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AMENDED AND RESTATED REVOLVING CREDIT
AND
SECURITY AGREEMENT
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IBJ XXXXXXXX BANK & TRUST COMPANY
(AS AGENT)
AND
IBJ XXXXXXXX BANK & TRUST COMPANY
AND
NATIONAL BANK OF CANADA
(AS LENDERS)
WITH
ALLSTATE FINANCIAL CORPORATION
(BORROWER)
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AS OF MAY 28, 1997
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AMENDED AND RESTATED
REVOLVING CREDIT
AND
SECURITY AGREEMENT
Amended and Restated Revolving Credit and Security Agreement
("Agreement") dated as of May __, 1997 between ALLSTATE FINANCIAL CORPORATION, a
corporation organized under the laws of the Commonwealth of Virginia
("Borrower"), the undersigned financial institutions (collectively, the
"Lenders" and individually a "Lender") and IBJ XXXXXXXX BANK & TRUST COMPANY
("IBJS"), as agent for Lenders (IBJS, in such capacity, the "Agent").
BACKGROUND
Borrower is a party with Lenders and Agent to a Revolving
Credit and Security Agreement dated as of May 13, 1994 (as the same has been
amended, restated, supplemented or otherwise modified, from time to time, the
"Existing Agreement") pursuant to which Agent and Lenders provide Borrower with
certain financial accommodations.
By execution of this Agreement, Borrower, Lenders and Agent
intend to amend and restate the Existing Agreement in its entirety and, as so
amended and restated, the Existing Agreement shall read in full as set forth
herein on the Effective Date.
IN CONSIDERATION of the mutual covenants and undertakings
herein contained, Borrower and Lenders hereby agree as follows:
AMENDMENT AND RESTATEMENT
As of the date of this Agreement, the terms, conditions, covenants,
agreements, representations and warranties contained in the Existing Agreement
shall be deemed amended and restated in their entirety as follows; provided,
however, nothing contained in this Agreement shall impair, limit or affect the
Liens heretofore granted, pledged and/or assigned to Agent for the ratable
benefit of Lenders with respect to Collateral as security for the Obligations to
Agent and Lenders under the Existing Agreement.
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, the Revolving
Credit Note, or any certificate, report or other document made or delivered
pursuant to this Agreement, accounting terms not defined in Section 1.2 or
elsewhere in this Agreement and accounting terms partly defined in Section 1.2
to the extent not defined, shall have the respective meanings given to them
under GAAP.
1.2. General Terms. For purposes of this Agreement the
following terms shall have the following meanings:
"Account Debtor" shall mean any Person who may become
obligated under, with respect to, or on account of, a Receivable.
"Advances" shall mean and include, without
duplication, the Revolving Advances, the Inventory Value Advances,
the Equipment Value Advances and Letters of Credit.
"Advance Rates" shall have the meaning set forth in
Section 2.1(a) hereof.
"Affiliate" of any Person shall mean (a) any Person
(other than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with such Person, or (b) any Person
who is a director, officer, joint venturer or partner (i) of such Person, (ii)
of any Subsidiary of such Person or (iii) of any Person described in clause (a)
above. For purposes of this definition, control of a Person shall mean the
power, direct or indirect, (x) to vote 10% or more of the securities having
ordinary voting power for the election of directors of such Person, or (y) to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Agreement" shall have the meaning set forth in the
preamble hereof.
"Base Rate" shall mean the base rate of IBJS as
publicly announced by IBJS at its principal office from time to time, such rate
to be adjusted automatically, without notice, on the effective date of any
change in such rate. This rate of interest is determined from time to time by
IBJS as a means of pricing some loans to its customers and is neither tied to
any external rate of interest or index nor does it necessarily reflect the
lowest rate of interest actually charged by IBJS to any particular class or
category of customers of IBJS.
"Borrower" shall have the meaning set forth in the
preamble to this Agreement and shall extend to all permitted
successors and assigns.
"Borrowing Base" shall have the meaning set forth in
Section 2.1(a).
"Borrowing Base Certificate" shall mean a certificate
in the form attached hereto as Exhibit 1.2(a) provided by Borrower to Agent,
showing the calculation, as of the relevant period, of the Borrowing Base.
"Xxxxxx Employment Agreement" shall mean the Severance
Agreement dated as of July 1, 1996 between Borrower and Xxxxxxx Xxxxxx.
"Business Day" shall mean with respect to Eurodollar
Rate Loans, any day on which commercial banks are open for domestic and
international business, including dealings in Dollar deposits in London, England
and New York, New York and with respect to all
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other matters, any day that is not a Saturday, a Sunday or a day on which banks
are required to be closed in the State of Virginia or New York.
"X. Xxxxxxx Employment Agreement" shall mean the
Employment and Compensation Agreement dated as of July 1, 1996 between Borrower
and Xxxxx Xxxxxxx.
"Capital Expenditures" shall mean all payments for any
fixed assets or improvements or for replacements, substitutions or additions
thereto, that have a useful life of more than one year and that are required to
be capitalized under GAAP.
"Cash Collateral Account" shall have the meaning set
forth in Section 2.10(e).
"Cash Equivalents" shall mean (a) certificates of
deposit in dollars of any Lender or any commercial banks registered to do
business in any state of the United States (i) having capital and surplus in
excess of $1,000,000,000 and (ii) whose long-term debt rating is at least
investment grade as determined by either Standard & Poor's Corporation or
Xxxxx'x Investor Service, Inc., (b) readily marketable direct obligations of the
United States government or any agency thereof which are backed by the full
faith and credit of the United States, (c) commercial paper at the time of
acquisition having a rating of at least "A-l" from Standard & Poor's Corporation
or "Prime-1" from Xxxxx'x Investor Service, Inc., (d) repurchase agreements with
commercial banks of a type described in (a) above covering securities described
in (b) above, and (e) investments in money market funds substantially all of
whose assets are comprised of securities of the types described in clauses (a)
through (d) above.
"CERCLA" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. ss.ss.9601 et seq.
"Change of Control" shall mean (a) the occurrence of
any event (whether in one or more transactions) which results in a transfer of
control of Borrower to a Person who is not an Original Owner or (b) any merger
or consolidation of or with Borrower or sale of all or substantially all of the
property or assets of Borrower, except as specifically provided in Section 7.1
herein. For purposes of this definition, "control of Borrower" shall mean the
power, direct or indirect (x) to vote 50% or more of the securities having
ordinary voting power for the election of directors of Borrower or (y) to direct
or cause the direction of the management and policies of Borrower by contract or
otherwise.
"Charges" shall mean all taxes, charges, fees,
imposts, levies or other assessments, including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, inventory, capital stock, license, withholding,
payroll,
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employment, social security, unemployment, excise, severance, stamp, occupation
and property taxes, custom duties, fees, assessments, liens and charges of any
kind whatsoever, together with any interest and any penalties, additions to tax
or additional amounts, imposed by any taxing or other authority, domestic or
foreign (including, without limitation, the Pension Benefit Guaranty Corporation
or any environmental agency or superfund), upon the Collateral, the Obligations,
Borrower or any of its Subsidiaries.
"Claims" shall mean all security interests, Liens,
claims or encumbrances held or asserted by any Person against any or all of the
Collateral, other than (A) Charges and (B) Permitted Encumbrances.
"Class A Eligible Receivables Exposure" shall mean
Eligible Receivables which have formal due dates, and which remain unpaid ninety
(90) days or less from the original due date multiplied by the applicable Client
Stated Advance Rate for such Receivables.
"Class B Eligible Receivables Exposure" shall mean
Eligible Receivables which do not have formal due dates and which have been
owned by Borrower for one hundred twenty (120) days or less from the Purchase
Date, multiplied by the applicable Client Stated Advance Rate for such
Receivables.
"Class C Eligible Receivables Exposure" shall mean
Eligible Receivables which do not have formal due dates and which have been
owned by Borrower for more than one hundred twenty (120) days but less than two
hundred forty one (241) days from the Purchase Date, multiplied by the
applicable Client Stated Advance Rate for such Receivables.
"Client" shall mean any Person with whom Borrower is a
party to a Factoring Agreement, a Collateral Funding Repayment
Agreement and/or an Inventory Collateral Funding Repayment
Agreement.
"Client Funded Equipment" shall have the meaning set
forth in Section 2.2 hereof.
"Client Stated Advance Rate" shall mean the stated
advance rate to each Client under the applicable Factoring
Agreement.
"Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time and the regulations promulgated
thereunder.
"Collateral" shall mean and include:
(a) all Receivables;
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(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Subsidiary Stock;
(f) all of Borrower's right, title and
interest in and to (i) its goods and other property including, but not limited
to all merchandise returned to Clients or rejected by Account Debtors, relating
to or securing any of the Receivables; (ii) all of Borrower's rights as a
consignor, a consignee, an unpaid vendor, mechanic, artisan, or other lienor,
including stoppage in transit, setoff, detinue, replevin, reclamation and
repurchase; (iii) all additional amounts due to Borrower from any Client
relating to the Receivables; (iv) other property, including warranty claims,
relating to any goods securing this Agreement; (v) all of Borrower's contract
rights, rights of payment which have been earned under a contract right,
instruments, documents, chattel paper, warehouse receipts, deposit accounts,
investment property, money and securities; (vi) if and when obtained by
Borrower, all personal property of third parties in which Borrower has been
granted a lien or security interest as security for the payment or enforcement
of Receivables; and (vii) any other goods, personal property or real property
now owned or hereafter acquired in which Borrower has expressly granted a
security interest or may in the future grant a security interest to Agent
hereunder, under any Other Document or in any amendment or supplement hereto or
thereto, or under any other agreement between Agent and Borrower;
(g) all of Borrower's ledger sheets, ledger
cards, files, correspondence, records, books of account, business papers,
computers, computer software (owned by Borrower or in which it has an interest),
computer programs, tapes, disks and documents relating to (a), (b), (c), (d),
(e), or (f) of this Paragraph; and
(h) all proceeds and products of (a), (b),
(c), (d), (e), (f) and (g) in whatever form, including, but not limited to:
cash, deposit accounts (whether or not comprised solely of proceeds),
certificates of deposit, insurance proceeds (including hazard, flood and credit
insurance), negotiable instruments and other instruments for the payment of
money, chattel paper, security agreements, documents, eminent domain proceeds,
condemnation proceeds and tort claim proceeds.
"Collateral Assignment of Security" shall mean the
agreement executed by Borrower in favor of Agent pursuant to which all rights of
Borrower under each Factoring Agreement and related documents (including all
UCC-1 Financing Statements) are collaterally assigned to Agent for the benefit
of itself and Lenders.
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"Collateral Funding Repayment Agreement" shall mean a
Collateral Funding Repayment Agreement and such other agreements in
substantially the forms attached hereto as Exhibit 1.2(b) entered into between
Borrower and a Client, together with such modifications thereto as Borrower may
from time to time deem appropriate or desirable and such other agreements to be
approved by Agent in its sole reasonable discretion; provided, however, that, no
such modifications can be made without Agent's approval following the occurrence
and during the continuance of an Event of Default, such approval not to be
unreasonably withheld.
"Commitment Percentage" of any Lender shall mean the
percentage set forth below such Lender's name on the signature page hereof as
same may be adjusted upon any assignment by a Lender pursuant to Section 15.3(b)
hereof.
"Commitment Transfer Supplement" shall mean a document
in the form of Exhibit 15.3 hereto, properly completed and otherwise in form and
substance satisfactory to Agent by which the Purchasing Lender purchases and
assumes a portion of the obligation of Lenders to make Advances under this
Agreement.
"Consents" shall mean all filings and all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and other third parties, domestic or foreign, necessary
to carry on Borrower's business, including, without limitation, any Consents
required under all applicable federal, state or other applicable law.
"Controlled Group" shall mean all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with Borrower, are treated as
a single employer under Section 414 of the Code.
"Convertible, Senior Subordinated Notes" shall mean up
to an aggregate principal amount of $5,000,000.00 in convertible, senior
subordinated notes issued by Borrower from time to time pursuant to an Indenture
of Trust dated as of September 11, 1995 between Borrower and Fleet National Bank
of Connecticut (successor by merger to Shawmut Bank Connecticut, National
Association) (as modified, supplemented or amended from time to time in
accordance with the terms thereof, the "Indenture"), which notes (i) shall bear
interest at a rate not to exceed 10% per annum payable quarterly in arrears,
(ii) shall not call for any scheduled repayment of principal prior to September
30, 2000, (iii) shall at all times be unsecured, (iv) shall be subordinated in
right of payment (as and to the extent provided in the indenture) to the payment
or repayment of the Obligations, and (v) may, as specified therein, be converted
from time to time into common Stock of Borrower.
"Credit Standards" shall have the meaning set forth in
Section 6.8.
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"Default" shall mean an event which, with the giving
of notice or passage of time or both, would constitute an Event of
Default.
"Default Rate" shall have the meaning set forth in
Section 3.1 hereof.
"Xxxxx Employment Agreement" shall mean the Severance
Agreement dated as of July 1, 1996 between Borrower and Xxxxxx Xxxxx.
"Depository Account" shall have the meaning set forth
in Section 4.16(a).
"Documents" shall have the meaning set forth in
Section 8.1(c) hereof.
"Dollar" and the sign "$" shall mean lawful money of
the United States of America.
"Domestic Rate Loans" shall mean any Advance that
bears interest based upon the Base Rate.
"EBIT" shall mean Borrower's and its Subsidiaries' net
income before interest and taxes on a consolidated basis.
"Effective Date" shall mean the date on which all of
the conditions precedent in Section 8.1 have been satisfied.
"Eligible Client Funded Inventory" shall have the
meaning set forth in Section 2.2A(a) hereof.
"Eligible Receivables" shall mean each Receivable set
forth on the most recent Schedule of Receivables delivered by Borrower to Agent
and on other considerations as Agent may from time to time deem appropriate;
provided, however, that under no circumstances shall a Receivable be an Eligible
Receivable unless Borrower has recorded on its books and records and actually
made advances or loans to a Client pursuant to the applicable Factoring
Agreement with respect to such Receivable. In determining whether a particular
Receivable constitutes an Eligible Receivable, Agent shall include only a
Receivable:
(a) purportedly purchased by Borrower in the ordinary
course of business pursuant to a Factoring Agreement of Receivables which arose
from the sale of goods or the performance of services by Clients in the ordinary
course of the Client's business;
(b) upon which (i) Borrower's right to receive
payment is absolute and not contingent upon the fulfillment of any condition
whatever and (ii) Borrower is able to bring suit or otherwise enforce its
remedies against the Client and (iii) Borrower has the right to enforce payment
against the Account Debtor through judicial process;
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(c) against which is asserted no defense,
counterclaim or setoff, whether well-founded or otherwise except for ordinary
course adjustments (Agent reserves the right to establish appropriate reserves);
(d) that is a true and correct statement of a bona
fide indebtedness incurred in the amount of the Receivable for merchandise sold
to and accepted by, or for services performed by a Client and accepted by, the
Account Debtor obligated upon such Receivable (whether or not such services were
performed for the Account Debtor);
(e) with respect to which an invoice or similar
statement has been sent by the Client or by Borrower;
(f) that is owned by Borrower and not subject to any
right, claim or interest of another (but only to the extent of such right, claim
or interest) other than (i) the security interest in favor of Agent for the
benefit of Lenders, (ii) Risk Participations granted by Borrower which are fully
disclosed on the books and records of Borrower and disclosed to Lenders in the
Schedule of Receivables delivered to Agent pursuant to Section 9.2 hereof and
(iii) Liens subordinated to the Lien of Borrower and as to which the holder of
any such Lien has agreed not to exercise any rights or remedies until all
obligations of the Client to Borrower have been paid in full;
(g) that does not arise from a sale to or performance
of services for an employee, affiliate, parent or subsidiary of
Borrower, or an entity which has common officers or directors with
Borrower;
(h) that is not the obligation of an Account Debtor
that is the federal government or a political subdivision thereof unless
Borrower has complied with the Federal Assignment of Claims Act of 1940, and any
amendments thereto, with respect to such obligation;
(i) that is not the obligation of an Account Debtor
located in a foreign country (other than Puerto Rico or Canada) unless such
obligation is secured by a letter of credit or a guaranty issued by the
Export-Import Bank of the United States acceptable to Agent in its sole
reasonable judgment;
(j) to the extent that the amount of the Receivable
is not subject to claims by an Account Debtor to whom Borrower or a Client is
liable for goods sold or services rendered by the Account Debtor to Borrower or
such Client;
(k) that does not arise with respect to goods which
are delivered on a cash-on-delivery basis or placed on consignment, guaranteed
sale or other terms by reason of which the payment by the Account Debtor may be
conditional;
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(l) that is not in default; provided, that a
Receivable shall be deemed in default upon the occurrence of any of the
following:
(i) The Receivable is not paid within the two
hundred forty day period starting on the date of acquisition
thereof by Borrower;
(ii) Any Account Debtor obligated upon such
Receivable suspends business, makes a general assignment for the
benefit of creditors, or fails to pay its debts generally as they
come due; or
(iii) Any petition is filed by or against any Account
Debtor obligated upon such Receivable under any bankruptcy law or any
other law or laws for the relief of debtors; provided, however, that
$1,000,000 in the aggregate at any one time outstanding of
Receivables representing post-petition obligations of Account Debtors
operating under Chapter 11 of Title 11 of the United States Code and
which otherwise constitute Eligible Receivables hereunder may be
deemed to be Eligible Receivables;
(m) that is not the obligation of an Account Debtor
that is in default (as defined in subparagraph (l) above) on fifty percent (50%)
or more of the Receivables upon which such Account Debtor is obligated;
(n) that does not arise from the sale of goods which
remain in Borrower's or a Client's possession or under Borrower's
or a Client's control;
(o) (i) Borrower shall have purchased pursuant to a
valid, binding and enforceable Factoring Agreement, (ii) with respect to which
Borrower shall have taken all actions (including, without limitation, the filing
of financing statements under the Uniform Commercial Code) necessary to create
in favor of Borrower a valid perfected first priority security interest in each
such Receivable, (iii) with respect to which there shall not exist any default
declared by Borrower against a Client with respect to such Client's recourse
obligations under or with respect to the Factoring Agreement and (iv) with
respect to which the Account Debtor shall have been notified to pay Borrower
directly or to a location under Borrower's control;
(p) with respect to which the applicable Client is
not the subject of a proceeding under Title 11 of the United States Code or had
a petition filed by or against it under any bankruptcy or insolvency law, except
for S.O.S. Enterprises, Ltd. and except for purchases of Receivables outstanding
at any time not in excess of 15% of the sum of Tangible Net Worth and the
aggregate principal amount of outstanding Convertible, Senior Subordinated Notes
based upon Borrower's most recent consolidated balance sheet delivered to Agent
in accordance with Section 9.6 or 9.7 hereof as to which
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Borrower has obtained an order (i) authorizing interim or final financing of
post-petition Receivables and a superpriority Lien on all post-petition
Receivables and unshipped goods, (ii) containing a finding that Borrower is
entitled to the protection of Section 364(e) of Title 11 of the United States
Code, and (iii) if Borrower owns any pre-petition Receivables of the Client,
permitting Borrower to collect and apply the proceeds of such pre-petition
Receivables;
(q) that does not relate to the Viatical Settlement
and Personal Injury Settlement Businesses;
(r) to the extent such Receivable is not subject to
the rights of a participant in a Risk Participation;
(s) that is not a Receivable relating to medicare,
medicaid, social security or medical xxxxxxxx to other governmental
authorities; and
(t) notwithstanding (a) through (s) above, that is
otherwise acceptable to Required Lenders as determined in good faith by Required
Lenders in the exercise of their discretion in a reasonable manner.
"Environmental Authority" shall have the meaning set
forth in Section 4.20(d).
"Environmental Complaint" shall have the meaning set
forth in Section 4.20(d) hereof.
"Environmental Laws" shall mean all federal, state and
local environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances and codes relating to the protection of
the environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
"Equipment" shall mean and include all of Borrower's
goods (excluding Inventory) whether now owned or hereafter acquired and wherever
located including, without limitation, all equipment, machinery, apparatus,
motor vehicles, fittings, furniture, furnishings, fixtures, parts, accessories
and all replacements and substitutions therefor or accessions thereto.
"Equipment Collateral Assignment of Security" shall
mean the agreement executed by Borrower in favor of Agent pursuant to which all
rights of Borrower under each Collateral Funding Repayment Agreement and related
documents (including all UCC-1 Financing Statements) are collaterally assigned
to Agent for the benefit of itself and Lenders.
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"Equipment Value Advances" shall mean the Advances
made pursuant to Section 2.2 hereof.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974 (or any successor legislation thereto), as amended from
time to time and the rules and regulations promulgated thereunder.
"Eurodollar Rate Loan" shall mean an Advance at any
time that bears interest based on the Eurodollar Rate.
"Eurodollar Rate" shall mean for any Eurodollar Rate
Loan for the then current Interest Period relating thereto the rate per annum
(such Eurodollar Rate to be adjusted to the next higher 1/100 of one (1%)
percent) equal to the quotient of (a) LIBOR, divided by (b) a number equal to
1.00 minus the aggregate of the rates (expressed as a decimal) of reserve
requirements current on the day that is two Business Days prior to the beginning
of the Interest Period (including without limitation basic, supplemental,
marginal and emergency reserves) under any regulation promulgated by the Board
of Governors of the Federal Reserve System (or any other governmental authority
having jurisdiction over IBJS) as in effect from time to time, dealing with
reserve requirements prescribed for Eurocurrency funding including any reserve
requirements with respect to "Eurocurrency liabilities" under Regulation D of
the Board of Governors of the Federal Reserve System.
"Event of Default" shall mean the occurrence and
continuance of any of the events set forth in Article X hereof.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
"Factoring Agreement" shall mean an Accounts
Receivable Factoring and Security Agreement and such other agreements in
substantially the forms attached hereto as Exhibit 1.2(c) entered into between
Borrower and a Client, together with such modifications thereto as Borrower may
from time to time deem appropriate or desirable and such other agreements to be
approved by Agent in its sole reasonable discretion; provided, however, that, no
such modifications can be made without Agent's approval following the occurrence
and during the continuance of an Event of Default, such approval not to be
unreasonably withheld.
"Federal Funds Rate" shall mean, for any day, the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or if such rate
is not so published for any day which is a Business Day, the average of
quotations for such day on such transactions received by IBJS from
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three Federal funds brokers of recognized standing selected by
IBJS.
"Fiscal Month" shall mean any of the monthly
accounting periods of Borrower.
"Fiscal Quarter" shall mean any of the quarterly
accounting periods of Borrower.
"Fiscal Year" shall mean the 12-month period of
Borrower ending December 31 of each year.
"GAAP" shall mean generally accepted accounting
principles in the United States of America in effect from time to
time.
"General Intangibles" shall mean and include all of
Borrower's general intangibles, whether now owned or hereafter acquired
including, without limitation, all choses in action, causes of action, corporate
or other business records, inventions, designs, patents, patent applications,
equipment formulations, manufacturing procedures, quality control procedures,
trademarks, trade secrets, goodwill, copyrights, registrations, licenses,
franchises, customer lists, tax refunds, tax refund claims, computer programs,
all claims under guaranties, security interests or other security held by or
granted to Borrower to secure payment of any of the Receivables by a Client, all
amounts due from each Client to Borrower, all rights of indemnification and all
other intangible property of every kind and nature (other than Receivables).
"Governmental Authority" shall mean any nation or
government, any state or other political subdivision thereof, and any agency,
department or other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any
Person, any obligation of such Person guaranteeing any indebtedness, lease,
dividend, or other obligation ("primary obligations") of any Person (the
"primary obligor") in any manner including, without limitation, any obligation
or arrangement of such Person (i) to purchase or repurchase any such primary
obligation, (ii) to advance or supply funds (a) for the purchase or payment of
any such primary obligation or (b) to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet condition of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation, or (iv) to indemnify the owner of such primary
obligation against loss in respect thereof.
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"Guaranty" shall mean the joint and several guaranty
of the obligations of Borrower executed by Guarantors in favor of
Lenders.
"Guarantors" shall mean, collectively, LOI, SSI, AFC
Holding Corporation, Premium Sales Northeast, Inc., Business
Funding of America, Inc., Receivable Financing Corporation and
Business Funding of Florida, Inc.
"Hazardous Discharge" shall have the meaning set forth
in Section 4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation,
any flammable explosives, radon, radioactive materials, asbestos, urea
formaldehyde foam insulation, polychlorinated byphenyls, petroleum and petroleum
products, methane, hazardous materials, Hazardous Wastes, hazardous or toxic
substances or related materials as defined in CERCLA, the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, or any
other applicable Environmental Law and in the regulations adopted pursuant
thereto.
"Hazardous Wastes" shall mean all waste materials
subject to regulation under CERCLA, RCRA or applicable state law, and any other
applicable Federal and state laws now in force or hereafter enacted relating to
hazardous waste disposal.
"Hotsenpiller Employment Agreement" shall mean an
Employment and Compensation Agreement at any time entered into between Borrower
and Xxxx Hotesenpiller in a form similar to the Matthy Employment Agreement with
cash compensation not to exceed $175,000.
"IBJS" shall have the meaning set forth in the
preamble.
"Indebtedness" of a Person at a particular date shall
mean all obligations of such Person which in accordance with GAAP would be
classified upon a balance sheet as liabilities (except capital stock and surplus
earned or otherwise) and in any event, without limitation by reason of
enumeration, shall include all indebtedness, debt and other similar monetary
obligations of such Person whether direct or guaranteed, and all premiums, if
any, due at the required prepayment dates of such indebtedness, and all
indebtedness secured by a Lien on assets owned by such Person, whether or not
such indebtedness actually shall have been created, assumed or incurred by such
Person. Any indebtedness of such Person resulting from the acquisition by such
Person of any assets subject to any Lien shall be deemed, for the purposes
hereof, to be the equivalent of the creation, assumption and incurring of the
indebtedness secured thereby, whether or not actually so created, assumed or
incurred.
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"Interest Period" shall mean the period provided for
any Eurodollar Rate Loan pursuant to Section 2.12(b) hereof.
"Inventory" shall mean all of Borrower's now owned or
hereafter acquired goods, merchandise and other personal property, wherever
located, to be furnished under any contract of service or held for sale or
lease, all raw materials, work in process, finished goods and materials and
supplies of any kind, nature or description which are or might be used or
consumed in Borrower's business or used in selling or furnishing such goods,
merchandise and other personal property, and all documents of title or other
documents representing them.
"Inventory Borrowing Base" shall have the meaning set
forth in Section 2.2A(a).
"Inventory Collateral Assignment of Security" shall
mean the agreement executed by Borrower in favor of Agent pursuant to which all
rights of Borrower under each Inventory Collateral Funding Repayment Agreement
and related documents (including all UCC-1 Financing Statements) are
collaterally assigned to Agent for its benefit and the benefit of the Lenders.
"Inventory Collateral Funding Repayment Agreement"
shall mean an Inventory Collateral Funding Repayment Agreement and such other
agreements in substantially the forms attached hereto as Exhibit 1.2(d) entered
into between Borrower and a Client, together with such modifications thereto as
Borrower may from time to time deem appropriate or desirable and such other
agreements to be approved by Agent in its sole reasonable discretion; provided,
however, that, no such modifications can be made without Agent's approval
following the occurrence and during the continuance of an Event of Default, such
approval not to be unreasonably withheld.
"Inventory Value Advances" shall mean Advances made
pursuant to Section 2.2A(a) hereof.
"IRS" shall mean the Internal Revenue Service, or any
successor thereto.
"Lender and "Lenders" shall have the meaning ascribed
to such term in the Preamble and shall include each person which is a
transferee, successor or assign of any Lender.
"Letter of Credit Application" shall have the meaning
set forth in Section 2.9(a).
"Letter of Credit Fees" shall have the meaning set
forth in Section 3.2.
"Letter of Credit Obligations" means at any time with
respect to all Letters of Credit issued by and caused to be issued at the
request of the Agent in accordance with Section 2.8 the sum of (x) the aggregate
undrawn amount of all Letters of Credit
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outstanding at such time, plus (y) the aggregate amount of all Letters of Credit
for which the issuer and/or the Lenders have not been reimbursed and as to which
a Revolving Advance has not been made.
"Letter of Guaranty" shall mean an agreement,
instrument or other arrangement pursuant to which Borrower provides a guarantee
or similar undertaking with respect to obligations of any Client and, without
duplication, all additional Guaranteed Indebtedness (other than the Guaranty).
"Letters of Credit" shall have the meaning set forth
in Section 2.8.
"LIBOR" shall mean for any Eurodollar Rate Loan for
the then current Interest Period relating thereto, the rate per annum quoted by
Agent to Borrower two (2) Business Days prior to the first day of such Interest
Period as the rate available to Agent in the interbank market for offshore
Dollar deposits in immediately available funds for a period equal to such
Interest Period and in an amount equal to the amount of such Eurodollar Rate
Loan.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, Claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction.
"Lockbox Account" shall have the meaning set forth in
Section 4.16(a).
"LOI" shall mean Lifetime Options, Inc., a Viatical
Settlement Company, a Maryland corporation.
"Madden Employment Agreement" shall mean the
Employment and Compensation Agreement dated as of May 5, 1997 between Borrower
and Xxxxx Xxxxxx in substantially the form delivered to the Agent prior to the
Effective Date pursuant to a facsimile dated May 22, 1997.
"Material Adverse Effect" shall mean a material
adverse effect on (i) the business, assets, operations, prospects or financial
or other condition of Borrower and its Subsidiaries taken as a whole, (ii)
Borrower's and its Subsidiaries' collective ability to pay the Obligations in
accordance with the terms thereof, (iii) the Collateral or Agent's Liens on the
Collateral or the priority of any such Lien, or (iv) Agent's and Lenders' rights
and remedies under this Agreement and the Other Documents.
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"Matthy Employment Agreement" shall mean the
Employment and Compensation Agreement dated as of July 1, 1996 between Borrower
and Xxxxx Xxxxxx.
"Maximum Equipment Value Advance Amount" shall mean
$5,000,000.
"Maximum Inventory Value Advance Amount" shall mean
$2,500,000.
"Maximum Revolving Advance Amount" shall mean
$25,000,000.
"Multiemployer Plan" shall mean a plan described in
Sections 3(37) and Section 4001(a)(3) of ERISA to which Borrower has an
obligation to contribute.
"Obligations" shall mean all loans, advances, debts,
liabilities, and obligations, of every kind, nature and description, direct or
indirect, secured or unsecured, joint, several, joint and several, absolute or
contingent, due or to become due, now existing or hereafter arising, contractual
or tortious, liquidated or unliquidated, owing by Borrower or any of its
Subsidiaries or all of them to Agent or any Lender, at any time, whether or not
evidenced by any note, agreement or other instrument, arising in each case under
any of this Agreement or under any Other Document. This term includes, without
limitation, all principal, interest, fees, charges, reimbursement obligations in
respect of Letter of Credit Obligations, expenses, attorneys' fees and any other
sum chargeable to Borrower or any or all of its Subsidiaries under this
Agreement or under any of the Other Documents.
"Operating Account" shall have the meaning set forth
in Section 4.16(c).
"Original Closing Date" shall mean May 13, 1994.
"Original Owners" shall mean, collectively, Xxxx
Xxxxxxx, Xxxxxxx Xxxxxxx and Xxxxxx X. Xxxxxx.
"Other Documents" shall mean the Revolving Credit
Note, Stock Pledge Agreements, Guaranty, Security Agreement, Collateral
Assignment of Security, Equipment Collateral Assignment of Security, Inventory
Collateral Assignment of Security and any and all other agreements, instruments
and documents, including, without limitation, guaranties, pledges, powers of
attorney, consents, and all other writings heretofore, now or hereafter executed
by Borrower and/or delivered to Agent or any Lender in respect of the
transactions contemplated by this Agreement.
"Parent" of any Person shall mean a corporation or
other entity owning, directly or indirectly more than 50% of the
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shares of stock or other ownership interests having ordinary voting power to
elect a majority of the directors of the Person, or other Persons performing
similar functions for any such Person.
"Participant" shall mean each Person who shall be
granted the right by any Lender to participate in any of the Advances and who
shall have entered into a participation agreement in form and substance
satisfactory to such Lender.
"Payment Office" shall mean initially Xxx Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx; thereafter, such other office of Agent, if any,
which it may designate by notice to Borrower to be the Payment Office.
"Performance-Based Incentive Compensation Plan" shall
mean the performance-based incentive compensation plan for employees of the
Borrower and its Subsidiaries in the form delivered to the Agent prior to the
Effective Date, as same may be modified, supplemented or amended from time to
time by resolution of the Borrower's board of directors or the compensation
committee thereof.
"Permitted Encumbrances" shall mean (a) Liens in favor
of Agent for the benefit of Lenders; (b) Liens for taxes, assessments or other
governmental charges not delinquent, or, being contested in good faith and by
appropriate proceedings and with respect to which proper reserves have been
taken by Borrower; provided, that, the Lien shall have no effect on the priority
of the Liens in favor of Agent or the Lien shall not, in the sole discretion of
Agent, materially adversely affect the value of the assets in which Agent has
such a Lien; (c) Liens disclosed in the financial statements referred to in
Section 5.5; (d) deposits or pledges to secure obligations under worker's
compensation, social security or similar laws, or under unemployment insurance;
(e) deposits or pledges to secure bids, tenders, contracts (other than contracts
for the payment of money), leases, statutory obligations, surety and appeal
bonds (or in lieu of security or appeal bonds) and other obligations of like
nature arising in the ordinary course of Borrower's business; (f) judgment Liens
that have been stayed or bonded and mechanics', worker's, materialmen's or other
like Liens arising in the ordinary course of Borrower's business with respect to
obligations which are not due or which are being contested in good faith by
Borrower; (g) Liens placed upon fixed assets hereafter acquired to secure a
portion of the purchase price thereof, provided that (x) any such lien shall not
encumber any other property of Borrower and (y) the aggregate amount of
Indebtedness secured by such Liens incurred as a result of such purchases during
any fiscal year shall not exceed the amount provided for in Section 7.6; (h)
other Liens incidental to the conduct of Borrower's business or the ownership of
its property and assets which were not incurred in connection with the borrowing
of money or the obtaining of advances or credit, and which do not in the
aggregate materially detract from Agent's rights in and to the Collateral or the
value of Borrower's property or assets or which do not materially impair the use
thereof in the operation of
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Borrower's business; (i) Liens covering property of Borrower following the
exercise by Borrower of its rights and remedies against a Client or a guarantor
of a Client; (j) warehouseman's liens covering imported goods of Clients as to
which Borrower may from time to time own or be deemed to own such goods; (k)
Risk Participations, to the extent permitted under Section 7.1; (l) Liens on
Receivables (other than Receivables generated by Borrower) in favor of a party
other than Agent; provided, that, such Liens are subordinated to any Liens on
such Receivables in favor of Borrower pursuant to a written subordination
agreement pursuant to which, in each case, the subordinated lienor shall have
agreed not to exercise any rights or remedies prior to payment in full of all
amounts owing to Borrower; (m) Liens on Receivables generated by Borrower in
favor of a party other than Agent; provided, that, such Liens are subordinated
to any Liens on such Receivables in favor of Agent pursuant to a written
subordination agreement pursuant to which, in each case, the subordinated lienor
shall have agreed not to exercise any rights or remedies prior to payment in
full of all amounts owing to Agent and Lenders; and (n) Liens disclosed on
Schedule 1.2(a).
"Person" shall mean an individual, a partnership, a
corporation, a business trust, a joint stock company, a trust, an unincorporated
association, a joint venture, a governmental authority or any other entity of
whatever nature.
"Personal Injury Settlement Business" shall mean the
purchase by SSI of all or a portion of the proceeds of personal injury or other
legal or equitable claims at a discount from an injured party or other claimant.
"Plan" shall mean any employee benefit plan within the
meaning of Section 3(3) of ERISA, maintained for employees of Borrower or any
member of the Controlled Group or any such Plan to which Borrower or any member
of the Controlled Group is required to contribute on behalf of any of its
employees.
"Purchase Date" shall mean, with respect to any
Receivable purported to be purchased by Borrower, the original date Borrower
makes advances or loans to a Client with respect to such Receivable pursuant to
a Factoring Agreement.
"Purchasing Lender" shall have the meaning set forth
in Section 15.3(d).
"RCRA" shall mean the Resource Conservation and
Recovery Act, 42 U.S.C. xx.xx. 6901 et seq., as same may be amended
from time to time.
"Real Property" shall mean any real property owned or
leased by Borrower and set forth on Schedule 1.2(b) and all hereafter owned or
leased real property of Borrower.
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"Receivables" shall mean and include (a) all of
Borrower's accounts, contract rights, instruments (including those evidencing
indebtedness among Borrower and its Affiliates), documents, chattel paper,
general intangibles relating to accounts, drafts and acceptances, and all other
forms of obligations owing to Borrower arising out of or in connection with (i)
the sale or lease of Inventory by Borrower, (ii) the rendition of services by
Borrower, (iii) all accounts, contract rights, instruments, documents, chattel
paper, general intangibles relating to accounts, drafts and acceptances, and all
other forms of obligations which have been assigned to and/or purchased by
Borrower or (iv) any other transaction and (b) all guarantees and other security
therefor, whether secured or unsecured, now existing or hereafter created, and
whether or not specifically sold or assigned to Lender hereunder.
"Register" shall have the meaning set forth in Section
15.3(e).
"Related Person" shall mean as to any Person, any
other Person which, together with such Person, is treated as a single employer
under Section 414(c) of the Code.
"Release" shall have the meaning set forth in Section
5.7(c)(i) hereof.
"Required Lenders" shall mean, at any time for the
determination thereof, Lenders holding sixty-six and two-thirds percent (66
2/3%) or more of the outstanding Advances at such time or, if no Advances are
outstanding at such time, sixty-six and two-thirds percent (66 2/3%) or more of
the Commitment Percentages of all Lenders.
"Reserves" shall mean such reserves for doubtful
accounts, returns, allowances and the like as may be established by Borrower or
any Subsidiary or such additional or further reserves as may otherwise be
required in accordance with GAAP.
"Restricted Payment" shall mean (i) the declaration of
a payment of any dividend or the incurrence of any liability to make any payment
or distribution of cash or other property or assets in respect of Borrower's
Stock, (ii) any payment on account of the purchase, redemption or other
retirement of Borrower's Stock or any other payment or distribution made in
respect thereof, either directly or indirectly, or (iii) any payment, loan,
contribution, or other transfer of funds or other property to any Stockholder or
any Subsidiary of such Person except for reasonably equivalent value.
"Revolving Advances" shall mean Advances made other
than Letters of Credit, Equipment Value Advances and Inventory
Value Advances.
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"Revolving Credit Note" shall mean the promissory
note(s) referred to in Section 2.1(a) hereof and all replacements, substitutions
and amendments of such promissory note, including any promissory note(s) issued
to any Lender.
"Revolving Interest Rate" shall mean an interest rate
per annum equal to (a) the sum of the Base Rate plus twenty five (25) basis
points, with respect to Domestic Rate Loans or (b) the sum of the Eurodollar
Rate plus 225 basis points, with respect to Eurodollar Rate Loans.
"Risk Participation" shall mean a participation
agreement between Borrower and another Person as purchaser of an undivided
participation in Borrower's exposure under a Factoring Agreement, a Collateral
Funding Repayment Agreement and/or an Inventory Collateral Funding Repayment
Agreement, such participation to be on terms and conditions and pursuant to
agreements consistent with Borrower's historical practices, each of which
participations shall be disclosed in writing to Agent.
"Schedule of Receivables" shall have the meaning set
forth in Section 9.2.
"Security Agreement" shall mean the Security Agreement
executed jointly and severally by each Guarantor securing the
obligations under the Guaranty.
"SSI" shall mean Settlement Solutions, Inc., a
Virginia corporation.
"Settlement Date" shall mean any Wednesday.
"Stock" shall mean all shares, options, warrants,
general or limited partnership interests, participations or other equivalents
(regardless of how designated) of or in a corporation, partnership or equivalent
entity whether voting or nonvoting, including, without limitation, common stock,
preferred stock, or any other "equity security" (as such term is defined in Rule
3all-1 of the General Rules and Regulations promulgated by the Securities and
Exchange Commission under the Exchange Act).
"Stockholders" shall mean all of the holders of Stock
of Borrower from time to time.
"Stock Pledge Agreements" shall mean, collectively,
the (a) the pledge and security agreement between Agent and Borrower dated as of
the Original Closing Date relating to the pledge by Borrower of the Subsidiary
Stock and (b) the pledge and security agreement between Agent and LOI dated as
of the Original Closing Date relating to the pledge by LOI of the stock of SSI,
each such pledge agreement being in form and substance satisfactory to Lender
and each being accompanied by (i) original certificates evidencing all of the
Subsidiary Stock or the stock of SSI, as the
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case may be, and (ii) undated stock powers relating thereto endorsed in blank by
Borrower or LOI, as the case may be.
"Subsidiary" of any Person shall mean a corporation or
other entity of whose shares of stock or other ownership interests having
ordinary voting power (other than stock or other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the directors of such corporation, or other Persons performing similar functions
for such entity, are owned, directly or indirectly, by such Person.
"Subsidiary Stock" shall mean all of the issued and
outstanding shares of stock owned by Borrower of LOI, AFC Holding
Corporation, Premium Sales Northeast, Inc., Business Funding of
America, Inc., Receivable Financing Corporation and Business
Funding of Florida, Inc.
"Tangible Net Worth" shall mean the gross book value
of the assets of Borrower and its Subsidiaries on a consolidated basis
(exclusive of goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense, deferred charges and
other like intangibles) minus (without duplication) (i) Reserves applicable
thereto, and (ii) all of Borrower's and its Subsidiaries' liabilities (including
accrued and deferred income taxes), in each case, as such items would appear on
a consolidated balance sheet of Borrower and its Subsidiaries prepared in
accordance with GAAP.
"Term" shall mean the Original Closing Date through
May 12, 2000, as same may be extended in accordance with the provisions of
Section 13.1.
"Termination Date" shall have the meaning set forth in
Section 13.1.
"Termination Event" shall mean (i) a Reportable Event
with respect to any Plan or Multiemployer Plan; (ii) the withdrawal of either
Borrower or any member of the Controlled Group from a Plan or Multiemployer Plan
during a plan year in which such entity was a "substantial employer" as defined
in Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a Plan in a distress termination described in Section 4041(c) of
ERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan or
Multiemployer Plan; (v) any event or condition (a) which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Plan or Multiemployer
Plan, or (b) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA; or (vi) the partial or complete withdrawal within the
meaning of Sections 4203 and 4205 of ERISA, of either Borrower or any member of
the Controlled Group from a Multiemployer Plan.
"Total Liabilities" shall mean, as of any date of
calculation, the total liabilities of Borrower and its Subsidiaries
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at such date determined on a consolidated basis in accordance with GAAP plus,
without duplication, the sum of the Letter of Credit Obligations outstanding at
such time and the stated amount of all Letters of Guaranty outstanding at such
time in excess of $5,000,000.
"Toxic Substance" shall mean and include any material
present on the Real Property which has been shown to have significant adverse
effect on human health or which is subject to regulation under the Toxic
Substances Control Act (TSCA), 15 U.S.C. xx.xx. 2601 et seq., applicable state
law, or any other applicable Federal or state laws now in force or hereafter
enacted relating to toxic substances. "Toxic substance" includes but is not
limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.
"Transferee" shall have the meaning set forth in
Section 15.3(b) hereof.
"Undrawn Availability" at a particular date shall mean
an amount equal to (a) the lesser of (i) the Borrowing Base on such date or (ii)
the Maximum Revolving Advance Amount on such date, minus (b) the sum of (i) the
outstanding amount of Advances on such date plus (ii) all amounts due and owing
to Borrower's trade creditors which are outstanding beyond normal trade terms on
such date.
"Viatical Settlement Business" shall mean the entry
into an agreement by LOI with a Person owning a life insurance policy or who
owns or is covered under a group policy insuring the life of a person who has a
catastrophic or life threatening illness or condition and pursuant to which LOI,
as the viatical settlement provider, pays compensation which is less than the
expected death benefit of the insurance policy or certificate, in return for the
policyowner's assignment, transfer, sale, devise or bequest of the death benefit
or ownership of the insurance policy or certificate to LOI.
"Week" shall mean the time period commencing with a
Wednesday and ending on the following Tuesday.
"Xxxxxxx Employment Agreement" shall mean the
Employment and Compensation Agreement dated July 1, 1996 between
Borrower and Xx. Xxxxxxxx X. Xxxxxxx.
1.3. Uniform Commercial Code Terms. All terms used herein
and defined in the Uniform Commercial Code as adopted in the State
of New York shall have the meaning given therein unless otherwise
defined herein.
1.4. Certain Matters of Construction. The terms "herein",
"hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular section,
paragraph or subdivision. Any pronoun used shall be deemed to
cover all genders. Wherever appropriate in the context, terms used
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herein in the singular also include the plural and vice versa. All references to
statutes and related regulations shall include any amendments of same and any
successor statutes and regulations. All references to this Agreement, any other
instruments or agreements, including, without limitation, references to any of
the Other Documents entered into by or for the benefit of Agent or any Lender
shall include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
II. ADVANCES, PAYMENTS.
2.1. (a) Revolving Advances. Subject to the terms and
conditions set forth in this Agreement, each Lender, severally and
not jointly, will make Revolving Advances to Borrower in aggregate
amounts outstanding at any time equal to such Lender's Commitment
Percentage of the lesser of x) the Maximum Revolving Advance Amount
(less the sum of the aggregate amount of (I) outstanding Letters of
Credit, (II) outstanding Equipment Value Advances and (III)
outstanding Inventory Value Advances) or y) an amount equal to the
sum of:
(i) (A) 85%, subject to the provisions of Section 2.1(b)
hereof, of the lesser of (x) the value of Class A
Eligible Receivables Exposure or (y) the aggregate amount
from time to time outstanding of actual cash advances by
Borrower to Clients secured by Eligible Receivables
utilized in computing Class A Eligible Receivables
Exposure, plus (B) 75%, subject to the provisions of
Section 2.1(b) hereof, of the lesser of (x) value of
Class B Eligible Receivables Exposure or (y) the
aggregate amount from time to time outstanding of actual
cash advances by Borrower to Clients secured by Eligible
Receivables utilized in computing Class B Eligible
Receivables Exposure, plus (C) 65%, subject to the
provisions of Section 2.1(b) hereof, of the lesser of (x)
value of Class C Eligible Receivables Exposure or (y) the
aggregate amount from time to time outstanding of actual
cash advances by Borrower to Clients secured by Eligible
Receivables utilized in computing Class C Eligible
Receivables Exposure (collectively, the "Advance Rates")
less such reserves as Agent may reasonably deem proper
and necessary from time to time in connection with
charges, judgments, or other amounts which Agent may have
to pay to protect and preserve the Collateral or the
priority of the Lien of Agent therein, minus
(ii) the aggregate amount of outstanding Letters of
Credit.
The sum of the amounts derived from Section 2.1 (a)(y)(i) at any time
and from time to time shall be referred to as the "Borrowing Base". The
Revolving Advances shall be evidenced by a
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Revolving Credit Note in substantially the form attached hereto as EXHIBIT
2.1(A) issued by Borrower to each Lender in an amount equal to such Lender's
Commitment Percentage of the Maximum Revolving Advance Amount.
(b) Discretionary Rights. The Advance Rates may be
(i) decreased by Agent at any time and from time to time in the exercise of its
reasonable discretion or (ii) increased by Required Lenders at any time and from
time to time in the exercise of their reasonable discretion. Borrower consents
to any such increases or decreases and acknowledges that decreasing the Advance
Rates may limit or restrict Advances requested by Borrower. Agent shall give
Borrower five (5) days prior written notice of any decrease in the Advance
Rates.
2.2. Equipment Value Advances. (a) Subject to the terms and
conditions of this Agreement, each Lender, severally and not jointly, agrees to
make loans to Borrower ("Equipment Value Advances") to permit Borrower to make
loans or advances to Clients secured by the Clients' equipment ("Client Funded
Equipment") in aggregate amounts outstanding at any time equal to such Lender's
Commitment Percentage of the lesser of (i) the Maximum Equipment Value Advance
Amount, (ii) eighty-five percent (85%) of the aggregate amount from time to time
outstanding of actual cash advances by Borrower to Clients which is secured by
Client Funded Equipment or (iii) sixty percent (60%) of the liquidation value of
such Client Funded Equipment; provided, however, the maximum amount of Equipment
Value Advances is subject to the further limitations that: (A) from May 1, 1998
through and including April 30, 1999 Equipment Value Advances shall not exceed
the sum of (I) the difference between (x) $5,000,000 and (y) the amount of
outstanding Equipment Value Advances as of April 30, 1998 plus (II) principal
payments made by Borrower with respect to Equipment Value Advances outstanding
as of April 30, 1998 and (B) on and after May 1, 1999 Equipment Value Advances
shall not exceed the sum of (I) the difference between $5,000,000 and (II) the
amount of outstanding Equipment Value Advances as of April 30, 1999; provided,
further, that under no circumstances shall Equipment Value Advances be made
against Client Funded Equipment unless Borrower has recorded on its books and
records and actually made advances or loans to a Client pursuant to the
applicable Collateral Funding Repayment Agreement. Borrower may use the
Equipment Value Advances by borrowing, repaying and reborrowing, all in
accordance with the terms and conditions hereof. The proceeds of each Equipment
Value Advance requested by Borrower shall, to the extent Lenders make such
Equipment Value Advance, be made available to Borrower on the day so requested
by way of credit to Borrower's Operating Account, or such other bank as Borrower
may designate following notification to Agent, in immediately available federal
or other immediately available funds. The aggregate principal amount of
Equipment Value Advances (X) outstanding on April 30, 1998 will be amortized on
the basis of a thirty-six (36) month amortization schedule and shall be payable
in equal monthly installments commencing on May 1, 1998 and on the last day of
each month thereafter with the balance payable
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upon the expiration of the Term, and (Y) outstanding on April 30, 1999
(excluding any Equipment Value Advances that were outstanding on April 30, 1998)
will be amortized on the basis of a thirty-six (36) month amortization schedule
and shall be payable in equal monthly installments commencing May 1, 1999 and on
the last day of each month thereafter with the balance payable upon the
expiration of the Term, subject to acceleration upon the occurrence of an Event
of Default under this Agreement or termination of this Agreement. Any repayment
(other than regularly scheduled monthly amortization payments) or prepayment of
Equipment Value Advances shall be applied in the inverse order of maturity to
the then remaining monthly amortization of Equipment Value Advances.
(b) The agreement of Lenders to make each Equipment Value Advance is
subject to satisfaction of the following conditions precedent: (i) receipt by
Agent of (1) copies of all documentation and appraisals required to be delivered
by a Client to Borrower pursuant to the applicable Collateral Funding Repayment
Agreement, (2) evidence that such Client has obtained insurance covering the
theft, destruction or other loss of the Client Funded Equipment and (3) such
other documentation and evidence that Agent may reasonably request, including,
without limitation, copies of UCC-1 financing statements filed in accordance
with Section 6.10 hereof or evidence that such financing statements have been
filed in accordance therewith and (ii) after giving effect thereto (1) the
aggregate principal amount of Equipment Value Advances outstanding shall not
exceed the lesser of (i) the Maximum Equipment Value Advance Amount, (ii)
eighty-five percent (85%) of the aggregate amount from time to time outstanding
of actual cash advances made by Borrower to Clients which is secured by Client
Funded Equipment in accordance with the Collateral Funding Repayment Agreement
or (iii) sixty percent (60%) of the liquidation value of such Client Funded
Equipment, (2) the aggregate outstanding Advances shall not exceed the Maximum
Revolving Advance Amount, and (3) the sum of the aggregate principal amount of
Equipment Value Advances outstanding and the aggregate principal amount of
Inventory Value Advances outstanding shall not exceed $7,500,000 less regularly
scheduled monthly amortization payments on and after the Effective Date with
respect to Equipment Value Advances (but only to the extent that Borrower is not
permitted to incur additional Equipment Value Advances in amounts equal to such
payments).
2.2A Inventory Value Advances. (a) Subject to the terms and
conditions of this Agreement, each Lender, severally and not jointly, agrees to
make loans to Borrower ("Inventory Value Advances") to permit Borrower to make
loans or advances to Clients secured by Eligible Client Funded Inventory (as
defined below) in aggregate amounts outstanding at any time equal to such
Lender's Commitment Percentage of the lesser of (i) the Maximum Inventory Value
Advance Amount or (ii) (x) to the extent (but only to the extent) that the
aggregate amount from time to time outstanding of actual cash advances by
Borrower to Clients which is secured by Eligible Client Funded Inventory is
equal to or less than fifty percent (50%) of the liquidation value of such
Eligible Client
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Funded Inventory, thirty percent (30%) of the aggregate amount from time to time
outstanding of such actual cash advances by Borrower to Clients secured by such
Eligible Client Funded Inventory and (y) to the extent (but only to the extent)
that the aggregate amount from time to time outstanding of actual cash advances
by Borrower to Clients which is secured by Eligible Client Funded Inventory
exceeds 50% of the liquidation value of such Eligible Client Funded Inventory,
twenty-five percent (25%) of the aggregate amount from time to time outstanding
of such actual cash advances by Borrower to Clients secured by such Eligible
Client Funded Inventory (the sum of preceding clauses (ii)(x) and (y), the
"Inventory Borrowing Base"); provided, however, that under no circumstances
shall Inventory Value Advances be made against Eligible Client Funded Inventory
unless Borrower has recorded on its books and records and actually made advances
or loans to a Client pursuant to the applicable Inventory Collateral Funding
Repayment Agreement. "Eligible Client Funded Inventory" shall mean, with respect
to any Client, all of such Client's raw materials inventory and finished goods
inventory to the extent (i) Borrower provides Agent with a written description
thereof in reasonable detail and a written request that such inventory be
treated as Eligible Client Funded Inventory and (ii) Agent does not, within two
business days of its receipt of such description and request, notify Borrower in
writing that, in the exercise of Agent's sole, reasonable discretion, such
inventory (or a specified portion thereof) does not constitute Eligible Client
Funded Inventory. Notwithstanding the foregoing, Borrower acknowledges and
agrees that dynamic random access memory chips shall not constitute Eligible
Client Funded Inventory unless Agent (in the exercise of its sole and absolute
discretion) affirmatively consents thereto in writing.
Borrower may use the Inventory Value Advances by borrowing, repaying and
reborrowing, all in accordance with the terms and conditions hereof. The
proceeds of each Inventory Value Advance requested by Borrower shall, to the
extent Lenders make such Inventory Value Advance, be made available to Borrower
on the day so requested by way of credit to Borrower's Operating Account, or
such other bank as Borrower may designate following notification to Agent, in
immediately available federal or other immediately available funds. The
aggregate principal amount of Inventory Value Advances outstanding on the last
day of the Term shall be payable in full upon the expiration of the Term,
subject to acceleration upon the occurrence of an Event of Default under this
Agreement or termination of this Agreement.
(b) The agreement of Lenders to make each Inventory Value Advance is
subject to satisfaction of the following conditions precedent: (i) receipt by
Agent of (1) copies of all documentation and appraisals required to be delivered
by a Client to Borrower pursuant to the applicable Inventory Collateral Funding
Repayment Agreement, (2) evidence that such Client has obtained insurance
covering the theft, destruction or other loss of the Client Funded Inventory,
(3) a copy of a duly executed inventory management or inventory control
agreement among Borrower, the applicable Client
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and DiversiCorp, Inc. (or another third party collateral monitoring firm
selected by Borrower and reasonably satisfactory to Agent) or Borrower's
description of alternative inventory control or management procedures which
procedures must be satisfactory to Agent in its sole discretion and (4) such
other documentation and evidence that Agent may reasonably request, including,
without limitation, copies of UCC-1 financing statements filed in accordance
with Section 6.10 hereof or evidence that such financing statements have been
filed in accordance therewith and (ii) after giving effect thereto (1) the
aggregate principal amount of Inventory Value Advances outstanding shall not
exceed the lesser of (i) the Maximum Inventory Value Advance Amount or (ii) the
Inventory Borrowing Base, (2) the aggregate outstanding Advances shall not
exceed the Maximum Revolving Advance Amount and (3) the sum of the aggregate
principal amount of Inventory Value Advances outstanding and the aggregate
principal amount of Equipment Value Advances outstanding shall not exceed
$7,500,000 less regularly scheduled monthly amortization payments on and after
the Effective Date with respect to Equipment Value Advances (but only to the
extent that Borrower is not permitted to incur additional Equipment Value
Advances in amounts equal to such payments).
2.3. Disbursement of Revolving Advance Proceeds. All Revolving
Advances shall be disbursed from whichever office or other place Agent may
designate from time to time and, together with any and all other Obligations of
Borrower to Agent or Lenders, shall be charged to Borrower's account on Agent's
books. During the Term, Borrower may use the Revolving Advances by borrowing,
prepaying and reborrowing, all in accordance with the terms and conditions
hereof. The proceeds of each Revolving Advance requested by Borrower or deemed
to have been requested by Borrower under Section 2.12(a) hereof shall, with
respect to requested Revolving Advances to the extent Lenders make such
Revolving Advances, be made available to Borrower on the day so requested by way
of credit to Borrower's Operating Account, or such other bank as Borrower may
designate following notification to Agent, in immediately available federal or
other immediately available funds or, with respect to Revolving Advances deemed
to have been requested, be disbursed to Agent in payment of outstanding
Obligations.
2.4. Maximum Revolving Advances . The aggregate balance of Revolving
Advances outstanding at any time shall not exceed the lesser of (x) the Maximum
Revolving Advance Amount less the sum of (a) outstanding Equipment Value
Advances, (b) outstanding Inventory Value Advances, and (c) outstanding Letters
of Credit and (y) the Borrowing Base.
2.5. Maximum Equipment Value Advances. The aggregate balance of the
Equipment Value Advances outstanding at any time shall not exceed the lesser of
(i) the Maximum Equipment Value Advance Amount, (ii) eighty-five percent (85%)
of the aggregate amount from time to time outstanding of actual cash advances by
Borrower to Clients secured by Client Funded Equipment or (iii)
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sixty percent (60%) of the liquidation value of such Client Funded
Equipment.
2.5A Maximum Inventory Value Advances. The aggregate balance of the
Inventory Value Advances outstanding at any time shall not exceed the lesser of
(i) the Maximum Inventory Value Advance Amount or (ii) the Inventory Borrowing
Base.
2.6. Repayment of Excess Advances. The aggregate balance of Revolving
Advances, Equipment Value Advances and Inventory Value Advances, as the case may
be, outstanding at any time in excess of the maximum permitted under Section
2.4, Section 2.5 or Section 2.5A, as applicable, shall be immediately due and
payable without the necessity of any demand, at the Payment Office, whether or
not a Default or Event of Default has occurred.
2.7. Statement of Account. Agent shall maintain, in accordance with
its customary procedures, a loan account in the name of Borrower in which shall
be recorded the date and amount of each Advance made by Lenders and the date and
amount of each payment in respect thereof; provided, however, the failure by
Agent to record the date and amount of any Advance shall not adversely affect
Agent or any Lender. By the tenth day of each month, Agent shall send to
Borrower a statement showing the accounting for the Advances made, payments made
or credited in respect thereof, and other transactions between Lenders and
Borrower, during the preceding month. The monthly statements shall be deemed
correct and binding upon Borrower in the absence of manifest error and shall
constitute an account stated between Lenders and Borrower unless Agent receives
a written statement of Borrower's specific exceptions thereto within thirty (30)
days after such statement is received by Borrower. The records of Agent with
respect to the loan account shall be prima facie evidence of the amounts of
Advances and other charges thereto and of payments applicable thereto.
2.8. Letters of Credit. Subject to the terms and conditions hereof,
Agent shall issue or cause the issuance of Letters of Credit ("Letters of
Credit"); provided, however, that Agent will not be required to issue or cause
to be issued any Letters of Credit to the extent that the face amount of such
Letters of Credit would then cause the sum of (i) the outstanding Revolving
Advances plus (ii) outstanding Letters of Credit (with the requested Letter of
Credit being deemed to be outstanding for purposes of this calculation) to
exceed the lesser of (x) the sum of (a) Maximum Revolving Advance Amount less
(b) outstanding Equipment Value Advances less (c) outstanding Inventory Value
Advances or (y) the Borrowing Base. The maximum amount of Letter of Credit
Obligations shall not exceed $5,000,000.00 in the aggregate outstanding at any
time. All disbursements or payments related to Letters of Credit shall be deemed
to be Domestic Rate Loans consisting of Revolving Advances and shall bear
interest at the Revolving Interest Rate for Domestic Rate Loans. Once drawn
upon, a Letter of Credit shall be deemed not to be outstanding for all
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purposes hereof to the extent of such drawing; Letters of Credit that have not
been drawn upon shall not bear interest.
2.9. Issuance of Letters of Credit.
(a) Borrower may request Agent to issue or cause the
issuance of a Letter of Credit by delivering to Agent at the Payment Office,
Agent's or if a different issuing bank, such issuing bank's standard form of
Letter of Credit Application (collectively, the "Letter of Credit Application")
completed to the satisfaction of Agent; and, such other certificates, documents
and other papers and information as Agent may reasonably request.
(b) Each Letter of Credit shall, among other things,
(i) provide for the payment of drafts when presented for honor thereunder in
accordance with the terms thereof and when accompanied by the documents
described therein and (ii) have an expiry date not later than six (6) months
with respect to trade Letters of Credit and twelve (12) months with respect to
standby Letters of Credit after such Letter of Credit's date of issuance and in
no event later than the last day of the Term. Each Letter of Credit Application
and each Letter of Credit shall be subject to the Uniform Customs and Practice
for Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, and any amendments or revision thereof and, to the extent
not inconsistent therewith, the laws of the State of New York.
2.10. Requirements For Issuance of Letters of Credit.
(a) In connection with the issuance of any Letter of
Credit, Borrower shall indemnify, save and hold Agent and each Lender harmless
from any loss, cost, expense or liability, including, without limitation,
payments made by Agent and any Lender, and expenses and reasonable attorneys'
fees incurred by Agent or any Lender arising out of, or in connection with, any
Letter of Credit to be issued or created for Borrower other than for Agent's or
any Lender's gross negligence or willful misconduct. Borrower shall be bound by
Agent's or any issuing or accepting bank's regulations and good faith
interpretations of any Letter of Credit issued or created for Borrower's
account, although this interpretation may be different from Borrower's own; and,
neither Agent nor any Lender, the bank which opened the Letter of Credit, nor
any of its correspondents shall be liable for any error, negligence, or
mistakes, whether of omission or commission, in following Borrower's written
instructions or those contained in any Letter of Credit, or of any
modifications, amendments or supplements thereto or in issuing or paying any
Letter of Credit, except for Agent's or any Lender's or such issuing bank's
willful misconduct or gross negligence.
(b) In connection with all Letters of Credit issued
or caused to be issued by Agent under this Agreement, Agent, or its designee,
shall, upon Borrower's written request, act as Borrower's attorney, with full
power and authority (i) to sign and/or endorse
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Borrower's name upon any warehouse or other receipts, letter of credit
applications and acceptances; (ii) to sign Borrower's name on bills of lading;
(iii) to clear Inventory through the United States of America Customs Department
("Customs") in the name of Borrower or Agent or Agent's designee, and to sign
and delivery to Customs officials powers of attorney in the name of Borrower for
such purpose; and (iv) to complete in Borrower's name or Agent's, or in the name
of Agent's designee, any order, sale or transaction, obtain the necessary
documents in connection therewith, and collect the proceeds thereof. Neither
Agent nor its attorneys will be liable for any acts or omissions nor for any
error of judgment or mistakes of fact or law, except for Agent's or its
attorney's willful misconduct or gross negligence.
(c) Each Lender shall to the extent of the percentage
amount equal to the product of such Lender's Commitment Percentage times the
aggregate amount of all disbursements made with respect to the Letters of Credit
be deemed to have irrevocably purchased an undivided participation in each
Revolving Advance made as a consequence of such disbursement. In the event that
at the time a disbursement is made the unpaid balance of Revolving Advances
exceeds or would exceed, with the making of such disbursement, the lesser of (a)
the sum of (i) Maximum Revolving Advance Amount less (ii) outstanding Equipment
Value Advances less (iii) outstanding Inventory Value Advances less (iv)
outstanding Letters of Credit or (b) the Borrowing Base, and such disbursement
is not reimbursed by Borrower within two (2) Business Days, Agent shall promptly
notify each Lender and upon Agent's demand each Lender shall pay to Agent such
Lender's proportionate share of such unreimbursed disbursement together with
such Lender's proportionate share of Agent's unreimbursed costs and expenses
relating to such unreimbursed disbursement. Upon receipt by Agent of a repayment
from Borrower of any amount disbursed by Agent for which Agent had already been
reimbursed by Lenders, Agent shall deliver to each of Lenders that Lender's pro
rata share of such repayment. Each Lender's participation commitment shall
continue until the last to occur of any of the following events: (A) Agent
ceases to be obligated to issue Letters of Credit hereunder; (B) no Letter of
Credit issued hereunder remains outstanding and uncancelled or (C) all Persons
(other than Borrower) have been fully reimbursed for all payments made under or
relating to Letters of Credit.
(d) In the event that any Letter of Credit
Obligation, whether or not then due and payable, shall for any reason be
outstanding on the Termination Date, Borrower will pay to Lenders cash or Cash
Equivalents in an amount equal to the maximum amount then available to be drawn
under all such Letters of Credit. Such funds or Cash Equivalents shall be held
by Agent in a cash collateral account (the "Cash Collateral Account"). The Cash
Collateral Account shall be in the name of Lenders or the Agent for the benefit
of Lenders (as a cash collateral account), and shall be under the sole dominion
and control of Agent and subject to the terms of this Section 2.10(d). Borrower
hereby pledges, and grants to the Agent for the benefit of the Lenders a
security interest in,
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all such funds or Cash Equivalents held in the Cash Collateral Account from time
to time and all proceeds thereof, as security for the payment of all Letter of
Credit Obligations, whether or not then due.
From time to time after funds are deposited in the
Cash Collateral Account, the Agent and/or the Lenders may apply such funds or
Cash Equivalents then held in the Cash Collateral Account to the payment of any
amounts, in such order as Lenders may elect, as shall be or shall become due and
payable by Borrower to Lenders with respect to such Letter of Credit
Obligations.
Neither Borrower nor any Person or entity claiming on
behalf of or through Borrower shall have any right to withdraw any of the funds
or Cash Equivalents held in the Cash Collateral Account, except that upon the
termination of any Letter of Credit Obligation in accordance with its terms and
the payment of all amounts payable by Borrower to Lenders in respect thereof, if
no Default or Event of Default exists and is continuing at such time, any funds
remaining in the Cash Collateral Account in excess of the then remaining Letter
of Credit Obligations shall be returned to Borrower.
The Agent and the Lenders shall not have any
obligation to invest the funds in the Cash Collateral Account or deposit such
funds in an interest-bearing account, and interest and earnings thereon, if any,
shall be the property of Lenders.
2.11. Additional Payments. Any sums expended by Agent or any Lender
due to Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document including, without limitation, Borrower's
obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be
charged to Borrower's account as a Revolving Advance and added to the
Obligations.
2.12. Manner of Borrowing and Repayment of Advances.
(a) Borrower may notify Agent prior to 3:00 P. M. (New York time) on
a Business Day of its request to incur, on that day, a Revolving Advance,
Equipment Value Advance and/or Inventory Value Advance hereunder. Should any
amount required to be paid as interest hereunder, or as fees or other charges
under this Agreement or any Other Document, not be paid when due, same shall be
deemed a request for a Revolving Advance as of the date such payment is due, in
the amount required to pay in full such interest, fee, charge or Obligation
under this Agreement or any Other Document, and such request shall be
irrevocable.
(b) Notwithstanding the provisions of (a) above, in the event
Borrower desires to obtain a Eurodollar Rate Loan, Borrower shall give Agent at
least three (3) Business Days' prior written notice, specifying (i) the date of
the proposed borrowing (which shall be a Business Day), (ii) the type of
borrowing and the amount on the date of such Advance to be borrowed, which
amount shall not
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be less than $1,000,000 initially or an integral multiple of $100,000 in excess
thereof and (iii) the duration of the first Interest Period therefor. Interest
Periods for Eurodollar Rate Loans shall be for 30, 60 or 90 days. No Eurodollar
Rate Loan shall be made available to Borrower during the continuance of a
Default or an Event of Default. No more than three (3) Eurodollar Rate Loans
shall be outstanding at any time.
(c) Each Interest Period of a Eurodollar Rate Loan shall commence on
the date such Eurodollar Rate Loan is made and shall end on such date as
Borrower may elect as set forth in (b)(iii) above provided that the exact length
of each Interest Period shall be determined in accordance with the practice of
the interbank market for offshore Dollar deposits and no Interest Period shall
end after the last day of the Term.
Borrower shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.12(b) or by its notice of conversion given to Agent pursuant to
Section 2.12(d), as the case may be. Borrower shall elect the duration of each
succeeding Interest Period by giving irrevocable written notice to Agent of such
duration not less than three (3) Business Days prior to the last day of the then
current Interest Period applicable to such Eurodollar Rate Loan. If Agent does
not receive timely notice of the Interest Period elected by Borrower, Borrower
shall be deemed to have elected to convert to a Domestic Rate Loan in accordance
with Section 2.12(d) hereinbelow.
(d) Provided that no Event of Default shall have
occurred and be continuing, Borrower may, on the last Business Day of the then
current Interest Period applicable to any outstanding Eurodollar Rate Loan, or
on any Business Day with respect to Domestic Rate Loans, convert any such loan
into a loan of another type in the same aggregate principal amount provided that
any conversion of a Eurodollar Rate Loan shall be made only on the last Business
Day of the then current Interest Period applicable to such Eurodollar Rate Loan.
If a Borrower desires to convert a loan, Borrower shall give Agent not less than
three (3) Business Days' prior written notice to convert from a Domestic Rate
Loan to a Eurodollar Rate Loan or one (1) Business Day's prior written notice to
convert from a Eurodollar Rate Loan to a Domestic Rate Loan, specifying the date
of such conversion, the loans to be converted and if the conversion is from a
Domestic Rate Loan to any other type of loan, the duration of the first Interest
Period therefor.
(e) At its option and upon three (3) Business Days'
prior written notice, Borrower may prepay the Eurodollar Rate Loans in whole at
any time or in part from time to time, without premium or penalty, but with
accrued interest on the principal being prepaid to the date of such repayment.
Borrower shall specify the date of prepayment of Advances which are Eurodollar
Rate Loans and the amount of such prepayment. In the event that any prepayment
of a Eurodollar Rate Loan is required or permitted on a date other
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than the last Business Day of the then current Interest Period with respect
thereto, Borrower shall indemnify Agent and Lenders therefor in accordance with
Section 2.12(f) hereof.
(f) Borrower shall indemnify Agent and Lenders and
hold Agent and Lenders harmless from and against any and all losses or expenses
that Agent and Lenders may sustain or incur as a consequence of any prepayment,
conversion of or any default by Borrower in the payment of the principal of or
interest on any Eurodollar Rate Loan or failure by Borrower to complete a
borrowing of, a prepayment of or conversion of or to a Eurodollar Rate Loan
after notice thereof has been given, including, but not limited to, any interest
payable by Agent or Lenders to lenders of funds obtained by it in order to make
or maintain its Eurodollar Rate Loans hereunder. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by Agent
or any Lender to Borrower shall be conclusive absent manifest error.
(g) Notwithstanding any other provision hereof, if
any applicable law, treaty, regulation or directive, or any change therein or in
the interpretation or application thereof, shall make it unlawful for any Lender
(for purposes of this subsection (g), the term "Lender" shall include any Lender
and the office or branch where any Lender or any corporation or bank controlling
such Lender) makes or maintains any Eurodollar Rate Loans to make or maintain
its Eurodollar Rate Loans the obligation of Lenders to make Eurodollar Rate
Loans hereunder shall forthwith be cancelled and Borrower shall, if any affected
Eurodollar Rate Loans are then outstanding, promptly upon request from Agent,
either pay all such affected Eurodollar Rate Loans or convert such affected
Eurodollar Rate Loans into loans of another type. If any such payment or
conversion of any Eurodollar Rate Loan is made on a day that is not the last day
of the Interest Period applicable to such Eurodollar Rate Loan, Borrower shall
pay Agent, upon Agent's request, such amount or amounts as may be necessary to
compensate Lenders for any loss or expense sustained or incurred by Lenders in
respect of such Eurodollar Rate Loan as a result of such payment or conversion,
including (but not limited to) any interest or other amounts payable by Lenders
to lenders of funds obtained by Lenders in order to make or maintain such
Eurodollar Rate Loan. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Lenders to Borrower shall be
conclusive absent manifest error.
(h) The Revolving Advances shall be due and payable in full and the
Letter of Credit Obligations shall be fully collateralized in each case to the
satisfaction of Agent on the last day of the Term subject to earlier prepayment
as herein provided.
(i) Borrower shall pay principal, interest, and all other amounts
payable hereunder, or under any Other Document, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
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(j) Each borrowing of Revolving Advances shall be advanced
according to the Commitment Percentages of Lenders.
(k) Each payment (including each prepayment) by Borrower on account
of the principal of and interest on the Revolving Credit Note, shall be applied
by the Agent to the Revolving Advances and, subject to Sections 2.2 and 2.2A
hereof, to Equipment Value Advances and Inventory Value Advances, as the case
may be, as applicable pro rata according to the Commitment Percentages of
Lenders. Except as expressly provided herein, all payments (including
prepayments) to be made by Borrower on account of principal, interest and fees
shall be made without set-off or counterclaim and shall be made to Agent on
behalf of Lenders to the Payment Office, in each case on or prior to 3:00 P.M.,
New York time, in Dollars and in immediately available funds. Agent shall have
the right to effectuate payment on any and all Obligations due and owing
hereunder by charging Borrower's account or by making Revolving Advances as
provided in this Section 2.12. In the event Agent fails to remit to any Lender
such Lender's pro rata share of interest or fees to which such Lender is
entitled in a prompt manner but in any event within one (1) Business Day of the
payment of same by Borrower to Agent, Agent shall pay to such Lender on demand
for each day there is a delay in payment an amount equal to the product of (i)
the Federal Funds Rate (computed on the basis of a year of 360 days), times (ii)
such amount.
(l) (i) Notwithstanding anything to the contrary contained in
Sections 2.12(a), (h), (i), (j) and (k) hereof, commencing with the first
Business Day following the Original Closing Date, each borrowing of Revolving
Advances, Equipment Value Advances and/or Inventory Value Advances (as the case
may be) shall be advanced by Agent and each payment by Borrower on account of
Revolving Advances Equipment Value Advances and/or Inventory Value Advances (as
the case may be) shall be applied first to those Revolving Advances, Equipment
Value Advances and/or Inventory Value Advances (as the case may be) made by
Agent. On or before 3:00 P.M., New York time, on each Settlement Date commencing
with the first Settlement Date following the Original Closing Date, Agent and
Lenders shall make certain payments as follows: (I) if the aggregate amount of
new Revolving Advances, Equipment Value Advances and/or Inventory Value Advances
(as the case may be) made by Agent during the preceding Week exceeds the
aggregate amount of repayments applied to outstanding Revolving Advances,
Equipment Value Advances and/or Inventory Value Advances (as the case may be)
during such preceding Week, then each Lender shall provide Agent with funds in
an amount equal to its Commitment Percentage of the difference between (w) such
new Revolving Advances, Equipment Value Advances and/or Inventory Value Advances
(as the case may be) and (x) such repayments and (II) if the aggregate amount of
repayments applied to outstanding Revolving Advances, Equipment Value Advances
and/or Inventory Value Advances (as the case may be) during such preceding Week
exceeds the aggregate amount of new Revolving Advances, Equipment Value Advances
and/or Inventory Value Advances (as the case may be) made during such Week, then
Agent shall
-34-
provide each Lender with its Commitment Percentage of the difference between (y)
such repayments and (z) such new Revolving Advances, Equipment Value Advances
and/or Inventory Value Advances
(as the case may be).
(ii) Each Lender shall be entitled to earn
interest at the Revolving Interest Rate on outstanding Advances (other than
Letters of Credit) which it has funded.
(iii) Promptly following each Settlement Date,
Agent shall submit to each Lender a certificate with respect to payments
received and Advances (other than Letters of Credit) made during the Week
immediately preceding such Settlement Date. Such certificate of Agent shall be
conclusive in the absence of manifest error.
(m) If any Lender or Participant (a "benefitted
Lender") shall at any time receive any payment of all or part of its Revolving
Advances, Equipment Value Advances and/or Inventory Value Advances (as the case
may be) or interest thereon, or receive any Collateral in respect thereof
(whether voluntarily or involuntarily or by set-off) in a greater proportion
than any such payment to and Collateral received by any other Lender, if any, in
respect of such other Lender's Revolving Advances, Equipment Value Advances
and/or Inventory Value Advances (as the case may be) or interest thereon, and
such greater proportionate payment or receipt of Collateral is not expressly
permitted hereunder, such benefitted Lender shall purchase for cash from the
other Lenders such portion of each such other Lender's Revolving Advances,
Equipment Value Advances and/or Inventory Value Advances (as the case may be) or
shall provide such other Lender with the benefits of any such Collateral, or the
proceeds thereof, as shall be necessary to cause such benefitted Lender to share
the excess payment or benefits of such Collateral or proceeds ratably with each
of the other Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such benefitted Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest. Each Lender so purchasing
a portion of another Lender's Revolving Advances, Equipment Value Advances
and/or Inventory Value Advances (as the case may be) may exercise all rights of
payment (including, without limitation, rights of set-off) with respect to such
portion as fully as if such Lender were the direct holder of such portion.
(n) Unless Agent shall have been notified by
telephone, confirmed in writing, by any Lender that such Lender will not make
the amount which would constitute its Commitment Percentage of the Revolving
Advances, Equipment Value Advances and/or Inventory Value Advances (as the case
may be) available to Agent, Agent may (but shall not be obligated to) assume
that such Lender shall make such amount available to Agent and, in reliance upon
such assumption, make available to Borrower a corresponding amount. Agent will
promptly notify Borrower of its receipt of any
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such notice from a Lender. If such amount is made available to Agent on a date
after a Settlement Date, such Lender shall pay to Agent on demand an amount
equal to the product of (i) the daily average Federal Funds Rate (computed on
the basis of a year of 360 days) during such period as quoted by Agent, times
(ii) such amount, times (iii) the number of days from and including such
Settlement Date to the date on which such amount becomes immediately available
to Agent. A certificate of Agent submitted to any Lender with respect to any
amounts owing under this paragraph (n) shall be conclusive, in the absence of
manifest error. If such amount is not in fact made available to Agent by such
Lender within three (3) Business Days after such Settlement Date, Agent shall be
entitled to recover such an amount, with interest thereon at the rate per annum
then applicable to Revolving Advances, Equipment Value Advances and/or Inventory
Value Advances (as the case may be) hereunder, on demand from Borrower;
provided, however, that Agent's right to such recovery shall not prejudice or
otherwise adversely affect Borrower's rights (if any) against such Lender.
2.13. Use of Proceeds. Borrower shall apply the proceeds of
the Revolving Advances to provide for the working capital and
general corporate needs of Borrower and for any investment
permitted under Section 7.4 hereof.
III. INTEREST AND FEES.
3.1. Interest. Interest on Advances (other than Letters of Credit)
shall be payable in arrears on the first day of each month with respect to
Domestic Rate Loans and, with respect to Eurodollar Rate Loans, at the end of
each Interest Period. Interest charges shall be computed on the daily unpaid
balance of Advances (other than Letters of Credit) outstanding at the end of
each day during the month at a rate per annum equal to the Revolving Interest
Rate. Whenever, subsequent to the date of this Agreement, the Base Rate is
increased or decreased, the Revolving Interest Rate for Domestic Rate Loans
shall be similarly changed without notice or demand of any kind by an amount
equal to the amount of such change in the Base Rate during the time such change
or changes remain in effect. Upon and after the occurrence of an Event of
Default, and during the continuation thereof, the Advances (other than Letters
of Credit) shall bear interest at the applicable Revolving Interest Rate plus
two (2%) percent (the "Default Rate").
3.2. Letter of Credit Fees.
In the event that Agent or Lenders shall incur any Letter of Credit
Obligations pursuant hereto at the request or on behalf of Borrower hereunder,
Borrower agrees to pay to Agent for the ratable benefit of Lenders, as
compensation to Lenders for such Letter of Credit Obligation, (i) all fees and
charges paid by Lenders on account of such Letter of Credit Obligation to the
issuer or like party (other than commissions paid by Agent or Lenders and
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negotiation charges) and (ii) commencing with the month in which such Letter of
Credit Obligation is incurred by Lenders and monthly thereafter for each month
during which such Letter of Credit Obligation shall remain outstanding, a fee
(the "Letter of Credit Fee") at a rate equal to (a) 175 basis points per annum
on all trade Letters of Credit and all standby Letters of Credit expiring 180
days or less from date of issuance and (b) 175 basis points per annum on all
standby Letters of Credit expiring more than 180 days but less than 360 days
from date of issuance, in each case based upon the daily outstanding amount of
such Letter of Credit Obligations on each day during the previous month,
determined on the basis of a year of 360 days. So long as any Event of Default
shall have occurred and be continuing, the Letter of Credit Fee shall be
increased by two percent (2%) per annum above the rate otherwise applicable and
the Letter of Credit Fee shall be payable on demand. Fees payable in respect of
Letter of Credit Obligations shall be paid to Agent for the ratable benefit of
Lenders, in arrears, on the first day of such calendar month.
3.3. Closing Fee. Upon the execution of this Agreement,
Borrower shall pay to Agent for the ratable benefit of Lenders a
closing fee of $50,000.
3.4. Unused Line Fee. If, for any month during the term of this
Agreement, the daily unpaid balance of the Advances outstanding at the end of
each day of such month does not equal the Maximum Revolving Advance Amount, then
Borrower shall pay to Agent for the ratable benefit of Lenders a fee at a rate
equal to one quarter of one percent (1/4%) multiplied by (x) the lesser of (i)
the Maximum Revolving Advance Amount or (ii) the Borrowing Base, minus (y) the
unpaid balance of Advances. Such fee shall be payable to Agent for ratable
benefit of Lenders in arrears on the first day of each month.
3.5. Collateral Evaluation Fee. Borrower shall pay Agent a collateral
evaluation fee equal to $1,500 per month commencing on the first day of the
month following the Effective Date and on the first day of each month thereafter
during the Term. The collateral evaluation fee shall be deemed earned in full on
the date when same is due and payable hereunder and shall not be subject to
rebate or proration upon termination of this Agreement for any reason.
3.6. Field Examinations. Borrower shall pay to Agent on the first day
of each month (following any month) in which Agent performs a field examination
a fee of $500.00 per day for each person employed to perform such monitoring
plus all out of pocket expenses incurred by Agent in the performance of such
examination. Field examinations shall be conducted no more than four times a
year provided that no Event of Default shall have occurred and be continuing.
3.7. Computation of Interest and Fees. Interest and fees
hereunder shall be computed on the basis of a year of 360 days and
for the actual number of days elapsed. If any payment to be made
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hereunder becomes due and payable on a day other than a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be payable at the
Revolving Interest Rate for Domestic Rate Loans during such extension.
3.8. Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law which a
court of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that a court determines that Agent or any Lender has
received interest and other charges hereunder in excess of the highest rate
applicable hereto, such excess interest shall be first applied to any unpaid
principal balance owed by Borrower, and if the then remaining excess interest is
greater than the previously unpaid principal balance, Lenders shall promptly
refund such excess amount to Borrower and the provisions hereof shall be deemed
amended to provide for such permissible rate.
3.9. Increased Costs. In the event that any change in any applicable
law, treaty or governmental regulation, or in the interpretation or application
thereof, or compliance by any Lender (for purposes of this Section 3.9, the term
"Lender" shall include Agent or any Lender and any corporation or bank
controlling Agent or any Lender) and the office or branch where Agent or any
Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any
request or directive (whether or not having the force of law) from any central
bank or other financial, monetary or other authority, occurring after the
Effective Date shall:
(a) subject Agent or any Lender to any tax of any
kind whatsoever with respect to this Agreement or change the basis of taxation
of payments to Agent or any Lender of principal, fees, interest or any other
amount payable hereunder or under any Other Documents (except for changes in any
tax measured or imposed on the overall net income of Agent or any Lender by the
jurisdiction in which it maintains its principal office);
(b) INTENTIONALLY OMITTED.
(c) impose on Agent or any Lender or the London
Interbank Eurodollar Market any other condition with respect to
this Agreement or any Other Documents;
and the result of any of the foregoing is to increase the cost to Agent or
Lender of making, renewing or maintaining any Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material, then, in
any case Borrower shall promptly pay Agent or such Lender, upon its demand, such
additional amount as will compensate Agent or such Lender for such additional
cost or such reduction, as the case may be, provided that the foregoing shall
not apply to increased costs
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which are reflected in the Eurodollar Rate. Agent or such Lender shall certify
the amount of such additional cost or reduced amount (which certification shall
be supported by calculations in reasonable detail) to Borrower, and such
certification shall be conclusive absent manifest error.
3.10. Capital Adequacy.
(a) In the event that any change after the Effective
Date in any applicable law, rule, regulation or guideline regarding capital
adequacy, or any change after the Effective Date in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by Agent or any Lender (for purposes of this Section 3.10, the term "Lender"
shall include Agent or any Lender and any corporation or bank controlling Agent
or any Lender) and the office or branch where Agent or any Lender (as so
defined) makes or maintains any Eurodollar Rate Loans with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency made after the Effective
Date, has the effect of reducing the rate of return on Agent or any Lender's
capital as a consequence of its obligations hereunder to a level below that
which Agent or such Lender could have achieved but for such adoption, change or
compliance (taking into consideration Agent's and each Lender's policies with
respect to capital adequacy) by an amount deemed by Agent or any Lender to be
material, then, from time to time, Borrower shall pay upon demand to Agent or
such Lender such additional amount or amounts as will compensate Agent or such
Lender for such reduction. In determining such amount or amounts, Agent or such
Lender may use any reasonable averaging or attribution methods. The protection
of this Section 3.10 shall be available to Agent and each Lender regardless of
any possible contention of invalidity or inapplicability with respect to the
applicable law, regulation or condition.
(b) A certificate of Agent or such Lender setting
forth such amount or amounts (which certificate shall be supported by
calculations in reasonable detail) as shall be necessary to compensate Agent or
such Lender with respect to Section 3.10(a) hereof when delivered to Borrower
shall be conclusive absent manifest error.
3.11. Survival. The obligations of Borrower under Sections
2.10, 3.9 and, 3.10 shall survive termination of this Agreement and
the Other Documents and payment in full of the Obligations.
3.12. Basis For Determining Interest Rate Inadequate or
Unfair. In the event that Agent or any Lender shall have
determined that:
(a) reasonable means do not exist for ascertaining
the Eurodollar Rate for any Interest Period; or
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(b) Dollar deposits in the relevant amount and for
the relevant maturity are not available in the London interbank Eurodollar
market, with respect to an outstanding Eurodollar Rate Loan, a proposed
Eurodollar Rate Loan, or a proposed conversion of a Domestic Rate Loan into a
Eurodollar Rate Loan,
then Agent shall give Borrower prompt written, telephonic or telegraphic notice
of such determination. If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrower
shall notify Agent no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the date of such proposed borrowing, that its request for
such borrowing shall be cancelled or made as an unaffected type of Eurodollar
Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have
been converted to an affected type of Eurodollar Rate Loan shall be continued as
or converted into a Domestic Rate Loan, or, if Borrower shall notify Agent, no
later than 10:00 a.m. (New York City time) two (2) Business Days prior to the
proposed conversion, shall be maintained as an unaffected type of Eurodollar
Rate Loan and (iii) any outstanding affected Eurodollar Rate Loans shall be
converted into a Domestic Rate Loan as of the last day of the then current
Interest Period, or, if Borrower shall notify Agent, no later than 10:00 a.m.
(New York City time) two (2) Business Days prior to the last Business Day of the
then current Interest Period applicable to such affected Eurodollar Rate Loan,
such affected Eurodollar Rate Loan shall be converted into an unaffected type of
Eurodollar Rate Loan on the last Business Day of the then current Interest
Period for such affected Eurodollar Rate Loans. Until such notice has been
withdrawn, Lenders shall have no obligation to make an affected type of
Eurodollar Rate Loan or maintain outstanding affected Eurodollar Rate Loans and
Borrower shall not have the right to convert a Domestic Rate Loan or an
unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar Rate
Loan.
IV. COLLATERAL: GENERAL TERMS
4.1. Security Interest in the Collateral. To secure the prompt
payment and performance to Agent and each Lender of the Obligations, Borrower
hereby assigns, pledges and grants to Agent for its benefit and for the ratable
benefit of each Lender a continuing security interest in and to all of the
Collateral, whether now owned or existing or hereafter acquired or arising and
wheresoever located. Borrower shall xxxx its books and records as may be
necessary or appropriate to evidence, protect and perfect Agent's security
interest and shall cause its financial statements to reflect the existence of a
security interest.
4.2. Perfection of Security Interest. Borrower shall take
all action that may be necessary or desirable, or that Agent may
request, so as at all times to maintain the validity, perfection,
enforceability and priority of Agent's security interest in the
Collateral or to enable Agent to protect, exercise or enforce its
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rights hereunder and in the Collateral, including, but not limited to (i)
immediately discharging all Liens other than Permitted Encumbrances, (ii) using
its best efforts to obtain landlords' or mortgagees' lien waivers, (iii) making
available to Agent at the locations where same are kept, endorsed or accompanied
by such instruments of assignment as Agent may specify, and stamping or marking,
in such manner as Agent may specify, any and all chattel paper, instruments,
letters of credits and advices thereof and documents evidencing or forming a
part of the Collateral, (iv) entering into warehousing, lockbox and other
custodial arrangements satisfactory to Agent, and (v) executing and delivering
financing statements, instruments of pledge, mortgages, notices and assignments,
in each case in form and substance satisfactory to Agent, relating to the
creation, validity, perfection, maintenance or continuation of Agent's security
interest under the Uniform Commercial Code or other applicable law. All
reasonable charges, expenses and fees Agent may incur in doing any of the
foregoing, and any local taxes relating thereto, shall be charged to Borrower's
account as a Revolving Advance and added to the Obligations, or, at Agent's
option, shall be paid to Agent immediately upon demand.
4.3. Disposition of Collateral. Borrower will safeguard and protect
all Collateral for Agent's general account and make no disposition thereof
whether by sale, lease or otherwise except (a) the sale of Inventory in the
ordinary course of business, (b) the disposition or transfer of obsolete and
worn-out Equipment in the ordinary course of business during any fiscal year
having an aggregate fair market value of not more than $50,000 and (c) which is
otherwise permitted in Article VII of this Agreement.
4.4. Preservation of Collateral. Following the occurrence and during
the continuation of an Event of Default, in addition to the rights and remedies
set forth in Section 11.1 hereof, Agent: (a) may at any time take such steps as
Agent deems necessary to protect Agent's interest in and to preserve the
Collateral, including the hiring of such security guards or the placing of other
security protection measures as Agent may deem appropriate; (b) may employ and
maintain at any of Borrower's premises a custodian who shall have full authority
to do all acts necessary to protect Agent's interests in the Collateral; (c) may
lease warehouse facilities to which Agent may move all or part of the
Collateral; (d) may use any of Borrower's owned or leased lifts, hoists, trucks
and other facilities or equipment for handling or removing the Collateral; and
(e) shall have, and is hereby granted, a right of ingress and egress to the
places where the Collateral is located, and may proceed over and through any of
Borrower's owned or leased property. Borrower shall cooperate fully with all of
Agent's efforts to preserve the Collateral and will take such actions to
preserve the Collateral as Agent may direct. All of Agent's expenses of
preserving the Collateral, including any expenses relating to the bonding of a
custodian, shall be charged to Borrower's account as a Revolving Advance and
added to the Obligations.
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4.5. Ownership of Collateral. With respect to the Collateral, at the
time the Collateral becomes subject to Agent's security interest: (a) Borrower
shall be the sole owner of and fully authorized and able to sell, transfer,
pledge and/or grant a first security interest in each and every item of the
Collateral to Agent; and, except for Permitted Encumbrances the Collateral shall
be free and clear of all Liens whatsoever; (b) each document and agreement
executed by Borrower or delivered to Agent or any Lender by Borrower in
connection with this Agreement shall be true and correct in all material
respects at the time executed or delivered; (c) all signatures and endorsements
of Borrower that appear on such documents and agreements shall be genuine and
Borrower shall have full capacity to execute same; and (d) except for Inventory
relating to import financing by Borrower and except with respect to the sale of
Inventory in the ordinary course of business and Equipment to the extent
permitted in Section 4.3 hereof, Borrower's Equipment and Inventory shall be
located as set forth on Schedule 4.5 and shall not be removed from such
location(s) without the prior written consent of Agent, not to be unreasonably
withheld.
4.6. Defense of Agent's and Lender's Interests. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. During such period Borrower shall not, without Agent's prior written
consent, pledge, sell (except Inventory in the ordinary course of business and
Equipment to the extent permitted in Section 4.3 hereof), assign, transfer,
create or suffer to exist a Lien upon or encumber or allow or suffer to be
encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. Borrower shall defend Agent's interests in the Receivables against
any and all Persons whatsoever and shall defend Agent's interest in the
Collateral other than Receivables against any and all persons whatsoever other
than creditors of its Clients. At any time following the occurrence and during
the continuation of an Event of Default, Agent shall have the right to take
possession of the indicia of the Collateral and the Collateral in whatever
physical form contained, including without limitation: labels, stationery,
documents, instruments and advertising materials. If Agent exercises this right
to take possession of the Collateral, Borrower shall, upon demand, assemble it
in the best manner possible and make it available to Agent at a place reasonably
convenient to Agent. In addition, with respect to all Collateral, Agent and
Lenders shall be entitled to all of the rights and remedies set forth herein and
further provided by the Uniform Commercial Code or other applicable law.
Following the occurrence and during the continuation of an Event of Default
Borrower shall at Agent's request, and Agent may, at its option, instruct all
suppliers, carriers, forwarders, warehouses or others receiving or holding cash,
checks, Inventory, documents or instruments in which Agent holds a security
interest to deliver same to Agent and/or subject to Agent's order and if they
shall come into Borrower's possession, they, and each of them, shall be held by
Borrower in trust as Agent's trustee, and Borrower
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will immediately deliver them to Agent in their original form together with any
necessary endorsement.
4.7. Books and Records. Borrower (a) shall keep proper books of
record and account in which full, true and correct entries will be made of all
dealings or transactions of or in relation to its business and affairs; (b) set
up on its books accruals with respect to all taxes, assessments, charges, levies
and claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including without limitation by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties), which
should be set aside from such earnings in connection with its business. All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by Borrower.
4.8. Financial Disclosure. Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by Borrower at any time during the
term of this Agreement to exhibit and deliver to Agent and each Lender copies of
any of Borrower's financial statements, trial balances or other accounting
records of any sort in the accountant's or auditor's possession, and to disclose
to Agent and each Lender any information such accountants may have concerning
Borrower's financial status and business operations. Borrower hereby authorizes
all federal, state and municipal authorities to furnish to Agent and each Lender
copies of reports or examinations relating to Borrower, whether made by Borrower
or otherwise; however, Agent and each Lender will attempt to obtain such
information or materials directly from Borrower prior to obtaining such
information or materials from such accountants or such authorities and Agent and
each Lender shall provide Borrower with the opportunity to participate in any
meeting or communication with such accountants or such authorities.
4.9. Compliance with Laws. Borrower shall comply with all acts,
rules, regulations (including those relating to licensing and regulation of
Borrower's business, ERISA, those regarding the collection, payment and deposit
of sales, employees' income, unemployment and social security taxes, and those
relating to environmental matters) and orders of any legislative, administrative
or judicial body or official applicable to the Collateral or any part thereof or
to the operation of Borrower's business the non-compliance with which would have
a Material Adverse Effect.
4.10. Inspection of Premises. Subject to the limitation on
field examinations contained in Section 3.6, at all reasonable
times Agent or any Lender shall have full access to and the right
to audit, check, inspect and make abstracts and copies from
Borrower's books, records, audits, correspondence and all other
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papers relating to the Collateral and the operation of Borrower's business and
Agent, any Lender and their agents may enter upon any of Borrower's premises at
any time during business hours and at any other reasonable time, and from time
to time, for the purpose of inspecting the Collateral and any and all records
pertaining thereto and the operation of Borrower's business.
4.11. Insurance Policies. Schedule 4.11(a) lists all insurance of any
nature maintained for current occurrences by Borrower or its Subsidiaries, as
well as a summary of the terms of such insurance. Such insurance covers, without
limitation, environmental, fire, theft, burglary, public liability, property
damage, product liability, workers' compensation, and insurance on all of
Borrower's and each of its Subsidiaries tangible property and assets, wherever
located, all in amounts customary for Borrower's and such Subsidiary's industry
and under policies issued by insurers and pursuant to policies satisfactory to
Agent and in any event in compliance with any insurance requirements under this
Agreement or under any Other Document. Except as set forth on Schedule 4.11(b),
(a) all of such policies of insurance which are liability insurance policies
shall name Agent as additional insureds and (b) Borrower shall and shall cause
its Subsidiaries to use its best efforts to ensure that all such policies of
insurance which are casualty insurance policies shall contain an endorsement, in
form and substance acceptable to Agent, showing loss payable to Agent. The
endorsement referenced in clause (b) of the preceding sentence, or an
independent instrument furnished to Agent in lieu of such endorsement, shall
provide that the insurance companies will give Agent at least 30 days prior
written notice before any such policy or policies of insurance shall be altered
or cancelled and that no act or default of Borrower or any other Person shall
affect the right of Agent to recover under such policy or policies of insurance
in case of loss or damage. All of such policies (or replacements therefor) are
in full force and effect (except to the extent same relate to assets disposed of
as permitted in Article VII hereof) and provide coverage of such risks and for
such amounts as is customarily maintained for businesses of the scope and size
of Borrower.
4.12. Failure to Pay Insurance. If Borrower fails to obtain insurance
as hereinabove provided, or to keep the same in force, Agent, if Agent so
elects, may obtain such insurance and pay the premium therefor for Borrower's
account, and charge Borrower's account therefor and such expenses so paid shall
be part of the Obligations.
4.13. Payment of Taxes. Borrower will pay, when due, all
taxes, assessments and other Charges or Claims lawfully levied or
assessed upon Borrower or any of the Collateral including, without
limitation, real and personal property taxes, assessments and
charges and all franchise, income, employment, social security
benefits, withholding, and sales taxes except to the extent any of
the foregoing constitutes a Permitted Encumbrance. Subject to the
preceding sentence, if any tax by any governmental authority is or
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may be imposed on or as a result of any transaction between Borrower and Agent
or any Lender which Agent or any Lender may be required to withhold or pay or if
any taxes, assessments, or other Charges remain unpaid after the date fixed for
their payment, or if any Claim shall be made which, in Agent's or Lender's
opinion, may possibly create a valid Lien on the Collateral, Agent may without
notice to Borrower pay the taxes, assessments or other Charges and Borrower
hereby indemnifies and holds Agent and each Lender harmless in respect thereof.
Neither Agent nor any Lender will pay any taxes, assessments or Charges to the
extent that Borrower has contested or disputed those taxes, assessments or
Charges in good faith, by expeditious protest, administrative or judicial appeal
or similar proceeding provided that any related tax lien is stayed and
sufficient reserves are established to the reasonable satisfaction of Agent to
protect Agent's security interest in or Lien on the Collateral. The amount of
any payment by Agent under this Section 4.13 shall be charged to Borrower's
account as a Revolving Advance and added to the Obligations.
4.14. Payment of Leasehold Obligations. Borrower shall at all times
pay, when and as due, its rental obligations under all leases under which it is
a tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect and, at Agent's
request will provide evidence of having done so.
4.15. Receivables.
(a) Nature of Receivables. At the time of the
purchase by Borrower of any Client's Receivables pursuant to the applicable
Factoring Agreement, based upon the representations of such Client to Borrower
under the applicable Factoring Agreement with Borrower having no actual
knowledge to the contrary, each of the Receivables shall be (i) a bona fide and
valid account representing a bona fide indebtedness incurred by the Account
Debtor therein named, for a fixed sum as set forth in the invoice relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of the applicable Client, or work, labor or services
theretofore rendered by the applicable Client as of the date each Receivable is
created and (ii) due and owing in accordance with the applicable Client's
standard terms of sale without dispute, setoff or counterclaim except as may be
stated on the accounts receivable schedules, if any, delivered by the applicable
Client to Borrower.
(b) Solvency of Account Debtor. Each Account Debtor,
to the best of Borrower's knowledge, as of the date each Receivable is created,
is solvent and able to pay all Receivables on which the Account Debtor is
obligated in full when due or with respect to such Account Debtors of Client's
who are not solvent Borrower has set up on its books and in its financial
records bad debt reserves adequate in Borrower's opinion to cover such
Receivables.
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(c) Locations of Borrower. Borrower's chief
executive office is located at 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx
00000. Except as set forth in Schedule 4.15(c) attached hereto, until written
notice is given to Agent by Borrower of any other office at which it keeps its
records pertaining to Receivables, all such records shall be kept at such
executive office.
(d) Collection of Receivables. Until Borrower's
authority to do so is terminated by Agent by written notice (which notice Agent
may only give at any time following the occurrence and during the continuance of
an Event of Default), Borrower will, at Borrower's sole cost and expense, but on
Agent's behalf and for Agent's account, collect as Agent's property and in trust
for Agent all amounts received on Receivables, and shall not commingle such
collections with Borrower's funds. Borrower shall in accordance with Section
4.16 hereof deposit in the Lockbox Account, all checks, drafts, notes, money
orders, acceptances, cash and other evidences of Indebtedness collected by
Borrower.
(e) Notification of Assignment of Receivables. At
any time following the occurrence and during the continuation of an Event of
Default, Agent shall have the right to send notice of the assignment of, and
Agent's security interest in, the Receivables to any and all Clients or any
third party holding or otherwise concerned with any of the Collateral.
Thereafter (until such Event of Default has been cured or waived), Agent shall
have the sole right to collect the Receivables, take possession of the
Collateral, or both. Agent's actual collection expenses, including, but not
limited to, stationery and postage, telephone and telegraph, secretarial and
clerical expenses and the salaries of any collection personnel used for
collection, may be charged to Borrower's account and added to the Obligations.
(f) Power of Agent to Act on Borrower's Behalf.
(1) Borrower hereby irrevocably constitutes and appoints Agent and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of Borrower and in the name of Borrower or in its own name, from time
to time in Agent's discretion, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute and deliver any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, hereby grants to Agent the power and right, on behalf of
Borrower, without notice to or assent by Borrower, and at any time, to do the
following:
(i) except as provided in Section 4.15(d) or (e), in the
name of Borrower, in its own name or otherwise, take possession of,
endorse and receive payment of any checks, drafts, notes,
acceptances, or
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other instruments for the payment of monies due under any Collateral;
and
(ii) upon the occurrence and during the continuation of
an Event of Default, receive payment of any and all monies, claims,
and other amounts due or to become due at any time arising out of or
in respect of any Collateral other than the Receivables.
(2) Borrower hereby irrevocably constitutes and appoints Agent and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of Borrower and in the name of Borrower or in its own name, from time
to time in Agent's discretion, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute and deliver any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, hereby grants to Agent the power and right, on behalf of
Borrower, without notice to or assent by Borrower, upon the occurrence and
during the continuation of an Event of Default, to do the following:
(i) subject to the terms of the Factoring Agreements, the
Collateral Funding Repayment Agreements, if any, the Inventory
Collateral Funding Repayment Agreements, if any and the terms of the
Receivables, ask, demand, collect, receive and give acquittances and
receipts for any and all money due or to become due under any
Collateral, and take ownership and control of any and all lockboxes
and other depository accounts by written notice to any bank or other
institution maintaining such lockboxes or other depository accounts;
(ii) pay or discharge taxes, liens, security
interests, or other encumbrances levied or placed on or
threatened against the Collateral;
(iii) effect any repairs or obtain any insurance called
for by the terms of this Agreement and pay all or any part of the
premiums therefor and costs thereof;
(iv) direct any party liable for any payment under or in
respect of any of the Collateral to make payment of any and all
monies due or to become due thereunder, directly to Agent or as Agent
shall direct;
(v) sign and endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, and notices in connection with
accounts and other documents constituting or related to the
Collateral;
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(vi) subject to the terms of the Factoring Agreements,
the Collateral Funding Repayment Agreements, if any, the Inventory
Collateral Funding Repayment Agreements, if any, and the terms of the
Receivables, settle, compromise or adjust any suit, action, or
proceeding described below and, in connection therewith, give such
discharges or releases as Agent may deem appropriate;
(vii) subject to the terms of the Factoring Agreements,
the Collateral Funding Repayment Agreements, if any, the Inventory
Collateral Funding Repayment Agreements, if any, and the terms of the
Receivables, file any claim or take or commence any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by Agent for the purpose of collecting any and all such
monies due under any Collateral whenever due and payable;
(viii) subject to the terms of the Factoring Agreements,
the Collateral Funding Repayment Agreements, if any, the Inventory
Collateral Funding Repayment Agreements, if any, and the terms of the
Receivables, commence and prosecute any suits, actions or proceedings
at law or equity in any court of competent jurisdiction to collect
the Collateral or any part thereof and to enforce any other right in
respect of any Collateral;
(ix) defend any suit, action or proceeding brought
against Borrower with respect to any Collateral if Borrower does not
defend such suit, action or proceeding or if Agent believes that
Borrower is not pursuing such defense in a manner that will maximize
the recovery with respect to such Collateral;
(x) license or, to the extent permitted by an applicable
license, sublicense whether general, specific or otherwise, and
whether on an exclusive or non-exclusive basis, any patent or
trademark throughout the world for such term or terms on such
conditions and in such manner as Agent shall, in its sole discretion,
determine;
(xi) subject to Section 11.1 hereof, sell, transfer,
pledge, make any agreement with respect to, or otherwise deal with
any of the Collateral as fully and completely as Borrower could, and
to do, at Agent's option and Borrower's expense, at any time, or from
time to time, all acts and things which Agent reasonably deems
necessary to perfect, preserve, or, subject to Section 11.l hereof
and the terms of the Factoring Agreements, the Collateral Funding
Repayment Agreements, if any, the Inventory Collateral Funding
Repayment Agreements, if any, realize upon the Collateral and Agent's
Lien therein in order to effect the intent of this Agreement, all as
fully and effectively as Borrower might do;
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(xii) contact, make any agreement with, or otherwise deal
with any governmental or regulatory agency in connection with the
operation of Borrower's business or the possession or liquidation of
any or all of the Collateral; and
(xiii) change the address for delivery of mail addressed
to Borrower to such address as Agent may designate and open and
dispose of all such mail.
(3) Borrower hereby ratifies, to the extent permitted by law, all
that said attorneys shall lawfully do or cause to be done by virtue hereof, and
said attorneys or designees shall not be liable for any acts of omission or
commission nor for any error of judgment or mistake of fact or of law, unless
done maliciously or with gross (not mere) negligence. The powers of attorney
granted pursuant to this Section 4.15(f) are powers coupled with an interest and
shall be irrevocable until the Obligations are paid or otherwise satisfied in
full.
(4) The powers conferred on Agent hereunder are solely to protect
Agent's interests in the Collateral and shall not impose any duty upon it to
exercise any such powers. Agent shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers and neither Agent
nor any Lender nor any of their officers, directors, employees, agents or
representatives shall be responsible to Borrower for any act or failure to act,
except for their own gross negligence or willful misconduct.
(5) Borrower also authorizes Agent, at any time and from time to
time, upon the occurrence and during the continuation of an Event of Default, to
(i) communicate in its own name with any party to any contract with regard to
the assignment of the right, title and interest of Borrower in and under the
contracts and other matters relating thereto and (ii) execute any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral.
(g) No Liability. Neither Agent nor any Lender
shall, under any circumstances or in any event whatsoever, have any liability
for any error or omission or delay of any kind occurring in the settlement,
collection or payment of any of the Receivables or any instrument received in
payment thereof, or for any damage resulting therefrom except for Agent's or any
Lender's gross negligence or willful misconduct. Following the occurrence and
during the continuance of an Event of Default and subject to the terms of the
applicable Factoring Agreements, the Collateral Funding Repayment Agreements, if
any, the Inventory Collateral Funding Repayment Agreements, if any, and the
terms of the Receivables, Agent may, without notice or consent from Borrower,
xxx upon or otherwise collect, extend the time of payment of, compromise or
settle for cash, credit or upon any terms any of the Receivables or any other
securities, instruments or insurance applicable thereto and/or release any
obligor thereof. Agent is
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authorized and empowered to accept, following the occurrence and during the
continuance of an Event of Default, the return of the goods represented by any
of the Receivables to the extent Borrower would be empowered to accept same,
without notice to or consent by Borrower, all without discharging or in any way
affecting Borrower's liability hereunder.
4.16. Cash Management Systems
(a) Commencing on the Original Closing Date and for so long as
any Obligations are outstanding, Borrower shall deposit within three (3)
Business Days following the date of receipt thereof or cause to be deposited
directly all cash, checks, notes, drafts or other similar items of payment
relating to or constituting payments made in respect of any and all Receivables
into one collection account in Borrower's name at each bank set forth on
Schedule 4.16 hereto that have no rights of setoff or recoupment or any other
claim against such accounts (collectively, the "Lockbox Accounts"). To the
extent that any Lockbox Accounts are from time to time maintained at Agent or
any other Lender, all cash, checks, notes, drafts and other similar items of
payment from time to time deposited in such Lockbox Accounts shall be made
available to Borrower for all purposes hereof at the times and in a manner
consistent with IBJS's past practices with Borrower. At any time when an Event
of Default is not continuing, Borrower may pay down the Advances (other than
Letters of Credit) by (i) wiring funds from the Lockbox Account to Agent's
depository account as designated by Agent from time to time (the "Depository
Account"), and (ii) providing notice to Agent of such deposit. At any time when
an Event of Default is not continuing, Borrower may, in lieu of wiring funds to
the Depository Account, cause the transfer of funds in the Lockbox Accounts to
its Operating Accounts. Blocked account arrangements shall be established with
the banks at which the Lockbox Accounts are maintained. At any time when an
Event of Default is continuing, all amounts deposited in the Lockbox Accounts
shall on the same day that such amounts are available for transfer, unless the
Lockbox Account banks are otherwise instructed by Agent, be deposited via wire
transfer, in immediately available funds, into the Depository Account. Agent
shall give Borrower at least five (5) Business Days notice prior to changing the
Depository Account. So long as no Default has occurred, Borrower may open a
Lockbox Account with any bank in lieu of or in addition to those listed on
Schedule 4.16 hereto; provided, however, that (i) Agent shall have consented to
the opening of such Lockbox Account with such bank, and (ii) at the time of the
opening of such Lockbox Account Borrower shall deliver to Agent a blocked
account agreement duly executed by Borrower and such bank, in form and substance
satisfactory to Agent. The Lockbox Accounts shall be cash collateral accounts,
with all cash, checks and other similar items of payment in such accounts
securing payment of the Obligations, and in which Borrower will have granted a
Lien to Agent for the benefit of Lenders.
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(b) All amounts deposited in the Depository Account shall be
deemed received by Agent in accordance with Section 2.12(k) hereof and shall be
applied by Agent against any then due and payable interest and fees hereunder
and then against the outstanding balance of Revolving Advances, Inventory Value
Advances and Equipment Value Advances in such order as Agent shall determine,
provided, however, so long as no Event of Default shall have occurred and is
continuing (or would occur after giving effect to the application of such
amounts as requested by Borrower) Borrower may determine the order in which such
amounts shall be applied. In no event shall any amount be applied by Agent
against such interest and fees and the outstanding balance of the Revolving
Advance unless and until such amount shall have been credited in immediately
available funds to the Depository Account. Any funds deposited in the Depository
Account in excess of the amount applied to such interest and fees and the
outstanding balance of the Advances (the "excess funds") shall remain in and be
held in the Depository Account as collateral security securing the payment of
the Obligations and Borrower hereby grants to Agent for the benefit of the
Lenders a Lien on all cash, checks and other similar items of payment in such
account. Prior to the occurrence and during the continuance of an Event of
Default Borrower may request and obtain the return of any excess funds.
(c) Borrower shall maintain an account (the "Operating
Account") at a bank acceptable to Agent into which Agent or Lenders shall, from
time to time, (i) deposit proceeds of Revolving Advances made pursuant to
Section 2.1 hereof for use solely in accordance with the provisions of Section
2.13 hereof, (ii) deposit proceeds of Equipment Value Advances made pursuant to
Section 2.2 hereof for use in accordance with the provisions of Section 2.2
hereof, (iii) deposit proceeds of Inventory Value Advances made pursuant to
Section 2.2A hereof for use in accordance with Section 2.2A hereof, and (iv) in
accordance with Section 4.16(a), cause or permit transfers from the Lockbox
Account. The Operating Account shall be a cash collateral account, with all
cash, checks and other similar items of payment in such account securing payment
of the Obligations, and in which Borrower hereby grants a Lien to Agent for the
benefit of Lenders.
4.17. Inventory. All Inventory produced by Borrower (other than
Inventory purchased or acquired by Borrower from its Clients) has been, and will
be, produced by Borrower in accordance with the Federal Fair Labor Standards Act
of 1938, as amended, and all rules, regulations and orders thereunder.
4.18. Maintenance of Equipment. The Equipment used in the ordinary
course of Borrower's business shall be maintained in good operating condition
and repair (reasonable wear and tear excepted) and all necessary replacements of
and repairs thereto shall be made so that the value and operating efficiency of
the Equipment shall be maintained and preserved. Borrower shall not use or
operate such Equipment in violation of any law, statute, ordinance, code, rule
or regulation. Borrower shall have the right to sell
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Equipment to the extent set forth in Section 4.3 hereof or Article VII hereof.
4.19. Exculpation of Liability. Nothing herein contained shall be
construed to constitute Agent or any Lender as Borrower's agent for any purpose
whatsoever, nor shall Agent or any Lender be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof except to
the extent of Agent's or any such Lender's gross negligence or willful
misconduct. Neither Agent nor any Lender, whether by anything herein or in any
assignment or otherwise, assumes any of Borrower's obligations under any
contract or agreement assigned to Agent or such Lender, and neither Agent nor
any Lender shall be responsible in any way for the performance by Borrower of
any of the terms and conditions thereof.
4.20. Environmental Matters. (a) Borrower will ensure that
the Real Property remains in compliance with all Environmental Laws
and it will not place or permit to be placed any Hazardous
Substances on any Real Property except as not prohibited by
applicable law or appropriate governmental authorities or except as
would not have a Material Adverse Effect.
(b) Borrower will, with respect to Real Property
owned by Borrower establish and maintain a system to assure and monitor
continued compliance with all applicable Environmental Laws which system shall
include periodic reviews of such compliance.
(c) Borrower will (i) employ in connection with its
use of the Real Property appropriate technology necessary to maintain compliance
with any applicable Environmental Laws and (ii) dispose of any and all Hazardous
Waste generated at the Real Property owned by Borrower only at facilities and
with carriers that maintain valid permits under RCRA and any other applicable
Environmental Laws. Borrower shall use its best efforts to obtain certificates
of disposal, such as hazardous waste manifest receipts, from all treatment,
transport, storage or disposal facilities or operators employed by Borrower in
connection with the transport or disposal of any Hazardous Waste generated at
the Real Property.
(d) In the event Borrower obtains, gives or receives
notice of any Release or threat of Release of a reportable quantity of any
Hazardous Substances at the Real Property (any such event being hereinafter
referred to as a "Hazardous Discharge") or receives any notice of violation,
request for information or notification that it is potentially responsible for
investigation or cleanup of environmental conditions at the Real Property,
demand letter or complaint, order, citation, or other written notice with regard
to any Hazardous Discharge or violation of Environmental Laws affecting the Real
Property (any of the foregoing is referred to herein as an "Environmental
Complaint") from any Person or entity, including any state agency responsible in
whole or in part
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for environmental matters in the state in which the Real Property is located or
the United States Environmental Protection Agency (any such person or entity
hereinafter the "Environmental Authority"), then Borrower shall, within five (5)
Business Days, give written notice of same to Agent detailing facts and
circumstances of which Borrower is aware giving rise to the Hazardous Discharge
or Environmental Complaint. Such information is to be provided to allow Agent to
protect its security interest in the Real Property and is not intended to create
nor shall it create any obligation upon Agent or any Lender with respect
thereto.
(e) Borrower shall promptly forward to Agent copies
of any request for information, notification of potential liability, demand
letter relating to potential responsibility with respect to the investigation or
cleanup of Hazardous Substances at any other site owned, operated or used by
Borrower to dispose of Hazardous Substances and shall continue to forward copies
of correspondence between Borrower and the Environmental Authority regarding
such claims to Agent until the claim is settled. Borrower shall promptly forward
to Agent copies of all documents and reports concerning a Hazardous Discharge at
the Real Property that Borrower is required to file under any Environmental
Laws. Such information is to be provided solely to allow Agent to protect
Agent's security interest in the Real Property and the Collateral.
(f) Borrower shall respond promptly to any Hazardous
Discharge or Environmental Complaint with respect to Real Property and take all
necessary action in order to safeguard the health of any Person and to avoid
subjecting the Collateral or Real Property to any Lien other than Permitted
Encumbrances. Except as provided in the preceding sentence, if Borrower shall
fail to respond promptly to any such Hazardous Discharge or Environmental
Complaint or Borrower shall fail to comply with any of the requirements of any
Environmental Laws, Agent on behalf of Lenders may, but without the obligation
to do so, for the sole purpose of protecting Agent's interest in Collateral: (A)
give such notices or (B) enter onto the Real Property (or authorize third
parties to enter onto the Real Property) and take such actions as Agent (or such
third parties as directed by Agent) deem reasonably necessary or advisable, to
clean up, remove, mitigate or otherwise deal with any such Hazardous Discharge
or Environmental Complaint. All reasonable costs and expenses incurred by Agent
and Lenders (or such third parties) in the exercise of any such rights,
including any sums paid in connection with any judicial or administrative
investigation or proceedings, fines and penalties, together with interest
thereon from the date expended at the Default Rate for Domestic Rate Loans
constituting Revolving Advances shall be paid upon demand by Borrower, and until
paid shall be added to and become a part of the Obligations secured by the Liens
created by the terms of this Agreement or any Other Document.
(g) If Agent has any reason to believe that a
Hazardous Discharge has occurred or exists with respect to any Real
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Property owned by Borrower, promptly upon the written request of Agent, Borrower
shall provide Agent, at Borrower's expense, with an environmental site
assessment or environmental audit report prepared by an environmental
engineering firm acceptable in the reasonable opinion of Agent, to assess with a
reasonable degree of certainty the existence of a Hazardous Discharge and the
potential costs in connection with abatement, cleanup and removal of any
Hazardous Substances found on, under, at or within the Real Property. Any report
or investigation of such Hazardous Discharge proposed and acceptable to an
appropriate Environmental Authority that is charged to oversee the clean-up of
such Hazardous Discharge shall be acceptable to Agent. If such estimates,
individually or in the aggregate, exceed $500,000, Agent shall have the right to
require Borrower to post a bond, letter of credit or other security reasonably
satisfactory to Agent to secure payment of these costs and expenses.
(h) Borrower shall defend and indemnify Agent and
Lenders and hold Agent, Lenders and their respective employees, agents,
directors and officers harmless from and against all loss, liability, damage and
expense, claims, costs, fines and penalties, including reasonable attorney's
fees, suffered or incurred by Agent or Lenders under or on account of any
Environmental Laws with respect to the Real Property, including, without
limitation, the assertion of any lien thereunder, with respect to any Hazardous
Discharge, the presence of any Hazardous Substances affecting the Real Property,
whether or not the same originates or emerges from the Real Property or any
contiguous real estate, including any loss of value of the Real Property as a
result of the foregoing except to the extent such loss, liability, damage and
expenses is attributable to Agent's or any Lender's or their employees', agents'
or officers' gross negligence or willful misconduct. Borrower's obligations
under this Section 4.20 shall arise upon the discovery of the presence of any
Hazardous Substances at the Real Property, whether or not any federal, state, or
local environmental agency has taken or threatened any action in connection with
the presence of any Hazardous Substances. Borrower's obligation and the
indemnifications hereunder shall survive the termination of this Agreement.
(i) For purposes of Section 4.20 and 5.7, all
references to Real Property shall not include any interest of Borrower in Real
Property which is a mortgagee's interest.
V. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1. Authority. Borrower has full power, authority and
legal right to enter into this Agreement and the Other Documents
and perform all Obligations hereunder. The execution, delivery and
performance hereof and of the Other Documents (a) are within
Borrower's corporate powers, have been duly authorized, are not in
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contravention of law or the terms of Borrower's by-laws, certificate of
incorporation or other applicable documents relating to Borrower's formation or
to the conduct of Borrower's business or of any material agreement or
undertaking to which Borrower is a party or by which Borrower is bound, and (b)
do not conflict with nor result in any breach in any of the provisions of or
constitute a default under or result in the creation of any Lien except
Permitted Encumbrances upon any asset of Borrower under the provisions of any
agreement, charter, by-law, or other instrument to which Borrower is a party or
by which it may be bound.
5.2. Formation and Qualification. (a) Borrower is duly incorporated
and in good standing under the laws of the Commonwealth of Virginia and is
qualified to do business and is in good standing in the states listed on
Schedule 5.2(a) which constitute all states in which qualification and good
standing are necessary for Borrower to conduct its business and own its property
and where the failure to so qualify would have a Material Adverse Effect.
Borrower has delivered to Agent true and complete copies of its certificate of
incorporation and by-laws and will promptly notify Agent of any amendment or
changes thereto.
(b) The only Subsidiaries of Borrower are listed on
Schedule 5.2(b), which sets forth such Subsidiaries, together with their
respective jurisdictions of organization, and the authorized and outstanding
capital Stock of each such Subsidiary, by class and number and percentage of
each class legally owned by Borrower or a Subsidiary of Borrower or any other
Person.
5.3. Survival of Representations and Warranties. All representations
and warranties of Borrower contained in this Agreement and the Other Documents
shall be true at the time of Borrower's execution of this Agreement and the
Other Documents, and shall survive the execution, delivery and acceptance
thereof by the parties thereto and the closing of the transactions described
therein or related thereto.
5.4. Tax Returns. Borrower's federal tax identification number is
00-0000000. Borrower has filed all federal, state and material local tax returns
and other material reports it is required by law to file and has paid all taxes,
assessments, fees and other governmental charges that are due and payable except
as provided in Section 4.13 hereof. As of the Effective Date, federal, state and
local income tax returns of Borrower have been examined and reported upon by the
appropriate taxing authority or closed by applicable statute and satisfied for
all fiscal years prior to and including the fiscal year ending December 31,
1989. The provision for taxes on the books of Borrower are adequate for all
years not closed by applicable statutes, and for its current fiscal year, and
Borrower has no knowledge of any deficiency or additional assessment in
connection therewith not provided for on its books. Borrower has no obligation
under any written tax sharing agreement.
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5.5. Financial Statements.
The consolidated and consolidating balance sheets of Borrower, its
Subsidiaries and such other Persons described therein (including the accounts of
all Subsidiaries for the respective periods during which a subsidiary
relationship existed) as of December 31, 1996, and the related statements of
income, changes in stockholder's equity, and changes in cash flow for the period
ended on such date, all accompanied by reports thereon containing opinions
without qualification by independent certified public accountants, copies of
which have been delivered to Agent, have been prepared in accordance with GAAP,
consistently applied (except for changes in application in which such
accountants concur) and present fairly in all material respects the financial
position of Borrower and its Subsidiaries at such date and the results of their
operations for such period. Since December 31, 1996 there has been no change in
the condition, financial or otherwise, of Borrower or its Subsidiaries as shown
on the consolidated balance sheet as of such date and no change in the aggregate
value of machinery, equipment and Real Property owned by Borrower and its
Subsidiaries, except changes in the ordinary course of business, none of which
individually or in the aggregate has a Material Adverse Effect.
5.6. Corporate Name. Borrower has not been known by any other
corporate name in the past five years and does not sell Inventory under any
other name except as set forth on Schedule 5.6, nor has Borrower been the
surviving corporation of a merger or consolidation or acquired all or
substantially all of the assets of any person during the preceding five (5)
years.
5.7. O.S.H.A..
(a) Borrower has duly complied with, and its
facilities, business, assets, property, leaseholds and Equipment are in
compliance in all material respects with, the provisions of the Federal
Occupational Safety and Health Act; there have been no outstanding citations,
notices or orders of non-compliance issued to Borrower or relating to its
business, assets, property, leaseholds or equipment under such law.
(b) (i) There are no visible signs of releases,
spills, discharges, leaks or disposal (collectively referred to as "Releases")
of Hazardous Substances at, upon, under or within any Real Property except to
the extent disclosed in writing from time to time by Borrower to Agent; (ii) to
the best of Borrower's knowledge there are no underground storage tanks or
polychlorinated biphenyls on the Real Property; (iii) to the best of Borrower's
knowledge the Real Property has never been used as a treatment, storage or
disposal facility of Hazardous Waste; and (iv) to the best of Borrower's
knowledge no Hazardous Substances are present on the Real Property, excepting
such quantities as are handled in accordance with all applicable manufacturer's
instructions and governmental regulations and in proper storage containers and
as
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are necessary for the operation of the commercial business of
Borrower or of its tenants.
5.8. Solvency; No Litigation, Violation, Indebtedness or
Default.
(a) Borrower is solvent, able to pay its debts as
they mature, has capital sufficient to carry on its business and all businesses
in which it is about to engage, and (i) as of the Effective Date, the fair
present saleable value of its assets, calculated on a going concern basis, is in
excess of the amount of its liabilities and (ii) subsequent to the Effective
Date, the fair saleable value of its assets (calculated on a going concern
basis) will be in excess of the amount of its liabilities.
(b) Except as disclosed in Schedule 5.8(b) or except
as disclosed in a public filing made by Borrower, a copy of which has been
provided to Agent, Borrower has (i) no pending or, to the best of Borrower's
knowledge, threatened litigation, actions or proceedings which would if
adversely determined have a Material Adverse Effect, or impair the ability of
Borrower to perform this Agreement, and (ii) no liabilities nor indebtedness
other than the Obligations and other liabilities or Indebtedness permitted under
Article VII.
(c) Borrower is not in violation of any applicable
statute, regulation or ordinance which would have a Material Adverse Effect, nor
is Borrower in violation of any order of any court, governmental authority or
arbitration board or tribunal.
(d) Neither Borrower nor any member of the Controlled
Group maintains or contributes to any Plan other than those listed on Schedule
5.8(d) hereto. Except as set forth in Schedule 5.8(d), (i) no Plan has incurred
any "accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA
and Section 412(a) of the Code, whether or not waived, and Borrower and each
member of the Controlled Group has met all applicable minimum funding
requirements under Section 302 of ERISA in respect of each Plan, (ii) each Plan
which is intended to be a qualified plan under Section 401(a) of the Code as
currently in effect has been determined by the IRS to be qualified under Section
401(a) of the Code and the trust related thereto is exempt from federal income
tax under Section 501(a) of the Code, (iii) neither Borrower nor any member of
the Controlled Group has incurred any liability to the PBGC other than for the
payment of premiums, and there are no premium payments which have become due
which are unpaid, (iv) no Plan has been terminated by the plan administrator
thereof or by the PBGC, and there is no occurrence which would cause the PBGC to
institute proceedings under Title IV of ERISA to terminate any Plan, (v) at this
time, the current value of the assets of each Plan exceeds the present value of
the accrued benefits and other liabilities of such Plan and neither Borrower nor
any member of the Controlled Group knows of any facts or circumstances which
would materially change the value of such assets and accrued benefits and other
liabili-
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ties, (vi) neither Borrower nor any member of the Controlled Group has breached
any of the responsibilities, obligations or duties imposed on it by ERISA with
respect to any Plan, (vii) neither Borrower nor any member of a Controlled Group
has incurred any liability for any excise tax arising under Section 4972 or
4980B of the Code the effect of which would have a Material Adverse Effect, and
no fact exists to the best of Borrower's knowledge which could give rise to any
such liability, (viii) neither Borrower nor any member of the Controlled Group
nor any fiduciary of, nor any trustee to, any Plan, has engaged in a "prohibited
transaction" described in Section 406 of the ERISA or Section 4975 of the Code
nor taken any action which would constitute or result in a Termination Event
with respect to any such Plan which is subject to ERISA, (ix) Borrower and each
member of the Controlled Group has made all contributions due and payable with
respect to each Plan, (x) there exists no event described in Section 4043(b) of
ERISA, for which the thirty (30) day notice period contained in 29 CFR ss.2615.3
has not been waived, (xi) neither Borrower nor any member of the Controlled
Group has any fiduciary responsibility for investments with respect to any plan
existing for the benefit of persons other than employees or former employees of
Borrower and any member of the Controlled Group, and (xii) neither Borrower nor
any member of the Controlled Group has withdrawn, completely or partially, from
any Multiemployer Plan so as to incur liability under the Multiemployer Pension
Plan Amendments Act of 1980 the effect of which would have a Material Adverse
Effect.
5.9. Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, service marks, service xxxx
applications, copyrights, copyright applications, design rights, tradenames,
assumed names, trade secrets and licenses owned or utilized by Borrower are set
forth on Schedule 5.9, are valid and to the extent set forth on Schedule 5.9
have been duly registered or filed with all appropriate governmental authorities
and constitute all of the intellectual property rights which are necessary for
the operation of its business; there is no objection to or pending challenge to
the validity of any such material patent, trademark, copyright, design rights,
tradename, trade secret or license and Borrower is not aware of any grounds for
any challenge, except as set forth in Schedule 5.9 hereto. Each patent, patent
application, patent license, trademark, trademark application, trademark
license, service xxxx, service xxxx application, service xxxx license,
copyright, copyright application and copyright license owned or held by Borrower
and all trade secrets used by Borrower consists of original material or property
developed by Borrower or was lawfully acquired by Borrower from the proper and
lawful owner thereof. Each of such items has been maintained so as to preserve
the value thereof from the date of creation or acquisition thereof. With respect
to all custom software used by Borrower, Borrower is in possession of all source
and object codes related to each piece of such software or is the beneficiary of
a source code escrow agreement, each such source code escrow agreement being
listed on Schedule 5.9 hereto.
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5.10. Licenses and Permits. Except as set forth in Schedule 5.10,
Borrower (a) is in compliance with and (b) has procured and is now in possession
of, all material licenses or permits required by any applicable federal, state,
or local law or regulation for the operation of its business in each
jurisdiction wherein it is now conducting or proposes to conduct business and
where the failure to comply with or procure such licenses or permits would have
a Material Adverse Effect.
5.11. Default of Indebtedness. Borrower is not in default in the
payment of the principal of or interest on any Indebtedness or under any
instrument or agreement under or subject to which any Indebtedness has been
issued in excess of $100,000 in the aggregate and no event has occurred under
the provisions of any such instrument or agreement which with or without the
lapse of time or the giving of notice, or both, constitutes or would constitute
an event of default thereunder.
5.12. No Default. Borrower is not in default in the payment
or performance of any of its contractual obligations which default
would have a Material Adverse Effect and no Default has occurred
and is continuing.
5.13. No Burdensome Restrictions. Borrower is not party to any
contract or agreement the performance of which would have a Material Adverse
Effect. Borrower has not agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien which is not a
Permitted Encumbrance.
5.14. No Labor Disputes. Borrower is not involved in any labor
dispute which would have a Material Adverse Effect; to the best of Borrower's
knowledge there are no strikes or walkouts or union organization of any of
Borrower's employees threatened or in existence and no labor contract is
scheduled to expire during the Term other than as set forth on Schedule 5.14
hereto.
5.15. Margin Regulations. Borrower is not engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U or Regulation G of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect. No part of the proceeds
of any Advance will be used by Borrower for "purchasing" or "carrying" "margin
stock" as defined in Regulations U and G of such Board of Governors.
5.16. Investment Company Act. Borrower is not an
"investment company" registered or required to be registered under
the Investment Company Act of 1940, as amended, nor is it
controlled by such a company.
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5.17. Disclosure. No representation or warranty made by Borrower in
this Agreement or in any financial statement, report, certificate or any other
document furnished by Borrower in connection herewith or therewith contained any
untrue statement of a material fact when made or omitted to state any material
fact necessary to make the statements herein or therein not misleading. There is
no fact known to Borrower which Borrower has not disclosed to Agent in writing
with respect to the transactions contemplated by this Agreement which would have
a Material Adverse Effect.
5.18. Swaps. Borrower is not a party to, nor will it be a party to,
any swap agreement whereby Borrower has agreed or will agree to swap interest
rates or currencies unless same provides that damages upon termination following
an event of default thereunder are payable on an unlimited "two-way basis"
without regard to fault on the part of either party.
5.19. Conflicting Agreements. No provision of any mortgage,
indenture, contract, agreement, judgment, decree or order binding on Borrower or
affecting the Collateral conflicts with, or requires any Consent which has not
already been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.
5.20. Application of Certain Laws and Regulations. Neither Borrower
nor any Subsidiary of Borrower is subject to any statute, rule or regulation not
applicable to businesses in general which regulates the incurrence of any
Indebtedness. No Affiliate of Borrower is subject to any statute, rule or
regulation which regulates the incurrence of any Indebtedness the effect of
which would have a Material Adverse Effect.
5.21. Property of Borrower. On the Effective Date, Borrower
will own all the property and possess all of the rights and
Consents necessary for the conduct of the business of Borrower.
5.22. Other Ventures. Borrower is not engaged in any joint
venture or partnership with any other Person.
VI. AFFIRMATIVE COVENANTS.
Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
6.1. Payment of Fees. Pay to Agent on demand all usual and customary
fees and expenses which Agent incurs in connection with (a) the forwarding of
Advance proceeds and (b) the establishment and maintenance of any Lockbox
Account or Depository Account as provided for in Section 4.16. Agent may,
without making demand, charge the account of Borrower for all such fees and
expenses.
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6.2. Conduct of Business and Maintenance of Existence and Assets. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
tradenames, trade secrets and trademarks and take all actions necessary to
enforce and protect the validity of any intellectual property right or other
right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so would have a
Material Adverse Effect; and (c) make all such reports and pay all such
franchise and other taxes and license fees and do all such other acts and things
as may be lawfully required to maintain its rights, licenses, leases, powers and
franchises under the laws of the United States or any political subdivision
thereof where the failure to do so would have a Material Adverse Effect.
6.3. Violations. Promptly notify Agent in writing of any
violation of any law, statute, regulation or ordinance of any
governmental entity, or of any agency thereof, applicable to
Borrower which may have a Material Adverse Effect.
6.4. Government Receivables. At the request of Agent, (a) take or
cause to be taken all steps necessary to protect Agent's interest in the
Collateral under the Federal Assignment of Claims Act or other applicable state
or local statutes or ordinances to the extent applicable; (b) shall use its best
efforts to cause Clients to take all steps necessary to protect Borrower's
rights to receive payment under contracts between the United States and such
Clients to the extent Borrower has purported to purchase Receivables under such
contracts; and (c) after the occurrence and during the continuance of an Event
of Default deliver to Agent appropriately endorsed, any instrument or chattel
paper connected with any Receivable arising out of contracts between (i)
Borrower and the United States, any state or any department, agency or
instrumentality of any of them and (ii) any Client and the United States, any
state or any department, agency or instrumentality of any of them to the extent
in Borrower's possession.
6.5. Execution of Supplemental Instruments. Execute and deliver to
Agent from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may request, in order that the
full intent of this Agreement may be carried into effect including (i) using its
best efforts to secure all consents and approvals necessary or appropriate for
the assignment to or for the benefit of Agent of any license or contract held by
Borrower or in which Borrower has any rights not heretofore assigned, (ii)
filing any financing or continuation statements under the UCC with respect to
the liens and security interests granted hereunder or under any Other Document,
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and (iii) transferring Collateral to Agent's possession or the possession of a
Person to whom such transfer will perfect Agent's Lien under applicable law (if
such Collateral can be perfected only by possession).
6.6. Payment of Indebtedness. Pay, discharge or otherwise satisfy at
or before maturity (subject, where applicable, to specified grace periods and,
in the case of the trade payables, to normal payment practices) all its
obligations and liabilities of whatever nature other than obligations and
liabilities which in the aggregate do not exceed $100,000 outstanding at any
time or , except when the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and Borrower shall have
provided for such reserves as Agent may reasonably deem proper and necessary,
subject at all times to any applicable subordination arrangement in favor of
Agent or Lenders.
6.7. Standards of Financial Statements. Cause all financial
statements referred to in Sections 9.6, 9.7, 9.8, 9.9, 9.10 and 9.11, as to
those to which GAAP is applicable to be complete and correct in all material
respects (subject, in the case of interim financial statements, to normal
year-end audit adjustments and except for the omission of footnotes as permitted
by the rules of the Securities and Exchange Commission or other applicable
governmental authority) and to be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein (except as concurred in by such reporting accountants or officer, as the
case may be, and disclosed therein).
6.8. Credit Standards. Borrower shall (a) maintain its internal
credit approval and classification standards as set forth in Exhibit 6.8
("Credit Standards"), (b) apply the Credit Standards to each purchase of
Receivables and (c) not modify the Credit Standards without the prior written
consent of Agent in each instance, such consent not to be withheld unreasonably.
6.9. Insurance. Borrower shall and shall cause each of its
Subsidiaries to maintain insurance in the type, scope and amounts described in
Section 4.11 hereof. Borrower and each of its Subsidiaries shall use its best
efforts to cause its insurance carriers to be obligated to notify Agent 30 days
in advance if any carrier intends to cancel the insurance policies. Borrower
shall, and shall cause each of its Subsidiaries to, pay when due all insurance
premiums payable by them. Borrower shall deliver to Agent, upon request, a
certificate of insurance that evidences the existence of each policy of
insurance, payment of all premiums therefor and compliance with Section 4.11
hereof and this Section 6.9. In addition, Borrower shall notify Agent promptly
of any occurrence causing a material loss or decline in value of any real or
personal property used by Borrower and the estimated (or actual, if available)
amount of such loss or decline. Upon the occurrence of any event causing a
material loss or decline in value of any real or personal property of any Client
against which Borrower has
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made documented advances and with respect to which Borrower has received the
proceeds thereof, Borrower shall notify Agent by the end of the month in which
such proceeds are received. In the event Borrower at any time or times hereafter
shall fail to obtain or maintain any of the policies of insurance required above
or to pay any premium in whole or in part relating thereto, Agent, without
waiving or releasing any Obligations or Default or Event of Default hereunder,
may at any time or times thereafter (but shall not be obligated to) obtain and
maintain such policies of insurance and pay such premiums and take any other
action with respect thereto which Agent deems advisable. All sums so disbursed
by Agent, including reasonable attorneys' fees, court costs, expenses and other
charges relating thereto, shall be payable, on demand, by Borrower to Agent and
shall be additional Obligations hereunder secured by the Collateral. Agent
reserves the right at any time, upon review of Borrower's risk profile, to
require additional forms and limits of insurance to, in Agent's reasonable
opinion, adequately protect Lenders' interests.
6.10. Filing of Financing Statements. Borrower shall file appropriate
UCC-1 financing statements against Clients to the extent necessary to perfect
Borrower's ownership or security interests under the applicable Factoring
Agreement, applicable Collateral Funding Repayment Agreement and/or applicable
Inventory Collateral Funding Repayment Agreement, if any, to the extent such
interest may be perfected by filing financing statements under the Uniform
Commercial Code.
VII. NEGATIVE COVENANTS.
Borrower shall not, until satisfaction in full of the Obligations and
termination of this Agreement:
7.1. Merger, Consolidation, Acquisition and Sale of Assets.
(a) Except as permitted under Section 7.4, 7.7 or
7.12 hereof, enter into any merger, consolidation or other reorganization with
or into any other Person or acquire all or a substantial portion of the assets
or stock of any Person or permit any other Person to consolidate with or merge
with it.
(b) Except as permitted under Section 4.3, sell,
lease, transfer or otherwise dispose of any of its properties or assets, except
in the ordinary course of its business.
Provided, however, that in the case of preceding clauses (a) and (b) (i)
Borrower may acquire Receivables in the ordinary course of business; (ii)
Borrower may acquire assets of Clients or guarantors of Clients pursuant to
foreclosure or other realization proceedings and Borrower or a Subsidiary of
Borrower may own real property which has been bid in for obligations owing to
Borrower at a foreclosure sale of assets of a Client or a guarantor of a Client;
(iii) Borrower may sell, transfer, convey, assign or otherwise dispose of
Collateral (including Receivables) acquired by Borrower
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in connection with a default by a Client; (iv) Borrower may sell Risk
Participations in Factoring Agreements, Collateral Funding Repayment Agreements
and/or Inventory Collateral Funding Repayment Agreements provided that such
sales are recorded on the books of Borrower and disclosed to Agent; (v) Borrower
may make transfers resulting from any casualty or condemnation of assets or
properties, (vi) Borrower may engage in transactions contemplated in this
Agreement, (vii) Borrower may sell all or part of the stock owned by it in LOI,
(viii) Borrower may sell warrants and stock and make other investments permitted
pursuant to Sections 7.4(a) and (d) hereof, (ix) Borrower may sell, transfer,
convey, assign or otherwise dispose of Collateral (including Receivables) in
connection with the repayment of a Client's obligations to Borrower and (x)
Borrower may sell, transfer, convey, assign or otherwise dispose of Collateral
(including Receivables) to a direct wholly-owned Subsidiary of Borrower if (i)
in the exercise of Borrower's business judgment, such sale, transfer,
conveyance, assignment or other disposition should maximize the value of such
Collateral and/or reduce risks to Borrower associated with such Collateral or
the collection thereof, (ii) Borrower shall notify Agent upon such occurrence
and (iii) such Subsidiary is or shall become a party to the Guaranty and the
Security Agreement.
To the extent Borrower sells, transfers, conveys, assigns, or otherwise disposes
of properties or assets pursuant to this Section 7.1 (or pursuant to any waiver
hereof) (i) the properties or assets so sold, transferred, conveyed, assigned,
or otherwise disposed of shall be sold, transferred, conveyed, assigned, or
otherwise disposed of free and clear of the Liens created by this Agreement and
the Other Documents, but such Liens shall continue in the proceeds of such sale,
transfer, conveyance, assignment or other disposition and (ii) to the extent
that such sale, transfer, conveyance, assignment or disposition is in connection
with Sections 7.1(iii) or 7.1(ix) above, Borrower shall promptly remit such
proceeds to Agent for application to the outstanding Obligations.
7.2. Creation of Liens. Create or suffer to exist any Lien
upon or against any of its property or assets now owned or
hereafter acquired, except Permitted Encumbrances.
7.3. Guaranties. Become liable upon the obligations of any person,
firm or corporation by assumption, endorsement or guaranty thereof or otherwise
(other than to Agent or Lenders) except (a) as disclosed on Schedule 7.3, (b)
the Guaranty, Letters of Guaranty and Guaranteed Indebtedness thereunder
provided that such Letters of Guaranty and Guaranteed Indebtedness shall only be
provided on a fully secured basis (as determined by Borrower in the reasonable
exercise of its business judgment at the time any such Letters of Guaranty and
Guaranteed Indebtedness are provided) or Borrower shall otherwise have available
to it at the time payment is made upon such Letters Guaranty or Guaranteed
Indebtedness sufficient Collateral to secure such performance and (c) the
endorsement of checks in the ordinary course of business and (d) to the extent
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permitted by law the indemnification of officers and directors of AFC Holding
Corporation who are not also officers or directors of the Borrower (if any) from
and against costs and losses incurred in connection with the service and
performance by such officers and directors (if any) of their duties to AFC
Holding Corporation.
7.4. Investments. Except as permitted by and subject to the terms of
Sections 7.1, 7.3, 7.5, 7.10, or 7.12 hereof, make any investment in, or make or
accrue loans or advances of money to any Person, through the direct or indirect
holding of securities or otherwise; provided, however, that (a) Borrower may
purchase and own Cash Equivalents, (b) Borrower may maintain its existing
investments set forth on Schedule 7.4, (c) Borrower may in the ordinary course
of business make loans and advances of money or credit to or for the benefit of
Clients in accordance with Section 7.5(d) hereof, and (d) Borrower may maintain
those investments set forth in Schedule 7.4 and may make additional investments
in Clients through the acquisition of stock options or warrants (and the
exercise thereof); provided further, however, that all investments set forth in
clauses (a), (b), (c) and (d) above shall be pledged to the Agent for the
benefit of the Lenders.
7.5. Loans. Except as otherwise permitted under Sections 7.3, 7.4,
7.7 or 7.10 hereof, make advances, loans or extensions of credit to any Person,
including without limitation, any Parent, Subsidiary or Affiliate except with
respect to (a) the extension of credit in connection with the sale of Collateral
to the extent permitted hereunder, (b) loans to its employees in the ordinary
course of business not to exceed the aggregate amount of $50,000 at any time
outstanding, (c) loans to LOI and SSI for working capital purposes, such
outstanding loans not to exceed in the aggregate $4,000,000 outstanding at any
time; provided, however, that if (i) all such intercompany loans to LOI and/or
SSI, as the case may be, are paid in full and (ii) Borrower agrees in writing
not to make any further loans to SSI and/or LOI, as the case may be, Agent and
Lenders will release LOI and SSI from their obligations under the Guaranty and
the Security Agreement, (d) advances, loans or extensions of credit to or for
the benefit of Clients in accordance with the applicable Factoring Agreements,
Collateral Funding Repayment Agreement and/or applicable Inventory Collateral
Funding Repayment Agreement which at the time made are either (i) fully secured
(as determined by Borrower in the reasonable exercise of its business judgment
at the time any such advances, loans or extensions of credit are provided) or
(ii) after a Client has defaulted under its Factoring Agreement or, if
applicable, its Collateral Funding Repayment Agreement or its Inventory
Collateral Funding Repayment Agreement and in connection with a work-out, for
the purpose of maximizing the amount to be realized upon the collateral securing
such advances, loans or extensions of credit, provided that Agent (1) has been
notified that it is a work-out and (2) has been given the reasonable details of
Borrower's work-out plan, (e) advances to Receivable Financing Corporation to
pay legal fees and any final judgment in an amount not in excess of $425,000;
and (f) advances to Subsidiaries who have acquired property in
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foreclosure or from Borrower, such advances to all Subsidiaries not to exceed in
the aggregate $350,000 in any Fiscal Year.
7.6. Capital Expenditures. Make Capital Expenditures in
excess of $150,000 in any fiscal year; provided, that, Borrower may
make Capital Expenditures up to an additional $500,000 for the
purchase of computer equipment.
7.7. Restricted Payments. Except as otherwise permitted under
Sections 7.5 or 7.10, make any Restricted Payments; provided, that (a) so long
as no Default has occurred and is continuing, or would exist after giving effect
to any such payment, subsequent to the receipt by Agent of Borrower's annual
audited financial statements pursuant to Section 9.6 hereof for any Fiscal Year,
Borrower may declare and pay cash dividends in an amount not to exceed 50% of
Borrower's consolidated net income determined in accordance with GAAP for the
preceding Fiscal Year, (b) Borrower may declare and pay dividends in common
stock of Borrower, (c) Subsidiaries of Borrower may declare and pay cash or
other dividends to Borrower, (d) so long as no Event of Default has occurred and
is continuing or would exist after giving effect to any such payment, Borrower
may make Restricted Payments to the Stockholders in the form of all or a portion
of the Stock of LOI and/or SSI, and to the extent the Stock of LOI and/or SSI is
distributed in accordance with the foregoing, Agent shall release its Lien on
the Stock of LOI and SSI held by Agent pursuant to the applicable Stock Pledge
Agreement, (e) Borrower may from time to time acquire, purchase, redeem or
otherwise retire common Stock of Borrower in exchange for Convertible, Senior
Subordinated Notes, (f) Borrower may make regularly scheduled payments of
principal and interest in respect of the Convertible, Senior Subordinated Notes
in accordance with (and subject to) the terms thereof and of the Indenture, and
(g) Borrower may from time to time issue common Stock of Borrower upon the
proper exercise of the conversion rights contained in the Convertible, Senior
Subordinated Notes and in the Indenture (whether or not Borrower is deemed to
have received reasonably equivalent value in connection with any such
conversion).
7.8. Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) of Borrower except in respect of (i)
Indebtedness to Agent and Lenders (including all Obligations); (ii) Indebtedness
incurred for capital expenditures permitted under Section 7.6 hereof; (iii) the
Guaranty and to the extent permitted in Section 7.3, the Letters of Guaranty,
and the Guaranteed Indebtedness thereunder; (iv) credit balances of factoring
clients and accrued expenses determined, in each case, in a manner consistent
with the determination of the line item entitled "credit balances of factoring
clients" and "accounts payable and accrued expenses", respectively, appearing in
Borrower's audited balance sheet dated December 31, 1996; (v) Indebtedness
arising from any judgment, compromise, settlement or consent relating to any
litigation, investigation or other proceeding whether or not actually commenced;
(vi) Indebtedness
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under Risk Participations permitted pursuant to Section 7.1; (vii) unsecured
Indebtedness incurred in the ordinary course of business (except with respect to
the Convertible, Senior Subordinated Notes), not to exceed $5,000,000
outstanding at any one time in the aggregate, bearing interest at a rate not
greater than the Base Rate plus five percent (5%), provided that the instruments
evidencing such Indebtedness shall state that no repayment shall be made on such
Indebtedness so long as any Event of Default shall exist and is continuing or
would occur as a result of or after giving effect to any such payment; (viii)
Indebtedness to AFC Holding Corporation so long as immediately prior to each
loan giving rise to such Indebtedness, Borrower pays a like amount to AFC
Holding Corporation in a transaction permitted under Section 7.10; (ix)
Indebtedness secured by Liens permitted under Section 7.2; (x) accrued income
and other taxes not yet payable; and (xi) unsecured notes payable incurred by
Subsidiaries of Borrower to related parties and appearing on Borrower's
consolidated balance sheet from time to time not in excess of $1,250,000 in the
aggregate outstanding at any time.
7.9. Nature of Business. Substantially change the nature of the
business in which it is presently engaged as disclosed in Borrower's Annual
Report on Form 10-KSB for Fiscal Year ended December 31, 1993, nor except as
specifically permitted hereby purchase or invest, directly or indirectly, in any
assets or property other than in the ordinary course of business for assets or
property which are useful in, necessary for and are to be used in its business
as presently conducted. With respect to Borrower's Subsidiaries formed after the
Original Closing Date in accordance with Section 7.12, Borrower shall not permit
any such Subsidiary to engage in any business other than the marketing and
development of the business of Borrower outside the Commonwealth of Virginia or
the marketing and development of the business or programs offered by banks and
other financial institutions.
7.10. Transactions with Affiliates.
(a) Enter into or be a party to any transaction with
any Affiliate of Borrower, except as otherwise permitted in this Agreement, or
in the ordinary course of and pursuant to the reasonable requirements of
Borrower's business and upon fair and reasonable terms that are fully disclosed
to Agent and are no less favorable to Borrower than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate of Borrower
except that (i) Borrower may pay a licensing fee to AFC Holding Corporation in
an amount equal to one percent (1%) of Borrower's gross purchases of
Receivables, so long as immediately following such payment AFC Holding
Corporation loans a like amount to Borrower in a transaction permitted under
Section 7.8, (ii) Borrower may pay customary fees to directors, (iii) Borrower
may make payments under and in accordance with the Xxxxxx Employment Agreement,
the X. Xxxxxxx Employment Agreement, the Xxxxx Employment Agreement, the
Hotsenpiller Employment Agreement, the Madden Employment Agreement, the Matthy
Employment Agreement and
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the Xxxxxxx Employment Agreement, (iv) Borrower may make payments to any
Subsidiary formed in accordance with Section 7.12 to fund the salary, overhead
and other necessary business expenses of such subsidiaries and (v) Borrower may
(x) issue, from time to time the Convertible, Senior Subordinated Notes and make
regularly scheduled payments of principal and interest in respect of the
Convertible, Senior Subordinated Notes in accordance with (and subject to) the
terms thereof and of the Indenture and (y) issue from time to time common Stock
of Borrower upon the proper exercise of the conversion rights contained therein.
(b) Enter into any agreement or transaction to pay management,
consulting, advisory or similar fees (i) to any Person, based on or related to
Borrower's or any of its Subsidiaries' operating performance or income or any
percentage thereof except (x) to Xx. Xxxx Xxxxxxx as and to the extent approved
by the Borrower's board of directors or the compensation committee thereof, (y)
that Borrower may pay commissions to financial intermediaries who are not
Affiliates of the Borrower, in the ordinary course of business, for business
referred to the Borrower and (z) Borrower may make payments under and in
accordance with the Performance-Based Incentive Compensation Plan), or (ii) to
an Affiliate or Subsidiary except that Borrower may pay management or collateral
administration fees to Subsidiaries in amounts sufficient to fund such
Subsidiary's salary, overhead and necessary business expenses.
7.11. Leases. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 7.6 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $350,000 in any one fiscal year.
7.12. Subsidiaries.
Except as permitted by Section 7.1 or 7.4 Borrower
shall not directly or indirectly, by operation of law or otherwise, merge with,
consolidate with, acquire all or substantially all of the assets or capital
stock of, or otherwise combine with, any Person or form any Subsidiary after the
date hereof, except that (i) Borrower may form new Subsidiaries in jurisdictions
outside of the Commonwealth of Virginia, which new Subsidiaries shall be formed
solely for the purpose of marketing Borrower's products and services outside of
the Commonwealth of Virginia or the products and services of banks and other
financial institutions and shall not own any assets or, contract for any
liabilities inconsistent with such purpose; provided, however, that upon the
formation of any such Subsidiary, Borrower will supplement Schedule 5.2(b) to
add such Subsidiary thereto and Borrower shall cause such Subsidiary to become a
party to the Guaranty and to grant to the Agent for the benefit of the Lenders a
security interest in all assets of such Subsidiary, all in form and substance
satisfactory to the Agent; (ii) with the prior written consent of Agent (such
consent not to be unreasonably withheld), wholly-owned Subsidiaries
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of Borrower may merge with and into each other or with and into Borrower; (iii)
Borrower and its Subsidiaries may acquire Receivables in the ordinary course of
business; and (iv) Borrower or a Subsidiary of Borrower may acquire assets of
Clients or guarantors of Clients pursuant to foreclosure or other realization
proceedings and Borrower or a Subsidiary of Borrower may own real property which
has been bid in for obligations owing to a Borrower at a foreclosure sale of
assets of a Client or a guarantor of a Client.
7.13. Fiscal Year and Accounting Changes. Change its fiscal
year end from December 31 or make any change (i) in accounting
treatment and reporting practices except as required by GAAP or
(ii) in tax reporting treatment except as required by law.
7.14. Intentionally Omitted.
7.15. Amendment of Articles of Incorporation, By-Laws. Amend, modify
or waive any term or material provision of its Articles of Incorporation or
By-Laws unless required by law or unless such amendment, modification or waiver
would not adversely affect the repayment of Obligations and notice of such
change has been given to Agent.
7.16. Compliance with ERISA. (i) (x) Maintain, or permit any member
of the Controlled Group to maintain, or (y) become obligated to contribute, or
permit any member of the Controlled Group to become obligated to contribute, to
any Plan, other than those Plans disclosed on Schedule 5.8(d) except as
otherwise disclosed to Agent in writing, (ii) engage, or permit any member of
the Controlled Group to engage, in any non-exempt "prohibited transaction", as
that term is defined in section 406 of ERISA and Section 4975 of the Code, (iii)
incur, or permit any member of the Controlled Group to incur, any "accumulated
funding deficiency", as that term is defined in Section 302 of ERISA or Section
412 of the Code, the effect of which would have a Material Adverse Effect (iv)
terminate, or permit any member of the Controlled Group to terminate, any Plan
where such event could result in any liability of Borrower or any member of the
Controlled Group or the imposition of a lien on the property of Borrower or any
member of the Controlled Group pursuant to Section 4068 of ERISA, the effect of
which would have a Material Adverse Effect (v) assume, or permit any member of
the Controlled Group to assume, any obligation to contribute to any
Multiemployer Plan not disclosed on Schedule 5.8(d) except as otherwise
disclosed to Agent unless otherwise disclosed to Agent in writing, (vi) incur,
or permit any member of the Controlled Group to incur, any withdrawal liability
to any Multiemployer Plan the effect of which would have a Material Adverse
Effect; (vii) fail promptly to notify Lender of the occurrence of any
Termination Event, (viii) fail to comply in all material respects, or permit a
member of the Controlled Group to fail to comply in all material respects, with
the requirements of ERISA or the Code or other applicable laws in respect of any
Plan, (ix) fail to meet, or permit any member of the Controlled Group to
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fail to meet, all minimum funding requirements under ERISA or the Code or
postpone or delay or allow any member of the Controlled Group to postpone or
delay any funding requirement with respect to any Plan, the effect of which
would in any case have a Material Adverse Effect.
7.17. Prepayment of Indebtedness. At any time, directly or
indirectly, prepay any Indebtedness (other than to Agent or Lenders), or
repurchase, redeem, retire or otherwise acquire any Indebtedness of Borrower
other than when due in accordance with the terms of the agreements governing
such Indebtedness or repurchase, redeem, retire or otherwise acquire, in whole
or in part, the Convertible, Senior Subordinated Notes prior to their final
stated maturity in the year 2000, provided that nothing contained in this
Section 7.17 shall (or shall be deemed to) restrict or impair Borrower's ability
to issue from time to time common Stock of Borrower upon the proper exercise of
the conversion rights contained in the Convertible, Senior Subordinated Notes
and in the Indenture.
7.18. Pledge of Credit. Pledge Agent's or any Lender's credit on any
purchases or for any purpose whatsoever (other than Letters of Credit issued in
accordance with this Agreement) or use any portion of any Advance in or for any
business other than Borrower's business as conducted on the date of this
Agreement except as otherwise permitted under Sections 7.9 or 7.12.
7.19. Financial Covenants. Breach, on a consolidated basis,
any of the following financial covenants, each of which shall be
calculated in accordance with GAAP as in effect on the Effective
Date:
(a) (i) On the last day of each Fiscal Quarter
commencing with the Fiscal Quarter ending June 30, 1997, the ratio of (a) EBIT
to (b) interest expense (other than interest expense in respect of the
Convertible, Senior Subordinated Notes for the four Fiscal Quarters then ended
(taken as one accounting period) shall not be less than 3:1 and (ii) on the last
day of each Fiscal Quarter commencing with the Fiscal Quarter ended June 30,
1997, the ratio of (A) EBIT to (B) total interest expense for the four Fiscal
Quarters then ended (taken as one accounting period) shall not be less than 2:1.
(b) On the last day of each Fiscal Quarter, the ratio
of (i) Total Liabilities to (ii) Tangible Net Worth plus the aggregate principal
amount of Convertible, Senior Subordinated Notes then outstanding shall not
exceed 2:1.
(c) (1) The sum of (i) Tangible Net Worth plus (ii)
the aggregate principal amount of Convertible, Senior Subordinated Notes
outstanding shall equal or exceed $27,250,000 on December 31, 1996, and (2) on
the last day of any Fiscal Quarter thereafter, the sum of (i) Tangible Net Worth
and (ii) the aggregate principal amount of Convertible, Senior Subordinated
Notes then outstanding,
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shall equal or exceed the sum of (x) $27,250,000 and (y) $10,000 times the
number of Fiscal Quarters elapsed from December 31, 1996 to the end of such
Fiscal Quarter.
(d) (i) Net cash advanced to any Client by Borrower
(net of Risk Participations sold with respect to such Client) shall not at any
time exceed 25% of the sum of (x) Borrower's Tangible Net Worth (on a
consolidated basis) and (y) the aggregate principal amount of Convertible,
Senior Subordinated Notes outstanding at such time; and (ii) net cash advanced
by Borrower (net of Risk Participations) with respect to Receivables owed by a
single Account Debtor shall not at any time exceed 25% of the sum of (x)
Borrower's Tangible Net Worth (on a consolidated basis) and (y) the aggregate
principal amount of Convertible, Senior Subordinated Notes outstanding at such
time.
For purposes of this Section 7.19(d), (x) each agency,
branch or division of the Federal government shall be treated as a separate
Account Debtor and (y) each insurance company under state xxxxxxx'x compensation
arrangements shall be treated as a separate Account Debtor.
7.20. Assets of Certain Subsidiaries. Permit Receivable
Financing Corporation or Premium Sales Northeast, Inc. to acquire
any additional assets.
VIII. CONDITIONS PRECEDENT.
8.1. Conditions to Initial Advances. The agreement of
Lenders to make the initial Advances requested to be made on the
Effective Date is subject to the satisfaction, or waiver by
Lenders, immediately prior to or concurrently with the making of
such Advances, of the following conditions precedent:
(a) Revolving Credit Note. Agent shall have received
the Revolving Credit Note duly executed and delivered by an
authorized officer of Borrower;
(b) Filings, Registrations and Recordings. Each
document (including, without limitation, any Uniform Commercial Code financing
statement) required by this Agreement, any Other Document or under law or
reasonably requested by Agent to be filed, registered or recorded in order to
create, in favor of Agent, a perfected security interest in or lien upon the
Collateral shall have been properly filed, registered or recorded in each
jurisdiction in which the filing, registration or recordation thereof is so
required or requested, and to the extent practicable Agent shall have received
an acknowledgment copy, or other evidence satisfactory to it, of each such
filing, registration or recordation and satisfactory evidence of the payment of
any necessary fee, tax or expense relating thereto;
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(c) Corporate Proceedings of Borrower. Agent shall
have received a copy of the resolutions in form and substance reasonably
satisfactory to Agent, of the Board of Directors of Borrower and its
Subsidiaries, as applicable, authorizing (i) the execution, delivery and
performance of this Agreement, the Revolving Credit Note, Collateral Assignment
of Security, Guaranty, Security Agreement, Stock Pledge Agreements, and any
related agreements (collectively the "Documents") and (ii) the granting by
Borrower and each Guarantor of the security interests in and liens upon the
Collateral in each case certified by the Secretary or an Assistant Secretary of
Borrower and each Guarantor as of the Effective Date; and, such certificate
shall state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded as of the date of such certificate;
(d) Incumbency Certificates of Borrower. Agent shall
have received a certificate of the Secretary or an Assistant Secretary of
Borrower, dated the Effective Date, as to the incumbency and signature of the
officers of Borrower executing this Agreement, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
(e) Certificates. Agent shall have received a copy
of the Articles or Certificate of Incorporation of Borrower, and all amendments
thereto, certified by the Secretary of State or other appropriate official of
its jurisdiction of incorporation together with copies of the By-Laws of
Borrower and all agreements of Borrower's Stockholder's certified as accurate
and complete by the Secretary of Borrower;
(f) Good Standing Certificates. Agent shall have
received good standing certificates for Borrower dated not more than fifteen
(15) days prior to the Effective Date, issued by the Secretary of State or other
appropriate official of Borrower's jurisdiction of incorporation and each
jurisdiction where the conduct of Borrower's business activities or the
ownership of its properties necessitates qualification;
(g) Legal Opinion. Agent shall have received the
executed legal opinion of Xxxxx Xxxxxxx in form and substance satisfactory to
Lenders which shall cover such matters incident to the transactions contemplated
by this Agreement, the Revolving Credit Note, and related agreements as Agent
may reasonably require;
(h) No Litigation. (i) No litigation, investigation
or proceeding before or by any arbitrator or Governmental Authority shall be
continuing or, to the best of Borrower's knowledge, threatened against Borrower
or against the officers or directors of Borrower (A) in connection with the
Documents or any of the transactions contemplated thereby and which, in the
reasonable opinion of Agent, is deemed material or (B) which if adversely
determined, would, in the reasonable opinion of Agent, have a
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Material Adverse Effect other than litigation previously disclosed to Agent in
Borrower's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996, Borrower's Annual Report on Form 10-KSB for Fiscal Year ended December 31,
1996 and Borrower's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997; and (ii) no injunction, writ, restraining order or other order of any
nature materially adverse to Borrower or the conduct of its business or
inconsistent with the due consummation of the transactions contemplated hereby
shall have been issued by any governmental authority;
(i) Financial Condition Certificate. Agent shall
have received an executed Financial Condition Certificate in the
form of Exhibit 8.1(i).
(j) Collateral Examination. Agent shall have
completed Collateral examinations and received appraisals, the results of which
shall be satisfactory in form and substance to Lenders, of the Receivables,
Inventory, General Intangibles, and Equipment of Borrower and all books and
records in connection therewith;
(k) Fees. Agent shall have received all fees due and
payable to Agent and Lenders on or prior to the Effective Date
pursuant to this Agreement and under any related agreement;
(l) Insurance. Agent shall have received in form and
substance satisfactory to Agent, certified copies of Borrower's casualty
insurance policies, together with, to the extent contemplated in this Agreement,
loss payable endorsements on Agent's standard form of loss payee endorsement
naming Agent as loss payee, and certified copies of Borrower's liability
insurance policies, together with, to the extent contemplated in this Agreement,
endorsements naming Agent as a co-insured;
(m) Leasehold Agreements. Agent shall have received
a landlord agreement satisfactory to Agent with respect to
Borrower's chief executive office;
(n) Reaffirmation of Guaranty, Stock Pledge
Agreements, etc.. Agent shall have received an executed (i) reaffirmation of the
Guaranty and Security Agreement, (ii) reaffirmation of the Collateral Assignment
of Security and (iii) reaffirmation of the Stock Pledge Agreements, each in form
and substance satisfactory to Lenders;
(o) Payment Instructions; Borrowing Base Certificate.
Agent shall have received written instructions from Borrower directing the
application of proceeds of the initial Advances made pursuant to this Agreement
and an initial Borrowing Base Certificate from Borrower reflecting that Borrower
has Eligible Receivables in amounts sufficient in value and amount to support
Advances in the amount by or on behalf of Borrower on the date of such
certificate;
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(p) Lockbox Accounts. Agent shall have received duly
executed blocked account agreements with respect to the Lockbox Accounts in form
and substance and with financial institutions acceptable to Agent;
(q) Consents. Agent shall have received any and all
Consents necessary to permit the effectuation of the transactions contemplated
by this Agreement and the Other Documents; and, Agent shall have received such
Consents and waivers of such third parties as might assert claims with respect
to the Collateral, as Agent and its counsel shall deem necessary;
(r) No Adverse Material Change. Since December 31,
1996, there shall not have occurred any event, condition or state of facts which
would have a Material Adverse Effect;
(s) Undrawn Availability. After giving effect to the
initial Advance hereunder, Borrower shall have aggregate Undrawn Availability of
at least $2,500,000.
(t) Contract Review. Lenders shall have reviewed all
material contracts of Borrower and such contracts shall be
satisfactory in all respects to Lenders;
(u) Closing Certificate. Agent shall have received a
closing certificate signed by the President and Chief Financial Officer of
Borrower dated as of the date hereof, stating that (i) all representations and
warranties set forth in this Agreement and the Other Documents are true and
correct on and as of such date, (ii) Borrower is on such date in compliance with
all the terms and provisions set forth in this Agreement and the other Documents
and (iii) on such date no Default or Event of Default has occurred and is
continuing;
(v) Representations and Warranties. Each of the
representations and warranties made by Borrower and each Subsidiary in or
pursuant to this Agreement and any of the Other Documents and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished by Borrower any time under or in
connection with this Agreement or any Other Documents shall be true and correct
on and as of the Effective Date as if made on and as of such date except as
otherwise disclosed to Agent in writing on or before the Effective Date; and
(w) Other. All corporate and other proceedings, and
all documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement shall be satisfactory in form and
substance to Agent, Lenders and their counsel.
8.2. Conditions to Each Advance. The agreement of Lenders
to make any Advance requested to be made on any date (including,
without limitation, its initial Advance), is subject to the
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satisfaction of the following conditions precedent as of the date
such Advance is made:
(a) Representations and Warranties. Each of the
representations and warranties made by Borrower in or pursuant to this Agreement
and any Other Document to which it is a party, and each of the representations
and warranties contained in any certificate, document or financial or other
statement furnished by Borrower to Agent at any time under or in connection with
this Agreement or any Other Document shall be true and correct in all material
respects on and as of such date as if made on and as of such date;
(b) No Default. No Event of Default shall have
occurred and be continuing on such date, or would exist after giving effect to
the Advances requested to be made, on such date; provided, however that Lenders
in their sole discretion, may continue to make Advances notwithstanding the
existence of an Event of Default; and
(c) Maximum Advances. In the case of any Advances
requested to be made, after giving effect thereto, the aggregate Advances shall
not exceed the maximum Advances permitted under Section 2.4, Section 2.5 or
Section 2.5A hereof, as applicable.
Each request for an Advance by Borrower hereunder shall constitute a
representation and warranty by Borrower as of the date of such Advance that the
conditions contained in this subsection shall have been satisfied.
IX. INFORMATION AS TO BORROWER.
Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
9.1. Disclosure of Material Matters. Promptly upon learning thereof,
report to Agent all matters materially and adversely affecting the value,
enforceability or collectibility of the Collateral taken as a whole. With
respect to any Client whose Receivables are at the time of determination
included in the Borrowing Base, Borrower shall notify Agent within three
Business Days following any unreimbursed adjustment to such Receivables in
excess of $100,000.
9.2. Schedules; Borrowing Base Certificate. Deliver to Agent on or
before the fifteenth (15th) day of each month as and for the prior month (a) a
Borrowing Base Certificate; provided, however, Borrower may submit a Borrowing
Base Certificate more frequently, (b) accounts receivable ageings in
substantially the form delivered to Agent prior to the Effective Date, (c)
Schedule of Receivables ("Schedule of Receivables") substantially in the form
and detail of an IBJS Lending Base Worksheet with such changes as Agent may,
from time to time, request, (d) a schedule of loans
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made by Borrower to its Clients which are secured by Client Funded Equipment
stating the name of the Client to which such loans are made and the dollar
amount thereof and (e) a schedule of loans made by Borrower to its Clients which
are secured by Eligible Client Funded Inventory stating the name of the Client
to which such loans are made and the dollar amount thereof. In addition,
Borrower will deliver to Agent at such intervals as Agent may require following
the occurrence and during the continuation of an Event of Default: (i)
confirmatory assignment schedules, (ii) copies of Client's invoices, (iii)
evidence of shipment or delivery of goods, and (iv) such further schedules,
documents and/or information regarding the Collateral as Agent may require
including, without limitation, trial balances and test verifications. Agent
shall have the right to confirm and verify all Receivables in writing, or upon
the occurrence and during the continuation of an Event of Default, by any manner
and through any medium it considers advisable and do whatever it may deem
reasonably necessary to protect its interests hereunder. The items to be
provided under the second sentence of this Section are, when required to be
delivered under such sentence, to be in form satisfactory to Agent and executed
when appropriate by Borrower and delivered to Agent from time to time solely for
Agent's convenience in maintaining records of the Collateral, and Borrower's
failure to deliver any of such items to Agent shall not affect, terminate,
modify or otherwise limit Agent's Lien with respect to the Collateral.
9.3. Litigation. Promptly notify Agent in writing of any
litigation affecting Borrower, whether or not the claim is covered
by insurance, and of any suit or administrative proceeding, which
in any case may have a Material Adverse Effect.
9.4. Occurrence of Defaults, etc. Promptly notify Agent in writing
upon the occurrence of (a) any Event of Default; (b) any event, development or
circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of Borrower
as of the date of such statements; (c) any accumulated retirement plan funding
deficiency which, if such deficiency continued for two plan years and was not
corrected as provided in Section 4971 of the Internal Revenue Code, could
subject Borrower to a tax imposed by Section 4971 of the Internal Revenue Code
the effect of which would have a Material Adverse Effect; (d) each and every
default by Borrower which might result in the acceleration of the maturity of
any Indebtedness for borrowed money in an aggregate amount in excess of
$100,000, including the names and addresses of the holders of such Indebtedness
with respect to which there is a default existing or with respect to which the
maturity has been or could be accelerated, and the amount of such Indebtedness;
and (e) any other development in the business or affairs of Borrower which might
reasonably be likely to have a Material Adverse Effect; in each case describing
the nature thereof and the action Borrower proposes to take with respect
thereto.
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9.5. Intentionally Omitted.
9.6. Annual Financial Statements. Furnish Agent within one hundred
(100) days after the end of each Fiscal Year annual audited financial statements
of Borrower and its Subsidiaries on a consolidated basis and annual unaudited
financial statements of Borrower and its Subsidiaries on a consolidating basis
excluding the statement of cash flows, including, but not limited to, statements
of income and stockholders' equity from the beginning of the prior fiscal year
to the end of such fiscal year and the balance sheet as at the end of such
fiscal year, all prepared in accordance with GAAP (only with respect to the
consolidated financial statements) applied on a basis consistent with prior
practices, and in reasonable detail and reported upon without qualification by
Deloitte & Touche or another independent certified public accounting firm
selected by Borrower and satisfactory to Agent (the "Accountants"); provided,
however, that delivery of substantially the same financial statement information
that is required by an Annual Report on Form 10-KSB or any successor form for
such Fiscal Year under the Exchange Act, together with the consolidating
financial statements referred to herein, shall be deemed to satisfy the
requirements of this Section 9.6. The report of such accounting firm shall be
accompanied by a statement of such accounting firm certifying that in making the
examination upon which such report was based either no information came to their
attention which to their knowledge constituted an Event of Default under this
Agreement or, if such information came to their attention, specifying any such
default, and such report shall contain or have appended thereto calculations
which set forth Borrower's compliance with the financial covenants contained in
Sections 7.6, 7.11 and 7.19. In addition, the reports shall be accompanied by a
certificate of Borrower's President, Chief Financial Officer or Chief Operating
Officer which shall state that, based on an examination sufficient to permit him
to make an informed statement, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default, its nature,
when it occurred, whether it is continuing and the steps being taken by Borrower
with respect to such event and, such certificate shall have appended thereto
calculations which set forth Borrower's compliance with the financial covenants
contained in Sections 7.6, 7.11 and 7.19.
9.7. Quarterly Financial Statements. Furnish Agent within 55 days
after the end of the first three Fiscal Quarters of each year, an unaudited
balance sheet of Borrower and its Subsidiaries on a consolidated and
consolidating basis and unaudited statements of income and stockholders' equity
and cash flow of Borrower and its Subsidiaries on a consolidated basis
reflecting results of operations from the beginning of the fiscal year to the
end of such quarter and for such quarter, prepared on a basis consistent with
prior practices and complete and correct in all material respects, subject to
normal year end adjustments, provided, however, that delivery of substantially
the same financial statement information that is required by a Quarterly Report
on Form 10-Q or any
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successor form for such Fiscal Quarter under the Exchange Act, together with the
consolidating financial statements referred to herein, shall be deemed to
satisfy the requirements of this Section 9.7. The reports shall be accompanied
by a certificate of Borrower's President, Chief Financial Officer or Chief
Operating Officer which shall state that, based on an examination sufficient to
permit him to make an informed statement, no Default or Event of Default exists,
or, if such is not the case, specifying such Default or Event of Default, its
nature, when it occurred, whether it is continuing and the steps being taken by
Borrower with respect to such event and, such certificate shall have appended
thereto calculations which set forth Borrower's compliance with the financial
covenants contained in Sections 7.6, 7.11 and 7.19
9.8. Intentionally Omitted.
9.9. Other Reports. Furnish Agent as soon as available,
but in any event within ten (10) days after the issuance thereof,
with copies of such financial statements, reports and returns as
Borrower shall send to its Stockholders.
9.10. Additional Information. Furnish Agent with additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Revolving Credit Note have been complied with by Borrower
including, without limitation, copies of all environmental audits and reviews in
Borrower's possession or subject to Borrower's control. Borrower shall (a) at
least ten (10) days prior thereto, notify Agent of Borrower's opening of any new
office or place of business or Borrower's closing of any existing office or
place of business, and (b) promptly upon Borrower's learning thereof, notify
Agent of any material labor dispute to which Borrower is a party, any strikes or
walkouts relating to any of its plants or other facilities, and the expiration
of any labor contract to which Borrower is a party or by which Borrower is
bound.
9.11. Projected Operating Budget. Within 100 days after the end of
each Fiscal Year, furnish Agent an operating plan, approved by Borrower's board
of directors, which includes the quarterly budget for the following year and
which integrates operating profit projections, such projections to be
accompanied by a certificate signed by Borrower's President, Chief Financial
Officer or Chief Operating Officer to the effect that such projections have been
prepared on the basis of sound financial planning practice consistent with past
budgets and financial statements and that such officer has no reason to question
the reasonableness of any material assumptions on which such projections were
prepared; provided that such certificate may contain the following
qualification:
Projections as to future events are not to be viewed as
facts and actual results during the period(s) covered by
these projections may
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differ from the projected results and such
differences may be material.
9.12. Intentionally Omitted.
9.13. Notice of Suits, Adverse Events. Furnish Agent with (x) prompt
notice of (i) any lapse or other termination of any Consent issued to Borrower
by any Governmental Authority or any other Person that is material to the
operation of Borrower's business, and (ii) any refusal by any Governmental
Authority or any other Person to renew or extend any such Consent, (y) copies of
any periodic or special reports filed by Borrower with any Governmental
Authority or Person, if such reports indicate any material adverse change in the
business, operations, affairs or condition of Borrower and (z) copies of any
notices and other communications from any Governmental Authority or Person which
specifically relate to Borrower which are reasonably likely to have a Material
Adverse Effect.
9.14. ERISA Notices and Requests. Furnish Agent with prompt written
notice in the event that (i) Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which Borrower or member of the Controlled Group has taken, is taking, or
proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, Department of Labor or PBGC with
respect thereto, (ii) Borrower or any member of the Controlled Group knows or
has reason to know that a prohibited transaction (as defined in Sections 406 of
ERISA and 4975 of the Internal Revenue Code) has occurred together with a
written statement describing such transaction and the action which Borrower or
any member of the Controlled Group has taken, is taking or proposes to take with
respect thereto, (iii) a funding waiver request has been filed with respect to
any Plan together with all communications received by either Borrower or any
member of the Controlled Group with respect to such request, (iv) any increase
in the benefits of any existing Plan or the establishment of any new Plan or the
commencement of contributions to any Plan to which either Borrower or any member
of the Controlled Group was not previously contributing shall occur the effect
of which would have a Material Adverse Effect, (v) Borrower or any member of the
Controlled Group shall receive from the PBGC a notice of intention to terminate
a Plan or to have a trustee appointed to administer a Plan, together with copies
of each such notice, (vi) Borrower or any member of the Controlled Group shall
receive any unfavorable determination letter from the Internal Revenue Service
regarding the qualification of a Plan under Section 401(a) of the Code, together
with copies of each such letter; (vii) Borrower or any member of the Controlled
Group shall receive a notice regarding the imposition of withdrawal liability,
together with copies of each such notice; (viii) Borrower or any member of the
Controlled Group shall fail to make a required installment or any other required
payment under Section 412 of the Code on or before the due date for
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such installment or payment; (ix) Borrower or any member of the Controlled Group
knows that (a) a Multiemployer Plan has been terminated and such termination
would have a Material Adverse Effect, (b) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC
has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
9.15. Additional Documents. To the extent not inconsistent with any
other provision of this Agreement, execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
10.1. failure by Borrower to pay any principal or
interest on the Obligations when due, whether at maturity or by reason of
acceleration pursuant to the terms of this Agreement, or by required prepayment
pursuant to the terms of this Agreement or failure to pay any other liabilities
or make any other payment, fee or charge to Lenders or Agent provided for in
this Agreement;
10.2. any representation or warranty made or deemed
made by Borrower in this Agreement or any Other Document or in any certificate,
document or financial or other statement furnished by Borrower or any Subsidiary
at any time in connection herewith or therewith shall prove to have been
misleading in any material respect on the date when made or deemed to have been
made or furnished;
10.3. failure by Borrower to (i) furnish when due the
financial information required under Article IX, or (ii) permit the inspection
of its books or records under and in accordance with the terms of this
Agreement;
10.4. issuance of a notice of Lien, levy, assessment,
injunction or attachment against property of Borrower or Guarantors having an
aggregate value of more than $500,000 outstanding at any time which is not
stayed, bonded, paid or discharged for a period of sixty (60) days;
10.5. except to the extent addressed by other Events
of Default, failure or neglect of Borrower or any Guarantor to perform, keep or
observe any term, provision, condition, covenant herein contained, or contained
in any other agreement or arrangement, now or hereafter entered into between
Borrower and Lender which failure or neglect shall remain unremedied for a
period of the earlier of (x) ten (10) days after Borrower shall
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receive written notice from Agent of any such failure or (y) thirty (30) days
after Borrower shall become aware thereof;
10.6. any judgment is rendered or judgment liens
filed against Borrower or Guarantors for an aggregate amount in excess of
$500,000 outstanding at any time not fully covered by insurance which within
forty-five (45) days of such rendering or filing is not either vacated,
satisfied, stayed, bonded or discharged of record;
10.7. Borrower shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within thirty (30) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing;
10.8. Borrower shall admit in writing its inability,
or be generally unable, to pay its debts as they become due or
cease operations of its present business;
10.9. any Subsidiary (other than Receivable Financing
Corporation and Premium Sales Northeast, Inc.) of Borrower or any Guarantor
shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property, (ii) admit in writing its inability, or
be generally unable, to pay its debts as they become due or cease operations of
its present business, (iii) make a general assignment for the benefit of
creditors, (iv) commence a voluntary case under any state or federal bankruptcy
laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or
insolvent, (vi) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vii) acquiesce to, or fail to have
dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;
10.10. An "Event of Default" under (and as defined
in) the Indenture shall have occurred and be continuing;
10.11. any Lien created hereunder or provided for
hereby or under any Other Document for any reason ceases to be or is not a valid
and perfected Lien having a first priority interest except as otherwise provided
herein or in any Other Document;
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10.12. any default of the obligations of Borrower
under any other agreement to which it is a party the effect of
which shall result in a Material Adverse Effect;
10.13. termination or breach of the Guaranty,
Security Agreement, Stock Pledge Agreements, or Collateral Assignment of
Security, or Equipment Collateral Assignment of Security or Inventory Collateral
Assignment of Security or if any Guarantor attempts to terminate, challenge the
validity of, or its liability under, any such Guaranty;
10.14. any Change of Control;
10.15. any material provision of this Agreement
shall, for any reason, cease to be valid and binding on Borrower,
or Borrower shall so claim in writing to Agent; or
10.16. an event or condition specified in Sections
7.16 or 9.14 hereof shall occur or exist with respect to any Plan and, as a
result of such event or condition, together with all other such events or
conditions, Borrower or any member of the Controlled Group shall incur, or in
the opinion of Agent be reasonably likely to incur, a liability to a Plan or the
PBGC (or both) which, in the reasonable judgment of Agent, would have a Material
Adverse Effect upon the Collateral or the ability of Borrower to perform its
Obligations under this Agreement.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1. Rights and Remedies. Upon the occurrence of an Event of Default
pursuant to Section 10.7 all Obligations shall be immediately due and payable
and this Agreement and the obligation of Lenders to make Advances shall be
deemed terminated; and, upon the occurrence of any of the other Events of
Default and at any time thereafter (such Event of Default not having previously
been cured or waived), upon the declaration of the Agent with the consent of or
at the direction of Required Lenders all Obligations shall be immediately due
and payable and with the consent of or at the direction of Required Lenders
Agent shall have the right to terminate this Agreement and to terminate the
obligation of Lenders to make Advances. Upon the occurrence and during the
continuance of any Event of Default, Agent shall have the right to exercise any
and all other rights and remedies provided for herein, under the Uniform
Commercial Code and at law or equity generally, including, without limitation,
the right to foreclose the security interests granted herein and to realize upon
any Collateral by any available judicial procedure and/or to take possession of
and sell any or all of the Collateral with or without judicial process. Agent
may following the occurrence and during the continuance of an Event of Default
enter any of Borrower's premises or other premises without legal process and
without incurring liability to Borrower therefor, and Agent may thereupon, or at
any time thereafter, in its discretion without notice or demand, take the
Collateral and remove
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the same to such place as Agent may deem advisable and Agent may require
Borrower to make the Collateral available to Agent at a convenient place. With
or without having the Collateral at the time or place of sale, Agent may sell
the Collateral, or any part thereof, at public or private sale, at any time or
place, in one or more sales, at such price or prices, and upon such terms,
either for cash, credit or future delivery, as Agent may elect. Except as to
that part of the Collateral which is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Agent shall
give Borrower reasonable notification of such sale or sales, it being agreed
that in all events written notice mailed to Borrower at least ten (10) days
prior to such sale or sales is reasonable notification. At any public sale Agent
or any Lender may bid for and become the purchaser, and Agent, any Lender or any
other purchaser at any such sale thereafter shall hold the Collateral sold
absolutely free from any claim or right of whatsoever kind, including any equity
of redemption and such right and equity are hereby expressly waived and released
by Borrower. The proceeds realized from the sale of any Collateral shall be
applied first to the reasonable costs, expenses and attorneys' fees and expenses
incurred by Agent for collection and for acquisition, completion, protection,
removal, storage, sale and delivery of the Collateral; second to interest due
upon any of the Obligations; and third to the principal of the Obligations. If
any deficiency shall arise, Borrower shall remain liable to Agent and Lenders
therefor. Any surplus shall be returned to Borrower unless any other Person(s)
shall be entitled to same as a matter of law.
11.2. Agent's Discretion. Agent shall have the right in its sole
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.
11.3. Setoff. In addition to any other rights which Agent or any
Lender may have under applicable law, upon the occurrence and during the
continuance of an Event of Default hereunder, Agent and such Lender shall have a
right to apply any of Borrower's property held by Agent and such Lender or by
IBJS to reduce the Obligations.
11.4. Rights and Remedies not Exclusive. The enumeration of
the foregoing rights and remedies is not intended to be exhaustive
and the exercise of any right or remedy shall not preclude the
exercise of any other right or remedies, all of which shall be
cumulative and not alternative.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. Waiver of Notice. Borrower hereby waives notice of
non-payment of any of the Receivables, demand, presentment, protest
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and notice thereof with respect to any and all instruments, notice of acceptance
hereof, notice of loans or advances made, credit extended, Collateral received
or delivered, or any other action taken in reliance hereon, and all other
demands and notices of any description, except such as are expressly provided
for herein.
12.2. Delay. No delay or omission on Agent's or any
Lender's part in exercising any right, remedy or option shall
operate as a waiver of such or any other right, remedy or option or
of any default.
12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY
HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1. Term. This Agreement, which shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of each of
Borrower, Agent and each Lender, shall become effective on the date hereof and
shall continue in full force and effect until the end of the initial Term unless
sooner terminated as herein provided. Borrower may terminate this Agreement at
any time during the Term upon not less than thirty (30) days' prior written
notice to Agent ("Termination Date") upon payment in full of the Obligations;
provided however that Borrower pays to Agent for the ratable benefit of Lenders
an early termination fee in an amount equal to the Required Percentage of the
Maximum Revolving Advance Amount. For the purposes of this paragraph, Required
Percentage shall mean (a) 1% from the Effective Date through and including
November 12, 1997, (b) 1/2% from November 13, 1997 through and including May 12,
1998 and (c) 0% at any time thereafter. Notwithstanding the foregoing, if during
the period commencing February 12, 1998 through and including May 12, 1998,
Borrower secures replacement financing from another financial institution on
terms and conditions similar to (or more favorable than) those provided
hereunder, but without the necessity of a borrowing base or formula advance
rate, Agent and Lenders shall waive the early termination fee, provided, that,
prior to such
termination Borrower shall provide Agent and Lenders a good faith opportunity to
match the terms of any replacement financing.
13.2. Termination. The termination of the Agreement shall not affect
any of Borrower's, Agent's or any Lender's rights, or any of the Obligations
having their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all Obligations
have been paid in full. The security interests, Liens and rights granted to
Agent and Lenders hereunder and the financing statements filed hereunder shall
continue in full force and effect, notwithstanding the termination of this
Agreement or the fact that Borrower's account may from time to time be
temporarily in a zero or credit position, until all of the Obligations of
Borrower have been paid or performed in full after the termination of this
Agreement or Borrower has furnished Agent and Lenders with an indemnification
satisfactory to Agent and Lenders with respect thereto. Upon termination of this
Agreement and payment in full of all Obligations in immediately available funds
(or, with respect to Obligations arising out of an indemnification claim of
Agent and/or any Lender against Borrower in accordance with the terms of this
Agreement which has been made at such time, the establishment of security
arrangements satisfactory to Agent and Lenders), at the request and expense of
Borrower, Agent shall deliver to Borrower (without recourse and without
representation and warranty) all Collateral then in Agent's (or its designee's)
possession and deliver to Borrower (without recourse and without representation
and warranty) termination statements with respect to the Collateral and take
such further actions as may be required under the Other Documents or as may be
reasonably requested by Borrower to fully release (i) the Collateral from all
Liens in favor of Agent and (ii) Borrower and its Subsidiaries hereunder and
under the Other Documents. All representations, warranties, covenants, waivers
and agreements contained herein shall survive termination hereof until all
Obligations are repaid or performed in full, except for those which, by their
terms, expressly survive termination of this Agreement.
XIV. Regarding Agent.
14.1. Appointment. Each Lender hereby designates IBJS to act as Agent
for such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees, charges and collections (without
giving effect to any collection days) received pursuant to this Agreement, for
the ratable benefit of Lenders. Agent may perform any of its duties hereunder by
or through its agents or employees. As to any matters not expressly
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provided for by this Agreement (including without limitation, collection of the
Revolving Credit Note) Agent shall not be required to exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall be binding;
provided, however, that Agent shall not be required to take any action which
exposes Agent to liability or which is contrary to the Documents or applicable
law unless Agent is furnished with an indemnification reasonably satisfactory to
Agent with respect thereto.
14.2. Nature of Duties. Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement. Neither
Agent nor any of its officers, directors, employees or agents shall be (i)
liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross negligence (but not mere
negligence) or willful misconduct, or (ii) responsible in any manner to any
Lender for any recitals, statements, representations or warranties made by
Borrower or any officer thereof contained in this Agreement, or in any of the
Other Documents or in any certificate, report, statement or Other Document
referred to or provided for in, or received by Agent under or in connection
with, this Agreement or any of the Other Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, or
any of the Other Documents or for any failure of Borrower to perform its
obligations hereunder. Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any of the Other
Documents, or to inspect the properties, books or records of Borrower. The
duties of Agent shall be mechanical and administrative in nature; Agent shall
not have by reason of this Agreement a fiduciary relationship in respect of any
Lender; and nothing in this Agreement, expressed or implied, is intended to or
shall be so construed as to impose upon Agent any obligations in respect of this
Agreement except as expressly set forth herein.
14.3. Lack of Reliance on Agent and Resignation. Independently and
without reliance upon Agent or any other Lender, each Lender has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of Borrower in connection with the making and the
continuance of the Advances hereunder and the taking or not taking of any action
in connection herewith, and (ii) its own appraisal of the creditworthiness of
Borrower. Agent shall have no duty or responsibility, either initially or on a
continuing basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before making of the
Advances or at any time or times thereafter except as shall be provided by or on
behalf of Borrower pursuant to the terms hereof. Agent shall not be responsible
to any Lender for any recitals, statements, information, representations or
warranties
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herein or in any agreement, document, certificate or a statement delivered in
connection with or for the execution, effectiveness, genuineness, validity,
enforceability, collectability or sufficiency of this Agreement or the Revolving
Credit Note, or of the financial condition of Borrower, or be required to make
any inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement, the Revolving Credit Note, the Other
Documents or the financial condition of Borrower, or the existence of any Event
of Default.
Agent may resign on sixty (60) days' written notice to Borrower and
each of the Lenders and upon such resignation, the Required Lenders will
promptly designate a successor Agent reasonably satisfactory to Borrower.
Without the consent of any Lender, the Borrower or any other Person, Agent may
appoint IBJ Xxxxxxxx Business Credit Corporation as successor Agent.
Any such successor Agent shall succeed to the rights, powers and
duties of Agent, and the term "Agent" shall mean such successor agent effective
upon its appointment, and the former Agent's rights, powers and duties as Agent
shall be terminated, without any other or further act or deed on the part of
such former Agent. After any Agent's resignation or removal hereunder as Agent,
the provisions of this Article XIV shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
14.4. Certain Rights of Agent. If Agent shall request instructions
from Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
14.5. Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and its duties hereunder, upon
advice of counsel selected by it. Agent may employ agents and attorneys-in-fact
and shall not be liable for the default or misconduct of any such agents or
attorneys-in-fact selected by Agent with reasonable care.
14.6. Notice of Default. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Event of Default
hereunder or under the Other Documents, unless Agent has received
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notice from a Lender or Borrower referring to this Agreement or the Other
Documents, describing such Event of Default and stating that such notice is a
"notice of default". In the event that Agent receives such a notice, Agent shall
give notice thereof to Lenders. Agent shall take such action with respect to
such Event of Default as shall be reasonably directed by the Required Lenders;
provided, that, unless and until Agent shall have received such directions,
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Event of Default as it shall deem
advisable in the best interests of Lenders.
14.7. Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrower, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; provided that, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
negligence (but not mere negligence) or willful misconduct.
14.8. Agent in its Individual Capacity. With respect to the
obligation of Agent to lend under this Agreement, the Advances made by it shall
have the same rights and powers hereunder as any other Lender and as if it were
not performing the duties as Agent specified herein; and the term "Lender" or
any similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity as a Lender. Agent may engage in business with
Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from Borrower for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
14.9. Delivery of Documents. To the extent Agent receives
documents and information from or on behalf of Borrower pursuant to
the terms of this Agreement, Agent will promptly furnish such
documents and information to Lenders.
14.10. Borrower' Undertaking to Agent. Without prejudice to its
obligations to the Lenders under the other provisions of this Agreement,
Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or the Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any such payment made to Agent pursuant to any such demand shall
pro tanto satisfy Borrower's obligations to make payments for the account of the
Lenders or the relevant one or more of them pursuant to this Agreement.
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14.11. Sharing of Setoffs. Each of the Lenders agrees that (i) all
Obligations of Borrower to each Lender under this Agreement and under the
Revolving Credit Note rank pari passu in all respects with each other, and (ii)
if any Lender shall, through the exercise of a right of banker's lien, setoff,
counterclaim or otherwise, obtain payment (whether from Borrower or otherwise)
with respect to principal of or interest on Revolving Advances, which results in
its receiving more than its pro rata share of the Revolving Advances, then (A)
such Lender shall be deemed to have simultaneously purchased from the other
Lenders a share in their Revolving Advances so that the amount of the Revolving
Advances of all Lenders shall be equal to their Commitment Percentage and (B)
such other adjustments shall be made from time to time as shall be equitable to
insure that all Lenders share such payments ratably. If all or any portion of
any such excess payment is thereafter recovered from the Lender which received
the same, the purchase provided in this Section 14.11 shall be deemed to have
been rescinded to the extent of such recovery, without interest. Borrower
expressly consents to the foregoing arrangements and agrees that each Lender so
purchasing a portion of another Lender's Revolving Advances may exercise all
rights of payment (including without limitation, all rights of setoff, banker's
lien or counterclaim) with respect to such portion as fully as if such Lender
were the direct holder of such portion.
14.12. Applicability of Section to Borrower. Except as otherwise
provided in this Article XIV, the rights and obligations of Borrower under this
Agreement shall not be affected by any provision otherwise included in this
Article XIV. Borrower shall be permitted to rely on communications from Agent
which it reasonably believes are made on behalf of Agent and, if specified
therein, the Lenders or the Required Lenders, and except as otherwise set forth
specifically herein, all notices and payments to be made by Borrower hereunder
shall be made to Agent. Further, if any Lender shall be in default hereunder,
such default shall not affect the rights and obligations of Borrower hereunder
or the rights and obligations of any other Lender hereunder.
XIV. MISCELLANEOUS.
15.1. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applied to
contracts to be performed wholly within the State of New York. Any judicial
proceeding brought by or against Borrower with respect to any of the
Obligations, this Agreement or any related agreement may be brought in any court
of competent jurisdiction in the State of New York, United States of America,
and, by execution and delivery of this Agreement, Borrower accepts for itself
and in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement.
Nothing herein shall affect the right to serve process in any manner permitted
by law or shall limit the
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right of Lenders to bring proceedings in the courts of any other jurisdiction.
Borrower waives any objection to jurisdiction and venue of any action instituted
hereunder in the aforesaid courts and shall not assert any defense based on lack
of jurisdiction or venue or based upon forum non conveniens. Any judicial
proceeding by Borrower against Lenders involving, directly or indirectly, any
matter or claim in any way arising out of, related to or connected with this
Agreement or any related agreement, shall be brought only in a federal or state
court located in the City of New York, State of New York.
15.2. Entire Understanding. (a) This Agreement and the documents
executed concurrently herewith contain the entire understanding between
Borrower, Agent and each Lender and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof. Any promises,
representations, warranties or guarantees not herein contained and hereinafter
made shall have no force and effect unless in writing, signed by Borrower's,
Agent's and each Lender's respective officers. Neither this Agreement nor any
portion or provisions hereof may be changed, modified, amended, waived,
supplemented, discharged, cancelled or terminated orally or by any course of
dealing, or in any manner other than by an agreement in writing, executed in
accordance with Section 15.2(b) hereof. Borrower acknowledges that it has been
advised by counsel in connection with the execution of this Agreement and the
Other Documents and is not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement.
(b) The Required Lenders, Agent with the consent in
writing of the Required Lenders, and Borrower may, subject to the provisions of
this Section 15.2 (b), from time to time enter into written supplemental
agreements to this Agreement, the Revolving Credit Note or the Other Documents
executed by Borrower, for the purpose of adding or deleting any provisions or
otherwise changing, varying or waiving in any manner the rights of Lenders,
Agent or Borrower thereunder or the conditions, provisions or terms thereof or
waiving any Event of Default thereunder, but only to the extent specified in
such written agreements; provided, however, that no such supplemental agreement
shall, without the consent of all Lenders:
(i) increase or decrease the amount of the Commitment
Percentage of any Lender, it being understood and agreed that this Section 15.2
(b)(i) does not (and shall not be deemed to) require the consent of any Lender
(other than a transferor Lender or Purchasing Lender) to an increase or a
decrease in the Commitment Percentage of a transferor Lender or a Purchasing
Lender in connection with an assignment effected in accordance with Section 15.3
(d) hereof.
(ii) change the maturity of the Revolving Credit Note,
or increase the Maximum Revolving Advance Amount, the Maximum
Equipment Value Advance Amount, the Maximum Inventory Value Advance
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Amount or the sublimit with respect to Letters of Credit, or reduce the rate or
extend the time of payment of interest or of any fee payable by Borrower to
Agent for the ratable benefit of Lenders pursuant to this Agreement.
(iii) alter the definition of the term Required
Lenders or the eligibility standards applied by Agent to the determination of
which Receivables are Eligible Receivables.
(iv) alter, amend or modify this Section 15.2(b) or
release Collateral having a fair market value of in excess of $100,000, it being
understood and agreed that this Section 15.2(b) (iv) does not (and shall not be
deemed to) require the consent of any Lender (or all of the Lenders) in
connection with a sale, transfer, conveyance, assignment or other disposition of
any of Borrower's properties or assets (or any of the Collateral) to the extent
any such sale, transfer, conveyance, assignment or other disposition is
authorized or permitted by the terms of this Agreement or any Other Document.
(v) change the rights and duties of Agent.
Any such supplemental agreement shall apply equally to each of the Lenders and
shall be binding upon Borrower, Lenders and Agent and all future holders of the
Revolving Credit Note and all Participants. In the case of any waiver, Borrower,
Agent and Lenders shall be restored to their former positions and rights, and
any Event of Default waived shall be deemed to be cured and not continuing, but
no waiver of a specific Event of Default shall extend to any subsequent Event of
Default (whether or not the subsequent Event of Default is the same as the Event
of Default which was waived), or impair any right consequent thereon.
15.3. Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure to
the benefit of Borrower, Agent, each Lender, all future holders of the Revolving
Credit Note and their respective successors and assigns, except that Borrower
may not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of Agent and each Lender.
(b) Subject to Section 15.3(d), and subject to
Borrower's consent, which consent shall not be unreasonably withheld, any Lender
may sell, assign or transfer all or any part of its rights under this Agreement
and the Revolving Credit Note and all Other Documents, instruments and documents
provided Borrower is given notice of such sale as soon as practicable and the
transferee agrees to perform the obligations of the transferor. In addition to
the foregoing, any Lender may grant one or more participations in its interests
in the Advances in a minimum amount equal to $3,000,000 or in integral multiples
of $l,000,000 in excess thereof; provided, however, that (a) such Lender shall
remain a "Lender" for all purposes under this Agreement, (b) any
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such grant of a participation will be made in compliance with all applicable
state or federal laws, rules and regulations, and (c) no Lender shall grant any
participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or the Other Documents, except to the
extent such amendment or waiver would: (i) increase the amount of the Commitment
Percentage of any Lender; (ii) change the maturity of the Revolving Credit Note
or the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon or of any fee payable by Borrower to Lenders
pursuant to this Agreement; (iii) alter the definition of the term Required
Lenders; (iv) alter, amend or modify this Section 15.2(b); or (v) change the
rights and duties of Agent. In the case of any participation, the participant
shall not have any rights under this Agreement or any of the Other Documents
(the participant's right against such Lender in respect of such participation to
be those set forth in the participation or other agreement executed by such
Lender and the participant related thereto) and all amounts payable to any
Lender hereunder (including, without limitation, Sections 3.2, 3.10 or 3.9
hereof) shall be determined as if such Lender had not sold such participation.
In no event shall any participant grant a participation in its participation
interest in the Advances without the prior written consent of Agent.
(c) In connection with any assignments,
participations or offers thereof pursuant to this Section 15.3 each Lender shall
be entitled to provide to any assignee or participant or prospective assignee or
participant such information pertaining to Borrower or any of its Subsidiaries
as such Lender may deem appropriate or such assignee or participant or
prospective assignee or participant may request; provided, however, that such
assignee or participant or prospective assignee or participant shall agree (i)
to treat in confidence all such information, (ii) not to disclose such
information to any third party, and (iii) not to make use of such information
for purposes of transactions other than contemplated by such assignment or
participation.
(d) Subject to Borrower's consent, which consent
shall not be unreasonably withheld, any Lender may sell, assign or transfer all
or any part of its rights under this Agreement and the Other Documents to one or
more additional banks or financial institutions and one or more additional banks
or financial institutions may commit to make Advances hereunder (each a
"Purchasing Lender"), in minimum amounts of not less than $3,000,000, pursuant
to a Commitment Transfer Supplement, executed by a Purchasing Lender, the
transferor Lender, and Agent and delivered to Agent for recording. Upon such
execution, delivery, acceptance and recording, from and after the transfer
effective date determined pursuant to such Commitment Transfer Supplement, (i)
Purchasing Lender thereunder shall be a party hereto and, to the extent provided
in such Commitment Transfer Supplement, have the rights and obligations of a
Lender thereunder with a Commitment Percentage as set forth therein; provided,
however, that unless Borrower consents, IBJS shall maintain at all times during
the Term
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a Commitment Percentage in excess of 50%, and (ii) the transferor Lender
thereunder shall, to the extent provided in such Commitment Transfer Supplement,
be released from its obligations under this Agreement, the Commitment Transfer
Supplement creating a novation for that purpose. Such Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of the Commitment Percentages arising from the purchase by
such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Documents. Borrower hereby
consents to the addition of such Purchasing Lender and the resulting adjustment
of the Commitment Percentages arising from the purchase by such Purchasing
Lender of all or a portion of the rights and obligations of such transferor
Lender under this Agreement and the Other Documents. Without in any manner
limiting the foregoing, the Borrower and each Lender specifically consents to
the sale, assignment and/or transfer by IBJS to IBJ Xxxxxxxx Business Credit
Corporation of all or any part of its rights and obligations under this
Agreement and the Other Documents in its capacity as Agent and as Lender.
(e) Agent shall maintain at its address a copy of
each Commitment Transfer Supplement delivered to it and a register (the
"Register") for the recordation of the names and addresses of the Advances owing
to each Lender from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and Borrower, Agent and Lenders
may treat each Person whose name is recorded in the Register as the owner of the
Advance recorded therein for the purposes of this Agreement. The Register shall
be available for inspection by Borrower or any Lender at any reasonable time and
from time to time upon reasonable prior notice. Agent shall receive a fee in the
amount of $3000 payable by the applicable Purchasing Lender upon the effective
date of each transfer or assignment to such Purchasing Lender.
(f) At Agent's or Lenders' expense, Borrower shall
execute and deliver to Agent, upon request, such further documents and
agreements and do such further acts and things as Agent may request in order to
carry out the purposes, terms or conditions of this Section 15.3.
15.4. Application of Payments. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations in accordance with the
terms of this Agreement. To the extent that Borrower makes a payment or Agent or
any Lender receives any payment or proceeds of the Collateral for Borrower's
benefit, which are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver, custodian or any other party under any bankruptcy law,
common law or equitable cause, then, to such extent, the Obligations or part
thereof intended to
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be satisfied shall be revived and continue as if such payment or proceeds had
not been received by Agent or such Lender.
15.5. Indemnity. Borrower shall indemnify Agent and each Lender from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, reasonable fees and
disbursements of counsel) which may be imposed on, incurred by, or asserted
against Agent or any Lender in any litigation, proceeding or investigation
instituted or conducted by any governmental agency or instrumentality or any
other Person with respect to any aspect of, or any transaction contemplated by,
or referred to in, or any matter related to, this Agreement, whether or not the
Agent or any Lender is a party thereto, except to the extent that any of the
foregoing arises out of the gross negligence or willful misconduct of the party
being indemnified.
15.6. Notice. Any notice or request hereunder may be given to
Borrower or to Agent or any Lender at their respective addresses set forth below
or at such other address as may hereafter be specified in a notice designated as
a notice of change of address under this Section. Any notice or request
hereunder shall be in writing and given by (a) hand delivery, (b) registered or
certified mail, return receipt requested, (c) telex or telegram, subsequently
confirmed by registered or certified mail, or (d) telefax to the number set out
below (or such other number as may hereafter be specified in a notice designated
as a notice of change of address) with telephone communication to a duly
authorized officer of the recipient confirming its receipt and subsequently
confirmed by registered or certified mail or recognized overnight courier. Any
notice or other communication required or permitted pursuant to this Agreement
shall be deemed given on the earliest of (a) when personally delivered to any
officer of the party to whom it is addressed, (b) on the earlier of actual
receipt thereof or five (5) days following posting thereof by certified or
registered mail, postage prepaid, or (c) upon actual receipt thereof when sent
by a recognized overnight delivery service or (d) upon actual receipt thereof
when sent by telecopier to the number set forth below with telephone
communication confirming receipt in each case addressed to each party at its
address set forth below or at such other address as has been furnished in
writing by a party to the other by like notice:
(A) If IBJS (either as Agent or a Lender), at:
IBJ Xxxxxxxx Bank & Trust
Company
Xxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to: Xxxx & Hessen
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000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(B) If to any Lender other than Agent, as specified in the applicable
Commitment Transfer Supplement (or a schedule thereto).
(C) If to Borrower, at: Allstate Financial Corporation
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxx -
President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to its General Counsel at the same
address, telephone and telecopier numbers.
15.7. Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
15.8. Expenses. All reasonable, out-of-pocket costs and expenses
including, without limitation, reasonable attorneys' fees and disbursements
incurred by Agent, Agent on behalf of Lenders and Lenders (a) in all efforts
made to enforce payment of any Obligation or effect collection of any
Collateral, or (b) in connection with the entering into, modification,
amendment, administration and enforcement of this Agreement or any consents or
waivers hereunder and all related agreements, documents and instruments, or (c)
following the occurrence and during the continuance of an Event of Default, in
instituting, maintaining, preserving, enforcing and foreclosing on Agent's
security interest in or Lien on any of the Collateral, whether through judicial
proceedings or otherwise, or (d) in defending or prosecuting any actions or
proceedings arising out of or relating to Agent's or any Lender's transactions
hereunder with Borrower, or (e) in connection with any advice given to Agent or
any Lender with respect to its rights and obligations under this Agreement and
all Other Documents, may be charged to Borrower's account as a Revolving Advance
and shall be part of the Obligations; provided, that, the reasonable
out-of-pocket fees and expenses of counsel to Agent in connection with the
initial closing of the loans hereunder shall not exceed $50,000 in the
aggregate.
15.9. Injunctive Relief. Borrower recognizes that, in the
event Borrower fails to perform, observe or discharge any of its
obligations or liabilities under this Agreement, any remedy at law
-95-
may prove to be inadequate relief to Lenders; therefore, each Lender, if such
Lender so requests, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
15.10. Consequential Damages. Neither Lenders nor any agent
r attorney for any of them shall be liable to Borrower for
consequential damages arising from any breach of contract, tort or
other wrong relating to the establishment, administration or
collection of the Obligations.
15.11. Captions. The captions at various places in this
Agreement are intended for convenience only and do not constitute
and shall not be interpreted as part of this Agreement.
15.12. Counterparts. This Agreement may be executed in one
or more counterparts, each of which taken together shall constitute
one and the same instrument.
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15.13. Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
Each of the parties has signed this Agreement as of the 13th day of
May 1997.
ALLSTATE FINANCIAL CORPORATION
--------------------------------
Name: Xxxxx Xxxxxxx
Title: President
IBJ XXXXXXXX BANK & TRUST COMPANY,
as Lender and as Agent
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
Commitment Percentage: 60%
NATIONAL BANK OF CANADA, as Lender
-------------------------------
Name:
Title:
-------------------------------
Name:
Title:
Commitment Percentage: 40%
-00-
XXXXX XX XXX XXXX )
) ss.
COUNTY OF NEW YORK )
On this ______ day of May, 1997, before me personally came
_____________, to me known, who, being by me duly sworn, did depose and say that
he is the ______________ of ALLSTATE FINANCIAL CORPORATION, the corporation
described in and which executed the foregoing instrument; and that he signed his
name thereto by order of the board of directors of said corporation.
------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of May, 1997, before me personally came
_________________, to me known, who, being by me duly sworn, did depose and say
that he is the ______________ of IBJ XXXXXXXX BANK & TRUST COMPANY, the
corporation described in and which executed the foregoing instrument and that he
was authorized to sign his name thereto on behalf of said corporation.
------------------------------
NOTARY PUBLIC
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Table of Contents
I. DEFINITIONS...................................................... 1
-----------
1.1. Accounting Terms................................... 1
----------------
1.2. General Terms...................................... 1
-------------
1.3. Uniform Commercial Code Terms...................... 22
-----------------------------
1.4. Certain Matters of Construction.................... 22
-------------------------------
II. ADVANCES, PAYMENTS............................................... 23
------------------
2.1. (a) Revolving Advances........................ 23
------------------
(b) Discretionary Rights...................... 24
--------------------
2.2. ................................................... 24
2.3. Disbursement of Revolving Advance Proceeds......... 27
------------------------------------------
2.4. ................................................... 27
2.5. ................................................... 27
2.6. ................................................... 28
2.7. Statement of Account............................... 28
--------------------
2.8. Letters of Credit.................................. 28
-----------------
2.9. Issuance of Letters of Credit...................... 29
-----------------------------
2.10. Requirements For Issuance of Letters of Credit..... 29
----------------------------------------------
2.11. Additional Payments................................ 31
-------------------
2.12. Manner of Borrowing and Repayment of Advances...... 31
---------------------------------------------
2.13. Use of Proceeds.................................... 36
---------------
III. INTEREST AND FEES..................................................... 36
-----------------
3.1. Interest........................................... 36
--------
3.2. Letter of Credit Fees.............................. 36
---------------------
3.3. Closing Fee........................................ 37
-----------
3.4. Unused Line Fee.................................... 37
---------------
3.5. Collateral Evaluation Fee.......................... 37
-------------------------
3.6. Field Examinations................................. 37
------------------
3.7. Computation of Interest and Fees................... 37
--------------------------------
3.8. Maximum Charges.................................... 38
---------------
3.9. Increased Costs.................................... 38
---------------
3.10. Capital Adequacy................................... 39
----------------
3.11. Survival.................................................. 39
--------
IV. COLLATERAL: GENERAL TERMS............................................. 40
--------------------------
4.1. Security Interest in the Collateral................ 40
-----------------------------------
4.2. Perfection of Security Interest.................... 40
-------------------------------
4.3. Disposition of Collateral.......................... 41
-------------------------
4.4. Preservation of Collateral......................... 41
--------------------------
4.5. Ownership of Collateral............................ 42
-----------------------
4.6. Defense of Agent's and Lender's Interests.......... 42
-----------------------------------------
4.7. Books and Records.................................. 43
-----------------
4.8. Financial Disclosure............................... 43
--------------------
4.9. Compliance with Laws............................... 43
--------------------
4.10. Inspection of Premises............................. 43
----------------------
4.12. Failure to Pay Insurance........................... 44
------------------------
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4.13. Payment of Taxes.................................... 44
----------------
4.14. Payment of Leasehold Obligations.................... 45
--------------------------------
4.15. Receivables......................................... 45
-----------
(a) Nature of Receivables...................... 45
---------------------
(b) Solvency of Account Debtor................. 45
--------------------------
(c) Locations of Borrower...................... 46
---------------------
(d) Collection of Receivables.................. 46
-------------------------
(e) Notification of Assignment of Receivables.. 46
-----------------------------------------
(f) Power of Agent to Act on Borrower's Behalf. 46
------------------------------------------
(g) No Liability............................... 49
------------
4.16. Cash Management Systems............................. 50
-----------------------
4.17. Inventory........................................... 51
---------
4.18. Maintenance of Equipment............................ 51
------------------------
4.19. Exculpation of Liability............................ 52
------------------------
4.20. Environmental Matters............................... 52
---------------------
V. REPRESENTATIONS AND WARRANTIES........................................... 54
------------------------------
5.1. Authority........................................... 54
---------
5.2. Formation and Qualification......................... 55
---------------------------
5.3. Survival of Representations and Warranties.......... 55
------------------------------------------
5.4. Tax Returns......................................... 55
-----------
5.5. Financial Statements................................ 55
--------------------
5.6. Corporate Name...................................... 56
--------------
5.7. O.S.H.A............................................. 56
--------
5.8. Solvency; No Litigation, Violation, Indebte
ness or Default..................................... 57
---------------
5.9. Patents, Trademarks, Copyrights and Licenses........ 58
--------------------------------------------
5.10. Licenses and Permits................................ 58
--------------------
5.11. Default of Indebtedness............................. 59
-----------------------
5.12. No Default.......................................... 59
----------
5.13. No Burdensome Restrictions.......................... 59
--------------------------
5.14. No Labor Disputes................................... 59
-----------------
5.15. Margin Regulations.................................. 59
------------------
5.16. Investment Company Act.............................. 59
----------------------
5.17. Disclosure.......................................... 59
----------
5.18. Swaps............................................... 60
-----
5.19. Conflicting Agreements.............................. 60
----------------------
5.20. Application of Certain Laws and Regulations......... 60
-------------------------------------------
5.21. Property of Borrower................................ 60
--------------------
5.22. Other Ventures...................................... 60
--------------
.................................................... 60
VI. AFFIRMATIVE COVENANTS................................................... 60
6.1. Payment of Fees..................................... 60
---------------
6.2. Conduct of Business and Maintenance of Existence
and Assets.......................................... 60
----------
6.3. Violations.......................................... 61
----------
6.4. Government Receivables.............................. 61
----------------------
6.5. Execution of Supplemental Instruments............... 61
-------------------------------------
6.6. Payment of Indebtedness............................. 62
-----------------------
6.7. Standards of Financial Statements................... 62
---------------------------------
6.8. Credit Standards.................................... 62
----------------
6.9. Insurance........................................... 62
---------
6.10. Filing of Financing Statements...................... 63
------------------------------
-ii-
VII. NEGATIVE COVENANTS..................................................... 63
7.1. Merger, Consolidation, Acquisition and Sale of
Assets.............................................. 63
------
7.2. Creation of Liens................................... 64
-----------------
7.3. Guaranties.......................................... 64
----------
7.4. Investments......................................... 65
-----------
7.5. Loans............................................... 65
-----
7.6. Capital Expenditures................................ 66
--------------------
7.7. Restricted Payments................................. 66
-------------------
7.8. Indebtedness........................................ 66
------------
7.9. Nature of Business.................................. 67
------------------
7.10. Transactions with Affiliates........................ 67
----------------------------
7.11. Leases.............................................. 68
------
7.12. Subsidiaries........................................ 68
------------
7.13. Fiscal Year and Accounting Changes.................. 69
----------------------------------
7.14. Intentionally Omitted............................... 69
---------------------
7.15. Amendment of Articles of Incorporation, By-Laws..... 69
-----------------------------------------------
7.16. Compliance with ERISA............................... 69
---------------------
7.17. Prepayment of Indebtedness.......................... 70
--------------------------
.................................................... 70
7.18. Pledge of Credit.................................... 70
----------------
VIII. CONDITIONS PRECEDENT.................................................. 71
--------------------
8.1. Conditions to Initial Advances...................... 71
------------------------------
(a) Revolving Credit Note...................... 71
---------------------
(b) Filings, Registrations and Recordings...... 71
-------------------------------------
(c) Corporate Proceedings of Borrower.......... 72
---------------------------------
(d) Incumbency Certificates of Borrower........ 72
-----------------------------------
(e) Certificates............................... 72
------------
(f) Good Standing Certificates................. 72
--------------------------
(g) Legal Opinion.............................. 72
-------------
(h) No Litigation.............................. 72
-------------
(i) Financial Condition Certificate............ 73
-------------------------------
(j) Collateral Examination..................... 73
----------------------
(k) Fees....................................... 73
----
(l) Insurance.................................. 73
---------
(m) Leasehold Agreements....................... 73
--------------------
(n) Reaffirmation of Guaranty, Stock Pledge
---------------------------------------
Agreements, etc............................ 73
(o) Payment Instructions; Borrowing Base
Certificate................................ 73
-----------
(p) Lockbox Accounts........................... 74
----------------
(q) Consents................................... 74
--------
(r) No Adverse Material Change................. 74
--------------------------
(s) Undrawn Availability....................... 74
--------------------
(t) Contract Review............................ 74
---------------
(u) Closing Certificate........................ 74
-------------------
(v) Representations and Warranties............. 74
------------------------------
(w) Other...................................... 74
-----
8.2. Conditions to Each Advance.......................... 74
--------------------------
(a) Representations and Warranties............. 75
------------------------------
(b) No Default................................. 75
----------
(c) Maximum Advances........................... 75
----------------
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IX. INFORMATION AS TO BORROWER.............................................. 75
--------------------------
9.1. Disclosure of Material Matters...................... 75
------------------------------
9.2. Schedules; Borrowing Base Certificate............... 75
-------------------------------------
9.3. Litigation.......................................... 76
----------
9.4. Occurrence of Defaults, etc......................... 76
---------------------------
9.5. Intentionally Omitted............................... 77
---------------------
9.6. Annual Financial Statements......................... 77
---------------------------
9.7. Quarterly Financial Statements...................... 77
------------------------------
9.8. Intentionally Omitted............................... 78
---------------------
9.9. Other Reports....................................... 78
-------------
9.10. Additional Information.............................. 78
----------------------
9.11. Projected Operating Budget.......................... 78
--------------------------
9.12. Intentionally Omitted............................... 79
---------------------
9.13. Notice of Suits, Adverse Events..................... 79
-------------------------------
9.14. ERISA Notices and Requests.......................... 79
--------------------------
9.15. Additional Documents................................ 80
--------------------
X. EVENTS OF DEFAULT........................................................ 80
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.............................. 82
------------------------------------------
11.1. Rights and Remedies................................. 82
-------------------
11.2. Agent's Discretion.................................. 83
------------------
11.3. Setoff.............................................. 83
------
11.4. Rights and Remedies not Exclusive................... 83
---------------------------------
XII. WAIVERS AND JUDICIAL PROCEEDINGS....................................... 83
--------------------------------
12.1. Waiver of Notice.................................... 83
----------------
12.2. Delay............................................... 84
-----
12.3. Jury Waiver......................................... 84
-----------
XIII. EFFECTIVE DATE AND TERMINATION........................................ 84
------------------------------
13.1. Term................................................ 84
----
13.2. Termination......................................... 85
-----------
XIV. Regarding Agent........................................................ 85
---------------
14.1. Appointment......................................... 85
-----------
14.2. Nature of Duties.................................... 86
----------------
14.3. Lack of Reliance on Agent and Resignation........... 86
-----------------------------------------
14.4. Certain Rights of Agent............................. 87
-----------------------
14.5. Reliance............................................ 87
--------
14.6. Notice of Default................................... 87
-----------------
14.7. Indemnification..................................... 88
---------------
14.8. Agent in its Individual Capacity.................... 88
--------------------------------
14.9. Delivery of Documents............................... 88
---------------------
14.10. Borrower' Undertaking to Agent...................... 88
------------------------------
14.12. Applicability of Section to Borrower................ 89
------------------------------------
XIV. MISCELLANEOUS.......................................................... 89
15.2. Entire Understanding................................ 90
--------------------
15.3. Successors and Assigns; Participations; New
Lenders............................................. 91
-------
15.4. Application of Payments............................. 93
-----------------------
15.5. Indemnity........................................... 94
---------
15.6. Notice.............................................. 94
------
-iv-
15.7. Severability........................................ 95
------------
15.8. Expenses............................................ 95
--------
15.9. Injunctive Relief................................... 95
-----------------
15.10. Consequential Damages............................... 96
---------------------
15.11. Captions........................................... 96
--------
15.12. Counterparts.............................................. 96
------------
15.13. Construction................................ 96
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