1
EXHIBIT 10.2
-------------------------------------------------------------------------------
VANS, INC.
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
-------------------------------------------------------------------------------
2
Page 2
TABLE OF CONTENTS
Page
----
1. DEFINITIONS AND CONSTRUCTION....................................................... 1
1.1 Definitions................................................................. 1
1.2 Accounting Terms............................................................ 14
2. LOAN, LETTERS OF CREDIT AND TERMS OF PAYMENT....................................... 14
2.1 Advances.................................................................... 14
2.2 Letters of Credit........................................................... 15
2.3 Repayment of Overadvance.................................................... 16
2.4 Interest Rates, Payments, and Calculations.................................. 16
2.5 LIBOR Advance Termination................................................... 17
2.6 Crediting Payments.......................................................... 17
2.7 Depository Account.......................................................... 18
2.8 Application of Principal Payments........................................... 18
2.9 Fees........................................................................ 18
2.10 Additional Costs............................................................ 19
2.11 LIBOR Indemnity............................................................. 19
2.12 Term........................................................................ 20
2.13 Termination................................................................. 20
3. CONDITIONS OF LOANS................................................................ 21
4. CREATION OF SECURITY INTEREST...................................................... 21
4.1 Grant of Security Interest.................................................. 21
4.2 Delivery of Additional Documentation Required............................... 21
4.3 Right to Inspect............................................................ 21
4.4 Negative Pledge............................................................. 21
5. REPRESENTATIONS AND WARRANTIES..................................................... 21
5.1 Due Organization and Qualification.......................................... 21
5.2 Due Authorization; No Conflict.............................................. 22
5.3 No Prior Encumbrances....................................................... 22
5.4 Bona Fide Eligible Accounts................................................. 22
5.5 Merchantable Inventory...................................................... 22
5.6 Name; Location of Chief Executive Office.................................... 22
5.7 Litigation.................................................................. 22
5.8 No Material Adverse Change in Financial Statements.......................... 22
5.9 Solvency.................................................................... 23
5.10 Regulatory Compliance....................................................... 23
5.11 Environmental Condition..................................................... 23
5.12 Taxes....................................................................... 23
5.13 Permitted Investments....................................................... 24
5.14 Government Consents......................................................... 24
5.15 Full Disclosure............................................................. 24
6. AFFIRMATIVE COVENANTS.............................................................. 24
6.1 Good Standing............................................................... 24
6.2 Government Compliance....................................................... 24
6.3 Financial Statements, Reports, Certificates................................. 24
6.4 Inventory................................................................... 25
6.5 Taxes ..................................................................... 26
6.6 Insurance................................................................... 26
6.7 Further Assurances.......................................................... 26
3
Page 3
7. NEGATIVE COVENANTS................................................................. 26
7.1 Change in Business.......................................................... 26
7.2 Mergers or Acquisitions..................................................... 26
7.3 Indebtedness................................................................ 27
7.4 Encumbrances................................................................ 27
7.5 Distributions............................................................... 27
7.6 Current Ratio............................................................... 27
7.7 Quick Ratio................................................................. 27
7.8 Interest Coverage Ratio..................................................... 27
7.9 Adjusted Consolidated Tangible Net Worth.................................... 27
7.10 Working Capital............................................................. 27
7.11 Leverage Ratio.............................................................. 28
7.12 Quarterly Losses............................................................ 28
7.13 Investments................................................................. 28
7.14 Transactions with Affiliates................................................ 28
7.15 Inventory................................................................... 28
7.16 Subordinated Debt........................................................... 28
7.17 Compliance.................................................................. 28
8. EVENTS OF DEFAULT.................................................................. 29
8.1 Payment Default............................................................. 29
8.2 Covenant Default............................................................ 29
8.3 Material Adverse Effect..................................................... 29
8.4 Attachment.................................................................. 29
8.5 Insolvency.................................................................. 29
8.6 Other Agreements............................................................ 30
8.7 Judgments................................................................... 30
8.8 Misrepresentations.......................................................... 30
9. BANK'S RIGHTS AND REMEDIES......................................................... 30
9.1 Rights and Remedies......................................................... 30
9.2 Power of Attorney........................................................... 31
9.3 Accounts Collection......................................................... 32
9.4 Bank Expenses............................................................... 32
9.5 Bank's Liability for Collateral............................................. 32
9.6 Remedies Cumulative......................................................... 32
9.7 Demand; Protest; Application................................................ 32
10. NOTICES............................................................................ 33
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER......................................... 33
12. GENERAL PROVISIONS................................................................. 34
12.1 Successors and Assigns...................................................... 34
12.2 Indemnification............................................................. 34
12.3 Time of Essence............................................................. 34
12.4 Severability of Provisions; Headings........................................ 34
12.5 Amendments; Integration..................................................... 34
12.6 Counterparts................................................................ 34
12.7 Survival.................................................................... 34
12.8 Confidentiality............................................................. 35
12.9 No Novation................................................................. 35
4
Page 4
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the "Agreement")
is entered into as of October 31, 1997, by and between BANK OF THE WEST ("Bank")
and VANS, INC. ("Borrower"), and amends and restates the Existing Loan Agreement
(hereinafter defined).
RECITALS
WHEREAS, Bank and Borrower wish to amend and restate the Amended and
Restated Loan and Security Agreement, dated as of December 2, 1996, by and
between Borrower and Bank (the "Existing Loan Agreement"); and
WHEREAS, Borrower has requested certain changes to the credit facility
extended under the Existing Loan Agreement and Bank has agreed to such requests,
to the extent and manner set forth herein;
NOW, THEREFORE, IT IS AGREED THAT:
DEFINITIONS AND CONSTRUCTION
Definitions. As used herein, the following terms shall have the
following definitions:
"Account Debtor" means the Person who is obligated on or under an
Account.
"Accounts" means all presently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owing to Borrower arising
out of the sale or lease of goods or the rendering of services by Borrower,
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor.
"Adjusted Committed Line" means, at any date, the Committed Line, less
(i) the sum of the aggregate undrawn face amount of the Letters of Credit
outstanding and the aggregate drawn but unreimbursed Letters of Credit on such
date and (ii) the sum of the Reserves on such date.
5
Page 5
"Adjusted Consolidated Tangible Net Worth" means at any date as of which
the amount thereof shall be determined, the consolidated total assets of
Borrower and the Subsidiaries minus, without duplication, (i) the sum of any
amounts attributable to (a) goodwill, (b) intangible items such as unamortized
debt discount and expense, patents, trade and service marks and names,
copyrights and research and development expenses except prepaid expenses, and
(c) all reserves not already deducted from assets, and (ii) Total Liabilities.
"Advance" or "Advances" means an advance under the Revolving Facility.
"Affiliate" means, with respect to any Person, any Person that owns or
controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
and Bank's reasonable attorneys' fees and expenses incurred in amending,
enforcing or defending the Loan Documents, whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records regarding
Accounts, including: ledgers and records concerning the Collateral (other than
Borrower's Books) and all computer programs, or tape files, and the related
equipment containing such information and, in any event, related solely to the
Collateral.
"Borrowing Base" means as of any date the sum of (i) eighty percent
(80%) of the aggregate face amount of Eligible Accounts as of such date;
provided that if Dilution equals or exceeds seven and one-half percent (7.5%) at
any time, Bank may, in its discretion, implement appropriate Reserves to reflect
such increased Dilution, and (ii) the lesser of (A) forty percent (40%) of the
value of Eligible Inventory at such time (valued
6
Page 6
at the lower of cost or fair market value, on a FIFO basis, in
accordance with GAAP), and (B) Nine Million Dollars ($9,000,000).
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which banks in the State of California are authorized or required to
close.
"Cash Equivalents" means as of any date the net current cash value of
obligations issued or guaranteed by the United States of America then held by
Borrower.
"Closing Date" means July 1, 1995.
"Code" means the California Uniform Commercial Code.
"Collateral" means (i) the Accounts, (ii) the Depository Account, as
defined in Section 2.7 hereof, (iii) the Negotiable Collateral, (iv) the
Inventory, (v) Borrower's Books, and (vi) all claims, rights and interests in
any of the foregoing and all proceeds thereof.
"Committed Line" means Twenty Million Dollars ($20,000,000).
"Consolidated Current Assets" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current assets on
the consolidated balance sheet of Borrower and the Subsidiaries as at such date.
"Consolidated Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and the Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Advances
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination.
7
Page 7
"Consolidated Interest Charges" means, for any period, the aggregate
amount accrued (determined in accordance with GAAP on a consolidated basis after
eliminating inter-company items) of all interest (whether or not actually paid)
during such period in respect of Indebtedness of Borrower and the Subsidiaries,
including, without limitation, (a) all fees paid during such period for the
purchase of interest rate protection products, amortized appropriately over the
terms of the applicable Indebtedness, (b) amortized discount in respect of
Indebtedness issued at a discount, and (c) imputed interest on capital lease
obligations.
"Consolidated Net Income" means, for any period, the net income (or
deficit) of Borrower and the Subsidiaries for such period (taken as a cumulative
whole) after deducting, without duplication, operating expenses, provisions for
all taxes and reserves (including reserves for deferred income taxes) and all
other proper deductions, all determined in accordance with GAAP on a
consolidated basis, after eliminating all inter-company items in accordance with
GAAP and after deducting portions of income properly attributable to outside
minority interests, if any, in the stock and surplus of any Subsidiary;
provided, however, that there shall be excluded from Consolidated Net Income:
(i) the income (or deficit) of any Person, other than a Subsidiary, in which
Borrower or any Subsidiary has an ownership interest, except to the extent that
any such income has been actually received by Borrower or such Subsidiary in the
form of cash dividends or similar distributions, (ii) any aggregate net gain or
losses during such period arising from the sale, exchange or other disposition
of capital assets (such term to include all fixed assets, whether tangible or
intangible, and all securities), (iii) any portion of the net income of a
Subsidiary which is unavailable (whether by law, agreement or otherwise) for the
payment of dividends to Borrower or another Subsidiary, (iv) the income (or
deficit) of any other Person accrued prior to the date it becomes a Subsidiary
or is merged or consolidated with a Subsidiary, (v) any write up (less any
non-cash write down) of any asset, other than Inventory adjustments made in
accordance with GAAP, (vi) any net gain from the collection of the proceeds of
life insurance policies, (vii) any gain or loss, or the extinguishment under
GAAP of any Indebtedness of Borrower or any Subsidiary arising from the
acquisition of any securities of Borrower or any Subsidiary, (viii) any deferred
credit representing the excess of equity in
8
Page 8
any Subsidiary at the date of acquisition over the cost of the Investment in
such Subsidiary, (ix) in the case of any merger or consolidation of Borrower
into another Person, other than a Subsidiary, any earnings of such Person prior
to the consummation of such merger or consolidation, (x) any portion of the net
earnings of Borrower or any Subsidiary which cannot be freely converted into
United States dollars, and (xi) any portion of net earnings (or loss) of
Borrower or any Subsidiary which results from foreign currency translation as
determined in accordance with GAAP.
"Consolidated Quick Assets" means as of any date the sum of (i)
Borrower's cash as of such date, (ii) Cash Equivalents as of such date, and
(iii) Borrower's accounts receivable as of such date, all as determined in
accordance with GAAP.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Daily Balance" means the amount of the Obligations owed
9
Page 9
at the end of a given day.
"Debt/EBITDA Ratio" means with respect to the last day of any fiscal
quarter of Borrower the ratio of (i) all Obligations outstanding as of such day,
to (ii) aggregate EBITDA for the four (4) fiscal quarters ending as of such day.
"Dilution" means, with respect to any period, the percentage obtained by
dividing (a) the sum of non-cash credits against Accounts for such period, plus
pending or probable, but not yet applied, non-cash credits against Accounts for
such period, as reasonably determined by Bank, by (b) gross invoiced sales of
Borrower for such period.
"EBIT" means, with respect to any fiscal quarter of Borrower,
Consolidated Net Income for such fiscal quarter plus taxes and interest expense
deducted in determining Consolidated Net Income for such fiscal quarter, plus
the pre-tax increase in LIFO reserves or minus the pre-tax decrease in LIFO
reserves, and minus dividends paid or accrued and withdrawals paid or accrued to
shareholders or other Affiliates not deducted in determining Consolidated Net
Income for such fiscal quarter.
"EBITDA" means, with respect to any fiscal quarter of Borrower,
Consolidated Net Income for such fiscal quarter plus interest expense, taxes,
depreciation and amortization deducted in determining Consolidated Net Income
for such fiscal quarter, plus the pre-tax increase in LIFO reserves or minus the
pre-tax decrease in LIFO reserves, and minus dividends paid or accrued and
withdrawals paid or accrued to shareholders or other Affiliates not deducted in
determining Consolidated Net Income for such fiscal quarter.
"Eligible Accounts" means those Accounts (i) which are due and payable
within ninety (90) days from the original date of invoice, and (ii), commencing
on the Trigger Date, have been validly assigned to Bank and comply in all
material respects with all of the terms, conditions, warranties and
representations made to Bank hereunder and the other Loan Documents; but
Eligible Accounts shall not include the following:
10
Page 10
(a) Accounts with respect to which the Account Debtor is
an officer, director, employee, or agent of Borrower or an
Affiliate of Borrower;
(b) Accounts with respect to which goods are placed on
consignment, guaranteed sale, xxxx-and-hold, repurchase or
return, or other terms by reason of which the payment of the
Account Debtor may be conditional;
(c) Accounts arising from progress xxxxxxxx, invoices for
deposits, and rebills of amounts previously credited to the
extent of credits issued more than fifteen (15) days prior to
such rebill;
(d) Accounts with respect to which the Account Debtor is
not domiciled in the United States of America or Canada (unless
such Account is fully secured by an irrevocable letter of credit
acceptable to Bank and assigned to Bank or fully insured for
commercial and political risks under insurance policies
acceptable to Bank and for which Bank has been designated loss
payee);
(e) Accounts with respect to which the sale is on an
installment sale, lease or other extended payment basis, except
for Accounts for which Sears Xxxxxxx, Shoe Carnival, Just for
Feet, Sports Odyssee, Famous Footwear, Genesco, Track n' Trail
and Gadzooks are the Account Debtors, which may be due and
payable within one hundred twenty (120) days from the original
date of invoice;
(f) Accounts with respect to which the Account Debtor is a
governmental agency or authority unless such agency or authority
is the United States of America or any department, agency or
instrumentality of the United States, and Borrower complies with
the Assignment of Claims Act of 1940, as amended (31 U.S.C.
Section 203 et seq.);
(g) All Accounts owing by any Account Debtor if fifty
percent (50%) or more of the Accounts due from such Account
11
Page 11
Debtor are deemed not to be Eligible Accounts hereunder;
(h) Accounts with respect to which the Account Debtor is
an Affiliate of, or has common officers or directors with,
Borrower;
(i) Accounts with respect to which Bank does not for any
reason, commencing on the Trigger Date, have a perfected first
priority Lien;
(j) Accounts with respect to which Borrower is or may
become liable to the Account Debtor for goods sold or services
rendered by the Account Debtor to Borrower, to the extent of
Borrower's existing or potential liability to such Account
Debtor;
(k) Accounts with respect to which the Account Debtor has
disputed any liability, or the Account Debtor has made any claim
with respect to any other Account due, or the Account is
otherwise subject to any right of setoff, deduction, breach of
warranty or other defense, dispute or counterclaim by the Account
Debtor;
(l) that portion of the Accounts owed by any single
Account Debtor which exceeds ten percent (10%) of all of the
Accounts, except that with respect to the Sports Authority,
Mervyns, Shoe Carnival, Sears Xxxxxxx, Just for Feet, Famous
Footwear, or Xxxxxx Shoe Corp., the ineligible portion of the
Accounts of either such Account Debtor shall be that portion
which exceeds fifteen percent (15%) of all the Accounts;
(m) that portion of any Accounts representing late fees,
service charges or interest, but only to the extent of such
portion;
(n) Accounts of an Account Debtor where the Account Debtor
is located in New Jersey or Minnesota unless Borrower (1) with
respect to such state, has received a Certificate of Authority to
do business and is in good standing in such state, or (2) has
filed a Notice of Business Activities Report with the New Jersey
12
Page 12
Division of Taxation or the Minnesota Department of Revenue, as
applicable, for the then current year;
(o) Accounts owed by any Account Debtor which is insolvent
or is the subject of an Insolvency Proceeding;
(q) that portion of any Accounts represented by contract
rights, documents, instruments, chattel paper or general
intangibles; and
(r) all Accounts of an Account Debtor whose
creditworthiness is not satisfactory to Bank in its reasonable
credit judgment due to Bank's reasonable belief of jeopardy of
insolvency of such Account Debtor or impairment of such Account
Debtor's ability to timely pay its Accounts, based on information
available to Bank. References to percentages of all Accounts are
based on dollar amount of Accounts and not number of Accounts.
"Eligible Inventory" means that portion of Inventory consisting of raw
materials normally and currently used in Borrower's business, and finished goods
held for sale by Borrower, normally and currently saleable in the ordinary
course of Borrower's business, and which at all times pertinent hereto is of
good and merchantable quality, free from material defects, which is located at
the locations described in Section 7.15 hereof and, commencing on the Trigger
Date, as to which Bank has a perfected first priority Lien.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"Eurodollar Banking Day" means any Business Day on which commercial
banks are open for international business (including dealing in dollar deposits)
in London, England and New York, New York.
"GAAP" means generally accepted accounting principles as from time to
time set forth in the opinions of the Accounting Principles Board
13
Page 13
of the American Institute of Certified Public Accountants and in statements by
the Financial Accounting Standards Board or in such opinions and statements of
such other entities as shall be approved by a significant segment of the
accounting profession in the United States.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against any
person or entity under any provision of the United States Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency law, including assignments
for the benefit of creditors, formal or informal moratoria, compositions,
extension generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Inventory" means all present and future inventory in which Borrower has
any interest, including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any of
the foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Letter of Credit" has the meaning specified in Section 2.2(a) hereof.
"LIBOR Advance" has the meaning specified in Section 2.4(a)(ii) hereof.
14
Page 14
"LIBOR Interbank Offered Rate" means with respect to any LIBOR Period
the rate per annum (rounded upward, if necessary, to the next higher 1/100th of
1%) at which the Bank's New York branch, which for purposes hereof shall be
deemed the New York branch of Banque Nationale de Paris, would offer a deposit
in Dollars to major banks in the New York interbank Eurodollar market at
approximately 11:00 a.m., New York time, two (2) Eurodollar Banking Days prior
to the commencement of such LIBOR Period and in an amount substantially equal to
the aggregate amount of the LIBOR Advance scheduled to be outstanding during
such LIBOR Period.
"LIBOR Margin" means as of any date (i) if the Debt/EBITDA Ratio as of
the last day of fiscal quarter ended immediately prior to such date was equal to
or less than 1.00 to 1.00, 1.875%, (ii) if the Debt/EBITDA Ratio as of the last
day of fiscal quarter ended immediately prior to such date was greater than 1.00
to 1.00 but equal to or less than 1.50 to 2.00, 2.00%, (iii) if the Debt/EBITDA
Ratio as of the last day of fiscal quarter ended immediately prior to such date
was greater than 2.00 to 1.00 but equal to or less than 2.50 to 1.00, 2.25%,
(iv) if the Debt/EBITDA Ratio as of the last day of fiscal quarter ended
immediately prior to such date was greater than 2.50 to 1.00 but equal to or
less than 3.00 to 1.00, 2.50%, or (v) if the Debt/EBITDA Ratio as of the last
day of fiscal quarter ended immediately prior to such date was greater than 3.00
to 1.00, 2.75%.
"LIBOR Period" has the meaning specified in Section 2.4(a)(ii) hereof.
"LIBOR Rate" means with respect to any LIBOR Advance the rate per annum
(rounded upwards, if necessary, to the next higher 1/100th of 1%) determined by
Bank to be equal to (A) the quotient of (1) the London Interbank Offered Rate
for such LIBOR Advance for the LIBOR Period with respect thereto divided by (2)
one minus the Reserve Requirement for such LIBOR Period, plus (B) the LIBOR
Margin as of the first day of the LIBOR Period for such LIBOR Advance.
"Lien" means any mortgage, lien, deed of trust, security interest or
other encumbrance.
15
Page 15
"Loan Documents" means, collectively, this Agreement, any note or notes
executed by Borrower, and any other agreement entered into between Borrower and
Bank in connection with this Agreement, all as amended or extended from time to
time.
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition of Borrower and the Subsidiaries taken as a
whole, (ii) the ability of Borrower to repay the Obligations or otherwise
perform its obligations under the Loan Documents, (iii) the validity or
enforceability of the Loan Documents, or (iv) the rights and remedies of Bank
under the Loan Documents.
"Maturity Date" means November 1, 1999.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit of which it is a beneficiary, notes, drafts, instruments,
securities, documents of title, and chattel paper, which relate to any of the
Accounts described in clause (i) of the definition of Collateral.
"Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to the Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now
existing or hereafter arising (including all interest accruing after the
commencement of an Insolvency Proceeding).
"Periodic Payments" means all installments or similar recurring payments
that Borrower may now or hereafter become obligated to pay to Bank pursuant to
the terms and provisions of any instrument, or agreement now or hereafter in
existence between Borrower and Bank.
16
Page 16
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising hereunder or any
other Loan Document;
(b) Subordinated Debt;
(c) Indebtedness of Borrower incurred after the date hereof, to the
extent that such Indebtedness is not described in any other clause of this
definition and to the extent that the aggregate principal amount of such
Indebtedness does not exceed Five Million Dollars ($5,000,000);
(d) Indebtedness of Borrower to trade creditors incurred in the ordinary
course of business; and
(e) Indebtedness that is secured by Liens described in clause (c) of the
definition of Permitted Liens.
"Permitted Investments" means:
(a) investments satisfying the investment objectives and investment
criteria set forth in Borrower's Investment Policy, as in effect on the date
hereof and attached hereto as Exhibit B; and
(b) an equity investment in another Person to the extent that (i) the
aggregate dollar amount of such investment does not exceed One Million Dollars
($1,000,000) and (ii) the aggregate dollar amount of such investment, when
aggregated with all other investments described in this clause (b) made during
the same fiscal year, does not exceed Five Million Dollars ($5,000,000).
"Permitted Liens" means the following:
(a) Any Liens arising hereunder or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other
17
Page 17
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings, provided the same have no priority over any of
Bank's security interests;
(c) Liens (i) upon or in any equipment acquired or held by Borrower or
any of the Subsidiaries to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment, or (ii) existing on such equipment at the time of its
acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;
(d) Liens consisting of leases or subleases and licenses and sublicenses
granted to others in the ordinary course of Borrower's or a Subsidiary's
business not interfering in any material respect with the business of Borrower
or such Subsidiary and any interest or title of a lessor or licensor under any
lease or license, as applicable;
(e) Liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons imposed without action
of such parties, provided that the payment thereof is not yet required;
(f) Liens incurred or deposits made in the ordinary course of Borrower's
or a Subsidiary's business in connection with worker's compensation,
unemployment insurance, social security and other like laws;
(g) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
(h) Easements, reservations, rights-of-way, restrictions, minor defects
or irregularities in title and other similar charges or encumbrances affecting
real property not interfering in any material respect with the ordinary conduct
of Borrower's or a Subsidiary's business;
(i) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
18
Page 18
(j) Liens that are not prior to Bank's security interest which
constitute rights of set-off of a customary nature;
(k) Liens securing Indebtedness of Borrower described in clause (c) of
the definition of Permitted Indebtedness, to the extent that such Liens are not
against any of the Collateral (whether or not the Trigger Date has occurred);
and
(l) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (k) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship, limited liability
company, partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Potential Default" means any event which through the passage of time,
service of notice or both, would mature into an Event of Default.
"Prime Interest Rate" means as of any date the sum of (i) the Prime Rate
as of such date and (ii) the Prime Rate Margin as of such date.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Prime Rate Margin" means as of any date (i) if the Debt/EBITDA Ratio as
of the last day of fiscal quarter ended immediately prior to such date was equal
to or less than 2.00 to 1.00, 0%, (ii) if the Debt/EBITDA Ratio as of the last
day of fiscal quarter ended immediately prior to such date was greater than 2.00
to 1.00 but equal to or less than 2.50
19
Page 19
to 1.00, .25%, (iii) if the Debt/EBITDA Ratio as of the last day of fiscal
quarter ended immediately prior to such date was greater than 2.50 to 1.00 but
equal to or less than 3.00 to 1.00, .50%, or (iv) if the Debt/EBITDA Ratio as of
the last day of fiscal quarter ended immediately prior to such date was greater
than 3.00 to 1.00, .75%.
"Reserve Requirement" means for any LIBOR Advance and any related LIBOR
Period the rate on the day of pricing at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
LIBOR Period under Regulation D by Bank against "Eurocurrency Liabilities" (as
such term is used in Regulation D), but without the benefit or credit of
proration, exemptions, or offsets that might otherwise be available to Bank from
time to time under Regulation D. Without limiting the effect of the foregoing,
the Reserve Requirement shall reflect any other reserves required to be
maintained by Bank by reason of any Regulatory Change against (a) any category
of liabilities which includes deposits by reference to which the LIBOR Rate is
to be determined hereunder or (b) any category of extensions of credit or other
assets that include any LIBOR Advance.
"Reserves" means the reserves consistent with the definition of Eligible
Accounts and the definition of Eligible Inventory, the Currency Reserve, as
defined in Section 2.2(d) hereof, and such other reserves, deductions or
adjustments Bank, in its reasonable credit judgment, deems necessary to reflect
items reimbursable to Bank hereunder which have been incurred or are anticipated
but not yet paid, any breaches of the warranties, representations or covenants
of Borrower hereunder, or any Events of Default or Potential Defaults; provided
that Bank shall retain all of its other rights and remedies hereunder, the other
Loan Documents and by law.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System, as the same may be amended or supplemented from time to
time.
"Regulatory Change" means, as to Bank, any change after the Closing Date
in United States federal, state or foreign laws or regulations (including
Regulation D) or the adoption or making after such date of any
20
Page 20
interpretations, directives or requests applying to a class of banks including
Bank of or under any United States federal, state, or foreign laws or
regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"Responsible Officer" means any of the Chief Executive Officer, the
Chief Financial Officer or the Corporate Controller of Borrower.
"Revolving Facility" means the facility under which Borrower may request
Bank to issue cash advances, as specified in Section 2.1 hereof.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the Obligations on terms reasonably acceptable to Bank.
"Subsidiary" means any corporation or partnership in which (i) any
general partnership interest or (ii) more than fifty percent (50%) of the stock
of which by the terms thereof ordinary voting power to elect the Board of
Directors, managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through an
Affiliate.
"Total Liabilities" means at any date as of which the amount thereof
shall be determined, all obligations that should, in accordance with GAAP be
classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness.
"Trigger Date" means the first date after November 1, 1997, on which any
of the following occur:
(a) an Event of Default, as defined in Section 8.1, Section 8.3, Section
8.4, Section 8.5, Section 8.6, Section 8.7, or Section 8.8; and
(b) Borrower fails or neglects to perform, keep, or
21
Page 21
observe any term, provision, condition, covenant or agreement contained in this
Agreement or any of the other Loan Documents, or in any other persent or future
agreement between Borrower and Bank (other than the payment terms described in
Section 8.1) and such failure, in the case of breaches that are curable (the
parties acknowledge that financial covenant breaches are not curable), continues
for forty-five (45) days; for non-curable breaches, the Trigger Date shall occur
as of the date of breach; for curable breaches, the Trigger Date shall occur as
of the expiration of the forty-five (45) days period described above.
"Working Capital" means as of any date Consolidated Current Assets as of
such date less Consolidated Current Liabilities as of such date.
Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP and all calculations made hereunder
shall be made in accordance with GAAP. When used herein, the terms "financial
statements" shall include the notes and schedules thereto.
LOAN, LETTERS OF CREDIT AND TERMS OF PAYMENT
Advances. Subject to the terms and provisions hereof, including, without
limitation, that no Event of Default or Potential Default has occurred and is
continuing, upon Borrower's request, made at any time and from time to time
during the term hereof, Bank shall make Advances up to the Adjusted Committed
Line, so long as the Borrowing Base formula is not in effect. While the
Borrowing Base formula is in effect, Bank shall make Advances up to (A) the
lesser of (i) the Borrowing Base and (ii) the Committed Line, minus (B) the sum
of (i) the sum of the aggregate undrawn face amount of the Letters of Credit
outstanding and the aggregate drawn but unreimbursed Letters of Credit and (ii)
the sum of the Reserves; provided, however, that in no event shall Advances
based on Eligible Inventory exceed fifty percent (50%) of the aggregate dollar
amount of the Advances outstanding. Availability under the immediately preceding
sentence during a calendar month shall be determined based on Eligible Accounts
and Eligible Inventory as of the last day of the immediately preceding calendar
month.
22
Page 22
The Borrowing Base formula shall be in effect commencing on each and
every date on which Borrower delivers to Bank financial statements that show
that as of the last day of the most recently completed fiscal quarter of
Borrower the Debt/EBITDA Ratio exceeded 2.00 to 1.00 and shall cease to be in
effect on the first date thereafter that Borrower delivers to Bank financial
statements that show that as of the last day of the most recently completed
fiscal quarter of Borrower the Debt/EBITDA Ratio did not exceed 2.00 to 1.00.
Whenever Borrower desires an Advance, it shall notify Bank by facsimile
transmission or telephone no later than 3:00 p.m. California time, on the
Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit A hereto. Bank is authorized to make Advances hereunder, based upon
instructions received from a Responsible Officer, or without instructions if in
Bank's discretion such Advances are necessary to meet Obligations which have
become due and remain unpaid. Bank shall be entitled to rely on any telephonic
notice given by a person who Bank reasonably believes to be a Responsible
Officer, and Borrower shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank shall credit the amount
of Advances made under this Section 2.1 to Borrower's deposit account.
The Revolving Facility shall terminate on the Maturity Date, at which
time all Advances under this Section 2.1 and other amounts due hereunder shall
be immediately due and payable.
Letters of Credit.
Issuance. Subject to the terms and conditions hereof, Bank agrees to
issue or cause to be issued for Borrower's account (A) sight documentary letters
of credit, (B) usance documentary letters of credit with a final maturity or
payment date of not more than one hundred twenty (120) days from acceptance date
and (C) standby letters of credit (the "Letters of Credit") in an aggregate face
amount not to exceed (i) the Adjusted Committed Line minus (ii) the then
outstanding principal balance of the Advances provided that the face amount of
outstanding Letters of Credit
23
Page 23
(including drawn but unreimbursed Letters of Credit) shall not in any case
exceed Twenty Million Dollars ($20,000,000), unless the Borrowing Base formula
is in effect, in which case the aggregate face amount of the Letters of Credit
may not exceed (i) the lesser of the Committed Line or the Borrowing Base, minus
(ii) the then outstanding principal balance of the Advances and the Reserves.
Each such sight Letter of Credit shall have an expiry date no later than one
hundred twenty (120) days after the Maturity Date. Each such usance Letter of
Credit shall have a final maturity or payment date no later than one hundred
twenty (120) days after the Maturity Date. All such Letters of Credit shall be,
in form and substance, acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank's form of application and letter of
credit agreement.
Expenses. Borrower shall pay Bank for all of Bank's handling fees, as
set forth in Exhibit C hereto, for each Letter of Credit issued, including, but
not limited to, issuance, negotiation and amendment fees.
Indemnity. Borrower shall indemnify, defend and hold Bank harmless from
any loss, cost, expense or liability, including, without limitation, reasonable
attorneys' fees, arising out of or in connection with any Letters of Credit.
Reimbursement; Currency Reserve.
Borrower may request that Bank issue a Letter of Credit
payable in a currency other than United States Dollars. If demand for payment is
made under any such Letter of Credit, Bank shall treat such demand as an Advance
of the equivalent of the amount thereof (plus cable charges) in United States
currency at the then prevailing rate of exchange in San Francisco, California,
for sales of such other currency for cable transfer to the country of which it
is the currency.
Upon the issuance of any Letter of Credit payable in a
currency other than United States Dollars, Bank shall create a reserve against
fluctuations in currency exchange rates (the "Currency Reserve"), in an amount
equal to ten percent (10%) of the face amount of
24
Page 24
such Letter of Credit. The amount of the Currency Reserve may be amended by Bank
from time to time to account for fluctuations in the exchange rate. The Currency
Reserve for a Letter of Credit shall remain in effect so long as such Letter of
Credit remains outstanding or reimbursement due with respect thereto.
Repayment of Overadvance. If, at any time while the Borrowing Base
formula is in effect and for any reason, the outstanding Advances plus (i) the
sum of the aggregate undrawn face amount of the Letters of Credit and (ii) the
drawn but unreimbursed Letters of Credit exceed the Borrowing Base, less the sum
of the Reserves, Borrower shall, upon telephonic or other notice from Bank, pay
to Bank, in cash, the amount of such excess (such amount the "Overadvance"), and
prior to such repayment such Overadvance shall bear interest at the per annum
rate of the Prime Interest Rate plus two percent (2%); provided, however, that
if the Overadvance exists as of the date that the Borrowing Base formula is
imposed as a result of the Debt/EBITDA Ratio exceeding 2.00 to 1.00, Borrower
shall have thirty (30) days from the date that the Borrowing Base formula is
imposed to pay the full amount of such Overadvance.
Interest Rates, Payments, and Calculations.
Interest Rate.
Prime Interest Rate. Except as set forth in Section
2.4(a)(ii) and Section 2.4(b), all Advances shall bear interest, on the average
Daily Balance, at a rate equal to the Prime Interest Rate.
LIBOR Rate. At any time during the term hereof, and
from time to time during the term hereof, Borrower may elect to have all or a
portion of the Advances (such portion of the Advances a "LIBOR Advance") bear
interest, on the average Daily Balances owing, at a rate per annum equal to the
LIBOR Rate. The LIBOR Rate may take effect only on the first Eurodollar Banking
Day of a calendar month and shall end on the numerically corresponding day in
the first, third, sixth, or twelfth calendar month thereafter (the "LIBOR
Period"). The election shall be effected by Borrower giving Bank irrevocable
written notice not less than three (3)
25
Page 25
Business Days prior to the first day of the calendar month for which the
election is made and shall be with respect to the portion of the Advances
principal outstanding equal to an integral multiple of One Hundred Thousand
Dollars ($100,000) and shall not be less than Five Hundred Thousand Dollars
($500,000). In the notice, Borrower shall indicate whether the LIBOR Period is
to be one (1) month, three (3) months, six (6) months, or twelve (12) months.
Borrower may not elect a LIBOR Period that would expire after the Maturity Date.
Default Rate. All Obligations shall bear interest, from and
after the occurrence of an Event of Default, at a rate equal to two (2)
percentage points above the interest rate applicable thereto immediately prior
to the occurrence of the Event of Default.
Payments. Interest hereunder shall be due and payable in
arrears on the last calendar day of each month during the term hereof. Bank may,
at its option, charge such interest, all Bank Expenses, and all Periodic
Payments against any of Borrower's deposit accounts or against the Committed
Line, in which case those amounts shall thereafter accrue interest at the Prime
Interest Rate then applicable hereunder. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the Prime Interest Rate then applicable hereunder.
Computation. If the Prime Rate or the Prime Rate Margin is
changed from time to time hereafter, the Prime Interest Rate hereunder with
respect to Advances outstanding which do not constitute LIBOR Advances shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate or
the Prime Rate Margin, as applicable, is changed, by an amount equal to such
change in the Prime Rate or the Prime Rate Margin, as applicable. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
LIBOR Advance Termination. If any Regulatory Change or other
circumstances relating to the interbank Eurodollar markets shall, at any time,
in Bank's reasonable determination (which determination shall be
26
Page 26
conclusive), make it unlawful or impractical for Bank to fund or maintain,
during any LIBOR Period, the portion of the Advances which have been designated
a LIBOR Advance for that LIBOR Period, or to continue such funding or to
determine or charge interest rates based upon LIBOR, Bank shall give Borrower
notice of such circumstances and:
(i) In the case of a LIBOR Period in progress, Borrower shall, if
requested by Bank, promptly pay any interest which had accrued
prior to such request and the date of such request shall be
deemed to be the last day of the term of the LIBOR Period; and
(ii) No LIBOR Period may be designated thereafter until Bank
determines that such would be practical.
Crediting Payments. Bank's receipt of any wire transfer of funds,
check, or other item of payment shall be immediately applied to conditionally
reduce Obligations, but shall not be considered a payment on account until (A)
the date that such payment constitutes immediately available federal funds and
is made to the appropriate deposit account of Bank or (B) the date that such
check or other item of payment is honored when presented for payment.
Notwithstanding anything to the contrary contained herein, any wire transfer or
payment received by Bank after 2:00 p.m. California time shall be deemed to have
been received by Bank as of the opening of business on the immediately following
Business Day. Whenever any payment to Bank under the Loan Documents would
otherwise be due (except by reason of acceleration) on a date that is not a
Business Day, such payment shall instead be due on the next Business Day, and
additional fees or interest, as the case may be, shall accrue and be payable for
the period of such extension.
Depository Account. If the Debt/EBITDA Ratio as of the last day
of any fiscal quarter was greater than 2.00 to 1.00, then, during the period
commencing thirty (30) days after such date and terminating as of the date that
the Debt/EBITDA Ratio as of the last day of a subsequent fiscal quarter was less
than 2.00 to 1.00, Borrower shall maintain a depository account ("Depository
Account") with Bank. If Borrower receives any payments from any Account Debtor
while the Depository Account requirement is in effect under this section, it
agrees that all such payments
27
Page 27
shall be the Bank's sole and exclusive property and that it shall hold such
payments in trust as Bank's trustee and immediately deliver them to the
Depository Account.
Application of Principal Payments. If on the date a principal
payment is made with respect to the Advances, interest is calculated both on the
basis of the Prime Interest Rate and the LIBOR Rate, then such payment shall be
applied first to the Advances principal for which interest is calculated on the
basis of the Prime Interest Rate (the "Prime Interest Rate Principal"). Only
when the Prime Interest Rate Principal is fully paid shall the principal payment
be applied to the LIBOR Advance(s) principal. If more than one LIBOR Advance is
outstanding, the principal amount shall be applied to the LIBOR Advances in the
order of maturity, with the LIBOR Advances with the shortest time to maturity
paid first.
Fees. Borrower shall pay to Bank the following:
Unused Facility Fee. An unused facility fee (the "Unused
Facility Fee") on the first day of each calendar month equal to the quotient of
the Unused Facility Fee Percentage and the amount by which the Committed Line
exceeds the sum of (i) the average daily balance of the Advances for the
immediately preceding calendar month and (ii) the aggregate average daily
undrawn face amount of the Letters of Credit outstanding and the aggregate
average daily unreimbursed amount of the Letters of Credit for the immediately
preceding calendar month. The Unused Facility Fee Percentage on an Unused
Facility Fee payment date shall be (i) one-eighth of one percent (.125%) per
annum (computed on the basis of a year of three hundred sixty (360) days for the
actual number of days elapsed) if the Debt/EBITDA Ratio as shown on the most
recent financial statements delivered by Borrower to Bank was equal to or less
than 1.50 to 1.00, (ii) one-quarter of one percent (.25%) per annum (computed on
the basis of a year of three hundred sixty (360) days for the actual number of
days elapsed) if the Debt/EBITDA Ratio as shown on the
most recent financial statements delivered by Borrower to Bank was greater than
1.50 to 1.00 but equal to less than 2.50 to 1.00, and (iii) three-eighths of one
percent (.375%) per annum (computed on the basis of a year of three hundred
sixty (360) days for the actual number of days elapsed) if the Debt/EBITDA Ratio
as shown on the
28
Page 28
most recent financial statements delivered by Borrower to Bank was greater than
2.50 to 1.00;
Financial Examination and Appraisal Fees. Bank's customary
fees and reasonable out-of-pocket expenses for Bank's audits of Accounts, and
for each appraisal of Collateral (whether or not the Trigger Date has occurred)
and financial analysis and examination of Borrower performed from time to time
by Bank or its agents; and
Bank Expenses. Upon the date hereof, all Bank Expenses
incurred through the date hereof, including reasonable attorneys' fees and
expenses.
Additional Costs. If any law, regulation, treaty or
official directive or the interpretation or application thereof by any court or
any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law):
subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on Bank's overall net income imposed by the United States of America or any
political subdivision thereof);
imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank; or
imposes upon Bank any other condition with respect to its
performance hereunder,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans hereunder, Bank shall notify Borrower thereof. Borrower agrees to pay
to Bank the amount of such increase in cost, reduction in income or additional
expense as and when such cost, reduction or expense is incurred or
29
Page 29
determined, upon Bank's presentation of a statement of the amount and setting
forth Bank's calculation thereof, all in reasonable detail, which statement
shall be deemed true and correct absent manifest error.
LIBOR Indemnity. Borrower shall indemnify Bank and hold Bank harmless
from, and reimburse Bank on demand for, all losses and expenses which Bank
sustains or incurs as a result of (i) any payment of a LIBOR Advance prior to
the last day of the LIBOR Period therefor for any reason, including termination
hereof, whether pursuant to Section 2.13 hereof or the occurrence of an Event of
Default for any reason, (ii) any termination of a LIBOR Period in accordance
with Section 2.5 hereof, or (iii) any failure by Borrower, for any reason, to
borrow any portion of a LIBOR Advance. This indemnification and hold harmless
requirement shall include, without limitation, all losses and expenses arising
from interest and fees that Bank pays to lenders of funds it obtained in order
to fund the Advances on the basis of the LIBOR Rate(s) and all losses incurred
in liquidating or re-deploying deposits from which such funds were obtained and
loss of profit for the period after termination. A written statement by Bank to
Borrower of such losses and expenses shall be conclusive and binding, absent
manifest error, for all purposes. This covenant shall survive the expiration or
termination hereof.
Term. This Agreement shall become effective upon the Closing Date and
shall continue in full force and effect for a term ending on the date that all
Obligations have been satisfied. Notwithstanding the foregoing, Bank shall have
the right to terminate its obligation to make Advances and to issue Letters of
Credit hereunder immediately and without notice upon the occurrence and during
the continuance of an Event of Default. On the date of termination, all
Obligations shall become immediately due and payable in cash or by wire
transfer. Notwithstanding termination, if the Trigger Date has occurred, Bank
shall retain its Lien on the Collateral to secure satisfaction of such
Obligations until all Obligations have been satisfied.
Termination. Subject to the terms of this section, Borrower may, at any
time, on ten (10) days' written notice prior to the end of any month, and
without payment of any premium or penalty, prepay in full the Advances and
terminate this Agreement by paying to Bank, in cash or by a
30
Page 30
wire transfer of immediately available funds, the Obligations. If any Letters of
Credit are outstanding on the effective date of termination, Borrower shall
deliver to Bank cash collateral in an amount equal to the aggregate undrawn face
amount of such Letters of Credit plus the projected amount of all fees
associated therewith.
CONDITIONS OF LOANS. Bank's obligation to make each Advance
and to issue each Letter of Credit is subject to the following conditions:
timely receipt by Bank of the Borrowing Certificate as provided
in Section 2.1; and
the representations and warranties contained in Section 5 shall
be true and correct in all material respects on and as of the date of such
Borrowing Certificate and on the effective date of each Advance or Letter of
Credit issuance, as applicable, as though made at and as of each such date, Bank
shall have timely received the statements, reports and certificates specified in
Section 6.3, and no Event of Default or Potential Default shall have occurred
and be continuing, or would exist immediately after giving effect to such
Advance or Letter of Credit issuance, as applicable. The making of each Advance
and the issuance of each Letter of Credit shall be deemed to be a representation
and warranty by Borrower on the date of such Advance or Letter of Credit
issuance as to the accuracy of the facts referred to in this Section 3(b).
CREATION OF SECURITY INTEREST AS OF THE TRIGGER DATE
Grant of Security Interest. Borrower grants to Bank, effective as of the
Trigger Date, a continuing security interest in all presently existing and
hereafter acquired or arising Collateral in order to secure prompt repayment of
any and all Obligations and in order to secure prompt performance by Borrower of
each of its covenants and duties under the Loan Documents. Such security
interest shall constitute as of the Trigger Date a valid, first priority
security interest in the Collateral existing on the Trigger Date, and will
constitute a valid, first priority security interest in Collateral
31
Page 31
acquired after the Trigger Date.
Delivery of Additional Documentation Required. Borrower shall from time
to time, commencing as of the Trigger Date, execute and deliver to Bank, at
Bank's request, all Negotiable Collateral, all financing statements and other
documents that Bank may reasonably request, in form satisfactory to Bank, to
perfect and continue perfected Bank's Liens in the Collateral and in order to
fully consummate all of the transactions contemplated under the Loan Documents.
Right to Inspect. Bank (through any of its officers, employees, or
agents) shall have the right from time to time, commencing on the Closing Date,
to inspect Borrower's Books and to make copies thereof and to check, test, and
appraise the Collateral in order to verify Borrower's financial condition or the
amount, condition of, or any other matter relating to, the Collateral.
Negative Pledge. Borrower acknowledges that under Section 7.4 hereof it
is prohibited from granting, or suffering to exist, any Lien, other than a
Permitted Lien, against the Collateral. In furtherance of such prohibition,
Borrower hereby agrees that it will not grant, or suffer to exist, any Lien with
respect to any of its personal property that comes within the definition of
Collateral other than Permitted Liens without obtaining the Bank's prior written
consent, given in its sole discretion, to such Lien, and that the Bank may take,
and the Borrower will cooperate in, such actions as the Bank deems necessary to
give notice to other Persons of this Lien prohibition with respect to Borrower's
personal property that comes within the definition of Collateral.
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
Due Organization and Qualification. Each of Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws of
its state of incorporation and qualified and licensed to do business in, and is
in good standing in, any state in which the conduct of its business or its
32
Page 32
ownership of property requires that it be so qualified.
Due Authorization; No Conflict. The execution, delivery, and performance
of the Loan Documents are within Borrower's powers, have been duly authorized,
and are not in conflict with nor constitute a breach of any provision contained
in Borrower's Restated Certificate of Incorporation or Restated Bylaws, nor, to
the best of Borrower's knowledge, will they constitute an event of default under
any material agreement to which Borrower is a party or by which Borrower is
bound. Borrower is not in default under any agreement to which it is a party or
by which it is bound, which default could have a Material Adverse Effect.
No Prior Encumbrances. Borrower has good and indefeasible title to the
Collateral, free and clear of Liens, except for Permitted Liens.
Bona Fide Eligible Accounts. The Accounts are bona fide existing
obligations of Borrower's Account Debtors, created by the sale or lease of
goods, the licensing of rights, or the rendition of services to Account Debtors
in the ordinary course of Borrower's business, and unconditionally owed to
Borrower. The property giving rise to such Accounts has been delivered to the
Account Debtor or to the Account Debtor's agent for immediate shipment to and
unconditional acceptance by the Account Debtor.
Merchantable Inventory. Substantially all Inventory is in all material
respects of good quality, free from all material defects, and salable, either as
current merchandise or close-out items.
Name; Location of Chief Executive Office. During the five (5) year
period ending on the Closing Date, Borrower has not done business under any name
other than that specified on the signature page hereof and the names MDV
Holdings, Inc. and Xxx Xxxxx Rubber Company, Inc. As of the date hereof,
Borrower's chief executive office is located at the address indicated in Section
10 hereof.
Litigation. There are no actions or proceedings pending by or against
Borrower or any Subsidiary before any court or administrative
33
Page 33
agency in which an adverse decision could have a Material Adverse Effect or a
material adverse effect on Borrower's interest or, commencing as of the Trigger
Date, Bank's Lien in the Collateral. Borrower does not have knowledge of any
such pending or threatened actions or proceedings.
No Material Adverse Change in Financial Statements. All consolidated
financial statements related to Borrower that Borrower has delivered to Bank
fairly present in all material respects Borrower's consolidated financial
condition as of the date thereof and Borrower's consolidated results of
operations for the period then ended. There has not been a material adverse
change in the consolidated financial condition of Borrower since the date of the
most recent of such financial statements submitted to Bank.
Solvency. Borrower is solvent and able to pay its debts (including trade
debts) as they mature.
Regulatory Compliance. Borrower and each Subsidiary has met ERISA's
minimum funding requirements with respect to any employee benefit plans subject
to ERISA. No event has occurred resulting from Borrower's failure to comply with
ERISA that is reasonably likely to result in Borrower's incurring any liability
that could have a Material Adverse Effect. Neither Borrower nor any Subsidiary
has withdrawn from, and no termination or partial termination has occurred with
respect to, any deferred compensation plan, and neither Borrower nor any
Subsidiary has withdrawn from any multi-employer plan under ERISA. Borrower is
not an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940. Borrower is not
engaged principally, or as one of the important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act to the extent that non-compliance with such provisions
could have a Material Adverse Effect or a material adverse effect on the
Collateral or, commencing as of the Trigger Date, the priority of the Bank's
Lien on the Collateral. Borrower has complied with all statutes, laws,
ordinances, and government rules and regulations to which it is subject,
34
Page 34
non-compliance with which could have a Material Adverse Effect or a material
adverse effect on the Collateral or, commencing on the Trigger Date, the
priority of Bank's Lien on the Collateral.
Environmental Condition. None of Borrower's or any Subsidiary's
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower's knowledge, by previous owners or operators, in the disposal
of, or to produce, store, handle, treat, release, or transport, any hazardous
waste or hazardous substance other than in accordance with applicable law; to
the best of Borrower's knowledge, none of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute; no
Lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and neither Borrower nor any Subsidiary has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal or state governmental agency concerning any action or omission by
Borrower or any Subsidiary relating to the release or disposal of hazardous
waste or hazardous substances.
Taxes. Borrower and each Subsidiary has filed or caused to be filed all
tax returns required to be filed, and has paid, or has made adequate provision
for the payment of, all taxes reflected therein.
Permitted Investments. Borrower does not have any Investment other than
(i) Permitted Investments and (ii) stock, partnership interest and other equity
securities of each Subsidiary disclosed to and approved by Bank as of the date
hereof.
Government Consents. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted.
Full Disclosure. No representation, warranty or other
35
Page 35
statement made by Borrower in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading.
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
Obligations, and for so long as Bank is committed to make an Advance or issue a
Letter of Credit hereunder, Borrower shall do all of the following:
Good Standing. Borrower shall maintain its and each of the Subsidiaries'
corporate existence and good standing in its jurisdiction of incorporation and
maintain qualification in each jurisdiction in which the failure to so qualify
could have a Material Adverse Effect. Borrower shall maintain, and shall cause
each of the Subsidiaries to maintain, to the extent consistent with prudent
management of Borrower's business, in force all licenses, approvals and
agreements, the loss of which could have a Material Adverse Effect.
Government Compliance. Borrower shall meet, and shall cause each
Subsidiary to meet, ERISA's minimum funding requirements with respect to any
employee benefit plans subject to ERISA. Borrower shall comply, and shall cause
each Subsidiary to comply, with all statutes, laws, ordinances and government
rules and regulations to which it is subject, noncompliance with which could
have a Material Adverse Effect or a material adverse effect on the Collateral
or, commencing on the Trigger Date, the priority of Bank's Lien on the
Collateral.
Financial Statements, Reports, Certificates. Borrower shall maintain a
standard system of accounting in accordance with GAAP. Borrower shall deliver to
Bank: (a) within five (5) days upon becoming available, but in any event within
fifty (50) days after the end of Borrower's fiscal quarter, the report on Form
10-Q filed or required to be filed with the Securities and Exchange Commission
and a Compliance Certificate signed by a Responsible Officer in form and
substance acceptable to Bank; (b) within five (5) days upon becoming available,
but in any event within ninety-five (95)
36
Page 36
days after the end of Borrower's fiscal year, the report on Form 10-K filed or
required to be filed with the Securities and Exchange Commission; (c) promptly
upon receipt of notice thereof, a report of any legal actions pending or
threatened against Borrower or any Subsidiary that could result in damages or
costs to Borrower or any Subsidiary of Five Hundred Thousand Dollars ($500,000)
or more; (d) promptly upon their becoming available (and in any event within
five (5) Business Days thereafter), copies of (i) all financial statements,
reports, notices, proxy statements and other information that Borrower sends or
generally makes available to any class of its security holders or that any
Subsidiary sends or generally makes available to any class of its security
holders, (ii) all regular and periodic reports and all registration statements,
forms and prospectuses that Borrower or any Subsidiary files with any securities
exchange or with the Securities and Exchange Commission, to the extent that such
documents are not already required to be delivered under clauses (a) and (b) of
this Section 6.3, and (iii) all press releases and other statements that
Borrower or any Subsidiary makes generally available to the public concerning
material developments in the business of Borrower or any Subsidiary; (e) within
fifteen (15) days after the end of each calendar month after the Closing Date
during which the Borrowing Base formula is in effect, (i) a detailed aged trial
balance of the Accounts, in form and substance satisfactory to Bank, in its sole
discretion, including, without limitation, the names and addresses of all
Account Debtors, (ii) a detailed accounts payable aging, in form and substance
satisfactory to Bank, in its sole discretion, (iii) an inventory report, in form
and substance satisfactory to Bank, in its sole discretion, and (iv) a backlog
report, in form and substance satisfactory to Bank, in its sole discretion; and
(f) such budgets, sales projections, operating plans or other financial
information as Bank may reasonably request from time to time.
Bank shall have a right from time to time hereafter to conduct a field
exam and to audit Accounts and Inventory at Borrower's expense, provided that
such audits will be conducted no more often than once every six (6) months,
unless an Event of Default has occurred and is continuing, in which case Bank
may conduct such audits, at Borrower's expense, as frequently as Bank deems
appropriate.
Bank may destroy or otherwise dispose of any documents delivered to
37
Page 37
Bank six (6) months after Bank's receipt thereof.
Inventory. Borrower shall keep all Inventory in good and marketable
condition, free from all material defects. Returns and allowances, if any, as
between Borrower and its Account Debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they exist at the
time of the Closing Date. Borrower shall promptly notify Bank of all returns and
recoveries and of all disputes and claims, where the return, recovery, dispute
or claim involves more than One Hundred Thousand Dollars ($100,000).
38
Page 38
Taxes. Borrower shall make, and shall cause each Subsidiary to make, due
and timely payment or deposit of all material federal, state, and local taxes,
assessments, or contributions required of it by law, and shall execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment or
deposit thereof; and Borrower shall make, and shall cause each Subsidiary to
make, timely payment or deposit of all material tax payments and withholding
taxes required of it by applicable laws, including, but not limited to, those
laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and
federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by
GAAP).
Insurance. Borrower, at its expense and with such companies as are
reasonably acceptable to Bank, shall maintain business interruption and
liability insurance and fire, theft and other hazard insurance which covers the
Collateral, which insurance shall be in such amounts as are ordinarily carried
by other owners in similar businesses conducted in the locations where
Borrower's business is conducted on the date hereof. All such liability
insurance policies shall show Bank as an additional insured or loss payee, as
applicable, and shall specify that the insurer must give at least twenty (20)
days' notice to Bank before canceling its policy for any reason. Borrower shall
deliver to Bank certified copies of such policies of insurance and evidence of
the payments of all premiums therefor.
Further Assurances. At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes hereof.
NEGATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
Obligations, and for so long as Bank is committed to make an Advance or issue a
Letter of Credit hereunder, Borrower will not do any of the following:
39
Page 39
Change in Business. Suspend or go out of business, engage in any
business, or permit any of the Subsidiaries to engage in any business, other
than the businesses currently engaged in by Borrower and any business
substantially similar or related thereto (or incidental thereto). Borrower will
not, without thirty (30) days' prior written notification to Bank, relocate its
chief executive office.
Mergers or Acquisitions. Merge or consolidate, or permit any of the
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of the Subsidiaries to acquire, all or a
substantial portion of the capital stock or property of another Person or sell
or otherwise dispose of all or substantially all of its assets; provided,
however, that Borrower may, upon prior notice to Bank, but without obtaining
Bank's consent, merge or consolidate with or into another business organization
or acquire, or permit any of the Subsidiaries to acquire, all or a substantial
portion of the capital stock, assets, or property of another Person if no Event
of Default then exists and no Event of Default would exist upon the closing of
merger, consolidation or acquisition.
Indebtedness. Create, incur, assume or be or remain liable with respect
to any Indebtedness, or permit any Subsidiary so to do, other than Permitted
Indebtedness.
Encumbrances. Create, incur, assume or suffer to exist any Lien with
respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of the
Subsidiaries so to do, except for Permitted Liens.
Distributions. Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any capital
stock other than the purchase of Borrower's stock from former employees,
consultants or agents of Borrower.
Current Ratio. Permit the ratio of Consolidated Current Assets to
Consolidated Current Liabilities to be less than 2.50 to 1.00 as of the last day
of any fiscal quarter of Borrower.
40
Page 40
Quick Ratio. Permit the ratio of Consolidated Quick Assets to
Consolidated Current Liabilities to be less than 1.50 to 1.00 on the last day of
any fiscal quarter of Borrower.
Interest Coverage Ratio. Permit the ratio of EBIT to Consolidated
Interest Charges to be less than 3.00 to 1.00, on the last day of any fiscal
quarter, with the ratio for each such date determined for the period of the four
(4) fiscal quarters of Borrower ended on such date.
Adjusted Consolidated Tangible Net Worth. Permit, on the last day of any
fiscal quarter of Borrower, Adjusted Consolidated Tangible Net Worth to be less
than the Minimum Amount for such fiscal quarter. For purposes of this Section
7.9, the "Minimum Amount" shall be (i) for the fiscal quarter ending December
31, 1996, Fifty Million Dollars ($50,000,000), and (ii) for each fiscal quarter
thereafter, the sum of the Minimum Amount for the immediately preceding fiscal
quarter plus seventy-five percent (75%) (zero percent (0%), in the case of a
deficit) of Consolidated Net Income for such immediately preceding fiscal
quarter.
Working Capital. Permit, on the last day of any fiscal quarter of
Borrower, Working Capital to be less than Thirty Million Dollars ($30,000,000).
Leverage Ratio. Permit, on the last day of any fiscal quarter of
Borrower, the ratio of Total Liabilities to Adjusted Consolidated Tangible Net
Worth to be more than .50 to 1.00.
Quarterly Losses. Permit Consolidated Net Income in any fiscal quarter
of Borrower to be less than zero.
Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of the Subsidiaries so to do,
other than Permitted Investments.
Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower
41
Page 41
except for (i) transactions that are in the ordinary course of Borrower's
business, upon fair and reasonable terms that are no less favorable to Borrower
than would be obtained in an arm's length transaction with a nonaffiliated
Person, and (ii) payment to MDC Management Company of compensation in connection
with the rendering by MDC Management Company to Borrower of consulting and
financial services, provided that the compensation paid by Borrower to MDC
Management Company in respect thereof does not exceed Three Hundred Fifty
Thousand Dollars ($350,000) for any fiscal year of Borrower.
Inventory. Store the Inventory with a bailee, warehouseman, or similar
party unless Bank has received a pledge of the warehouse receipt covering such
Inventory. Except for Inventory sold in the ordinary course of business and
except for such other locations as Bank may approve in writing, which approval
shall not be unreasonably withheld, conditioned or delayed, Borrower shall keep
the Inventory only at the location set forth in Section 10 hereof, Borrower's
Vista plant, Borrower's retail stores and such other locations of which Borrower
gives Bank prior written notice and as to which Borrower signs and files a
financing statement where needed to perfect Bank's security interest.
Subordinated Debt. Make any payment in respect of any Subordinated Debt,
or permit any of the Subsidiaries to make any such payment, except in compliance
with any applicable subordination agreement or with the terms of such
Subordinated Debt, or amend any provision contained in any documentation
relating to the Subordinated Debt without Bank's prior written consent, which
approval shall not be unreasonably withheld, conditioned or delayed.
Compliance. Become an "investment company" or controlled by an
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose. Fail
to meet ERISA's minimum funding requirements, permit a Reportable Event or
Prohibited Transaction, as such terms are defined in ERISA, to occur, permit any
condition to exist that would entitle any Person
42
Page 42
to obtain a decree adjudicating that any plan under ERISA must be terminated,
fail to comply with the Federal Fair Labor Standards Act in any way which could
have a Material Adverse Effect or violate any law or regulation, which violation
could have a Material Adverse Effect or a material adverse effect on the
Collateral or, commencing on the Trigger Date, the priority of Bank's Lien on
the Collateral, or permit any of the Subsidiaries to do any of the foregoing.
EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default hereunder:
Payment Default. If Borrower fails to pay (i) any interest or principal
Obligations when due and payable or (ii) any Obligations, other than interest
and principal Obligations, within five (5) days of the date due and payable;
Covenant Default. If Borrower fails or neglects to perform, keep, or
observe any other term, provision, condition, covenant, or agreement contained
herein, in any of the Loan Documents, or in any other present or future
agreement between Borrower and Bank;
Material Adverse Effect. If there occurs an event that has a Material
Adverse Effect or, commencing on the Trigger Date, a material impairment of the
value or priority of Bank's Lien against the Collateral;
Attachment. If all or any portion of Borrower's assets is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within thirty (30) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any part of its business affairs, or if a judgment or other claim
becomes a Lien upon any portion of Borrower's assets, or if a notice of Lien,
levy, or assessment is filed of record with respect to any of Borrower's assets
by the United States Government, or any department,
43
Page 43
agency, or instrumentality thereof, or by any state, county, municipal, or
governmental agency, and the same is not paid within ten (10) days after
Borrower receives notice thereof; provided that Bank shall not be required to
make any Advances or issue any Letters of Credit during such cure period;
Insolvency. If an Insolvency Proceeding is commenced by Borrower, or if
an Insolvency Proceeding is commenced against Borrower and is not dismissed or
stayed within sixty (60) days; provided that Bank shall not be required to make
any Advances or issue any Letters of Credit prior to the dismissal of such
Insolvency Proceeding;
Other Agreements. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness if such default could have a Material Adverse Effect;
Judgments. If a judgment or judgments for the payment of money in an
amount, individually or in the aggregate, which could have a Material Adverse
Effect shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of thirty (30) days (provided that no Advances will be
made prior to the satisfaction or stay of such judgment); or
Misrepresentations. If a material misrepresentation or misstatement
exists now or hereafter in any warranty or representation set forth herein or in
any certificate delivered to Bank by any Responsible Officer pursuant to this
Agreement or to induce Bank to enter into this Agreement or any other Loan
Document.
BANK'S RIGHTS AND REMEDIES
Rights and Remedies. Upon the occurrence and during the continuance of
an Event of Default, Bank may, at its election, without notice of its election
and without demand, do any one or more of the following, all of which are
authorized by Borrower:
Declare all Obligations, whether evidenced by this
44
Page 44
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable without any
action by Bank);
Cease making Advances, issuing Letters of Credit or
otherwise extending credit to or for the benefit of Borrower hereunder or under
any other agreement between Borrower and Bank;
Commencing on the Trigger Date, settle or adjust disputes
and claims directly with Account Debtors for amounts, upon terms and in whatever
order that Bank reasonably considers advisable;
Make such payments and do such acts as Bank considers
necessary or reasonable to protect its Lien on the Collateral, to the extent
that such Lien exists. Commencing on the Trigger Date, Borrower agrees to make
the Collateral available to Bank as Bank designates. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any Lien which in Bank's determination appears to be prior or
superior to its Lien and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's owned premises, Borrower hereby grants Bank a
license to enter into possession of such premises and to occupy the same,
without charge, for up to one hundred twenty (120) days in order to exercise any
of Bank's rights or remedies provided herein, at law, in equity, or otherwise;
Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
Commencing on the Trigger Date, ship, reclaim, recover,
store, finish, maintain, repair, prepare for sale, advertise for sale, and sell
(in the manner provided for herein) the Collateral. Bank is hereby granted,
effective as of the Trigger Date, a license or other right, solely pursuant to
the provisions of this Section 9.1, to use, without charge,
45
Page 45
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit, and Bank shall not be obligated to pay any compensation to Borrower or
any other Person in connection with the exercise of such rights;
Commencing on the Trigger Date, sell the Collateral at either a public
or private sale, or both, by way of one or more contracts or transactions, for
cash or on terms, in such manner and at such places (including, without
limitation, Bank's or Borrower's premises) as Bank determines is reasonable;
Commencing on the Trigger Date, Bank may credit bid and purchase at any
public sale; and
Any deficiency that exists after disposition of the Collateral on or
after the Trigger Date as provided above shall be paid immediately by Borrower.
Power of Attorney. Borrower hereby irrevocably appoints Bank (and any of
Bank's designated officers, employees or agents) as Borrower's true and lawful
attorney, with the power, commencing on the Trigger Date, to: (a) send requests
for verification of Accounts or notify Account Debtors of Bank's Lien against
the Accounts, provided that at the time of the verification request or
notification an Event of Default has occurred and is continuing; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession which constitute proceeds of any of the Collateral;
(c) sign Borrower's name on any invoice or xxxx of lading relating to any
Account, drafts against Account Debtors, schedules and assignments of Accounts,
verifications of Accounts, and notices to Account Debtors; and (d) during the
continuance of an Event of Default, settle and adjust disputes and claims
respecting the accounts directly with Account Debtors for amounts and upon terms
which Bank determines to be reasonable; provided Bank may exercise such power of
46
Page 46
attorney to sign the name of Borrower on any of the documents described in
Section 4.2 regardless of whether an Event of Default is continuing. The Bank's
appointment as Borrower's attorney in fact, and each and every one of Bank's
rights and powers, being coupled with an interest, is irrevocable until all of
the Obligations are fully satisfied and Bank's obligation to make Advances and
issue Letters of Credit hereunder is terminated or expires.
Accounts Collection. Provided that the Trigger Date has occurred, Bank
may, at any time during the continuance of an Event of Default, notify any
Person owing funds to Borrower which constitute part of the Collateral of Bank's
Lien against such funds. Commencing as of the Trigger Date, Borrower shall
collect all amounts owing to Borrower which constitute part of the Collateral
for Bank, receive in trust all payments as Bank's trustee, and immediately
deliver such payments to Bank in their original form as received from the
Account Debtor, with proper endorsements for deposit.
Bank Expenses. If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms hereof, then Bank may do any or all of the following: (a) make payment
of the same or any part thereof; (b) set up such Reserves as Bank deems
necessary to protect it from the exposure created by such failure; or (c) obtain
and maintain insurance policies of the type described in Section 6.6 hereof, and
take any action with respect to such policies as Bank deems prudent. Any amounts
so paid or deposited by Bank shall constitute Bank Expenses, shall be
immediately due and payable, and shall bear interest at the Prime Interest Rate
then in effect. Any payments made by Bank shall not constitute an agreement by
Bank to make similar payments in the future or a waiver by Bank of any Event of
Default.
Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for any diminution in the value of any Collateral.
Remedies Cumulative. Bank's rights and remedies hereunder, the other
Loan Documents, and by law shall be cumulative. Bank shall have all other rights
and remedies not inconsistent herewith as provided
47
Page 47
under the Code, by law, or in equity. No exercise by Bank of one right or remedy
shall be deemed an election, and no waiver by Bank of any Event of Default on
Borrower's part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be
effective unless in writing.
Demand; Protest; Application. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
Borrower waives any right to direct the application of any amount received by
Bank.
NOTICES
Unless otherwise provided herein, all notices or demands by any party
relating to this Agreement or any other Loan Document shall be in writing and
(except for financial statements and other informational documents, which may be
sent by first-class mail, postage prepaid) shall be personally delivered or sent
by a recognized, overnight delivery service or by certified mail, postage
prepaid, return receipt requested, or by facsimile to Borrower or Bank, as the
case may be, at its address set forth below:
If to Borrower: Vans, Inc.
00000 Xxxxxxxxx Xxxxxx
Xxxxx Xx Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxx, Esq.,
Vice President and General Counsel
FAX: (000) 000-0000
If to Bank: Bank of the West
0000 Xxxxx Xxxx.
Xxxxxx Xxxxx, XX 00000
Attn: Xx. Xxxx X. Xxxxxx
FAX: (000) 000-0000
48
Page 48
Either party may change its address for notices by written notice given in the
foregoing manner to the other.
CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to conflicts of law
principles. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of San
Francisco, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
GENERAL PROVISIONS
Successors and Assigns. This Agreement shall bind and inure to the
benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which may be
granted or withheld in Bank's sole discretion. Bank shall have the right without
the consent of or notice to Borrower to sell, transfer, negotiate, or grant
participations in all or any part of, or any interest in, Bank's obligations,
rights and benefits hereunder.
Indemnification. Borrower shall defend, indemnify and hold harmless Bank
and its officers, employees, and agents against: (a) all
49
Page 49
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether hereunder, or otherwise
(including without limitation reasonable attorneys fees and expenses), except
for losses caused by Bank's gross negligence or willful misconduct.
Time of Essence. Time is of the essence for the performance of all
obligations set forth herein.
Severability of Provisions; Headings. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision. Headings are
set forth herein for convenience only.
Amendments; Integration. This Agreement cannot be changed or terminated
orally. All prior agreements, understandings, representations, warranties, and
negotiations between the parties hereto with respect to the subject matter
hereof, if any, are merged into this Agreement and the Loan Documents.
Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
Survival. All covenants, representations and warranties made herein
shall continue in full force and effect so long as any Obligations remain
outstanding. Borrower's obligations to indemnify Bank with respect to the
expenses, damages, losses, costs and liabilities described in Section 12.2 shall
survive until all applicable statute of limitations periods with respect to
actions that may be brought against Bank have run.
Confidentiality. Bank shall not disclose to any third party any
Confidential Information disclosed to Bank pursuant to the Loan
50
Page 50
Documents, except that (i) the Bank may disclose Confidential Information to a
third party to the extent compelled by law, subpoena, civil investigative
demand, interrogatories or similar legal process, and (ii) Bank may disclose
Confidential Information to a potential transferee of or participant in the Loan
Documents, provided that the potential transferee or participant agrees to be
bound by the same confidentiality obligations as Bank under this section. For
purposes hereof, Confidential Information is information disclosed by Borrower
to Bank pursuant to the Loan Documents that is not information which (i) becomes
generally available to the public, other than as a result of disclosure by Bank,
(ii) was available on a non-confidential basis prior to its disclosure to Bank
by Borrower, or (iii) becomes available to Bank on a non-confidential basis from
a source other than Borrower.
No Novation. This Amended and Restated Loan and Security Agreement is
not intended to be, and shall not be construed to create, a novation or accord
and satisfaction, and, except as otherwise provided herein, the Loan and
Security Agreement, as executed and delivered on July 1, 1995, and amended and
restated prior to the execution hereof, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
VANS, INC.
By:
Title:
By:
Title:
BANK OF THE WEST
51
Page 51
By:
Xxxx X. Xxxxxx
Regional Vice President
