EXECUTION COPY
LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 24, 2001
AMONG
LASALLE BUSINESS CREDIT, INC.
AS LENDER,
AND
PROTECTIVE APPAREL CORPORATION OF AMERICA
POINT BLANK BODY ARMOR, INC.
AND NDL PRODUCTS, INC.,
AS BORROWERS
AND
DHB INDUSTRIES, INC., AS GUARANTOR
TABLE OF CONTENTS
PAGE
1. DEFINITIONS..............................................................................................1
2. LOANS...................................................................................................11
(a) Revolving Loans................................................................................11
(b) Term Loan......................................................................................14
(c) Capital Expenditure Loans......................................................................14
(d) Repayments.....................................................................................14
(e) Notes..........................................................................................16
3. LETTERS OF CREDIT.......................................................................................16
(a) General Terms..................................................................................16
(b) Requests for Letters of Credit.................................................................17
(c) Obligations Absolute...........................................................................17
(d) Expiration Dates of Letters of Credit..........................................................17
4. INTEREST, FEES AND CHARGES..............................................................................18
(a) Interest Rate..................................................................................18
(b) Other Libor Provisions.........................................................................19
(c) Fees And Charges...............................................................................21
(d) Maximum Interest...............................................................................22
5. COLLATERAL..............................................................................................22
(a) Grant of Security Interest to Lender...........................................................22
(b) Other Security.................................................................................22
(c) Possessory Collateral..........................................................................23
(d) Electronic Chattel Paper.......................................................................23
6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.................................23
7. POSSESSION OF COLLATERAL AND RELATED MATTERS............................................................24
8. COLLECTIONS.............................................................................................24
9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES............................................27
(a) Daily Reports..................................................................................27
(b) Monthly Reports................................................................................27
(c) Financial Statements...........................................................................28
(d) Annual Projections.............................................................................28
(e) Explanation of Budgets and Projections.........................................................28
(f) Public Reporting...............................................................................28
(g) Other Information..............................................................................29
10. TERMINATION; AUTOMATIC RENEWAL..........................................................................29
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11. REPRESENTATIONS AND WARRANTIES..........................................................................29
(a) Financial Statements and Other Information.....................................................30
(b) Locations......................................................................................30
(c) Loans by the Borrowers.........................................................................30
(d) Accounts and Inventory.........................................................................30
(e) Liens..........................................................................................31
(f) Organization, Authority and No Conflict........................................................31
(g) Litigation.....................................................................................31
(h) Compliance with Laws and Maintenance of Permits................................................31
(i) Affiliate Transactions.........................................................................32
(j) Names and Tradenames...........................................................................32
(k) Equipment......................................................................................32
(l) Enforceability.................................................................................32
(m) Solvency.......................................................................................32
(n) Indebtedness...................................................................................33
(o) Margin Security and Use of Proceeds............................................................33
(p) Parent, Subsidiaries and Affiliates............................................................33
(q) No Defaults....................................................................................33
(r) Employee Matters...............................................................................33
(s) Intellectual Property..........................................................................33
(t) Environmental Matters..........................................................................33
(u) ERISA Matters..................................................................................34
(v) Shareholder Debt...............................................................................34
12. AFFIRMATIVE COVENANTS...................................................................................34
(a) Maintenance of Records.........................................................................35
(b) Notices........................................................................................35
(c) Compliance with Laws and Maintenance of Permits................................................36
(d) Inspection and Audits..........................................................................36
(e) Insurance......................................................................................37
(f) Collateral.....................................................................................38
(g) Use of Proceeds................................................................................38
(h) Taxes..........................................................................................39
(i) Intellectual Property..........................................................................39
13. NEGATIVE COVENANTS......................................................................................40
(a) Guaranties.....................................................................................40
(b) Indebtedness...................................................................................40
(c) Liens..........................................................................................40
(d) Mergers, Sales, Acquisitions, Subsidiaries and Other Transactions Outside the
Ordinary Course of Business....................................................................40
(e) Dividends and Distributions....................................................................41
(f) Investments; Loans.............................................................................42
(g) Fundamental Changes, Line of Business..........................................................42
(h) Equipment......................................................................................42
(i) Use of Proceeds................................................................................42
(j) Affiliate Transactions.........................................................................43
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(k) Settling of Accounts...........................................................................43
(l) Management Fees; Expenses......................................................................43
(m) Shareholder Debt...............................................................................44
(n) Availability...................................................................................44
(o) Parent Subordination...........................................................................44
(p) Transfer of Assets.............................................................................44
(q) Transfer of Shareholder Debt...................................................................45
14. FINANCIAL COVENANTS.....................................................................................45
(a) Tangible Net Worth.............................................................................45
(b) Fixed Charge Coverage..........................................................................45
(c) Consolidated EBITDA............................................................................45
(d) Capital Expenditure Limitations................................................................45
15. DEFAULT.................................................................................................45
(a) Payment........................................................................................46
(b) Breach of this Agreement and the Other Agreements..............................................46
(c) Breaches of Other Obligations..................................................................46
(d) Breach of Representations and Warranties.......................................................46
(e) Loss of Collateral.............................................................................46
(f) Levy, Seizure or Attachment....................................................................34
(g) Bankruptcy or Similar Proceedings..............................................................47
(h) Appointment of Receiver........................................................................47
(i) Judgment.......................................................................................47
(j) Dissolution of Obligor.........................................................................47
(k) Default or Revocation of Guaranty..............................................................47
(l) Criminal Proceedings...........................................................................48
(m) Change of Control..............................................................................48
(n) Change of Management...........................................................................48
(o) Material Adverse Change........................................................................48
16. REMEDIES UPON AN EVENT OF DEFAULT.......................................................................48
17. CONDITIONS PRECEDENT....................................................................................49
18. INDEMNIFICATION.........................................................................................52
19. NOTICE..................................................................................................52
20. CHOICE OF GOVERNING LAW: CONSTRUCTION: FORUM SELECTION..................................................53
21. MODIFICATION AND BENEFIT OF AGREEMENT...................................................................53
22. HEADINGS OF SUBDIVISIONS................................................................................54
23. POWER OF ATTORNEY.......................................................................................54
24. CONFIDENTIALITY.........................................................................................54
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25. COUNTERPARTS............................................................................................54
26. ELECTRONIC SUBMISSIONS..................................................................................54
27. WAIVER OF JURY TRIAL: OTHER WAIVERS.....................................................................55
28. JOINT AND SEVERAL OBLIGATIONS; GUARANTEES...............................................................56
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EXHIBITS
Exhibit A Business and Collateral Locations
Exhibit B Compliance Certificate
Exhibit C Commercial Tort Claims
Exhibit D Form of Capital Expenditure Note
Exhibit E Financial Statements
SCHEDULES
Schedule A Account Debtors
Schedule 11(g) Litigation
Schedule 11(i) Affiliate Transactions
Schedule 11(j) Names and Trade Names
Schedule 11(n) Indebtedness
Schedule 11(p) Parents, Subsidiaries and Affiliates
Schedule 13(a) Guaranties
Schedule 17(a) Closing Document List
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (as amended, modified or
supplemented from time to time, this "AGREEMENT") made this 24th day of
September, 2001 by and among LASALLE BUSINESS CREDIT, INC., a Delaware
corporation ("LENDER"), located at 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx
00000-0000, and PROTECTIVE APPAREL CORPORATION OF AMERICA, a New York
corporation ("PACA"), POINT BLANK BODY ARMOR, INC., a Delaware corporation
("POINT BLANK") and NDL PRODUCTS, INC., a Florida corporation ("NDL", and
together with PACA and Point Blank, collectively, the "BORROWERS" and each,
individually, a "BORROWER"), and DHB INDUSTRIES, INC., a Delaware corporation
(f/k/a DHB Capital Group, Inc., the "PARENT" or a "GUARANTOR").
WITNESSETH:
WHEREAS, the Borrowers may, from time to time, request Loans
and Letters of Credit from Lender, and the parties wish to provide for the terms
and conditions upon which such Loans or other financial accommodations, if made
by Lender, shall be made;
NOW, THEREFORE, in consideration of any Loan (including any
Loan by renewal or extension) or Letter of Credit hereafter made to the
Borrowers by Lender, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by the Borrowers, the parties
agree as follows:
1. DEFINITIONS.
"ACCOUNT", "ACCOUNT DEBTOR", "CHATTEL PAPER", "COMMERCIAL TORT
CLAIMS", "DEPOSIT ACCOUNTS", "DOCUMENTS", "ELECTRONIC CHATTEL PAPER",
"EQUIPMENT", "FIXTURES", "GENERAL INTANGIBLES", "GOODS", "INSTRUMENTS",
"INVENTORY", "INVESTMENT PROPERTY", "LETTER-OF-CREDIT RIGHT", "PROCEEDS" AND
"TANGIBLE CHATTEL PAPER" shall have the respective meanings assigned to such
terms in the New York Uniform Commercial Code, as the same may be in effect from
time to time.
"ADJUSTED AVAILABILITY" shall mean, as of any date of
determination, an amount, determined by the Lender in a commercially reasonable
manner, equal to the excess of (a) the Revolving Loan Limit OVER (b) the sum of
(i) the principal amount of all outstanding Revolving Loans and all Letter of
Credit Obligations PLUS (ii) the aggregate amount of all outstanding and unpaid
trade payables and other obligations of the Borrowers which are more than sixty
(60) days past due as of such date.
"AFFILIATE" shall mean any Person (i) which directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, Parent or any Borrower, (ii) which beneficially owns
or holds five percent (5%) or more of the voting control or outstanding equity
interests of Parent or any Borrower, or (iii) five percent (5%) or more of the
voting control or outstanding equity interests of which is beneficially owned or
held by Parent or any Borrower.
"ANNUAL TERM LOAN PREPAYMENT" shall have the meaning specified
in SUBSECTION 2(D)(IV)(B) hereof.
"AVAILABILITY" shall mean, as of any date of determination, an
amount, determined by the Lender in a commercially reasonable manner, equal to
the excess of (a) the Revolving Loan Limit OVER (b) the sum of the principal
amount of all outstanding Revolving Loans and all Letter of Credit Obligations.
"BLOCKED ACCOUNT" shall have the meaning specified in
SUBSECTION 8(A) hereof.
"BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or (i) with respect to all matters, determinations, fundings and payments
in connection with LIBOR Rate Loans, any day on which banks in London, England
or Chicago, Illinois are required or permitted to close, and (ii) with respect
to all other matters, any day that banks in Chicago, Illinois are required or
permitted to close.
"CAPITAL EXPENDITURE LOAN LIMIT" shall have the meaning
specified in SUBSECTION 2(C) hereof.
"CAPITAL EXPENDITURE LOANS" shall mean the Loans made pursuant
to SUBSECTION 2(C) hereof.
"CAPITAL EXPENDITURE NOTE" shall have the meaning specified in
SUBSECTION 17(C) hereof.
"CAPITAL EXPENDITURES" shall mean, with respect to any period,
the aggregate of all expenditures (whether paid in cash or accrued as
liabilities and including expenditures for capitalized lease obligations) made
by each of the Borrowers during such period that are required by generally
accepted accounting principles, consistently applied, to be included in or
reflected by the property, plant and equipment or similar fixed asset accounts
(or intangible accounts subject to amortization) on the consolidated balance
sheet of Parent and its Subsidiaries.
"CASH PROCEEDS" shall have the meaning specified in SUBSECTION
2(D)(IV)(A) hereof.
"CLOSING DOCUMENT CHECKLIST" shall have the meaning specified
in SUBSECTION 17(A)(I) hereof.
"COLLATERAL" shall mean all of the property of the Parent, the
Borrowers and the DHB Subsidiaries described in SECTION 5 hereof, together with
all other real or personal property of any Obligor or any other Person now or
hereafter pledged or assigned to Lender to secure, either directly or
indirectly, repayment of any of the Liabilities.
"COLLATERAL MANAGEMENT FEE" shall have the meaning specified
in SUBSECTION 12(D) hereof.
"DEFAULT" shall have the meaning specified in SUBSECTION 2(A)
hereof.
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"DFAS-CO" shall mean Defense Financing & Account Service -
Columbus, Ohio.
"DFAS ACCOUNT SUBLIMIT" shall have the meaning specified in
the definition of "ELIGIBLE ACCOUNT".
"DHB SUBSIDIARY " shall mean each of DHB Armor Group, Inc., a
Delaware corporation, DHB Sports Group, Inc., a Delaware corporation, Lanxide
Armor Products Inc., a Delaware corporation, and Orthopedic Products, Inc., a
Florida corporation.
"DISTRIBUTION" shall have the meaning specified in SUBSECTION
13(O) hereof.
"EBITDA" shall mean, with respect to any period, the net
income of Parent and its consolidated Subsidiaries, after taxes, for such period
(excluding any after-tax gains or losses on the sale of assets outside of the
ordinary course of business and excluding other after-tax extraordinary gains or
losses) PLUS interest expense, income tax expense, depreciation and amortization
for such period, MINUS or PLUS gains or losses attributable to any fixed asset
sales made during such period (to the extent not already excluded in this
definition), PLUS or MINUS any other non-cash charges or gains which have been
subtracted or added in calculating net income after taxes for such period, all
on a consolidated basis.
"ELIGIBLE ACCOUNT" shall mean an Account owing to a Borrower
which is acceptable to Lender in its sole discretion, exercised in a
commercially reasonable manner, for lending purposes. Without limiting Lender's
discretion, Lender shall consider an Account (or portion thereof) to be an
Eligible Account if it meets, and so long as it continues to meet, the following
requirements:
(i) it is genuine and in all respects what it purports to be;
(ii) it is owned by a Borrower, such Borrower has the right to
subject it to a security interest in favor of Lender or assign it to Lender and
it is subject to a first priority perfected security interest in favor of Lender
and to no other claim, lien, security interest or encumbrance whatsoever, other
than Permitted Liens;
(iii) it arises from (A) the performance of services by a
Borrower in the ordinary course of such Borrower's business, and such services
have been fully performed and acknowledged and accepted by the Account Debtor
thereunder; or (B) the sale or lease of Goods by a Borrower in the ordinary
course of such Borrower's business, and (w) such Goods have been completed in
accordance with the Account Debtor's specifications (if any) and delivered to
the Account Debtor, (x) or, in the case of Accounts where a department or agency
of the U.S. Government is the Account Debtor, such Goods have been segregated in
an area of a warehouse where such Borrower to which such Accounts are owed
stores Inventory, clearly designated as containing Goods to be shipped to U.S.
military bases and which Goods have been accepted and approved by such
department or agency on a completed and signed form DD-250, (y) and shall not
include any portion of Goods which such Account Debtor has refused to accept,
returned or offered to return, which are the subject of such Account, and (z)
such Borrower has possession of, or such Borrower has delivered to Lender (at
Lender's request), shipping and delivery receipts evidencing delivery of such
Goods;
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(iv) it is evidenced by an invoice rendered to the Account
Debtor thereunder and is not outstanding beyond the earlier of (i) sixty (60)
days past the due date and (ii) (x) in the case of all Account Debtors other
than DFAS-CO, ninety (90) days past the invoice date and (y) in the case of
DFAS-CO, one hundred and fifty days past the invoice date, PROVIDED that not
more than $3,000,000 in the aggregate outstanding at any one time of Accounts
described in this clause (y) (the "DFAS ACCOUNT SUBLIMIT") may be deemed
"ELIGIBLE ACCOUNTS", PROVIDED FURTHER, in the event that additional contracts
are awarded by DFAS-CO to a Borrower, Lender may, in its sole discretion,
exercised in a commercially reasonable manner, after discussion with such
Borrower, increase the DFAS Account Sublimit in incremental amounts, but in no
event to an amount greater than $5,000,000, for the purpose of financing all or
a portion of the increased Accounts to be generated under such new contracts, so
long as no Event of Default shall have occurred and be continuing, PROVIDED,
FURTHER that if more than fifty percent (50%) of the aggregate dollar amount of
invoices owing by a particular Account Debtor are ineligible hereunder, then all
Accounts owing by that Account Debtor shall be deemed ineligible;
(v) it is a valid, legally enforceable and unconditional
obligation of the Account Debtor thereunder; PROVIDED that any portion of such
Account, and only such portion, which is subject to setoff, counterclaim,
credit, allowance or adjustment by such Account Debtor, or to any claim by such
Account Debtor denying liability thereunder in whole or in part shall not be
deemed 'Eligible' hereunder;
(vi) it does not arise out of a contract or order which fails
in any material respect to comply with the requirements of applicable law;
(vii) the Account Debtor thereunder is not a director,
officer, employee or agent of Parent or a Borrower, a Subsidiary of a Borrower
or Parent or an Affiliate of Parent or a Borrower;
(viii) (a) on and after the date ninety-one (91) days from the
date of this Agreement (the "COMPLIANCE Date"), it is not an Account
with respect to which the Account Debtor is the United States of
America, or any department, agency or instrumentality thereof (each, a
"FEDERAL ENTITY"), unless the Borrower to which the Account is payable
has duly assigned its right to payment of such Account to the Lender
pursuant to, and in full compliance with, the Federal Assignment of
Claims Act of 1940, as amended; PROVIDED, HOWEVER, that, on and after
the Compliance Date, an Account that is an Eligible Account in all
other respects shall not be deemed to be ineligible under this clause
(viii)(a) solely because it has not been duly assigned in compliance
with the Federal Assignment of Claims Act of 1940, so long as the face
amount of each such Account does not exceed $10,000; PROVIDED FURTHER,
that, on and after the Compliance Date, notwithstanding the terms of
the preceding proviso, that portion of the aggregate amount of all such
Accounts outstanding at any one time which exceeds $60,000 shall be
ineligible hereunder.
(b) it is not an Account with respect to which the
Account Debtor is any state or local government, or any department,
agency or instrumentality thereof, unless the Borrower to which the
Account is payable has assigned its right to payment of such Account to
the Lender pursuant to, and in full compliance with, any local
applicable
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law comparable to the Federal Assignment of Claims Act of 1940;
PROVIDED, HOWEVER, that an Account that is an Eligible Account in all
other respects shall not be deemed to be ineligible under this clause
(viii)(b) solely because it has not been duly assigned in compliance
with such applicable local law, so long as (I) the face amount of such
Account does not exceed $15,000; PROVIDED FURTHER, that,
notwithstanding the terms of the preceding proviso, that portion of the
aggregate amount of all such Accounts outstanding at any one time which
exceeds $50,000 shall be ineligible hereunder.
(ix) it is not an Account with respect to which the Account
Debtor is located in a state which requires the Borrower to which the Account is
payable, as a precondition to commencing or maintaining an action in the courts
of that state, either to (A) receive a certificate of authority to do business
and be in good standing in such state; or (B) file a notice of business
activities report or similar report with such state's taxing authority, unless
(x) such Borrower has taken the actions described in clauses (A) or (B); (y) the
failure to take one of the actions described in either clause (A) or (B) may be
cured retroactively by such Borrower at its election; or (z) such Borrower has
proven, to Lender's satisfaction, that it is exempt from any such requirements
under any such state's laws;
(x) the Account Debtor is located within the United States of
America;
(xi) it is not an Account with respect to which the Account
Debtor's obligation to pay is subject to any repurchase obligation or return
right, as with sales made on a xxxx-and-hold, guaranteed sale, sale on approval,
sale or return or consignment basis, provided, HOWEVER, that Accounts in an
aggregate amount of up to $1,000,000 outstanding at any one time arising from
sales made to DFAS-CO on a xxxx-and-hold basis shall not be ineligible under
this clause (xi) so long as such Accounts otherwise constitute "ELIGIBLE
ACCOUNTS";
(xii) it is not an Account (A) with respect to which any
representation or warranty contained in this Agreement is untrue; or (B) which
violates any of the covenants of any Borrower contained in this Agreement;
(xiii) it is not an Account which, when added to a particular
Account Debtor's other indebtedness to any Borrower, exceeds (A) 10% of all
Accounts of all Borrowers, except for those Account Debtors listed on SCHEDULE A
hereto, or hereafter approved by Lender in its sole discretion, exercised in a
commercially reasonable manner, or (B) a credit limit determined by Lender in
its sole discretion, exercised in a commercially reasonable manner, for that
Account Debtor (except that Accounts excluded from Eligible Accounts solely by
reason of this clause (xiii) shall be Eligible Accounts to the extent of such
credit limit);
(xiv) it does not arise out of progress xxxxxxxx or prior to
completion of an order, or is not subject to any adverse security deposit or
other similar advance made by or for the benefit of the applicable Account
Debtor;
(xv) it is not an Account which constitutes advertising,
finance charges, service charges or excise taxes; and
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(xvi) it is not an Account with respect to which the prospect
of payment or performance by the Account Debtor is or will be impaired, as
determined by Lender in its sole discretion, exercised in a commercially
reasonable manner;
"ELIGIBLE INVENTORY" shall mean Inventory of each Borrower
which is acceptable to Lender in its sole discretion, exercised in commercially
reasonable manner, for lending purposes. Without limiting Lender's discretion,
Lender shall consider Inventory to be Eligible Inventory if it meets, and so
long as it continues to meet, the following requirements:
(i) it is owned by a Borrower, such Borrower has the right to
subject it to a security interest in favor of Lender and it is subject to a
first priority perfected security interest in favor of Lender and to no other
claim, lien, security interest or encumbrance whatsoever, other than Permitted
Liens;
(ii) it is located on one of the premises listed on EXHIBIT A
(or other locations of which Lender has been advised in writing pursuant to
SUBSECTION 12(B)(I) hereof) and is not in transit except between such locations;
(iii) if held for sale or lease or furnishing under contracts
of service, it is (except as Lender may otherwise consent in writing) new and
unused and free from defects which would, in Lender's sole determination, made
in a commercially reasonable manner, affect its market value;
(iv) it is not stored with a bailee, consignee, warehouseman,
processor or similar party unless Lender has given its prior written approval
and the relevant Borrower has caused any such bailee, consignee, warehouseman,
processor or similar party to issue and deliver to Lender, in form and substance
acceptable to Lender, such Uniform Commercial Code financing statements,
warehouse receipts, waivers and other documents as Lender shall require, or is
on consignment to a Borrower from any Person;
(v) Lender has determined, in accordance with Lender's
customary business practices, that it is not unacceptable due to age, type,
category or quantity;
(vi) it does not consist of supplies, packaging, parts or
sample Inventory;
(vii) no Borrower has returned, has attempted to return, is in
the process of returning or intends to return such Inventory to the vendor
thereof;
(viii) it is not damaged, obsolete, slow moving or not
currently usable or saleable in the normal course of the applicable Borrower's
operations; and
(ix) it is not Inventory (A) with respect to which any of the
representations and warranties contained in this Agreement are untrue; or (B)
which violates any of the covenants of any Borrower contained in this Agreement.
"ENVIRONMENTAL LAWS" shall mean all federal, state, district,
local and foreign laws, rules, regulations, ordinances, and consent decrees
relating to health, safety, hazardous substances, pollution and environmental
matters, as now or at any time hereafter in effect,
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applicable to any Borrower's business or facilities owned or operated by any
Borrower, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contamination, chemicals, or hazardous, toxic
or dangerous substances, materials or wastes into the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) or otherwise relating to the generation, manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, modified or restated from time to time.
"EVENT OF DEFAULT" shall have the meaning specified in SECTION
15 hereof.
"EXCESS CASH FLOW" shall have the meaning specified in
SUBSECTION 2(D)(IV)(B) hereof.
"FEDERAL CONTRACT" shall have the meaning specified in
SUBSECTION 12(C) hereof.
"FEDERAL ENTITY" shall have the meaning specified in clause
(viii)(a) of the definition of Eligible Account.
"FISCAL YEAR" shall mean each twelve (12) month accounting
period of Parent, which ends on December 31 of each year.
"FIXED CHARGES" shall mean for any period, without
duplication, all payments, whether or not scheduled, of principal during the
applicable period with respect to all indebtedness of Parent and its
Subsidiaries, on a consolidated basis, for borrowed money, plus all payments,
whether or not scheduled, of principal during the applicable period with respect
to all capitalized lease obligations of Parent and its Subsidiaries, on a
consolidated basis, plus all payments, whether or not scheduled, of interest
during the applicable period with respect to all indebtedness of Parent and its
Subsidiaries, on a consolidated basis, for borrowed money including capital
lease obligations, plus unfinanced Capital Expenditures of Parent and its
Subsidiaries, on a consolidated basis, during the applicable period, plus
payments during the applicable period in respect of income or franchise taxes of
Parent and its Subsidiaries, on a consolidated basis, plus the amount of all
dividends paid by Parent and its Subsidiaries, on a consolidated basis.
"GUARANTOR" or "GUARANTORS" shall have the respective meanings
specified in SUBSECTION 28(B) hereof.
"HAZARDOUS MATERIALS" shall mean any hazardous, toxic or
dangerous substance, materials and wastes, including, without limitation,
hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, biological substances, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants (including, without limitation, materials which include hazardous
constituents), sewage, sludge, industrial slag, solvents and/or any other
similar substances, materials, or wastes and including any other substances,
materials or wastes that are or become regulated under any Environmental Law
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(including, without limitation any that are or become classified as hazardous or
toxic under any Environmental Law).
"INDEMNIFIED PARTY" shall have the meaning specified in
SECTION 18 hereof.
"INTEREST PERIOD" shall have the meaning specified in
SUBSECTION 4(A)(II) hereof.
"LASALLE BANK" shall mean LaSalle Bank National Association,
Chicago, Illinois.
"LETTER OF CREDIT" shall mean any Letter of Credit issued on
behalf of a Borrower in accordance with this Agreement.
"LETTER OF CREDIT OBLIGATIONS" shall mean, as of any date of
determination, the sum of (i) the aggregate undrawn face amount of all Letters
of Credit and (ii) the aggregate unreimbursed amount of all drawn Letters of
Credit not already converted to Loans hereunder.
"LIABILITIES" shall mean any and all obligations, liabilities
and indebtedness of each Borrower to Lender or to any parent, affiliate or
subsidiary of Lender, of any and every kind and nature, arising under or
pursuant to this Agreement or the transactions contemplated hereunder, howsoever
created, arising or evidenced and howsoever owned, held or acquired, whether now
or hereafter existing, whether now due or to become due, whether primary,
secondary, direct, indirect, absolute, contingent or otherwise (including,
without limitation, obligations of performance), whether several, joint or joint
and several, and whether arising or existing under written or oral agreement or
by operation of law.
"LIBOR RATE" shall mean, with respect to any LIBOR Rate Loan
for any Interest Period, a rate per annum equal to (a) the offered rate for
deposits in United States dollars for a period equal to such Interest Period as
it appears on Telerate page 3750 as of 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period. "Telerate page 3750" means
the display designated as "Page 3750" on the Telerate Service (or such other
page as may replace page 3750 of that service or such other service) as may be
nominated by the British Bankers' Association as the vendor for the purpose of
displaying British Bankers' Association interest settlement rates for United
States dollar deposits, divided by (b) a number equal to 1.0 minus the maximum
reserve percentages (express as a decimal fraction) including, without
limitation, basic supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal Reserve System or other
governmental authority having jurisdiction with respect thereto, as now and from
time to time in effect, for Eurocurrency funding (currently referred to as
"EUROCURRENCY LIABILITIES" in Regulation D of such Board) which are required to
be maintained by Lender by the Board of Governors of the Federal Reserve System.
The LIBOR Rate shall be adjusted automatically on and as of the effective date
of any change in such reserve percentage.
"LIBOR RATE LOANS" shall mean the Loans bearing interest with
reference to the LIBOR Rate.
"LIFE INSURANCE ASSIGNMENT" shall mean an Assignment of Life
Insurance Policy to be executed by the owner and the beneficiary thereof, in
form and substance
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satisfactory to the Lender, collaterally assigning to the Lender the Life
Insurance Policy in order to secure payment of the Liabilities.
"LIFE INSURANCE POLICY" shall have the meaning specified in
SUBSECTION 12(J) hereof.
"LOANS" shall mean all loans and advances made by Lender to or
on behalf of any Borrower hereunder.
"LOCK BOX" shall have the meaning specified in SUBSECTION 8(B)
hereof.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on the business, property, assets, prospects, operations or condition, financial
or otherwise, of a Person.
"MAXIMUM LOAN LIMIT" shall mean Eighteen Million Eight Hundred
Thousand and No/100 Dollars ($18,800,000).
"MAXIMUM REVOLVING LOAN LIMIT" shall have the meaning
specified in SUBSECTION 2(A) hereof.
"OBLIGOR" shall mean Parent and each Borrower and each other
Person who is or shall become primarily or secondarily liable for any of the
Liabilities.
"ORIGINAL TERM" shall have the meaning specified in SECTION 10
hereof.
"OTHER AGREEMENTS" shall mean all agreements, instruments and
documents, other than this Agreement, including, without limitation, guaranties,
mortgages, trust deeds, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements and all
other writings heretofore, now or from time to time hereafter executed by or on
behalf of Parent, one or more Borrowers, one or more DHB Subsidiaries or any
other Obligor and delivered to Lender or to any parent, affiliate or subsidiary
of Lender in connection with the Liabilities or the transactions contemplated
hereby, as each of the same may be amended, modified or supplemented from time
to time.
"PAYMENT CONDITIONS" shall have the meaning specified in
SUBSECTION 13(E) hereof.
"PBGC" shall have the meaning specified in SUBSECTION 12(B)(V)
hereof.
"PERMITTED ACQUISITION" and "PERMITTED ACQUISITIONS" shall
have the respective meanings specified in SUBSECTION 13(d) hereof.
"PERMITTED JV INVESTMENT" and "PERMITTED JV INVESTMENTS" shall
have the respective meanings specified in SUBSECTION 13(F) hereof.
"PERMITTED LIENS" shall mean (i) liens of lessors under lease
agreements and statutory liens of landlords, carriers, warehousemen, processors,
mechanics, materialmen or suppliers incurred in the ordinary course of business
and securing amounts not yet due or
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declared to be due by the claimant thereunder; (ii) liens or security interests
in favor of Lender; (iii) zoning restrictions and easements, licenses, covenants
and other restrictions affecting the use of real property that do not
individually or in the aggregate have a material adverse effect on any
Borrower's ability to use such real property for its intended purpose in
connection with such Borrower's business; (iv) liens in connection with purchase
money indebtedness and capitalized leases otherwise permitted pursuant to this
Agreement; PROVIDED, that such liens attach only to the assets the purchase of
which was financed by such purchase money indebtedness or which is the subject
of such capitalized leases; (v) liens securing the payment of Taxes not yet due
or the payment of which is being contested in good faith and by appropriate
proceedings for which adequate reserves have been established to the extent
required by GAAP, consistently applied; (vi) deposits under workers
compensation, unemployment insurance or social security laws, or to secure the
performance of bids, tenders, contracts or leases, or to secure statutory
obligations, surety or appeal bonds, or other bonds in the ordinary course of
business; (vii) liens securing judgments or awards which do not constitute
Events of Default hereunder and which are being appealed while a stay is in
effect; (viii) other liens that secure obligations, the aggregate principal
amount of which does not exceed, as of any date of determination, Five Thousand
and No/100 Dollars ($5,000); (ix) liens that secure the Shareholder Debt and (x)
liens to which Lender has given its prior written consent.
"PERMITTED TRANSFEREE" shall have the meaning given such term
in SUBSECTION 13(Q) hereof.
"PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, entity, party or foreign or
United States government (whether federal, state, county, city, municipal or
otherwise), including, without limitation, any instrumentality, division,
agency, body or department thereof.
"PLAN" shall have the meaning specified in SUBSECTION 12(B)(V)
hereof.
"PRIME RATE" shall mean LaSalle Bank's publicly announced
prime rate (which is not intended to be LaSalle Bank's lowest or most favorable
rate in effect at any time) in effect from time to time.
"PRIME RATE LOANS" shall means the Loans bearing interest with
reference to the Prime Rate.
"REGULATORY CHANGE" shall have the meaning specified in
SUBSECTION 4(B)(III) hereof.
"RENEWAL TERM" shall have the meaning specified in SECTION 10
hereof.
"REVOLVING LOAN LIMIT" shall have the meaning specified in
SUBSECTION 2(A) hereof.
"REVOLVING LOANS" shall have the meaning specified in
SUBSECTION 2(A) hereof.
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"SHAREHOLDER DEBT" shall mean the indebtedness owing by Parent
to Xxxxx X. Xxxxxx, an individual, the aggregate unpaid principal amount of
which indebtedness, immediately prior to the making of the initial Loans
hereunder, is approximately $16,000,000.
"SUBSIDIARY" shall mean, as to any Person, any corporation of
which more than fifty percent (50%) of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether at the time stock of any other class of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned by
such Person, or any partnership, joint venture or limited liability company of
which more than fifty percent (50%) of the outstanding equity interests are at
the time, directly or indirectly, owned by such Person or any partnership of
which such Person is a general partner.
"TANGIBLE NET WORTH" shall mean, with respect to a Person,
such Person's shareholders' equity (including retained earnings) LESS the book
value (to the extent included in such shareholders' equity) of all intangible
assets, including, without limitation, non-marketable securities, prepaid
expenses, deferred tax assets and, in the case of the Parent or any Borrower,
"other assets" as reflected on such Person's balance sheet, PLUS the amount of
any LIFO reserve and the amount of any debt subordinated to Lender, all as
determined under generally accepted accounting principles applied, in the case
of the Parent, on a basis consistent with the consolidated financial statements
of the Parent and its Subsidiaries dated as of December 31, 2000;
"TAX" shall mean any tax, levy, impost, duty, deduction,
withholding or charges of whatever nature required to be paid by Lender (i) in
relation to any LIBOR Rate Loans and the applicable LIBOR Rate, and/or (ii) to
be withheld or deducted from any payment otherwise required hereby to be made by
one or more Borrowers to Lender; PROVIDED, that the term "TAX" shall not include
any taxes imposed upon the net income of Lender.
"TERM LOAN" shall have the meaning specified in SUBSECTION
2(B) hereof.
"TREASURY RATE" shall have the meaning specified in SUBSECTION
4(A)(IV) hereof. "TRIGGERING EVENT" shall have the meaning
specified in SUBSECTION 8(B) hereof.
2. LOANS.
(A) REVOLVING LOANS.
Subject to the terms and conditions of this Agreement and the
Other Agreements, during the Original Term and any Renewal Term, commencing on
the date the conditions in SUBSECTION 17(A) are satisfied, Lender shall make
revolving loans and advances to one or more Borrowers (the "REVOLVING LOANS") in
an amount up to the sum of the following sublimits (the "REVOLVING LOAN LIMIT"):
(i) Up to eighty-five percent (85%) of the face amount (less
maximum discounts, credits and allowances which may be taken by or granted to
Account Debtors in
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connection therewith in the ordinary course of each Borrower's business) of such
Borrower's Eligible Accounts; PLUS
(ii) Up to the least of the following amounts: (I) Ten Million
and No/100 Dollars ($10,000,000), (II) an amount equal to the sum of (x) up to
fifty-five percent (55%) of the lower of cost or market value of Eligible
Inventory consisting of raw materials, PLUS (y) the lesser of Two Million Five
Hundred Thousand and No/100 Dollars ($2,500,000) and up to fifty-five percent
(55%) of the lower of cost or market value of Eligible Inventory consisting of
finished goods, PLUS (z) the lesser of Two Million Five Hundred Thousand and
No/100 Dollars ($2,500,000) and up to twenty-five percent (25%) of the lower of
cost or market value of Eligible Inventory consisting of work-in-process; and
(III) an amount equal to up to eighty percent (80%) of the orderly liquidation
value of Eligible Inventory consisting of raw materials, work-in-process and
finished goods, where cost shall be determined based on the first-in-first-out
method, and orderly liquidation value shall be determined based on the then most
recent appraisal of inventory of Borrowers performed by The Xxxxxxx Group (or
other appraisal company satisfactory to Lender); PROVIDED, that, after applying
the applicable advance rates set forth above in this clause (ii), in no event
shall Lender make any Revolving Loans against the value of Eligible Inventory
located at premises which are neither owned nor leased by the applicable
Borrower in an amount to exceed One Hundred Twenty-Five Thousand and No/100
Dollars ($125,000) at any one time; PLUS
(iii) Up to fifty percent (50%) of the face amount of
documentary Letters of Credit issued or guaranteed by Lender for the purpose of
purchasing Eligible Inventory; PROVIDED, that such Letters of Credit are in form
and substance satisfactory to Lender; MINUS
(iv) such reserves as Lender elects, in its sole discretion,
exercised in a commercially reasonable manner, to establish from time to time;
PROVIDED, that (x) the sum of the Letters of Credit to be issued under clause
(iii) above, together with the aggregate undrawn amount of all standby Letters
of Credit issued or guaranteed by Lender, with respect to all Borrowers, shall
at no time exceed Two Million and No/100 Dollars ($2,000,000) and (y) the
Revolving Loan Limit with respect to Revolving Loans made to all Borrowers, at
any one time outstanding, shall in no event exceed Fifteen Million Five Hundred
Thousand and No/100 Dollars ($15,500,000) (the "MAXIMUM REVOLVING LOAN LIMIT").
The aggregate unpaid principal balance of the Revolving Loans
made to all Borrowers, at any one time outstanding, shall not at any time exceed
the lesser of (i) the Revolving Loan Limit MINUS the Letter of Credit
Obligations of all Borrowers and (ii) the Maximum Revolving Loan Limit MINUS the
Letter of Credit Obligations of all Borrowers. If at any time the outstanding
aggregate principal amount of such Revolving Loans exceeds the Revolving Loan
Limit MINUS such Letter of Credit Obligations, or any portion of the outstanding
principal of such Revolving Loans and such Letter of Credit Obligations exceeds
any applicable sublimit within the Revolving Loan Limit, the Borrowers shall
immediately, on a joint and several basis, and without the necessity of demand
by Lender, pay to Lender such amount as may be necessary to eliminate such
excess, and Lender shall apply such payment to the outstanding principal amount
of the Revolving Loans which are Prime Rate Loans until paid in full, and
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thereafter, to any other outstanding Revolving Loans, in such order as Lender
shall determine in its sole discretion.
Each Borrower hereby authorizes Lender, in its sole
discretion, exercised in a commercially reasonable manner, to charge any of such
Borrower's accounts or advance Revolving Loans to make any payments of
principal, interest, fees, costs or expenses required to be made to Lender under
this Agreement or the Other Agreements.
A request for a Revolving Loan shall be made or shall be
deemed to be made, each in the following manner: Each Borrower shall give Lender
same day notice, no later than 11:30 A.M. (New York time) for such day, of its
request for a Revolving Loan as a Prime Rate Loan, and at least two (2) Business
Days prior notice of its request for a Revolving Loan as a LIBOR Rate Loan, in
which notice such Borrower shall specify the amount and type of the proposed
borrowing and the proposed borrowing date; PROVIDED, HOWEVER, that no such
request may be made at a time when there exists an Event of Default or an event
which, with the passage of time or giving of notice, will become an Event of
Default (a "DEFAULT"). In the event that a Borrower maintains a control
disbursement account at LaSalle Bank, each check presented for payment against
such control disbursement account and any other charge or request for payment
against such control disbursement account shall constitute a request for a
Revolving Loan as a Prime Rate Loan. As an accommodation to each Borrower,
Lender may permit telephone requests for Revolving Loans and electronic
transmittal of instructions, authorizations, agreements or reports to Lender by
such Borrower. Unless a Borrower specifically directs Lender in writing not to
accept or act upon telephonic or electronic communications from such Borrower,
Lender shall have no liability to such Borrower for any loss or damage suffered
by such Borrower as a result of Lender's honoring of any requests, execution of
any instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and purporting to have been
sent to Lender by such Borrower, and Lender shall have no duty to verify the
origin of any such communication or the authority of the Person sending it.
Each Borrower hereby irrevocably authorizes Lender to disburse
the proceeds of each Revolving Loan requested by such Borrower, or deemed to be
requested by such Borrower, as follows: the proceeds of each Revolving Loan
requested under SUBSECTION 2(a) hereof shall be disbursed by Lender in lawful
money of the United States of America in immediately available funds, in the
case of the initial borrowing by such Borrower, in accordance with the terms of
the written disbursement letter from such Borrower, and in the case of each
subsequent borrowing, by wire transfer or Automated Clearing House (ACH)
transfer to such bank account as may be agreed upon by such Borrower and Lender
from time to time, or elsewhere if pursuant to a written direction from such
Borrower.
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(B) TERM LOAN.
Subject to the terms and conditions of this Agreement and the
Other Agreements, on the date that the conditions in SUBSECTION 17(A) hereof are
satisfied, Lender shall make a term loan to Point Blank in the amount of One
Million Eight Hundred Thousand and No/100 Dollars ($1,800,000) (the "TERM
LOAN").
(C) CAPITAL EXPENDITURE LOANS.
Subject to the terms and conditions of this Agreement and the
Other Agreements, from time to time after the initial Loans are advanced
hereunder, Lender shall make advances (each such advance, a "CAPITAL EXPENDITURE
LOAN") to the Borrowers of up to seventy-five percent (75%) of the net invoice
cost (exclusive of sales taxes, delivery charges and other "soft" costs related
to such purchase) of Equipment to be purchased with the proceeds of such
advances, which Equipment is acceptable to Lender in its sole discretion,
exercised in a commercially reasonable manner, and upon which Lender shall have
a first priority perfected security interest; PROVIDED, that (i) the aggregate
principal amount of Capital Expenditure Loans advanced hereunder shall not
exceed One Million Five Hundred Thousand and No/100 Dollars ($1,500,000) (the
"CAPITAL EXPENDITURE LOAN LIMIT"), (ii) at least five (5) Business Days prior to
any such Capital Expenditure Loan advanced hereunder, the Borrower requesting
the Capital Expenditure Loan shall have furnished to Lender an invoice and
acceptance letter for the Equipment being purchased and shall have executed such
documents and taken such other actions as Lender shall require to assure that
Lender has a first priority perfected security interest in such Equipment, (iii)
each Capital Expenditure Loan advanced hereunder shall be in an amount of not
less than One Hundred Thousand and No/100 Dollars ($100,000), and (iv) such
Borrower shall have executed and delivered to Lender a promissory note in the
form OF EXHIBIT D annexed hereto, in a principal amount equal to the amount of
the Capital Expenditure Loan to be made to such Borrower.
(D) REPAYMENTS.
The obligation of the Borrowers to repay the Liabilities shall
be joint and several. The Liabilities shall be repaid as follows:
(i) REPAYMENT OF REVOLVING LOANS. The Revolving Loans and all
other Liabilities (other than the Term Loan and the Capital Expenditure Loans)
shall be repaid in full on the last day of the Original Term, or any Renewal
Term, if this Agreement is renewed pursuant to SECTION 10 hereof. Revolving
Loans borrowed as Prime Rate Loans may be repaid at any time in whole or in
part. Revolving Loans borrowed as LIBOR Rate Loans may be repaid at the end of
the relevant Interest Period.
(ii) REPAYMENT OF TERM LOAN. The Term Loan shall be repaid in
thirty-five (35) consecutive monthly installments of principal, on the first day
of each month, commencing November 1, 2001, of which the first twenty-four (24)
installments shall be in the amount of Sixty-Two Thousand Five Hundred and
No/100 Dollars ($62,500) each and the remaining eleven (11) installments shall
be in the amount of Eight Thousand Three Hundred Thirty-Three and No/100 Dollars
($8,333) each; PROVIDED, that any remaining outstanding principal balance of the
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Term Loan shall be repaid on the earlier to occur of last day of the Original
Term and the date of termination of this Agreement pursuant to SECTION 10
hereof. If any such payment due date is not a Business Day, then such payment
shall be made on the next succeeding Business Day, and such extension of time
shall be included in the computation of the amount of interest and fees due
hereunder.
(iii) REPAYMENT OF CAPITAL EXPENDITURE LOANS. Each Capital
Expenditure Loan shall be repaid in consecutive equal monthly installments, on
the first day of each month, commencing with the first day of the calendar month
immediately following the month in which such Capital Expenditure Loan was
advanced, based on an amortization schedule consisting of sixty (60) months;
PROVIDED, however, that any remaining outstanding principal balance of such
Capital Expenditure Loan shall be repaid on the earlier to occur of last day of
the Original Term and the date of termination of this Agreement pursuant to
SECTION 10; PROVIDED FURTHER, that if this Agreement is renewed pursuant to
SECTION 10 hereof, such Capital Expenditure Loan shall continue to be repaid in
consecutive equal monthly installments of principal in amounts based on the
amortization schedule then in effect, until the earlier of (i) repayment in full
thereof, (ii) the last day of such Renewal Term or (iii) the date of termination
of this Agreement pursuant to SECTION 10, on which date any remaining
outstanding principal of such Capital Expenditure Loan shall be repaid in full.
If any such payment due date is not a Business Day, then such payment may be
made on the next succeeding Business Day and such extension of time shall be
included in the computation of the amount of interest and fees due hereunder.
(iv) MANDATORY PREPAYMENTS OF THE TERM LOAN AND THE CAPITAL
EXPENDITURE LOANS.
(A) SALES OF ASSETS. Upon receipt of the proceeds of
the sale or other disposition of any Equipment, or if any of the Equipment is
damaged, destroyed or taken by condemnation in whole or in part, the proceeds
thereof (such proceeds, "CASH PROCEEDS") shall be paid by the Borrowers on a
joint and several basis to Lender as a mandatory prepayment of the Term Loan or
the Capital Expenditure Loan which was advanced against the value and for the
purchase of such asset, such payment to be applied against the remaining
installments of principal in the inverse order of their maturities until such
Term Loan or Capital Expenditure Loan is repaid in full, and then shall be
applied to any remaining installments of principal of any other outstanding
Capital Expenditure Loan, in the inverse order of their respective maturities
until repaid in full, and then, upon repayment in full of the Term Loan and all
outstanding Capital Expenditure Loans, shall be applied to the other
Liabilities, as determined by Lender, in its sole discretion, exercised in a
commercially reasonable manner; PROVIDED, that, with respect to no more than One
Hundred Thousand and No/100 Dollars ($100,000) of aggregate Cash Proceeds in any
one Fiscal Year, such Cash Proceeds shall not be required to be so applied on
such date so long as (i) no Default or Event or Default exists on such date,
(ii) the Borrowers deliver a certificate on or prior to such date to Lender
stating that such Cash Proceeds shall be used to purchase Equipment to be used
in the ordinary course of business in compliance with this Agreement within
ninety (90) days following the date such Cash Proceeds are received by a
Borrower and (iii) such Cash Proceeds shall be placed in a cash collateral
account with LaSalle Bank until such time as they are so used; PROVIDED,
FURTHER, that if all or any portion of such Cash Proceeds which are not being
applied to the repayment of either the Term Loan or Capital Expenditure Loans
pursuant to the previous proviso of this SUBSECTION 4(D)(IV)(A) are not used
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for the purchase of Equipment within such ninety (90) day period, such remaining
portion thereof shall be applied on the last day of such period as a mandatory
prepayment in accordance with this SUBSECTION 4(D)(IV)(A).
(B) EXCESS CASH FLOW. Ten (10) days after receipt of
Parent's Fiscal Year end audited financial statements for each Fiscal Year,
commencing with the Fiscal Year ending December 31, 2002, the Borrowers shall
make a mandatory prepayment of the Term Loan in an amount equal to twenty-five
percent (25%) of the Parent's Excess Cash Flow (as defined below) for the Fiscal
Year just ended, such prepayment to be applied against the remaining
installments of principal in the inverse order of their maturities, with such
mandatory prepayments to continue until the date on which the Term Loan shall be
repaid in full (each such prepayment, an "ANNUAL TERM LOAN PREPAYMENT"). For
purposes hereof, "EXCESS CASH FLOW" shall mean, for each Fiscal Year, EBITDA for
such period, minus taxes of Parent and its Subsidiaries paid during such period
and any distributions made to Parent's shareholders during such period in
respect of taxes for such period, minus non-PIK interest payable during such
period, minus actual principal payments made with respect to long-term debt
during such period, minus all unfinanced Capital Expenditures during such period
on a consolidated basis, without taking into consideration any insurance
proceeds received by Parent or any Borrower in payment of damages incurred by
Parent or such Borrower as result of Hurricane Xxxxx in October 1999.
(E) NOTES.
The Loans shall, in Lender's sole discretion, exercised in a
commercially reasonable manner, be evidenced by one or more promissory notes in
form and substance satisfactory to Lender, and the entries on such promissory
notes shall be deemed to be accurate, absent manifest error. However, if such
Loans are not so evidenced, such Loans may be evidenced solely by entries upon
the books and records maintained by Lender.
3. LETTERS OF CREDIT.
(A) GENERAL TERMS.
Subject to the terms and conditions of the Agreement and the
Other Agreements, during the Original Term or any Renewal Term, commencing on
the date the conditions in SUBSECTION 17(A) are satisfied, Lender may, in its
sole discretion, from time to time cause to be issued and co-sign for or
otherwise guarantee, upon the request of any Borrower, documentary and/or
standby Letters of Credit; PROVIDED, that the aggregate undrawn face amount of
all such Letters of Credit shall at no time exceed Two Million and No/100
Dollars ($2,000,000). Payments made by Lender to any Person on account of any
Letter of Credit shall constitute Revolving Loans hereunder, and each Borrower
agrees that each payment made by the issuer of a Letter of Credit in respect of
a Letter of Credit shall constitute a request by the Borrowers for a Revolving
Loan to reimburse such issuer. The Borrowers shall agree on a joint and several
basis to remit to Lender a Letter of Credit fee equal to two percent (2%) per
annum on the aggregate undrawn face amount of all Letters of Credit outstanding,
which fee shall be payable monthly in arrears on the last Business Day of each
month. The Borrowers shall also agree on a joint and several basis to pay on
demand the normal and customary administrative charges of the issuer of
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the Letter of Credit for issuance, amendment, negotiation, renewal or extension
of any Letter of Credit.
(B) REQUESTS FOR LETTERS OF CREDIT.
The request by any Borrower for the issuance of a Letter of
Credit shall be made in writing at least two (2) Business Days prior to the date
such Letter of Credit is to be issued. Each such request shall specify the date
such Letter of Credit is to be issued, the amount thereof, the name and address
of the beneficiary thereof and a description of the transaction to be supported
thereby. Any such notice shall be accompanied by the form of Letter of Credit
requested and any application or reimbursement agreement required by the issuer
of such Letter of Credit. If any term of such application or reimbursement
agreement is inconsistent with this Agreement, then the provisions of this
Agreement shall control to the extent of such inconsistency.
(C) OBLIGATIONS ABSOLUTE.
The Borrowers shall be obligated jointly and severally to
reimburse the issuer of any Letter of Credit, or Lender, if Lender has
reimbursed such issuer on any one or more of the Borrowers' behalf, for any
payments made in respect of any Letter of Credit, which obligation shall be
unconditional and irrevocable and shall be paid regardless of: (i) any lack of
validity or enforceability of any Letter of Credit, (ii) any amendment or waiver
of or consent or departure from all or any provisions of any Letter of Credit,
this Agreement or any Other Agreement, (iii) the existence of any claim, set
off, defense or other right which any Borrower or any other Person may have
against any beneficiary of any Letter of Credit, Lender or the issuer of the
Letter of Credit, (iv) any draft or other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid, or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect, (v) any
payment under any Letter of Credit against presentation of a draft or other
document that does not comply with the terms of such Letter of Credit, and (vi)
any other act or omission to act or delay of any kind of the issuer of such
Letter of Credit, the Lender or any other Person or any other event or
circumstance that might otherwise constitute a legal or equitable discharge of
any of the Borrowers' obligations hereunder, except in any case to the extent of
the issuer's or the Lender's gross negligence or willful misconduct. It is
understood and agreed by each Borrower that the issuer of any Letter of Credit
may accept documents that appear on their face to be in order without further
investigation or inquiry, regardless of any notice or information to the
contrary.
(D) EXPIRATION DATES OF LETTERS OF CREDIT.
The expiration date of each Letter of Credit shall be no later
than the earlier of (i) one (1) year from the date of issuance and (ii) the
thirtieth (30th) day prior to the end of the Original Term or any Renewal Term.
Notwithstanding the foregoing, a Letter of Credit may provide for automatic
extensions of its expiration date for one or more one (1) year periods, so long
as the issuer thereof has the right to terminate the Letter of Credit at the end
of each one (1) year period and no extension period extends past the thirtieth
(30th) day prior to the end of the Original Term or any Renewal Term.
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4. INTEREST, FEES AND CHARGES.
(A) INTEREST RATE.
Subject to the terms and conditions set forth below, the Loans
shall bear interest at the per annum rates of interest set forth in SUBSECTION
(I), (II), (III) or (IV) below:
(i) Prime Rate Loans shall bear interest as follows: (a)
Revolving Loans borrowed as Prime Rate Loans shall bear interest at the Prime
Rate in effect from time to time, (b) portions of the Term Loan borrowed as
Prime Rate Loans shall bear interest at one-half of one percent (0.5%) in excess
of the Prime Rate in effect from time to time, and (c) portions of any Capital
Expenditure Loan borrowed as Prime Rate Loans shall bear interest at one-quarter
of one percent (0.25%) in excess of the Prime Rate in effect from time to time.
The rates of interest set forth in this clause (i) shall increase or decrease by
an amount equal to each increase or decrease in the Prime Rate effective on the
effective date of each such change in the Prime Rate.
(ii) LIBOR Rate Loans shall bear interest as follows: (a)
Revolving Loans borrowed as LIBOR Rate Loans shall bear interest at two and
one-half percent (2.5%) in excess of the LIBOR Rate for the applicable Interest
Period, (b) portions of the Term Loan borrowed as LIBOR Rate Loans shall bear
interest at three percent (3.0%) in excess of the LIBOR Rate for the applicable
Interest Period and (c) portions of any Capital Expenditure Loan borrowed as
LIBOR Rate Loans shall bear interest at two and three-quarters percent (2.75%)
in excess of the LIBOR Rate for the applicable Interest Period, in each case
such interest rate to remain fixed for such Interest Period. "INTEREST PERIOD"
shall mean any continuous period of thirty (30), sixty (60), ninety (90), one
hundred eighty (180) or if available, two hundred seventy (270) or three hundred
sixty (360) days, as selected from time to time by the requesting Borrower by
irrevocable notice (in writing, by telex, telegram or cable) given to Lender not
less than two (2) Business Days prior to the first day of each respective
Interest Period; PROVIDED that: (A) each such Interest Period occurring after
such initial Interest Period shall commence on the day on which the immediately
preceding Interest Period expires; (B) the final Interest Period shall be such
that its expiration occurs on or before the end of the Original Term or any
Renewal Term; and (C) if for any reason a requesting Borrower shall fail to
timely select an Interest Period, then such Loans shall continue as, or revert
to, Prime Rate Loans.
(iii) Upon the occurrence of an Event of Default and during
the continuance thereof, all Loans shall bear interest at the rate of two
percent (2.0%) per annum in excess of the interest rate otherwise payable
thereon, which interest shall be payable on demand.
(iv) The Borrowers may elect at any time to pay interest on all or any portion
of the outstanding principal balance of the Term Loan, for its remaining term,
at a fixed rate of interest equal to the Treasury Rate plus a margin of
interest, which margin shall be determined in the sole discretion of Lender,
exercised in a commercially reasonable manner, and shall be commensurate with
the margins applied to Prime Rate Loans and LIBOR Rate Loans hereunder.
"TREASURY RATE" means with respect to a request by the Borrowers in connection
with the Term Loan pursuant to this SUBSECTION 4(A)(IV), a fixed interest rate
per annum equal to the sum of (i) the rate of maturity of U.S. Treasury Bills
maturing on, or as nearly as possible prior to, the maturity date of the Term
Loan, such rate to be determined by the Lender as of the Business Day
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immediately preceding the first day the Treasury Rate shall be applied, PLUS
(ii) Lender's cost (expressed as a percentage per annum) to acquire such U.S.
Treasury issues. The determination of the Treasury Rate by Lender shall, in the
absence of manifest error, be conclusive.
(v) All interest shall be calculated on the basis of a 360-day
year. Unless otherwise indicated herein, interest shall be payable in arrears on
the first Business Day of each month.
(B) OTHER LIBOR PROVISIONS.
(i) Subject to the provisions of this Agreement, the Borrowers
shall have the option (A) as of any date, to convert all or any part of the
Prime Rate Loans to, or request that new Loans be made as, LIBOR Rate Loans of
various Interest Periods, (B) as of the last day of any Interest Period, to
continue all or any portion of the relevant LIBOR Rate Loans as LIBOR Rate
Loans; (C) as of the last day of any Interest Period, to convert all or any
portion of the LIBOR Rate Loans to Prime Rate Loans; and (D) at any time, to
request new Loans as Prime Rate Loans; PROVIDED, that Loans may not be continued
as or converted to LIBOR Rate Loans, if the continuation or conversion thereof
would violate the provisions of SUBSECTIONS 4(B)(II) or 4(B)(III) of this
Agreement or if an Event of Default has occurred and is continuing.
(ii) Lender's determination of LIBOR as provided above, shall
be conclusive, absent manifest error. Furthermore, if Lender determines, in good
faith (which determination shall be conclusive, absent manifest error), prior to
the commencement of any Interest Period, that (A) U.S. Dollar deposits of
sufficient amount and maturity for funding the Loans are not available to Lender
in the London Interbank Eurodollar market in the ordinary course of business, or
(B) by reason of circumstances affecting the London Interbank Eurodollar market,
adequate and fair means do not exist for ascertaining the rate of interest to be
applicable to the Loans requested by the Borrowers to be LIBOR Rate Loans or the
Loans bearing interest at the rates set forth in SUBSECTION 4(A)(II) of this
Agreement shall not represent the effective pricing to Lender for U.S. Dollar
deposits of a comparable amount for the relevant period (such as for example,
but not limited to, official reserve requirements required by Regulation D to
the extent not given effect in determining the rate), Lender shall promptly
notify the Borrowers and (1) all existing LIBOR Rate Loans shall convert to
Prime Rate Loans upon the end of the applicable Interest Period, and (2) no
additional LIBOR Rate Loans shall be made until such circumstances are cured.
(iii) If, after the date hereof, the introduction of, or any
change in, any applicable law, treaty, rule, regulation or guideline or in the
interpretation or administration thereof by any governmental authority or any
central bank or other fiscal, monetary or other authority having jurisdiction
over Lender or its lending offices (a "REGULATORY CHANGE"), shall, in the
opinion of counsel to Lender, make it unlawful for Lender to make or maintain
LIBOR Rate Loans, then Lender shall promptly notify the Borrowers and (A) the
LIBOR Rate Loans shall immediately convert to Prime Rate Loans on the last
Business Day of the then existing Interest Period or Interest Periods, or on
such earlier date as required by law and (B) no additional LIBOR Rate Loans
shall be made until such circumstance is cured.
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(iv) If, for any reason, a LIBOR Rate Loan is repaid prior to
the last Business Day of any Interest Period or if a LIBOR Rate Loan does not
occur on a date specified by any of the Borrowers in their request (other than
as a result of a default by Lender), the Borrowers agree jointly and severally
to indemnify Lender against any loss (including any loss on redeployment of the
deposits or other funds acquired by Lender to fund or maintain such LIBOR Rate
Loan), cost or expense incurred by Lender as a result of such prepayment.
(v) If any Regulatory Change (whether or not having the force
of law) shall (A) impose, modify or deem applicable any assessment, reserve,
special deposit or similar requirement against assets held by, or deposits in or
for the account of or loans by, or any other acquisition of funds or
disbursements by, Lender; (B) subject Lender or the LIBOR Rate Loans to any Tax
or change the basis of taxation of payments to Lender of principal or interest
due from the Borrowers to Lender hereunder (other than a change in the taxation
of the overall net income of Lender); or (C) impose on Lender any other
condition regarding the LIBOR Rate Loans or Lender's funding thereof, and Lender
shall determine (which determination shall be conclusive, absent any manifest
error) that the result of the foregoing is to increase the cost to Lender of
making or maintaining the LIBOR Rate Loans or to reduce the amount of principal
or interest received by Lender hereunder, then the Borrowers shall be jointly
and severally obligated to pay to Lender, on demand, such additional amounts as
Lender shall, from time to time, determine are sufficient to compensate and
indemnify Lender from such increased cost or reduced amount.
(vi) Lender shall receive payments of amounts of principal of
and interest with respect to the LIBOR Rate Loans free and clear of, and without
deduction for, any Taxes. If (A) Lender shall be subject to any Tax in respect
of any LIBOR Rate Loans or any part thereof or, (B) the Borrowers shall be
required to withhold or deduct any Tax from any such amount, the LIBOR Rate
applicable to such LIBOR Rate Loans shall be adjusted by Lender to reflect all
additional costs incurred by Lender in connection with the payment by Lender or
the withholding by the Borrowers of such Tax and the Borrowers shall provide
Lender with a statement detailing the amount of any such Tax actually paid by
the Borrowers. Determination by Lender of the amount of such costs shall be
conclusive, absent manifest error. If after any such adjustment any part of any
Tax paid by Lender is subsequently recovered by Lender, Lender shall reimburse
the Borrowers to the extent of the amount so recovered. A certificate of an
officer of Lender setting forth the amount of such recovery and the basis
therefor shall be conclusive, absent manifest error.
(vii) Each request for LIBOR Rate Loans shall be in an amount
of not less than Five Hundred Thousand and No/100 Dollars ($500,000), and in
integral multiples of One Hundred Thousand and No/100 Dollars ($100,000).
(viii) Unless otherwise specified by the Borrowers, all Loans
shall be Prime Rate Loans.
(ix) No more than six (6) Interest Periods may be in effect
with respect to outstanding LIBOR Rate Loans at any one time.
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(x) No more than ninety percent (90%) of the aggregate
principal amount of Loans outstanding at any one time may be LIBOR Rate Loans.
(C) FEES AND CHARGES.
(i) CLOSING FEE: The Borrowers agree jointly and severally to
pay to Lender a closing fee of Seventy Thousand and No/100 Dollars ($70,000),
which fee shall be fully earned and payable on the date of disbursement of the
initial Loans hereunder. Lender acknowledges its receipt on or about July 27,
2001 of payment by Borrowers of a commitment fee of $25,000. Lender further
acknowledges its receipt of a good faith deposit of $30,000 prior to the
acceptance by Parent of Lender's initial proposal dated May 30, 2001. Both the
commitment fee and the good faith deposit shall be applied by Lender as a credit
against the payment of the aforedescribed closing fee, less all costs and
out-of-pocket expenses incurred by Lender prior to the date hereof in connection
with this Agreement.
(ii) UNUSED LINE FEE: The Borrowers jointly and severally
agree to pay to Lender an unused line fee of one-quarter of one percent per
annum (0.25%) of the difference each month between (i) the Maximum Revolving
Loan Limit PLUS the Capital Expenditure Loan Limit and (ii) the average daily
balance of the Revolving Loans, PLUS the outstanding Letter of Credit
Obligations, PLUS the outstanding principal amount of all Capital Expenditure
Loans, in each case for such month; PROVIDED, that such fee shall be
three-eighths of one percent per annum (0.375%) for any month in which such
difference is less than Four Million and No/100 Dollars ($4,000,000). Said fee
shall be fully earned by Lender and payable monthly in arrears on the first
Business Day of each month for the previous month, and shall be calculated on
the basis of a 360 day year.
(iii) COSTS AND EXPENSES: The Borrowers shall be obligated
jointly and severally to reimburse Lender for all out-of pocket costs and
expenses, including, without limitation, legal expenses and reasonable
attorneys' fees incurred by Lender in connection with the (i) documentation and
consummation of this transaction and any other transactions between the Parent
and/or Borrowers and Lender, including, without limitation, Uniform Commercial
Code and other public record searches and filings, overnight courier or other
express or messenger delivery, appraisal costs, surveys, title insurance and
environmental audit or review costs; (ii) collection, protection or enforcement
of any rights in or to the Collateral; (iii) collection of any Liabilities; and
(iv) administration and enforcement of any of Lender's rights under this
Agreement, PROVIDED, HOWEVER, that the Borrowers shall not be obligated to
reimburse Lender for its normal overhead expenses and/or for attorneys' fees for
services performed on or before the date of this Agreement to the extent such
fees exceed $25,000. Lender hereby acknowledges receipt from the Borrowers of
$25,000 in respect of payment of such attorney's fees. The Borrowers shall also
agree jointly and severally to pay all normal service charges with respect to
all accounts maintained by the Borrowers with Lender and LaSalle Bank and any
additional services requested by any of the Borrowers from Lender and LaSalle
Bank. All such costs, expenses and charges shall, if owed to LaSalle Bank, be
reimbursed by Lender and, in such event or in the event such costs and expenses
are owed to Lender, constitute Liabilities hereunder, shall be payable by the
Borrowers jointly and severally to Lender on demand, and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder.
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(D) MAXIMUM INTEREST.
It is the intent of the parties that the rate of interest and
other charges to the Borrowers under this Agreement shall be lawful; therefore,
if for any reason the interest or other charges payable under this Agreement are
found by a court of competent jurisdiction, in a final determination, to exceed
the limit which Lender may lawfully charge the Borrowers, then the obligation to
pay interest and other charges shall automatically be reduced to such limit and,
if any amount in excess of such limit shall have been paid, then such amount
shall be refunded to the Borrowers.
5. COLLATERAL.
(A) GRANT OF SECURITY INTEREST TO LENDER.
As security for the payment of all Loans made and Letters of
Credit issued now or in the future by Lender to the Borrowers hereunder and for
the payment or other satisfaction of all other Liabilities, each of Parent, each
Borrower and each DHB Subsidiary hereby assigns to Lender and grants to Lender a
continuing security interest in the following property of Parent, such Borrower
or such DHB Subsidiary, whether now or hereafter owned, existing, acquired or
arising and wherever now or hereafter located: (a) all Accounts (whether or not
Eligible Accounts) and all Goods whose sale, lease or other disposition by
Parent, such Borrower or such DHB Subsidiary, has given rise to Accounts and
have been returned to, or repossessed or stopped in transit by, Parent, such
Borrower or such DHB Subsidiary; (b) all Chattel Paper, Instruments, Documents
and General Intangibles (including, without limitation, all patents, patent
applications, trademarks, trademark applications, tradenames, trade secrets,
goodwill, copyrights, copyright applications, registrations, licenses, software,
franchises, customer lists, tax refund claims, claims against carriers and
shippers, guarantee claims, contracts rights, payment intangibles, security
interests, security deposits and rights to indemnification); (c) all Inventory
(whether or not Eligible Inventory); (d) all Goods (other than Inventory),
including, without limitation, Equipment, vehicles and Fixtures; (e) all
Investment Property; (f) all Deposit Accounts, bank accounts, deposits and cash;
(g) all Letter-of-Credit Rights; (h) Commercial Tort Claims listed on EXHIBIT C
hereto; (i) all policies and certificates of insurance of Parent insuring the
property and assets of any of the Borrowers and the Life Insurance Policy, and
all policies and certificates of insurance of each Borrower; (j) any other
property of Parent, each Borrower and each DHB Subsidiary, now or hereafter in
the possession, custody or control of Lender or any agent or any parent,
affiliate or subsidiary of Lender or any participant with Lender in the Loans or
Letters of Credit, for any purpose (whether for safekeeping, deposit,
collection, custody, pledge, transmission or otherwise) and (k) all additions
and accessions to, substitutions for, and replacements, products and Proceeds of
the foregoing property, including, without limitation, proceeds of all insurance
policies insuring the foregoing property, and all of Parent's, such Borrower's
or such DHB Subsidiary's books and records relating to any of the foregoing and
to such Parent's or Borrower's business.
(B) OTHER SECURITY.
Lender, in its sole discretion, without waiving or releasing
any obligation, liability or duty of Parent, any Borrower or any DHB Subsidiary
under this Agreement or the Other
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Agreements or any Event of Default, may at any time or times hereafter, but
shall not be obligated to, pay, acquire or accept an assignment of any security
interest, lien, encumbrance or claim (other than Permitted Liens) asserted by
any Person in, upon or against the Collateral. All sums paid by Lender in
respect thereof and all costs, fees and expenses including, without limitation,
reasonable attorney fees, all court costs and all other charges relating thereto
incurred by Lender shall constitute Liabilities, payable by the Borrowers on a
joint and several basis to Lender on demand and, until paid, shall bear interest
at the highest rate then applicable to Loans hereunder.
(C) POSSESSORY COLLATERAL.
Immediately upon the receipt by Parent and/or one or more
Borrowers and/or one or more DHB Subsidiaries of any portion of the Collateral
evidenced by an agreement, Instrument or Document, including, without
limitation, any Tangible Chattel Paper and any Investment Property consisting of
certificated securities, Parent and/or such Borrower or Borrowers and/or such
DHB Subsidiary or DHB Subsidiaries shall deliver the original thereof to Lender
together with an appropriate endorsement or other specific evidence of
assignment thereof to Lender (in form and substance acceptable to Lender). If an
endorsement or assignment of any such items shall not be made for any reason,
Lender is hereby irrevocably authorized, as the attorney and agent-in-fact for
Parent and/or such Borrower or Borrowers and/or such DHB Subsidiary or DHB
Subsidiaries, to endorse or assign the same on behalf of Parent and/or such
Borrower or Borrowers and/or such DHB Subsidiary or DHB Subsidiaries.
(D) ELECTRONIC CHATTEL PAPER.
To the extent that Parent and/or one or more Borrowers and/or
one or more DHB Subsidiaries obtain or maintain any Electronic Chattel Paper,
Parent and/or such Borrower or Borrowers and/or such DHB Subsidiary or DHB
Subsidiaries shall create, store and assign the record or records comprising the
Electronic Chattel Paper in such a manner that (i) a single authoritative copy
of the record or records exists which is unique, identifiable and except as
otherwise provided in clauses (iv), (v) and (vi) below, unalterable, (ii) the
authoritative copy identifies Lender as the assignee of the record or records,
(iii) the authoritative copy is communicated to and maintained by the Lender or
its designated custodian, (iv) copies or revisions that add or change an
identified assignee of the authoritative copy can only be made with the
participation of Lender, (v) each copy of the authoritative copy and any copy of
a copy is readily identifiable as a copy that is not the authoritative copy and
(vi) any revision of the authoritative copy is readily identifiable as an
authorized or unauthorized revision.
6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY
INTERESTS THEREIN.
The Parent, the Borrowers and the DHB Subsidiaries shall, at
Lender's request, at any time and from time to time, authenticate, execute and
deliver to Lender such financing statements, documents and other agreements and
instruments (and pay the cost of filing or recording the same in all public
offices deemed necessary or desirable by Lender) and do such other acts and
things or cause third parties to do such other acts and things as Lender may
deem necessary or desirable in its sole discretion in order to establish and
maintain a valid, attached
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and perfected security interest in the Collateral in favor of Lender (free and
clear of all other liens, claims, encumbrances and rights of third parties
whatsoever, whether voluntarily or involuntarily created, except Permitted
Liens) to secure payment of the Liabilities, and in order to facilitate the
collection of the Collateral. Each of Parent, each Borrower and each DHB
Subsidiary irrevocably hereby makes, constitutes and appoints Lender (and all
Persons designated by Lender for that purpose) as Parent's, such Borrower's or
such DHB Subsidiary's true and lawful attorney and agent-in-fact to execute and
file such financing statements, documents and other agreements and instruments
and do such other acts and things as may be necessary to preserve and perfect
Lender's security interest in the Collateral. Each of Parent, each Borrower and
each DHB Subsidiary further agrees that a carbon, photographic, photostatic or
other reproduction of this Agreement or of a financing statement shall be
sufficient as a financing statement. Each of Parent, each Borrower and each DHB
Subsidiary further authorizes, notifies and confirms the prior filing by Lender
of any and all financing statements which identify Parent, such Borrower or such
DHB Subsidiary as debtor, Lender as secured party and any or all Collateral as
collateral.
7. POSSESSION OF COLLATERAL AND RELATED MATTERS.
Unless an Event of Default has occurred and is continuing,
each Borrower shall have the right, except as otherwise provided in this
Agreement, in the ordinary course of such Borrower's business, to (a) sell,
lease or furnish under contracts of service any of such Borrower's Inventory
normally held by such Borrower for any such purpose; and (b) use and consume any
raw materials, work in process or other materials normally held by such Borrower
for such purpose; PROVIDED, HOWEVER, that a sale in the ordinary course of
business shall not include any transfer or sale in satisfaction, partial or
complete, of a debt owed by such Borrower.
8. COLLECTIONS.
(a) Each Borrower shall direct all of its Account Debtors that
remit payment on the Accounts due to such Borrower by electronic funds transfer
to remit such amounts directly to a deposit account in Lender's name which shall
be established by such Borrower at LaSalle Bank or at another financial
institution acceptable to Lender (each a "BLOCKED ACCOUNT"). The financial
institution with which such Blocked Account is established shall acknowledge and
agree, in a manner satisfactory to Lender, that the amounts in such Blocked
Account are the sole and exclusive property of Lender, that such financial
institution will follow the instructions of Lender with respect to the
disposition of funds in the Blocked Account without further consent of such
Borrower, that such financial institution has no right of setoff against the
Blocked Account or against any account maintained by such financial institution
into which any amounts are remitted by Account Debtors of such Borrower, and
that the financial institution shall wire, or otherwise transfer in immediately
available funds to Lender in a manner satisfactory to Lender, funds deposited
into the Blocked Account on a daily basis as such funds are collected. Each
Borrower agrees that all payments made to the Blocked Account of such Borrower
or otherwise received by Lender, whether in respect of the Accounts or as
Proceeds of other Collateral or otherwise, will be applied on account of the
Liabilities then due and payable in accordance with the terms of this Agreement;
provided, that so long as no Event of Default has occurred and is continuing,
payments received by Lender shall not be applied to the unmatured portion of the
LIBOR Rate Loans, but shall be held in an interest bearing cash collateral
account
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maintained by Lender, until the earlier of (i) the last Business Day of the
Interest Period applicable to such LIBOR Rate Loan and (ii) the occurrence of an
Event of Default. The Borrowers jointly and severally agree to pay all fees,
costs and expenses in connection with opening and maintaining the Blocked
Accounts. All of such fees, costs and expenses, if not paid by the Borrowers,
may be paid by Lender and in such event all amounts paid by Lender shall
constitute Liabilities hereunder, shall be payable to Lender by the Borrowers
jointly and severally upon demand, and, until paid, shall bear interest at the
highest rate then applicable to Loans hereunder. For the purpose of this
section, each Borrower irrevocably hereby makes, constitutes and appoints Lender
(and all Persons designated by Lender for that purpose) as such Borrower's true
and lawful attorney and agent-in-fact.
(b) Upon the occurrence of a Triggering Event, each Borrower
shall be required to direct all of its Account Debtors to remit all payments on
the Accounts due to such Borrower, other than payments by electronic funds
transfer, directly to a post office box (a "LOCK BOX") designated by, and under
the exclusive control of Lender at the financial institution where the Blocked
Account has been established for such Borrower. All payments received into the
Lock Box will be deposited into such Blocked Account. At all times after the
occurrence of a Triggering Event, if a Borrower, Parent, any Affiliate or
Subsidiary of Parent or a Borrower, any shareholder, officer, director, employee
or agent of the Parent or such Borrower or Affiliate or Subsidiary of Parent or
such Borrower or any other Person acting for or in concert with such Borrower
shall receive monies, checks, notes, drafts or other payments relating to or as
Proceeds of Accounts or other Collateral, such Borrower and each such Person
shall receive all such items in trust for, and as the sole and exclusive
property of, such Lender and, immediately upon receipt thereof, shall remit the
same (or cause the same to be remitted) in kind to the Blocked Account of such
Borrower. At all times after the occurrence and during the continuance of a
Triggering Event, all checks, drafts, instruments and other items of payment or
Proceeds of Collateral shall be endorsed by the Borrower in receipt thereof to
Lender, and, if that endorsement of any such item shall not be made for any
reason, Lender is hereby irrevocably authorized to endorse the same on such
Borrower's behalf. For the purpose of this section, each Borrower irrevocably
hereby makes, constitutes and appoints Lender (and all persons designated by
Lender for that purpose) as such Borrower's true and lawful attorney and
agent-in-fact (i) to endorse such Borrower's name upon said items of payment
and/or Proceeds of Collateral and upon any Chattel Paper, Document, Instrument,
invoice or similar document or agreement relating to any Account of such
Borrower or Goods pertaining thereto; (ii) to take control in any manner of any
item of payment or Proceeds thereof and (iii) to have access to any lock box or
postal box into which any of such Borrower's mail is deposited, and open and
process all mail addressed to such Borrower and deposited therein.
A "TRIGGERING EVENT" shall mean any of the following: (x) the
occurrence of an Event of Default or (y) the determination by Lender that the
dollar amount of all payments made on Accounts which have been remitted by
electronic funds transfer to the Blocked Accounts over the aggregate of payments
made on all Accounts, expressed as a percentage, is:
(i) for the thirty-day period commencing on the date
of this Agreement, less than fifty percent (50%);
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(ii) during any sixty-day period ending on or after
the date sixty days from, but prior to the date one hundred twenty
(120) days from, the date of this Agreement, less than fifty percent
(50%);
(iii) during any sixty-day period ending on or after
the date one hundred twenty (120) days from the date of this Agreement,
less than seventy percent (70%); PROVIDED, that solely for purposes of
compliance with this clause (iii) and calculating the percentage set
forth herein, payments made on Accounts which have been remitted
initially by an Account Debtor to a Borrower by electronic funds
transfer and then remitted by such Borrower to the applicable Blocked
Account (such payments, the "REFERENCED PAYMENTS") shall be deemed to
have been remitted directly by the applicable Account Debtor to such
Blocked Account so long as (x) such Borrower immediately remits such
funds electronically to such Blocked Account (or, if the Borrowers fail
to make immediate remittance to the applicable Blocked Account other
than due to the Borrowers' negligence, such remittance is made within
three days of receipt of such funds by the Borrowers) and (y) such
Borrower continues to use its best efforts to cause such Account Debtor
to remit via electronic funds transfer any future payments made on
Accounts directly to such Blocked Account; PROVIDED, FURTHER, that in
no event during any such sixty-day period shall the aggregate amount of
Referenced Payments exceed twenty percent (20%) of the aggregate amount
of all payments made by Account Debtors on all Accounts.
(c) Lender may, at any time and from time to time after the
occurrence and during the continuance of an Event of Default, whether before or
after notification to any Account Debtor and whether before or after the
maturity of any of the Liabilities, (i) enforce collection of any of any
Borrower's Accounts or other amounts owed to a Borrower by suit or otherwise;
(ii) exercise all of a Borrower's rights and remedies with respect to
proceedings brought to collect any Accounts or other amounts owed to such
Borrower; (iii) surrender, release or exchange all or any part of any Accounts
or other amounts owed to such Borrower, or compromise or extend or renew for any
period (whether or not longer than the original period) any indebtedness
thereunder, as Lender may deem appropriate in its reasonable judgment; (iv) sell
or assign any Account of a Borrower or other amount owed to a Borrower upon such
terms, for such amount and at such time or times as Lender deems advisable in
its reasonable judgment; (v) prepare, file and sign a Borrower's name on any
proof of claim in bankruptcy or other similar document against any Account
Debtor or other Person obligated to such Borrower; and (vi) do all other acts
and things which are necessary, in Lender's sole discretion, exercised in a
commercially reasonable manner, to fulfill any Borrower's obligations under this
Agreement and to allow Lender to collect the Accounts or other amounts owed to
any Borrower. In addition to any other provision hereof, Lender may at any time,
after the occurrence and during the continuance of an Event of Default, at the
Borrowers' expense, notify any parties obligated on any of the Accounts to make
payment directly to Lender of any amounts due or to become due thereunder.
(d) For purposes of calculating interest and fees, Lender
shall, within one (1) Business Day after receipt by Lender at its office in
Chicago, Illinois of (i) checks and (ii) cash or other immediately available
funds from collections of items of payment and Proceeds of any Collateral, apply
such collections or Proceeds against the Liabilities then due in such order as
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Lender shall determine in its sole discretion. For purposes of determining the
amount of Loans available for borrowing purposes, checks and cash or other
immediately available funds from collections of items of payment and Proceeds of
any Collateral shall be applied against the Liabilities then due, in such order
as Lender shall determine in its sole discretion, on the day of receipt, subject
to actual collection.
(e) On a monthly basis, Lender shall deliver to the Borrowers
an account statement showing all Loans, charges and payments, which shall be
deemed final, binding and conclusive upon the Borrowers, unless the Borrowers
notify Lender in writing, specifying any error therein, within sixty (60) days
of the date such account statement is received by the Borrowers and any such
notice shall only constitute an objection to the items specifically identified.
9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.
(A) DAILY REPORTS.
The Borrowers shall deliver to Lender an executed daily loan
report and certificate in Lender's then current form on each day on which any
Borrower requests a Revolving Loan, and in any event at least once each week,
which shall be accompanied by copies of each Borrower's sales journal, cash
receipts journal and credit memo journal for the relevant period. Such report
shall reflect the activity of such Borrower with respect to Accounts of such
Borrower for the immediately preceding week, and shall be in a form and with
such specificity as is reasonably satisfactory to Lender and shall contain such
additional information concerning Accounts and Inventory as may be reasonably
requested by Lender including, without limitation, but only if specifically
requested by Lender, copies of all invoices prepared in connection with such
Accounts. To the extent that information concerning Inventory is required to be
provided more often than monthly under this SUBSECTION 9(A), Lender acknowledges
and agrees that such information shall only be required to be updated on a
monthly basis.
(B) MONTHLY REPORTS.
The Borrowers shall deliver to Lender, in addition to any
other reports, as soon as practicable and in any event: (i) within ten (10) days
after the end of each calendar month, (A) a detailed trial balance of Accounts
aged per invoice date, in form and substance reasonably satisfactory to Lender
including, without limitation, the names and addresses (which may be in a
separate document or ledger) or such comparable information as is reasonably
satisfactory to the Lender of all Accounts, and (B) a summary and detail of
accounts payable (such Accounts and accounts payable divided into such time
intervals as Lender may require in its reasonable discretion), including a
listing of any held checks; and (ii) within eighteen (18) days after the end of
each calendar month, the general ledger inventory account balance, an inventory
report and Lender's standard form of Inventory report then in effect or the form
most recently requested from the Borrowers by Lender, for the Borrowers by each
category of Inventory, together with a description of the monthly change in each
category of Inventory.
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(C) FINANCIAL STATEMENTS.
The Borrowers shall deliver to Lender the following financial
information, all of which shall be prepared in accordance with generally
accepted accounting principles consistently applied, and shall be accompanied by
a compliance certificate in the form of EXHIBIT B hereto, which compliance
certificate shall include a calculation of all financial covenants contained in
this Agreement: (i) no later than thirty (30) days after the end of each
calendar month, copies of internally prepared financial statements, including,
without limitation, balance sheets and statements of income, retained earnings,
cash flow and shareholders equity, of Parent and its Subsidiaries, on a
consolidated and consolidating basis, certified by the Chief Financial Officer
of Parent, and (ii) no later than ninety (90) days after the end of each Fiscal
Year, audited annual financial statements including, without limitation, balance
sheets and statements of income, retained earnings, cash flows and stockholders
equity, of Parent and its Subsidiaries, on a consolidated basis, with an
unqualified opinion by Paritz and Co., or other independent certified public
accountants selected by Parent and reasonably satisfactory to Lender, which
financial statements shall be accompanied by (A) a letter from such accountants
acknowledging that they are aware that a primary intent of Parent in obtaining
such financial statements is to influence Lender and that Lender is relying upon
such financial statements in connection with the exercise of its rights
hereunder and (B) copies of any management letters sent to the Parent by such
accountants.
(D) ANNUAL PROJECTIONS.
As soon as practicable and in any event no later than thirty
(30) days prior to the beginning of each Fiscal Year, the Borrowers shall
deliver to Lender projected balance sheets, statements of income and cash flow
for Parent and its Subsidiaries, on a consolidated and, to the extent prepared
by Parent or the Borrowers, on a consolidating, basis, for each of the twelve
(12) months during such Fiscal Year, which shall include the assumptions used
therein, together with appropriate supporting details as reasonably requested by
Lender.
(E) EXPLANATION OF BUDGETS AND PROJECTIONS.
In conjunction with the delivery of the annual presentation of
projections or budgets referred to in SUBSECTION 9(D) above, the Borrowers shall
deliver a letter signed by the President or a Vice President of Parent and by
the Treasurer or Chief Financial Officer of Parent, describing, comparing and
analyzing, in reasonable detail, all changes and developments between the
anticipated financial results included in such projections or budgets and the
historical financial statements of Parent and its Subsidiaries.
(F) PUBLIC REPORTING.
Promptly upon the filing thereof, the Borrowers shall deliver
to Lender copies of all registration statements and annual, quarterly, monthly
or other regular reports which Parent or any of its Subsidiaries files with the
Securities and Exchange Commission, as well as promptly providing to Lender
copies of any reports and proxy statements delivered to its shareholders.
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(G) OTHER INFORMATION.
Promptly following request therefor by Lender, such other
business or financial data, reports, appraisals and projections as Lender may
reasonably request.
10. TERMINATION; AUTOMATIC RENEWAL.
THIS AGREEMENT SHALL BE IN EFFECT FOR A PERIOD (SUCH PERIOD,
THE "ORIGINAL TERM") FROM THE DATE HEREOF UNTIL THE DATE WHICH COINCIDES WITH
THE THIRD YEARLY ANNIVERSARY HEREOF, AND SHALL BE EXTENDED THEREAFTER (EACH SUCH
EXTENSION BEING REFERRED TO HEREIN AS A "RENEWAL TERM") SOLELY AT THE OPTION OF
THE LENDER, UNLESS (A) THE DUE DATE OF THE LIABILITIES IS ACCELERATED PURSUANT
TO SECTION 16 HEREOF OR (B) THE BORROWERS ELECT TO TERMINATE THIS AGREEMENT AT
THE END OF THE ORIGINAL TERM OR AT THE END OF ANY RENEWAL TERM BY GIVING LENDER
WRITTEN NOTICE OF SUCH ELECTION AT LEAST FORTY-FIVE (45) DAYS PRIOR TO THE END
OF THE ORIGINAL TERM OR THE THEN CURRENT RENEWAL TERM AND BY PAYING ALL OF THE
LIABILITIES IN FULL ON THE LAST DAY OF SUCH TERM. If one or more of the events
specified in clause (A) or (B) occurs, then (i) Lender shall not make any
additional Loans or issue any additional Letters of Credit on or after the date
identified as the date on which the Liabilities are to be repaid; and (ii) this
Agreement shall terminate on the date thereafter that the Liabilities are paid
in full. At such time as the Borrowers have repaid all of the Liabilities and
this Agreement has terminated, (i) the Borrowers shall deliver to Lender a
release, in form and substance reasonably satisfactory to Lender, of all
obligations and liabilities of Lender and its officers, directors, employees,
agents, parents, subsidiaries and affiliates to the Borrowers, and if the
Borrowers are obtaining new financing from another lender, the Borrowers shall
deliver such lender's indemnification of Lender, in form and substance
reasonably satisfactory to Lender, effective for a period not longer than ninety
(90) days after the termination of this Agreement, for checks which Lender has
credited to any account of the Borrowers, but which subsequently are dishonored
for any reason or for automatic clearinghouse or wire transfers not yet posted
to any account of the Borrowers, and (ii) the Lender shall deliver to the
Borrowers and all Obligors, in form and substance reasonably satisfactory to the
Borrowers, a release of all obligations and shall discharge all liens and
security interests, including any filed financing statements, and shall provide
Borrowers copies thereof. If, prior to the first anniversary of this Agreement,
the Borrowers elect to terminate this Agreement and prepay all of the
Liabilities, the Borrowers agree jointly and severally to pay to Lender as a
prepayment fee, in addition to the payment of all other Liabilities, an amount
equal to one percent (1%) of the Maximum Revolving Loan Limit. There shall be no
prepayment fee relating to any subsequent termination of the Revolving Loans,
and there shall be no prepayment fee imposed on the Borrowers upon any
prepayment of the Term Loan or any Capital Expenditure Loan made hereunder.
11. REPRESENTATIONS AND WARRANTIES.
Parent and each Borrower hereby represent and warrant to
Lender, as applicable, which representations and warranties (whether appearing
in this SECTION 11 or elsewhere) shall
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be true at the time of such Borrower's execution hereof and the closing of the
transactions described herein or related hereto, shall remain true until the
repayment in full and satisfaction of all the Liabilities and termination of
this Agreement, and shall be remade by Parent and each Borrower, as applicable,
at the time each Loan is made pursuant to this Agreement.
(A) FINANCIAL STATEMENTS AND OTHER INFORMATION.
The financial statements and other information delivered or to
be delivered by Parent and the Borrowers to Lender at or prior to the date of
this Agreement and which are attached hereto as EXHIBIT E, accurately reflect
the financial condition of Parent and each Borrower as of the dates thereof and
for the periods covered thereby. As of the date of this Agreement, there has
been no material adverse change in the financial condition, the operations or
any other status of Parent or any Borrower since the date of the most recent
financial statements delivered to Lender prior to the date of this Agreement.
All written information now or heretofore furnished by Parent and the Borrowers
to Lender is true and correct in all material respects as of the date with
respect to which such information was furnished.
(B) LOCATIONS.
The office where each Borrower keeps its books, records and
accounts (or copies thereof) concerning the Collateral, such Borrower's
principal place of business and all of such Borrower's other places of business,
locations of Collateral and post office boxes and locations of bank accounts are
as set forth in EXHIBIT A and at other locations within the continental United
States of which Lender has been advised by the Borrowers in accordance with
SUBSECTION 12(B)(I). The Collateral, including, without limitation, the
Equipment (except any part thereof which the Borrowers shall have advised Lender
in writing consists of Collateral normally used in more than one state) is kept,
or, in the case of vehicles, based, only at the addresses set forth on EXHIBIT
A, and at other locations within the continental United States of which Lender
has been advised by the Borrowers in writing in accordance with SUBSECTION
12(B)(I) hereof.
(C) LOANS BY THE BORROWERS.
Neither Parent nor any Borrower has made any loans or advances
to any Affiliate or other Person except for advances authorized hereunder to
employees, officers and directors of Parent or any of the Borrowers for travel
and other expenses arising in the ordinary course of Parent's or such Borrower's
business and loans permitted pursuant to SUBSECTION 13(F) hereof.
(D) ACCOUNTS AND INVENTORY.
Each Account or item of Inventory which the Borrowers shall,
expressly or by implication, request Lender to classify as an Eligible Account
or as Eligible Inventory, respectively, shall, as of the time when such request
is made, conform in all respects to the requirements of such classification as
set forth in the respective definitions of "ELIGIBLE ACCOUNT" and "ELIGIBLE
INVENTORY" as set forth herein.
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(E) LIENS.
Each Borrower is the lawful owner of all Collateral now
purportedly owned or hereafter purportedly acquired by such Borrower, free from
all liens, claims, security interests and encumbrances whatsoever, whether
voluntarily or involuntarily created and whether or not perfected, other than
the Permitted Liens.
(F) ORGANIZATION, AUTHORITY AND NO CONFLICT. (i) PACA is duly
organized, validly existing and in good standing in the State of New York, and
its state organizational identification number is 920413000037; (ii) Point Blank
is duly organized, validly existing and in good standing in the State of
Delaware, and its state organizational identification number is 2475533; (iii)
NDL is duly organized, validly existing and in good standing in the State of
Florida, and its state organizational identification number is P94000091162; and
(iv) Parent is duly organized, validly existing and in good standing in the
State of Delaware and its state organizational identification number is 2431782.
Parent and each Borrower is duly qualified and in good standing in all states
where the nature and extent of the business transacted by it or the ownership of
its assets makes such qualification necessary and where the failure to be so
qualified would not have a Material Adverse Effect on the Parent or such
Borrower, except that the Parent is not qualified in the State of New York.
Parent and each Borrower has the right and power and is duly authorized and
empowered to enter into, execute and deliver this Agreement and the Other
Agreements and perform its obligations hereunder and thereunder. Parent's and
each Borrower's execution, delivery and performance of this Agreement and the
Other Agreements does not conflict with the provisions of the organizational
documents of Parent or such Borrower, any statute, regulation, ordinance or rule
of law, or any agreement, contract or other document which may now or hereafter
be binding on Parent or such Borrower, and Parent's and such Borrower's
execution, delivery and performance of this Agreement and the Other Agreements
shall not result in the imposition of any lien or other encumbrance upon any of
Parent's or such Borrower's property under any existing indenture, mortgage,
deed of trust, loan or credit agreement or other agreement or instrument by
which such Borrower or any of its property may be bound or affected.
(G) LITIGATION.
Except as disclosed on SCHEDULE 11(G) attached hereto, there
are no actions or proceedings which are pending or threatened against Parent or
any Borrower which could reasonably be expected to have a Material Adverse
Effect on Parent or any Borrower, and Parent and each Borrower shall, promptly
upon becoming aware of any such pending or threatened action or proceeding, give
written notice thereof to Lender. Neither Parent nor any Borrower has any
Commercial Tort Claims pending other than those set forth on EXHIBIT C hereto,
as EXHIBIT C may be amended from time to time.
(H) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS.
Parent and each Borrower has obtained all governmental
consents, franchises, certificates, licenses, authorizations, approvals and
permits, the lack of which would have a Material Adverse Effect on Parent and
the Borrowers, taken as a whole. Parent and each
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Borrower are in compliance in all material respects with all applicable federal,
state, local and foreign statutes, orders, regulations, rules and ordinances
(including, without limitation, Environmental Laws and statutes, orders,
regulations, rules and ordinances relating to taxes, employer and employee
contributions and similar items, securities, ERISA or employee health and
safety) the failure to comply with which would have a Material Adverse Effect on
Parent and the Borrowers, taken as a whole.
(I) AFFILIATE TRANSACTIONS.
Except as set forth on SCHEDULE 11(I) hereto or as permitted
pursuant to SUBSECTION 11(C) hereof, neither Parent nor any Borrower is
conducting, permitting or suffering to be conducted, any transaction with any
Affiliate other than transactions with Affiliates for the purchase or sale of
Inventory or services in the ordinary course of business pursuant to terms that
are no less favorable to Parent or such Borrower than the terms upon which such
transfers or transactions would have been made had they been made to or with a
Person that is not an Affiliate.
(J) NAMES AND TRADENAMES.
Parent's and each Borrower's name has always been as set forth
on the first page of this Agreement and Parent and each Borrower uses no
tradenames, assumed names, fictitious names or division names in the operation
of its business, except in each case as set forth on SCHEDULE 11(J) hereto.
(K) EQUIPMENT.
Each Borrower has good and indefeasible and merchantable title
to and ownership of all of its Equipment.
(L) ENFORCEABILITY.
This Agreement and the Other Agreements to which Parent or any
Borrower is a party are the legal, valid and binding obligations of Parent or
such Borrower, and are enforceable against Parent or such Borrower in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance and other laws affecting
creditors' rights, and by general limitations on the availability of equitable
remedies.
(M) SOLVENCY.
Parent and its Subsidiaries, taken as a whole, are, and each
Borrower, individually, is, after giving effect to the transactions contemplated
hereby, solvent, able to pay its debts as they become due, has capital
sufficient to carry on its business, now owns property having a value both at
fair valuation and at present fair saleable value greater than the amount
required to pay its debts, and will not be rendered insolvent by the execution
and delivery of this Agreement or any of the Other Agreements or by completion
of the transactions contemplated hereunder or thereunder.
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(N) INDEBTEDNESS.
Except as set forth on SCHEDULE 11(N) hereto, neither Parent
nor any Borrower is obligated (directly or indirectly), for any loans or other
indebtedness for borrowed money other than the Loans and the Letters of Credit.
(O) MARGIN SECURITY AND USE OF PROCEEDS.
No Borrower owns any margin securities, and none of the
proceeds of the Loans hereunder shall be used for the purpose of purchasing or
carrying any margin securities or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase any margin securities or
for any other purpose not permitted by Regulation U of the Board of Governors of
the Federal Reserve System as in effect from time to time.
(P) PARENT, SUBSIDIARIES AND AFFILIATES.
Except as set forth on SCHEDULE 11(P) hereto, Parent and each
Borrower has no parents, Subsidiaries or other Affiliates or divisions, and
neither Parent nor any Borrower is engaged in any joint venture or partnership
with any other Person.
(Q) NO DEFAULTS.
Neither Parent nor any Borrower is in default in any respect
under any contract, lease or commitment to which it is a party or by which it is
bound, nor does Parent nor any Borrower know of any dispute regarding any
contract, lease or commitment which would have a Material Adverse Effect on
Parent and the Borrowers, taken as a whole.
(R) EMPLOYEE MATTERS.
There are no controversies pending or, to any Borrower's or
Parent's knowledge, threatened between Parent or any Borrower and any of its
respective employees, agents or independent contractors other than employee
grievances arising in the ordinary course of business which would not, in the
aggregate, have a Material Adverse Effect on Parent and the Borrowers, taken as
a whole, and Parent and each Borrower is in compliance with all federal and
state laws respecting employment and employment terms, conditions and practices,
except for such non-compliance which would not have a Material Adverse Effect on
Parent and the Borrowers, taken as a whole.
(S) INTELLECTUAL PROPERTY.
Parent and each Borrower possess adequate licenses, patents,
patent applications, copyrights, service marks, trademarks, trademark
applications, tradestyles and tradenames to continue to conduct their respective
businesses as heretofore conducted by them.
(T) ENVIRONMENTAL MATTERS.
Neither Parent nor any Borrower has generated, used, stored,
treated, transported, manufactured, handled, produced or disposed of any
Hazardous Materials, on or off its premises
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(whether or not owned by it) in any manner which at any time violates any
Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder, and the operations of Parent and each Borrower comply
in all material respects with all Environmental Laws and all licenses, permits,
certificates, approvals and similar authorizations thereunder. There has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other Person, nor is any pending or
to the best of Parent's and each Borrower's knowledge threatened with respect to
any non-compliance with or violation of the requirements of any Environmental
Law by Parent or such Borrower or the release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which affects
Parent or such Borrower or its business, operations or assets or any properties
at which Parent or such Borrower has transported, stored or disposed of any
Hazardous Materials. Neither Parent nor any Borrower has material liability
(contingent or otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.
(U) ERISA MATTERS.
Parent and each Borrower has paid and discharged all
obligations and liabilities arising under ERISA of a character which, if unpaid
or unperformed, might result in the imposition of a lien against any of its
properties or assets.
(V) SHAREHOLDER DEBT.
As of the date of this Agreement, the sole obligee of the
Shareholder Debt is Xxxxx X. Xxxxxx, and no other Person has any legal right to
receive any payment on account of the Shareholder Debt.
(W) LEVY, SEIZURE OR ATTACHMENT.
No Person has made or has attempted to make any levy, seizure
or attachment upon any of the Collateral.
(X) DHB SUBSIDIARY.
No DHB Subsidiary owns any assets or property of any kind.
12. AFFIRMATIVE COVENANTS.
Until payment and satisfaction in full of all Liabilities and
termination of this Agreement, unless Parent or the Borrowers obtain Lender's
prior written consent waiving or modifying any of their covenants hereunder in
any specific instance, Parent and each Borrower, as applicable, covenant and
agree as follows:
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(A) MAINTENANCE OF RECORDS.
Parent and each Borrower shall at all times keep accurate and
complete books, records and accounts with respect to all of such Borrower's
business activities, in accordance with sound accounting practices and generally
accepted accounting principles consistently applied, and shall keep such books,
records and accounts, and any copies thereof, only at the addresses indicated
for such purpose on EXHIBIT A.
(B) NOTICES.
Parent and the Borrowers shall:
(i) LOCATIONS. Promptly (but in no event less than ten (10)
days prior to the occurrence thereof) notify Lender of the proposed opening of
any new place of business or new location of Collateral, the closing of any
existing place of business or location of Collateral, any change of in the
location of any Borrower's books, records and accounts (or copies thereof), the
opening or closing of any post office box, the opening or closing of any bank
account or, if any of the Collateral consists of Goods of a type normally used
in more than one state, the use of any such Goods in any state other than a
state in which the Borrowers have previously advised Lender that such Goods will
be used.
(ii) ELIGIBLE ACCOUNTS AND INVENTORY. Promptly upon becoming
aware thereof, notify Lender if any Account or Inventory identified by the
Borrowers to Lender as an Eligible Account or Eligible Inventory becomes
ineligible for any reason.
(iii) LITIGATION AND PROCEEDINGS. Promptly upon becoming aware
thereof, notify Lender of any actions or proceedings which are pending or
threatened against Parent or any Borrower which might have a Material Adverse
Effect on Parent or any Borrower, and of any Commercial Tort Claims of Parent or
any Borrower which may arise, which notice shall constitute Parent's or such
Borrower's authorization to amend EXHIBIT C to add such Commercial Tort Claim.
(iv) NAMES AND TRADENAMES. Notify Lender within ten (10) days
of any change of any Borrower's or Parent's name or the use of any tradename,
assumed name, fictitious name or division name not previously disclosed to
Lender in writing by a Borrower or Parent.
(v) ERISA MATTERS. Promptly notify Lender of (x) the
occurrence of any "reportable event" (as defined in ERISA) which might result in
the termination by the Pension Benefit Guaranty Corporation (the "PBGC") of any
employee benefit plan ("PLAN") covering any officers or employees of the Parent
or any Borrower, any benefits of which are, or are required to be, guaranteed by
the PBGC, (y) receipt of any notice from the PBGC of its intention to seek
termination of any Plan or appointment of a trustee therefor or (z) its
intention to terminate or withdraw from any Plan.
(vi) ENVIRONMENTAL MATTERS. Immediately notify Lender upon
becoming aware of any investigation, proceeding, complaint, order, directive,
claim, citation or notice with respect to any non-compliance with or violation
of the requirements of any Environmental Law by Parent or any Borrower or the
generation, use, storage, treatment, transportation, manufacture
-35-
handling, production or disposal of any Hazardous Materials or any other
environmental, health or safety matter which affects Parent or any Borrower or
its respective business operations or assets or any properties at which Parent
or any Borrower has transported, stored or disposed of any Hazardous Materials.
(vii) DEFAULT; MATERIAL ADVERSE CHANGE. Promptly advise Lender
of any material adverse change in the business, property, assets, prospects,
operations or condition, financial or otherwise, of Parent and the Borrowers,
taken as a whole, the occurrence of any Event of Default hereunder or the
occurrence of any event which, if uncured, will become an Event of Default,
after notice or lapse of time (or both).
(viii) U.S. GOVERNMENT CONTRACTS. Promptly notify Lender, upon
entering into a new contract with any agency, department or other subdivision of
the U.S. Government, of such event, and provide Lender all information Lender
may request, such as size and duration of such contract, and all information
necessary for due submission of a Notice of Assignment under the Federal
Assignment of Claims Act of 1940 with respect to such contract.
All of the foregoing notices shall be provided by the Borrowers to Lender in
writing.
(C) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS.
(i) Parent and each Borrower shall maintain all governmental
consents, franchises, certificates, licenses, authorizations, approvals and
permits, the lack of which would have a Material Adverse Effect on Parent and
the Borrowers, taken as a whole, and Parent and each Borrower shall remain in
compliance with all applicable federal, state, local and foreign statutes,
orders, regulations, rules and ordinances (including, without limitation,
Environmental Laws and statutes, orders, regulations, rules and ordinances
relating to taxes, employer and employee contributions and similar items,
securities, ERISA or employee health and safety) the failure with which to
comply would have a Material Adverse Effect on Parent and the Borrowers, taken
as a whole.
(ii) Each Borrower shall use its best efforts to comply with
all of the provisions of the Federal Assignment of Claims Act of 1940 on or
before the Compliance Date with respect to each material contract such Borrower
entered into with each Federal Entity prior to the date of this Agreement;
PROVIDED, that the failure by a Borrower to obtain countersignatures on any
notice of assignment shall not, of itself, constitute a Default hereunder.
(D) INSPECTION AND AUDITS.
Parent and the Borrowers shall permit Lender, or any Persons
designated by it, to call at any of the Borrowers' respective places of
business, upon reasonable notice and at any reasonable times, and, without
hindrance or delay, but without undue disruption to the Borrowers' business, to
inspect the Collateral and to inspect, audit, check and make extracts from any
books, records, journals, orders, receipts and any correspondence of Parent or
any Borrower and other data relating to Parent's or any Borrower's business, the
Collateral or any transactions between the parties hereto, and shall have the
right to make such verification concerning Parent's or any Borrower's business
as Lender may consider reasonable under the circumstances. Parent and the
Borrowers shall furnish to Lender such information relevant to Lender's rights
under this
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Agreement as Lender shall at any time and from time to time request. Lender,
through its officers, employees or agents shall have the right, at any time and
from time to time, in Lender's name, to verify the validity, amount or any other
matter relating to any of the Accounts of any Borrower, by mail, telephone,
telegraph or otherwise. Parent and each Borrower authorizes Lender to discuss
the affairs, finances and business of Parent or such Borrower with any officers,
employees (as designated by the Parent or the Borrowers) or directors of such
Borrower or Parent or any Affiliate, and to discuss the financial condition of
Parent or such Borrower with Parent's and such Borrower's independent public
accountants. Any such discussions shall be without liability to Lender or to
Parent's or such Borrower's independent public accountants. The Borrowers shall
agree jointly and severally to pay to Lender all customary fees and all costs
and out-of-pocket expenses incurred by Lender in the exercise of its rights
hereunder, including fees in connection with any audits or inspections of any
Collateral or Borrowers' operations or businesses (such fee, the "COLLATERAL
MANAGEMENT FEE"), which Collateral Management Fee shall be in the amount of $700
per day, per person; PROVIDED, HOWEVER, that, unless an Event of Default has
occurred and is continuing, the Borrowers shall not be obligated to reimburse
Lender for more than four (4) of such audits or inspections conducted during any
one 365-day period, aggregating no more than twenty (20) days in any such
period. All of such fees, costs and expenses shall constitute Liabilities
hereunder, shall be payable on demand and, until paid, shall bear interest at
the highest rate then applicable to Loans hereunder.
(E) INSURANCE.
Each Borrower shall:
(i) Keep the Collateral properly housed and insured for the
full insurable value thereof against loss or damage by fire, theft, explosion,
sprinklers, collision (in the case of motor vehicles) and such other risks as
are customarily insured against by Persons engaged in businesses similar to that
of such Borrower, with such companies, in such amounts, with such deductibles,
and under policies in such form, as shall be reasonably satisfactory to Lender.
Original (or certified) copies of such policies of insurance have been or shall
be, within ninety (90) days of the date hereof, delivered to Lender, together
with evidence of payment of all premiums due therefor, and shall contain an
endorsement, in form and substance acceptable to Lender, showing loss under such
insurance policies payable to Lender. Such endorsement, or an independent
instrument furnished to Lender, shall provide that the insurance company shall
give Lender at least thirty (30) days written notice before any such policy of
insurance is altered or canceled and that no act, whether willful or negligent,
or default of such Borrower or any other Person shall affect the right of Lender
to recover under such policy of insurance in case of loss or damage. In
addition, after the occurrence and during the continuance of an Event of
Default, each Borrower shall cause to be executed and delivered to Lender an
assignment of proceeds of its business interruption insurance policies. Each
Borrower hereby directs all insurers under all policies of insurance to pay all
proceeds payable thereunder directly to Lender. Each Borrower irrevocably makes,
constitutes and appoints Lender (and all officers, employees or agents
designated by Lender) as such Borrower's true and lawful attorney (and
agent-in-fact), after the occurrence and during the continuance of an Event of
Default, for the purpose of making, settling and adjusting claims under such
policies of insurance, endorsing the name of such Borrower on any check, draft,
instrument or other item of payment for the proceeds of such
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policies of insurance and making all determinations and decisions with respect
to such policies of insurance.
(ii) Maintain, at its expense, such public liability and third
party property damage insurance as is customary for Persons engaged in
businesses similar to that of such Borrower with such companies and in such
amounts, with such deductibles and under policies in such form as shall be
reasonably satisfactory to Lender and original (or certified) copies of such
policies have been or shall be, within ninety (90) days after the date hereof,
delivered to Lender, together with evidence of payment of all premiums due
therefor; each such policy shall contain an endorsement showing Lender as
additional insured thereunder and providing that the insurance company shall
give Lender at least thirty (30) days written notice before any such policy
shall be altered or canceled.
If any Borrower at any time or times hereafter shall fail to obtain or maintain
any of the policies of insurance required above or to pay when due any premium
relating thereto, then Lender, without waiving or releasing any obligation or
default by such Borrower hereunder, may (but shall be under no obligation to)
obtain and maintain such policies of insurance and pay such premiums and take
such other actions with respect thereto as Lender deems advisable. Such
insurance, if obtained by Lender, may, but need not, protect such Borrower's
interests or pay any claim made by or against such Borrower with respect to the
Collateral. Such insurance may be more expensive than the cost of insurance such
Borrower may be able to obtain on its own and may be cancelled only upon such
Borrower providing evidence that it has obtained the insurance as required
above. All sums disbursed by Lender in connection with any such actions,
including, without limitation, court costs, expenses, other charges relating
thereto and reasonable attorneys' fees, shall constitute Revolving Loans
hereunder, shall be payable on demand by the Borrowers jointly and severally to
Lender and, until paid, shall bear interest at the highest rate then applicable
to Revolving Loans hereunder.
(F) COLLATERAL.
Each Borrower shall keep the Collateral owned by it in good
condition, repair and order (reasonable wear and tear excepted) and shall make
all necessary repairs to the Equipment and replacements thereof so that the
operating efficiency and the value thereof shall at all times be preserved and
maintained. Each Borrower shall permit Lender to examine any of the Collateral
owned by it at any time and wherever the Collateral may be located and, each
Borrower shall, immediately upon request therefor by Lender, deliver to Lender
any and all evidence of ownership of any Equipment owned by it, including,
without limitation, certificates of title and applications of title. Each
Borrower shall, at the request of Lender, indicate on its records concerning
Collateral owned by it a notation, in form satisfactory to Lender, of the
security interest of Lender hereunder.
(G) USE OF PROCEEDS.
All monies and other property obtained by the Borrowers from
Lender pursuant to this Agreement shall be used (i) to refinance partially the
Shareholder Debt, (ii) for the business purposes of the Borrowers, such as
funding the ongoing working capital requirements of the Borrowers and the
acquisition of Equipment, (iii) to fund the construction of a ballistic range
and
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the related capital expenditures and (iv) to fund the payment of transaction
costs and expenses in connection with the transactions described in this
Agreement.
(H) TAXES.
The Parent and each Borrower shall file all required tax
returns and pay all of its taxes when due, including, without limitation, taxes
imposed by federal, state or municipal agencies, and shall cause any liens for
taxes to be promptly released; PROVIDED, that Parent and each Borrower shall
have the right to contest the payment of such taxes in good faith by appropriate
proceedings so long as (i) the amount so contested is shown on Parent's or such
Borrower's financial statements; (ii) the contesting of any such payment does
not give rise to a lien for taxes; and (iii) Parent or such Borrower shall
establish an adequate reserve therefor to the extent required by generally
accepted accounting principles, consistently applied. If Parent or any Borrower
fails to pay any such taxes and in the absence of any such contest by Parent or
Borrower, Lender may (but shall be under no obligation to) advance and pay any
sums required to pay any such taxes and/or to secure the release of any lien
therefor, and any sums so advanced by Lender shall constitute Revolving Loans
hereunder, shall be payable by Parent or Borrower to Lender on demand, and,
until paid, shall bear interest at the highest rate then applicable to Revolving
Loans hereunder;
(I) INTELLECTUAL PROPERTY.
Parent and each Borrower shall maintain licenses, patents,
patent applications, copyrights, service marks, trademarks, trademark
applications, tradestyles and tradenames which such Person reasonably deems to
be adequate to continue its business as heretofore conducted by it or as
hereafter conducted by it.
(J) KEY PERSON LIFE INSURANCE.
The Parent shall maintain insurance upon the life of Xxxxx X.
Xxxxxx (the "LIFE INSURANCE POLICY"), with the death benefit thereunder in an
amount not less than One Million Five Hundred Thousand and No/100 Dollars
($1,500,000). The Borrowers shall have caused the Life Insurance Policy to be
delivered to the Lender within thirty (30) days of the date of this Agreement.
Parent shall at all times maintain the Life Insurance Assignment in favor of the
Lender in full force and effect. The Life Insurance Policy is in addition to any
and all other life insurance policies maintained by Parent or any Borrower, and
Lender has no claim or rights to such other life insurance policies.
(K) SHAREHOLDER DEBT.
After giving effect to the repayment of (i) Six Million and
No/100 Dollars ($6,000,000) of principal and (ii) accrued interest on the
Shareholder Debt on or about the date of this Agreement, there shall be
outstanding at all times (except to the extent paid out of the proceeds of life
insurance policies (other than the Life Insurance Policy) on the life of Xxxxx
X. Xxxxxx) at least Ten Million and No/100 Dollars ($10,000,000) of principal
(when aggregated with any accrued and unpaid interest thereon) of the
Shareholder Debt.
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(L) PARENT QUALIFICATION.
Parent shall take all steps necessary to become qualified to
transact business in the State of New York, and shall be so qualified within
ninety (90) days of the date of this Agreement.
13. NEGATIVE COVENANTS.
Until payment and satisfaction in full of all Liabilities and
termination of this Agreement, unless Parent and Borrowers obtain Lender's prior
written consent waiving or modifying any of their covenants hereunder in any
specific instance, Parent and each Borrower, as applicable, agree as follows:
(A) GUARANTIES.
No Borrower shall assume, guarantee or endorse, or otherwise
become liable in connection with, the obligations of any Person, except (i) for
the existing guaranties listed on SCHEDULE 13(A) hereto, (ii) by endorsement of
instruments for deposit or collection or similar transactions in the ordinary
course of business, (iii) for guaranties given to suppliers, other vendors and
customers in the ordinary course of business and (iv) pursuant to this
Agreement.
(B) INDEBTEDNESS.
No Borrower shall create, incur, assume or become obligated
(directly or indirectly), for any loans or other indebtedness for borrowed money
other than the Loans and Liabilities, except that the Borrowers may (i) borrow
money from a Person other than Lender on an unsecured and subordinated basis if
a subordination agreement in favor of Lender and in form and substance
satisfactory to Lender is executed and delivered to Lender relative thereto;
(ii) maintain the existing indebtedness listed on SCHEDULE 11(N) hereto
(including the Shareholder Debt); (iii) incur unsecured indebtedness to trade
creditors in the ordinary course of business and for the financing of the
payment of insurance premiums; and (iv) incur purchase money indebtedness or
capitalized lease obligations in connection with Capital Expenditures permitted
pursuant to SUBSECTION 14(D) hereof in an aggregate principal amount not to
exceed Two Hundred Fifty Thousand and No/100 Dollars ($250,000) during any
Fiscal Year.
(C) LIENS.
No Borrower shall grant or permit to exist (voluntarily or
involuntarily) any lien, claim, security interest or other encumbrance
whatsoever on any of its assets, other than Permitted Liens.
(D) MERGERS, SALES, ACQUISITIONS, SUBSIDIARIES AND OTHER
TRANSACTIONS OUTSIDE THE ORDINARY COURSE OF BUSINESS.
No Borrower shall, and in the case of clause (i) hereof, the
Parent shall not, (i) enter into any merger or consolidation; PROVIDED, HOWEVER,
that any Borrower may merge with and into any other Person, so long as such
Borrower is the surviving entity of such merger, and any Borrower may merger
with and into any other Borrower; (ii) change the state of its
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organization or enter into any transaction which has the effect of changing its
state of organization (iii) sell, lease or otherwise dispose of any of its
assets other than in the ordinary course of business; (iv) purchase the stock,
other equity interests or all or a material portion of the assets of any Person
or division of such Person, PROVIDED, HOWEVER, that the Borrowers may purchase
out of the ordinary course of their business assets of other Persons in one or
more transactions in an aggregate amount not to exceed Five Hundred Thousand and
no/100 Dollars ($500,000) in any one Fiscal Year (each a "PERMITTED
ACQUISITION", and collectively, the "PERMITTED ACQUISITIONS"); PROVIDED,
FURTHER, that such Permitted Acquisitions, when aggregated with the Permitted JV
Investments made in any one Fiscal Year pursuant to SUBSECTION 13(F) hereof,
shall not exceed Seven Hundred Fifty Thousand and no/100 Dollars ($750,000) in
any one Fiscal Year; or (v) enter into any other transaction outside the
ordinary course of its business, including, without limitation, any purchase,
redemption or retirement of any shares of any class of its stock or any other
equity interest, and any issuance of any shares of, or warrants or other rights
to receive or purchase any shares of, any class of its stock or any other equity
interest. Except to the extent permitted by SUBSECTION 13(F) hereof, no Borrower
shall form any Subsidiaries or enter into any joint ventures or partnerships
with any other Person.
(E) DIVIDENDS AND DISTRIBUTIONS.
No Borrower shall declare or pay any dividend or other
distribution (whether in cash or in kind) on any class of its stock (if it is a
corporation) or on account of any equity interest in itself (if it is a
partnership, limited liability company or other type of entity), except to the
extent permitted under SUBSECTIONS 13(F), (L) OR (M) hereof, and solely for the
purposes described therein; PROVIDED, HOWEVER, that, in addition to the
foregoing, (i) the Borrowers may, on or about the date of this Agreement, pay
dividends to Parent for the purpose of (A) the repayment by Parent of principal
of the Shareholder Debt, which dividends, when aggregated with any loans made by
the Borrowers to Parent on or about the date of this Agreement pursuant to
SUBSECTION 13(F) hereof for the purpose of repayment by Parent of the
Shareholder Debt, shall not exceed Six Million and No/100 ($6,000,000) and (B)
the payment of accrued and unpaid interest on the Shareholder Debt; and (ii) at
the end of each Fiscal Year, commencing with the Fiscal Year ending on December
31, 2002, so long as Lender shall have first received payment in full of the
Annual Term Loan Prepayment for such Fiscal Year, Borrowers may pay dividends to
Parent which in the aggregate do not exceed an amount equal to twenty-five
percent (25%) of Excess Cash Flow for such Fiscal Year, MINUS any amounts loaned
to Parent pursuant to SUBSECTION 13(F) hereof, PROVIDED, FURTHER that the
following conditions (the "PAYMENT CONDITIONS") shall have been, or shall be,
met at the time of such proposed payment pursuant to clause (ii) above: (A) the
proceeds of any such proposed payment made to Parent shall only be used to (i)
repay the Shareholder Debt or (ii) repurchase or redeem shares of the common
stock of Parent; (B) no Default or Event of Default shall have occurred and be
continuing on the date of, and immediately after giving effect to, such proposed
payment; (C) for the most recently ended Fiscal Year for which financial
statements are available, commencing with the Fiscal Year ending December 31,
2002, Net Income shall not have been less than Three Million and No/100 Dollars
($3,000,000); and (D) Adjusted Availability on the date of the proposed payment,
and immediately after giving effect thereto, shall be not less than Three
Million and No/100 Dollars ($3,000,000).
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(F) INVESTMENTS; LOANS.
No Borrower shall purchase or otherwise acquire, or contract
to purchase or otherwise acquire, the obligations or stock of any Person, other
than direct obligations of the United States, PROVIDED, that the Borrowers may
make investments in joint ventures in one or more transactions in an aggregate
amount not to exceed Five Hundred Thousand and No/100 Dollars ($500,000) in any
one Fiscal Year (each a "PERMITTED JV INVESTMENT", and collectively, the
"PERMITTED JV INVESTMENTS"); PROVIDED, however, that the maximum liability which
the Borrowers can incur in connection with any one Permitted JV Investment shall
be limited to the amount invested therein; and PROVIDED, further, that such
Permitted JV Investments, when aggregated with the Permitted Acquisitions made
in any one Fiscal Year pursuant to SUBSECTION 13(D) hereof, shall not exceed
Seven Hundred Fifty Thousand and No/100 Dollars ($750,000) in any one Fiscal
Year; nor shall any Borrower lend or otherwise advance funds to any Person,
except to the extent permitted under SUBSECTIONS 13(E), (L) OR (M) hereof, and
solely for the purposes described therein, and except for advances made to
employees, officers and directors for travel and other expenses arising in the
ordinary course of business; PROVIDED, HOWEVER, that, in addition to the
foregoing, (i) the Borrowers may, on or about the date of this Agreement, make
loans to Parent for the purpose of (A) the repayment by Parent of principal of
the Shareholder Debt, which loans, when aggregated with any dividends paid by
the Borrowers to Parent on or about the date of this Agreement pursuant to
SUBSECTION 13(E) hereof for the purpose of repayment by Parent of principal of
the Shareholder Debt, shall not exceed Six Million and No/100 Dollars
($6,000,000) and (B) the payment of accrued and unpaid interest on the
Shareholder Debt; and (ii) at the end of each Fiscal Year, so long as Lender
shall have first received payment in full of the Annual Term Loan Prepayment for
such Fiscal Year, Borrowers may make loans to Parent which in the aggregate do
not exceed an amount equal to twenty-five percent (25%) of Excess Cash Flow for
such Fiscal Year MINUS any amounts paid to Parent in the form of a dividend
pursuant to SUBSECTION 13(E) hereof, PROVIDED that the Payment Conditions shall
have been, or shall be, met at the time of such proposed loan.
(G) FUNDAMENTAL CHANGES, LINE OF BUSINESS.
Neither Parent nor any Borrower shall amend its organizational
documents or change its fiscal year in any manner adverse to the interests of
the Lender, and no Borrower shall enter into a new line of business materially
different from its current business.
(H) EQUIPMENT.
No Borrower shall (i) permit any Equipment to become a Fixture
to real property unless such real property is owned by such Borrower and is
subject to a mortgage in favor of Lender, or (ii) permit any Equipment to become
an accession to any other personal property unless such personal property is
subject to a first priority lien in favor of Lender.
(I) USE OF PROCEEDS.
(i) No Borrower nor any Affiliate thereof shall use any
portion of the proceeds of the Loans, either directly or indirectly, for the
purpose of (i) purchasing any securities underwritten or privately placed by ABN
AMRO Securities (USA) Inc. ("AASI"), an
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affiliate of Lender, (ii) purchasing from AASI any securities in which AASI
makes a market, or (iii) refinancing or making payments of principal, interest
or dividends on any securities issued by a Borrower or any Affiliate, and
underwritten, privately placed or dealt in by AASI.
(ii) (A) The proceeds of the dividends or loans permitted
to be paid by the Borrowers pursuant to SUBSECTION 13(l)(i) hereof shall only be
used by Parent for the payment of management fees.
(B) The proceeds of the dividends or loans permitted
to be paid by the Borrowers pursuant to SUBSECTION 13(L)(II) hereof shall only
be used by Parent for the payment of operating expenses.
(J) AFFILIATE TRANSACTIONS.
Expect as set forth on SCHEDULE 11(I) hereto or as permitted
pursuant to SUBSECTION 11(C) hereof, no Borrower shall conduct, permit or suffer
to be conducted, transactions with Affiliates for the purchase or sale of
Inventory or services in the ordinary course of business pursuant to terms that
are less favorable to such Borrower than the terms upon which such transfers or
transactions would have been made had they been made to or with a Person that is
not an Affiliate.
(K) SETTLING OF ACCOUNTS.
Except in the ordinary course of its business, no Borrower
shall settle or adjust any Account identified by the Borrowers as an Eligible
Account or with respect to which the Account Debtor is an Affiliate without the
consent of Lender; PROVIDED, that following the occurrence and during the
continuance of an Event of Default, no Borrower shall settle or adjust any
Account without the consent of Lender.
(L) MANAGEMENT FEES; EXPENSES.
(i) The Borrowers may, in addition to the dividends and loans
permitted to be paid or made under SUBSECTIONS 13(E), (F) and (M) hereof, pay
dividends and/or make loans to the Parent the proceeds of which shall be used to
fund the payment by Parent of management fees; PROVIDED, HOWEVER, that (A) no
Default or Event of Default shall have occurred and be continuing on the date
of, and immediately after giving effect to, such payment; and (B) Adjusted
Availability on the date of the proposed payment, and immediately after giving
effect thereto, on a combined basis for all Borrowers, shall not be less than
Three Million and No/100 Dollars ($3,000,000); and (C) such payments shall not
aggregate in any one Fiscal Year more than the lesser of (x) ten percent (10%)
of net income, as defined under generally accepted accounting principles,
consistently applied, of the Parent and its Subsidiaries, on a consolidated
basis, for the immediately prior Fiscal Year and (y) One Million and No/100
Dollars ($1,000,000).
(ii) The Borrowers may, in addition to the dividends and loans
permitted to be paid or made under SUBSECTIONS 13(E), (F) and (M) hereof, pay
dividends and/or make loans to Parent in an aggregate amount not to exceed One
Million and No/100 Dollars ($1,000,000) each calendar month for the payment by
Parent of its operating expenses.
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(M) SHAREHOLDER DEBT.
In addition to the amounts which are permitted to be paid as a
dividend by the Borrowers to Parent pursuant to SUBSECTIONS 13(E) and (L)
hereof, or loaned by Borrowers to Parent pursuant to SUBSECTIONS 13(F) and (L)
hereof, so long as no Event of Default shall have occurred and be continuing or
shall occur as a result of such dividend payment or loan, the Borrowers may pay
dividends and make loans to Parent, PROVIDED the proceeds thereof are used
concurrently by Parent solely to fund scheduled payments of interest on and/or
payments of accrued interest on and/or payments of principal of the Shareholder
Debt, and PROVIDED FURTHER that Parent will not, without the prior written
consent of Lender, (i) modify or amend any material term or provision of the
documents or instruments evidencing the Shareholder Debt or the agreements
pursuant to which the Shareholder Debt is governed, except in accordance with
SUBSECTION 13(Q) hereof, or (ii) make any payment or prepayment of interest on
or principal of the Shareholder Debt, except for such scheduled installments of
interest thereon and principal thereof as are in effect on the date of this
Agreement, accrued interest thereon and those prepayments of principal thereof
allowed pursuant to SUBSECTIONS 13(E) AND (F) hereof.
(N) AVAILABILITY.
The Borrowers shall maintain at all times, on a combined
basis, Availability of not less than Five Hundred Thousand and No/100 Dollars
($500,000).
(O) PARENT SUBORDINATION.
Parent agrees and acknowledges that its right to receive any
dividend, loan or other payment from the Borrowers pursuant to SUBSECTIONS
13(E), (F), (L)(I) and (M) hereof (each, for purposes of this SUBSECTION 13(O),
a "DISTRIBUTION"), shall be subordinate and junior in right of payment to
Lender's right to receive payment of the Liabilities. Parent agrees that, until
all of the Liabilities shall have been repaid, it shall instruct each of the
Borrowers not to pay, and agrees not to accept payment of, any dividend, loan or
other payment of any kind from the Borrowers; PROVIDED, that the Parent may
receive Distributions so long as no Default or Event of Default has occurred and
is continuing under this Agreement, or would be caused by any such Distribution.
If Parent receives any Distribution or any other amounts from a Borrower in
violation of this SUBSECTION 13(O) or any other terms of this Agreement, Parent
agrees to receive and hold in trust for and promptly turn over to the Lender, in
the form received, any such sums at any time paid to, or received by, the Parent
until payment in full of the Liabilities, and to reimburse the Lender for all
costs, including reasonable attorney's fees, incurred by the Lender in the
course of collecting said sums, should Parent fail voluntarily to turn the same
over to the Lender as herein required.
(P) TRANSFER OF ASSETS.
Notwithstanding the terms of SUBSECTION 13(J) hereof, no
Borrower shall transfer any of its assets or property to any DHB Subsidiary.
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(Q) TRANSFER OF SHAREHOLDER DEBT.
Xxxxx X. Xxxxxx shall not assign or transfer any interest in
the Shareholder Debt to any other Person without the prior written consent of
Lender which shall not be unreasonably withheld or delayed (such Person, a
"PERMITTED TRANSFEREE"). Any such Permitted Transferee shall be obligated to
execute a subordination agreement substantially similar to the Subordination
Agreement by and between the Lender and Xxxxx X. Xxxxxx, dated the date of this
Agreement.
14. FINANCIAL COVENANTS.
Parent and the Borrowers shall maintain and keep in full force
and effect each of the financial covenants set forth below:
(A) TANGIBLE NET WORTH.
(i) The Tangible Net Worth of Parent and its Subsidiaries, on
a consolidated basis, shall not at any time be less than Three Million Five
Hundred Thousand and No/100 Dollars ($3,500,000).
(ii) Each Borrower shall at all times maintain a minimum
Tangible Net Worth of at least One Dollar.
(B) FIXED CHARGE COVERAGE.
Parent and the Borrowers shall not permit the ratio of EBITDA
to Fixed Charges, as of the end of each fiscal quarter, commencing with the
fiscal quarter ending on December 31, 2001, in each case with the immediately
preceding three fiscal quarters, to be less than 2.20:1.00.
(C) CONSOLIDATED EBITDA.
Parent and the Borrowers shall not permit EBITDA as of the end
of each fiscal quarter, commencing with the fiscal quarter ending on December
31, 2001, in each case with the immediately preceding three fiscal quarters, to
be less than Seven Million Five Hundred Thousand and No/100 Dollars
($7,500,000).
(D) CAPITAL EXPENDITURE LIMITATIONS.
Borrowers shall not make any Capital Expenditure if, after
giving effect to such Capital Expenditure, the aggregate cost of all such fixed
assets purchased or otherwise acquired by the Borrowers would exceed Two Million
and No/100 Dollars ($2,000,000) during any Fiscal Year, commencing with the
Fiscal Year ending on December 31, 2002.
15. DEFAULT.
The occurrence of any one or more of the following events
shall constitute an "EVENT OF DEFAULT" hereunder:
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(A) PAYMENT.
The failure of any the Borrowers to pay when due any of the
Liabilities.
(B) BREACH OF THIS AGREEMENT AND THE OTHER AGREEMENTS.
(i) The failure of any Obligor (other than a DHB Subsidiary)
to perform, keep or observe any of the covenants, conditions, promises,
agreements or obligations of such Obligor under this Agreement or any of the
Other Agreements (other than those contained in subsections 5(c), 9(a), except
to the extent information is required daily, 9(b) and 9(c), 12(a), 12(b), other
than clauses (ii) and (vii) therein, 12(c), 12(f) and 12(h); or
(ii) The failure of any Obligor (other than a DHB Subsidiary)
to perform, keep or observe (A) the covenants contained in subsection 9(a), to
the extent such information is required weekly and not daily, and such default
shall have continued unremedied for a period of two days; (B) the covenants
contained in subsections 5(c), 9(b), 9(c)(i), 12(a) or 12(b), other than clauses
(ii) and (vii) therein, and such default shall have continued unremedied for a
period of ten (10) days; or (C) the covenants contained in subsections 9(c)(ii),
12(c)(i), 12(f) or 12(h), and such default shall have continued unremedied for a
period of thirty (30) days; PROVIDED, that with respect to the covenants
contained in subsections 12(a) and 12(c), such default shall have continued
unremedied for a period of thirty (30) days from the earlier of (x) the date on
which the failure was discovered by the applicable Obligor and (y) written
notice thereof was delivered by Lender to the Borrowers.
(C) BREACHES OF OTHER OBLIGATIONS.
The failure of any Obligor (other than a DHB Subsidiary) to
(i) pay any amount when due on indebtedness of such Obligor for borrowed money,
the then unpaid aggregate principal amount of which is Fifty Thousand and No/100
Dollars ($50,000) or greater, including without limitation the Shareholder Debt.
(D) BREACH OF REPRESENTATIONS AND WARRANTIES.
The making or furnishing by any Obligor (other than a DHB
Subsidiary) to Lender of any representation, warranty, certificate, schedule,
report or other communication within or in connection with this Agreement or the
Other Agreements or in connection with any other agreement between such Obligor
and Lender, which is untrue or misleading in any material respect.
(E) LOSS OF COLLATERAL.
The loss, theft, damage or destruction of, or (except as
permitted hereby) sale, lease or furnishing under a contract of service (unless
in the ordinary course of business) of any of the Collateral having a fair
market value in excess of Two Hundred Fifty Thousand and No/100 Dollars
($250,000).
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(F) BANKRUPTCY OR SIMILAR PROCEEDINGS.
The commencement of any proceedings in bankruptcy by or
against any Obligor (other than a DHB Subsidiary) or for the liquidation or
reorganization of any Obligor (other than a DHB Subsidiary), or alleging that
such Obligor (other than a DHB Subsidiary) is insolvent or unable to pay its
debts as they mature, or for the readjustment or arrangement of any such
Obligor's (other than a DHB Subsidiary's) debts, whether under the United States
Bankruptcy Code or under any other law, whether state or federal, now or
hereafter existing, for the relief of debtors, or the commencement of any
analogous statutory or non-statutory proceedings involving any such Obligor
(other than a DHB Subsidiary); PROVIDED, HOWEVER, that if such commencement of
proceedings against such Obligor is involuntary, such action shall not
constitute an Event of Default unless such proceedings are not dismissed within
forty-five (45) days after the commencement of such proceedings.
(G) APPOINTMENT OF RECEIVER.
The appointment of a receiver or trustee for any Obligor
(other than a DHB Subsidiary), for any of the Collateral or for any substantial
part of any such Obligor's (other than a DHB Subsidiary's) assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation (unless such merger or consolidation
is otherwise permitted hereunder), of any Obligor which is a corporation,
limited liability company or a partnership (other than a DHB Subsidiary);
PROVIDED, HOWEVER, that if such appointment or commencement of proceedings
against such Obligor is involuntary, such action shall not constitute an Event
of Default unless such appointment is not revoked or such proceedings are not
dismissed within forty-five (45) days after the commencement of such
proceedings.
(H) JUDGMENT.
The entry of any judgment or order in an amount in excess of
One Hundred Thousand and No/100 Dollars ($100,000) against any Obligor (other
than a DHB Subsidiary) which remains unsatisfied or undischarged and in effect
for thirty (30) days after such entry without a stay of enforcement or
execution.
(I) DISSOLUTION OF OBLIGOR.
The dissolution of any Obligor (other than a DHB Subsidiary)
which is a partnership, limited liability company, corporation or other entity.
(J) DEFAULT OR REVOCATION OF GUARANTY.
The occurrence of an event of default under, or the revocation
or termination of, any agreement, instrument or document executed and delivered
by any Person to Lender pursuant to which such Person has guaranteed to Lender
the payment of all or any of the Liabilities or has granted Lender a security
interest in or lien upon some or all of such Person's real and/or personal
property to secure the payment of all or any of the Liabilities.
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(K) CRIMINAL PROCEEDINGS.
The conviction of any Obligor (other than a DHB Subsidiary)
for any felony.
(L) CHANGE OF CONTROL.
The failure of (i) Xxxxx X. Xxxxxx and/or members of his
immediate family, to own beneficially and of record, and have voting control of,
at least twenty percent (20%) of the issued and outstanding voting equity
interests of Parent or (ii) Parent to own beneficially and of record all of the
issued and outstanding shares of capital stock of each Borrower.
(M) CHANGE OF MANAGEMENT.
If Xxxxx X. Xxxxxx shall cease to be the Chairman or
Co-Chairman of the Board of Parent at any time or shall cease to be actively
involved, on a day-to day basis (other than due to illness or vacation of less
than three months' duration), in the business of the Parent and the Borrowers.
(N) MATERIAL ADVERSE CHANGE.
Any material adverse change in the Collateral, business,
property, assets, prospects, operations or condition, financial or otherwise of
Parent and the Borrowers, taken as a whole, as determined by Lender in its sole
judgment, exercised in a commercially reasonable manner, or the occurrence of
any event which, in Lender's sole judgment, exercised in a commercially
reasonable manner, could have a Material Adverse Effect.
(O) LIFE INSURANCE POLICY.
Life Insurance Policy shall be terminated, by the Parent or
otherwise; or the Life Insurance Policy shall be scheduled to terminate within
thirty (30) days and the Parent shall not have delivered a satisfactory renewal
thereof to the Lender; or the Parent shall fail to pay any premium on any Life
Insurance Policy when due; or the Parent shall take any other action that
impairs the value of the Life Insurance Policy.
16. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in
subsection 15(f) hereof, all of the Liabilities shall immediately and
automatically become due and payable, without notice of any kind. Upon the
occurrence of any other Event of Default, all Liabilities may, at the option of
Lender, and without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
(b) Upon the occurrence and during the continuance of an Event
of Default, (i) Lender may exercise from time to time any rights and remedies
available to it under the Uniform Commercial Code and any other applicable law
in addition to, and not in lieu of, any rights and remedies expressly granted in
this Agreement or in any of the Other Agreements and all of Lender's rights and
remedies shall be cumulative and non-exclusive to the extent permitted by law,
(ii) in particular, but not by way of limitation of the foregoing, Lender may,
without notice,
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demand or legal process of any kind (to the extent permitted by applicable law),
take possession of any or all of the Collateral (in addition to Collateral of
which it already has possession), wherever it may be found, and for that purpose
may pursue the same wherever it may be found, and may enter onto any of premises
of the Borrowers where any of the Collateral may be, and search for, take
possession of, remove, keep and store any of the Collateral until the same shall
be sold or otherwise disposed of, and Lender shall have the right to store the
same at any of premises of the Borrowers without cost to Lender, and (iii) at
Lender's request, the Borrowers shall, at Borrowers' expense, which they agree
shall be a joint and several obligation, assemble the Collateral and make it
available to Lender at one or more places to be designated by Lender and
reasonably convenient to Lender and the Borrowers. The Borrowers recognize that
if Borrowers fail to perform, observe or discharge any of their Liabilities
under this Agreement or the Other Agreements, no remedy at law will provide
adequate relief to Lender, and agree that Lender shall be entitled to temporary
and permanent injunctive relief in any such case without the necessity of
proving actual damages. Any notification of intended disposition of any of the
Collateral required by law will be deemed to be a reasonable authenticated
notification of disposition if given at least ten (10) days prior to such
disposition and such notice shall (i) describe Lender and the Borrowers, (ii)
describe the Collateral that is the subject of the intended disposition, (iii)
state the method of the intended disposition, (iv) state that Borrowers are
entitled to an accounting of the Liabilities and state the charge, if any, for
an accounting and (v) state the time and place of any public disposition or the
time after which any private sale is to be made. Lender may disclaim any
warranties that might arise in connection with the sale, lease or other
disposition of the Collateral and has no obligation to provide any warranties at
such time. Any Proceeds of any disposition by Lender of any of the Collateral
may be applied by Lender to the payment of reasonable expenses in connection
with the Collateral, including, without limitation, legal expenses and
reasonable attorneys' fees, and any balance of such Proceeds may be applied by
Lender toward the payment of such of the Liabilities, and in such order of
application, as Lender may from time to time elect.
17. CONDITIONS PRECEDENT.
(a) The obligation of Lender to fund the Term Loan, to fund
the initial Revolving Loan, and to issue or cause to be issued the initial
Letter of Credit, if funded or issued on the day of the funding of the Term
Loan, is subject to the satisfaction or waiver on or before such funding date of
the following conditions precedent:
(ii) Lender shall have received each of the agreements,
opinions, reports, approvals, consents, certificates and other documents set
forth on the closing document list attached hereto as SCHEDULE 17(A) (the
"CLOSING DOCUMENT LIST");
(iii) Since June 30, 2001, no event shall have occurred which
has had or could reasonably be expected to have a Material Adverse Effect on
Parent and its Subsidiaries, taken as a whole, or on Parent or any Borrower,
individually, as determined by Lender in its sole discretion, exercised in a
commercially reasonable manner;
(iv) Lender shall have received payment in full of all fees
and expenses payable to it by the Borrowers or any other Obligor in connection
herewith, on or before disbursement of the initial Loans hereunder;
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(v) Lender shall have determined that immediately after giving
effect to
(A) the making of the Term Loan and the initial
Revolving Loans, if any, requested to be made on such date,
(B) the issuance of the initial Letter of Credit, if
any, requested to be made on such date,
(C) the payment of all fees due upon such date,
(D) the payment or reimbursement by the Borrowers of
Lender for all closing costs and expenses incurred in connection with the
transactions contemplated hereby, and
(E) the payment of all taxes due and owing by the
Parent and the Borrowers as of the date of this Agreement, and assuming all of
Borrowers' trade payables and outstanding debt which remain unpaid more than
sixty (60) days after the due dates thereof on the date of determination, are
paid by drawing additional Revolving Loans, on a PRO FORMA basis, Adjusted
Availability shall not be less than Four Million Five Hundred Thousand and
No/100 Dollars ($4,500,000);
(vi) Lender shall have completed to its satisfaction its due
diligence review of the Parent and the Borrowers, their business and financial
affairs and the members of their management team, Lender shall have received
background investigations on the key operating members of such team, and shall
have reviewed to its satisfaction the results of a field examination performed
by Lender, as of a recent date, of the Collateral, including a final appraisal
report prepared by the Xxxxxxx Group of the Borrowers' Inventory, based on
acceptable valuation definitions, and of the Parent's and each Borrower's books
and records;
(vii) Parent and the Borrowers, taken as a whole, shall be in
compliance in all material respects with all applicable legal requirements and
shall not be in material default of any of their respective obligations to any
third parties;
(viii) Lender shall have received and reviewed to its
satisfaction evidence of each Borrower's insurance coverage and Lender shall
have been named as loss payee or additional insured under each policy of
insurance (other than workers compensation insurance), the terms of each
endorsement naming Lender as loss payee or additional insured to be satisfactory
to Lender;
(ix) Lender shall have received financial projections for
Parent and its Subsidiaries on a consolidated basis, for the first twelve (12)
months after the date of this Agreement, together with financial projections for
the second and third years, prepared on an annual basis, after the date of this
Agreement;
(x) Lender shall have had satisfactory discussions with
appropriate personnel of financial institutions with which Parent and/or the
Borrowers have had banking or lending relationships;
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(xi) Lender and counsel to Lender shall have received and
reviewed to their reasonable satisfaction all documentation and agreements
evidencing and governing any indebtedness of Parent or any Borrower, including
the Shareholder Debt. The promissory note, as amended, evidencing the
Shareholder Debt shall have a maturity date subsequent to the last day of the
Original Term. The holder of the Shareholder Debt and Lender shall have entered
into a subordination agreement (the provisions of which shall be satisfactory to
the Lender), pursuant to which (i) the Shareholder Debt shall be subordinated in
right of payment to the prior payment and satisfaction in full of all
Liabilities, and (ii) any liens or security interests which secure the
Shareholder Debt shall be subordinated in right of priority to those securing
the Liabilities;
(xii) Lender shall have reviewed to its reasonable
satisfaction the corporate and capital structure of Parent and its Subsidiaries,
on a consolidated basis, as of the date of this Agreement, and the PRO FORMA
opening balance sheet and statement of sources and uses of funds, as of the date
of this Agreement, after giving effect to the repayment of up to Six Million and
No/100 Dollars ($6,000,000) in aggregate principal amount of the Shareholder
Debt. Upon such repayment of principal of the Shareholder Debt, there shall be
at least Ten Million and No/100 Dollars ($10,000,000) outstanding in aggregate
principal amount (when aggregated with any accrued and unpaid interest thereon)
of the Shareholder Debt.
(xiii) Lender shall have received (i) landlord's waivers with
respect to each property being leased by a Borrower and where a material portion
of the Collateral is being stored, and, if required, a waiver from any
landlord's mortgagees and (ii) an acknowledgement and waiver of liens from each
warehouse in which a Borrower is storing a material portion of the Inventory;
(xiv) Lender shall have received and reviewed to its
reasonable satisfaction the unclassified sections of each government sales
contract to which Parent or a Borrower is party, including without imitation
each material contract between DFAS-CO and a Borrower; and
(xv) The Obligors shall have executed and delivered to Lender
all such other documents, instruments and agreements which Lender determines are
reasonably necessary to consummate the transactions contemplated hereby.
(b) After the date of the making of the Term Loan and the
initial Revolving Loans and issuance of the initial Letters of Credit, if any,
the obligation of Lender to make any requested Loan or issue any Letter of
Credit is subject to the satisfaction of the conditions precedent set forth
below. Each such request shall constitute a representation and warranty that
such conditions are satisfied:
(i) All representations and warranties contained in this
Agreement and the Other Agreements shall be true and correct in all material
respects on and as of the date of such request, as if then made, other than
representations and warranties that relate solely to an earlier date;
(ii) No Default or Event of Default shall have occurred and be
continuing, or would result from the making of the requested Loan or issuance of
the requested Letter of Credit, which has not been waived; and
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(iii) Since June 30, 2001, no event has occurred which has had
or would be reasonably likely to have a Material Adverse Effect on Parent and
its Subsidiaries, taken as a whole.
(c) Upon the making of each Capital Expenditure Loan, the
Borrower incurring such Capital Expenditure Loan shall execute a Capital
Expenditure Note evidencing such Loan.
18. INDEMNIFICATION.
The Borrowers agree, on a joint and several basis, to defend
(with counsel reasonably satisfactory to Lender), protect, indemnity and hold
harmless Lender, each affiliate or subsidiary of Lender, and each of their
respective officers, directors, employees, attorneys and agents (each an
"INDEMNIFIED PARTY") from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature (including, without limitation, the
disbursements and the reasonable fees of counsel for each Indemnified Party in
connection with any investigative, administrative or judicial proceeding,
whether or not the Indemnified Party shall be designated a party thereto), which
may be imposed on, incurred by, or asserted against, any Indemnified Party
(whether direct, indirect or consequential and whether based on any federal,
state or local laws or regulations, including, without limitation, securities
laws and regulations, Environmental Laws and commercial laws and regulations,
under common law or in equity, or based on contract or otherwise) in any manner
relating to or arising out of this Agreement or any Other Agreement, or any act,
event or transaction related or attendant thereto, the making or issuance and
the management of the Loans or any Letters of Credit or the use or intended use
of the proceeds of the Loans or any Letters of Credit; PROVIDED, HOWEVER, that
the Borrowers shall not have any obligation hereunder to any Indemnified Party
with respect to matters caused by or resulting from the willful misconduct or
gross negligence of any Indemnified Party. To the extent that the undertaking to
indemnify set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, the Borrowers shall satisfy such
undertaking to the maximum extent permitted by applicable law. Any liability,
obligation, loss, damage, penalty, cost or expense covered by this indemnity
shall be paid to each Indemnified Party on demand, and, failing prompt payment,
shall, together with interest thereon at the highest rate then applicable to
Loans hereunder from the date incurred by each Indemnified Party until paid by
the Borrowers, be added to the Liabilities of the Borrowers and be secured by
the Collateral. The provisions of this Section 18 shall survive the satisfaction
and payment of the other Liabilities and the termination of this Agreement.
19. NOTICE.
All written notices and other written communications with
respect to this Agreement shall be sent by ordinary, certified or overnight
mail, by telecopy or delivered in person, and in the case of Lender shall be
sent to it at 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000, attention Credit
Manager, facsimile number 000-000-0000, and, in the case of Parent or the
Borrowers shall be sent to it at its principal place of business set forth on
EXHIBIT A hereto or as otherwise directed by Parent or the Borrowers in writing.
All notices shall be deemed received upon actual receipt thereof or refusal of
delivery.
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20. CHOICE OF GOVERNING LAW: CONSTRUCTION: FORUM SELECTION.
This Agreement and the Other Agreements are submitted by
Parent and the Borrowers to Lender for Lender's acceptance or rejection at
Lender 's principal place of business as an offer by the Borrowers to borrow
monies from Lender now and from time to time hereafter, and shall not be binding
upon Lender or become effective until accepted by Lender, in writing, at said
place of business. If so accepted by Lender, this Agreement and the Other
Agreements shall be deemed to have been made at said place of business. THIS
AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND CONTROLLED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK AS TO INTERPRETATION, ENFORCEMENT,
VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING, WITHOUT
LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING
PERFECTION OF THE SECURITY INTERESTS IN COLLATERAL, WHICH SHALL BE GOVERNED AND
CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION. If any provision of this
Agreement shall be held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or remaining
provisions of this Agreement.
To induce Lender to accept this Agreement, Parent and the
Borrowers irrevocably agree that, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER
OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER
AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN
XXX XXXX XX XXX XXXX, XXXXX XX XXX XXXX; PROVIDED that Lender may elect to
commence an action or proceeding with respect to the Collateral in another
jurisdiction. PARENT AND THE BORROWERS HEREBY CONSENT AND SUBMIT TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN SAID CITY AND
STATE. Parent and the Borrowers hereby irrevocably appoint and designate
Xxxxxxxxx Xxxxxxx, LLP, whose address is 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000,
Attn: Xxxxxx Xxxxx, Esq. (or any other person having and maintaining a place of
business in such state whom Parent and the Borrowers may from time to time
hereafter designate upon ten (10) days written notice to Lender and whom Lender
has agreed in its sole discretion in writing is satisfactory and who has
executed an agreement in form and substance satisfactory to Lender agreeing to
act as such attorney and agent), as Parent's and Borrowers' true and lawful
attorney and duly authorized agent for acceptance of service of legal process.
Parent and the Borrowers agree that service of such process upon such person
shall constitute personal service of such process upon Parent and the Borrowers.
PARENT AND THE BORROWERS HEREBY WAIVE ANY RIGHT THEY MAY HAVE TO TRANSFER OR
CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST PARENT OR ANY OF THE
BORROWERS BY LENDER IN ACCORDANCE WITH THIS SECTION.
21. MODIFICATION AND BENEFIT OF AGREEMENT.
This Agreement and the Other Agreements may not be modified,
altered or amended except by an agreement in writing signed by Parent and the
Borrowers parties thereto or such other person who is a party to such Other
Agreement and Lender. Parent and the
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Borrowers may not sell, assign or transfer this Agreement, or the Other
Agreements or any portion thereof, including, without limitation, Parent's or
Borrowers' rights, titles, interest, remedies, powers or duties hereunder and
thereunder. The Parent and the Borrowers hereby consent to Lender's sale,
assignment, transfer or other disposition, at any time and from time to time
hereafter, of this Agreement, or the Other Agreements, or of any portion
thereof, or participations therein, including, without limitation, Lender's
rights, titles, interest, remedies, powers and/or duties and agrees that they
shall execute and deliver such documents as Lender may reasonably request in
connection with any such sale, assignment, transfer or other disposition.
22. HEADINGS OF SUBDIVISIONS.
The headings of subdivisions in this Agreement are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of this Agreement.
23. POWER OF ATTORNEY.
Parent and the Borrowers acknowledge and agree that their
appointment of Lender as their attorney and agent-in-fact for the purposes
specified in this Agreement is an appointment coupled with an interest and shall
be irrevocable until all of the Liabilities (other than inchoate indemnification
obligations) are satisfied and paid in full and this Agreement is terminated.
24. CONFIDENTIALITY.
Parent, the Borrowers and Lender hereby agree and acknowledge
that any and all information relating to Parent and the Borrowers which is (i)
furnished by Parent or a Borrower to Lender (or to any affiliate of Lender); and
(ii) non-public, confidential or proprietary in nature, shall be kept
confidential by Lender or such affiliate and not used for any purpose other than
in connection with this Agreement and the transactions contemplated hereunder;
PROVIDED, HOWEVER, that such information and other credit information relating
to Parent or a Borrower may be distributed by Lender or such affiliate (subject,
to the extent practicable, to the restrictions set forth in this SECTION 24) to
Lender's or such affiliate's, directors, officers, employees, attorneys,
affiliates, assignees, participants, auditors, agents and regulators, and upon
the order of a court or other governmental agency having jurisdiction over
Lender or such affiliate, to any other party. Parent, the Borrowers and Lender
further agree that this provision shall survive the termination of this
Agreement. Notwithstanding the foregoing, Parent and the Borrowers hereby
consent to Lender publishing, with Parent's prior reasonable review) a tombstone
or similar advertising material relating to the financing transaction
contemplated by this Agreement.
25. COUNTERPARTS.
This Agreement and any amendments, waivers, consents or
supplements may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which, when so executed and
delivered, shall be deemed an original, but all of which counterparts together
shall constitute but one agreement.
26. ELECTRONIC SUBMISSIONS.
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Upon not less than thirty (30) days' prior written notice (the
"APPROVED ELECTRONIC FORM NOTICE"), Lender may permit or require (in Lender's
reasonable judgment, taking into account Borrowers' existing electronic systems)
that any of the documents, certificates, forms, deliveries or other
communications, authorized, required or contemplated by this Agreement or the
Other Agreements, be submitted to Lender in "APPROVED ELECTRONIC FORM" (as
hereafter defined), subject to any reasonable terms, conditions and requirements
in the applicable Approved Electronic Forms Notice. For purposes hereof
"ELECTRONIC FORM" means e-mail, e-mail attachments, data submitted on web-based
forms or any other communication method that delivers machine readable data or
information to Lender, and "APPROVED ELECTRONIC FORM" means an Electronic Form
that has been approved in writing by Lender (which approval has not been revoked
or modified by Lender) and sent to Parent and the Borrowers in an Approved
Electronic Form Notice. Except as otherwise specifically provided in the
applicable Approved Electronic Form Notice, any submissions made in an
applicable Approved Electronic Form shall have the same force and effect that
the same submissions would have had if they had been submitted in any other
applicable form authorized, required or contemplated by this Agreement or the
Other Agreements.
27. WAIVER OF JURY TRIAL: OTHER WAIVERS.
(a) PARENT, THE BORROWERS AND LENDER EACH HEREBY WAIVES ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR
INDIRECTLY TO THIS AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE
COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY PARENT OR ANY BORROWER OR LENDER OR
WHICH, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE
RELATIONSHIP BETWEEN PARENT AND THE BORROWERS, ON THE ONE HAND, AND LENDER. IN
NO EVENT SHALL LENDER BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR
CONSEQUENTIAL DAMAGES.
(b) Parent and each Borrower hereby waive demand, presentment,
protest and notice of nonpayment, and further waives the benefit of all
valuation, appraisal and exemption laws.
(c) Parent and each Borrower hereby waive the benefit of any
law that would otherwise restrict or limit Lender or any affiliate of Lender in
the exercise of its right, which is hereby acknowledged and agreed to, to
set-off against the Liabilities, without notice at any time hereafter, any
indebtedness, matured or unmatured, owing by Lender or such affiliate of Lender
to Parent or any Borrower, including, without limitation, any deposit account at
Lender or such affiliate.
(d) PARENT AND EACH BORROWER HEREBY WAIVE ALL RIGHTS TO NOTICE
AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY LENDER OF ITS RIGHTS TO
REPOSSESS THE COLLATERAL OF THE BORROWERS WITHOUT JUDICIAL PROCESS OR TO
REPLEVY, ATTACH OR LEVY UPON SUCH COLLATERAL.
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(e) Lender's failure, at any time or times hereafter, to
require strict performance by Parent or any Borrower of any provision of this
Agreement or any of the Other Agreements shall not waive, affect or diminish any
right of Lender thereafter to demand strict compliance and performance
therewith. Any suspension or waiver by Lender of an Event of Default under this
Agreement or any default under any of the Other Agreements shall not suspend,
waive or affect any other Event of Default under this Agreement or any other
default under any of the Other Agreements, whether the same is prior or
subsequent thereto and whether of the same or of a different kind or character.
No delay on the part of Lender in the exercise of any right or remedy under this
Agreement or any Other Agreement shall preclude other or further exercise
thereof or the exercise of any right or remedy. None of the undertakings,
agreements, warranties, covenants and representations of Parent or the Borrowers
contained in this Agreement or any of the Other Agreements and no Event of
Default under this Agreement or default under any of the Other Agreements shall
be deemed to have been suspended or waived by Lender unless such suspension or
waiver is in writing, signed by Lender and directed to Parent or the Borrowers
specifying such suspension or waiver.
28. JOINT AND SEVERAL OBLIGATIONS; GUARANTEES.
(a) Each Borrower shall be jointly and severally liable with
each other Borrower for the payment and performance when due of all Liabilities.
(b) For purposes of this subsection 28(b), each of Parent and
each Borrower shall be referred to individually as a "GUARANTOR" and
collectively, as the "GUARANTORS". Each Guarantor unconditionally guarantees, as
a primary obligor and not merely as a surety, jointly and severally with each
other Guarantor, the due and punctual payment of the principal and interest on
each of the Loans and all Letter of Credit Obligations and all fees due
hereunder, in each case when and as due, whether at maturity, by acceleration,
by notice of prepayment or otherwise, and the due and punctual performance of
all other Liabilities. Each Guarantor further agrees that the Liabilities may be
extended and renewed, in whole or in part, without notice to or further assent
from it, and that it will remain bound upon its guarantee notwithstanding any
extension or renewal of any Liabilities.
(c) Each Guarantor waives presentment to, demand of payment
from and protest to the Borrowers of any of the Liabilities, and also waives
notice of acceptance of its guarantee and notice of protest for nonpayment. The
obligations of a Guarantor hereunder shall not be affected by (a) the failure of
the Lender to assert any claim or demand or to enforce any right or remedy
against the Borrowers or any other Guarantor under the provisions of this
Agreement or any of the Other Documents or otherwise; (b) any recission, waiver,
amendment or modification of any of the terms or provisions of this Agreement or
any of the Other Agreements; (c) the release of any security held by the Lender
for the Liabilities; or (d) the failure of the Lender to exercise any right or
remedy against any other Guarantor of the Liabilities.
(d) Each Guarantor further agrees that its guarantee
constitutes a guarantee of payment when due and not of collection, and waives
any right to require that any resort be had by the Lender to any security
(including, without limitation, any Collateral) held for payment of the
Liabilities or to any balance of any deposit account or credit on the books of
the Lender in favor of any Guarantor or any other person.
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(e) The obligations of each Guarantor hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including, without limitation, any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Liabilities or otherwise. Without limiting
the generality of the foregoing, the obligations of each Guarantor hereunder
shall not be discharged or impaired or otherwise affected by the failure of the
Lender to assert any claim or demand or to enforce any remedy under this
Agreement or under any Other Agreements, by any waiver or modification of any
provision thereof, by any default, failure or delay, willful or otherwise, in
the performance of the Liabilities, or by any other act or omission which may or
might in any manner or to any extent vary the risk of such Guarantor or
otherwise operate as a discharge of such Guarantor as a matter of law or equity.
(f) Each Guarantor further agrees that its guarantee shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of or interest on any Liability is
rescinded or must otherwise be returned by the Lender upon the bankruptcy or
reorganization of a Guarantor or otherwise.
(g) Each Guarantor hereby agrees not to assert or exercise,
until all Liabilities have been paid or satisfied in full and the Borrowers have
no further right to borrow Loans hereunder, any and all rights of subrogation
against the Borrowers and their property and all rights of indemnification,
contribution and reimbursement from the Borrowers and their property, in each
case in connection with this guarantee and any payments made hereunder, and
regardless of whether such rights arise by operation of law, pursuant to
contract or otherwise.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
LASALLE BUSINESS CREDIT, INC., as Lender
By____________________________________________________
Its___________________________________________________
PROTECTIVE APPAREL CORPORATION OF AMERICA, as Borrower
______________________________________________________
By____________________________________________________
Its___________________________________________________
POINT BLANK BODY ARMOR, INC., as Borrower
______________________________________________________
By____________________________________________________
Its___________________________________________________
NDL PRODUCTS, INC., as Borrower
______________________________________________________
By____________________________________________________
Its___________________________________________________
DHB INDUSTRIES INC., as Guarantor
______________________________________________________
By____________________________________________________
Its___________________________________________________
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XXX XXXXX GROUP, INC., as Grantor
______________________________________________________
By____________________________________________________
Its___________________________________________________
DHB SPORTS GROUP, INC., as Grantor
______________________________________________________
By____________________________________________________
Its___________________________________________________
LANXIDE ARMOR PRODUCTS INC., as Grantor
______________________________________________________
By____________________________________________________
Its___________________________________________________
ORTHOPEDIC PRODUCTS, INC., as Grantor
______________________________________________________
By____________________________________________________
Its___________________________________________________
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EXHIBIT A
BUSINESS AND COLLATERAL LOCATIONS
Attached to and made a part of that certain Loan and Security
Agreement of even date herewith by and among PROTECTIVE APPAREL CORPORATION OF
AMERICA, POINT BLANK ARMOR, INC., and NDL PRODUCTS, INC. (each a "BORROWER" and
collectively, the "BORROWERS"), DHB CAPITAL GROUP INC. and LASALLE BUSINESS
CREDIT, INC. ("LENDER").
A. Each Borrower's Business Locations (please indicate which location is
the principal place of business and at which locations originals and
all copies of each Borrower's books, records and accounts are kept).
1.
2.
3.
B. Other locations of Collateral (including, without limitation, warehouse
locations, processing locations, consignment locations) and all post
office boxes of each Borrower. Please indicate the relationship of such
location to each Borrower (i.e. public warehouse, processor, etc.).
1.
2.
3.
C. Bank Accounts of each Borrower (other than those at LaSalle Bank
National Association):
BANK (WITH ADDRESS) ACCOUNT NUMBER TYPE OF ACCOUNT
1.
2.
3.
EXHIBIT B
COMPLIANCE CERTIFICATE
Attached to and made a part of that certain Loan and Security
Agreement, as it may be amended in accordance with its terms from time to time,
including all exhibits attached thereto (the "AGREEMENT"), dated as of September
24, 2001, by and among PROTECTIVE APPAREL CORPORATION OF AMERICA, POINT BLANK
BODY ARMOR, INC., and NDL PRODUCTS, INC. (each a "BORROWER"), DHB CAPITAL GROUP,
INC. and LASALLE BUSINESS CREDIT, INC. ("LENDER").
This Certificate is submitted pursuant to subsection 9(c) of
the Agreement.
The undersigned hereby certifies to Lender that as of the date
of this Certificate:
1. The undersigned is the _____________________ of the
Borrowers.
2. There exists no event or circumstance which is or
which with the passage of time, the giving of notice, or both would constitute
an Event of Default, as that term is defined in the Agreement, or, if such an
event of circumstance exists, a writing attached hereto specifies the nature
thereof, the period of existence thereof and the action that the applicable
Borrower has taken or proposes to take with respect thereto.
3. No material adverse change in the condition,financial
or otherwise, business, property, or results of operations of DHB and its
Subsidiaries, taken as a whole, has occurred since [DATE OF LAST COMPLIANCE
CERTIFICATE/LAST FINANCIAL STATEMENTS DELIVERED PRIOR TO CLOSING], or, if such a
change has occurred, a writing attached hereto specifies the nature thereof and
the action that such Borrower has taken or proposes to take with respect
thereto.
4. Each Borrower is in compliance with the represent-
ations, warranties and covenants in the Agreement, or, if such Borrower is not
in compliance with any representations, warranties or covenants in the
Agreement, a writing attached hereto specifies the nature thereof, the period of
existence thereof and the action that such Borrower has taken or proposes to
take with respect thereto.
5. The financial statements of each Borrower being
concurrently delivered herewith have been prepared in accordance with generally
accepted accounting principles consistently applied and there have been no
material changes in accounting policies or financial reporting practices of such
Borrower since [DATE OF THE LAST COMPLIANCE CERTIFICATE/DATE OF LAST FINANCIAL
STATEMENTS DELIVERED PRIOR TO CLOSING] or, if any such change has occurred, such
changes are set forth in a writing attached hereto.
-2-
6. Attached hereto is a true and correct calculation of
the financial covenants contained in the Agreement.
-3-
EXHIBIT C
COMMERCIAL TORT CLAIMS
-4-
EXHIBIT D
FORM OF CAPITAL EXPENDITURE NOTE
[TO FOLLOW]
-5-
SCHEDULE 11I
AFFILIATE TRANSACTIONS
-6-
SCHEDULE 11J
NAMES AND TRADE NAMES
-7-
SCHEDULE 11N
INDEBTEDNESS
-8-
SCHEDULE 11P
PARENTS SUBSIDIARIES AND AFFILIATES
-9-
SCHEDULE 17A
CLOSING DOCUMENT LIST
-10-
