Exhibit 4.30
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REVOLVING CREDIT
AND
SECURITY AGREEMENT
GMAC COMMERCIAL CREDIT LLC,
AS LENDER
WITH
XXXXXX XXXXXXXXXX, INC. AND
PARLUX LTD.,
AS BORROWERS
July 20, 2001
TABLE OF CONTENTS
I. DEFINITIONS..........................................................................................1
1.1. Accounting Terms.........................................................................1
1.2. (a) General Terms.................................................................1
1.3 "Uniform Commercial Code Terms". ......................................................18
1.4 Certain Matters of Construction.........................................................18
II. REVOLVING ADVANCES, PAYMENTS........................................................................18
2.1. (a) Total Revolving Advances.....................................................18
(b) Discretionary Rights.........................................................19
2.2. Procedure for Borrowing Revolving Advances..............................................20
2.3. Disbursement of Revolving Advance Proceeds..............................................20
2.4. Repayment of Revolving Advances.........................................................20
2.5. Repayment of Excess Revolving Advances..................................................21
2.6. Statement of Account....................................................................21
2.7. Additional Payments.....................................................................21
2.8. Manner of Payment.......................................................................21
2.9. Mandatory Prepayments...................................................................22
2.10. Use of Proceeds.........................................................................22
2.11. Joint and Several Liability.............................................................22
III. INTEREST AND FEES...................................................................................23
3.1. Interest................................................................................23
3.2. Intentionally Deleted...................................................................24
3.3. (a) Closing Fee..................................................................24
(b) Due Diligence Fee............................................................24
(c) Unused Line Fee..............................................................24
(d) Collateral Examination Fee...................................................24
(e) Collateral Monitoring Fee....................................................24
3.4. Computation of Interest and Fees........................................................25
3.5. Maximum Charges.........................................................................25
3.6. Increased Costs.........................................................................25
3.7. Basis For Determining Interest Rate Inadequate or Unfair................................26
3.8. Capital Adequacy........................................................................26
IV. COLLATERAL: GENERAL TERMS...........................................................................27
4.1. Security Interest in the Collateral.....................................................27
4.2. Perfection of Security Interest.........................................................27
4.3. Disposition of Collateral...............................................................31
4.4. Preservation of Collateral..............................................................31
4.5. Ownership of Collateral.................................................................31
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4.6. Defense of Lender's Interests...........................................................32
4.7. Books and Records.......................................................................32
4.8. Financial Disclosure....................................................................32
4.9. Compliance with Laws....................................................................33
4.10. Inspection of Premises..................................................................33
4.11. Insurance...............................................................................33
4.12. Failure to Pay Insurance................................................................34
4.13. Payment of Taxes........................................................................34
4.14. Payment of Leasehold Obligations........................................................34
4.15. Accounts and other Receivables..........................................................35
(a) Nature of Accounts...........................................................35
(b) Solvency of Customers........................................................35
(c) Locations of Borrower........................................................35
(d) Collection of Receivables....................................................35
(e) Notification of Assignment of Receivables....................................35
(f) Power of Lender to Act on Borrower's Behalf..................................35
(g) No Liability.................................................................36
(h) Establishment of a Lockbox Account, Dominion Account.........................37
(i) Adjustments..................................................................37
4.16. Inventory...............................................................................37
4.17. Maintenance of Equipment................................................................37
4.18. Exculpation of Liability................................................................37
4.19. Environmental Matters...................................................................38
4.20. Financing Statements....................................................................40
V. REPRESENTATIONS AND WARRANTIES......................................................................40
5.1. Authority...............................................................................40
5.2. Formation and Qualification.............................................................40
5.3. Survival of Representations and Warranties..............................................41
5.4. Tax Returns.............................................................................41
5.5. Financial Statements....................................................................42
5.6. Corporate Name..........................................................................42
5.7. O.S.H.A. and Environmental Compliance...................................................42
5.8. Solvency; No Litigation, Violation, Indebtedness or Default.............................43
5.9. Patents, Trademarks, Copyrights and Licenses............................................44
5.10. Licenses and Permits....................................................................44
5.11. Default of Indebtedness.................................................................44
5.12. No Default..............................................................................44
5.13. No Burdensome Restrictions..............................................................45
5.14. No Labor Disputes.......................................................................45
5.15. Margin Regulations......................................................................45
5.16. Investment Company Act..................................................................45
5.17. Disclosure..............................................................................45
5.18. Swaps...................................................................................45
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5.19. Conflicting Agreements..................................................................45
5.20. Application of Certain Laws and Regulations.............................................45
5.21. Business and Property of Borrower.......................................................46
VI. AFFIRMATIVE COVENANTS...............................................................................46
6.1. Payment of Fees.........................................................................46
6.2. Conduct of Business and Maintenance of Existence and Assets.............................46
6.3. Violations..............................................................................47
6.4. Government Receivables..................................................................47
6.5. Tangible Net Worth......................................................................47
6.6. Minimum EBITDA..........................................................................47
6.7. Fixed Charge Coverage Ratio.............................................................47
6.8. Maximum Funded Debt/EBITDA Ratio........................................................47
6.9. Execution of Supplemental Instruments...................................................47
6.10. Payment of Indebtedness.................................................................47
6.11. Standards of Financial Statements.......................................................48
VII. NEGATIVE COVENANTS..................................................................................48
7.1. Merger, Consolidation, Acquisition and Sale of Assets...................................48
7.2. Creation of Liens.......................................................................48
7.3. Guarantees..............................................................................48
7.4. Investments.............................................................................48
7.5. Loans...................................................................................49
7.6. Capital Expenditures....................................................................49
7.7. Dividends...............................................................................49
7.8. Indebtedness............................................................................49
7.9. Nature of Business......................................................................49
7.10. Transactions with Affiliates............................................................49
7.11. Leases..................................................................................49
7.12. Subsidiaries............................................................................50
7.13. Fiscal Year and Accounting Changes......................................................50
7.14. Pledge of Credit........................................................................50
7.15. Amendment of Articles of Incorporation, By-Laws.........................................50
7.16. Compliance with ERISA...................................................................50
7.17. Prepayment of Indebtedness..............................................................51
VIII. CONDITIONS PRECEDENT................................................................................51
8.1. Conditions to Initial Revolving Advances................................................51
(a) Notes........................................................................51
(b) Filings, Registrations and Recordings........................................51
(c) Corporate Proceedings of Borrower and Guarantors.............................51
(d) Incumbency Certificates of Borrower and Guarantors...........................51
(e) Certificates.................................................................52
(f) Good Standing Certificates...................................................52
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(g) Legal Opinions...............................................................52
(h) No Litigation................................................................52
(i) Collateral Examination/Lien Searches.........................................52
(j) Financial Condition Certificates.............................................53
(k) Fees.........................................................................53
(l) Financial Information........................................................53
(m) Other Documents..............................................................53
(n) Insurance....................................................................53
(o) Payment Instructions.........................................................54
(p) Blocked Accounts.............................................................54
(q) Consents.....................................................................54
(r) No Adverse Material Change...................................................54
(s) Contract Review..............................................................54
(t) Closing Certificate..........................................................54
(u) Borrowing Base...............................................................55
(v) Undrawn Availability.........................................................55
(w) Other........................................................................55
(x) Leasehold Agreements.........................................................55
8.2. Conditions to Each Revolving Advance....................................................55
(a) Representations and Warranties...............................................55
(b) No Default...................................................................55
(c) Maximum Revolving Advances...................................................55
IX. INFORMATION AS TO BORROWERS.........................................................................56
9.1. Disclosure of Material Matters..........................................................56
9.2. Schedules...............................................................................56
9.3. Environmental Reports...................................................................56
9.4. Litigation..............................................................................56
9.5. Material Occurrences....................................................................56
9.6. Government Receivables..................................................................57
9.7. Annual Financial Statements.............................................................57
9.8. Monthly Financial Statements............................................................57
9.9. Other Reports/Consolidating Statements..................................................58
9.10. Additional Information..................................................................58
9.11. Projected Operating Budget..............................................................58
9.12. Variances From Operating Budget.........................................................58
9.13. Notice of Suits, Adverse Events.........................................................59
9.14. ERISA Notices and Requests..............................................................59
9.15. Additional Documents....................................................................59
X. EVENTS OF DEFAULT...................................................................................60
XI. LENDER'S RIGHTS AND REMEDIES AFTER DEFAULT..........................................................62
11.1. Rights and Remedies.....................................................................62
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11.2. Lender's Discretion.....................................................................63
11.3. Setoff..................................................................................64
11.4. Rights and Remedies not Exclusive.......................................................64
XII. WAIVERS AND JUDICIAL PROCEEDINGS....................................................................64
12.1. Waiver of Notice........................................................................64
12.2. Delay...................................................................................64
12.3. JURY TRIAL WAIVER.......................................................................64
XIII. EFFECTIVE DATE AND TERMINATION......................................................................65
13.1. Term....................................................................................65
13.2. Termination.............................................................................65
XIV. BORROWING AGENCY....................................................................................66
14.1. Borrowing Agency Provisions.............................................................66
14.2. Waiver of Subrogation...................................................................67
XV. MISCELLANEOUS.......................................................................................67
15.1. Governing Law...........................................................................67
15.2. Entire Understanding....................................................................67
15.3. Successors and Assigns; Participations; New Lenders.....................................68
15.4. Application of Payments.................................................................68
15.5. Indemnity...............................................................................68
15.6. Notice..................................................................................69
15.7. Survival................................................................................70
15.8. Severability............................................................................70
15.9. Expenses................................................................................70
15.10. Injunctive Relief.......................................................................70
15.11. Consequential Damages...................................................................71
15.12. Captions................................................................................71
15.13. Counterparts; Telecopied Signatures.....................................................71
15.14. Construction............................................................................71
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REVOLVING CREDIT
AND
SECURITY AGREEMENT
Revolving Credit and Security Agreement dated as of July 20, 2001 by
and among XXXXXX XXXXXXXXXX, INC., a corporation organized under the laws of the
State of Delaware ("Fragrances"), PARLUX LTD., a corporation organized under the
laws of the state of New York ("Parlux"; and together with Fragrances, each
individually a "Borrower" and, collectively, the "Borrowers") and GMAC
COMMERCIAL CREDIT LLC, a limited liability company formed under the laws of the
State of New York ("Lender").
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, each of Borrowers and Lender hereby agree as follows:
I. DEFINITIONS.
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1.1. Accounting Terms. As used in this Agreement, the Note, or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP, provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP applied in preparation of the audited
financial statements of Borrowers for the fiscal year ended March 31, 2001.
1.2. (a) General Terms. For purposes of this Agreement the
following terms shall have the following meanings:
"Accountants" shall have the meaning set forth in Section 9.7
hereof.
"Accounts" shall mean all present and future rights of any
Borrower to payment of a monetary obligation, whether or not earned by
performance, which is not evidenced by chattel paper or an instrument, (a) for
property that has been or is to be sold, leased, licensed, assigned, or
otherwise disposed of, (b) for services rendered or to be rendered, (c) for a
secondary obligation incurred or to be incurred, or (d) arising out of the use
of a credit or charge card or information contained on or for use with the card.
"Accounts Advance Rate" shall have the meaning set forth in
Section 2.1(a)(i) hereof.
"Advance Rates" shall have the meaning set forth in Section
2.1(a)(ii) hereof.
"Affiliate" of any Person shall mean (a) any Person (other
than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with such Person, or (b) any Person
who is a director or executive officer of such Person, of any Subsidiary of such
Person or of any Person described in clause (a) above. For purposes of this
definition, control of a Person shall mean the power, direct or indirect, (i) to
vote ten percent (10%) or more of the securities having ordinary voting power
for the election of directors of such Person, or (ii) to direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise.
"Alternate Base Rate" shall mean, for any day, a rate per
annum equal to the higher of (a) the Prime Rate in effect on such day and (b)
the Federal Funds Rate in effect on such day plus one half of one percent (1/2
%).
"Applicable Margin for Domestic Rate Revolving Loans" for any
given quarter, (a) for the period commencing on the Closing Date and ending on
March 31, 2002, the Applicable Margin for Domestic Rate Revolving Loans shall be
1.0%; and (b) commencing on the first day of the quarter immediately following
the date on which Borrowers deliver to Lender audited annual financial
statements for the fiscal year ending March 31, 2002 in accordance with Section
9.7 of this Agreement, and at all times thereafter for the balance of the Term,
if the Borrowers' Leverage Ratio for Borrowers' immediately preceding fiscal
quarter (as determined from the Borrowers' financial statements delivered for
the last month of the applicable quarter in accordance with Section 9.8 hereof,
which financial statements shall be acceptable in form and substance to Lender),
is (i) greater than or equal to 6.0:1, then the Applicable Margin for Domestic
Rate Revolving Loans for such quarter shall be 1.50%; (ii) greater than or equal
to 5.5:1 but less than 6.0:1, then the Applicable Margin for Domestic Rate
Revolving Loans for such quarter shall be 1.25%; (iii) greater than or equal to
4.5:1 but less than 5.5:1, then the Applicable Margin for Domestic Rate
Revolving Loans for such quarter shall be 1.00%; (iv) greater than or equal to
3.5:1 but less than 4.5:1, then the Applicable Margin for Domestic Rate
Revolving Loans for such quarter shall be 0.75%; (v) greater than or equal to
2.5:1 but less than 3.5:1, then the Applicable Margin for Domestic Rate
Revolving Loans shall be 0.50%; and (vi) less than 2.5:1, then the Applicable
Margin for Domestic Rate Revolving Loans for such quarter shall be 0.00%.
Notwithstanding anything to the contrary set forth herein, if after March 31,
2002, Borrowers shall fail to deliver financial statements in accordance with
Section 9.7 or 9.8 in form and substance satisfactory to Lender, then the
Applicable Margin for Domestic Rate Revolving Loans for the applicable quarter
shall be 1.50%.
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"Applicable Margin for LIBOR Rate Revolving Loans" shall mean,
for any given quarter, (a) for the period commencing on the Closing Date and
ending on March 31, 2002, the Applicable Margin for LIBOR Rate Revolving Loans
shall be 3.75%; and (b) for the period commencing on the first day of the
quarter immediately following the date on which Borrowers deliver to Lender
audited annual financial statements for the fiscal year ending March 31, 2002 in
accordance with Section 9.7 of this Agreement and at all times thereafter for
the balance of the Term, if the Borrowers' Leverage Ratio for Borrowers'
immediately preceding fiscal quarter (as determined from the Borrowers'
financial statements delivered for the last month of the applicable quarter in
accordance with Section 9.8 hereof, which financial statements shall be
acceptable in form and substance acceptable to Lender), is (i) greater than or
equal to 6.0:1, then the Applicable Margin for LIBOR Rate Revolving Loans for
such quarter shall be 4.25%; (ii) greater than or equal to 5.5:1 but less than
6.0:1, then the Applicable Margin for LIBOR Rate Revolving Loans for such
quarter shall be 4.00%; (iii) greater than or equal to 4.5:1 but less than
5.5:1, then the Applicable Margin for LIBOR Rate Revolving Loans for such
quarter shall be 3.75%; (iv) greater than or equal to 3.5:1 but less than 4.5:1,
then the Applicable Margin for LIBOR Rate Revolving Loans for such quarter shall
be 3.50%; (v) greater than or equal to 2.5:1 but less than 3.5:1, then the
Applicable Margin for LIBOR Rate Revolving Loans shall be 3.25%; and (vi) less
than 2.5:1, then the Applicable Margin for LIBOR Rate Revolving Loans for such
quarter shall be 2.75%. Notwithstanding anything to the contrary set forth
herein, if after March 31, 2002 the Borrower shall fail to deliver financial
statements in accordance with Section 9.7 or 9.8 hereof, in form and substance
satisfactory to Lender, then the Applicable Margin for LIBOR Rate Revolving
Loans for the applicable quarter shall be 4.25%.
"Authority" shall have the meaning set forth in Section
4.19(d).
"Bank" shall mean The Bank of New York, and its successors and
assigns.
"Blocked Accounts" shall have the meaning set forth in Section
4.15(h).
"Borrower" or "Borrowers" shall have the meaning set forth in
the preamble to this Agreement and shall extend to all permitted successors and
assigns of such Persons.
"Borrowing Agent" shall mean Xxxxxx Xxxxxxxxxx, Inc.
"Business Day" shall mean with respect to LIBOR Rate Revolving
Loans, any day on which commercial banks are open for domestic and international
business, including dealings in Dollar deposits in London, England and New York,
New York and with respect to all other loans, any day other than a day on which
commercial banks in New York are authorized or required by law to close.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.ss.9601 et seq.
"Change of Control" shall mean (a) the occurrence of any event
(whether in one or more transactions) which results in a transfer of control of
any Borrower to a Person or (b) any merger or consolidation of or with any
Borrower or sale of all or substantially all of the property or assets of any
Borrower. For purposes of this definition, "control of Borrower" shall mean the
power, direct or indirect (i) to vote 50% or more of the securities having
ordinary voting power for the election of directors of any Borrower or (ii) to
direct or cause the direction of the management and policies of any Borrower by
contract or otherwise.
3
"Charges" shall mean all taxes, charges, fees, imposts, levies
or other assessments, including, without limitation, all net income, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation
and property taxes, custom duties, fees, assessments, liens, claims and charges
of any kind whatsoever, together with any interest and any penalties, additions
to tax or additional amounts, imposed by any taxing or other authority, domestic
or foreign (including, without limitation, the PBGC or any environmental agency
or superfund), upon the Collateral, any Borrower or any of its Subsidiaries.
"Closing Date" shall mean the date hereof or such other date
as may be agreed to in writing by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time and the regulations promulgated thereunder.
"Collateral" shall mean and include, with respect to each
Borrower:
(a) all Accounts;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Real Property;
(f) all Subsidiary Stock;
(g) all of Borrower's present and future
right, title and interest in and to (i) goods and other property including, but
not limited to, all merchandise returned or rejected by Customers, relating to
or securing any of the Receivables; (ii) all of Borrower's rights as a
consignor, a consignee, an unpaid vendor, mechanic, artisan, or other lienor,
including stoppage in transit, setoff, detinue, replevin, reclamation and
repurchase; (iii) all additional amounts due to Borrower from any Customer
relating to the Receivables; (iv) other property, including warranty claims,
relating to any goods securing this Agreement; (v) all of Borrower's contract
rights, rights of payment which have been earned under a contract right,
instruments (including all promissory notes), documents, chattel paper
(including all tangible and electronic chattel paper), warehouse receipts,
deposit accounts, money, securities and investment property (including
securities, whether certificated or uncertificated, securities accounts,
security entitlements, commodity contracts or commodity accounts), credit
balances and other property of Borrower now or hereafter held or received by or
intransit to Lender or any of Lender's Affiliates or at any other depository or
other institution from or for the account of Borrower whether for safekeeping,
pledge, custody, transmission, collection or otherwise; (vi) if and when
obtained by Borrower, all real and personal property of third parties in which
Borrower has been granted a lien or security interest as security for the
payment or enforcement of Receivables and including deposits by and property of
account debtors or other persons securing
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the obligations of account debtors; (vii) any other goods, personal property or
real property now owned or hereafter acquired in which Borrower has expressly
granted a security interest or may in the future grant a security interest to
Lender hereunder, or in any amendment or supplement hereto or thereto, or under
any other agreement between Lender and Borrower; (viii) all letters of credit,
banker's acceptances and similar instruments and including all letter-of-credit
rights; and (ix) all commercial tort claims, including, without limitation, all
commercial tort claims set forth on Schedule 4.2(g);
(h) all present and future supporting
obligations and all present and future liens, security interests, rights,
remedies, title and interest in, to and in respect of Receivables and other
Collateral, including (i) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (ii) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (iii) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing,
Receivables or other Collateral, including returned, repossessed and reclaimed
goods, and (iv) deposits by and property of account debtors or other persons
securing the obligations of account debtors;
(i) to the extent not otherwise described above,
all Receivables;
(j) all of Borrower's ledger sheets, ledger
cards, files, correspondence, Records, books of account, business papers,
computers, computer software (whether owned by any Borrower or in which it has
an interest), computer programs, tapes, disks and documents relating to (a),
(b), (c), (d), (e), (f), (g), (h) or (i) of this Paragraph; and
(k) all proceeds and products of (a), (b), (c),
(d), (e), (f), (g), (h), (i) and (j) in whatever form, including, but not
limited to: cash, deposit accounts (whether or not comprised solely of
proceeds), certificates of deposit, insurance proceeds (including hazard, flood
and credit insurance), negotiable instruments and other instruments for the
payment of money, chattel paper, security agreements, documents, eminent domain
proceeds, condemnation proceeds and tort claim proceeds.
"Consents" shall mean all filings and all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and other third parties, domestic or foreign, necessary to carry on
any Borrower's business, including, without limitation, any Consents required
under all applicable federal, state or other applicable law.
"Controlled Group" shall mean all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with any Borrower, are treated as a single
employer under Section 414 of the Code.
"Customer" shall mean and include the account debtor with
respect to any Account, other Receivable and/or the prospective purchaser of
goods, services or both with respect to any contract or contract right, and/or
any party who enters into or proposes to enter into any contract or other
arrangement with any Borrower, pursuant to which such Borrower is to deliver any
personal property or perform any services.
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"Default" shall mean an event which, with the giving of notice
or passage of time or both, would constitute an Event of Default.
"Default Rate" shall mean a rate equal to two percent (2%) per
annum in excess of the Revolving Interest Rate or the Overadvance Rate, as the
case may be.
"Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Lender, by and among Lender, any
Borrower and any bank at which any deposit account of Borrowers is at any time
maintained which provides that such bank will comply with the irrevocable
instructions originated by Lender directing disposition of the funds in the
deposit account without further consent by Borrowers and such other terms and
conditions as Lender may require, including as to any such agreement with
respect to any Blocked Account, providing that all items received or deposited
in the Blocked Accounts are the property of Lender, that the bank has no lien
upon, or right to setoff against, the Blocked Accounts, the items received for
deposit therein, or the funds from time to time on deposit therein and that the
bank will wire, or otherwise transfer, in immediately available funds, on a
daily basis to an account designated by Lender in writing all funds received or
deposited into the Blocked Accounts.
"Depository Accounts" shall have the meaning set forth in
Section 4.15(h) hereof.
"Documents" shall have the meaning set forth in Section 8.1(c)
hereof.
"Dollars" and the sign "$" shall mean lawful money of the
United States of America.
"Domestic Rate Revolving Loan" shall mean any Revolving
Advance that bears interest based upon the Alternate Base Rate.
"EBITDA" shall mean for any given period for Borrowers on a
consolidated basis (1) net income (or loss) determined in accordance with GAAP
exclusive of all extraordinary gains as defined by GAAP plus (2) taxes, plus (3)
interest expense plus (4) depreciation and amortization and other non-cash
expenses during such period. EBITDA shall be determined on a trailing twelve
(12) month basis.
"Eligible Inventory" shall mean and include Inventory held for
sale by each Borrower in the ordinary course of business, valued at the lower of
cost or market value, determined on a first-in-first-out basis, which is not, in
Lender's opinion, obsolete, slow moving or unmerchantable, and which Lender, in
its sole discretion, shall not deem ineligible Inventory, based on such
considerations as Lender may from time to time deem appropriate including,
without limitation, whether the Inventory is subject to a perfected, first
priority security interest in favor of Lender and whether the Inventory conforms
to all standards imposed by any governmental agency, division or department
thereof which has regulatory authority over such goods or the use or sale
thereof. "Eligible Inventory" includes Inventory, excluding work in process, (i)
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at a public warehouse or at premises leased by Borrower, provided that, Lender
shall have received an agreement in writing from the owner or lessor of such
premises, in form and substance satisfactory to Lender, acknowledging Lender's
first priority security interest in the Inventory, waiving security interests
and claims by such person against such Inventory and permitting Lender access
to, and the right to remain on, the premises so as to exercise Lender's rights
and remedies and otherwise deal with the Collateral and (ii) at a location owned
by a processor of the Inventory, provided that, (x) the aggregate value of such
Inventory located at any such location, valued and the lower of cost or market,
is in excess of $100,000 and (y) Lender shall have received an agreement in
writing from the processor of such Inventory, in form and substance satisfactory
to Lender, acknowledging Lender's first priority security interest in the
Inventory, waiving security interests and claims by such person against such
Inventory and agreeing to take direction from Lender , Lender's exercise of its
rights and remedies regarding the Collateral. In general, Eligible Inventory
shall not include (a) packaging and shipping materials; (b) work in process or
supplies used or consumed in Borrower's business; (c) Inventory subject to a
security interest or lien in favor of any person other than Lender except those
permitted in this Agreement including Permitted Encumbrances; (d) xxxx and hold
goods; (e) unserviceable, obsolete or slow moving Inventory; (f) Inventory which
is not subject to the first priority, valid and perfected security interest of
Lender; (g) damaged and/or defective Inventory (h) returned Inventory that is
not held for resale; (i) Inventory subject to deposits made by customers for
sales of Inventory that has not been delivered; (j) Inventory held after the
applicable expiration date thereof; (k) testers and samples; and (l) Inventory
purchased or sold on consignment. General criteria for Eligible Inventory may be
established and revised from time to time by Lender in its sole and absolute
discretion.
"Eligible Accounts" shall mean and include with respect to
each Borrower each Account of such Borrower (other than Perfumania Receivables)
arising in the ordinary course of such Borrower's business and which Lender, in
its sole credit judgment, shall deem to be an Eligible Account, based on such
considerations as Lender may from time to time deem appropriate. An Account
shall not be deemed eligible unless such Account is subject to Lender's
perfected security interest and no other Lien other than Permitted Encumbrances,
and is evidenced by an invoice, xxxx of lading or other documentary evidence
satisfactory to Lender. In addition, no Account shall be an Eligible Account if:
(a) it arises out of a sale made or rendition of service by
such Borrower to an Affiliate of such Borrower or to a Person controlled by an
Affiliate of such Borrower;
(b) it is due or unpaid more than ninety (90) days after the
original invoice date or more than sixty (60) days after the original due date;
(c) fifty percent (50%) or more of the Accounts from the
Customer are not deemed Eligible Accounts hereunder. Such percentage may, in
Lender's sole discretion, be increased or decreased from time to time;
(d) any covenant, representation or warranty contained in this
Agreement with respect to such Account has been breached;
7
(e) the Customer shall (i) apply for, suffer, or consent to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property
or call a meeting of its creditors, (ii2) admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present business, (iii) make a general assignment for the benefit of creditors,
(iv) commence a voluntary case under any state or federal bankruptcy laws (as
now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (iv)
file a petition seeking to take advantage of any other law providing for the
relief of debtors, (vii) acquiesce to, or fail to have dismissed, any petition
which is filed against it in any involuntary case under such bankruptcy laws, or
(viii) take any action for the purpose of effecting any of the foregoing;
(f) the sale or rendition of services is to a Customer outside
the United States of America, Puerto Rico or Canada, unless the sale is on
letter of credit, guaranty or acceptance terms, in each case acceptable to
Lender in its sole discretion;
(g) the sale to the Customer is on a xxxx-and-hold, guaranteed
sale, sale-and-return, sale on approval, consignment or any other repurchase or
return basis or is evidenced by chattel paper;
(h) Lender believes, in its sole judgment that collection of
such Account is insecure or that such Account may not be paid by reason of the
Customer's financial inability to pay;
(i) the Customer is the United States of America, any state or
any department, agency or instrumentality of any of them, unless such Borrower
effectuates an assignment of its right to payment of such Account to Lender
pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C.
Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise
complied with other applicable statutes or ordinances;
(j) the goods giving rise to such Account have not been
shipped and delivered to and accepted by the Customer or the services giving
rise to such Account have not been performed by the applicable Borrower and
accepted by the Customer or the Account otherwise does not represent a final
sale or completed rendition of service;
(k) the Accounts of the Customer exceed a credit limit
determined by Lender, in its sole discretion, to the extent such Account exceeds
such limit;
(l) an Account is subject to any offset, deduction, defense,
dispute, or counterclaim, or an Account is contingent in any respect or for any
reason, or an Account is from a Customer that is also a creditor or supplier of
a Borrower;
(m) Borrower has made any agreement with a Customer for any
deduction therefrom, except for discounts or allowances made in the ordinary
course of business for prompt payment, all of which discounts or allowances are
reflected in the calculation of the face value of each respective invoice
related thereto;
8
(n) shipment of the merchandise or the rendition of services
has not been completed;
(o) any return, rejection or repossession of the merchandise
whose sale gave rise to the Account has occurred;
(p) such Account is not payable to a Borrower; or
(q) such Account is not otherwise satisfactory to Lender as
determined in good faith by Lender in the exercise of its discretion in a
reasonable manner.
"Environmental Complaint" shall have the meaning set forth in
Section 4.19(d) hereof.
"Environmental Laws" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
"Equipment" shall mean all of Borrower's now owned and
hereafter acquired goods (other than inventory), wherever located, including,
without limitation, equipment, machinery, vehicles, tools, furniture, fixtures,
data processing and computer equipment and computer hardware and software,
whether owned or licensed, and including embedded software, all attachments,
accessions and property now or hereafter affixed thereto or used in connection
therewith, and substitutions and replacements thereof, wherever located.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time and the rules and regulations promulgated
thereunder.
"Event of Default" shall mean the occurrence of any of the
events set forth in Article X hereof.
"Federal Funds Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or if such day is not a Business Day, for the next immediately preceding
Business Day) by the Federal Reserve Bank of New York, or if such rate is not so
published for any day which is a Business Day, the average of quotations for
such day on such transactions received by the Bank from three Federal funds
brokers of recognized standing selected by the Bank.
9
"Fixed Charge Coverage Ratio" shall mean as at the end of each
quarter, determined on a consolidated basis for Borrowers, the ratio for any
given computation period of (a) EBITDA to (b) the sum of (i) the interest
expense (including all imputed interest on capital lease obligations of
Borrowers) plus (ii) the aggregate amount of all scheduled debt repayments
(including all imputed principal payments on capital lease obligations of
Borrowers but excluding all Revolving Credit Advances) plus (iii) cash taxes
paid by Borrowers, plus (iv) unfinanced capital expenditures, in all cases for
such quarter.
"Formula Amount" shall have the meaning set forth in Section
2.1(a).
"Funded Debt" shall mean for Borrowers on a consolidated
basis, all liabilities for borrowed money, including, without limitation,
capitalized lease obligations.
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time.
"General Intangibles" shall mean and include as to each
Borrower all of such Borrower's general intangibles, whether now owned or
hereafter acquired including, without limitation, all choses in action, causes
of action, corporate or other business records, patents, patent rights, patent
applications, equipment formulations, manufacturing procedures, quality control
procedures, trademarks, service marks, service xxxx applications, goodwill
(including any goodwill associated with any trademark or the license of any
trademark), copyrights, works which are the subject matter of copyrights, rights
in works of authorship, copyright registrations, inventions, tradesecrets,
formulae, processes, compounds, drawings, designs, blueprints, surveys, reports,
manuals and operating standards, design rights, registrations, licenses,
franchises, customer lists, tax refunds, tax refund claims, computer programs,
domaine names, domaine name registrations, software and contract rights relating
to software, all claims under guaranties, security interests or other security
held by or granted to such Borrower to secure payment of any of the Receivables
by a Customer, all rights of indemnification and all other intangible property
of every kind and nature (other than Receivables).
"Governmental Body" shall mean any nation or government, any
state or other political subdivision thereof or any entity exercising the
legislative, judicial, regulatory or administrative functions of or pertaining
to a government.
"Guarantor" shall mean, individually and collectively, any
Person that at any time executes a Guaranty.
"Guaranty" shall mean, individually and collectively, each
Guaranty of the Obligations of Borrowers executed by a Guarantor in favor of
Lender.
"Hazardous Discharge" shall have the meaning set forth in
Section 4.19(d) hereof.
10
"Hazardous Substance" shall mean, without limitation, any
flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, or any other
applicable Environmental Law and in the regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous
waste disposal.
"Indebtedness" of a Person at a particular date shall mean all
obligations of such Person which in accordance with GAAP would be classified
upon a balance sheet as liabilities (except capital stock and surplus earned or
otherwise) and in any event, without limitation by reason of enumeration, shall
include all indebtedness, debt and other similar monetary obligations of such
Person whether direct or guaranteed, and all premiums, if any, due at the
required prepayment dates of such indebtedness, and all indebtedness secured by
a Lien on assets owned by such Person, whether or not such indebtedness actually
shall have been created, assumed or incurred by such Person. Any indebtedness of
such Person resulting from the acquisition by such Person of any assets subject
to any Lien shall be deemed, for the purposes hereof, to be the equivalent of
the creation, assumption and incurring of the indebtedness secured thereby,
whether or not actually so created, assumed or incurred.
"Inventory" shall mean, with respect to each Borrower, all of
such Borrower's now owned and hereafter existing or acquired goods, wherever
located, which (a) are leased by such Borrower as lessor; (b) are held by such
Borrower for sale or lease or to be furnished under a contract of service; (c)
are furnished by such Borrower under a contract of service; or (d) consist of
raw materials, work in process, finished goods or materials used or consumed in
its business, together with all documents of title or other documents
representing or relating to any of the foregoing.
"Inventory Advance Rate" shall have the meaning set forth in
Section 2.1(a)(ii) hereof.
"Investment Property Control Agreement" shall mean an
agreement in writing, in form and substance satisfactory to Lender, by and among
Lender, any Borrower and any securities intermediary, commodity intermediary or
other person who has custody, control or possession of any investment property
of such Borrower acknowledging that such securities intermediary, commodity
intermediary or other person has custody, control or possession of such
investment property on behalf of Lender, that it will comply with entitlement
orders originated by Lender with respect to such investment property, or other
instructions of Lender, or (as the case may be) apply any value distributed on
account of any commodity contract as directed by Lender, in each case, without
the further consent of such Borrower and including such other terms and
conditions as Lender may require.
11
"Lender" shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which is a transferee,
successor or assign of Lender.
"Lender's security interest" or words of similar import shall
have the meaning set forth in Section 4.1 hereof.
"Leverage Ratio" shall mean as at the end of each quarter, the
ratio, for any given computation period of (a) Funded Debt to (b) EBITDA.
"LIBOR Rate" shall mean the London Interbank Offered Rate for
the period of one month, as published in The Wall Street Journal, computed and
averaged on a monthly basis and adjusted for reserves.
"LIBOR Rate Revolving Loan" shall mean a Revolving Advance at
any time that bears interest based upon the LIBOR Rate.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the condition, operations, assets, business or prospects of the
applicable Person or Persons, (b) any Borrower's ability to pay the Obligations
in accordance with the terms thereof, (c) the value of the Collateral, the Liens
on the Collateral or the priority of any such Lien or (d) the practical
realization of the benefits of Lender's rights and remedies under this Agreement
and the Other Documents.
"Maximum Loan Amount" shall mean $20,000,000.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Sections 3(37) and 4001(a)(3) of ERISA to which a Borrower or any
member of the Controlled Group is required to contribute.
"Net Face Amount" of Perfumania Receivables means the gross
face invoice amount thereof, less returns, discounts (the calculation of which
shall be determined by Lender where optional terms are given), anticipation or
any other unilateral deductions taken by Perfumania, Inc. and credits and
allowances to Perfumania, Inc. of any nature.
"Net Income" means the net income of Borrowers determined on a
consolidated basis in accordance with GAAP, consistently applied.
12
"Net Recovery Value of Eligible Inventory" shall mean, as of a
particular date, the net recovery value of each Borrower's Eligible Inventory,
as determined by Lender in its sole discretion, from the most recent appraisal
of Inventory acceptable to and received by Lender from an appraiser acceptable
to Lender. As of the Closing Date, Hilco Appraisal Services, LLC is an
acceptable appraiser to Lender.
"Note" shall mean collectively, the promissory note referred
to in Section 2.1(a) hereof.
"Obligations" shall mean and include any and all of each
Borrower's Indebtedness and/or liabilities to Lender or any corporation that
directly or indirectly controls or is controlled by or is under common control
with Lender of every kind, nature and description, direct or indirect, secured
or unsecured, joint, several, joint and several, absolute or contingent, due or
to become due, now existing or hereafter arising, contractual or tortious,
liquidated or unliquidated, regardless of how such indebtedness or liabilities
arise or by what agreement or instrument they may be evidenced or whether
evidenced by any agreement or instrument, including, but not limited to, any and
all of any Borrower's Indebtedness and/or liabilities under this Agreement, the
Other Documents or under any other agreement between Lender and any Borrower and
all obligations of any Borrower to Lender to perform acts or refrain from taking
any action.
"Other Documents" shall mean the Note, the Questionnaire and
any and all other agreements, instruments and documents, including, without
limitation, notes, guaranties, pledges, additional security agreements, powers
of attorney, consents, and all other writings heretofore, now or hereafter
executed by a Borrower and/or delivered by or on behalf of any Borrower to
Lender in respect of the transactions contemplated by this Agreement.
"Overadvance" shall have the meaning set forth in Section 3.1
hereof.
"Overadvance Rate" shall mean a per annum rate equal to one
percent (1%) in excess of the Revolving Interest Rate.
"Parent" of any Person shall mean a corporation or other
entity owning, directly or indirectly, at least fifty percent (50%) of the
shares of stock or other ownership interests having ordinary voting power to
elect a majority of the directors of the Person, or other Persons performing
similar functions for any such Person.
"Payment Office" shall mean initially 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx; thereafter, such other office of Lender, if any,
which it may designate by notice to Borrowing Agent to be the Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Perfumania Receivables" shall have the meaning set forth in
Section 2.1(c) hereof.
13
"Permitted Encumbrances" shall mean (a) Liens in favor of
Lender; (b) Liens for taxes, assessments or other governmental charges not
delinquent or which are being contested in good faith and by appropriate
proceedings and with respect to which proper reserves have been taken by
Borrowers; provided, that, the Lien shall have no effect on the priority of the
Liens in favor of Lender or the value of the assets in which Lender has such a
Lien and a stay of enforcement of any such Lien shall be in effect; (c) Liens
disclosed in the financial statements referred to in Section 5.5, the existence
of which Lender has consented to in writing; (d) deposits or pledges of cash to
secure obligations under worker's compensation, social security or similar laws,
or under unemployment insurance; (e) deposits or pledges of cash to secure bids,
tenders, contracts (other than contracts for the payment of money), leases,
statutory obligations, surety and appeal bonds and other obligations of like
nature arising in the ordinary course of any Borrower's business; (f) judgment
Liens that have been stayed or bonded and mechanics', workers', materialmen's or
other like Liens arising in the ordinary course of any Borrower's business with
respect to obligations which are not due or which are being contested in good
faith by the applicable Borrower; (g) Liens placed upon fixed assets hereafter
acquired to secure a portion of the purchase price thereof, provided that (x)
any such lien shall not encumber any other property of the Borrowers and (y) the
aggregate amount of Indebtedness secured by such Liens incurred as a result of
such purchases during any fiscal year shall not exceed the amount provided for
in Section 7.6; and (h) Liens disclosed on Schedule 1.2(b).
"Person" shall mean any individual, sole proprietorship,
partnership, corporation, business trust, joint stock company, trust,
unincorporated organization association, limited liability company, institution,
public benefit corporation, joint venture, entity or government (whether
federal, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof).
"Plan" shall mean any employee pension benefit plan within the
meaning of Section 3(2) of ERISA, maintained for employees of any Borrower or
any member of the Controlled Group or any such Plan to which any Borrower or any
member of the Controlled Group is required to contribute on behalf of any of its
employees.
"Prepayment Date" shall have the meaning set forth in Section
13.1 hereof.
"Prime Rate" shall mean the prime commercial lending rate of
the Bank as publicly announced to be in effect from time to time, such rate to
be adjusted automatically, without notice, on the effective date of any change
in such rate. This rate of interest is determined from time to time by the Bank
as a means of pricing some loans to its customers and is neither tied to any
external rate of interest or index nor does it necessarily reflect the lowest
rate of interest actually charged by the Bank to any particular class or
category of customers of the Bank.
"Pro Forma Balance Sheet" shall have the meaning set forth in
Section 5.5(a) hereof.
"Questionnaire" shall mean the Documentation Information
Questionnaire and the responses thereto provided by Borrowers and delivered to
Lender.
14
"RCRA" shall mean the Resource Conservation and Recovery Act,
42 U.S.C.ss.ss.6901 et seq., as same may be amended from time to time.
"Real Property" shall mean, with respect to each Borrower, all
of such Borrower's right, title and interest in and to its owned and leased
premises.
"Receivables" shall mean, with respect to each Borrower, all
of the following now owned or hereafter arising or acquired property of such
Borrower: (a) all Accounts; (b) all amounts at any time payable to such Borrower
in respect of the sale or other disposition by such Borrower or any Account or
other obligation for the payment of money; (c) all interest, fees, late charges,
penalties, collection fees and other amounts due or to become due or otherwise
payable in connection with any Account; (d) all payment intangibles of such
Borrower and other contract rights, chattel paper, instruments, notes, and other
forms of obligations owing to such Borrower, whether from the sale and lease of
goods or other property, licensing of any property (including Intellectual
Property or other general intangibles), rendition of services or from loans or
advances by such Borrower or to or for the benefit of any third person
(including loans or advances to any Affiliates or Subsidiaries of such Borrower)
or otherwise associated with any Accounts, Inventory or General Intangibles of
such Borrower (including, without limitation, choses in action, causes of
action, tax refunds, tax refund claims, any funds which may become payable to
such Borrower in connection with the termination of any Plan or other employee
benefit plan and any other amounts payable to such Borrower from any Plan or
other employee benefit plan, rights and claims against carriers and shippers,
rights to indemnification, business interruption insurance and proceeds thereof,
casualty or any similar types of insurance and any proceeds thereof and proceeds
of insurance covering the lives of employees on which Borrower is beneficiary).
"Records" shall mean, with respect to each Borrower, all of
such Borrower's present and future books of account of every kind or nature,
purchase and sale agreements, invoices, ledger cards, bills of lading and other
shipping evidence, statements, correspondence, memoranda, credit files and other
data relating to the Collateral or any account debtor, together with the tapes,
disks, diskettes and other data and software storage media and devices, file
cabinets or containers in or on which the foregoing are stored (including any
rights of such Borrower with respect to the foregoing maintained with or by any
other person).
"Release" shall have the meaning set forth in Section
5.7(c)(i) hereof.
"Reportable Event" shall mean a reportable event described in
Section 4043(b) of ERISA or the regulations promulgated thereunder.
"Reserves" shall mean all Obligations then chargeable to any
account of Borrowers, as well as Obligations which may, in Lender's sole
discretion, be chargeable to Borrowers' account thereafter, in each case,
without duplication, by reason of or in connection with any of the following:
Accounts which are not Eligible Accounts; Inventory which is not Eligible
Inventory; disputed items; deductions; allowances; credits; retentions; xxxx and
hold sales; consignment sales; letters of credit; steamship guarantees; airway
15
releases; offsets asserted or granted to account debtors; sales calling for
payment in currencies other than United States Dollars; to adjust for
audit/examination of Borrowers' accounts(s) or for any documentation correction;
and such additional reserves as Lender in its sole discretion, deems
appropriate. In addition to and not in limitation of the foregoing, reserves
shall be established with respect to each Borrower (a) to reflect events,
conditions or contingencies that, as determined by Lender in it sole discretion,
adversely affect or would adversely affect the security interests and other
rights of Lender in the Collateral (including the enforceability, perfection and
priority thereof), or (b) to reflect Lender's good faith belief that any
collateral report or financial information furnished by or on behalf of any
Borrower to Lender is or may have been incomplete, inaccurate or misleading in
any material respect, or (c) in respect of any state of facts which Lender
determines constitutes an Event of Default or may, with notice or passage of
time or both, constitute an Event of Default, or (d) to reflect amounts due or
to become due in respect of sales, use and/or withholding taxes.
"Revolving Advances" shall have the meaning set forth in
Section 2.1(a) hereof.
"Revolving Interest Rate" shall mean an interest rate per
annum equal to (a) the sum of the Alternate Base Rate plus the Applicable Margin
for Domestic Revolving Rate Revolving Loans with respect to Domestic Rate
Revolving Loans or (b) the sum of the LIBOR Rate plus the Applicable Margin for
LIBOR Rate Revolving Loans, with respect to LIBOR Rate Revolving Loans.
"Senior Debt Payments" shall mean and include all cash
actually expended by Borrowers, on a consolidated basis, to make (a) interest
payments on any Revolving Advances hereunder, plus (b) payments for all fees,
commissions and charges set forth herein and with respect to any Revolving
Advances.
"Subsidiary" shall mean a corporation or other entity of whose
shares of stock or other ownership interests having ordinary voting power (other
than stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"Subsidiary Stock" shall mean all of the issued and
outstanding stock owned by Borrower of each Subsidiary of Borrower.
"Tangible Net Worth" shall mean for Borrowers on a
consolidated basis, at a particular date, (a) the aggregate amount of all assets
of Borrowers, on a consolidated basis, as may be properly classified as such in
accordance with GAAP consistently applied excluding such other assets as are
properly classified as intangible assets under GAAP, less (b) the aggregate
amount of all liabilities of the Borrowers on a consolidated basis.
"Term" shall mean the Closing Date through July 20, 2004, as
same may be extended in accordance with the provisions of Section 13.1 hereof.
16
"Termination Event" shall mean (i) a Reportable Event with
respect to any Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower
or any member of the Controlled Group from a Plan or Multiemployer Plan during a
plan year in which such entity was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a Plan in a distress termination described in Section 4041(c) of
ERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan or
Multiemployer Plan; (v) any event or condition (a) which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan or Multiemployer Plan, or (b) that may
result in termination of a Multiemployer Plan pursuant to Section 4041A of
ERISA; or (vi) the partial or complete withdrawal within the meaning of Sections
4203 and 4205 of ERISA, of any Borrower or any member of the Controlled Group
from a Multiemployer Plan.
"Toxic Substance" shall mean and include any material present
on the Real Property or the Leasehold Interests which has been shown to have
significant adverse effect on human health or which is subject to regulation
under the Toxic Substances Control Act (TSCA), 15 U.S.C. xx.xx. 2601 et seq.,
applicable state law, or any other applicable Federal or state laws now in force
or hereafter enacted relating to toxic substances. "Toxic Substance" includes
but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based
paints.
"Transactions" shall have the meaning set forth in Section 5.5
hereof.
"Transferee" shall have the meaning set forth in Section
14.3(b) hereof.
"UCC" shall mean the Uniform Commercial Code as in effect in
the State of New York and any successor statute, as in effect from time to time
(except that terms used herein which are defined in the Uniform Commercial Code
as in effect in the State of New York on the date hereof shall continue to have
the same meaning notwithstanding any replacement or amendment of such statute
except as Lender may otherwise determine).
"Undrawn Availability" at a particular date shall mean an
amount equal to (a) the lesser of (i) the Formula Amount or (ii) the Maximum
Loan Amount, minus (b) the sum of (i) the outstanding amount of Revolving
Advances plus (ii) all amounts due and owing to Borrowers' trade creditors which
are in excess of thirty (30) days past due.
1.3 "Uniform Commercial Code Terms". All terms used herein and
defined in the UCC shall have the meaning given therein unless otherwise defined
herein.
1.4 Certain Matters of Construction. The terms "herein", "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular section, paragraph or subdivision. Any pronoun
used shall be deemed to cover all genders. Wherever appropriate in the context,
terms used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. All references to any
instruments or agreements, including, without limitation, references to any of
17
the Other Documents shall include any and all modifications or amendments
thereto and any and all extensions or renewals thereof. All references to the
term "good faith" used herein when applicable to Lender shall mean,
notwithstanding anything to the contrary contained herein or in the UCC, honesty
in fact in the conduct or transaction concerned. Borrowers shall have the burden
of proving any lack of good faith on the part of Lender alleged by Borrowers at
any time.
II. REVOLVING ADVANCES, PAYMENTS.
-----------------------------
2.1 (a) Total Revolving Advances. Subject to the terms and
conditions set forth in this Agreement, Lender will make revolving advances
("Revolving Advances") to Borrowers in aggregate amounts outstanding at any time
not greater than the lesser of (x) the Maximum Loan Amount or (y) an amount
equal to the sum of:
(i) up to 85%, subject to the provisions of Section
2.1(b) hereof ("Accounts Advance Rate"), of Eligible Accounts, plus
(ii) up to 60%, subject to the provisions of Section
2.1(b) hereof ("Inventory Advance Rate"; and together with the Accounts Advance
Rate, collectively, the "Advance Rates") of the value of Eligible Inventory,
provided that, at no time shall the aggregate amount of Revolving Advances made
by Lender in respect of Eligible Inventory exceed an amount equal to eighty
percent (80%) of the Net Recovery Value of Eligible Inventory in effect from
time to time, minus
(iii) Reserves.
The amount derived from (x) the sum of Sections 2.1(a)(y)(i) plus (ii),
minus (y) Section 2.1(a)(y)(iii) at any time and from time to time shall be
referred to as the "Formula Amount". The Revolving Advances shall be evidenced
by the secured promissory note (the "Note") substantially in the form attached
hereto as Exhibit 2.1(a).
(b) Discretionary Rights. The Advance Rates and Reserves
may be increased or decreased by Lender at any time and from time to time in the
exercise of its reasonable discretion. Each Borrower consents to any such
increases or decreases and acknowledges that decreasing the Advance Rates or
increasing the Reserves may limit or restrict Revolving Advances requested by
Borrowing Agent on behalf of Borrowers. Lender shall give Borrowing Agent five
(5) days prior written notice of its intention to decrease the Advance Rates.
(c) Purchase of Accounts Owing by Perfumania, Inc.
----------------------------------------------
(i) Each Borrower hereby assigns and sells to Lender, as
absolute owner, and Lender hereby purchases from such Borrower all Accounts
owing to such Borrower from Perfumania, Inc. and xxxxxxxxxx.xxx, inc. created on
and after the date hereof, which arise from such Borrower's sale of merchandise
or rendition of services to Perfumania, Inc. and/or xxxxxxxxxx.xxx, inc.
(collectively, the "Perfumania Receivables").
18
(ii) Lender shall not assume the risk of nonpayment for
any reason with respect to any Perfumania Receivable. Accordingly, all
Perfumania Receivables shall be purchased by Lender with full recourse to each
Borrower. In the event of non-payment of any Perfumania Receivable for any
reason whatsoever; Lender may charge back to such Borrower's ledger account for
Perfumania Receivables the amount of any such Perfumania Receivable that is not
paid on its due date.
(iii) The purchase price of each Perfumania Receivable
shall be the Net Face Amount thereof. The purchase price will be credited to
each Borrower's ledger account and remitted to such Borrower on the date which
is two (2) Business Days after the date on which the Perfumania Receivable is
actually collected by Lender in accordance with Section 2.4(b) of this
Agreement. Lender may deduct from the amount payable to such Borrower in respect
of any Perfumania Receivable Reserves for all Obligations then chargeable to
such Borrower's account and Obligations which, in Lender's sole judgment may be
chargeable to such Borrower's account thereafter.
(iv) Monthly, on the fifteenth (15th) day of each month
for the immediately preceding month, Borrowers shall deliver to Lender a
schedule of the Perfumania Receivables, in form and content satisfactory to
Lender, detailing, individually and in the aggregate, each outstanding
Perfumania Receivable (including, without limitation, invoice date, original due
date and amount) and each Perfumania Receivable collected during such
immediately preceding month.
2.2. Procedure for Borrowing Revolving Advances. Borrowing Agent,
on behalf of Borrowers, may notify Lender prior to 12:00 a.m. on a Business Day
of Borrowers' request to incur, on that day, a Revolving Advance hereunder. Such
request shall indicate the amount of the requested Revolving Advance. Should any
amount required to be paid as interest hereunder, or as fees or other charges
under this Agreement or any other agreement with Lender, or with respect to any
other Obligation, become due, same shall be deemed a request for a Revolving
Advance bearing interest at the rate applicable to Domestic Rate Revolving Loans
as of the date such payment is due, in the amount required to pay in full such
interest, fee, charge or Obligation under this Agreement or any other agreement
with Lender, and such request shall be irrevocable.
2.3. Disbursement of Revolving Advance Proceeds. All Revolving
Advances shall be disbursed from whichever office or other place Lender may
designate from time to time and, together with any and all other Obligations of
Borrowers to Lender, shall be charged to Borrowers' account on Lender's books.
During the Term, Borrowers may use the Revolving Advances by borrowing,
prepaying and reborrowing, all in accordance with the terms and conditions of
this Agreement. The proceeds of each Revolving Advance requested by Borrowers or
deemed to have been requested by Borrowers under Section 2.2 hereof shall, with
respect to requested Revolving Advances to the extent Lender makes such
Revolving Advances, be made available to Borrowers on the day so requested by
way of credit to Borrowers' operating account at Washington Mutual Bank, or such
other bank as Borrowing Agent may designate following notification to Lender, in
federal funds or other immediately available funds or, with respect to Revolving
Advances deemed to have been requested by Borrowers, be disbursed to Lender to
be applied to the outstanding Obligations giving rise to such deemed request.
19
2.4. Repayment of Revolving Advances.
-------------------------------
(a) The Revolving Advances shall be due and payable in full on
the last day of the Term subject to earlier prepayment as herein provided.
(b) Each Borrower recognizes that the amounts evidenced by
checks, notes, drafts or any other items of payment relating to and/or proceeds
of Collateral may not be collectible by Lender on the date received. In
consideration of Lender's agreement to conditionally credit Borrowers' account
as of the Business Day on which Lender receives those items of payment, each
Borrower agrees that, in computing the charges under this Agreement, all items
of payment shall be deemed applied by Lender on account of the Obligations two
(2) Business Days after confirmation to Lender by the Blocked Account bank or
Depository Account bank, as provided for in Section 4.15(h) hereof, that such
items of payment have been collected in good funds and finally credited to
Lender's account. Lender is not, however, required to credit Borrowers' account
for the amount of any item of payment which is unsatisfactory to Lender, in its
reasonable discretion and Lender may charge Borrowers' account for the amount of
any item of payment which is returned to Lender unpaid.
(c) All payments of principal, interest and other amounts
payable hereunder, or under any of the related agreements shall be made to
Lender at the Payment Office not later than 1:00 P.M. (New York Time) on the due
date therefor in lawful money of the United States of America in federal funds
or other funds immediately available to Lender. Lender shall have the right to
effectuate payment on any and all Obligations due and owing hereunder by
charging Borrowers' account or by making Revolving Advances as provided in
Section 2.2 hereof.
(d) Borrowers shall pay principal, interest, and all other
amounts payable hereunder, or under any Other Documents, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
2.5. Repayment of Excess Revolving Advances. The aggregate balance
of Revolving Advances outstanding at any time in excess of the maximum amount of
Revolving Advances permitted hereunder shall be immediately due and payable
without the necessity of any demand, at the Payment Office, whether or not a
Default or Event of Default has occurred.
2.6. Statement of Account. Lender shall maintain, in accordance
with its customary procedures, a loan account in the name of Borrowers in which
shall be recorded the date and amount of each Revolving Advance made by Lender
and the date and amount of each payment in respect thereof; provided, however,
the failure by Lender to record the date and amount of any Revolving Advance
shall not adversely affect Lender. Each month, Lender shall send to Borrowing
Agent a statement showing the accounting for the Revolving Advances made,
payments made or credited in respect thereof, and other transactions between
Lender and Borrowers, during such month. The monthly statements shall be deemed
correct and binding upon Borrowers in the absence of manifest error and shall
constitute an account stated between Lender and Borrowers unless Lender receives
a written statement of Borrowers' specific exceptions thereto within thirty (30)
days after such statement is received by Borrowing Agent. The records of Lender
with respect to the loan account shall be prima facie evidence of the amounts of
Revolving Advances and other charges thereto and of payments applicable thereto.
20
2.7. Additional Payments. Any sums expended by Lender due to any
Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document including, without limitation, any Borrower's
obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be
charged to Borrowers' account as a Revolving Advance, shall bear interest at the
Default Rate applicable to Domestic Rate Revolving Loans and shall be added to
the Obligations.
2.8. Manner of Payment.
-----------------
(a) Each payment (including each prepayment) by Borrowers on
account of the principal of and interest on the Revolving Advances, shall be
applied to the Revolving Advances. Except as expressly provided herein, all
payments (including prepayments) to be made by Borrowers on account of
principal, interest and fees shall be made without set off or counterclaim and
shall be made to Lender to the Payment Office, in each case on or prior to 1:00
P.M., New York time, in Dollars and in immediately available funds.
(b) Notwithstanding anything to the contrary contained in
Sections 2.9(a) hereof, commencing with the first Business Day following the
Closing Date, each borrowing of Revolving Advances shall be advanced by Lender
and each payment by Borrowers on account of Revolving Advances shall be applied
first to those Revolving Advances made by Lender.
2.9. Mandatory Prepayments. In addition to the prepayment set forth
in Section 2.4 hereof, when any Borrower sells or otherwise disposes of any
Collateral (other than Inventory in the ordinary course of business or in
accordance with Section 4.3 hereof) Borrowers shall repay the Revolving Advances
in an amount equal to the net proceeds of such sale (i.e., gross proceeds less
the reasonable costs of such sales or other dispositions), such repayments to be
made promptly but in no event more than two (2) Business Days following receipt
of such net proceeds, and until the date of payment, such proceeds shall be held
in trust for Lender. The foregoing shall not be deemed to be implied consent to
any such sale otherwise prohibited by the terms and conditions hereof. Such
repayments shall be applied in such order as Lender may determine, subject to
Borrowers' ability to reborrow Revolving Advances in accordance with the terms
hereof.
2.10. Use of Proceeds. Borrowers shall apply the proceeds of
Revolving Advances to (a) repay all existing indebtedness to General Electric
Capital Corporation, (b) pay fees and expenses relating to this transaction, (c)
provide for its working capital needs, and (d) to finance other lawful corporate
actions of Borrowers as approved from time to time in writing by GMACCC in its
sole discretion.
21
2.11. Joint and Several Liability. All Borrowers shall be liable for
all amounts due to Lender under this Agreement, regardless of which Borrower
actually receives the Revolving Advances hereunder or the amount of such
Revolving Advances received or the manner in which Lender accounts for such
Revolving Advances or other extensions of credit on its books and records. The
Obligations with respect to Revolving Advances made to a Borrower, and the
Obligations arising as a result of the joint and several liability of a Borrower
hereunder, with respect to Revolving Advances made to the other Borrower
hereunder, shall be separate and distinct obligations, but all such Obligations
shall be primary obligations of all Borrowers. The Obligations arising as a
result of the joint and several liability of a Borrower hereunder with respect
to Revolving Advances or other extensions of credit made to the other Borrower
hereunder shall, to the fullest extent permitted by law, be unconditional
irrespective of (a) the validity or enforceability, avoidance or subordination
of the Obligations of the other Borrower or of any promissory note or other
document evidencing all or any part of the Obligations of the other Borrower,
(b) the absence of any attempt to collect the Obligations from the other
Borrower or any other security therefor, or the absence of any other action to
enforce the same, (c) the waiver, consent, extension, forbearance or granting of
any indulgence by Lender with respect to any provisions of any instrument
evidencing the Obligations of the other Borrower, or any part thereof, or any
other agreement now or hereafter executed by the other Borrower and delivered to
Lender, (d) the failure by Lender to take any steps to perfect and maintain its
security interest in, or to preserve its rights and maintain its security or
collateral for the Obligations of the other Borrower, (e) the election of Lender
in any proceeding instituted under Title 11 of the United States Code, as
amended ("Bankruptcy Code"), of the application of Section 1111(b)(2) of the
Bankruptcy Code, (f) the disallowance of all or any portion of the claim(s) of
Lender for the repayment of the Obligations of the other Borrower under Section
502 of the Bankruptcy Code, or (g) any other circumstances which might
constitute a legal or equitable discharge or defense of the other Borrower. With
respect to the Obligations arising as a result of the joint and several
liability of a Borrower hereunder with respect to Revolving Advances or other
extensions of credit made to the other Borrower hereunder, each Borrower waives,
until the Obligations shall have been paid in full and this Agreement shall have
been terminated, any right to enforce any right of subrogation or any remedy
which Lender now has or may hereafter have against Borrowers, any endorser or
any guarantor of all or any part of the Obligations, and any benefit of, and any
right to participate in, any security or collateral given to Lender. Upon any
Event of Default and for so long as the same is continuing, Lender may proceed
directly and at once, without notice, against any Borrower to collect and
recover the full amount, or any portion of the Obligations, without first
proceeding against the other Borrower or any other Person, or against any
security or collateral for the Obligations. Each Borrower consents and agrees
that Lender shall be under no obligation to xxxxxxxx any assets in favor of
Borrower(s) or against or in payment of any or all of the Obligations.
III. INTEREST AND FEES.
-----------------
3.1. Interest. (a) Interest on Revolving Advances shall be payable
in arrears on the last day of each month. Interest charges shall be computed on
the actual principal amount of Revolving Advances outstanding during the month
at a rate per annum equal to the applicable Revolving Interest Rate. Whenever,
subsequent to the date of this Agreement, the Alternate Base Rate and/or the
22
LIBOR Rate is increased or decreased, the Revolving Interest Rate with respect
to Domestic Rate Revolving Loans and/or LIBOR Rate Revolving Loans, as the case
may be, shall be similarly changed without notice or demand of any kind by an
amount equal to the amount of such change in the Alternate Base Rate and/or the
LIBOR Rate, as the case may be, during the time such change or changes remain in
effect.
(b) On the Closing Date, all Revolving Advances shall be
Domestic Rate Revolving Loans. On or prior to the third Business Day prior to
the end of a month during the Term, commencing with the month immediately
following the Closing Date, Borrowers may, in writing, designate to Lender in
advance the percentage of the Revolving Advances for the immediately succeeding
month which shall constitute Domestic Rate Revolving Loans and the percentage of
the Revolving Advances which shall constitute LIBOR Rate Revolving Loans. If
Borrowers fail to timely make such a designation to Lender for any month, the
interest rate designations for such month shall continue to be the interest rate
designations as in effect for the immediately preceding month.
(c) Upon and after the occurrence of an Event of Default,
and during the continuation thereof, the Obligations shall bear interest at the
Default Rate. In the event that the aggregate outstanding amount of all
Revolving Advances exceeds the lesser of the Maximum Loan Amount and the Formula
Amount for three (3) or more days in any month during the Term (such excess, an
"Overadvance"), the average daily balance of all Revolving Advances and other
amounts charged or chargeable to Borrowers' account for such month shall bear
interest at the Overadvance Rate.
(d) Notwithstanding anything to the contrary contained
herein, upon the occurrence of an Event of Default, and during its continuance,
all Revolving Advances shall, for the purposes of Section 3.1(b), be
automatically converted to Domestic Rate Revolving Loans, and Borrowers shall
have no right to request, and Lender shall thereafter during the continuance of
an Event of Default have no obligation to make, LIBOR Rate Revolving Loans.
3.2. Intentionally Deleted.
---------------------
3.3. (a) Closing Fee. Borrowers shall pay to Lender a closing fee
in the amount of $50,000 (the "Closing Fee"). The Closing Fee shall be paid to
Lender on the Closing Date, and shall be deemed to be fully earned as of the
date thereof and shall not be subject to refund, rebate or proration for any
reason whatsoever.
(b) Due Diligence Fee. Borrowers shall pay to Lender a due
diligence fee in the amount of $50,000 (the "Due Diligence Fee"). The Due
Diligence Fee shall be paid to Lender on the Closing Date, and shall be deemed
to be fully earned as of the date thereof and shall not be subject to refund,
rebate or proration for any reason whatsoever.
23
(c) Unused Line Fee. If, for any month during the Term, the
average daily unpaid balance of the Revolving Advances for each day of such
month does not equal the Maximum Loan Amount, then Borrowers shall pay to Lender
a fee at a rate equal to one half of one percent (1/2%) per annum on the amount
by which the Maximum Loan Amount exceeds such average daily unpaid balance. Such
fee shall be payable to Lender in arrears on the last day of each month.
(d) Collateral Examination Fee. Borrowers shall pay to
Lender on the first day of each month following any month in which Lender
performs any field examinations, collateral analysis, orderly liquidation
analysis or other business analysis (individually and collectively, a
"Collateral Examination"), the need and frequency for which is to be determined
by Lender in its reasonable discretion, a fee in an amount equal to Lender's per
diem charge then in effect per day for each person employed to perform such
Collateral Examination plus all reasonable costs and disbursements incurred by
Lender in the performance of such Collateral Examination (including, without
limitation, charges for fees and expenses, as billed, for outside auditors used
by Lender).
(e) Collateral Monitoring Fee. Commencing on the first day
of the month immediately following the Closing Date and on the first day of each
month thereafter, Borrowers shall pay to Lender monthly in arrears, a collateral
monitoring fee in an amount equal to $5,000 per month (the "Collateral
Monitoring Fee"). The Collateral Monitoring Fee shall be fully earned monthly
when due and shall not be subject to refund, rebate or proration for any reason
whatsoever.
3.4. Computation of Interest and Fees. Interest and fees hereunder
shall be computed on the basis of a year of 360 days and for the actual number
of days elapsed. If any payment to be made hereunder becomes due and payable on
a day other than a Business Day, the due date thereof shall be extended to the
next succeeding Business Day and interest thereon shall be payable at the
applicable Revolving Interest Rate during such extension.
3.5. Maximum Charges. In no event whatsoever shall interest and
other charges charged hereunder exceed the highest rate permissible under law
which a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that a court determines that Lender has received
interest and other charges hereunder in excess of the highest rate permissible
hereto, such excess amount shall be first applied to any unpaid principal
balance owed by Borrowers, and if the then remaining excess amount is greater
than the previously unpaid principal balance, Lender shall promptly refund such
excess amount to Borrowers and the provisions hereof shall be deemed amended to
provide for such permissible rate.
3.6. Increased Costs. In the event that any applicable law, treaty
or governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by Lender (for purposes of this Section 3.6,
the term "Lender" shall include Lender and any corporation or bank controlling
Lender and the office or branch where Lender (as so defined) makes or maintains
any LIBOR Rate Revolving Loans) with any request or directive (whether or not
having the force of law) from any central bank or other financial, monetary or
other authority, shall:
24
(a) subject Lender to any tax of any kind whatsoever with
respect to this Agreement or change the basis of taxation of payments to Lender
of principal, fees, interest or any other amount payable hereunder or under any
Other Documents (except for changes in the rate of tax on the overall net income
of Lender by the jurisdiction in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or deposits
in or for the account of, advances or loans by, or other credit extended by, any
office of Lender, including (without limitation) pursuant to Regulation D of the
Board of Governors of the Federal Reserve System; or
(c) impose on Lender or the London interbank Eurodollar
market any other condition with respect to this Agreement, any Other Documents;
and the result of any of the foregoing is to increase the cost to Lender of
making, renewing or maintaining its Revolving Advances hereunder by an amount
that Lender deems to be material or to reduce the amount of any payment (whether
of principal, interest or otherwise) in respect of any of the Revolving Advances
by an amount that Lender deems to be material, then, in any case Borrowers shall
promptly pay Lender, upon its demand, such additional amount as will compensate
Lender for such additional cost or such reduction, as the case may be. Lender
shall certify the amount of such additional cost or reduced amount to Borrowers,
and such certification shall be conclusive absent manifest error.
3.7. Basis For Determining Interest Rate Inadequate or Unfair. In
the event that Lender shall have determined that:
(a) reasonable means do not exist for ascertaining the LIBOR
Rate;
(b) Dollar deposits in the relevant amount and for the
relevant maturity are not available in the London interbank LIBOR market, with
respect to an outstanding LIBOR Rate Revolving Loan, a proposed LIBOR Rate
Revolving Loan, or a proposed conversion of a Domestic Rate Revolving Loan into
a LIBOR Rate Revolving Loan;
then Lender shall give Borrowing Agent prompt written, telephonic or telegraphic
notice of such determination. If such notice is given, (i) any such requested
LIBOR Rate Revolving Loan shall be made as a Domestic Rate Revolving Loan,
unless Borrowing Agent shall notify Lender no later than 10:00 a.m. (New York
City time) two (2) Business Days prior to the date of such proposed borrowing,
that its request for such borrowing shall be cancelled or made as an unaffected
type of LIBOR Rate Revolving Loan, (ii) any Domestic Rate Revolving Loan, or
LIBOR Rate Revolving Loan which was to have been converted to an affected type
of LIBOR Rate Revolving Loan shall be continued as or converted into a Domestic
Rate Revolving Loan, or, if Borrowing Agent shall notify Lender, no later than
10:00 a.m. (New York City time) two (2) Business Days prior to the proposed
conversion, shall be maintained as an unaffected type of LIBOR Rate Revolving
Loan, and (iii) any outstanding affected LIBOR Rate Revolving Loans, shall be
converted into a Domestic Rate Revolving Loan, or, if the Borrowing Agent shall
notify Lender, no later than 10:00 a.m. (New York City time) two (2) Business
25
Days prior to the last Business Day of the then current Interest Period
applicable to such affected LIBOR Rate Revolving Loan, shall be converted into
an unaffected type of LIBOR Rate Revolving Loan, on the last Business Day of the
then current Interest Period for such affected LIBOR Rate Revolving Loans. Until
such notice has been withdrawn, Lender shall have no obligation to make an
affected type of LIBOR Rate Revolving Loan or maintain outstanding affected
LIBOR Rate Revolving Loans and no Borrower shall have the right to convert a
Domestic Rate Revolving Loan, or an unaffected type of LIBOR Rate Revolving Loan
into an affected type of LIBOR Rate Revolving Loan.
3.8. Capital Adequacy.
----------------
(a) In the event that Lender shall have determined that any
applicable law, rule, regulation or guideline regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Lender (for purposes
of this Section 3.8, the term "Lender" shall include Lender and any corporation
or bank controlling Lender) and the office or branch where Lender (as so
defined) makes or maintains any LIBOR Rate Revolving Loans with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on Lender's capital as a consequence of
its obligations hereunder to a level below that which Lender could have achieved
but for such adoption, change or compliance (taking into consideration Lender's
policies with respect to capital adequacy) by an amount deemed by Lender to be
material, then, from time to time, Borrowers shall pay upon demand to Lender
such additional amount or amounts as will compensate Lender for such reduction.
In determining such amount or amounts, Lender may use any reasonable averaging
or attribution methods. The protection of this Section 3.8 shall be available to
Lender regardless of any possible contention of invalidity or inapplicability
with respect to the applicable law, regulation or condition.
(b) A certificate of Lender setting forth such amount or
amounts as shall be necessary to compensate Lender with respect to Section
3.8(a) hereof when delivered to Borrowers shall be conclusive absent manifest
error.
IV. COLLATERAL: GENERAL TERMS
--------------------------
4.1. Security Interest in the Collateral. To secure the prompt
payment and performance to Lender of the Obligations, each Borrower hereby
assigns, pledges and grants to Lender a continuing security interest in and to
all of its Collateral, whether now owned or existing or hereafter acquired or
arising and wheresoever located. Each Borrower shall xxxx its books and records
as may be necessary or appropriate to evidence, protect and perfect Lender's
security interest ("Lender's security interest") and shall cause its financial
statements to reflect such security interest.
4.2. Perfection of Security Interest.
-------------------------------
26
(a) Each Borrower irrevocably and unconditionally authorizes
Lender (or its agent) to file at any time and from time to time such financing
statements with respect to the Collateral naming Lender or its designee as the
secured party and such Borrower as debtor, as Lender may require, and including
any other information with respect to such Borrower or otherwise required by
part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as
Lender may determine, together with any amendment and continuations with respect
thereto, which authorization shall apply to all financing statements filed on,
prior to or after the date hereof. Each Borrower hereby ratifies and approves
all financing statements naming Lender or its designee as secured party and such
Borrower as debtor with respect to the Collateral (and any amendments with
respect to such financing statements) filed by or on behalf of Lender prior to
the date hereof and ratifies and confirms the authorization of Lender to file
such financing statements (and amendments, if any). Each Borrower hereby
authorizes Lender to adopt on behalf of such Borrower any symbol required for
authenticating any electronic filing. In no event shall any Borrower at any time
file, or permit or cause to be filed, any correction statement or termination
statement with respect to any financing statement (or amendment or continuation
with respect thereto) naming Lender or its designee as secured party and any
such Borrower as debtor. In the event that the description of the collateral in
any financing statement naming Lender or its designee as the secured party and
any Borrower as debtor includes assets and properties of any Borrower that do
not at any time constitute Collateral, whether hereunder, under any of the Other
Documents or otherwise, the filing of such financing statement shall nonetheless
be deemed authorized by such Borrower to the extent of the Collateral included
in such description and it shall not render the financing statement ineffective
as to any of the Collateral or otherwise affect the financing statement as it
applies to any of the Collateral.
(b) Each Borrower does not have any chattel paper (whether
tangible or electronic) or instruments as of the date hereof, except as set
forth on Schedule 4.2(b). In the event that any Borrower shall be entitled to or
shall receive any chattel paper or instrument after the date hereof, such
Borrower shall promptly notify Lender thereof in writing. Promptly upon the
receipt thereof by or on behalf of such Borrower (including by any agent or
representative), such Borrower shall deliver, or cause to be delivered to
Lender, all tangible chattel paper and instruments that such Borrower or may at
any time acquire, accompanied by such instruments of transfer or assignment duly
executed in blank as Lender may from time to time specify, in each case except
as Lender may otherwise agree. At Lender's option, such Borrower shall, or
Lender may at any time on behalf of such Borrower, cause the original of any
such instrument or chattel paper to be conspicuously marked in a form and manner
acceptable to Lender with a legend, to be approved by Lender, indicating that
the chattel paper or instruments, as applicable, is subject to the security
interest and rights of Lender.
(c) In the event that any Borrower shall at any time hold or
acquire an interest in any electronic chattel paper or any "transferable record"
(as such term is defined in Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction), such Borrower shall
promptly notify Lender thereof in writing. Promptly upon Lender's request, such
Borrower shall take, or cause to be taken, such actions as Lender may reasonably
request to give Lender control of such electronic chattel paper under Section
9-105 of the UCC and control of such transferable record under Section 201 of
the Federal Electronic Signatures in Global and National Commerce Act or, as the
case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect
in such jurisdiction.
27
(d) No Borrower has any deposit accounts as of the date
hereof, except as set forth on Schedule 4.2(d). No Borrower shall, directly or
indirectly, after the date hereof open, establish or maintain any deposit
account unless each of the following conditions is satisfied: (1) Lender shall
have received not less than five (5) Business Days prior written notice of the
intention of such Borrower to open or establish such account which notice shall
specify in reasonable detail and specificity acceptable to Lender the name of
the account, the owner of the account, the name and address of the bank at which
such account is to be opened or established, the individual at such bank with
whom such Borrower is dealing and the purpose of the account, (2) the bank where
such account is opened or maintained shall be acceptable to Lender, and (3) on
or before the opening of such deposit account, such Borrower shall as Lender may
specify either (A) deliver to Lender a Deposit Account Control Agreement with
respect to such deposit account duly authorized, executed and delivered by such
Borrower and the bank at which such deposit account is opened and maintained or
(B) arrange for Lender to become the customer of the bank with respect to the
deposit account on terms and conditions acceptable to Lender. The terms of this
subsection (d) shall not apply to deposit accounts specifically and exclusively
used for payroll, payroll taxes and other employee wage and benefit payments to
or for the benefit of such Borrower's salaried employees.
(e) No Borrower owns or holds, directly or indirectly,
beneficially or as record owner or both, any investment property, as of the date
hereof, or have any investment account, securities account, commodity account or
other similar account with any bank or other financial institution or other
securities intermediary or commodity intermediary as of the date hereof, in each
case except as set forth on Schedule 4.2(e).
(i) In the event that any Borrower shall be entitled to or
shall at any time after the date hereof hold or acquire any certificated
securities, such Borrower shall promptly endorse, assign and deliver the same to
Lender, accompanied by such instruments of transfer or assignment duly executed
in blank as Lender may from time to time specify. If any securities, now or
hereafter acquired by such Borrower are uncertificated and are issued to such
Borrower or its nominee directly by the issuer thereof, such Borrower shall
immediately notify Lender thereof and shall as Lender may specify, either (A)
cause the issuer to agree to comply with instructions from Lender as to such
securities, without further consent of such Borrower or such nominee, or (B)
arrange for Lender to become the registered owner of the securities.
(ii) No Borrower shall, directly or indirectly, after the
date hereof open, establish or maintain any investment account, securities
account, commodity account or any other similar account (other than a deposit
account) with any securities intermediary or commodity intermediary unless each
of the following conditions is satisfied: (A) Lender shall have received not
less than five (5) Business Days prior written notice of the intention of such
Borrower to open or establish such account which notice shall specify in
reasonable detail and specificity acceptable to Lender the name of the account,
the owner of the account, the name and address of the securities intermediary or
commodity intermediary at which such account is to be opened or established, the
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individual at such intermediary with whom such Borrower is dealing and the
purpose of the account, (B) the securities intermediary or commodity
intermediary (as the case may be) where such account is opened or maintained
shall be acceptable to Lender, and (C) on or before the opening of such
investment account, securities account or other similar account with a
securities intermediary or commodity intermediary, such Borrower shall as Lender
may specify either (1) execute and deliver, and cause to be executed and
delivered to Lender, an Investment Property Control Agreement with respect
thereto duly authorized, executed and delivered by such Borrower and such
securities intermediary or commodity intermediary or (2) arrange for Lender to
become the entitlement holder with respect to such investment property on terms
and conditions acceptable to Lender.
(f) No Borrower is the beneficiary or otherwise entitled to
any right to payment under any letter of credit, banker's acceptance or similar
instrument as of the date hereof, except as set forth on Schedule 4.2(f). In the
event that any Borrower shall be entitled to or shall receive any right to
payment under any letter of credit, banker's acceptance or any similar
instrument, whether as beneficiary thereof or otherwise after the date hereof,
such Borrower shall promptly notify Lender thereof in writing. Except as set
forth in Schedule 4.2(f), Borrower shall immediately, as Lender may specify,
either (1) deliver, or cause to be delivered to Lender, with respect to any such
letter of credit, banker's acceptance or similar instrument, the written
agreement of the issuer and any other nominated person obligated to make any
payment in respect thereof (including any confirming or negotiating bank), in
form and substance satisfactory to Lender, consenting to the assignment of the
proceeds of the letter of credit to Lender by such Borrower and agreeing to make
all payments thereon directly to Lender or as Lender may otherwise direct or (2)
cause Lender to become, at such Borrower's expense, the transferee beneficiary
of the letter of credit, banker's acceptance or similar instrument (as the case
may be).
(g) No Borrower has commercial tort claims as of the date
hereof, except as set forth on Schedule 4.2(g). In the event that any Borrower
shall at any time after the date hereof have any commercial tort claims, such
Borrower shall promptly notify Lender thereof in writing, which notice shall (1)
set forth in reasonable detail the basis for and nature of such commercial tort
claim and (2) include the express grant by such Borrower to Lender of a security
interest in such commercial tort claim (and the proceeds thereof). In the event
that such notice does not include such grant of a security interest, the sending
thereof by such Borrower to Lender shall be deemed to constitute such grant to
Lender. Upon the sending of such notice, any commercial tort claim described
therein shall constitute part of the Collateral and shall be deemed included
therein. Without limiting the authorization of Lender provided in Section 4.2(a)
hereof or otherwise arising by the execution by such Borrower of this Agreement
or any of the Other Documents, Lender is hereby irrevocably authorized from time
to time and at any time to file such financing statements naming Lender or its
designee as secured party and such Borrower as debtor, or any amendments to any
financing statements, covering any such commercial tort claim as Collateral. In
addition, such Borrower shall promptly upon Lender's request, execute and
deliver, or cause to be executed and delivered, to Lender such other agreements,
documents and instruments as Lender may require in connection with such
commercial tort claim.
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(h) No Borrower has any goods, documents of title or other
Collateral in the custody, control or possession of a third party as of the date
hereof, except as set forth on Schedule 4.2(h) and except for goods located in
the United States in transit to a location of such Borrower permitted herein in
the ordinary course of business of such Borrower in the possession of the
carrier transporting such goods.
(i) Each Borrower shall take any other actions reasonably
requested by Lender from time to time to cause the attachment, perfection and
first priority of, and the ability of Lender to enforce, the security interest
of Lender in any and all of the Collateral, including, without limitation, (i)
executing, delivering and, where appropriate, filing financing statements and
amendments relating thereto under the UCC or other applicable law, to the
extent, if any, that such Borrower's signature thereon is required therefor,
(ii) causing Lender's name to be noted as secured party on any certificate of
title for a titled good if such notation is a condition to attachment,
perfection or priority of, or ability of Lender to enforce, the security
interest of Lender in such Collateral, (iii) complying with any provision of any
statute, regulation or treaty of the United States as to any Collateral if
compliance with such provision is a condition to attachment, perfection or
priority of, or ability of Lender to enforce, the security interest of Lender in
such Collateral, (iv) obtaining the consents and approvals of any Governmental
Body or third party, including, without limitation, any consent of any licensor,
lessor or other person obligated on Collateral, and taking all actions required
by any earlier versions of the UCC or by other law, as applicable in any
relevant jurisdiction.
4.3 Disposition of Collateral. Each Borrower will safeguard and
protect all Collateral for Lender's general account and make no disposition
thereof whether by sale, lease or otherwise except (a) the sale of Inventory in
the ordinary course of business, (b) the disposition or transfer of obsolete and
worn-out Equipment in the ordinary course of business during any fiscal year
having an aggregate fair market value of not more than $50,000 and only to the
extent that (i) the proceeds of any such disposition are used to acquire
replacement Equipment which is subject to Lender's first priority security
interest or (ii) the proceeds of which are remitted to Lender.
4.4. Preservation of Collateral. In addition to the rights and
remedies set forth in Section 11.1 hereof, Lender: (a) may at any time take such
steps as Lender deems necessary to protect Lender's security interest in and to
preserve the Collateral, including the hiring of such security guards or the
placing of other security protection measures as Lender may deem appropriate;
(b) may employ and maintain at any Borrower's premises a custodian who shall
have full authority to do all acts necessary to protect Lender's security
interests in the Collateral; (c) upon the occurrence of an Event of Default may
lease warehouse facilities to which Lender may move all or part of the
Collateral; (d) upon the occurrence of an Event of Default, may use any
Borrower's owned or leased lifts, hoists, trucks and other facilities or
equipment for handling or removing the Collateral; and (e) shall have, and is
hereby granted, a right of ingress and egress to the places where the Collateral
is located, and may proceed over and through any Borrower's owned or leased
property. Each Borrower shall cooperate fully with all of Lender's efforts to
preserve the Collateral and will take such actions to preserve the Collateral as
Lender may reasonably direct. All of Lender's expenses of preserving the
Collateral, including any expenses relating to the bonding of a custodian, shall
be charged to Borrowers' account as a Revolving Advance and added to the
Obligations.
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4.5. Ownership of Collateral. With respect to the Collateral, at
the time the Collateral becomes subject to Lender's security interest: (a) each
Borrower shall be the sole owner of and fully authorized and able to sell,
transfer, pledge and/or grant a first priority security interest in each and
every item of its respective Collateral to Lender; and, except for Permitted
Encumbrances the Collateral shall be free and clear of all Liens and
encumbrances whatsoever; (b) each document and agreement executed by each
Borrower or delivered to Lender in connection with this Agreement shall be true
and correct in all material respects; (c) all signatures and endorsements of
each Borrower that appear on such documents and agreements shall be genuine and
each Borrower shall have full capacity to execute same; and (d) each Borrower's
Equipment and Inventory shall be located as set forth on Schedule 4.5 and shall
not be removed from such location(s) without the prior written consent of Lender
except with respect to the sale of Inventory in the ordinary course of business
and Equipment and other Collateral to the extent permitted in Section 4.3
hereof.
4.6. Defense of Lender's Interests. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Lender's security interests in the Collateral shall continue in full
force and effect. During such period no Borrower shall, without Lender's prior
written consent, pledge, sell (except Inventory in the ordinary course of
business, and Equipment to the extent permitted in Section 4.3 hereof), assign,
transfer, create or suffer to exist a Lien upon or encumber or allow or suffer
to be encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. Each Borrower shall defend Lender's security interests in the
Collateral against any and all Persons whatsoever. At any time following the
occurrence of an Event of Default, Lender shall have the right to take
possession of the indicia of the Collateral and the Collateral in whatever
physical form contained, including without limitation: labels, stationery,
documents, instruments and advertising materials. If Lender exercises this right
to take possession of the Collateral, Borrowers shall, upon demand, assemble it
in the best manner possible and make it available to Lender at a place
reasonably convenient to Lender. In addition, with respect to all Collateral,
Lender shall be entitled to all of the rights and remedies set forth herein and
further provided by the Uniform Commercial Code or other applicable law. Each
Borrower shall, and Lender may, at its option, instruct all suppliers, carriers,
forwarders, warehouses or others receiving or holding cash, checks, Inventory,
documents or instruments in which Lender holds a security interest to deliver
same to Lender and/or subject to Lender's order and if they shall come into any
Borrower's possession, they, and each of them, shall be held by such Borrower in
trust as Lender's trustee, and such Borrower will immediately deliver them to
Lender in their original form together with any necessary endorsement.
4.7. Books and Records. Each Borrower shall (a) keep proper books of
record and account in which full, true and correct entries will be made of all
dealings or transactions of or in relation to its business and affairs; (b) set
up on its books accruals with respect to all taxes, assessments, charges, levies
and claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including without limitation by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties), which
should be set aside from such earnings in connection with its business. All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of the Accountants, as
shall then be regularly engaged by Borrowers.
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4.8. Financial Disclosure. Each Borrower hereby irrevocably
authorizes and directs all accountants and auditors employed by such Borrower at
any time during the Term to exhibit and deliver to Lender copies of any of the
Borrower's financial statements, trial balances or other accounting records of
any sort in the accountant's or auditor's possession, and to disclose to Lender
any information such accountants may have concerning such Borrower's financial
status and business operations. Each Borrower hereby authorizes all federal,
state and municipal authorities to furnish to Lender copies of reports or
examinations relating to such Borrower, whether made by such Borrower or
otherwise; however, Lender will attempt to obtain such information or materials
directly from such Borrower prior to obtaining such information or materials
from such accountants or such authorities.
4.9. Compliance with Laws. Each Borrower shall comply with, all
acts, rules, regulations and/or orders of any legislative, administrative or
judicial body or official applicable to its respective Collateral or any part
thereof or to the operation of such Borrower's business the non-compliance with
which could have a Material Adverse Effect on such Borrower. Each Borrower may,
however, contest or dispute any acts, rules, regulations, orders and directions
of those bodies or officials in any reasonable manner, provided that any related
Lien is inchoate or stayed and sufficient reserves are established to the
reasonable satisfaction of Lender to protect Lender's Lien on or security
interest in the Collateral. The Collateral at all times shall be maintained in
accordance with the requirements of all insurance carriers which provide
insurance with respect to the Collateral so that such insurance shall remain in
full force and effect.
4.10. Inspection of Premises. At all reasonable times Lender shall
have full access to and the right to audit, check, inspect and make abstracts
and copies from each Borrower's books, records, audits, correspondence and all
other papers relating to the Collateral and the operation of each Borrower's
business. Lender may enter upon any Borrower's premises at any time during
business hours and at any other reasonable time, and from time to time, for the
purpose of inspecting the Collateral and any and all records pertaining thereto
and the operation of such Borrower's business. Without in any way limiting the
foregoing, so long as no Default exists, Lender will provide such Borrower with
two (2) days prior notice before entering such Borrower's premises for the
purposes set forth in this Section 4.10.
4.11 Insurance. Each Borrower shall bear the full risk of any loss
of any nature whatsoever with respect to the Collateral. At each Borrower's own
cost and expense in amounts and with carriers acceptable to Lender, each
Borrower shall (a) keep all its insurable properties and properties in which
such Borrower has an interest insured against the hazards of fire, flood,
sprinkler leakage, those hazards covered by extended coverage insurance and such
other hazards, and for such amounts, as is customary in the case of companies
engaged in businesses similar to such Borrower's including, without limitation,
business interruption insurance; (b) maintain public and product liability
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insurance against claims for personal injury, death or property damage suffered
by others; (c) maintain all such worker's compensation or similar insurance as
may be required under the laws of any state or jurisdiction in which such
Borrower is engaged in business; (d) furnish Lender with (i) copies of all
policies and evidence of the maintenance of such policies by the renewal thereof
at least thirty (30) days before any expiration date, and (ii) appropriate loss
payable endorsements in form and substance satisfactory to Lender, naming Lender
as a co-insured and loss payee as its interests may appear with respect to all
insurance coverage referred to in clauses (a), (c) and (d) above, and providing
(A) that all proceeds thereunder shall be payable to Lender, (B) no such
insurance shall be affected by any act or neglect of the insured or owner of the
property described in such policy, and (C) that such policy and loss payable
clauses may not be cancelled, amended or terminated unless at least thirty (30)
days' prior written notice is given to Lender. In the event of any loss
thereunder, the carriers named therein hereby are directed by Lender and the
applicable Borrower to make payment for such loss to Lender and not to such
Borrower and Lender jointly. If any insurance losses are paid by check, draft or
other instrument payable to any Borrower and Lender jointly, Lender may endorse
such Borrower's name thereon and do such other things as Lender may deem
advisable to reduce the same to cash. Upon the occurrence of an Event of Default
and during its continuance, Lender is hereby authorized to adjust and compromise
claims under insurance coverage referred to in clauses (a), (c) and (d) above.
All loss recoveries received by Lender upon any such insurance may be applied to
the Obligations, in such order as Lender in its sole discretion shall determine.
4.12. Failure to Pay Insurance. If any Borrower fails to obtain
insurance as hereinabove provided, or to keep the same in force, Lender, if
Lender so elects, may obtain such insurance and pay the premium therefor for
Borrowers' account, and charge Borrowers' account therefor and such expenses so
paid shall be part of the Obligations.
4.13. Payment of Taxes. Each Borrower will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon such Borrower or
any of the Collateral including, without limitation, real and personal property
taxes, assessments and charges and all franchise, income, employment, social
security benefits, withholding, and sales taxes. If any Charge by any
governmental authority is or may be imposed on or as a result of any transaction
between any Borrower, and Lender which Lender may be required to withhold or pay
or if any Charges remain unpaid after the date fixed for their payment, or if
any claim shall be made which, in Lender's opinion, may possibly create a valid
Lien on the Collateral, Lender may without notice to Borrowers pay the Charges
and each Borrower hereby indemnifies and holds Lender and each Lender harmless
in respect thereof. Lender will not pay any Charges to the extent that any
Borrower has contested or disputed those Charges in good faith, by expeditious
protest, administrative or judicial appeal or similar proceeding provided that
any related Lien is stayed and sufficient reserves are established to the
reasonable satisfaction of Lender to protect Lender's security interest in or
Lien on the Collateral. The amount of any payment by Lender under this Section
4.13 shall be charged to the Borrowers' account as a Revolving Advance and added
to the Obligations and, until Borrowers shall furnish Lender with an indemnity
therefor (or supply Lender with evidence satisfactory to Lender that due
provision for the payment thereof has been made), Lender may hold without
interest any balance standing to Borrowers' credit and Lender shall retain
Lender's security interest in any and all Collateral held by Lender.
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4.14. Payment of Leasehold Obligations. Each Borrower shall at all
times pay, when and as due, its rental obligations under all leases under which
it is a tenant, and shall otherwise comply, in all material respects, with all
other terms of such leases and keep them in full force and effect and, at
Lender's request, will provide evidence of having done so.
4.15. Accounts and other Receivables.
------------------------------
(a) Nature of Accounts. Each of the Accounts shall be a bona
fide and valid account representing a bona fide indebtedness incurred by the
Customer therein named, for a fixed sum as set forth in the invoice relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of a Borrower, or work, labor or services theretofore
rendered by a Borrower as of the date each Account is created. Same shall be due
and owing in accordance with the applicable Borrower's standard terms of sale
without dispute, setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by Borrowers to Lender.
(b) Solvency of Customers. Each Customer, to the best of each
Borrower's knowledge, as of the date each Account is created, is and will be
solvent and able to pay all Accounts on which the Customer is obligated in full
when due or with respect to such Customers of any Borrower who are not solvent
such Borrower has set up on its books and in its financial records bad debt
reserves adequate to cover such Accounts.
(c) Locations of Borrowers. Each Borrower's chief executive
office is located at the addresses set forth on Schedule 4.15(c) hereto. Until
written notice is given to Lender by Borrowing Agent of any other office at
which any Borrower keeps its records pertaining to Receivables, all such records
shall be kept at such executive office.
(d) Collection of Receivables. Until any Borrower's authority
to do so is terminated by Lender (which notice Lender may give at any time
following the occurrence of an Event of Default or a Default) each Borrower
will, at such Borrower's sole cost and expense, but on Lender's behalf and for
Lender's account, collect as Lender's property and in trust for Lender all
amounts received on Receivables, and shall not commingle such collections with
any Borrower's funds or use the same except to pay Obligations. Each Borrower
shall, upon request, deliver to Lender, the Blocked Account or the Depository
Account in original form and on the date of receipt thereof, all checks, drafts,
notes, money orders, acceptances, cash and other evidences of Indebtedness.
(e) Notification of Assignment of Receivables. Upon the
occurrence of an Event of Default, Lender shall have the right to send notice of
the assignment of, and Lender's security interest in, the Receivables to any and
all Customers or any third party holding or otherwise concerned with any of the
Collateral. Thereafter, Lender shall have the sole right to collect the
Receivables, take possession of the Collateral, or both. Lender's actual
collection expenses, including, but not limited to, stationery and postage,
telephone and telegraph, secretarial and clerical expenses and the salaries of
any collection personnel used for collection, may be charged to Borrowers'
account and added to the Obligations.
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(f) Power of Lender to Act on Borrower's Behalf. Lender shall
have the right to receive, endorse, assign and/or deliver in the name of Lender
or any Borrower any and all checks, drafts and other instruments for the payment
of money relating to the Receivables, and each Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. For the
purposes of this Agreement, including this Section 4.15, each Borrower hereby
constitutes Lender or Lender's designee as such Borrower's attorney with power
(i) to endorse such Borrower's name upon any notes, acceptances, checks, drafts,
money orders or other evidences of payment or Collateral; (ii) to sign such
Borrower's name on any invoice or xxxx of lading relating to any of the
Receivables, drafts against Customers, assignments and verifications of
Receivables;(iii) to send verifications of Receivables to any Customer; (iv) to
sign such Borrower's name on all financing statements or any other documents or
instruments deemed necessary or appropriate by Lender to preserve, protect, or
perfect Lender's security interest in the Collateral and to file same; (v) to
demand payment of the Receivables and any other Collateral; (vi) to enforce
payment of the Receivables and any other Collateral by legal proceedings or
otherwise; (vii) to exercise all of such Borrower's rights and remedies with
respect to the collection of the Receivables and any other Collateral; (viii) to
settle, adjust, compromise, extend or renew the Receivables; (ix) to settle,
adjust or compromise any legal proceedings brought to collect Receivables; (x)
to prepare, file and sign such Borrower's name on a proof of claim in bankruptcy
or similar document against any Customer; (xi) to take all action contemplated
under Section 4.2 and to prepare, file and sign such Borrower's name on any
notice of Lien, assignment or satisfaction of Lien or similar document in
connection with the Receivables and any other Collateral; and (xii) to do all
other acts and things necessary to carry out this Agreement. All acts of said
attorney or designee are hereby ratified and approved, and said attorney or
designee shall not be liable for any acts of omission or commission nor for any
error of judgment or mistake of fact or of law, unless done maliciously or with
gross (not mere) negligence; this power being coupled with an interest is
irrevocable during the Term and thereafter while any of the Obligations remain
unpaid. Lender shall have the right at any time following the occurrence of an
Event of Default or Default, to change the address for delivery of mail
addressed to any Borrower to such address as Lender may designate and to
receive, open and dispose of all mail addressed to any Borrower, and Lender
agrees to use its best efforts to deliver to such Borrower any mail, which does
not relate, either directly or indirectly, to the Obligations or the Collateral.
(g) No Liability. Lender shall not, under any circumstances or
in any event whatsoever, have any liability for any error or omission or delay
of any kind occurring in the settlement, collection or payment of any of the
Receivables or any instrument received in payment thereof, or for any damage
resulting therefrom unless due to Lender's gross negligence or willful
misconduct. Following the occurrence of an Event of Default or Default, Lender
may, without notice or consent from any Borrower, xxx upon or otherwise collect,
extend the time of payment of, compromise or settle for cash, credit or upon any
terms any of the Receivables, any of the other Collateral or any other
securities, instruments or insurance applicable thereto and/or release any
obligor thereof. Lender is authorized and empowered to accept, following the
occurrence of an Event of Default or Default, the return of the goods
represented by any of the Receivables, without notice to or consent by any
Borrower, all without discharging or in any way affecting any Borrower's
liability hereunder.
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(h) Establishment of a Lockbox Account, Dominion Account.
Borrower shall establish and maintain, at its expense, blocked accounts or
lockboxes and related blocked accounts (in either case, "Blocked Accounts"), as
Lender may specify, with such banks as are acceptable to Lender into which
Borrower shall promptly deposit and direct its account debtors to directly remit
all payments on Receivables and all payments constituting proceeds of Inventory
or other Collateral in the identical form in which such payments are made,
whether by cash, check or other manner. Borrower shall deliver, or cause to be
delivered to Lender, a Depository Account Control Agreement duly authorized,
executed and delivered by each bank where a Blocked Account is maintained as
provided in Section 4.2 hereof or at any time and from time to time Lender may
become bank's customer with respect to the Blocked Accounts and promptly upon
Lender's request, Borrower shall execute and deliver such agreements or
documents as Lender may require in connection therewith. Borrower agrees that
all payments made to such Blocked Accounts or other funds received and collected
by Lender, whether in respect of the Receivables, as proceeds of Inventory or
other Collateral or otherwise shall be treated as payments to Lender in respect
of the Obligations and therefore shall constitute the property of Lender to the
extent of the then outstanding Obligations.
(i) Adjustments. No Borrower will, without Lender's consent,
compromise or adjust any Receivables (or extend the time for payment thereof) or
accept any returns of merchandise or grant any additional discounts, allowances
or credits thereon except for those compromises, adjustments, returns,
discounts, credits and allowances as have been heretofore customary in the
business of such Borrower.
4.16. Inventory. All Inventory has been, and will be, produced by
Borrowers in accordance with the Federal Fair Labor Standards Act of 1938, as
amended, and all rules, regulations and orders thereunder.
4.17. Maintenance of Equipment. The Equipment shall be maintained in
good operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved. No
Borrower shall use or operate the Equipment in material violation of any law,
statute, ordinance, code, rule or regulation.
4.18. Exculpation of Liability. Nothing herein contained shall be
construed to constitute Lender as any Borrower's Agent for any purpose
whatsoever, nor shall Lender be responsible or liable for any shortage,
discrepancy, damage, loss or destruction of any part of the Collateral wherever
the same may be located and regardless of the cause thereof. Lender, whether by
anything herein or in any assignment or otherwise, assumes no obligations of any
Borrower under any contract or agreement assigned to Lender, and Lender shall
not be responsible in any way for the performance by any Borrower of any of the
terms and conditions thereof. Except as prohibited by law, each Borrower waives
any right which it may have to claim or recover in any litigation with Lender
any special, exemplary, punitive or consequential damages or any damages other
than, or in addition to, actual damages. Borrower: (a) certifies that neither
Lender nor any representative, agent or attorney acting for or on behalf of
36
Lender has represented, expressly or otherwise, that Lender would not, in the
event of litigation, seek to enforce any of the waivers provided for in this
Agreement or any of the Other Documents and (b) acknowledges that in entering
into this Agreement and the Other Documents, Lender is relying upon, among other
things, the waivers and certifications set forth in this Section 4.18 and
elsewhere herein and therein
4.19. Environmental Matters.
---------------------
(a) Borrowers shall ensure that the Real Property remains in
material compliance with all Environmental Laws and they shall not place or
permit to be placed any Hazardous Substances on any Real Property except as not
prohibited by applicable law or appropriate governmental authorities.
(b) Borrowers shall establish and maintain a system to assure
and monitor continued material compliance with all applicable Environmental Laws
which system shall include periodic reviews of such compliance.
(c) Borrowers shall employ in connection with the use of the
Real Property appropriate technology necessary to maintain material compliance
with any applicable Environmental Laws and treat, store or dispose of any and
all Hazardous Waste generated at the Real Property only at facilities and with
carriers that maintain valid permits under RCRA and any other applicable
Environmental Laws as may be legally required for such Hazardous Waste.
Borrowers shall use reasonable efforts to obtain certificates of disposal, such
as hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrowers in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.
(d) In the event any Borrower obtains, gives or receives
notice of any Release or threat of Release of a reportable quantity of any
Hazardous Substances at the Real Property (any such event being hereinafter
referred to as a "Hazardous Discharge") or receives any notice of violation,
request for information or notification that it is potentially responsible for
investigation or cleanup of environmental conditions at the Real Property,
demand letter or complaint, order, citation, or other written notice with regard
to any Hazardous Discharge or violation of Environmental Laws affecting the Real
Property or any Borrower's interest therein (any of the foregoing is referred to
herein as an "Environmental Complaint") from any Person, including any state
agency responsible in whole or in part for environmental matters in the state in
which the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority"), then Borrowing
Agent shall, within five (5) Business Days following such notice, give written
notice of same to Lender detailing facts and circumstances of which any Borrower
is aware giving rise to the Hazardous Discharge or Environmental Complaint. Such
information is to be provided to allow Lender to protect its security interest
in the Real Property and is not intended to create nor shall it create any
obligation upon Lender with respect thereto.
37
(e) Borrowers shall promptly forward to Lender copies of any
request for information, notification of potential liability, demand letter
relating to potential responsibility with respect to the investigation or
cleanup of Hazardous Substances at any other site owned, operated or used by any
Borrower to dispose of Hazardous Substances and shall continue to forward copies
of correspondence between any Borrower and the Authority regarding such claims
to Lender until the claim is settled. Borrowers shall promptly forward to Lender
copies of all documents and reports concerning a Hazardous Discharge at the Real
Property that any Borrower is required to file under any Environmental Laws.
Such information is to be provided solely to allow Lender to protect Lender's
security interest in the Real Property and the Collateral.
(f) Borrowers shall respond promptly to any Hazardous
Discharge or Environmental Complaint and take all action reasonably necessary in
order to safeguard the health of any Person and to avoid subjecting the
Collateral or Real Property to any Lien. If any Borrower shall fail to respond
in to any Hazardous Discharge or Environmental Complaint or any Borrower shall
fail to comply with any of the requirements of any Environmental Laws, Lender
may, but without the obligation to do so, for the sole purpose of protecting
Lender's security interest in Collateral: (A) give such notices or (B) enter
onto the Real Property (or authorize third parties to enter onto the Real
Property) and take such actions as Lender (or such third parties as directed by
Lender) deem reasonably necessary to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Lender (or such third parties) in the
exercise of any such rights, including any sums paid in connection with any
judicial or administrative investigation or proceedings, fines and penalties,
together with interest thereon from the date expended at the Default Rate for
Domestic Rate Revolving Loans constituting Revolving Advances shall be paid upon
demand by Borrowers, and until paid shall be added to and become a part of the
Obligations secured by the Liens created by the terms of this Agreement or any
other agreement between Lender and any Borrower.
(g) Promptly upon the written request of Lender from time to
time, Borrowers shall provide Lender, at Borrowers' expense, with an
environmental site assessment or environmental audit report prepared by an
environmental engineering firm acceptable in the reasonable opinion of Lender,
to assess with a reasonable degree of certainty the existence of a Hazardous
Discharge and, if requested by Lender, the potential costs in connection with
abatement, cleanup and removal of any Hazardous Substances found on, under, at
or within the Real Property. The necessity and frequency of such environmental
site assessments or environmental audit reports shall be reasonably determined
by Lender. Any report or investigation of such Hazardous Discharge proposed and
acceptable to an appropriate Authority that is charged to oversee the clean-up
of such Hazardous Discharge shall be acceptable to Lender. If such estimates,
individually or in the aggregate, exceed $100,000, Lender shall have the right
to require Borrowers to post a bond, letter of credit or other security
reasonably satisfactory to Lender to secure payment of these costs and expenses.
(h) Borrowers shall defend and indemnify Lender and hold
Lender and its employees, directors and officers harmless from and against all
loss, liability, damage and expense, claims, costs, fines and penalties,
including attorney's fees, suffered or incurred by Lender under or on account of
any Environmental Laws, including, without limitation, the assertion of any Lien
38
thereunder, with respect to any Hazardous Discharge, the presence of any
Hazardous Substances affecting the Real Property, whether or not the same
originates or emerges from the Real Property or any contiguous real estate,
including any loss of value of the Real Property as a result of the foregoing
except to the extent such loss, liability, damage and expense is attributable to
any Hazardous Discharge resulting from actions on the part of Lender. Borrowers'
obligations under this Section 4.19 shall arise upon the discovery of the
presence of any Hazardous Discharge or Environmental Complaint at the Real
Property, whether or not any federal, state, or local environmental agency has
taken or threatened any action in connection with such occurrence. Borrowers'
obligation and the indemnifications hereunder shall survive the termination of
this Agreement.
(i) For purposes of Section 4.19 and 5.7, all references to
Real Property shall be deemed to include all of Borrowers' right, title and
interest in and to its owned and leased premises wherever located.
4.20. Financing Statements. Except as respect to the financing
statements filed by Lender and with respect to the parties described on Schedule
1.2(b), no financing statement covering any of the Collateral or any proceeds
thereof is on file in any public office.
V. REPRESENTATIONS AND WARRANTIES.
------------------------------
Each Borrower represents and warrants as follows:
5.1. Authority. Each Borrower has full power, authority and legal
right to enter into this Agreement and the Other Documents and to perform all
its respective Obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and of the Other Documents (1) are within such
Borrower's corporate powers, have been duly authorized, are not in contravention
of law or the terms of such Borrower's by-laws, certificate of incorporation or
other applicable documents relating to such Borrower's formation or to the
conduct of such Borrower's business or of any material agreement or undertaking
to which such Borrower is a party or by which such Borrower is bound, and (2)
will not conflict with nor result in any breach in any of the provisions of or
constitute a default under or result in the creation of any Lien except
Permitted Encumbrances upon any asset of such Borrower under the provisions of
any agreement, charter document, instrument, by-law, or other instrument to
which such Borrower or its property is a party or by which it may be bound.
5.2. Formation and Qualification.
---------------------------
(a) Each Borrower is duly incorporated and in good standing
under the laws of the state listed on Schedule 5.2 and is qualified to do
business and is in good standing in the states listed on Schedule 5.2 which
constitute all states in which qualification and good standing are necessary for
such Borrower to conduct its business and own its property and where the failure
39
to so qualify could have a Material Adverse Effect on such Borrower. Each
Borrower has delivered to Lender true and complete copies of its certificate of
incorporation and by-laws and will promptly notify Lender of any amendment or
changes thereto.
(b) The only Subsidiaries of each Borrower are listed on
Schedule 5.2(b).
(c) The exact legal name of each Borrower is as set forth on
the signature page of this Agreement.
(d) Each Borrower is an organization of the type and organized
in the jurisdiction set forth on Schedule 5.2(d). Schedule 5.2(d) accurately
sets forth the organizational identification number of each Borrower or
accurately states that each Borrower has none and accurately sets forth the
federal employer identification number of such Borrower.
(e) The chief executive office and mailing address of each
Borrower and each Borrower's Records concerning Accounts or other Receivables
are located only at the address identified as such on Schedule 5.2(e) and its
only other places of business and the only other locations of Collateral, if
any, are the addresses set forth on Schedule 5.2(e), subject to the right of
Borrower to establish new locations in accordance with Section 9.2 below.
Schedule 5.2(e) correctly identifies any of such locations which are not owned
by Borrower and sets forth the owners and/or operators thereof.
5.3. Survival of Representations and Warranties. All
representations and warranties of each Borrower contained in this Agreement and
the Other Documents shall be true at the time of such Borrower's execution of
this Agreement and the Other Documents, and shall survive the execution,
delivery and acceptance thereof by the parties thereto and the closing of the
transactions described therein or related thereto.
5.4. Tax Returns. Each Borrower's federal tax identification number
is set forth on Schedule 5.4. Each Borrower has filed all federal, state and
local tax returns and other reports each is required by law to file and has paid
all taxes, assessments, fees and other governmental charges that are due and
payable. Federal, state and local income tax returns of each Borrower have been
examined and reported upon by the appropriate taxing authority or closed by
applicable statute and satisfied for all fiscal years prior to and including the
fiscal year ended March 31, 1997. The provision for taxes on the books of each
Borrower are adequate for all years not closed by applicable statutes, and for
its current fiscal year, and no Borrower has knowledge of any deficiency or
additional assessment in connection therewith not provided for on its books.
5.5. Financial Statements. The balance sheet of the Borrowers, as
of March 31, 2001 and the related statements of income, changes in stockholder's
equity, and changes in cash flow for the year ended March 31, 2001, all
accompanied by reports thereon containing opinions which, after giving effect to
the transactions (the "Transactions") contemplated hereby, shall be without
qualification by independent certified public accountants, copies of which have
been delivered to Lender, have been prepared in accordance with GAAP,
40
consistently applied (except for changes in application in which such
accountants concur and present fairly the financial position of the Borrowers
and their Subsidiaries at such date and the results of their operations for such
period). Since June 1, 2001 there has been no change in the condition, financial
or otherwise, of Borrowers or their Subsidiaries as shown on the consolidated
balance sheet as of such date and no change in the aggregate value of machinery,
equipment and Real Property owned by Borrowers and their Subsidiaries, except
changes in the ordinary course of business, none of which individually or in the
aggregate has been materially adverse.
5.6. Corporate Name. No Borrower has been known by any other
corporate name in the past five years and does not sell Inventory or perform
services under any other name except as set forth on Schedule 5.6, nor has any
Borrower been the surviving corporation of a merger or consolidation or acquired
all or substantially all of the assets of any Person during the preceding five
(5) years.
5.7. O.S.H.A. and Environmental Compliance.
-------------------------------------
(a) Each Borrower has duly complied with, and its facilities,
business, assets, property, leaseholds and Equipment are in compliance in all
material respects with, the provisions of the Federal Occupational Safety and
Health Act, the Environmental Protection Act, RCRA and all other Environmental
Laws; there have been no outstanding citations, notices or orders of
non-compliance issued to any Borrower or relating to its business, assets,
property, leaseholds or Equipment under any such laws, rules or regulations.
(b) Each Borrower has been issued all required federal, state
and local licenses, certificates or permits relating to all applicable
Environmental Laws.
(c) (i) There are no visible signs of releases, spills,
discharges, or leaks (collectively referred to as "Releases") of Hazardous
Substances at, upon, under or within any Real Property or any premises leased by
any Borrower; and, (ii)(A) there are no underground storage tanks or
polychlorinated biphenyls on the Real Property and other real property owned by
any Borrower; (B) the Real Property has never been used as a treatment, storage
or disposal facility of Hazardous Waste; and (C) no Hazardous Substances are
present on the Real Property or any premises leased by any Borrower, excepting
such quantities as are handled in accordance with all applicable manufacturer's
instructions and governmental regulations and in proper storage containers and
as are necessary for the operation of the commercial business of any Borrower or
of its tenants.
5.8. Solvency; No Litigation, Violation, Indebtedness or Default.
-----------------------------------------------------------
(a) After giving effect to the Transactions, Borrowers are
solvent, able to pay their debts as they mature, have capital sufficient to
carry on their business and all businesses in which they are about to engage,
and as of the Closing Date, the fair present saleable value of their assets,
calculated on a going concern basis, is in excess of the amount of their
liabilities and subsequent to the Closing Date, the fair saleable value of their
assets (calculated on a going concern basis) will be in excess of the amount of
their liabilities.
41
(b) Except as disclosed in Schedule 5.8(b), no Borrower has
(1) any pending or threatened litigation, arbitration, actions or proceedings
which involve the possibility of having a Material Adverse Effect on such
Borrower, and (2) any liabilities nor indebtedness other than the Obligations.
(c) No Borrower is in violation of any applicable statute,
regulation or ordinance in any respect which could have a Material Adverse
Effect on Borrower, nor is any Borrower in violation of any order of any court,
governmental authority or arbitration board or tribunal.
(d) No Borrower nor any member of the Controlled Group
maintains or contributes to any Plan other than those listed on Schedule 5.8(d)
hereto. Except as set forth in Schedule 5.8(d), (i) no Plan has incurred any
"accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA and
Section 412(a) of the Code, whether or not waived, and each Borrower and each
member of the Controlled Group has met all applicable minimum funding
requirements under Section 302 of ERISA in respect of each Plan, (ii) each Plan
which is intended to be a qualified plan under Section 401(a) of the Code as
currently in effect has been determined by the Internal Revenue Service to be
qualified under Section 401(a) of the Code and the trust related thereto is
exempt from federal income tax under Section 501(a) of the Code, (iii) no
Borrower nor any member of the Controlled Group has incurred any liability to
the PBGC other than for the payment of premiums, and there are no premium
payments which have become due which are unpaid, (iv) no Plan has been
terminated by the plan administrator thereof nor by the PBGC, and there is no
occurrence which would cause the PBGC to institute proceedings under Title IV of
ERISA to terminate any Plan, (v) at this time, the current value of the assets
of each Plan exceeds the present value of the accrued benefits and other
liabilities of such Plan and no Borrower nor any member of the Controlled Group
knows of any facts or circumstances which would materially change the value of
such assets and accrued benefits and other liabilities, (vi) no Borrower or any
member of the Controlled Group has breached any of the responsibilities,
obligations or duties imposed on it by ERISA with respect to any Plan, (vii) no
Borrower or any member of a Controlled Group has incurred any liability for any
excise tax arising under Section 4972 or 4980B of the Code, and no fact exists
which could give rise to any such liability, (viii) no Borrower or any member of
the Controlled Group or any fiduciary of, or any trustee to, any Plan, has
engaged in a non-exempt "prohibited transaction" described in Section 406 of the
ERISA or Section 4975 of the Code or taken any action which would constitute or
result in a Termination Event with respect to any such Plan which is subject to
ERISA, (ix) each Borrower and each member of the Controlled Group has made all
contributions due and payable with respect to each Plan, (x) there exists no
event described in Section 4043(b) of ERISA, for which the thirty (30) day
notice period contained in 29 CFR ss. 2615.3 has not been waived, and (xi) no
Borrower or any member of the Controlled Group has any fiduciary responsibility
for investments with respect to any plan existing for the benefit of persons
other than employees or former employees of any Borrower and any member of the
Controlled Group, and no Borrower or any member of the Controlled Group has
withdrawn, completely or partially, from any Multiemployer Plan so as to incur
any liability under the Multiemployer Pension Plan Amendments Act of 1980.
42
5.9. Patents, Trademarks, Copyrights and Licenses. All patents,
patent applications, trademarks, trademark applications, service marks, service
xxxx applications, copyrights, copyright applications, design rights, trade
names, assumed names, trade secrets and licenses owned or utilized by any
Borrower are set forth on Schedule 5.9, are valid and have been duly registered
or filed with all appropriate governmental authorities and constitute all of the
intellectual property rights which are necessary for the operation of its
business; there is no pending challenge to the validity of any such material
patent, trademark, copyright, design right, trade name, trade secret or license
and no Borrower is aware of any grounds for any challenge, except as set forth
in Schedule 5.9 hereto. Each patent, patent application, patent license,
trademark, trademark application, trademark license, service xxxx, service xxxx
application, service xxxx license, copyright, copyright application and
copyright license owned or held by any Borrower and all trade secrets used by
any Borrower consist of original material or property developed by any Borrower
or was lawfully acquired by any Borrower from the proper and lawful owner
thereof. Each of such items has been maintained so as to preserve the value
thereof from the date of creation or acquisition thereof. With respect to all
software owned by any Borrower, such Borrower is in possession of all source and
object codes related to each piece of software or is the beneficiary of a source
code escrow agreement, each such source code escrow agreement being listed on
Schedule 5.9 hereto.
5.10. Licenses and Permits. Except as set forth in Schedule 5.10,
each Borrower (a) is in compliance with and (b) has procured and is now in
possession of, all material licenses or permits required by any applicable
federal, state, provincial or local law or regulation for the operation of its
business in each jurisdiction wherein it is now conducting or proposes to
conduct business and where the failure to procure such licenses or permits could
have a Material Adverse Effect on such Borrower.
5.11. Default of Indebtedness. No Borrower is in default in the
payment of the principal of or interest on any Indebtedness or under any
instrument or agreement under or subject to which any Indebtedness has been
issued and no event has occurred under the provisions of any such instrument or
agreement which with or without the lapse of time or the giving of notice, or
both, constitutes or would constitute an event of default thereunder.
5.12. No Default. No Borrower is in default in the payment or
performance of any of its contractual obligations and no Default has occurred.
5.13. No Burdensome Restrictions. No Borrower is party to any
contract or agreement the performance of which could have a Material Adverse
Effect on such Borrower. No Borrower has agreed or consented to cause or permit
in the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a Lien which
is not a Permitted Encumbrance.
5.14. No Labor Disputes. No Borrower is involved in any labor
dispute; there are no strikes or walkouts or union organization of any
Borrower's employees threatened or in existence and no labor contract is
scheduled to expire during the Term other than as set forth on Schedule 5.14
hereto.
43
5.15. Margin Regulations. No Borrower is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any Revolving
Advance will be used for "purchasing" or "carrying" "margin stock" as defined in
Regulation U of such Board of Governors.
5.16. Investment Company Act. No Borrower is an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.17. Disclosure. No representation or warranty made by any Borrower
in this Agreement or in the Acquisition Agreement or in any financial statement,
report, certificate or any other document furnished in connection herewith
contains any untrue statement of fact or omits to state any fact necessary to
make the statements herein or therein not misleading. There is no fact known to
any Borrower or which reasonably should be known to any Borrower which Borrowers
have not disclosed to Lender in writing with respect to the Transactions which
could have a Material Adverse Effect on any Borrower.
5.18. Swaps. No Borrower is a party to, nor will it be a party to,
any swap agreement whereby such Borrower has agreed or will agree to swap
interest rates or currencies unless same provides that damages upon termination
following an event of default thereunder are payable on an unlimited "two-way
basis" without regard to fault on the part of either party.
5.19. Conflicting Agreements. No provision of any mortgage,
indenture, contract, agreement, judgment, decree or order binding on any
Borrower or affecting the Collateral conflicts with, or requires any Consent
which has not already been obtained to, or would in any way prevent the
execution, delivery or performance of, the terms of this Agreement or the Other
Documents.
5.20. Application of Certain Laws and Regulations. No Borrower nor
any Affiliate of any Borrower is subject to any statute, rule or regulation
which regulates the incurrence of any Indebtedness, including without
limitation, statutes or regulations relative to common or interstate carriers or
to the sale of electricity, gas, steam, water, telephone, telegraph or other
public utility services.
5.21. Business and Property of Borrower. Upon and after the Closing
Date, Borrowers do not propose to engage in any business other than the business
of the Borrowers conducted as of the Closing Date and activities necessary to
conduct the foregoing. On the Closing Date, each Borrower will own all the
property and possess all of the rights and Consents necessary for the conduct of
the business of such Borrower.
44
VI. AFFIRMATIVE COVENANTS.
---------------------
Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
6.1. Payment of Fees. Pay to Lender on demand all usual and
customary fees and expenses which Lender incurs in connection with (a) the
forwarding of Revolving Advance proceeds and (b) the establishment and
maintenance of any Blocked Accounts or Depository Accounts as provided for in
Section 4.15(h). Lender may, without making demand, charge the account of
Borrowers for all such fees and expenses.
6.2. Conduct of Business and Maintenance of Existence and Assets.
(a) Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
design rights, tradenames, trade secrets and trademarks and take all actions
necessary to enforce and protect the validity of any intellectual property right
or other right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could have a
Material Adverse Effect on such Borrower; and (c) make all such reports and pay
all such franchise and other taxes and license fees and do all such other acts
and things as may be lawfully required to maintain its rights, licenses, leases,
powers and franchises under the laws of the United States or any political
subdivision thereof where the failure to do so could have a Material Adverse
Effect on such Borrower, (d) no Borrower shall change its name unless each of
the following conditions is satisfied: (i) Lender shall have received not less
than thirty (30) days prior written notice from such Borrower of such proposed
change in its corporate name, which notice shall accurately set forth the new
name; and (ii) Lender shall have received a copy of the amendment to the
Certificate of Incorporation of Borrower providing for the name change certified
by the Secretary of State of the jurisdiction of incorporation or organization
of Borrower as soon as it is available; and (e) no Borrower shall change its
chief executive office or its mailing address or organizational identification
number (or if it does not have one, shall not acquire one) unless Lender shall
have received not less than thirty (30) days' prior written notice from such
Borrower of such proposed change, which notice shall set forth such information
with respect thereto as Lender may require and Lender shall have received such
agreements as Lender may reasonably require in connection therewith. No Borrower
shall change its type of organization, jurisdiction of organization or other
legal structure.
6.3. Violations. Promptly notify Lender in writing of any violation
of any law, statute, regulation or ordinance of any Governmental Body, or of any
agency thereof, applicable to any Borrower which may have a Material Adverse
Effect on any Borrower.
6.4. Government Receivables. Take all steps necessary to protect
Lender's interest in the Collateral under the Federal Assignment of Claims Act
or other applicable state or local statutes or ordinances and deliver to Lender
appropriately endorsed, any instrument or chattel paper connected with any
Accounts or other Receivable arising out of contracts between any Borrower and
the United States, any state or any department, agency or instrumentality of any
of them.
45
6.5. Tangible Net Worth. Maintain, on a consolidated basis, as at
the end of each fiscal quarter (June 30, September 30, December 31, March 31 in
any given year) a Tangible Net Worth in an amount not less than $30,000,000,
which amount shall be increased at the end of each fiscal quarter by an amount
equal to fifty percent (50%) of the Borrowers' Net Income for such quarter and
which shall exclude the change in the carrying value of Borrower's investments
in Affiliates and the income tax effects thereof.
6.6. Minimum EBITDA. Maintain, on a consolidated basis, as at the
end of each fiscal quarter (June 30, September 30, December 31, March 31 in any
given year) an EBITDA for the twelve (12) month period ending as of each such
quarter of not less than $8,000,000.
6.7. Fixed Charge Coverage Ratio. Maintain, on a consolidated
basis, as at the end of each fiscal quarter (June 30, September 30, December 31,
March 31, in any given year) a Fixed Charge Coverage Ratio for the twelve (12)
month period ending as of each such quarter, a ratio of not less than 1.5:1.
6.8. Maximum Funded Debt/EBITDA Ratio. Maintain, on a consolidated
basis, as at the end of each fiscal quarter (June 30, September 30, December 31
and March 31 in any given year) a ratio of Funded Debt to EBITDA for the twelve
(12) month period ending as of each such date in an amount not more 6.5:1.
6.9. Execution of Supplemental Instruments. Execute and deliver to
Lender from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Lender may request, in order that the
full intent of this Agreement may be carried into effect.
6.10. Payment of Indebtedness. Pay, discharge or otherwise satisfy
at or before maturity (subject, where applicable, to specified grace periods
and, in the case of the trade payables, to normal payment practices) all its
obligations and liabilities of whatever nature, except when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and each Borrower shall have provided for such reserves as Lender
may reasonably deem proper and necessary, subject at all times to any applicable
subordination arrangement in favor of Lender.
6.11. Standards of Financial Statements. Cause all financial
statements referred to in Sections 9.7, 9.8, 9.9, 9.11, 9.12 and 9.15 as to
which GAAP is applicable to be complete and correct in all material respects
(subject, in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).
46
VII. NEGATIVE COVENANTS.
------------------
No Borrower shall, until satisfaction in full of the Obligations and
termination of this Agreement:
7.1. Merger, Consolidation, Acquisition and Sale of Assets.
-----------------------------------------------------
(a) Enter into any merger, consolidation or other
reorganization with or into any other Person or acquire all or a substantial
portion of the assets or stock of any Person or permit any other Person to
consolidate with or merge with it.
(b) Sell, lease, transfer or otherwise dispose of any of its
properties or assets, except in the ordinary course of its business except as
permitted under Section 4.3 of this Agreement.
7.2. Creation of Liens. Create or suffer to exist any Lien or
transfer upon or against any of its property or assets now owned or hereafter
acquired, including but not limited to, all Real Property, except Permitted
Encumbrances.
7.3. Guarantees. Become liable upon the obligations of any Person
by assumption, endorsement or guaranty thereof or otherwise (other than to
Lender) except (1) as disclosed on Schedule 7.3, (2) guarantees made in the
ordinary course of business up to an aggregate amount of $50,000 and the
endorsement of checks in the ordinary course of business.
7.4. Investments. Purchase or acquire obligations or stock of, or
any other interest in, any Person, except (a) obligations issued or guaranteed
by the United States of America or any agency thereof; (b) commercial paper with
maturities of not more than 180 days and a published rating of not less than A-1
or P-1 (or the equivalent rating); (c) certificates of time deposit and bankers'
acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency; and U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency thereof.
7.5. Loans. Except as set forth on Schedule 1.2(b) hereto, make
advances, loans or extensions of credit to any Person, including without
limitation, any Original Owner, Subsidiary, or Affiliate or Guarantor, except
with respect to the extension of commercial trade credit in connection with the
sale of Inventory in the ordinary course of its business and loans to its
employees in the ordinary course of business not to exceed the aggregate amount
of $100,000 at any time outstanding.
7.6. Capital Expenditures. Contract for, purchase or make any
expenditure or commitments for fixed or capital assets (including capitalized
leases) in any fiscal year in an amount in excess of $1,100,000 in the
aggregate.
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7.7. Dividends. Declare, pay or make any dividend or distribution
on any shares of the common stock or preferred stock of any Borrower (other than
dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds, property or assets to
the purchase, redemption or other retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of common or preferred
stock of any Borrower; provided that, upon the prior written consent of Lender,
each Borrower may purchase any of its outstanding common stock through the
NASDAQ, in compliance with all securities laws, rules and regulations.
7.8. Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) except in respect of (i) Indebtedness to
Lender, (ii) Indebtedness incurred for capital expenditures permitted under
Section 7.6 hereof, and (iii) Indebtedness set forth on Schedule 1.2 hereto.
7.9. Nature of Business. Substantially change the nature of the
business in which it is presently engaged, nor except as specifically permitted
herein purchase or invest, directly or indirectly, in any assets or property
other than in the ordinary course of business for assets or property which are
useful in, necessary for and are to be used in its business as presently
conducted.
7.10. Transactions with Affiliates. Directly or indirectly,
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, or otherwise deal with, any Affiliate, except transactions in the
ordinary course of business and on an arm's-length basis, consistent with
historical practices, on terms no less favorable than terms which would have
been obtainable from a Person other than an Affiliate.
7.11. Leases. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 7.6 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $1,250,000 in any one fiscal year.
7.12. Subsidiaries.
------------
(a) Form any Subsidiary unless (i) such Subsidiary expressly
joins in this Agreement as a borrower or Guarantor and becomes jointly and
severally liable for the Obligations of Borrowers hereunder, under the Note, and
under any other agreement between any Borrower and Lender and (ii) Lender shall
have received all documents, including stock pledges and legal opinions, it may
reasonably require to establish compliance with each of the foregoing
conditions.
(b) Enter into any partnership, joint venture or similar
arrangement.
7.13. Fiscal Year and Accounting Changes. Change its fiscal year
from March 31 or make any change (i) in accounting treatment and reporting
practices except as required by GAAP or (ii) in tax reporting treatment except
as required by law.
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7.14. Pledge of Credit. Now or hereafter pledge Lender's credit on
any purchases or for any purpose whatsoever or use any portion of any Revolving
Advance in or for any business other than such Borrower's business as conducted
on the date of this Agreement.
7.15. Amendment of Articles of Incorporation, By-Laws. Amend, modify
or waive any term or material provision of its Articles of Incorporation or
By-Laws unless required by law.
7.16. Compliance with ERISA. (a) (i) Maintain, or permit any member
of the Controlled Group to maintain, or (ii) become obligated to contribute, or
permit any member of the Controlled Group to become obligated to contribute, to
any Plan subject to Title IV of ERISA, other than those Plans disclosed on
Schedule 5.8(d); (b) engage, or permit any member of the Controlled Group to
engage, in any non-exempt "prohibited transaction", as that term is defined in
section 406 of ERISA and Section 4975 of the Code; (c) incur, or permit any
member of the Controlled Group to incur, any "accumulated funding deficiency",
as that term is defined in Section 302 of ERISA or Section 412 of the Code; (d)
terminate, or permit any member of the Controlled Group to terminate, any Plan
where such event could result in any liability of any Borrower or any member of
the Controlled Group pursuant to Title IV of ERISA or the imposition of a lien
on the property of any Borrower or any member of the Controlled Group pursuant
to Section 4068 of ERISA; (e) assume, or permit any member of the Controlled
Group to assume, any obligation to contribute to any Multiemployer Plan not
disclosed on Schedule 5.8(d); (f) incur, or permit any member of the Controlled
Group to incur, any withdrawal liability to any Multiemployer Plan; (g) fail
promptly to notify Lender of the occurrence of any Termination Event; (h) fail
to comply, or permit a member of the Controlled Group to fail to comply, with
the requirements of ERISA or the Code or other applicable laws in respect of any
Plan; (i) fail to meet, or permit any member of the Controlled Group to fail to
meet, all minimum funding requirements under ERISA or the Code or postpone or
delay or allow any member of the Controlled Group to postpone or delay any
funding requirement with respect of any Plan.
7.17. Prepayment of Indebtedness. At any time, directly or
indirectly, prepay any Indebtedness (other than to Lender or trade creditors in
the ordinary course of business), or repurchase, redeem, retire or otherwise
acquire any Indebtedness of Borrower.
VIII. CONDITIONS PRECEDENT.
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8.1. Conditions to Initial Revolving Advances. The agreement of
Lender to make the initial Revolving Advances requested to be made on the
Closing Date is subject to the satisfaction, or waiver by Lender, immediately
prior to or concurrently with the making of such Revolving Advances, of the
following conditions precedent:
(a) Notes. Lender shall have received the Note duly executed
and delivered by an authorized officer of each Borrower;
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(b) Filings, Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code financing statement)
required by this Agreement, any Other Document or under law or reasonably
requested by the Lender to be filed, registered or recorded in order to create,
in favor of Lender, a perfected security interest in or lien upon the Collateral
shall have been properly filed, registered or recorded in each jurisdiction in
which the filing, registration or recordation thereof is so required or
requested, and Lender shall have received an acknowledgment copy, or other
evidence satisfactory to it, of each such filing, registration or recordation
and satisfactory evidence of the payment of any necessary fee, tax or expense
relating thereto;
(c) Corporate Proceedings of Borrower and Guarantors. Lender
shall have received, in form and substance satisfactory to Lender, a copy of the
resolutions in form and substance reasonably satisfactory to Lender, of the
Board of Directors of each Borrower and each Guarantor authorizing (1) the
execution, delivery and performance of this Agreement and the Other Documents,
the Note, and any related agreements (collectively the "Documents") and (2) the
granting by each Borrower of the Liens upon the Collateral, in favor of Lender,
in each case certified by the Secretary or an Assistant Secretary of each
Borrower and each Guarantor as of the Closing Date; and, such certificate shall
state that the resolutions thereby certified have not been amended, modified,
revoked or rescinded as of the date of such certificate;
(d) Incumbency Certificates of Borrower and Guarantors. Lender
shall have received, in form and substance satisfactory to Lender, a certificate
of the Secretary or an Assistant Secretary of each Borrower and each Guarantor,
dated the Closing Date, as to the incumbency and signature of the officers of
each Borrower executing this Agreement, and each Borrower and each Guarantor,
executing any of the Other Documents or any certificate or other documents to be
delivered by it pursuant hereto, together with evidence of the incumbency of
such Secretary or Assistant Secretary;
(e) Certificates. Lender shall have received, in form and
substance satisfactory to Lender, a copy of the Articles or Certificate of
Incorporation or other charter documents of each Borrower and each Guarantor,
and all amendments thereto, certified by the Secretary of State or other
appropriate official of its jurisdiction of incorporation together with copies
of the By-Laws of each Borrower and each Guarantor, and all agreements of each
Borrower's shareholders certified as accurate and complete by the Secretary of
each Borrower and each Guarantor. In addition, Lender shall have received all
information and copies of all documents, including records of requisite
corporate action and proceedings which Lender may have requested in connection
therewith, such documents where requested by Lender or its counsel to be
certified by appropriate corporate officers or Governmental Body (and including
a copy of the certificate of incorporation of each Borrower and Guarantor
certified by the Secretary of State (or equivalent Governmental Body) which
shall set forth the same complete corporate name of each Borrower and Guarantor
as is set forth herein and such document as shall set forth the organizational
identification number of each Borrower and Guarantor, if one is issued in its
jurisdiction of incorporation);
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(f) Good Standing Certificates. Lender shall have received, in
form and substance satisfactory to Lender, good standing certificates for each
Borrower and each Guarantor, dated not more than thirty (30) days prior to the
Closing Date, issued by the Secretary of State or other appropriate official of
each Borrower's and each Guarantor jurisdiction of incorporation and each
jurisdiction where the conduct of each Borrower's and each Guarantor's business
activities or the ownership of its properties necessitates qualification;
(g) Legal Opinions. Lender shall have received the executed
legal opinion of Xxxxxxx Xxxx LLP in form and substance satisfactory to Lender,
which shall cover such matters incident to the transactions contemplated by this
Agreement, the Note, and related agreements as Lender may reasonably require and
each Borrower hereby authorizes and directs such counsel to deliver such
opinions to Lender;
(h) No Litigation. (i) No litigation, investigation or
proceeding before or by any arbitrator or Governmental Body shall be continuing
or threatened against any Borrower or Guarantor against or the officers or
directors of any Borrower or any Guarantor (A) in connection with the Documents
or any of the Transactions and which, in the reasonable opinion of Lender, is
deemed material or (B) which if adversely determined, could, in the reasonable
opinion of Lender, have a Material Adverse Effect on any Borrower or any
Guarantor, and (ii) no injunction, writ, restraining order or other order of any
nature materially adverse to any Borrower or any Guarantor or the conduct of its
business or inconsistent with the due consummation of the Transactions shall
have been issued by any Governmental Body;
(i) Collateral Examination/Lien Searches. Lender shall have
(i) completed Collateral examinations and received any required appraisals, the
results of which shall be satisfactory in form and substance to Lender, of the
Receivables, Inventory, the General Intangibles, Real Property, Subsidiary Stock
and Equipment of each Borrower and all books and records in connection
therewith; and (ii) received and reviewed lien and judgement search results for
the jurisdiction of incorporation or organization of Borrowers, the jurisdiction
of the chief executive office of Borrowers and all jurisdictions in which assets
of Borrowers are located, which search results shall be in form and substance
satisfactory to Lender;
(j) Financial Condition Certificates. Lender shall have
received executed Officers' Certificates satisfactory in form and substance
reasonably satisfactory to Lender, executed Officers' Certificates certifying
the solvency of Borrowers on a consolidated basis after giving effect to the
Transactions and the Indebtedness contemplated hereby and as to Borrowers'
financial resources and their ability to meet their obligations and liabilities
as they become due; to the effect that as of the Closing Date and after giving
effect to the Transactions:
(i) the assets of Borrowers on a consolidated basis,
at a fair valuation, exceed the total liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities) of Borrowers on a
consolidated basis;
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(ii) current projections which are based on
underlying assumptions which provide a reasonable basis for the projections and
which reflect each Borrower's judgment based on present circumstances of the
most likely set of conditions and each Borrower's most likely course of action
for the period projected, demonstrate each Borrower will have sufficient cash
flow to enable it to pay its debts as they mature; and
(iii) no Borrower has an unreasonably small capital
base with which to engage in its anticipated business.
For purposes of this subsection (j) the "fair valuation" of the assets of each
Borrower shall be determined on the basis of the amount which may be realized
within a reasonable time, either through collection or sale of such assets at
market value, conceiving the latter as the amount which could be obtained for
the property in question within such period by a capable and diligent
businessman from an interested buyer who is willing to purchase under ordinary
selling conditions;
(k) Fees. Lender shall have received all fees payable to
Lender and Lender on or prior to the Closing Date pursuant to Article III
hereof;
(l) Financial Information. Lender shall have received, in
form and substance satisfactory to Lender, a current aging of accounts
receivable and accounts payable for Borrowers which shall be reasonably
satisfactory in all respects to Lender;
(m) Other Documents. Lender shall have received, as
applicable, all executed Other Documents, each in form and substance reasonably
satisfactory to Lender;
(n) Insurance. Lender shall have received in form and
substance reasonably satisfactory to Lender, certified copies of Borrowers'
casualty insurance policies, together with loss payable endorsements on Lender's
standard form of loss payee endorsement naming Lender as loss payee, and
certified copies of Borrowers' liability insurance policies, together with
endorsements naming Lender as a co-insured;
(o) Payment Instructions. Lender shall have received, in form
and substance reasonably satisfactory to Lender, written instructions from
Borrowers directing the application of proceeds of the initial Revolving
Advances made pursuant to this Agreement;
(p) Blocked Accounts/Deposit Control Agreements. Lender shall
have received, in form and substance satisfactory to Lender, (i) duly executed
agreements establishing the Blocked Accounts or Depository Accounts with
financial institutions acceptable to Lender for the collection or servicing of
the Receivables and proceeds of the Collateral; and (ii) Deposit Account Control
Agreements by and among Lender, Borrowers and each bank where any Borrower has a
deposit account, in each case, duly authorized, executed and delivered by such
bank and Borrowers (or Lender shall be the bank's customer with respect to such
deposit account, as Lender may specify);
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(q) Consents. Lender shall have received, in form and
substance reasonably satisfactory to Lender, any and all Consents necessary to
permit the effectuation of the transactions contemplated by this Agreement and
the Other Documents; and, Lender shall have received such Consents and waivers
of such third parties as might assert claims with respect to the Collateral, as
Lender and its counsel shall deem reasonably necessary;
(r) No Adverse Material Change. (1) Since June 1, 2001, there
shall not have occurred (w) any material adverse change in the condition,
financial or otherwise, operations, properties or prospects of any Borrower or
any Guarantor, (x) any material damage or destruction to any of the Collateral
nor any material depreciation in the value thereof and (y) any event, condition
or state of facts which could reasonably be expected to have a Material Adverse
Effect on any Borrower or any Guarantor, and (z) any material deviation from the
forecasts furnished to Lender with respect to Borrowers, and (ii) no
representations made or information supplied to Lender shall have been proven to
be inaccurate or misleading in any material respect;
(s) Contract Review. Lender shall have reviewed all material
contracts of Borrowers including, without limitation, leases, union contracts,
labor contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be reasonably satisfactory in
all respects to Lender;
(t) Closing Certificate. Lender shall have received, in form
and substance reasonably satisfactory to Lender, a closing certificate signed by
the President of each Borrower dated as of the date hereof, stating that (i) all
representations and warranties set forth in this Agreement and the Other
Documents are true and correct on and as of such date in all material respects,
(ii) Borrowers are on such date in material compliance with all the terms and
provisions set forth in this Agreement and the Other Documents and (iii) on such
date no Default or Event of Default has occurred or is continuing;
(u) Borrowing Base. Lender shall have received, in form and
substance satisfactory to Lender, evidence from Borrowers that the aggregate
amount of Eligible Accounts and Eligible Inventory is sufficient in value and
amount to support Revolving Advances in the amount requested by Borrowers on the
Closing Date;
(v) Undrawn Availability. After giving effect to the initial
Revolving Advances hereunder and all Reserves, Borrowers shall have Undrawn
Availability of at least $2,000,000;
(w) Other. Lender shall have received in form and substance
satisfactory to Lender, evidence of all corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
Transactions shall be reasonably satisfactory in form and substance to Lender,
Lender and their counsel;
(x) Leasehold Agreements. Lender shall have received
Landlord, mortgagee or warehouseman agreements satisfactory to Lender with
respect to all premises leased by any Borrower at which books and records
relating to Receivables and Inventory are located; and
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8.2. Conditions to Each Revolving Advance. The agreement of Lender
to make any Revolving Advance requested to be made on any date is subject to the
satisfaction of the following conditions precedent as of the date such Revolving
Advance is made:
(a) Representations and Warranties. Each of the
representations and warranties made by any Borrower in or pursuant to this
Agreement and any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement or any related agreement shall be true and correct in all
material respects on and as of such date as if made on and as of such date.
(b) No Default. No Event of Default or Default shall have
occurred and be continuing on such date, or would exist after giving effect to
the Revolving Advances requested to be made, on such date; provided, however
that Lender, in their sole discretion, may continue to make Revolving Advances
notwithstanding the existence of an Event of Default or Default and that any
Revolving Advances so made shall not be deemed a waiver of any such Event of
Default or Default;
(c) Maximum Revolving Advances. In the case of any
Revolving Advances requested to be made, after giving effect thereto, the
aggregate Revolving Advances shall not exceed the maximum amount of Revolving
Advances permitted under Section 2.1 hereof; and
Each request for a Revolving Advance by Borrowers hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Revolving
Advance that the conditions contained in this subsection shall have been
satisfied.
IX. INFORMATION AS TO BORROWERS.
---------------------------
Each Borrower shall, until satisfaction in full of the Obligations and
the termination of this Agreement:
9.1. Disclosure of Material Matters. Immediately upon learning
thereof, report to Lender all matters materially affecting the value,
enforceability or collectibility of any portion of the Collateral including,
without limitation, any Borrower's reclamation or repossession of, or the return
to any Borrower of, a material amount of goods or claims or disputes asserted by
any Customer or other obligor.
9.2. Schedules. Deliver to Lender on or before the fifteenth (15th)
day of each month as and for the prior month (a) accounts receivable agings, (b)
accounts payable schedules, (c) Inventory reports, and (d) a schedule of all
ineligible Inventory and Accounts. In addition, each Borrower will deliver to
Lender at such intervals as Lender may require: (i) confirmatory assignment
schedules, (ii) copies of Customer's invoices, (iii) evidence of shipment or
delivery, and (iv) such further schedules, documents and/or information
regarding the Collateral as Lender may require including, without limitation,
54
trial balances and test verifications. Lender shall have the right to confirm
and verify all Receivables by any manner and through any medium it considers
advisable and do whatever it may deem reasonably necessary to protect its
interests hereunder. The items to be provided under this Section are to be in
form satisfactory to Lender and executed by each Borrower and delivered to
Lender from time to time solely for Lender's convenience in maintaining records
of the Collateral, and any Borrower's failure to deliver any of such items to
Lender shall not affect, terminate, modify or otherwise limit Lender's security
interest with respect to the Collateral.
9.3. Environmental Reports/Appraisals. Furnish Lender, concurrently
with the delivery of the financial statements referred to in Sections 9.7 and
9.8, with a certificate signed by the President and/or Chief Financial Officer
of each Borrower stating, to the best of his knowledge, that each Borrower is in
compliance in all material respects with all applicable Environmental Laws. To
the extent any Borrower is not in compliance with the foregoing laws, the
certificate shall set forth with specificity all areas of non-compliance and the
proposed action such Borrower will implement in order to achieve compliance in
all material respects.
9.4. Litigation. Promptly notify Lender in writing of any
litigation, suit or administrative proceeding affecting any Borrower, whether or
not the claim is covered by insurance, and of any suit or administrative
proceeding, which may have a Material Adverse Effect on any Borrower.
9.5. Material Occurrences. Promptly notify Lender in writing upon
the occurrence of (a) any Event of Default or Default; (b) any event,
development or circumstance whereby any financial statements or other reports
furnished to Lender fail in any material respect to present fairly, in
accordance with GAAP consistently applied, the financial condition or operating
results of any Borrower as of the date of such statements; (c) any accumulated
retirement plan funding deficiency which, if such deficiency continued for two
plan years and was not corrected as provided in Section 4971 of the Code, could
subject any Borrower to a tax imposed by Section 4971 of the Code; (d) each and
every default by any Borrower which might result in the acceleration of the
maturity of any Indebtedness, including the names and addresses of the holders
of such Indebtedness with respect to which there is a default existing or with
respect to which the maturity has been or could be accelerated, and the amount
of such Indebtedness; and (e) any other development in the business or affairs
of any Borrower which might have a Material Adverse Effect; in each case
describing the nature thereof and the action Borrowers propose to take with
respect thereto.
9.6. Government Receivables. Notify Lender promptly if any of its
Receivables arise out of contracts between any Borrower and the United States,
any state, or any department, agency or instrumentality of any of them.
9.7. Annual Financial Statements. Furnish Lender within one hundred
twenty (120) days after the end of each fiscal year of Borrowers, consolidated
and consolidating financial statements of Borrowers including, but not limited
to, consolidated and consolidating statements of income and stockholders' equity
and cash flow from the beginning of the current fiscal year to the end of such
fiscal year and the balance sheet as at the end of such fiscal year, all
55
prepared in accordance with GAAP applied on a basis consistent with prior
practices, and in reasonable detail and reported upon, commencing with the year
ending March 31, 2002, without qualification by an independent certified public
accounting firm selected by Borrowers and satisfactory to Lender (the
"Accountants"). The audit report of such accounting firm shall be accompanied by
a statement of such accounting firm certifying that (i) they have caused this
Agreement to be reviewed, (ii) in making the examination upon which such report
was based either no information came to their attention which to their knowledge
constituted an Event of Default or a Default under this Agreement or any Other
Document or, if such information came to their attention, specifying any such
Default or Event of Default, its nature, when it occurred and whether it is
continuing, and such report shall contain or have appended thereto calculations
which set forth the Borrowers' compliance with the requirements or restrictions
imposed by Sections 6.5, 6.6, 6.7 and 6.8. In addition, the reports shall be
accompanied by a certificate of the President and/or Chief Financial Officer of
each Borrower which shall state that, based on an examination sufficient to
permit him to make an informed statement, no Default or Event of Default exists,
or, if such is not the case, specifying such Default or Event of Default, its
nature, when it occurred, whether it is continuing and the steps being taken by
such Borrower with respect to such default and, such certificate shall have
appended thereto calculations which set forth Borrowers' compliance with the
requirements or restrictions imposed by Sections 6.5, 6.6, 6.7 and 6.8.
9.8. Monthly Financial Statements. Furnish Lender within thirty
(30) days after the end of each month or 45 days after the end of each month
that is also the end of one of Borrowers' fiscal quarters, a consolidated and
consolidating unaudited balance sheet of Borrowers and a consolidated and
consolidating unaudited statements of income and stockholders' equity and cash
flow of Borrowers reflecting results of operations from the beginning of the
fiscal year to the end of such month and for such month, prepared in accordance
with GAAP (except for disclosures required by GAAP) applied on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal year end adjustments. The reports shall be
accompanied by a certificate signed by the President and/or Chief Financial
Officer of each Borrower, which shall state that, based on an examination
sufficient to permit him to make an informed statement, no Default or Event of
Default exists, or, if such is not the case, specifying such Default or Event of
Default, its nature, when it occurred, whether it is continuing and the steps
being taken by Borrowers with respect to such event and, such certificate shall
have appended thereto calculations which set forth Borrowers' compliance with
the requirements or restrictions imposed by Sections 6.5, 6.6, 6., and 6.8.
9.9. Other Reports/Consolidating Statements. Furnish Lender as soon
as available, but in any event within ten (10) days after the issuance thereof,
with copies of such financial statements, reports and returns as each Borrower
shall send to its stockholders.
9.10. Additional Information. Furnish Lender with such additional
information as Lender shall reasonably request in order to enable Lender to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Note have been complied with by Borrowers including, without
limitation and without the necessity of any request by Lender, (a) copies of all
environmental audits and reviews, (b) at least thirty (30) days prior thereto,
56
notice of any Borrower's opening of any new office or place of business or any
Borrower's closing of any existing office or place of business, and (c) promptly
upon any Borrower's learning thereof, notice of any labor dispute to which any
Borrower may become a party, any strikes or walkouts relating to any of its
plants or other facilities, and the expiration of any labor contract to which
any Borrower is a party or by which any Borrower is bound.
9.11. Projected Operating Budget. Furnish Lender, no later than
thirty (30) days prior to the beginning of each Borrower's fiscal years
commencing with the fiscal year ending on March 31, 2003, a month by month
projected operating budget and cash flow of Borrowers, on a consolidated and
consolidating basis, for such fiscal year (including an income statement,
statements of cash disbursements, cash collections and borrowing base
projections for each month and a balance sheet as at the end of the last month
in each fiscal quarter), such projections to be accompanied by a certificate
signed by the President or Chief Financial Officer of each Borrower to the
effect that such projections have been prepared on the basis of sound financial
planning practice consistent with past budgets and financial statements and that
such officer has no reason to question the reasonableness of any material
assumptions on which such projections were prepared.
9.12. Variances From Operating Budget. Furnish Lender, concurrently
with the delivery of the financial statements referred to in Section 9.7 and
within thirty (30) days after the end of each month, a written report
summarizing all material variances from budgets submitted by Borrowers pursuant
to Section 9.11 and a discussion and analysis by management with respect to such
variances.
9.13. Notice of Suits, Adverse Events. Furnish Lender with prompt
notice of (a) any lapse or other termination of any Consent issued to any
Borrower by any Governmental Body or any other Person that is material to the
operation of any Borrower's business, (b) any refusal by any Governmental Body
or any other Person to renew or extend any such Consent; and (c) copies of any
periodic or special reports filed by any Borrower with any Governmental Body or
Person, if such reports indicate any material change in the business,
operations, affairs or condition of any Borrower, or if copies thereof are
requested by Lender, and (d) copies of any material notices and other
communications from any Governmental Body or Person which specifically relate to
any Borrower.
9.14. ERISA Notices and Requests. Furnish Lender with immediate
written notice in the event that (a) any Borrower or any member of the
Controlled Group knows or has reason to know that a Termination Event has
occurred, together with a written statement describing such Termination Event
and the action, if any, which such Borrower or member of the Controlled Group
has taken, is taking, or proposes to take with respect thereto and, when known,
any action taken or threatened by the Internal Revenue Service, Department of
Labor or PBGC with respect thereto, (b) any Borrower or any member of the
Controlled Group knows or has reason to know that a prohibited transaction (as
defined in Sections 406 of ERISA and 4975 of the Code) has occurred together
with a written statement describing such transaction and the action which such
Borrower or any member of the Controlled Group has taken, is taking or proposes
to take with respect thereto, (c) a funding waiver request has been filed with
respect to any Plan together with all communications received by any Borrower or
any member of the Controlled Group with respect to such request, (d) any
material increase in the benefits of any existing Plan or the establishment of
any new Plan or the commencement of contributions to any Plan to which any
57
Borrower or any member of the Controlled Group was not previously contributing
shall occur, (e) any Borrower or any member of the Controlled Group shall
receive from the PBGC a notice of intention to terminate a Plan or to have a
trustee appointed to administer a Plan, together with copies of each such
notice, (f) any Borrower or any member of the Controlled Group shall receive any
unfavorable determination letter from the Internal Revenue Service regarding the
qualification of a Plan under Section 401(a) of the Code, together with copies
of each such letter; (g) any Borrower or any member of the Controlled Group
shall receive a notice regarding the imposition of withdrawal liability,
together with copies of each such notice; (h) any Borrower or any member of the
Controlled Group knows that (i) a Multiemployer Plan has been terminated, (ii)
the administrator or plan sponsor of a Multiemployer Plan intends to terminate a
Multiemployer Plan, or (iii) the PBGC has instituted or will institute
proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan; and
(i) any Borrower or any member of the Controlled Group shall fail to make a
required installment or any other required payment under Section 412 of the Code
on or before the due date for such installment or payment.
9.15. Additional Documents. Execute and deliver to Lender, upon
request, such documents and agreements as Lender may, from time to time,
reasonably request to carry out the purposes, terms or conditions of this
Agreement.
X. EVENTS OF DEFAULT.
-----------------
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
10.1. failure by any Borrower to pay any principal or interest on
the Obligations when due, whether at maturity or by reason of acceleration
pursuant to the terms of this Agreement or by notice of intention to prepay, or
by required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein or any Other Document when due;
10.2. any representation or warranty made or deemed made by any
Borrower in this Agreement or any related agreement or in any certificate,
document or financial or other statement furnished at any time in connection
herewith or therewith shall prove to have been misleading in any material
respect on the date when made or deemed to have been made;
10.3. failure by any Borrower to (i) furnish financial information
when due or when requested by Lender within a reasonable time after such
request, or (ii) permit the inspection of its books or records;
10.4. issuance of a notice of lien, which is not a Permitted
Encumbrance, levy, assessment, injunction or attachment against a material
portion of any Borrower's property which is not bonded or lifted within thirty
(30) days or which at any time is not stayed;
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10.5. failure or neglect of any Borrower to perform, keep or observe
any term, provision, condition, covenant herein contained, or contained in any
other agreement or arrangement, now or hereafter entered into between any
Borrower and Lender;
10.6. any judgment is rendered or judgment liens filed against any
Borrower for an amount in excess of $100,000 which within forty-five (45) days
of such rendering or filing is not either satisfied, stayed or discharged of
record, or which at any time is unstayed;
10.7. any Borrower shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, or fail to have dismissed, within forty-five (45)
days, any petition filed against it in any involuntary case under such
bankruptcy laws, or (vii) take any action for the purpose of effecting any of
the foregoing;
10.8. any Borrower shall admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present business;
10.9. any Affiliate (other than E Com Ventures, Inc., Perfumania,
Inc. or xxxxxxxxxx.xxx, inc.) or any Subsidiary of any Borrower, or any
Guarantor shall (i) apply for, consent to or suffer the appointment of, or the
taking of possession by, a receiver, custodian, trustee, liquidator or similar
fiduciary of itself or of all or a substantial part of its property, (ii) admit
in writing its inability, or be generally unable, to pay its debts as they
become due or cease operations of its present business, (iii) make a general
assignment for the benefit of creditors, (iv) commence a voluntary case under
any state or federal bankruptcy laws (as now or hereafter in effect), (v) be
adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (vii) acquiesce
to, or fail to have dismissed, within sixty (60) days, any petition filed
against it in any involuntary case under such bankruptcy laws, or (viii) take
any action for the purpose of effecting any of the foregoing;
10.10. any Liens created hereunder or provided for hereby or under
any related agreement for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest;
10.11. a default of the obligations of any Borrower under any other
agreement to which it is a party shall occur which adversely affects, in any
material respect, its condition, affairs or prospects (financial or otherwise)
which default is not cured within any applicable grace period or waived by
Lender;
10.12. termination or breach of any agreement executed and delivered
to Lender in connection with the Obligations of any Borrower, or if any
Guarantor attempts to terminate, challenges the validity of, or its liability
under, any such Guaranty or similar agreement;
59
10.13. any Change of Control shall occur;
10.14. any material provision of this Agreement shall, for any
reason, cease to be valid and binding on any Borrower, or any Borrower shall so
claim in writing to Lender;
10.15. if (i) any Governmental Body shall (A) revoke, terminate,
suspend or adversely modify any license, permit, patent, trademark or trade name
of any Borrower, which revocation, termination or suspension has or could have a
Material Adverse Effect, or (B) commence proceedings to suspend, revoke,
terminate or adversely modify any such license, permit, trademark, trade name or
patent and such proceedings shall not be dismissed or discharged within sixty
(60) days, or (C) schedule or conduct a hearing on the renewal of any license,
permit, trademark, trade name or patent necessary for the continuation of any
Borrower's business and the staff of such Governmental Body issues a report
recommending the termination, revocation, suspension or material, adverse
modification of such license, permit, trademark, trade name or patent; and (ii)
any agreement which is necessary or material to the operation of any Borrower's
business shall be revoked or terminated and not replaced by a substitute
acceptable to Lender within thirty (30) days after the date of such revocation
or termination, and such revocation or termination and non-replacement could
have a Material Adverse Effect on any Borrower;
10.16. any portion of the Collateral shall be seized or taken by a
Governmental Body, or any Borrower or the title and rights of any Borrower or
any other Person with respect to any material portion of the Collateral shall
have become the subject matter of litigation which might, in the opinion of
Lender, upon final determination, result in impairment or loss of the security
provided by this Agreement or the Other Documents;
10.17. the business operations of any Borrower is interrupted at any
time for more than eight (8) hours a day during any period of five (5)
consecutive days and such interruption has a Material Adverse Effect upon
Borrower, taken as a whole, unless such Borrower shall (i) be entitled to
receive for such period of interruption, proceeds of business interruption
insurance sufficient to assure that its per diem cash needs during such period
is at least equal to its average per diem cash needs for the consecutive three
month period immediately preceding the initial date of interruption and (ii)
receive such proceeds in the amount described in clause (i) preceding not later
than thirty (30) days following the initial date of any such interruption;
provided, however, that notwithstanding the provisions of clauses (i) and (ii)
of this section, an Event of Default shall be deemed to have occurred if such
Borrower shall be receiving the proceeds of business interruption insurance for
a period of thirty (30) consecutive days;
10.18. an event or condition specified in Sections 7.16 or 9.1 hereof
shall occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, any Borrower or
any member of the Controlled Group shall incur, or in the opinion of Lender be
reasonably likely to incur, a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of Lender, could have a Material Adverse Effect on
any Borrower; or
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10.19. any bank at which any deposit account of any Borrower is
maintained shall fail to comply with any of the terms of any Deposit Account
Control Agreement to which such bank is a party or any securities intermediary,
commodity intermediary or other financial institution at any time in custody,
control or possession of any investment property of such Borrower shall fail to
comply with any of the terms of any Investment Property Control Agreement to
which such person is a party.
XI. LENDER'S RIGHTS AND REMEDIES AFTER DEFAULT.
------------------------------------------
11.1. Rights and Remedies. Upon the occurrence of (i) a Default
pursuant to Section 10.7(vi) or any other Event of Default pursuant to Section
10.7 all Obligations shall be immediately due and payable and this Agreement and
the obligation of Lender to make Revolving Advances shall be deemed terminated;
and (ii) any of the other Events of Default and at any time thereafter (such
default not having previously been cured), at the option of Lender, all
Obligations shall be immediately due and payable and Lender shall have the right
to terminate this Agreement and to terminate the obligation of Lender to make
Revolving Advances. Upon the occurrence of any Event of Default, Lender shall
have the right to exercise any and all other rights and remedies provided for
herein, under the Uniform Commercial Code and at law or equity generally,
including, without limitation, the right to foreclose the security interests
granted herein and to realize upon any Collateral by any available judicial
procedure and/or to take possession of and sell any or all of the Collateral
with or without judicial process. Lender may enter any Borrower's premises or
other premises without legal process and without incurring liability to any
Borrower therefor, and Lender may thereupon, or at any time thereafter, in its
discretion without notice or demand, take the Collateral and remove the same to
such place as Lender may deem advisable and Lender may require Borrowers to make
the Collateral available to Lender at a convenient place. With or without having
the Collateral at the time or place of sale, Lender may sell the Collateral, or
any part thereof, at public or private sale, at any time or place, in one or
more sales, at such price or prices, and upon such terms, either for cash,
credit or future delivery, as Lender may elect. Except as to that part of the
Collateral which is perishable or threatens to decline speedily in value or is
of a type customarily sold on a recognized market, Lender shall give Borrowers
reasonable notification of such sale or sales, it being agreed that in all
events written notice mailed to Borrowers at least five (5) days prior to such
sale or sales is reasonable notification. At any public sale Lender may bid for
and become the purchaser, and Lender, or any other purchaser at any such sale
thereafter shall hold the Collateral sold absolutely free from any claim or
right of whatsoever kind, including any equity of redemption and such right and
equity are hereby expressly waived and released by each Borrower. In connection
with the exercise of the foregoing remedies, Lender is granted permission,
without charge, to use all of Borrowers' trademarks, trade styles, trade names,
patents, patent applications, copyrights, licenses, franchises and other
proprietary rights which are used in connection with (a) Inventory for the
purpose of disposing of such Inventory and (b) Equipment for the purpose of
completing the manufacture of unfinished goods. The proceeds realized from the
sale of any Collateral shall be applied as follows: first, to the reasonable
costs, expenses and attorneys' fees and expenses incurred by Lender and Lender
for collection and for acquisition, completion, protection, removal, storage,
sale and delivery of the Collateral; second, to interest due upon any of the
Obligations; and, third, to the principal of the Obligations. If any deficiency
shall arise, Borrowers shall remain liable to Lender therefor.
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11.2. Lender's Discretion. Lender shall have the right in its sole
discretion to determine which rights, Liens, security interests or remedies
Lender may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Lender's rights hereunder. To the extent that applicable
law imposes duties on Lender to exercise remedies in a commercially reasonable
manner (which duties cannot be waived under such law), each Borrower
acknowledges and agrees that it is not commercially unreasonable for Lender (a)
to fail to incur expenses reasonably deemed significant by Lender to prepare
Collateral for disposition or otherwise to complete raw material or work in
process into finished goods or other finished products for disposition, (b) to
fail to obtain third party consents for access to Collateral to be disposed of,
or to obtain or, if not required by other law, to fail to obtain consents of any
Governmental Body or other third party for the collection or disposition of
Collateral to be collected or disposed of, (c) to fail to exercise collection
remedies against account debtors, secondary obligors or other persons obligated
on Collateral or to remove liens or encumbrances on or any adverse claims
against Collateral, (d) to exercise collection remedies against account debtors
and other persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (e) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (f) to contact other
persons, whether or not in the same business as Borrowers for expressions of
interest in acquiring all or any portion of the Collateral, (g) to hire one or
more professional auctioneers to assist in the disposition of Collateral,
whether or not the collateral is of a specialized nature, (h) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of
doing so, or that match buyers and sellers of assets, (i) to dispose of assets
in wholesale rather than retail markets, (j) to disclaim disposition
warranties, (k) to purchase insurance or credit enhancements to insure Lender
against risks of loss, collection or disposition of Collateral or to provide to
Lender a guaranteed return from the collection or disposition of Collateral, or
(l) to the extent deemed appropriate by Lender, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist
Lender in the collection or disposition of any of the Collateral. Each Borrower
acknowledges that the purpose of this Section 11.2 is to provide non-exhaustive
indications of what actions or omissions by Lender would not be commercially
unreasonable in Lender's exercise of remedies against the Collateral and that
other actions or omissions by Lender shall not be deemed commercially
unreasonable solely on account of not being indicated in this Section 11.2.
Without limitation of the foregoing, nothing contained in this Section 11.2
shall be construed to grant any rights to Borrowers or to impose any duties on
Lender that would not have been granted or imposed by this Agreement or by
applicable law in the absence of this Section 11.2.
11.3. Setoff. In addition to any other rights which Lender may have
under applicable law, upon the occurrence of an Event of Default hereunder,
Lender shall have a right to apply any Borrower's property held by Lender or by
the Bank to reduce the Obligations.
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11.4. Rights and Remedies not Exclusive. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the exercise
of any right or remedy shall not preclude the exercise of any other right or
remedies provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
--------------------------------
12.1. Waiver of Notice. Each Borrower hereby waives notice of
non-payment of any of the Receivables, demand, presentment, protest and notice
thereof with respect to any and all instruments, notice of acceptance hereof,
notice of loans or advances made, credit extended, Collateral received or
delivered, or any other action taken in reliance hereon, and all other demands
and notices of any description, except such as are expressly provided for
herein.
12.2. Delay. No delay or omission on Lender's part in exercising any
right, remedy or option shall operate as a waiver of such or any other right,
remedy or option or of any default.
12.3. JURY TRIAL WAIVER. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND
EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
------------------------------
13.1. Term. This Agreement, which shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of each
Borrower and Lender, shall become effective on the date hereof and shall
continue in full force and effect until the last day of the Term unless sooner
terminated as herein provided. The Term shall be automatically extended for
successive periods of one (1) year each unless terminated by either party at the
end of such initial Term or any successive Term by giving the other party sixty
(60) days prior written notice. Borrowers may terminate this Agreement at any
time upon sixty (60) days' prior written notice upon payment in full of the
Obligations. In the event that the Obligations are prepaid in full prior to the
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last day of the Term (the date of such prepayment hereinafter referred to as the
"Prepayment Date") Borrowers shall pay to Lender an early termination fee in an
amount equal to (1) three percent (3%) of the Maximum Loan Amount if the
Prepayment Date occurs on or after the Closing Date to and including the date
immediately preceding the first anniversary of the Closing Date, (2) two percent
(2%) of the Maximum Loan Amount if the Prepayment Date occurs on or after the
first anniversary of the Closing Date to and including the date immediately
preceding the second anniversary of the Closing Date, and (3) one percent (1%)
of the Maximum Loan Amount if the Prepayment Date occurs on or after the second
anniversary of the Closing Date to and including the date immediately preceding
the third anniversary of the Closing Date or prior to the end of any extended
term.
13.2. Termination. The termination of the Agreement shall not affect
any Borrower's, or Lender's rights, or any of the Obligations having their
inception prior to the effective date of such termination, and the provisions
hereof shall continue to be fully operative until all transactions entered into,
rights or interests created or Obligations have been fully disposed of,
concluded or liquidated. The Liens and rights granted to Lender hereunder and
the financing statements filed hereunder shall continue in full force and
effect, notwithstanding the termination of this Agreement or the fact that any
Borrower's respective account may from time to time be temporarily in a zero or
credit position, until all of the Obligations of each Borrower have been paid or
performed in full after the termination of this Agreement or each Borrower has
furnished Lender with an indemnification satisfactory to Lender with respect
thereto. Accordingly, each Borrower waives any rights which it may have under
Section 9-504(1) of the Uniform Commercial Code to demand the filing of
termination statements with respect to the Collateral, and Lender shall not be
required to send such termination statements to each Borrower, or to file them
with any filing office, unless and until this Agreement shall have been
terminated in accordance with its terms and all Obligations paid in full in
immediately available funds. All representations, warranties, covenants, waivers
and agreements contained herein shall survive termination hereof until all
Obligations are paid or performed in full.
XIV. BORROWING AGENCY.
----------------
14.1. Borrowing Agency Provisions.
---------------------------
(a) Each Borrower hereby irrevocably designates Borrowing
Agent to be its attorney and agent and in such capacity to borrow, sign and
endorse notes, and execute and deliver all instruments, documents, writings and
further assurances now or hereafter required hereunder, on behalf of such
Borrower or Borrowers, and hereby authorizes Agent to pay over or credit all
loan proceeds hereunder in accordance with the request of Borrowing Agent.
(b) The handling of this credit facility as a co-borrowing
facility with a borrowing agent in the manner set forth in this Agreement is
solely as an accommodation to Borrowers and at their request. Lender shall not
incur liability to Borrowers as a result thereof. To induce Lender to do so and
in consideration thereof, each Borrower hereby indemnifies Lender and holds
Lender harmless from and against any and all liabilities, expenses, losses,
damages and claims of damage or injury asserted against Lender by any Person
arising from or incurred by reason of the handling of the financing arrangements
of Borrowers as provided herein, reliance by Lender on any request or
instruction from Borrowing Agent or any other action taken by Lender with
respect to this Section 14.1 except due to willful misconduct or gross (not
mere) negligence by the indemnified party.
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(c) All Obligations shall be joint and several, and each
Borrower shall make payment upon the maturity of the Obligations by acceleration
or otherwise, and such obligation and liability on the part of each Borrower
shall in no way be affected by any extensions, renewals and forbearance granted
to Lender to any Borrower, failure of Lender to give any Borrower notice of
borrowing or any other notice, any failure of Lender to pursue or preserve its
rights against any Borrower, the release by Lender of any Collateral now or
thereafter acquired from any Borrower, and such agreement by each Borrower to
pay upon any notice issued pursuant thereto is unconditional and unaffected by
prior recourse by Lender to the other Borrowers or any Collateral for such
Borrower's Obligations or the lack thereof.
14.2. Waiver of Subrogation. Until all Obligations are fully and
indefeasibly paid to Lender, each Borrower expressly waives any and all rights
of subrogation, reimbursement, indemnity, exoneration, contribution of any other
claim which such Borrower may now or hereafter have against the other Borrowers
or other Person directly or contingently liable for the Obligations hereunder,
or against or with respect to the other Borrowers' property (including, without
limitation, any property which is Collateral for the Obligations), arising from
the existence or performance of this Agreement.
XV. MISCELLANEOUS.
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15.1. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applied to
contracts to be performed wholly within the State of New York. Any judicial
proceeding brought by or against any Borrower with respect to any of the
Obligations, this Agreement or any related agreement may be brought in any court
of competent jurisdiction in the State of New York, United States of America,
and, by execution and delivery of this Agreement, each Borrower accepts for
itself and in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. Each
Borrower hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by registered mail (return
receipt requested) directed to Borrowing Agent at its address set forth in
Section 15.6 and service so made shall be deemed completed five (5) days after
the same shall have been so deposited in the mails of the United States of
America, or, at the Lender's option, by service upon Borrowing Agent which each
Borrower irrevocably appoints as such Borrower's Agent for the purpose of
accepting service within the state of New York. Nothing herein shall affect the
right to serve process in any manner permitted by law or shall limit the right
of Lender to bring proceedings against any Borrower in the courts of any other
jurisdiction. Each Borrower waives any objection to jurisdiction and venue of
any action instituted hereunder and shall not assert any defense based on lack
of jurisdiction or venue or based upon forum non conveniens. Any judicial
proceeding by any Borrower against Lender involving, directly or indirectly, any
matter or claim in any way arising out of, related to or connected with this
Agreement or any related agreement, shall be brought only in a federal or state
court located in the City of New York, State of New York.
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15.2. Entire Understanding. This Agreement and the documents
executed concurrently herewith contain the entire understanding between each
Borrower, Lender and supersedes all prior agreements and understandings, if any,
relating to the subject matter hereof. Any promises, representations, warranties
or guarantees not herein contained and hereinafter made shall have no force and
effect unless in writing, signed by each Borrower's, and Lender's respective
officers. Neither this Agreement nor any portion or provisions hereof may be
changed, modified, amended, waived, supplemented, discharged, cancelled or
terminated orally or by any course of dealing, or in any manner other than by an
agreement in writing, signed by the party to be charged. Each Borrower
acknowledges that it has been advised by counsel in connection with the
execution of this Agreement and Other Documents and is not relying upon oral
representations or statements inconsistent with the terms and provisions of this
Agreement.
15.3. Successors and Assigns; Participations; New Lenders.
---------------------------------------------------
(a) This Agreement shall be binding upon and inure to the
benefit of Borrowers, Lender all future holders of the Obligations and their
respective successors and assigns, except that no Borrower may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Lender.
(b) Each Borrower acknowledges that in the regular course of
commercial lending business Lender may at any time and from time to time sell
participating interests in the Revolving Advances to other financial
institutions (each such transferee or purchaser of a participating interest, a
"Transferee"). Each Transferee may exercise all rights of payment (including
without limitation rights of set-off) with respect to the portion of such
Revolving Advances held by it or other Obligations payable hereunder as fully as
if such Transferee were the direct holder thereof provided that Borrowers shall
not be required to pay to any Transferee more than the amount which it would
have been required to pay to Lender which granted an interest in its Revolving
Advances or other Obligations payable hereunder to such Transferee had Lender
retained such interest in the Revolving Advances hereunder or other Obligations
payable hereunder and in no event shall Borrowers be required to pay any such
amount arising from the same circumstances and with respect to the same
Revolving Advances or other Obligations payable hereunder to both Lender and
such Transferee. Each Borrower hereby grants to any Transferee a continuing
security interest in any deposits, moneys or other property actually or
constructively held by such Transferee as security for the Transferee's interest
in the Revolving Advances.
(c) Each Borrower authorizes Lender to disclose to any
Transferee and any prospective Transferee any and all financial information in
Lender's possession concerning each Borrower which has been delivered to Lender
by or on behalf of each Borrower pursuant to this Agreement or in connection
with Lender's credit evaluation of each Borrower.
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15.4. Application of Payments. Lender shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that any
Borrower makes a payment or Lender receives any payment or proceeds of the
Collateral for any Borrower's benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Lender.
15.5. Indemnity. Each Borrower shall indemnify Lender and Lender's
officers, directors, Affiliates, employees and agents from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, fees and disbursements of counsel) which may be
imposed on, incurred by, or asserted against Lender in any litigation,
proceeding or investigation instituted or conducted by any governmental agency
or instrumentality or any other Person with respect to any aspect of, or any
transaction contemplated by, or referred to in, or any matter related to, this
Agreement or the Other Documents, whether or not Lender is a party thereto,
except to the extent that any of the foregoing arises out of the wilful
misconduct by the indemnified party as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.
15.6. Notice. Any notice or request hereunder may be given to any
Borrower or to Lender at their respective addresses set forth below or at such
other address as may hereafter be specified in a notice designated as a notice
of change of address under this Section. Any notice or request hereunder shall
be given by (a) hand delivery, (b) overnight courier, (c) registered or
certified mail, return receipt requested, (d) telex or telegram, subsequently
confirmed by registered or certified mail, or (e) telecopy to the number set out
below (or such other number as may hereafter be specified in a notice designated
as a notice of change of address) with telephone communication to a duly
authorized officer of the recipient confirming its receipt as subsequently
confirmed by registered or certified mail. Any notice or other communication
required or permitted pursuant to this Agreement shall be deemed given (i) when
personally delivered to any officer of the party to whom it is addressed, (ii)
on the earlier of actual receipt thereof or five (5) days following posting
thereof by certified or registered mail, postage prepaid, or (iii) recognized
overnight delivery service or (iv) upon actual receipt thereof when sent by
telecopier to the number set forth below with telephone communication confirming
receipt and subsequently confirmed by registered, certified or overnight mail to
the address set forth below, in each case addressed to each party at its address
set forth below or at such other address as has been furnished in writing by a
party to the other by like notice:
(A) If to Lender: GMAC COMMERCIAL CREDIT LLC
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Corporate Loan Administration
Xx. Xxxxx Xxxxxxxx,
Senior Vice President
Telephone: 000 000-0000
Telecopier: 000 000-0000
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and
GMAC COMMERCIAL CREDIT LLC
0000 Xxxxxxxxx Xxxxxxx
X.X. Xxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxx, VP
Telephone: 000 000-0000
Telecopier: 000 000-0000
(B) If to Borrowers: XXXXXX XXXXXXXXXX, INC.,
Borrowing Agent
0000 X.X. 00xx Xxxxxx
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxxxx, EVP/COO/CFO
Telephone: 000-000-0000, x. 117
Telecopy: 000-000-0000
With a copy to: XXXXXXX XXXX LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
Telephone: 000-000-0000
Telecopy: 000-000-0000
provided that, Lender's failure to deliver a copy of any
such notice to Xxxxxxx Xxxx LLP shall not limit, impair, prohibit or otherwise
affect in any way Lenders's rights and remedies hereunder or the enforcement
hereof.
15.7. Survival. The obligations of Borrowers under Sections 3.7, 3.8
and 14.5 shall survive termination of this Agreement and the Other Documents and
payment in full of the Obligations.
15.8. Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
15.9. Expenses. All costs and expenses including, without
limitation, attorneys' fees and disbursements incurred by Lender (a) in all
efforts made to enforce payment of any Obligation or effect collection of any
Collateral, or (b) in connection with the entering into, modification,
amendment, administration and enforcement of this Agreement or any consents or
waivers hereunder and all related agreements, documents and instruments, or (c)
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in instituting, maintaining, preserving, enforcing and foreclosing on Lender's
security interest in or Lien on any of the Collateral, whether through judicial
proceedings or otherwise, or (d) in defending or prosecuting any actions or
proceedings arising out of or relating to Lender's transactions with any
Borrower, or (e) in connection with any advice given to Lender with respect to
its rights and obligations under this Agreement and all related agreements, may
be charged to Borrowers' account and shall be part of the Obligations.
15.10. Injunctive Relief. Each Borrower recognizes that, in the event
any Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to Lender; therefore, each Lender, if Lender so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving that actual damages are not an adequate remedy.
15.11. Consequential Damages. Neither Lender or Lender's attorney
shall be liable to any Borrower for consequential damages arising from any
breach of contract, tort or other wrong relating to the establishment,
administration or collection of the Obligations.
15.12. Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
15.13. Counterparts; Telecopied Signatures. This Agreement may be
executed in any number of and by different parties hereto, on separate
counterparts, all of which when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
15.14. Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
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Each of the parties has signed this Agreement as of the day and year
first above written.
XXXXXX XXXXXXXXXX, INC.
By: /s/ Xxxxx X. Xxxxxxxxxxx
---------------------------------------------
Title: Executive VP/COO/CFO
-------------------------------------------
PARLUX LTD.
By: /s/ Xxxxx X. Xxxxxxxxxxx
---------------------------------------------
Title: Executive VP/COO/CFO
-------------------------------------------
GMAC COMMERCIAL CREDIT LLC
By: /s/ Xxxxx X. Childs, Jr.
---------------------------------------------
Title: Senior Vice President
-------------------------------------------
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