CREDIT AND SECURITY AGREEMENT BY AND BETWEEN uBID.COM HOLDINGS, INC. AND UBID, INC. AND WELLS FARGO BANK, NATIONAL ASSOCIATION Acting through its WELLS FARGO BUSINESS CREDIT operating division May 9, 2006
CREDIT
AND SECURITY AGREEMENT
BY
AND BETWEEN
xXXX.XXX
HOLDINGS, INC.
AND
UBID,
INC.
AND
XXXXX
FARGO BANK,
NATIONAL ASSOCIATION
Acting
through its XXXXX FARGO BUSINESS CREDIT operating
division
|
May
9, 2006
|
TABLE
OF CONTENTS
ARTICLE
I
DEFINITIONS
|
4
|
|
Section
1.1
|
Definitions
|
4
|
Section
1.2
|
Other
Definitional Terms; Rules of Interpretation
|
13
|
ARTICLE
II
AMOUNT AND TERMS OF THE CREDIT FACILITY
|
13
|
|
Section
2.1
|
Revolving
Advances
|
13
|
Section
2.2
|
Procedures
for Requesting Advances
|
13
|
Section
2.3
|
LIBOR
Advances
|
14
|
Section
2.4
|
Letters
of Credit
|
15
|
Section
2.5
|
Special
Account
|
16
|
Section
2.6
|
Interest;
Minimum Interest Charge; Default Interest Rate; Application of
Payments;
Participations; Usury
|
16
|
Section
2.7
|
Fees
|
18
|
Section
2.8
|
Time
for Interest Payments; Payment on Non-Business Days; Computation
of
Interest and Fees
|
20
|
Section
2.9
|
Collateral
Account; Sweep of Funds
|
20
|
Section
2.10
|
Voluntary
Prepayment; Termination of the Credit Facility by the
Borrower
|
21
|
Section
2.11
|
Mandatory
Prepayment
|
21
|
Section
2.12
|
Revolving
Advances to Pay Obligations
|
21
|
Section
2.13
|
Use
of Proceeds
|
22
|
Section
2.14
|
Liability
Records
|
22
|
ARTICLE
III
SECURITY INTEREST; OCCUPANCY; SETOFF
|
22
|
|
Section
3.1
|
Grant
of Security Interest
|
22
|
Section
3.2
|
Notification
of Account Debtors and Other Obligors
|
23
|
Section
3.3
|
Assignment
of Insurance
|
23
|
Section
3.4
|
Occupancy
|
24
|
Section
3.5
|
License
|
24
|
Section
3.6
|
Financing
Statement
|
24
|
Section
3.7
|
Setoff
|
25
|
Section
3.8
|
Collateral
|
25
|
ARTICLE
IV
CONDITIONS OF LENDING
|
25
|
|
Section
4.1
|
Conditions
Precedent to the Initial Advances and Letter of Credit
|
25
|
Section
4.2
|
Conditions
Precedent to All Advances and Letters of Credit
|
28
|
i
ARTICLE
V
REPRESENTATIONS AND WARRANTIES
|
28
|
|
Section
5.1
|
Existence
and Power; Name; Chief Executive Office; Inventory and Equipment
Locations; Federal Employer Identification Number and Organizational
Identification Number
|
28
|
Section
5.2
|
Capitalization
|
28
|
Section
5.3
|
Authorization
of Borrowing; No Conflict as to Law or Agreements
|
28
|
Section
5.4
|
Legal
Agreements
|
29
|
Section
5.5
|
Subsidiaries
|
29
|
Section
5.6
|
Financial
Condition; No Adverse Change
|
29
|
Section
5.7
|
Litigation
|
29
|
Section
5.8
|
Regulation U
|
29
|
Section
5.9
|
Taxes
|
29
|
Section
5.10
|
Titles
and Liens
|
30
|
Section
5.11
|
Intellectual
Property Rights
|
30
|
Section
5.12
|
Plans
|
31
|
Section
5.13
|
Default
|
31
|
Section
5.14
|
Environmental
Matters
|
31
|
Section
5.15
|
Submissions
to Lender
|
32
|
Section
5.16
|
Financing
Statements
|
32
|
Section
5.17
|
Rights
to Payment
|
32
|
Section
5.18
|
Financial
Solvency
|
33
|
ARTICLE
VI
COVENANTS
|
33
|
|
Section
6.1
|
Reporting
Requirements
|
33
|
Section
6.2
|
Financial
Covenants
|
36
|
Section
6.3
|
Permitted
Liens; Financing Statements
|
37
|
Section
6.4
|
Indebtedness
|
37
|
Section
6.5
|
Guaranties
|
38
|
Section
6.6
|
Investments
and Subsidiaries
|
38
|
Section
6.7
|
Dividends
and Distributions
|
38
|
Section
6.8
|
Salaries
|
38
|
Section
6.9
|
Key
Person Life Insurance
|
38
|
Section
6.10
|
Books
and Records; Collateral Examination; Inspection and
Appraisals
|
39
|
Section
6.11
|
Account
Verification
|
39
|
Section
6.12
|
Compliance
with Laws
|
39
|
Section
6.13
|
Payment
of Taxes and Other Claims
|
49
|
Section
6.14
|
Maintenance
of Properties
|
40
|
Section
6.15
|
Insurance
|
40
|
Section
6.16
|
Preservation
of Existence
|
41
|
Section
6.17
|
Delivery
of Instruments, etc.
|
41
|
Section
6.18
|
Sale
or Transfer of Assets; Suspension of Business Operations
|
41
|
Section
6.19
|
Consolidation
and Merger; Asset Acquisitions
|
41
|
Section
6.20
|
Sale
and Leaseback
|
41
|
Section
6.21
|
Restrictions
on Nature of Business
|
41
|
ii
Section
6.22
|
Accounting
|
42
|
Section
6.23
|
Discounts,
etc.
|
42
|
Section
6.24
|
Plans
|
42
|
Section
6.25
|
Place
of Business; Name
|
42
|
Section
6.26
|
Constituent
Documents; S Corporation Status
|
42
|
Section
6.27
|
Performance
by the Lender
|
42
|
ARTICLE
VII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
|
43
|
|
Section
7.1
|
Events
of Default
|
43
|
Section
7.2
|
Rights
and Remedies
|
45
|
Section
7.3
|
Certain
Notices
|
46
|
ARTICLE
VIII
MISCELLANEOUS
|
46
|
|
Section
8.1
|
No
Waiver; Cumulative Remedies; Compliance with Laws
|
46
|
Section
8.2
|
Amendments,
Etc.
|
46
|
Section
8.3
|
Notices;
Communication of Confidential Information; Requests for
Accounting
|
46
|
Section
8.4
|
Further
Documents
|
47
|
Section
8.5
|
Costs
and Expenses
|
47
|
Section
8.6
|
Indemnity
|
47
|
Section
8.7
|
Participants
|
48
|
Section
8.8
|
Execution
in Counterparts; Telefacsimile Execution
|
48
|
Section
8.9
|
Retention
of Borrower’s Records
|
48
|
Section
8.10
|
Binding
Effect; Assignment; Complete Agreement; Sharing
Information
|
49
|
Section
8.11
|
Severability
of Provisions
|
49
|
Section
8.12
|
Headings
|
49
|
Section
8.13
|
Governing
Law; Jurisdiction, Venue; Waiver of Jury Trial
|
49
|
Section
8.14
|
Servicing
of Credit Facility
|
49
|
iii
CREDIT
AND SECURITY AGREEMENT
Dated
as
of May 9, 2006
xXXX.XXX
HOLDINGS, INC., a Delaware corporation (“xXxx.Xxx”), and UBID, INC., a Delaware
corporation (“uBid”), each Borrower are hereafter, unless referenced
individually, collectively referred to as the (“Borrower”) and XXXXX FARGO BANK,
NATIONAL ASSOCIATION (“Lender”) through its XXXXX FARGO BUSINESS CREDIT
operating division, hereby agree as follows:
ARTICLE
I
DEFINITIONS
Section
1.1 Definitions.
Except
as otherwise expressly provided in this Agreement, the following terms shall
have the meanings given them in this Section:
“Accounts”
shall have the meaning given it under the UCC.
“Accounts
Advance Rate” means up to eighty-five percent (85%), or such lesser rate as the
Lender in its sole discretion may deem appropriate from time to
time.
“Advance”
means a Revolving Advance .
“Affiliate”
or “Affiliates” means any Person controlled by, controlling or under common
control with the Borrower, including any Subsidiary of the Borrower. For
purposes of this definition, “control,” when used with respect to any specified
Person, means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by
contract or otherwise.
“Agreement”
means this Credit and Security Agreement.
“Availability”
means the amount, if any, by which the Borrowing Base exceeds the sum of
(i) the outstanding principal balance of the Revolving Note, (ii) any
reserves, and (iii) the L/C Amount.
“Book
Net
Worth” means the aggregate of the common and preferred shareholders’ equity in
the Borrower, determined in accordance with GAAP.
“Borrowing
Base” means at any time the lesser of:
(a) The
Maximum Line Amount; or
(b) Subject
to change from time to time in the Lender’s sole discretion, the sum
of:
(i) The
lesser of (A) the product of the Accounts Advance Rate times Eligible Accounts
or (B) $25,000,000.00, plus
4
(ii) The
lesser of (A) the product of the Inventory Advance Rate times Eligible
Inventory; or (B) 85% of the Net Orderly Liquidation Value of Eligible
Inventory; or (C) $20,000,000.00, less
(iii) The
Borrowing Base Reserve, less
(iv) Obligations
that the Borrower owes to the Lender that have not yet been advanced on the
Revolving Note, and the dollar amount that the Lender in its discretion believes
is a reasonable determination of the Borrower’s credit exposure with respect to
Xxxxx Fargo Affiliate Obligations and obligations owed to Xxxxx Fargo Merchant
Services, LLC.
“Borrowing
Base Reserve” means, as of any date of determination, such amounts (expressed as
either a specified amount or as a percentage of a specified category or item)
as
the Lender may from time to time establish and adjust in reducing Availability
(a) to reflect events, conditions, contingencies or risks which, as determined
by the Lender, do or may affect (i) the Collateral or its value, (ii) the
assets, business or prospects of the Borrower, or (iii) the security interests
and other rights of the Lender in the Collateral (including the enforceability,
perfection and priority thereof), or (b) to reflect the Lender’s judgment that
any collateral report or financial information furnished by or on behalf of
the
Borrower to the Lender is or may have been incomplete, inaccurate or misleading
in any material respect, or (c) in respect of any state of facts that the Lender
determines constitutes a Default or an Event of Default.
"Business
Day" means a day on which the Federal Reserve Bank of New York is open for
business and, if such day relates to a LIBOR Advance, a day on which dealings
are carried on in the London interbank eurodollar market.
“Capital
Expenditures” means for a period, any expenditure of money during such period
for the lease, purchase or other acquisition of any capital asset, or for the
lease of any other asset whether payable currently or in the future.
“Change
of Control” means the occurrence of any of the following events:
During
any consecutive two-year period, individuals who at the beginning of such period
constituted the board of Directors of the Borrower (together with any new
Directors whose election to such board of Directors, or whose nomination for
election by the Owners of the Borrower, was approved by a vote of two thirds
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 the Borrower then in office.
“Collateral”
means all of the Borrower’s Accounts, chattel paper and electronic chattel
paper, deposit accounts, documents, Equipment, General Intangibles, goods,
instruments, Inventory, Investment Property, letter-of-credit rights, letters
of
credit, all sums on deposit in any Collateral Account, and any items in any
Lockbox; together with (i) all substitutions and replacements for and
products of any of the foregoing; (ii) in the case of all goods, all
accessions; (iii) all accessories, attachments, parts, equipment and
repairs now or hereafter attached or affixed to or used in connection with
any
goods; (iv) all warehouse receipts, bills of lading and other documents of
title now or hereafter covering such goods; (v) all collateral subject to
the Lien of any Security Document; (vi) any money, or other assets of the
Borrower that now or hereafter come into the possession, custody, or control
of
the Lender; (vii) all sums on deposit in the Special Account;
(viii) proceeds of any and all of the foregoing; (ix) books and records of
the Borrower, including all mail or electronic mail addressed to the Borrower;
and (x) all of the foregoing, whether now owned or existing or hereafter
acquired or arising or in which the Borrower now has or hereafter acquires
any
rights.
5
“Collateral
Account” means the “Collection Account” as defined in the Collection Account
Agreement.
“Collection
Account Agreement” means the Collection Account Agreement by and between the
Borrower and the Lender, dated the same date as this Agreement.
“Commercial
Letter of Credit Agreement” means an agreement governing the issuance of
documentary letters of credit by the Lender, entered into between the Borrower
as applicant and the Lender as issuer.
“Commitment”
means the Lender’s commitment to make Advances to, and to issue Letters of
Credit for the account of, the Borrower.
“Constituent
Documents” means with respect to any Person, as applicable, such Person’s
certificate of incorporation, articles of incorporation, by-laws, certificate
of
formation, articles of organization, limited liability company agreement,
management agreement, operating agreement, shareholder agreement, partnership
agreement or similar document or agreement governing such Person’s existence,
organization or management or concerning disposition of ownership interests
of
such Person or voting rights among such Person’s owners.
“Copyright
Security Agreement” means each and every Copyright Security Agreement now or
hereafter executed by the Borrower in favor of the Lender.
“Credit
Facility” means the credit facility under which Revolving Advances and Letters
of Credit may be made available to the Borrower by the Lender under Article
II.
“Cut-off
Time” means 11:00 a.m. Milwaukee, Wisconsin time.
“Debt”
means of a Person as of a given date, all items of indebtedness or liability
which in accordance with GAAP would be included in determining total liabilities
as shown on the liabilities side of a balance sheet for such Person and shall
also include the aggregate payments required to be made by such Person at any
time under any lease that is considered a capitalized lease under
GAAP.
“Default”
means an event that, with giving of notice or passage of time or both, would
constitute an Event of Default.
“Default
Period” means any period of time beginning on the day a Default or Event of
Default occurs and ending on the date identified by the Lender in writing as
the
date that such Default or Event of Default has been cured or
waived.
6
“Default
Rate” means an annual interest rate in effect during a Default Period or
following the Termination Date, which interest rate shall be equal to three
percent (3%) over the applicable Floating Rate or the LIBOR Advance Rate, as
the
case may be, as such rate may change from time to time.
“Deposit
Account Control Agreement” means the Deposit Account Control Agreement of even
date herewith, executed by the Borrower in the Lender’s favor.
“Director”
means a director if the Borrower is a corporation, a governor or manager if
the
Borrower is a limited liability company, or a general partner if the Borrower
is
a partnership.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from
time
to time.
“ERISA
Affiliate” means any trade or business (whether or not incorporated) that is a
member of a group which includes the Borrower and which is treated as a single
employer under Section 414 of the IRC.
“Earnings
Before Taxes” means pretax earnings from operations, excluding extraordinary
gains, but including extraordinary losses, excluding any adjustments related
to
FASB 123R.
“Eligible
Accounts” means all unpaid Accounts of the Borrower arising from the sale or
lease of goods or the performance of services, net of any credits, but excluding
any such Accounts having any of the following characteristics:
(i) That
portion of Accounts unpaid 90 days or more after the invoice date or, if
the Lender in its discretion has determined that a particular dated Account
may
be eligible, that portion of such Account which is unpaid more than 60 days
past
the stated due date or more than 90 days past the invoice date;
(ii) That
portion of Accounts related to goods or services with respect to which the
Borrower has received notice of a claim or dispute, which are subject to a
claim
of offset or a contra account, or which reflect a reasonable reserve for
warranty claims or returns;
(iii) That
portion of Accounts not yet earned by the final delivery of goods or rendition
of services, as applicable, by the Borrower to the customer, including progress
xxxxxxxx, and that portion of Accounts for which an invoice has not been sent
to
the applicable account debtor;
(iv) Accounts
constituting (i) proceeds of copyrightable material unless such copyrightable
material shall have been registered with the United States Copyright Office,
or
(ii) proceeds of patentable inventions unless such patentable inventions have
been registered with the United States Patent and Trademark Office;
(v) Accounts
owed by any unit of government, whether foreign or domestic (provided,
however,
that
there shall be included in Eligible Accounts that portion of Accounts owed
by
such units of government for which the Borrower has provided evidence
satisfactory to the Lender that (A) the Lender has a first priority
perfected security interest and (B) such Accounts may be enforced by the
Lender directly against such unit of government under all applicable
laws);
7
(vi) Accounts
denominated in any currency other than United States dollars;
(vii) Accounts
owed by an account debtor located outside the United States which are not
(A) backed by a bank letter of credit naming the Lender as beneficiary or
assigned to the Lender, in the Lender’s possession or control, and with respect
to which a control agreement concerning the letter-of-credit rights is in
effect, and acceptable to the Lender in all respects, in its sole discretion,
or
(B) covered by a foreign receivables insurance policy acceptable to the
Lender in its sole discretion;
(viii) Accounts
owed by an account debtor that is insolvent, the subject of bankruptcy
proceedings or has gone out of business;
(ix) Accounts
owed by an Owner, Subsidiary, Affiliate, Officer or employee of the
Borrower;
(x) Accounts
not subject to a duly perfected security interest in the Lender’s favor or which
are subject to any Lien in favor of any Person other than the
Lender;
(xi) That
portion of Accounts that has been restructured, extended, amended or
modified;
(xii) That
portion of Accounts that constitutes advertising, finance charges, service
charges or sales or excise taxes;
(xiii) Accounts
owed by an account debtor, regardless of whether otherwise eligible, to the
extent that the aggregate balance of such Accounts exceeds 15% of the aggregate
amount of all Eligible Accounts;
(xiv) Accounts
owed by an account debtor, regardless of whether otherwise eligible, if 25%
or
more of the total amount of Accounts due from such debtor is ineligible under
clauses (i), (ii), or (x) above; and
(xv) Accounts,
or portions thereof, otherwise deemed ineligible by the Lender in its sole
discretion.
“Eligible
Inventory” means all Inventory of the Borrower, valued at the lower of cost or
market in accordance with GAAP; but excluding any Inventory having any of the
following characteristics:
(i) Inventory
that is: in-transit; located at any warehouse, job site or other premises not
approved by the Lender in writing; not subject to a duly perfected first
priority security interest in the Lender’s favor; subject to any lien or
encumbrance that is subordinate to the Lender’s first priority security
interest; covered by any negotiable or non-negotiable warehouse receipt, xxxx
of
lading or other document of title; on consignment from any Person; on
consignment to any Person or subject to any bailment unless such consignee
or
bailee has executed an agreement with the Lender; provided;
however,
that
Inventory that is in-transit and is supported by documentation acceptable to
Lender in its sole discretion may be deemed by Lender to be Eligible Inventory;
provided,
further,
however,
that
Inventory which is supported by documentation acceptable to Lender in its sole
discretion and that is (i) in-transit from an offshore supplier limited to
$5,000,000.00 (ii) considered to be re-work Inventory not stored at Borrower’s
premises or (iii) in-transit or located at a domestic supplier where said
Inventory is paid for via a wire transfer initiated through Lender and that
said
Inventory is received by Borrower at Borrower’s Naperville facility within seven
(7) days from the ealier of payment or transfer of title may be deemed by Lender
in its sole discretion to be Eligible Inventory;
8
(ii) Supplies,
packaging, maintenance parts or sample Inventory, or customer supplied parts
or
Inventory;
(iii) Work-in-process
Inventory;
(iv) Inventory
that is damaged, defective, obsolete, slow moving or not currently saleable
in
the normal course of the Borrower’s operations, or the amount of such Inventory
that has been reduced by shrinkage;
(v) Inventory
that the Borrower has returned, has attempted to return, is in the process
of
returning or intends to return to the vendor thereof;
(vi) Inventory
that is perishable or live;
(vii) Inventory
manufactured by the Borrower pursuant to a license unless the applicable
licensor has agreed in writing to permit the Lender to exercise its rights
and
remedies against such Inventory;
(viii) Inventory
that is subject to a Lien in favor of any Person other than the Lender;
(ix) Inventory
stored at locations holding less than 5% of the aggregate value of Borrower’s
Inventory;
(x) Inventory
not located at Borrower’s premises in Chicago, Illinois except as provided in
(i) above; and
(xi) Inventory
otherwise deemed ineligible by the Lender in its sole discretion.
“Environmental
Law” means any federal, state, local or other governmental statute, regulation,
law or ordinance dealing with the protection of human health and the
environment.
“Equipment”
shall have the meaning given it under the UCC.
“Event
of
Default” is defined in Section 7.1.
9
“Financial
Covenants” means the covenants set forth in Section 6.2.
“Floating
Rate” means an annual interest rate equal to the Prime Rate, which interest rate
shall change when and as the Prime Rate changes.
“Floating
Rate Advance” means an Advance bearing interest at the Floating Rate.
“Funding
Date” is defined in Section 2.1.
“GAAP”
means generally accepted accounting principles, applied on a basis consistent
with the accounting practices applied in the financial statements described
in
Section 5.6.
“General
Intangibles” shall have the meaning given it under the UCC.
“Guarantor(s)”
means any Person now or in the future guaranteeing the Obligations.
“Guaranty”
means each unconditional continuing guaranty or unconditional continuing
guaranty by corporation executed by a Guarantor in favor of the Lender
(collectively, the “Guaranties”)
“Hazardous
Substances” means pollutants, contaminants, hazardous substances, hazardous
wastes, petroleum and fractions thereof, and all other chemicals, wastes,
substances and materials listed in, regulated by or identified in any
Environmental Law.
“Indemnified
Liabilities” is defined in Section 8.6
“Indemnitees”
is defined in Section 8.6.
“IRC”
means the Internal Revenue Code of 1986, as amended from time to
time.
“Infringement”
or “Infringing” when used with respect to Intellectual Property Rights means any
infringement or other violation of Intellectual Property Rights.
“Intellectual
Property Rights” means all actual or prospective rights arising in connection
with any intellectual property or other proprietary rights, including all rights
arising in connection with copyrights, patents, service marks, trade dress,
trade secrets, trademarks, trade names or mask works.
“Interest
Payment Date” is defined in Section 2.8(a).
"Interest
Period" means the period that commences on (and includes) the Business Day
on
which either a LIBOR Advance is made or continued pursuant to Sections 2.2(a)
or
2.3(b), or on which a Floating Rate Advance is converted to a LIBOR Advance
pursuant to Section 2.3(a), and ending on (but excluding) the Business Day
numerically corresponding to such date that is thirty, sixty or ninety days
thereafter as designated by the Borrower, during which period the outstanding
principal balance of the LIBOR Advance shall bear interest at the LIBOR Advance
Rate; provided,
however,
that:
10
(a) No
Interest Period may be selected for an Advance for a principal amount less
than
One Million Dollars ($1,000,000.00) for the initial Advance and Five Hundred
Thousand Dollars ($500,000.00) for each Advance thereafter, and no more than
four (4) different Interest Periods may be outstanding at any one
time;
(b) If
an
Interest Period would otherwise end on a day which is not a Business Day, then
the Interest Period shall end on the next Business Day thereafter, unless that
Business Day is the first Business Day of a month, in which case the Interest
Period shall end on the last Business Day of the preceding month);
(c) No
Interest Period applicable to a Revolving Advance may end later than the
Maturity Date; and
(d) In
no
event shall the Borrower select Interest Periods with respect to Advances which,
in the aggregate, would require payment of a contracted funds breakage fee
under
Section 2.7(g) in order to make required principal payments.
“Inventory”
shall have the meaning given it under the UCC.
“Inventory
Advance Rate” means up to sixty-five percent (65%), or such lesser rate as the
Lender in its sole discretion may deem appropriate from time to
time.
“Investment
Property” shall have the meaning given it under the UCC.
“L/C
Amount” means the sum of (i) the aggregate amount available for drawing
under any issued and outstanding Letters of Credit and (ii) the unpaid
amount of the Obligation of Reimbursement.
“L/C
Application” means an application for the issuance of documentary letters of
credit pursuant to the terms of a Commercial Letter of Credit Agreement, in
form
acceptable to the Lender.
“Letter
of Credit” is defined in Section 2.4(a).
"LIBOR"
means the rate per annum (rounded upward, if necessary, to the nearest whole
1/8
of 1%) determined pursuant to the following formula:
LIBOR
=
|
Base
LIBOR
|
|
100%
- LIBOR Reserve Percentage
|
(i)
"Base
LIBOR" means the rate per annum for United States dollar deposits quoted by
the
Lender as the Inter-Bank Market Offered Rate, with the understanding that such
rate is quoted by the Lender for the purpose of calculating effective rates
of
interest for loans making reference thereto, on the first day of a Interest
Period for delivery of funds on said date for a period of time approximately
equal to the number of days in such Interest Period and in an amount
approximately equal to the principal amount to which such Interest Period
applies. The Borrower understands and agrees that the Lender may base its
quotation of the Inter-Bank Market Offered Rate upon such offers or other market
indicators of the Inter-Bank Market as the Lender in its discretion deems
appropriate including the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.
11
(ii)
"LIBOR
Reserve Percentage" means the reserve percentage prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for "Eurocurrency
Liabilities" (as defined in Regulation D of the Federal Reserve Board, as
amended), adjusted by the Lender for expected changes in such reserve percentage
during the applicable Interest Period.
“LIBOR
Advance” means an Advance bearing interest at the LIBOR Advance Rate.
“LIBOR
Advance Rate” means an annual interest rate equal to the sum of LIBOR plus two
and one half percent (2.50%).
“Licensed
Intellectual Property” is defined in Section 5.11(c).
“Lien”
means any security interest, mortgage, deed of trust, pledge, lien, charge,
encumbrance, title retention agreement or analogous instrument or device,
including the interest of each lessor under any capitalized lease and the
interest of any bondsman under any payment or performance bond, in, of or on
any
assets or properties of a Person, whether now owned or subsequently acquired
and
whether arising by agreement or operation of law.
“Loan
Documents” means this Agreement, the Revolving Note, any L/C Applications and
the Security Documents, together with every other agreement, note, document,
contract or instrument to which the Borrower now or in the future may be a
party
and which is required by the Lender.
“Loan
Year” is defined in Section 2.6(b).
“Material
Adverse Effect” means any of the following:
(i) A
material adverse effect on the business, operations, results of operations,
prospects, assets, liabilities or financial condition of the
Borrower;
(ii) A
material adverse effect on the ability of the Borrower to perform its
obligations under the Loan Documents;
(iii) A
material adverse effect on the ability of the Lender to enforce the Obligations
or to realize the intended benefits of the Security Documents, including a
material adverse effect on the validity or enforceability of any Loan Document
or of any rights against any Guarantor, or on the status, existence, perfection,
priority (subject to Permitted Liens) or enforceability of any Lien securing
payment or performance of the Obligations; or
(iv) Any
claim
against the Borrower or threat of litigation which if determined adversely
to
the Borrower would cause the Borrower to be liable to pay an amount exceeding
$100,000.00 or would result in the occurrence of an event described in
clauses (i), (ii) and (iii) above.
12
“Maturity
Date” means April 28, 2009.
“Maximum
Line Amount” means $25,000,000.00.
“Minimum
Interest Charge” is defined in Section 2.6(b).
“Multiemployer
Plan” means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to
which the Borrower or any ERISA Affiliate contributes or is obligated to
contribute.
“Net
Cash
Proceeds” means in connection with any asset sale, the cash proceeds (including
any cash payments received by way of deferred payment whether pursuant to a
note, installment receivable or otherwise, but only as and when actually
received) from such asset sale, net of (i) attorneys’ fees, accountants’ fees,
investment banking fees, brokerage commissions and amounts required to be
applied to the repayment of any portion of the Debt secured by a Lien not
prohibited hereunder on the asset which is the subject of such sale, and (ii)
taxes paid or reasonably estimated to be payable as a result of such asset
sale.
“Net
Earnings” means, excluding any adjustments related to FASB 123R, the excess
of:
(a) All
revenues and income derived from operations in the ordinary course of business
(excluding extraordinary gains and gains and profits upon the disposition of
investments and fixed assets)
Over:
(b) All
expenses and other proper charges against income (including all applicable
taxes, but excluding extraordinary losses and losses upon the disposition of
investments and fixed assets), all as determined in accordance with
GAAP.
“Net
Income” means fiscal year-to-date after-tax net income from continuing
operations, including
extraordinary losses but excluding extraordinary gains, all as determined in
accordance with GAAP, excluding any adjustments related to FASB
123R.
“Net
Loss” means fiscal year-to-date after-tax net loss from continuing operations as
determined in accordance with GAAP, excluding any adjustments related to FASB
123R.
“Net
Orderly Liquidation Value” means a professional opinion of the estimated most
probable Net Cash Proceeds which could typically be realized at a properly
advertised and professionally managed liquidation sale, conducted under orderly
sale conditions for an extended period of time (usually six to nine months),
under the economic trends existing at the time of the appraisal.
“Obligation
of Reimbursement” means the obligation of the Borrower to reimburse the Lender
pursuant to the terms of the Commercial Letter of Credit Agreement and any
applicable L/C Application.
13
“Obligations”
means the Revolving Note, the Obligation of Reimbursement and each and every
other debt, liability and obligation of every type and description which the
Borrower may now or at any time hereafter owe to the Lender, whether such debt,
liability or obligation now exists or is hereafter created or incurred, whether
it arises in a transaction involving the Lender alone or in a transaction
involving other creditors of the Borrower, and whether it is direct or indirect,
due or to become due, absolute or contingent, primary or secondary, liquidated
or unliquidated, or sole, joint, several or joint and several, and including
all
indebtedness of the Borrower arising under any Loan Document or guaranty between
the Borrower and the Lender, whether now in effect or subsequently entered
into,
and all Xxxxx Fargo Affiliate Obligations and indebtedness owed by the Borrower
to Xxxxx Fargo Merchant Services, L.L.C.
“Officer”
means with respect to the Borrower, an officer if the Borrower is a corporation,
a manager if the Borrower is a limited liability company, or a partner if the
Borrower is a partnership.
“OFAC”
is
defined in Section 6.12(c).
"Overadvance"
means the amount, if any, by which the outstanding principal balance of the
Revolving Note, plus the L/C Amount, is in excess of the then-existing Borrowing
Base.
“Owned
Intellectual Property” is defined in Section 5.11(a).
“Owner”
means with respect to the Borrower, each Person having legal or beneficial
title
to an ownership interest in the Borrower or a right to acquire such an
interest.
“Patent
and Trademark Security Agreement” means each and every Patent and Trademark
Security Agreement now or hereafter executed by the Borrower in favor of the
Lender.
“Pension
Plan” means a pension plan (as defined in Section 3(2) of ERISA) maintained for
employees of the Borrower or any ERISA Affiliate and covered by Title IV of
ERISA.
“Permitted
Lien” and “Permitted Liens” are defined in Section 6.3(a) .
“Person”
means any individual, corporation, partnership, joint venture, limited liability
company, association, joint-stock company, trust, unincorporated organization
or
government or any agency or political subdivision thereof.
“Plan”
means an employee benefit plan (as defined in Section 3(3) of ERISA) maintained
for employees of the Borrower or any ERISA Affiliate.
“Premises”
means all locations where the Borrower conducts its business or has any rights
of possession, including the locations legally described in Exhibit C attached
hereto.
“Prime
Rate” means at any time the rate of interest most recently announced by the
Lender at its principal office as its Prime Rate, with the understanding that
the Prime Rate is one of the Lender’s base rates, and serves as the basis upon
which effective rates of interest are calculated for those loans making
reference thereto, and is evidenced by the recording thereof in such internal
publication or publications as the Lender may designate. Each change in the
rate
of interest shall become effective on the date each Prime Rate change is
announced by the Lender.
14
“Reportable
Event” means a reportable event (as defined in Section 4043 of ERISA), other
than an event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the Pension Benefit Guaranty
Corporation.
“Revolving
Advance” is defined in Section 2.1.
“Revolving
Note” means the Borrower’s revolving promissory note, payable to the order of
the Lender in substantially the form of Exhibit A hereto, as same may be renewed
and amended from time to time, and all replacements thereto.
“Security
Documents” means this Agreement, the Collection Account Agreement, the Deposit
Account Control Agreement, the Patent and Trademark Security Agreement, and
the
Copyright Security Agreement, and any other document delivered to the Lender
from time to time to secure the Obligations.
“Security
Interest” is defined in Section 3.1.
“Special
Account” means a specified cash collateral account maintained with Lender or
another financial institution acceptable to the Lender in connection with
Letters of Credit, as contemplated by Section 2.5.
“Subsidiary”
means any Person of which more than 50% of the outstanding ownership interests
having general voting power under ordinary circumstances to elect a majority
of
the board of directors or the equivalent of such Person, regardless of whether
or not at the time ownership interests of any other class or classes shall
have
or might have voting power by reason of the happening of any contingency, is
at
the time directly or indirectly owned by the Borrower, by the Borrower and
one
or more other Subsidiaries, or by one or more other Subsidiaries.
“Termination
Date” means the earliest of (i) the Maturity Date, (ii) the date the Borrower
terminates the Credit Facility, or (iii) the date the Lender demands payment
of
the Obligations, following an Event of Default, pursuant to Section
7.2.
“Trademark
Security Agreement” means each and every Trademark Security Agreement now or
hereafter executed by the Borrower in favor of the Lender dated the same date
as
this Agreement.
“UCC”
means the Uniform Commercial Code in effect in the state designated in this
Agreement as the state whose laws shall govern this Agreement, or in any other
state whose laws are held to govern this Agreement or any portion of this
Agreement.
“Unused
Amount” is defined in Section 2.7(b).
“Xxxxx
Fargo Affiliate Obligations” means all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by the Borrower or its
Subsidiaries to any Person that is owned in material part by the Lender, and
that relates to any service or facility extended to the Borrower or its
Subsidiaries, including: (a) credit cards, (b) credit card processing services,
(c) debit cards, and (d) purchase cards, as well as any other services or
facilities from time to time specified by the Lender, whether direct or
indirect, absolute or contingent, due or to become due, and whether existing
now
or in the future.
15
Section
1.2 Other
Definitional Terms; Rules of Interpretation.
The
words “hereof”, “herein” and “hereunder” and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All accounting terms not otherwise
defined herein have the meanings assigned to them in accordance with GAAP.
All
terms defined in the UCC and not otherwise defined herein have the meanings
assigned to them in the UCC. References to Articles, Sections, subsections,
Exhibits, Schedules and the like, are to Articles, Sections and subsections
of,
or Exhibits or Schedules attached to, this Agreement unless otherwise expressly
provided. The words “include”, “includes” and “including” shall be deemed to be
followed by the phrase “without limitation”. Unless the context in which used
herein otherwise clearly requires, “or” has the inclusive meaning represented by
the phrase “and/or”. Defined terms include in the singular number the plural and
in the plural number the singular. Reference to any agreement (including the
Loan Documents), document or instrument means such agreement, document or
instrument as amended or modified and in effect from time to time in accordance
with the terms thereof (and, if applicable, in accordance with the terms hereof
and the other Loan Documents), except where otherwise explicitly provided,
and
reference to any promissory note includes any promissory note which is an
extension or renewal thereof or a substitute or replacement therefor. Reference
to any law, rule, regulation, order, decree, requirement, policy, guideline,
directive or interpretation means as amended, modified, codified, replaced
or
reenacted, in whole or in part, and in effect on the determination date,
including rules and regulations promulgated thereunder.
ARTICLE
II
AMOUNT
AND TERMS OF THE CREDIT FACILITY
Section
2.1 Revolving
Advances.
The
Lender agrees, subject to the terms and conditions of this Agreement, to make
advances (“Revolving Advances”) to the Borrower from time to time from the date
that all of the conditions set forth in 4.1 are satisfied (the “Funding Date”)
to and until (but not including) the Termination Date in an amount not in excess
of the Maximum Line Amount. The Lender shall have no obligation to make a
Revolving Advance to the extent that the amount of the requested Revolving
Advance exceeds Availability. The Borrower’s obligation to pay the Revolving
Advances shall be evidenced by the Revolving Note and shall be secured by the
Collateral. Within the limits set forth in this Section 2.1, the Borrower may
borrow, prepay pursuant to Section 2.10, and reborrow.
Section
2.2 Procedures
for Requesting Advances.
The
Borrower shall comply with the following procedures in requesting Revolving
Advances:
(a) Type
of Advances. Each
Advance shall be funded as either a Floating Rate Advance or a LIBOR Advance,
as
the Borrower shall specify in a request delivered to the Lender conforming
to
the requirements of Section 2.2(b); Floating Rate Advances and LIBOR Advances
may be outstanding at the same time. Each request for a LIBOR Advance shall
be
in multiples of $500,000, with a minimum initial request of at least $1,000,000.
LIBOR Advances shall not be available during Default Periods.
16
(b) Time
for Requests.
The
Borrower shall request each Floating Rate Advance not later than the cut-off
time on the Business Day on which the Floating Rate Advance is to be made,
and
each LIBOR Advance not later than the Cut-off Time on the Business Day that
is
three (3) days preceding the Business Day on which the
LIBOR
Advance is to be made.
Each
request that conforms to the terms of this Agreement shall be effective upon
receipt by the Lender, shall be in writing or by telephone or telecopy
transmission, and shall be confirmed in writing by the Borrower if so requested
by the Lender,
by
(i) an Officer of the Borrower; or (ii) a Person designated as the
Borrower’s agent by an Officer of the Borrower in a writing delivered to the
Lender; or (iii) a Person whom the Lender reasonably believes to be an
Officer of the Borrower or such a designated agent, which confirmation shall
specify whether the Advance shall be a Floating Rate Advance or a LIBOR Advance
and, with respect to any LIBOR Advance, shall specify the principal amount
of
the LIBOR Advance and the Interest Period applicable thereto. The Borrower
shall
repay all Advances even if the Lender does not receive such confirmation and
even if the Person requesting an Advance was not in fact authorized to do so.
Any request for an Advance, whether written or telephonic, shall be deemed
to be
a representation by the Borrower that the conditions set forth in Section 4.2
have been satisfied as of the time of the request.
(c) Disbursement.
Upon
fulfillment of the applicable conditions set forth in Article IV, the
Lender shall disburse the proceeds of the requested Advance by crediting the
same to the Borrower’s demand deposit account maintained with the Lender unless
the Lender and the Borrower shall agree in writing to another manner of
disbursement.
Section
2.3 LIBOR
Advances.
(a) Converting
Floating Rate Advances to LIBOR Advances; Procedures. So
long
as no Default Period is in effect, the Borrower may convert all or any part
of
the principal amount of any outstanding Floating Rate Advance into a LIBOR
Advance by requesting that the Lender convert same no later than the Cut-off
Time on the Business Day that is three (3) days preceding the Business Day
on
which the Borrower wishes the conversion to become effective. Each request
that
conforms to the terms of this Agreement shall be effective upon receipt by
the
Lender and shall be confirmed in writing by the Borrower if the Lender so
requests by any Officer or designated agent identified in Section 2.2(b) or
Person reasonably believed by the Lender to be such an Officer or designated
agent, which request shall specify the Business Day on which the conversion
is
to occur, the total amount of the Floating Rate Advance to be converted, and
the
applicable Interest Period. Each such conversion shall occur on a Business
Day,
and the aggregate amount of Floating Rate Advances converted to LIBOR Advances
shall be in multiples of $500,000, with a minimum conversion amount of at least
$1,000,000.
(b) Procedures
at End of an Interest Period. Unless
the Borrower requests a new LIBOR Advance in accordance with the procedures
set
forth below, or prepays the principal of an outstanding LIBOR Advance at the
expiration of an Interest Period, the Lender shall automatically and without
request of the Borrower convert each LIBOR Advance to a Floating Rate Advance
on
the last day of the relevant Interest Period. So long as no Default exists,
the
Borrower may cause all or any part of any maturing LIBOR Advance to be renewed
as a new LIBOR Advance by requesting that the Lender continue the maturing
Advance as a LIBOR Advance no later than the Cut-off Time on the Business Day
that is three (3) days preceding the Business Day constituting the first day
of
the new Interest Period. Each such request shall be confirmed in writing by
the
Borrower upon the Lender’s request by any Officer or designated agent identified
in Section 2.2(b), which confirmation shall be effective upon receipt by the
Lender, and which shall specify the amount of the expiring LIBOR Advance to
be
continued and the applicable Interest Period. Each new Interest Period shall
begin on a Business Day and the amount of each LIBOR Advance shall be in
multiples of $500,000, with a minimum initial Advance of at least $1,000,000.
17
(c) Setting
and Notice of Rates.
The
Lender shall, with respect to any request for a LIBOR Advance under Section
2.2
or a conversion or renewal of a LIBOR Advance under this Section 2.3, provide
the Borrower with a LIBOR quote for each Interest Period identified by the
Borrower on the Business Day on which the request was made, if the request
is
received by the Lender prior to the Cut-off Time, or for requests received
by
the Lender after the Cut-off Time, on the next Business Day or on the Business
Day on which the Borrower has requested that the LIBOR Advance be made
effective. If the Borrower does not immediately accept a LIBOR quote, the quoted
rate shall expire and any subsequent request from Borrower for a LIBOR quote
shall be subject to redetermination by the Lender of the applicable LIBOR for
the LIBOR Advance.
(d) Taxes
and Regulatory Costs. The
Borrower shall pay the Lender with respect to any Advance, upon demand and
in
addition to any other amounts due or to become due hereunder, any and all (i)
withholdings, interest equalization taxes, stamp taxes or other taxes (except
income and franchise taxes) imposed upon banks generally by any domestic or
foreign governmental authority and related in any manner to LIBOR, and (ii)
future, supplemental, emergency or other changes in the LIBOR Reserve
Percentage, assessment rates imposed by the Federal Deposit Insurance
Corporation, or similar requirements or costs imposed upon banks generally
by
any domestic or foreign governmental authority or resulting from compliance
by
the Lender with any request or directive (whether or not having the force of
law) upon banks generally from any central bank or other governmental authority
and related in any manner to LIBOR to the extent they are not included in the
calculation of LIBOR. In determining which of the foregoing are attributable
to
any LIBOR option available to the Borrower hereunder, any reasonable allocation
made by the Lender among its operations shall be conclusive and binding upon
the
Borrower.
Section
2.4 Letters
of Credit.
(a) The
Lender agrees, subject to the terms and conditions of this Agreement, to issue,
at any time after the Funding Date and prior to the Termination Date, one or
more irrevocable standby or documentary letters of credit (each, a “Letter of
Credit”) for the Borrower’s account. The Lender will not issue any Letter of
Credit if the face amount of the Letter of Credit to be issued would exceed
the
lesser of:
(i) $7,000,000.00
less the L/C Amount, or
18
(ii) Availability.
Each
Letter of Credit, if any, shall be issued pursuant to a separate L/C Application
made by the Borrower to the Lender, which must be completed in a manner
satisfactory to the Lender. The terms and conditions set forth in each such
L/C
Application shall supplement the terms and conditions of the Commercial Letter
of Credit Agreement.
(b) No
Letter
of Credit shall be issued with an expiry date later than one (1) year from
the
date of issuance or the Maturity Date in effect as of the date of issuance,
whichever is earlier.
(c) Any
request for issuance of a Letter of Credit shall be deemed to be a
representation by the Borrower that the conditions set forth in Section 4.2
have
been satisfied as of the date of the request.
(d) If
a
draft is submitted under a Letter of Credit when the Borrower is unable, because
a Default Period exists or for any other reason, to obtain a Revolving Advance
to pay the Obligation of Reimbursement, the Borrower shall pay to the Lender
on
demand and in immediately available funds, the amount of the Obligation of
Reimbursement together with interest, accrued from the date of the draft until
payment in full at the Default Rate. Notwithstanding the Borrower’s inability to
obtain a Revolving Advance for any reason, the Lender is irrevocably authorized,
in its sole discretion, to make a Revolving Advance in an amount sufficient
to
discharge the Obligation of Reimbursement and all accrued but unpaid interest
thereon.
Section
2.5 Special
Account.
If the
Credit Facility is terminated for any reason while any Letter of Credit is
outstanding, the Borrower shall thereupon pay the Lender in immediately
available funds for deposit in the Special Account an amount equal to the L/C
Amount plus any anticipated fees and costs. If the Borrower fails to promptly
make any such payment in the amount required hereunder, then the Lender may
make
a Revolving Advance against the Credit Facility in an amount sufficient to
fulfill this obligation and deposit the proceeds to the Special Account. The
Special Account shall be an interest bearing account either maintained with
the
Lender or with a financial institution acceptable to the Lender. Any interest
earned on amounts deposited in the Special Account shall be credited to the
Special Account. The Lender may apply amounts on deposit in the Special Account
at any time or from time to time to the Obligations in the Lender’s sole
discretion. The Borrower may not withdraw any amounts on deposit in the Special
Account as long as the Lender maintains a security interest therein. The Lender
agrees to transfer any balance in the Special Account to the Borrower when
the
Lender is required to release its security interest in the Special Account
under
applicable law.
Section
2.6 Interest;
Minimum Interest Charge; Default Interest Rate; Application of Payments;
Participations; Usury.
(a) Interest.
Except
as provided in Section 2.3, Section 2.6(c) and Section 2.6(f), the principal
amount of each Advance shall bear interest as a Floating Rate
Advance.
(b) Minimum
Interest Charge. Notwithstanding
any other terms of this Agreement to the contrary, the Borrower shall pay to
the
Lender annually in arrears interest of not less than $120,000.00 per Loan Year
(the “Minimum Interest Charge”) during the term of this Agreement, and the
Borrower shall pay any deficiency between the Minimum Interest Charge and the
amount of interest otherwise calculated under Section 2.6(a) following each
anniversary of the Funding Date and on the Termination Date. When calculating
this deficiency, the Default Rate, if applicable, shall be disregarded, and
any
interest that accrues on a payment following its receipt on those days specified
in Section 2.6(d) shall be excluded in determining the total amount of interest
otherwise calculated under Section 2.6(a). As used in this subsection (c),
“Loan
Year” means each one-year period ending on an anniversary of the Funding
Date.
19
(c) Default
Interest Rate.
At any
time during any Default Period or following the Termination Date, in the
Lender’s sole discretion and without waiving any of its other rights or
remedies, the principal of the Revolving Note shall bear interest at the Default
Rate or such lesser rate as the Lender may determine, effective as of the first
day of the month in which any Default Period begins through the last day of
such
Default Period, or any shorter time period that the Lender may determine. The
decision of the Lender to impose a rate that is less than the Default Rate
or to
not impose the Default Rate for the entire duration of the Default Period shall
be made by the Lender in its sole discretion and shall not be a waiver of any
of
its other rights and remedies, including its right to retroactively impose
the
full Default Rate for the entirety of any such Default Period or following
the
Termination Date.
(d) Application
of Payments. Payments
shall be applied to the Obligations on the Business Day of receipt by the Lender
in the Lender’s general account, but the amount of principal paid shall continue
to accrue interest at the interest rate applicable under the terms of this
Agreement from the calendar day the Lender receives the payment, and continuing
through the end of the first Business Day following receipt of the
payment.
(e) Participations.
If any
Person shall acquire a participation in the Advances or the Obligation of
Reimbursement, the Borrower shall be obligated to the Lender to pay the full
amount of all interest calculated under this Section 2.6, along with all other
fees, charges and other amounts due under this Agreement, regardless if such
Person elects to accept interest with respect to its participation at a lower
rate than that calculated under this Section 2.6, or otherwise elects to accept
less than its prorata share of such fees, charges and other amounts due under
this Agreement.
(f) Usury.
In any
event no rate change shall be put into effect which would result in a rate
greater than the highest rate permitted by law. Notwithstanding anything to
the
contrary contained in any Loan Document, all agreements which either now are
or
which shall become agreements between the Borrower and the Lender are hereby
limited so that in no contingency or event whatsoever shall the total liability
for payments in the nature of interest, additional interest and other charges
exceed the applicable limits imposed by any applicable usury laws. If any
payments in the nature of interest, additional interest and other charges made
under any Loan Document are held to be in excess of the limits imposed by any
applicable usury laws, it is agreed that any such amount held to be in excess
shall be considered payment of principal hereunder, and the indebtedness
evidenced hereby shall be reduced by such amount so that the total liability
for
payments in the nature of interest, additional interest and other charges shall
not exceed the applicable limits imposed by any applicable usury laws, in
compliance with the desires of the Borrower and the Lender. This provision
shall
never be superseded or waived and shall control every other provision of the
Loan Documents and all agreements between the Borrower and the Lender, or their
successors and assigns.
20
Section
2.7 Fees.
(a) Origination
Fee.
The
Borrower shall pay the Lender a fully earned and non-refundable origination
fee
of $100,000.00, due and payable upon the execution of this Agreement.
(b) Unused
Line Fee. For
the
purposes of this Section 2.7(b), “Unused Amount” means the Maximum Line Amount
reduced by outstanding Revolving Advances and the L/C Amount. The Borrower
agrees to pay to the Lender quarterly an unused line fee at the rate of
one-fifth of one percent (0.20%) per annum on the average daily Unused Amount
from the date of this Agreement to and including the Termination Date, due
and
payable quarterly on the first day of the month immediately following the end
of
the respective quarter and on the Termination Date.
(c) Collateral
Exam Fees.
The
Borrower shall pay the Lender fees in connection with any collateral exams,
audits or inspections conducted by or on behalf of the Lender of any Collateral
or the Borrower’s operations or business at the rates established from time to
time by the Lender as its collateral exam fees (which fees are currently $950.00
per day per collateral examiner), together with all actual out-of-pocket costs
and expenses incurred in conducting any such collateral examination or
inspection; provided,
however,
that
during Default Periods, the Borrower shall reimburse the Lender for such fees,
costs and expenses as the Lender deems necessary.
(d) Letter
of Credit Fees.
The
Borrower shall pay to the Lender a fee with respect to each Letter of Credit
that has been issued, if any, which fee shall be calculated on a per diem basis
at an annual rate equal to one and one half percent (1.50%) of the aggregate
amount that may then be drawn under the Letter of Credit, assuming compliance
with all conditions for drawing (the “Aggregate Face Amount”), from and
including the date of issuance of the Letter of Credit until the date that
the
Letter of Credit terminates or is returned to the Lender, which fee shall be
due
and payable monthly in arrears on the first day of each month and on the date
that the Letter of Credit terminates or is returned to the Lender; provided,
however,
effective as of the first day of the month in which any Default Period begins
through the last day of such Default Period, or any shorter time period that
the
Lender may determine, in the Lender’s sole discretion and without waiving any of
its other rights and remedies, such fee shall increase to four and one half
percent (4.50%) of the Aggregate Face Amount. The foregoing fee shall be in
addition to any and all other fees, commissions and charges imposed by Lender
with respect to or in connection with such Letter of Credit.
(e)
Letter
of Credit Administrative Fees.
The
Borrower shall pay all administrative fees charged by Lender in connection
with
the honoring of drafts under any Letter of Credit, amendments thereto, transfers
thereof and all other activity with respect to the Letters of Credit at the
then
- current rates published by Lender for such services rendered on behalf of
customers of Lender generally.
21
(f) Termination
Fees.
If (i)
the Lender terminates the Credit Facility during a Default Period, or if (ii)
the Borrower terminates the Credit Facility on a date prior to the Maturity
Date, then the Borrower shall pay the Lender as liquidated damages and not
as a
penalty a termination fee in an amount equal to a percentage of the Maximum
Line
Amount calculated as follows: (A) two percent (2.0%) if the termination occurs
on or before the first anniversary of the Funding Date; (B) one and one half
percent (1.50%) if the termination occurs after the first anniversary of the
Funding Date, but on or before the second anniversary of the Funding Date;
and
(C) one half of one percent (0.50%) if the termination occurs after the second
anniversary of the Funding Date.
(g) Contracted
Funds Breakage Fees.
The
Borrower may prepay the principal amount of the Revolving Note at any time,
whether voluntarily or by acceleration, provided,
however,
that if
the principal amount of any Revolving Note LIBOR Advance is prepaid, the
Borrower shall pay to the Lender immediately upon demand a contracted funds
breakage fee equal to the sum of the discounted monthly differences for each
month from the month of prepayment through the month in which such Interest
Period matures, calculated as follows for each such month:
(i) |
Determine
the amount of interest which would have accrued each month on the
amount
prepaid at the interest rate applicable to such amount had it remained
outstanding until the last day of the applicable Interest
Period.
|
(ii) |
Subtract
from the amount determined in (i) above the amount of interest which
would
have accrued for the same month on the amount prepaid for the remaining
term of such Interest Period at LIBOR in effect on the date of prepayment
for new loans made for such term in a principal amount equal to the
amount
prepaid.
|
(iii) |
If
the result obtained in (ii) for any month is greater than zero, discount
that difference by LIBOR used in (ii)
above.
|
The
Borrower acknowledges that a prepayment of the Revolving Note may result in
the
Lender incurring additional costs, expenses or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses or liabilities.
The Borrower therefore agrees to pay the above-described contracted funds
breakage fee and agrees that this fee represents a reasonable estimate of the
contracted funds breakage costs, and any expenses or liabilities of the
Lender.
(h) Overadvance
Fees.
The
Borrower shall pay an Overadvance fee in the amount of $1,000.00 for each day
or
portion thereof during which an Overadvance exists, regardless of how the
Overadvance arises or whether or not the Overadvance has been agreed to in
advance by the Lender; provided,
further,
however,
that
from the date on which any Default or Event of Default occurs or exists at
any
time, the Borrower shall pay an Overadvance fee in the amount of $2,000.00
for
each day or portion thereof during which an Overadvance exists, regardless
of
how the Overadvance arises or whether or not the Overadvance has been agreed
to
in advance by the Lender. The acceptance of payment of an Overadvance fee by
the
Lender shall not be deemed to constitute either consent to the Overadvance
or a
waiver of the resulting Event of Default, unless the Lender specifically
consents to the Overadvance in writing and waives the Event of Default on
whatever conditions the Lender deems appropriate.
22
(i) Processing
Fees.
Accounts receivable agings and Inventory reports shall be submitted
electronically by Borrower to Lender via Collateral Services, Inc. A set-up
fee
of $750.00, in addition to a monthly processing fee of less than $100 per month,
shall be charged by Lender to Borrower.
(j) Other
Fees and Charges.
The
Lender may from time to time impose additional fees and charges as consideration
for Advances made in excess of Availability or for other events that constitute
an Event of Default or a Default hereunder, including fees and charges for
the
administration of Collateral by the Lender, and fees and charges for the late
delivery of reports, which may be assessed in the Lender’s sole discretion on
either an hourly, periodic, or flat fee basis, and in lieu of or in addition
to
imposing interest at the Default Rate.
Section
2.8 Time
for Interest Payments; Payment on Non-Business Days; Computation of Interest
and
Fees.
(a) Time
For Interest Payments.
Accrued
and unpaid interest accruing on Floating Rate Advances shall be due and payable
on the first day of each month and on the Termination Date (each an "Interest
Payment Date"), or if any such day is not a Business Day, on the next succeeding
Business Day. Interest will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of advance to
the
Interest Payment Date. If an Interest Payment Date is not a Business Day,
payment shall be made on the next succeeding Business Day. Interest
accruing on each LIBOR Advance shall be due and payable on the last day of
the
applicable Interest Period; provided,
however,
for
Interest Periods that are longer than one month, interest shall nevertheless
be
due and payable monthly on the last day of each month, and on the last day
of
the Interest Period.
(b) Payment
on Non-Business Days.
Whenever any payment to be made hereunder shall be stated to be due on a day
which is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case be included in
the
computation of interest on the Advances or the fees hereunder, as the case
may
be.
(c) Computation
of Interest and Fees.
Interest accruing on the outstanding principal balance of the Advances and
fees
hereunder outstanding from time to time shall be computed on the basis of actual
number of days elapsed in a year of 360 days.
Section
2.9 Collateral
Account; Sweep
of Funds.
(a) Collateral
Account.
(i) The
Borrower shall wire transfer payments on Accounts it receives and shall deposit
such payments into the Collateral Account. The Borrower shall also deposit
all
other cash proceeds of Collateral regardless of source or nature directly into
the Collateral Account. Until so deposited, the Borrower shall hold all such
payments and cash proceeds in trust for and as the property of the Lender and
shall not commingle such property with any of its other funds or property.
All
deposits in the Collateral Account shall constitute proceeds of Collateral
and
shall not constitute payment of the Obligations.
23
(ii) All
items
deposited in the Collateral Account shall be subject to final payment. If any
such item is returned uncollected, the Borrower will immediately pay the Lender,
or, for items deposited in the Collateral Account, the bank maintaining such
account, the amount of that item, or such bank at its discretion may charge
any
uncollected item to the Borrower’s commercial account or other account. The
Borrower shall be liable as an endorser on all items deposited in the Collateral
Account, whether or not in fact endorsed by the Borrower.
(b) Sweep
of Funds.
The
Lender shall from time to time, in accordance with the Collection Account
Agreement, cause funds in the Collateral Account to be transferred to the
Lender’s general account for payment of the Obligations. Amounts deposited in
the Collateral Account shall not be subject to withdrawal by the Borrower,
except after payment in full and discharge of all Obligations.
Section
2.10 Voluntary
Prepayment; Termination of the Credit Facility by the Borrower.
Except
as otherwise provided herein, the Borrower may prepay the Advances in whole
at
any time or from time to time in part. The Borrower may terminate the Credit
Facility at any time if it (i) gives the Lender at least 90 days advance
written notice prior to the proposed Termination Date, and (ii) pays the
Lender applicable termination and contracted funds breakage fees in accordance
with Section 2.7(f) and Section 2.7(g). If the Borrower terminates the Credit
Facility, all Obligations shall be immediately due and payable, and if the
Borrower gives the Lender less than the required 90 days advance written notice,
then the interest rate applicable to borrowings evidenced by Revolving Note
shall be the Default Rate for the period of time commencing 90 days prior to
the
proposed Termination Date through the date that the Lender actually receives
such written notice. If the Borrower does not wish the Lender to consider
renewal of the Credit Facility on the next Maturity Date, then the Borrower
shall give the Lender at least 90 days written notice prior to the Maturity
Date
that it will not be requesting renewal. If the Borrower fails to give the Lender
such timely notice, then the interest rate applicable to borrowings evidenced
by
the Revolving Note shall be the Default Rate for the period of time commencing
90 days prior to the Maturity Date through the date that the Lender actually
receives such written notice.
Section
2.11 Mandatory
Prepayment.
Without notice or demand, if the sum of the outstanding principal balance of
the
Revolving Advances plus the L/C Amount shall at any time exceed the Borrowing
Base, the Borrower shall (i) first, immediately prepay the Revolving
Advances to the extent necessary to eliminate such excess; and (ii) if
prepayment in full of the Revolving Advances is insufficient to eliminate such
excess, pay to the Lender in immediately available funds for deposit in the
Special Account an amount equal to the remaining excess. Any payment received
by
the Lender hereunder or under Section 2.10 may be applied to the Obligations,
in
such order and in such amounts as the Lender in its sole discretion may
determine from time to time.
Section
2.12 Revolving
Advances to Pay Obligations.
Notwithstanding the terms of Section 2.1, the Lender may, in its discretion
at
any time or from time to time, without the Borrower’s request and even if the
conditions set forth in Section 4.2 would not be satisfied, make a Revolving
Advance in an amount equal to the portion of the Obligations from time to time
due and payable,
and may
deliver the proceeds of any such Revolving Advance to any affiliate of the
Lender in satisfaction of any Xxxxx Fargo Affiliate Obligations and may deliver
the proceeds of any such Revolving Advance to Xxxxx Fargo Merchant Services,
L.L.C. in satisfaction of any unpaid obligations due to that entity.
24
Section
2.13 Use
of
Proceeds.
The Borrower shall use the proceeds of Advances and each Letter of Credit for
ordinary working capital purposes.
Section
2.14 Liability
Records.
The Lender may maintain from time to time, at its discretion, records as to
the
Obligations. All entries made on any such record shall be presumed correct
until
the Borrower establishes the contrary. Upon the Lender’s demand, the Borrower
will admit and certify in writing the exact principal balance of the Obligations
that the Borrower then asserts to be outstanding. Any billing statement or
accounting rendered by the Lender shall be conclusive and fully binding on
the
Borrower unless the Borrower gives the Lender specific written notice of
exception within 60 days after receipt.
Section
2.15 Lender’s
Election.
Each
Borrower hereby acknowledges and agrees that such Borrower is jointly and
severally liable for, and hereby absolutely and unconditionally obligated to
the
Lender for the full and prompt payment of all Obligations owed or hereafter
owed
to the Lender by each Borrower. Notwithstanding any provision contained herein
to the contrary, xXxx.xxx’s liability to Lender shall be limited to the amount
which could be claimed by the Lender from xXxx.xxx under this section without
rendering such claim voidable or avoidable under Section 548 of the Bankruptcy
Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform
Fraudulent Conveyance Act or similar statute or common law after taking into
account, among other things, its right of contribution and indemnification
from
other parties.
This
section is intended only to define the relative rights of xXxx.xxx and UBid
and
nothing set forth in this section is intended to nor shall impair the
Obligations of the Borrower, jointly and severally, to pay any amounts as and
when the same shall become due and payable in accordance with the terms of
this
Credit Agreement including without limitation any provision herein. Nothing
contained herein shall limit the liability of any Borrower to pay Advances,
Obligations and reimbursement to Lender of letters of credit or any other
instrument, interest, fees, expenses and all other amounts with respect thereto
for which such Borrower shall be liable.
This
section shall only be in effect in the event the Lender, in its sole discretion,
declares this section to be effective.
ARTICLE
III
SECURITY
INTEREST; OCCUPANCY; SETOFF
Section
3.1 Grant
of Security Interest.
The
Borrower hereby pledges, assigns and grants to the Lender, for the benefit
of
itself and as agent for Xxxxx Fargo Merchant Services, LLC and for the benefit
of itself and as agent for any affiliate of the Lender that may provide credit
or services to the Borrower that constitute Xxxxx Fargo Affiliate Obligations,
a
lien and security interest (collectively referred to as the “Security Interest”)
in the Collateral, as security for the payment and performance of the
Obligations. Upon request by the Lender, the Borrower will grant the Lender,
for
the benefit of itself and as agent for Xxxxx Fargo Merchant Services, LLC and
for the benefit of itself and as agent for any affiliate of the Lender that
may
provide credit or services to the Borrower that constitute Xxxxx Fargo Affiliate
Obligations, a security interest in all commercial tort claims that the Borrower
may have against any Person.
25
Section
3.2 Notification
of Account Debtors and Other Obligors.
The Lender may at any time (as long as a Default Period then exists) notify
any
account debtor or other Person obligated to pay the amount due that such right
to payment has been assigned or transferred to the Lender for security and
shall
be paid directly to the Lender. The Borrower will join in giving such notice
if
the Lender so requests. At any time after the Borrower or the Lender gives
such
notice to an account debtor or other obligor, the Lender may, but need not,
in
the Lender’s name or in the Borrower’s name, demand, xxx for, collect or receive
any money or property at any time payable or receivable on account of, or
securing, any such right to payment, or grant any extension to, make any
compromise or settlement with or otherwise agree to waive, modify, amend or
change the obligations (including collateral obligations) of any such account
debtor or other obligor. The Lender may, in the Lender’s name or in the
Borrower’s name, as the Borrower’s agent and attorney-in-fact, notify the United
States Postal Service to change the address for delivery of the Borrower’s mail
to any address designated by the Lender, otherwise intercept the Borrower’s
mail, and receive, open and dispose of the Borrower’s mail, applying all
Collateral as permitted under this Agreement and holding all other mail for
the
Borrower’s account or forwarding such mail to the Borrower’s last known
address.
Section
3.3 Assignment
of Insurance.
As additional security for the payment and performance of the Obligations,
the
Borrower hereby assigns to the Lender any and all monies (including proceeds
of
insurance and refunds of unearned premiums) due or to become due under, and
all
other rights of the Borrower with respect to, any and all policies of insurance
now or at any time hereafter covering the Collateral or any evidence thereof
or
any business records or valuable papers pertaining thereto, and the Borrower
hereby directs the issuer of any such policy to pay all such monies directly
to
the Lender. At any time, whether or not a Default Period then exists, the Lender
may (but need not), in the Lender’s name or in the Borrower’s name, execute and
deliver proof of claim, receive all such monies, endorse checks and other
instruments representing payment of such monies, and adjust, litigate,
compromise or release any claim against the issuer of any such
policy.
Any
monies received as payment for any loss under any insurance policy mentioned
above (other than liability insurance policies) or as payment of any award
or
compensation for condemnation or taking by eminent domain, shall be paid over
to
the Lender to be applied, at the option of the Lender, either to the prepayment
of the Obligations or shall be disbursed to the Borrower under staged payment
terms reasonably satisfactory to the Lender for application to the cost of
repairs, replacements, or restorations. Any such repairs, replacements, or
restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items or property destroyed prior
to
such damage or destruction.
26
Section
3.4 Occupancy.
(a) The
Borrower hereby irrevocably grants to the Lender the right to take exclusive
possession of the Premises at any time during a Default Period without notice
or
consent.
(b) The
Lender may use the Premises only to hold, process, manufacture, sell, use,
store, liquidate, realize upon or otherwise dispose of goods that are Collateral
and for other purposes that the Lender may in good xxxxx xxxx to be related
or
incidental purposes.
(c) The
Lender’s right to hold the Premises shall cease and terminate upon the earlier
of (i) payment in full and discharge of all Obligations and termination of
the Credit Facility, and (ii) final sale or disposition of all goods
constituting Collateral and delivery of all such goods to
purchasers.
(d) The
Lender shall not be obligated to pay or account for any rent or other
compensation for the possession, occupancy or use of any of the Premises;
provided,
however,
that if
the Lender does pay or account for any rent or other compensation for the
possession, occupancy or use of any of the Premises, the Borrower shall
reimburse the Lender promptly for the full amount thereof. In addition, the
Borrower will pay, or reimburse the Lender for, all taxes, fees, duties,
imposts, charges and expenses at any time incurred by or imposed upon the Lender
by reason of the execution, delivery, existence, recordation, performance or
enforcement of this Agreement or the provisions of this Section
3.4.
Section
3.5 License.
Without limiting the generality of any other Security Document, the Borrower
hereby grants to the Lender a non-exclusive, worldwide and royalty-free license
to use or otherwise exploit all Intellectual Property Rights of the Borrower
for
the purpose of: (a) completing the manufacture of any in-process materials
during any Default Period so that such materials become saleable Inventory,
all
in accordance with the same quality standards previously adopted by the Borrower
for its own manufacturing and subject to the Borrower’s reasonable exercise of
quality control; and (b) selling, leasing or otherwise disposing of any or
all Collateral during any Default Period.
Section
3.6 Financing
Statement.
The Borrower authorizes the Lender to file from time to time, such financing
statements against collateral described as “all personal property” or “all
assets” or describing specific items of collateral including commercial tort
claims as the Lender deems necessary or useful to perfect the Security Interest.
All financing statements filed before the date hereof to perfect the Security
Interest were authorized by the Borrower and are hereby re-authorized. A carbon,
photographic or other reproduction of this Agreement or of any financing
statements signed by the Borrower is sufficient as a financing statement and
may
be filed as a financing statement in any state to perfect the security interests
granted hereby. For this purpose, the Borrower represents and warrants that
the
following information is true and correct:
27
Name
and
address of Debtor:
xXxx.xxx
Holdings, Inc.
0000
Xxxx
Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxxxxx 00000
Federal
Employer Identification No. 000000000
Organizational
Identification No. DE 4057093
UBid,
Inc.
0000
Xxxx
Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxxxxx 00000
Federal
Employer Identification No. 000000000
Organizational
Identification No. DE 3633799
Name
and
address of Secured Party:
Xxxxx
Fargo Business Credit, Inc.
000
Xxxx
Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx,
Xxxxxxxxx 00000
Section
3.7 Setoff.
The
Lender may at any time or from time to time, at its sole discretion and without
demand and without notice to anyone, setoff any liability owed to the Borrower
by the Lender, whether or not due, against any Obligation, whether or not due.
In addition, each other Person holding a participating interest in any
Obligations shall have the right to appropriate or setoff any deposit or other
liability then owed by such Person to the Borrower, whether or not due, and
apply the same to the payment of said participating interest, as fully as if
such Person had lent directly to the Borrower the amount of such participating
interest.
Section
3.8 Collateral.
This Agreement does not contemplate a sale of accounts, contract rights or
chattel paper, and, as provided by law, the Borrower is entitled to any surplus
and shall remain liable for any deficiency. The Lender’s duty of care with
respect to Collateral in its possession (as imposed by law) shall be deemed
fulfilled if it exercises reasonable care in physically keeping such Collateral,
or in the case of Collateral in the custody or possession of a bailee or other
third Person, exercises reasonable care in the selection of the bailee or other
third Person, and the Lender need not otherwise preserve, protect, insure or
care for any Collateral. The Lender shall not be obligated to preserve any
rights the Borrower may have against prior parties, to realize on the Collateral
at all or in any particular manner or order or to apply any cash proceeds of
the
Collateral in any particular order of application. The Lender has no obligation
to clean-up or otherwise prepare the Collateral for sale. The Borrower waives
any right it may have to require the Lender to pursue any third Person for
any
of the Obligations.
ARTICLE
IV
CONDITIONS
OF LENDING
Section
4.1 Conditions
Precedent to the Initial Advances and Letter of Credit.
The
Lender’s obligation to make the initial Advances or to cause any Letters of
Credit to be issued shall be subject to the condition precedent that the Lender
shall have received all of the following, each properly executed by the
appropriate party and in form and substance satisfactory to the
Lender:
(a) This
Agreement.
28
(b) The
Revolving Note.
(c) A
Commercial Letter of Credit Agreement and L/C Application for each Letter of
Credit that the Borrower wishes to have issued thereunder.
(d) A
true
and correct copy of any and all leases pursuant to which the Borrower is leasing
the Premises where Inventory is located, together with a landlord’s disclaimer
and consent with respect to each such lease.
(e) A
true
and correct copy of any and all mortgages pursuant to which the Borrower has
mortgaged the Premises, together with a mortgagee’s disclaimer and consent with
respect to each such mortgage.
(f) A
true
and correct copy of any and all agreements pursuant to which the Borrower’s
property is in the possession of any Person other than the Borrower, together
with, in the case of any goods held by such Person for resale, (i) a
consignee’s acknowledgment and waiver of Liens, (ii) UCC financing
statements sufficient to protect the Borrower’s and the Lender’s interests in
such goods, and (iii) UCC searches showing that no other secured party has
filed a financing statement against such Person and covering property similar
to
the Borrower’s other than the Borrower, or if there exists any such secured
party, evidence that each such secured party has received notice from the
Borrower and the Lender sufficient to protect the Borrower’s and the Lender’s
interests in the Borrower’s goods from any claim by such secured
party.
(g) An
acknowledgment and waiver of Liens from each warehouse in which the Borrower
is
storing Inventory.
(h) A
true
and correct copy of any and all agreements pursuant to which the Borrower’s
property is in the possession of any Person other than the Borrower, together
with, (i) an acknowledgment and waiver of Liens from each subcontractor who
has possession of the Borrower’s goods from time to time, (ii) UCC
financing statements sufficient to protect the Borrower’s and the Lender’s
interests in such goods, and (iii) UCC searches showing that no other
secured party has filed a financing statement covering such Person’s property
other than the Borrower, or if there exists any such secured party, evidence
that each such secured party has received notice from the Borrower and the
Lender sufficient to protect the Borrower’s and the Lender’s interests in the
Borrower’s goods from any claim by such secured party.
(i) The
Collection Account Agreement.
(j) Control
agreements with each bank at which the Borrower maintains deposit
accounts.
(k) [Intentionally
Omitted]
(l) [Intentionally
Omitted]
(m) Current
searches of appropriate filing offices showing that (i) no Liens have been
filed and remain in effect against the Borrower except Permitted Liens or Liens
held by Persons who have agreed in writing that upon receipt of proceeds of
the
initial Advances, they will satisfy, release or terminate such Liens in a manner
satisfactory to the Lender, and (ii) the Lender has duly filed all
financing statements necessary to perfect the Security Interest, to the extent
the Security Interest is capable of being perfected by filing.
29
(n) A
certificate of the Borrower’s Secretary or Assistant Secretary certifying that
attached to such certificate are (i) the resolutions of the Borrower’s
Directors and, if required, Owners, authorizing the execution, delivery and
performance of the Loan Documents, (ii) true, correct and complete copies
of the Borrower’s Constituent Documents, and (iii) examples of the
signatures of the Borrower’s Officers or agents authorized to execute and
deliver the Loan Documents and other instruments, agreements and certificates,
including Advance requests, on the Borrower’s behalf.
(o) A
current
certificate issued by the Delaware Department of State, certifying that the
Borrower is in compliance with all applicable organizational requirements of
the
State of Delaware.
(p) Evidence
that the Borrower is duly licensed or qualified to transact business in all
jurisdictions where the character of the property owned or leased or the nature
of the business transacted by it makes such licensing or qualification
necessary.
(q) A
certificate of an Officer of the Borrower confirming, in his official capacity,
the representations and warranties set forth in Article V.
(r) Certificates
of the insurance required hereunder, with all hazard insurance containing a
lender’s loss payable endorsement in the Lender’s favor and with all liability
insurance naming the Lender as an additional insured.
(s) Payment
of the fees and commissions due under Section 2.7 through the date of the
initial Advance or Letter of Credit and expenses incurred by the Lender through
such date and required to be paid by the Borrower under Section 8.5, including
all legal expenses incurred through the date of this Agreement.
(t)
Evidence
that after making the initial Revolving Advance, satisfying all obligations
owed
to the Borrower’s prior lender, satisfying all trade payables older than
60 days from invoice date, book overdrafts and closing costs, Availability
shall be not less than $2,000,000.00.
(u) A
Customer Identification Information form and such other forms and verification
as the Lender may need to comply with the U.S.A. Patriot Act.
(v) Such
other documents as the Lender in its sole discretion may require.
30
Section
4.2 Conditions
Precedent to All Advances and Letters of Credit. The Lender’s obligation to
make each Advance or to cause the issuance of a Letter of Credit shall be
subject to the further conditions precedent that:
(a) the
representations and warranties contained in Article V are correct on and as
of the date of such Advance or issuance of a Letter of Credit as though made
on
and as of such date, except to the extent that such representations and
warranties relate solely to an earlier date; and
(b) no
event
has occurred and is continuing, or would result from such Advance or issuance
of
a Letter of Credit which constitutes a Default or an Event of
Default.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES
The
Borrower represents and warrants to the Lender as follows:
Section
5.1 Existence
and Power; Name; Chief Executive Office; Inventory and Equipment Locations;
Federal Employer Identification Number and Organizational Identification
Number.
The Borrower is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Delaware and is duly licensed or
qualified to transact business in all jurisdictions where the character of
the
property owned or leased or the nature of the business transacted by it makes
such licensing or qualification necessary. The Borrower has all requisite power
and authority to conduct its business, to own its properties and to execute
and
deliver, and to perform all of its obligations under, the Loan Documents. During
its existence, the Borrower has done business solely under the names set forth
in Schedule 5.1. The Borrower’s chief executive office and principal place of
business is located at the address set forth in Schedule 5.1, and all of the
Borrower’s records relating to its business or the Collateral are kept at that
location. All Inventory and Equipment is located at that location or at one
of
the other locations listed in Schedule 5.1. The Borrower’s federal employer
identification number and organization identification number are correctly
set
forth in Section 3.6.
Section
5.2 Capitalization.
Schedule 5.2 constitutes a correct and complete list of all ownership interests
of the Borrower and rights to acquire ownership interests including the record
holder, number of interests and percentage interests on a fully diluted basis,
and an organizational chart showing the ownership structure of all Subsidiaries
of the Borrower.
Section
5.3 Authorization
of Borrowing; No Conflict as to Law or Agreements.
The execution, delivery and performance by the Borrower of the Loan Documents
and the borrowings from time to time hereunder have been duly authorized by
all
necessary corporate action and do not and will not (i) require any consent
or approval of the Borrower’s Owners; (ii) require any authorization,
consent or approval by, or registration, declaration or filing with, or notice
to, any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice
as
has been obtained, accomplished or given prior to the date hereof;
(iii) violate any provision of any law, rule or regulation (including
Regulation X of the Board of Governors of the Federal Reserve System) or of
any order, writ, injunction or decree presently in effect having applicability
to the Borrower or of the Borrower’s Constituent Documents; (iv) result in
a breach of or constitute a default under any indenture or loan or credit
agreement or any other material agreement, lease or instrument to which the
Borrower is a party or by which it or its properties may be bound or affected;
or (v) result in, or require, the creation or imposition of any Lien (other
than the Security Interest) upon or with respect to any of the properties now
owned or hereafter acquired by the Borrower.
31
Section
5.4 Legal
Agreements.
This Agreement constitutes and, upon due execution by the Borrower, the other
Loan Documents will constitute the legal, valid and binding obligations of
the
Borrower, enforceable against the Borrower in accordance with their respective
terms.
Section
5.5 Subsidiaries.
Except as set forth in Schedule 5.5 hereto, the Borrower has no
Subsidiaries.
Section
5.6 Financial
Condition; No Adverse Change.
The Borrower has furnished to the Lender its audited consolidated and
consolidating financial statements for its fiscal year ended December 31, 2005
and internally prepared financial statements for the fiscal-year-to-date period
ended January 31, 2006, and those statements fairly present the Borrower’s
financial condition on the dates thereof and the results of its operations
and
cash flows for the periods then ended and were prepared in accordance with
GAAP.
Since the date of the most recent financial statements, there has been no change
in the Borrower’s business, properties or condition (financial or otherwise)
which has had a Material Adverse Effect.
Section
5.7 Litigation.
There are no actions, suits or proceedings pending or, to the Borrower’s
knowledge, threatened against or affecting the Borrower or any of its Affiliates
or the properties of the Borrower or any of its Affiliates before any court
or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which, if determined adversely to the Borrower or any
of
its Affiliates, would result in a final judgment or judgments against the
Borrower or any of its Affiliates in an amount in excess of $50,000.00, apart
from those matters specifically listed in Schedule 5.7.
Section
5.8 Regulation U.
The Borrower is not engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulation U
of
the Board of Governors of the Federal Reserve System), and no part of the
proceeds of any Advance will be used to purchase or carry any margin stock
or to
extend credit to others for the purpose of purchasing or carrying any margin
stock.
Section
5.9 Taxes.
The Borrower and its Affiliates have paid or caused to be paid to the proper
authorities when due all federal, state and local taxes required to be withheld
by each of them. The Borrower and its Affiliates have filed all federal, state
and local tax returns which to the knowledge of the Officers of the Borrower
or
any Affiliate, as the case may be, are required to be filed, and the Borrower
and its Affiliates have paid or caused to be paid to the respective taxing
authorities all taxes as shown on said returns or on any assessment received
by
any of them to the extent such taxes have become due.
32
Section
5.10 Titles
and Liens.
The Borrower has good and absolute title to all Collateral free and clear of
all
Liens other than Permitted Liens. No financing statement naming the Borrower
as
debtor is on file in any office except to perfect only Permitted
Liens.
Section
5.11 Intellectual
Property Rights.
(a) Owned
Intellectual Property.
Schedule 5.11 is a complete list of all patents, applications for patents,
trademarks, applications to register trademarks, service marks, applications
to
register service marks, mask works, trade dress and copyrights for which the
Borrower is the owner of record (the “Owned Intellectual Property”). Except as
disclosed on Schedule 5.11, (i) the Borrower owns the Owned Intellectual
Property free and clear of all restrictions (including covenants not to xxx
a
third party), court orders, injunctions, decrees, writs or Liens, whether by
written agreement or otherwise, (ii) no Person other than the Borrower owns
or has been granted any right in the Owned Intellectual Property, (iii) all
Owned Intellectual Property is valid, subsisting and enforceable and
(iv) the Borrower has taken all commercially reasonable action necessary to
maintain and protect the Owned Intellectual Property.
(b) Agreements
with Employees and Contractors.
The
Borrower has entered into a legally enforceable agreement with each of its
employees and subcontractors obligating each such Person to assign to the
Borrower, without any additional compensation, any Intellectual Property Rights
created, discovered or invented by such Person in the course of such Person’s
employment or engagement with the Borrower (except to the extent prohibited
by
law), and further requiring such Person to cooperate with the Borrower, without
any additional compensation, in connection with securing and enforcing any
Intellectual Property Rights therein; provided,
however,
that
the foregoing shall not apply with respect to employees and subcontractors
whose
job descriptions are of the type such that no such assignments are reasonably
foreseeable.
(c) Intellectual
Property Rights Licensed from Others.
Schedule 5.11 is a complete list of all agreements under which the Borrower
has
licensed Intellectual Property Rights from another Person (“Licensed
Intellectual Property”) other than readily available, non-negotiated licenses of
computer software and other intellectual property used solely for performing
accounting, word processing and similar administrative tasks (“Off-the-shelf
Software”) and a summary of any ongoing payments the Borrower is obligated to
make with respect thereto. Except as disclosed on Schedule 5.11 and in written
agreements, copies of which have been given to the Lender, the Borrower’s
licenses to use the Licensed Intellectual Property are free and clear of all
restrictions, Liens, court orders, injunctions, decrees, or writs, whether
by
written agreement or otherwise. Except as disclosed on Schedule 5.11, the
Borrower is not obligated or under any liability whatsoever to make any
payments of a material nature by way of royalties, fees or otherwise to any
owner of, licensor of, or other claimant to, any Intellectual Property
Rights.
(d) Other
Intellectual Property Needed for Business.
Except
for Off-the-shelf Software and as disclosed on Schedule 5.11, the Owned
Intellectual Property and the Licensed Intellectual Property constitute all
Intellectual Property Rights used or necessary to conduct the Borrower’s
business as it is presently conducted or as the Borrower reasonably foresees
conducting it.
33
(e) Infringement.
Except
as disclosed on Schedule 5.11, the Borrower has no knowledge of, and has not
received any written claim or notice alleging, any Infringement of another
Person’s Intellectual Property Rights (including any written claim that the
Borrower must license or refrain from using the Intellectual Property Rights
of
any third party) nor, to the Borrower’s knowledge, is there any threatened claim
or any reasonable basis for any such claim.
Section
5.12 Plans.
Except as disclosed to the Lender in writing prior to the date hereof, neither
the Borrower nor any ERISA Affiliate (i) maintains or has maintained any Pension
Plan, (ii) contributes or has contributed to any Multiemployer Plan or
(iii) provides or has provided post-retirement medical or insurance benefits
with respect to employees or former employees (other than benefits required
under Section 601 of ERISA, Section 4980B of the IRC or applicable state law).
Neither the Borrower nor any ERISA Affiliate has received any notice or has
any
knowledge to the effect that it is not in full compliance with any of the
requirements of ERISA, the IRC or applicable state law with respect to any
Plan.
No Reportable Event exists in connection with any Pension Plan. Each Plan which
is intended to qualify under the IRC is so qualified, and no fact or
circumstance exists which may have an adverse effect on the Plan’s tax-qualified
status. Neither the Borrower nor any ERISA Affiliate has (i) any
accumulated funding deficiency (as defined in Section 302 of ERISA and Section
412 of the IRC) under any Plan, whether or not waived, (ii) any liability
under Section 4201 or 4243 of ERISA for any withdrawal, partial withdrawal,
reorganization or other event under any Multiemployer Plan or (iii) any
liability or knowledge of any facts or circumstances which could result in
any
liability to the Pension Benefit Guaranty Corporation, the Internal Revenue
Service, the Department of Labor or any participant in connection with any
Plan
(other than routine claims for benefits under the Plan).
Section
5.13 Default.
The Borrower is in compliance with all provisions of all agreements,
instruments, decrees and orders to which it is a party or by which it or its
property is bound or affected, the breach or default of which could have a
Material Adverse Effect.
Section
5.14 Environmental
Matters.
To Borrower’s knowledge as to the subsections herein:
(a) Except
as
disclosed on Schedule 5.14, there are not present in, on or under the Premises
any Hazardous Substances in such form or quantity as to create any material
liability or obligation for either the Borrower or the Lender under the common
law of any jurisdiction or under any Environmental Law, and no Hazardous
Substances have ever been stored, buried, spilled, leaked, discharged, emitted
or released in, on or under the Premises in such a way as to create any such
material liability.
(b) Except
as
disclosed on Schedule 5.14, the Borrower has not disposed of Hazardous
Substances in such a manner as to create any material liability under any
Environmental Law.
34
(c) Except
as
disclosed on Schedule 5.14, there have not existed in the past, nor are there
any threatened or impending requests, claims, notices, investigations, demands,
administrative proceedings, hearings or litigation relating in any way to the
Premises or the Borrower, alleging material liability under, violation of,
or
noncompliance with any Environmental Law or any license, permit or other
authorization issued pursuant thereto.
(d) Except
as
disclosed on Schedule 5.14, the Borrower’s businesses are and have in the past
always been conducted in accordance with all Environmental Laws and all
licenses, permits and other authorizations required pursuant to any
Environmental Law and necessary for the lawful and efficient operation of such
businesses are in the Borrower’s possession and are in full force and effect,
nor has the Borrower been denied insurance on grounds related to potential
environmental liability. No permit required under any Environmental Law is
scheduled to expire within 12 months and there is no threat that any such permit
will be withdrawn, terminated, limited or materially changed.
(e) Except
as
disclosed on Schedule 5.14, the Premises are not and never have been listed
on
the National Priorities List, the Comprehensive Environmental Response,
Compensation and Liability Information System or any similar federal, state
or
local list, schedule, log, inventory or database.
(f) The
Borrower has delivered to the Lender all environmental assessments, audits,
reports, permits, licenses and other documents which are in the Borrower’s
possession and control describing or relating in any way to the Premises or
the
Borrower’s businesses.
Section
5.15 Submissions
to Lender.
All financial and other information provided to the Lender by or on behalf
of
the Borrower in connection with the Borrower’s request for the credit facilities
contemplated hereby (i) is true and correct in all material respects,
(ii) does not omit any material fact necessary to make such information not
misleading and, (iii) as to projections, valuations or proforma financial
statements, presents a good faith opinion as to such projections, valuations
and
proforma condition and results.
Section
5.16 Financing
Statements.
The
Borrower has authorized the filing of financing statements sufficient when
filed
to perfect the Security Interest and the other security interests created by
the
Security Documents. When such financing statements are filed in the offices
noted therein, the Lender will have a valid and perfected security interest
in
all Collateral which is capable of being perfected by filing financing
statements. None of the Collateral is or will become a fixture on real estate,
unless a sufficient fixture filing is in effect with respect
thereto.
Section
5.17 Rights
to Payment.
Each right to payment and each instrument, document, chattel paper and other
agreement constituting or evidencing Collateral is (or, in the case of all
future Collateral, will be when arising or issued) the valid, genuine and
legally enforceable obligation, subject to no defense, setoff or counterclaim,
of the account debtor or other obligor named therein or in the Borrower’s
records pertaining thereto as being obligated to pay such
obligation.
35
Section
5.18 Financial
Solvency.
Both before and after giving effect to the refinancing and all of the
transactions contemplated in the Loan Documents, none of the Borrower or its
Affiliates:
(a) Was
or
will be insolvent, as that term is used and defined in Section 101(32) of the
United States Bankruptcy Code and Section 2 of the Uniform Fraudulent Transfer
Act;
(b) Has
unreasonably small capital or is engaged or about to engage in a business or
a
transaction for which any remaining assets of the Borrower or such Affiliate
are
unreasonably small;
(c) By
executing, delivering or performing its obligations under the Loan Documents
or
other documents to which it is a party or by taking any action with respect
thereto, intends to, nor believes that it will, incur debts beyond its ability
to pay them as they mature;
(d) By
executing, delivering or performing its obligations under the Loan Documents
or
other documents to which it is a party or by taking any action with respect
thereto, intends to hinder, delay or defraud either its present or future
creditors; and
(e) At
this
time contemplates filing a petition in bankruptcy or for an arrangement or
reorganization or similar proceeding under any law of any jurisdiction, nor,
to
the best knowledge of the Borrower, is the subject of any actual, pending or
threatened bankruptcy, insolvency or similar proceedings under any law of any
jurisdiction.
ARTICLE
VI
COVENANTS
So
long
as the Obligations shall remain unpaid, or the Credit Facility shall remain
outstanding, the Borrower will comply with the following requirements, unless
the Lender shall otherwise consent in writing:
Section
6.1 Reporting
Requirements.
The Borrower will deliver, or cause to be delivered, to the Lender each of
the
following, which shall be in form and detail acceptable to the
Lender:
(a) Annual
Financial Statements.
As soon
as available, and in any event within 90 days after the end of each fiscal
year
of the Borrower, the Borrower’s audited financial statements on a consolidated
and consolidating basis with the unqualified opinion of independent certified
public accountants selected by the Borrower and acceptable to the Lender, which
annual financial statements shall include the Borrower’s balance sheet as at the
end of such fiscal year and the related statements of the Borrower’s income,
retained earnings and cash flows for the fiscal year then ended, prepared,
if
the Lender so requests, on a consolidating and consolidated basis to include
any
Affiliates, all in reasonable detail and prepared in accordance with GAAP,
together with (i) copies of all management letters prepared by such
accountants; (ii) an acknowledgment as part of the audited financial
statements and/or documents filed with the Securities and Exchange Commission
(“SEC”) signed by such accountants stating whether any Default or Event of
Default then exists (and, if any Default or Event of Default then exists, a
description of such Default or Event of Default); and (iii) a certificate
of the Borrower’s chief financial officer stating that such financial statements
have been prepared in accordance with GAAP, fairly represent the Borrower’s
financial position and the results of its operations, and whether or not such
Officer has knowledge of the occurrence of any Default or Event of Default
and,
if so, stating in reasonable detail the facts with respect thereto.
36
(b) Monthly
Financial Statements.
As soon
as available and in any event within 20 days after the end of each month,
the internally prepared unaudited/internal balance sheet and statements of
income and retained earnings of the Borrower as at the end of and for such
month
and for the year to date period then ended, prepared, if the Lender so requests,
on a consolidating and consolidated basis to include any Affiliates, in
reasonable detail and stating in comparative form the figures for the
corresponding date and periods in the previous year, all prepared in accordance
with GAAP, subject to year-end audit adjustments and which fairly represent
the
Borrower’s financial position and the results of its operations; and accompanied
by a certificate of the Borrower’s chief financial officer, substantially in the
form of Exhibit B hereto stating (i) that such financial statements have
been prepared in accordance with GAAP, subject to year-end audit adjustments,
and fairly represent the Borrower’s financial position and the results of its
operations, (ii) whether or not such Officer has knowledge of the
occurrence of any Default or Event of Default not theretofore reported and
remedied and, if so, stating in reasonable detail the facts with respect
thereto, and (iii) all relevant facts in reasonable detail to evidence, and
the computations as to, whether or not the Borrower is in compliance with the
Financial Covenants.
(c) Collateral
Reports.
Within
15 days after the end of each month or more frequently if the Lender so
requires, the Borrower’s accounts receivable and its accounts payable, a
detailed inventory report, an inventory certification report, and a calculation
of the Borrower’s Accounts, Eligible Accounts, Inventory and Eligible Inventory
as at the end of such month or shorter time period (the “Collateral
Reports”).
Borrower
agrees to submit the Collateral Reports to Lender via Collateral Services,
Inc.
(“CSI”) and further agrees to pay Lender as specified in Section 2.7(i) herein.
(d) Projections.
As soon
as available, and in any event within 30 days prior to the beginning of each
fiscal year, the Borrower will deliver to the Lender the Borrower’s projected
balance sheets, income statements, statements of cash flow and projected
Availability for each month of the succeeding fiscal year, each in reasonable
detail. Such items will be certified by the Officer who is the Borrower’s chief
financial officer as being the most accurate projections available and identical
to the projections used by the Borrower for internal planning purposes and
be
delivered with a statement of underlying assumptions and such supporting
schedules and information as the Lender may in its discretion
require.
(e) Supplemental
Reports.
Weekly,
or more frequently if the Lender so requires, the Borrower’s “daily collateral
reports”, receivables schedules, collection reports, copies of invoices to
account debtors, signed and dated shipment documents and delivery receipts
for
goods sold to said account debtors, as requested by Lender in its sole
discretion.
(f) Litigation.
Immediately after the commencement thereof, notice in writing of all litigation
and of all proceedings before any governmental or regulatory agency affecting
the Borrower (i) of the type described in Section 5.14(c) or
(ii) which seek a monetary recovery against the Borrower in excess of
$50,000.
37
(g) Defaults.
When
any Officer of the Borrower becomes aware of the probable occurrence of any
Default or Event of Default, and no later than 3 days after such Officer becomes
aware of such Default or Event of Default, notice of such occurrence, together
with a detailed statement by a responsible Officer of the Borrower of the steps
being taken by the Borrower to cure the effect thereof.
(h) Plans.
As soon
as possible, and in any event within 30 days after the Borrower knows or
has reason to know that any Reportable Event with respect to any Pension Plan
has occurred, a statement signed by the Officer who is the Borrower’s chief
financial officer setting forth details as to such Reportable Event and the
action which the Borrower proposes to take with respect thereto, together with
a
copy of the notice of such Reportable Event to the Pension Benefit Guaranty
Corporation. As soon as possible, and in any event within 10 days after the
Borrower fails to make any quarterly contribution required with respect to
any
Pension Plan under Section 412(m) of the IRC, the Borrower will deliver to
the
Lender a statement signed by the Officer who is the Borrower’s chief financial
officer setting forth details as to such failure and the action which the
Borrower proposes to take with respect thereto, together with a copy of any
notice of such failure required to be provided to the Pension Benefit Guaranty
Corporation. As soon as possible, and in any event within ten days after the
Borrower knows or has reason to know that it has or is reasonably expected
to
have any liability under Sections 4201 or 4243 of ERISA for any withdrawal,
partial withdrawal, reorganization or other event under any Multiemployer Plan,
the Borrower will deliver to the Lender a statement of the Borrower’s chief
financial officer setting forth details as to such liability and the action
which the Borrower proposes to take with respect thereto.
(i) Disputes.
Promptly upon knowledge thereof, notice of (i) any disputes or claims by
the Borrower’s customers exceeding $100,000 in the aggregate at any one time
during any fiscal year; (ii) credit memos; and (iii) any goods
returned to or recovered by the Borrower.
(j) Officers
and Directors.
Promptly upon knowledge thereof, notice of any change in the persons
constituting the Borrower’s Officers and Directors.
(k) Collateral.
Promptly upon knowledge thereof, notice of any material loss of or material
damage to any Collateral or of any substantial adverse change in any Collateral
or the prospect of payment thereof.
(l) Commercial
Tort Claims.
Promptly upon knowledge thereof, notice of any commercial tort claims it may
bring against any Person, including the name and address of each defendant,
a
summary of the facts, an estimate of the Borrower’s damages, copies of any
complaint or demand letter submitted by the Borrower, and such other information
as the Lender may request.
38
(m) Intellectual
Property.
(i) 30
days
prior written notice of Borrower’s intent to acquire material Intellectual
Property Rights; except for transfers permitted under Section 6.18, the Borrower
will give the Lender 30 days prior written notice of its intent to dispose
of
material Intellectual Property Rights and upon request shall provide the Lender
with copies of all proposed documents and agreements concerning such
rights.
(ii) Promptly
upon knowledge thereof, notice of (A) any Infringement of its Intellectual
Property Rights by others, (B) claims that the Borrower is Infringing
another Person’s Intellectual Property Rights and (C) any threatened
cancellation, termination or material limitation of its Intellectual Property
Rights.
(iii) Promptly
upon receipt, copies of all registrations and filings with respect to its
Intellectual Property Rights.
(n) Reports
to Owners.
Promptly upon their distribution, copies of all financial statements, reports
and proxy statements which the Borrower shall have sent to its
Owners.
(o) SEC
Filings.
Promptly after the sending or filing thereof, copies of all regular and periodic
reports which the Borrower shall file with the Securities and Exchange
Commission or any national securities exchange.
(p) Tax
Returns of Borrower. As
soon
as possible, and in any event no later than five days after they are due to
be filed, copies of the state and federal income tax returns and all schedules
thereto of the Borrower.
(q) Tax
Returns and Personal Financial Statements of Owners.
[Intentionally deleted]
(r) Violations
of Law.
Promptly upon knowledge thereof, notice of the Borrower’s violation of any law,
rule or regulation, the non-compliance with which could have a Material Adverse
Effect on the Borrower.
(s)
Other
Reports.
From
time to time, with reasonable promptness, any and all receivables schedules,
inventory reports, collection reports, deposit
records, equipment schedules, copies of invoices to account debtors, shipment
documents and delivery receipts for goods sole, and such other material,
reports, records or information as the Lender may request.
Section
6.2 Financial
Covenants.
(a) Net
Earnings.
While
any part of the Obligations remains unpaid, the Borrower will not be required
to
demonstrate a required amount of Net Earnings if
and
only if
Borrower’s average monthly excess Availability on the Revolving Facility is not
less than Three Million Five Hundred Thousand Dollars ($3,500,000.00) (the
“Minimum Excess Availability”); provided,
however,
that in
the event that Borrower does not meet the Minimum Excess Availability while
any
part of the Obligations remains unpaid, then the Borrower shall, unless waived
in writing by the Lender, demonstrate Net Earnings, as measured on a quarterly
basis and calculated based upon Borrower’s trailing twelve (12) month, of: (i)
not more than a negative Three Million Dollars (<$3,000,000.00>) during
the fiscal year ending December 31, 2006; (ii) not more than a negative Two
Million Dollars (<$2,000,000.00>) during the fiscal year ending December
31, 2007; and (iii) not more than a negative One Million Dollars
(<$1,000,000.00>) during the fiscal year ending December 31,
2008.
39
(b) Capital
Expenditures.
The
Borrower will not to subject to a Capital Expenditures limit so
long as
Borrower’s average monthly excess Availability on the Revolving Facility is not
less than Three Million Five Hundred Thousand Dollars ($3,500,000.00) (the
“Minimum Excess Availability”); provided,
however,
that in
the event that Borrower does not meet the Minimum Excess Availability at any
time during this Agreement, then the Borrower agrees that it will not incur
or
contract to incur Capital Expenditures of more than $1,700,000.00 in the
aggregate for the fiscal year ending December 31, 2006; provided,
further,
however,
that in
the event that Borrower does not meet the Minimum Excess Availability at any
time during this Agreement, then the Borrower agrees that it will not incur
or
contract to incur Capital Expenditures of more than $1,200,000.00 in the
aggregate for the fiscal year ending December 31, 2007 and for each fiscal
year
end thereafter.
Section
6.3 Permitted
Liens; Financing Statements.
(a) The
Borrower will not create, incur or suffer to exist any Lien upon or of any
of
its assets, now owned or hereafter acquired, to secure any indebtedness;
excluding,
however,
from
the operation of the foregoing, the following (each a “Permitted Lien”;
collectively, “Permitted Liens”):
(i) In
the
case of any of the Borrower’s property which is not Collateral, covenants,
restrictions, rights, easements and minor irregularities in title which do
not
materially interfere with the Borrower’s business or operations as presently
conducted;
(ii) Liens
in
existence on the date hereof and listed in Schedule 6.3 hereto, securing
indebtedness for borrowed money permitted under Section 6.4; and
(iii) The
Security Interest and Liens created by the Security Documents.
(b) The
Borrower will not amend any financing statements in favor of the Lender except
as permitted by law.
Any
authorization by the Lender to any Person to amend financing statements in
favor
of the Lender shall be in writing.
Section
6.4 Indebtedness.
The Borrower will not incur, create, assume or permit to exist any indebtedness
or liability on account of deposits or advances or any indebtedness for borrowed
money or letters of credit issued on the Borrower’s behalf, or any other
indebtedness or liability evidenced by notes, bonds, debentures or similar
obligations, except:
(a) Indebtedness
arising hereunder;
(b) Indebtedness
of the Borrower in existence on the date hereof and listed in Schedule 6.4
hereto; and
40
(c) Indebtedness
relating to Permitted Liens.
Section
6.5 Guaranties.
The Borrower will not assume, guarantee, endorse or otherwise become directly
or
contingently liable in connection with any obligations of any other Person,
except:
(a) The
endorsement of negotiable instruments by the Borrower for deposit or collection
or similar transactions in the ordinary course of business; and
(b) Guaranties,
endorsements and other direct or contingent liabilities in connection with
the
obligations of other Persons, in existence on the date hereof and listed in
Schedule 6.4 hereto.
Section
6.6 Investments
and Subsidiaries.
The Borrower will not make or permit to exist any loans or advances to, or
make
any investment or acquire any interest whatsoever in, any other Person or
Affiliate, including any partnership or joint venture, nor purchase or hold
beneficially any stock or other securities or evidence of indebtedness of any
other Person or Affiliate, except:
(a) Investments
in direct obligations of the United States of America or any agency or
instrumentality thereof whose obligations constitute full faith and credit
obligations of the United States of America having a maturity of one year or
less, commercial paper issued by U.S. corporations rated “A-1” or “A-2” by
Standard & Poor’s Ratings Services or “P-1” or “P-2” by Xxxxx’x
Investors Service or certificates of deposit or bankers’ acceptances having a
maturity of one year or less issued by members of the Federal Reserve System
having deposits in excess of $100,000,000 (which certificates of deposit or
bankers’ acceptances are fully insured by the Federal Deposit Insurance
Corporation);
(b) Travel
advances or loans to the Borrower’s Officers and employees not exceeding at any
one time an aggregate of $10,000.00;
(c) Prepaid
rent not exceeding one month or security deposits; and
(d) Current
investments in the Subsidiaries in existence on the date hereof and listed
in
Schedule 5.5 hereto.
Section
6.7 Dividends
and Distributions.
The Borrower will not declare or pay any dividends (other than dividends payable
solely in stock of the Borrower) on any class of its stock, or make any payment
on account of the purchase, redemption or other retirement of any shares of
such
stock, or other securities or evidence of its indebtedness or make any
distribution in respect thereof, either directly or indirectly.
Section
6.8 Salaries.
The Borrower will not pay excessive or unreasonable salaries, bonuses,
commissions, consultant fees or other compensation.
Section
6.9 Intentionally
Deleted.
41
Section
6.10 Books
and Records; Collateral
Examination, Inspection and Appraisals.
(a) The
Borrower will keep accurate books of record and account for itself pertaining
to
the Collateral and pertaining to the Borrower’s business and financial condition
and such other matters as the Lender may from time to time request in which
true
and complete entries will be made in accordance with GAAP and, upon the Lender’s
request, will permit any officer, employee, attorney, accountant or other agent
of the Lender to audit, review, make extracts from or copy any and all company
and financial books and records of the Borrower at all times during ordinary
business hours, to send and discuss with account debtors and other obligors
requests for verification of amounts owed to the Borrower, and to discuss the
Borrower’s affairs with any of its Directors, Officers, employees or agents.
(b) The
Borrower hereby irrevocably authorizes all accountants and third parties to
disclose and deliver to the Lender or its designated agent, at the Borrower’s
expense, all financial information, books and records, work papers, management
reports and other information in their possession regarding the Borrower.
(c) The
Borrower will permit the Lender or its employees, accountants, attorneys or
agents, to examine and inspect any Collateral or any other property of the
Borrower at any time during ordinary business hours.
(d) The
Lender may also, in the event of an Event of Default by Borrower, obtain at
the
Borrower’s expense an appraisal of Inventory and Equipment by an appraiser
acceptable to the Lender
in
its sole discretion.
Section
6.11 Account
Verification.
(a) The
Lender or its agent may at any time and from time to time send or require the
Borrower to send requests for verification of accounts or notices of assignment
to account debtors and other obligors. The Lender or its agent may also at
any
time and from time to time telephone account debtors and other obligors to
verify accounts.
(b) The
Borrower shall pay when due unless being contested in good faith each account
payable due to a Person holding a Permitted Lien (as a result of such payable)
on any Collateral.
Section
6.12 Compliance
with Laws.
(a) The
Borrower shall (i) comply with the requirements of applicable laws and
regulations, the non-compliance with which would materially and adversely affect
its business or its financial condition and (ii) use and keep the
Collateral, and require that others use and keep the Collateral, only for lawful
purposes, without violation of any federal, state or local law, statute or
ordinance.
(b) Without
limiting the foregoing undertakings, the Borrower specifically agrees that
it
will comply with all applicable Environmental Laws and obtain and comply with
all permits, licenses and similar approvals required by any Environmental Laws,
and will not generate, use, transport, treat, store or dispose of any Hazardous
Substances in such a manner as to create any material liability or obligation
under the common law of any jurisdiction or any Environmental Law.
42
(c) The
Borrower
shall (i) ensure that no Owner shall be listed on the Specially Designated
Nationals and Blocked Person List or other similar lists maintained by the
Office of Foreign Assets Control ("OFAC"), the Department of the Treasury or
included in any Executive Orders, (ii) not use or permit the use of the proceeds
of the Credit Facility or any other financial accommodation from the Lender
to
violate any of the foreign asset control regulations of OFAC or other applicable
law, (iii) comply with all applicable Bank Secrecy Act laws and regulations,
as
amended from time to time, and (iv) otherwise comply with the USA Patriot Act
as
required by federal law and the Lender's policies and practices.
Section
6.13 Payment
of Taxes and Other Claims.
The Borrower will pay or discharge, when due, (a) all taxes, assessments
and governmental charges levied or imposed upon it or upon its income or
profits, upon any properties belonging to it (including the Collateral) or
upon
or against the creation, perfection or continuance of the Security Interest,
prior to the date on which penalties attach thereto, (b) all federal, state
and local taxes required to be withheld by it, and (c) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a Lien
upon any properties of the Borrower; provided, that the Borrower shall not
be
required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which proper reserves have been made.
Section
6.14 Maintenance
of Properties.
(a) The
Borrower will keep and maintain the Collateral and all of its other properties
necessary or useful in its business in good condition, repair and working order
(normal wear and tear excepted) and will from time to time replace or repair
any
worn, defective or broken parts; provided,
however,
that
nothing in this covenant shall prevent the Borrower from discontinuing the
operation and maintenance of any of its properties if such discontinuance is,
in
the Borrower’s judgment, desirable in the conduct of the Borrower’s business and
not disadvantageous in any material respect to the Lender. The Borrower will
take all commercially reasonable steps necessary to protect and maintain its
Intellectual Property Rights.
(b) The
Borrower will defend the Collateral against all Liens, claims or demands of
all
Persons (other than the Lender) claiming the Collateral or any interest therein.
The Borrower will keep all Collateral free and clear of all Liens except
Permitted Liens. The Borrower will take all commercially reasonable steps
necessary to prosecute any Person Infringing its Intellectual Property Rights
and to defend itself against any Person accusing it of Infringing any Person’s
Intellectual Property Rights.
Section
6.15 Insurance.
The Borrower will obtain and at all times maintain insurance with insurers
acceptable to the Lender, in such amounts, on such terms (including any
deductibles) and against such risks as may from time to time be required by
the
Lender, but in all events in such amounts and against such risks as is usually
carried by companies engaged in similar business and owning similar properties
in the same general areas in which the Borrower operates. Without limiting
the
generality of the foregoing, the Borrower will at all times maintain business
interruption insurance including coverage for force majeure and keep all
tangible Collateral insured against risks of fire (including so-called extended
coverage), theft, collision (for Collateral consisting of motor vehicles) and
such other risks and in such amounts as the Lender may reasonably request,
with
any loss payable to the Lender to the extent of its interest, and all policies
of such insurance shall contain a lender’s loss payable endorsement for the
Lender’s benefit. All policies of liability insurance required hereunder shall
name the Lender as an additional insured.
43
Section
6.16 Preservation
of Existence.
The Borrower will preserve and maintain its existence and all of its rights,
privileges and franchises necessary or desirable in the normal conduct of its
business and shall conduct its business in an orderly, efficient and regular
manner.
Section
6.17 Delivery
of Instruments, etc.
Upon
request by the Lender, the Borrower will promptly deliver to the Lender in
pledge all instruments, documents and chattel paper constituting Collateral,
duly endorsed or assigned by the Borrower.
Section
6.18 Sale
or Transfer of Assets; Suspension of Business Operations.
The Borrower will not sell, lease, assign, transfer or otherwise dispose of
(i) the stock of any Subsidiary, (ii) all or a substantial part of its
assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than
the
sale of Inventory in the ordinary course of business and will not liquidate,
dissolve or suspend business operations. The Borrower will not transfer any
part
of its ownership interest in any Intellectual Property Rights and will not
permit any agreement under which it has licensed Licensed Intellectual Property
to lapse, except that the Borrower may transfer such rights or permit such
agreements to lapse if it shall have reasonably determined that the applicable
Intellectual Property Rights are no longer useful in its business. If the
Borrower transfers any Intellectual Property Rights for value, the Borrower
will
pay over the proceeds to the Lender for application to the Obligations. The
Borrower will not license any other Person to use any of the Borrower’s
Intellectual Property Rights, except that the Borrower may grant licenses in
the
ordinary course of its business in connection with sales of Inventory or
provision of services to its customers.
Section
6.19 Consolidation
and Merger; Asset Acquisitions.
The Borrower will not consolidate with or merge into any Person, or permit
any
other Person to merge into it, or acquire (in a transaction analogous in purpose
or effect to a consolidation or merger) all or substantially all the assets
of
any other Person without the written consent of the Lender, which consent shall
not be unreasonably withheld.
Section
6.20 Sale
and Leaseback.
The Borrower will not enter into any arrangement, directly or indirectly, with
any other Person whereby the Borrower shall sell or transfer any real or
personal property, whether now owned or hereafter acquired, and then or
thereafter rent or lease as lessee such property or any part thereof or any
other property which the Borrower intends to use for substantially the same
purpose or purposes as the property being sold or transferred.
44
Section
6.21 Restrictions
on Nature of Business.
The Borrower will not engage in any line of business materially different from
that presently engaged in by the Borrower and will not purchase, lease or
otherwise acquire assets not related to its business.
Section
6.22 Accounting.
The Borrower will not adopt any material change in accounting principles other
than as required by GAAP. The Borrower will not adopt, permit or consent to
any
change in its fiscal year.
Section
6.23 Discounts,
etc.
After
notice from the Lender, the Borrower will not grant any discount, credit or
allowance to any customer of the Borrower or accept any return of goods sold.
The Borrower will not at any time modify, amend, subordinate, cancel or
terminate the obligation of any account debtor or other obligor of the
Borrower.
Section
6.24 Plans.
Unless disclosed to the Lender pursuant to Section 5.12, neither the Borrower
nor any ERISA Affiliate will (i) adopt, create, assume or become a party to
any
Pension Plan, (ii) incur any obligation to contribute to any Multiemployer
Plan,
(iii) incur any obligation to provide post-retirement medical or insurance
benefits with respect to employees or former employees (other than benefits
required by law) or (iv) amend any Plan in a manner that would materially
increase its funding obligations.
Section
6.25 Place
of Business; Name.
The Borrower will not transfer its chief executive office or principal place
of
business, or move, relocate, close or sell any business location except as
disclosed on Schedule 5.1. The Borrower will not permit any tangible Collateral
or any records pertaining to the Collateral to be located in any state or area
in which, in the event of such location, a financing statement covering such
Collateral would be required to be, but has not in fact been, filed in order
to
perfect the Security Interest. The Borrower will not change its name or
jurisdiction of organization.
Section
6.26 Constituent
Documents; S Corporation Status.
The Borrower will not amend its Constituent Documents. The Borrower will not
become an S Corporation.
Section
6.27 Performance
by the Lender.
If the Borrower at any time fails to perform or observe any of the foregoing
covenants contained in this Article VI or elsewhere herein, and if such
failure shall continue for a period of ten calendar days after the Lender gives
the Borrower written notice thereof (or in the case of the agreements contained
in Section 6.13 and Section 6.15, immediately upon the occurrence of such
failure, without notice or lapse of time), the Lender may, but need not, perform
or observe such covenant on behalf and in the name, place and stead of the
Borrower (or, at the Lender’s option, in the Lender’s name) and may, but need
not, take any and all other actions which the Lender may reasonably deem
necessary to cure or correct such failure (including the payment of taxes,
the
satisfaction of Liens, the performance of obligations owed to account debtors
or
other obligors, the procurement and maintenance of insurance, the execution
of
assignments, security agreements and financing statements, and the endorsement
of instruments); and the Borrower shall thereupon pay to the Lender on demand
the amount of all monies expended and all costs and expenses (including
reasonable attorneys’ fees and legal expenses) incurred by the Lender in
connection with or as a result of the performance or observance of such
agreements or the taking of such action by the Lender, together with interest
thereon from the date expended or incurred at the Default Rate. To facilitate
the Lender’s performance or observance of such covenants of the Borrower, the
Borrower hereby irrevocably appoints the Lender, or the Lender’s delegate,
acting alone, as the Borrower’s attorney in fact (which appointment is coupled
with an interest) with the right (but not the duty) from time to time to create,
prepare, complete, execute, deliver, endorse or file in the name and on behalf
of the Borrower any and all instruments, documents, assignments, security
agreements, financing statements, applications for insurance and other
agreements and writings required to be obtained, executed, delivered or endorsed
by the Borrower hereunder.
45
ARTICLE
VII
EVENTS
OF DEFAULT, RIGHTS AND REMEDIES
Section
7.1 Events
of Default.
“Event of Default”, wherever used herein, means any one of the following
events:
(a) Default
in the payment of any Obligations when they become due and payable;
(b) Default
in the performance, or breach, of any covenant or agreement of the Borrower
contained in this Agreement;
(c) An
Overadvance arises as the result of any reduction in the Borrowing Base, or
arises in any manner on terms not otherwise approved of in advance by the Lender
in writing;
(d) A
Change
of Control shall occur;
(e) Any
Financial Covenant shall become inapplicable due to the lapse of time and the
failure to amend any such covenant to cover future periods;
(f) The
Borrower or any Guarantor shall be or become insolvent, or admit in writing
its
or his inability to pay its or his debts as they mature, or make an assignment
for the benefit of creditors; or the Borrower or any Guarantor shall apply
for
or consent to the appointment of any receiver, trustee, or similar officer
for
it or him or for all or any substantial part of its or his property; or such
receiver, trustee or similar officer shall be appointed without the application
or consent of the Borrower or such Guarantor, as the case may be; or the
Borrower or any Guarantor shall institute (by petition, application, answer,
consent or otherwise) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding relating
to
it or him under the laws of any jurisdiction; or any such proceeding shall
be
instituted (by petition, application or otherwise) against the Borrower or
any
such Guarantor; or any judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied against a substantial part of the
property of the Borrower or any Guarantor;
(g) A
petition shall be filed by or against the Borrower or any Guarantor under the
United States Bankruptcy Code or the laws of any other jurisdiction naming
the
Borrower or such Guarantor as debtor and such petition is not dismissed within
60 days of the filing of such petition, provided,
further,
however,
that an
Order relating to financing acceptable to Lender in its sole discretion is
entered by a court of competent jurisdiction;
46
(h) Any
representation or warranty made by the Borrower in this Agreement, by any
Guarantor in any Guaranty delivered to the Lender, or by the Borrower (or any
of
its Officers) or any Guarantor in any agreement, certificate, instrument or
financial statement or other statement contemplated by or made or delivered
pursuant to or in connection with this Agreement or any such Guaranty shall
prove to have been incorrect in any material respect when deemed to be
effective;
(i) The
rendering against the Borrower of an arbitration award, final judgment, decree
or order for the payment of money in excess of $100,000 and the continuance
of
such arbitration award, judgment, decree or order unsatisfied and in effect
for
any period of 30 consecutive days without a stay of execution;
(j) A
default
under any bond, debenture, note or other evidence of material indebtedness
of
the Borrower owed to any Person other than the Lender, or under any indenture
or
other instrument under which any such evidence of indebtedness has been issued
or by which it is governed, or under any material lease or other contract,
and
the expiration of the applicable period of grace, if any, specified in such
evidence of indebtedness, indenture, other instrument, lease or
contract;
(k) Any
Reportable Event, which the Lender determines in good faith might constitute
grounds for the termination of any Pension Plan or for the appointment by the
appropriate United States District Court of a trustee to administer any Pension
Plan, shall have occurred and be continuing 30 days after written notice to
such effect shall have been given to the Borrower by the Lender; or a trustee
shall have been appointed by an appropriate United States District Court to
administer any Pension Plan; or the Pension Benefit Guaranty Corporation shall
have instituted proceedings to terminate any Pension Plan or to appoint a
trustee to administer any Pension Plan; or the Borrower or any ERISA Affiliate
shall have filed for a distress termination of any Pension Plan under Title
IV
of ERISA; or the Borrower or any ERISA Affiliate shall have failed to make
any
quarterly contribution required with respect to any Pension Plan under Section
412(m) of the IRC, which the Lender determines in good faith may by itself,
or
in combination with any such failures that the Lender may determine are likely
to occur in the future, result in the imposition of a Lien on the Borrower’s
assets in favor of the Pension Plan; or any withdrawal, partial withdrawal,
reorganization or other event occurs with respect to a Multiemployer Plan which
results or could reasonably be expected to result in a material liability of
the
Borrower to the Multiemployer Plan under Title IV of ERISA;
(l) An
event
of default shall occur under any Security Document;
(m) The
Borrower shall liquidate, dissolve, terminate or suspend its business operations
or otherwise fail to operate its business in the ordinary course, merge with
another Person unless the Borrower is the surviving entity; or sell or attempt
to sell all or substantially all of its assets, without the Lender’s prior
written consent;
(n) Default
in the payment of any amount owed by the Borrower to the Lender other than
any
indebtedness arising hereunder;
47
(p) Any
event
or circumstance with respect to the Borrower shall occur such that the Lender
shall believe in good faith that the prospect of payment of all or any part
of
the Obligations or the performance by the Borrower under the Loan Documents
is
impaired or any material adverse change in the business or financial condition
of the Borrower shall occur;
(q) Any
breach, default or event of default by or attributable to any Affiliate under
any agreement between such Affiliate and the Lender shall occur;
or
(r) The
indictment of any Director, Officer, Guarantor, or any Owner of the Borrower
for
a felony offence under state or federal law.
Section
7.2 Rights
and Remedies.
During any Default Period, the Lender may exercise any or all of the following
rights and remedies:
(a) The
Lender may, by notice to the Borrower, declare the Commitment to be terminated,
whereupon the same shall forthwith terminate;
(b) The
Lender may, by notice to the Borrower, declare the Obligations to be forthwith
due and payable, whereupon all Obligations shall become and be forthwith due
and
payable, without presentment, notice of dishonor, protest or further notice
of
any kind, all of which the Borrower hereby expressly waives;
(c) The
Lender may, without notice to the Borrower and without further action, apply
any
and all money owing by the Lender to the Borrower to the payment of the
Obligations;
(d) The
Lender may exercise and enforce any and all rights and remedies available upon
default to a secured party under the UCC, including the right to take possession
of Collateral, or any evidence thereof, proceeding without judicial process
or
by judicial process (without a prior hearing or notice thereof, which the
Borrower hereby expressly waives) and the right to sell, lease or otherwise
dispose of any or all of the Collateral (with or without giving any warranties
as to the Collateral, title to the Collateral or similar warranties), and,
in
connection therewith, the Borrower will on demand assemble the Collateral and
make it available to the Lender at a place to be designated by the Lender which
is reasonably convenient to both parties;
(e) The
Lender may make demand upon the Borrower and, forthwith upon such demand, the
Borrower will pay to the Lender in immediately available funds for deposit
in
the Special Account pursuant to Section 2.5 an amount equal to the aggregate
maximum amount available to be drawn under all Letters of Credit then
outstanding, assuming compliance with all conditions for drawing
thereunder;
(f) The
Lender may exercise and enforce its rights and remedies under the Loan
Documents;
(g) The
Lender may without regard to any waste, adequacy of the security or solvency
of
the Borrower, apply for the appointment of a receiver of the Collateral, to
which appointment the Borrower hereby consents, whether or not foreclosure
proceedings have been commenced under the Security Documents and whether or
not
a foreclosure sale has occurred; and
48
(h) The
Lender may exercise any other rights and remedies available to it by law or
agreement.
Notwithstanding
the foregoing, upon the occurrence of an Event of Default described in Section
7.1(f) or (g), the Obligations shall be immediately due and payable
automatically without presentment, demand, protest or notice of any kind. If
the
Lender sells any of the Collateral on credit, the Obligations will be reduced
only to the extent of payments actually received. If the purchaser fails to
pay
for the Collateral, the Lender may resell the Collateral and shall apply any
proceeds actually received to the Obligations.
Section
7.3 Certain
Notices.
If notice to the Borrower of any intended disposition of Collateral or any
other
intended action is required by law in a particular instance, such notice shall
be deemed commercially reasonable if given (in the manner specified in Section
8.3) at least ten calendar days before the date of intended disposition or
other
action.
ARTICLE
VIII
MISCELLANEOUS
Section
8.1 No
Waiver; Cumulative Remedies; Compliance with Laws.
No failure or delay by the Lender in exercising any right, power or remedy
under
the Loan Documents shall operate as a waiver thereof; nor shall any single
or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
under the Loan Documents. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law. The Lender may
comply with any applicable state or federal law requirements in connection
with
a disposition of the Collateral and such compliance will not be considered
adversely to affect the commercial reasonableness of any sale of the
Collateral.
Section
8.2 Amendments,
Etc.
No
amendment, modification, termination or waiver of any provision of any Loan
Document or consent to any departure by the Borrower therefrom or any release
of
a Security Interest shall be effective unless the same shall be in writing
and
signed by the Lender, and then such waiver or consent shall be effective only
in
the specific instance and for the specific purpose for which given. No notice
to
or demand on the Borrower in any case shall entitle the Borrower to any other
or
further notice or demand in similar or other circumstances.
Section
8.3 Notices;
Communication of Confidential Information; Requests for
Accounting.
Except
as otherwise expressly provided herein, all notices, requests, demands and
other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United
States mail, (c) sent by overnight courier of national reputation,
(d) transmitted by telecopy, or (e) sent as electronic mail, in each case
delivered or sent to the party to whom notice is being given to the business
address, telecopier number, or e mail address set forth below next to its
signature or, as to each party, at such other business address, telecopier
number, or e mail address as it may hereafter designate in writing to the other
party pursuant to the terms of this Section. All such notices, requests, demands
and other communications shall be deemed to be an authenticated record
communicated or given on (a) the date received if personally delivered,
(b) when deposited in the mail if delivered by mail, (c) the date
delivered to the courier if delivered by overnight courier, or (d) the date
of transmission if sent by telecopy or by e mail, except that notices or
requests delivered to the Lender pursuant to any of the provisions of
Article II shall not be effective until received by the Lender. All
notices, financial information, or other business records sent by either party
to this Agreement may be transmitted, sent, or otherwise communicated via such
medium as the sending party may deem appropriate and commercially reasonable;
provided,
however,
that
the risk that the confidentiality or privacy of such notices, financial
information, or other business records sent by either party may be compromised
shall be borne exclusively by the Borrower. All requests for an accounting
under
Section 9-210 of the UCC (i) shall be made in a writing signed by a Person
authorized under Section 2.2(b), (ii) shall be personally delivered, sent
by registered or certified mail, return receipt requested, or by overnight
courier of national reputation, (iii) shall be deemed to be sent when
received by the Lender and (iv) shall otherwise comply with the requirements
of
Section 9-210. The Borrower requests that the Lender respond to all such
requests which on their face appear to come from an authorized individual and
releases the Lender from any liability for so responding. The Borrower shall
pay
the Lender the maximum amount allowed by law for responding to such
requests.
49
Section
8.4 Further
Documents.
The Borrower will from time to time execute, deliver, endorse and authorize
the
filing of any and all instruments, documents, conveyances, assignments, security
agreements, financing statements, control agreements and other agreements and
writings that the Lender may reasonably request in order to secure, protect,
perfect or enforce the Security Interest or the Lender’s rights under the Loan
Documents (but any failure to request or assure that the Borrower executes,
delivers, endorses or authorizes the filing of any such item shall not affect
or
impair the validity, sufficiency or enforceability of the Loan Documents and
the
Security Interest, regardless of whether any such item was or was not executed,
delivered or endorsed in a similar context or on a prior occasion).
Section
8.5 Costs
and Expenses.
The Borrower shall pay on demand all costs and expenses, including reasonable
attorneys’ fees, incurred by the Lender in connection with the Obligations, this
Agreement, the Loan Documents, any Letter of Credit and any other document
or
agreement related hereto or thereto, and the transactions contemplated hereby,
including all such costs, expenses and fees incurred in connection with the
negotiation, preparation, execution, amendment, administration, performance,
collection and enforcement of the Obligations and all such documents and
agreements and the creation, perfection, protection, satisfaction, foreclosure
or enforcement of the Security Interest.
Section
8.6 Indemnity.
In addition to the payment of expenses pursuant to Section 8.5, the Borrower
shall indemnify, defend and hold harmless the Lender, and any of its
participants, parent corporations, subsidiary corporations, affiliated
corporations, successor corporations, and all present and future officers,
directors, employees, attorneys and agents of the foregoing (the “Indemnitees”)
from and against any of the following (collectively, “Indemnified
Liabilities”):
(i) Any
and
all transfer taxes, documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery of the Loan
Documents or the making of the Advances;
50
(ii) Any
claims, loss or damage to which any Indemnitee may be subjected if any
representation or warranty contained in Section 5.14 proves to be incorrect
in
any respect or as a result of any violation of the covenant contained in Section
6.12(b) ; and
(iii) Any
and
all other liabilities, losses, damages, penalties, judgments, suits, claims,
costs and expenses of any kind or nature whatsoever (including the reasonable
fees and disbursements of counsel) in connection with the foregoing and any
other investigative, administrative or judicial proceedings, whether or not
such
Indemnitee shall be designated a party thereto, which may be imposed on,
incurred by or asserted against any such Indemnitee, in any manner related
to or
arising out of or in connection with the making of the Advances and the Loan
Documents or the use or intended use of the proceeds of the Advances.
If
any
investigative, judicial or administrative proceeding arising from any of the
foregoing is brought against any Indemnitee, upon such Indemnitee’s request, the
Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrower’s sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because
it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower’s obligation
under this Section 8.6 shall survive the termination of this Agreement and
the
discharge of the Borrower’s other obligations hereunder. Notwithstanding any of
the foregoing, Borrower shall not have any obligation for Indemnified
Liabilities arising from the gross negligence or willful misconduct of any
Indemnitees determined by a final order of a court of competent jurisdiction.
Section
8.7 Participants.
The Lender and its participants, if any, are not partners or joint venturers,
and the Lender shall not have any liability or responsibility for any
obligation, act or omission of any of its participants. All rights and powers
specifically conferred upon the Lender may be transferred or delegated to any
of
the Lender’s participants, successors or assigns.
Section
8.8 Execution
in Counterparts; Telefacsimile Execution.
This Agreement and other Loan Documents may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed
to be
an original and all of which counterparts, taken together, shall constitute
but
one and the same instrument. Delivery of an executed counterpart of this
Agreement by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver
an
original executed counterpart of this Agreement but the failure to deliver
an
original executed counterpart shall not affect the validity, enforceability,
and
binding effect of this Agreement.
Section
8.9 Retention
of Borrower’s Records.
The Lender shall have no obligation to maintain any electronic records or any
documents, schedules, invoices, agings, or other papers delivered to the Lender
by the Borrower or in connection with the Loan Documents for more than 30 days
after receipt by the Lender.
If there
is a special need to retain specific records, the Borrower must inform the
Lender of its need to retain those records with particularity, which must be
delivered in accordance with the notice provisions of Section 8.3 within 30
days
of the Lender taking control of same.
51
Section
8.10 Binding
Effect; Assignment; Complete Agreement; Sharing Information.
The Loan Documents shall be binding upon and inure to the benefit of the
Borrower and the Lender and their respective successors and assigns, except
that
the Borrower shall not have the right to assign its rights thereunder or any
interest therein without the Lender’s prior written consent. To the extent
permitted by law, the Borrower waives and will not assert against any assignee
any claims, defenses or set-offs which the Borrower could assert against the
Lender. This Agreement shall also bind all Persons who become a party to this
Agreement as a borrower. This Agreement, together with the Loan Documents,
comprises the complete and integrated agreement of the parties on the subject
matter hereof and supersedes all prior agreements, written or oral, on the
subject matter hereof. To the extent that any provision of this Agreement
contradicts other provisions of the Loan Documents, this Agreement shall
control. Without limiting the Lender’s right to share information regarding the
Borrower and its Affiliates with the Lender’s participants, accountants, lawyers
and other advisors, the Lender and Xxxxx Fargo Bank may share with each other
any and all information they may have in their possession regarding the Borrower
and its Affiliates, and the Borrower waives any right of confidentiality it
may
have with respect to such sharing of information.
Section
8.11 Severability
of Provisions.
Any provision of this Agreement which is prohibited or unenforceable shall
be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof.
Section
8.12 Headings.
Article, Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
Section
8.13 Governing
Law; Jurisdiction, Venue; Waiver of Jury Trial.
The Loan Documents shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Wisconsin. The
parties hereto hereby (i) consent to the personal jurisdiction of the state
and federal courts located in the State of Wisconsin in connection with any
controversy related to this Agreement; (ii) waive any argument that venue
in any such forum is not convenient; (iii) agree that any litigation
initiated by the Lender or the Borrower in connection with this Agreement or
the
other Loan Documents may be venued in either the state or federal courts located
in the County of Milwaukee, Wisconsin; and (iv) agree that a final judgment
in any such suit, action or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on the judgment or in any other manner provided
by law.
Section
8.14
Intentionally Deleted.
52
THE
BORROWER AND THE LENDER WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION AT LAW
OR
IN EQUITY OR IN ANY OTHER PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT
OR
ANY OTHER LOAN DOCUMENT. Borrower’s Initials /s/
MAM ; Lender’s
Initials
/s/ MLD ;
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by
their respective officers thereunto duly authorized as of the date first above
written.
xXxx.xxx
Holdings, Inc.
0000
Xxxx Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxxxxx 00000
Telecopier:
000-000-0000
Attention:
X. Xxxxxxxx
e-mail:
xxxxx@xxxx.xxx
|
xXXX.XXX
HOLDINGS, INC.
By:
/s/
Xxxxxx X. Xxxxxxxx, Xx.
Xxxxxx
Xxxxxxxx, Xx.
Its
Vice President Finance
|
UBid,
Inc.
0000
Xxxx Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxxxxx 00000
Telecopier:
000-000-0000
Attention:
X. Xxxxxxxx
e-mail:
xxxxx@xxxx.xxx
|
UBID,
INC.
By: /s/ Xxxxxx X. Xxxxxxxx, Xx. Xxxxxx Xxxxxxxx, Xx. Its
Vice President Finance
|
Xxxxx
Fargo Bank, National Association,
acting
through its Xxxxx Fargo Business Credit
operating
division
000
Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx,
Xxxxxxxxx 00000
Telecopier:
Attention:
Xxxxxxx Xxxxxxxxxx
e-mail:
Xxxxxxx.Xxxxxxxxxx@xxxxxxxxxx.xxx
|
XXXXX
FARGO BANK, NATIONAL ASSOCIATION,
acting
through its Xxxxx Fargo Business Credit
operating
division
By:
/s/
Xxxxxxx X. Xxxxxxxxxx
Xxxxxxx
Xxxxxxxxxx
Its
Vice President
|
53
REVOLVING
NOTE
$25,000,000.00
|
May
9, 2006
|
For
value
received, the undersigned, xXXX.XXX HOLDINGS, INC., a Delaware corporation
(“xXxx.Xxx) and UBID, INC., a Delaware corporation (“UBid”), each a Borrower are
hereinafter collectively referred to as (the “Borrower”), jointly and severally
hereby promises to pay on the Termination Date under the Credit Agreement
(defined below), to the order of XXXXX FARGO BANK, NATIONAL ASSOCIATION (the
“Lender”), acting through its Xxxxx Fargo Business Credit operating division, at
its office in Milwaukee, Wisconsin, or at any other place designated at any
time
by the holder hereof, in lawful money of the United States of America and
in
immediately available funds, the principal sum of Twenty-Five Million Dollars
($25,000,000.00) or the aggregate unpaid principal amount of all Revolving
Advances made by the Lender to the Borrower under the Credit Agreement (defined
below) together with interest on the principal amount hereunder remaining
unpaid
from time to time, computed on the basis of the actual number of days elapsed
and a 360-day year, from the date hereof until this Note is fully paid at
the
rate from time to time in effect under the Credit and Security Agreement
dated
the same date as this Note (the “Credit Agreement”) by and between the Lender
and the Borrower. The principal hereof and interest accruing thereon shall
be
due and payable as provided in the Credit Agreement. This Note may be prepaid
only in accordance with the Credit Agreement.
This
Note
is issued pursuant, and is subject, to the Credit Agreement, which provides,
among other things, for acceleration hereof. This Note is the Revolving Note
referred to in the Credit Agreement. This Note is secured, among other things,
pursuant to the Credit Agreement and the Security Documents as therein defined,
and may now or hereafter be secured by one or more other security agreements,
mortgages, deeds of trust, assignments or other instruments or
agreements.
The
Borrower shall pay all costs of collection, including reasonable attorneys’ fees
and legal expenses if this Note is not paid when due, whether or not legal
proceedings are commenced.
Presentment
or other demand for payment, notice of dishonor and protest are expressly
waived.
XXXX.XXX
HOLDINGS, INC.
By:
/s/
Xxxxxx X. Xxxxxxxxx, Xx.
Name:
Xxxxxx X. Xxxxxxxxx, Xx.
Its:
President and Chief Executive Officer
UBID,
INC.
By:
/s/ Xxxxxxx X. Xxxxxxx
Name:
Xxxxxxx X. Xxxxxxx
Its:
Executive Vice President --
Merchandise
|