EXHIBIT 10.12
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated as of April 30, 2001 is entered
into by and between CONGRESS FINANCIAL CORPORATION, a Delaware corporation
("Lender"), and FOOTWEAR ACQUISITION, INC., a Delaware corporation ("Borrower").
WITNESSETH:
WHEREAS, Borrower has requested that Lender enter into certain financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower;
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein; and
WHEREAS, prior to the execution and delivery hereof, the Bankruptcy Court
in the pending Chapter 11 Case of Seller has entered the Converse Sale Order (as
each capitalized term is hereinafter defined) approving the sale by Seller of
certain of its assets to Borrower.
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, whether or not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes
hereof, "Reserve Percentage" shall mean the reserve percentage, expressed as a
decimal, prescribed by any United States or foreign banking authority for
determining the reserve requirement which is or would be applicable to deposits
of United States dollars in a non-United States or an international banking
office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar
Rate Loan made with the proceeds of such deposit, whether or not the Reference
Bank actually holds or has made any such deposits or loans. The Adjusted
Eurodollar Rate shall be adjusted on and as of the effective day of any change
in the Reserve Percentage.
1.3 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its Subsidiaries (if any), the amount
equal to the difference between: (a) the aggregate net book value of all assets
of such Person and its Subsidiaries, calculating the book value of inventory for
this purpose on a first-in-first-out basis, after deducting from such book
values all appropriate reserves in accordance with GAAP (including all reserves
for doubtful receivables, obsolescence, depreciation and amortization) and (b)
the aggregate amount of the Indebtedness and other liabilities of such Person
and its Subsidiaries (including tax and other proper accruals).
1.4 "Affiliate" shall mean, with respect to a specified Person, any
other Person (a) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
person; (b) which beneficially owns or holds five (5%) percent or more of any
class of the Voting Stock or other equity interest of such specified person; or
(c) of which five (5%) percent or more of the Voting Stock or other equity
interest is beneficially owned or held by such specified person or a Subsidiary
of such specified person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling", "controlled by" and "under
common control with") when used with respect to any specified person shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through the
ownership of Voting Stock, by agreement or otherwise.
1.5 "Bankruptcy Code" shall mean the United States Bankruptcy Code,
being Title 11 of the United States Code as enacted in 1978, as the same may
have heretofore been or may hereafter be amended, recodified, modified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.6 "Bankruptcy Court" shall mean the United States Bankruptcy Court
for the District of Delaware.
1.7 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.8 "Borrowing Base" shall mean, at any time, the amount equal to:
(a) Eighty (80%) percent of the Net Amount of Eligible
Accounts, plus
(b) the lesser of (i) the lesser of: (A) sixty (60%) percent of
the Value of Eligible Inventory and (B) eighty-five (85%) percent of the Net
Recovery Percentage multiplied by the Value of Eligible Inventory (the
"Inventory Advance Rate"), and (ii) $25,000,000, plus
(c) the License Income Availability less
(d) any Reserves.
For purposes only of applying the sublimit on Loans based on Eligible Inventory
set forth in clause (b)(ii) above, Lender may treat the then undrawn amounts of
outstanding Letter of Credit Accommodations for the purpose of purchasing
Eligible Inventory as Loans to the extent Lender is in effect basing the
issuance of the Letter of Credit Accommodations on the Value of the Eligible
Inventory being purchased with such Letter of Credit Accommodations. In
determining the actual amounts of such Letter of Credit Accommodations to be so
treated for purposes of the sublimit, the outstanding Loans and Reserves shall
be attributed first to any components of the lending formulas set forth above
that are not subject to such sublimit, before being attributed to the components
of the lending formulas subject to such sublimit.
1.9 "Business Day" shall mean any day other than a Saturday, Sunday,
or other day on which commercial banks are authorized or required to close under
the laws of the State of New York or the State of North Carolina, and a day on
which the Reference Bank and Lender are open for the transaction of business,
except that if a determination of a Business Day shall relate to any Eurodollar
Rate Loans, the term Business Day shall also exclude any day on which banks are
closed for dealings in dollar deposits in the London interbank market or other
applicable Eurodollar Rate market.
1.10 "Capital Leases" shall mean, as applied to any Person, any lease
of (or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such Person.
1.11 "Capital Stock" shall mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated)
of such Person's capital stock, partnership interests or limited liability
company interests at any time outstanding, and any and all rights, warrants or
options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.12 "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of one hundred eighty (180) days or less
issued or directly and fully guaranteed or insured by the United States of
America of any agency or instrumentality thereof; provided, that, the full faith
and credit of the United States of America is pledged in support thereof; (b)
certificates of deposit or bankers' acceptances with a maturity of one hundred
eighty (180) days or less of any financial institution that is a member of the
Federal Reserve System having combined capital and surplus and undivided profits
of not less than $250,000,000; (c) commercial paper (including variable rate
demand notes) with a maturity of one hundred eighty (180) days or less issued by
a corporation (except an Affiliate of Borrower) organized under the laws of any
State of the United States of America or the District of Columbia and rated at
least A-1 by Standard & Poor's Ratings Service, a division of The XxXxxx-Xxxx
Companies, Inc. or at least P-1 by Xxxxx'x Investors Service, Inc.; (d)
repurchase obligations with a term of not more than thirty (30) days for
underlying securities of the types described in clause (a) above entered into
with any financial institution having combined capital and surplus and undivided
profits of not less than $250,000,000; (e) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the United States of America or issued by any
governmental agency thereof and backed by the full faith and credit to the
United States of America, in each case maturing within one hundred eighty (180)
days or less from the date of acquisition; provided, that, the terms of such
agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions with Securities Dealers and Others, as
adopted by the Comptroller of the Currency on October 31, 1985; and (f)
investments in money market funds and mutual funds which
invest substantially all of their assets in securities of the types described in
clauses (a) through (e) above.
1.13 "Change of Control" shall mean (a) the transfer (in one
transaction or a series of transactions) of all or substantially all of the
assets of Borrower to any Person or group (as such term is used in Section
13(d)(3) of the Exchange Act); (b) the liquidation or dissolution of Borrower or
the adoption of a plan by the stockholders of Borrower relating to the
dissolution or liquidation of Borrower; (c) the acquisition by any Person or
group (as such term is used in Section 13(d)(3) of the Exchange Act), except for
one or more Permitted Holders, of beneficial ownership, directly or indirectly,
of fifty (50%) percent or more of the voting power of the total outstanding
Voting Stock of Borrower or the Board of Directors of Borrower; (d) during any
period of two (2) consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of Borrower (together with any new
directors who have been appointed by any Permitted Holder, or whose nomination
for election by the stockholders of Borrower, as the case may be, was approved
by a vote of at least sixty-six and two-thirds (66 2/3%) percent of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of Borrower then still in office; or (e) the failure of the Permitted
Holders to own more than fifty (50%) percent of the voting power of the total
outstanding Voting Stock of Borrower.
1.14 "Chapter 11 Case" shall mean the Chapter 11 Case of Seller under
the Bankruptcy Code known as In re Converse Inc., in the Bankruptcy Court,
designated Case No. 01-0223 (SLR).
1.15 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.16 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.17 "Collateral Access Agreement" shall mean an agreement in writing,
in form and substance satisfactory to Lender, from any lessor of premises to
Borrower, or any other person to whom any Collateral (including Inventory,
Equipment, bills of lading or other documents of title) is consigned or who has
custody, control or possession of any such Collateral or is otherwise the owner
or operator of any premises on which any of such Collateral is located, pursuant
to which such lessor, consignee or other person, inter alia, acknowledges the
first priority security interest of Lender in such Collateral, agrees to waive
any and all claims such lessor, consignee or other person may, at any time, have
against such Collateral, whether for processing, storage or otherwise, and
agrees to permit Lender access to, and the right to remain on, the premises of
such lessor, consignee or other person so as to exercise Lender's rights and
remedies and otherwise deal with such Collateral and in the case of any person
who at any time has custody, control or possession of any bills of lading or
other documents of title, agrees to hold such bills of lading or other documents
as bailee for Lender and to follow all instructions of Lender with respect
thereto.
1.18 "Consolidated Pre-Tax Net Income" means, with respect to any
Person for any period, the aggregate of the net income (loss) of such Person and
its Subsidiaries, on a consolidated basis, for such period (excluding to the
extent included therein any extraordinary and/or unusual or
non-recurring gains) after deducting all charges which should be deducted before
arriving at the net income (loss) for such period and, without duplication,
before deducting the Provision for Taxes for such period, all as determined in
accordance with GAAP; provided, that, (a) the net income of any Person that is
not a wholly-owned Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid or payable to such Person or a wholly-owned Subsidiary of
such Person; (b) except to the extent included pursuant to the foregoing clause,
the net income of any Person accrued prior to the date it becomes a wholly-owned
Subsidiary of such Person or is merged into or consolidated with such Person or
any of its wholly-owned Subsidiaries or that Person's assets are acquired by
such Person or by its wholly-owned Subsidiaries shall be excluded; and (c) the
net income (if positive) of any wholly-owned Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such
wholly-owned Subsidiary to such Person or to any other wholly-owned Subsidiary
of such Person is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such wholly-owned Subsidiary shall be
excluded. For the purposes of this definition, net income excludes any gain
together with any related Provision for Taxes for such gain realized upon the
sale or other disposition of any assets that are not sold in the ordinary course
of business (including, without limitation, dispositions pursuant to sale and
leaseback transactions) or of any Capital Stock of such Person or a Subsidiary
of such Person and any net income realized or loss incurred as a result of
changes in accounting principles or the application thereof to such Person.
1.19 "Converse Sale Order" means the Order entered by the Bankruptcy
Court on April 13, 2001 pursuant to which, inter alia, the Bankruptcy Court
approved the sale and transfer of the Purchased Assets by Seller to Borrower on
and subject to the terms and conditions set forth in the Purchase Agreements.
1.20 "Dilution" shall mean, at any time, the fraction, expressed as a
percentage, the numerator of which is the aggregate amount of non-cash
reductions in Accounts for the immediately preceding one hundred and twenty
(120) day period and the denominator of which is the aggregate dollar amount of
the sales of Borrowers for the immediately preceding one hundred and twenty
(120) day period.
1.21 "Eligible Accounts" shall mean Accounts created by Borrower which
are and continue to be acceptable to Lender based on the criteria set forth
below. In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrower in the ordinary course of its business which
transactions are completed in accordance with the terms and provisions contained
in any documents related thereto;
(b) such Accounts are not related to the payment of any license
fees by any licensee to Borrower under any License Agreement;
(c) such Accounts are not unpaid more than the sixty (60) days
past the original due date thereof, but less than one hundred twenty (120) days
after the original invoice for them;
(d) such Accounts comply with the terms and conditions
contained in Section 7.2(c) of this Agreement;
(e) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent;
(f) the chief executive office of the account debtor with
respect to such Accounts is located in the United States of America or Canada
(provided, that, at any time promptly upon Lender's request, Borrower shall
execute and deliver, or cause to be executed and delivered, such other
agreements, documents and instruments as may be required by Lender to perfect
the security interests of Lender in those Accounts of an account debtor with its
chief executive office or principal place of business in Canada in accordance
with the applicable laws of the Province of Canada in which such chief executive
office or principal place of business is located and take or cause to be taken
such other and further actions as Lender may request to enable Lender as secured
party with respect thereto to collect such Accounts under the applicable Federal
or Provincial laws of Canada) or, at Lender's option, if the chief executive
office and principal place of business of the account debtor with respect to
such Accounts is located other than in the United States of America or Canada,
then if either: (i) the account debtor has delivered to Borrower an irrevocable
letter of credit issued or confirmed by a bank reasonably satisfactory to Lender
and payable only in the United States of America and in U.S. dollars, sufficient
to cover such Account, in form and substance reasonably satisfactory to Lender
and if required by Lender, the original of such letter of credit has been
delivered to Lender or Lender's agent and the issuer has acknowledged in writing
to Lender the assignment of the proceeds of such letter of credit to Lender, or
(ii) such Account is subject to credit insurance payable to Lender issued by an
insurer and on terms and in an amount acceptable to Lender, or (iii) such
Account is otherwise acceptable in all respects to Lender (subject to such
lending formula with respect thereto as Lender may determine);
(g) such Accounts do not consist of progress xxxxxxxx (such
that the obligation of the account debtors with respect to such Accounts is
conditioned upon Borrower's satisfactory completion of any further performance
under the agreement giving rise thereto), xxxx and hold invoices or retainage
invoices, except as to xxxx and hold invoices, if Lender shall have received an
agreement in writing from the account debtor, in form and substance satisfactory
to Lender, confirming the unconditional obligation of the account debtor to take
the goods related thereto and pay such invoice;
(h) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to any right of setoff or recoupment
against such Accounts (but the portion of the Accounts of such account debtor in
excess of the amount at any time and from time to time owed by Borrower to such
account debtor or claimed owed by such account debtor may be deemed Eligible
Accounts);
(i) there are no facts, events or occurrences which would
impair the validity, enforceability or collectability of such Accounts or reduce
the amount payable or delay payment thereunder;
(j) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(k) neither the account debtor nor any officer or employee of
the account debtor with respect to such Accounts is an officer, employee, agent
or other Affiliate of Borrower;
(l) the account debtors with respect to such Accounts are not
any foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended, or any
similar State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(m) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition;
(n) such Accounts are not evidenced by or arising under any
instrument or chattel paper;
(o) such Accounts of a single account debtor or its affiliates
do not constitute more than ten (10%) percent of all otherwise Eligible
Accounts, except that the Accounts of the Account Debtors set forth on Schedule
1.21(o) or their respective Affiliates may constitute up to twenty (20%) percent
of all otherwise Eligible Accounts (but the portion of the Accounts not in
excess of such percentages, as applicable, may be deemed Eligible Accounts);
(p) such Accounts are not owed by an account debtor who has
Accounts unpaid more than sixty (60) days past the original due date thereof,
but less than one hundred twenty (120) days after the date of the original
invoice for them and which Accounts constitute more than fifty (50%) percent of
the total Accounts of such account debtor;
(q) the account debtor is not located in a state requiring the
filing of a Notice of Business Activities Report or similar report in order to
permit Borrower to seek judicial enforcement in such State of payment of such
Account, unless Borrower has qualified to do business in such state or has filed
a Notice of Business Activities Report or equivalent report for the then current
year or such failure to file and inability to seek judicial enforcement is
capable of being remedied without any material delay or material cost;
(r) such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the credit limit with respect to such
account debtors as determined by Borrower from time to time and as is reasonably
acceptable to Lender (but the portion of the Accounts not in excess of such
credit limit may be deemed Eligible Accounts); and
(s) such Accounts are owed by account debtors deemed
creditworthy at all times by Borrower consistent with its current practice and
who are reasonably acceptable to Lender.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith based on an event, condition or other
circumstance arising after the date hereof, or existing on the date hereof to
the extent Lender has no written notice thereof from Borrower, which adversely
affects or could reasonably be expected to adversely affect the Accounts in the
good faith determination of Lender. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.22 "Eligible Inventory" shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of Borrower which
are acceptable to Lender based on the criteria set forth below. In general,
Eligible Inventory shall not include (a) work-in process; (b) raw materials; (c)
packaging and shipping materials; (d) supplies used or consumed in Borrower's
business; (e) from and after the date which is forty-five (45) days after the
date hereof, any Inventory located at any retail store owned or leased by
Seller; (f) Inventory (other than Inventory subject to Section 1.22(e) above) at
premises other than those owned by Borrower, except any Inventory which would
otherwise be deemed Eligible Inventory at locations in the United States of
America which are not owned and operated by Borrower shall nevertheless be
considered Eligible Inventory: (i) as to locations which are leased by Borrower
if Lender shall have received a Collateral Access Agreement from the owner and
lessor of such location, duly authorized, executed and delivered by such owner
and lessor, except that notwithstanding that Lender shall not have received such
an agreement for a particular leased location, Lender will consider Inventory at
such leased location which would otherwise be Eligible Inventory to be Eligible
Inventory and Lender may, at its option, at any time establish such Reserves as
Lender may determine in good faith in accordance with the terms of this
Agreement in respect of amounts at any time payable by Borrower to the owner or
lessor of such location, without limiting any other rights and remedies of
Lender under this Agreement or under the other Financing Agreements with respect
to the establishment of Reserves or otherwise, provided, that, (A) the Reserves
established pursuant to this Section shall not exceed at any time the aggregate
of amounts payable to such owners and lessors for the next two (2) months from
any such time and including amounts if any, then outstanding and unpaid owed by
Borrower to such owners and lessors, provided, that, such limitation on the
amount of the Reserves pursuant to this Section shall only apply so long as: (1)
no Default or Event of Default shall exist or have occurred and be continuing,
(2) neither Borrower nor Lender shall have received notice of any default or
event of default by the lessee under the lease with respect to such location and
(3) Lender shall have received evidence, in form and substance satisfactory to
Lender, that Borrower has not granted to the owner and lessor a security
interest or lien upon any assets of Borrower and (B) in the event that the
amount of the Reserves established by Lender pursuant to the foregoing as to any
specific location exceeds the Value of the Inventory at such location to the
extent included in the Borrowing Base, the Inventory of such location shall not
be Eligible Inventory and Lender shall not establish any Reserve with respect to
amounts owing to the owner and lessor of such premises, so long as no Default or
Event of Default shall exist or have occurred and be continuing and (ii) as to
premises operated by third parties (including sales agents, consignees,
warehouses and processors), if Lender shall have received a Collateral Access
Agreement duly authorized, executed and delivered by the owner and operator of
such premises, except that notwithstanding that Lender shall not have received
such an agreement as to a particular third party location, Lender may consider
Inventory at such location which would otherwise be Eligible Inventory to be
Eligible Inventory and in such event, Lender may at any time establish such
Reserves as Lender may determine in good faith in accordance with the terms of
this Agreement in respect of amounts at any time payable by Borrower
to such third party, without limiting any other rights or remedies of Lender
under this Agreement or under the other Financing Agreements with respect to the
establishment of Reserves or otherwise, and in addition, if required by Lender,
as to premises of third parties where assets of Borrower are located: (A) the
owner and operator executes appropriate UCC-1 financing statements in favor of
Borrower, which are duly assigned to Lender and (B) any secured lender to the
owner and operator is properly notified of the first priority lien on such
Inventory of Lender.
1.23 "Environmental Laws" shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between Borrower and any
Governmental Authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials. The term "Environmental Laws" includes (i) the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Federal Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal
Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal Solid
Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws, and (iii) any
common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Materials.
1.24 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.25 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, together with all rules, regulations and interpretations
thereunder or related thereto.
1.26 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m)
or 414(o) of the Code.
1.27 "ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder, with respect to a
Plan; (b) the adoption of any amendment to a Plan that would require the
provision of security pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA; (c) the existence with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (d) the filing pursuant to Section 412 of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (e) the
occurrence of a "prohibited transaction" with respect to which Borrower or any
of its Subsidiaries is a "disqualified person" (within the meaning of Section
4975 of the Code) or with respect to which Borrower or any of its Subsidiaries
could otherwise be liable; (f) a complete or partial withdrawal by the Borrower
or any ERISA Affiliate from a Multiemployer Plan or a cessation of operations
which is treated as such a withdrawal or notification that a Multiemployer Plan
is in reorganization; (g) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the Pension Benefit Guaranty
Corporation to terminate a Plan or Multiemployer Plan; (h) an event or condition
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; (i) the imposition of any liability under Title IV
of ERISA, other than the Pension Benefit Guaranty Corporation premiums due but
not delinquent under Section 4007 of ERISA, upon Borrower or any ERISA
Affiliate; and (j) any other event or condition with respect to a Plan or
Multiemployer Plan or any Plan subject to Title IV of ERISA maintained, or
contributed to, by any ERISA Affiliate that could reasonably be expected to
result in liability of Borrower.
1.28 "Escrow Refund" shall mean the amount of any escrow monies paid by
Borrower under the Purchase Agreements which is returned to, and received by,
Borrower from Seller in accordance with the terms of the Purchase Agreements.
1.29 "Eurodollar Rate" shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to Borrower in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrower.
1.30 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.31 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.32 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of: (i) the Borrowing
Base and (ii) the Maximum Credit, minus (b) the sum of: (i) the amount of all
then outstanding and unpaid Obligations, plus (ii) the aggregate amount of all
then outstanding and unpaid trade payables and other obligations of Borrower
which are more than sixty (60) days past due as of such time.
1.33 "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.34 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by
Borrower or any Obligor in connection with this Agreement.
1.35 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Section 9.18, GAAP shall be determined on the basis of such
principles in effect on the date hereof and consistent with those used in the
preparation of the most recent audited financial statements delivered to Lender
prior to the date hereof.
1.36 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
1.37 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.38 "Indebtedness" shall mean, with respect to any Person, any
liability, whether or not contingent, (a) in respect of borrowed money (whether
or not the recourse of the lender is to the whole of the assets of such Person
or only to a portion thereof) or evidenced by bonds, notes, debentures or
similar instruments; (b) representing the balance deferred and unpaid of the
purchase price of any property or services (except any such balance that
constitutes an account payable to a trade creditor (whether or not an Affiliate)
created, incurred, assumed or guaranteed by such Person in the ordinary course
of business of such Person in connection with obtaining goods, materials or
services that is not overdue by more than ninety (90) days, unless the trade
payable is being contested in good faith); (c) all obligations as lessee under
leases which have been, or should be, in accordance with GAAP recorded as
Capital Leases; (d) any contractual obligation, contingent or otherwise, of such
Person to pay or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, or any agreement to purchase,
repurchase, or otherwise acquire such indebtedness, obligation or liability or
any security therefor, or to provide funds for the payment or discharge thereof,
or to maintain solvency, assets, level of income, or other financial condition;
(e) all obligations with respect to redeemable stock and redemption or
repurchase obligations under
any Capital Stock or other equity securities issued by such Person; (f) all
reimbursement obligations and other liabilities of such Person with respect to
surety bonds (whether bid, performance or otherwise), letters of credit,
banker's acceptances or similar documents or instruments issued for such
Person's account; and (g) all indebtedness of such Person in respect of
indebtedness of another Person for borrowed money or indebtedness of another
Person otherwise described in this definition which is secured by any consensual
lien, security interest, collateral assignment, conditional sale, mortgage, deed
of trust, or other encumbrance on any asset of such Person, whether or not such
obligations, liabilities or indebtedness are assumed by or are a personal
liability of such Person, all as of such time.
1.39 "Information Certificate" shall mean the Information Certificate
of Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.40 "Intellectual Property" shall mean Borrower's now owned and
hereafter arising or acquired: patents, patent rights, patent applications,
copyrights, works which are the subject matter of copyrights, copyright
registrations, trademarks, trade names, trade styles, trademark and service xxxx
applications, and licenses and rights to use any of the foregoing; all
extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to xxx for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys,
reports, manuals, and operating standards; goodwill; customer and other lists in
whatever form maintained; and trade secret rights, copyright rights, rights in
works of authorship, and contract rights relating to computer software programs,
in whatever form created or maintained.
1.41 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as
Borrower may elect, the exact duration to be determined in accordance with the
customary practice in the applicable Eurodollar Rate market; provided, that,
Borrower may not elect an Interest Period which will end after the last day of
the then-current term of this Agreement.
1.42 "Interest Rate" shall mean,
(a) Subject to clauses (b), (c), (d) and (e) of this definition
below:
(i) as to Prime Rate Loans, a rate equal to
three-quarters (3/4%) percent per annum ("Prime Rate Margin") plus the Prime
Rate, and
(ii) as to Eurodollar Rate Loans, a rate equal to two and
three-quarters (2 3/4%) percent per annum (the "Eurodollar Rate Margin") plus
the Adjusted Eurodollar Rate (in each case, based on the Eurodollar Rate
applicable for the Interest Period selected by Borrower as in effect three (3)
Business Days after the date of receipt by Lender of the request of Borrower for
such Eurodollar Rate Loans in accordance with the terms hereof, whether such
rate is higher or lower than any rate previously quoted to Borrower).
(b) (i) Subject to clauses (c) and (d) of this definition
below, the Eurodollar Rate Margin and Prime Rate Margin shall each be reduced by
one-quarter (1/4%) percent per annum effective as of the first day of the month
after each of the following conditions is satisfied: (i) the Consolidated
Pre-Tax Net Income of Borrower and its Subsidiaries for the immediately
preceding fiscal year (commencing with the fiscal year ending December 31, 2002)
calculated based on the audited financial statements of Borrower and its
Subsidiaries for such fiscal year delivered to Lender, together with the
unqualified opinion of the independent certified accountants, in accordance with
Section 9.6 hereof, shall equal or exceed $2,000,000, and (ii) no Event of
Default shall exist or have occurred and be continuing.
(ii) The Eurodollar Rate Margin and Prime Rate Margin
shall be not be reduced in accordance with Section 1.42(b)(i) above more than
two (2) times during the term of this Agreement.
(c) In the event that the Eurodollar Rate Margin and Prime Rate
Margin is reduced as provided in clause (b) above, if, in the immediately
following fiscal year thereafter, the Consolidated Pre-Tax Net Income of
Borrower and its Subsidiaries is less than $2,000,000, effective as of the first
day of the month after the receipt by Lender of the audited financial statements
of Borrower and its Subsidiaries for such fiscal year, the Eurodollar Rate
Margin and Prime Rate Margin shall increase to the applicable Eurodollar Rate
Margin and Prime Rate Margin as set forth in Section 1.42(a) above.
(d) Notwithstanding anything to the contrary contained in
clauses (a), (b), and (c) of this definition, the Eurodollar Rate Margin and
Prime Rate Margin otherwise used to calculate the Interest Rate for Prime Rate
Loans and for Eurodollar Rate Loans shall be at the applicable Eurodollar Rate
Margin and Prime Rate Margin as set forth in Section 1.42(a) above, (without
regard to clauses (b) and (c) of this definition) plus two (2%) percent per
annum, at Lender's option, (i) for the period (A) from and after the effective
date of termination or non-renewal hereof until Lender has received full and
final payment of all outstanding and unpaid Obligations or as to contingent
Obligations, cash collateral in the amount and on the terms required under
Section 12.1 hereof (notwithstanding entry of a judgment against Borrower) and
(B) from and after the date of the occurrence of an Event of Default for so long
as such Event of Default is continuing, and (ii) on Loans (excluding Loans made
under Section 2.2(b) hereof) to Borrower at any time outstanding in excess of
the Borrowing Base or the Maximum Credit (whether or not such excess(es), arise
or are made with or without Lender's knowledge or consent and whether made
before or after an Event of Default).
1.43 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.44 "LaSalle Standby LC" shall mean that certain Irrevocable Standby
Letter of Credit dated on or about the date hereof, issued by First Union
National Bank for the account of Borrower and payable to LaSalle Bank, N.A., as
beneficiary in the face amount of $1,843,423.96.
1.45 "Letter of Credit Accommodations" shall mean, collectively, the
letters of credit, merchandise purchase or other guaranties which are from time
to time either (a) issued or opened by Lender for the account of Borrower or any
Obligor or (b) with respect to which Lender has agreed to indemnify the issuer
or guaranteed to the issuer the performance by Borrower of its obligations to
such issuer: sometimes being referred to herein individually as "Letter of
Credit Accommodation".
1.46 "License Agreements" shall mean, collectively, Licensor Agreements
and Licensee Agreements.
1.47 "Licensee Agreements" shall mean each of the present and future
license agreements between any Person, as licensor, and Borrower, as licensee,
pursuant to which Borrower licenses Intellectual Property from such Person. As
of the date hereof, each of the Licensee Agreements are set forth on Schedule
8.11(c).
1.48 "License Income Availability" shall mean $8,000,000. The License
Income Availability shall reduce on a monthly basis as follows: (a) commencing
June 1, 2001 and on the first (lst) day of each month thereafter through January
1, 2002, by an amount equal to $408,333.34 per month; and (b) commencing
February 1, 2002 and on the first (15th) day of each month thereafter, by an
amount equal to $295,833.33 per month.
1.49 "Licensor Agreements" shall mean each of the present and future
license agreements between Borrower, as licensor, and any Person pursuant to
which Borrower licenses Intellectual Property to such Person. As of the date
hereof, each of the Licensor Agreements are set forth on Schedule 8.11(b).
1.50 "Loans" shall mean the loans now or hereafter made by Lender to or
for the benefit of Borrower on a revolving basis (involving advances, repayments
and readvances) as set forth in Section 2.1 hereof.
1.51 "Material Adverse Effect" shall mean a material adverse effect on
(a) the financial condition, business, performance or operations of Borrower; or
(b) the legality, validity or enforceability of this Agreement or any of the
other Financing Agreements; (c) the legality, validity, enforceability,
perfection or priority of the security interests and liens of Lender upon the
Collateral or any other property which is security for the Obligations; (d) the
Collateral of Borrower (taken as a whole) or the value of the Collateral; (e)
the ability of Borrower to repay the Obligations or of Borrower to perform its
obligations under this Agreement or any of the other Financing Agreements; or
(f) the ability of Lender to enforce the Obligations or realize upon the
Collateral or otherwise with respect to the rights and remedies of Lender under
this Agreement or any of the other Financing Agreements.
1.52 "Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements), written or oral, of Borrower involving
monetary liability of or to any Person in, an amount in excess of $1,000,000 in
any fiscal year and (b) any other contract or other agreement (other than the
Financing Agreements), whether written or oral, to which Borrower is a party as
to which the breach, nonperformance, cancellation or failure to renew by any
party thereto would have a material adverse effect on the business, assets,
condition (financial or otherwise) or
results of operations or prospects of Borrower or the validity or enforceability
of this Agreement, any of the other Financing Agreements, or any of the rights
and remedies of Lender hereunder or thereunder.
1.53 "Maximum Credit" shall mean the amount of $50,000,000.
1.54 "Multiemployer Plan" shall mean a "multi-employer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding six (6) years contributed to by Borrower or
any ERISA Affiliate.
1.55 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, available or claimed with
respect thereto.
1.56 "Net Recovery Percentage" shall mean the fraction, expressed as a
percentage, (a) the numerator of which is the amount equal to the recovery on
the aggregate amount of the Inventory at such time on an orderly liquidation
basis as set forth in the most recent acceptable appraisal of Inventory received
by Lender in accordance with Section 7.3, net of operating expenses, liquidation
expenses and commissions, and (b) the denominator of which is the original cost
of the aggregate amount of the Inventory subject to appraisal.
1.57 "Obligations" shall mean (a) any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by Borrower to Lender and/or its affiliates,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether arising under this Agreement or otherwise, whether now existing or
hereafter arising, whether arising before, during or after the initial or any
renewal term of this Agreement or after the commencement of any case with
respect to Borrower under the United States Bankruptcy Code or any similar
statute (including the payment of interest and other amounts which would accrue
and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case), whether
direct or indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, secured or unsecured, and
however acquired by Lender and (b) for purposes only of Section 5.1 hereof, any
and all obligations, liabilities and indebtedness of any kind, nature and
description owing by Borrower to any Lender or any Affiliate of Lender arising
under or in connection with a swap agreement between Borrower and Lender or any
Affiliate of Lender; provided, that, (i) in no event shall the amount of such
obligations, liabilities and indebtedness secured by the Collateral pursuant
hereto or any of the other Financing Agreements in the aggregate outstanding at
any time exceed the amount of the Reserve established with respect thereto as in
effect at such time, and (ii) Lender shall have entered into an agreement, in
form and substance satisfactory to Lender, with any Affiliate of Lender that is
a counterparty to such swap agreement, as acknowledged and agreed to by
Borrower, providing for the delivery to Lender by such counterparty of
information with respect to the amount of such indebtedness, obligations and
liabilities and providing for the other rights of such Affiliate pursuant
hereto.
1.58 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrower.
1.59 "Original Investors" shall mean, collectively, Perseus Investors
and Union Overseas Holdings Limited.
1.60 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.61 "Permitted Holders" shall mean the persons listed on Schedule 1.61
hereto and their respective successors and assigns.
1.62 Perseus Investors" shall mean Perseus Acquisition/Recapitalization
Fund, L.L.C. and any of its affiliates (as defined within the codes and
regulations promulgated under the Securities Act of 1933, as amended) or
co-investors that become stockholders of Borrower, and their respective
successors and assigns.
1.63 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including any corporation which elects
subchapter S status under the Code), limited liability company, limited
liability partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.64 "Post Closing Balance Sheet" shall have the meaning set forth in
Section 9.6(6) hereof.
1.65 "Prime Rate" shall mean the rate from time to time publicly
announced by Reference Bank, or its successors, as its prime rate, whether or
not such announced rate is the best rate available at such bank.
1.66 "Prime Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.67 "Pro Forma Closing Balance Sheet" shall have the meaning set forth
in Section 4.1(b) hereof.
1.68 "Provision for Taxes" shall mean an amount equal to all taxes
imposed on or measured by net income, whether Federal, State, Provincial, county
or local, and whether foreign or domestic, that are paid or payable by any
Person in respect of any period in accordance with GAAP.
1.69 "Purchase Agreements" shall mean, individually and collectively,
the Asset Purchase Agreement, dated as of April 6, 2001, by and between Seller
and Borrower, together with bills of sale, quitclaim deeds, assignment and
assumption agreements and such other instruments of transfer as are referred to
therein and all side letters with respect thereto, and all agreements, documents
and instruments executed and/or delivered in connection therewith, as all of the
foregoing now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced;
provided, that, the term "Purchase Agreements" as used herein shall not include
any of the "Financing Agreements" as such term is defined herein.
1.70 "Purchased Assets" means all of the "Assets" purchased and
acquired by Borrower from Seller pursuant to, and as such quoted term is defined
in, the Purchase Agreements.
1.71 "Real Property" shall mean all now owned and hereafter acquired
real property of Borrower, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located.
1.72 "Receivables" shall mean: (a) all Accounts; (b) all amounts at any
time payable to Borrower in respect of the sale or other disposition by Borrower
of any Account or other obligation for the payment of money; (c) all interest,
fees, late charges, penalties, collection fees and other amounts due or to
become due or otherwise payable in connection with any Account; (d) all letters
of credit, indemnities, guarantees, security or other deposits and proceeds
thereof issued payable to Borrower or otherwise in favor of or delivered to
Borrower in connection with any Account; or (e) all other contract rights
(including all rights and remedies of Borrower under or pursuant to the Purchase
Agreements), chattel paper, instruments, notes, general intangibles and other
forms of obligations owing to Borrower, whether from the sale and lease of goods
or other property, licensing of any property (including Intellectual Property or
other general intangibles), rendition of services or from loans or advances by
Borrower or to or for the benefit of any third person (including loans or
advances to any Affiliates or Subsidiaries of Borrower) or otherwise associated
with any Accounts, Inventory or general intangibles of Borrower (including,
without limitation, choses in action, causes of action, tax refunds, tax refund
claims, any funds which may become payable to Borrower in connection with the
termination of any Plan or other employee benefit plan and any other amounts
payable to Borrower from any Plan or other employee benefit plan, rights and
claims against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, casualty or any similar types of
insurance and any proceeds thereof and proceeds of insurance covering the lives
of employees on which Borrower is beneficiary).
1.73 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.74 "Reference Bank" shall mean First Union National Bank, or, if
First Union National Bank no longer publicly announces a rate as its prime rate,
such other bank as Lender may from time to time designate.
1.75 "Renewal Date" shall the meaning set forth in Section 12.1 hereof.
1.76 "Reserves" shall mean as of any date of determination, such
amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Loans and Letter of Credit Accommodations which would
otherwise be available to Borrower under the lending formula(s) provided for
herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, adversely affect, or would have a reasonable
likelihood of adversely affecting, either (i) the Collateral or its value, (ii)
the assets or business of Borrower or any Obligor or (iii) the security
interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Lender's good
faith belief that any collateral report or financial information furnished by or
on behalf of Borrower or any Obligor to Lender is or may have been incomplete,
inaccurate or misleading in any material respect or (c) to reflect outstanding
Letter of Credit Accommodations as provided in Section 2.2 hereof or (d) in
respect of the obligations, liabilities or indebtedness of Borrower of any kind,
nature or description owing by Borrower to Lender or any Affiliate of Lender
arising under or in connection with any swap agreement of Borrower with Lender
or any Affiliate of Lender, or (e) in respect of any state of facts which Lender
determines in good faith constitutes an Event of Default or may, with notice or
passage of time or both, constitute an Event of Default, or (f) for the payment
of all freight and/or shipping charges with respect to the delivery of Inventory
from any retail store owned or leased by Seller to any location owned and
controlled by Borrowers; or (g) (i) if, on a rolling twelve (12) month basis,
(A) from the date hereof up to and including January 1, 2002, the license fee
income is less than $11,000,000, and (B) from and after February 1, 2002, the
license fee income is less than $9,500,000; or (ii) if the license fee income
for any consecutive three-month period is more than ten (10%) percent less than
the license fee income for the same consecutive three-month period in the
immediately preceding year; or (h) to reflect any material variance in any test
counts of Borrower's Inventory. To the extent Lender may revise the lending
formulas used to determine the Borrowing Base or establish new criteria or
revise existing criteria for Eligible Accounts or Eligible Inventory so as to
address any circumstances, condition, event or contingency in a manner
satisfactory to Lender, Lender shall not establish a Reserve for the same
purpose. The amount of any Reserve established by Lender shall have a reasonable
relationship to the event, condition or other matter which is the basis for such
reserve as determined by Lender in good faith.
1.77 "Seller" shall mean Converse Inc., as debtor and
debtor-in-possession in the Chapter 11 Case, and its successors and assigns.
1.78 "Spring 2002 Appraisal" shall mean the written report of an
appraisal of the Borrower's Inventory conducted during the month of March, 2002,
conducted by an appraiser reasonably acceptable to Lender and on which Lender is
expressly permitted to rely, in form, scope and methodology reasonably
satisfactory to Lender, setting forth the Net Recovery Percentage of each type
of category of inventory and such other values as Lender may specify.
1.79 "Subsidiary" or "subsidiary" shall mean, with respect to any
Person, any corporation, limited liability company, limited liability
partnership or other limited or general partnership, trust, association or other
business entity of which an aggregate of at least a majority of the outstanding
Capital Stock or other interests entitled to vote in the election of the board
of directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), managers, trustees
or other controlling persons, or an equivalent controlling interest therein, of
such
Person is, at the time, directly or indirectly, owned by such Person and/or one
or more subsidiaries of such Person.
1.80 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in first-out
basis in accordance with GAAP or (b) market value.
1.81 "Voting Stock" shall mean with respect to any Person, (a) one (1)
or more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, even if at the time any other class or classes of Capital Stock
have, or might have, voting power by reason of the happening of any contingency,
and (b) any Capital Stock of such Person convertible or exchangeable without
restriction at the option of the holder thereof into Capital Stock of such
Person described in clause (a) of this definition.
SECTION 2. CREDIT FACILITIES
2.1 Loans.
(a) Subject to and upon the terms and conditions contained
herein, Lender agrees to make Loans to Borrower from time to time in amounts
requested by Borrower up to the amount equal to the lesser of: (i) the Borrowing
Base or (ii) the Maximum Credit.
(b) Lender may, in its discretion, from time to time, upon not
less than five (5) days prior notice to Borrower, (i) (A) reduce the lending
formula with respect to Eligible Accounts to the extent that, at any time,
Dilution is or may reasonably be anticipated to be greater than ten (10%)
percent and any such decrease shall be in an amount equal to one (1%) percentage
point for each percentage point that Dilution exceeds ten (10%) percent; or (B)
if the lending formula with respect to Eligible Accounts has decreased under
Section 2.1(b)(i)(A) above and, thereafter, if Dilution improves, Lender will
increase the lending formula with respect to Eligible Accounts up to eighty
(80%) percent, to the extent of the difference between the Dilution
corresponding to the then-current lending formula with respect to Eligible
Accounts and the then-current Dilution and any such increase shall be in an
amount equal to one (1%) percent for each percentage point of such difference;
provided that if, after May 1, 2002, Dilution is less than five (5%) percent,
Lender will increase the lending formula with respect to Eligible Accounts to
eighty-five (85%) percent; except that if Dilution is less than ten (10%)
percent but greater than five (5%) percent, the lending formula with respect to
Eligible Accounts will be eighty (80%) percent; or (ii) reduce the lending
formula(s) with respect to Eligible Inventory to the extent that Lender
determines that: (A) the number of days of the turnover of the Inventory for any
period has increased in any material respect, or (B) the Net Recovery Percentage
of the Eligible Inventory, or any category thereof, has decreased, or (C) the
quality or mix of the Inventory has deteriorated in any material respect. To the
extent Lender shall have established a Reserve which is sufficient to address
any event, condition or matter in a manner satisfactory to Lender in good faith,
Lender shall not exercise its rights under Section 2.1(b) to reduce the lending
formulas to address such event, condition or matter. The amount of any reduction
in the lending formula by Lender pursuant to Section 2.1(b) or the establishment
of any Reserve shall have a reasonable relationship to the matter which is the
basis for such a reduction or such Reserve, as the case may be. The amount of
any decrease in the lending formulas shall have a
reasonable relationship to the event, condition or circumstance which is the
basis for such decrease as determined by Lender in good faith. In determining
whether to reduce the lending formula(s), Lender may consider events,
conditions, contingencies or risks which are also considered in determining
Eligible Accounts, Eligible Inventory or in establishing Reserves.
(c) Lender will increase the Inventory Advance Rate (as defined
in Section 1.9(b)) based upon the Spring 2002 Appraisal and the Net Recovery
Percentage of the Borrower's Inventory as set forth therein. Any increase in the
Inventory Advance Rate shall be effective on the first (1st) day of the month
immediately following the month that Lender receives the Spring 2002 Appraisal.
(d) Except in Lender's discretion, the aggregate amount of the
Loans and the Letter of Credit Accommodations outstanding at any time shall not
exceed the Maximum Credit. In the event that the outstanding amount of any
component of the Loans, or the aggregate amount of the outstanding Loans and
Letter of Credit Accommodations, exceed the amounts available under the lending
formulas, the sublimits for Letter of Credit Accommodations set forth in Section
2.2(e) or the Maximum Credit, as applicable, such event shall not limit, waive
or otherwise affect any rights of Lender in that circumstance or on any future
occasions and Borrower shall, upon demand by Lender, which may be made at any
time or from time to time, immediately repay to Lender the entire amount of any
such excess(es) for which payment is demanded.
2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained
herein, at the request of Borrower, Lender agrees to provide or arrange for
Letter of Credit Accommodations for the account of Borrower containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Loans to Borrower
pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any
bank or issuer in connection with the Letter of Credit Accommodations, Borrower
shall pay to Lender a letter of credit fee at a rate equal to two (2%) percent
per annum on the daily outstanding balance of the Letter of Credit
Accommodations for the immediately preceding month (or part thereof), payable in
arrears as of the first day of each succeeding month, except that Borrower shall
pay to Lender such letter of credit fee, at Lender's option, without notice, at
a rate equal to four (4%) percent per annum on such daily outstanding balance
for: (i) the period from and after the date of termination or non-renewal hereof
until Lender has received full and final payment of all Obligations
(notwithstanding entry of a judgment against Borrower) and (ii) the period from
and after the date of the occurrence of an Event of Default for so long as such
Event of Default is continuing as determined by Lender. Such letter of credit
fee shall be calculated on the basis of a three hundred sixty (360) day year and
actual days elapsed and the obligation of Borrower to pay such fee shall survive
the termination or non-renewal of this Agreement.
(c) Borrower shall give Lender two (2) Business Days' prior
written notice of Borrower's request for the issuance of a Letter of Credit
Accommodation. Such notice shall be
irrevocable and shall specify the original face amount of the Letter of Credit
Accommodation requested, the effective date (which date shall be a Business Day)
of issuance of such requested Letter of Credit Accommodation, whether such
Letter of Credit Accommodations may be drawn in a single or in partial draws,
the date on which such requested Letter of Credit Accommodation is to expire
(which date shall be a Business Day), the purpose for which such Letter of
Credit Accommodation is to be issued, and the beneficiary of the requested
Letter of Credit Accommodation. Borrower shall attach to such notice the
proposed form of the Letter of Credit Accommodation.
(d) In addition to being subject to the satisfaction of the
applicable conditions precedent contained in Section 4 hereof and the other
terms and conditions contained herein, no Letter of Credit Accommodations shall
be available unless each of the following conditions precedent have been
satisfied in a manner satisfactory to Lender: (i) Borrower shall have delivered
to the proposed issuer of such Letter of Credit Accommodation at such times and
in such manner as such proposed issuer may require, an application in form and
substance satisfactory to such proposed issuer and Lender for the issuance of
the Letter of Credit Accommodation and such other documents as may be required
pursuant to the terms thereof, and the form and terms of the proposed Letter of
Credit Accommodation shall be satisfactory to Lender and such proposed issuer,
(ii) as of the date of issuance, no order of any court, arbitrator or other
Governmental Authority shall purport by its terms to enjoin or restrain money
center banks generally from issuing letters of credit of the type and in the
amount of the proposed Letter of Credit Accommodation, and no law, rule or
regulation applicable to money center banks generally and no request or
directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over money center banks generally shall prohibit, or
request that the proposed issuer of such Letter of Credit Accommodation refrain
from, the issuance of letters of credit generally or the issuance of such
Letters of Credit Accommodation; and (iii) the Excess Availability, prior to
giving effect to any Reserves with respect to such Letter of Credit
Accommodations, on the date of the proposed issuance of any Letter of Credit
Accommodations, shall be equal to or greater than: (A) with respect to the
LaSalle Standby LC, an amount equal to forty-seven (47%) percent multiplied by
the Value of such Eligible Inventory, plus freight, taxes, duty and other
amounts which Lender estimates must be paid in connection with such Inventory
upon arrival and for delivery to one of Borrower's locations for Eligible
Inventory within the United States of America; (B) if the proposed Letter of
Credit Accommodation is for the purpose of purchasing Eligible Inventory and the
documents of title with respect thereto are consigned to the issuer, the sum of
(1) the percentage equal to one hundred (100%) percent minus the then-applicable
percentage with respect to Eligible Inventory set forth in the definition of the
term Borrowing Base multiplied by the Value of such Eligible Inventory, plus (2)
freight, taxes, duty and other amounts which Lender estimates must be paid in
connection with such Inventory upon arrival and for delivery to one of
Borrower's locations for Eligible Inventory within the United States of America;
and (C) if the proposed Letter of Credit Accommodation is for any other purpose
or the documents of title are not consigned to the issuer in connection with a
Letter of Credit Accommodation for the purpose of purchasing Inventory, an
amount equal to one hundred (100%) percent of the face amount thereof and all
other commitments and obligations made or incurred by Lender with respect
thereto. Effective on the issuance of each Letter of Credit Accommodation, a
Reserve shall be established in the applicable amount set forth in Sections
2.2(d)(iii)(A),(B) or (C).
(e) Except in Lender's discretion, the amount of all
outstanding Letter of Credit Accommodations and all other commitments and
obligations made or incurred by Lender in connection therewith shall not at any
time exceed $20,000,000. At any time an Event of Default exists or has occurred
and is continuing, upon Lender's request, Borrower will either furnish cash
collateral to secure the reimbursement obligations to the issuer in connection
with any Letter of Credit Accommodations or furnish cash collateral to Lender
for the Letter of Credit Accommodations.
(f) Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation. Borrower assumes all risks with respect to the acts or
omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
Borrower's agent. Borrower assumes all risks for, and agrees to pay, all
foreign, Federal, State and local taxes, duties and levies relating to any goods
subject to any Letter of Credit Accommodations or any documents, drafts or
acceptances thereunder. Borrower hereby releases and holds Lender harmless from
and against any acts, waivers, errors, delays or omissions, whether caused by
Borrower, by any issuer or correspondent or otherwise with respect to or
relating to any Letter of Credit Accommodation, except for the gross negligence
or willful misconduct of Lender as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction. The provisions of
this Section 2.2(f) shall survive the payment of Obligations and the termination
or non-renewal of this Agreement.
(g) In connection with Inventory purchased pursuant to Letter
of Credit Accommodations, Borrower shall, at Lender's request, instruct all
suppliers, carriers, forwarders, customs brokers, warehouses or others receiving
or holding cash, checks, Inventory, documents or instruments in which Lender
holds a security interest to deliver them to Lender and/or subject to Lender's
order, and if they shall come into Borrower's possession, to deliver them, upon
Lender's request, to Lender in their original form. Borrower shall also, at
Lender's request, designate Lender as the consignee on all bills of lading and
other negotiable and non-negotiable documents.
(h) Borrower hereby irrevocably authorizes and directs any
issuer of a Letter of Credit Accommodation to name Borrower as the account party
therein and to deliver to Lender all instruments, documents and other writings
and property received by issuer pursuant to the Letter of Credit Accommodations
and to accept and rely upon Lender's instructions and agreements with respect to
all matters arising in connection with the Letter of Credit Accommodations or
the applications therefor. Nothing contained herein shall be deemed or construed
to grant Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter of
Credit Accommodation provided by an issuer other than Lender unless Lender has
duly executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrower shall be bound by any interpretation made in good faith by Lender, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrower. Lender shall have the sole and exclusive right and
authority to, and Borrower shall not: (i) at any time an Event of Default exists
or has occurred and is continuing, (A) approve or resolve any questions of
non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Lender may take such actions either in its
own name or in Borrower's name.
(i) Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Any duties or obligations
undertaken by Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrower to Lender and to apply in all
respects to Borrower.
2.3 Reserves. All Loans otherwise available to Borrower hereunder
shall be subject to Lender's continuing right to establish and revise Reserves.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the Loans at the Interest Rate. All interest accruing
hereunder on and after the date of any Event of Default or termination or
non-renewal hereof shall be payable on demand.
(b) Borrower may from time to time request Eurodollar Rate
Loans or may request that Prime Rate Loans be converted to Eurodollar Rate Loans
or that any existing Eurodollar Rate Loans continue for an additional Interest
Period. Such request from Borrower shall specify the amount of the Eurodollar
Rate Loans or the amount of the Prime Rate Loans to be converted to Eurodollar
Rate Loans or the amount of the Eurodollar Rate Loans to be continued (subject
to the limits set forth below) and the Interest Period to be applicable to such
Eurodollar Rate Loans. Subject to the terms and conditions contained herein,
three (3) Business Days after receipt by Lender of such a request from Borrower,
such Prime Rate Loans shall be converted to Eurodollar Rate Loans or such
Eurodollar Rate Loans shall continue, as the case may be, provided, that, (i) no
Event of Default, or act, condition or event which with notice or passage of
time or both would constitute an Event of Default shall exist or have occurred
and be continuing, (ii) no party hereto shall have sent any notice of
termination or non-renewal of this Agreement, (iii) Borrower shall have complied
with such customary procedures as are established by Lender and specified by
Lender to Borrower from time to time for requests by Borrower for Eurodollar
Rate Loans, (iv) no more than five (5) Eurodollar Rate Loans may be in effect at
any one time, (v) the minimum amount of any Eurodollar
Rate Loan must be in an amount not less than $2,000,000 or an integral multiple
of $500,000 in excess thereof and (vi) Lender shall have determined that the
Interest Period or Adjusted Eurodollar Rate is available to Lender through the
Reference Bank and can be readily determined as of the date of the request for
such Eurodollar Rate Loan by Borrower. Any request by Borrower for Eurodollar
Rate Loans or to convert Prune Rate Loans to Eurodollar Rate Loans or to
continue any existing Eurodollar Rate Loans shall be irrevocable.
Notwithstanding anything to the contrary contained herein, Lender and Reference
Bank shall not be required to purchase United States Dollar deposits in the
London interbank market or other applicable Eurodollar Rate market to fund any
Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if
Lender and Reference Bank had purchased such deposits to fund the Eurodollar
Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest Period, unless
Lender has received and approved a request to continue such Eurodollar Rate Loan
at least three (3) Business Days prior to such last day in accordance with the
terms hereof: Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to Borrower, convert to Prime Rate Loans in the event that this
Agreement shall terminate or not be renewed. Borrower shall pay to Lender, upon
demand by Lender (or Lender may, at its option, charge any loan account of
Borrower) any amounts required to compensate Lender, the Reference Bank or any
participant with Lender for any loss (including loss of anticipated profits),
cost or expense incurred by such person, as a result of the conversion of
Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on non-contingent Obligations (other than Eurodollar
Rate Loans) shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month after any
change in such Prime Rate is announced based on the Prime Rate in effect on the
last day of the month in which any such change occurs. In no event shall charges
constituting interest payable by Borrower to Lender exceed the maximum amount or
the rate permitted under any applicable law or regulation, and if any such part
or provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform thereto.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee the
amount of $500,000, which shall be fully earned and payable as of the date
hereof.
3.3 Servicing Fee. Borrower shall pay to Lender monthly a servicing
fee in an amount equal to $5,000 in respect of Lender's services for each month
(or part thereof) while this Agreement remains in effect and for so long
thereafter as any of the Obligations are outstanding, which fee shall be fully
earned as of and payable in advance on the date hereof and on the first day of
each month hereafter.
3.4 Unused Line Fee. Borrower shall pay to Lender monthly an unused
line fee at a rate equal to one-half (1/2%) percent per annum calculated upon
the amount by which the Maximum Credit exceeds the average daily principal
balance of the outstanding Loans and Letter of Credit Accommodations during the
immediately preceding month (or part thereof) while this Agreement is
in effect and for so long thereafter as any of the Obligations are outstanding,
which fee shall be payable on the first day of each month in arrears.
3.5 Changes in Laws and Increased Costs of Loans.
(a) Notwithstanding anything to the contrary contained herein,
all Eurodollar Rate Loans shall, upon notice by Lender to Borrower, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for Lender, Reference Bank or any participant with Lender to
make or maintain Eurodollar Rate Loans or to comply with the terms hereof in
connection with the Eurodollar Rate Loans, or (B) shall result in the increase
in the costs to Lender, Reference Bank or any participant of making or
maintaining any Eurodollar Rate Loans by an amount deemed by Lender in good
faith to be material, or (C) reduce the amounts received or receivable by Lender
in respect thereof, by an amount deemed by Lender in good faith to be material
or (ii) the cost to Lender, Reference Bank or any participant of making or
maintaining any Eurodollar Rate Loans shall otherwise increase by an amount
deemed by Lender in good faith to be material. Borrower shall pay to Lender,
upon demand by Lender (or Lender may, at its option, charge any loan account of
Borrower) any amounts required to compensate Lender, the Reference Bank or any
participant with Lender for any loss (including loss of anticipated profits),
cost or expense incurred by such person as a result of the foregoing, including,
without limitation, any such loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such person
to make or maintain the Eurodollar Rate Loans or any portion thereof: A
certificate of Lender setting forth the basis for the determination of such
amount necessary to compensate Lender as aforesaid shall be delivered to
Borrower and shall be conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the Eurodollar
Rate Loans are received by Lender other than on the last day of the applicable
Interest Period (whether pursuant to acceleration, upon maturity or otherwise),
including any payments pursuant to the application of collections under Section
6.3 or any other payments made with the proceeds of Collateral, Borrower shall
pay to Lender upon demand by Lender (or Lender may, at its option, charge any
loan account of Borrower) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any additional loss (including
loss of anticipated profits), cost or expense incurred by such person as a
result of such prepayment or payment, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such person to make or maintain such
Eurodollar Rate Loans or any portion thereof.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance
satisfactory to Lender, evidence that the Purchase Agreements have been duly
executed and delivered by and to the appropriate parties thereto and the
transactions contemplated under the terms of the Purchase
Agreements have been consummated prior to or contemporaneously with the
execution of this Agreement;
(b) Lender shall have received, in form and substance
reasonably satisfactory to Lender, a pro forma balance sheet of Borrower
reflecting the initial transactions contemplated hereunder (the "Pro Forma
Closing Balance Sheet"), including, but not limited to, (i) the consummation of
the acquisition of the Purchased Assets by Borrower from Seller and the other
transactions contemplated by the Purchase Agreements, including the payment of
all costs, fees and expenses required to be paid at the closing of the
acquisition of the Purchase Assets, (ii) all cash equity capital contributions
to Borrower, (iii) the receipt by Borrower of the proceeds of the sale by
Borrower of the Seller's footwear license for the territory of Japan, and (iv)
the Loans and Letter of Credit Accommodations provided by Lender to Borrower on
the date hereof and the use of the proceeds of the initial Loans as provided
herein, accompanied by a certificate, dated of even date herewith, of the chief
financial officer, or such other officer reasonably acceptable to Lender, of
Borrower stating that such Pro Forma Closing Balance Sheet represents the
reasonable, good faith opinion of such officer as to the subject matter thereof
as of the date of such certificate;
(c) Lender shall have received, in form and substance
satisfactory to Lender, evidence that Borrower has received net cash proceeds
from a cash equity capital contribution to Borrower of not less than $58,000,000
from Perseus Investors and Union Overseas Holdings Limited and such proceeds
have been applied to the purchase price for the Purchased Assets payable
pursuant to the Purchase Agreements;
(d) The transfer by Borrower to Itochu Corporation of all
right, title and interest in the Japanese Footwear Trademarks (as defined in the
Stock Purchase and Trademark Agreement, entered into as of February 24, 2001,
among Borrower, cre-8-net Ventures L.L.C. and Itochu Corporation (the "Stock
Purchase Agreement")), and the other assets and rights conveyed by Borrower to
Itochu Corporation pursuant to the Stock Purchase Agreement, shall have been
closed prior to the making of any Loans and the grant of the security interests
by Borrower pursuant to Section 5, and Lender shall have received, in form and
substance satisfactory to Lender, evidence that Borrower has received not less
than $29,000,000 in cash or other immediately available funds as proceeds from
the sale by Borrower of the Seller's footwear license for the territory of
Japan, and such proceeds have been applied to the purchase price for the
Purchased Assets payable pursuant to the Purchase Agreements;
(e) no court of competent jurisdiction shall have issued any
injunction, restraining order or other order with respect to the Converse Sale
Order which otherwise prohibits the consummation of the transactions described
in the Purchase Agreements or the Financing Agreements, or modifies such
transactions, and no governmental or other action or proceeding shall have been
commenced, seeking any injunction, restraining order or other order which seeks
to void or otherwise modify the transactions described in the Purchase
Agreements or the Financing Agreements.
(f) Lender shall have received a certified copy of the Converse
Sale Order as duly entered by the Bankruptcy Court in the Chapter 11 Case and
the time within which any Person may contest or appeal from the Converse Sale
Order shall have expired, without such contest or appeal
having been taken (or if any contest or appeal shall have been taken from such
Order, the contest for appeal shall have been finally disposed of, and the same
shall not be subject to any further appeal or contest) and the Converse Sale
Order shall, inter alia, (i) contain a finding that Borrower is a good faith
purchaser for value of the assets of Seller under the Purchase Agreements within
the meaning of Section 363(m) of the Bankruptcy Code and (ii) authorize Seller
to sell the Purchased Assets to Borrower, free and clear of any security
interests, liens, claims or encumbrances and to execute, deliver and perform the
terms and provisions of all of the Purchase Agreements;
(g) Lender shall have received, in form and substance
reasonably satisfactory to Lender, all releases, terminations and such other
documents as Lender may reasonably request to evidence and effectuate the
termination by the existing lenders to Borrower of their respective financing
arrangements with Borrower and the termination and release by it or them, as the
case may be, of any interest in and to any assets and properties of Borrower and
each Obligor, duly authorized, executed and delivered by it or each of them,
including, but not limited to, (i) UCC termination statements for all UCC
financing statements previously filed by it or any of them or their
predecessors, as secured party and Borrower or any Obligor, as debtor and (ii)
satisfactions and discharges of any mortgages, deeds of trust or deeds to secure
debt by Borrower or any Obligor in favor of such existing lender or lenders, in
form acceptable for recording with the appropriate Governmental Authority;
(h) all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
reasonably satisfactory in form and substance to Lender, and Lender shall have
received all information and copies of all documents, including records of
requisite corporate action and proceedings which Lender may have reasonably
requested in connection therewith, such documents where requested by Lender or
its counsel to be certified by appropriate corporate officers or Governmental
Authority;
(i) no material adverse change shall have occurred in the
assets, business or prospects of Borrower (including the Purchased Assets) since
the date of Lender's latest field examination and no change or event shall have
occurred which would impair, in any material respect, the ability of Borrower or
any Obligor to perform its obligations hereunder or under any of the other
Financing Agreements to which it is a party or of Lender to enforce the
Obligations or realize upon the Collateral;
(j) Lender shall have completed a field review of the Records
and such other information with respect to the Collateral as Lender may require
to determine the amount of Loans available to Borrower (including, without
limitation, current perpetual inventory records and/or roll-forwards of Accounts
and Inventory through the close of business on April 27, 2001 and test counts of
the Inventory in a manner satisfactory to Lender, together with such supporting
documentation as may be necessary or appropriate, and other documents and
information that will enable Lender to accurately identify and verify the
Collateral), the results of which each case shall be satisfactory to Lender, not
more than three (3) Business Days prior to the date hereof;
(k) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to perfect its security interests in and liens upon the Collateral
or to effectuate the provisions or purposes of this Agreement and the other
Financing Agreements, including, without limitation, Collateral Access
Agreements by owners and lessors of leased premises of Borrower and by
warehouses at which Collateral is located to the extent required hereunder;
(l) Lender shall have received a final written report of an
appraisal of the inventory, conducted by an appraiser reasonably acceptable to
Lender and on which Lender is expressly permitted to rely, in form, scope and
methodology reasonably satisfactory to Lender setting forth the orderly
liquidation value of each type of category of inventory and such other values as
Lender may specify;
(m) the Excess Availability as determined by Lender in good
faith, as of the date hereof, shall be not less than $14,000,000 after giving
effect to the initial Loans made or to be made and Letter of Credit
Accommodations issued or to be issued in connection with the initial
transactions hereunder and the payment of all costs, fees and expenses required
to be paid by Borrower in connection with the Purchase Agreements and all
transactions thereunder;
(n) Lender shall have received, in form and substance
reasonably satisfactory to Lender, all agreements with the depository banks and
Borrower with respect to the Blocked Accounts as Lender may require pursuant to
Section 6.3 hereof, duly authorized, executed and delivered by such depository
banks and Borrower;
(o) Lender shall have received evidence, in form and substance
reasonably satisfactory to Lender, that Lender has a valid perfected first
priority security interest in all of the Collateral;
(p) Lender shall have received and reviewed UCC search results
for all jurisdictions in which assets of Borrower are located, which search
results shall be in form and substance satisfactory to Lender;
(q) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(r) Lender shall have received, in form and substance
reasonably satisfactory to Lender, such opinion letters of counsel to Borrower
with respect to the Purchase Agreements, the Financing Agreements and such other
matters as Lender may request; and
(s) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrower, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto, except
to the extent that such representations and warranties expressly relate solely
to an earlier date (in which case such representations and warranties shall have
been true and accurate on and as of such earlier date);
(b) no law, regulation, order, judgment or decree of any
Governmental Authority shall exist, and no action, suit, investigation,
litigation or proceeding shall be pending or threatened in any court or before
any arbitrator or Governmental Authority, which (i) purports to enjoin,
prohibit, restrain or otherwise affect (A) the making of the Loans or providing
the Letter of Credit Accommodations, or (B) the consummation of the transactions
contemplated pursuant to the terms hereof or the other Financing Agreements or
(ii) has or could reasonably be expected to have a Material Adverse Effect; and
(c) no Event of Default and no act, condition or event which,
with notice or passage of time or both, would constitute an Event of Default,
shall exist or have occurred and be continuing on and as of the date of the
making of such Loan or providing each such Letter of Credit Accommodation and
after giving effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
To secure payment and performance of all Obligations, Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right of
set off against, and hereby assigns to Lender as security, the following
property and interests in property of Borrower, whether now owned or hereafter
acquired or existing, and wherever located (together with all other collateral
security for the Obligations at any time granted to or held or acquired by
Lender, collectively, the "Collateral"):
5.1 Receivables;
5.2 all other present and future general intangibles (including
Intellectual Property and existing and future leasehold interests in equipment,
real estate and fixtures), chattel paper, documents, instruments, investment
property (including securities, whether certificated or uncertificated,
securities accounts, security entitlements, commodity contracts or commodity
accounts), letters of credit, bankers' acceptances and guaranties;
5.3 all present and future monies, securities and other investment
property, credit balances, deposits, deposit accounts and other property of
Borrower now or hereafter held or received by or in transit to Lender or its
Affiliates or at any other depository or other institution from or for the
account of Borrower, whether for safekeeping, pledge, custody, transmission,
collection or otherwise, and all present and future liens, security interests,
rights, remedies, title and interest in, to and in respect of Receivables and
other Collateral, including (a) rights and remedies under or relating to
guaranties, contracts of suretyship, letters of credit and credit and other
insurance related to the Collateral, (b) rights of stoppage in transit,
replevin, repossession, reclamation and other rights
and remedies of an unpaid vendor, lien or secured party, (c) goods described in
invoices, documents, contracts or instruments with respect to, or otherwise
representing or evidencing, Receivables or other Collateral, including returned,
repossessed and reclaimed goods, and (d) deposits by and property of account
debtors or other persons securing the obligations of account debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Real Property;
5.7 Records; and
5.8 all products and proceeds of the foregoing, in any form, including
insurance proceeds and all claims against third parties for loss or damage to or
destruction of any or all of the foregoing.
Notwithstanding anything to the contrary set forth above, nothing
contained herein shall be construed to constitute a present assignment by
Borrower to Lender of title to any Intellectual Property.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs, expenses
and interest. All entries in the loan account(s) shall be made in accordance
with Lender's customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrower a written statement as
provided above, the balance in Borrower's loan account(s) shall be presumptive
evidence of the amounts due and owing to Lender by Borrower.
6.3 Collection of Accounts.
(a) Borrower shall establish and maintain, at its expense,
blocked accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts"), as Lender may reasonably specify, with such banks as are
reasonably acceptable to Lender into which Borrower shall promptly deposit and
direct its account debtors to directly remit all payments on Receivables
and all payments constituting proceeds of Inventory or other Collateral in the
identical form in which such payments are made, whether by cash, check or other
manner. The banks at which the Blocked Accounts are established shall enter into
an agreement, in form and substance reasonably satisfactory to Lender, providing
that all items received or deposited in the Blocked Accounts are the property of
Lender, that the depository bank has no lien upon, or right to setoff against,
the Blocked Accounts, the items received for deposit therein, or the funds from
time to time on deposit therein and that the depository bank will wire, or
otherwise transfer, in immediately available funds, on a daily basis, all funds
received or deposited into the Blocked Accounts to such bank account of Lender
as Lender may from time to time designate for such purpose ("Payment Account").
Borrower agrees that all payments made to such Blocked Accounts or other funds
received and collected by Lender, whether in respect of the Receivables, as
proceeds of Inventory or other Collateral or otherwise shall be treated as
payments to Lender in respect of the Obligations and therefore shall constitute
the property of Lender to the extent of the then-outstanding Obligations.
(b) For purposes of calculating the amount of the Loans
available to Borrower, such payments will be applied (conditional upon final
collection) to the Obligations on the Business Day of receipt by Lender of
immediately available funds in the Payment Account, provided such payments and
notice thereof are received in accordance with Lender's usual and customary
practices as in effect from time to time and within sufficient time to credit
Borrower's loan account on such day, and if not, then on the next Business Day.
For the purposes of calculating interest on the Obligations, such payments or
other funds received will be applied (conditional upon final collection) to the
Obligations one (1) Business Day following the date of receipt of immediately
available funds by Lender in the Payment Account, provided such payments or
other funds and notice thereof are received in accordance with Lender's usual
and customary practices as in effect from time to time and within sufficient
time to credit Borrower's loan account on such day, and if not, then on the next
Business Day.
(c) Borrower and its stockholders, directors, employees,
agents, Subsidiaries or other Affiliates shall, acting as trustee for Lender,
receive, as the property of Lender, any monies, checks, notes, drafts or any
other payment relating to and/or proceeds of Accounts or other Collateral which
come into their possession or under their control and immediately upon receipt
thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to
Lender. In no event shall the same be commingled with Borrower's own funds.
Borrower agrees to reimburse Lender on demand for any amounts owed or paid to
any bank at which a Blocked Account is established or any other bank or person
involved in the transfer of funds to or from the Blocked Accounts arising out of
Lender's payments to or indemnification of such bank or person. The obligation
of Borrower to reimburse Lender for such amounts pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Lender may designate from time
to time. Lender shall apply payments received or collected from Borrower or for
the account of Borrower (including the monetary proceeds of collections or of
realization upon any Collateral) as follows: first, to pay any fees, indemnities
or expense reimbursements then due to Lender from Borrower; second, to pay
interest due in respect of any Loans; third, to pay principal due in respect of
the Loans; fourth, to pay or prepay any other Obligations whether or not then
due, in such order and manner as Lender
determines. Notwithstanding anything to the contrary contained in this
Agreement, unless so directed by Borrower, or unless an Event of Default shall
exist or have occurred and be continuing, Lender shall not apply any payments
which it receives to any Eurodollar Rate Loans, except (a) on the expiration
date of the Interest Period applicable to any such Eurodollar Rate Loans, or (b)
in the event that there are no outstanding Prime Rate Loans. At Lender's option,
all principal, interest, fees, costs, expenses and other charges provided for in
this Agreement or the other Financing Agreements may be charged directly to the
loan account(s) of Borrower. Borrower shall make all payments to Lender on the
Obligations free and clear of, and without deduction or withholding for or on
account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts,
fees, deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment of,
any of the Obligations, Lender is required to surrender or return such payment
or proceeds to any Person for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall be reinstated and continue and this
Agreement shall continue in full force and effect as if such payment or proceeds
had not been received by Lender. Borrower shall be liable to pay to Lender, and
does hereby indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the
Loans and provide the Letter of Credit Accommodations based upon telephonic or
other instructions received from anyone purporting to be an officer of Borrower
or other authorized person named in written notice from Borrower to Lender from
time to time or, at the discretion of Lender, if such Loans are necessary to
satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations hereunder shall specify the date on which the requested advance
is to be made or Letter of Credit Accommodations established (which day shall be
a Business Day) and the amount of the requested Loan. Requests received after
11:00 a.m. New York time on any day shall be deemed to have been made as of the
opening of business on the immediately following Business Day. All Loans and
Letter of Credit Accommodations under this Agreement shall be conclusively
presumed to have been made to, and at the request of and for the benefit of,
Borrower when deposited to the credit of Borrower or otherwise disbursed or
established in accordance with the instructions of Borrower or in accordance
with the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the
Loans provided by Lender to Borrower hereunder only for: (a) payments to each of
the persons listed in the disbursement direction letter furnished by Borrower to
Lender on or about the date hereof for purposes of paying a portion of the
purchase price for the Purchased Assets under the Purchase Agreements and (b)
costs, expenses and fees in connection with the preparation, negotiation,
execution and delivery of this Agreement, the other Financing Agreements and the
Purchase Agreements. All other Loans made or Letter of Credit Accommodations
provided by Lender to Borrower pursuant to the provisions hereof shall be used
by Borrower only for general operating, working capital and other proper
corporate purposes of Borrower not otherwise prohibited by the terms hereof:
None of the proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security or for the purposes of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which
might cause any of the Loans to be considered a "purpose credit" within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System,
as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting.
(a) Borrower shall provide Lender with the following documents
in a form satisfactory to Lender:
(i) on a weekly basis, or more frequently as required by
Lender at any time that Excess Availability of Borrower is less than $7,500,000
or an Event of Default exists, a schedule of sales made, credits issued and cash
received;
(ii) as soon as possible after the end of each month (but
in any event within ten (10) days after the end thereof), or more frequently as
Lender may reasonably request, (A) perpetual inventory reports by location and
category, (B) agings of accounts receivable (together with a reconciliation to
the previous month's aging and general ledger); (C) agings of account payable
(and including information indicting the status of payments to owners and
lessors of the leased premises of Borrower), (D) with respect to each Licensor
Agreement, (1) a report of all license fee income received by Borrower for such
month and for the same month in the immediately preceding year, and (2) a report
of all license fee income received by Borrower during the twelve (12) month
period ending such month, and during the twelve (12) month period ending the
same month in the immediately preceding year;
(iii) upon Lender's request, (A) copies of customer
statements and credit memos, remittance advices and reports, and copies of
deposit slips and bank statements, (B) copies of shipping and delivery
documents, and (C) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by Borrower;
(iv) such other reports as to the Collateral as Lender
shall reasonably request from time to time; and
(b) If any of Borrower's records or reports of the Collateral
are prepared or maintained by an accounting service, contractor, shipper or
other agent, Borrower hereby irrevocably authorizes such service, contractor,
shipper or agent to deliver such records, reports, and related documents to
Lender and to follow Lender's instructions with respect to further services at
any time that an Event of Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrower shall notify Lender promptly of (i) any material
delay in Borrower's performance of any of its obligations to any account debtor;
or the assertion of any claims, offsets, defenses or counterclaims by any
account debtor, or any disputes with account debtors, or any settlement,
adjustment or compromise thereof, to the extent that any such dispute,
settlement, adjustment or compromise involves more than $100,000 as to any one
account debtor or $500,000 as to all account debtors in the aggregate, (ii) all
material adverse information then known to Borrower
relating to the financial condition of any account debtor and (iii) any event or
circumstance which, to Borrower's knowledge would cause Lender to consider any
then-existing Accounts as no longer constituting Eligible Accounts. No credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor without Lender's consent, except in the ordinary
course of Borrower's business in accordance with practices and policies
previously disclosed in writing to Lender. So long as no Event of Default exists
or has occurred and is continuing, Borrower may settle, adjust or compromise any
claim, offset, counterclaim or dispute with any account debtor. At any time that
an Event of Default exists or has occurred and is continuing, Lender shall, at
its option, have the exclusive right to settle, adjust or compromise any claim,
offset, counterclaim or dispute with account debtors or grant any credits,
discounts or allowances.
(b) Without limiting the obligation of Borrower to deliver any
other information to Lender, Borrower shall promptly report to Lender any return
of Inventory by any one account debtor if the Inventory so returned in such case
has a value in excess of $300,000. At any time that Inventory is returned,
reclaimed or repossessed, the Account (or portion thereof) which arose from the
sale of such returned, reclaimed or repossessed Inventory shall not be deemed an
Eligible Account. In the event any account debtor returns Inventory when an
Event of Default exists or has occurred and is continuing, Borrower shall, upon
Lender's request, (i) hold the returned Inventory in trust for Lender, (ii)
segregate all returned Inventory from all of its other property, (iii) dispose
of the returned Inventory solely according to Lender's instructions, and (iv)
not issue any credits, discounts or allowances with respect thereto without
Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and, in all material respects, complete, (ii) no payments shall be made
thereon except payments immediately delivered to Lender pursuant to the terms of
this Agreement, (iii) no credit, discount, allowance or extension or agreement
for any of the foregoing shall be granted to any account debtor except as
reported to Lender in accordance with this Agreement and except for credits,
discounts, allowances or extensions made or given in the ordinary course of
Borrower's business in accordance with practices and policies previously
disclosed to Lender, (iv) there shall be no setoffs, deductions, contras,
defenses, counterclaims or disputes existing or asserted with respect thereto
except as reported to Lender in accordance with the terms of this Agreement, (v)
none of the transactions giving rise thereto will violate any applicable
foreign, Federal, State or local laws or regulations, all documentation relating
thereto will be legally sufficient under such laws and regulations and all such
documentation will be legally enforceable in accordance with its terms.
(d) Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Borrower shall deliver or cause to be delivered to Lender,
with appropriate endorsement and assignment, with full recourse to Borrower, all
chattel paper and instruments which Borrower now owns or may at any time acquire
immediately upon Borrower's receipt thereof, except as Lender may otherwise
agree.
(f) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account debtors
and other obligors in respect thereof that the Receivables have been assigned to
Lender and that Lender has a security interest therein and Lender may direct any
or all accounts debtors and other obligors to make payment of Receivables
directly to Lender, (ii) extend the time of payment of, compromise, settle or
adjust for cash, credit, return of merchandise or otherwise, and upon any terms
or conditions, any and all Receivables or other obligations included in the
Collateral and thereby discharge or release the account debtor or any other
party or parties in any way liable for payment thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Receivables or
such other obligations, but without any duty to do so, and Lender shall not be
liable for its failure to collect or enforce the payment thereof nor for the
negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Lender may deem necessary or desirable for the protection
of its interests. At any time that an Event of Default exists or has occurred
and is continuing, at Lender's request, all invoices and statements sent to any
account debtor shall state that the Accounts and such other obligations have
been assigned to Lender and are payable directly and only to Lender and Borrower
shall deliver to Lender such originals of documents evidencing the sale and
delivery of goods or the performance of services giving rise to any Accounts as
Lender may require.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
physical count of the Inventory either through periodic cycle counts or
otherwise at least once each year, but at any time or times as Lender may
request on or after an Event of Default, and promptly following such physical
inventory (whether pursuant to periodic cycle counts or otherwise) shall supply
Lender with a report in the form and with such specificity as may be reasonably
satisfactory to Lender concerning such physical count; (c) Borrower shall not
remove any Inventory from the locations set forth or permitted herein, including
pursuant to Section 9.2 hereof, without the prior written consent of Lender,
which consent shall not be unreasonably withheld, except for sales of Inventory
in the ordinary course of Borrower's business and except to move Inventory
directly from one location set forth or permitted herein to another such
location and except for Inventory shipped from the manufacturer thereof to
Borrower which is in transit to the locations set forth or permitted herein; (d)
upon Lender's request, Borrower shall, at its expense, no more than twice in any
twelve (12) month period, but at any time or times as Lender may request on or
after an Event of Default, deliver or cause to be delivered to Lender written
appraisals as to the Inventory in form, scope and methodology acceptable to
Lender and by an appraiser reasonably acceptable to Lender, addressed to Lender
and upon which Lender is expressly permitted to rely; (e) Borrower shall
produce, use, store and maintain the Inventory with all reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity with applicable laws (including the requirements of the Federal Fair
Labor Standards Act of 1938, as amended, and all rules, regulations and orders
related thereto); (f) Borrower assumes all responsibility and liability arising
from or relating to the production, use, sale or other disposition of the
Inventory; (g) Borrower shall not sell Inventory to any customer on approval, or
any other basis which entitles the customer to return or may obligate Borrower
to repurchase such Inventory; (h) Borrower shall keep the Inventory in good and
marketable condition, ordinary wear and tear excepted; and (i) Borrower shall
not, without prior written notice to Lender, acquire or accept any Inventory on
consignment or approval.
7.4 Power of Attorney. Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name,
to: (a) at any time an Event of Default exists or has occurred and is continuing
(i) exercise and enforce all of Borrower's or Lender's rights and remedies to
collect any Receivable or other Collateral, (ii) prepare, file and sign
Borrower's name on any proof of claim in bankruptcy or other similar document
against an account debtor or other obligor in respect of any Receivables or
other Collateral, (iii) clear Inventory the purchase of which was financed with
Letter of Credit Accommodations through U.S. Customs in Borrower's name,
Lender's name or the name of Lender's designee, and to sign and deliver to
customs officials powers of attorney in Borrower's name for such purpose, and to
complete in Borrower's or Lender's name, any order, sale or transaction, obtain
the necessary documents in connection therewith and collect the proceeds
thereof, and (iv) do all acts and things which are necessary, in Lender's
determination, to fulfill Borrower's obligations under this Agreement and the
other Financing Agreements; and (b) at any time to (i) take control in any
manner of any item of payment in respect of Receivables or constituting
Collateral or otherwise received in or for deposit in the Blocked Accounts or
otherwise received by Lender, (ii) have access to any lockbox or postal box into
which remittances from account debtors or other obligors in respect of
Receivables or other proceeds of Collateral are sent or received, (iii) endorse
Borrower's name upon any items of payment in respect of Receivables or
constituting Collateral or otherwise received by Lender and deposit the same in
Lender's account for application to the Obligations, (iv) endorse Borrower's
name upon any chattel paper, document, instrument, invoice, or similar document
or agreement relating to any Receivable or any goods pertaining thereto or any
other Collateral, including any warehouse or other receipts, or bills of lading
and other negotiable or non-negotiable documents, (v) sign Borrower's name on
any verification of Receivables and notices thereof to account debtors or other
obligors in respect thereof, and (vi) execute in Borrower's name and file any
UCC financing statements or amendments thereto. Borrower hereby releases Lender
and its officers, employees and designees from any liabilities arising from any
act or acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of Lender's own gross negligence or
willful misconduct as determined pursuant to a final non-appealable order of a
court of competent jurisdiction.
7.5 Right to Cure. Lender may, at its option, (a) upon notice to
Borrower, cure any default by Borrower under any Material Contract with a third
party which has, or reasonably would be expected to have, a Material Adverse
Effect upon the Collateral, its value or the ability of Lender to collect, sell
or otherwise dispose of the Collateral or the rights and remedies of Lender
therein or the ability of Borrower to perform its obligations under the other
Financing Agreements, (b) pay or bond on appeal any judgment entered against
Borrower, (c) discharge taxes, liens, security interests or other encumbrances
at any time levied on or existing with respect to the Collateral and (d) pay any
amount, incur any expense or perform any act which, in Lender's judgment, is
necessary or appropriate to preserve, protect, insure or maintain the Collateral
and the rights of Lender with respect thereto. Lender may add any amounts so
expended to the Obligations and charge Borrower's account therefor, such amounts
to be repayable by Borrower on demand. Lender shall be under no obligation to
effect such cure, payment or bonding and shall not, by doing so, be deemed to
have assumed any obligation or liability of Borrower. Any payment made or other
action taken by Lender under this Section shall be without prejudice to any
right to assert an Event of Default hereunder and to proceed accordingly.
7.6 Access to Premises. From time to time as requested by Lender, at
the cost and expense of Borrower, (a) Lender or its designee shall have complete
access to all of Borrower's premises during normal business hours and after
notice to Borrower, or at any time and without notice to Borrower if an Event of
Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including the Records, and (b) Borrower shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender may
request, and (c) Lender or its designee may use during normal business hours
such of Borrower's personnel, equipment, supplies and premises as may be
reasonably necessary for the foregoing and if an Event of Default exists or has
occurred and is continuing for the collection of Accounts and realization of
other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority, Subsidiaries. Borrower
is a corporation duly organized and in good standing under the laws of its state
of incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on Borrower's financial condition,
results of operation or business or the rights of Lender in or to any of the
Collateral. The execution, delivery and performance of this Agreement, the other
Financing Agreements and the transactions contemplated hereunder and thereunder
(a) are all within Borrower's corporate powers, (b) have been duly authorized,
(c) are not in contravention of law or the terms of Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or (except with
respect to the assignability of rights thereunder, as set forth on Schedule
8.16) any indenture, agreement or undertaking to which Borrower is a party or by
which Borrower or its property are bound and (d) will not result in the creation
or imposition of, or require or give rise to any obligation to grant, any lien,
security interest, charge or other encumbrance upon any property of Borrower.
This Agreement and the other Financing Agreements constitute legal, valid and
binding obligations of Borrower enforceable in accordance with their respective
terms. As of the date hereof, Borrower does not have any Subsidiaries except as
set forth on the Information Certificate.
8.2 Financial Statements, No Material Adverse Change. All audited
consolidated financial statements and audited consolidating financial statements
of Borrower and its Subsidiaries delivered by Borrower to Lender fairly present,
in accordance with GAAP, the financial condition and the results of operations
of Borrower and its Subsidiaries as of the end of and for the applicable fiscal
year. All interim financial statements (which shall not include the Audit Report
or Post Closing Balance Sheet as referred to in Section 9.6(e)) relating to
Borrower which have been delivered by Borrower to Lender fairly present, in
accordance with GAAP (subject to normal year-end audit adjustments and the
absence of footnotes), the financial condition and the results of operation of
Borrower as at the dates and for the periods set forth therein. As of the date
hereof, except as disclosed in any interim financial statements furnished by
Borrower to Lender prior to the
date of this Agreement, there has been no material adverse change in the assets,
liabilities, properties and condition, financial or otherwise, of Borrower,
since the date of the most recent audited financial statements furnished by
Borrower to Lender prior to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. As of the date
hereof, the chief executive office of Borrower and Borrower's Records concerning
Accounts are located only at the address set forth on the signature page hereto
and its only other places of business and the only other locations of
Collateral, if any, are the addresses set forth in the Information Certificate,
subject to the right of Borrower to establish new locations in accordance with
Section 9.2 below. As of the date hereof, the Information Certificate correctly
identifies any of such locations which are not owned by Borrower and sets forth
the owners and/or operators thereof and to the best of Borrower's knowledge, the
holders of any mortgages on such locations.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto, the licenses granted pursuant to the Licensor Agreements, and the other
liens permitted under Section 9.8 hereof: Borrower has good and marketable title
to all of its properties and assets subject to no liens, mortgages, pledges,
security interests, encumbrances or charges of any kind, except those granted to
Lender, the Licenses granted pursuant to the Licensor Agreements, and such
others as are specifically listed on Schedule 8.4 hereto or permitted under
Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to be
filed by it. All information in such tax returns, reports and declarations is
complete and accurate in all material respects. Borrower has paid or caused to
be paid all taxes due and payable or claimed due and payable in any assessment
received by it, except taxes the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to Borrower
and with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid
Federal, State, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate, as
of the date hereof there is no present investigation by any Governmental
Authority pending, or to the best of Borrower's knowledge threatened, against or
affecting Borrower, its assets or business, and there is no action, suit,
proceeding or claim by any Person pending, or to the best of Borrower's
knowledge threatened, against Borrower or its assets or goodwill, or against or
affecting any transactions contemplated by this Agreement, which if adversely
determined against Borrower would result in any material adverse change in the
assets, business or prospects of Borrower or would impair the ability of
Borrower to perform its obligations hereunder or under any of the other
Financing Agreements to which it is a party or of Lender to enforce any
Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws. Borrower is
not in default in any material respect under, or in violation in any material
respect of any of the terms of, any Material Contract or other commitment to
which it is a party or by which it or any of its assets are
bound and Borrower is in compliance in all material respects with all applicable
provisions of laws, rules, regulations, licenses, permits, approvals and orders
of any foreign, Federal, State or local Governmental Authority, except where the
failure to so comply does not and could not be reasonably expected to have a
Material Adverse Effect.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 hereto, Borrower and
any Subsidiary have not generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on or
off its premises (whether or not owned by it) in any manner which at any time
violates any applicable Environmental Law or any license, permit, certificate,
approval or similar authorization thereunder and the operations of Borrower and
any Subsidiary complies in all material respects with all Environmental Laws and
all licenses, permits, certificates, approvals and similar authorizations
thereunder, except where the failure to so comply does not and could not be
reasonably expected to have a Material Adverse Effect.
(b) Except as set forth on Schedule 8.8 hereto, there has been
no investigation, proceeding, complaint, order, directive, claim, citation or
notice by any Governmental Authority or any other person nor is any pending or
to the best of Borrower's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
Borrower and any Subsidiary, which could reasonably be expected to have a
Material Adverse Effect if adversely determined, or the release, spill or
discharge, threatened or actual, of any Hazardous Material or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or any other environmental, health or safety
matter, which adversely affects in any material respect Borrower or its
business, operations or assets or any properties at which Borrower has
transported, stored or disposed of any Hazardous Materials.
(c) Borrower and its Subsidiaries have no material liability
(contingent or otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.
(d) Borrower and its Subsidiaries have all licenses, permits,
certificates, approvals or similar authorizations required to be obtained or
filed in connection with the operations of Borrower under any Environmental Law
and all of such licenses, permits, certificates, approvals or similar
authorizations are valid and in full force and effect, except for such licenses,
permits, certificates, approvals or authorizations the failure of which to
obtain or file does not and could not reasonably be expected to have a Material
Adverse Effect.
8.9 Employee Benefits.
(a) Each Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other federal or state law,
except where the failure to so comply does not and could not be reasonably
expected to have a Material Adverse Effect. Each Plan which is intended to
qualify under Section 401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service and to the best of Borrower's
knowledge, nothing has occurred
which would cause the loss of such qualification. Borrower and its ERISA
Affiliates have made all required contributions to any Plan subject to Section
412 of the Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.
(b) There are no pending or to the best of Borrower's
knowledge, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan.
(c) (i) No ERISA Event has occurred or is reasonably expected
to occur; (ii) the current value of each Plan's assets (determined in accordance
with the assumptions used for funding such Plan pursuant to Section 412 of the
Code) are not less than such Plan's liabilities under Section 4001(a)(16) of
ERISA; (iii) Borrower and its ERISA Affiliates have not incurred and do not
reasonably expect to incur, any liability under Title IV of ERISA with respect
to any Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) Borrower and its ERISA Affiliates have not incurred and do not
reasonably expect to incur, any liability (and no event has occurred which, with
the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) Borrower and its ERISA Affiliates have not engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
8.10 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth on Schedule 8.10 hereto, subject to
the right of Borrower to establish new accounts in accordance with Section 9.13
below.
8.11 Intellectual Property. Borrower owns or licenses or otherwise has
the right to use all Intellectual Property materially necessary for the
operation of its business as presently conducted or proposed to be conducted. As
of the date hereof, Borrower does not have any Intellectual Property registered,
or subject to pending applications, in the United States Patent and Trademark
Office or any similar office or agency in the United States, any State thereof,
any political subdivision thereof or in any other country, other than those
described in Schedule 8.11 (a) hereto and has not granted any licenses with
respect thereto other than as set forth in Schedule 8.11(b) hereto. To
Borrower's knowledge, after reasonable investigation, no event has occurred
which permits or would permit after notice or passage of time or both, the
revocation, suspension or termination of such rights. Except as otherwise
disclosed by Borrower to Lender after the date hereof, to the best of Borrower's
knowledge, no slogan or other advertising device, product, process, method,
substance or other Intellectual Property or goods bearing or using any
Intellectual Property presently contemplated to be sold by or employed by
Borrower infringes any patent, trademark, servicemark, trade name, copyright,
license or other Intellectual Property owned by any other Person presently and
no claim or litigation is pending or threatened against or affecting Borrower
contesting its right to sell or use any such Intellectual Property. Schedule
8.11 (c) sets forth all of the agreements or other arrangements of Borrower
pursuant to which Borrower has a license or other right to use any trademarks,
logos, designs, representations or other Intellectual Property owned by another
person as in effect on the date hereof and the dates of the expiration of such
agreements or other arrangements of Borrower as
in effect on the date hereof: No trademark, servicemark or other Intellectual
Property at any time used by Borrower which is owned by another person, or owned
by Borrower subject to any security interest, lien, collateral assignment,
pledge or other encumbrance in favor of any person other than Lender, is affixed
to any Eligible Inventory.
8.12 Capitalization.
(a) As of the date hereof, the issued and outstanding shares of
Capital Stock of Borrower are directly and beneficially owned and held by the
persons indicated in the Information Certificate, and in each case all of such
shares have been duly authorized and are fully paid and non-assessable, free and
clear of all claims, liens, pledges and encumbrances of any kind, except for
shares of Capital Stock of Borrower issued to Cre-8-net Ventures L.L.C. on the
date hereof, limitations under applicable securities laws and shareholder
agreements among the parties and as disclosed in writing to Lender.
(b) Borrower is solvent and will continue to be solvent after
the creation of the Obligations, the security interests of Lender and the other
transaction contemplated hereunder, is able to pay its debts as they mature and
has (and has reason to believe it will continue to have) sufficient capital (and
not unreasonably small capital) to carry on its business and all businesses in
which it is about to engage. The assets and properties of Borrower at a fair
valuation and at their present salable value are, and will be, greater than the
Indebtedness of Borrower, and including subordinated and contingent liabilities
computed at the amount which, to the best of Borrower's knowledge, represents an
amount which can reasonably be expected to become an actual or matured
liability.
8.13 Labor Disputes.
(a) Set forth on Schedule 8.13 hereto is a list (including
dates of termination) of all collective bargaining or similar agreements between
or applicable to Borrower and any union, labor organization or other bargaining
agent in respect of the employees of Borrower on the date hereof.
(b) As of the date hereof, there is (i) no significant unfair
labor practice complaint pending against Borrower or, to the best of Borrower's
knowledge, threatened against it, before the National Labor Relations Board, and
no significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is pending on the date hereof against
Borrower or, to best of Borrower's knowledge, threatened against it, and (ii) no
significant strike, labor dispute, slowdown or stoppage is pending against
Borrower or, to the best of Borrower's knowledge, threatened against Borrower.
8.14 Corporate Name, Prior Transactions. As of the date hereof,
Borrower has not, during the past five years, been known by or used by any other
corporate or fictitious name or been a party to any merger or consolidation, or
acquired all or substantially all of the assets of any Person, or acquired any
of its property or assets out of the ordinary course of business, except as set
forth herein or in the Information Certificate.
8.15 Restrictions on Subsidiaries. Except for restrictions contained in
this Agreement or any other agreement with respect to Indebtedness of Borrower
permitted hereunder as in effect on the date hereof, there are no contractual or
consensual restrictions on Borrower or any of its Subsidiaries which prohibit or
otherwise restrict (a) the transfer of cash or other assets (1) between Borrower
and any of its Subsidiaries or (ii) between any Subsidiaries of Borrower or (b)
the ability of Borrower or any of its Subsidiaries to incur Indebtedness or
grant security interests to Lender in the Collateral.
8.16 Material Contracts. Schedule 8.16 hereto sets forth all Material
Contracts to which Borrower is a party or is bound as of the date hereof:
Borrower has delivered true, correct and complete copies of such Material
Contracts to Leader on or before the date hereof. Borrower is not in breach of
or in default under, in any material respect, any Material Contract and has not
received any notice of the intention of any other party thereto to terminate any
Material Contract.
8.17 Payable Practices. Borrower has not made any material change in
the historical accounts payable practices from those in effect immediately prior
to the date hereof.
8.18 Accuracy and Completeness of Information. All information
furnished by or on behalf of Borrower in writing to Lender in connection with
this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate, is true and correct in all material respects on the date as of
which such information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading in any material
respect. No event or circumstance has occurred which has had or could reasonably
be expected to have a Material Adverse Effect which has not been fully and
accurately disclosed to Lender in writing.
8.19 Acquisition of Purchased Assets.
(a) The Purchase Agreements and the transactions contemplated
thereunder have been duly executed, delivered and performed in accordance with
their terms. As of the date hereof, Borrower acquired and has good and
marketable title to the Purchased Assets, free and clear of all claims, liens,
pledges and encumbrances of any kind, except as permitted hereunder or as set
forth in any schedule hereto.
(b) All actions and proceedings required by the Purchase
Agreements, the Converse Sale Order, applicable law or regulation (including,
but not limited to, compliance with the Xxxx-Xxxxx-Xxxxxx Anti-Trust
Improvements Act of 1976, as amended) have been taken and the transactions
required thereunder have been duly and validly taken and consummated.
(c) No court of competent jurisdiction has issued any
injunction, restraining order or other order which prohibits consummation of the
transactions described in the Purchase Agreements or the Converse Sale Order and
no governmental or other action or proceeding has been commenced, seeking any
injunction, restraining order or other order which seeks to void, stay, enjoin
or otherwise modify the Converse Sale Order or the transactions described in the
Purchase Agreements.
(d) The Converse Sale Order (i) has been duly entered, (ii) is
valid, subsisting and continuing, (iii) has not been revoked, remanded, vacated,
appealed (except as indicated in Attachment 8.19 hereto), modified, reversed on
appeal or revoked, remanded, vacated, reversed or modified by any Bankruptcy or
District Court Judge, (iv) (except as indicated in Attachment 8.19 hereto) is
final and non-appealable and not subject to any pending appeal and (v) includes
a finding that Borrower is a good faith purchaser for value of the assets of
Seller under the Purchase Agreements within the meaning of Section 363(m) of the
Bankruptcy Code.
(e) Borrower has delivered, or caused to be delivered, to
Lender, true, correct and complete copies of the Converse Sale Order and the
Purchase Agreements. Set forth in Schedule 8.19 hereto is a correct and complete
list of the Purchase Agreements and all other agreements, documents and
instruments existing as of the date hereof between or among Borrower, any of its
affiliates, Seller and any Affiliate of Seller.
8.20 Survival of Warranties Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence arid rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, trade names, approvals, authorizations, leases
and contracts necessary to carry on the business as presently or proposed to be
conducted. Borrower shall give Lender twenty (20) days prior written notice of
any proposed change in its corporate name, which notice shall set forth the new
name and Borrower shall deliver to Lender a copy of the amendment to the
Certificate of Incorporation of Borrower providing for the name change certified
by the Secretary of State of the jurisdiction of incorporation of Borrower as
soon as it is available.
9.2 New Collateral Locations. Borrower may open any new location
within the continental United States provided Borrower (a) gives Lender thirty
(30) days' prior written notice of the intended opening of any such new location
and (b) executes and delivers, or causes to be executed and delivered, to Lender
such agreements, documents, and instruments as Lender may deem reasonably
necessary or desirable to protect its interests in the Collateral at such
location, including Uniform Commercial Code financing statements; provided,
however, that Borrower shall only be required to deliver a Collateral Access
Agreement to the extent required under Section 1.22(f) hereof.
9.3 Compliance with Laws, Regulations Etc.
(a) Borrower shall at all times comply in all material respects
with all laws, rules, regulations, licenses, permits, approvals and orders
applicable to it and duly observe all requirements of any foreign, Federal,
State or local Governmental Authority, including ERISA, the Code, the
Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards
Act of 1938, as amended, and all statutes, rules, regulations, orders, permits
and stipulations relating to environmental pollution and employee health and
safety, including all of the Environmental Laws, except where the failure to so
comply does not, individually or in the aggregate, and could not reasonably be
expected to, result in a Material Adverse Effect.
(b) Borrower shall establish and maintain, at its expense, a
system to assure and monitor its continued compliance in all material respects
with all Environmental Laws as required pursuant to Section 9.3(a) hereof in all
of its operations, which system shall include annual reviews of such compliance
by employees or agents of Borrower who are familiar with the requirements of the
Environmental Laws. Borrower shall take prompt and appropriate action to respond
to any non-compliance with any of the Environmental Laws and shall regularly
report to Lender on such response.
(c) Borrower shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including attorneys' fees and legal expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including the costs of any required or
necessary repair, cleanup or other remedial work with respect to any property of
Borrower and the preparation and implementation of any closure, remedial or
other required plans. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Borrower shall duly pay and discharge
all taxes, assessments, contributions and governmental charges upon or against
it or its properties or assets, except for taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower or such Subsidiary, as the case may be, and with respect
to which adequate reserves have been set aside on its books. Borrower shall be
liable for any tax or penalties imposed on Lender as a result of the financing
arrangements provided for herein and Borrower agrees to indemnify and hold
Lender harmless with respect to the foregoing, and to repay to Lender on demand
the amount thereof, and until paid by Borrower such amount shall be added and
deemed part of the Loans, provided, that, nothing contained herein shall be
construed to require Borrower to pay any income or franchise taxes attributable
to the income of Lender from any amounts charged or paid hereunder to Lender.
The foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
9.5 Insurance. Borrower shall at all times maintain with financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established
reputation engaged in the same or similar businesses and similarly situated.
Said policies of insurance shall be reasonably satisfactory to Lender as to
form, amount and insurer. Borrower shall furnish certificates, policies or
endorsements to Lender as Lender shall reasonably require as proof of such
insurance, and, if Borrower fails to do so, Lender is authorized, but not
required, to obtain such insurance at the expense of Borrower. All policies
shall provide for at least thirty (30) days prior written notice to Lender of
any cancellation or reduction of coverage and that Lender may act as attorney
for Borrower in obtaining, and at any time an Event of Default exists or has
occurred and is continuing, adjusting, settling, amending and canceling such
insurance. Borrower shall cause Lender to be named as a loss payee and an
additional insured (but without any liability for any premiums) under such
insurance policies and Borrower shall obtain non-contributory lender's loss
payable endorsements to all insurance policies in form and substance reasonably
satisfactory to Lender. Such lender's loss payable endorsements shall specify
that the proceeds of such insurance shall be payable to Lender as its interests
may appear and further specify that Lender shall be paid regardless of any act
or omission by Borrower or any of its Affiliates. At its option, Lender may
apply any insurance proceeds received by Lender at any time to the cost of
repairs or replacement of Collateral and/or to payment of the Obligations,
whether or not then due, in any order and in such manner as Lender may determine
or hold such proceeds as cash collateral for the Obligations.
9.6 Financial Statements and Other Information.
(a) Borrower shall keep proper books and records in which true
and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of Borrower and its Subsidiaries (if
any) in accordance with GAAP. Borrower shall promptly furnish to Lender all such
financial and other information as Lender shall reasonably request relating to
the Collateral and the assets, business and operations of Borrower, and to
notify the auditors and accountants of Borrower that Lender is authorized to
obtain such information directly from them. Without limiting the foregoing,
Borrower shall furnish or cause to be furnished to Lender, the following: (i)
within thirty (30) days after the end of each fiscal month, monthly unaudited
consolidated financial statements, and unaudited consolidating financial
statements (including in each case balance sheets, statements of income and
loss, statements of cash flow, and statements of shareholders' equity), all in
reasonable detail, fairly presenting in accordance with GAAP (subject to normal
year-end audit adjustments and the absence of footnotes) the financial position
and the results of the operations of Borrower and its Subsidiaries as of the end
of and through such fiscal month, certified to be correct by the chief financial
officer, or other officer reasonably acceptable to Lender, of Borrower, and
accompanied by a compliance certificate substantially in the form of Exhibit B
hereto, along with a schedule in form reasonably satisfactory to Lender of the
calculations used in determining, as of the end of such month, whether Borrower
was in compliance with the covenant set forth in Section 9.18 of this Agreement
for such month and (ii) within ninety (90) days after the end of each fiscal
year, audited consolidated financial statements and audited consolidating
financial statements of Borrower and its Subsidiaries (including in each
unaudited case balance sheets, statements of income and loss, statements of cash
flow and statements of shareholders' equity), and the accompanying notes
thereto, all in reasonable detail, fairly presenting the financial position and
the results of the operations of Borrower and its Subsidiaries as of the end of
and for such fiscal year, together with the unqualified opinion of independent
certified public accountants, which accountants shall be an independent
accounting firm selected by Borrower and reasonably acceptable to Lender, that
such financial statements have been prepared in accordance with GAAP,
and present fairly the results of operations and financial condition of Borrower
and its Subsidiaries as of the end of and for the fiscal year then ended.
(b) Borrower shall promptly notify Lender in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim which has or could result in a Material Adverse Effect, (ii) any Material
Contract of Borrower being terminated or amended or any new Material Contract
entered into (in which event Borrower shall provide Lender with a copy of such
Material Contract), (iii) any order, judgment or decree in excess of $1,000,000
shall have been entered against Borrower or any of its properties or assets,
(iv) any notification from a Governmental Authority of violation of laws or
regulations received by Borrower, (v) any ERISA Event, and (vi) the occurrence
of any Event of Default or act, condition or event which, with notice or the
passage of time or giving of notice or both, would constitute an Event of
Default.
(c) Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which Borrower
sends to its stockholders generally and copies of all reports and registration
statements which Borrower files with the Securities and Exchange Commission, any
national securities exchange or the National Association of Securities Dealers,
Inc.
(d) Borrower shall furnish or cause to be furnished to Lender
such budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrower, as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrower to any court or other Government Authority or to any participant or
assignee or prospective participant or assignee. Borrower hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Lender, at
Borrower's expense, copies of the financial statements of Borrower and any
reports or management letters prepared by such accountants or auditors on behalf
of Borrower and to disclose to Lender such information as they may have
regarding the business of Borrower. Any documents, schedules, invoices or other
papers delivered to Lender may be destroyed or otherwise, disposed of by Lender
one (1) year after the same are delivered to Lender, except as otherwise
designated by Borrower to Lender in writing.
(e) Borrower shall deliver, or cause to be delivered, to
Lender, within one hundred and twenty (120) days from the date hereof, an
opening balance sheet of Borrower after giving effect to the transactions
contemplated by this Agreement and the Purchase Agreements, together with the
unqualified opinion (except as to the absence of footnotes) of independent
certified public accountants, which accountants shall be an independent
accounting firm selected by Borrower and reasonably acceptable to Lender, to the
effect that such opening balance sheet has been prepared in accordance with GAAP
and presents fairly the financial condition of Borrower as of such date ("Post
Closing Balance Sheet"). In addition, Borrower shall deliver to Lender, within
three (3) Business Days following Borrower's receipt thereof, a copy of the
Auditor Report (as defined in Section 1.05 of the Asset Purchase Agreement
referred to in Section 1.68) of Xxxxxx Xxxxxxxx L.L.P.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
shall not, and shall not permit any Subsidiary to, directly or indirectly,
(a) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it; or
(b) sell, assign, lease, transfer, abandon or otherwise dispose
of any Capital Stock or Indebtedness to any other Person or any of its assets to
any other Person, except for (i) sales of Inventory in the ordinary course of
business, (ii) the disposition of worn-out or obsolete Equipment so long as (A)
any proceeds are paid to Lender and (B) such sales do not involve Equipment
having an aggregate fair market value in excess of $250,000 for all such
Equipment disposed of in any fiscal year of Borrower, (iii) the issuance by
Borrower of any of its Capital Stock as a dividend to certain of Borrower's
stockholders, provided that, such dividend is permitted to be paid in accordance
with Section 9.11 hereof, and (iv) the issuance and sale by Borrower of Capital
Stock of Borrower after the date hereof, provided, that, (A) Lender shall have
received not less than ten (10) Business Days prior written notice of such
issuance and sale by Borrower, which notice shall specify the parties to whom
such shares are to be sold, the terms of such sale, the total amount which it is
anticipated will be realized from the issuance and sale of such stock and the
net cash proceeds which it is anticipated will be received by Borrower from such
sale, (B) Borrower shall not be required to pay any cash dividends or repurchase
or redeem such Capital Stock or make any other payments in respect thereof, (C)
the terms of such Capital Stock, and the terms and conditions of the purchase
and sale thereof, shall not include any terms that include any limitation on the
right of Borrower to request or receive Loans or Letter of Credit Accommodations
or the right of Borrower to amend or modify any of the terms and conditions of
this Agreement or any of the other Financing Agreements or otherwise in any way
relate to or affect the arrangements of Borrower with Lender or are more
restrictive or burdensome to Borrower than the terms of any Capital Stock in
effect on the date hereof, and (D) as of the date of such issuance and sale and
after giving effect thereto, no Event of Default or act, condition or event
which with notice or passage of time or both would constitute an Event of
Default shall exist or have occurred; or
(c) form or acquire any Subsidiaries (except as provided under
Section 9.10(8) below), or
(d) wind up, liquidate or dissolve; or
(e) agree to do any of the foregoing.
9.8 Encumbrances. Borrower shall not, and shall permit any Subsidiary
to, create, incur, assume, suffer or permit to exist any security interest,
mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on
any of its assets or properties, including the Collateral, except: (a) the
security interests and liens of Lender; (b) liens securing the payment of taxes,
either not yet overdue or the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to Borrower or
such Subsidiary, as the case may be and with respect to which adequate reserves
have been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of
Borrower's or such Subsidiary's business to the extent: (i) such liens secure
Indebtedness which is not overdue or (ii) such liens secure Indebtedness
relating to claims or liabilities which are fully insured and being defended at
the sole cost and expense and at the sole risk of the insurer or being contested
in good faith by appropriate proceedings diligently pursued and available to
Borrower or such Subsidiary, in
each case prior to the commencement of foreclosure or other similar proceedings
and with respect to which adequate reserves have been set aside on its books;
(d) zoning restrictions, easements, licenses, covenants and other restrictions
affecting the use of Real Property which do not interfere in any material
respect with the use of such Real Property or ordinary conduct of the business
of Borrower or such Subsidiary as presently conducted thereon or materially
impair the value of the Real Property which may be subject thereto; (e) purchase
money security interests in Equipment (including Capital Leases) and purchase
money mortgages on Real Property to secure Indebtedness permitted under Section
9.9(b) hereof; (f) the security interests and liens set forth on Schedule 8.4
hereto and (g) the Licenses granted pursuant to the Licensor Agreements.
9.9 Indebtedness. Borrower shall not, and shall not permit any
Subsidiary to, incur, create, assume, become or be liable in any manner with
respect to, suffer or permit to exist, any Indebtedness or guarantee, assume,
endorse, or otherwise become responsible for (directly or indirectly) the
performance, dividends or other obligations of any Person, except:
(a) the Obligations;
(b) purchase money Indebtedness (including Capital Leases)
arising after the date hereof to the extent secured by purchase money security
interests in Equipment (including Capital Leases) and purchase money mortgages
on real estate not to exceed $5,000,000 in the aggregate at any time outstanding
so long as such security interests and mortgages do not apply to any property of
Borrower other than the Equipment or real estate so acquired, and the
Indebtedness secured thereby does not exceed the cost of the Equipment or real
estate so acquired, as the case may be;
(c) guarantees by any Subsidiaries of Borrower of the
Obligations in favor of Lenders;
(d) Indebtedness of Borrower under swap agreements, cap
agreements, collar agreements, exchange agreements, futures or forward hedging
contracts or similar contractual arrangements intended to protect a Person
against fluctuations in interest rates or currency exchange rates of Borrower;
provided, that, such arrangements are with banks or other financial institutions
that have combined capital and surplus and undivided profits of not less than
$250,000,000 and are not for speculative purposes and such Indebtedness shall be
unsecured (except that Indebtedness arising under or in connection with swap
agreements with any Affiliate of Lender may be secured to the extent provided
herein);
(e) unsecured Indebtedness (other than Indebtedness otherwise
permitted under this Section 9.9) of Borrower arising after the date hereof
owing to any Person (other than Borrower) as a result of loans in cash or other
immediately available funds by such Person to Borrower; provided, that, as to
any such Indebtedness ("Subordinated Indebtedness"), each of the following
conditions is satisfied in each case as determined by Lender: (i) Lender shall
have received not less than ten (10) Business Days prior written notice of the
intention to incur such Indebtedness, which notice shall set forth in reasonable
detail satisfactory to Lender, the amount of such Indebtedness, the person to
whom such Indebtedness will be owed, the interest rate and fees, the schedule of
repayments and maturity date with respect thereto and such other information
with respect thereto as Lender may request, (ii) Lender shall have received
true, correct and complete copies of all
agreements, documents and instruments evidencing or otherwise related to such
Indebtedness, as duly authorized, executed and delivered by the parties thereof,
(iii) such Indebtedness shall be incurred by Borrower at commercially reasonable
rates and terns in a bona fide arm's length transaction, (iv) such Indebtedness
shall be subject and subordinate in right of payment to the indefeasible payment
and satisfaction in full of the Obligations and Lender shall have received a
subordination agreement, in form and substance satisfactory to Lender, providing
for such subordination and related matters, duly authorized, executed and
delivered by the person to whom such Indebtedness is owed, Borrower and Lender,
(v) as of the date of incurring such Indebtedness, and after giving effect
thereto, no Event of Default or act, condition or event which with notice or
passage of time or both would constitute an Event of Default, shall exist or
have occurred, (vi) the aggregate principal amount of all such Indebtedness
outstanding at any time shall not exceed $25,000,000, (vii) Borrower shall be in
compliance with Section 9.18 hereof after giving effect to such Indebtedness on
a pro forma basis, and (viii) Borrower shall immediately remit to Lender for
application against the Obligations an amount of not less than fifty (50%)
percent of the proceeds from such Subordinated Indebtedness, with any remaining
proceeds ("Excess Proceeds") to be used by Borrower for general operating or
working capital purposes or to make a dividend or redemption payment in an
aggregate amount not to exceed such Excess Proceeds, provided that such dividend
or redemption payment or payments is permitted under Section 9.11 hereof and is
made within ten (10) days from the date the proceeds from such Subordinated
Indebtedness are received by Borrower; and
(f) the Indebtedness set forth on Schedule 9.9 hereto.
With respect to such Subordinated Indebtedness, except as set forth under
any subordination agreement or except as otherwise agreed to in writing by
Lender, Borrower shall not, directly or indirectly, make, or be required to
make, any payments in respect of such Indebtedness; Borrower shall not, directly
or indirectly, amend, modify, alter or change the terms of the agreements with
respect to such Indebtedness, or redeem, retire, defease, purchase or otherwise
acquire such Indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose; and Borrower shall furnish to Lender all notices or demands in
connection with such Indebtedness received by Borrower promptly after the
receipt thereof, or sent by Borrower, concurrently with the sending thereof, as
the case may be.
9.10 Loans Investments Guarantees Etc. Borrower shall not, and shall
not permit any Subsidiary to, directly or indirectly, make, or suffer or permit
to exist, any loans or advance money or property to any person, or any
investment in (by capital contribution, dividend or otherwise) or purchase or
repurchase the Capital Stock or Indebtedness or all or a substantial part of the
assets or property of any person, or form or acquire any Subsidiaries, or agree
to do any of the foregoing, except:
(a) the endorsement of instruments for collection or deposit in
the ordinary course of business;
(b) investments in cash or Cash Equivalents, provided, that,
(i) no Loans are then outstanding and (ii) as to any of the foregoing, unless
waived in writing by Lender, Borrower shall
take such actions as are deemed necessary by Lender to perfect the security
interest of Lender in such investments;
(c) the existing equity investments of Borrower as of the date
hereof in its Subsidiaries, provided, that, Borrower shall have no obligation to
make any other investment in, or loans to, or other payments in respect of, any
such Subsidiaries;
(d) stock or obligations issued to Borrower by any Person (or
the representative of such Person) in respect of Indebtedness of such Person
owing to Borrower in connection with the insolvency, bankruptcy, receivership or
reorganization of such Person or a composition or readjustment of the debts of
such Person; provided, that, the original of any such stock or instrument
evidencing such obligations shall be promptly delivered to Lender, upon Lender's
request, together with such stock power, assignment or endorsement by Borrower
as Lender may request;
(e) obligations or account debtors to Borrower arising from
Accounts which are past due evidenced by a promissory note made by such account
debtor payable to Borrower; provided, that, promptly upon the receipt of the
original of any such promissory note by Borrower, such promissory note shall be
endorsed to the order of Lender by Borrower and promptly delivered to Lender as
so endorsed;
(f) any investments of Borrower in swap agreements, cap
agreements, collar agreements, exchange agreements futures or forward hedging
contracts or similar contractual arrangements intended to protect a Person
against fluctuations in interest rates, currency exchange rates or the price of
raw materials and other chemical products used or produced in the business of
Borrower; provided, that, such arrangements are with banks or other financial
institutions that have combined capital and surplus and undivided profits of not
less than the $250,000,000 and are not for speculative purposes and are
unsecured (except that Indebtedness arising under or in connection with swap
agreements with any Affiliate of Lender may be secured to the extent provided
herein);
(g) the formation or acquisition by a Borrower after the date
hereof of one or more Subsidiaries incorporated or organized under the laws of
any State of the United States of America; provided, that: (i) Borrower shall
cause any such Subsidiary to execute and deliver to Lender, the following in
form and substance satisfactory to Lender, (A) an absolute and unconditional
guarantee of payment of the Obligations, (B) a security agreement granting to
Lender a first security interest and lien (except as otherwise consented to in
writing by Lender) upon all of the assets of any such Subsidiary, (C) related
UCC financing statements, and (D) such other agreements, documents and
instruments as Lender may require, including, but not limited to, supplements
and amendments hereto and other loan agreements or instruments evidencing
Indebtedness of such new Subsidiaries to Lender, (ii) Borrower shall (A) execute
and deliver to Lender, a pledge and security agreement in form and substance
satisfactory to Lender, granting to Lender a first pledge of and lien on all of
the issued and outstanding shares of Capital Stock of any such Subsidiary, and
(B) deliver the original stock certificates evidencing such shares of Capital
Stock (or such other evidence as may be issued in the case of a limited
liability company), together with stock powers with respect thereto duly
executed in blank (or the equivalent thereof in the case of a limited liability
company in which such interests are certificated, or otherwise take such actions
as Lender shall require with respect to Lender's security interests therein),
(iii) the Subsidiary formed
or acquired shall be engaged in a business related, ancillary or complementary
to the businesses of Borrower permitted in this Agreement as determined by the
Board of Directors (or managers in the case of a limited liability company) of
Borrower, (iv) Borrower shall not use the proceeds of any Loans to consummate
any investment in or payment required to be made in connection with the
formation or acquisition of such Subsidiary,(v) Lender shall have received (A)
not less than ten (10) Business Days' prior written notice of the formation or
acquisition of any such Subsidiary and such information with respect thereto as
Lender may reasonably request, and (B) true, correct and complete copies of all
agreements, documents and instruments relating thereto, and (vi) as of the date
of any such loan, advance, capital contribution or other investment or payment
by Borrower, no Event of Default or act, condition or event which with notice or
passage of time or both would constitute an Event of Default shall exist or have
occurred and be continuing; and
(h) the loans and advances set forth on Schedule 9.10 hereto;
provided, that, as to such loans and advances, (i) Borrower shall not, directly
or indirectly, amend, modify, alter or change the terms of such loans and
advances or any agreement, document or instrument related thereto and (ii)
Borrower shall furnish to Lender all notices or demands in connection with such
loans and advances either received by Borrower or on its behalf, promptly after
the receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be.
9.11 Dividends, Distributions and Redemptions. Borrower shall not,
directly or indirectly, declare or pay any dividends or make any distributions
on account of any shares of class of capital stock of Borrower now or hereafter
outstanding, or set aside or otherwise deposit or invest any sums for such
purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of
any class of capital stock (or set aside or otherwise deposit or invest any sums
for such purpose) for any consideration other than common stock or apply or set
apart any sum, or make any other distribution (by reduction of capital or
otherwise) in respect of any such shares or agree to do any of the foregoing
except that:
(a) Borrower may make a distribution to the Original Investors
in the amount of the Escrow Refund provided, that, Borrower provides Lender with
no less than five (5) Business Days' prior written notice of any distribution
and each of the following conditions is satisfied:
(i) such payment shall be made with funds legally
available therefor;
(ii) such payment shall not violate any law or regulation
or the terms of any indenture, agreement or undertaking to which Borrower is a
party or by which Borrower or its properties are bound;
(iii) as of the date of such payment and after giving
effect thereto, no Event of Default or act, condition or event which with notice
or passage of time or both would constitute an Event of Default shall exist or
have occurred;
(iv) for the thirty (30) day period immediately preceding
any intended payment, and after giving effect thereto, the average Excess
Availability of Borrower was not less than 7,500,000; and
(v) as of the day of such payment, and after giving
effect thereto, Excess Availability is not less than $7,500,000;
(b) Borrower may, from November 1, 2001 through and including
April 30; 2002, pay dividends or redeem or repurchase any of its Capital Stock
in the amount of any Excess Proceeds (as defined in Section 9.9(e)(viii)) and in
an aggregate additional amount not to exceed $4,000,000, provided, that, in each
instance, Borrower provides Lender with no less than five (5) Business Days'
prior written notice of any dividend or redemption or repurchase and each of the
following conditions is satisfied:
(i) such dividend or redemption or repurchase shall be
made with funds legally available therefor;
(ii) such dividend or redemption or repurchase shall not
violate any law or regulation or the terms of any indenture, agreement or
undertaking to which Borrower is a party or by which Borrower or its properties
are bound;
(iii) as of the date of the payment of such dividend or
redemption or repurchase and after giving effect thereto, no Event of Default or
act, condition or event which with notice or passage of time or both would
constitute an Event of Default shall exist or have occurred;
(iv) for the thirty (30) day period immediately preceding
any intended dividend or redemption or repurchase, and after giving effect
thereto, the average Excess Availability of Borrower was not less than
$20,000,000; and
(v) as of the day of the payment of such dividend or
redemption or repurchase and after giving effect thereto, Excess Availability is
not less than $20,000,000; and
(c) Borrower may, during the period from May 1 of any year and
ending April 30 of the immediately following year, commencing with the twelve
month period beginning May l, 2002, pay dividends or redeem or repurchase any of
its Capital Stock in the amount of any Excess Proceeds (as defined in Section
9.9(e)(viii)) and in an aggregate additional amount not to exceed $12,000,000
per year, provided, that, in each instance, Borrower provides Lender with not
less than five (5) Business Days' prior written notice of any dividend or
redemption or repurchase and each of the following conditions is satisfied:
(i) such dividend or redemption or repurchase shall be
made with funds legally available therefor;
(ii) such dividend or redemption or repurchase shall not
violate any law or regulation or the terms of any indenture, agreement or
undertaking to which Borrower is a party or by which Borrower or its properties
are bound;
(iii) as of the date of the payment of such dividend or
redemption or repurchase and after giving effect thereto, no Event of Default or
act, condition or event which with notice or passage of time or both would
constitute an Event of Default shall exist or have occurred;
(iv) Borrower had a positive Consolidated Pre-Tax Net
Income for the Borrower's immediately preceding fiscal year, and with respect to
Borrower's current fiscal year, Borrower has positive year-to-date Consolidated
Pre-Tax Net Income;
(v) (A) if the aggregate year-to-date dividends,
redemptions or repurchases, after giving effect to any intended dividend,
redemption or repurchase, is less than or equal to $8,000,000, for the thirty
(30) day period immediately preceding any intended payment of such dividend or
redemption or repurchase, and after giving effect thereto, the average Excess
Availability of Borrower was not less than $10,000,000; or (B) if the aggregate
year-to-date dividends, redemptions or repurchases, after giving effect to any
intended dividend, redemption or repurchase, is greater than $8,000,000, for the
thirty (30) day period immediately preceding any intended payment of such
dividend, redemption or repurchase, and after giving effect thereto, the average
Excess Availability of Borrower was not less than $25,000,000; and
(vi) as of the day of the payment of such dividend,
redemption or repurchase and after giving effect thereto, (A) if the aggregate
year-to-date dividends, redemptions or repurchases, after giving effect to any
intended dividend, redemption or repurchase, is less than or equal to
$8,000,000, Excess Availability is not less than $10,000,000, or (B) if the
aggregate year-to-date dividends, redemptions or repurchases, after giving
effect to any intended dividend or redemption or repurchase, is greater than
$8,000,000, Excess Availability is not less than $25,000,000.
9.12 Transactions with Affiliates. Except as set forth on Schedule
9.12, Borrower shall not, directly or indirectly, (a) purchase, acquire or lease
any property from, or sell, transfer or lease any property to, any officer,
director, agent or other person affiliated with Borrower, except in the ordinary
course of and pursuant to the reasonable requirements of Borrower's business and
upon fair and reasonable terms no less favorable to the Borrower than Borrower
would obtain in a comparable arm's length transaction with an unaffiliated
person or (b) make any payments of management, consulting or other fees for
management or similar services, or of any Indebtedness owing to any officer,
employee, shareholder, director or other Affiliate of Borrower except reasonable
compensation to officers, employees, directors and Affiliates for services
rendered to Borrower in the ordinary course of business.
9.13 Additional Bank Accounts. Borrower shall not, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Blocked Accounts and the accounts set forth in Schedule 8.10 hereto, except:
(a) as to any new or additional Blocked Accounts and other such new or
additional accounts which contain any Collateral or proceeds thereof, with the
prior written consent of Lender and subject to such conditions thereto as Lender
may establish and (b) as to any accounts used by Borrower to make payments of
payroll, taxes or other obligations to third parties, after prior written notice
to Lender.
9.14 Compliance with ERISA. Borrower shall and shall cause each of its
ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other Federal and
State law, except where the failure to so comply does not and could not be
reasonably expected to have a Material Adverse Effect; (b) cause
each Plan which is qualified under Section 401(a) of the Code to maintain such
qualification; (c) not terminate any of such Plans so as to incur any material
liability to the Pension Benefit Guaranty Corporation; (d) not allow or suffer
to exist any prohibited transaction involving any of such Plans or any trust
created thereunder which would subject Borrower or such ERISA Affiliate to a tax
or penalty or other liability on prohibited transactions imposed under Section
4975 of the Code or ERISA; (e) make all required contributions to any Plan which
it is obligated to pay under Section 302 of ERISA, Section 412 of the Code or
the terms of such Plan; (f) not allow or suffer to exist any accumulated funding
deficiency, whether or not waived, with respect to any such Plan; or (g) not
allow or suffer to exist any occurrence of a reportable event or any other event
or condition which presents a material risk of termination by the Pension
Benefit Guaranty Corporation of any such Plan that is a single employer plan,
which termination could result in any liability to the Pension Benefit Guaranty
Corporation.
9.15 End of Fiscal Years: Fiscal Quarters. Borrower shall, for
financial reporting purposes, cause its, and each of its Subsidiaries' (a)
fiscal years to end on December 31 of each year and (b) fiscal quarters to end
on March 31, June 30, September 30 and December 31 of each year.
9.16 Change in Business. Borrower shall not engage in any business
other than the business of Borrower on the date hereof and any business
reasonably related, ancillary or complementary to the business in which Borrower
is engaged on the date hereof.
9.17 Limitation of Restrictions Affecting Subsidiaries. Borrower shall
not, directly, or indirectly, create or otherwise cause or suffer to exist any
encumbrance or restriction which prohibits or limits the ability of any
Subsidiary of Borrower to (a) pay dividends or make other distributions or pay
any Indebtedness owed to Borrower or any Subsidiary of Borrower; (b) make loans
or advances to Borrower or any Subsidiary of Borrower, (c) transfer any of its
properties or assets to Borrower or any Subsidiary of Borrower; or (d) create,
incur, assume or suffer to exist any lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, other than encumbrances and
restrictions arising under (i) applicable law, (ii) this Agreement, (iii)
customary provisions restricting subletting or assignment of any lease governing
a leasehold interest of Borrower or any of its Subsidiaries, (iv) customary
restrictions on dispositions of real property interests found in reciprocal
easement agreements of Borrower or its Subsidiary, (v) any agreement relating to
permitted Indebtedness incurred by a Subsidiary of Borrower prior to the date on
which such Subsidiary was acquired by Borrower and outstanding on such
acquisition date, and (vi) the extension or continuation of contractual
obligations in existence on the date hereof, provided, that, any such
encumbrances or restrictions contained in such extension or continuation are no
less favorable to Lender than those encumbrances and restrictions under or
pursuant to the contractual obligations so extended or continued.
9.18 Adjusted Net Worth. Borrower shall, at all times, maintain
Adjusted Net Worth of not less than $50,000,000.00, provided that (a) (i) if the
Post Closing Balance Sheet reflects that, as of the date hereof, the Adjusted
Net Worth of the Borrower is more than the Adjusted Net Worth as reflected in
the Pro Forma Closing Balance Sheet then, effective immediately upon the receipt
by Lender of the Post Closing Balance Sheet, the amount of the Adjusted Net
Worth required to be maintained by Borrower under this Section 9.18 shall be
increased, on a dollar for dollar basis, by such amount, or (ii) if the Post
Closing Balance Sheet reflects that, as of the date hereof, the
Adjusted Net Worth of the Borrower is less than the Adjusted Net Worth as
reflected in the Pro Forma Closing Balance Sheet then, effective immediately
upon the receipt by Lender of the Post Closing Balance Sheet, the amount of the
Adjusted Net Worth required to be maintained by Borrower under this Section 9.18
shall be decreased, on a dollar for dollar basis, by such amount, and (b) the
amount of the Adjusted Net Worth required to be maintained by Borrower under
this Section 9.18 shall be decreased, on a dollar-for-dollar basis, by the
amount of any dividend payments made pursuant to and in accordance with the
terms and conditions of Sections 9.11(b) and 9.11(c).
9.19 License Agreements.
(a) Borrower shall (i) observe and perform all of the material
terms, covenants, conditions and provisions of the License Agreements to be
observed and performed by it, at the times set forth therein, if any, (ii) not
do, permit, suffer or refrain from doing anything could reasonably be expected
to result in a default under or breach of any of the terms of any License
Agreement, (iii) not cancel, surrender, modify, amend, waive or release any
License Agreement in any material respect or any term, provision or right of the
licensee thereunder in any material respect, or consent to or permit to occur
any of the foregoing; except, that, subject to Section 9.19(b) below, Borrower
may cancel, surrender or release any License Agreement in the ordinary course of
the business of Borrower; provided, that, Borrower shall give Lender not less
than ten (10) days prior written notice of its intention to so cancel, surrender
and release any such License Agreement, (iv) give Lender prompt written notice
of any License Agreement entered into by Borrower after the date hereof,
together with a true, correct and complete copy thereof and such other
information with respect thereto as Lender may reasonably request, (v) give
Lender prompt written notice of any material breach of any obligation, or any
default, by any party under any License Agreement, and deliver to Lender
(promptly upon the receipt thereof by Borrower in the case of a notice to
Borrower, and concurrently with the sending thereof in the case of a notice from
Borrower) a copy of each notice of default received or delivered by Borrower in
connection with any License Agreement, and (vi) furnish to Lender, promptly upon
the request of Lender, such information and evidence as Lender may reasonably
require from time to time concerning the observance, performance and compliance
by Borrower or the other party or parties thereto with the terms, covenants or
provisions of any License Agreement.
(b) Borrower will either exercise any option to renew or extend
the term of each License Agreement in such manner as will cause the term of such
License Agreement to be effectively renewed or extended in accordance with, and
subject to, the terms thereof, for the period provided by such option and give
prompt written notice thereof to Lender or give Lender prior written notice that
Borrower does not intend to renew or extend the term of any such License
Agreement or that the term thereof shall otherwise be expiring, not less than
ten (10) days prior to the date of any such non-renewal or expiration. In the
event of the failure of Borrower to extend or renew any License Agreement,
Lender shall have, and is hereby granted, the irrevocable right and authority,
at its option, in accordance with, and subject to, the terms thereof and subject
to the limitations referenced in Schedule 8.4, to renew or extend the term of
such License Agreement, whether in its own name and behalf, or in the name and
behalf of a designee or nominee of Lender or in the name and behalf of Borrower,
as Lender shall determine at any time that an Event of
Default shall exist or have occurred and be continuing. Any sums so paid by
Lender shall constitute part of the Obligations.
(c) Notwithstanding the foregoing, the terms of Sections
9.19(a) and 9.19(b) above shall not apply to any action or inaction as described
therein unless the effect of such action or inaction shall be a reduction, in
any twelve (12) month period, of revenues to the Borrower under License
Agreements in an amount greater than $1,500,000.
9.20 Costs and Expenses. Borrower shall pay to Lender on demand all
reasonable costs expenses and filing fees and taxes paid or payable in
connection with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, Lender's rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including: (a) all costs and expenses of filing or recording (including
Uniform Commercial Code financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees, if applicable);
(b) costs and expenses and fees for insurance premiums, appraisal fees and
search fees, costs and expenses of remitting loan proceeds, collecting checks
and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Lender's customary charges and fees with respect
thereto; (c) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations; (d) costs and expenses of
preserving and protecting the Collateral; (e) reasonable costs and expenses paid
or incurred in connection with obtaining payment of the Obligations, enforcing
the security interests and liens of Lender, selling or otherwise realizing upon
the Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Lender arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters); (f)
all reasonable out-of-pocket expenses and costs heretofore and from time to time
hereafter incurred by Lender during the course of periodic field examinations of
the Collateral and Borrower's operations, plus a per diem charge at the rate of
$750 per person per day for Lender's examiners in the field and office; and (g)
the reasonable fees and disbursements of counsel (including legal assistants) to
Lender in connection with any of the foregoing.
9.21 Payment of Purchase Price Adjustments. In the event that Borrower
is required to remit to Seller all or any portion of the Holdback Amount (as
defined in the Asset Purchase Agreement described in Section 1.69 hereof) under
the Purchase Agreements, Borrower shall be permitted to make such payment if no
Event of Default exists and is continuing and if, after giving effect to any
such payment, Borrower has Excess Availability of not less than $14,000,000.
9.22 Further Assurances. At the request of Lender at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or cause
to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to
the making of Loans and providing Letter of Credit Accommodations contained
herein are satisfied. In the event of such request by Lender, Lender may, at its
option, cease to make any further Loans or provide any further Letter of Credit
Accommodations until Lender has received such certificate and, in addition,
Lender has determined that such conditions are satisfied. Where permitted by
law, Borrower hereby authorizes Lender to execute and file one or more UCC
financing statements signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) Borrower fails to pay any of the Obligations within
three (3) days after the due date thereof or (ii) Borrower or Obligor fails to
perform any of the covenants contained in Sections 9.3, 9.4, 9.6, 9.14, 9.15,
9.16, 9.17, 9.20 or 9.22 of this Agreement and such failure shall continue for
ten (10) days; provided, that, such ten (10) day period shall not apply in the
case of (A) any failure to observe any such covenant which is not capable of
being cured at all or within such ten (10) day period or which has been the
subject of a prior failure within a six (6) month period or (B) an intentional
breach by Borrower or Obligor of any such covenant or (iii) Borrower or Obligor
fails to perform any of the terms, covenants, conditions or provisions contained
in this Agreement or any of the other Financing Agreements other than those
described in Sections 10.1(a)(i) and 10.1(a)(ii) above;
(b) any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(c) any Obligor revokes, terminates or fails to perform any of
the terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) any judgment for the payment of money is rendered against
Borrower or any Obligor in excess of $1,000,000 in any one case or in excess of
$2,000,000 in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against Borrower or
any Obligor or any of their assets;
(e) any Obligor, which is a partnership, limited liability
company, limited liability partnership or a corporation, dissolves or suspends
or discontinues doing business;
(f) Borrower or any Obligor becomes insolvent (however defined
or evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or, in connection with any of the foregoing, calls a
meeting of its creditors or principal creditors;
(g) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against Borrower or any Obligor or all or any part of its
properties and such petition or application is not dismissed within forty-five
(45) days after the date of its filing or Borrower or any Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or any Obligor or for all or any part of its
property; or
(i) any default by Borrower or any Obligor under any agreement,
document or instrument relating to any Indebtedness for borrowed money owing to
any person other than Lender, or any capitalized lease obligations, contingent
Indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, in any case
in an amount in excess of $1,000,000, which default continues for more than the
applicable cure period, if any, with respect thereto, or any default by Borrower
or any Obligor under any Material Contract, which default continues for more
than the applicable cure period, if any, with respect thereto;
(j) an ERISA Event shall occur which results in or could
reasonably be expected to result in liability of Borrower in an aggregate amount
in excess of $1,000,000;
(k) any Change of Control;
(l) the indictment by any Governmental Authority, or as Lender
may reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of Borrower of which Borrower or Lender receives notice,
in either case, as to which there is a reasonable possibility of an adverse
determination, in the good faith determination of Lender, under any criminal
statute, or commencement or threatened commencement of criminal or civil
proceedings against Borrower, pursuant to which statute or proceedings the
penalties or remedies sought or available include forfeiture of (i) any of the
Collateral having an aggregate value in excess of $500,000 or (ii) any other
property of Borrower which is necessary or material to the conduct of its
business; or
(m) there shall be a Material Adverse Effect.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and
is continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and
remedies may be exercised without notice to or consent by Borrower or any
Obligor, except as such notice or consent is expressly provided for hereunder or
required by applicable law. All rights, remedies and powers granted to Lender
hereunder, under any of the other Financing Agreements, the Uniform Commercial
Code or other applicable law, are cumulative, not exclusive and enforceable, in
Lender's discretion, alternatively, successively, or concurrently on any one or
more occasions, and shall include, without limitation, the right to apply to a
court of equity for an injunction to restrain a breach or threatened breach by
Borrower of this Agreement or any of the other Financing Agreements. Lender may,
at any time or times, proceed directly against Borrower or any Obligor to
collect the Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation, (1) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1 (g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrower, at Borrower's expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrower and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Lender. If notice of disposition of Collateral is
required by law, ten (10) days prior notice by Lender to Borrower designating
the time and place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrower waives any other notice. In the event
Lender institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrower waives the posting of any bond
which might otherwise be required.
(c) For the purpose of enabling Lender to exercise the rights
and remedies hereunder, Borrower hereby grants to Lender, effective as of the
occurrence of any Event of Default, to the extent assignable and subject to any
license rights outstanding, in writing, as of the date hereof or granted, in
writing, by Borrower to third parties, an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to Borrower) to
use, assign, license or sublicense any of the trademarks, service-marks, trade
names, business names, trade styles, designs, logos and other source of business
identifiers and other Intellectual Property and general intangibles now owned or
hereafter acquired by Borrower, wherever the same maybe located,
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer programs used for
the compilation or printout thereof.
(d) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrower shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.
(e) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Loans and Letter of Credit Accommodations
available to Borrower and/or (ii) terminate any provision of this Agreement
providing for any future Loans or Letter of Credit Accommodations to be made by
Lender to Borrower.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process: Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York
(without giving effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Supreme Court of the State of New York, County
of New York and the United States District Court for the Southern District of
New York, whichever Lender may elect, and waive any objection based on venue or
forum non conveniens with respect to any action instituted therein arising under
this Agreement or any of the other Financing Agreements or in any way connected
with or related or incidental to the dealings of the parties hereto in respect
of this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Lender shall have the right to bring any action or
proceeding against Borrower or its property in the courts of any other
jurisdiction which Lender deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against Borrower or its
property).
(c) Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails, or,
at Lender's option, by service upon Borrower in any other manner provided under
the rules of any such
courts. Within thirty (30) days after such service, Borrower shall appear in
answer to such process, failing which Borrower shall be deemed in default and
judgment may be entered by Lender against Borrower for the amount of the claim
and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER
EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT-TRIAL WITHOUT A JURY AND THAT BORROWER OR
LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in
tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit of
the rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and chattel paper, included in or evidencing any of
the Obligations or the Collateral, and any and all other demands and notices of
any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Lender may elect to give shall entitle Borrower
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel (collectively, "Indemnified Persons"),
harmless from and against any and all losses, claims, damages, liabilities,
costs or expenses imposed on, incurred by or asserted against any of them in
connection with any litigation, investigation, claim or proceeding commenced or
threatened related to the negotiation, preparation, execution, delivery,
enforcement, performance or administration of this Agreement, any other
Financing Agreements, or any undertaking or proceeding related to any of the
transactions contemplated hereby or any act, omission, event or transaction
related or attendant thereto, including amounts paid in settlement, court costs,
and the fees and expenses of counsel ("Indemnified Liabilities"), except for any
losses, claims, damages, liabilities, costs or expenses which result from the
gross negligence or wilful misconduct of any Indemnified Person as determined
pursuant to a final, non-appealable order of a court of competent jurisdiction.
To the extent that the undertaking to indemnify, pay and hold harmless set forth
in this Section may be unenforceable because it violates any law or public
policy, Borrower shall pay the maximum portion which it is permitted to pay
under applicable law to Lender in satisfaction of indemnified matters under this
Section. The foregoing indemnity shall survive the payment of the Obligations
and the termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date three (3) years
from the date hereof (the "Renewal Date"), and from year to year thereafter,
unless sooner terminated pursuant to the terms hereof: Lender or Borrower may
terminate this Agreement and the other Financing Agreements effective on the
Renewal Date or on the anniversary of the Renewal Date in any year by giving to
the other party at least sixty (60) days prior written notice; provided, that,
this Agreement and all other Financing Agreements must be terminated
simultaneously. Upon the effective date of termination or non-renewal of this
Agreement, Borrower shall pay to Lender, in full, all outstanding and unpaid
Obligations and shall furnish cash collateral to Lender in such amounts as
Lender determines are reasonably necessary to secure Lender from loss, cost,
damage or expense, including attorneys' fees and legal expenses, in connection
with any contingent Obligations, including issued and outstanding Letter of
Credit Accommodations and checks or other payments provisionally credited to the
Obligations and/or as to which Lender has not yet received final and
indefeasible payment. Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrower for such purpose. Interest shall be due until and including the next
business day, if the amounts so paid by Borrower to the bank account designated
by Lender are received in such bank account later than 12:00 noon, New York
time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid. Accordingly, Borrower waives any rights
which it may have under Section 9-404 of the Uniform Commercial Code to demand
the filing of termination statements with respect to the Collateral, and Lender
shall not be required to send such termination statements to Borrower, or to
file them with any filing office, unless and until this Agreement is terminated
in accordance with its terms and all of the Obligations paid in immediately
available funds.
(c) If for any reason this Agreement is terminated prior to
April 30, 2004, in view of the impracticality and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of Lender's lost profits as a result thereof, Borrower
agrees to pay to Lender, upon the effective date of such termination, an early
termination fee in the amount of one-half (1/2%) percent of the Maximum Credit.
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Lender does not exercise its right to terminate this Agreement, but elects, at
its option, to provide financing to Borrower or permit the use of cash
collateral under the United States Bankruptcy Code. The early termination fee
provided for in this Section 12.1 shall be deemed included in the Obligations.
(d) Notwithstanding anything to the contrary contained in
Section 12.1(c), Borrower shall not be required to pay the early termination fee
which would otherwise be payable under Section 12.1(c) if each of the following
conditions is satisfied as determined in good faith by Lender at any time after
the first anniversary of the date hereof (i) Lender shall have received a copy
of a written commitment letter issued in good faith by a bank or other financial
institution that is engaged in the business of making loans to corporations in
the ordinary course of its business, which commitment letter is addressed to
Borrower, duly authorized, executed and delivered by such bank or financial
institution, setting forth the commitment of such bank or other financial
institution to provide to Borrower loans for a term of not less than one (1)
year, and (ii) within thirty (30) days after the receipt by Lender of such
commitment letter, Lender (or any of its affiliates) shall not have issued to
Borrower a commitment letter with the material terms and conditions thereof
being substantially similar to the material terms and conditions of the
commitment letter provided by Borrower to Lender under clause (i) above, and
(iii) no Event of Default or act, condition or event which with notice or
passage of time or both would constitute an Event of Default shall exist or have
occurred. For purposes hereof, the "material terms and conditions" of the
commitment letter shall mean the aggregate amount of the fees payable by
Borrower for the proposed facility, the aggregate amount of interest that would
be payable in any form for the proposed facility, the amount of the loans that
would be available under the proposed credit facility compared to the amounts
available under the commitment letter provided by Lender to Borrower, in each
case as calculated by Lender in good faith.
(e) Upon Borrower's written request, promptly after the
effective date of the termination or non-renewal of this Agreement, Lender shall
deliver to Borrower, at Borrower's cost and expense, UCC-3 termination
statements and a release and reassignment of trademarks, patents, and
copyrights, each in form and substance satisfactory to Lender, necessary to
evidence the termination of Lender's security interests in and liens upon the
Collateral, provided that, each of the following conditions is satisfied: (i)
Lender shall have received payment in full in cash and performance of all
outstanding and unpaid Obligations and the delivery to Lender of cash collateral
in such amounts as Lender determines are reasonably necessary to secure Lender
from loss, cost, damage or expense, including attorneys' fees and legal
expenses, in connection with any contingent Obligations, including issued and
outstanding Letter of Credit Accommodations and checks or other payments
provisionally credited to the Obligations and/or as to which Lender has not yet
received final and indefeasible payment, and upon the release of all claims
against Lender, (ii) Lender shall have received a written release by Borrower
and Obligors of Lender and the other Indemnified Parties, in form and substance
satisfactory to Lender, duly authorized, executed and delivered by Borrower and
Obligors, and (iii) no suits, actions, proceedings or claims are pending or
threatened against any Indemnified Person (as defined in Section 11.5) asserting
any damages, losses or liabilities that are Indemnified Liabilities (as defined
in Section 11.5).
12.2 Interpretative Provisions.
(a) All terms used herein which are defined in Article 1 or
Article 9 of the Uniform Commercial Code shall have the meanings given therein
unless otherwise defined in this Agreement.
(b) All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural unless the context
otherwise requires.
(c) All references to Borrower and Lender pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns.
(d) The words "hereof", "herein", "hereunder", "this Agreement"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(e) The word "including" when used in this Agreement shall mean
"including, without limitation".
(f) An Event of Default shall exist or continue or be
continuing until such Event of Default is waived in accordance with Section 11.3
or is cured in a manner satisfactory to Lender, if such Event of Default is
capable of being cured as determined by Lender in good faith.
(g) Any accounting term used in this Agreement shall have,
unless otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the financial statements of
Borrower most recently received by Lender prior to the date hereof.
(h) In the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including", the words
"to" and "until" each mean "to but excluding" and the word "through" means "to
and including".
(i) Unless otherwise expressly provided herein, (i) references
herein to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing Agreement,
and (ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, recodifying, supplementing or interpreting the statute or regulation.
(j) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(k) This Agreement and other Financing Agreements may use
several different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are cumulative and
shall each be performed in accordance with their terms.
(l) This Agreement and the other Financing Agreements are the
result of negotiations among and have been reviewed by counsel to Lender and the
other parties, and are the products of all parties. Accordingly, this Agreement
and the other Financing Agreements shall not be construed against Lender merely
because of Lender's involvement in their preparation.
12.3 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrower at
its chief executive office set forth below with a copy to Perseus
Acquisition/Recapitalization Fund, L.L.C., 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xx. Xxxxxx X. Xxxxxxx, Telecopier No.: (212)
245-1852, or to such other address as either party may designate by written
notice to the other in accordance with this provision, and (b) deemed to have
been given or made: if delivered in person, immediately upon delivery; if by
telex, telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next Business Day, one (1) Business Day after
sending; and if by certified mail, return receipt requested, five (5) days after
mailing.
12.4 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.5 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
12.6 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
12.7 Counterparts, Etc. This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement or any of the
other Financing Agreements by telefacsimile shall have the same force and effect
as the delivery of an original executed counterpart of this Agreement or any of
such other Financing Agreements. Any party delivering an executed counterpart of
any such agreement by telefacsimile shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
================================================================================
LENDER BORROWER
CONGRESS FINANCIAL CORPORATION FOOTWEAR ACQUISITION, INC.
By: /s/ signature illegible By: /s/ Marsden X. Xxxxx
--------------------------------- ---------------------------------
Title: Executive Vice President Title: President
------------------------------ ------------------------------
Address: Chief Executive Office:
1133 Avenue of the Americas Xxx Xxxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxxxx Xxxxxxx, Xxxxxxxxxxxxx 00000
================================================================================
