disclosed in Schedule 8.8, no Obligor shall, purchase or acquire any
partnership, joint venture or other interest in obligations, stocks or
securities of, or make any capital contribution, loan or advance to, any other
Person, or make any other investments, except that the Borrower may make
advances to the Guarantors as long as they continue as guarantors of the
Obligations.
8.9 Continuous Perfection. No Obligor shall not change its (i) name,
identity, corporate structure or jurisdiction of incorporation or (ii) the
location of its chief executive office or principal place of business or the
office where it keeps its records concerning the Collateral, unless the Borrower
shall have given the Bank at least thirty (30) days prior written notice thereof
and shall have taken, at the Borrower's expense, all action necessary or
reasonably requested by the Bank in order to maintain and continue the
perfection and priority of the Liens on and security interests of the Bank in
the Collateral intended to be created by the Loan Documents.
8.10 Limitation on Capital Expenditures and Acquisition of Fixed Assets.
The Obligors shall not expend nor commit themselves to expend in excess of
$750,000 in the aggregate within any Fiscal Year for Capital Expenditures and/or
for the purpose of acquiring fixed assets.
8.11 Ratio of Funded Debt to EBITDA. The Borrower will not permit its
ratio of Funded Debt to EBITDA on a consolidated basis for the Obligors to be
1.75 to 1.00 or greater at any time.
8.12 Fixed Charge Coverage Ratio. The Borrower will not permit its ratio
of (i) EBITDA to (ii) the sum of Current Maturities plus interest expense plus
cash taxes paid plus Distributions plus Capital Expenditures made from funds
other than borrowed funds, on a consolidated basis for the Obligors, to be less
than 1.75 to 1.00, on a rolling four quarter basis, at any time.
33
8.13 Minimum Liquidity. The Borrower will not permit its cash and cash
equivalents, on a consolidated basis with its Subsidiaries, to be less than
$2,500,000 at any time.
8.14 Distributions. The Borrower shall not make any Distributions, except
for Distributions payable solely in Borrower's capital stock.
9. TERMINATION OF FINANCING
No termination or cancellation (regardless of cause or procedure) of any
financing facility under this Agreement shall in any way affect or impair the
obligations, duties, and liabilities of the Borrower relating to any transaction
or event occurring prior to such termination; and all Liens and rights of the
Bank hereunder and under the other Loan Documents shall continue in full force
and effect until all Obligations are indefeasibly paid in full; and all
undertakings, agreements, covenants, warranties and representations contained in
the Loan Documents shall survive such termination or cancellation and shall
continue in full force and effect until such time as all of the Obligations have
been paid indefeasibly in full.
10. EVENTS OF DEFAULT: RIGHTS AND REMEDIES
10.1 Events of Default. The occurrence of any one or more of the following
events (regardless of the cause thereof) shall constitute an "Event of Default"
hereunder:
(a) the Borrower shall fail to make any payment of principal,
interest or other amount in respect of any 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 the Borrower
shall fail to pay any other liabilities or make any other payment, fee or charge
provided for herein or in any other Loan Document when due;
(b) the Borrower shall fail timely or fully to perform, keep or
observe any of the provisions of Article 8;
(c) an Obligor shall fail timely and fully to perform, keep or
observe any other provision of this Agreement or of any of the other Loan
Documents, and such failure shall continue unremedied for a period of fifteen
(15) days after the Borrower shall receive notice of such failure, which period
may be extended, not exceeding an additional thirty (30) days if the applicable
Obligor is diligently pursuing a cure;
(d) any representation or warranty herein or in any Loan Document or
in any written statement pursuant thereto or hereto, or any report, financial
statement or certificate now or at any time hereafter made or delivered to the
Bank by the Borrower or on behalf of an Obligor pursuant to any of the Loan
Documents or otherwise at the request of the Bank, shall be untrue, incorrect or
incomplete in any material respect, as of the date it purports to speak;
(e) any Material Obligor or Afinsa shall (i) voluntarily commence any
proceeding or file any petition seeking relief, under the Bankruptcy Code or any
other Federal, state or foreign bankruptcy, insolvency, liquidation or similar
law, (ii) consent to the institution of, or fail to oppose in a timely and
appropriate manner, any such proceeding or the filing of any such petition,
(iii) apply for or consent to the appointment of a receiver, trustee, custodian,
34
sequestrator or similar official for the Material Obligor or Afinsa or for a
substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it or him in any such proceeding, (v)
make a general assignment for the benefit of creditors, (vi) become unable,
admit in writing its or his inability or fail generally to pay its or his debts
as they become due or (vii) take corporate action for the purpose of effecting
any of the foregoing;
(f) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of a Material Obligor or Afinsa, or of a substantial part of the
assets of the Material Obligor or Afinsa under the Bankruptcy Code or any other
Federal, state or foreign bankruptcy, insolvency, receivership or similar law,
(ii) the appointment of a receiver, trustee, custodian, sequestrator or similar
official for the Material Obligor or Afinsa or for a substantial part of its
property, or (iii) the dissolution, winding-up or liquidation of the material
Obligor or Afinsa; and such proceeding or petition shall continue undismissed
for thirty (30) days or an order or decree approving or ordering any of the
foregoing shall continue unstayed and in effect;
(g) default shall be made, beyond any applicable grace period, with
respect to other Indebtedness of an Obligor (excluding obligations to trade
creditors being contested in good faith) in an amount greater than $500,000 if
the effect of any such default shall be to accelerate, or to permit (with the
giving of notice or the passage of time or both) the holder or obligee of any
Indebtedness (or any trustee on behalf of such holder or obligee) at its option
to accelerate the maturity of such Indebtedness; or any amount of principal or
interest in respect of such Indebtedness shall not be paid as and when due
(after giving effect to any period of grace specified for such payment in the
instrument evidencing or governing the same); provided that such a default or
failure to pay shall not be an Event of Default hereunder for a period of thirty
days after such default or failure to pay, if the Obligor disputes in good faith
the validity of such default or payment, unless the holder or obligee of any
Indebtedness (or any trustee on behalf of such holder or obligee) commences an
action to collect such Indebtedness;
(h) a judgment for the payment of money (not reimbursed by insurance
policies of an Obligor within 30 days of the occurrence of the event giving rise
to such claim) in excess of $200,000 shall be rendered by a court or other
tribunal against an Obligor and (i) shall remain undischarged for a period of 30
consecutive days during which the execution of such judgment shall not have been
stayed effectively or (ii) any judgment creditor shall legally commence actions
to collect on or enforce such judgment;
(i) any Lien created by any of the Loan Documents shall for any
reason cease to be, or be asserted by an Obligor not to be, a valid, first
priority perfected security interest in any of the Collateral (except with
respect to Collateral subject to Permitted Encumbrances);
(j) with respect to any Plan, there occurs or exists any of the
events or conditions described in the following clauses (i) through (viii) and
such event or condition, together with all like events or conditions, could in
the reasonable opinion of the Bank subject the Borrower to any tax, penalty or
other liability that might, singly or in the aggregate, have a Material Adverse
Effect: (i) a reportable event as defined in Section 4043 of ERISA, (ii) a
prohibited transaction as defined in Section 406 of ERISA or Section 4975 of the
IRC, (iii) termination of the Plan or filing of notice of intention to
terminate, (iv) institution by the PBGC
35
of proceedings to terminate, or to appoint a trustee to administer, the Plan, or
circumstances that constitute grounds for any such proceedings, (v) complete or
partial withdrawal from a Multiemployer Plan, or the reorganization, insolvency
or termination of a Multiemployer Plan, (vi) an accumulated funding deficiency
within the meaning of ERISA, (vii) violation of the reporting, disclosure or
fiduciary responsibility requirements of ERISA or the IRC, or (viii) any act or
condition which could result in direct, indirect or contingent liability to any
Plan or the PBGC;
(k) there occurs any material change in the financial condition of
the Obligors on an aggregate basis or Afinsa which in the reasonable opinion of
the Bank materially impairs the Bank' security or materially increases the Bank'
risk;
(l) Xxxx Xxxxxxx ceases to be the First Vice Chairman and Chief
Executive Officer of the Borrower, or Afinsa ceases to own directly or through
an Affiliate, at least 51% of all of the issued and outstanding shares of the
voting stock of the Borrower
10.2 Consequences of Default. Automatically upon the occurrence of an
Event of Default described in paragraphs (e) or (f) of Section 11.1, or upon the
determination of the Bank upon the occurrence and during the continuance of any
other Event of Default, (i) any obligation of the Bank to make Advances and any
obligation of the Bank to issue Letters of Credit shall terminate immediately,
(ii) the Bank shall declare all amounts payable under this Loan Agreement or any
other Loan Document to become immediately due and payable, (iii) the interest
rate on the outstanding Obligations shall immediately become the Default Rate,
(iv) the Borrower shall provide the Bank with cash collateral in the amount of
the Letters of Credit outstanding and (v) the Bank shall be entitled to exercise
forthwith and thereafter (to the extent and in such order and at such time or
times as the Bank in consultation with the Bank may elect) any or all rights and
remedies provided for in the Security Documents or other provision of this Loan
Agreement, any provision of any other Loan Document or that may otherwise be
available to the Bank by law. The Proceeds of collateral under any Security
Document shall be applied as follows:
First: To the expenses of collecting, enforcing, safeguarding,
holding and disposing of the Collateral, and to other reasonable expenses of the
Bank in connection with the enforcement of this Agreement, any of the other Loan
Documents, or any other reasonable agreement relating to any of the Obligations
(including, without limitation, court costs and the fees and expenses of
attorneys, accountants and appraisers), together with interest at the Default
Rate from the respective dates such sums are expended;
Second: Any surplus then remaining to the payment of other
Obligations, in such order as the Bank elects; and
Third: Any surplus then remaining to the Borrower or whoever may
be lawfully entitled thereto.
10.3 Right of Setoff. If any Event of Default shall have occurred and be
continuing and the Bank shall have declared the Obligations immediately due and
payable pursuant to Section 10.2 or any Event of Default described in paragraphs
(e) or (f) of Section 10.1 shall have
36
occurred and be continuing, the Bank is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
deposits or other sums credited by or due from the Bank to the Borrower against
any and all liabilities, direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, of the Borrower to the Bank.
10.4 Waivers by the Borrower. Except as otherwise provided for in this
Agreement and applicable law, the Borrower waives (i) presentment, demand and
protest and notice of presentment, dishonor, protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents, instruments, chattel
paper and guaranties at any time held by the Bank on which the Borrower may in
any way be liable, (ii) all rights to notice prior to the Bank's taking
possession or control of, or to the Bank's replevy, attachment or levy upon, the
Collateral or any bond or security which might be required by any court prior to
allowing the Bank to exercise any of its remedies, and (iii) the benefit of all
valuation, appraisal and exemption laws. Notwithstanding the foregoing waiver of
notice by the Borrower, the Bank shall endeavor to provide the Borrower with
notice of an Event of Default hereunder; provided that, the failure of the Bank
to provide such notice shall not affect in any way, or prevent the Bank from
acting on, the rights and remedies of the Bank hereunder. The Borrower
acknowledges that it has been advised by counsel of its choice with respect to
this Agreement, the other Loan Documents and the transactions evidenced by this
Agreement and the other Loan Documents.
11. MISCELLANEOUS
11.1 Complete Agreement. The Loan Documents constitute the complete
agreement between the parties with respect to the subject matter hereof and may
not be modified, altered or amended except by an agreement in writing signed by
the applicable Obligor and the Bank.
11.2 Sale of Interests. The Borrower may not sell, assign or otherwise
transfer any of the Loan Documents or any portion thereof, including, without
limitation, any of the Borrower's rights, title, interests, remedies, powers and
duties hereunder or thereunder whether such transfer is voluntary, by operation
of law or otherwise. The Borrower hereby consent to the Bank's sale of
participations, assignment, transfer or other disposition, at any time or times,
to a United States person, as defined in section 7701(a)(30) of the Internal
Revenue Code of 1986, as amended, of any of the Loan Documents or of any portion
thereof or interest therein, including, without limitation, the Bank's rights
title, interests, remedies, powers or duties thereunder, whether evidenced by a
writing or not. The Borrower agrees that it will use its best efforts to assist
and cooperate with the Bank in any manner reasonably requested by the Bank to
effect the sale of participations in or assignments of any of the Loan Documents
or of any portion thereof or interest therein, including, without limitation,
assistance in the preparation of appropriate disclosure documents. In the event
the Bank assigns or otherwise transfers all or any part of its interest in the
Line of Credit, the Borrower, shall, upon the request of the Bank, issue notes
or other instruments to effectuate such assignment or transfer.
11.3 Amendments; Waiver; Consent. No amendment, modification, termination
or waiver of any provision of this Agreement or any other Loan Document, nor
consent to any departure by the Borrower therefrom, shall in any event be
effective unless the same shall be in
37
writing and signed by the Bank. Any waiver shall apply only to the specific
instance or purpose for which it is given and shall not give rise to a course of
dealing between the parties.
11.4 Fees and Expenses. Whether or not the transactions contemplated
hereunder are completed, the Borrower shall pay all reasonable expenses of the
Bank in connection with the preparation of the Loan Documents and the
administration of the Line of Credit made pursuant thereto (including, without
limitation, the reasonable fees and expenses of all of its counsel and other
advisors retained in connection with the Loan Documents and the transactions
contemplated thereby and advice in connection therewith). If, at any time or
times, regardless of the existence of an Event of Default, the Bank shall employ
counsel or other advisors for advice or other representation or shall incur
reasonable legal or other costs and expenses in connection with: (i) any
amendment, modification or waiver, or consent with respect to, any of the Loan
Documents or advice in connection with the administration of the Line of Credit
made pursuant hereto or its rights hereunder or thereunder; (ii) any litigation,
contest, dispute, suit, proceeding or action (whether instituted by the Bank,
the Borrower or any other Person) in any way relating to the Collateral, any of
the Loan Documents or any other agreements to be executed or delivered in
connection herewith; (iii) any attempt to enforce any rights of the Bank against
the Borrower or any other Person, that may be obligated to the Banks by virtue
of any of the Loan Documents; (iv) any attempt to verify, protect, collect,
sell, liquidate or otherwise dispose of the Collateral; then, and in any such
event, the fees of counsel and other advisors arising from such services,
including those of any appellate proceedings, and all reasonable expenses,
costs, charges and other fees incurred by such counsel and others in any way
arising in connection with or relating to any of the events or actions described
in this Section shall be payable on demand by the Borrower to the Bank and shall
be additional Obligations secured under this Agreement. Without limiting the
generality of the foregoing, such expenses, costs, charges and fees may include:
paralegal fees and expenses; accountants' and investment bankers' fees, costs
and expenses; court costs and expenses; photocopying and duplicating expenses;
court reporter fees, costs and expenses; long distance telephone charges; air
express charges; telecopy charges; secretarial overtime charges; and expenses
for travel, lodging and food paid or incurred in connection with the performance
of such legal and other services.
11.5 No Waiver by the Bank. The Bank's failure at any time or times, to
require strict performance by an Obligor of any provision of this Agreement and
any of the other Loan Documents shall not waive, affect or diminish any right of
the Bank thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by the Bank of an Event of Default by an Obligor under the
Loan Documents shall not suspend, waive or affect any other Event of Default by
an Obligor under this Agreement and any of the other Loan Documents whether the
same is prior or subsequent thereto and whether of the same or of a different
type. None of the undertakings, agreements, warranties, covenants and
representations of the Obligors contained in this Agreement or any of the other
Loan Documents shall be deemed to have been suspended or waived unless such
suspension or waiver is by an instrument in writing signed by an officer of the
Bank and directed to the Borrower specifying such suspension or waiver.
11.6 Additional Remedies. The Bank's rights and remedies under this
Agreement shall be cumulative and concurrent, may be pursued separately,
successively or together, at the discretion of the Bank, and may be exercised as
often as occasion therefore shall arise. The
38
failure to exercise any such right or remedy shall in no event be construed as a
waiver or release thereof. Recourse to the Collateral shall not be required.
11.7 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of this Agreement shall be or become
unenforceable or invalid under then applicable law, the remaining provisions of
this Agreement shall nevertheless continue in full force and effect, and the
parties shall promptly and in good faith undertake to negotiate an amendment
hereto to carry out the purposes of the invalidated provision. Should the
parties be unable to agree on such an amendment and if the Bank deem the invalid
or unenforceable provision material to its agreements hereunder, the Bank may
terminate this Agreement on notice in writing to the Borrower 90 days prior to
the declared date of termination.
11.8 Parties. This Agreement and the other Loan Documents shall be binding
upon, and inure to the benefit of, the successors of the Borrower, and the
successors and assigns of the Bank; provided, however, the Borrower may not
assign its right to borrow under this Agreement.
11.9 Conflict of Terms. Except as otherwise specifically provided in this
Agreement, if any provision contained in this Agreement is in conflict with, or
inconsistent with, any provision in any of the other Loan Document, the
provision contained in this Agreement shall govern and control.
11.10 Security for Cleanup. If any investigation, environmental report or
investigation or order of any Governmental Authority indicates that there may
exist any damage or risk to any property occupied by an Obligor or any
Collateral, or any liability of an Obligor relating to any Contaminants or other
environmental conditions, the Bank may require the Borrower to furnish
immediately an indemnity bond in an amount and form determined by the Bank, in
its reasonable discretion, to be sufficient to pay all actual and estimated
cleanup costs and to satisfy any Liens that may arise with respect to any such
cleanup costs. The Bank's demand that the Borrower post any bond or other
security shall not be a waiver of any Event of Default or of any other right or
remedy available to the Bank.
11.11 Governing Law; Litigation. (a) Except as otherwise expressly
provided in any of the Loan Documents, in all respects, including all matters of
construction, validity and performance, this Agreement and the Obligations
arising hereunder shall be governed by, and be construed and enforced in
accordance with, the laws of the State of New Jersey applicable to contracts
made and performed in such state, without regard to the principles of conflict
of laws.
(b) BORROWER AGREES THAT, IN CONNECTION WITH ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS:
(i) BORROWER WAIVES THE RIGHT TO TRIAL BY JURY AND THE RIGHT TO
INTERPOSE ANY SETOFF OR COUNTERCLAIM OF ANY NATURE, EXCEPT FOR MANDATORY
COUNTERCLAIMS;
(ii) BORROWER CONSENTS TO THE JURISDICTION OF ANY COURT OF THE
STATE OF NEW JERSEY AND OF ANY FEDERAL COURT
39
LOCATED IN NEW JERSEY, AND BORROWER WAIVES ANY RIGHT TO OBJECT TO SUCH COURT AS
AN INCONVENIENT FORUM.
11.12 Notices. Except as otherwise specifically provided this Agreement,
whenever it is provided in this Agreement that any notice, demand, request,
consent, approval, declaration or other communication shall or may be given to
or served upon any of the parties by another, or whenever any of the parties
desires to give or serve upon another any communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and either delivered in person or sent
by registered or certified mail, return receipt requested, postage prepaid, or
telecopied and confirmed by telecopy answer back as follows:
(a) If to the Bank, at
PNC Bank, National Association
Corporate Banking
Xxx Xxxxxx Xxxxxxxx Xxxxx
Xxxx Xxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxxx Xxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(b) If to the Borrower, at
Xxxx Xxxxxxx Auctions, Inc.
000 Xxxxxxx Xxx.
Xxxx Xxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxx Xxxxxxxx, Chief Financial Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
in either case with copies to:
(which copies shall not be required to constitute notice)
Xxxxxxx, Del Deo, Dolan, Griffinger & Xxxxxxxxx
Xxx Xxxxxxxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
and
Xxxxx Xxxxxxx, Esq.
Xxxx Xxxxxxx Auctions, Inc.
000 Xxxxxxx Xxxxxx
Xxxx Xxxxxxxx, Xxx Xxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
40
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
telecopied and confirmed by telecopy answer back or three (3) Business Days
after the same shall have been deposited in the United States mail. Failure or
delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
11.13 Limitation of Consequential Damages. Neither the Bank nor any agent
or attorney of the Bank shall be liable to the Borrower for consequential
damages arising from any breach of contract, tort or other wrong relating in any
way to the establishment, administration or collection of the Obligations.
11.14 Reversal of Payments. To the extent the Borrower makes a payment or
payments to the Bank or the Bank receives any payment or Proceeds of the
Collateral for the Borrower's benefit, which payment(s) or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then, to the extent of such payment or proceeds received, the Obligations or
part thereof intended to be satisfied shall be revived and continue in full
force and effect, as if such payment or proceeds had not been received by the
Bank.
11.15 Survival. The representations and warranties of the Borrower in this
Agreement shall survive the execution, delivery and acceptance hereof by the
parties hereto and the closing of the transactions described herein or related
hereto.
11.16 Section Titles. The Section titles and Table of Contents contained
in this Agreement are used merely for convenience and shall have no substantive
effect in interpreting this Agreement.
11.17 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
[remainder of page intentionally left blank]
41
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
XXXX XXXXXXX AUCTIONS, INC.
By: /s/ Xxxx Xxxxxxx
-----------------------------
Name: Xxxx Xxxxxxx
Title: President and CEO
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Xxxxxxx X. Xxxx
-----------------------------
Name: Xxxxxxx X. Xxxx
Title: Vice President
42
EXHIBIT A
Committed Line Of Credit Note PNCBANK
-----------------------------
(Multi-Rate Options)
$10,000,000 May 28, 2004
FOR VALUE RECEIVED, XXXX XXXXXXX AUCTIONS , INC. (the "Borrower"), with an
address at 000 Xxxxxxx Xxxxxx, Xxxx Xxxxxxxx, Xxx Xxxxxx 00000, promises to pay
to the order of PNC BANK, NATIONAL ASSOCIATION (the "Bank"), in lawful money of
the United States of America in immediately available funds at its offices
located at 0 Xxxxxx Xxxxxxxx Xxxxx Xxxx Xxxxxxxx, Xxx Xxxxxx 00000, or at such
other location as the Bank may designate from time to time, the principal sum of
TEN MILLION DOLLARS ($10,000,000) (the "Facility") or such lesser amount as may
be advanced to or for the benefit of the Borrower hereunder, together with
interest accruing on the outstanding principal balance from the date hereof, all
as provided below.
1. Advances. The Borrower may request advances, repay and request additional
advances hereunder until the Expiration Date, subject to the terms and
conditions of this Note and the Loan Documents (as hereinafter defined). The
"Expiration Date" shall mean May 27, 2005, or such later date as may be
designated by the Bank by written notice from the Bank to the Borrower. The
Borrower acknowledges and agrees that in no event will the Bank be under any
obligation to extend or renew the Facility or this Note beyond the Expiration
Date. The Borrower may request advances hereunder upon giving oral or written
notice to the Bank by 11:00 a.m., (West Paterson, New Jersey time) (a) on the
day of the proposed advance, in the case of advances to bear interest under the
Prime-based Rate Option (as hereinafter defined) and (b) three (3) Business Days
prior to the proposed advance, in the case of advances to bear interest under
the LIBOR Rate Option (as hereinafter defined), followed promptly thereafter by
the Borrower's written confirmation to the Bank of any oral notice. The
aggregate unpaid principal amount of advances under this Note shall not exceed
the face amount of this Note.
2. Rate of Interest. Each advance outstanding under this Note will bear interest
at a rate or rates per annum as may be selected by the Borrower from the
interest rate options set forth below (each, an "Option"):
(i) Prime-based Rate Option. A rate of interest per annum which is at
all times equal to (A) the Prime Rate plus (B) zero (0) basis points (0%)
("Prime-based Rate"). For purposes hereof, the term "Prime Rate" shall mean the
rate publicly announced by the Bank from time to time as its prime rate. The
Prime Rate is determined from time to time by the Bank as a means of pricing
some loans to its borrowers. The Prime Rate is not tied to any external rate of
interest or index, and does not necessarily reflect the lowest rate of interest
actually charged by the Bank to any particular class or category of customers.
If and when the Prime Rate changes, the rate of interest with respect to any
advance to which the Prime-based Rate Option applies will change automatically
without notice to the Borrower, effective on the date of any such change. There
are no required minimum interest periods for advances bearing interest under the
Prime-based Rate Option.
(ii) LIBOR Rate Option. A rate per annum equal to (A) LIBOR plus (B) two
hundred fifty (250) basis points (2.50%), for the applicable LIBOR Rate Interest
Period.
For purposes hereof, the following terms shall have the following meanings:
"Business Day" shall mean any day other than a Saturday or Sunday or a
legal holiday on which commercial banks are authorized or required by law
to be closed for business in New Jersey.
"LIBOR" shall mean, with respect to any advance to which the LIBOR Rate
Option applies for the applicable LIBOR Rate Interest Period, the interest
rate per annum determined by the Bank by dividing (the resulting quotient
rounded upwards, if necessary, to the nearest 1/16th of 1%) (i) the rate
of interest determined by the Bank in accordance with its usual procedures
(which determination shall be conclusive absent manifest error) to be the
eurodollar rate two (2) Business Days prior to the first day of such LIBOR
Rate Interest Period for an amount comparable to such advance and having a
borrowing date and a maturity comparable to such LIBOR Rate Interest
Period by (ii) a number equal to 1.00 minus the LIBOR Reserve Percentage.
"LIBOR Rate Interest Period" shall mean, as to any advance to which the
LIBOR Rate Option applies, the period of one (1), two (2), three (3) or
six (6) months as selected by the Borrower in its notice of borrowing or
notice of conversion, as the case may be, commencing on the date of
disbursement of an advance (or the date of conversion of an advance to the
LIBOR Rate Option, as the case may be) and each successive period selected
by the Borrower thereafter; provided that, (i) if a LIBOR Rate Interest
Period would end on a day which is not a Business Day, it shall end on the
next succeeding Business Day unless such day falls in the next succeeding
calendar month in which case the LIBOR Rate Interest Period shall end on
the next preceding Business Day, (ii) the Borrower may not select a LIBOR
Rate Interest Period that would end on a day after the Expiration Date,
and (iii) any LIBOR Rate Interest Period that begins on the last Business
Day of a calendar month (or a day for which there is no numerically
corresponding day in the last calendar month of such LIBOR Interest
Period) shall end on the last Business Day of the last calendar month of
such LIBOR Rate Interest Period.
"LIBOR Reserve Percentage" shall mean the maximum effective percentage in
effect on such day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including, without limitation, supplemental, marginal and emergency
reserve requirements) with respect to eurocurrency funding (currently
referred to as "Eurocurrency liabilities").
LIBOR shall be adjusted with respect to any advance to which the LIBOR Option
applies on and as of the effective date of any change in the LIBOR Reserve
Percentage. The Bank shall give prompt notice to the Borrower of LIBOR as
determined or adjusted in accordance herewith, which determination shall be
conclusive absent manifest error.
If the Bank determines (which determination shall be final and conclusive) that,
by reason of circumstances affecting the eurodollar market generally, deposits
in dollars (in the applicable amounts) are not being offered to banks in the
eurodollar market for the selected term, or adequate means do not exist for
ascertaining LIBOR, then the Bank shall give notice thereof to the Borrower.
Thereafter, until the Bank notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, (a) the availability of the LIBOR Rate
Option shall be suspended, and (b) the interest rate for all advances then
bearing interest under the LIBOR Rate Option shall be converted at the
expiration of the then current LIBOR Rate Interest Period(s) to the Prime-based
Rate.
In addition, if, after the date of this Note, the Bank shall determine (which
determination shall be final and conclusive) that any enactment, promulgation or
adoption of or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by a governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or
compliance by the Bank with any guideline, request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency shall make it unlawful or impossible for the Bank to make or maintain or
fund loans based on LIBOR, the Bank shall notify the Borrower. Upon receipt of
such notice, until the Bank notifies the Borrower that the circumstances giving
rise to such determination no longer apply, (a) the availability of the LIBOR
Rate Option shall be suspended, and (b) the interest rate on all advances then
bearing interest under the LIBOR Rate Option shall be converted to the
Prime-based Rate either (i) on the last day of the then current LIBOR Rate
Interest Period(s) if the Bank may lawfully continue to maintain advances based
on LIBOR to such day, or (ii) immediately if the Bank may not lawfully continue
to maintain advances based on LIBOR.
The foregoing notwithstanding, it is understood that the Borrower may select
different Options to apply simultaneously to different portions of the advances
and may select up to four (4) different interest periods to apply simultaneously
to different portions of the advances bearing interest under the LIBOR Rate
Option. Interest hereunder will be calculated based on the actual number of days
that principal is outstanding over a year of 360 days. In no event will the rate
of interest hereunder exceed the maximum rate allowed by law.
3. Interest Rate Election. Subject to the terms and conditions of this Note, at
the end of each interest period applicable to any advance, the Borrower may
renew the Option applicable to such advance or convert such advance to a
different Option; provided that, during any period in which any Event of Default
(as hereinafter defined) has occurred and is continuing, any advances bearing
interest under the LIBOR Rate Option shall, at the Bank's sole discretion, be
converted at the end of the applicable LIBOR Rate Interest Period to the
Prime-based Rate and the LIBOR Rate Option will not be available to Borrower
with respect to any new advances (or with respect to the conversion or renewal
of any existing advances) until such Event of Default has been cured by the
Borrower or waived by the Bank. The Borrower shall notify the Bank of each
election of an Option, each conversion from one Option to another, the amount of
the advances then outstanding to be allocated to each Option and where relevant
the interest periods therefor. In the case of converting to the LIBOR Rate
Option, such notice shall be given at least three (3) Business Days prior to the
commencement of any LIBOR Rate Interest Period. If no interest period is
specified in any such notice for which the resulting advance is to bear interest
under the LIBOR Rate Option, the Borrower shall be deemed to have selected a
LIBOR Rate Interest Period of one month's duration. If no notice of election,
conversion or renewal is timely received by the Bank with respect to any
advance, the Borrower shall be deemed to have elected the Prime-based Rate
Option. Any such election shall be promptly confirmed in writing by such method
as the Bank may require.
4. Advance Procedures. A request for advance made by telephone must be promptly
confirmed in writing by such method as the Bank may require. The Borrower
authorizes the Bank to accept telephonic requests for advances, and the Bank
shall be entitled to rely upon the authority of any person providing such
instructions. The Borrower hereby indemnifies and holds the Bank harmless from
and against any and all damages, losses, liabilities, costs and expenses
(including reasonable attorneys' fees and expenses) which may arise or be
created by the acceptance of such telephone requests or making such advances.
The Bank will enter on its books and records, which entry when made will be
presumed correct, the date and amount of each advance, the interest rate and
interest period applicable thereto, as well as the date and amount of each
payment.
5. Payment Terms. The Borrower shall pay accrued interest on the unpaid
principal balance of this Note in arrears: (a) for the portion of advances
bearing interest under the Prime-based Rate Option, on the first day of each
calendar month during the term hereof, (b) for the portion of advances bearing
interest under the LIBOR Rate Option, on the last day of the respective LIBOR
Rate Interest Period for such advance, (c) if any LIBOR Rate Interest Period is
longer than three (3) months, then also on the three (3) month anniversary of
such interest period and every three (3) months thereafter, and (d) for all
advances, at maturity, whether by acceleration of this Note or otherwise, and
after maturity, on demand
until paid in full. All outstanding principal and accrued interest hereunder
shall be due and payable in full on the Expiration Date.
If any payment under this Note shall become due on a Saturday, Sunday or public
holiday under the laws of the State where the Bank's office indicated above is
located, such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in computing interest in connection with
such payment. The Borrower hereby authorizes the Bank to charge the Borrower's
deposit account at the Bank for any payment when due hereunder. Payments
received will be applied to charges, fees and expenses (including attorneys'
fees), accrued interest and principal in any order the Bank may choose, in its
sole discretion.
6. Late Payments; Default Rate. If the Borrower fails to make any payment of
principal, interest or other amount coming due pursuant to the provisions of
this Note within fifteen (15) calendar days of the date due and payable, the
Borrower also shall pay to the Bank a late charge equal to the lesser of five
percent (5%) of the amount of such payment or $500.00 (the "Late Charge"). Such
fifteen (15) day period shall not be construed in any way to extend the due date
of any such payment. Upon maturity, whether by acceleration, demand or
otherwise, and at the Bank's option upon the occurrence and during the
continuance of any Event of Default (as hereinafter defined) and during the
continuance thereof, each advance outstanding under this Note shall bear
interest at a rate per annum (based on the actual number of days that principal
is outstanding over a year of 360 days) which shall be three percentage points
(3%) in excess of the interest rate in effect from time to time under this Note
but not more than the maximum rate allowed by law (the "Default Rate"). The
Default Rate shall continue to apply whether or not judgment shall be entered on
this Note. Both the Late Charge and the Default Rate are imposed as liquidated
damages for the purposes of defraying the Bank's expenses incident to the
handling of delinquent payments, but are in addition to, and not in lieu of, the
Bank's exercise of any rights and remedies hereunder, under the other Loan
Documents or under applicable law, and any reasonable fees and expenses of any
agents or attorneys which the Bank may employ. In addition, the Default Rate
reflects the increased credit risk to the Bank of carrying a loan that is in
default. The Borrower agrees that the Late Charge and Default Rate are
reasonable forecasts of just compensation for anticipated and actual harm
incurred by the Bank, and that the actual harm incurred by the Bank cannot be
estimated with certainty and without difficulty.
7. Prepayment. The Borrower shall have the right to prepay any advance hereunder
at any time and from time to time, in whole or in part; subject, however, to
payment of any break funding indemnification amounts owing pursuant to paragraph
8 below.
8. Yield Protection; Break Funding Indemnification. The Borrower shall pay to
the Bank on written demand therefor, together with the written evidence of the
justification therefor, all direct costs incurred, losses suffered or payments
made by Bank by reason of any change in law or regulation or its interpretation
imposing any reserve, deposit, allocation of capital, or similar requirement
(including without limitation, Regulation D of the Board of Governors of the
Federal Reserve System) on the Bank, its holding company or any of their
respective assets. In addition, the Borrower agrees to indemnify the Bank
against any liabilities, losses or expenses (including, without limitation, loss
of margin, any loss or expense sustained or incurred in liquidating or employing
deposits from third parties, and any loss or expense incurred in connection with
funds acquired to effect, fund or maintain any advance (or any part thereof)
bearing interest under the LIBOR Rate Option which the Bank sustains or incurs
as a consequence of either (i) the Borrower's failure to make a payment on the
due date thereof, (ii) the Borrower's revocation (expressly, by later
inconsistent notices or otherwise) in whole or in part of any notice given to
Bank to request, convert, renew or prepay any advance bearing interest under the
LIBOR Rate Option, or (iii) the Borrower's payment or prepayment (whether
voluntary, after acceleration of the maturity of this Note or otherwise) or
conversion of any advance bearing interest under the LIBOR Rate Option on a day
other than the last day of the applicable LIBOR Rate Interest Period. A notice
as to any
amounts payable pursuant to this paragraph given to the Borrower by the Bank
shall, in the absence of manifest error, be conclusive and shall be payable upon
demand. The Borrower's indemnification obligations hereunder shall survive the
payment in full of the advances and all other amounts payable hereunder.
9. Other Loan Documents. This Note is issued in connection with a loan agreement
between the Borrower and the Bank, dated on or before the date hereof (the "Loan
Agreement"), and the other agreements and documents executed and/or delivered in
connection therewith or referred to therein, the terms of which are incorporated
herein by reference (as amended, modified or renewed from time to time,
collectively the "Loan Documents"), and is secured by the property (if any)
described in the Loan Documents and by such other collateral as previously may
have been or may in the future be granted to the Bank to secure this Note.
10. Events of Default. Upon the occurrence and during the continuance of an
Event of Default under the Loan Agreement, the Bank may exercise from time to
time any of the rights and remedies available under the Loan Documents or under
applicable law.
11. Right of Setoff. In addition to all liens upon and rights of setoff against
the Borrower's money, securities or other property given to the Bank by law, the
Bank shall have, with respect to the Borrower's obligations to the Bank under
this Note and to the extent permitted by law, a contractual possessory security
interest in and a contractual right of setoff against, and the Borrower hereby
grants the Bank a security interest in, and hereby assigns, conveys, delivers,
pledges and transfers to the Bank, all of the Borrower's right, title and
interest in and to, all of the Borrower's deposits, moneys, securities and other
property now or hereafter in the possession of or on deposit with, or in transit
to, the Bank or any other direct or indirect subsidiary of The PNC Financial
Services Group, Inc., whether held in a general or special account or deposit,
whether held jointly with someone else, or whether held for safekeeping or
otherwise, excluding, however, all XXX, Xxxxx, and trust accounts. Every such
security interest and right of setoff may be exercised without demand upon or
notice to the Borrower. Every such right of setoff shall be deemed to have been
exercised immediately upon the occurrence of an Event of Default hereunder
without any action of the Bank, although the Bank may enter such setoff on its
books and records at a later time.
12. Indemnity. The Borrower agrees to indemnify each of the Bank, each legal
entity, if any, who controls, is controlled by or is under common control with
the Bank, and each of their respective directors, officers and employees (the
"Indemnified Parties"), and to hold each Indemnified Party harmless from and
against any and all claims, damages, losses, liabilities and reasonable expenses
(including all reasonable fees and charges of internal or external counsel with
whom any Indemnified Party may consult and all reasonable expenses of litigation
and preparation therefor) which any Indemnified Party may incur or which may be
asserted against any Indemnified Party by any person, entity or governmental
authority (including any person or entity claiming derivatively on behalf of the
Borrower), in connection with or arising out of or relating to the matters
referred to in this Note or in the other Loan Documents or the use of any
advance hereunder, whether (a) arising from or incurred in connection with any
breach of a representation, warranty or covenant by the Borrower, or (b) arising
out of or resulting from any suit, action, claim, proceeding or governmental
investigation, pending or threatened, whether based on statute, regulation or
order, or tort, or contract or otherwise, before any court or governmental
authority; provided, however, that the foregoing indemnity agreement shall not
apply to any claims, damages, losses, liabilities and expenses solely
attributable to an Indemnified Party's gross negligence or willful misconduct.
The indemnity agreement contained in this Section shall survive the termination
of this Note, payment of any advance hereunder and the assignment of any rights
hereunder. The Borrower may participate at its expense in the defense of any
such action or claim.
13. Miscellaneous. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder ("Notices") must be in writing
(except as may be agreed otherwise above with respect to borrowing requests) and
will be effective upon receipt. Notices may be given in any manner to which the
parties may separately agree, including electronic mail. Without limiting the
foregoing, first-class mail, facsimile transmission and commercial courier
service are hereby agreed to as acceptable methods for giving Notices.
Regardless of the manner in which provided, Notices may be sent to a party's
address as set forth above or to such other address as any party may give to the
other for such purpose in accordance with this paragraph. No delay or omission
on the Bank's part to exercise any right or power arising hereunder will impair
any such right or power or be considered a waiver of any such right or power,
nor will the Bank's action or inaction impair any such right or power. The
Bank's rights and remedies hereunder are cumulative and not exclusive of any
other rights or remedies which the Bank may have under other agreements, at law
or in equity. No modification, amendment or waiver of, or consent to any
departure by the Borrower from, any provision of this Note will be effective
unless made in a writing signed by the Bank, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. The Borrower agrees to pay on demand, to the extent permitted by law, all
costs and reasonable expenses incurred by the Bank in the enforcement of its
rights in this Note and in any security therefor, including without limitation
reasonable fees and expenses of the Bank's counsel. If any provision of this
Note is found to be invalid, illegal or unenforceable in any respect by a court,
all the other provisions of this Note will remain in full force and effect. The
Borrower and all other makers and indorsers of this Note hereby forever waive
presentment, protest, notice of dishonor and notice of non-payment. The Borrower
also waives all defenses based on suretyship or impairment of collateral. If
this Note is executed by more than one Borrower, the obligations of such persons
or entities hereunder will be joint and several. This Note shall bind the
Borrower and its heirs, executors, administrators, successors and assigns, and
the benefits hereof shall inure to the benefit of the Bank and its successors
and assigns; provided, however, that the Borrower may not assign this Note in
whole or in part without the Bank's written consent and the Bank at any time may
assign this Note in whole or in part.
This Note has been delivered to and accepted by the Bank and will be deemed to
be made in the State where the Bank's office indicated above is located. THIS
NOTE WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE BANK AND THE
BORROWER DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE BANK'S
OFFICE INDICATED ABOVE IS LOCATED, EXCLUDING ITS CONFLICT OF LAWS RULES. The
Borrower hereby irrevocably consents to the exclusive jurisdiction of any state
or federal court in the county or judicial district where the Bank's office
indicated above is located; provided that nothing contained in this Note will
prevent the Bank from bringing any action, enforcing any award or judgment or
exercising any rights against the Borrower individually, against any security or
against any property of the Borrower within any other county, state or other
foreign or domestic jurisdiction. The Borrower acknowledges and agrees that the
venue provided above is the most convenient forum for both the Bank and the
Borrower. The Borrower waives any objection to venue and any objection based on
a more convenient forum in any action instituted under this Note.
14. Authorization to Obtain Credit Reports. By signing below, each Borrower who
is an individual provides written authorization to the Bank or its designee (and
any assignee or potential assignee hereof) to obtain the Borrower's personal
credit profile from one or more national credit bureaus. Such authorization
shall extend to obtaining a credit profile in considering this Note and
subsequently for the purposes of update, renewal or extension of such credit or
additional credit and for reviewing or collecting the resulting account.
15. WAIVER OF JURY TRIAL. THE BORROWER IRREVOCABLY WAIVES ANY AND ALL RIGHTS THE
BORROWER MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY
NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS
NOTE OR
ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE BORROWER ACKNOWLEDGES
THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
The Borrower acknowledges that it has read and understood all the provisions of
this Note, including the waiver of jury trial, and has been advised by counsel
as necessary or appropriate.
WITNESS the due execution hereof as a document under seal, as of the date first
written above, with the intent to be legally bound hereby.
WITNESS / ATTEST: XXXX XXXXXXX AUCTIONS, INC.
____________________________________________
By:_________________________________
Name:___________________________ Name:
Title:
Title:________________________________
(Include title only if an officer of entity signing to the right)
EXHIBIT B
Notice of Conversion/Continuation
PNC Bank, National Association
Xxx Xxxxxx Xxxxxxxx Xxxxx
Xxxx Xxxxxxxx, Xxx Xxxxxx 00000
Ladies and Gentlemen:
Pursuant to that certain Loan Agreement dated as of May 28, 2004, as the
same may be amended from time to time (the "Agreement"), by and between Xxxx
Xxxxxxx Auctions, Inc., as the Borrower, and PNC Bank, National Association as
the Bank, we hereby give you, the Bank, this Irrevocable Notice of
Conversion/Continuation with respect to the principal balance of the portion of
the outstanding Line of Credit set forth below outstanding to the Borrower
pursuant to the Agreement (capitalized terms used herein, unless otherwise
defined herein, shall have the meanings ascribed to them in the Agreement):
1. Balance of Line of Credit: $__________________________
2. Conversion to LIBOR Rate Loans:
(i) Principal amount to be converted: $_____________
(ii) Requested Conversion Date: _________________
(iii) Applicable LIBOR Rate Interest Period: _____ month
3. Continuation of existing LIBOR Rate Loans:
(i) Principal amount: $_____________
(ii) Applicable LIBOR Rate Interest Period: _____ month
(iii) Present LIBOR Rate Interest Period Expires: ________________
4. Request for LIBOR Rate Loan:
(i) Principal amount: $_____________
(ii) Requested Date: _____
(iii) Applicable LIBOR Rate Interest: ________________
Period: __________
XXXX XXXXXXX AUCTIONS, INC.
By:
----------------------------
Name:
Title:
EXHIBIT C
BORROWING BASE CERTIFICATE
AS OF ____________________
XXXX XXXXXXX AUCTIONS, INC.
This Borrowing Base Certificate is made pursuant to the Loan and Security
Agreement dated as of May 28, 2004 (the "Loan Agreement") between Xxxx Xxxxxxx
Auctions, Inc., a Delaware corporation (the "Borrower"), and PNC Bank, National
Association (the "Bank").
Capitalized terms used in this Certificate without definition shall have
the respective meanings assigned to such terms in the Loan Agreement.
The Borrower hereby certifies, represents and warrants to the Bank, as of
the date hereof, that (a) the person signing below is the chief financial
officer or other authorized officer of the Borrower; (b) the statements below
concerning the Accounts and Inventory are true and complete; (c) the Borrower is
in compliance with all of the terms and provisions of the Loan Agreement and the
other Loan Documents; (d) all of the Borrower's representations and warranties
in the Loan Agreement and the other Loan Documents are true and correct in all
material respects; and (e) no Event of Default has occurred and is continuing.
1. Collateral Availability
A. Accounts Receivable
1. Total A/R (exclusive of Afinsa) $______________
1A Less: Over 90 days past invoice date $ 1B Less:
Entire Account if 50% of the amount owed is greater
than 90 days past invoice date $______________
1C Less: Uninsured foreign Accounts $______________
1D Less: Amount of accounts payable owing to Account
debtors (whether or not accounts payable are yet due) $______________
1E Less: Inter-Obligor and affiliated Accounts $______________
1F Less: Accounts of individuals $______________
1G Less: In the case of Accounts
of a single Customer exceeding 20% of an Obligor's
total Accounts, the portion $______________
in excess of 20%.
1H Less: All other Ineligible Accounts $______________
2. Ineligible A/R (1A to 1H) $______________
3. Qualified A/R (L1 - L2) $______________
4. Advance Percentage 85%
5. A/R Borrowing Availability (L3 x L4) $______________
B. Afinsa Accounts
6. Total Afinsa Accounts
6A Less: Over 90 days past invoice date $______________
6B Less: Entire Account is 50% of the amount owed
is greater than 90 days past invoice date $______________
7. Ineligible Afinsa Accounts (6A & 6B) $______________
8. Qualified Afinsa Accounts (L6-L7) $______________
9. Advance Percentage 60%
10. Borrowing Availability (L8 x L9) (not to exceed
$5,000,000) $______________
C. Consignor Advance Obligations
11. Total Consignor Advance Obligations $______________
11A Less: Over 150 days
11B Less: Entire Consignor Advance Obligations if
Customers' $______________
Accounts are ineligible
11C Less: All other ineligible $______________
12. Ineligible Consignor Advance Obligations (11A to 11C) $______________
13. Qualified Consignor Advance Obligations (L11-L12) $______________
14. Advance Percentage or Cap 70%/$3,000,000
15. Tentative Borrowing Availability (lesser of L13 x 70%
(less amount in excess of $1,750,000 for any single CAO
or cap) $______________
16. Aggregate value of pledged collections $______________
17. Advance Percentage or Cap 35%/$3,000,000
18. Alternate Borrowing Availability (L16 x 35% or cap) $______________
D. Inventory
19. Total Inventory $______________
19A Less: Slow Moving Inventory turning > 364 days
and other reserves $______________
19B Less: All other ineligible inventory $______________
20. Ineligible Inventory (19A + 19B) $______________
21. Eligible Xxxxxxxxx (X00 - L20) $______________
22. Advance Percentage or Cap (50% or $5,000,000) 50%/$5,000,000
23. Inventory Borrowing Availability (lesser of L21 x 50%
or cap) $______________
24. Total Availability (Sum of L5 + (lesser of L15 or L18) $______________
2. Borrowing Availability
25. Maximum Line Amount $10,000,000
26. Total Availability (L24) $______________
27. Maximum Borrowing Capacity (lesser of L25 and L26) $______________
28. Outstanding Principal Balance - Direct Loans $______________
29. Outstanding documentary letters of credit $______________
30. Outstanding standby letters of credit $______________
31. Reserves $______________
31A: $______________
31B: $______________
32. Available to Xxxxxx (X00 - X00 - X00 - X00 - sum of $______________
all L31)
Date:_____________________________ XXXX XXXXXXX AUCTIONS, INC.
By:
---------------------------
Name:
Title:
EXHIBIT D
COMPLIANCE CERTIFICATE
[Letterhead of Borrower]
Date: ,
------------- ----
PNC Bank, National Association
Xxx Xxxxxx Xxxxxxxx Xxxxx
Xxxx Xxxxxxxx, Xxx Xxxxxx 00000
Ladies and Gentlemen:
__________________ hereby certifies to you as follows:
(a) ___________________________ is the duly elected ______________[Title]
of Xxxx Xxxxxxx Auctions Inc., a Delaware corporation ("Borrower"). Capitalized
but undefined terms used in this Certificate shall have the meanings assigned to
them in the Loan Agreement, dated as of May 28, 2004 (together with all
modifications, renewals or replacements, the "Agreement"), between the Borrower
and you.
(b) I have reviewed the terms of the Agreement, and have made, or have
caused to be made under our supervision, a review in reasonable detail of the
transactions and the financial condition of the Borrower during the immediately
preceding [fiscal quarter] [fiscal year].
(c) The review described in paragraph (b) above did not disclose the
existence during or at the end of such period, and we have no knowledge of the
existence as of the date hereof, of any condition or event which constitutes a
Default or an Event of Default, except as hereinafter set forth. Described in a
separate attachment to this Certificate are any exceptions, to this paragraph
(c) (listing, in detail, the nature of the condition or event, the period during
which it has existed and the action which the Borrower have taken, is taking or
proposes to take with respect to such condition or event).
The following are calculations demonstrating compliance by Obligors with
the financial covenants contained in Sections 8.10 through 8.13 of the
Agreement:
(a) Section 8.10: Capital expenditures fiscal year to date not in excess
of $750,000:
(b) Section 8.11: Ratio of Funded Debt to EBITDA of less than 1.50 to
1.00:
(c) Section 8.12: Fixed charge coverage ratio of at least 1.75 to 1.00 on
a rolling four quarters basis:
(d) Section 8.13: Minimum liquidity of at least $2,500,000:
I further certify that, based on the review described in paragraph (b)
above, no Obligor at any time during or at the end of such period did any of the
following:
(i) Change its name, or transact business under any trade name, style, or
fictitious name, other than those previously described to you and set forth in
the Agreement.
(ii) Change the location of its chief executive office, or change the
location of its books and records, or change the location of or dispose of any
of their assets (other than as permitted under the Agreement) or establish any
new inventory or equipment locations, other than as previously disclosed to you
in writing.
(iii) Permit or suffer to exit any liens or encumbrances on any of its
properties, whether real, personal, or mixed, other than as specifically
permitted in the Agreement.
(iv) Fail to provide to you any notices from any federal, state or local
agency, or other authority, regulating or having responsibility for any
environmental matters of a nature required to be provided to you pursuant to the
Agreement.
(v) Become aware of, obtain knowledge of, or receive notification of, any
breach or violation of any material covenant contained in any instrument or
agreement in respect of indebtedness for money borrowed.
The following are all exceptions, if any, to paragraphs (i) through (v)
above:
The foregoing certifications are made and delivered this _____ day of
______, ___.
Very truly yours,
XXXX XXXXXXX AUCTIONS, INC.
By:
--------------------------------
Name:
Title:
