1
Exhibit 10.21
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BY AND AMONG
CYRK, INC.
AND
EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO
AS BORROWERS,
AND
FOOTHILL CAPITAL CORPORATION
AS LENDER
DATED AS OF FEBRUARY 15, 2001
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AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "Agreement"),
is entered into as of February 15, 2001, between and among FOOTHILL CAPITAL
CORPORATION, a California corporation ("Lender"), CYRK, INC. a Delaware
corporation ("PARENT"), and each of Parent's Subsidiaries identified on the
signature pages hereof (such Subsidiaries, together with Parent, are referred to
hereinafter each individually as a "BORROWER" and, collectively, jointly and
severally, as the "BORROWERS").
RECITALS
A. Lender, Borrowers, Tonkin, Inc., a Delaware corporation ("Tonkin"),
and Cyrk Acquisition Corp., a Delaware corporation ("Marketing Incentives"), are
parties to a Loan and Security Agreement dated as of December 28, 2000 (the
"December 2000 Loan Agreement").
B. Parent has entered into a Purchase Agreement dated as of January 20,
2001 (the "Purchase Agreement") with Cyrk Holdings, Inc. (formerly Rockridge
Partners, Inc.), a Massachusetts corporation (the "Buyer"). Pursuant to the
Purchase Agreement, Buyer has agreed to purchase, and Parent has agreed to sell,
certain of its assets, including the Stock of Tonkin and Marketing Incentives
owned by it.
C. In connection with the Purchase Agreement, Parent, Xxxx.xxx, Inc.,
Tonkin and Marketing Incentives have requested Lender to (i) release its liens
on the assets to be sold by Parent to Buyer, and (ii) restructure the credit
facility evidenced by the December 2000 Loan Agreement such that, among other
things, only Parent and Xxxx.xxx, Inc. remain as borrowers thereunder.
D. Lender has agreed to such restructuring on the terms and conditions
set forth below.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following terms shall have
the following definitions:
"ACCEPTABLE PURCHASE ORDER" means a purchase order issued to a Borrower by
Xxxxxx Xxxxxx or Ty, or any other Person whose credit standing is acceptable to
Lender in its Permitted Discretion, for the sale of goods by a Borrower in the
ordinary course of its business to Xxxxxx Xxxxxx, Xx or such other Person, as
the case may be, which:
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(i) purchase order,
(a) has been accepted by such Borrower,
(b) provides that the subject goods will be shipped to, or taken delivery
of by, Xxxxxx Xxxxxx, Xx or such other Person directly from such Borrower (or
its agent) at a location in the continental United States after such goods have
cleared customs in the continental United States,
(c) otherwise is in a form approved by Lender, including terms
satisfactory to Lender in its Permitted Discretion, and
(e) is valid, binding and enforceable against Xxxxxx Xxxxxx, Xx or such
other Person; and
(ii) which goods,
(x) must be purchased by such Borrower prior to such sale to Xxxxxx
Xxxxxx, XX or such other Person, which purchase by such Borrower will involve
the issuance of a Letter of Credit, and
(y) upon title passing to such Borrower, shall constitute Eligible
In-Transit Inventory.
"ACCEPTABLE PURCHASE ORDER LETTER OF CREDIT" means a Qualified Import
Letter of Credit issued in connection with an Acceptable Purchase Order.
"ACCOUNT DEBTOR" means any Person who is or who may become obligated under,
with respect to, or on account of, an Account, chattel paper, or a General
Intangible.
"ACCOUNTS" means all of Borrowers' now owned or hereafter acquired right,
title, and interest with respect to "accounts" (as that term is defined in the
Code), and any and all supporting obligations in respect thereof.
"ACKNOWLEDGMENT AND ASSET SEGREGATION LETTER" means a letter executed and
delivered by Borrowers, Buyer, Tonkin and Marketing Incentives, the form and
substance of which is satisfactory to Lender.
"ACTIVE DOMESTIC SUBSIDIARY" means a Domestic Subsidiary of a Borrower
which is not an Inactive Subsidiary.
"ADDITIONAL DOCUMENTS" has the meaning set forth in SECTION 4.4.
"ADJUSTED LETTER OF CREDIT USAGE" means, as of the date of determination,
the sum of (a) 100% of the undrawn amount of outstanding Letters of Credit
(other than Acceptable Purchase Order Letters of Credit, Letters of Credit
supported by the Back to Back Standby Letter of Credit and Letters of Credit
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(other than Acceptable Purchase Order Letters of Credit) which are cash
collateralized in accordance with SECTION 2.12(I) or SECTION 3.1(P)), plus (b)
without duplication, 100% of the amount of outstanding time drafts accepted by
an Underlying Issuer as a result of drawings under Underlying Letters of Credit.
"ADMINISTRATIVE BORROWER" has the meaning set forth in SECTION 16.10.
"ADVANCES" has the meaning set forth in SECTION 2.1. "Advances" under the
December 2000 Loan Agreement which are outstanding as of the date hereof shall
be deemed to be Advances hereunder.
"AFFILIATE" means, as applied to any Person, any other Person who, directly
or indirectly, controls, is controlled by, or is under common control with, such
Person. For purposes of this definition, "control" means the possession,
directly or indirectly, of the power to direct the management and policies of a
Person, whether through the ownership of Stock, by contract, or otherwise;
PROVIDED, HOWEVER, that, in any event: (a) any Person which owns directly or
indirectly 10% or more of the securities having ordinary voting power for the
election of directors or other members of the governing body of a Person or 10%
or more of the partnership or other ownership interests of a Person (other than
as a limited partner of such Person) shall be deemed to control such Person; (b)
each director (or comparable manager) of a Person shall be deemed to be an
Affiliate of such Person; and (c) each partnership or joint venture in which a
Person is a partner or joint venturer shall be deemed to be an Affiliate of such
Person.
"AGREEMENT" has the meaning set forth in the preamble hereto.
"ASSIGNEE" has the meaning set forth in SECTION 14.1(A).
"AUTHORIZED PERSON" means any officer or other employee of Administrative
Borrower.
"AVAILABILITY" means, as of any date of determination, if such date is a
Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day, the
amount that Borrowers are entitled to borrow as Advances under SECTION 2.1
(after giving effect to all then outstanding Obligations and all sublimits and
reserves applicable hereunder).
"BACK TO BACK STANDBY LETTER OF CREDIT" means an irrevocable standby letter
of credit in the amount of $668,396.71 issued to Lender, which standby letter of
credit is (a) issued by a bank or other financial institution reasonably
satisfactory to Lender, (b) in form satisfactory to Lender, and (c) payable to
Lender in the event any draw is made on any Existing Other Underlying Letter of
Credit.
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"BANKRUPTCY CODE" means the United States Bankruptcy Code, as in effect
from time to time.
"BASE LIBOR RATE" means the rate per annum, determined by Lender in
accordance with its customary procedures, and utilizing such electronic or other
quotation sources as it considers appropriate (rounded upwards, if necessary, to
the next 1/16%), on the basis of the rates at which Dollar deposits are offered
to major banks in the London interbank market on or about 11:00 a.m. (California
time) 2 Business Days prior to the commencement of the applicable Interest
Period, for a term and in amounts comparable to the Interest Period and amount
of the LIBOR Rate Loan requested by Administrative Borrower in accordance with
this Agreement, which determination shall be conclusive in the absence of
manifest error.
"BASE RATE" means, the rate of interest publicly announced by Xxxxx Fargo
at its principal office in San Francisco as its "prime rate", with the
understanding that the "prime rate" is one of Xxxxx Fargo's base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publication or publications as Xxxxx Fargo may designate.
"BASE RATE LOAN" means each portion of an Advance that bears interest at a
rate determined by reference to the Base Rate.
"BASE RATE MARGIN" means one-half of one percentage point.
"BENEFIT PLAN" means a "defined benefit plan" (as defined in SECTION 3(35)
of ERISA) for which any Borrower or any Subsidiary or ERISA Affiliate of any
Borrower has been an "employer" (as defined in SECTION 3(5) of ERISA) within the
past six years.
"BOARD OF DIRECTORS" means the board of directors (or comparable managers)
of Parent or any committee thereof duly authorized to act on behalf thereof.
"BOOKS" means all of each Borrower's now owned or hereafter acquired books
and records (including all of its Records indicating, summarizing, or evidencing
its assets (including the Collateral) or liabilities, all of its Records
relating to its business operations or financial condition, and all of its goods
or General Intangibles related to such information).
"BORROWER" and "BORROWERS" have the respective meanings set forth in the
preamble to this Agreement.
"BORROWING" means a borrowing hereunder of an Advance.
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"BORROWING BASE" has the meaning set forth in SECTION 2.1.
"BORROWING BASE CERTIFICATE" means a certificate in the form of EXHIBIT
B-1.
"BUSINESS DAY" means any day that is not a Saturday, Sunday, or other day
on which national banks are authorized or required to close, except that, if a
determination of a Business Day shall relate to a LIBOR Rate Loan, the term
"Business Day" also shall exclude any day on which banks are closed for dealings
in Dollar deposits in the London interbank market.
"BUYER" has the meaning set forth in the Recitals hereof.
"BUYER NOTE" means that certain Subordinated Promissory Note, dated the
date hereof, in the original principal amount of $2,300,000, made by Buyer in
favor of Parent.
"CAPITAL LEASE" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATION" means any Indebtedness represented by
obligations under a Capital Lease.
"CASH COLLATERAL RESERVE" means any cash collateral held by Lender to
secure the Obligations, including contingent reimbursement obligations of
Borrowers relating to outstanding Letters of Credit.
"CASH COLLATERAL AGREEMENT" means a cash collateral agreement relating to
the Cash Collateral Reserve executed and delivered by Parent, the form and
substance of which is satisfactory to Lender.
"CASH EQUIVALENTS" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within 1 year from the date of acquisition thereof, (b) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 1 year from the date of acquisition thereof and, at the time of
acquisition, having a rating in one of the two highest rating categories
obtainable from either S&P or Xxxxx'x, (c) commercial paper maturing no more
than 1 year from the date of acquisition thereof and, at the time of
acquisition, having a rating of A-1 or P-1, or better, from S&P or Xxxxx'x, and
(d) certificates of deposit or bankers' acceptances maturing within 1 year from
the date of acquisition thereof either (i) issued by any bank organized under
the laws of the United States or any state thereof which bank has a rating of A
or A2, or better, from S&P or Xxxxx'x, or (ii) certificates of deposit less than
or
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equal to $100,000 in the aggregate issued by any other bank insured by the
Federal Deposit Insurance Corporation.
"CASH MANAGEMENT BANK" has the meaning set forth in Section 2.7(a).
"CASH MANAGEMENT ACCOUNT" has the meaning set forth in Section 2.7(a).
"CASH MANAGEMENT AGREEMENTS" means those certain cash management service
agreements, in form and substance satisfactory to Lender, each of which is among
Administrative Borrower, Lender, and one of the Cash Management Banks.
"CHANGE OF CONTROL" means (a) any "person" or "group" (within the meaning
of Sections 13(d) and 14(d) of the Exchange Act) other than Overseas Toys,
becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 20%, or more, of the Stock of Parent having the right
to vote for the election of members of the Board of Directors, or (b) a majority
of the members of the Board of Directors do not constitute Continuing Directors,
or (c) any Borrower ceases to directly own and control 100% of the outstanding
capital Stock of each of its Subsidiaries extant as of the Closing Date, except
to the extent such cessation of ownership and control results from a transaction
permitted by SECTION 7.3(B).
"CLOSING DATE" means the date of the making of the initial Advance (or
other extension of credit) hereunder or the date on which Lender sends Borrowers
a written notice that each of the conditions precedent set forth in SECTION 3.1
either have been satisfied or have been waived.
"CODE" means the Uniform Commercial Code, as adopted and as in effect from
time to time in the Commonwealth of Massachusetts.
"COLLATERAL" means all of each Borrower's now owned or hereafter acquired
right, title, and interest in and to each of the following:
(a) Accounts,
(b) Books,
(c) Equipment,
(d) General Intangibles,
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
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(h) Real Property Collateral,
(i) money or other assets of each such Borrower that now or hereafter
come into the possession, custody, or control of Lender, and
(j) the proceeds and products, whether tangible or intangible, of any
of the foregoing, including proceeds of insurance covering any or all of the
foregoing, and any and all Accounts, Books, Equipment, General Intangibles,
Inventory, Investment Property, Negotiable Collateral, Real Property, money,
deposit accounts, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
"COLLATERAL ACCESS AGREEMENT" means a landlord waiver, bailee letter, or
acknowledgement agreement of any lessor, warehouseman, processor, consignee, or
other Person in possession of, having a Lien upon, or having rights or interests
in the Equipment or Inventory, in each case, in form and substance reasonably
satisfactory to Lender.
"COLLATERAL ASSIGNMENT" means a collateral assignment of undertakings under
the Purchase Documents executed and delivered by Parent and Lender, the form and
substance of which is satisfactory to Lender.
"COLLECTIONS" means all cash, checks, notes, instruments, and other items
of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds) of Borrowers.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form of
EXHIBIT C-1 delivered by the chief financial officer of Parent to Lender.
"CONTINUING DIRECTOR" means (a) any member of the Board of Directors who
was a director (or comparable manager) of Parent on the Closing Date, and (b)
any individual who becomes a member of the Board of Directors after the Closing
Date if such individual was nominated and recommended for election to the Board
of Directors pursuant to Section 4.5(e) of the Overseas Toys Securities Purchase
Agreement, or was appointed or nominated for election to the Board of Directors
by a majority of the Continuing Directors, but excluding any such individual
originally proposed for election in opposition to the Board of Directors in
office at the Closing Date in an actual or threatened election contest relating
to the election of the directors of Parent (as such terms are used in Rule
14a-11 under the Exchange Act) and whose initial assumption of office resulted
from such contest or the settlement thereof.
"CONTROL AGREEMENT" means a control agreement, in form and substance
satisfactory to Lender.
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"COPYRIGHT SECURITY AGREEMENT" means an amended and restated copyright
security agreement in form and substance satisfactory to Lender executed and
delivered by each Borrower, which amends and restates that certain Copyright
Security Agreement, dated as of December 28, 2000, executed and delivered by the
Borrowers, Tonkin, Marketing Incentives and Lender in connection with the
December 2000 Loan Agreement.
"DAILY BALANCE" means, with respect to each day during the term of this
Agreement, the amount of an Obligation owed at the end of such day.
"DDA" means any checking or other demand deposit account maintained by any
Borrower.
"DEFAULT" means an event, condition, or default that, with the giving of
notice, the passage of time, or both, would be an Event of Default.
"DECEMBER 2000 FEE AGREEMENT" means that certain Fee Agreement, dated as of
December 28, 2000, executed and delivered by Borrowers, Tonkin, Marketing
Incentives and Lender in connection with the December 2000 Loan Agreement.
"DECEMBER 2000 LOAN AGREEMENT" has the meaning set forth in the Recitals
hereof.
"DESIGNATED ACCOUNT" means account number 268-94227 of Administrative
Borrower maintained with the Designated Account Bank, or such other deposit
account of Administrative Borrower (located within the United States) that has
been designated as such, in writing, by Administrative Borrower to Lender.
"DESIGNATED ACCOUNT BANK" means Fleet National Bank, whose office is
located at 000 Xxxxxxx Xxxxxx, Xxxxxx, XX 00000 and whose ABA number is
000-000-000.
"DILUTION" means, as of any date of determination, a percentage, based upon
the experience of the immediately prior 90 days (or such time period as
determined by Lender in the exercise of its Permitted Discretion), that is the
result of dividing the Dollar amount of (a) bad debt write-downs, discounts,
advertising allowances, credits, or other dilutive items with respect to the
Accounts during such period, by (b) Borrowers' Collections with respect to
Accounts during such period (excluding extraordinary items) plus the Dollar
amount of clause (a).
"DILUTION RESERVE" means, as of any date of determination, an amount
sufficient to reduce the advance rate against Eligible Accounts by one
percentage point for each percentage point by which Dilution is in excess of 5%.
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"DISBURSEMENT LETTER" means an instructional letter executed and delivered
by Administrative Borrower to Lender regarding the extensions of credit to be
made on the Closing Date, the form and substance of which is satisfactory to
Lender.
"DOLLARS" or "$" means United States dollars.
"DOMESTIC SUBSIDIARY" means a Subsidiary of a Borrower (other than another
Borrower) which is incorporated or organized under the laws of any state of the
United States.
"DUE DILIGENCE LETTER" means the due diligence letter sent by Lender's
counsel to Administrative Borrower in connection with the December 2000 Loan
Agreement, together with Administrative Borrower's completed responses to the
inquiries set forth therein, the form and substance of such responses to be
satisfactory to Lender.
"ELIGIBLE ACCOUNTS" means those Accounts created by one of Borrowers in the
ordinary course of its business, that arise out of its sale of goods or
rendition of services, that comply with each of the representations and
warranties respecting Eligible Accounts made by Borrowers under the Loan
Documents, and that are not excluded as ineligible by virtue of one or more of
the criteria set forth below; PROVIDED, HOWEVER, that such criteria may be fixed
and revised from time to time by Lender in Lender's Permitted Discretion to
address the results of any audit performed by Lender from time to time after the
Closing Date. In determining the amount to be included, Eligible Accounts shall
be calculated net of customer deposits, unapplied cash remitted to Borrowers,
and reserves for unissued credit memoranda. Eligible Accounts shall not include
the following:
(a) Accounts that the Account Debtor has failed to pay within 90 days
of original invoice date or Accounts with selling terms of more than 30 days,
(b) Accounts owed by an Account Debtor (or its Affiliates) where 50%
or more of all Accounts owed by that Account Debtor (or its Affiliates) are
deemed ineligible under clause (a) above,
(c) Accounts with respect to which the Account Debtor is an employee,
Affiliate, or agent of any Borrower,
(d) Accounts arising in a transaction wherein goods are placed on
consignment or are sold pursuant to a guaranteed sale, a sale or return, a sale
on approval, a xxxx and hold, or any other terms by reason of which the payment
by the Account Debtor may be conditional,
(e) Accounts that are not payable in Dollars,
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(f) Accounts with respect to which the Account Debtor either (i) does
not maintain its chief executive office in the United States or Canada, (ii) is
not organized under the laws of the United States, any state thereof, Canada or
any province thereof or (iii) is the government of any foreign country or
sovereign state, or of any state, province, municipality, or other political
subdivision thereof, or of any department, agency, public corporation, or other
instrumentality thereof, unless (y) the Account is supported by an irrevocable
letter of credit satisfactory to Lender (as to form, substance, and issuer or
domestic confirming bank) that has been delivered to Lender and is directly
drawable by Lender, or (z) the Account is covered by credit insurance in form,
substance, and amount, and by an insurer, reasonably satisfactory to Lender,
(g) Accounts with respect to which the Account Debtor is either (i)
the United States or any department, agency, or instrumentality of the United
States (exclusive, however, of Accounts with respect to which the applicable
Borrower has complied, to the reasonable satisfaction of Lender, with the
Assignment of Claims Act, 31 USC ss. 3727), or (ii) any state of the United
States (exclusive, however, of (y) Accounts owed by any state that does not have
a statutory counterpart to the Assignment of Claims Act or (z) Accounts owed by
any state that does have a statutory counterpart to the Assignment of Claims Act
as to which the applicable Borrower has complied to Lender's reasonable
satisfaction),
(h) Accounts with respect to which the Account Debtor is a creditor
of any Borrower, has or has asserted a right of setoff, has disputed its
liability, or has made any claim with respect to its obligation to pay the
Account, to the extent of such claim, right of setoff, or dispute,
(i) Accounts with respect to an Account Debtor (other than Xxxxxx
Xxxxxx) whose total obligations owing to Borrowers exceed 10% of all Eligible
Accounts, to the extent of the obligations owing by such Account Debtor in
excess of such percentage,
(j) Accounts with respect to which the Account Debtor is subject to
an Insolvency Proceeding, is not Solvent, has gone out of business, or as to
which (i) a Borrower has received notice of an imminent Insolvency Proceeding or
(ii) a material impairment of the financial condition of such Account Debtor, in
Lender's Permitted Discretion, has occurred,
(k) Accounts with respect to which the Account Debtor is located in
the states of New Jersey, Minnesota, or West Virginia (or any other state that
requires a creditor to file a business activity report or similar document in
order to bring suit or otherwise enforce its remedies against such Account
Debtor in the courts or through any judicial process of such state), unless the
applicable Borrower has qualified to do business in New Jersey, Minnesota, West
Virginia, or such other states, or has filed a business activities
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report with the applicable division of taxation, the department of revenue, or
with such other state offices, as appropriate, for the then-current year, or is
exempt from such filing requirement,
(l) Accounts, the collection of which, Lender, in its Permitted
Discretion, believes to be doubtful by reason of the Account Debtor's financial
condition,
(m) Accounts that are not subject to a valid and perfected first
priority Lender's Lien,
(n) Accounts with respect to which (i) the goods giving rise to such
Account have not been shipped and billed to the Account Debtor, (ii) the
services giving rise to such Account have not been performed and billed to the
Account Debtor, or (iii) invoices for services rendered which do not include
appropriate supporting documentation,
(o) Accounts that represent the right to receive progress payments or
other advance xxxxxxxx that are due prior to the completion of performance by
the applicable Borrower of the subject contract for goods or services
(p) Accounts in respect of which an Account Debtor has made a
prepayment, to the extent of such prepayment, or
(q) Accounts with respect to Ty (as Account Debtor) until Lender
shall have received a copy of a signed agreement between Ty and Parent relating
to the discontinued 1998-1999 "Beanie Baby" program pursuant to which Parent and
Ty acknowledge and agree on the obligations owing by Parent to Ty, which
agreement shall be in form and substance reasonably satisfactory to Lender;
thereafter, to the extent of the obligations owing by Parent to Ty.
"ELIGIBLE IN-TRANSIT INVENTORY" means those items of Inventory that
otherwise qualify as Eligible Landed Inventory, but as to which:
(a) the Inventory was acquired by a Borrower (which title may be held
through or by an agent of such Borrower) to fill an Acceptable Purchase Order
and was the subject of a Qualified Import Letter of Credit,
(b) such Inventory currently is in transit (whether by vessel, air, or
land) from a location outside of the continental United States to an Imported
Inventory Customer at a location within the continental United States,
(c) title to such Inventory has passed to, and is exclusively held by a
Borrower, and such Inventory is not subject to any Lien (other than a Permitted
Lien in favor of a carrier),
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(d) such Inventory is insured against types of loss, damage, hazards, and
risks, and in amounts, satisfactory to Lender in its Permitted Discretion,
pursuant to a policy of insurance issued by underwriters reasonably satisfactory
to Lender, under which policy Lender is named as an additional insured,
(e) such Inventory is the subject of a negotiable xxxx of lading, which in
the case of shipments from any port or terminal outside the continental United
States to any port or terminal in the continental United States, must be a
through intermodal xxxx of lading providing for transportation of such Inventory
to a terminal in Illinois, Iowa, Ohio, or another state in the continental
United States approved by Lender (such approval not to be unreasonably withheld
or delayed) and in respect of which Lender will have a first priority perfected
security interest in any Inventory of such Borrower located therein, all
originals of which (i) were issued by a common carrier respecting the subject
Inventory, and (ii) are in the possession of Lender in the United States,
(f) the sale thereof to the subject Imported Inventory Customer shall give
rise to an Eligible Account,
(g) the Underlying Letter of Credit has been drawn upon partially or in
full (as applicable) and the Underlying Issuer has honored such drawing and
Lender has honored its obligations to the Underlying Issuer under the applicable
Qualified Import Letter of Credit or, if the Underlying Letter of Credit
provided for the presentation of a time draft to the Underling Issuer, such time
draft has been presented and accepted by the Underlying Issuer, and
(h) the subject customs broker or brokers of Borrowers in the United
States has or have delivered to Lender a Collateral Access Agreement.
"ELIGIBLE INVENTORY" means Eligible In-Transit Inventory.
"ELIGIBLE LANDED INVENTORY" means Inventory of Borrowers, consisting of
first quality finished goods, that complies with each of the representations and
warranties respecting Eligible Inventory made by Borrowers in the Loan
Documents, and that is not excluded as ineligible by virtue of the one or more
of the criteria set forth below; PROVIDED, HOWEVER, that such criteria may be
fixed and revised from time to time by Lender in Lender's Permitted Discretion
to address the results of any audit or appraisal performed by Lender from time
to time after the Closing Date. In determining the amount to be so included,
unless otherwise provided, Inventory shall be valued at the lower of cost or
market on a basis consistent with Borrowers' historical accounting practices net
of reserves for inventory count variances. An item of Inventory shall not be
included in Eligible Landed Inventory if:
(a) a Borrower does not have good, valid, and marketable title
thereto,
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(b) it is not subject to a valid and perfected first priority
Lender's Lien,
(c) it consists of goods returned or rejected by a Borrower's
customers,
(d) it consists of goods that are obsolete or slow moving,
work-in-process, raw materials, or goods that constitute spare parts, packaging
and shipping materials, supplies used or consumed in a Borrower's business, xxxx
and hold goods, defective goods, "seconds," Inventory acquired on consignment,
or customized goods that relate to programs that are to be discontinued or have
been discontinued (including, without limitation, Inventory from the
discontinued 1998-1999 "Beanie Baby" program), or
(e) it is Inventory subject to an Acceptable Purchase Order from
sPhilip Xxxxxx in respect of which Xxxxxx Xxxxxx has made a prepayment.
"ELIGIBLE TRANSFEREE" means (a) a commercial bank organized under the laws
of the United States, or any state thereof, and having total assets in excess of
$1,000,000,000, (b) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country and which has total
assets in excess of $1,000,000,000, provided that such bank is acting through a
branch or agency located in the United States, (c) a finance company, insurance
company, or other financial institution or fund that is engaged in making,
purchasing, or otherwise investing in commercial loans in the ordinary course of
its business and having (together with its Affiliates) total assets in excess of
$250,000,000 (provided that if Lender intends to assign all of the Obligations
and other rights and obligations of Lender hereunder and under the Loan
Documents, then any such finance company, insurance company, or other financial
institution or fund only shall be an Eligible Transferee if it is engaged in the
ordinary course of its business in the making of commercial loans and issuing of
letters of credit in the manner required of Lender hereunder and it otherwise
complies with this clause (c)), (d) any Affiliate (other than individuals) of
Lender, (e) so long as no Event of Default has occurred and is continuing, any
other Person approved by Lender and Administrative Borrower, and (f) during the
continuation of an Event of Default, any other Person approved by Lender;
PROVIDED, HOWEVER, in no event shall an Eligible Transferee be a direct
competitor of Borrowers. It is acknowledged and agreed by Borrowers that Persons
enumerated in clauses (a) through (c) are not direct competitions of Borrowers.
"ENVIRONMENTAL ACTIONS" means any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter, or other communication from any Governmental
Authority, or any third party involving violations of Environmental Laws or
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15
releases of Hazardous Materials from (a) any assets, properties, or businesses
of any Borrower or any predecessor in interest, (b) from adjoining properties or
businesses, or (c) from or onto any facilities which received Hazardous
Materials generated by a Borrower or any predecessor in interest.
"ENVIRONMENTAL LAW" means any applicable federal, state, provincial,
foreign or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy or rule of common
law now or hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, to the extent binding on a Borrower, relating
to the environment, employee health and safety, or Hazardous Materials,
including CERCLA; RCRA; the Federal Water Pollution Control Act, 33 USC.ss.1251
ET SEQ; the Toxic Substances Control Act, 15 USC,ss. 2601 ET SEQ; the Clean Air
Act, 42 USC.ss.7401 ET SEQ.; the Safe Drinking Water Act, 42 USC.ss.3803 ET
SEQ.; the Oil Pollution Act of 1990, 33 XXX.xx. 2701 ET SEQ.; the Emergency
Planning and the Community Right-to-Know Act of 1986, 42 XXX.xx. 11001 ET SEQ.;
the Hazardous Material Transportation Act, 49 XXX.xx. 1801 ET SEQ.; and the
Occupational Safety and Health Act, 29 USC.ss.651 ET SEQ. (to the extent it
regulates occupational exposure to Hazardous Materials); any state and local or
foreign counterparts or equivalents, in each case as amended from time to time.
"ENVIRONMENTAL LIABILITIES AND COSTS" means all liabilities, monetary
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts, or consultants and costs of
investigation and feasibility studies), fines, penalties, sanctions, and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any Environmental Action.
"ENVIRONMENTAL LIEN" means any Lien in favor of any Governmental Authority
for Environmental Liabilities and Costs.
"EQUIPMENT" means all of Borrowers' now owned or hereafter acquired right,
title, and interest with respect to equipment, machinery, machine tools, motors,
furniture, furnishings, fixtures, vehicles (including motor vehicles), tools,
parts, goods (other than consumer goods, farm products, or Inventory), wherever
located, including all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto.
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16
"ERISA AFFILIATE" means (a) any Person subject to ERISA whose employees are
treated as employed by the same employer as the employees of a Borrower under
IRC Section 414(b), (b) any trade or business subject to ERISA whose employees
are treated as employed by the same employer as the employees of a Borrower
under IRC Section 414(c), (c) solely for purposes of Section 302 of ERISA and
Section 412 of the IRC, any organization subject to ERISA that is a member of an
affiliated service group of which a Borrower is a member under IRC Section
414(m), or (d) solely for purposes of Section 302 of ERISA and Section 412 of
the IRC, any Person subject to ERISA that is a party to an arrangement with a
Borrower and whose employees are aggregated with the employees of a Borrower
under IRC Section 414(o).
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.
"EXCESS AVAILABILITY" means the amount, as of the date any determination
thereof is to be made, equal to Availability minus the aggregate amount, if any,
of all trade payables of Borrowers aged in excess of their historical levels
with respect thereto and all book overdrafts in excess of their historical
practices with respect thereto, in each case as determined by Lender in its
Permitted Discretion.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as in effect from
time to time.
"EXISTING UNDERLYING ACCEPTABLE PURCHASE ORDER LETTERS OF CREDIT" means
those outstanding Underlying Letters of Credit described on SCHEDULE E-1.
"EXISTING STANDBY UNDERLYING LETTERS OF CREDIT" means those outstanding
standby Underlying Letters of Credit which are (a) not Existing Other Underlying
Letters of Credit, and (b) described on SCHEDULE E-2.
"EXISTING OTHER UNDERLYING LETTERS OF CREDIT" means those outstanding
Underlying Letters of Credit described on SCHEDULE E-3.
"FEE LETTER" means that certain fee letter, dated as of even date herewith,
between Borrowers and Lender, in form and substance satisfactory to Lender.
"FEIN" means Federal Employer Identification Number.
"FOREIGN SUBSIDIARY" means a Subsidiary of a Borrower (other than another
Borrower) which is not a Domestic Subsidiary.
"FUNDING DATE" means the date on which a Borrowing occurs.
"FUNDING LOSSES" has the meaning set forth in SECTION 2.13(b)(ii).
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17
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means all of Borrowers' now owned or hereafter
acquired right, title, and interest with respect to general intangibles
(including payment intangibles, contract rights, rights to payment, rights
arising under common law, statutes, or regulations, choses or things in action,
goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs,
information contained on computer disks or tapes, software, literature, reports,
catalogs, money, deposit accounts, insurance premium rebates, tax refunds, and
tax refund claims), and any and all supporting obligations in respect thereof,
and all of Borrowers' now owned or hereafter acquired right, title, and interest
with respect to any other personal property other than goods, Accounts,
Investment Property, and Negotiable Collateral.
"GOVERNING DOCUMENTS" means, with respect to any Person, the certificate or
articles of incorporation, by-laws, or other organizational documents of such
Person.
"GOVERNMENTAL AUTHORITY" means any federal, state, local, or other
governmental or administrative body, instrumentality, department, or agency or
any court, tribunal, administrative hearing body, arbitration panel, commission,
or other similar dispute-resolving panel or body.
"HAZARDOUS MATERIALS" means (a) substances that are defined or listed in,
or otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"IMPORTED INVENTORY CUSTOMER" means the non-Borrower party to an Acceptable
Purchase Order.
"INACTIVE SUBSIDIARY" means a Subsidiary of a Borrower which conducts no
business and does not own assets with a book value greater than $10,000.
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18
"INDEBTEDNESS" means (a) all obligations of a Borrower for borrowed money,
(b) all obligations of a Borrower evidenced by bonds, debentures, notes, or
other similar instruments and all reimbursement or other obligations of a
Borrower in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations of a Borrower under
Capital Leases, (d) all obligations or liabilities of others secured by a Lien
on any asset of a Borrower, irrespective of whether such obligation or liability
is assumed, and (e) all obligations of a Borrower for the deferred purchase
price of assets (other than trade debt incurred in the ordinary course of a
Borrower's business and repayable in accordance with customary trade practices),
and (f) any obligation of a Borrower guaranteeing or intended to guarantee
(whether directly or indirectly guaranteed, endorsed, co-made, discounted, or
sold with recourse to a Borrower) any obligation of any other Person.
"INDEMNIFIED LIABILITIES" has the meaning set forth in SECTION 11.3.
"INDEMNIFIED PERSON" has the meaning set forth in SECTION 11.3.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other state or
federal bankruptcy or insolvency law (including any receivership or like
proceeding) assignments for the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief.
"INTANGIBLE ASSETS" means, with respect to any Person, that portion of the
book value of all of such Person's assets that would be treated as intangibles
under GAAP.
"INTERCOMPANY NOTE" has the meaning set forth in the definition of
"Permitted Investments."
"INTEREST PERIOD" means, with respect to each LIBOR Rate Loan, a period
commencing on the date of the making of such LIBOR Rate Loan and ending 1, 2, 3
or 6 months thereafter; PROVIDED, HOWEVER, that (a) if any Interest Period would
end on a day that is not a Business Day, such Interest Period shall be extended
(subject to clauses (c)-(e) below) to the next succeeding Business Day, (b)
interest shall accrue at the applicable rate based upon the LIBOR Rate from and
including the first day of each Interest Period to, but excluding, the day on
which any Interest Period expires, (c) any Interest Period that would end on a
day that is not a Business Day shall be extended to the next succeeding Business
Day unless such Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Business Day, (d) with respect
to an Interest Period that begins on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period), the Interest
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19
Period shall end on the last Business Day of the calendar month that is 1, 2, 3
or 6 months after the date on which the Interest Period began, as applicable,
and (e) Borrowers (or Administrative Borrower on behalf thereof) may not elect
an Interest Period which will end after the Maturity Date.
"INVENTORY" means all of Borrowers' now owned or hereafter acquired right,
title, and interest with respect to inventory, including goods held for sale or
lease or to be furnished under a contract of service, goods that are leased by a
Borrower as lessor, goods that are furnished by a Borrower under a contract of
service, and raw materials, work in process, or materials used or consumed in a
Borrower's business.
"INVENTORY CERTIFICATE" means a certificate to Lender from Administrative
Borrower pursuant to which Administrative Borrower certifies that, to the best
knowledge of Borrowers, all Eligible In-Transit Inventory meets all of
Borrowers' representations and warranties contained in the Loan Documents
concerning Eligible Inventory, that it knows of no reason why such Inventory
would not be accepted by the subject Imported Inventory Customer or Customers)
when it arrives in the state of Illinois, Iowa, Ohio, or such other state in the
United States approved by Lender as set forth in the definition of "Eligible
In-Transit Inventory," as applicable, and that the shipment documents conform to
the related order documents.
"INVESTMENT" means, with respect to any Person, any investment by such
Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising from the
sale of goods or rendition of services in the ordinary course of business
consistent with past practice), purchases or other acquisitions for
consideration of Indebtedness or Stock, and any other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"INVESTMENT PROPERTY" means all of Borrowers' now owned or hereafter
acquired right, title, and interest with respect to "investment property" as
that term is defined in the Code, and any and all supporting obligations in
respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect from time to
time.
"L/C" has the meaning set forth in SECTION 2.12(a).
"L/C DISBURSEMENT" means a payment made by Lender pursuant to a Letter of
Credit.
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20
"L/C UNDERTAKING" has the meaning set forth in SECTION 2.12(a).
"LENDER" has the meaning set forth in the preamble to this Agreement.
"LENDER'S ACCOUNT" means an account at a bank designated by Lender from
time to time as the account into which Borrowers shall make all payments to
Lender under this Agreement and the other Loan Documents; unless and until
Lender notifies Administrative Borrower, Lender's Account shall be that certain
deposit account bearing account number 323-266193 and maintained by Lender with
The Chase Manhattan Bank, 4 New York Plaza, 15th Floor, New York, New York
10004, ABA #000000000.
"LENDER'S LIENS" means the Liens granted by Borrowers to Lender under this
Agreement, the December 2000 Loan Agreement or the other Loan Documents.
"LENDER EXPENSES" means all (a) costs or expenses (including taxes, and
insurance premiums) required to be paid by a Borrower under any of the Loan
Documents that are paid or incurred by Lender in accordance with the terms
hereof, (b) reasonable fees or charges paid or incurred by Lender in connection
with Lender's transactions with Borrowers, including, fees or charges for
photocopying, notarization, couriers and messengers, telecommunication, public
record searches (including tax lien, litigation, and UCC searches and including
searches with the patent and trademark office, the copyright office, or the
department of motor vehicles), filing, recording, publication, appraisal
(including periodic Collateral appraisals or business valuations to the extent
of the fees and charges (and up to the amount of any limitation) contained in
this Agreement, real estate surveys, real estate title policies and
endorsements, and environmental audits, (c) costs and expenses incurred by
Lender in the disbursement of funds to or for the account of Borrowers (by wire
transfer or otherwise), (d) charges paid or incurred by Lender resulting from
the dishonor of checks, (e) reasonable costs and expenses paid or incurred by
Lender to correct any default or enforce any provision of the Loan Documents, or
in gaining possession of, maintaining, handling, preserving, storing, shipping,
selling, preparing for sale, or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated, (f) audit fees
and expenses of Lender related to audit examinations of the Books to the extent
of the fees and charges (and up to the amount of any limitation) contained in
this Agreement, (g) reasonable costs and expenses of third party claims or any
other suit paid or incurred by Lender in enforcing or defending the Loan
Documents or in connection with the transactions contemplated by the Loan
Documents or Lender's relationship with any Borrower or any guarantor of the
Obligations, (h) Lender's reasonable fees and expenses (including reasonable
attorneys fees) incurred in advising, structuring, drafting, reviewing,
administering, or amending the Loan Documents, and (i) Lender's reasonable fees
and expenses (including reasonable attorneys fees) incurred in terminating,
enforcing
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21
(including attorneys fees and expenses incurred in connection with a "workout,"
a "restructuring," or an Insolvency Proceeding concerning any Borrower or in
exercising rights or remedies under the Loan Documents), or defending the Loan
Documents, irrespective of whether suit is brought, or in taking any Remedial
Action concerning the Collateral.
"LENDER-RELATED PERSON" means Lender, Lender's Affiliates, and the
officers, directors, employees, and agents of Lender.
"LETTER OF CREDIT" means an L/C or an L/C Undertaking, as the context
requires. For avoidance of doubt, Letter of Credit includes an Acceptable
Purchase Order Letter of Credit and a Qualified Import Letter of Credit. Any
"L/C" and "L/C Undertaking" issued under the December 2000 Loan Agreement which
is outstanding on the date hereof shall be deemed a Letter of Credit hereunder.
"LETTER OF CREDIT STANDBY RESERVE" means the undrawn amount of the Back to
Back Standby Letter of Credit.
"LETTER OF CREDIT USAGE" means, as of any date of determination, the sum of
(a) the aggregate undrawn amount of all outstanding Letters of Credit (other
than Letters of Credit supported by the Back to Back Standby Letter of Credit),
plus (b) without duplication, 100% of the amount of outstanding time drafts
accepted by an Underlying Issuer as a result of drawings under Underlying
Letters of Credit.
"LIBOR DEADLINE" has the meaning set forth in SECTION 2.13(b)(i).
"LIBOR NOTICE" means a written notice in the form of EXHIBIT L-1.
"LIBOR OPTION" has the meaning set forth in SECTION 2.13(a).
"LIBOR RATE" means, for each Interest Period for each LIBOR Rate Loan, the
rate per annum determined by Lender (rounded upwards, if necessary, to the next
1/16%) by dividing (a) the Base LIBOR Rate for such Interest Period, by (b) 100%
minus the Reserve Percentage. The LIBOR Rate shall be adjusted on and as of the
effective day of any change in the Reserve Percentage.
"LIBOR RATE LOAN" means each portion of an Advance that bears interest at a
rate determined by reference to the LIBOR Rate.
"LIBOR RATE MARGIN" means two and one-quarter percentage points.
"LIEN" means any interest in an asset securing an obligation owed to, or a
claim by, any Person other than the owner of the asset, whether such interest
shall be based on the common law, statute, or contract, whether such interest
shall be recorded or perfected, and whether such interest shall be contingent
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22
upon the occurrence of some future event or events or the existence of some
future circumstance or circumstances, including the lien or security interest
arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation,
assignment, deposit arrangement, security agreement, conditional sale or trust
receipt, or from a lease, consignment, or bailment for security purposes and
also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.
"LOAN ACCOUNT" has the meaning set forth in SECTION 2.10.
"LOAN DOCUMENTS" means this Agreement, the Cash Collateral Agreement, the
Cash Management Agreements, the Collateral Assignment, the Control Agreements,
the Copyright Security Agreement, the Disbursement Letter, the Due Diligence
Letter, the Fee Letter, the Letters of Credit, the Officers' Certificate, the
Patent Security Agreement, the Stock Pledge Agreement, the Trademark Security
Agreement, any note or notes executed by a Borrower in connection with this
Agreement and payable to Lender, and any other agreement entered into, now or in
the future, by any Borrower and Lender in connection with this Agreement.
"MARKETING INCENTIVES" has the meaning set forth in the Recitals hereof.
"MATERIAL ADVERSE CHANGE" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrowers and their Subsidiaries taken as
a whole, (b) a material impairment of a Borrower's ability to perform its
obligations under the Loan Documents to which it is a party or of Lender's
ability to enforce the Obligations or realize upon the Collateral, or (c) a
material impairment of the enforceability or priority of the Lender's Liens with
respect to the Collateral as a result of an action or failure to act on the part
of a Borrower.
"MATURITY DATE" has the meaning set forth in SECTION 3.4.
"MAXIMUM REVOLVER AMOUNT" means $6,000,000.
"NEGOTIABLE COLLATERAL" means all of Borrowers' now owned and hereafter
acquired right, title, and interest with respect to letters of credit, letter of
credit rights, instruments, promissory notes, drafts, documents, and chattel
paper (including electronic chattel paper and tangible chattel paper), and any
and all supporting obligations in respect thereof.
"OBLIGATIONS" means all (a) loans, Advances, debts, principal, interest
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), (b) contingent reimbursement obligations with respect to
outstanding Letters of Credit, premiums, liabilities (including all amounts
charged to Borrowers' Loan Account pursuant hereto), obligations, fees
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(including the fees provided for in the Fee Letter), charges, costs, and (c)
Lender Expenses (including any fees or expenses that, but for the provisions of
the Bankruptcy Code, would have accrued), lease payments, guaranties, covenants,
and duties of any kind and description owing by Borrowers to Lender pursuant to
or evidenced by the Loan Documents and irrespective of whether for the payment
of money, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, and including all interest not paid when
due and all Lender Expenses that Borrowers are required to pay or reimburse by
the Loan Documents, by law, or otherwise. Any reference in this Agreement or in
the Loan Documents to the Obligations shall include all amendments, changes,
extensions, modifications, renewals replacements, substitutions, and
supplements, thereto and thereof, as applicable, both prior and subsequent to
any Insolvency Proceeding. For avoidance of doubt, Obligations includes all
"Obligations" under the December 2000 Loan Agreement.
"OFFICERS' CERTIFICATE" means the representations and warranties of
officers form submitted by Lender to Administrative Borrower, together with
completed responses to the inquiries set forth therein from Parent and Xxxx.xxx,
delivered to Lender in connection with the closing of the December 2000 Loan
Agreement.
"OVERADVANCE" has the meaning set forth in SECTION 2.5.
"OVERSEAS TOYS" means Overseas Toys, L.P., a Delaware limited partnership.
"OVERSEAS TOYS SECURITIES PURCHASE AGREEMENT" means the Securities Purchase
Agreement by and among Overseas Toys and Parent dated as of September 1, 1999.
"PARENT" has the meaning set forth in the preamble to this Agreement.
"PARTICIPANT" has the meaning set forth in SECTION 14.1(d).
"PATENT SECURITY AGREEMENT" means an amended and restated patent security
agreement in form and substance satisfactory to Lender executed and delivered by
each Borrower, which amends and restates that certain Patent Security Agreement,
dated as of December 28, 2000, executed and delivered by Borrowers, Tonkin,
Marketing Incentives and Lender in connection with the December 2000 Loan
Agreement.
"PERMITTED DISCRETION" means a determination made in good faith and in the
exercise of reasonable (from the perspective of a secured asset-based lender)
business judgment.
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24
"PERMITTED DISPOSITIONS" means (a) sales or other dispositions by Borrowers
of Equipment that is surplus to the applicable Borrower's business needs, or is
substantially worn, damaged, or obsolete in the ordinary course of the
applicable Borrower's business, (b) sales by Borrowers of Inventory to buyers in
the ordinary course of business, (c) the use or transfer of money or Cash
Equivalents by Borrowers in a manner that is not prohibited by the terms of this
Agreement or the other Loan Documents, (d) sales or other dispositions of assets
(other than Accounts) by a Borrower to another Borrower, and (e) the licensing
by Borrowers, on a non-exclusive basis, of patents, trademarks, copyrights, and
other intellectual property rights in the ordinary course of the applicable
Borrower's business. For purposes of SECTION 6.6 only, (1) the terms "Inventory"
and "Equipment" in the foregoing definition also shall refer to inventory and
equipment of Cyrk (H.K.) Limited and Cyrk Europe Limited, (2) clause (c) above
also shall refer to cash and Cash Equivalents of Cyrk (H.K.) Limited and Cyrk
Europe Limited, and (3) the term "Borrowers" in clauses (a), (b) and (c) above
also shall include Cyrk (H.K.) Limited and Cyrk Europe Limited.
"PERMITTED INVESTMENTS" means (a) Investments in Cash Equivalents, (b)
Investments in negotiable instruments for collection, (c) advances made in
connection with purchases of goods or services in the ordinary course of
business, (d) Investments of Parent in Cyrk (H.K.) Limited for working capital
needs not to exceed an aggregate of $500,000 at any one time, (e) Investments of
Parent in Cyrk Europe Limited for working capital needs not to exceed an
aggregate of $500,000 at any one time, and (f) other Investments of Borrowers
existing as of the Closing Date and set forth in SCHEDULE I-1; PROVIDED,
HOWEVER, an Investment in the form of Indebtedness permitted by clause (d), (e)
or (f) shall not become a Permitted Investment until a promissory note (an
"INTERCOMPANY NOTE") in form and substance reasonably satisfactory to Lender has
been executed in favor of the Person to whom such Indebtedness is owed and such
note shall have been endorsed and delivered to Lender.
"PERMITTED LIENS" means (a) Liens held by Lender, (b) Liens for unpaid
taxes that either (i) are not yet delinquent, or (ii) do not constitute an Event
of Default hereunder and are the subject of Permitted Protests, (c) Liens set
forth on SCHEDULE P-1, (d) the interests of lessors under operating leases and
Capital Leases (to the extent interests under the Capital Leases secure
Permitted Purchase Money Indebtedness and so long as such Lien attaches only to
the asset acquired and the proceeds thereof), (e) purchase money Liens to the
extent that such Liens or interests secure Permitted Purchase Money Indebtedness
and so long as each such Lien attaches only to the asset purchased or acquired
and the proceeds thereof, (f) Liens arising by operation of law in favor of
warehousemen, landlords, carriers, mechanics, materialmen, laborers, or
suppliers, incurred in the ordinary course of Borrowers' business and not in
connection with the borrowing of money, and which Liens either (i) are for sums
not yet delinquent, or (ii) are the subject of Permitted Protests,
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25
(g) Liens arising from deposits made in connection with obtaining worker's
compensation or other unemployment insurance, (h) Liens or deposits to secure
performance of bids, tenders, or leases incurred in the ordinary course of
Borrowers' business and not in connection with the borrowing of money, (i) Liens
granted as security for surety or appeal bonds in connection with obtaining such
bonds in the ordinary course of Borrowers' business, (j) Liens resulting from
any judgment or award that is not an Event of Default hereunder, (k) Liens with
respect to the Real Property Collateral that are exceptions to the commitments
for title insurance issued in connection with any mortgage in favor of Lender,
as accepted by Lender, and (l) with respect to any Real Property that is not
part of the Real Property Collateral, easements, rights of way, and zoning
restrictions that do not materially interfere with or impair the use or
operation thereof by Borrowers.
"PERMITTED PROTEST" means the right of the applicable Borrower to protest
any Lien (other than any such Lien that secures the Obligations), taxes (other
than payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with respect to such
obligation is established on the Books in such amount as is required under GAAP,
(b) any such protest is instituted promptly and prosecuted diligently by the
applicable Borrower in good faith, and (c) Lender is reasonably satisfied that,
while any such protest is pending, there will be no material impairment of the
enforceability, validity, or priority of any of the Lender's Liens.
"PERMITTED PURCHASE MONEY INDEBTEDNESS" means, as of any date of
determination, Purchase Money Indebtedness incurred after the Closing Date in an
aggregate amount outstanding at any one time not in excess of $800,000.
"PERSON" means natural persons, corporations, limited liability companies,
limited partnerships, general partnerships, limited liability partnerships,
joint ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.
"PERSONAL PROPERTY COLLATERAL" means all Collateral other than Real
Property.
"XXXXXX XXXXXX" means Xxxxxx Xxxxxx Incorporated, a Virginia corporation.
"PURCHASE AGREEMENT" has the meaning set forth in the Recitals hereof.
"PURCHASE DOCUMENTS" means the Purchase Agreement and the other agreements,
documents and instruments listed on SCHEDULE D-1, together with (a) any
amendments, modifications or supplements to any of the foregoing, and (b) any
agreements or documents executed by either of Borrowers or Buyer subsequent to
the date hereof.
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"PURCHASE MONEY INDEBTEDNESS" means Indebtedness (other than the
Obligations, but including Capitalized Lease Obligations), incurred at the time
of, or within 20 days after, the acquisition of any fixed assets for the purpose
of financing all or any part of the acquisition cost thereof.
"QUALIFIED IMPORT LETTER OF CREDIT" means a Letter of Credit that (a) is
issued to facilitate the purchase by a Borrower of Eligible Inventory, (b) is in
form and substance acceptable to Lender, and (c) is issued to support an
Underlying Letter of Credit that only is drawable by the beneficiary thereof by
the presentation of customary documents, including an inspection certificate.
"REAL PROPERTY" means any estates or interests in real property now owned
or hereafter acquired by any Borrower and the improvements thereto.
"REAL PROPERTY COLLATERAL" means any Real Property hereafter acquired by a
Borrower.
"RECORD" means information that is inscribed on a tangible medium or which
is stored in an electronic or other medium and is retrievable in perceivable
form.
"REMEDIAL ACTION" means all actions taken to (a) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate, or in any way address
Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC ss. 9601.
"REPORT" has the meaning set forth in SECTION 16.17.
"REQUIRED AVAILABILITY" means Excess Availability and unrestricted cash and
Cash Equivalents in an amount of not less than $5,000,000.
"RESERVE PERCENTAGE" means, on any day, for Lender, the maximum percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor Governmental Authority) for determining the reserve requirements
(including any basic, supplemental, marginal, or emergency reserves) that are in
effect on such date with respect to eurocurrency funding (currently referred to
as "eurocurrency liabilities") of that Lender, but so long as Lender is not
required or directed under applicable regulations to maintain such reserves, the
Reserve Percentage shall be zero.
"REVOLVER USAGE" means, as of any date of determination, the sum of (a) the
then extant amount of outstanding Advances, plus (b) the then extant amount of
the Letter of Credit Usage.
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"SALE ASSETS" means the assets of Parent which are being sold by Parent to
Buyer pursuant to the Purchase Documents.
"SALE TRANSACTION" means the sale of the Sale Assets by Parent to Buyer
pursuant to the Purchase Documents.
"SEC" means the United States Securities and Exchange Commission and any
successor thereto.
"SECURITIES ACCOUNT" means a "securities account" as that term is defined
in the Code.
"SMI" means Simon Marketing, Inc., a Delaware corporation.
"SOLVENT" means, with respect to any Person on a particular date, that such
Person is not insolvent (as such term is defined in the Uniform Fraudulent
Transfer Act).
"START UP INVESTMENTS" means the Investments reflected in item 2 of
SCHEDULE I-1.
"STOCK" means all shares, options, warrants, interests, participations, or
other equivalents (regardless of how designated) of or in a Person, whether
voting or nonvoting, including common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the SEC under the Exchange Act).
"STOCKHOLDER EQUITY (SMI)" means total stockholder equity of SMI,
calculated in accordance with GAAP.
"STOCK PLEDGE AGREEMENT" means an amended and restated pledge agreement in
form and substance satisfactory to Lender executed and delivered by each
Borrower, which amends and restates that certain Pledge Agreement, dated as of
December 28, 2000, executed and delivered by Borrowers, Tonkin, Marketing
Incentives and Lender in connection with the December 2000 Loan Agreement.
"SUBSIDIARY" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of Stock having ordinary voting power to elect a
majority of the board of directors (or appoint other comparable managers) of
such corporation, partnership, limited liability company, or other entity;
PROVIDED, HOWEVER, for purposes hereof, neither SMI nor any of its Subsidiaries
shall constitute a Subsidiary of Parent.
"TAXES" has the meaning set forth in SECTION 16.5.
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"TONKIN" has the meaning set forth in the Recitals hereof.
"TRADE BANK" means Xxxxx Fargo HSBC Trade Bank, N.A.
"TRADEMARK SECURITY AGREEMENT" means an amended and restated trademark
security agreement in form and substance satisfactory to Lender executed and
delivered by each Borrower, which amends and restates that certain Trademark
Security Agreement, dated as of December 28, 2000, executed and delivered by
Borrowers, Tonkin, Marketing Incentives and Lender in connection with the
December 2000 Loan Agreement.
"TY" means Ty Inc., a Delaware corporation.
"UNDERLYING ISSUER" means a third Person which is the beneficiary of an L/C
Undertaking and which has issued a letter of credit at the request of Lender for
the benefit of Borrowers.
"UNDERLYING LETTER OF CREDIT" means a letter of credit that has been issued
by an Underlying Issuer. Any "Underlying Letter of Credit" issued in connection
with the December 2000 Loan Agreement which is outstanding on the date hereof
shall be deemed an Underlying Letter of Credit hereunder.
"VOIDABLE TRANSFER" has the meaning set forth in SECTION 16.8.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrowers" or the term "Parent" is used in respect of a financial
covenant or a related definition, it shall be understood to mean Parent and its
Subsidiaries on a consolidated basis unless the context clearly requires
otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 CONSTRUCTION. Unless the context of this Agreement or any other Loan
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in
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the other Loan Documents to any agreement, instrument, or document shall include
all alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). Any reference herein to any Person
shall be construed to include such Person's successors and assigns. Any
requirement of a writing contained herein or in the other Loan Documents shall
be satisfied by the transmission of a Record and any Record transmitted shall
constitute a representation and warranty as to the accuracy and completeness of
the information contained therein.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits attached to
this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVER ADVANCES.
(a) Subject to the terms and conditions of this Agreement, and during
the term of this Agreement, Lender agrees to make advances ("ADVANCES") to
Borrowers in an amount at any one time outstanding not to exceed an amount equal
to the lesser of (i) the Maximum Revolver Amount less the Letter of Credit
Usage, or (ii) the Borrowing Base less the Adjusted Letter of Credit Usage. For
purposes of this Agreement, "BORROWING BASE," as of any date of determination,
shall mean the lesser of (1) clause (w) plus clause (x) minus clause (y), or (2)
clause (z), where (w), (x), (y) and (z) are as follows:
(w) = 75% of the amount of Eligible Accounts, less the amount, if
any, of the Dilution Reserve.
(x) = the sum of: (1) the lesser of (a) 42% of Eligible
In-Transit Inventory subject to Acceptable Purchase Orders,
and (b) 75% of the selling price for such Inventory.
(y) = the aggregate amount of reserves, if any, established by
Lender under SECTION 2.1(B).
(z) = 75% of Borrowers' Collection with respect to Accounts for
the immediately preceding 90-day period.
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(b) Anything to the contrary in this SECTION 2.1 notwithstanding,
Lender shall have the right to establish reserves in such amounts as Lender in
its Permitted Discretion shall deem necessary or appropriate with respect to
such matters which likely would result in a Lien senior in priority to any of
the Lender's Liens or which otherwise would adversely effect the value of the
Collateral (in each case, as determined by Lender in the exercise of its
Permitted Discretion), including reserves with respect to (i) sums that
Borrowers are required to pay (such as taxes, assessments, insurance premiums,
or, in the case of leased assets, rents or other amounts payable under such
leases) and have failed to pay under any Section of this Agreement or any other
Loan Document, and (ii) amounts owing by a Borrower to any Person to the extent
secured by a Lien on, or trust over, any of the Collateral (other than any
existing Permitted Lien set forth on SCHEDULE P-1 which is specifically
identified thereon as entitled to have priority over the Lender's Liens), such
as Liens or trusts in favor of landlords, warehousemen, carriers, mechanics,
materialmen, laborers, or suppliers, or Liens or trusts for ad valorem, excise,
sales, or other taxes where given priority under applicable law).
(c) Lender shall have no obligation to make additional Advances
hereunder to the extent such additional Advances would cause the Revolver Usage
to exceed the Maximum Revolver Amount.
(d) Amounts borrowed pursuant to this Section may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
(e) In no event shall Availability at any time be less than $500,000.
2.2 INTENTIONALLY OMITTED.
2.3 BORROWING PROCEDURES AND SETTLEMENTS.
(a) PROCEDURE FOR BORROWING. Each Borrowing shall be made by a
written request by an Authorized Person delivered to Lender (which notice must
be received by Lender no later than 10:00 a.m. (California time) on a Business
Day specifying (i) the amount of such Borrowing, and (ii) the requested Funding
Date, which shall be a Business Day. At Lender's election, in lieu of delivering
the above-described request in writing, any Authorized Person may give Lender
telephonic notice of such request by the required time, with such telephonic
notice to be confirmed in writing within 24 hours of the giving of such notice.
The provisions of this clause (a) are subject to the provisions of SECTION
2.13(B).
(b) MAKING OF ADVANCES. If Lender has received a timely request for a
Borrowing in accordance with the provisions hereof, and subject to the
satisfaction of the applicable terms and conditions set forth herein,
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Lender shall make the proceeds of such Advance available to Borrowers on the
applicable Funding Date by transferring available funds equal to such proceeds
to Administrative Borrower's Designated Account.
2.4 PAYMENTS.
(a) PAYMENTS BY BORROWERS. Except as otherwise expressly provided
herein, all payments by Borrowers shall be made to Lender's Account and shall be
made in immediately available funds no later than 11:00 a.m. (California time)
on the date specified herein. Any payment received by Lender later than 11:00
a.m. (California time), shall be deemed to have been received on the following
Business Day and any applicable interest or fee shall continue to accrue until
such following Business Day.
(b) APPLICATION OF PAYMENTS.
(i) All payments shall be remitted to Lender and all such
payments (other than payments received while no Default or Event of
Default has occurred and is continuing and which relate to the payment
of principal or interest of specific Obligations or which relate to
the payment of specific fees), and all proceeds of Accounts or other
Collateral received by Lender, shall be applied as follows:
(A) FIRST, to pay any Lender Expenses then due to Lender
under the Loan Documents, until paid in full,
(B) SECOND, to pay any fees then due to Lender under the
Loan Documents until paid in full,
(C) THIRD, to pay interest due in respect of Advances until
paid in full,
(D) FOURTH, to pay the principal of all Advances until paid
in full,
(E) FIFTH, if an Event of Default has occurred and is
continuing, to be held by Lender as cash collateral in an amount
equal to 105% of the then extant Letter of Credit Usage until
paid in full,
(F) SIXTH, to pay any other Obligations until paid in full,
and
(G) SEVENTH, to Borrowers (to be wired to the Designated
Account) or such other Person entitled thereto under applicable
law.
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(ii) In each instance, so long as no Default or Event of Default
has occurred and is continuing, SECTION 2.4(b) shall not be deemed to
apply to any payment by Borrowers specified by Borrowers to be for the
payment of specific Obligations then due and payable (or prepayable)
under any provision of this Agreement.
(iii) For purposes of the foregoing, "paid in full" means payment
of all amounts owing under the Loan Documents according to the terms
thereof, including loan fees, service fees, professional fees,
interest (and specifically including interest accrued after the
commencement of any Insolvency Proceeding), default interest, interest
on interest, and expense reimbursements, whether or not the same would
be or is allowed or disallowed in whole or in part in any Insolvency
Proceeding.
(iv) In the event of a direct conflict between the priority
provisions of this SECTION 2.4 and other provisions contained in any
other Loan Document, it is the intention of the parties hereto that
such priority provisions in such documents shall be read together and
construed, to the fullest extent possible, to be in concert with each
other. In the event of any actual, irreconcilable conflict that cannot
be resolved as aforesaid, the terms and provisions of this SECTION 2.4
shall control and govern.
2.5 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrowers to Lender pursuant to SECTIONS 2.1 AND 2.12 is
greater than either the Dollar or percentage limitations set forth in SECTIONS
2.1 OR 2.12, (an "OVERADVANCE"), Borrowers immediately shall pay to Lender, in
cash, the amount of such excess, which amount shall be used by Lender to reduce
the Obligations in accordance with the priorities set forth in SECTION 2.4(b).
In addition, Borrowers hereby promise to pay the Obligations (including
principal, interest, fees, costs, and expenses) in Dollars in full to Lender as
and when due and payable under the terms of this Agreement and the other Loan
Documents.
2.6 INTEREST RATES AND LETTER OF CREDIT FEE: RATES, PAYMENTS, AND
CALCULATIONS.
(a) INTEREST RATES. Except as provided in clause (c) below, all
Obligations (except for undrawn Letters of Credit) that have been charged to the
Loan Account pursuant to the terms hereof shall bear interest on the Daily
Balance thereof as follows (i) if the relevant Obligation is an Advance that is
a LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus the LIBOR
Rate Margin, and (ii) otherwise, at a per annum rate equal to the Base Rate plus
the Base Rate Margin.
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(b) LETTER OF CREDIT FEE. Borrowers shall pay Lender a Letter of
Credit fee (in addition to the charges, commissions, fees, and costs set forth
in Section 2.12(e)) which shall accrue at a rate equal to 1% per annum times the
Daily Balance of the undrawn amount of all outstanding Letters of Credit.
(c) DEFAULT RATE. Upon the occurrence and during the continuation of
an Event of Default,
(i) all Obligations (except for undrawn Letters of Credit) that
have been charged to the Loan Account pursuant to the terms hereof
shall bear interest on the Daily Balance thereof at a per annum rate
equal to 3 percentage points above the per annum rate otherwise
applicable hereunder, and
(ii) the Letter of Credit fee provided for above shall be
increased to 2 percentage points above the per annum rate otherwise
applicable hereunder.
(d) PAYMENT. Interest, Letter of Credit fees, and all other fees
payable hereunder shall be due and payable, in arrears, on the first day of each
month at any time that Obligations or obligation to extend credit hereunder are
outstanding; PROVIDED, HOWEVER, that interest due in respect of LIBOR Rate Loans
shall be payable as set forth in Section 2.13(a). Borrowers hereby authorize
Lender, from time to time, without prior notice to Borrowers, to charge such
interest and fees, all Lender Expenses (as and when incurred), the charges,
commissions, fees, and costs provided for in SECTION 2.12(E) (as and when
accrued or incurred), the fees and costs provided for in SECTION 2.11 (as and
when accrued or incurred), and all other payments as and when due and payable
under any Loan Document to Borrowers' Loan Account, which amounts thereafter
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances hereunder. Any interest not paid when due shall be
compounded by being charged to Borrowers' Loan Account and shall thereafter
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances that are Base Rate Loans hereunder.
(e) COMPUTATION. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed. In the event the Base Rate is changed from time to time
hereafter, the rates of interest hereunder based upon the Base Rate
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Base Rate.
(f) INTENT TO LIMIT CHARGES TO MAXIMUM LAWFUL RATE. In no event shall
the interest rate or rates payable under this Agreement, plus any other amounts
paid in connection herewith, exceed the highest rate permissible under any law
that a court of competent jurisdiction shall, in a final
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determination, deem applicable. Borrowers and Lender, in executing and
delivering this Agreement, intend legally to agree upon the rate or rates of
interest and manner of payment stated within it; PROVIDED, HOWEVER, that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto, as of the date of this Agreement, Borrowers are and shall
be liable only for the payment of such maximum as allowed by law, and payment
received from Borrowers in excess of such legal maximum, whenever received,
shall be applied to reduce the principal balance of the Obligations to the
extent of such excess.
2.7 CASH MANAGEMENT.
(a) Borrowers shall (i) establish and maintain cash management
services of a type and on terms reasonably satisfactory to Lender at one or more
of the banks set forth on SCHEDULE 2.7(a) (each a "CASH MANAGEMENT BANK"), and
shall request in writing and otherwise take such reasonable steps to ensure that
all of its Account Debtors forward payment of the amounts owed by them directly
to such Cash Management Bank, and (ii) deposit or cause to be deposited
promptly, and in any event no later than the first Business Day after the date
of receipt thereof, all Collections (including those sent directly by Account
Debtors to a Cash Management Bank) into a bank account in Lender's name (a "Cash
Management Account") at one of the Cash Management Banks.
(b) Each Cash Management Bank shall establish and maintain Cash
Management Agreements with Lender and Borrowers, in form and substance
acceptable to Lender. Each such Cash Management Agreement shall provide, among
other things, that (i) all items of payment deposited in such Cash Management
Account and proceeds thereof are held by such Cash Management Bank Lender as
bailee-in-possession for Lender, (ii) the Cash Management Bank has no rights of
setoff or recoupment or any other claim against the applicable Cash Management
Account, other than for payment of its service fees and other charges directly
related to the administration of such Cash Management Account and for returned
checks or other items of payment, and (iii) the Cash Management Bank immediately
will forward by daily sweep all amounts in the applicable Cash Management
Account to the Lender's Account; PROVIDED, HOWEVER, the daily sweep provision in
clause (iii) above will not become operative until the date on which Borrowers
first do not have the Required Availability.
(c) So long as no Default or Event of Default has occurred and is
continuing, Administrative Borrower may amend SCHEDULE 2.7(a) OR (b) to add or
replace a Cash Management Account Bank or Cash Management Account; PROVIDED,
HOWEVER, that (i) such prospective Cash Management Bank shall be reasonably
satisfactory to Lender and Lender shall have consented in writing in advance to
the opening of such Cash Management Account with the
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prospective Cash Management Bank (such consent not to be unreasonably withheld
or delayed), and (ii) prior to the time of the opening of such Cash Management
Account, Borrowers and such prospective Cash Management Bank shall have executed
and delivered to Lender a Cash Management Agreement. Borrowers shall close any
of their Cash Management Accounts (and establish replacement cash management
accounts in accordance with the foregoing sentence) promptly and in any event
within 30 days of notice from Lender that the creditworthiness of any Cash
Management Bank is no longer acceptable in Lender's reasonable judgment, or as
promptly as practicable and in any event within 60 days of notice from Lender
that the operating performance, funds transfer, or availability procedures or
performance of the Cash Management Bank with respect to Cash Management Accounts
or Lender's liability under any Cash Management Agreement with such Cash
Management Bank is no longer acceptable in Lender's reasonable judgment.
(d) The Cash Management Accounts shall be cash collateral accounts,
with all cash, checks and similar items of payment in such accounts securing
payment of the Obligations, and in which Borrowers are hereby deemed to have
granted a Lien to Lender.
2.8 CREDITING PAYMENTS; FLOAT CHARGE. The receipt of any payment item by
Lender (whether from transfers to Lender by the Cash Management Banks pursuant
to the Cash Management Agreements or otherwise) shall not be considered a
payment on account unless such payment item is a wire transfer of immediately
available federal funds made to the Lender's Account or unless and until such
payment item is honored when presented for payment. Should any payment item not
be honored when presented for payment, then Borrowers shall be deemed not to
have made such payment and interest shall be calculated accordingly. Anything to
the contrary contained herein notwithstanding, any payment item shall be deemed
received by Lender only if it is received into the Lender's Account on a
Business Day on or before 11:00 a.m. (California time). If any payment item is
received into the Lender's Account on a non-Business Day or after 11:00 a.m.
(California time) on a Business Day, it shall be deemed to have been received by
Lender as of the opening of business on the immediately following Business Day.
2.9 DESIGNATED ACCOUNT. Lender is authorized to make the Advances, and
Lender is authorized to issue the Letters of Credit, under this Agreement based
upon telephonic or other instructions received from anyone purporting to be an
Authorized Person, or without instructions if pursuant to SECTION 2.6(d).
Administrative Borrower agrees to establish and maintain the Designated Account
with the Designated Account Bank for the purpose of receiving the proceeds of
the Advances requested by Borrowers and made by Lender hereunder. Unless
otherwise agreed by Lender and Administrative Borrower, any Advance requested by
Borrowers and made by Lender hereunder shall be made to the Designated Account.
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2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS. Lender shall
maintain an account on its books in the name of Borrowers (the "LOAN ACCOUNT")
on which Borrowers will be charged with all Advances made by Lender to Borrowers
or for Borrowers' account, the Letters of Credit issued by Lender for Borrowers'
account, and with all other payment Obligations hereunder or under the other
Loan Documents, including, accrued interest, fees and expenses, and Lender
Expenses. In accordance with SECTION 2.8, the Loan Account will be credited with
all payments received by Lender from Borrowers or for Borrowers' account,
including all amounts received in the Lender's Account from any Cash Management
Bank. Lender shall render statements regarding the Loan Account to
Administrative Borrower, including principal, interest, fees, and including an
itemization of all charges and expenses constituting Lender Expenses owing, and
such statements shall be conclusively presumed to be correct and accurate and
constitute an account stated between Borrowers and Lender unless, within 30 days
after receipt thereof by Administrative Borrower, Administrative Borrower shall
deliver to Lender written objection thereto describing the error or errors
contained in any such statements.
2.11 FEES. Borrowers shall pay to Lender the following fees and charges,
which fees and charges shall be non-refundable when paid (irrespective of
whether this Agreement is terminated thereafter):
(a) UNUSED LINE FEE. On the first day of each month during the term
of this Agreement, an unused line fee in the amount equal to .375% per annum
times the result of (a) the Maximum Revolver Amount, less (b) the sum of (i) the
average Daily Balance of Advances that were outstanding during the immediately
preceding month, plus (ii) the average Daily Balance of the Letter of Credit
Usage during the immediately preceding month,
(b) FEE LETTER FEES. As and when due and payable under the terms of
the Fee Letter, Borrowers shall pay to Lender the fees set forth in the Fee
Letter, and
(c) AUDIT, APPRAISAL, AND VALUATION CHARGES. Audit, appraisal, and
valuation fees and charges as follows, (i) a fee of $750 pay day, per auditor,
plus out-of-pocket expenses for each financial audit of a Borrower performed by
personnel employed by Lender, (ii) if implemented, a one time charge of $3,000
plus out-of-pocket expenses for expenses for the establishment of electronic
collateral reporting systems, (iii) a fee of $1,500 per day per appraiser, plus
out-of-pocket expenses, for each appraisal of the Collateral performed by
personnel employed by Lender, and (iv) the actual charges paid or incurred by
Lender if it elects to employ the services of one or more third Persons to
perform financial audits of Borrowers, to appraise the Collateral, or any
portion thereof, or to assess a Borrower's business valuation.
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2.12 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement, Lender
agrees to issue letters of credit for the account of Borrowers (each, an "L/C")
or to purchase participations or execute indemnities or reimbursement
obligations (each such undertaking, an "L/C UNDERTAKING") with respect to
letters of credit issued by an Underlying Issuer (as of the Closing Date, the
prospective Underlying Issuer is to be the Trade Bank) for the account of
Borrowers; PROVIDED, HOWEVER, (i) in no event shall any Underlying Letter of
Credit be issued for the benefit of the beneficiary of payment or performance
obligations incurred by or of, as applicable, any Subsidiary of any Borrower
which is not a Borrower, and (ii) L/C or L/C Undertaking be issued unless it
constitutes an Acceptable Purchase Order Letter of Credit. To request the
issuance of an L/C or an L/C Undertaking (or the amendment, renewal, or
extension of an outstanding L/C or L/C Undertaking), Administrative Borrower
shall hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by Lender) to Lender and Lender
(reasonably in advance of the requested date of issuance, amendment, renewal, or
extension) a notice requesting the issuance of an L/C or L/C Undertaking, or
identifying the L/C or L/C Undertaking to be amended, renewed, or extended, the
date of issuance, amendment, renewal, or extension, the date on which such L/C
or L/C Undertaking is to expire, the amount of such L/C or L/C Undertaking, the
name and address of the beneficiary thereof (or of the Underlying Letter of
Credit, as applicable), and such other information as shall be necessary to
prepare, amend, renew, or extend such L/C or L/C Undertaking. If requested by
Lender, Borrowers also shall be an applicant under the application with respect
to any Underlying Letter of Credit that is to be the subject of an L/C
Undertaking. Lender shall have no obligation to issue a Letter of Credit if any
of the following would result after giving effect to the requested Letter of
Credit:
(i) the Adjusted Letter of Credit Usage would exceed the
Borrowing Base less the sum of the then extant amount of outstanding
Advances, or
(ii) the Letter of Credit Usage would exceed $4,000,000, or
(iii) the Letter of Credit Usage would exceed the Maximum
Revolver Amount less the sum of the then extant amount of outstanding
Advances.
(b) Each Letter of Credit (and corresponding Underlying Letter of
Credit other than the Existing Other Underlying Letter of Credit which are
standby Underlying Letters of Credit) shall have an expiry date no later than 30
days after the Maturity Date and all such Letters of Credit (and corresponding
Underlying Letters of Credit) shall be in form and substance acceptable to
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Lender (in the exercise of its Permitted Discretion), including the requirement
that the amounts payable thereunder must be payable in Dollars. No Underlying
Letter of Credit may be amended more than three times (and no Existing Other
Underlying Letter of Credit may be amended without Lender's prior written
consent) and, after the date hereof, only Underlying Letters of Credit which are
documentary letters of credit will be issued. If Lender is obligated to advance
funds under a Letter of Credit, Borrowers immediately shall reimburse such L/C
Disbursement to Lender by paying to Lender an amount equal to such L/C
Disbursement not later than 11:00 a.m., California time, on the date that such
L/C Disbursement is made, if Administrative Borrower shall have received written
or telephonic notice of such L/C Disbursement prior to 10:00 a.m., California
time, on such date, or, if such notice has not been received by Administrative
Borrower prior to such time on such date, then not later than 11:00 a.m.,
California time, on (i) the Business Day that Administrative Borrower receives
such notice, if such notice is received prior to 10:00 a.m., California time, on
the date of receipt, and, in the absence of such reimbursement, the L/C
Disbursement immediately and automatically shall be deemed to be an Advance
hereunder and, thereafter, shall bear interest at the rate then applicable to
Advances that are Base Rate Loans under Section 2.6. To the extent an L/C
Disbursement is deemed to be an Advance hereunder, Borrowers' obligation to
reimburse such L/C Disbursement shall be discharged and replaced by the
resulting Advance.
(c) Each Borrower hereby agrees to indemnify, save, defend, and hold
Lender harmless from any loss, cost, expense, or liability, and reasonable
attorneys fees incurred by Lender arising out of or in connection with any
Letter of Credit; provided, however, that no Borrower shall be obligated
hereunder to indemnify for any loss, cost, expense, or liability that is caused
by the gross negligence or willful misconduct of Lender. Each Borrower agrees to
be bound by the Underlying Issuer's regulations and interpretations of any
Underlying Letter of Credit or by Lender's interpretations of any L/C issued by
Lender to or for such Borrower's account, even though this interpretation may be
different from such Borrower's own, and each Borrower understands and agrees
that Lender shall not be liable for any error, negligence, or mistake, whether
of omission or commission, in following Borrowers' instructions or those
contained in the Letter of Credit or any modifications, amendments, or
supplements thereto (unless, in each case, the same shall constitute gross
negligence or willful misconduct). Each Borrower understands that the L/C
Undertakings may require Lender to indemnify the Underlying Issuer for certain
costs or liabilities arising out of claims by Borrowers against such Underlying
Issuer. Each Borrower hereby agrees to indemnify, save, defend, and hold Lender
harmless with respect to any loss, cost, expense (including reasonable attorneys
fees), or liability incurred by Lender under any L/C Undertaking as a result of
Lender's indemnification of any Underlying Issuer; provided, however, that no
Borrower shall be obligated hereunder to indemnify
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for any loss, cost, expense, or liability that is caused by the gross negligence
or willful misconduct of Lender.
(d) Each Borrower hereby authorizes and directs any Underlying Issuer
to deliver to Lender all instruments, documents, and other writings and property
received by such Underlying Issuer pursuant to such Underlying Letter of Credit
and to accept and rely upon Lender's instructions with respect to all matters
arising in connection with such Underlying Letter of Credit and the related
application.
(e) Any and all charges, commissions, fees, and costs incurred by
Lender relating to Underlying Letters of Credit shall be Lender Expenses for
purposes of this Agreement and immediately shall be reimbursable by Borrowers to
Lender for the account of Lender. Borrowers acknowledge and agree that they will
pay the Underlying Issuer all fees and charges imposed by the Underlying Issuer
in connection with the issuance of Underlying Letters of Credit.
(f) If by reason of (i) any change in any applicable law, treaty,
rule, or regulation or any change in the interpretation or application thereof
by any Governmental Authority, or (ii) compliance by the Underlying Issuer or
Lender with any direction, request, or requirement (irrespective of whether
having the force of law) of any Governmental Authority or monetary authority
including, Regulation D of the Federal Reserve Board as from time to time in
effect (and any successor thereto), occurring or issued, as the case may be,
after the Closing Date:
(i) any reserve, deposit, or similar requirement is or shall be
imposed or modified in respect of any Letter of Credit issued
hereunder, or
(ii) there shall be imposed on the Underlying Issuer or Lender
any other condition regarding any Underlying Letter of Credit or any
Letter of Credit issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to Lender of issuing, making, guaranteeing, or maintaining any Letter of Credit
or to reduce the amount receivable in respect thereof by Lender, then, and in
any such case, Lender may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify
Administrative Borrower, and Borrowers shall pay on demand such amounts as
Lender may specify to be necessary to compensate Lender for such additional cost
or reduced receipt, together with interest on such amount from the date of such
demand until payment in full thereof at the rate then applicable to Base Rate
Loans hereunder. The determination by Lender of any amount due pursuant to this
Section, as set forth in a certificate setting forth
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the calculation thereof in reasonable detail, shall, in the absence of manifest
or demonstrable error, be final and conclusive and binding on all of the parties
hereto. In determining such amount, Lender may use any reasonable averaging and
attribution methods.
(g) Each Borrower acknowledges and agrees that (i) certain of the
Underlying Letters of Credit may provide for the presentation of time drafts to
the Underlying Issuer, and (ii) no such time draft shall have a maturity date
beyond 120 days. If an Underlying Issuer accepts such a time draft that is
presented under an Underlying Letter of Credit, it is acknowledged and agreed
that (i) the Letter of Credit will require Lender to reimburse the Underlying
Issuer for amounts paid on account of such time draft on or after the maturity
date thereof, (ii) the pricing provisions hereof (including Sections 2.6(b) and
2.12(e)) shall continue to apply, until payment of such time draft on or after
the maturity date thereof, as if the Underlying Letter of Credit were still
outstanding, and (iii) on the date on which Lender makes payment to the
Underlying Issuer of the amounts paid on account of such time draft, Borrowers
immediately shall reimburse such amount to Lender and such amount shall
constitute an L/C Disbursement hereunder.
(h) Simultaneously with a request by Borrowers under clause (a) of
this Section, Administrative Borrower shall deliver to Lender an officer's
certificate (i) certifying that the requested L/C or L/C Undertaking, upon
issuance, will constitute an Acceptable Purchase Order Letter of Credit, and
(ii) attached to which shall be a true and correct copy of the subject
Acceptable Purchase Order. Within three (3) Business Days, Lender shall notify
Administrative Borrower, based on the exercise of its Permitted Discretion,
whether the subject L/C or L/C Undertaking constitutes an Acceptable Purchase
Order Letter of Credit. If Lender notifies Administrative Borrower that the L/C
or L/C Undertaking does not constitute an Acceptable Purchase Order Letter of
Credit, Lender shall have no further obligations hereunder with respect to the
subject request. If Lender does not so notify Administrative Borrower, the
subject L/C or L/C Undertaking automatically then shall be deemed an Acceptable
Purchase Order Letter of Credit.
(i) Lender shall have no obligation to issue an L/C or L/C
Undertaking unless (i) Borrowers have funded the Cash Collateral Reserve in an
amount equal to 58% of the amount of the requested L/C or L/C Undertaking, or
(ii) the then balance of the Cash Collateral Reserve otherwise is acceptable to
Lender.
2.13 LIBOR OPTION.
(a) INTEREST AND INTEREST PAYMENT DATES. In lieu of having interest
charged at the rate based upon the Base Rate, Borrowers shall have the option
(the "LIBOR OPTION") to have interest on all or a portion of the
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Advances be charged at the LIBOR Rate. Interest on LIBOR Rate Loans shall be
payable on the earliest of (i) the last day of the Interest Period applicable
thereto, (ii) the occurrence of an Event of Default in consequence of which
Lender has elected to accelerate the maturity of the Obligations, or (iii)
termination of this Agreement pursuant to the terms hereof. On the last day of
each applicable Interest Period, unless Administrative Borrower properly has
exercised the LIBOR Option with respect thereto, the interest rate applicable to
such LIBOR Rate Loan automatically shall convert to the rate of interest then
applicable to Base Rate Loans of the same type hereunder. At any time that an
Event of Default has occurred and is continuing, Borrowers no longer shall have
the option to request that Advances bear interest at the LIBOR Rate and Lender
shall have the right to convert the interest rate on all outstanding LIBOR Rate
Loans to the rate then applicable to Base Rate Loans hereunder.
(b) LIBOR ELECTION.
(i) Administrative Borrower may, at any time and from time to
time, so long as no Event of Default has occurred and is continuing,
elect to exercise the LIBOR Option by notifying Lender prior to 11:00
a.m. (California time) at least 3 Business Days prior to the
commencement of the proposed Interest Period (the "LIBOR DEADLINE").
Notice of Administrative Borrower's election of the LIBOR Option for a
permitted portion of the Advances and an Interest Period pursuant to
this Section shall be made by delivery to Lender of a LIBOR Notice
received by Lender before the LIBOR Deadline, or by telephonic notice
received by Lender before the LIBOR Deadline (to be confirmed by
delivery to Lender of a LIBOR Notice received by Lender prior to 5:00
p.m. (California time) on the same day.
(ii) Each LIBOR Notice shall be irrevocable and binding on
Borrowers. In connection with each LIBOR Rate Loan, each Borrower
shall indemnify, defend, and hold Lender harmless against any loss,
cost, or expense incurred by Lender as a result of (a) the payment of
any principal of any LIBOR Rate Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event
of Default), (b) the conversion of any LIBOR Rate Loan other than on
the last day of the Interest Period applicable thereto, or (c) the
failure to borrow, convert, continue or prepay any LIBOR Rate Loan on
the date specified in any LIBOR Notice delivered pursuant hereto (such
losses, costs, and expenses, collectively, "FUNDING LOSSES"). Funding
Losses shall, with respect to Lender, be deemed to equal the amount
reasonably determined by Lender to be the excess, if any, of (i) the
amount of interest that would have accrued on the principal amount of
such LIBOR Rate Loan had such event not occurred, at
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the LIBOR Rate that would have been applicable thereto, for the period
from the date of such event to the last day of the then current
Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest
Period therefor), minus (ii) the amount of interest that would accrue
on such principal amount for such period at the interest rate which
Lender would be offered were it to be offered, at the commencement of
such period, for Dollar deposits of a comparable amount and period in
the London interbank market. A certificate of Lender delivered to
Administrative Borrower setting forth any amount or amounts that
Lender is entitled to receive pursuant to this Section shall be
conclusive absent manifest error.
(iii) Borrowers shall have not more than 7 LIBOR Rate Loans in
effect at any given time. Borrowers only may exercise the LIBOR Option
for LIBOR Rate Loans of at least $500,000 and integral multiples of
$500,000 in excess thereof.
(c) PREPAYMENTS. Borrowers may prepay LIBOR Rate Loans at any time;
PROVIDED, HOWEVER, that in the event that LIBOR Rate Loans are prepaid on any
date that is not the last day of the Interest Period applicable thereto,
including as a result of any automatic prepayment through the required
application by Lender of proceeds of Collections in accordance with SECTION
2.4(B) or for any other reason, including early termination of the term of this
Agreement or acceleration of the Obligations pursuant to the terms hereof, Each
Borrower shall indemnify, defend, and hold Lender and their Participants
harmless against any and all Funding Losses in accordance with clause (b) above.
(d) SPECIAL PROVISIONS APPLICABLE TO LIBOR RATE.
(i) The LIBOR Rate may be adjusted by Lender on a prospective
basis to take into account any additional or increased costs to Lender
of maintaining or obtaining any eurodollar deposits or increased costs
due to changes in applicable law occurring subsequent to the
commencement of the then applicable Interest Period, including changes
in tax laws (except changes of general applicability in corporate
income tax laws) and changes in the reserve requirements, occurring
subsequent to the commencement of the then applicable Interest Period,
imposed by the Board of Governors of the Federal Reserve System (or
any successor), excluding the Reserve Percentage, which additional or
increased costs would increase the cost of funding loans bearing
interest at the LIBOR Rate. In any such event, Lender shall give
Administrative Borrower notice of such a determination and adjustment
and, upon its receipt of the notice from Lender,
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Administrative Borrower may, by notice to Lender (y) require Lender to
furnish to Administrative Borrower a statement setting forth the basis
for adjusting such LIBOR Rate and the method for determining the
amount of such adjustment, or (z) repay the LIBOR Rate Loans with
respect to which such adjustment is made (together with any amounts
due under clause (b)(ii) above).
(ii) In the event that any change in market conditions or any
law, regulation, treaty, or directive, or any change therein or in the
interpretation of application thereof, shall at any time after the
date hereof, in the reasonable opinion of Lender, make it unlawful or
impractical for Lender to fund or maintain LIBOR Rate Loans or to
continue such funding or maintenance, or to determine or charge
interest rates at the LIBOR Rate, Lender shall give notice of such
changed circumstances to Administrative Borrower and (y) in the case
of any LIBOR Rate Loans that are outstanding, the date specified in
Lender's notice shall be deemed to be the last day of the Interest
Period of such LIBOR Rate Loans, and interest upon the LIBOR Rate
Loans of Lender thereafter shall accrue interest at the rate then
applicable to Base Rate Loans, and (z) Borrowers shall not be entitled
to elect the LIBOR Option until Lender determines that it would no
longer be unlawful or impractical to do so.
(e) NO REQUIREMENT OF MATCHED FUNDING. Anything to the contrary
contained herein notwithstanding, neither Lender, nor any of its Participants,
is required actually to acquire eurodollar deposits to fund or otherwise match
fund any Obligation as to which interest accrues at the LIBOR Rate. The
provisions of this Section shall apply as if Lender or its Participants had
match funded any Obligation as to which interest is accruing at the LIBOR Rate
by acquiring eurodollar deposits for each Interest Period in the amount of the
LIBOR Rate Loans.
2.14 CAPITAL REQUIREMENTS. If, after the date hereof, Lender reasonably
determines that (i) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies, or
any change in the interpretation or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by Lender
or its parent bank holding company with any guideline, request or directive
becoming effective after the date hereof, of any such entity regarding capital
adequacy (whether or not having the force of law), the effect of reducing the
return on Lender's or such holding company's capital as a consequence of
Lender's obligations hereunder to a level below that which Lender or such
holding company could have achieved but for such adoption, change, or compliance
(taking into consideration Lender's or such holding company's then existing
policies with respect to capital adequacy and
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44
assuming the full utilization of such entity's capital) by any amount deemed by
Lender to be material, then Lender may notify Administrative Borrower thereof.
Following receipt of such notice, Borrowers agree to pay Lender on demand the
amount of such reduction of return of capital as and when such reduction is
determined, payable within 90 days after presentation by Lender of a statement
in the amount and setting forth in reasonable detail Lender's calculation
thereof and the assumptions upon which such calculation was based (which
statement shall be deemed true and correct absent manifest error). In
determining such amount, Lender may use any reasonable averaging and attribution
methods.
2.15 JOINT AND SEVERAL LIABILITY OF BORROWERS.
(a) Each of Borrowers is accepting joint and several liability
hereunder and under the other Loan Documents in consideration of the financial
accommodations to be provided by Lender under this Agreement, for the mutual
benefit, directly and indirectly, of each of Borrowers and in consideration of
the undertakings of the other Borrowers to accept joint and several liability
for the Obligations.
(b) Each of Borrowers, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Borrowers, with respect to the payment and
performance of all of the Obligations (including, without limitation, any
Obligations arising under this Section 2.15), it being the intention of the
parties hereto that all the Obligations shall be the joint and several
obligations of each Person composing Borrowers without preferences or
distinction among them.
(c) If and to the extent that any of Borrowers shall fail to make any
payment with respect to any of the Obligations as and when due or to perform any
of the Obligations in accordance with the terms thereof, then in each such event
the other Borrowers will make such payment with respect to, or perform, such
Obligation.
(d) The Obligations of each Borrower under the provisions of this
Section 2.15 constitute the absolute and unconditional, full recourse
Obligations of each such Borrower enforceable against each such Borrower to the
full extent of its properties and assets, irrespective of the validity,
regularity or enforceability of this Agreement or any other circumstances
whatsoever.
(e) Except as otherwise expressly provided in this Agreement, each
Borrower hereby waives notice of acceptance of its joint and several liability,
notice of any Advances or Letters of Credit issued under or pursuant to this
Agreement, notice of the occurrence of any Default, Event of Default, or of any
demand for any payment under this Agreement, notice of any action at
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any time taken or omitted by Lender under or in respect of any of the
Obligations, any requirement of diligence or to mitigate damages and, generally,
to the extent permitted by applicable law, all demands, notices and other
formalities of every kind in connection with this Agreement (except, in each
case, as otherwise provided in this Agreement). Each Borrower hereby assents to,
and waives notice of, any extension or postponement of the time for the payment
of any of the Obligations, the acceptance of any payment of any of the
Obligations, the acceptance of any partial payment thereon, any waiver, consent
or other action or acquiescence by Lender at any time or times in respect of any
default by any Borrower in the performance or satisfaction of any term,
covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by Lender in respect of any of the Obligations, and the
taking, addition, substitution or release, in whole or in part, at any time or
times, of any security for any of the Obligations or the addition, substitution
or release, in whole or in part, of any Borrower. Without limiting the
generality of the foregoing, each Borrower assents to any other action or delay
in acting or failure to act on the part of Lender with respect to the failure by
any Borrower to comply with any of its Obligations, including, without
limitation, any failure strictly or diligently to assert any right or to pursue
any remedy or to comply fully with applicable laws or regulations thereunder,
which might, but for the provisions of this Section 2.15 afford grounds for
terminating, discharging or relieving any Borrower, in whole or in part, from
any of its Obligations under this Section 2.15, it being the intention of each
Borrower that, so long as any of the Obligations hereunder remain unsatisfied,
the Obligations of such Borrower under this Section 2.15 shall not be discharged
except by performance and then only to the extent of such performance. The
Obligations of each Borrower under this Section 2.15 shall not be diminished or
rendered unenforceable by any winding up, reorganization, arrangement,
liquidation, reconstruction or similar proceeding with respect to any Borrower
or Lender. The joint and several liability of the Borrower hereunder shall
continue in full force and effect notwithstanding any absorption, merger,
amalgamation or any other change whatsoever in the name, constitution or place
of formation of any of the Borrowers or Lender.
(f) Each Borrower represents and warrants to Lender that such
Borrower is currently informed of the financial condition of Borrowers and of
all other circumstances which a diligent inquiry would reveal and which bear
upon the risk of nonpayment of the Obligations. Each Borrower further represents
and warrants to Lender that such Borrower has read and understands the terms and
conditions of the Loan Documents. Each Borrower hereby covenants that such
Borrower will continue to keep informed of Borrowers' financial condition, the
financial condition of guarantors, if any, and of all other circumstances which
bear upon the risk of nonpayment or nonperformance of the Obligations.
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46
(g) The provisions of this SECTION 2.15 are made for the benefit of
Lender and its respective successors and assigns, and may be enforced by it or
them from time to time against any or all of the Borrowers as often as occasion
therefor may arise and without requirement on the part of Lender, successor, or
assign first to marshal any of its or their claims or to exercise any of its or
their rights against any of the Borrowers or to exhaust any remedies available
to it or them against any of the Borrowers or to resort to any other source or
means of obtaining payment of any of the Obligations hereunder or to elect any
other remedy. The provisions of this SECTION 2.15 shall remain in effect until
all of the Obligations shall have been paid in full or otherwise fully
satisfied. If at any time, any payment, or any part thereof, made in respect of
any of the Obligations, is rescinded or must otherwise be restored or returned
by Lender upon the insolvency, bankruptcy or reorganization of any of the
Borrowers, or otherwise, the provisions of this SECTION 2.15 will forthwith be
reinstated in effect, as though such payment had not been made.
(h) Each of the Borrowers hereby agrees that it will not enforce any
of its rights of contribution, subrogation, reimbursement or indemnity against
the other Borrowers with respect to any liability incurred by it hereunder or
under any of the other Loan Documents, any payments made by it to Lender with
respect to any of the Obligations or any collateral security therefor until such
time as all of the Obligations have been paid in full in cash. Any claim which
any Borrower may have against any other Borrower with respect to any payments to
Lender hereunder or under any other Loan Documents are hereby expressly made
subordinate and junior in right of payment, without limitation as to any
increases in the Obligations arising hereunder or thereunder, to the prior
payment in full in cash of the Obligations and, in the event of any insolvency,
bankruptcy, receivership, liquidation, reorganization or other similar
proceeding under the laws of any jurisdiction relating to any Borrower, its
debts or its assets, whether voluntary or involuntary, all such Obligations
shall be paid in full in cash before any payment or distribution of any
character, whether in cash, securities or other property, shall be made to any
other Borrower therefor.
(i) Each of the Borrowers hereby agrees that, after the occurrence
and during the continuance of any Default or Event of Default, the payment of
any amounts due with respect to the indebtedness owing by any Borrower to any
other Borrower is hereby subordinated to the prior payment in full in cash of
the Obligations. Each Borrower hereby agrees that after the occurrence and
during the continuance of any Default or Event of Default, such Borrower will
not demand, xxx for or otherwise attempt to collect any indebtedness of any
other Borrower owing to such Borrower until the Obligations shall have been paid
in full in cash. If, notwithstanding the foregoing sentence, such Borrower shall
collect, enforce or receive any amounts in respect of such indebtedness, such
amounts shall be collected, enforced and received by such Borrower as trustee
for the Lender, and such Borrower shall
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47
deliver any such amounts to Lender for application to the Obligations in
accordance with SECTION 2.4(b). In connection with any receivership, insolvency,
bankruptcy proceeding, assignment for the benefit of creditors or any similar
proceeding by or against any Borrower, Borrowers irrevocably authorize Lender in
any such proceeding or at any related meeting of creditors to (a) prove any
claim (by the filing of proof(s) of claim(s) or otherwise) in respect of any
indebtedness of any Borrower that is subject to any such proceeding to any other
Borrower, either in the name of the creditor Borrower or in the name of Lender,
(b) vote claims in respect of any such indebtedness, to accept or reject any
plan for liquidation, reorganization, arrangement, composition or extension, and
(c) take generally any action in connection with any such proceeding or meeting
which any creditor Borrower likely might otherwise take.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT. The
obligation of Lender to make the initial Advance (or otherwise to extend any
credit provided for hereunder), is subject to the fulfillment, to the
satisfaction of Lender, of each of the conditions precedent set forth below:
(a) the Closing Date shall occur on or before February 16, 2001;
(b) Lender shall have received all financing statements required by
Lender, duly executed by the applicable Borrowers, and Lender shall have
received searches reflecting the filing of all such financing statements;
(c) Lender shall have received each of the following documents, in
form and substance satisfactory to Lender, duly executed, and each such document
shall be in full force and effect (and filed or recorded, as applicable):
(i) an acknowledgment letter regarding the Control Agreement,
dated as of December 28, 2000, executed and delivered by Parent,
Lender and Xxxxx Fargo Brokerage Services, LLC in connection with the
December 2000 Loan Agreement,
(ii) the Copyright Security Agreement,
(iii) the Disbursement Letter,
(iv) the Fee Letter,
(v) the Cash Management Agreements,
(vi) the Patent Security Agreement,
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(vii) the Stock Pledge Agreement, together with all certificates
representing the shares of Stock pledged thereunder, as well as Stock
powers with respect thereto endorsed in blank,
(viii) the Trademark Security Agreement,
(ix) the Buyer Note, endorsed to Lender,
(x) the Collateral Assignment,
(xi) the Cash Collateral Agreement,
(xii) a certificate from the Secretary of Parent attaching true
and correct copies of the Purchase Documents (other than the Purchase
Documents to be executed subsequent to the date hereof),
(xiii) the consummation of the Sale Transaction, to the
satisfaction of Lender in its Permitted Discretion, and
(xiv) the Acknowledgement and Asset Segregation Letter.
(d) Lender shall have received a certificate from the Secretary of
each Borrower attesting to the resolutions of such Borrower's Board of Directors
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which such Borrower is a party and authorizing specific
officers of such Borrower to execute the same;
(e) Lender shall have received copies of each Borrower's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of such Borrower;
(f) Lender shall have received a certificate of status with respect
to each Borrower, dated within 10 days of the Closing Date, such certificate to
be issued by the appropriate officer of the jurisdiction of organization of such
Borrower, which certificate shall indicate that such Borrower is in good
standing in such jurisdiction;
(g) Lender shall have received certificates of status with respect to
each Borrower, each dated within 30 days of the Closing Date, such certificates
to be issued by the appropriate officer of the jurisdictions (other than the
jurisdiction of organization of such Borrower) in which its failure to be duly
qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that such Borrower is in good standing in such
jurisdictions;
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(h) Lender shall have received opinions of Borrowers' counsel and a
reliance letter in favor of Lender in respect of Buyer's counsel's opinion, each
in form and substance (including such Buyer's counsel's opinion) satisfactory to
Lender;
(i) Lender shall have received satisfactory evidence (including a
certificate of the chief financial officer of Parent) that all tax returns
required to be filed by Borrowers have been timely filed and all taxes upon
Borrowers or their properties, assets, income, and franchises (including Real
Property taxes and payroll taxes) have been paid prior to delinquency, except
such taxes that are the subject of a Permitted Protest;
(j) Borrowers shall have the Required Availability and be in
compliance with Section 2.1(e) after giving effect to the initial extensions of
credit hereunder;
(k) Lender shall have completed its business, legal, and collateral
due diligence, including (i) a collateral audit and review of Borrowers' books
and records and verification of Borrowers' representations and warranties to
Lender, the results of which shall be satisfactory to Lender, (ii) an inspection
of each of the locations where Inventory is located, the results of which shall
be satisfactory to Lender, (iii) satisfactory legal review of contracts with
Borrowers' major customers, and (iv) satisfactory legal review of the Purchase
Documents and the transactions contemplated thereby;
(l) Borrowers shall pay all Lender Expenses incurred in connection
with the transactions evidenced by this Agreement and the December 2000 Loan
Agreement;
(m) Borrower shall pay all fees due and owing under or in connection
with the December 2000 Loan Agreement including any fees owing under the
December 2000 Fee Agreement,
(n) Borrowers shall have received all licenses, approvals or evidence
of other actions required by any Governmental Authority in connection with the
execution and delivery by Borrowers of this Agreement or any other Loan Document
or with the consummation of the transactions contemplated hereby and thereby;
(o) Borrowers shall have funded the Cash Collateral Reserve in an
aggregate amount equal to (i) 58% of the undrawn amount of Existing Underlying
Acceptable Purchase Order Letters of Credit, and (ii) 100% of the undrawn amount
of the Existing Standby Underlying Letters of Credit.
(p) the issuance to, and receipt by Lender of, the Back to Back
Standby Letter of Credit; and
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(q) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance reasonably satisfactory to
Lender.
3.2 CONDITIONS SUBSEQUENT TO THE INITIAL EXTENSION OF CREDIT. The
obligation of Lender to continue to make Advances (or otherwise extend credit
hereunder) is subject to the fulfillment, on or before the date applicable
thereto, of each of the conditions subsequent set forth below (the failure by
Borrowers to so perform or cause to be performed constituting an Event of
Default):
(a) within 5 days after the Closing Date, Borrowers shall deliver to
Lender an original replacement stock certificate representing all of the
outstanding shares of Stock of SMI, together with stock powers with respect
thereto endorsed in blank. The restrictive legend on the reverse side of the
certificate delivered in connection with the December 2000 Loan Agreement shall
be replaced on such replacement certificate with the following restrictive
legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR THE SECURITIES LAWS OF ANY STATE. SUCH
SHARES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS SUCH OFFERING, SALE, DELIVERY, TRANSFER, PLEDGE
OR HYPOTHECATION IS IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE ACT
AND SUCH LAWS OR AN EXEMPTION FROM SUCH REQUIREMENTS OF THE ACT AND SUCH LAWS IS
AVAILABLE WITH RESPECT THERETO.
(b) within 10 days of the Closing Date, deliver to Lender certified
copies of the policies of cargo and property insurance, together with the
endorsements thereto, as are required by SECTION 6.8, the form and substance of
which shall be reasonably satisfactory to Lender and its counsel;
(c) within 10 days of the Closing Date, deliver to Lender
Intercompany Notes from Cyrk Europe Limited and Cyrk (H.K.) Limited,
respectively, endorsed to Lender;
(d) within 15 days of the Closing Date, deliver to Lender a
Collateral Access Agreement with respect to 000 Xxxxxxxxx Xxxxx, Xxxxxxxxx, XX
00000;
(e) within 15 days of the Closing Date, deliver to Lender Collateral
Access Agreements for each of the customs brokers of Borrowers in the United
States; and
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51
(f) within 2 days of the Closing Date, deliver a certificate of
insurance, together with the endorsements thereto, as are required by SECTION
6.8, the form and substance of which shall be satisfactory to Xxxxx.
3.3 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The obligation of
Lender to make all Advances (or to extend any other credit hereunder) shall be
subject to the following conditions precedent:
(a) the representations and warranties contained in this Agreement
and the other Loan Documents shall be true and correct in all material respects
on and as of the date of such extension of credit, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof;
(c) no injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the extending of such credit shall
have been issued and remain in force by any Governmental Authority against any
Borrower, Lender, or any of their Affiliates; and
(d) no Material Adverse Change shall have occurred.
3.4 TERM. This Agreement shall become effective upon the execution and
delivery hereof by Borrowers and Lender and shall continue in full force and
effect for a term ending on May 15, 2001 (the "MATURITY DATE"). The foregoing
notwithstanding, Lender shall have the right to terminate its obligations under
this Agreement immediately and without notice upon the occurrence and during the
continuation of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of this Agreement,
all Obligations (including contingent reimbursement obligations of Borrowers
with respect to any outstanding Letters of Credit) immediately shall become due
and payable without notice or demand. No termination of this Agreement, however,
shall relieve or discharge Borrowers of their duties, Obligations, or covenants
hereunder and the Lender's Liens in the Collateral shall remain in effect until
all Obligations have been fully and finally discharged and Lender's obligations
to provide additional credit hereunder have been terminated. When this Agreement
has been terminated and all of the Obligations have been fully and finally
discharged and Lender's obligations to provide additional credit under the Loan
Documents have been terminated irrevocably, Lender will, at Borrowers' sole
expense, execute and deliver any UCC termination statements, lien releases,
mortgage releases, re-assignments of trademarks, discharges of security
interests, and other similar discharge or release documents (and, if applicable,
in recordable form) as are reasonably
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necessary to release, as of record, the Lender's Liens and all notices of
security interests and liens previously filed by Lender with respect to the
Obligations.
3.6 EARLY TERMINATION BY BORROWERS. Borrowers have the option, at any time
upon 45 days prior written notice by Administrative Borrower to Lender, to
terminate this Agreement by paying to Lender, in cash, the Obligations
(including either (i) providing cash collateral to be held by Lender in an
amount equal to 105% of the then extant Letter of Credit Usage, or (ii) causing
the original Letters of Credit to be returned to Lender), in full. If
Administrative Borrower has sent a notice of termination pursuant to the
provisions of this Section, then Lender's obligations to extend credit hereunder
shall terminate and Borrowers shall be obligated to repay the Obligations
(including either (i) providing cash collateral to be held by Lender in an
amount equal to 105% of the then extant Letter of Credit Usage, or (ii) causing
the original Letters of Credit to be returned to Lender), in full, on the date
set forth as the date of termination of this Agreement in such notice.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Each Borrower hereby grants to Lender a
continuing security interest in all of its right, title, and interest in all
currently existing and hereafter acquired or arising Personal Property
Collateral in order to secure prompt repayment of any and all of the Obligations
in accordance with the terms and conditions of the Loan Documents and in order
to secure prompt performance by Borrowers of each of their covenants and duties
under the Loan Documents. The Lender's Liens in and to the Personal Property
Collateral shall attach to all Personal Property Collateral without further act
on the part of Lender or Borrowers, other than Personal Property Collateral
which is not subject to attachment under the Code and commercial tort claims.
Anything contained in this Agreement or any other Loan Document to the contrary
notwithstanding, except for Permitted Dispositions, Borrowers have no authority,
express or implied, to dispose of any item or portion of the Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, and if and to
the extent that perfection of priority of Lender's security interest is
dependent on or enhanced by possession, the applicable Borrower, immediately
upon the request of Lender, shall endorse and deliver physical possession of
such Negotiable Collateral to Lender.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time after the occurrence and during the continuation of an
Event of Default, Lender or Lender's designee may (a) notify Account Debtors of
Borrowers that the Accounts, chattel paper, or General Intangibles have been
assigned to Lender or that Lender has a security interest therein, or (b)
collect
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53
the Accounts, chattel paper, or General Intangibles directly and charge the
collection costs and expenses to the Loan Account. Each Borrower agrees that it
will hold in trust for Lender, as Lender's trustee, any Collections that it
receives and immediately will deliver said Collections to Lender or a Cash
Management Bank in their original form as received by the applicable Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time, upon the
reasonable request of Lender, Borrowers shall execute and deliver to Lender any
and all financing statements, initial financing statements in lieu of
continuation statements, fixture filings, security agreements, pledges,
assignments, endorsements of certificates of title, and all other documents (the
"ADDITIONAL DOCUMENTS") that Lender may request in its Permitted Discretion, in
form and substance satisfactory to Lender, to perfect and continue perfected or
better perfect the Lender's Liens in the Collateral (whether now owned or
hereafter arising or acquired), to create and perfect Liens in favor of Lender
in any Real Property acquired after the Closing Date, and in order to fully
consummate all of the transactions contemplated hereby and under the other Loan
Documents. To the maximum extent permitted by applicable law, each Borrower
authorizes Lender to execute any such Additional Documents in the applicable
Borrower's name and authorize Lender to file such executed Additional Documents
in any appropriate filing office. In addition, on such periodic basis as Lender
shall reasonably require, Borrowers shall (but not more than once each quarter
unless an Event of Default shall have occurred and be continuing) (a) provide
Lender with a report of all new patentable, copyrightable, or trademarkable
materials acquired or generated by Borrowers during the prior period, (b) cause
all material patents, copyrights, and trademarks acquired or generated by
Borrowers that are not already the subject of a registration with the
appropriate filing office (or an application therefor diligently prosecuted) to
be registered with such appropriate filing office in a manner sufficient to
impart constructive notice of Borrowers' ownership thereof, and (c) cause to be
prepared, executed, and delivered to Lender supplemental schedules to the
applicable Loan Documents to identify such material patents, copyrights, and
trademarks as being subject to the security interests created thereunder.
4.5 POWER OF ATTORNEY. Each Borrower hereby irrevocably makes,
constitutes, and appoints Lender (and any of Lender's officers, employees, or
agents designated by Lender) as such Borrower's true and lawful attorney, with
power to (a) if such Borrower refuses to, or fails timely to execute and deliver
any of the documents described in SECTION 4.4, sign the name of such Borrower on
any of the documents described in SECTION 4.4, (b) at any time that an Event of
Default has occurred and is continuing, sign such Borrower's name on any invoice
or xxxx of lading relating to the Collateral, drafts against Account Debtors, or
notices to Account Debtors, (c) send requests for verification of Accounts, (d)
endorse such Borrower's name on any Collection item that may
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54
come into Lender's possession, provided that if no Event of Default has occurred
and is continuing, such item shall be deposited by Lender into a Cash Management
Account, (e) at any time that an Event of Default has occurred and is
continuing, make, settle, and adjust all claims under such Borrower's policies
of insurance and make all determinations and decisions with respect to such
policies of insurance, and (f) at any time that an Event of Default has occurred
and is continuing, settle and adjust disputes and claims respecting the
Accounts, chattel paper, or General Intangibles directly with Account Debtors,
for amounts and upon terms that Lender determines to be reasonable in its
Permitted Discretion, and Lender may cause to be executed and delivered any
documents and releases reasonably determined by Lender in its Permitted
Discretion to be necessary. The appointment of Lender as each Borrower's
attorney, and each and every one of its rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully and
finally repaid and performed and Lender's obligations to extend credit hereunder
are terminated.
4.6 RIGHT TO INSPECT. Lender (through any of its respective officers,
employees, or agents) shall have the right, from time to time hereafter (but not
more than once each quarter unless an Event of Default shall have occurred and
be continuing), to inspect the Books and to check, test, and appraise the
Collateral in order to verify Borrowers' financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral,
and/or to conduct an audit.
4.7 CONTROL AGREEMENTS. Each Borrower agrees that it will not transfer
assets out of any Securities Accounts other than as permitted under SECTION 7.19
and, if to another securities intermediary, unless each of the applicable
Borrower, Lender, and the substitute securities intermediary have entered into a
Control Agreement. No arrangement contemplated hereby or by any Control
Agreement in respect of any Securities Accounts or other Investment Property
shall be modified by Borrowers without the prior written consent of Lender (such
consent not to be unreasonably withheld or delayed). Upon the occurrence and
during the continuance of a Default or Event of Default, Lender may notify any
securities intermediary to liquidate the applicable Securities Account or any
related Investment Property maintained or held thereby and remit the proceeds
thereof to the Lender's Account.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Lender to enter into this Agreement, each Borrower makes
the following representations and warranties to Lender which shall be true,
correct, and complete, in all material respects, as of the date hereof, and
shall be true, correct, and complete, in all material respects, as of the
Closing Date, and at and as of the date of the making of each Advance (or other
extension of credit) made thereafter, as though made on and as of the date of
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such Advance (or other extension of credit) (except to the extent that such
representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:
5.1 NO ENCUMBRANCES. Each Borrower has good and indefeasible title to its
Collateral and the Real Property, free and clear of Liens except for Permitted
Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide existing
payment obligations of Account Debtors created by the sale and delivery of
Inventory or the rendition of services to such Account Debtors in the ordinary
course of Borrowers' business, owed to Borrowers without defenses, disputes,
offsets, counterclaims, or rights of return or cancellation. As to each Eligible
Account, such Account is not:
(a) owed by an employee, Affiliate, or Lender of a Borrower,
(b) on account of a transaction wherein goods were placed on
consignment or were sold pursuant to a guaranteed sale, a sale or return, a sale
on approval, a xxxx and hold, or on any other terms by reason of which the
payment by the Account Debtor may be conditional,
(c) payable in a currency other than Dollars,
(d) owed by an Account Debtor that has or has asserted a right of
setoff, has disputed its liability, or has made any claim with respect to its
obligation to pay the Account,
(e) to the actual knowledge of Borrowers, owed by an Account Debtor
that is subject to any Insolvency Proceeding or is not Solvent or as to which a
Borrower has received notice of an imminent Insolvency Proceeding or a material
impairment of the financial condition of such Account Debtor,
(f) on account of a transaction as to which the goods giving rise to
such Account have not been shipped and billed to the Account Debtor or the
services giving rise to such Account have not been performed and accepted by the
Account Debtor,
(g) a right to receive progress payments or other advance xxxxxxxx
that are due prior to the completion of performance by the applicable Borrower
of the subject contract for goods or services, and
(h) an Account that has not been billed to the customer.
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5.3 ELIGIBLE INVENTORY. All Eligible Inventory is of good and merchantable
quality, free from defects. As to each item of Eligible Inventory, such
Inventory is
(a) owned by a Borrower free and clear of all Liens other than Liens
in favor of Lender,
(b) not goods that have been returned or rejected by Borrowers'
customers, and
(c) not goods that are obsolete or slow moving, restrictive or custom
items, work-in-process, or that constitute spare parts, packaging and shipping
materials, supplies used or consumed in Borrowers' business, xxxx and hold
goods, defective goods, "seconds," or Inventory acquired on consignment.
5.4 EQUIPMENT. All of the Equipment material to any of the Borrowers'
business is used or held for use in Borrowers' business and is materially fit
for such purposes.
5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and Equipment are
not stored with a bailee, warehouseman, or similar party and are located only at
the locations identified on SCHEDULE 5.5.
5.6 INVENTORY RECORDS. Each Borrower keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its Inventory and
the book value thereof.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive office
of each Borrower is located at the address indicated in SCHEDULE 5.7 and each
Borrower's FEIN is identified in SCHEDULE 5.7.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each Borrower is duly organized and existing and in good standing
under the laws of the jurisdiction of its organization and qualified to do
business in any state where the failure to be so qualified reasonably could be
expected to have a Material Adverse Change.
(b) Set forth on SCHEDULE 5.8(b), is a complete and accurate
description of the authorized capital Stock of each Borrower, by class, and, as
of the Closing Date, a description of the number of shares of each such class
that are issued and outstanding. Other than as described on SCHEDULE 5.8(b),
there are no subscriptions, options, warrants, or calls relating to any shares
of each Borrower's capital Stock, including any right of conversion or exchange
under any outstanding security or other instrument. No Borrower is subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire or
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57
retire any shares of its capital Stock or any security convertible into or
exchangeable for any of its capital Stock.
(c) Set forth on SCHEDULE 5.8(c), is a complete and accurate list of
each Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction
of their organization; (ii) the number of shares of each class of common and
preferred Stock authorized for each of such Subsidiaries; and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by the applicable Borrower. All of the outstanding capital Stock
of each such Subsidiary has been validly issued and is fully paid and
non-assessable.
(d) Except as set forth on SCHEDULE 5.8(c), there are no
subscriptions, options, warrants, or calls relating to any shares of any
Borrower's Subsidiaries' capital Stock, including any right of conversion or
exchange under any outstanding security or other instrument. No Borrower or any
of its respective Subsidiaries is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of any
Borrower's Subsidiaries' capital Stock or any security convertible into or
exchangeable for any such capital Stock.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) As to each Borrower, the execution, delivery, and performance by
such Borrower of this Agreement and the Loan Documents to which it is a party
have been duly authorized by all necessary action on the part of such Borrower.
(b) As to each Borrower, the execution, delivery, and performance by
such Borrower of this Agreement and the Loan Documents to which it is a party do
not and will not (i) violate any provision of federal, state, or local law or
regulation applicable to any Borrower, the Governing Documents of any Borrower,
or any order, judgment, or decree of any court or other Governmental Authority
binding on any Borrower, (ii) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any
contractual obligation of any Borrower, unless such a default or breach would
not have a material adverse effect on the business, finances or operations of
any Borrower or the Collateral, (iii) result in or require the creation or
imposition of any Lien of any nature whatsoever upon any properties or assets of
Borrower, other than Permitted Liens, or (iv) require any approval of any
Borrower's stockholders or any approval or consent of any Person under any
contractual obligation of any Borrower, unless failure to obtain such approval
in regard to any such contractual obligation would not have a material adverse
effect on the business, finances or operations of any Borrower or the
Collateral.
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(c) Other than the filing of financing statements and fixture
filings, the execution, delivery, and performance by each Borrower of this
Agreement and the Loan Documents to which such Borrower is a party do not and
will not require any registration with, consent, or approval of, or notice to,
or other action with or by, any Governmental Authority or other Person.
(d) As to each Borrower, this Agreement and the other Loan Documents
to which such Borrower is a party, and all other documents contemplated hereby
and thereby, when executed and delivered by such Borrower will be the legally
valid and binding obligations of such Borrower, enforceable against such
Borrower in accordance with their respective terms, except as enforcement may be
limited by equitable principles or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws relating to or limiting creditors' rights generally.
(e) The Lender's Liens are validly created, perfected, and first
priority Liens, subject only to Permitted Liens.
5.10 LITIGATION. Other than those matters disclosed on SCHEDULE 5.10, there
are no actions, suits, or proceedings pending or, to the best knowledge of
Borrowers, threatened against Borrowers, or any of their Subsidiaries, as
applicable, except for (a) matters that are fully covered by insurance (subject
to customary deductibles), and (b) matters arising after the Closing Date that,
if decided adversely to Borrowers, or any of their Subsidiaries, as applicable,
reasonably would not be expected to result in a Material Adverse Change.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements relating to
Borrowers that have been delivered by Borrowers to Lender have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements, for
the lack of footnotes and being subject to year-end audit adjustments) and
present fairly in all material respects, Borrowers' financial condition as of
the date thereof and results of operations for the period then ended. There has
not been a Material Adverse Change with respect to Borrowers since the date of
the latest financial statements submitted to Lender on or before the Closing
Date.
5.12 FRAUDULENT TRANSFER.
(a) Other than Xxxx.xxx, Inc., each Borrower is Solvent.
(b) No transfer of property is being made by any Borrower and no
obligation is being incurred by any Borrower in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of Borrowers.
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5.13 EMPLOYEE BENEFITS. Except as set forth in SCHEDULE 5.13, none of
Borrowers, any of their Subsidiaries, or any of their ERISA Affiliates maintains
or contributes to any Benefit Plan.
5.14 ENVIRONMENTAL CONDITION. Except as set forth on SCHEDULE 5.14, (a) to
Borrowers' knowledge, none of Borrowers' properties or assets has ever been used
by Borrowers or by previous owners or operators in the disposal of, or to
produce, store, handle, treat, release, or transport, any Hazardous Materials,
where such production, storage, handling, treatment, release or transport was in
violation, in any material respect, of applicable Environmental Law, (b) to
Borrowers' knowledge, none of Borrowers' properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a Hazardous Materials disposal site, (c) none of Borrowers have
received notice that a Lien arising under any Environmental Law has attached to
any revenues or to any Real Property owned or operated by Borrowers, and (d)
none of Borrowers have received a summons, citation, notice, or directive from
the Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by any Borrower resulting in the
releasing or disposing of Hazardous Materials into the environment.
5.15 BROKERAGE FEES. Borrowers have not utilized the services of any broker
or finder in connection with Borrowers' obtaining financing from Lender under
this Agreement and no brokerage commission or finders fee is payable by
Borrowers in connection herewith.
5.16 INTELLECTUAL PROPERTY. Each Borrower owns, or holds licenses in, all
trademarks, trade names, copyrights, patents, patent rights, and licenses that
are necessary to the conduct of its business as currently conducted. Attached
hereto as SCHEDULE 5.16 is a true, correct, and complete listing of all material
patents, patent applications, trademarks, trademark applications, copyrights,
and copyright registrations as to which each Borrower is the owner or is an
exclusive licensee.
5.17 LEASES. Borrowers enjoy peaceful and undisturbed possession under all
leases material to the business of Borrowers and to which Borrowers are a party
or under which Borrowers are operating. All of such leases are valid and
subsisting and no material default by Borrowers exists under any of them.
5.18 DDAS. Set forth on SCHEDULE 5.18 are all of the DDAs of each Borrower,
including, with respect to each depository (i) the name and address of such
depository, and (ii) the account numbers of the accounts maintained with such
depository.
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5.19 COMPLETE DISCLOSURE. All factual information (taken as a whole)
furnished by or on behalf of Borrowers in writing to Lender (including all
information contained in the Schedules hereto or in the other Loan Documents)
for purposes of or in connection with this Agreement, the other Loan Documents
or any transaction contemplated herein or therein is, and all other such factual
information (taken as a whole) hereafter furnished by or on behalf of Borrowers
in writing to the Lender will be, true and accurate, in all material respects,
on the date as of which such information is dated or certified and not
incomplete by omitting to state any fact necessary to make such information
(taken as a whole) not misleading in any material respect at such time in light
of the circumstances under which such information was provided.
5.20 INDEBTEDNESS. Set forth on SCHEDULE 5.20 is a true and complete list
of all Indebtedness of each Borrower outstanding immediately prior to the
Closing Date that is to remain outstanding after the Closing Date and such
Schedule accurately reflects the aggregate principal amount of such Indebtedness
and the principal terms thereof.
5.21 INACTIVE SUBSIDIARIES. Set forth on SCHEDULE 5.21 is a true and
complete list of the Subsidiaries of each Borrower which constitute Inactive
Subsidiaries.
5.22 ACTIVE DOMESTIC SUBSIDIARIES. Set forth on SCHEDULE 5.22 is a true and
complete list of the Subsidiaries of each Borrower which constitute Active
Domestic Subsidiaries.
5.23 IMPORTING OF INVENTORY. The Borrowers have complied with all United
States customs laws and regulations in all material respects, including, but not
limited to, such laws and regulations that pertain to entry, classification and
valuation of merchandise, payment of duties, recordkeeping and country-of-origin
marking.
5.24 LETTERS OF CREDIT. Set forth on SCHEDULE 5.24 is a true and complete
list and description of all outstanding letters of credit (and the undrawn
amounts thereof) issued for the account of each Borrower, Tonkin or Marketing
Incentives prior to the closing of the December 2000 Loan Agreement.
5.25 SALE ASSETS. Set forth on SCHEDULE 5.25 is a true and complete list
and description of all Sale Assets.
5.26 PURCHASE DOCUMENTS. Lender has received true, correct and complete
copies of all Purchase Documents (other than Purchase Documents to be executed
subsequent to the date hereof), and the Purchase Documents constitute all of the
documents, agreements and instruments executed and delivered by Parent or
Xxxx.xxx, Inc. in connection with the Sale Transaction and the closing of the
transaction contemplated thereby.
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6. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations,
Borrowers shall and shall, where applicable, cause each of their respective
Subsidiaries to do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a system of accounting that enables
Borrowers to produce financial statements in accordance with GAAP and maintain
records pertaining to the Collateral that contain information as from time to
time reasonably may be requested by Lender. Borrowers also shall keep an
inventory reporting system that shows all additions, sales, claims, returns, and
allowances with respect to the Inventory.
6.2 COLLATERAL REPORTING. Provide Lender with the following documents at
the following times in form satisfactory to Lender:
========================== =======================================================
Weekly (not later than (a) a report as of such date listing all outstanding
the 2nd day of each week) Underlying Letters of Credit and time drafts as of
such date, and
(b) a report as of such date listing Eligible
In-Transit Inventory subject to an Acceptable
Purchase Order, the date or dates such Inventory
became Eligible In-Transit Inventory, the estimated
date of arrival at the port of entry, the port of
entry and the Underlying Letters of Credit related to
such Inventory.
-------------------------- -------------------------------------------------------
Monthly (not later than (c) a sales journal, collection journal, and credit
the 2nd day of each register since the last such schedule and a calculation of
month) the Borrowing Base as of such date,
(d) notice of all returns, disputes, or claims, and
(e) an Inventory Certificate regarding Eligible
In-Transit Inventory as of such date.
-------------------------- -------------------------------------------------------
Weekly (not later than (f) Inventory reports specifying each Borrower's cost
the 2nd day of each week) of its Inventory, by category.
-------------------------- -------------------------------------------------------
Weekly (not later than (g) a detailed calculation of the Borrowing Base
the 2nd day of (including detail regarding those Accounts that are
not Eligible Accounts),
========================== =======================================================
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========================== =======================================================
each week) (h) a detailed aging, by total, of the Accounts,
together with a reconciliation to the detailed
calculation of the Borrowing Base previously provided
to Lender,
(i) a summary aging, by vendor, of Borrowers' accounts
payable and any book overdraft, and
(j) a calculation of Dilution for the prior month.
-------------------------- -------------------------------------------------------
Quarterly (k) a detailed list of each Borrower's customers, and
(l) a report regarding each Borrower's accrued, but
unpaid, ad valorem taxes.
-------------------------- -------------------------------------------------------
Upon reasonable request (m) copies of invoices in connection with the Accounts,
by Lender credit memos, remittance advices, deposit slips,
shipping and delivery documents in connection with the
Accounts and, for Inventory and Equipment acquired by
Borrowers, purchase orders and invoices, and
(n) such other reports as to the Collateral, or the
financial condition of Borrowers as Lender may
reasonably request.
========================== =======================================================
Notwithstanding the foregoing, during any period when Borrowers do not have the
Required Availability, Borrowers, at Lender's request, shall provide the
documents described in clauses (a) through (i) above on a more frequent basis as
reasonably required by Lender. In addition, each Borrower agrees to cooperate
fully with Lender to facilitate and implement a system of electronic collateral
reporting in order to provide electronic reporting of each of the items set
forth above.
6.3 Financial Statements, Reports, Certificates. Deliver to Lender:
(a) as soon as available, but in any event within 45 days after the
end of each month during each of Parent's fiscal years,
(i) a company prepared unaudited consolidated balance sheet,
income statement, and statement of cash flow (which cash flow
statements only shall be required to be delivered to Lender within 45
days after the end of the last month of each quarter and which only
shall cover each such quarter) covering Parent's and its Subsidiaries'
operations during such period,
(ii) a certificate signed by the chief financial officer of
Parent to the effect that:
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(A) the financial statements delivered hereunder in respect
of (1) the last month in any fiscal quarter have been prepared in
accordance with GAAP (except for the lack of footnotes and being
subject to year-end audit adjustments) and fairly present in all
material respects the financial condition of Parent and its
Subsidiaries and (2) the other months in any such fiscal quarter,
to the actual knowledge of such officer after due inquiry, such
financial statements do not (except for the lack of footnotes and
being subject to year-end audit adjustments) contain any material
inaccuracies,
(B) the representations and warranties of Borrowers
contained in this Agreement and the other Loan Documents are true
and correct in all material respects on and as of the date of
such certificate, as though made on and as of such date (except
to the extent that such representations and warranties relate
solely to an earlier date),
(C) there does not exist any condition or event that
constitutes a Default or Event of Default (or, to the extent of
any non-compliance, describing such non-compliance as to which he
or she may have knowledge and what action Borrowers have taken,
are taking, or propose to take with respect thereto), and
(iii) for each month that is the date on which a financial
covenant in SECTION 7.20 is to be tested, a Compliance Certificate
demonstrating, in reasonable detail, compliance at the end of such
period with the applicable financial covenants contained in SECTION
7.20, and
(b) as soon as available, but in any event within 120 days after the
end of each of Parent's fiscal years,
(i) financial statements of Parent and its Subsidiaries for each
such fiscal year, audited by independent certified public accountants
reasonably acceptable to Lender and certified, without any
qualifications, by such accountants to have been prepared in
accordance with GAAP (such audited financial statements to include a
balance sheet, income statement, and statement of cash flow and, if
prepared, such accountants' letter to management),
(ii) a certificate of such accountants addressed to Lender
stating that such accountants do not have knowledge of the existence
of any Default or Event of Default under SECTION 7.20,
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(c) as soon as available, but in any event within 30 days prior to
the start of each of Parent's fiscal years,
(i) copies of Borrowers' Projections, in form and substance
(including as to scope and underlying assumptions) satisfactory to
Lender, in its sole discretion, for the forthcoming 2 years, year by
year, and for the forthcoming fiscal year, quarter by quarter,
certified by the chief financial officer of Parent as being such
officer's good faith best estimate of the financial performance of
Parent and its Subsidiaries during the period covered thereby,
(d) if and when filed by any Borrower,
(i) 10-Q quarterly reports, Form 10-K annual reports, and Form
8-K current reports,
(ii) any other filings made by any Borrower with the SEC,
(iii) copies of Borrowers' federal income tax returns, and any
amendments thereto, filed with the Internal Revenue Service, and
(iv) any other information that is provided by Parent to its
shareholders generally,
(e) if and when filed by any Borrower and as requested by Lender,
satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which (i) any Borrower conducts business or is required to pay
any such excise tax, (ii) where any Borrower's failure to pay any such
applicable excise tax would result in a Lien on the properties or assets of any
Borrower, or (iii) where any Borrower's failure to pay any such applicable
excise tax reasonably could be expected to result in a Material Adverse Change,
(f) as soon as a Borrower has knowledge of any event or condition
that constitutes a Default or an Event of Default, notice thereof and a
statement of the curative action that Borrowers propose to take with respect
thereto, and
(g) upon the request of Lender, any other report reasonably requested
relating to the financial condition of Borrowers.
Borrowers agree to deliver financial statements prepared on both a
consolidated basis and consolidating (but unaudited) basis and that no Borrower,
or any Subsidiary of a Borrower, will have a fiscal year different from that of
Parent. Borrowers agree that their independent certified public accountants are
authorized to communicate with Lender and to release to
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Lender whatever financial information concerning Borrowers that Lender
reasonably may request.
6.4 INTENTIONALLY OMITTED.
6.5 RETURN. Cause returns and allowances as between Borrowers and their
Account Debtors, to be on the same basis and in accordance with the usual
customary practices of the applicable Borrower, as they exist at the time of the
execution and delivery of this Agreement. If, at a time when an Event of Default
has occurred and is continuing, any Account Debtor returns any Inventory to any
Borrower, the applicable Borrower promptly shall determine the reason for such
return and, if Lender consents (which consent shall not be unreasonably withheld
or delayed), issue a credit memorandum (with a copy to be sent to Lender) in the
appropriate amount to such Account Debtor.
6.6 MAINTENANCE OF PROPERTIES. Except with respect to Permitted
Dispositions, maintain and preserve all of its material properties which are
necessary or useful in the proper conduct to its business in good working order
and condition, ordinary wear and tear excepted, and comply at all times with the
provisions of all leases to which it is a party as lessee, so as to prevent any
loss or forfeiture thereof or thereunder.
6.7 TAXES. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrowers
or any of their assets to be paid in full, before delinquency or before the
expiration of any extension period, except to the extent that the validity of
such assessment or tax shall be the subject of a Permitted Protest. Borrowers
will make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Lender with proof satisfactory to Lender indicating
that the applicable Borrower has made such payments or deposits. Borrowers shall
deliver satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which any Borrower is required to pay any such excise tax.
6.8 INSURANCE.
(a) At Borrowers' expense, maintain insurance respecting its property
and assets wherever located, covering loss or damage by fire, theft, explosion,
and all other hazards and risks as ordinarily are insured against by other
Persons engaged in the same or similar businesses. Borrowers also shall maintain
business interruption, public liability, and product liability insurance, as
well as insurance against larceny, embezzlement, and criminal misappropriation.
All such policies of insurance shall be in such amounts and with such insurance
companies as are reasonably satisfactory to Lender (it being agreed that
Borrowers' present insurance companies and coverages are
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satisfactory to Lender). Borrowers shall deliver copies of all such policies to
Lender with a satisfactory lender's loss payable endorsement naming Lender as
sole loss payee or additional insured, as appropriate. Each policy of insurance
or endorsement shall contain a clause requiring the insurer to give not less
than 30 days prior written notice to Lender in the event of cancellation of the
policy for any reason whatsoever.
(b) Administrative Borrower shall give Lender prompt notice of any
loss in excess of $200,000 covered by such insurance. Lender shall have the
exclusive right to adjust any losses payable under any such insurance policies
in excess of $200,000, without any liability to Borrowers whatsoever in respect
of such adjustments; PROVIDED, HOWEVER, prior to adjusting any such loss, Lender
first shall consult with Administrative Borrower in respect thereof. Any monies
received as payment for any loss under any insurance policy mentioned above
(other than liability insurance policies) or as payment of any award or
compensation for condemnation or taking by eminent domain, in each case, to the
extent exceeding $200,000, shall be paid over to Lender to be applied at the
option of Lender either to the prepayment of the Obligations or shall be
disbursed to Administrative Borrower under staged payment terms reasonably
satisfactory to Lender for application to the cost of repairs, replacements, or
restorations. Any such repairs, replacements, or restorations shall be effected
with reasonable promptness and shall be of a value at least equal to the value
of the items or property destroyed prior to such damage or destruction.
(c) Borrowers shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under this SECTION 6.8, unless Lender is included thereon as named insured with
the loss payable to Lender under a lender's loss payable endorsement or its
equivalent. Administrative Borrower immediately shall notify Lender whenever
such separate insurance is taken out, specifying the insurer thereunder and full
particulars as to the policies evidencing the same, and copies of such policies
promptly shall be provided to Lender.
6.9 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory and Equipment
only at the locations identified on SCHEDULE 5.5 (except to the extent the
Inventory or Equipment is in transit for a valid business purpose to any such
location, between such locations or to a buyer thereof in the ordinary course of
business in connection with a purchase that does not contravene the terms
hereof); PROVIDED, HOWEVER, that Administrative Borrower may amend SCHEDULE 5.5
so long as such amendment occurs by written notice to Lender not less than 30
days prior to the date on which the Inventory or Equipment is moved to such new
location, so long as such new location is within the continental United States,
and so long as, at the time of such written notification, the applicable
Borrower provides any financing statements or
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fixture filings necessary to perfect and continue perfected the Lender's Liens
on such assets and also provides to Lender a Collateral Access Agreement.
6.10 COMPLIANCE WITH LAWS. Comply with the requirements of all applicable
laws, rules, regulations, and orders of any Governmental Authority, including
the Fair Labor Standards Act and the Americans With Disabilities Act, other
laws, rules, regulations, and orders the non-compliance with which, individually
or in the aggregate, would not result in and reasonably could not be expected to
result in a Material Adverse Change.
6.11 LEASES. Pay when due (inclusive of any grace period) all rents and
other amounts payable under any leases to which any Borrower is a party or by
which any Borrower's properties and assets are bound, unless such payments are
the subject of a Permitted Protest.
6.12 BROKERAGE COMMISSIONS. Pay any and all brokerage commission or finders
fees incurred by Borrowers in connection with or as a result of Borrowers'
obtaining financing from Lender under this Agreement. Borrowers agree and
acknowledge that payment of all such brokerage commissions or finders fees shall
be the sole responsibility of Borrowers, and each Borrower agrees to indemnify,
defend, and hold Lender harmless from and against any such claim of any broker
or finder in respect of any such commissions or fees.
6.13 EXISTENCE. At all times preserve and keep in full force and effect
each Borrower's valid existence and good standing and any rights and franchises
material to Borrowers' businesses.
6.14 ENVIRONMENTAL.
(a) Keep any property either owned or operated by any Borrower free
of any Environmental Liens or post bonds or other financial assurances
sufficient to satisfy the obligations or liability evidenced by such
Environmental Liens, (b) comply, in all material respects, with Environmental
Laws and provide to Lender documentation of such compliance which Lender
reasonably requests, (c) promptly notify Lender of any release of a Hazardous
Material of any reportable quantity from or onto property owned or operated by
any Borrower and take any Remedial Actions required to xxxxx said release or
otherwise to come into compliance with applicable Environmental Law, and (d)
promptly provide Lender with written notice within 10 days of the receipt of any
of the following: (i) notice that an Environmental Lien has been filed against
any of the real or personal property of any Borrower, (ii) commencement of any
Environmental Action or notice that an Environmental Action will be filed
against any Borrower, and (iii) notice of a violation, citation, or other
administrative order which reasonably could be expected to result in a Material
Adverse Change.
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6.15 DISCLOSURE UPDATES. Promptly and in no event later than 5 Business
Days after obtaining knowledge thereof, (a) notify Lender if any written
information, exhibit, or report furnished to Lender contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which made, (b) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgement,
filing, or recordation thereof, and (c) notify Lender if Borrowers change
customs broker in Chicago, Illinois, in which case Borrowers shall cause such
customs broker to promptly execute and deliver to Lender a Collateral Access
Agreement.
6.16 PURCHASE DOCUMENTS. Promptly and in no event later than 3 Business
Days after execution of any agreement or document described in clause (b) of the
definition of Purchase Documents, deliver to Lender a true and accurate copy of
any such agreement or document.
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations,
Borrowers will not and will not, where applicable, permit any of their
respective Subsidiaries to do any of the following:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and the other Loan
Documents, together with Indebtedness owed to Underlying Issuers with respect to
Underlying Letters of Credit;
(b) Indebtedness set forth on SCHEDULE 5.20;
(c) Permitted Purchase Money Indebtedness;
(d) refinancings, renewals, or extensions of Indebtedness permitted
under clauses (b) and (c) of this SECTION 7.1 (and continuance or renewal of any
Permitted Liens associated therewith) so long as: (i) the terms and conditions
of such refinancings, renewals, or extensions do not, in Lender's judgment,
materially impair the prospects of repayment of the Obligations by Borrowers or
materially impair Borrowers' creditworthiness, (ii) such refinancings, renewals,
or extensions do not result in an increase in the principal amount of the
Indebtedness so refinanced, renewed, or extended, (iii) such refinancings,
renewals, or extensions do not result in a shortening of the average weighted
maturity of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions, that, taken as a whole, are
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materially more burdensome or restrictive to the applicable Borrower, and (iv)
if the Indebtedness that is refinanced, renewed, or extended was subordinated in
right of payment to the Obligations, then the terms and conditions of the
refinancing, renewal, or extension Indebtedness must be include subordination
terms and conditions that are at least as favorable to Lender as those that were
applicable to the refinanced, renewed, or extended Indebtedness;
(e) intercompany Indebtedness arising out of loans permitted under
SECTION 7.13; and
(f) other unsecured Indebtedness in an aggregate amount not to exceed
$250,000 at any one time.
7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Liens that are replacements of Permitted
Liens to the extent that the original Indebtedness is refinanced, renewed, or
extended under SECTION 7.1(D) and so long as the replacement Liens only encumber
those assets that secured the refinanced, renewed, or extended Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES
(a) Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock; PROVIDED, HOWEVER, that any Borrower
may merge or consolidate with any other Borrower so long as after giving effect
to such transaction, no Default or Event of Default would exist.
(b) Other than an Inactive Subsidiary (provided notice is given to
Lender) and except as Lender otherwise consents in writing in advance,
liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution).
(c) Convey, sell, lease, license, assign, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its assets.
7.4 DISPOSAL OF ASSETS. Other than Permitted Dispositions, convey, sell,
lease, license, assign, transfer, or otherwise dispose of any of the assets of
any Borrower.
7.5 CHANGE NAME. Change any Borrower's name, FEIN, corporate structure or
identity, or add any new fictitious name; PROVIDED, HOWEVER, that a Borrower may
change its name upon at least 5 days prior written notice by Administrative
Borrower to Lender of such change and so long as, at the time of such written
notification, such Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected Lender's Liens.
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7.6 GUARANTEE. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except for guarantees which are
permitted under Section 7.1 and except by endorsement of instruments or items of
payment for deposit to the account of Borrowers or their Subsidiaries or which
are transmitted or turned over to Lender.
7.7 NATURE OF BUSINESS. Make any change in the principal nature of
Borrowers' business.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted by SECTION
7.1(d), prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness
of any Borrower, other than the Obligations in accordance with this Agreement,
and
(b) Except in connection with a refinancing permitted by SECTION
7.1(d), directly or indirectly, amend, modify, alter, increase, or change any of
the terms or conditions of any agreement, instrument, document, indenture, or
other writing evidencing or concerning Indebtedness permitted under SECTIONS
7.1(b) or (c).
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or indirectly,
any Change of Control.
7.10 CONSIGNMENTS. Consign any Inventory or sell any Inventory on xxxx and
hold, sale or return, sale on approval, or other conditional terms of sale in
excess of $500,000 in the aggregate at any one time.
7.11 DISTRIBUTIONS. Other than distributions or declaration and payment of
dividends by a Borrower to another Borrower, make any distribution or declare or
pay any dividends (in cash or other property, other than Stock) on, or purchase,
acquire, redeem, or retire any of any Borrower's Stock, of any class, whether
now or hereafter outstanding.
7.12 ACCOUNTING METHODS. Modify or change its method of accounting (other
than as may be required to conform to GAAP).
7.13 INVESTMENTS. Except for Permitted Investments, directly or indirectly,
make or acquire any Investment, or incur any liabilities (including contingent
obligations) for or in connection with any Investment; PROVIDED, HOWEVER, that
Borrowers shall not have Permitted Investments (other than in the Cash
Management Accounts and the Investments described in clauses (d), (e), (f), (g)
and (h) in the definition of "Permitted Investments") in excess of $1,000,000
outstanding at any one time unless the applicable Borrower and the applicable
securities intermediary or bank have entered into Control Agreements or similar
arrangements governing such Permitted Investments, as
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Lender shall determine in its Permitted Discretion, to perfect (and further
establish) the Lender's Liens in such Permitted Investments.
7.14 TRANSACTIONS WITH AFFILIATES. Except with respect to transactions
among any of Borrowers, directly or indirectly enter into or permit to exist any
transaction (a) with any Affiliate of any Borrower (other than an Inactive
Subsidiary) except for transactions permitted by SECTION 7.1(b), SECTION 7.1(e),
SECTION 7.3, SECTION 7.13 or transactions that are in the ordinary course of
Borrowers' business, upon fair and reasonable terms, that are fully disclosed to
Lender, and that are no less favorable to Borrowers than would be obtained in an
arm's length transaction with a non-Affiliate, or (b) with or between any
Inactive Subsidiary.
7.15 SUSPENSION. Suspend or go out of a substantial portion of its
business.
7.16 INACTIVE SUBSIDIARIES. Permit to occur the conducting of any business
by an Inactive Subsidiary, except as permitted in SECTION 7.3(b).
7.17 USE OF PROCEEDS. Use the proceeds of the Advances for any purpose
other than (a) on the Closing Date, (i) to repay in full the outstanding
principal, accrued interest, and accrued fees and expenses owing to Existing
Lender, and (ii) to pay transactional fees, costs, and expenses incurred in
connection with this Agreement, the other Loan Documents, and the transactions
contemplated hereby and thereby, and (b) thereafter, consistent with the terms
and conditions hereof, for its lawful and permitted purposes.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND EQUIPMENT
WITH BAILEES. Relocate its chief executive office to a new location without
Administrative Borrower providing 5 days prior written notification thereof to
Lender and so long as, at the time of such written notification, the applicable
Borrower provides any financing statements or fixture filings necessary to
perfect and continue perfected the Lender's Liens and also provides to Lender a
Collateral Access Agreement with respect to such new location. The Inventory and
Equipment shall not at any time now or hereafter be stored with a bailee,
warehouseman, or similar party without Lender's prior written consent, except to
the extent subject to a Collateral Access Agreement executed in connection with
SECTION 5.3(c).
7.19 SECURITIES ACCOUNTS. Establish or maintain any Securities Account
unless Lender shall have received a Control Agreement in respect of such
Securities Account, except if a Control Agreement is not required under SECTION
7.13. Borrowers agree to not transfer assets out of any Securities Account;
PROVIDED, HOWEVER, that, so long as no Event of Default has occurred and is
continuing or would result therefrom, Borrowers may use such assets (and the
proceeds thereof) to the extent not prohibited by this Agreement.
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7.20 FINANCIAL COVENANTS.
(a) STOCKHOLDER EQUITY (SMI). Fail to maintain Stockholder Equity
(SMI) of at least the required amount set forth in the following table as of the
applicable date set forth opposite thereto:
--------------------------------------- ----------------------------------------
Applicable Amount Applicable Date
--------------------------------------- ----------------------------------------
$83,000,000 Commencing March 31, 2001 and each
month end thereafter
--------------------------------------- ----------------------------------------
(b) Make capital expenditures in excess of (a) $900,000 in respect of
Borrowers' enterprise resource planning system between the date hereof and the
Maturity Date, and (b) $600,000 in respect of other capital expenditures between
the date hereof and the Maturity Date.
7.21 SMI. Notwithstanding anything to the contrary contained herein,
without the prior written consent of Lender, (a) sell the Stock of SMI, or (b)
permit or cause to be sold substantially all, or a material portion of, the
assets of SMI.
7.22 AMENDMENT OF PURCHASE DOCUMENTS. Enter into or consent to any
modification, alteration, amendment or supplement of, or waiver of rights under,
the Purchase Documents which: (a) is prohibited by the Acknowledgement and Asset
Segregation Letter; or (b) in any manner would have an adverse effect upon the
interests of Lender, PROVIDED, HOWEVER, prior to entering into or consenting to
any modification, alteration, amendment or supplement of, or waiver of rights
under, the Purchase Documents which would not have an adverse effect upon the
interest of Lender, Borrowers shall give Lender 3 Business Days prior written
notice thereof.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "EVENT OF DEFAULT") under this Agreement:
8.1 If Borrowers fail to pay when due and payable or when declared due and
payable, all or any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due Lender, reimbursement
of Lender Expenses, or other amounts constituting Obligations);
8.2 If Borrowers fail to perform the covenants contained in (a) SECTION
6.2, SECTION 6.9, SECTION 6.11, SECTION 6.13, SECTION 6.15 or SECTION 7.13 (with
respect to the obligation to enter into a Control Agreement or similar
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arrangement as set forth therein), and any such failure continues for 5 days,
(b) SECTION 6.3, SECTION 6.5 or SECTION 6.6, and such failure continues for 10
days, or (c) SECTION 6.1, and any such failure continues for 15 days.
8.3 If Borrowers fail to perform, keep, or observe any other term,
provision, condition, covenant, or agreement contained in this Agreement or in
any of the other Loan Documents;
8.4 If any material portion of any Borrower's or any of its Subsidiaries'
assets is attached, seized, subjected to a writ or distress warrant, levied
upon, or comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by any Borrower or any of its
Subsidiaries;
8.6 If an Insolvency Proceeding is commenced against any Borrower, or any
of its Subsidiaries, and any of the following events occur: (a) the applicable
Borrower or the Subsidiary consents to the institution of the Insolvency
Proceeding against it, (b) the petition commencing the Insolvency Proceeding is
not timely controverted, (c) the petition commencing the Insolvency Proceeding
is not dismissed within 60 calendar days of the date of the filing thereof;
PROVIDED, HOWEVER, that, during the pendency of such period, Lender shall be
relieved of its obligation to extend credit hereunder, (d) an interim trustee is
appointed to take possession of all or any substantial portion of the properties
or assets of, or to operate all or any substantial portion of the business of,
any Borrower or any of its Subsidiaries, or (e) an order for relief shall have
been entered therein;
8.7 If any Borrower or any of its Subsidiaries is enjoined, restrained, or
in any way prevented by court order from continuing to conduct all or any
material part of its business affairs;
8.8 If a notice of Lien, levy, or assessment is filed of record with
respect to any Borrower's or any of its Subsidiaries' assets by the United
States, or any department, agency, or instrumentality thereof, or by any state,
county, municipal, or governmental agency, or if any taxes or debts owing at any
time hereafter to any one or more of such entities becomes a Lien, whether
xxxxxx or otherwise, upon any Borrower's or any of its Subsidiaries' assets and
the same is not paid before such payment is delinquent unless the same shall
have been bonded in a manner satisfactory to Lender in the exercise of its
Permitted Discretion;
8.9 If a judgment or other claim becomes a Lien or encumbrance upon any
material portion of any Borrower's or any of its Subsidiaries' assets unless the
same shall have been bonded in a manner satisfactory to Lender in the exercise
of its Permitted Discretion or is the subject of a Permitted Protest;
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8.10 If there is a default in any agreement involving a liability or
Indebtedness in excess of $250,000 to which any Borrower or any of its
Subsidiaries is a party and such default (a) occurs at the final maturity of the
obligations thereunder, or (b) results in a right by the other party thereto,
irrespective of whether exercised, to accelerate the maturity of the applicable
Borrower's or its Subsidiaries' obligations thereunder, to terminate such
agreement, or to refuse to renew such agreement pursuant to an automatic renewal
right therein;
8.11 If any Borrower or any of its Subsidiaries makes any payment on
account of Indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent such payment is
permitted by the terms of the subordination provisions applicable to such
Indebtedness;
8.12 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or Record made to Lender
by any Borrower, its Subsidiaries, or any officer, employee, agent, or director
of any Borrower or any of its Subsidiaries;
8.13 If this Agreement or any other Loan Document that purports to create a
Lien, shall, for any reason, fail or cease to create a valid and perfected and,
except to the extent permitted by the terms hereof or thereof, first priority
Lien on or security interest in the Collateral covered hereby or thereby;
8.14 Any provision of any Loan Document shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof shall be
contested by any Borrower, or a proceeding shall be commenced by any Borrower,
or by any Governmental Authority having jurisdiction over any Borrower, seeking
to establish the invalidity or unenforceability thereof, or any Borrower shall
deny that any Borrower has any liability or obligation purported to be created
under any Loan Document; or
8.15 The Closing Date does not occur on or before February 16, 2001.
9. THE LENDER'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the continuation,
of an Event of Default, Lender (at its election but without notice of its
election and without demand) may do any one or more of the following, all of
which are authorized by Borrowers:
(a) Declare all Obligations, whether evidenced by this Agreement, by
any of the other Loan Documents, or otherwise, immediately due and payable;
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(b) Cease advancing money or extending credit to or for the benefit
of Borrowers under this Agreement, under any of the Loan Documents, or under any
other agreement between Borrowers and Lender;
(c) Terminate this Agreement and any of the other Loan Documents as
to any future liability or obligation of Lender, but without affecting any of
the Lender's Liens in the Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Lender considers advisable, and in such
cases, Lender will credit the Loan Account with only the net amounts received by
Lender in payment of such disputed Accounts after deducting all Lender Expenses
incurred or expended in connection therewith;
(e) Cause Borrowers to hold all returned Inventory in trust for
Lender, segregate all returned Inventory from all other assets of Borrowers or
in Borrowers' possession and conspicuously label said returned Inventory as the
property of Lender;
(f) Without notice to or demand upon any Borrower, make such payments
and do such acts as Lender considers necessary or reasonable to protect its
security interests in the Collateral. Each Borrower agrees to assemble the
Personal Property Collateral if Lender so requires, and to make the Personal
Property Collateral available to Lender at a place that Lender may designate
which is reasonably convenient to both parties. Each Borrower authorizes Lender
to enter the premises where the Personal Property Collateral is located, to take
and maintain possession of the Personal Property Collateral, or any part of it,
and to pay, purchase, contest, or compromise any Lien that in Lender's
determination appears to conflict with the Lender's Liens and to pay all
expenses incurred in connection therewith and to charge Borrowers' Loan Account
therefor. With respect to any of Borrowers' owned or leased premises, each
Borrower hereby grants Lender a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Lender's rights or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to any Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation (within the meaning of the Code), set off and apply to the
Obligations any and all (i) balances and deposits of any Borrower held by Lender
(including any amounts received in the Cash Management Accounts), or (ii)
Indebtedness at any time owing to or for the credit or the account of any
Borrower held by Lender;
(h) Hold, as cash collateral, any and all balances and deposits of
any Borrower held by Lender, and any amounts received in the Cash
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Management Accounts, to secure the full and final repayment of all of the
Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein) the
Personal Property Collateral. Each Borrower hereby grants to Lender a license or
other right to use, without charge, such Borrower's labels, patents, copyrights,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Personal Property
Collateral, in completing production of, advertising for sale, and selling any
Personal Property Collateral and such Borrower's rights under all licenses and
all franchise agreements shall inure to Lender's benefit;
(j) Sell the Personal Property Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrowers' premises)
as Lender determines is commercially reasonable. It is not necessary that the
Personal Property Collateral be present at any such sale;
(k) Lender shall give notice of the disposition of the Personal
Property Collateral as follows:
(i) Lender shall give Administrative Borrower (for the benefit
of the applicable Borrower) a notice in writing of the time and place
of public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the Personal
Property Collateral, then the time on or after which the private sale
or other disposition is to be made; and
(ii) The notice shall be personally delivered or mailed, postage
prepaid, to Administrative Borrower as provided in SECTION 12, at
least 10 days before the earliest time of disposition set forth in the
notice; no notice needs to be given prior to the disposition of any
portion of the Personal Property Collateral that is perishable or
threatens to decline speedily in value or that is of a type
customarily sold on a recognized market;
(l) Lender may credit bid and purchase at any public sale;
(m) Lender may seek the appointment of a receiver or keeper to take
possession of all or any portion of the Collateral or to operate same and, to
the maximum extent permitted by law, may seek the appointment of such a receiver
without the requirement of prior notice or a hearing;
(n) Lender shall have all other rights and remedies available to it
at law or in equity pursuant to any other Loan Documents; and
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(o) Any deficiency that exists after disposition of the Personal
Property Collateral as provided above will be paid immediately by Borrowers. Any
excess will be returned, without interest and subject to the rights of third
Persons, by Lender to Administrative Borrower (for the benefit of the applicable
Borrower).
9.2 REMEDIES CUMULATIVE. The rights and remedies of Lender under this
Agreement, the other Loan Documents, and all other agreements shall be
cumulative. Lender shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by Lender
of one right or remedy shall be deemed an election, and no waiver by Lender of
any Event of Default shall be deemed a continuing waiver. No delay by Lender
shall constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Lender, in its sole discretion
and without prior notice to any Borrower (except, if in its Permitted
Discretion, Lender determines that such a failure is not reasonably likely to
give rise to a Lien on the Collateral, then Lender shall give 5 days notice
thereof to Administrative Borrower, after which Lender), may do any or all of
the following: (a) make payment of the same or any part thereof, (b) set up such
reserves in Borrowers' Loan Account as Lender deems necessary to protect Lender
from the exposure created by such failure, or (c) in the case of the failure to
comply with SECTION 6.8 hereof, obtain and maintain insurance policies of the
type described in SECTION 6.8 and take any action with respect to such policies
as Lender deems prudent. Any such amounts paid by Lender shall constitute Lender
Expenses and any such payments shall not constitute an agreement by Lender to
make similar payments in the future or a waiver by Lender of any Event of
Default under this Agreement. Lender need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST. Each Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of documents, instruments, chattel paper, and guarantees at any time held by
Lender on which any such Borrower may in any way be liable.
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11.2 LENDER'S LIABILITY FOR COLLATERAL. Each Borrower hereby agrees that:
(a) so long as Lender complies with its obligations, if any, under the Code,
Lender shall not in any way or manner be liable or responsible for: (i) the
safekeeping of the Collateral, (ii) any loss or damage thereto occurring or
arising in any manner or fashion from any cause, (iii) any diminution in the
value thereof, or (iv) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person, and (b) all risk of loss, damage, or
destruction of the Collateral shall be borne by Borrowers.
11.3 INDEMNIFICATION. Each Borrower shall pay, indemnify, defend, and hold
the Lender-Related Persons, each Participant, and each of their respective
officers, directors, employees, agents, and attorneys-in-fact (each, an
"INDEMNIFIED PERSON") harmless (to the fullest extent permitted by law) from and
against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them (a) in connection
with or as a result of or related to the execution, delivery, enforcement,
performance, or administration of this Agreement, any of the other Loan
Documents, or the transactions contemplated hereby or thereby, and (b) with
respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder, but excluding items specifically excluded from Borrower's
obligations under SECTION 16.5 (irrespective of whether any Indemnified Person
is a party thereto), or any act, omission, event, or circumstance in any manner
related thereto (all the foregoing, collectively, the "INDEMNIFIED
LIABILITIES"). The foregoing to the contrary notwithstanding, Borrowers shall
have no obligation to any Indemnified Person under this SECTION 11.3 with
respect to any Indemnified Liability that a court of competent jurisdiction
finally determines to have resulted from the gross negligence or willful
misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations. If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which Borrowers were required to
indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be indemnified and reimbursed by Borrowers
with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO
EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE
OR IN PART CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH
INDEMNIFIED PERSON OR OF ANY OTHER PERSON.
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12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
Borrowers or Lender to the other relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail (postage
prepaid, return receipt requested), overnight courier, electronic mail (at such
email addresses as the Administrative Borrower or Lender, as applicable, may
designate to each other in accordance herewith), or telefacsimile to Borrowers
in care of Administrative Borrower or to Lender, as the case may be, at its
address set forth below:
If to Administrative
Borrower: CYRK, INC.
000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Chief Financial
Officer
Fax No. 000.000.0000
with copies to: XXXXXX, HALL & XXXXXXX
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Cameron Read, Esq.
Fax No. 000.000.0000
If to Lender: FOOTHILL CAPITAL CORPORATION
0000 Xxxxxxxx Xxxxxx
Xxxxx 0000X
Xxxxx Xxxxxx, XX 00000
Attn: Business Finance Division Manager
Fax No. 000.000.0000
with copies to: HOLLAND & KNIGHT LLP
Xxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxx, Esq.
Fax No. 000.000.0000
Lender and Borrowers may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other party. All notices or demands sent in accordance with this SECTION 12,
other than notices by Lender in connection with enforcement rights against the
Collateral under the provisions of the Code, shall be deemed received on the
earlier of the date of actual receipt or 3 Business Days after the deposit
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thereof in the mail. Each Borrower acknowledges and agrees that notices sent by
Lender in connection with the exercise of enforcement rights against Collateral
under the provisions of the Code shall be deemed sent when deposited in the mail
or personally delivered, or, where permitted by law, transmitted by
telefacsimile or any other method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH
OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF
AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO
ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL
BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE COMMONWEALTH OF MASSACHUSETTS.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF SUFFOLK,
THE COMMONWEALTH OF MASSACHUSETTS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE LENDER ELECTS TO BRING SUCH
ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWERS AND
LENDER WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY
HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).
BORROWERS AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWERS AND LENDER REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
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14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Lender may assign and delegate to an Eligible Transferee (each an
"ASSIGNEE") all, or any ratable part of all, of the Obligations and the other
rights and obligations of Lender hereunder and under the other Loan Documents;
PROVIDED, HOWEVER, that Borrowers may continue to deal solely and directly with
Lender in connection with the interest so assigned to an Assignee until written
notice of such assignment, together with payment instructions, addresses, and
related information with respect to the Assignee, and a copy of the executed
assignment agreement between Lender and the Assignee have been given to
Administrative Borrower by Lender.
(b) From and after the date that Lender provides Administrative
Borrower with such written notice and an executed assignment and acceptance
agreement, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such assignment and acceptance agreement, shall have the assigned and
delegated rights and obligations of Lender under the Loan Documents, and (ii)
Lender shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned and delegated by it pursuant to such
assignment and acceptance agreement, relinquish its rights (except with respect
to SECTION 11.3 hereof) and be released from its obligations under this
Agreement (and in the case of an assignment and acceptance agreement covering
all or the remaining portion of Lender's rights and obligations under this
Agreement and the other Loan Documents, Lender shall cease to be a party hereto
and thereto).
(c) Immediately upon Borrower's receipt of such fully executed
assignment and acceptance agreement, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the rights and duties of Lender
arising therefrom.
(d) Lender may at any time sell to one or more commercial banks,
financial institutions, or other Persons not Affiliates of Lender (a
"PARTICIPANT") participating interests in Obligations and the other rights and
interests of Lender hereunder and under the other Loan Documents; PROVIDED,
HOWEVER, that (i) Lender shall remain the "Lender" for all purposes of this
Agreement and the other Loan Documents and the Participant receiving the
participating interest in the Obligations and the other rights and interests of
Lender hereunder shall not constitute a "Lender" hereunder or under the other
Loan Documents and Lender's obligations under this Agreement shall remain
unchanged, (ii) Lender shall remain solely responsible for the performance of
such obligations, (iii) Borrowers and Lender shall continue to deal solely and
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directly with each other in connection with Lender's rights and obligations
under this Agreement and the other Loan Documents, (iv) Lender shall not
transfer or grant any participating interest under which the Participant has the
right to approve any amendment to, or any consent or waiver with respect to,
this Agreement or any other Loan Document, except to the extent such amendment
to, or consent or waiver with respect to this Agreement or of any other Loan
Document would (A) extend the final maturity date of the Obligations hereunder
in which such Participant is participating, (B) reduce the interest rate
applicable to the Obligations hereunder in which such Participant is
participating, (C) release all or a material portion of the Collateral or
guaranties (except to the extent expressly provided herein or in any of the Loan
Documents) supporting the Obligations hereunder in which such Participant is
participating, (D) postpone the payment of, or reduce the amount of, the
interest or fees payable to such Participant through Lender, or (E) change the
amount or due dates of scheduled principal repayments or prepayments or
premiums, and (v) all amounts payable by Borrowers hereunder shall be determined
as if Lender had not sold such participation, except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement. The rights of any Participant only shall be
derivative through Lender and no Participant shall have any rights under this
Agreement or the other Loan Documents or any direct rights as to Borrowers, the
Collections, the Collateral, or otherwise in respect of the Obligations. No
Participant shall have the right to participate directly in the making of
decisions by Lender.
(e) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may disclose all documents and
information which it now or hereafter may have relating to Borrowers or
Borrowers' business.
(f) Any other provision in this Agreement notwithstanding, Lender may
at any time create a security interest in, or pledge, all or any portion of its
rights under and interest in this Agreement in favor of any Federal Reserve Bank
in accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury
Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.
14.2 SUCCESSORS. This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; PROVIDED, HOWEVER,
that Borrowers may not assign this Agreement or any rights or duties hereunder
without Lender's prior written consent and any prohibited
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assignment shall be absolutely void ab initio. No consent to assignment by
Lender shall release any Borrower from its Obligations. Lender may assign this
Agreement and the other Loan Documents and its rights and duties hereunder and
thereunder pursuant to SECTION 14.1 hereof and, except as expressly required
pursuant to SECTION 14.1 hereof, no consent or approval by any Borrower is
required in connection with any such assignment.
15. AMENDMENTS; WAIVERS.
15.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrowers therefrom, shall be effective unless the same shall be in
writing and signed by Lender and Administrative Borrower (on behalf of all
Borrowers) and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given
15.2 NO WAIVERS; CUMULATIVE REMEDIES. No failure by Lender to exercise any
right, remedy, or option under this Agreement or, any other Loan Document, or
delay by Lender in exercising the same, will operate as a waiver thereof. No
waiver by Lender will be effective unless it is in writing, and then only to the
extent specifically stated. No waiver by Lender on any occasion shall affect or
diminish Lender's rights thereafter to require strict performance by Borrowers
of any provision of this Agreement. Lender's rights under this Agreement and the
other Loan Documents will be cumulative and not exclusive of any other right or
remedy that Lender may have.
16. GENERAL PROVISIONS.
16.1 EFFECTIVENESS. This Agreement shall be binding and deemed effective
when executed by Borrowers and Lender.
16.2 SECTION HEADINGS. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each Section applies equally to this entire Agreement.
16.3 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed against Lender or Borrowers, whether under
any rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by all parties and shall be construed and interpreted according to the
ordinary meaning of the words used so as to accomplish fairly the purposes and
intentions of all parties hereto.
16.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
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16.5 WITHHOLDING TAXES. All payments made by Borrowers hereunder or under
any note will be made without setoff, counterclaim, or other defense, except as
required by applicable law other than for Taxes (as defined below). All such
payments will be made free and clear of, and without deduction or withholding
for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction
(other than the United States) or by any political subdivision or taxing
authority thereof or therein (other than of the United States) with respect to
such payments (but excluding, any tax imposed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein (i) measured by or
based on the net income or net profits of Lender, (ii) to the extent that such
tax results from a change in the circumstances of Lender, including a change in
the residence, place of organization, or principal place of business of Lender,
or a change in the branch or lending office of Lender participating in the
transactions set forth herein), or (iii) to the extent that Borrowers are
withholding amounts for any payment pursuant to the last sentence of this
SECTION 16.15) and all interest, penalties or similar liabilities with respect
thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments
or other charges being referred to collectively as "TAXES"). If any Taxes are so
levied or imposed, each Borrower agrees to pay the full amount of such Taxes,
and such additional amounts as may be necessary so that every payment of all
amounts due under this Agreement or under any note, including any amount paid
pursuant to this SECTION 16.5 after withholding or deduction for or on account
of any Taxes, will not be less than the amount provided for herein; PROVIDED,
HOWEVER, that Borrowers shall not be required to increase any such amounts
payable to Lender if the increase in such amount payable results from Lender's
own willful misconduct or gross negligence. Borrowers will furnish to Lender as
promptly as possible after the date the payment of any Taxes is due pursuant to
applicable law certified copies of tax receipts evidencing such payment by
Borrowers. If any Assignee is a foreign corporation, foreign partnership, or
foreign trust as defined in the IRC, Borrowers shall withhold from each payment
to the Assignee such amounts as are required as U.S. withholding tax under
Section 1441 or 1442 of the IRC unless such Assignee shall establish an
exemption from, or reduction of, such withholding tax amount by submitting
appropriate information as required by the IRC that is satisfactory to
Borrowers. Borrowers shall remit to the U.S. Treasury any amounts withheld from
payments to the Assignee pursuant to this provision.
16.6 AMENDMENTS IN WRITING. This Agreement only can be amended by a writing
signed by Lender and each of Borrowers.
16.7 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one
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and the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis.
16.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or payment
of the Obligations by any Borrower or the transfer to Lender of any property
should for any reason subsequently be declared to be void or voidable under any
state or federal law relating to creditors' rights, including provisions of the
Bankruptcy Code relating to fraudulent transfers, preferences, or other voidable
or recoverable payments of money or transfers of property (collectively, a
"VOIDABLE TRANSFER"), and if Lender is required to repay or restore, in whole or
in part, any such Voidable Transfer, or elects to do so upon the reasonable
advice of its counsel, then, as to any such Voidable Transfer, or the amount
thereof that Lender is required or elects to repay or restore, and as to all
reasonable costs, expenses, and attorneys fees of Lender related thereto, the
liability of Borrowers automatically shall be revived, reinstated, and restored
and shall exist as though such Voidable Transfer had never been made.
16.9 INTEGRATION. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
16.10 PARENT AS AGENT FOR BORROWERS. Each Borrower hereby irrevocably
appoints Parent as the borrowing agent and attorney-in-fact for all Borrowers
(the "ADMINISTRATIVE BORROWER") which appointment shall remain in full force and
effect unless and until Lender shall have received prior written notice signed
by each Borrower that such appointment has been revoked and that another
Borrower has been appointed Administrative Borrower. Each Borrower hereby
irrevocably appoints and authorizes the Administrative Borrower (i) to provide
Lender with all notices with respect to Advances and Letters of Credit obtained
for the benefit of any Borrower and all other notices and instructions under
this Agreement and (ii) to take such action as the Administrative Borrower deems
appropriate on its behalf to obtain Advances and Letters of Credit and to
exercise such other powers as are reasonably incidental thereto to carry out the
purposes of this Agreement. It is understood that the handling of the Loan
Account and Collateral of Borrowers in a combined fashion, as more fully set
forth herein, is done solely as an accommodation to Borrowers in order to
utilize the collective borrowing powers of Borrowers in the most efficient and
economical manner and at their request, and that Lender shall not incur
liability to any Borrower as a result hereof.
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Each Borrower expects to derive benefit, directly or indirectly, from the
handling of the Loan Account and the Collateral in a combined fashion since the
successful operation of each Borrower is dependent on the continued successful
performance of the integrated group. To induce Lender to do so, and in
consideration thereof, each Borrower hereby jointly and severally agrees to
indemnify and hold harmless each Lender-Related Persons against any and all
liability, expense, loss or claim of damage or injury, made against any each
such Lender-Related Party by any Borrower or by any third party whosoever,
arising from or incurred by reason of (a) the handling of the Loan Account and
Collateral of Borrowers as herein provided, (b) Lender's relying on any
instructions of the Administrative Borrower, or (c) any other action taken by
any Lender-Related Party hereunder or under the other Loan Documents, except
that Borrowers will have no liability to a Lender-Related Person under this
SECTION 16.10 with respect to any liability that has been finally determined by
a court of competent jurisdiction to have resulted solely from the gross
negligence or willful misconduct of such Lender-Related Person.
16.11 CONFIDENTIALITY. Lender agrees that it will use its reasonable
efforts to keep confidential any non-public information from time to time
supplied to it under any Loan Document; PROVIDED, HOWEVER, that nothing herein
shall affect the disclosure of any such information to (i) the extent Lender in
good faith believes it is required by statute, rule regulation or judicial
process, (ii) counsel for such Lender or to its accountants or auditors, (iii)
bank examiners or comparable Persons, (iv) any Affiliate of Lender, (v) any
Assignee, or participant, or any potential assignee or participant, of all or
any portion of any Lender's rights who is notified of the confidential nature of
the information and agrees to be bound by this provision or provisions
reasonably comparable hereto, or (vi) any other Person in connection with any
litigation to which Lender is a party; and PROVIDED, FURTHER that Lender shall
hereunder have no obligation under this SECTION 16.11 to the extent any such
information becomes available on a non-confidential basis from a source other
than a Borrower or that any information becomes publicly available other than by
a breach of this Section 16.11. Lender agrees that it will use all confidential
information exclusively for the purpose of evaluating, monitoring, selling,
protecting or enforcing its rights under the Loan Documents.
17. AMENDMENT AND RESTATEMENT
17.1 AMENDMENT AND RESTATEMENT. This Agreement amends and restates in its
entirety the December 2000 Credit Agreement. Notwithstanding any other provision
of this Agreement or any provision of any other Loan Document, the execution and
delivery of this Agreement (a) shall not be deemed payment of any "Obligations"
owing to Lender under the December 2000 Credit Agreement and shall not
constitute a novation, and (b) except as provided in the Acknowledgement and
Asset Segregation Letter, shall not release, terminate or limit or cause the
release, termination or limitation of, the
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87
liens and security interests granted to Lender pursuant to the December 2000
Loan Agreement, which liens and security interests are hereby ratified and
confirmed in all respects. Such liens and security interests continue to secure
the Obligations, including, without limitation, the "Obligations" under the
December 2000 Loan Agreement.
17.2 DECEMBER 2000 FEE AGREEMENT. Subject to the payment of any fees due
under the December 2000 Fee Agreement in accordance with SECTION 3.1(N), such
agreement is hereby terminated.
[Signature page to follow.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
CYRK, INC.
a Delaware Corporation
By:
------------------------------------
Title:
XXXX.XXX, INC.
a Delaware corporation
By:
------------------------------------
Title:
FOOTHILL CAPITAL CORPORATION
a California corporation
By:
------------------------------------
Title:
89
AGREEMENT
The undersigned (a) hereby agree and consent to the amendment and
restatement of the December 2000 Loan Agreement as set forth herein, (b)
acknowledge and agree that they are no longer borrowers and have no rights
hereunder, (c) release Lender from any obligations under the December 2000 Loan
Agreement, as amended and restated hereby, and (d) waive, release, remise and
discharge Lender from all claims, debts, liabilities and obligations of whatever
name, kind and nature, whether known or unknown, that either may have against
Lender or ever had in connection with or relating to the December 2000 Loan
Agreement or otherwise.
TONKIN, INC.
a Delaware corporation
By:
------------------------------------
Title:
CYRK ACQUISITION CORP.
a Delaware corporation
By:
------------------------------------
Title:
90
TABLE OF CONTENTS
1. DEFINITIONS AND CONSTRUCTION..............................................1
1.1 DEFINITIONS......................................................1
1.2 ACCOUNTING TERMS................................................27
1.3 CODE............................................................27
1.4 CONSTRUCTION....................................................27
1.5 SCHEDULES AND EXHIBITS..........................................28
2. LOAN AND TERMS OF PAYMENT................................................28
2.1 REVOLVER ADVANCES...............................................28
2.2 INTENTIONALLY OMITTED...........................................29
2.3 BORROWING PROCEDURES AND SETTLEMENTS............................29
2.4 PAYMENTS........................................................30
2.5 OVERADVANCES....................................................31
2.6 INTEREST RATES AND LETTER OF CREDIT FEE.........................31
2.7 CASH MANAGEMENT.................................................33
2.8 CREDITING PAYMENTS; FLOAT CHARGE................................34
2.9 DESIGNATED ACCOUNT..............................................34
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS..........35
2.11 FEES............................................................35
2.12 LETTERS OF CREDIT...............................................36
2.13 LIBOR OPTION....................................................39
2.14 CAPITAL REQUIREMENTS............................................42
2.15 JOINT AND SEVERAL LIABILITY OF BORROWERS........................43
3. CONDITIONS; TERM OF AGREEMENT............................................46
3.1 CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT.........46
3.2 CONDITIONS SUBSEQUENT TO THE INITIAL EXTENSION OF CREDIT........49
3.3 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT................50
3.4 TERM............................................................50
3.5 EFFECT OF TERMINATION...........................................50
3.6 EARLY TERMINATION BY BORROWERS..................................51
4. CREATION OF SECURITY INTEREST............................................51
4.1 GRANT OF SECURITY INTEREST......................................51
4.2 NEGOTIABLE COLLATERAL...........................................51
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND
NEGOTIABLE COLLATERAL...........................................51
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED...................51
4.5 POWER OF ATTORNEY...............................................52
4.6 RIGHT TO INSPECT................................................53
4.7 CONTROL AGREEMENTS..............................................53
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5. REPRESENTATIONS AND WARRANTIES...........................................53
5.1 NO ENCUMBRANCES.................................................54
5.2 ELIGIBLE ACCOUNTS...............................................54
5.3 ELIGIBLE INVENTORY..............................................55
5.4 EQUIPMENT.......................................................55
5.5 LOCATION OF INVENTORY AND EQUIPMENT.............................55
5.6 INVENTORY RECORDS...............................................55
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN........................55
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES................55
5.9 DUE AUTHORIZATION; NO CONFLICT..................................56
5.10 LITIGATION......................................................57
5.11 NO MATERIAL ADVERSE CHANGE......................................57
5.12 FRAUDULENT TRANSFER.............................................57
5.13 EMPLOYEE BENEFITS...............................................58
5.14 ENVIRONMENTAL CONDITION.........................................58
5.15 BROKERAGE FEES..................................................58
5.16 INTELLECTUAL PROPERTY...........................................58
5.17 LEASES..........................................................58
5.18 DDAS............................................................58
5.19 COMPLETE DISCLOSURE.............................................59
5.20 INDEBTEDNESS....................................................59
5.21 INACTIVE SUBSIDIARIES...........................................59
5.22 ACTIVE DOMESTIC SUBSIDIARIES....................................59
5.23 IMPORTING OF INVENTORY..........................................59
5.24 LETTERS OF CREDIT...............................................59
5.25 SALE ASSETS.....................................................59
5.26 PURCHASE DOCUMENTS..............................................59
6. AFFIRMATIVE COVENANTS....................................................60
6.1 ACCOUNTING SYSTEM...............................................60
6.2 COLLATERAL REPORTING............................................60
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.....................61
6.4 INTENTIONALLY OMITTED...........................................64
6.5 RETURN..........................................................64
6.6 MAINTENANCE OF PROPERTIES.......................................64
6.7 TAXES...........................................................64
6.8 INSURANCE.......................................................64
6.9 LOCATION OF INVENTORY AND EQUIPMENT.............................65
6.10 COMPLIANCE WITH LAWS............................................66
6.11 LEASES..........................................................66
6.12 BROKERAGE COMMISSIONS...........................................66
6.13 EXISTENCE.......................................................66
6.14 ENVIRONMENTAL...................................................66
6.15 DISCLOSURE UPDATES..............................................67
6.16 PURCHASE DOCUMENTS..............................................67
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7. NEGATIVE COVENANTS.......................................................67
7.1 INDEBTEDNESS....................................................67
7.2 LIENS...........................................................68
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES.............................68
7.4 DISPOSAL OF ASSETS..............................................68
7.5 CHANGE NAME.....................................................68
7.6 GUARANTEE.......................................................69
7.7 NATURE OF BUSINESS..............................................69
7.8 PREPAYMENTS AND AMENDMENTS......................................69
7.9 CHANGE OF CONTROL...............................................69
7.10 CONSIGNMENTS....................................................69
7.11 DISTRIBUTIONS...................................................69
7.12 ACCOUNTING METHODS..............................................69
7.13 INVESTMENTS.....................................................69
7.14 TRANSACTIONS WITH AFFILIATES....................................70
7.15 SUSPENSION......................................................70
7.16 INACTIVE SUBSIDIARIES...........................................70
7.17 USE OF PROCEEDS.................................................70
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE;
INVENTORY AND EQUIPMENT WITH BAILEES............................70
7.19 SECURITIES ACCOUNTS.............................................70
7.20 FINANCIAL COVENANTS.............................................71
7.21 SMI.............................................................71
7.22 AMENDMENT OF PURCHASE DOCUMENTS.................................71
8. EVENTS OF DEFAULT........................................................71
9. THE LENDER'S RIGHTS AND REMEDIES.........................................73
9.1 RIGHTS AND REMEDIES.............................................73
9.2 REMEDIES CUMULATIVE.............................................76
10. TAXES AND EXPENSES.......................................................76
11. WAIVERS; INDEMNIFICATION.................................................76
11.1 DEMAND; PROTEST.................................................76
11.2 LENDER'S LIABILITY FOR COLLATERAL...............................77
11.3 INDEMNIFICATION.................................................77
12. NOTICES..................................................................78
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER...............................79
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS...............................80
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14.1 ASSIGNMENTS AND PARTICIPATIONS..................................80
14.2 SUCCESSORS......................................................81
15. AMENDMENTS; WAIVERS......................................................82
15.1 AMENDMENTS AND WAIVERS..........................................82
15.2 NO WAIVERS; CUMULATIVE REMEDIES.................................82
16. GENERAL PROVISIONS.......................................................82
16.1 EFFECTIVENESS...................................................82
16.2 SECTION HEADINGS................................................82
16.3 INTERPRETATION..................................................82
16.4 SEVERABILITY OF PROVISIONS......................................82
16.5 WITHHOLDING TAXES...............................................83
16.6 AMENDMENTS IN WRITING...........................................83
16.7 COUNTERPARTS; TELEFACSIMILE EXECUTION...........................83
16.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS........................84
16.9 INTEGRATION.....................................................84
16.10 PARENT AS AGENT FOR BORROWERS...................................84
16.11 CONFIDENTIALITY.................................................85
17. AMENDMENT AND RESTATEMENT................................................85
17.1 AMENDMENT AND RESTATEMENT.......................................85
17.2 DECEMBER 2000 FEE AGREEMENT.....................................86
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EXHIBITS AND SCHEDULES
Exhibit B-1 Form of Borrowing Base Certificate
Exhibit C-1 Form of Compliance Certificate
Exhibit L-1 Form of LIBOR Notice
Schedule E-1 Existing Underlying Acceptable Purchase Order
Letters of Credit
Schedule E-2 Existing Standby Underlying Letters of Credit
Schedule E-3 Existing Standby Other Underlying Letters of Credit
Schedule I-1 Permitted Investments
Schedule P-1 Permitted Liens
Schedule D-1 Purchase Documents
Schedule 2.7(a) Cash Management Banks
Schedule 5.5 Locations of Inventory and Equipment
Schedule 5.7 Chief Executive Office; FEIN
Schedule 5.8(b) Capitalization of Borrowers
Schedule 5.8(c) Capitalization of Borrowers' Subsidiaries
Schedule 5.10 Litigation
Schedule 5.13 Employee Benefits
Schedule 5.14 Environmental Matters
Schedule 5.16 Intellectual Property
Schedule 5.18 Demand Deposit Accounts
Schedule 5.20 Permitted Indebtedness
Schedule 5.21 Inactive Subsidiaries
Schedule 5.22 Active Domestic Subsidiaries
Schedule 5.24 Letters of Credit
Schedule 5.25 Sale Assets
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