Exhibit 10.2
FORM OF
LOAN AND SECURITY AGREEMENT
among
CASUAL MALE RETAIL GROUP, INC.
as Lender
and
LP INNOVATIONS, INC.
as Borrower
and
SECUREX LLC
as Guarantor
_______________________, 2004
TABLE OF CONTENTS
Page
----
ARTICLE 1 INTERPRETATION.............................................1
Section 1.1 Definitions................................................1
Section 1.2 Rules of Construction......................................5
ARTICLE 2 TERMS OF LOAN AND EXISTING OBLIGATIONS.....................5
Section 2.1 Terms of Loan..............................................5
Section 2.2 Interest on Overdue Payments; Interest Rate on Default.....7
Section 2.3 Repayment of Principal.....................................8
Section 2.4 Time and Place of Payments.................................8
Section 2.5 Application of Funds.......................................8
Section 2.6 Payments to be Free of Deductions..........................9
ARTICLE 3 SECURITY INTERESTS; FURTHER ASSURANCES.....................9
Section 3.1 Grant of Security Interest.................................9
Section 3.2 Other Collateral; Lien Perfection.........................10
Section 3.3 Further Assurances........................................10
Section 3.4 Locations of Collateral...................................11
Section 3.5 Protection of Collateral..................................11
ARTICLE 4 REPRESENTATIONS AND WARRANTIES............................11
Section 4.1 Enforceable Obligations...................................11
Section 4.2 No Legal Bar..............................................11
Section 4.3 Compliance with Laws; Licenses and Permits................12
Section 4.4 Location..................................................12
Section 4.5 Organization and Qualification............................12
Section 4.6 Corporate Power and Authority.............................12
Section 4.7 Deposit Accounts..........................................12
Section 4.8 Taxes.....................................................12
Section 4.9 Litigation................................................13
Section 4.10 No Defaults...............................................13
Section 4.11 General Collateral Representation.........................13
Section 4.12 Disclosure................................................13
Section 4.13 Survival of Representations and Warranties................14
ARTICLE 5 AFFIRMATIVE COVENANTS.....................................14
Section 5.1 Maintenance of Property; Insurance; Licenses..............14
Section 5.2 Inspection of Property; Books and Records.................14
Section 5.3 Notices...................................................14
Section 5.4 Collateral................................................14
Section 5.5 Further Documents.........................................15
Section 5.6 Licenses and Permits......................................15
Section 5.7 Financial Statements......................................15
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Section 5.8 Other Information.........................................16
ARTICLE 6 NEGATIVE COVENANTS........................................16
Section 6.1 Limitation on Liens.......................................16
Section 6.2 Limitation on Sale of Assets..............................16
Section 6.3 Change of Locations.......................................16
Section 6.4 Mergers; Consolidations; Acquisitions.....................16
Section 6.5 Loans.....................................................16
Section 6.6 Total Indebtedness........................................16
Section 6.7 Net Book Value............................................17
Section 6.8 Positive EBITDA...........................................17
Section 6.9 Dividends.................................................17
Section 6.10 Other Changes.............................................17
ARTICLE 7 EVENTS OF DEFAULT AND REMEDIES............................17
Section 7.1 Events of Default.........................................17
Section 7.2 Remedies..................................................19
Section 7.3 Application of Proceeds...................................20
Section 7.4 Set-Off...................................................20
Section 7.5 Rights Cumulative; Waiver.................................20
ARTICLE 8 COLLECTION OF COLLATERAL AND NOTICE OF ASSIGNMENT.........20
Section 8.1 Disclaimer of Liability...................................20
ARTICLE 9 SUBSIDIARY GUARANTY AND PLEDGE............................20
Section 9.1 Payment Guaranty..........................................20
Section 9.2 Obligations Not Affected..................................21
Section 9.3 Not a Collection Guaranty.................................23
Section 9.4 Payments Returned.........................................23
Section 9.5 Subsidiary Pledge.........................................23
Section 9.6 Further Agreement by Guarantor............................24
ARTICLE 10 MISCELLANEOUS.............................................24
Section 10.1 Amendments and Waivers....................................24
Section 10.2 Notices...................................................24
Section 10.3 Successors and Assigns....................................24
Section 10.4 Collection Costs..........................................25
Section 10.5 Counterparts..............................................25
Section 10.6 Governing Law.............................................25
Section 10.7 Consent to Jurisdiction...................................25
Section 10.8 WAIVER OF JURY TRIAL......................................26
Section 10.9 Other Waivers.............................................26
Section 10.10 Power of Attorney.........................................26
Section 10.11 Indemnity.................................................26
Section 10.12 Entire Agreement..........................................26
Section 10.13 Interpretation............................................26
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LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (this "Agreement") is made this ____
day of ____________, 2004, by and among CASUAL MALE RETAIL GROUP, INC.
("Lender"), a Delaware corporation, LP INNOVATIONS, INC. ("Borrower"), a Nevada
corporation, and SECUREX LLC ("Guarantor"), a Delaware limited liability company
and wholly-owned subsidiary of Borrower, as guarantor hereunder.
Preliminary Statements
WHEREAS, Lender owns 80% of the issued and outstanding shares (the
"Spin-off Shares") of Common Stock (defined below), and Lender now wishes to
distribute the Spin-off Shares to its stockholders.
WHEREAS, Borrower owes Lender $_______________ on account of unpaid
advances (the "Previous Advancements").
WHEREAS, Borrower has requested that Lender make available a
revolving credit facility (the "New Loan") to Borrower of up to $500,000.00 (the
"Maximum Loan Amount").
WHEREAS, Lender has agreed to make the New Loan in an amount up to
the Maximum Loan Amount if Borrower and Guarantor enter into and deliver this
Loan and Security Agreement governing amongst other things, the making of the
New Loan and the repayment of the Previous Advancements and such New Loan and
the granting of the security interest in the Collateral to Lender to secure the
Total Borrowings and the other Obligations.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Borrower and Guarantor
hereby agrees with Lender as follows:
ARTICLE 1
INTERPRETATION
Section 1.1 Definitions. The following capitalized terms are defined
as follows:
"Borrower Account" has the meaning set forth in Section 2.1(b)
hereof.
"Borrowing Date" means any date on which a Revolving Loan is made
under Section 2.1(b).
"Business Day" means any day except a Saturday, Sunday or legal
holiday on which commercial banking institutions are not open for business in
New York City.
"Cash Flow" means, for any period of determination thereof, the
following, each calculated for such period, without duplication: (i) EBITDA,
less (ii) capital expenditures of Borrower and its subsidiaries, on a
consolidated basis, actually made and paid in cash, less (iii) income taxes and
franchise taxes resulting from tax payments by the Borrower or any
subsidiary thereof, actually made and paid in cash, less interest paid on
indebtedness of the Borrower or any subsidiary thereof (including the Total
Borrowing), during such Period, to the extent the amount resulting from such
calculation is in excess of $25,000.00 for such period of determination.
"Collateral" has the meaning set forth in Section 3.1 hereof.
"Common Stock" means the authorized common stock of Borrower, par
value $0.01 per share.
"Default" means any event or condition the occurrence of which with
giving of notice, the lapse of time, or both, would constitute an Event of
Default.
"Default Rate" means a rate of interest equal to eighteen percent
(18%) per annum, compounded quarterly.
"Distribution" means the distribution by Lender of the Spin-off
Shares to stockholders of Lender.
"Distribution Date" means the date on which the Distribution is
consummated.
"EBITDA" means, for any period, the sum of (a) Operating Income, plus
(b) consolidated depreciation and amortization expenses of the Borrower and its
subsidiaries.
"Elevated Interest Rate" means a rate of interest equal to twelve
percent (12%) per annum, compounded quarterly.
"Event of Default" has the meaning set forth in Article 7 hereof.
"Excess Cash Flow" means, for any period of determination (i) Cash
Flow, minus (ii) scheduled amortization of principal and interest and mandatory
prepayments of any indebtedness (including the Total Borrowings), minus (iii)
cash dividends and distribution paid (or accrued during such period) on capital
stock as permitted hereunder, minus (iv) increases in working capital, and plus,
decreases in working capital.
"GAAP" means Generally Accepted Accounting Principles, being those
principles of accounting set forth in pronouncements of the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants or
which have other substantial authoritative support and are applicable in the
circumstances as of the date of a report, such principles to be applied on a
consistent basis.
"Guarantor" means Securex LLC, a Delaware limited liability company
and wholly-owned subsidiary of Borrower.
"Guaranty" means the guaranty by Guarantor set forth in Section 9.1
hereof.
"Initial Interest Rate" means a rate of interest equal to five
percent (5%) per annum, compounded quarterly.
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"Interest Elevation Date" has the meaning set forth in Section
2.1(c)(4) hereof.
"Interest Payment Date" has the meaning set forth in Section
2.1(c)(5) hereof.
"Lien" means in respect of property or assets, any mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction in respect of any of the foregoing). The term "Lien" shall
include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances.
"Loan Documents" means this Agreement, the Notes and all documents,
instruments, financing statements, certificates and other agreements executed in
connection with this Agreement.
"Loan Party" means Borrower or Guarantor and "Loan Parties" means
both Borrower and Guarantor.
"Maturity Date" means the date which is twenty four (24) months
following the Distribution Date, unless this Agreement is earlier terminated
pursuant to the terms hereof.
"Maximum Loan Amount" means $500,000.00.
"Net Book Value" means, as of any date on which the amount thereof is
to be determined, that value which equals the total assets of Borrower (and its
subsidiaries) minus the total liabilities of Borrower (and its subsidiaries) as
determined (on a consolidated basis) in accordance with GAAP.
"New Loan" means the new loan in an amount up to the Maximum Loan
Amount as requested by Borrower.
"Notes" mean (i) the secured promissory note evidencing the Previous
Advancements (the "Advancements Note") and (ii) the revolving secured promissory
note, evidencing the New Loan (the "Revolving Note"), each such note executed by
Borrower in favor of Lender and in substantially the forms thereof attached
hereto as Exhibit A-1 and Exhibit A-2, respectively.
"Notice of Borrowing" means a notice in substantially the form of
Exhibit B.
"Obligations" means, without limitation, the New Loan, the Previous
Advancements, all interest thereon and all other debts, obligations, or
liabilities of every kind and description of Borrower to Lender, now due or to
become due, direct or indirect, absolute or contingent, presently existing or
hereafter arising, joint or several, secured or unsecured, whether for payment
or performance, regardless of how the same arise or by what instrument,
agreement or book account they may be evidenced, or whether evidenced by any
instrument, agreement or book account, including, without limitation, all loans
(including any loan by renewal or
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extension), all extensions and advancements of funds, all overdrafts, all
guarantees, all bankers acceptances, all agreements, all letters of credit
issued by Lender for Borrower and the applications relating thereto, all
indebtedness of Borrower to Lender, and all undertakings to take or refrain from
taking any action. Obligations shall also include all interest and other charges
chargeable to Borrower or due from Borrower to Lender from time to time and all
costs and expenses referred to in Section 10.4. Notwithstanding the foregoing,
"Obligations" shall not include any obligations of Borrower or Guarantor under
any agreement listed on Schedule 1.1, as any such agreement may be modified or
amended from time to time.
"Operating Income" means for any period of determination, Borrower's
consolidated operating income (as defined by GAAP).
"Organizational ID Number" means the organizational identification
number assigned to a Loan Party by the applicable governmental unit or agency of
the State of Nevada.
"Permitted Liens" means (a) Liens imposed by law for taxes that are
not yet due; (b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the ordinary course
of business and securing obligations that are not overdue by more than 30 days;
(c) pledges and deposits made in the ordinary course of business in compliance
with workers' compensation, unemployment insurance and other social security
laws or regulations; (d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature, and Liens imposed by statutory or
common law relating to banker's liens or rights of setoff or similar rights
relating to deposit accounts, in each case in the ordinary course of business;
(e) Liens arising in the ordinary course of business in favor of issuers of
documentary letters of credit; (f) easements, zoning restrictions,
rights-of-way, licenses, reservations, minor irregularities of title and similar
encumbrances on real property imposed by law or arising in the ordinary course
of business that do not secure any monetary obligation and do not materially
detract from the value of the affected property or interfere with the ordinary
conduct of business of the Loan Parties (or any subsidiary thereof); and (g) any
other Liens listed on Schedule 1.2.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
"Proceeds" has the meaning provided in the Uniform Commercial Code.
"Record" has the meaning as defined in Article 9 of the Uniform
Commercial Code.
"Requirements of Law" means, with respect to any Person, any law,
treaty, rule or regulation or determination of an arbitrator or a court or other
governmental authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"Revolving Loan" has the meaning set forth in Section 2.1(b) hereof.
"Solvent" as to any Person, that such Person (i) owns property and
assets the fair saleable value of which is greater than the amount required to
pay all of such Person's indebtedness
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(including contingent debts), (ii) is able to pay all of its indebtedness as
such indebtedness matures and (iii) has capital sufficient to carry on its
business and transactions and all business and transactions in which it is about
to engage.
"Total Borrowings" shall mean the aggregate of the New Loan, if and
to the extent made, and the Previous Advancements.
"Uniform Commercial Code" or "UCC" means the Uniform Commercial Code
in effect in the State of New York on the date hereof as it may be amended or
revised.
Section 1.2 Rules of Construction.
(a) Use of Capitalized Terms. For purposes of this Agreement,
unless the context otherwise requires, the capitalized terms used in this
Agreement shall have the meanings herein assigned to them, and such definitions
shall be applicable to both singular and plural forms of such terms. In
addition, all terms defined in the Uniform Commercial Code shall have the
meanings given therein unless otherwise defined herein.
(b) Construction. All references in this Agreement to the single
number and neuter gender shall be deemed to mean and include the plural number
and all genders, and vice versa, unless the context shall otherwise require.
(c) Headings. All headings and titles contained in this Agreement
are for convenience only and shall not affect the interpretation of this
Agreement.
(d) Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(e) Interpretation. This document is the result of reasoned
negotiation between the parties and should not be construed against any party.
ARTICLE 2
TERMS OF LOAN AND EXISTING OBLIGATIONS
Section 2.1 Terms of Loan.
(a) Previous Advancements. Borrower acknowledges the receipt of
the Previous Advancements and its obligation to repay such advancements in
accordance with the terms of this Agreement, and hereby agrees to repay the
Previous Advancements in accordance with the terms hereof. Any reference in this
Agreement to the Total Borrowings shall include the Previous Advancements.
(b) New Loan. Subject to and upon the terms and conditions of and
in reliance upon the representations and warranties made in this Agreement,
Lender hereby agrees
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to make the New Loan available to Borrower in advances (each, a "Revolving
Loan") from time to time on any Business Day during the period from the
Distribution Date until the Business Day immediately preceding the Maturity Date
in an amount (which amount shall not be less than $10,000 and shall be an
integral multiple of $1,000) for each such Revolving Loan not to exceed the
unused portion of the Maximum Loan Amount at such time. Within the limits of the
unused portion of the Maximum Loan Amount in effect from time to time, Borrower
may borrow Revolving Loans under this Section 2.1(b), prepay pursuant to Section
2.3(b) and reborrow under this Section 2.1(b). Such advances, if made, shall be
deposited to Borrower's account at account number 9420943217 (Account Name: LP
Innovations, Inc. Operating Account) at Fleet Bank (ABA # 00000000) (the
"Borrower Account"). Such Revolving Loans shall be used solely for the working
capital requirements of Borrower following the Distribution Date.
(c) Obligations of Borrower. Subject to Lender's right to cease
making Revolving Loans to Borrower upon the occurrence of a Default or an Event
of Default and upon the terms and conditions of this Agreement, Borrower hereby
agrees to repay the Total Borrowings to Lender, if not earlier repaid, on the
Maturity Date. The absolute and unconditional obligation of Borrower to repay
the Total Borrowings and interest thereon shall be evidenced by the Notes. The
Notes shall include the following terms:
(1) Amount. The face amount of the Advancements Note shall
equal the amount of the Previous Advancements and the
face amount of the Revolving Note shall equal the
amount of the New Loan;
(2) Term. The Notes shall be dated as of the Distribution
Date and shall mature and be due and payable in full
on, or before (upon acceleration of the Notes in
accordance with the terms hereof), the Maturity Date;
(3) Initial Interest Rate. For the period from the
Distribution Date until the day immediately preceding
that date which is the one-year anniversary of the
Distribution Date (the "Interest Elevation Date"), the
Notes shall bear interest (computed on the basis of the
actual number of days elapsed over a 360-day year) on
the daily outstanding principal balance thereunder at
the Initial Interest Rate;
(4) Elevated Interest Rate. For the period from the
Interest Elevation Date and thereafter, the Notes shall
bear interest (computed on the basis of the actual
number of days elapsed over a 360-day year) on the
daily outstanding principal balance thereunder at the
Elevated Interest Rate;
(5) Interest Payment Dates. Interest on the Notes shall be
due and payable on the first Business Day of each
fiscal quarter, commencing on the first Business Day of
the first fiscal quarter immediately following the
Distribution Date and on the date the Total Borrowings
are due whether by maturity, acceleration or otherwise
(each an "Interest Payment Date"); and
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(6) Principal Payment. Other than as specified with respect
to prepayments in Section 2.3 hereof, Borrower shall
pay to the order of Lender, in lawful money of the
United States of America, the aggregate unpaid
principal amount of the Previous Advancements and the
New Loan and any other Obligations on the Maturity
Date, without any action being taken on the part of
Lender and in accordance with Section 2.4 hereof.
(d) Procedure for Borrowing. (1) Lender shall not be required to
make any Revolving Loan to Borrower unless: (i) the representations and
warranties contained in Article 4 hereof are true and correct in all material
respects as though made on and as of the date the Revolving Loan is made (except
to the extent such representations and warranties expressly relate to an earlier
date, in which case they are true and correct as of such date); (ii) no Default
or Event of Default has occurred and is continuing or will result from such
proposed Revolving Loan; (iii) the proposed Revolving Loan will not cause the
principal amount of the New Loan to exceed the Maximum Loan Amount; (iv) there
has occurred no breach of the covenants contained in Articles 5 and 6 hereof;
and (v) Lender shall have received Borrower's irrevocable written notice
delivered to Lender in the form of a Notice of Borrowing, which notice must be
received by Lender prior to 11:00 a.m. (Eastern time) at least one Business Day
prior to the requested Borrowing Date, specifying the amount of the Revolving
Loan and the requested Borrowing Date, which shall be a Business Day.
(2) Lender shall make the amount of each Revolving Loan
available to Borrower by crediting Borrower Account by
2:00 p.m. (Eastern time) on the Borrowing Date
requested by Borrower and in immediately available
funds.
Section 2.2 Interest on Overdue Payments; Interest Rate on Default.
(a) If any payment of interest or principal is not paid when due for any period
(after expiration of any applicable grace period), the default interest rate for
the applicable period shall be calculated at the Elevated Interest Rate,
provided, however, that beginning on the Interest Elevation Date, the default
interest rate for the applicable period shall be calculated at the Default Rate.
(b) Upon the occurrence and during the continuance of any Event
of Default, the outstanding principal and all accrued interest as well as any
other charges due Lender hereunder or under the Notes, shall bear interest from
the date on which such amount shall have first become due and payable to Lender
(or, in the case of other charges due Lender hereunder, five (5) Business Days
after demand therefor by Lender) to the date on which such amount shall be paid
to Lender (whether before or after judgment), at the Default Rate. Upon the
occurrence and during the continuance of any Event of Default, any accrued and
unpaid interest shall become and be absolutely due and payable to Lender, on
demand, at any time. Interest will continue to accrue until all the Obligations
are discharged (whether before or after judgment) in full.
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Section 2.3 Repayment of Principal.
(a) Mandatory Prepayments. Borrower shall mandatorily and
immediately prepay the Total Borrowings, in part or in full, to the extent
applicable, in any and/or all of the following circumstances:
(1) Upon any partial or full sale or encumbrance by
Borrower or Guarantor of any Collateral (other than the
sale of goods or services in the ordinary course of
business), Borrower shall make a mandatory prepayment
to Lender in an amount equal to the total amount
realized from such sale or the value of such
encumbrance;
(2) Upon any sale of its equity securities by Borrower
(including the sale of its stock to its stockholders)
or Guarantor, Borrower shall make a mandatory
prepayment to the extent the aggregate net proceeds
thereof exceed $1,500,000, provided, however, that any
such prepayment shall only be made from aggregate net
proceeds exceeding $1,500,000; and
(3) Upon the realization by Borrower and its subsidiaries
of Excess Cash Flow during any fiscal quarter, Borrower
shall make a mandatory prepayment in an amount equal to
such Excess Cash Flow.
(b) Voluntary Prepayments. Borrower may voluntarily prepay,
without premium or penalty, the Total Borrowings in part or in full at any time
upon notice to Lender of at least five (5) days prior to the specified
prepayment date, together with accrued interest to the prepayment date. Only
borrowings under the New Loan may be reborrowed and only upon the terms and
conditions set forth in this Agreement.
Section 2.4 Time and Place of Payments. Notwithstanding anything in
the Loan Documents to the contrary, each payment payable by Borrower to Lender
under this Agreement or the Notes shall be made directly by wire transfer to the
Lender's account at account number 9428426572 (Account Name: Designs) at Fleet
National Bank (ABA # 000000000), or such other place as may be designated by
Lender, not later than 12:00 p.m. (Eastern time) on the due date of each such
payment in immediately available funds.
Section 2.5 Application of Funds. Notwithstanding anything in this
Article 2 to the contrary, any funds received by Lender (other than pursuant to
Section 2.3(b)) shall be applied toward the Obligations as follows: first, to
the payment of all fees, charges and other sums (with the exception of principal
and interest) due and payable to Lender under the Notes or this Agreement at
such time including, without limitation, all reasonable and necessary costs,
expenses, disbursements and losses which shall have been incurred or sustained
by Lender in the collection of the Obligations hereunder (including attorneys
fees) or the exercise, protection, or enforcement by Lender of all or any of the
rights, remedies, powers and privileges of Lender under this Agreement, the
Notes, or any of the other Loan Documents and in and towards the provision of
adequate indemnity to Lender against all taxes or Liens which by law shall have,
or
8
may have, priority over the rights of Lender in and to such funds; second, to
the payment of accrued interest on the principal of the Advancements Note;
third, to the payment of accrued interest on the principal of the Revolving
Note; fourth, to the payment of principal amounts of the Advancements Note;
fifth, to the payment of principal amounts of the Revolving Note; and sixth, the
surplus remaining (if any), to Borrower or such other Person or Persons as may
be determined by Borrower or any court of competent jurisdiction.
Notwithstanding anything in this Article 2 to the contrary, any funds received
by Lender pursuant to Section 2.3(b) shall be applied toward the Obligations as
follows: first, to the payment of all fees, charges and other sums (with the
exception of principal and interest) due and payable to Lender under the Notes
or this Agreement at such time; second, unless otherwise specified by Borrower
in its notice of prepayment delivered pursuant to Section 2.3 (b), to the
payment of accrued interest on the principal of the Revolving Note; third,
unless otherwise specified by Borrower in its notice of prepayment delivered
pursuant to Section 2.3 (b), to the payment of principal of the Revolving Note;
fourth, unless otherwise specified by Borrower in its notice of prepayment
delivered pursuant to Section 2.3 (b), to the payment of interest on principal
amounts of the Advancements Note; fifth, unless otherwise specified by Borrower
in its notice of prepayment delivered pursuant to Section 2.3 (b), to the
payment of principal amounts of the Advancements Note; and sixth, the surplus
remaining (if any), to Borrower or such other Person or Persons as may be
determined by Borrower or any court of competent jurisdiction.
Section 2.6 Payments to be Free of Deductions. Each payment payable
to Lender under this Agreement or the Notes, shall be made in accordance with
Section 2.4 hereof, without set-off or counterclaim and free and clear of and
without any deduction of any kind for any taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, restrictions or conditions of any
nature now or hereafter imposed or levied as a result of any change in law or
regulation or any change in the interpretation or application of any existing
law by any political subdivision or any taxing or other authority therein,
unless Borrower is compelled by law to make any such deduction or withholding.
ARTICLE 3
SECURITY INTERESTS; FURTHER ASSURANCES
Section 3.1 Grant of Security Interest. To secure the prompt payment
and performance of all of the Obligations under the Loan Documents, Borrower
hereby grants to Lender a continuing security interest in all of Borrower's
assets or property whether real, personal or mixed, or tangible or intangible,
wheresoever located, now owned or hereafter acquired by Borrower, including
without limitation, all Accounts, Certificated Securities, Chattel Paper,
Contract Rights, Deposit Accounts, Documents, Equipment, Financial Assets,
Fixtures, General Intangibles, Goods, Instruments, Inventory, Investment
Property, Security Entitlements, Uncertificated Securities, Commercial Tort
Claims, Software, Letter of Credit Rights and all Proceeds thereof (as each such
defined term is defined in the UCC) and to the extent not included in the
foregoing, all property and assets of any kind or description owned by Borrower,
all of such assets and property (together with the "Collateral" of Guarantor
pursuant to Section 9.5 hereof) being collectively hereinafter the "Collateral."
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Section 3.2 Other Collateral; Lien Perfection. Borrower shall
promptly notify Lender in writing upon acquiring or otherwise obtaining any new
Collateral (other than items purchased and used or goods purchased and sold by
Borrower in the ordinary course of its business) and, upon the request of
Lender, will promptly execute such other documents, and do such other acts or
things deemed appropriate by Lender to deliver to Lender a perfected security
interest in such Collateral. Borrower shall execute such UCC-1 financing
statements as are required by the UCC and such other instruments, assignments or
documents as are necessary to perfect Lender's Lien upon any of the Collateral
and shall take such other action as may be required or advisable in Lender's
sole discretion to perfect or to continue the perfection of Lender's Lien upon
the Collateral. Unless prohibited by applicable law, Borrower hereby irrevocably
authorizes Lender to execute and file any such financing statements, including,
without limitation, financing statements that indicate the Collateral (i) as
being all assets of Borrower or words of similar effect, or (ii) as being of an
equal or lesser scope, or with greater or lesser detail, than as set forth in
Section 3.1, on Borrower's behalf. The parties agree that a photographic or
other reproduction of this Agreement shall be sufficient as a financing
statement and may be filed in any appropriate office in lieu thereof.
Section 3.3 Further Assurances.
(a) Borrower agrees that from time to time, at the expense of
Borrower, it shall promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or desirable, or
that Lender may reasonably request to give effect to, or carry out, the terms or
intent of the Loan Documents.
(b) Borrower agrees that from time to time, at the expense of
Borrower, it shall promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or desirable, or
that Lender may reasonably request, in order to create and/or maintain the
validity, perfection or priority of and protect any security interest granted or
purported to be granted hereby or to enable Lender to exercise and enforce its
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, Borrower shall:
(1) file such financing or continuation statements, or
amendments thereto, and execute and deliver such other
agreements, instruments, endorsements, powers of
attorney or notices as may be necessary, or as Lender
may reasonably request, in order to perfect and
preserve the security interests granted or purported to
be granted hereby;
(2) at Lender's request, appear in and defend any action or
proceeding that may affect Borrower's title to or
Lender's security interest in all or any part of the
Collateral.
(c) Borrower hereby authorizes Lender to file a Record or
Records, including, without limitation, financing or continuation statements and
amendments thereto in any jurisdictions and with any filing offices as Lender
may determine, in its reasonable judgment, are necessary to perfect the security
interest granted to Lender herein. Such financing statements
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may describe the Collateral in the same manner as described herein or may
contain an indication or description of collateral that describes such property
in any other manner as Lender may determine, in its reasonable judgment, is
necessary, advisable or prudent to ensure the perfection of the security
interest in the Collateral granted to Lender herein, including, without
limitation, describing such property as "all assets" or "all personal property,
whether now owned or hereafter acquired." Borrower shall furnish to Lender from
time to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as Lender
may reasonably request, all in reasonable detail.
(d) Borrower hereby authorizes Lender to modify this Agreement
after obtaining Borrower's approval of or signature to such modification.
Section 3.4 Locations of Collateral. All Collateral, will at all
times be kept by Borrower at the business locations set forth in Schedule 3.4
hereto and shall not, without the prior written approval of Lender, be moved
therefrom.
Section 3.5 Protection of Collateral. All expenses of protecting,
storing, warehousing, insuring, handling, maintaining and shipping the
Collateral, any and all excise, property, sales, and use taxes imposed by any
state, federal, or local authority on any of the Collateral or in respect of the
sale thereof shall be borne and paid by Borrower. If Borrower fails to promptly
pay any portion thereof when due, Lender may, at its option, but shall not be
required to, pay the same and charge Borrower therefor. Lender shall not be
liable or responsible in any way for the safekeeping of any of the Collateral or
for any loss or damage thereto (except for reasonable care in the custody
thereof while any Collateral is in Lender's actual possession) or for any
diminution in the value thereof, or for any act or default of any warehouseman,
carrier, forwarding agency, or other person whomsoever, but the same shall be at
Borrower's sole risk.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Agreement and make the
New Loan, each Loan Party hereby represents and warrants to Lender that:
Section 4.1 Enforceable Obligations. This Agreement and the Notes
have been duly executed and delivered on behalf of the Loan Parties, and
constitute the legal, valid and binding obligation of each Loan Party,
enforceable against it in accordance with their terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
Section 4.2 No Legal Bar. The execution, delivery and performance
of this Agreement, the Notes, and the other Loan Documents and the consummation
of the transactions contemplated thereby, will not (i) violate any Requirements
of Law, or (ii) conflict with or result in a breach of the terms or provisions
of, or constitute a default under, or (except as otherwise contemplated and
required or permitted by any of the Loan Documents) result in the creation of
any Lien, under any material contractual obligation of any Loan Party.
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Section 4.3 Compliance with Laws; Licenses and Permits. Each Loan
Party is in compliance with all Requirements of Law and possesses all licenses
and permits required for the operation of the Collateral.
Section 4.4 Location. Schedule 4.4 attached hereto lists each
Loan Party's exact legal name, jurisdiction of organization, chief executive
office or principal place of business, and each Loan Party's Organizational I.D.
Number and federal tax identification number.
Section 4.5 Organization and Qualification. Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. Guarantor is a limited liability
company duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization. Each Loan Party is duly qualified and is
authorized to do business and is in good standing as a foreign corporation or
foreign limited liability company, as appropriate, in each state or jurisdiction
listed on Schedule 4.5 hereto and in all other states and jurisdictions in which
the failure of such Loan Party to be so qualified would have a material adverse
effect on the financial condition, business or properties and assets of any Loan
Party.
Section 4.6 Corporate Power and Authority. Each Loan Party is
duly authorized and empowered to enter into, execute, deliver and perform this
Agreement and each of the other Loan Documents. The execution, delivery and
performance of this Agreement and each of the other Loan Documents have been
duly authorized by all necessary corporate or limited liability company action,
as appropriate, and do not and will not (i) require any consent or approval of
the shareholders or owners; (ii) contravene any Loan Party's articles or
certificate of incorporation or by-laws, certificate of formation or
organization or limited liability company operating agreement or other
organizational documents, as applicable; (iii) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which any Loan Party is a party or by
which it or its properties and assets may be bound or affected.
Section 4.7 Deposit Accounts. Schedule 4.7 (as such schedule may
be amended or supplemented from time to time) sets forth under the headings
"Deposit Accounts" all of the Deposit Accounts in which any Loan Party has an
interest. Each Loan Party is the sole account holder of each such Deposit
Account attributed to it and such Loan Party has not consented to, and is not
otherwise aware of, any Person (other than Lender pursuant hereto) having either
sole dominion and control (within the meaning of common law) or "control"
(within the meaning of Section 9-104 of the UCC) over, or any other interest in,
any such Deposit Account or any cash or other property deposited therein.
Section 4.8 Taxes. Each Loan Party has filed all federal, state
and local tax returns and other reports it is required by law to file and has
paid, or made provision for the payment of, all taxes, assessments, fees, levies
and other governmental charges upon it, its income, properties and assets as and
when such taxes, assessments, fees, levies and charges are due and payable,
unless and to the extent any thereof are being actively contested in good faith
and by appropriate proceedings and each Loan Party maintains reasonable reserves
on its books therefor. The provision for taxes on the books of each Loan Party
are adequate for all years not closed by applicable statutes, and for its
current fiscal year.
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Section 4.9 Litigation. Except as set forth on Schedule 4.9
hereto, there are no actions, suits, proceedings or investigations pending, or
to the knowledge of any Loan Party, threatened, against or affecting any Loan
Party, or the business, operations, properties, assets prospects, profits or
condition of any Loan Party. No Loan Party is in default with respect to any
order, writ, injunction, judgment, decree or rule of any court, governmental
authority or arbitration board or tribunal.
Section 4.10 No Defaults. No event has occurred and no condition
exists which would, upon or after the execution and delivery of this Agreement
or any Loan Party's performance hereunder, constitute a Default or an Event of
Default.
Section 4.11 General Collateral Representation.
(a) Each Loan Party is and at all times will be the sole owner of
and have good title to the Collateral pledged by it pursuant to this Agreement,
free from all Liens, in favor of any Person other than the Permitted Liens, and
has full right and power to grant Lender a security interest therein. All
information furnished to Lender concerning the Collateral is and will be
complete, accurate and correct in all respects when furnished;
(b) No security agreement, financing statement, equivalent
security or Lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except such as
may have been filed (i) by a Loan Party in favor of Lender pursuant to this
Agreement, or (ii) in respect of the items of Collateral subject to the
Permitted Liens; and
(c) The provisions of this Agreement are sufficient to create in
favor of Lender, from and after the date hereof, a valid and continuing lien on,
and security interest in, the types of the Collateral hereunder in which a
security interest may be created under Article 9 of the UCC. Financing
Statements on Form UCC-1 have been duly executed on behalf of the Loan Parties
and the description of such Collateral set forth therein is sufficient to
perfect security interests in such Collateral in which a security interest may
be perfected by the filing of financing statements under the UCC. When such
financing statements are duly filed in the filing offices listed on Schedule
4.11, and the requisite filing fees are paid, such filings will be sufficient to
perfect the security interests in such of the Collateral described in the
financing statements as can be perfected by filing, which perfected security
interests will be prior to all other Liens in favor of others and rights of
others except for Permitted Liens, enforceable as such against creditors of and
purchasers from the Loan Parties. All action necessary to protect and perfect a
security interest in each item of the Collateral (excluding cash and cash
equivalents not constituting Proceeds) in which a security interest may be
perfected under Article 9 of the UCC has been duly taken, except that a security
interest in cash and cash equivalents not in the possession of Lender is not
perfected.
Section 4.12 Disclosure. No representation or warranty made by any
Loan Party in this Agreement or in any other document furnished or to be
furnished from time to time in connection herewith or therewith contains or will
contain any misrepresentation of a material fact or omits or will omit to state
any material fact necessary to make the statements herein or therein not
misleading. The Loan Parties represent and warrant that all information about
them
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and their business in the Form 10 Registration Statement filed by Borrower with
the Securities and Exchange Commission did not, on its filing or effective date,
contain any misrepresentation of a material fact or omit to state any material
fact necessary to make the statements therein not misleading.
Section 4.13 Survival of Representations and Warranties. The
foregoing representations and warranties are made by the Loan Parties with the
knowledge and intention that Lender will rely thereon, and shall survive the
execution and delivery of this Agreement. Such representations and warranties
shall be continuous in nature and shall remain accurate, complete and not
misleading during the term of this Agreement, except for changes to which Lender
consents in writing.
ARTICLE 5
AFFIRMATIVE COVENANTS
So long as any amount due on any Note remains outstanding and unpaid
or any other Obligation is owing to Lender, the Loan Parties agree as follows:
Section 5.1 Maintenance of Property; Insurance; Licenses. To the
extent applicable, the Loan Parties shall keep the Collateral in good working
order and condition, ordinary wear and tear excepted; maintain all workers'
compensation insurance required by law; maintain with financially sound and
reputable insurance companies insurance on the Collateral and liability
insurance with respect to its activities against at least such risks as are
usually insured against in the same general area by companies engaged in the
same or a similar business or use of Equipment similar to the Collateral, or, in
case of an Event of Default which shall occur and be continuing, as Lender may
specify from time to time, with insurers and in amounts acceptable to Lender;
and furnish to Lender, upon written request, full information as to the
insurance carried. Such insurance, other than Workers' compensation insurance
shall name Lender as additional insured or loss payee, as the case may be.
Section 5.2 Inspection of Property; Books and Records. Each Loan
Party grants to Lender, or its representatives, upon reasonable notice (or no
notice if Lender believes that an Event of Default has occurred and deems it
necessary for the protection of the Collateral or its rights under this
Agreement), full and complete access to the Collateral and all books of account,
records, correspondence and other papers relating to the Collateral during
normal business hours and the right to inspect, examine, verify and make
abstracts from the copies of such books of account, records, correspondence and
other papers and discuss the contents thereof and the Loan Parties' business and
financial condition and prospects with officers of Lender.
Section 5.3 Notices. Each Loan Party shall promptly give notice to
Lender of (i) any breach of any representation or warranty and (ii) the
occurrence of any Default or Event of Default setting forth the details of the
Default or Event of Default and any action taken or contemplated to be taken
with respect to the same.
Section 5.4 Collateral. The Loan Parties shall maintain the
Collateral, as the same is constituted from time to time, free and clear of all
Liens, except Permitted Liens; defend the
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Collateral against all claims and demands of all Persons at any time claiming
the same or any interest therein and pay all costs and expenses (including
reasonable attorney's fees) incurred in connection with such defense.
Section 5.5 Further Documents. The Loan Parties shall execute such
further documents and instruments and take such other action as to enable Lender
to cause Lender's Lien to be noted on each document of ownership or title as to
which evidence of Lender's Lien is necessary or, in Lender's or Lender's
counsel's opinion, advisable to be shown in order to perfect Lender's Lien on
the Collateral covered by such document.
In addition, the Loan Parties shall promptly pay all necessary
filing, subscription and inscription fees and all recording and other similar
fees, and all taxes and other expenses related to such filings, registrations or
recordings.
After the date hereof, at the request of Lender, the Loan Parties
shall pay, upon demand, all expenses (including reasonable attorneys' fees)
incurred by Lender in connection herewith and the other Loan Documents
including, protecting the Collateral or exercising any rights in connection
therewith.
Section 5.6 Licenses and Permits. The Loan Parties shall maintain
all licenses and permits applicable to the Collateral.
Section 5.7 Financial Statements. The Borrower shall keep adequate
records and books of account with respect to its business activities (and those
of Guarantor) in which proper entries are made in accordance with GAAP
reflecting all its financial transactions; and cause to be prepared and
furnished to Lender the following (all to be prepared in accordance with GAAP
applied on a consistent basis, unless Borrower's certified public accountants
concur in any change therein and such change is disclosed to Lender and is
consistent with GAAP):
(i) not later than ninety (90) days after the close of each
fiscal year of Borrower, audited consolidated financial
statements of Borrower as of the end of such year, certified by
a firm of independent certified public accountants of recognized
standing selected by Borrower but acceptable to Lender (except
for a qualification for a change in accounting principles with
which the accountant concurs);
(ii) not later than thirty (30) days after the end of each
quarter hereafter, unaudited, interim consolidated financial
statements of Borrower as of the end of such quarter and of the
portion of Borrower's financial year then elapsed, certified by
the principal financial officer of Borrower as prepared in
accordance with GAAP and fairly presenting the financial
position and results of operations of Borrower and its
consolidated subsidiaries for such period subject only to
changes from audit and year-end adjustments and except that such
statements need not contain notes;
(iii) promptly after the sending or filing thereof, as the
case may be, copies of any proxy statements, financial
statements or reports or other communications which Borrower has
made available to its shareholders; and
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(iv) such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably request,
bearing upon or related to this Agreement, the Collateral or a
Loan Party's financial condition, prospects or results of
operations.
Concurrently with the delivery of the financial statements
described in clause (i) of this Section 5.7, Borrower shall forward to Lender
(i) an officer's certificate in form satisfactory to Lender, as to the financial
statement delivered and (ii) a copy of the accountants' letter to Borrower's
management that is prepared in connection with such financial statements and
also shall cause to be prepared and shall furnish to Lender.
Section 5.8 Other Information. The Loan Parties shall furnish to
Lender such other information and reports in form and substance satisfactory to
Lender as and when Lender may from time to time reasonably request.
ARTICLE 6
NEGATIVE COVENANTS
So long as any amount due on any Note remains outstanding and unpaid
or any other Obligation is owing to Lender, the Loan Parties agree as follows:
Section 6.1 Limitation on Liens. No Loan Party shall create, incur,
assume or suffer to exist any Lien upon any of the Collateral, except for the
Permitted Liens.
Section 6.2 Limitation on Sale of Assets. No Loan Party shall
convey, sell, lease, assign, transfer or otherwise dispose of any of the
Collateral (other than in connection with the sale of goods in the ordinary
course of business), absent the written consent of Lender and upon such sale or
disposition, the proceeds thereof shall be paid to Lender.
Section 6.3 Change of Locations. No Loan Party shall remove the
Collateral from the location or jurisdiction set forth in Schedule 3.4; unless
(a) such Loan Party gives Lender prior written consent thereto (which consent
shall not be unreasonably withheld); and (b) a financing statement covering such
location of the Collateral is on file and of record in the appropriate
governmental office creating a valid first lien and security interest in the
Collateral in favor of Lender.
Section 6.4 Mergers; Consolidations; Acquisitions. No Loan Party
shall merge or consolidate, with any Person; nor acquire, all or any substantial
part of the properties or assets of any Person.
Section 6.5 Loans. No Loan Party shall make any loans or other
advances of money (other than for salary, travel advances, advances against
commissions and other similar advances in the ordinary course of business) to
any Person.
Section 6.6 Total Indebtedness. No Loan Party shall create, incur,
assume, or suffer to exist, any indebtedness, except:
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(i) Obligations owing to Lender;
(ii) obligations of Borrower or Guarantor under any
agreement listed on Schedule 1.1;
(iii) indebtedness existing on the date of this Agreement
and disclosed to Lender in writing;
(iv) indebtedness owing from Guarantor to Borrower or from
Borrower to Guarantor;
(v) accounts payable to trade creditors and current
operating expenses, in each case incurred in the ordinary course
of business; and
(vi) indebtedness not included in paragraphs (i) through
(v) above which does not exceed at any time, in the aggregate,
the sum of $1,000,000.00.
Section 6.7 Net Book Value. Borrower (together with its consolidated
subsidiaries) shall have a Net Book Value of not less than negative (-)
$3,500,000.00 as at the end of each fiscal quarter. Borrower shall provide to
Lender promptly at the end of each fiscal quarter a calculation of the Net Book
Value and all requested supporting documentation.
Section 6.8 Positive EBITDA. Beginning on the Borrower's fourth
fiscal quarter ended after the date hereof, Borrower (together with its
consolidated subsidiaries) shall have EBITDA (computed on a rolling four quarter
average basis) exceeding zero, which shall be measured as of the last day of
each fiscal quarter. Borrower shall provide to Lender promptly at the end of
each fiscal quarter a calculation of EBITDA at the end of such fiscal quarter
and a calculation setting forth the basis of the computation of the four quarter
average, as well as all requested supporting documentation.
Section 6.9 Dividends. Borrower shall not make, pay or declare any
dividend or other distribution on the capital stock of Borrower, absent Lender's
prior written consent, provided, however that Borrower may make a dividend
payable in its common stock or in rights to purchase such common stock.
Section 6.10 Other Changes. Absent Lender's prior written consent,
no Loan Party shall change its exact legal name, jurisdiction of organization,
chief executive office or principal place of business, its Organizational I.D.
Number and federal tax identification number, or its corporate structure in any
way (e.g., by merger, consolidation, change in corporate form or otherwise).
ARTICLE 7
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default. The occurrence of any one or more of
the following events shall constitute an Event of Default:
(a) Payments. Failure by Borrower to pay any interest on any Note
within five (5) Business Days of when it is due and payable or declared due and
payable, as the case may be, or failure by Borrower to pay any principal on any
Note on the date on which it is due and payable or declared due and payable, as
the case may be.
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(b) Commencement of Bankruptcy or Reorganization Proceeding.
(1) Any Loan Party shall commence any case, proceeding or
other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it as
bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, wind-up, liquidation,
dissolution, composition or other relief with respect to
it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets;
or
(2) There shall be commenced against a Loan Party any such
case, proceeding or other action which results in the
entry of an order for relief or any such adjudication or
appointment or remains undismissed, undischarged or
unbonded for a period of thirty (30) days; or
(3) There shall be commenced against a Loan Party any case,
proceeding or other action seeking issuance of a warrant
of attachment, execution, distraint or similar process
against all or any substantial part of its assets which
results in the entry of an order for any such relief
which shall not have been vacated, discharged, or stayed
or bonded pending appeal within thirty (30) days from
the entry thereof.
(c) Assignments and Delegations. Any attempt by a Loan Party to
transfer any of its rights or obligations under this Agreement without the prior
written consent of Lender.
(d) Misrepresentations. Any representation or warranty herein or
in any certificate or instrument finished by a Loan Party to Lender pursuant to
this Agreement, proves to have been false or misleading in any material respect.
(e) Covenants. Any Loan Party fails to perform or observe any
covenant or agreement contained herein or in any other Loan Document and, in the
case of any covenant or agreement other than Borrower's covenants and agreements
in the first sentence of Section 6.7 or the first sentence of Section 6.8, such
failure continues unremedied ten (10) days from the date on which Borrower first
became aware of such failure.
(f) Collateral. Any material loss, destruction or theft of any of
the Collateral not fully covered by insurance.
(g) Other Defaults. There shall occur any default or event of
default on the part of any Loan Party under any agreement, document or
instrument to which such Loan Party
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is a party or by which such Loan Party or any of its assets or property is
bound, (i) creating or relating to any indebtedness (other than the Obligations)
if the payment or maturity of such indebtedness is accelerated in consequence of
such default or event of default or demand for payment of such indebtedness is
made or if such indebtedness could be accelerated in accordance with its terms,
or (ii) under any of the agreements listed on Schedule 1.1.
Section 7.2 Remedies. Upon the occurrence of an Event of Default
described in this Article 7, Lender, at its option, may:
(a) declare the Obligations immediately due and payable, without
presentment, notice, protest or demand of any kind for the payment of all or any
part of the Obligations (all of which are expressly waived by the Loan Parties)
and exercise all of its rights and remedies against any Loan Party and any
Collateral provided herein or in any other agreement between any Loan Party and
Lender;
(b) terminate Borrower's right to receive any Revolving Loan; and
(c) exercise all rights granted to a secured party under the
Uniform Commercial Code or otherwise, provided, that upon the occurrence of an
Event of Default described in Section 7.1(b) above, all of the Obligations shall
become automatically due and payable without declaration, notice or demand by
Lender.
Upon the occurrence and during the continuance of an Event of Default, Lender
shall have the right, without notice of advertisement, to sell, lease, or
otherwise dispose of all or any part of the Collateral in the name of a Loan
Party, or Lender, or in the name of such other party as Lender may designate,
either at public or private sale or at any broker's board, in lots or in bulk,
for cash or for credit, with or without warranties or representations, and upon
such other terms and conditions as Lender, in its sole discretion, may deem
advisable, and Lender shall have the right to purchase at any such sale. If any
such Collateral shall require rebuilding, repairing, maintenance or preparation,
Lender shall have the right, at its option, to do such of the aforesaid as is
necessary, for the purpose of putting such Collateral in such saleable form as
Lender shall deem appropriate. Each Loan Party agrees, at the request of Lender
but at the Loan Party's expense, to assemble such Collateral and to make it
available to Lender, at its direction, either at Lender's principal place of
business, at the premises of the Loan Party or such other place Lender may
direct and to make available to Lender the premises and facilities of the Loan
Party for the purpose of Lender's taking possession of, removing or putting such
Collateral in saleable form. However, if notice of intended disposition of any
Collateral is required by law, it is agreed that ten (10) days' notice shall
constitute reasonable notification and full compliance with the law. The net
cash proceeds resulting from Lender's exercise of any of the foregoing rights
(after deducting all charges, costs and expenses including reasonable attorneys'
fees) shall be applied by Lender to the payment of the Obligations, whether due
or to become due, as provided in Section 2.5. The Loan Parties shall remain
liable to Lender for any deficiencies, and Lender in turn agrees to remit to the
Loan Parties, or its successors or assigns, any surplus resulting therefrom. The
enumeration of the foregoing rights is not intended to be exhaustive and the
exercise of any right shall not preclude the exercise of any other rights, all
of which shall be cumulative.
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Section 7.3 Application of Proceeds. Lender shall apply the proceeds
of any disposition of the Collateral to the payment of the Obligations in
accordance with the provisions of Section 2.5 hereof.
Section 7.4 Set-Off. Lender shall have the right, without prior
notice to the Loan Parties, any such notice being expressly waived to the extent
permitted by applicable law, to set-off and apply against the payment of the
Obligations, whether matured or unmatured, any amount owing from Lender to any
Loan Party at, or at any time after, the happening of any Event of Default, and
such right of set-off may be exercised by Lender against any Loan Party or
against any trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receiver, custodian or execution, judgment or attachment
creditor of any Loan Party, or against anyone else claiming through or against
the Loan Party or such trustee in bankruptcy, debtor in possession, assignee for
the benefit of creditors, receivers, or execution, judgment or attachment
creditor, notwithstanding the fact that such right of set-off shall not have
been exercised by Lender prior to the making, filing or issuance, or service
upon Lender of, or of notice of, any such petition, assignment for the benefit
of creditors, appointment or application for the appointment of a receiver, or
issuance of execution, subpoena, order or warrant.
Section 7.5 Rights Cumulative; Waiver. The rights, options and
remedies of Lender shall be cumulative and no failure or delay by Lender in
exercising any right, option or remedy shall be deemed a waiver thereof or of
any other right, option or remedy, or waiver of any Event of Default hereunder,
nor shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy hereunder. Lender shall not be deemed to have waived any
of Lender's rights hereunder or under any other agreement, instrument or paper
signed by a Loan Party unless such waiver shall be in writing and signed by
Lender in accordance with the provisions hereof.
ARTICLE 8
COLLECTION OF COLLATERAL AND NOTICE OF ASSIGNMENT
Section 8.1 Disclaimer of Liability. Lender shall not, under any
circumstances, be liable for any error or omission or delay of any kind
occurring in the settlement, collection or payment of any of the Collateral or
any instruments received in payment thereof or for any damage resulting
therefrom, unless caused by Lender's willful misconduct or gross negligence.
Lender shall not be liable for or prejudiced by any loss, depreciation or other
damage to the Collateral unless caused by Lender's malicious or gross negligence
act, and Lender shall have no duty to take any action to preserve or collect any
of the Collateral.
ARTICLE 9
SUBSIDIARY GUARANTY AND PLEDGE
Section 9.1 Payment Guaranty. Guarantor, as primary obligor and not
as a surety, unconditionally guarantees to Lender the full, prompt and punctual
payment and performance of the Obligations of Borrower when due (whether at the
stated maturity of such Obligations, by acceleration or otherwise) in accordance
with the Loan Documents. This Guaranty is
20
irrevocable, unconditional and absolute, and if for any reason all or any
portion of the Obligations shall not be paid when due, Guarantor will
immediately pay such Obligation to Lender or such other Person as may be
entitled to it, in dollars, regardless of (a) any defense, right of set-off or
counterclaim which Borrower or Guarantor may have or assert, (b) whether Lender
or any other Person shall have taken any steps to enforce any rights against any
Borrower, Guarantor or any other Person to collect any of the Obligations and
(c) any other circumstance, condition or contingency. Notwithstanding the
foregoing, the liability of Guarantor hereunder is and shall be limited to the
Obligations.
Section 9.2 Obligations Not Affected. Guarantor's covenants,
agreements and obligations under this Guaranty shall in no way be released,
diminished, reduced, impaired or otherwise affected by reason of the happening
from time to time of any of the following things, for any reason, whether by
voluntary act, operation of law or order of any competent governmental authority
and whether or not Guarantor is given any notice or is asked for or gives any
further consent (all requirements for which, however arising, Guarantor hereby
waives):
(a) release or waiver of any obligation or duty to perform or
observe any express or implied agreement, covenant, term or condition imposed in
any of the Loan Documents or by applicable law on Borrower, Guarantor or any
other obligor of the Obligations or any party to any of the Loan Documents;
(b) extension of the time for payment of any part of the
Obligations or any other sum payable under the Loan Documents, extension of the
time for performance of any other obligation under or arising out of or in
connection with the Loan Documents or change in the manner, place or other terms
of such payment or performance;
(c) settlement or compromise of any or all of the Obligations;
(d) renewal, supplementing, modification, rearrangement,
amendment, expansion, extension, restatement, replacement, cancellation,
rescission, revocation or reinstatement (whether or not material) of any part of
any of the Loan Documents or any obligations under the Loan Documents of
Borrower, Guarantor or any other obligor or any other party to the Loan
Documents;
(e) acceleration of the time for payment or performance of any
Obligation or other obligation under any of the Loan Documents or exercise of
any other right, privilege or remedy under or in regard to any of the Loan
Documents;
(f) failure, omission, delay, neglect, refusal or lack of
diligence by Lender or any other Person to assert, enforce, give notice of
intent to exercise, or any other notice with respect to, or exercise any right,
privilege, power or remedy conferred on Lender or any other Person in any of the
Loan Documents or by law or action on the part of Lender or any other Person
granting indulgence, grace, adjustment, forbearance or extension of any kind to
Borrower, Guarantor or any other obligor or any other Person;
(g) release, modification or waiver of, or failure, omission,
delay, neglect, refusal or lack of diligence to enforce, any guaranty, charge,
insurance agreement, bond, letter of credit or other security device, guaranty,
surety or indemnity agreement whatsoever;
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(h) taking or acceptance of any security or other guaranty for
the payment or performance of any or all of the Obligations or obligations of
any Borrower, Guarantor or any other obligor;
(i) release, modification or waiver of, or failure, omission,
delay, neglect, refusal or lack of diligence to enforce, any right, benefit,
privilege or interest under any contract or agreement, under which the rights of
Borrower, Guarantor or any other obligor have been collaterally or absolutely
assigned, or in which a security interest has been granted, to Lender as direct
or indirect security for payment of the Obligations or performance of any other
obligations to, or at any time held by, Lender;
(j) death, legal incapacity, disability, voluntary or involuntary
liquidation, dissolution, marshaling of assets and liabilities, change in
corporate or organizational status, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt or other similar proceedings of or affecting
Guarantor, Borrower or any other obligor or any of the assets of Guarantor,
Borrower or any other obligor, even if any of the Obligations are thereby
rendered void, unenforceable or uncollectible against any other Person;
(k) occurrence or discovery of any irregularity, invalidity or
unenforceability of any of the Obligations or Loan Documents or any defect or
deficiency in any of the Obligations or Loan Documents, including the
unenforceability of any provisions of any of the Loan Documents because entering
into any such Loan Document was ultra xxxxx or because anyone who executed them
exceeded their authority;
(l) failure by Lender or any other Person to notify, or timely
notify, Guarantor of any default, event of default or similar event (however
denominated) under any of the Loan Documents, any renewal, extension,
supplementing, modification, rearrangement, amendment, restatement, replacement,
cancellation, rescission, revocation or reinstatement (whether or not material)
or assignment of any part of the Obligations, release or exchange of any
security, any other action taken or not taken by Lender against any Borrower,
Guarantor or other obligor or any other Person or any direct or indirect
security for any part of the Obligations or other obligation of Borrower, any
new agreement between Lender and any Borrower, Guarantor or other obligor or any
other Person or any other event or circumstance;
(m) occurrence of any event or circumstances which might
otherwise constitute a defense available to, or a discharge of, Borrower,
Guarantor or any other obligor, including failure of consideration, fraud by or
affecting any Person, usury, forgery, breach of warranty, failure to satisfy any
requirement of the statute of frauds, running of any statute of limitation,
accord and satisfaction and any defense based on election of remedies of any
type;
(n) receipt and/or application of any proceeds, credits or
recoveries from any source, including any proceeds, credits, or amounts realized
from exercise of any of Lender's rights, remedies, powers or privileges under
the Loan Documents, by law or otherwise available to Lender; and
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(o) occurrence of any act, error or omission of Lender, except
behavior which is proven to be in bad faith to the extent (but no further) that
Guarantor cannot effectively waive the right to protest.
Guarantor acknowledges that Lender has no duty or obligation to give Guarantor
any notice of any kind under any circumstances whatsoever with respect to or in
connection with the Obligations or the Loan Documents.
Section 9.3 Not a Collection Guaranty. This Guaranty is an absolute
guaranty of payment and not of collection, and Guarantor waives any right to
require that any action be brought against Borrower or any other Person, or that
Lender be required to enforce or exhaust any of Lender's rights, benefits or
privileges under any of the Loan Documents, by law or otherwise; provided that
nothing herein shall be construed to prevent Lender from exercising and
enforcing at any time any right, benefit or privilege which Lender may have
under any Loan Document or by law from time to time, and at any time, and
Guarantor agrees that Guarantor's obligations hereunder are, and shall be,
absolute, independent and unconditional under any and all circumstances. Should
Lender seek to enforce Guarantor's obligations by action in any court, Guarantor
waives any requirement, substantive or procedural, that Lender pursue any
foreclosure action or that a judgment first be sought or rendered against
Borrower or any other Person be joined in such cause or that a separate action
be brought against Borrower or any other Person. The Guarantor's obligations
under this Guaranty are several from those of any other Person, and are primary
obligations concerning which the Guarantor is the principal obligor. All waivers
in this Guaranty or any of the Loan Documents shall be without prejudice to
Lender at its option to proceed against any Person, whether by separate action
or by joinder. The Guarantor agrees that this Guaranty shall not be discharged
except by indefeasible payment of the Obligations in full, complete performance
of all obligations of the Borrower and Guarantor under the Loan Documents and
termination of Lender's obligation, if any, to make any further advances under
the Note or extend other financial accommodations to Borrower or Guarantor.
Section 9.4 Payments Returned. Guarantor agrees that, if at any time
all or any part of any payment previously applied by Lender to the Obligations
is or must be returned by Lender, or recovered from Lender, for any reason
(including the order of any bankruptcy court), this Guaranty shall automatically
be reinstated to the same effect as if the prior application had not been made,
and, in addition, Guarantor hereby agrees to indemnify Lender against, and to
save and hold Lender harmless from any required return by Lender, or recovery
from Lender, of any such payment because of its being deemed preferential under
applicable bankruptcy, receivership or insolvency laws, or for any other reason.
Section 9.5 Subsidiary Pledge. To secure the prompt payment and
performance of all of the Obligations under the Loan Documents and its guarantee
made in this Article 9, Guarantor hereby grants to Lender a continuing security
interest in all of Guarantor's assets or property whether real, personal or
mixed, or tangible or intangible, wheresoever located, now owned or hereafter
acquired by Guarantor, including without limitation, all Accounts, Certificated
Securities, Chattel Paper, Contract Rights, Deposit Accounts, Documents,
Equipment, Financial Assets, Fixtures, General Intangibles, Goods, Instruments,
Inventory, Investment Property, Security Entitlements, Uncertificated
Securities, Commercial Tort Claims, Software, Letter of Credit Rights and all
Proceeds thereof (as each such defined term is defined in the UCC) and to
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the extent not included in the foregoing, all property and assets of any kind or
description owned by Guarantor, all of such assets and property (together with
the "Collateral" of Borrower pursuant to Section 3.1 hereof) being collectively
hereinafter the "Collateral."
Section 9.6 Further Agreement by Guarantor. The Guarantor agrees to
comply with the obligations set forth in Articles 3, 4, 5 and 6 hereof as if the
Guarantor were the "Borrower" hereunder.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Amendments and Waivers. The Loan Parties and Lender may
amend this Agreement or the Notes, and Lender may waive future compliance by any
Loan Party with any provision of this Agreement or the Notes, but no such
amendment or waiver shall be effective unless in a written instrument executed
by an authorized officer of Lender and each Loan Party.
Section 10.2 Notices. All notices, consents, requests and demands to
or upon the respective parties hereto shall be in writing and, unless otherwise
expressly provided herein, shall be deemed to have been duly given or made when
delivered by hand, or when deposited in the mail, postage prepaid, or, in the
case of telex, telegraphic or telecopy notice, when sent, addressed as follows:
If to Lender: Casual Male Retail Group, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: General Counsel/Chief Financial
Officer
Fax: (000) 000-0000
If to Borrower: LP Innovations, Inc.
00 X Xxxxxx
Xxxxxxx, XX 00000
Attn: President/Chief Financial Officer
Fax: (000) 000-0000
If to Guarantor: Securex LLC
c/o LP Innovations, Inc.
00 X Xxxxxx
Xxxxxxx, XX 00000
Attn: President/Chief Financial Officer
Fax: (000) 000-0000
Notices of changes of address shall be given in the same manner.
Section 10.3 Successors and Assigns. This Agreement will be binding
upon and inure to the benefit of each Loan Party, Lender and their respective
successors and assigns, except that no Loan Party may assign or transfer any of
its rights or obligations under this Agreement without the prior written consent
of Lender. Such consent may be refused for any reason or no
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reason at all. Any attempt by a Loan Party to transfer any of its rights or
obligations under this Agreement without the prior written consent of Lender
will be null and void and shall constitute an Event of Default under Section
7.1. If Lender transfers the Notes and its rights under this Agreement, then
Lender shall be relieved and released from its obligations hereunder.
Section 10.4 Collection Costs. All reasonable costs and expenses
incurred by Lender to obtain, enforce or preserve the security interests granted
by this Agreement and to collect the Obligations, including, without limitation,
all reasonable out-of-pocket costs, all reasonable costs to maintain and
preserve the Collateral and all reasonable attorneys' fees and legal expenses
incurred in obtaining or enforcing payment of any of the Obligations or
foreclosing Lender's security interest in any of the Collateral, whether through
judicial proceedings or otherwise, or in enforcing or protecting its rights and
interests under this Agreement or under any other instrument or document
delivered pursuant hereto, or in protecting the rights of any holder or holders
with respect thereto, or in defending or prosecuting any actions or proceedings
arising out of or relating to Lender's transactions with the Loan Parties, shall
be paid by the Loan Parties to Lender, upon demand, and Lender may take judgment
against the Loan Parties for all such costs, expense and fees in addition to all
other amounts due from the Loan Parties hereunder.
Section 10.5 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.
Section 10.6 Governing Law. This Agreement and the Notes and the
rights and obligations of the parties under this Agreement and the Notes is
governed by, and shall be construed and interpreted in accordance with, the laws
of the State of New York, without regard to New York choice of law provisions.
Section 10.7 Consent to Jurisdiction. Each Loan Party hereby
absolutely and irrevocably consents and submits to the jurisdiction of the
courts of the State of New York and of any federal court located in the said
state in connection with any actions or proceedings brought against any Loan
Party by Lender arising out of or relating to this Agreement, the Notes or any
other Loan Documents. Each Loan Party hereby waives and shall not assert in any
such action or proceeding, in each case, to the fullest extent permitted by
applicable law, any claim that (a) the Loan Party is not personally subject to
the jurisdiction of any such court, (b) the Loan Party is immune from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to it or
its property, (c) any such suit, action or proceeding is brought in an
inconvenient forum, (d) the venue of any such suit, action or proceeding is
improper, or (e) this Agreement, any Note or any Loan Document may not be
enforced in or by any such court. In any such action or proceeding, each Loan
Party hereby absolutely and irrevocably waive personal service of any summons,
complaint, declaration or other process and hereby absolutely and irrevocably
agree that the service thereof may be made as Lender may elect, by certified
mail directed to the Loan Party at the location provided for notices to such
Loan Party under this Agreement or, in the alternative, in any other form or
manner permitted by law. Each Loan Party hereby agrees that they will appear or
answer any such summons, complaint, declaration or other process so served upon
them within thirty (30) days after receipt of notice thereof. Any action brought
by a Loan Party in connection with this Agreement or the transactions
contemplated hereby shall be brought in
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any state or federal court sitting in the State of New York. Anything
hereinbefore to the contrary notwithstanding, Lender hereof may xxx any Loan
Party in the courts of any other country, state of the United States or place
where a Loan Party or any of the property or assets may be found or in any other
appropriate jurisdictions.
Section 10.8 WAIVER OF JURY TRIAL. AS A SPECIFICALLY BARGAINED
INDUCEMENT FOR THE LENDER TO MAKE CREDIT AVAILABLE TO THE BORROWER, AND AFTER
HAVING THE OPPORTUNITY TO CONSULT ITS ADVISORS AND COUNSEL, EACH LOAN PARTY
HEREBY EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING
RELATING TO THIS AGREEMENT OR ARISING IN ANY WAY FROM THE OBLIGATIONS.
Section 10.9 Other Waivers. Each Loan Party waives notice of
nonpayment, demand, notice of demand, presentment, protest and notice of protest
with respect to the Obligations, or notice of acceptance hereof, notice of the
Loan made or Previous Advancements extended, credit extended, Collateral
received or delivered, or any other action taken in reliance hereon, and all
other demands and notices of any description, except such as are expressly
provided for herein.
Section 10.10 Power of Attorney. Each Loan Party hereby irrevocably
designates, makes, constitutes and appoints Lender (and all Persons designated
by Lender) as its true and lawful attorney (and agent-in-fact) and Lender, or
Lender's agent, may, without notice to the Loan Party at any time, after the
occurrence of an Event of Default, and in either the Loan Party's or Lender's
name, but at the cost and expense of the Loan Party, act and perform under this
Agreement and the other Loan Documents as Lender sees fit in its sole
discretion.
Section 10.11 Indemnity. Each Loan Party hereby agrees to indemnify
Lender and hold Lender harmless from and against any liability, loss, damage,
suit, action or proceeding ever suffered or incurred by Lender (including
reasonable attorneys fees and legal expenses) as the result of a Loan Party's
failure to observe, perform or discharge its duties hereunder. In addition, each
Loan Party shall defend Lender against and save it harmless from all claims of
any Person with respect to the Collateral. Without limiting the generality of
the foregoing, these indemnities shall extend to any claims asserted against
Lender by any Person under any environmental laws or similar laws by reason of
the Loan Party's or any other Person's failure to comply with laws applicable to
solid or hazardous waste materials or other toxic substances. Notwithstanding
any contrary provision in this Agreement, the obligations of each Loan Party
under this Section 10.11 shall survive the payment in full of the Obligations
and the termination of this Agreement.
Section 10.12 Entire Agreement. This Agreement, the Notes and the
other Loan Documents embody the entire understanding and agreement among the
parties hereto and thereto with respect to the subject matter hereof and thereof
and supersede all prior agreements, understandings and inducements, whether
express or implied, oral or written.
Section 10.13 Interpretation. No provision of this Agreement or any
of the other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement by
their duly authorized officers as of the date first above written.
LENDER:
CASUAL MALE RETAIL GROUP, INC.
By:
-------------------------------------
Name:
Title:
BORROWER:
LP INNOVATIONS, INC.
By:
-------------------------------------
Name:
Title:
GUARANTOR:
SECUREX LLC
By:
-------------------------------------
Name:
Title:
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