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EXHIBIT 4.3
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made and entered into this
29th day of October, 1997, by and between INTERLOTT TECHNOLOGIES, INC., a
Delaware corporation ("Borrower"), and MERCANTILE BUSINESS CREDIT INC., a
Missouri corporation ("Lender").
WITNESSETH:
WHEREAS, Borrower has applied for a revolving credit loan from Lender
in an aggregate principal amount of up to $15,000,000.00; and
WHEREAS, Lender is willing to make said revolving credit loan to
Borrower upon, and subject to, the terms, provisions and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby mutually covenant and agree as follows:
SECTION 1. DEFINITIONS.
1.01 Definitions. In addition to the terms defined elsewhere in this
Agreement or in any Exhibit or Schedule hereto, when used in this Agreement, the
following terms shall have the following meanings (such meanings shall be
equally applicable to the singular and plural forms of the terms used, as the
context requires):
Account Debtor shall mean any Person who is and/or may become obligated
to Borrower under or on account of any of the Accounts.
Accounts shall mean all trade accounts receivable of Borrower for goods
sold or services rendered by Borrower which have been invoiced by Borrower.
Accounts shall not include any amounts due Borrower under or in respect of any
Leases.
Affiliate shall mean any Person (a) which directly or indirectly
through one or more intermediaries controls, is controlled by or is under common
control with Borrower or any Subsidiary, (b) which directly or indirectly
through one or more intermediaries beneficially owns or holds or has the power
to direct the voting power of Five Percent (5%) or more of any class of capital
stock of Borrower or any Subsidiary, (c) which has Five Percent (5%) or more of
any class of its capital stock (or, in the case of a Person which is not a
corporation, Five Percent (5%) or more of its equity interest) beneficially
owned or held, directly or indirectly, by Borrower or any Subsidiary or (d) who
is a director, officer or employee of Borrower or any Subsidiary. For purposes
of this definition, "control" shall mean the power to direct the management and
policies of a Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise.
Attorneys' Fees shall mean the reasonable value of the services (and
costs, charges and expenses related thereto) of the attorneys (and all
paralegals, accountants and other staff employed by such attorneys) employed by
Lender from time to time (a) in connection with the negotiation, preparation,
execution, delivery, amendment, modification, extension, renewal, administration
and/or enforcement of this Agreement and/or any of the other Transaction
Documents, (b) in connection with the preparation, negotiation or execution of
any waiver or consent with respect to this Agreement or any of the other
Transaction Documents, (c) in connection with any Default or Event of Default
under this Agreement, (d) to represent Lender in any litigation, contest,
dispute, suit or proceeding, or to commence, defend or intervene in any
litigation, contest, dispute, suit or proceeding, or to file any petition,
complaint, answer, motion or other pleading or to take any other action in or
with respect to any litigation, contest, dispute, suit or proceeding (whether
instituted by Lender, Borrower or any other Person and whether in bankruptcy or
otherwise) in any way or respect relating to this Agreement or any of the other
Transaction Documents, Borrower, any other Obligor, any Subsidiary, any
Collateral or any Third Party Collateral, (e) to protect, collect, lease, sell,
take possession of or liquidate any Collateral or any Third Party Collateral,
(f) to attempt to enforce any security interest in or other Lien upon any
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Collateral or any Third Party Collateral or to give any advice with respect to
such enforcement and/or (g) to enforce any of the rights or remedies of Lender
to collect any of the Borrower's Obligations.
Borrower's Obligations shall mean any and all indebtedness (principal,
interest, fees, collection costs and expenses, and other amounts), liabilities
and obligations of Borrower to Lender evidenced by or arising under this
Agreement, the Revolving Credit Note, any of the other Transaction Documents
and/or any other agreement, document or instrument heretofore, now or hereafter
executed and delivered by Borrower to Lender, in each case whether now existing
or hereafter arising, absolute or contingent, joint and/or several, secured or
unsecured, direct or indirect, expressed or implied in law, contractual or
tortious, liquidated or unliquidated, at law or in equity, or otherwise, and
whether created directly or acquired by Lender by assignment or otherwise, and
any and all costs of collection and/or Attorneys' Fees incurred or to be
incurred in connection therewith.
Borrowing Base shall have the meaning ascribed thereto in Section 2.01
(b).
Borrowing Base Certificate shall have the meaning ascribed thereto in
Section 2.01 (c).
Borrowing Notice shall have the meaning ascribed thereto
in Section 2.02(a).
Capital Expenditure shall mean any expenditure which, in accordance
with GAAP, is required to be capitalized on the balance sheet of the Person
making the same. For purposes of this Agreement, Capital Expenditures shall not
include expenditures for items held for sale or lease by Borrower.
Capitalized Lease shall mean any lease of Property, whether real and/or
personal, by a Person as lessee which in accordance with GAAP is required to be
capitalized on the balance sheet of such Person.
Capitalized Lease Obligations of any Person shall mean, as of the date
of any determination thereof, the amount at which the aggregate rental
obligations due and to become due under all Capitalized Leases under which such
Person is a lessee would be reflected as a liability on a balance sheet of such
Person in accordance with GAAP.
CERCLA shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. xx.xx. 9601 et seq., and as the same
may from time to time be further amended.
Change of Control Event shall mean each and every issue, sale, transfer
or other disposition, directly or indirectly, of shares of capital stock of
Borrower which, after giving effect thereto, results in (a) the Principal
Shareholders legally or beneficially owning or controlling in the aggregate less
than Thirty Percent (30%) (by number of votes) of the Voting Stock of Borrower
and (b) any Person or group of Persons acting in concert (other than the
Principal Shareholders) legally or beneficially owning or controlling in the
aggregate more than Twenty Percent (20%) (by number of votes) of the Voting
Stock of Borrower.
Code shall mean the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections of the Code
shall be construed to also refer to any successor sections.
Collateral shall mean any Property or assets of Borrower which now or
at any time hereafter secure the payment or performance of any of the Borrower's
Obligations.
Collateral Report shall have the meaning ascribed thereto in Section
3(a) of the Security Agreement.
Consolidated Debt shall mean, as of the date of any determination
thereof, all Debt of Borrower and its Subsidiaries as of such date (excluding
any Subordinated Debt), determined on a consolidated basis and in accordance
with GAAP.
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Consolidated Debt to Consolidated EBITDA Ratio shall mean, as of
the last day of any fiscal quarter of Borrower, the ratio of (A) Consolidated
Debt as of such day to (B) Consolidated EBITDA for the four (4) consecutive
fiscal quarter period of Borrower ending on such day.
Consolidated EBITDA shall mean, for the period in question, the sum of
(a) Consolidated Net Income during such period plus (b) to the extent deducted
in determining Consolidated Net Income, the sum of (i) Consolidated Interest
Expense during such period, plus (ii) all provisions for any Federal, state,
local and/or foreign income taxes made by Borrower and its Subsidiaries during
such period (whether paid or deferred) plus (iii) all depreciation and
amortization expenses of Borrower and its Subsidiaries during such period, all
determined on a consolidated basis and in accordance with GAAP.
Consolidated Interest Coverage Ratio shall mean, for the period in
question, the ratio of (a) Consolidated EBITDA during such period to (b)
Consolidated Interest Expense during such period, all determined on a
consolidated basis and in accordance with GAAP.
Consolidated Interest Expense shall mean, for the period in question,
without duplication, all gross interest expense of Borrower and its Subsidiaries
(including, without limitation, all commissions, discounts and/or related
amortization and other fees and charges owed by Borrower and its Subsidiaries
with respect to letters of credit, the net costs associated with interest swap
obligations of Borrower and its Subsidiaries, capitalized interest expense, the
interest portion of Capitalized Lease Obligations and the interest portion of
any deferred payment obligation) during such period, all determined on a
consolidated basis and in accordance with GAAP.
Consolidated Net Income shall mean the after-tax net income (or loss)
of Borrower and its Subsidiaries for the period in question, determined on a
consolidated basis and in accordance with GAAP, but excluding from the
definition of Consolidated Net Income any extraordinary gains and/or losses and
any gains and/or losses from the sale or other disposition of assets other than
in the ordinary course of business, all determined in accordance with GAAP.
Consolidated Net Worth shall mean, as of the date of any determination
thereof, the amount of the capital stock accounts (net of treasury stock, at
cost and excluding the aggregate par value of all issued and outstanding shares
of Series A Preferred Stock of Borrower) of Borrower and its Subsidiaries as of
such date plus (or minus in the case of a deficit) the surplus and retained
earnings of Borrower and its Subsidiaries as of such date, all determined on a
consolidated basis and in accordance with GAAP.
Consolidated Tangible Net Worth shall mean, as of the date of any
determination thereof, the sum of (a) Consolidated Net Worth as of such date
minus (b) the book value of all Intangible Assets of Borrower and its
Subsidiaries as of such date, all determined on a consolidated basis and in
accordance with GAAP.
Default shall mean any event or condition the occurrence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default as defined in Section 6 hereof.
Debt of any Person shall mean, as of the date of determination thereof,
the sum of, without duplication, (a) all Indebtedness of such Person for
borrowed money, plus) (b) all Indebtedness of such Person which has been
incurred in connection with the purchase or other acquisition of Property or
assets (other than unsecured trade accounts payable incurred in the ordinary
course of business), plus (c) all Capitalized Lease Obligations of such Person
plus (d) all Guarantees by such Person of Debt of others plus (e) in the case of
Borrower, the aggregate par value of all issued and outstanding shares of Series
A Preferred Stock of Borrower.
Distribution in respect of any corporation shall mean: (a) dividends or
other distributions (other than stock dividends and stock splits) on or in
respect of any of the capital stock of such corporation; and (b) the redemption,
repurchase or other acquisition of any capital stock of such corporation or of
any warrants, rights or other options to purchase any such capital stock (except
when solely in exchange for such stock).
Domestic Business Day shall mean any day except a Saturday, Sunday or
legal holiday observed by Lender or by commercial banks in St. Louis, Missouri.
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Eligible Accounts shall mean all Accounts other than: (a) Accounts
which remain unpaid for more than ninety (90) days after their invoice dates and
Accounts which are not due and payable within ninety (90) days after their
invoice dates; (b) Accounts owing by a single Account Debtor, including a
currently scheduled Account, if Twenty-Five Percent (25%) or more of the balance
owing by said Account Debtor upon said Accounts is ineligible pursuant to clause
(a) above; (c) Accounts with respect to which the Account Debtor is a
shareholder or partner of Borrower or an Affiliate of Borrower; (d) Accounts
with respect to which payment by the Account Debtor is or may be conditional and
Accounts commonly known as xxxx and hold Accounts or Accounts of a similar or
like arrangement; (e) Accounts with respect to which the Account Debtor is not a
resident or citizen of or otherwise located in the United States of America,
unless such Accounts are backed in full by an irrevocable letter of credit in
form and substance satisfactory to Lender issued by a domestic commercial bank
acceptable to Lender; (f) Accounts with respect to which the Account Debtor is
the United States of America or any department, agency or instrumentality of the
United States of America, unless such Accounts are duly assigned to Lender in
accordance with all applicable governmental and regulatory rules and regulations
(including, without limitation, the Federal Assignment of Claims Act of 1940, as
amended, if applicable) so that Lender is recognized by the Account Debtor to
have all of the rights of an assignee of such Accounts; (g) Accounts with
respect to which the Account Debtor is any state of the United States or any
department, agency or instrumentality of any state of the United States if such
state or such department, agency or instrumentality is subject to or entitled to
the benefits of any law, rule, regulation or ordinance which prohibits,
restricts, impose conditions upon or requires notice to or consent of such state
or such department, agency or instrumentality for or with respect to the
assignment of, or the grant of a security interest in or lien on, any Accounts
owed by such state or such department, agency or instrumentality, unless such
Accounts are duly assigned to Lender in accordance with all such applicable
laws, rules, regulations and ordinances so that Lender is recognized by the
Account Debtor to have all of the rights of an assignee of such Accounts; (h)
Accounts with respect to which Borrower is or may become liable to the Account
Debtor for goods sold or services rendered by such Account Debtor to Borrower,
but only to the extent of such Borrower's then aggregate liability to such
Account Debtor (i.e. the excess of the aggregate face amount of Accounts of such
Account Debtor over the aggregate liability of Borrower to such Account Debtor
shall constitute an Eligible Account unless otherwise excepted under this
definition of Eligible Accounts); (i) Accounts with respect to which the goods
giving rise thereto have not been shipped and delivered to and accepted as
satisfactory by the Account Debtor thereof or with respect to which the
services performed giving rise thereto have not been completed and accepted as
satisfactory by the Account Debtor thereof; (j) Accounts with respect to which
possession and/or control of the goods sold giving rise thereto is held,
maintained or retained by Borrower (or by any agent or custodian of Borrower)
for the account of or subject to further and/or future direction from the
Account Debtor thereof; (k) Accounts arising from a consignment sale, a "sale on
approval" or a "sale or return"; (l) Accounts as to which Lender, at any time or
times hereafter, determines in good faith, in -accordance with Lender's
customary business practices exercised in a commercially reasonable manner, that
the prospects of payment or performance by the Account Debtor is or will be
impaired in any material respect; (m) Accounts of an Account Debtor to the
extent, but only to the extent, that the same exceed a credit limit determined
at any time or times hereafter by Lender in good faith in accordance with
Lender's customary business practices exercised in a commercially reasonable
manner; (n) Accounts with respect to which the Account Debtor is located in the
State of New Jersey, the State of Minnesota or the State of West Virginia;
provided, however, that such restriction shall not apply if Borrower (i) has
filed and has effective (A) in respect of Account Debtors located in the State
of New Jersey, a Notice of Business Activities Report with the State of New
Jersey Division of Taxation for the then current year, (B) in respect of Account
Debtors located in the State of Minnesota, a Minnesota Business Activity Report
with the Minnesota Department of Revenue for the then current year or (C) in
respect of Account Debtors located in the State of West Virginia, a West
Virginia Business Activity Report with the West Virginia Department of Tax and
Revenue for the then current year, as applicable, or (ii) is otherwise exempt
from such reporting requirements under the laws of such State(s); and (o)
Accounts which are not subject to a first priority perfected security interest
in favor of Lender.
Eligible Inventorv shall mean all Inventory of Borrower which consists
of raw materials or finished goods (specifically excluding any Inventory of
Borrower which consists of work-in-process) other than: (a) any Inventory which
is Subject to Lease or has ever been Subject to Lease (this clause (a) shall not
exclude Inventory which was but is not currently Subject to Lease and which has
been reconditioned and put into Borrower's parts Inventory); (b) any Inventory
which is obsolete; (c) any Inventory which Lender has in good faith determined,
in accordance with Lender's customary business practices exercised in a
commercially
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reasonable manner, is unacceptable due to age, type, category, quality and/or
quantity; (d) any inventory which is not located in the continental United
States of America; (e) any Inventory which is not located at the chief executive
office of Borrower, one of the locations listed on Exhibit A to the Security
Agreement or another location with respect to which Borrower has complied with
all of the requirements of Section 2(h) of the Security Agreement; and (f) any
Inventory which is not subject to a first priority perfected security interest
in favor of Lender.
Eligible Lease shall mean a Lease which (a) is a lease of one or more
instant lottery vending machines, prepaid phone card dispensing machines and/or
smart card dispensing machines (and not a maintenance-only contract) which are
located in the United States of America and (b) as of the applicable date of
determination, meets all of the following requirements: (i) the lessee under
such Lease is (A) the United States of America or any state of the United States
or any department, agency or instrumentality of any of the foregoing or (B) a
Person who is a resident or citizen of or otherwise located in the United States
of America and whose creditworthiness is reasonably acceptable to Lender (as
determined from time to time by Lender); (ii) no payment due Borrower under such
Lease (other than disputed payments aggregating less than $50,000.00) is more
than (A) one hundred twenty (120) days past due if the lessee under such Lease
is the United States of America or any state of the United States or any
department, agency or instrumentality of any of the foregoing or (B) ninety (90)
days past due if the lessee under such Lease is not the United States of America
or a state of the United States or a department, agency or instrumentality of
any of the foregoing; (iii) no other default or event of default under such
Lease has been declared by Borrower or the applicable lessee(s); (iv) the
lessee(s) under such Lease have not asserted any defenses, claims, counterclaims
or set-offs against Borrower under or in respect of such Lease which,
individually or in the aggregate, involve an amount in excess of $50,000.00; (v)
it arises from a bona fide lease of the instant lottery vending machines,
prepaid phone card dispensing machines and/or smart card dispensing machines
covered thereby, is the legal, valid, binding and enforceable obligation of the
lessee(s) thereunder and is in full force and effect and has not been
terminated; (vi) such Lease complies with all applicable Federal, state and
local laws, rules and regulations; (vii) such Lease is not subject to any
defenses, claims, counterclaims or set-offs against Lender, including, without
limitation, those resulting from acts or omissions of Borrower or its agents,
which, individually or in the aggregate, involve an amount in excess of
$50,000.00; (viii) such Lease (or an independent instrument executed by the
applicable lessees)) expressly provides that all amounts (whether for rent or
otherwise) from time to time payable to Borrower under such Lease are assignable
by Borrower to Lender consistent with the terms of the Security Agreement
(provided, however, that in order to permit Borrower time to obtain such
consents, this clause (viii) shall not apply during the period commencing on the
date of this Agreement and ending January 28, 1998); (ix) the Lease, the
payments thereunder and the related Inventory are not subject to any security
interest or other Lien except in favor of Lender under the Security Agreement;
and (x) Borrower holds good title to the Lease and the payments due thereunder,
Lender has a perfected security interest in such Lease and all payments due
thereunder and the perfected security interest of Lender in such Lease and the
payments due thereunder is a first priority security interest.
Eligible Lease Payments shall mean, with respect to each Eligible
Lease, as of any date, the aggregate minimum base rental payments (excluding any
percentage rental payments) due or to become due under such Eligible Lease for
instant lottery vending machines, prepaid phone card dispensing machines and/or
smart card dispensing machines delivered to and accepted by the lessee(s) under
such Eligible Lease on or prior to such date during the shorter of (a) the
period commencing on such date and ending eighteen (18) months thereafter and
(b) the remaining term of such Lease (determined without giving effect to any
renewal or extension terms exercisable at the option of the lessee(s) which have
not been exercised by such lessee(s)).
Environmental Claim shall mean any administrative, regulatory or
judicial action, judgment, order, consent decree, suit, demand, demand letter,
claim, Lien, notice of noncompliance or violation, investigation or other
proceeding arising (a) pursuant to any Environmental Law or governmental or
regulatory approval issued under any such Environmental Law, (b) from the
presence, use, generation, storage, treatment, Release, threatened Release,
disposal, remediation or other existence of any Hazardous Substance, (c) from
any removal, remedial, corrective or other response action pursuant to an
Environmental Law or the order of any governmental or regulatory authority or
agency, (d) from any third party seeking damages, contribution, indemnification,
cost recovery, compensation, injunctive or other relief in connection with a
Hazardous Substance or arising from alleged injury or threat of injury to
health, safety, natural resources or the
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environment or (e) from any Lien against any Property owned, leased or operated
by Borrower or any Subsidiary in favor of any governmental or regulatory
authority or agency in connection with a Release, threatened Release or disposal
of a Hazardous Substance.
Environmental Law shall mean any international, Federal, state or local
statute, law, rule, regulation, order, consent decree, judgment, permit,
license, code, covenant, deed restriction, common law, treaty, convention,
ordinance or other requirement relating to public health, safety or the
environment, including, without limitation, those relating to Releases,
discharges or emissions to air, water, land or groundwater, to the withdrawal or
use of groundwater, to the use and handling of polychlorinated biphenyls or
asbestos, to the disposal, treatment, storage or management of hazardous or
solid waste, Hazardous Substances or crude oil, or any fraction thereof, to
exposure to toxic or hazardous materials, to the handling, transportation,
discharge or release of gaseous or liquid Hazardous Substances and any rule,
regulation, order, notice or demand issued pursuant to such law, statute or
ordinance, in each case applicable to any of the Property owned, leased or
operated by Borrower or any Subsidiary or the operation, construction or
modification of any such Property, including, without limitation, the following:
CERCLA, the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984,
the Hazardous Materials Transportation Act, as amended, the Federal Water
Pollution Control Act, as amended by the Clean Water Act of 1976, the Safe
Drinking Water Control Act, the Clean Air Act of 1966, as amended, the Toxic
Substances Control Act of 1976, the Occupational Safety and Health Act of 1970,
as amended, the Emergency Planning and Community Right-to-Know Act of 1986, the
National Environmental Policy Act of 1975, the Oil Pollution Act of 1990 and any
similar or implementing state or local law, and any state or local statute and
any further amendments to these laws providing for financial responsibility for
cleanup or other actions with respect to the Release or threatened Release of
Hazardous Substances or crude oil, or any fraction thereof and all rules,
regulations, guidance documents and publication promulgated
thereunder.
ERISA shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections;
ERISA Affiliate shall mean any corporation, trade or business that is,
along with Borrower or any Subsidiary, a member of a controlled group of
corporations or a controlled group of trades or businesses, as described in
Sections 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA.
Eurodollar Business Day shall mean any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
Event of Default shall have the meaning ascribed thereto in Section 6.
Exchange Act shall mean the Securities Exchange Act of 1934, as
amended.
GAAP shall mean generally accepted accounting principles at the time in
the United States.
Guarantee by any Person shall mean any obligation (other than
endorsements of negotiable instruments for deposit or collection in the ordinary
course of business), contingent or otherwise, of such Person guaranteeing, or in
effect guaranteeing, any Indebtedness, liability, dividend or other obligation
of any other Person (the "primary obliger") in any manner, whether directly or
indirectly, including, without limitation, all obligations incurred through an
agreement, contingent or otherwise, by such Person: (a) to purchase such
Indebtedness or obligation or any Property or assets constituting security
therefor, (b) to advance or supply funds (i) for the purchase or payment of such
Indebtedness or obligation, (ii) to maintain working capital or other balance
sheet condition or otherwise to advance or make available funds for the purchase
or payment of such Indebtedness or obligation, (iii) to lease property or to
purchase securities or other property or services primarily for the purpose of
assuring the owner of such Indebtedness or obligation of the ability of the
primary obliger to make payment of the Indebtedness or obligation or (iv)
otherwise to assure the owner of the Indebtedness or obligation of the primary
obliger against loss in respect thereof. For the purposes of all computations
made under this Agreement, a Guarantee in respect of any Indebtedness for
borrowed money
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shall be deemed to be Indebtedness equal to the then outstanding principal
amount of such Indebtedness for borrowed money which has been guaranteed or such
lesser amount to which the maximum exposure of the guarantor shall have been
specifically limited, and a Guarantee in respect of any other obligation or
liability or any dividend shall be deemed to be Indebtedness equal to the
maximum aggregate amount of such obligation, liability or dividend or such
lesser amount to which the maximum exposure of the guarantor shall have been
specifically limited. Guarantee when used as a verb shall have a correlative
meaning.
Hazardous Substance shall mean any hazardous or toxic material,
substance or waste, pollutant or contaminant which is regulated under any
Environmental Law or any other statute, law, ordinance, rule or regulation of
any local, state, regional, Federal or international authority having
jurisdiction over any of the Property owned, leased or operated by Borrower or
any Subsidiary or its use, including, without limitation, any material,
substance or waste which is: (a) defined as a hazardous substance under Section
311 of the Federal Water Pollution Control Act (33 U.S.C. ss.ss.1317), as
amended; (b) regulated as a hazardous waste under Section 1004 or Section 3001
of the Federal Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act (42 U.S.C. ss. ss.6901 et seq.), as amended; (c) defined as a
hazardous substance under Section 101 of the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. ss. ss.9601 et seq.), as
amended; or (d) defined or regulated as a hazardous substance or hazardous waste
under any rules or regulations promulgated under any of the foregoing statutes.
Indebtedness shall mean, with respect to any Person, without
duplication, all indebtedness, liabilities and obligations of such Person which
in accordance with GAAP are required to be classified upon a balance sheet of
such Person as liabilities of such Person, and in any event shall include all
(a) obligations of such Person for borrowed money or which have been incurred in
connection with the purchase or other acquisition of Property or assets, (b)
obligations secured by any Lien on, or payable out of the proceeds of or
production from, any Property or assets owned by such Person, whether or not
such Person has assumed or become liable for the payment of such obligations,
(c) indebtedness, liabilities and obligations of third parties, including joint
ventures and partnerships of which such Person is a venturer or general partner,
recourse to which may be had against such Person, (d) obligations created or
arising under any conditional sale or other title retention agreement with
respect to Property acquired by such Person, notwithstanding the fact that the
rights and remedies of the seller, lender or lessor under such agreement in the
event of default are limited to repossession or sale of such Property, (e)
Capitalized Lease Obligations of such Person, (f) indebtedness, liabilities and
obligations of such Person under Guarantees and (f) unpaid reimbursement
obligations of such Person with respect to letters of credit issued for the
account of such Person.
Intangible Assets shall mean all patents, trademarks, service marks,
copyrights, trade names, goodwill (including any amounts, however designated,
representing the cost of acquisition of business and investments in excess of
the book value thereof), prepaid expenses, deferred tax assets (net of any
deferred tax liabilities), unamortized debt discount and expense, unamortized
deferred charges, deferred research and development costs, any write-up of asset
value after the date of this Agreement, non-competition covenants, signing
bonuses and any other assets treated as intangible assets under GAAP.
Interest Period shall mean with respect to each LIBOR Loan:
(a) initially, the period commencing on the date of such
Revolving Credit Loan and ending one (1), two (2) or three (3) months
thereafter (or such other period agreed upon in writing by Borrower and
Lender), as Borrower may elect in the applicable Borrowing Notice; and
(b) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such Revolving
Credit Loan and ending one (1), two (2) or three (3) months thereafter
(or such other period agreed upon in writing by Borrower and Lender),
as Borrower may elect pursuant to Section 2.04;
provided that:
(c) subject to clauses (d) and (e) below, any Interest Period
which would otherwise end on a day which is not a Eurodollar Business
Day shall be extended to the next succeeding Eurodollar
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Business Day unless such Eurodollar Business Day falls in another
calendar month, in which case such Interest Period shall end on the
immediately preceding Eurodollar Business Day;
(d) subject to clause (e) below, any Interest Period which
begins on the last Eurodollar Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last
Eurodollar Business Day of a calendar month; and
(e) no Interest Period shall extend beyond the last day of the
Revolving Credit Period.
Inventory shall mean all personal property owned by Borrower and held
for sale or lease, valued at the lower of cost or market in accordance with
GAAP.
Investment shall mean any investment by Borrower or any Subsidiary in
any Person, whether payment therefor is made in cash or capital stock of
Borrower or any Subsidiary, and whether such investment is by acquisition of
stock or Indebtedness, or by loan, advance, transfer of property out of the
ordinary course of business, capital contribution, equity or profit sharing
interest, extension of credit on terms other than those normal in the ordinary
course of business or otherwise.
Lease shall mean a lease agreement entered into by Borrower, as lessor,
in the ordinary course of business with a Person who is not an Affiliate of
Borrower or any Subsidiary.
Lease Payments shall mean all rents and other sums payable to or
receivable by Borrower from the lessee(s) under or pursuant to the provisions of
the Leases, whether as rent, late fees, interest, casualty payments, indemnity
payments, liquidated or unliquidated damages or otherwise.
Lender's Revolving Credit Commitment shall mean the sum of
$15,000,000.00.
Letter of Credit shall mean each commercial and/or standby letter of
credit issued for the account of Borrower with respect to which Lender has
agreed to indemnify the issuer of such letter of credit in accordance with
Section 2.06 of this Agreement; and Letters of Credit shall mean all of the
foregoing.
LIBOR Base Rate shall mean, with respect to the applicable Interest
Period, (a) the LIBOR Index Rate for such Interest Period, if such rate is
available or (b) if the LIBOR Index Rate cannot be determined, the average
(rounded upward, if necessary, to the next higher 1/100 of 1%) of the
respective rates per annum of interest at which deposits in dollars are offered
to Mercantile Bank National Association (or its successor) in the London
interbank market by two (2) Eurodollar dealers of recognized standing, selected
by Mercantile Bank National Association (or its successor) in its sole
discretion, at such time on the date two (2) Eurodollar Business Days before the
first day of such Interest Period as Mercantile Bank National Association (or
its successor) in its sole discretion elects, for delivery on the first day of
the applicable Interest Period for a number of days comparable to the number of
days in such Interest Period and in an amount approximately equal to the
principal amount of the LIBOR Loan to which such Interest Period is to apply.
LIBOR Index Rate shall mean, with respect to the applicable Interest
Period, the rate per annum (rounded upwards, if necessary, to the next higher
1/100 of 1%) for deposits in U.S. Dollars for a period equal to such Interest
Period, which appears on the Telerate Page 3750 as of 9:00 a.m. (St. Louis time)
on the day two (2) Eurodollar Business Days before the commencement of such
Interest Period.
LIBOR Loan shall mean any Revolving Credit Loan bearing interest at the
LIBOR Rate.
LIBOR Margin shall mean Two Percent (2%) per annum.
LIBOR Rate shall mean (a) the quotient of the (i) LIBOR Base Rate
divided by (ii) one minus the applicable LIBOR Reserve Percentage plus (b) the
LIBOR Margin. The LIBOR Rate shall be adjusted automatically on and as of the
effective date of any change in the LIBOR Reserve Percentage.
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9
LIBOR Reserve Percentage shall mean for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor), for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in St. Louis, Missouri with respect to "Eurocurrency liabilities"
(or in respect of any other category of liabilities which includes deposits by
reference to which the interest rate on LIBOR Loans is determined or any
category of extensions of credit or other assets which include loans by a
non-United States office of Mercantile Bank National Association (or its
successor) to United States residents).
Lien shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract, including, without
limitation, any security interest, mortgage, deed of trust, pledge,
hypothecation, judgment lien or other lien or encumbrance of any kind or nature
whatsoever, any conditional sale or trust receipt, any lease, consignment or
bailment for security purposes and any Capitalized Lease. The term "Lien" shall
include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property.
Material Adverse Effect shall mean (a) a material adverse effect on the
Properties, assets, liabilities, business, operations, prospects, income or
condition (financial or otherwise) of Borrower and its Subsidiaries taken as a
whole, (b) material impairment of Borrower's ability to perform any of its
obligations under this Agreement, the Revolving Credit Note or any of the other
Transaction Documents or (c) material impairment of the enforceability of the
rights of, or benefits available to, Lender under this Agreement, the Revolving
Credit Note or any of the other Transaction Documents.
Moody's shall mean Xxxxx'x Investors Service, Inc.
Multi-Employer Plan shall mean a "multi-employer plan" as defined in
Section 4001(a)(3) of ERISA which is maintained for employees of Borrower, any
Subsidiary or any ERISA Affiliate or to which Borrower, any Subsidiary or any
ERISA Affiliate has contributed in the past or currently contributes.
Obligor shall mean Borrower and each other Person who is or shall at
any time hereafter become primarily or secondarily liable on any of the
Borrower's Obligations or who grants Lender a Lien upon any of the Property or
assets of such Person as security for any of the Borrower's Obligations;
provided, however, that neither an Account Debtor on an Account nor a lessee
under a Lease shall be deemed to be an Obligor solely because such Person is
such an Account Debtor or lessee.
Occupational Safety and Health Laws shall mean the Occupational Safety
and Health Act of 1970, as amended, and any other Federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability or standards of conduct concerning employee
health and/or safety, as now or at any time hereafter in effect.
Patent, Trademark and License Security Agreement shall mean that
certain Patent, Trademark and License Security Agreement dated the date hereof
and executed by Borrower in favor of Lender, as the same may from time to time
be amended, modified, extended or renewed.
PBGC shall mean the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
Pension Plan shall mean a "pension plan," as such term is defined in
Section 3(2) of ERISA, which is established or maintained by Borrower, any
Subsidiary or any ERISA Affiliate, other than a Multi-Employer Plan.
Permitted Liens shall mean any of the following:
(a) Liens on Property or assets of a Subsidiary to secure
obligations of such Subsidiary to Borrower;
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(b) Liens for property taxes and assessments or governmental
charges or levies and Liens securing claims or demands of mechanics and
materialmen, provided payment thereof is not at the time required by
Section 5.01(d) and/or 5.01(e);
(c) Liens (other than any Liens imposed by ERISA) incidental
to the conduct of business or the ownership of Properties and assets
(including Liens in connection with worker's compensation, unemployment
insurance and other like laws, warehousemen's and attorneys' liens and
statutory landlords' liens) and Liens to secure the performance of
bids, tenders or trade contracts, or to secure statutory obligations,
surety or appeal bonds or other Liens of like general nature incurred
in the ordinary course of business and not in connection with the
borrowing of money or the purchase or other acquisition of Property;
provided in each case the obligation secured is not overdue or, if
overdue, is being contested in good faith by appropriate actions or
proceedings being diligently conducted and for which adequate reserves
in accordance with GAAP have been set aside;
(d) minor survey exceptions or minor encumbrances, easements
or reservations, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use
of real properties, which are necessary or desirable for the conduct of
the activities of Borrower and its Subsidiaries or which customarily
exist on properties of corporations engaged in similar activities and
similarly situated and which do not in any event materially impair the
use of such real properties in the operation of the business of the
Borrower and its Subsidiaries;
(e) Liens existing as of the date of this Agreement and listed
on Schedule 4.12 attached hereto;
(f) purchase money Liens granted to a Person financing a
Capital Expenditure permitted by Section 5.02(m) of this Agreement so
long as (i) the Lien granted is limited to the specific fixed assets
acquired and the proceeds thereof, (ii) the aggregate principal amount
of Debt secured by the Lien is not more than the acquisition cost of
the specific fixed assets on which the Lien is granted and (iii) the
transaction does not violate any other provision of this Agreement;
(g) Capitalized Leases permitted by Section 5.02(m) of this
Agreement; and
(h) the rights of a lessee under a Lease to the Inventory
subject to such Lease.
Person shall mean any individual, sole proprietorship, partnership,
joint venture, limited liability company, trust, unincorporated organization,
association, corporation, institution, entity or government (whether national,
Federal, state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department thereof).
Prime Loan shall mean any Revolving Credit Loan bearing interest at the
Prime Rate.
Prime Rate shall mean the interest rate announced from time to time by
Mercantile Bank National Association (or its successor) as its "prime rate"
(which rate shall fluctuate as and when said prime rate shall change). Borrower
acknowledges that such "prime rate" is a reference rate and does not necessarily
represent the lowest or best rate offered by Lender or Mercantile Bank National
Association to its customers.
Principal Shareholders shall mean and include (a) X. Xxxxxx Xxxxx, (b)
the spouses, lineal descendants and spouses of the lineal descendants of one or
more of the individuals listed in clause (a) above, (c) the estates of one or
more of the individuals listed in clauses (a) or (b) above and (d) trusts
established solely for the benefit of one or more of the individuals listed in
clauses (a) or (b) above.
Property shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible. Properties shall
mean the plural of Property. For purposes of this Agreement, Borrower and each
Subsidiary shall be deemed to be the owner of any Property which it has acquired
or holds subject to a conditional sale agreement, financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.
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11
Rate of Dilution of Borrower's Accounts shall mean the value of all
non-cash credits to Borrower's Accounts (including, without limitation, bad debt
expense) during the twelve (12) month period immediately preceding the date of
calculation divided by Borrower's sales during said period. The Rate of Dilution
shall be calculated by Lender in connection with each of its collateral
examinations of the Borrower's Accounts (which calculation shall be conclusive
in the absence of manifest error), and the Rate of Dilution as so calculated by
Lender shall be and remain the applicable Rate of Dilution until the next
collateral examination is performed by Lender. If the Rate of Dilution at the
time of any calculation thereof has increased or decreased from the prior
calculation thereof, then Lender shall adjust the advance rate for Accounts used
in the Borrowing Base accordingly.
RCRA shall mean the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste
Amendments of 1984, 42 U.S.C. XX.XX. 6901 et seq., and any future amendments.
Regulation D shall mean Regulation D of the Board of Governors of the
Federal Reserve System, as amended.
Regulatory Change shall mean if (a) Regulation D or (b) after the date
hereof, the adoption of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof by any
governmental or regulatory authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by Lender with
any request or directive (whether or not having the force of law) of any such
governmental or regulatory authority, central bank or comparable agency shall
(i) subject Lender to any tax, duty or other charge with respect to any of the
LIBOR Loans, the Revolving Credit Note or Lender's obligation to make, maintain
or fund any of the LIBOR Loans, or shall change the basis of taxation of
payments to Lender of the principal of or interest on any of the LIBOR Loans or
any other amounts due under this Agreement in respect of any of the LIBOR Loans
or its obligation to make, maintain or fund any of the LIBOR Loans (except for
taxes on or changes in the rate of tax on the overall net income of Lender) or
(ii) impose, modify or deem applicable any reserve (including, without
limitation, any reserve imposed by the Board of Governors of the Federal Reserve
System), special deposit, capital or similar requirement against assets of,
deposits with or for the account of, or credit extended or committed to be
extended by, Lender or shall, with respect to Lender or the London interbank
market, impose, modify or deem applicable any other condition affecting any of
the LIBOR Loans, the Revolving Credit Note or Lender's obligation to make,
maintain or fund any of the LIBOR Loans.
Release shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment, including, without limitation, the abandonment or discarding of
barrels, drums, containers, tanks and/or other receptacles containing (or
containing traces of) any Hazardous Substance.
Reportable Event shall have the meaning given to such term in ERISA.
Restricted Investment shall mean any Investment, or any expenditure or
any incurrence of any liability to make any expenditure for an Investment, other
than:
(a) loans and/or advances by any Subsidiary to Borrower which
are subordinated in writing to the payment of the Borrower's
Obligations in form and substance satisfactory to Lender;
(b) direct obligations of the United States of America or any
instrumentality or agency thereof, the payment of which is
unconditionally guaranteed by the United States of America or any
instrumentality or agency thereof (all of which Investments must mature
within twelve (12) months from the time of acquisition thereof);
(c) Investments in readily marketable commercial paper which,
at the time of acquisition thereof by Borrower or any Subsidiary, is
rated A-1 or better by S&P and P-1 or better by Moody's and which
matures within 270 days from the date of acquisition thereof, provided
that the issuer of such
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commercial paper shall, at the time of acquisition of such commercial
paper, have a senior long-term debt rating of at least A by S&P and
Moody's;
(d) negotiable certificates of deposit or negotiable bankers
acceptances issued by Mercantile Bank National Association or any other
bank or trust company organized under the laws of the United States of
America or any state thereof, which bank or trust company (other than
Mercantile Bank National Association to which such restrictions shall
not apply) is a member of both the Federal Deposit Insurance
Corporation and the Federal Reserve System and is rated B or better by
Thompsons Bank Watch Service (all of which Investments must mature
within twelve (12) months from the time of acquisition thereof);
(e) repurchase agreements, which shall be collateralized for
at least 102% of face value, issued by Mercantile Bank National
Association or any other bank or trust company organized under the laws
of the United States or any state thereof, which bank or trust company
(other than Mercantile Bank National Association to which such
restrictions shall not apply) is a member of both the Federal Deposit
Insurance Corporation and the Federal Reserve System and is rated B or
better by Thompsons Bank Watch Service (all of which Investments must
mature within twelve (12) months from the time of acquisition thereof);
(f) Investments existing as of the date hereof as described in
Schedule 4.18 attached hereto, and any future retained earnings in
respect thereof; and
(g) loans or advances in the usual and ordinary course of
business to officers and/or employees of Borrower or a Subsidiary for
business expenses in the aggregate principal amount of up to $25,000.00
at any one time outstanding.
Revolving Credit Loan and Revolving Credit Loans shall have the
meanings ascribed thereto in Section 2.01 (a).
Revolving Credit Note shall have the meaning ascribed thereto in
Section 2.03.
Revolving Credit Period shall mean the period commencing on the date of
this Agreement and ending October 29, 2000; provided, however, that
notwithstanding the foregoing, (a) so long as no Default or Event of Default
under this Agreement has occurred and is then continuing, the Revolving Credit
Period shall be automatically extended for subsequent successive one (1) year
periods unless Borrower or Lender provides written notice to the other at least
sixty (60) days prior to the expiration of the then current period that it does
not wish to extend the Revolving Credit Period (in which event the Revolving
Credit Period shall expire at the end of the then current period) and (b) the
Revolving Credit Period shall end on the date of the termination of this
Agreement by Borrower or Lender (Lender may terminate this Agreement prior to
the end of the Revolving Credit Agreement only if an Event of Default under this
Agreement has occurred and is continuing).
S&P shall mean Standard and Poor's Ratings Group.
Security Agreement shall mean that certain Security Agreement dated the
date hereof and executed by Borrower in favor of Lender, as the same may from
time to time be amended, modified, extended or renewed.
Subject To Lease shall mean, with respect to any Inventory, that such
Inventory has been delivered to a lessee by Borrower, and accepted by such
lessee, under the terms of a Lease.
Subordinated Debt shall mean, as of the date of any determination
thereof, the aggregate principal amount of all Debt of Borrower outstanding as
of such date which is subordinated in writing (either by its terms or pursuant
to a subordination agreement) to the payment and priority of all of the
Borrower's Obligations in form and substance satisfactory to Lender.
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Subsidiary shall mean any corporation of which more than Fifty Percent
(50%) of the issued and outstanding capital stock entitled to vote for the
election of directors (other than by reason of default in the payment of
dividends) is at the time owned directly or indirectly by Borrower or any
Subsidiary.
Telerate Page 3750 shall mean the display designated as "Page 3750" on
the Telerate Service (or such other page as may replace Page 3750 on that
service or such other service as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying British
Bankers' Association Interest Settlement Rates for U.S. Dollar Deposits).
Third Party Collateral shall mean any Property or assets of any Obligor
other than Borrower which now or at any time hereafter secure the payment or
performance of any of the Borrower's Obligations.
Total Revolving Credit Outstandings shall mean, as of any date, the sum
of (a) the aggregate principal amount of all Revolving Credit Loans outstanding
as of such date, plus (b) the aggregate undrawn face amount of all Letters of
Credit outstanding as of such date.
Transaction Documents shall mean this Agreement, the Revolving Credit
Note, the Security Agreement, the Patent, Trademark and License Security
Agreement and all other agreements, documents and instruments heretofore, now or
hereafter delivered to Lender with respect to or in connection with or pursuant
to this Agreement, any Revolving Credit Loans made hereunder or any of the other
Borrower's Obligations, and executed by or on behalf of Borrower, all as the
same may from time to time be amended, modified, extended or renewed.
Unused Availability shall mean, as of any date, the sum of (a) the
lesser of (i) the Lender's Revolving Credit Commitment as of such date or (ii)
the Borrowing Base as of such date minus (b) the Total Revolving Credit
Outstandings as of such date.
Voting Stock shall mean, with respect to any corporation, any shares of
stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
Welfare Plan shall mean a "welfare plan" as such term is defined in
Section 3(1) of ERISA, which is established or maintained by Borrower, any
Subsidiary or any ERISA Affiliate, other than a Multi-Employer
Plan.
1.02 Accounting Terms and Determinations. Except as otherwise specified
in this Agreement, all accounting terms used in this Agreement shall be
interpreted, all accounting determinations under this Agreement shall be made
and all financial statements required to be delivered under this Agreement shall
be prepared in accordance with GAAP as in effect from time to time, applied on a
basis consistent (except for changes approved by Lender and by Borrower's
independent certified public accountants) with the most recent audited financial
statements of Borrower delivered to Lender.
SECTION 2. THE REVOLVING CREDIT LOANS.
2.01 Revolving Credit Loans.
(a) Subject to the terms and conditions of this Agreement, during the
Revolving Credit Period of this Agreement, and so long as no Default or Event of
Default under this Agreement has occurred and is continuing, Lender hereby
agrees to make such loans (individually, a "Revolving Credit Loan" and
collectively, the "Revolving Credit Loans") to Borrower as Borrower may from
time to time request pursuant to Section 2.02(a) or 2.02(b). Each Revolving
Credit Loan under this Section 2.01 (a) which is a LIBOR Loan shall be for an
aggregate principal amount of at least $1,000,000.00 or any larger multiple of
$1,000,000.00. The aggregate principal amount of Revolving Credit Loans which
Lender shall be required to have outstanding under this Agreement at any one
time shall not exceed the sum of (i) the lesser of (A) the Lender's Revolving
Credit Commitment or (B) the Borrowing Base minus (ii) the aggregate undrawn
face amount of all outstanding Letters of Credit. Subject to the terms and
conditions of this Agreement, Borrower may borrow, repay and reborrow
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14
such sums from Lender, provided, however, that in no event may the Total
Revolving Credit Outstandings on any given day exceed the lesser of (a) the
Lender's Revolving Credit Commitment as of such day or (b) the Borrowing Base as
of such day. All Revolving Credit Loans not paid prior to the last day of the
Revolving Credit Period, together with all accrued and unpaid interest thereon,
shall be due and payable on the last day of the Revolving Credit Period.
(b) For purposes of this Agreement, the "Borrowing Base" shall mean the
sum of:
(i) (A) Eighty-Five Percent (85%) if the Rate of Dilution of
Borrower's Accounts is less than or equal to Five Percent (5%), (B)
Eighty Percent (80%) if the Rate of Dilution of Borrower's Accounts is
greater than Five Percent (5%) but less than or equal to Eight Percent
(8%), (C) Seventy-Five Percent (75%) if the Rate of Dilution of
Borrower's Accounts is greater than Eight Percent (8%) but less than or
equal to Ten Percent (10%) or (D) such percentage as Lender may
determine in its sole and absolute discretion if the Rate of Dilution
of Borrower's Accounts is greater than Ten Percent (10%), of the face
amount of all then existing Eligible Accounts (less maximum discounts,
credits and allowances which may be taken by or granted to Account
Debtors in connection therewith and/or adjustments for reserves and
allowances deemed appropriate by Lender in its good faith discretion
exercised in accordance with its customary business practices and in a
commercially reasonable manner to protect Lender with respect to the
repayment of the Borrower's Obligations); plus
(ii) the lesser of (A) Fifty Percent (50%) of the Eligible
Inventory of Borrower, valued at the lower of cost or market in
accordance with GAAP or (B) $2,500,000.00; plus
(iii) Sixty-Five Percent (65%) of the aggregate amount of all
Eligible Lease Payments of Borrower; provided, however, that in no
event may the aggregate amount of all Eligible Lease Payments of
Borrower which are due from lessees who are not the United States of
America or a state of the United States or a department, agency or
instrumentality of any of the foregoing exceed the sum of $500,000.00.
Notwithstanding any provision contained in this Section 2.01 (b) to the
contrary, Lender may at any time and from time to time, in its sole and absolute
discretion, loan to Borrower more than the above stated percentage of Eligible
Accounts, more than the above stated percentage of the value of Eligible
Inventory and/or more than the above stated percentage of Eligible Lease
Payments, without notice to Borrower; provided, however, that no such
over-advance shall establish a custom or course of dealing or entitle Borrower
to any subsequent over-advance under the same or different circumstances.
Lender reserves the right at any time and from time to time in its good
faith discretion, exercised in a commercially reasonable manner to protect
Lender with respect to the repayment of the Borrower's Obligations, to increase
or decrease the percentage advance rates on Eligible Accounts, Eligible
Inventory and/or Eligible Lease Payments specified in this Section 2.01(b) upon
seven (7) days' prior written notice to Borrower.
(c) Borrower shall deliver to Lender on the date of execution of this
Agreement (calculated as of August 31, 1997) and on the first (1st) day of each
month thereafter during the Revolving Credit Period (provided, however, that if
any Default or Event of Default under this Agreement occurs or if the Unused
Availability of Borrower is ever less than $ 1,500,000.00, Borrower shall
deliver such Borrowing Base Certificates to Lender on at least one (1) Domestic
Business Day during each week (or at such other intervals as Lender shall
require from time to time)), a borrowing base certificate in the form of Exhibit
A attached hereto and incorporated herein by reference (or in such other form as
Lender shall require from time to time) (each, a "Borrowing Base Certificate")
setting forth:
(i) the Borrowing Base and its components as of the end of
the immediately preceding Domestic Business Day;
(ii) the aggregate principal amount of all Revolving Credit
Loans outstanding as of the end of the immediately preceding Domestic
Business Day;
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15
(iii) the aggregate undrawn face amount of all Letters of
Credit outstanding as of the end of the immediately preceding Domestic
Business Day; and
(iv) the difference, if any, between the Borrowing Base and
the sum of the Total Revolving Credit Outstandings as of the end of the
immediately preceding Domestic Business Day.
The Borrowing Base shown in such Borrowing Base Certificate (subject to
adjustment for collections of Accounts received by Lender since the date of such
Borrowing Base Certificate) shall be and remain the Borrowing Base hereunder
until the next Borrowing Base Certificate is delivered to Lender, at which time
the Borrowing Base shall be the amount shown in such subsequent Borrowing Base
Certificate. Each Borrowing Base Certificate shall be certified as to truth and
accuracy by the chairman, chief executive officer, president, chief financial
officer or chief accounting officer of Borrower. Borrower shall have the right
to submit Borrowing Base Certificates to Lender more frequently than from time
to time required by Lender.
(d) If at any time the Total Revolving Credit Outstandings are greater
than the Borrowing Base as shown on the most recent Borrowing Base Certificate,
Borrower shall be required to, upon oral or written demand by Lender,
immediately repay the Revolving Credit Loans and/or surrender for cancellation
the outstanding Letters of Credit, in either case in an amount sufficient to
reduce the amount of the Total Revolving Credit Outstandings to the amount of
the Borrowing Base.
(e) Borrower may not have outstanding and Lender shall not be obligated
to make more than ten (10) LIBOR Loans at any one time.
2.02 Procedure for Borrowing. (a) Borrower shall give oral or written
notice (a "Borrowing Notice") to Lender by 10:00 a.m. (St. Louis time) on the
Domestic Business Day of each Prime Loan, and by 10:00 a.m. (St. Louis Time) at
least three (3) Eurodollar Business Days before each LIBOR Loan, specifying:
(i) the date of such Revolving Credit Loan, which shall be a
Domestic Business Day in the case of a Prime Loan and a Eurodollar
Business Day in the case of a LIBOR Loan,
(ii) the aggregate principal amount of such Revolving Credit
Loan,
(iii) whether such Revolving Credit Loan is to be a Prime Loan
or a LIBOR Loan, and
(iv) in the case of a LIBOR Loan, the duration of the initial
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
(b) In addition to Revolving Credit Loans requested by Borrower
pursuant to Section 2.02(a) above, Borrower hereby irrevocably requests and
authorizes Lender, without any other request or authorization from Borrower and
without any notice to Borrower, to automatically make a Prime Loan to Borrower
at the end of each Domestic Business Day on which any checks are presented for
payment on Borrower's controlled disbursement account (Account No. 1005008600)
at Mercantile Bank National Association (the "Controlled Disbursement Accounts),
by crediting the amount of such Prime Loan, which shall be in an amount equal to
the aggregate amount of all checks presented for payment on the Controlled
Disbursement Account on such Domestic Business Day, to the Controlled
Disbursement Account. Notwithstanding the foregoing, Borrower acknowledges and
agrees that Lender has no obligation to make any Revolving Credit Loan requested
under this Section 2.02(b) if (i) after giving effect to such Revolving Credit
Loan the Total Revolving Credit Outstandings would be greater than the lesser of
(A) the Lender's Revolving Credit Commitment or (B) the Borrowing Base or (ii)
any applicable condition set forth in Section 3 has not been satisfied.
(c) A Borrowing Notice for a LIBOR Loan shall not be revocable by
Borrower.
(d) Subject to the terms and conditions of this Agreement, provided
that Lender has received the Borrowing Notice, Lender shall (unless any
applicable condition specified in Section 3 has not been satisfied) make any
Revolving Credit Loan requested by Borrower pursuant to Section 2.02(a) above to
Borrower by crediting the amount of such Revolving Credit Loan to an account of
Borrower at Mercantile Bank National
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16
Association or such other bank as may from time to time be acceptable to Lender,
not later than 2:30 p.m. (St. Louis time) on the Domestic Business Day or
Eurodollar Business Day, as the case may be, specified in said Borrowing Notice.
(e) If Lender makes a new Revolving Credit Loan hereunder on a day on
which Borrower is required to or has elected to repay all or any part of an
outstanding Revolving Credit Loan, Lender shall apply the proceeds of the new
Revolving Credit Loan to make such repayment and only an amount equal to the
difference (if any) between the amount being borrowed and the amount being
repaid shall be made available by Lender to Borrower as provided in subsection
Id) of this Section, or remitted by Borrower to Lender as provided in Section
2.11, as the case may be.
(f) Borrower hereby irrevocably authorizes Lender to rely on
telephonic, telegraphic, telecopy, telex or written instructions of any
individual identifying himself or herself as one of the individuals listed on
Schedule 2.02(f) attached hereto (or any other individual from time to time
authorized to act on behalf of Borrower pursuant to a resolution adopted by the
Board of Directors of Borrower and certified by the Secretary of Borrower and
delivered to Lender) with respect to any request to make a Revolving Credit Loan
or a repayment hereunder, and on any signature which Lender believes to be
genuine, and Borrower shall be bound thereby in the same manner as if such
person were actually authorized or such signature were genuine. Borrower also
hereby agrees to indemnify Lender and hold Lender harmless from and against any
and all claims, demands, damages, liabilities, losses, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses)
relating to or arising out of or in connection with the acceptance of
instructions for making Revolving Credit Loans or repayments hereunder.
2.03 Revolving Credit Note. (a) The Revolving Credit Loans of Lender to
Borrower shall be evidenced by a Revolving Credit Note of Borrower dated the
date hereof and payable to the order of Lender in the principal amount of
$15,000,000.00, which Revolving Credit Note shall be in substantially the form
of Exhibit B attached hereto and incorporated herein by reference (as the same
may from time to time be amended, modified extended or renewed, the "Revolving
Credit Note").
(b) Lender shall record in its books and records the date, amount, type
and maturity of each Revolving Credit Loan made by it and the date and amount of
each payment of principal and/or interest made by Borrower with respect thereto.
The books and records of Lender showing the account between Lender and Borrower
shall be admissible in evidence in any action or proceeding and shall, absent
manifest error, constitute prima facie proof of the items therein set forth.
2.04 Duration of Interest Periods and Selection of Interest Rates. (a)
The duration of the initial Interest Period for each LIBOR Loan shall be as
specified in the applicable Borrowing Notice. Borrower shall elect the duration
of each subsequent Interest Period applicable to such LIBOR Loan and the
interest rate to be applicable during such subsequent Interest Period (and
Borrower shall have the option (i) in the case of any Prime Loan, to elect that
such Revolving Credit Loan become a LIBOR Loan and the Interest Period to be
applicable thereto, and (ii) in the case of any LIBOR Loan, to elect that such
Revolving Credit Loan become a Prime Loan), by giving notice of such election to
Lender by 10:00 a.m. (St. Louis time) on the Domestic Business Day of, in the
case of the election of the Prime Rate, and by 10:00 a.m. (St. Louis time) at
least three (3) Eurodollar Business Days before, in the case of the election of
the LIBOR Rate, the end of the immediately preceding Interest Period applicable
thereto, if any; provided, however, that notwithstanding the foregoing, in
addition to and without limiting the rights and remedies of Lender under Section
6 hereof, so long as any Default or Event of Default under this Agreement has
occurred and is continuing, Borrower shall not be permitted to renew any LIBOR
Loan as a LIBOR Loan or to convert any Prime Loan into a LIBOR Loan.
(b) If Lender does not receive a notice of election for a Revolving
Credit Loan pursuant to Section 2.04(a) above within the applicable time limits
specified therein, Borrower shall be deemed to have elected to pay such
Revolving Credit Loan in whole pursuant to Section 2.10 on the last day of the
current Interest Period with respect thereto and to reborrow the principal
amount of such Revolving Credit Loan on such date as a Prime Loan.
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17
2.05 Interest Rates. (a) So long as no Event of Default under this
Agreement has been declared by Lender and is continuing, each Prime Loan shall
bear interest prior to maturity at a rate per annum equal to the Prime Rate
(fluctuating as and when the Prime Rate shall change). So long as any Event of
Default under this Agreement has been declared by Lender and is continuing, each
Prime Loan shall bear interest prior to maturity at a rate per annum equal to
Four Percent (4%) over and above the Prime Rate (fluctuating as and when the
Prime Rate shall change). Interest on Prime Loans shall be payable monthly in
arrears on the first (1st) day of each month, commencing on the first such date
after such Prime Loan is made, and at the maturity of the Revolving Credit Note,
whether by reason of acceleration or otherwise. From and after the maturity of
the Revolving Credit Note, whether by reason of acceleration or otherwise, each
Prime Loan shall bear interest payable on demand until paid at a rate per annum
equal to Four Percent (4%) over and above the Prime Rate (fluctuating as and
when the Prime Rate shall change).
(b) So long as no Event of Default under this Agreement has been
declared by Lender and is continuing, each LIBOR Loan shall bear interest on the
outstanding principal amount thereof for each Interest Period applicable thereto
at a rate per annum equal to the applicable LIBOR Rate. So long as any Event of
Default under this Agreement has been declared by Lender and is continuing, each
LIBOR Loan shall bear interest on the outstanding principal amount thereof for
each Interest Period applicable thereto at a rate per annum equal to Four
Percent (4%) over and above the applicable LIBOR Rate. Interest on the LIBOR
Loans shall be payable for each Interest Period on the last day thereof and at
the maturity of the Revolving Credit Note, whether by reason of acceleration or
otherwise. From and after the maturity of the Revolving Credit Note, whether by
reason of acceleration or otherwise, each LIBOR Loan shall bear interest payable
on demand until paid at a rate per annum equal to Four Percent (4%) over and
above the Prime Rate (fluctuating as and when the Prime Rate shall change).
(c) Subject to and in accordance with the provisions of this Agreement,
Lender shall determine the interest rate applicable to each Revolving Credit
Loan hereunder and its determination thereof shall be conclusive in the absence
of manifest error.
2.06 Letters of Credit. Lender may, in its sole and absolute
discretion, provide indemnification for the payment of letters of credit issued
at the request and for the account of the Borrower by financial institutions
acceptable to Lender. No Letter of Credit shall have a term extending beyond the
last day of the Revolving Credit Period. In no event may (a) the aggregate
undrawn face amount of all outstanding Letters of Credit exceed the sum of
$500,000.00 or (b) the Total Revolving Credit Outstandings exceed the lesser of
(i) the Lender's Revolving Credit Commitment or (ii) the Borrowing Base. In
consideration of Lender's indemnification with respect to such Letter(s) of
Credit, Borrower hereby agrees to pay Lender a nonrefundable indemnity fee at
the rate of Two and One-Half Percent (2-1/2%) per annum on the aggregate undrawn
face amount of all Letters of Credit which are outstanding for the account of
Borrower, which indemnity fee shall be (i) computed on a daily basis, (ii)
payable monthly in arrears on the first (1st) day of each month and (iii)
calculated on an actual day, 360-day year basis. Said indemnity fee shall be in
addition to any fees charged by the issuers of such Letters of Credit. In the
event of any payment by Lender on or in respect of its indemnity obligations
with respect to a Letter of Credit, Borrower agrees to pay Lender in immediately
available funds at the time of such payment an amount equal to the amount of
such payment. In the event any payment is made by Lender on or in respect of its
indemnity obligations with respect to a Letter of Credit prior to Lender's
receipt of payment from Borrower, such payment by Lender shall constitute a
request by Borrower for a Revolving Credit Loan under Section 2.01 (a) above
(and Lender may make such Revolving Credit Loan to Borrower regardless of
whether such Revolving Credit Loan would otherwise be permitted under the
requirements of Sections 2.01 of this Agreement) and the proceeds of such
Revolving Credit Loan shall be retained by Lender and applied by Lender to the
payment of any amounts owed by Borrower to Lender under this Section 2.06.
Notwithstanding any provision contained in this Agreement to the
contrary: (a) if any Letters of Credit remain outstanding on the last day of the
Revolving Credit Period or, if earlier, the date of the termination of this
Agreement, Borrower shall, on or before 12:00 noon (St. Louis time) on the last
day of the Revolving Credit Period or, if earlier, the date of the termination
of this Agreement, (i) surrender the originals of the applicable Letter(s) of
Credit to Lender for cancellation or (ii) provide Lender with cash collateral
(or other collateral acceptable to Lender in its sole and absolute discretion)
in an amount at least equal to the aggregate
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18
undrawn face amount of all Letter(s) of Credit which remain outstanding at such
time and execute and deliver to Lender such agreements as Lender may require to
grant Lender a first priority perfected security interest in such cash or other
collateral; and (b) upon the occurrence of any Event of Default under this
Agreement (including, without limitation, Borrower's failure to comply with the
requirements of clause (a) above), at Lender's option and without demand or
further notice to Borrower, an amount equal to the aggregate undrawn face amount
of all Letter(s) of Credit then outstanding shall be deemed (as between Lender
and Borrower) to have been paid or disbursed by Lender under its indemnity
obligations to the issuing bank(s) (notwithstanding that such amounts may not in
fact have been so paid or disbursed by Lender), and a Revolving Credit Loan to
Borrower in such amount to have been made and accepted by Borrower, which
Revolving Credit Loan shall be immediately due and payable. In lieu of the
foregoing, at the election of Lender, Borrower shall, upon Lender's demand, (i)
deliver to Lender cash, or other collateral acceptable to Lender in its sole and
absolute discretion, having a value, as determined by Lender, at least equal to
aggregate undrawn face amount of all outstanding Letters of Credit and (ii)
execute and deliver to Lender such agreements as Lender may require to grant
Lender a first priority perfected security interest in such cash or other
collateral. Any such collateral and/or any amounts received by Lender in payment
of the Revolving Credit Loan made pursuant to this Section 2.06 shall be held by
Lender in a separate account at Mercantile Bank National Association (or its
successor) appropriately designated as a cash collateral account in relation to
this Agreement and the Letters of Credit and retained by Lender as collateral
security for the payment of the Borrower's Obligations. Cash amounts delivered
to Lender pursuant to the foregoing requirements of this Section 2.06 shall be
invested, at the request and for the account of Borrower, in investments of a
type and nature and with a term acceptable to Lender. Such amounts, including in
the case of cash amounts invested in the manner set forth above, any investment
realized thereon, may, at Lender's option, be applied by Lender to reimburse
Lender for any amounts paid by Lender in respect of its indemnity obligations
with respect to the Letters of Credit, or if no such indemnity payments are
required to the payment of such other of the Borrower's Obligations as Lender
shall determine. Any amounts remaining in any cash collateral account
established pursuant to this Section 2.06 after the payment in full of all of
the Borrower's Obligations and the expiration or cancellation of all of the
Letters of Credit shall be returned to Borrower (after deduction of Lender's
reasonable expenses, if any).
2.07 Method of Making Interest and Other Payments; Application of
Payments. Lender may, at its option, deem interest and other amounts payable
under this Agreement (other than the principal balance of the Revolving Credit
Loans) to be paid by causing a Revolving Credit Loan to be made to Borrower in
such amount(s). Solely for the purpose of calculating interest earned by Lender,
payment by or for the account of Borrower shall be applied by the Lender on
account of the Borrower's Obligations on the first (1st) Domestic Business Day
after a deposit of funds is made in the amount of that payment in Lender's
operating account at Mercantile Bank National Association or to such other
operating account at such other financial institution as Lender shall designate.
Deposits received after 3:00 p.m. (St. Louis time) shall be deemed to have been
received or deposited on the following Domestic Business Day.
2.08 Fees.
(a) Borrower hereby agrees to pay Lender a nonrefundable
commitment fee in the amount of $25,000.00 prior to or
contemporaneously with the execution of this Agreement, receipt of
which fee is hereby acknowledged by Bank.
(b) Borrower hereby agrees to pay Lender a nonrefundable
origination fee in the amount of $75,000.00 contemporaneously with the
execution of this Agreement.
(c) Borrower hereby agrees to pay Lender a nonrefundable
anniversary fee in the amount of $15,000.00 on each October 29 during
the Revolving Credit Period commencing October 29, 1998.
(d) During the Revolving Credit Period, Borrower hereby agrees
to pay Lender a minimum monthly fee of $30,000.00 (the "Minimum Monthly
Fee"), which Minimum Monthly Fee shall be reduced by the aggregate
amount of accrued interest actually paid by Borrower with respect to
the Revolving Credit Loans during such month and which Minimum Monthly
Fee shall be payable monthly in arrears on the first (1st) day of each
month commencing December 1, 1997, and on the last day of the Revolving
Credit Period.
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19
(e) Borrower hereby agrees to pay Lender a quarterly
collateral examination fee in the amount of $2,500.00 payable on the
date hereof and every three (3) months thereafter during the Revolving
Credit Period. In addition to said quarterly collateral examination
fee, Borrower hereby agrees to reimburse Lender upon demand for any
reasonable out-of-pocket costs and expenses incurred by Lender in
connection with any collateral examination conducted by Lender (Lender
agrees that the maximum amount of such out-of-pocket costs and expenses
for which it will seek reimbursement from Borrower will not exceed the
sum of $1,000.00 per collateral examination or $4,000.00 per calendar
year so long as no Default or Event of Default under this Agreement has
occurred and is continuing).
(f) If Borrower fails to make any payment of any principal of
or interest on any Revolving Credit Loan within ten (10) days after the
date the same shall become due and payable, whether by reason of
maturity, acceleration or otherwise, in addition to all of the other
rights and remedies of Lender under this Agreement and at law or in
equity, Borrower shall pay Lender on demand with respect to each such
late payment a late fee in an amount equal to the greater of $100.00 or
Five Percent (5%) of the amount of each such late payment.
2.09 Early Termination and Early Termination Fee. Borrower may elect to
terminate this Agreement at any time. Borrower hereby agrees that in the event
that Lender or Borrower elects to terminate this Agreement (including, without
limitation, any termination by Lender as a result of the occurrence of an Event
of Default under this Agreement), Borrower will pay to Lender the total of the
following: (a) any amount of interest accrued through the date of termination
with respect to the outstanding Borrower's Obligations; and (b) the outstanding
Borrower's Obligations.
2.10 Early Payments. (a) Borrower may, upon notice to Lender specifying
that it is paying the Prime Loans, prepay without penalty or premium the Prime
Loans in whole or in part at any time or from time to time by paying the
principal amount to be paid.
(b) Borrower may, upon at least one (1) Eurodollar Business Day's
prior notice to Lender specifying that it is paying the LIBOR Loans, prepay any
or all of its LIBOR Loans in whole, or in part in amounts aggregating
$1,000,000.00 or any larger multiple of $1,000,000.00, by paying the principal
amount to be paid together with all accrued and unpaid interest thereon to and
including the date of payment and any funding losses and other amounts payable
under Section 2.12; provided, however, that in no event may Borrower make a
partial payment of LIBOR Loans which results in the total outstanding LIBOR
Loans with respect to which a given Interest Period applies being greater than
$0.00 but less than $1,000,000.00.
(c) A notice of payment pursuant to this Section shall not be
revocable by Borrower.
2.11 General Provisions as to Payments. Borrower shall make each
payment of principal of, and interest on, the Revolving Credit Loans and of fees
and all other amounts payable by Borrower under this Section 2, not later than
3:00 p.m. (St. Louis time) on the date when due to Lender at its address
referred to in Section 7.07. Any such payment received by Lender after 3:00 p.m.
(St. Louis time) shall be deemed to have been paid on the next succeeding
Domestic Business Day. Whenever any payment of principal of, or interest on, the
Revolving Credit Loans or of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon, at the then
applicable rate, shall be payable for such extended time.
2.12 Funding Losses. Notwithstanding any provision contained in this
Agreement to the contrary, if Borrower makes any payment of principal with
respect to any LIBOR Loan Pursuant to Sections 2 or 6 or otherwise) on any day
other than the last day of an Interest Period applicable thereto, or if Borrower
fails to borrow or pay any LIBOR Loan after notice has been given to Lender in
accordance with Sections 2.02, 2.04 or 2.10(b) by Borrower, Borrower shall
reimburse Lender on demand for any resulting losses and expenses incurred by it,
including, without limitation, any losses incurred in obtaining, liquidating or
employing deposits from third parties and any loss of margin for the period
after any such payment, provided that Lender shall
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20
have delivered to Borrower a certificate as to the amount of such losses and
expenses, which certificate shall be conclusive in the absence of manifest
error.
2.13 Basis for Determining Interest Rate Inadequate or Unfair. If with
respect to any Interest Period:
(i) deposits in dollars (in the applicable amounts) are not
being offered to Lender in the relevant market for such Interest
Period, or
(ii) the LIBOR Rate as determined by Lender in good faith will
not adequately and fairly reflect the cost to Lender of maintaining or
funding the LIBOR Loans for such Interest Period,
Lender shall forthwith give notice thereof to Borrower, whereupon until the
circumstances giving rise to such suspension no longer exist, (a) the
obligations of Lender to make LIBOR Loans shall be suspended and (b) Borrower
shall repay in full the then outstanding principal amount of each of the LIBOR
Loans together with all accrued and unpaid interest thereon, on the last day of
the then current Interest Period applicable to such Revolving Credit Loan.
Concurrently with repaying each such LIBOR Loan pursuant to this Section,
Borrower may borrow a Prime Loan in an equal principal amount from Lender, and,
if Borrower so elects, Lender shall make such a Prime Loan to Borrower.
2.14 Illegality. If, after the date of this Agreement, the adoption of
any applicable law, rule or regulation, or any change therein, or any change in
the interpretation or administration thereof by any governmental or regulatory
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Lender with any request or directive
(whether or not having the force of law) of any such governmental or regulatory
authority, central bank or comparable agency shall make it unlawful or
impossible for Lender to make, maintain or fund its LIBOR Loans to Borrower,
Lender shall so notify Borrower. Upon receipt of such notice, Borrower shall
repay in full the then outstanding principal amount of each of the LIBOR Loans,
together with all accrued and unpaid interest thereon to the date of prepayment
and any funding losses and other amounts due under Section 2.12, on either (a)
the last day of the then current Interest Period applicable to such LIBOR Loan
if Lender may lawfully continue to maintain and fund the LIBOR Loans to such day
or (b) immediately if Lender may not lawfully continue to fund and maintain the
LIBOR Loans to such day. Concurrently with repaying each LIBOR Loan, Borrower
may borrow a Prime Loan in an equal principal amount from Lender, and, if
Borrower so elects, Lender shall make such a Prime Loan to Borrower.
2.15 Increased Cost. (a) If any Regulatory Change occurs and the result
of any such Regulatory Change is to increase the cost to (or in the case of
Regulation D, to impose a cost on or increase the cost to) Lender of making,
maintaining or funding any LIBOR Loan, or to reduce the amount of any sum
received or receivable by Lender under this Agreement or under the Revolving
Credit Note with respect thereto, by an amount deemed by Lender, in its good
faith judgment, to be material, and if Lender is not otherwise fully compensated
for such increase in cost or reduction in amount received or receivable by
virtue of the inclusion of the reference to "LIBOR Reserve Percentage" in the
calculation of the interest rate applicable to LIBOR Loans, then, within fifteen
(15) days after notice by Lender to Borrower together with a copy of the
official notice of the applicable change in law (if applicable) and a work sheet
showing how the increase in cost or reduction in amount received or receivable
was calculated, Borrower shall pay Lender, as additional interest, such
additional amount or amounts as will compensate Lender for such increased cost
or reduction. Lender will promptly notify Borrower of any event of which it has
knowledge, occurring after the date hereof, which will entitle Lender to
compensation pursuant to this Section. The determination by Lender under this
Section of the additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In determining such amount or
amounts, Lender may use any reasonable averaging and attribution methods.
(b) If Lender demands compensation under this Section, Borrower may at
any time, upon at least two (2) Domestic Business Days' prior notice to Lender,
repay in full its then outstanding LIBOR Loans from Lender, together with all
accrued and unpaid interest thereon to the date of prepayment and any funding
losses and other amounts due under Section 2.12. Concurrently with repaying such
LIBOR Loans, Borrower may borrow from Lender a Prime Loan in an amount equal to
the aggregate principal amount of such LIBOR Loans, and, if Borrower so elects,
Lender shall make such a Prime Loan to Borrower.
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2.16 Prime Loans Substituted for Affected LIBOR Loans. If notice has
been given by Lender pursuant to Sections 2.13 or 2.14 or by Borrower pursuant
to Section 2.15 requiring the LIBOR Loans to be repaid, then, unless and until
the circumstances giving rise to such repayment no longer apply, all Revolving
Credit Loans which would otherwise be made by Lender to Borrower as LIBOR Loans
shall be made instead as Prime Loans. Lender shall promptly notify Borrower if
and when the circumstances giving rise to such repayment no longer apply.
2.17 Capital Adequacy. If Lender shall have determined in good faith
that the adoption after the date of this Agreement of any applicable law, rule,
regulation or guideline regarding capital adequacy, or any change therein, or
any change after the date of this Agreement in the interpretation or
administration thereof by any governmental or regulatory authority, central bank
or comparable agency charged with the interpretation or administration thereof,
or compliance by Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or will have the effect of reducing the rate of return on
Lender's capital in respect of its obligations under this Agreement with respect
to the Revolving Credit Loans to a level below that which Lender could have
achieved but for such adoption, change or compliance (taking into consideration
Lender's policies with respect to capital adequacy), then from time to time
Borrower shall pay to Lender upon demand such additional amount or amounts as
will compensate Lender for such reduction. All determinations made in good faith
by Lender of the additional amount or amounts required to compensate Lender in
respect of the foregoing shall be conclusive in the absence of manifest error.
In determining such amount or amounts, Lender may use any reasonable averaging
and attribution methods.
2.18 Survival of Indemnities. All indemnities and all provisions
relating to reimbursement to Lender of amounts sufficient to protect the yield
to Lender with respect to the Revolving Credit Loans, including, without
limitation, Sections 2.12, 2.13, 2.14, 2.15 and 2.17 hereof, shall survive the
payment of the Revolving Credit Loans and the other Borrower's Obligations and
the termination of this Agreement.
2.19 Discretion of Lender as to Manner of Funding. Notwithstanding any
provision contained in this Agreement to the contrary, Lender shall be entitled
to fund and maintain its funding of all or any part of the LIBOR Loans in any
manner it elects, it being understood, however, that for purposes of this
Agreement all determinations hereunder (including, without limitation, the
determination of Lender's funding losses and expenses under Section 2.12) shall
be made as if Lender had actually funded and maintained each LIBOR Loan through
the purchase of deposits having a maturity corresponding to the maturity of the
applicable Interest Period relating to the applicable LIBOR Loan and bearing an
interest rate equal to the applicable LIBOR Rate.
2.20 Computation of Interest. Interest on Prime Loans hereunder shall
be computed on the basis of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the last day). Interest on
LIBOR Loans shall be computed on the basis of a year of 360 days and paid for
the actual number of days elapsed, calculated as to each Interest Period from
and including the first day thereof to but excluding the last day thereof.
SECTION 3. PRECONDITIONS TO REVOLVING CREDIT LOANS.
3.01 Initial Revolving Credit Loan. Notwithstanding any provision
contained in this Agreement to the contrary, Lender shall have no obligation to
make the initial Revolving Credit Loan under this Agreement unless Lender shall
have first received:
(a) this Agreement and the Revolving Credit Note, each executed by a
duly authorized officer of Borrower;
(b) the Security Agreement (which must be in form and substance
satisfactory to Lender) and such Uniform Commercial Code financing statements
and other documents as Lender may require in connection therewith, each executed
by a duly authorized officer of Borrower;
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22
(c) the Patent, Trademark and License Security Agreement (which must be
in form and substance satisfactory to Lender) and such Uniform Commercial Code
financing statements and other documents as Lender may require in connection
therewith, each executed by a duly authorized officer of Borrower;
(d) a copy of resolutions of the Board of Directors of Borrower, duly
adopted, which authorize the execution, delivery and performance of this
Agreement, the Revolving Credit Note and the other Transaction Documents,
certified by the Secretary of Borrower;
(e) a copy of the Certificate of Incorporation of Borrower, including
any amendments thereto, certified by the Secretary of State of the State of
Delaware;
(f) a copy of the By-Laws of Borrower, including any amendments
thereto, certified by the Secretary of Borrower;
(g) an incumbency certificate, executed by the Secretary of Borrower,
which shall identify by name and title and bear the signatures of all of the
officers of Borrower executing any of the Transaction Documents;
(h) certificates of corporate good standing of Borrower issued by the
Secretaries of State of the States of Delaware and Ohio;
(i) an opinion of counsel of Xxxx, Xxxxxxxxxx & Xxxxxxxxx, outside
counsel to Borrower, in form and substance satisfactory to Lender and Lender's
counsel;
(j) the initial Borrowing Base Certificate required by Section 2.01(c)
and the initial Collateral Report required by Section 3(a) of the Security
Agreement;
(k) the Borrowing Notice required by Section 2.02(a), if applicable;
and
(l) evidence of the proper filing of UCC-1 Financing Statements
perfecting first priority security interests in favor of Lender in all of the
Collateral;
(m) UCC-3 Termination Statements for all UCC-1 Financing Statements
filed of record against Borrower other than UCC-1 Financing Statements relating
to Permitted Liens;
(n) evidence satisfactory to Lender of the insurance required by this
Agreement and the other Transaction Documents together with loss payable
endorsements in form and substance satisfactory to Lender, duly executed by the
insurance company;
(o) copies of all financial statements and other Exhibits and Schedules
required by this Agreement and the other Transaction Documents; and
(p) a letter of direction from Borrower with respect to the
disbursement of the proceeds of the initial Revolving Credit Loans under this
Agreement;
(q) such mortgagee, bailee, landlord or warehousemen's waivers as
Lender may deem necessary regarding locations at which Collateral is or will be
stored or otherwise located;
(r) a pay-off letter from Princeton Capital Finance Corporation in form
and substance satisfactory to Lender;
(s) evidence satisfactory to Lender that, after the pay-off of
Princeton Capital Finance Corporation, Borrower has Unused Availability of at
least $500,000.00;
(t) the results of reference, record, background and credit checks
(including Equifax Reports) on the senior management of Borrower, which results
must be satisfactory to Lender;
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(u) a consent in form and substance satisfactory to Lender, duly
executed by Algonquin Industries, Inc. and Xxxxxxx Xxxxxx with respect to
Borrower's granting Lender a security interest in the pull-tab manufacturing and
license agreement dated January 13, 1994, by and among Algonquin Industries,
Inc. and Xxxxxxx Xxxxxx, as licensors, and Borrower, as licensee, regarding a
pull-tab ticket mechanism;
(v) letter agreements in form and substance satisfactory to Lender,
duly executed by each bonding company which has issued a bond for the account of
Borrower in favor a lessee under a Lease; and
(w) such other agreements, documents, instruments and certificates as
Lender may reasonably request.
3.02 All Revolving Credit Loans. Notwithstanding any provision
contained in this Agreement to the contrary, Lender shall have no obligation to
make any Revolving Credit Loan under this Agreement unless:
(a) Lender shall have received a current Borrowing Base Certificate as
required by Section 2.01(c) and a current Collateral Report as required by
Section 3(a) of the Security Agreement;
(b) if such Revolving Credit Loan is requested by Borrower pursuant to
Section 2.02(a), Lender shall have received a Borrowing Notice for such
Revolving Credit Loan;
(c) on the date of and immediately after such Revolving Credit Loan,
no Default or Event of Default under this Agreement shall have occurred and be
continuing;
(d) no material adverse change in the Properties, assets, liabilities,
business, operations, prospects, income or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole shall have occurred since the
date of this Agreement and be continuing; and
(e) all of the representations and warranties of Borrower contained in
this Agreement and in the other Transaction Documents shall be true and correct
in all material respects on and as of the date of such Revolving Credit Loan as
if made on and as of the date of such Revolving Credit Loan.
Each request for a Revolving Credit Loan by Borrower under this
Agreement (whether pursuant to Section 2.02(a) or 2.02(b) or otherwise) shall be
deemed to be a representation and warranty by Borrower on the date of such
Revolving Credit Loan as to the facts specified in clauses (c), (d) and (e) of
this Section 3.02.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
Borrower hereby represents and warrants to Lender that:
4.01 Corporate Existence and Power. Borrower and each Subsidiary: (a)
is duly incorporated, validly existing and in good standing under the laws of
the jurisdiction of its incorporation; (b) has all requisite corporate powers
required to carry on its business as now conducted; (c) has all requisite
governmental and regulatory licenses, authorizations, consents and approvals
required to carry on its business as now conducted, except such licenses,
authorizations, consents and approvals the failure to have could not reasonably
be expected to have a Material Adverse Effect; and (d) is qualified to transact
business as a foreign corporation in, and is in good standing under the laws of,
all states in which it is required by applicable law to maintain such
qualification and good standing except for those states in which the failure to
qualify or maintain good standing could not reasonably be expected to have a
Material Adverse Effect.
4.02 Corporate Authorization. The execution, delivery and performance
by Borrower of this Agreement, the Revolving Credit Note and the other
Transaction Documents are within the corporate powers of Borrower and have been
duly authorized by all necessary corporate action.
4.03 Binding Effect. This Agreement, the Revolving Credit Note and the
other Transaction Documents have been duly executed and delivered by Borrower
and constitute the legal, valid and binding obligations of Borrower enforceable
in accordance with their respective terms, except as such enforceability
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may be limited by bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
4.04 Financial Statements. Borrower has furnished Lender with the
following financial statements, identified by the chief financial officer of
Borrower: (a) a balance sheet and the statements of income, retained earnings
and cash flows of Borrower as of and for the fiscal year ended December 31,
1996, all audited by Borrower's independent certified public accountants, which
financial statements have been prepared in accordance with GAAP consistently
applied; and (b) an unaudited balance sheet and statements of income, retained
earnings and cash flows of Borrower as of and for the fiscal quarter ended June
30, 1997, certified by the chief financial officer of Borrower as being true and
correct to the best of his or her knowledge and as being prepared in accordance
with GAAP consistently applied (subject to normal year-end adjustments and the
absence of footnotes). Borrower further represents and warrants to Lender that
(a) said balance sheets and their accompanying notes fairly present the
condition of Borrower as of the dates thereof, (b) there has been no material
adverse change in the condition or operation, financial or otherwise, of
Borrower since June 30, 1997, and (c) Borrower did not have any direct or
contingent liabilities which were not disclosed on said financial statements or
the notes thereto (to the extent such disclosure is required by GAAP).
4.05 Litigation. Except as disclosed on Schedule 4.05 attached hereto,
there is no action or proceeding pending or, to the knowledge of Borrower,
threatened against or affecting Borrower or any Subsidiary before any court,
arbitrator or any governmental, regulatory or administrative body, agency or
official which, if adversely determined against Borrower or any Subsidiary,
could reasonably be expected to have a Material Adverse Effect. Neither Borrower
nor any Subsidiary is in default with respect to any order, writ, injunction,
decision or decree of any court, arbitrator or any governmental, regulatory or
administrative body, agency or official, a default under which could reasonably
be expected to have a Material Adverse Effect. There are no outstanding
judgments against Borrower or any Subsidiary.
4.06 Pension and Welfare Plans. Each Pension Plan and Welfare Plan
complies in all material respects with ERISA and all other applicable statutes
and governmental and regulatory rules and regulations; no Reportable Event has
occurred and is continuing with respect to any Pension Plan; neither Borrower
nor any Subsidiary nor any ERISA Affiliate has withdrawn from any Multi-Employer
Plan in a "complete withdrawal" or a "partial withdrawal" as defined in Sections
4203 or 4205 of ERISA, respectively; neither Borrower nor any Subsidiary nor any
ERISA Affiliate has entered into an agreement pursuant to Section 4204 of ERISA;
neither Borrower nor any Subsidiary nor any ERISA Affiliate has in the past
contributed to or currently contributes to a Multi-Employer Plan; neither
Borrower nor any Subsidiary nor any ERISA Affiliate has any withdrawal liability
with respect to a Multi-Employer Plan; no steps have been instituted by Borrower
or any Subsidiary or any ERISA Affiliate to terminate any Pension Plan; no
condition exists or event or transaction has occurred in connection with any
Pension Plan, Multi-Employer Plan or Welfare Plan which could result in the
incurrence by Borrower or any Subsidiary or any ERISA Affiliate of any material
liability, fine or penalty; and neither Borrower nor any Subsidiary nor any
ERISA Affiliate is a "contributing sponsor" as defined in Section 4001 (a)(13)
of ERISA of a "single-employer plan" as defined in Section 4001 (a)(15) of ERISA
which has two or more contributing sponsors at least two of whom are not under
common control. Except as disclosed on the consolidated financial statements of
Borrower and its Subsidiaries delivered by Borrower to Lender, neither Borrower
nor any Subsidiary nor any ERISA Affiliate has any liability with respect to any
Welfare Plan.
4.07 Tax Returns and Payment. Borrower and its Subsidiaries have filed
all Federal, state, local and other income and other tax returns which are
required to be filed and have paid all taxes which have become due pursuant to
such returns and all other taxes, assessments, fees and other governmental
charges upon Borrower and its Subsidiaries and upon their respective Properties,
assets, income and franchises which have become due and payable by Borrower or
any of its Subsidiaries, except those wherein the amount, applicability or
validity are being contested by Borrower or any such Subsidiary by appropriate
proceedings being diligently conducted in good faith and in respect of which
adequate reserves in accordance with GAAP have been established. There is no
proposed, asserted or assessed tax deficiency against Borrower or any of its
Subsidiaries which, if adversely determined, could reasonably be expected to
have a Material Adverse Effect.
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4.08 Subsidiaries. Borrower has no Subsidiaries other than as
identified on Schedule 4.08 attached hereto, as the same may from time to time
be amended, modified or supplemented as provided herein. Schedule 4.08 attached
hereto correctly sets forth, for each Subsidiary, the number of shares of each
class of common and preferred stock authorized for such Subsidiary, the number
of outstanding and the percentage of the outstanding shares of each such class
owned, directly or indirectly, by Borrower or one or more of its Subsidiaries.
All of the issued and outstanding capital stock of each Subsidiary is duly
authorized, validly issued and fully paid and nonassessable. Except as disclosed
on Schedule 4.08 attached hereto, neither Borrower nor any of its Subsidiaries,
individually or collectively, owns or holds, directly or indirectly, any capital
stock or equity security of, or any equity interest in, any corporation or
business other than Borrower's Subsidiaries. Borrower may at any time amend,
modify or supplement Schedule 4.08 by notifying Lender in writing of any changes
thereto, including any formation, acquisition, merger or liquidation of
Subsidiaries or any change in the capitalization of any Subsidiary, in each
case, in accordance with the terms of this Agreement, and thereby the
representations and warranties contained in this Section 4.08 shall be amended
accordingly so long as such amendment, modification or supplement is made within
thirty (30) days after the occurrence of any such changes in the facts stated
therein and that such changes reflect transactions that are permitted under this
Agreement.
4.09 Compliance With Other Instruments; None Burdensome. Neither
Borrower nor any Subsidiary is a party to any contract or agreement or subject
to any charter or other corporate restriction which could reasonably be expected
to have a Material Adverse Effect and which is not disclosed on Borrower's
financial statements heretofore submitted to Lender; none of the execution and
delivery by Borrower of the Transaction Documents, the consummation of the
transactions therein contemplated or the compliance with the provisions thereof
will violate any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on Borrower, or any of the provisions of the Certificate
or Articles of Incorporation or By-Laws of Borrower or any of the provisions of
any indenture, agreement, document, instrument or undertaking to which Borrower
is a party or subject, or by which Borrower or any Property or assets of
Borrower is bound, or conflict with or constitute a default thereunder or result
in the creation or imposition of any Lien pursuant to the terms of any such
indenture, agreement, document, instrument or undertaking (other than in favor
of Lender pursuant to the Transaction Documents). No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with, or exemption by, any governmental, regulatory, administrative or public
body or authority, or any subdivision thereof, or any other Person is required
to authorize, or is required in connection with, the execution, delivery or
performance of, or the legality, validity, binding effect or enforceability of,
any of the Transaction Documents, except for any consents required under the
Leases to permit the grant of a security interest in Borrower's rights
thereunder to Lender and the assignment of the Lease Payments due thereunder to
Lender.
4.10 Other Debt. Guarantees and Capitalized Leases. Except as disclosed
on Schedule 4.10 attached hereto, neither Borrower nor any Subsidiary is a
borrower, guarantor or obligor with respect to, or a lessee under, any Debt,
Guarantees or Capitalized Leases. Borrower may at any time amend, modify or
supplement Schedule 4.10 by notifying Lender in writing of any changes thereto,
and thereby the representations and warranties contained in this Section 4.10
shall be amended accordingly so long as such amendment, modification or
supplement is made within thirty (30) days after the occurrence of any such
changes in the facts stated therein and that such changes reflect transactions
that are permitted under this Agreement.
4.11 Labor Matters. Neither Borrower nor any Subsidiary is a party to
any labor dispute which could reasonably be expected to have a Material Adverse
Effect. There are no strikes or walkouts relating to any labor contract to which
Borrower or any Subsidiary is subject. Hours worked and payments made to the
employees of Borrower and its Subsidiaries have not been in violation of (a) the
Fair Labor Standards Act or (b) any other applicable law dealing with such
matters, the violation of which could reasonably be expected to have a Material
Adverse Effect. All payments due from Borrower or any Subsidiary, or for which
any claim may be made against any of them, in respect of wages, employee health
and welfare insurance and/or other benefits have been paid or accrued as a
liability on their respective books.
4.12 Title to Property. Borrower and each Subsidiary is the sole and
absolute owner of, or has the legal right to use and occupy, all Property it
claims to own or which is necessary for Borrower or such
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26
Subsidiary to conduct its business, and all of such Property is free and clear
of all Liens other than Permitted Liens. Borrower and its Subsidiaries enjoy
peaceful and undisturbed possession in all material respects under all leases
under which they are operating as lessees.
4.13 Regulation U. Borrower is not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of The
Board of Governors of the Federal Reserve System, as amended) and no part of the
proceeds of any Revolving Credit Loan will be used, whether directly or
indirectly, and whether immediately, incidentally or ultimately (i) to purchase
or carry margin stock or to extend credit to others for the purpose of
purchasing or carrying margin stock, or to refund or repay indebtedness
originally incurred for such purpose or (ii) for any purpose which entails a
violation of, or which is inconsistent with, the provisions of any of the
Regulations of The Board of Governors of the Federal Reserve System, including,
without limitation, Regulations G, U, T or X thereof, as amended. If requested
by Lender, Borrower shall furnish to Lender a statement in conformity with the
requirements of Federal Reserve Form U-1 referred to in Regulation U.
4.14 Multi-Employment Pension Plan Amendments Act of 1980. Borrower and
each Subsidiary is in compliance with the Multi-Employer Pension Plan Amendments
Act of 1980, as amended ("MEPPAA"), and has no liability for pension
contributions pursuant to MEPPAA.
4.15 Investment Company Act of 1940; Public Utility Holding Company Act
of 1935. Borrower is not an "investment company" as that term is defined in, and
is not otherwise subject to regulation under, the Investment Company Act of
1940, as amended. Borrower is not a "holding company" as that term is defined
in, and is not otherwise subject to regulation under, the Public Utility Holding
Company Act of 1935, as amended.
4.16 Patents, Trademarks, Copyrights. Licenses, Etc. Except as
disclosed on Schedule 4.16 attached hereto, neither Borrower nor any Subsidiary
has any patents, patent applications, patent rights, trademarks, trademark
applications, trademark rights, copyrights or licenses which are material to the
business of Borrower or any Subsidiary. Borrower may at any time amend, modify
or supplement Schedule 4.16 by notifying Lender in writing of any changes
thereto, and thereby the representations and warranties contained in the first
sentence of this Section 4.16 shall be amended accordingly so long as such
amendment, modification or supplement is made within thirty (30) days after the
occurrence of any such changes in the facts stated therein and that such changes
reflect transactions that are permitted under this Agreement. Borrower and each
Subsidiary possesses all necessary patents, patent rights, trademarks, trademark
rights, trade names, trade name rights, copyrights and licenses to conduct its
business without conflict with any patent, patent right, trademark, trademark
right, trade name, copyright or license of any other Person.
4.17 Environmental and Safety and Health Matters. Except as disclosed
on Schedule 4.17 attached hereto: (i) the operations of Borrower and each
Subsidiary comply with all applicable Environmental Laws and all applicable
Occupational Safety and Health Laws, the violation or noncompliance with which
could reasonably be expected to have a Material Adverse Effect; (ii) none of the
operations of Borrower or any Subsidiary are subject to any Environmental Claim
or any judicial, governmental, regulatory or administrative proceeding alleging
the violation of any Occupational Safety and Health Law, which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect;
(iii) none of the operations of Borrower or any Subsidiary is the subject of any
Federal or state investigation evaluating whether any remedial action is needed
to respond to any Release of Hazardous Substances or any unsafe or unhealthful
condition at any premises owned, leased or operated by Borrower or such
Subsidiary; (iv) neither Borrower nor any Subsidiary has filed any notice under
any Environmental Law or Occupational Safety and Health Law indicating or
reporting (A) any past or present spillage, leakage or Release into the
environment of, or treatment, storage or disposal of, any Hazardous Substance or
(B) any unsafe or unhealthful condition at any premises owned, leased or
operated by Borrower or such Subsidiary; and (v) neither Borrower nor any
Subsidiary has any material contingent liability in connection with (A) any
spillage, disposal or Release into the environment of, or otherwise with respect
to, any Hazardous Substances or (B) any unsafe or unhealthful condition at any
premises owned, leased or operated by Borrower or such Subsidiary.
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4.18 Investments. Neither Borrower nor any Subsidiary has any
Restricted Investments.
4.19 No Default. No Default or Event of Default under this Agreement
has occurred and is continuing. There is no existing default or event of default
under or with respect to any indenture, contract, agreement, lease or other
instrument to which Borrower or any Subsidiary is a party or by which any
Property of Borrower or any Subsidiary is bound or affected, a default under
which could reasonably be expected to have a Material Adverse Effect. Borrower
and each Subsidiary of Borrower has and is in full compliance with and in good
standing with respect to all governmental permits, licenses, certificates,
consents and franchises necessary to continue to conduct its business as
previously conducted by it and to own or lease and operate its Properties as now
owned or leased by it, the failure to have or noncompliance with which could
reasonably be expected to have a Material Adverse Effect, and, to the best of
Borrower's knowledge, none of said permits, certificates, consents or franchises
contain any term, provision, condition or limitation more burdensome than such
as are generally applicable to Persons engaged in the same or similar business
as Borrower or such Subsidiary, as the case may be. Neither Borrower nor any
Subsidiary of Borrower is in violation of any applicable statute, law, rule,
regulation or ordinance of the United States of America, of any state, city,
town, municipality, county or of any other jurisdiction, or of any agency
thereof, a violation of which could reasonably be expected to have a Material
Adverse Effect.
4.20 Disclosure. Neither this Agreement nor any of the Exhibits or
Schedules hereto nor any certificate or other data furnished to Lender in
writing by or on behalf of Borrower or any Subsidiary in connection with the
transactions contemplated by this Agreement contains any untrue or incorrect
statement of a material fact. To the best knowledge of Borrower, there is no
fact peculiar to Borrower or any of its Subsidiaries which presently has a
Material Adverse Effect or in the future (so far as Borrower can now foresee)
could reasonably be expected to have a Material Adverse Effect, which has not
heretofore been disclosed in writing by Borrower to Lender.
SECTION 5. COVENANTS.
5.01 Affirmative Covenants of Borrower. Borrower covenants and agrees
that, so long as Lender has any obligation to make any Revolving Credit Loan
under this Agreement, any Letter of Credit remains outstanding or any of the
Borrower's Obligations remain unpaid, unless the prior written consent of Lender
is obtained:
(a) Information. Borrower will deliver to Lender:
(i) as soon as available and in any event within one hundred
twenty (120) days after the end of each fiscal year of Borrower,
consolidated and consolidating balance sheets of Borrower and its
Subsidiaries as of the end of such fiscal year and the related
consolidated and consolidating statements of income, retained earnings
and cash flows for such fiscal year, setting forth in each case, in
comparative form, the figures for the previous fiscal year, all such
financial statements to be prepared in accordance with GAAP
consistently applied and reported on by and accompanied by the
unqualified opinion of KPMG Peat Marwick LLP or other independent
certified public accountants selected by Borrower and reasonably
acceptable to Lender; provided, however, that delivery within the time
period specified above of copies of the Annual Report on Form 10-K of
Borrower for such fiscal year as filed with the Securities and Exchange
Commission (together with Borrower's annual report to shareholders, if
any, prepared pursuant to Rule 14a-3 under the Exchange Act) together
with the accountant's certificate described above shall be deemed to
satisfy the requirements of this Section 5.01 (a)(i) with respect to
delivery of the audited consolidated financial statements referred to
above;
(ii) as soon as available and in any event within forty-five
(45) days after the end of the first three (3) fiscal quarters of each
fiscal year of Borrower, consolidated and consolidating balance sheets
of Borrower and its Subsidiaries as of the end of such fiscal quarter
and the related consolidated and consolidating statements of income,
retained earnings and cash flows for such fiscal quarter and for the
portion of Borrower's fiscal year ended at the end of such fiscal
quarter, setting forth in each case in comparative form, the figures
for the corresponding fiscal quarter and the corresponding portion of
Borrower's previous fiscal year, all in reasonable detail and
satisfactory in form to Lender and certified
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(subject to normal year-end adjustments and footnote disclosures) as to
fairness of presentation, GAAP and consistency by the chief financial
officer of Borrower; provided, however, that delivery within the time
period specified above of copies of the Quarterly Report on Form 10-Q
of Borrower for such fiscal quarter as filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of this
Section 5.01 (a)(ii) with respect to consolidated financial statements;
(iii) as soon as available and in any event within forty-five
(45) days after the end of each fiscal month of Borrower which is not
the end of a fiscal quarter or fiscal year of Borrower, consolidated
and consolidating balance sheets of Borrower and its Subsidiaries as of
the end of such fiscal month and the related consolidated and
consolidating statements of income, retained earnings and cash flows
for such fiscal month and for the portion of Borrower's fiscal year
ended at the end of such fiscal month, setting forth in each case in
comparative form, the figures for the corresponding fiscal month and
the corresponding portion of Borrower's previous fiscal year, all in
reasonable detail and satisfactory in form to Lender;
(iv) simultaneously with the delivery of each set of
financial statements referred to in Sections 5.01 (a)(i) and (ii)
above, a certificate of the chief financial officer of Borrower (or
such other officer of Borrower as shall be reasonably acceptable to
Lender) in the form attached hereto as Exhibit C and incorporated
herein by reference, accompanied by supporting financial work sheets
where appropriate, (A) evidencing Borrower's compliance with the
financial covenants contained in Sections 5.01 (o) and 5.02(m) of this
Agreement, (B) stating whether there exists on the date of such
certificate any Default or Event of Default and, if any Default or
Event of Default then exists, setting forth the details thereof and the
action which Borrower is taking or proposes to take with respect
thereto and (C) certifying that all of the representations and
warranties of Borrower contained in this Agreement and in the other
Transaction Documents are true and correct in all material respects on
and as of the date of such certificate as if made on and as of the date
of such certificate;
(v) promptly upon transmission thereof, one copy of (A)
each financial statement, report, notice or proxy statement sent by
Borrower or any Subsidiary generally to its stockholders or to its
creditors (other than Borrower or another Subsidiary) and (B) each
regular or periodic report, each registration statement (without
exhibits except as expressly requested by Lender), and each prospectus
and all amendments thereto filed by Borrower or any Subsidiary with the
Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange Commission)
and of each press release and other statement made available generally
by Borrower or any Subsidiary to the public concerning developments
that are material;
(vi) promptly upon receipt thereof, any reports (including,
without limitation, any management reports) submitted to Borrower or
any Subsidiary (other than reports previously delivered pursuant to
Sections 5.01(a)(i) above) by independent accountants in connection
with any annual, interim or special audit made by them of the books of
Borrower or any Subsidiary;
(vii) within fifteen (15) days after the end of each fiscal
month of Borrower, (i) an accounts receivable aging of Borrower
indicating which Accounts are less than 30, 30 to 60, 60 to 90 and 90
days or more past the invoice date and including, if requested by
Lender, a listing of the names and addresses of all applicable Account
Debtors and (B) a summary of accounts payable of Borrower showing which
accounts payable are current, up to 30, 30 to 60, 60 to 90 and 90 days
or more past due and including, if requested by Lender, a listing of
the names and addresses of applicable creditors, all in form and detail
reasonably satisfactory to Lender and certified as being true, correct
and complete by the chief financial officer of Borrower;
(viii) at such intervals as Lender may request (but not more
often than monthly so long as no Default or Event of Default under this
Agreement has occurred and is continuing and Borrower has Unused
Availability of at least $1,500,000.00), such information and reports
regarding Borrower's Inventory as Lender may from time to time request,
all in form and detail reasonably satisfactory to Lender and certified
as being true, correct and complete by the chief financial officer of
Borrower;
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(ix) at such intervals as Lender may request (but not more
often than monthly so long as no Default or Event of Default under this
Agreement has occurred and is continuing and Borrower has Unused
Availability of at least $1,500,000.00), such information and reports
regarding the Leases, the Eligible Leases, the Lease Payments and the
Eligible Lease Payments as Lender may from time to time request, all in
form and detail reasonably satisfactory to Lender and certified as
being true, correct and complete by the chief financial officer of
Borrower;
(x) within ten (10) days after the execution thereof, a copy
of each Lease and of each amendment, modification, extension, renewal,
termination or cancellation of any Lease;
(xi) as soon as available and in any event within thirty (30)
days before the beginning of each fiscal year of Borrower, consolidated
and consolidating balance sheet, income statement and cash flow
projections for Borrower and its Subsidiaries for such fiscal year on a
month-by-month basis, all in form and detail reasonably acceptable to
Lender; and
(xii) with reasonable promptness, such further information
regarding the business, affairs and financial condition of Borrower or
any Subsidiary as Lender may from time to time reasonably request.
Lender is hereby authorized to deliver a copy of any financial
statement or other information made available by Borrower or any Subsidiary to
any regulatory authority having jurisdiction over Lender, pursuant to any
request therefor.
(b) Payment of Debt; Performance of Lease Obligations. Borrower will,
and it will cause each of its Subsidiaries to, (i) pay and discharge any and all
Debt payable or Guaranteed by Borrower or such Subsidiary, as the case may be,
and any interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) in accordance with the
agreement, document or instrument relating to such Debt or Guarantee and (ii)
faithfully perform, observe and discharge all covenants, conditions and
obligations which are imposed upon Borrower or such Subsidiary, as the case may
be, by any and all agreements, documents, instruments and indentures evidencing,
securing or otherwise relating to such Debt or Guarantee. Borrower will
faithfully perform, observe and discharge all covenants, conditions, obligations
and duties which are imposed upon Borrower under or in connection with the
Leases.
(c) Maintenance of Books and Records; Consultations and Inspections.
Borrower will, and it will cause each of its Subsidiaries to, maintain books and
records in accordance with GAAP and in which full, true and correct entries
shall be made of all dealings and transactions in relation to its business and
activities. Borrower will, and it will cause each of its Subsidiaries to, permit
Lender (and any Person appointed by Lender to whom Borrower does not reasonably
object) to discuss the affairs, finances and accounts of Borrower and each
Subsidiary with the officers of Borrower and each Subsidiary, all at such
reasonable times and as often as Lender may from time to time reasonably
request. Borrower will also permit, and will cause each of its Subsidiaries to
permit, inspection of its Properties, books and records by the Lender during
normal business hours and at other reasonable times upon at least one (1)
Domestic Business Day's prior oral or written notice from Lender to Borrower
(provided, however, that no such notice need be given by Lender if any Default
or Event of Default under this Agreement has occurred and is continuing).
Borrower will reimburse Lender upon demand for ail reasonable costs and expenses
incurred by Lender in connection with any such inspection conducted by Lender
while any Default or Event of Default under this Agreement has occurred and is
continuing. Borrower irrevocably authorizes Lender to, if any Default or Event
of Default under this Agreement has occurred and is continuing, communicate
directly with its independent public accountants and irrevocably authorizes and
directs such accountants to disclose to Lender any and all information with
respect to the business and financial condition of Borrower and its Subsidiaries
as Lender may from time to time reasonably request in writing (with a copy of
such request to be sent to Borrower).
(d) Payment of Taxes. Borrower will, and it will cause each of its
Subsidiaries to, duly file all Federal, state and local income tax returns and
all other tax returns and reports of Borrower or such Subsidiary, as the case
may be, which are required to be filed and duly pay and discharge promptly all
taxes, assessments and other governmental charges imposed upon it or any of its
Property; provided, however, that neither Borrower nor any Subsidiary shall be
required to pay any such tax, assessment or other governmental charge
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the payment of which is being contested in good faith and by appropriate
proceedings being diligently conducted and for which adequate reserves in
accordance with GAAP have been provided, except that Borrower or such
Subsidiary, as the case may be, shall pay or cause to be paid all such taxes,
assessments and governmental charges forthwith upon the commencement of
proceedings to foreclose any Lien which is attached as security therefor, unless
such foreclosure is stayed by the filing of an appropriate bond in a manner
reasonably satisfactory to Lender.
(e) Payment of Claims. Borrower will, and it will cause each of its
Subsidiaries to, promptly pay and discharge (i) all trade accounts payable in
accordance with usual and customary business practices (but in no event later
than thirty (30) days after the due date thereof) and (ii) all claims for work,
labor or materials which if unpaid might become a Lien upon any of its Property
or assets; provided, however, that neither Borrower nor any Subsidiary shall be
required to pay any such account payable or claim the payment of which is being
contested in good faith and by appropriate proceedings being diligently
conducted and for which adequate reserves in accordance with GAAP have been
provided, except that Borrower or such Subsidiary, as the case may be, shall pay
or cause to be paid all such accounts payable and claims forthwith upon the
commencement of proceedings to foreclose any Lien which is attached as security
therefor, unless such foreclosure is stayed by the filing of an appropriate bond
in a manner reasonably satisfactory to Lender.
(f) Corporate Existence. Borrower will, and it will cause each of its
Subsidiaries to, do all things necessary to (i) preserve and keep in full force
and effect at all times its corporate existence and all permits, licenses,
franchises and other rights material to its business and (ii) be duly qualified
to do business and be in good standing in all jurisdictions where the nature of
its business or its ownership of Property requires such qualification except for
those jurisdictions in which the failure to qualify or be in good standing could
not reasonably be expected to have a Material Adverse Effect.
(g) Maintenance of Property. Borrower will, and it will cause each of
its Subsidiaries to, at all times, preserve and maintain all of the Property
used or useful in the conduct of its business in good condition, working order
and repair, ordinary wear and tear excepted.
(h) Compliance with Laws, Regulations, Etc. Borrower will, and it will
cause each of its Subsidiaries to, comply with any and all laws, ordinances and
governmental and regulatory rules and regulations to which Borrower or such
Subsidiary, as the case may be, is subject (including, without limitation, all
Occupational Safety and Health Laws and all Environmental Laws) and obtain any
and all licenses, permits, franchises and other governmental and regulatory
authorizations necessary to the ownership of its Properties or to the conduct of
its business, which violation or failure to obtain could reasonably be expected
to have a Material Adverse Effect.
(i) Environmental Matters. Borrower shall give Lender prompt written
notice of (i) any Environmental Claim or any other action or investigation with
respect to the existence or potential existence of any Hazardous Substances
instituted or threatened with respect to Borrower or any Subsidiary or any of
the Properties or facilities owned, leased or operated by Borrower or any
Subsidiary which, if determined adversely to Borrower or any Subsidiary, could
reasonably be expected to have a Material Adverse Effect and (ii) any condition
or occurrence on any of the Properties or facilities owned, leased or operated
by Borrower or any Subsidiary which constitutes a violation of any Environmental
Laws, the violation of which could reasonably be expected to have a Material
Adverse Effect or which gives rise to a reporting obligation or requires removal
or remediation under any Environmental Laws. Within thirty (30) days after the
giving of any such notice, Borrower shall deliver to Lender Borrower's plan with
respect to removal or remediation and Borrower agrees to take all action which
is reasonably necessary in connection with such action, investigation, condition
or occurrence in accordance with such plan with due diligence and to complete
such removal or remediation as promptly as possible and in all events within the
time required by any Environmental Laws or any other applicable law, rule or
regulation. Borrower shall promptly provide Lender with copies of all
documentation relating thereto, and such other information with respect to
environmental matters as Lender may request from time to time.
(j) ERISA Compliance. If Borrower, any Subsidiary or any ERISA
Affiliate shall have any Pension Plan, Borrower, such Subsidiary or such ERISA
Affiliate, as the case may be, shall comply with all requirements
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of ERISA relating to such Pension Plan, the violation of or noncompliance with
which could reasonably be expected to have a Material Adverse Effect. Without
limiting the generality of the foregoing, Borrower will not, and it will not
cause or permit any Subsidiary or any ERISA Affiliate to:
(i) permit any Pension Plan maintained by Borrower, any
Subsidiary or any ERISA Affiliate to engage in any nonexempt
"prohibited transaction," as such term is defined in Section 4975 of
the Code;
(ii) permit any Pension Plan maintained by Borrower, any
Subsidiary or any ERISA Affiliate to incur any "accumulated funding
deficiency", as such term is defined in Section 302 of ERISA, 29 U.S.C.
ss. 1082, whether or not waived;
(iii) terminate any Pension Plan in a manner which could
result in the imposition of a Lien on any Property of Borrower, any
Subsidiary or any ERISA Affiliate pursuant to Section 4068 of ERISA, 29
U.S.C. ss. 1368; or
(iv) take any action which would constitute a complete or
partial withdrawal from a Multi-Employer Plan within the meaning of
Sections 4203 or 4205 of Title IV of ERISA.
Notwithstanding any provision contained in this Section 5.01(j) to the
contrary, an act by Borrower or any Subsidiary shall not be deemed to constitute
a violation of this Section 5.01(j) unless the Lender determines in good faith
that said action, individually or cumulatively with other acts of Borrower and
its Subsidiaries, has or could reasonably be expected to have a Material Adverse
Effect.
(k) Notices. Borrower will notify Lender in writing of any of the
following within three (3) Domestic Business Days after learning of the
occurrence thereof, describing the same and, if applicable, the steps being
taken by the Person(s) affected with respect thereto:
(i) the occurrence of any Default or Event of Default under
this Agreement;
(ii) the occurrence of any default or event of default by
Borrower, any other Obligor or any Subsidiary under any note,
indenture, loan agreement, mortgage, deed of trust, security agreement,
lease or other similar agreement, document or instrument to which
Borrower, any other Obligor or any Subsidiary, as the case may be, is a
party or by which it is bound or to which it is subject;
(iii) the institution of any litigation, arbitration
proceeding or governmental or regulatory proceeding affecting Borrower,
any other Obligor or any Subsidiary, whether or not considered to be
covered by insurance, in which the prayer or claim for relief seeks
recovery of an amount in excess of $100,000.00 (or, if no dollar amount
is specified in the prayer or claim for relief, in which there is a
reasonable likelihood of recovery of an amount in excess of
$100,000.00) or any form of equitable relief;
(iv) the entry of any judgment or decree against Borrower,
any other Obligor or any Subsidiary;
(v) the occurrence of a Reportable Event with respect to any
Pension Plan; the filing of a notice of intent to terminate a Pension
Plan by Borrower, any ERISA Affiliate or any Subsidiary; the
institution of proceedings to terminate a Pension Plan by the PBGC or
any other Person; the withdrawal in a "complete withdrawal" or a
"partial withdrawal" as defined in Sections 4203 and 4205,
respectively, of ERISA by Borrower, any ERISA Affiliate or any
Subsidiary from any Multi-Employer Plan; or the incurrence of any
material increase in the contingent liability of Borrower or any
Subsidiary with respect to any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA which covers retired employees and
their beneficiaries;
(vi) the occurrence of any material adverse change in the
Properties, assets, liabilities, business, operations, prospects,
income or condition (financial or otherwise) of Borrower, any other
Obligor or any Subsidiary;
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(vii) any change in the name of Borrower, any other Obligor
or any Subsidiary;
(viii) any proposed opening, closing or other change of any
place of business of borrower, any other obligor or any Subsidiary;
(ix) any material change in Borrower's or any Subsidiary's
line(s) of business;
(x) the occurrence of any Change of Control Event; and
(xi) any notices required to be provided pursuant to other
provisions of this Agreement and notice of the occurrence of such other
events as Lender may from time to time reasonably specify.
(l) Insurance. Borrower will, and it will cause each of its
Subsidiaries to, insure all of its Property of the character usually insured by
corporations engaged in the same or similar businesses similarly situated,
against loss or damage of the kind customarily insured against by such
corporations, unless higher limits or coverage are reasonably required in
writing by Lender, and carry adequate liability insurance and other insurance of
a kind and in an amount generally carried by corporations engaged in the same or
similar businesses similarly situated, unless higher limits or coverage are
reasonably required in writing by Lender; provided, however, that Borrower shall
not be required to maintain casualty insurance on Inventory which is in the
possession of a lessee under a Lease. All insurance required by this Section
5.01(1) shall be with insurers rated A-XI or better by A.M Best Company (or
accorded a similar rating by another nationally or internationally recognized
insurance rating agency of similar standing if A.M. Best Company is not then in
the business of rating insurers or rating foreign insurers) or such other
insurers as may from time to time be reasonably acceptable to Lender. All such
insurance may be subject to reasonable deductible amounts. Simultaneously with
each delivery of financial statements under Section 5.01 (a)(i), Borrower shall
deliver to Lender a certificate of an officer of Borrower specifying the details
of all insurance then in effect and evidence of the payment of all premiums
therefor. UNLESS BORROWER PROVIDES EVIDENCE OF THE INSURANCE COVERAGE REQUIRED
UNDER THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, LENDER MAY PURCHASE
INSURANCE AT BORROWER'S EXPENSE TO PROTECT LENDERS INTEREST IN THE COLLATERAL.
THIS INSURANCE MAY, BUT NEED NOT, PROTECT BORROWER'S INTERESTS. THE COVERAGE
THAT LENDER PURCHASES MAY NOT PAY ANY CLAIM THAT BORROWER MAY MAKE OR ANY CLAIM
THAT IS MADE AGAINST BORROWER IN CONNECTION WITH THE COLLATERAL. BORROWER MAY
LATER CANCEL ANY INSURANCE PURCHASED BY LENDER, BUT ONLY AFTER PROVIDING
EVIDENCE THAT BORROWER HAS OBTAINED INSURANCE AS REQUIRED BY THIS AGREEMENT AND
THE OTHER TRANSACTION DOCUMENTS. IF LENDER PURCHASES INSURANCE FOR THE
COLLATERAL, BORROWER WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE,
INCLUDING THE INSURANCE PREMIUM, INTEREST AND ANY OTHER CHARGES LENDER MAY
IMPOSE IN CONNECTION WITH THE PLACEMENT OF INSURANCE, UNTIL THE EFFECTIVE DATE
OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE
MAY BE ADDED TO THE BORROWER'S OBLIGATIONS. THE COSTS OF THE INSURANCE MAY BE
MORE THAN THE COST OF INSURANCE BORROWER MAY BE ABLE TO OBTAIN ON ITS OWN.
(m) Further Assurances. Borrower will execute and deliver to Lender, at
any time and from time to time, any and all further agreements, documents and
instruments, and take any and all further actions which may be required under
applicable law, or which Lender may from time to time reasonably request, in
order to effectuate the transactions contemplated by this Agreement and the
other Transaction Documents.
(n) Accountant. Borrower will give Lender prompt notice of any change
of Borrower's independent certified public accountants and a statement of the
reasons for such change. Borrower shall at all times utilize independent
certified public accountants reasonably acceptable to Lender.
(o) Financial Covenants.
(i) Maximum Consolidated Debt to Consolidated EBITDA Ratio.
Borrower will have and maintain a Consolidated Debt to Consolidated
EBITDA Ratio of not more than 2.0 to 1.0 as of the last day of each
fiscal quarter of Borrower commencing with the fiscal quarter of
Borrower ended September 30, 1997.
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33
(ii) Minimum Consolidated Tangible Net Worth. Borrower will
keep and maintain a Consolidated Tangible Net Worth plus Subordinated
Debt in an amount not less than (i) $9,200,000.00 as of the last day of
each fiscal quarter of Borrower ending during the period commencing
September 30, 1997, and ending December 30, 1997, (ii) $9,450,000.00 as
of the last day of each fiscal quarter of Borrower ending during the
period commencing December 31, 1997, and ending December 30, 1998,
(iii) $9,950,000.00 as of the last day of each fiscal quarter of
Borrower ending during the period commencing December 31,1998, and
ending December 30, 1999, and (iv) $10,450,000.00 as of the last day of
each fiscal quarter of Borrower ending on or after December 31, 1999.
(iii) Minimum Consolidated Interest Coverage Ratio. Borrower
will have and maintain a Consolidated Interest Coverage Ratio of at
least 5.0 to 1.0 for each period of four (4) consecutive fiscal
quarters of Borrower commencing with the four (4) consecutive fiscal
quarter period ended September 30, 1997.
(p) Lease Consents. Borrower will use its best efforts to obtain from
each lessee under a Lease which is in existence on the date of this Agreement a
written consent expressly providing that all amounts (whether for rent or
otherwise) from time to time payable to Borrower under such Lease are assignable
by Borrower to Lender consistent with the terms of the Security Agreement.
Borrower will use its best efforts to cause each Lease executed after the date
of this Agreement (or an independent instrument executed by the applicable
lessee(s)) to contain a provision expressly providing that all amounts (whether
for rent or otherwise) from time to time payable to Borrower under such Lease
are assignable by Borrower to Lender consistent with the terms of the Security
Agreement.
5.02 Negative Covenants of Borrower. Borrower covenants and agrees
that, so long as Lender has any obligation to make any Revolving Credit Loan
under this Agreement, any Letter of Credit remains outstanding or any of the
Borrower's Obligations remain unpaid, unless the prior written consent of Lender
is obtained:
(a) Limitation on Indebtedness. Borrower will not, and it will not
cause or permit any of its Subsidiaries to, incur or be obligated on any
Indebtedness, either directly or indirectly, by way of Guarantee, suretyship or
otherwise, other than:
(i) the Borrower's Obligations;
(ii) unsecured trade accounts payable and other normal
accruals incurred in the ordinary course of business which are not more
than thirty (30) days past due (provided, however, that neither
Borrower nor any Subsidiary shall be required to pay any such account
payable or other accrual the payment of which is being contested in
good faith and by appropriate proceedings being diligently conducted
and for which adequate reserves in accordance with GAAP have been
provided, except that Borrower or such Subsidiary, as the case may be,
shall pay or cause to be paid all such accounts payable and accruals
forthwith upon the commencement of proceedings to foreclose any Lien
which is attached as security therefor, unless such foreclosure is
stayed by the filing of an appropriate bond in a manner reasonably
satisfactory to Lender);
(iii) Indebtedness under performance bonds issued for the
account of Borrower and for the benefit of lessees under Leases so long
as no amount owed by Borrower under or in respect of any such
performance bond is past due;
(iv) Indebtedness existing as of the date of this Agreement
and listed on Schedule 5.10 attached hereto (nothing contained in this
Agreement is intended to prohibit Borrower from making payments
required to be made to the holders of the promissory note of Borrower
dated September 22, 1992, and payable to the order of Xxxxxx Xxxxx,
M.D. in the original principal amount of $400,000.00 and/or the
promissory note of Borrower dated September 25, 1992, and payable to
the order of Xxxxxx X. Xxxxx in the original principal amount of
$79,000.00 in accordance with the terms of such promissory notes so
long as such payments do not violate or result in the violation of any
of the financial covenants contained in Section 5.01(o) of this
Agreement);
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(v) Subordinated Debt;
(vi) purchase money Indebtedness incurred solely to finance
Capital Expenditures permitted by, and Capitalized Lease Obligations
permitted by, Section 5.02(m) of this Agreement; and
(vii) other Indebtedness not otherwise permitted by this
Section 5.02(a) in an amount not to exceed $100,000.00 in the aggregate
at any one time outstanding for Borrower and all of its Subsidiaries.
(b) Limitation on Liens. Borrower will not, and will not cause or
permit any of its Subsidiaries to, create, incur or assume, or suffer to be
incurred or to exist, any Lien on any of its or their Property or assets,
whether now owned or hereafter acquired, or upon any income or profits
therefrom, except for Permitted Liens.
(c) Consolidation, Merger, Sale of Assets, Etc.
(i) Borrower will not, and it will not cause or permit any
Subsidiary to, directly or indirectly merge or consolidate with or into
any other Person or permit any other Person to merge into or with or
consolidate with it.
(ii) Borrower will not, and will not cause or permit any of
its Subsidiaries to, (A) sell, assign, lease, transfer, abandon or
otherwise dispose of any of its Property or assets (including, without
limitation, any shares of capital stock of a Subsidiary owned by
Borrower or another Subsidiary) or (B) issue, sell or otherwise dispose
of any shares of capital stock of any Subsidiary, except for (1) sales
or leases of Inventory in the ordinary course of business (which does
not include a sale, transfer or lease of Inventory in partial or total
satisfaction of any Indebtedness), (2) sales of fixed assets which are
obsolete, worn-out or otherwise not used or useable in the ordinary
course of its business, so long as the net proceeds thereof are used
solely to purchase replacement fixed assets or assets of comparable
quality or to pay or prepay Debt of Borrower or such Subsidiary, as the
case may be, and (3) other sales of fixed assets which are not used or
useable in the ordinary course of its business, so long as the gross
sale proceeds from all such asset sales by Borrower and its
Subsidiaries does not exceed $25,000.00 in the aggregate in any fiscal
year.
(d) Sale and Leaseback Transactions. Borrower will not, and it will not
cause or permit any of its Subsidiaries to, enter into any arrangement, directly
or indirectly, whereby Borrower or such Subsidiary shall in one or more related
transactions sell, transfer or otherwise dispose of any Property owned by
Borrower or such Subsidiary to any Person and then rent or lease, as lessee,
such Property or any part thereof for a period or periods which in the aggregate
would exceed twelve (12) months from the date of commencement of the lease term.
(e) Sale or Discount of Accounts or Chattel Paper. Borrower will not,
and it will not cause or permit any of its Subsidiaries to, sell or discount any
of its notes or accounts receivable, any of its chattel paper or any of its
Leases, other than discounts of Eligible Accounts permitted by Section 3(f) of
the Security Agreement and other than ordinary course settlements of Accounts
which are not Eligible Accounts in an amount not to exceed $10,000.00 in any one
instance.
(f) Transactions with Affiliates. Borrower will not, and it will not
cause or permit any of its Subsidiaries to, enter into or be a party to any
transaction or arrangement with any Affiliate (including, without limitation,
the purchase from, sale to or exchange of Property with, or the rendering of any
service by or for, any Affiliate), except in the ordinary course of business and
pursuant to the reasonable requirements of Borrower's or such Subsidiary's
business and upon fair and reasonable terms no less favorable to Borrower or
such Subsidiary than would be obtained in a comparable arm's-length transaction
with a Person not an Affiliate.
(g) Changes in Nature of Business. Borrower will not, and it will not
cause or permit any of its Subsidiaries to, engage in any business if, as a
result, the general nature of the business which would then
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35
be engaged in by Borrower and its Subsidiaries, considered as a whole, would be
substantially changed from the general nature of the business engaged in by
Borrower and its Subsidiaries as of the date of this Agreement, which is the
business of the manufacture and distribution of instant lottery vending
machines, prepaid phone card dispensing machines and stored value card
dispensing machines.
(h) Fiscal Year. Borrower will not, and it will not cause or permit any
of its Subsidiaries to, change its fiscal year.
(i) Stock Redemptions and Distributions. Borrower will not, and it will
not cause or permit any of its Subsidiaries to, declare or incur any liability
to make any Distribution in respect of the capital stock of Borrower or the
capital stock of such Subsidiary, as the case may be, except that so long as no
Default or Event of Default under this Agreement has occurred and is continuing
or is created thereby or would result therefrom, (i) Borrower shall be permitted
to redeem shares of its Series A Preferred Stock as and when required by the
provisions thereof as in effect on the date of this Agreement and (ii) if no
shares of Series A Preferred Stock of Borrower are issued and outstanding,
during each fiscal year of Borrower, Borrower shall be permitted to declare and
pay cash dividends on its capital stock and/or redeem shares of its capital
stock for cash so long as the aggregate amount paid or committed to be paid by
Borrower in connection with such dividends and/or redemptions does not exceed an
amount equal to Twenty-Five Percent (25%) of the Consolidated Net Income of
Borrower during the immediately preceding fiscal year of Borrower.
(j) Pension Plans. Borrower will not, and it will not cause or permit
any of its Subsidiaries to, (a) permit any condition to exist in connection with
any Pension Plan which might constitute grounds for the PBGC to institute
proceedings to have such Pension Plan terminated or a trustee appointed to
administer such Pension Plan or (b) engage in, or permit to exist or occur, any
other condition, event or transaction with respect to any Pension Plan which
could result in the incurrence by Borrower, any Subsidiary or any ERISA
Affiliate of any material liability, fine or penalty.
(k) Subordinated Debt. Borrower will not make any payments of
principal, interest or other amounts on or with respect to any of its
Subordinated Debt to the extent prohibited by the subordination provisions
governing the same.
(l) Restricted Investments. Borrower will not, and it will not cause or
permit any of its Subsidiaries to, directly or indirectly, make any Restricted
Investments.
(m) Capital Expenditures and Capitalized Leases. Borrower will not, and
it will not cause or permit any of its Subsidiaries to, make any Capital
Expenditure or enter into any Capitalized Lease if the sum of (i) the aggregate
amount of all Capital Expenditures (including the Capital Expenditure in
question) made by Borrower and its Subsidiaries during any fiscal year of
Borrower plus (ii) the aggregate amount of all rental and other payments in
respect of Capitalized Leases (including the Capitalized Lease in question) made
or required to be made by Borrower and its Subsidiaries during such fiscal year
of Borrower would exceed $200,000.00.
(n) Maximum Officer Compensation. Borrower will not cause or permit the
aggregate amount of salaries, consulting fees, bonuses and/or other compensation
(other than dividends and amounts paid in redemption of capital stock to the
extent, if any, permitted by Section 5.02(i) of this Agreement) paid or
committed to be paid by Borrower to all of the shareholders, directors and/or
officers of Borrower (taken as a group) during any fiscal year of Borrower to
exceed One Hundred Twenty-Five Percent (125%) of the aggregate amount of
salaries, consulting fees, bonuses and/or other compensation (other than
dividends and amounts paid in redemption of capital stock to the extent, if any,
permitted by Section 5.02(i) of this Agreement) paid by Borrower to all of the
shareholders, directors and/or officers of Borrower (taken as a group) during
the immediately preceding fiscal year of Borrower.
(o) Subsidiaries. Borrower will not, and it will not cause or permit
any of its Subsidiaries to, create, form or acquire any Subsidiaries.
5.03 Use of Proceeds. Borrower covenants and agrees that (i) the
proceeds of the Revolving Credit Loans will be used solely for the working
capital and general corporate purposes of Borrower, (ii) no part of
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36
the proceeds of any Revolving Credit Loan will be used in violation of any
applicable law, rule or regulation and (iii) no part of the proceeds of any
Revolving Credit Loan will be used, whether directly or indirectly, and whether
immediately, incidentally or ultimately (A) to purchase or carry margin stock or
to extend credit to others for the purpose of purchasing or carrying margin
stock, or to refund or repay indebtedness originally incurred for such purpose
or (B) for any purpose which entails a violation of, or which is inconsistent
with, the provisions of any of the Regulations of The Board of Governors of the
Federal Reserve System, including, without limitation, Regulations G, U, T or X
thereof, as amended.
SECTION 6. EVENTS OF DEFAULT.
If any of the following (each of the following herein sometimes called
an "Event of Default") shall occur and be continuing:
6.01 Borrower shall fail to pay any of the Borrower's Obligations as
and when the same shall become due and payable, whether by reason of demand,
maturity, acceleration or otherwise, and any such failure shall remain
unremedied for five (5) days;
6.02 Any representation or warranty of Borrower made in this Agreement,
in any other Transaction Document to which Borrower is a party or in any
certificate, agreement, instrument or statement furnished or made or delivered
pursuant hereto or thereto or in connection herewith or therewith, shall prove
to have been untrue or incorrect in any material respect when made or effected;
6.03 Borrower shall fail to perform or observe any term, covenant or
provision contained in Section 5.01 (c), Section 5.01 (k), Section 5.01 (1),
Section 5.01 (m), Section 5.01 (o)(iii), Section 5.02 or Section 5.03;
6.04 Borrower shall fail to perform or observe any term, covenant or
provision contained in Sections 2.01 (d) or 5.01 (f) and any such failure shall
remain unremedied for five (5) days after the earlier of (i) written notice of
default is given to Borrower by Lender or (ii) any officer of Borrower obtaining
knowledge of such default;
6.05 Borrower shall fail to perform or observe any term, covenant or
provision contained in Sections 5.01(o)(i) or 5.01 (o)(ii) and any such failure
shall remain unremedied for five (5) days after the earliest of (i) written
notice of default is given to Borrower by Lender, (ii) any officer of Borrower
obtaining knowledge of such default or (iii) completion of Borrower's financial
statements for the applicable period;
6.06 Borrower shall fail to perform or observe any other term, covenant
or provision contained in this Agreement (other than those specified in Sections
6.01, 6.02, 6.03, 6.04 or 6.05 above) and any such failure shall remain
unremedied for fifteen (15) days after the earlier of (i) written notice of
default is given to Borrower by Lender or (ii) any officer of Borrower obtaining
knowledge of such default;
6.07 This Agreement or any of the other Transaction Documents shall at
any time for any reason cease to be in full force and effect or shall be
declared to be null and void by a court of competent jurisdiction, or if the
validity or enforceability thereof shall be contested or denied by Borrower, or
if the transactions completed hereunder or thereunder shall be contested by
Borrower or if Borrower shall deny that it has any further liability or
obligation hereunder or thereunder;
6.08 Borrower, any other Obligor or any Subsidiary shall (i)
voluntarily commence any proceeding or file any petition seeking relief under
Title 11 of the United States Code or any other Federal, state or foreign
bankruptcy, insolvency, receivership, liquidation or similar law, (ii) consent
to the institution of, or fail to contravene 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, sequestrator or
similar official of itself or of a substantial part of its Property or assets,
(iv) file an answer admitting the material allegations of a petition filed
against itself in any such proceeding, (v) make a general assignment for the
benefit of creditors, (vi) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take any corporate or
other action for the purpose of effecting any of the foregoing;
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37
6.09 (i) An involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking relief in
respect of Borrower, any other Obligor or any Subsidiary, or of a substantial
part of the Property or assets of Borrower, any other Obligor or any Subsidiary,
under Title 11 of the United States Code or any other Federal, state or foreign
bankruptcy, insolvency, liquidation or similar law and such proceeding or
petition shall continue undismissed for thirty (30) consecutive days or an order
or decree approving or ordering any proceeding or petition shall continue
unstayed and in effect for thirty (30) consecutive days; (ii) the appointment of
a receiver, trustee, custodian, sequestrator or similar official of Borrower,
any other Obligor or any Subsidiary or of a substantial part of the Property or
assets of Borrower, any other Obligor or any Subsidiary, and such appointment
shall continue in effect for thirty (30) consecutive days or an order or decree
approving or ordering any such appointment shall continue unstayed and in effect
for thirty (30) consecutive days; or (iii) the entry of any order or decree
approving or ordering any winding-up or liquidation of Borrower, any other
Obligor or any Subsidiary, and any such order or decree shall continue unstayed
and in effect for thirty (30) consecutive days;
6.10 Any "Event of Default" (as defined therein) shall occur under or
within the meaning of the Security Agreement;
6.11 The Patent, Trademark and License Security Agreement shall at any
time for any reason cease to be in full force and effect or shall be declared to
be null and void by a court of competent jurisdiction, or if the validity or
enforceability thereof shall be contested or denied by Borrower, or if Borrower
shall deny that it has any further liability or obligation thereunder or if
Borrower shall fail to comply with or observe any of the terms, provisions or
conditions contained in the Patent, Trademark and License Security Agreement and
any such failure shall remain unremedied for fifteen (15) days after the earlier
of (i) written notice of default is given to Borrower by Lender or (ii) any
officer of Borrower obtaining knowledge of such default;
6.12 Borrower, any other Obligor or any Subsidiary shall be declared by
Lender to be in default on, or pursuant to the terms of, (i) any other present
or future obligation to Lender, including, without limitation, any other loan,
line of credit, revolving credit, guaranty or letter of credit reimbursement
obligation, or (ii) any other present or future agreement purporting to convey
to Lender a Lien upon any Property or assets of Borrower, such other Obligor or
such Subsidiary, as the case may be;
6.13 The occurrence of any default or event of default under or within
the meaning of any agreement, document or instrument evidencing, securing,
guaranteeing the payment of or otherwise relating to any Debt of Borrower, any
other Obligor or any Subsidiary (other than the Borrower's Obligations) having
an aggregate outstanding principal balance in excess of $100,000.00 which is not
cured within any applicable cure or grace period (if any);
6.14 Borrower, any other Obligor or any Subsidiary shall have a
judgment entered against it by a court having jurisdiction in the premises and
such judgment shall not be appealed in good faith or satisfied by Borrower, such
other Obligor or such Subsidiary, as the case may be, within thirty (30) days
after the entry of such judgment;
6.15 The occurrence of a Reportable Event with respect to any Pension
Plan; the filing of a notice of intent to terminate a Pension Plan by Borrower,
any ERISA Affiliate or any Subsidiary; the institution of proceedings to
terminate a Pension Plan by the PBGC or any other Person; the withdrawal in a
"complete withdrawal" or a "partial withdrawal" as defined in Sections 4203 and
4205, respectively, of ERISA by Borrower, any ERISA Affiliate or any Subsidiary
from any Multi-Employer Plan; or the incurrence of any material increase in the
contingent liability of Borrower or any Subsidiary with respect to any "employee
welfare benefit plan" as defined in Section 3(1) of ERISA which covers retired
employees and their beneficiaries;
6.16 The institution by Borrower, any ERISA Affiliate or any Subsidiary
of steps to terminate any Pension Plan if, in order to effectuate such
termination, Borrower, such ERISA Affiliate or such Subsidiary, as the case may
be, would be required to make a contribution to such Pension Plan, or would
incur a liability or obligation to such Pension Plan, in excess of $100,000.00;
or the institution by the PBGC of steps to terminate any Pension Plan;
- 37 -
38
6.17 The occurrence of any Change of Control Event; or
6.18 The occurrence of any default or event of default on the part of
Borrower under or within the meaning of any of the Leases which is declared by
the lessee(s) under such Lease and is not cured by Borrower or waived by such
lessee(s) within thirty (30) days after the declaration of such default and
which could reasonably be expected to have a Material Adverse Effect;
THEN, and in each such event (other than an event described in Sections
6.08 or 6.09), Lender may declare that its obligation to make Revolving Credit
Loans under this Agreement has terminated, whereupon such obligation of Lender
shall be immediately and forthwith terminated, and Lender may further declare
the entire outstanding principal balance of and all accrued and unpaid interest
on the Revolving Credit Note and all of the other Borrower's Obligations to be
forthwith due and payable, whereupon all of the unpaid principal balance of and
all accrued and unpaid interest on the Revolving Credit Note and all of such
other Borrower's Obligations shall become and be immediately due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by Borrower, and Lender may exercise any and all
other rights and remedies which it may have under any of the other Transaction
Documents or under applicable law; provided, however, that upon the occurrence
of any event described in Sections 6.08 or 6.09, Lender's obligation to make
Revolving Credit Loans under this Agreement shall automatically terminate and
the entire outstanding principal balance of and all accrued and unpaid interest
on the Revolving Credit Note and all of the other Borrower's Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by Borrower, and Lender may exercise any and all other rights and remedies which
it may have under any of the other Transaction Documents or under applicable
law. If any Default or Event of Default under this Agreement has occurred and is
continuing, in addition to all of Lender's other rights and remedies under this
Agreement and the other Transaction Documents and at law or in equity, Lender
shall have the right, in its sole and absolute discretion, to (a) reduce the
amount of the Lender's Revolving Credit Commitment, (b) create reserves and/or
allowances against Unused Availability, Eligible Accounts, Eligible Inventory
and/or Eligible Lease Payments and/or (c) reduce the advance rates against
Eligible Accounts, Eligible Inventory and/or Eligible Lease payments set forth
in the definition of the Borrowing Base.
SECTION 7. GENERAL.
7.01 No Waiver. No failure or delay by Lender in exercising any right,
remedy, power or privilege hereunder or under any other Transaction Document
shall operate as a waiver thereof; nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The remedies provided herein and in the
other Transaction Documents are cumulative and not exclusive of any remedies
provided by law. Nothing herein contained shall in any way affect the right of
Lender to exercise any statutory or common law right of banker's lien or
set-off.
7.02 Right of Set-Off. Upon the occurrence and during the continuance
of any Event of Default, Lender is hereby authorized at any time and from time
to time, without notice to Borrower (any such notice being expressly waived by
Borrower) and to the fullest extent permitted by law, to set-off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held by Lender and any and all other indebtedness at any time owing by
Lender to or for the credit or account of Borrower against any and all of the
Borrower's Obligations irrespective of whether or not Lender shall have made any
demand hereunder or under any of the other Transaction Documents and although
such obligations may be contingent or unmatured. Lender agrees to promptly
notify Borrower after any such set-off and application made by Lender, provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of Lender under this Section 7.02 are
in addition to any other rights and remedies (including, without limitation,
other rights of set-off) which Lender may have. Nothing contained in this
Agreement or any other Transaction Document shall impair the right of Lender to
exercise any right of set-off or counterclaim it may have against Borrower and
to apply the amount subject to such exercise to the payment of indebtedness of
Borrower unrelated to this Agreement or the other Transaction Documents.
7.03 Cost and Expenses. Borrower agrees, whether or not any Revolving
Credit Loan is made hereunder, to pay Lender upon demand for (i) all
out-of-pocket costs and expenses and all Attorneys' Fees
- 38 -
39
incurred by Lender in connection with the preparation, documentation,
negotiation, execution and/or administration of this Agreement, the Revolving
Credit Note and/or any of the other Transaction Documents, (ii) all recording,
filing and search fees and expenses incurred by Lender in connection with this
Agreement and the other Transaction Documents, (iii) all out-of-pocket costs and
expenses and all Attorneys' Fees incurred by Lender in connection with the (A)
the preparation, documentation, negotiation and execution of any amendment,
modification, extension or renewal of this Agreement, the Revolving Credit Note
and/or any of the other Transaction Documents, (B) the preparation of any waiver
or consent hereunder or under any of the other Transaction Documents or (C) any
Default or Event of Default or alleged Default or Event of Default hereunder,
(iv) if an Event of Default occurs, all out-of-pocket costs and expenses and all
Attorneys' Fees incurred by Lender in connection with such Event of Default and
collection and other enforcement proceedings resulting therefrom and (v) all
other Attorneys' Fees incurred by Lender relating to or arising out of or in
connection with this Agreement or any of the other Transaction Documents.
Borrower further agrees to pay or reimburse Lender for any stamp or other taxes
which may be payable with respect to the execution, delivery, recording and/or
filing of this Agreement, the Revolving Credit Note or any of the other
Transaction Documents. All of the obligations of Borrower under this Section
7.03 shall survive the satisfaction and payment of the Borrower's Obligations
and the termination of this Agreement.
7.04 Environmental Indemnity. Borrower hereby agrees to indemnify
Lender and hold Lender harmless from and against any and all losses,
liabilities, damages, injuries, costs, expenses and claims of any and every kind
whatsoever (including, without limitation, court costs and attorneys' fees and
expenses) which at any time or from time to time may be paid, incurred or
suffered by, or asserted against, Lender for, with respect to or as a direct or
indirect result of the violation by Borrower or any Subsidiary of any
Environmental Laws; or with respect to, or as a direct or indirect result of the
presence on or under, or the Release from, properties owned, leased or operated
by Borrower and/or any Subsidiary in the conduct of their respective businesses
into or upon any land, the atmosphere or any watercourse, body of water or
wetland, of any Hazardous Substances or any other hazardous or toxic waste,
substance or constituent or other substance (including, without limitation, any
losses, liabilities, damages, injuries, costs, expenses or claims asserted or
arising under the Environmental Laws); and the provisions of and undertakings
and indemnification set out in this Section 7.04 shall survive the satisfaction
and payment of the Borrower's Obligations and the termination of this Agreement.
7.05 General Indemnity. In addition to the payment of expenses pursuant
to Section 7.03, whether or not the transactions contemplated hereby shall be
consummated, Borrower hereby agrees to indemnify, pay and hold Lender and any
holder(s) of the Revolving Credit Note, and the officers, directors, employees,
agents and affiliates of Lender and such holder(s) (collectively, the
"Indemnities") harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for such
Indemnities in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Indemnitees shall be
designated a party thereto), that may be imposed on, incurred by or asserted
against the Indemnitees, in any manner relating to or arising out of this
Agreement, any of the other Transaction Documents or any other agreement,
document or instrument executed and delivered by Borrower or any other Obligor
in connection herewith or therewith, the statements contained in any commitment
letters delivered by Lender, Lender's agreement to make the Revolving Credit
Loans hereunder or the use or intended use of the proceeds of any Revolving
Credit Loan hereunder (collectively, the "indemnified liabilities"); provided
that Borrower shall have no obligation to an Indemnitee hereunder with respect
to indemnified liabilities arising from the gross negligence or willful
misconduct of that Indemnitee as determined by a court of competent jurisdiction
in a final nonappealable order. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, Borrower shall contribute
the maximum portion that it is permitted to pay and satisfy under applicable law
to the payment and satisfaction of all indemnified liabilities incurred by the
Indemnitees or any of them. The provisions of the undertakings and
indemnification set out in this Section 7.05 shall survive satisfaction and
payment of the Borrower's Obligations and the termination of this Agreement.
7.06 Authority to Act. Lender shall be entitled to act on any notices
and instructions (telephonic or written) believed by Lender in good faith to
have been sent or delivered by any person authorized to act on
- 39 -
40
behalf of Borrower pursuant hereto, regardless of whether such notice or
instruction was in fact delivered by a person authorized to act on behalf of
Borrower, and Borrower hereby agrees to indemnify Lender and hold Lender
harmless from and against any and all losses and expenses, if any, ensuing from
any such action.
7.07 Notices. Any notice, request, demand, consent, confirmation or
other communication hereunder shall be in writing and delivered in person or
sent by telecopy or registered or certified mail, return receipt requested and
postage prepaid, to the applicable party at its address or telecopy number set
forth on the signature pages hereof (with a copy, in the case of notices sent to
Borrower, to be sent to Xxxx XxXxx, Esq., Xxxx, Stettinius & Hollister, 1800
Star Bank Center, 000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxx 00000), or at such other
address or telecopy number as any party hereto may designate as its address for
communications hereunder by notice so given. Such notices shall be deemed
effective on the day on which delivered or sent if delivered in person or sent
by telecopy, or on the third (3rd) Domestic Business Day after the day on which
mailed, if sent by registered or certified mail.
7.08 Consent to Jurisdiction: Waiver of Jury Trial. BORROWER
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY MISSOURI STATE
COURT OR ANY UNITED STATES OF AMERICA COURT SITTING IN THE EASTERN DISTRICT OF
MISSOURI, AS LENDER MAY ELECT, IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT. BORROWER HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT TO SUCH SUIT, ACTION OR PROCEEDING
MAY BE HELD AND DETERMINED IN ANY OF SUCH COURTS. BORROWER IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH BORROWER MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT, AND BORROWER FURTHER IRREVOCABLY WAIVES ANY CLAIM
THAT SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. BORROWER HEREBY EXPRESSLY WAIVES ALL RIGHTS OF ANY
OTHER JURISDICTION WHICH BORROWER MAY NOW OR HEREAFTER HAVE BY REASON OF ITS
PRESENT OR SUBSEQUENT DOMICILES. BORROWER AUTHORIZES THE SERVICE OF PROCESS UPON
BORROWER BY REGISTERED MAIL SENT TO BORROWER AT ITS ADDRESS SET FORTH IN SECTION
7.07. BORROWER AND LENDER HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY
WITH RESPECT TO ANY ACTION IN WHICH BORROWER AND LENDER ARE PARTIES RELATING TO
OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER
TRANSACTION DOCUMENTS.
7.09 Governing Law. This Agreement, the Revolving Credit Note and all
of the other Transaction Documents shall be governed by and construed in
accordance with the substantive laws of the State of Missouri (without reference
to conflict of law principles).
7.10 Amendments and Waivers. Any provision of this Agreement, the
Revolving Credit Note or any of the other Transaction Documents may be amended
or waived if, but only if, such amendment or waiver is in writing and is signed
by Borrower and Lender.
7.11 References; Headings for Convenience. Unless otherwise specified
herein, all references herein to Section numbers refer to Section numbers of
this Agreement, all references herein to Exhibits "A", "B" and "C" refer to
annexed Xxxxxxxx "X", "X" and "C" which are hereby incorporated herein by
reference and all references herein to Schedules 2.02(f), 4.05, 4.08, 4. 10, 4.
12, 4. 16, 4.1 7 and 4.18 refer to annexed Schedules 2.02(f), 4.05, 4.08, 4.10,
4.12, 4.16, 4.17 and 4.18 which are hereby incorporated herein by reference. The
Section headings are furnished for the convenience of the parties and are not to
be considered in the construction or interpretation of this Agreement.
7.12 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns, except that Borrower may not assign or
otherwise transfer any of its rights or delegate any of its obligations under
this Agreement.
7.13 NO ORAL AGREEMENTS; ENTIRE AGREEMENT. ORAL AGREEMENTS OR
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT
OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE.
TO PROTECT BORROWER AND LENDER FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY
AGREEMENTS REACHED BY BORROWER
- 40 -
41
AND LENDER COVERING SUCH MATTERS ARE CONTAINED IN THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS, WHICH AGREEMENT AND OTHER TRANSACTION DOCUMENTS ARE A
COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN BORROWER AND LENDER,
EXCEPT AS BORROWER AND LENDER MAY LATER AGREE IN WRITING TO MODIFY THEM. This
Agreement: embodies the entire agreement and understanding between the parties
hereto and supersedes all prior agreements and understandings (oral or written)
relating to the subject matter hereof.
7.14 Severability. In the event any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
7.15 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.16 Resurrection of the Borrower's Obligations. To the extent that Lender
receives any payment on account of any of the Borrower's Obligations, and any
such payment(s) or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, subordinated and/or required to be repaid
to a trustee, receiver or any other Person under any bankruptcy act, state or
Federal law, common law or equitable cause, then, to the extent of such
payment(s) received, the Borrower's Obligations or part thereof intended to be
satisfied and any and all Liens upon or pertaining to any Property or assets of
Borrower and theretofore created and/or existing in favor of Lender as security
for the payment of such Borrower's Obligations shall be revived and continue in
full force and effect, as if such payment(s) had not been received by Lender and
applied on account of the Borrower's Obligations.
7.17 Independence of Covenants. All of the covenants contained in this
Agreement and the other Transaction Documents shall be given independent effect
so that if a particular action, event or condition is prohibited by any one of
such covenants, the fact that it would be permitted by an exception to, or
otherwise be in compliance within the provisions of, another covenant shall not
avoid the occurrence of a Default or Event of Default if such action is taken,
such event occurs or such condition exists.
7.18 Subsidiary Reference. Any reference in this Agreement to a Subsidiary of
Borrower, and any financial definition, ratio, restriction or other provision of
this Agreement which is stated to be applicable to Borrower and its Subsidiaries
or which is to be determined on a "consolidated" or "consolidating" basis, shall
apply only to the extent Borrower has any Subsidiaries and, where applicable, to
the extent any such Subsidiaries are consolidated with Borrower for financial
reporting purposes in accordance with GAAP.
7.19 Compliance with Usury Laws. It is the intent of Borrower and
Lender in the execution and performance of this Agreement, the Revolving Credit
Note and the other Transaction Documents to contract in strict compliance with
any and all applicable usury laws, including conflicts of law concepts,
governing the Revolving Credit Loans. In furtherance thereof, Lender and
Borrower stipulate and agree that none of the terms and provisions contained in
this Agreement, the Revolving Credit Note or any of the other Transaction
Documents shall ever be construed to create a contract to pay, as consideration
for the use, forbearance or detention of money, interest at a rate in excess of
the highest rate permitted by applicable law (the "Highest Lawful Rate") and
that for purposes hereof "interest" shall include the aggregate of all charges
which constitute interest under such laws that are contracted for, charged or
received under this Agreement, the Revolving Credit Note or any of the other
Transaction Documents; and in the event that, notwithstanding the foregoing,
under any circumstances the aggregate amounts taken, reserved, charged, received
or paid on the Revolving Credit Loans include amounts which by applicable law
are deemed interest which would exceed the Highest Lawful Rate, then such excess
shall be deemed to be a mistake and Lender shall credit the same on the
principal balance of the Revolving Credit Loans hereunder (or if all of the
Borrower's Obligations shall have been paid in full, refund said excess to
Borrower). In the event of demand for payment of the Revolving Credit Note
and/or any of the other Borrower's Obligations by Lender, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest may never include more than the Highest Lawful Rate and any excess
interest, if any, provided for in this Agreement, the Revolving Credit Note or
otherwise shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited against the principal
balance of the Revolving Credit Loans hereunder (or, if all of the Borrower's
- 41 -
42
Obligations shall have been repaid in full, refunded to Borrower). The
provisions of the section shall control over all other provisions of this
Agreement, the Revolving Credit Note and/or the other Transaction Documents
which may be in apparent conflict herewith.
IN WITNESS WHEREOF, Borrower and Lender have executed this Loan Agreement
this 29th day of October, 1997.
INTERLOTT TECHNOLOGIES, INC.
By /s/ Xxxxxx X. Xxxx
----------------------------
Title: Chief Executive Officer
------------------------
By /s/ X. Xxxxxx Xxxxx
----------------------------
Title: Chief Executive Officer
------------------------
00000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Chief Executive Officer and Chief
Financial Officer
Telecopy number:(000) 000-0000
--------------
MERCANTILE BUSINESS CREDIT INC.
By /s/ Xxxxxx X. Xxxxxxxx
----------------------------
Title: Vice President
------------------------
000 Xxxxx Xxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Senior Credit Officer
Telecopy number: (000) 000-0000
-42-
43
SCHEDULE 2.02(f)
Authorized Individuals
X. Xxxxxx Xxxxx
Xxxxx X. Xxxxxxx
Xxxxxx X. Xxxx
-43-
44
SCHEDULE 4.05 - LITIGATION
In January 1996, Borrower filed a civil action in the Court of Common
Pleas for Xxxxxxxx County, Ohio against Lottery Enterprises, Inc. ("LEI") to
collect sums allegedly owed to it under an agreement in principle with LEI. That
action has been removed to Federal Court, and is styled International Lottery,
Inc. v. Lottery Enterprises, Inc. Case Xx. X-0-00-000, Xxxxxx Xxxxxx Xxxxxxxx
Xxxxx, Xxxxxxxx Xxxxxxxx of Ohio, Western Division. Borrower's claims under the
agreement in principle arose in connection with a potential merger transaction
between Borrower and LEI in 1995 that was not consummated. The agreement in
principle provided for the reimbursement of Borrower's expenses by LEI, and the
payment by LEI of a break-up fee to Borrower, under certain circumstances. LEI
has denied Borrower's allegations, and has asserted counterclaims against
Borrower for breach or contract, unfair competition, and tortious interference
with its business, seeking damages in excess of $500,000.
Westwood Fabrication & Sheetmetal, Inc. filed suit against Borrower in
the Xxxxxxxxxx County, Ohio Court of Common Pleas on May 6, 1997. Westwood
alleges that Borrower has failed to pay for merchandise (ITVM dispensing machine
cabinets) valued at $36,910. Borrower admits that it ordered the cabinets.
However, Borrower denies that it is obliged to pay for the cabinets, which were
defective. Borrower has made a counterclaim for $40,454, which represents the
costs incurred by Borrower as a result of Westwood's delivery of defective
cabinets. Discovery in the case has not been completed. The case is set for
trial on February 3,1998. [Please note that Borrower is listing the Westwood
litigation in the interest of full disclosure and that Borrower does not
consider the amount in controversy in this matter to be material.]
Default judgment against Borrower in Forms Plus Inc. v.
Interlott, Inc. in the amount of $779.63
Default judgment against Borrower in Blue Chip Fasteners v. Interlott,
Inc. in the amount of $1,091.39
45
SCHEDULE 4.08
Subsidiaries
NONE
-45-
46
SCHEDULE 4.10 - OTHER DEBT, GUARANTIES AND CAPITAL LEASES
Promissory Note of Borrower payable to the order of Xxxxxx X.
Xxxxx, M.D. in the principal sum of $400,000.00 dated
September 22, 1992.
Amended and Restated Promissory Note of Borrower payable to
the order of Xxxxxx X. Xxxxx in the principal sum of
$79,000.00 dated September 25, 1992.
1,335,000 issued and outstanding shares of the Borrower's
Series A Preferred Stock. The Borrower's preferred stock is
nonparticipating and has no rights to dividends. The holders
of the preferred stock are entitled to sell to the Borrower
all of their shares of preferred stock at a price of $1.00 per
share upon (i) the payment of all debts of the Borrower
outstanding as of September 25, 1992, (ii) the reporting by
the Borrower of retained earnings of at least $1,000,000
determined in accordance with generally accepted accounting
principles, and (iii) the payment in full by the Borrower of a
promissory note in the original amount of $400,000 to Xxxxxx
X. Xxxxx.
The Borrower may, at its discretion, redeem all or part of the
outstanding preferred stock at any time. The redemption price
for the preferred stock is $1.00 per share and may be payable
in the form of a promissory note.
47
SCHEDULE 4.12 - EXISTING LIENS
Lien by the Ohio Bureau of Employment Services dated April 3, 1992
filed with the Xxxxxxxx County Recorder's Office for unpaid unemployment
compensation in the amount of $273.00.
Personal Property Tax Lien dated December 15, 1992 filed with the
Xxxxxxxx County Recorder's Office in the amount of $315.83.
48
SCHEDULE 4.16 - PATENTS. TRADEMARKS. COPYRIGHTS AND LICENSES
Patents
5,472,247 Multipoint high security locking mechanism for lottery machines
5,330,185 Method and apparatus for random play of lottery games
D376,621 Double game ticket vending machine
4,982,337 System for distributing lottery tickets
Trademarks
Reg. No. 1,949,978 - Instant Success
Reg. No. 1,822,517 - Interlott (word only)
Reg. No. R1840378 - Interlott (word and design)
Copyrights
None
Licenses
Pull-tab manufacturing and license agreement among Algonquin Industries, Inc.,
Xxxxxxx Xxxxxx and Borrower dated January 13, 1994 regarding a pull-tab ticket
mechanism.
49
SCHEDULE 4.17
Environmental and Health and Safetv Matters
NONE
-49-
50
SCHEDULE 4.18
Existing Investments
NONE
-50-
51
EXHIBIT A
BORROWING BASE CERTIFICATE
This Borrowing Base Certificate is delivered pursuant to Section 2.01 (c)
of that certain Loan Agreement dated October 29, 1997, by and among Interlott
Technologies, Inc. ("Borrower") and Mercantile Business Credit Inc. ("Lender"),
as the same may from time to time be amended, modified, extended or renewed (the
"Loan Agreement"). All capitalized terms used and not otherwise defined herein
shall have the respective meanings ascribed to them in the Loan Agreement.
Borrower hereby represents and warrants to Lender that the following
information is true and correct as of ___________, 19___:
1. 85% of face amount of Eligible Accounts of Borrower $
-------------
2. 50% of Eligible Inventory of Borrower, valued in accordance with GAAP $
-------------
3. Inventory Sublimit $ 2,500,000.00
4. Inventory Availability (Lesser of Item 2 or Item 3)
--------------
5. 65% of Eligible Lease Payments $
--------------
6. Borrowing Base (Sum of Item 1 plus Item 4 plus Item 5) $
---- ---- --------------
7. Lender's Revolving Credit Commitment $15,000,000.00
8. Borrower's Maximum Availability (Lesser of Item 6 or Item 7) $
--------------
9. Aggregate principal amount of outstanding Revolving Credit Loans $
--------------
10. Aggregate undrawn face amount of outstanding Letters of Credit $
--------------
11. Total Outstandings [Sum of Item 9 plus Item 10] $
---- --------------
12. Borrowing Availability Excess (Deficit) [Item 8 minus Item 11] $
-----
(Negative amount represents mandatory repayment) --------------
If Item 12 above is negative, this Certificate is accompanied by the
mandatory repayment required by Section 2.01(d) of the Loan Agreement.
This Borrowing Base Certificate is dated the_______ day of________, 19___.
INTERLOTT TECHNOLOGIES, INC.
By:
------------------------------------------------
Title:
---------------------------------------------
-51-
52
EXHIBIT B
REVOLVING CREDIT NOTE
$15,000,000.00 St. Louis, Missouri
October 29, 1997
FOR VALUE RECEIVED, on the last day of the Revolving Credit Period, the
undersigned, INTERLOTT TECHNOLOGIES, INC., a Delaware corporation ("Borrower"),
hereby promises to pay to the order of MERCANTILE BUSINESS CREDIT INC., a
Missouri corporation ("Lender"), the principal sum of Fifteen Million Dollars
($15,000,000.00), or such lesser sum as may then constitute the aggregate unpaid
principal amount of all Revolving Credit Loans made by Lender to Borrower
pursuant to the Loan Agreement referred to below. The aggregate principal amount
of Revolving Credit Loans which Lender shall be committed to have outstanding
under this Note at any one time shall not exceed Fifteen Million Dollars
($15,000,000.00), which amount may be borrowed, paid, reborrowed and repaid, in
whole or in part, subject to the terms and conditions of this Note and of the
Loan Agreement referred to below.
Borrower further promises to pay to the order of Lender interest on the
unpaid principal balance from time to time outstanding under this Note on the
dates and at the rates set forth in the Loan Agreement referred to below. All
payments received by Lender under this Note shall be allocated among the
principal, interest, collection costs and expenses and other amounts due under
this Note as follows: (a) so long as no Event of Default under the Loan
Agreement has occurred and is continuing, as directed by Borrower; and (b) so
long as any Event of Default under the Loan Agreement has occurred and is
continuing, in such order and manner as Lender shall elect. The amount of
interest accruing under this Note shall be computed on an actual day, 360-day
year basis.
All payments of principal and interest under this Note shall be made in
lawful currency of the United States at the office of Lender situated at 000
Xxxxx Xxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xx. Xxxxx, Xxxxxxxx 00000, or at such
other place as the holder of this Note may from time to time designate in
writing.
Lender shall record in its books and records the date and amount of each
Revolving Credit Loan made by it to Borrower and the date and amount of each
payment of principal and/or interest made by Borrower with respect thereto;
provided, however, that the obligation of Borrower to repay each Revolving
Credit Loan made to Borrower under this Note shall be absolute and
unconditional, notwithstanding any failure of Lender to make any such
recordation or any mistake by Lender in connection with any such recordation.
The books and records of Lender showing the account between Lender and Borrower
shall be admissible in evidence in any action or proceeding and shall constitute
prima facie proof of the items therein set forth in the absence of manifest
error.
Subject to the terms of the Loan Agreement referred to below, Borrower
shall have the right to prepay all at any time or any portion from time to time
of the unpaid principal of this Note prior to maturity, without penalty or
premium.
This Note is the Revolving Credit Note referred to in that certain Loan
Agreement dated the date hereof by and between Borrower and Lender (as the same
may from time to time be amended, modified, extended or renewed, the "Loan
Agreement"). The Loan Agreement, among other things, contains provisions for
acceleration of the maturity of this Note upon the occurrence of certain stated
events and also for prepayments on account of the principal of this Note and
interest on this Note prior to the maturity of this Note upon the terms and
conditions specified therein. All capitalized terms used and not otherwise
defined in this Note shall have the respective meanings ascribed to them in the
Loan Agreement.
This Note is secured by, among other things, that certain Security
Agreement dated the date hereof and executed by Borrower in favor of Lender (as
the same may from time to time be amended, modified, extended or renewed, the
"Security Agreement") and that certain Patent, Trademark and License Security
Agreement dated the date hereof and executed by Borrower in favor of Lender (as
the same may from time to time be amended, modified, extended or renewed, the
"Patent, Trademark and License Security
53
Agreement"), to which Security Agreement and Patent, Trademark and License
Security Agreement reference is hereby made for a description of the security
and a statement of the terms and conditions upon which this Note is secured.
If any Event of Default under the Loan Agreement shall occur and be
continuing, then Lender's obligation to make additional Revolving Credit Loans
under this Note may be terminated in the manner and with the effect as provided
in the Loan Agreement and the entire outstanding principal balance of this Note
and all accrued and unpaid interest thereon may be declared to be immediately
due and payable in the manner and with the effect as provided in the Loan
Agreement.
In the event that any payment of any principal of or interest on this Note
is not paid when due, whether by reason of maturity, acceleration or otherwise,
and this Note is placed in the hands of an attorney or attorneys for collection
or for foreclosure of the Security Agreement or the Patent, Trademark and
License Security Agreement, or if this Note is placed in the hands of an
attorney or attorneys for representation of Lender in connection with bankruptcy
or insolvency proceedings relating hereto, Borrower promises to pay to the order
of Lender, in addition to all other amounts otherwise due hereon, the costs and
expenses of such collection, foreclosure and representation, including, without
limitation, reasonable attorneys' fees and expenses (whether or not litigation
shall be commenced in aid thereof). All parties hereto severally waive
presentment for payment, demand for payment, protest, notice of protest and
notice of dishonor.
This Note shall be governed by and construed in accordance with the
substantive laws of the State of Missouri (without reference to conflict of law
principles).
INTERLOTT TECHNOLOGIES, INC.
By:
-----------------------------------------
Title:
--------------------------------------
By:
-----------------------------------------
Title:
--------------------------------------
-2-
54
EXHIBIT C
__________, 19____
Mercantile Business Credit Inc.
000 Xxxxx Xxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Senior Credit Officer
Ladies and Gentlemen:
Reference is hereby made to that certain Loan Agreement dated October 29,
1997, by and between you and the undersigned, as the same may from time to time
amended, modified, extended or renewed (the "Loan Agreement"). All capitalized
terms used and not otherwise defined herein shall have the respective meanings
ascribed to them in the Loan Agreement.
Borrower hereby certifies to Lender that as of the date hereof:
(a) all of the representations and warranties of Borrower contained in the
Loan Agreement and in the other Transaction Documents are true and correct in
all material respects on and as of the date hereof as if made on and as of the
date hereof;
(b) no violation or breach of any of the affirmative covenants of Borrower
contained in the Loan Agreement has occurred and is continuing;
(c) no violation or breach of any of the negative covenants of Borrower
contained in the Loan Agreement has occurred and is continuing;
(d) no Default or Event of Default under or within the meaning of the Loan
Agreement has occurred and is continuing;
(e) the financial statements of Borrower [and its subsidiaries] delivered
to you with this letter are true, correct and complete and have been prepared in
accordance with GAAP consistently applied [(subject to normal year-end
adjustments and absence of footnotes)]; and
(f) the financial covenant information set forth in Schedule 1 to this
letter is true and correct.
Very truly yours,
INTERLOTT TECHNOLOGIES, INC.
By:
------------------------------------
Title:
---------------------------------
-53-
55
SCHEDULE 1
Financial Covenant Information as
as of , 19
-----------------
Financial Covenant Actual Required
------------------ ------ --------
-54-
