Exhibit 99.1
CREDIT
AND
SECURITY AGREEMENT
NATIONAL CITY BUSINESS CREDIT, INC.
(AS LENDER)
and
NATIONAL CITY BANK
(AS ISSUER)
and
THE BORROWERS PARTY HERETO
(AS BORROWERS)
and
THE GUARANTORS PARTY HERETO
(AS GUARANTORS)
DECEMBER 29, 2005
TABLE OF CONTENTS
I. DEFINITIONS.......................................................1
1.1 Accounting Terms..................................................1
1.2 General Terms.....................................................1
1.3 Uniform Commercial Code Terms....................................21
1.4 Certain Matters of Construction..................................21
II. ADVANCES, PAYMENTS...............................................21
2.1 Revolving Advances...............................................21
2.2 Procedure for Borrowing Advances.................................22
2.3 Disbursement of Advance Proceeds.................................24
2.4 Term Loan........................................................25
2.5 Maximum Revolving Advances.......................................25
2.6 Repayment of Advances............................................25
2.7 Repayment of Excess Advances.....................................26
2.8 Statement of Account.............................................26
2.9 Letters of Credit................................................27
2.10 Issuance of Letters of Credit....................................27
2.11 Requirements For Issuance of Letters of Credit...................28
2.12 Additional Payments..............................................29
2.13 Use of Proceeds..................................................30
III. INTEREST AND FEES................................................30
3.1 Interest.........................................................30
3.2 Letter of Credit Fees............................................30
3.3 Closing Fee/Facility Fee.........................................31
3.4 Collateral Fees..................................................31
3.5 Computation of Interest and Fees.................................32
3.6 Maximum Charges..................................................32
3.7 Increased Costs..................................................32
3.8 Basis For Determining Interest Rate Inadequate or
Unfair...........................................................33
3.9 Capital Adequacy.................................................33
IV. COLLATERAL: GENERAL TERMS........................................34
4.1 Security Interest in the Collateral..............................34
4.2 Perfection of Security Interest..................................34
4.3 Disposition of Collateral........................................35
4.4 Preservation of Collateral.......................................35
4.5 Ownership of Collateral..........................................36
4.6 Defense of the Lender's Interests................................36
4.7 Books and Records................................................37
4.8 Financial Disclosure.............................................37
4.9 Compliance with Laws.............................................37
4.10 Inspection of Premises...........................................37
4.11 Insurance........................................................38
4.12 Failure to Pay Insurance.........................................39
4.13 Payment of Taxes.................................................40
4.14 Payment of Leasehold Obligations.................................40
4.15 Receivables......................................................40
4.16 Maintenance of Equipment.........................................43
4.17 Exculpation of Liability.........................................43
4.18 Environmental Matters............................................44
-i-
4.19 Financing Statements.............................................46
V. REPRESENTATIONS AND WARRANTIES...................................46
5.1 Authority........................................................46
5.2 Formation and Qualification......................................47
5.3 Survival of Representations and Warranties.......................47
5.4 Tax Returns......................................................47
5.5 Financial Statements.............................................48
5.6 Corporate Name...................................................48
5.7 O.S.H.A. and Environmental Compliance............................48
5.8 Solvency; No Litigation, Violation, Indebtedness
or Default.......................................................49
5.9 Patents, Trademarks, Copyrights and Licenses.....................50
5.10 Licenses and Permits.............................................51
5.11 Default of Indebtedness..........................................51
5.12 No Default.......................................................51
5.13 No Burdensome Restrictions.......................................51
5.14 No Labor Disputes................................................51
5.15 Margin Regulations...............................................51
5.16 Investment Company Act...........................................52
5.17 Disclosure.......................................................52
5.18 Hedging Contracts................................................52
5.19 Conflicting Agreements...........................................52
5.20 Application of Certain Laws and Regulations......................52
5.21 Business and Property of the Loan Parties........................52
5.22 Section 20 Subsidiaries..........................................52
5.23 Anti-Terrorism Laws..............................................53
5.24 Inactive Subsidiaries............................................53
VI. AFFIRMATIVE COVENANTS............................................53
6.1 Payment of Fees..................................................54
6.2 Conduct of Business and Maintenance of Existence
and Assets.......................................................54
6.3 Violations.......................................................54
6.4 Government Receivables...........................................54
6.5 Fixed Charge Coverage Ratio......................................54
6.6 Execution of Supplemental Instruments............................55
6.7 Payment of Indebtedness..........................................55
6.8 Standards of Financial Statements................................55
6.9 Anti-Terrorism Laws..............................................55
VII. NEGATIVE COVENANTS...............................................56
7.1 Merger, Consolidation, Acquisition and Sale of Assets............56
7.2 Creation of Liens................................................56
7.3 Guarantees.......................................................56
7.4 Investments......................................................56
7.5 Loans............................................................57
7.6 Capital Expenditures.............................................57
7.7 Dividends........................................................58
7.8 Indebtedness.....................................................58
7.9 Nature of Business...............................................58
7.10 Transactions with Affiliates.....................................59
7.11 Leases...........................................................59
7.12 Subsidiaries.....................................................59
7.13 Fiscal Year and Accounting Changes...............................59
7.14 Pledge of Credit.................................................60
-ii-
7.15 Amendment of Articles of Incorporation, By-Laws,
Certificate of Limited Partnership, Limited
Partnership Agreement, Articles of Organization,
Operating Agreement, Etc.........................................60
7.16 Compliance with ERISA............................................60
7.17 Prepayment of Indebtedness.......................................60
7.18 Inactive Subsidiaries............................................61
VIII. CONDITIONS PRECEDENT.............................................61
8.1 Conditions to Initial Advances...................................61
8.2 Conditions to Each Advance.......................................65
IX. INFORMATION AS TO THE LOAN PARTIES...............................66
9.1 Disclosure of Material Matters...................................66
9.2 Schedules........................................................66
9.3 Environmental Reports............................................67
9.4 Litigation.......................................................67
9.5 Material Occurrences.............................................67
9.6 Government Receivables...........................................68
9.7 Annual Financial Statements......................................68
9.8 Quarterly Financial Statements...................................68
9.9 Monthly Financial Statements.....................................69
9.10 Other Reports....................................................69
9.11 Additional Information...........................................69
9.12 Projected Operating Budget.......................................69
9.13 Notice of Suits, Adverse Events..................................70
9.14 ERISA Notices and Requests.......................................70
9.15 Additional Documents.............................................71
X. EVENTS OF DEFAULT................................................71
10.1 Payment of Obligations...........................................71
10.2 Misrepresentations...............................................71
10.3 Failure to Furnish Information...................................71
10.4 Liens Against Assets.............................................71
10.5 Breach of Covenants..............................................71
10.6 Judgment.........................................................72
10.7 Insolvency and Related Proceedings of the Loan Parties...........72
10.8 Insolvency; Cessation of Operations..............................72
10.9 Bankruptcy.......................................................72
10.10 Material Adverse Effect..........................................72
10.11 Loss of Priority Lien............................................72
10.12 Breach of Material Agreements....................................73
10.13 Cross Default; Cross Acceleration................................73
10.14 Termination of Guaranty..........................................73
10.15 Change of Control................................................73
10.16 Invalidity of Credit Agreement...................................73
10.17 Loss of Material Intellectual Property...........................73
10.18 Destruction of Collateral........................................74
10.19 Business Interruption............................................74
10.20 ERISA Events.....................................................74
XI. LENDER'S RIGHTS AND REMEDIES AFTER DEFAULT.......................74
11.1 Rights and Remedies..............................................74
11.2 Lender Discretion................................................75
11.3 Setoff...........................................................75
-iii-
11.4 Rights and Remedies not Exclusive................................75
11.5 Allocation of Payments After Event of Default....................75
XII. WAIVERS AND JUDICIAL PROCEEDINGS.................................76
12.1 Waiver of Notice.................................................76
12.2 Delay............................................................77
12.3 Jury Waiver......................................................77
XIII. EFFECTIVE DATE AND TERMINATION...................................77
13.1 Term.............................................................77
13.2 Termination......................................................78
XIV. REGARDING LENDER AS COLLATERAL AGENT.............................78
14.1 Appointment......................................................78
14.2 Lack of Reliance on Lender.......................................78
14.3 Reliance.........................................................79
14.4 Notice of Default................................................79
14.5 Delivery of Documents............................................79
14.6 No Reliance on Lender's Customer Identification Program..........79
XV. BORROWING AGENCY.................................................80
15.1 Borrowing Agency Provisions......................................80
15.2 Waivers..........................................................80
XVI. MISCELLANEOUS....................................................81
16.1 Governing Law....................................................81
16.2 Entire Understanding.............................................81
16.3 Transfers and Assignments........................................82
16.4 Application of Payments..........................................83
16.5 Indemnity........................................................83
16.6 Notice...........................................................83
16.7 Survival.........................................................86
16.8 Severability.....................................................86
16.9 Expenses.........................................................86
16.10 Injunctive Relief................................................86
16.11 Consequential Damages............................................87
16.12 Captions.........................................................87
16.13 Counterparts; Telecopied Signatures..............................87
16.14 Construction.....................................................87
16.15 Confidentiality; Sharing Information.............................87
16.16 Tax Withholding Clause...........................................88
16.17 USA Patriot Act..................................................89
16.18 Publicity........................................................89
-iv-
CREDIT AND SECURITY AGREEMENT
Credit and Security Agreement (this "Agreement"), executed the 28th day of
December, 2005, to be effective on the 29th day of December, 2005 (the
"Effective Date"), by and among the Borrowers (as hereinafter defined), the
Guarantors (as hereinafter defined), National City Business Credit, Inc., an
Ohio corporation ("NCBC"), as lender (the "Lender") and National City Bank, a
national banking association, as the Issuer (as defined below).
IN CONSIDERATION of the mutual covenants and undertakings herein contained,
the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the
Guarantors, the Lender and the Issuer hereby agree as follows:
I. DEFINITIONS.
1.1 Accounting Terms.
As used in this Agreement, the Notes, or any certificate, report or other
document made or delivered pursuant to this Agreement, accounting terms not
defined in Section 1.2 or elsewhere in this Agreement and accounting terms
partly defined in Section 1.2 to the extent not defined shall have the
respective meanings given to them under GAAP; provided, however, whenever such
accounting terms are used for the purposes of determining compliance with
financial covenants in this Agreement, such accounting terms shall be defined in
accordance with GAAP. All financial computations to be made under this Agreement
shall, unless otherwise specifically provided herein, be made in accordance with
GAAP applied on a basis consistent in all material respects with the financial
statements delivered to the Lender on or prior to the Closing Date.
1.2 General Terms.
For purposes of this Agreement, the following terms shall have the
following meanings:
"Accountants" shall have the meaning set forth in Section 9.7.
"Advances" shall mean and include the Revolving Advances, Letters of Credit
and the Term Loan.
"Advance Rates" shall have the meaning set forth in Section 2.1(a) hereof.
"Affiliate" of any Person shall mean (a) any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person, or (b) any Person who is a director or officer (i) of such Person,
(ii) of any Subsidiary of such Person or (iii) of any Person described in clause
(a) above. For purposes of this definition, control of a Person shall mean the
power, direct or indirect, (x) to vote twenty-five percent (25%) or more of the
securities having ordinary voting power for the election of directors of such
Person, or (y) to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
-1-
"Agreement" shall have the meaning set forth in the preamble to this
Agreement, as amended, restated, modified or supplemented from time to time.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal to
the higher of: (a) the rate of interest which is established from time to time
by National City Bank at its principal office in Cleveland, Ohio as its "prime
rate" or "base rate" in effect, such rate to be adjusted automatically, without
notice, as of the opening of business on the effective date of any change in
such rate (it being agreed that: (i) such rate is not necessarily the lowest
rate of interest then available from National City Bank on fluctuating rate
loans and (ii) such rate may be established by National City Bank by public
announcement or otherwise) and (b) the Federal Funds Effective Rate in effect on
such day plus one half of one percent (.50%).
"Anti-Terrorism Laws" shall mean any laws relating to terrorism or money
laundering, including Executive Order No. 13224, the USA Patriot Act, the laws
comprising or implementing the Bank Secrecy Act, and the laws administered by
the United States Treasury Department's Office of Foreign Asset Control (as any
of the foregoing laws may from time to time be amended, renewed, extended, or
replaced).
"Authority" shall have the meaning set forth in Section 4.18(d) hereof.
"Blocked Account Agreements" shall mean, collectively, each of the Blocked
Account Agreements in form and substance satisfactory to the Lender, entered
into by the Borrowers, as applicable, the Lender and the applicable Lockbox Bank
at which the applicable Collection Account is located, together with all
amendments, supplements, modifications, substitutions and replacements thereto
and thereof.
"Blocked Person" shall have the meaning assigned to such term in Section
5.23(b) hereof.
"Borrower" shall mean BTL, BDR and any other Person who may hereafter
become a party hereto as a borrower and "Borrowers" shall collectively mean all
such Persons.
"Borrowing Agent" shall mean BTL.
"Borrowing Base Certificate" shall mean a certificate duly executed by an
officer of the Borrowing Agent appropriately completed and in substantially the
form of Exhibit A hereto.
"BDR" shall mean BDR Broadband, LLC, a Delaware limited liability company
and its successors and assigns.
"BTFE" shall mean Blonder Tongue Far East, LLC, a Delaware limited
liability company and its successors and assigns.
"BTIC" shall mean Blonder Tongue Investment Company, a Delaware corporation
and its successors and assigns.
-2-
"BTII" shall mean Blonder Tongue International, Inc., a Delaware
corporation and its successors and assigns.
"BTL" shall mean Blonder Tongue Laboratories, Inc., a Delaware corporation
and its successors and assigns.
"Business Day" shall mean any day other than Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required by law to be closed
for business in Cleveland, Ohio and, if the applicable Business Day relates to
any Libor Rate Loans, such day must also be a day on which dealings are carried
on in the London interbank market.
"Capital Expenditures" shall mean any expenditure made or liability
incurred which is, determined in accordance with GAAP, treated as a capital
expenditure (including, but not limited to, capital lease obligations) and not
as an expense item for the year in which it was made or incurred, as the case
may be.
"Cash Concentration Account" shall mean, with respect to the Borrowers,
that certain commercial deposit account at National City Bank, in the name of
NCBC, designated as "National City Business Credit, Inc. (for the benefit of
itself and the Issuer) Borrowing Agent Cash Concentration Account", which shall
be: (a) maintained by the Lender with National City Bank pursuant to a Deposit
Account Agreement, without liability by the Lender or National City Bank to pay
interest thereon, (b) the funds within which shall be the sole and exclusive
property of the Lender and (c) from which account the Lender shall have the
irrevocable and exclusive right to withdraw funds until all of the Obligations
are paid, performed, satisfied and enforced in full and the commitments of the
Lender to make Advances hereunder and all Letters of Credit have terminated.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601 et seq.
"Change of Control" shall mean (i) any event or circumstance pursuant to
which any "person" or "group" of related persons (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) other than the Permitted Holders
becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that such person or group shall be deemed to have
"beneficial ownership" of all shares that any such person or group has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than twenty five percent (25%)
of the total voting power of the voting stock of BTL (for the purposes of this
clause, such person or group shall be deemed to beneficially own any voting
stock of BTL held by a parent entity, if such persons or group "beneficially
owns" (as defined above), directly or indirectly, more than twenty five percent
(25%) of the voting power of the voting stock of such parent entity); or (ii)
the first (1st) day on which a majority of the members of the Board of Directors
of BTL are not Continuing Directors; (iii) the sale, lease, transfer, conveyance
or other disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the assets of BTL
and its Subsidiaries taken as a whole to any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act); or (iv) the adoption by the
stockholders of BTL of a plan or proposal for the liquidation or dissolution of
BTL.
-3-
"Charges" shall mean all taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation and property taxes,
custom duties, fees, assessments, liens, claims and charges, together with any
interest and any penalties, additions to tax or additional amounts, imposed by
any taxing or other similar governmental authority, domestic or foreign
(including, without limitation, the Pension Benefit Guaranty Corporation or any
environmental agency or superfund), upon the Collateral, any Loan Party or any
of its Affiliates.
"CIP Regulations" shall have the meaning assigned to such term in Section
14.6 hereof.
"Closing Date" shall mean December 29, 2005 or such other date as may be
agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time and the regulations promulgated thereunder.
"Collateral" shall mean and include:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Investment Property;
(f) all Subsidiary Stock;
(g) all Real Property;
(h) all Rights of Entry;
(i) all of each Loan Party's right, title and interest in and to (i)
its respective goods and other personal property including, but not limited
to, all merchandise returned or rejected by Customers, relating to or
securing any of the Receivables; (ii) all of each Loan Party's rights as a
consignor, a consignee, an unpaid vendor, mechanic, artisan, or other
lienor, including stoppage in transit, setoff, detinue, replevin,
reclamation and repurchase; (iii) all additional amounts due to any Loan
Party from any Customer relating to the Receivables; (iv) other property,
including warranty claims, relating to any goods securing this Agreement;
(v) all of each Loan Party's contract rights, rights of payment which have
been earned under a contract right, instruments (including promissory
notes), documents, chattel paper (including electronic chattel paper),
warehouse receipts, deposit accounts including, but not limited to, the
Blocked Accounts, letters of credit, and money; (vi) all commercial tort
claims (whether now existing or
-4-
hereafter arising); (vii) if and when obtained by any Loan Party, all real
and personal property of third parties in which such Loan Party has been
granted a lien or security interest as security for the payment or
enforcement of Receivables; and (viii) any other goods, personal property
or real property now owned or hereafter acquired in which any Loan Party
has expressly granted a security interest or may hereafter in the future
grant a security interest to the Lender hereunder, or in any amendment or
supplement hereto or thereto, or under any other agreement between the
Lender and any Loan Party;
(j) all of each Loan Party's ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computer
software (owned by any Loan Party or in which it has an interest), computer
programs, tapes, disks and documents relating to (a), (b), (c), (d), (e),
(f), (g), (h) or (i) of this Paragraph; and
(k) all proceeds and products of (a), (b), (c), (d), (e), (f), (g),
(h), (i) and (j) in whatever form, including, but not limited to: cash,
deposit accounts (whether or not comprised solely of proceeds),
certificates of deposit, insurance proceeds (including hazard, flood and
credit insurance), negotiable instruments and other instruments for the
payment of money, chattel paper, security agreements, documents, eminent
domain proceeds, condemnation proceeds and tort claim proceeds.
"Collection Accounts" shall have the meaning set forth in Section 4.15(g)
hereof.
"Consents" shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and other third parties, domestic or foreign, necessary to carry on any Loan
Party's business, including, without limitation, any Consents required under all
applicable federal, state or other applicable law.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of BTL who: (i) was a member of such Board of
Directors on the date hereof; or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board of Directors at the time of such
nomination or election.
"Contract Rate" shall mean, as applicable, the Revolving Interest Rate or
the Term Loan Rate.
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with any Loan Party, are treated as a single
employer under Section 414 of the Code.
"Customer" shall mean and include the account debtor with respect to any
Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with any Loan Party,
pursuant to which such Loan Party is to deliver any personal property or perform
any services.
"Default" shall mean an event which, with the giving of notice or passage
of time or both, would constitute an Event of Default.
-5-
"Default Rate" shall have the meaning set forth in Section 3.1(b) hereof.
"Deposit Account Agreement" shall have the meaning set forth in Section
4.15(g) hereof.
"Dollar" and the sign "$" shall mean lawful money of the United States of
America.
"Domestic Rate Loan" shall mean any Advance that bears interest based upon
the Alternate Base Rate.
"Domestic Subsidiary" shall mean a Subsidiary organized under the laws of
any state of the United States of America or the District of Columbia.
"Early Termination Date" shall have the meaning set forth in Section 13.1.
"Earnings Before Interest and Taxes" shall mean for any fiscal period the
sum of (i) net income (or loss) of BTL and its Subsidiaries determined on a
consolidated basis for such period (excluding extraordinary gains) in accordance
with GAAP, (ii) plus any increases and minus any decreases in the non-current
inventory reserves taken into account in determining net income, (iii) plus all
interest expense of BTL and its Subsidiaries determined on a consolidated basis
for such period in accordance with GAAP and (iv) plus all charges against or
minus credits to income of BTL and its Subsidiaries for federal, state and local
taxes determined on a consolidated basis for such period in accordance with
GAAP.
"EBITDA" shall mean for any fiscal period the sum of (i) Earnings Before
Interest and Taxes for such period, (ii) plus depreciation expenses of BTL and
its Subsidiaries determined on a consolidated basis for such period, and (iii)
plus amortization expenses of BTL and its Subsidiaries determined on a
consolidated basis for such period in accordance with GAAP.
"Eligible Inventory" shall mean and include with respect to each Borrower,
Inventory, excluding work-in-process and raw materials, of each Borrower, valued
at the lower of cost or market value, determined on a first-in-first-out basis,
which is not, in the Lender's opinion, obsolete, slow moving or unmerchantable
and which the Lender, in its sole and reasonable discretion, shall not deem
ineligible Inventory, based on such considerations as the Lender may from time
to time reasonably deem appropriate including, without limitation, whether the
Inventory is subject to a perfected, first priority security interest in favor
of the Lender and whether the Inventory conforms to all standards imposed by any
governmental agency, division or department thereof which has regulatory
authority over such goods or the use or sale thereof.
In addition, no Inventory of any Borrower shall be Eligible Inventory if it:
(a) is not owned by such Borrower free and clear of all Liens and rights of
any other Person (including the rights of a purchaser that has made progress
payments and the rights of a surety that has issued a bond to assure such
Borrower's performance with respect to
-6-
that Inventory), except the Liens in favor of the Lender, and other Permitted
Encumbrances (subject to reserves established by the Lender in accordance with
the terms of this Agreement);
(b) (i) is not located on premises owned, leased or rented by such Borrower
and set forth in Schedule 4.5 (as such Schedule may be updated from time to
time), or (ii) is stored at a leased location, unless a reasonably satisfactory
landlord waiver has been delivered to the Lender, or reserves reasonably
satisfactory to the Lender have been established by the Lender with respect
thereto or (iii) is stored with a bailee or warehouseman, unless a reasonably
satisfactory warehouseman waiver or a reasonably satisfactory, acknowledged
bailee letter has been received by the Lender or reserves reasonably
satisfactory to the Lender have been established by the Lender with respect
thereto, or (iv) is held at a location owned by a Borrower that is subject to a
mortgage in favor of a lender other than the Lender unless a reasonably
satisfactory mortgagee waiver has been delivered to the Lender, or reserves
reasonably satisfactory to the Lender have been established by the Lender with
respect thereto;
(c) is in transit unless such otherwise Eligible Inventory is (i) in
transit from a domestic location owned by a Borrower or a domestic location
identified on Schedule 8.1(s) (as such Schedule may be updated from time to
time) to a domestic location owned by a Borrower or a location identified on
Schedule 8.1(s) (as such Schedule may be updated from time to time) or (ii)
inventory for which title has passed to such Borrower, which is insured to the
full value thereof and with respect to which (A) all negotiable bills of lading
shall be properly endorsed and in the Lender's possession and (B) all
non-negotiable bills of lading shall be issued in the Lender's name;
(d) is covered by a negotiable document of title, unless such document has
been delivered to the Lender with all necessary endorsements, free and clear of
all Liens except those in favor of the Lender;
(e) is placed on consignment (or is being held pursuant to a consignment
agreement) unless all steps necessary to perfect the Lender's Lien thereon have
been properly taken to the satisfaction of the Lender;
(f) is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for
sale;
(g) consists of goods which have been returned by the Customer and cannot
be sold as "new" goods, excluding goods returned for reprocessing in the
ordinary course of business;
(h) consists of display items or packing or shipping materials,
manufacturing supplies or replacement parts;
(i) is not of a type held for sale in the ordinary course of such
Borrower's business;
(j) breaches any of the representations or warranties pertaining to
Inventory of such Borrower set forth in this Agreement or in any of the Other
Documents;
-7-
(k) consists of any costs associated with "freight-in" charges;
(l) consists of any gross profit xxxx-up in connection with the sale and
distribution thereof to any division of any Borrower or to any Affiliate of such
Borrower;
(m) consists of Hazardous Substances or goods that can be transported or
sold only with licenses that are not readily available;
(n) is not covered by casualty insurance reasonably acceptable to the
Lender, as required by terms of this
Agreement;
(o) was produced in violation of the Fair Labor Standards Act and subject
to the "hot goods" provision contained in Title 29 U.S.C. Section 215(a)(1);
(p) is within a category of Inventory on hand that exceeds sales of such
Inventory for the most recent twelve (12) month period; or
(q) is not otherwise satisfactory to the Lender, as determined in good
faith by the Lender in the exercise of its discretion in a reasonable manner.
"Eligible Receivables" shall mean and include with respect to each
Borrower, each Receivable of such Borrower arising in the ordinary course of
such Borrower's business and which the Lender, in its sole and reasonable credit
judgment, shall deem to be an Eligible Receivable, based on such considerations
as the Lender may from time to time deem appropriate. A Receivable shall not be
deemed eligible unless such Receivable is subject to the Lender's first priority
perfected security interest and no other Lien (other than Permitted
Encumbrances), and is evidenced by an invoice or other documentary evidence
satisfactory to the Lender. In addition, no Receivable of a Borrower shall be an
Eligible Receivable if:
(a) it arises out of a sale made by any Borrower to an Affiliate of any
Borrower or to a Person controlled by an Affiliate of any Borrower;
(b) it is due or unpaid more than sixty (60) days after the original due
date or more than one hundred twenty (120) days after the original invoice date;
(c) fifty percent (50%) or more of the Receivables from such Customer are
not deemed Eligible Receivables hereunder;
(d) any covenant, representation or warranty contained in this Agreement
with respect to such Receivable has been breached;
(e) the Customer shall (i) apply for, suffer, or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or liquidator
of itself or of all or a substantial part of its property or call a meeting of
its creditors, (ii) admit in writing its inability, or be generally unable, to
pay its debts as they become due or cease operations of its present business,
(iii) make a general assignment for the benefit of creditors, (iv) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition
seeking to take advantage of any other law providing
-8-
for the relief of debtors, (vii) acquiesce to, or fail to have dismissed, any
petition which is filed against it in any involuntary case under such bankruptcy
laws, or (viii) take any action for the purpose of effecting any of the
foregoing;
(f) the sale is to a Customer outside the continental United States of
America or Canada, unless the sale is on letter of credit, guaranty or
acceptance terms, in each case acceptable to the Lender in its sole reasonable
discretion;
(g) the sale to the Customer is on a xxxx-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase or return
basis or is evidenced by chattel paper;
(h) the Lender believes, in its sole reasonable judgment, that collection
of such Receivable is insecure or that such Receivable may not be paid by reason
of the Customer's financial inability to pay;
(i) the Customer is the United States of America, any state or any
department, agency or instrumentality of any of them, unless the applicable
Borrower assigns its right to payment of such Receivable to the Lender pursuant
to the Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727
et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with
other applicable laws and has complied with Section 6.4 hereof;
(j) the goods giving rise to such Receivable have not been shipped to the
Customer or the services giving rise to such Receivable have not been performed
by the applicable Borrower or the Receivable otherwise does not represent a
final sale;
(k) the Receivables of the Customer exceed a credit limit determined by the
Lender, in its sole reasonable discretion, to the extent such Receivables exceed
such limit;
(l) the Receivable is subject to any offset (unless such Borrower has
received a letter from the Customer in form and substance satisfactory to the
Lender indicating that such Customer shall not exercise its right of offset),
deduction, defense, dispute, or counterclaim, or is owed by a Customer that is
also a creditor or supplier of a Borrower (but only to the extent of such
Borrower's obligations to such customer from time to time) or the Receivable is
contingent in any respect or for any reason;
(m) the applicable Borrower has made any agreement with any Customer for
any deduction therefrom, except for discounts or allowances made in the ordinary
course of business for prompt payment, all of which discounts or allowances are
reflected in the calculation of the face value of each respective invoice
related thereto;
(n) any return, rejection or repossession of the merchandise has occurred
or the rendition of services has been disputed;
(o) such Receivable is not payable to a Borrower; or
(p) such Receivable is not otherwise satisfactory to the Lender as
determined in good faith by the Lender in the exercise of its discretion in a
reasonable manner.
-9-
"Eligible Rights of Entry" shall mean and include with respect to each
Borrower, all such Rights of Entry owned by such Borrower that (i) Lender, in
its sole discretion, deems to be eligible based on any credit or collateral
considerations as Lender deems reasonably appropriate from time to time and (ii)
is subject to a perfected, first priority security interest in favor of the
Lender, free of all Liens of any Person.
"Eligible Rights of Entry Amortization Amount" shall mean Seventy Three
Thousand Five Hundred Seventy and 00/100 Dollars ($73,570.00).
"Environmental Complaint" shall have the meaning set forth in Section
4.18(d) hereof.
"Environmental Indemnity" shall mean the Environmental Indemnity Agreement
among the Loan Parties and the Lender relating to possible environmental
liabilities associated with the Mortgaged Property, together with all
amendments, supplements, modifications, substitutions and replacements thereto
and thereof.
"Environmental Laws" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. 9601, et seq.) ("CERCLA"), the
Resource Conservation and Recovery Act (42 U.S.C. 6901, et seq.) ("RCRA"), the
Federal Water Pollution Control Act (33 U.S.C. 1251, et seq.), the Clean Air Act
(42 U.S.C. 7401, et seq.), the Toxic Substance Control Act (15 U.S.C. 2601, et
seq.), the Emergency Planning Community Right to Know Act (42 U.S.C. 11001, et
seq.), the Occupational Safety and Health Act of 1970 (29 U.S.C. 650, et seq.),
the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10B-1.1 et seq.,
the New Jersey Solid Waste Management Act, N.J.S.A. 13:1E-1 et seq., the
Industrial Site Recovery Act, N.J.S.A. 13:1K et seq., the New Jersey Water
Pollution Control Act (N.J.S.A. 58:10A-1 et seq.), the New Jersey Air Pollution
Control Act (N.J.S.A. 26:2C-1 et seq.), and any other present or future federal,
state or local statutes or laws relating to health and safety, land use,
protection of the environment and/or governing the use, storage, treatment,
generation, transportation, processing, handling, production or disposal of
Hazardous Substances, and any decisions, orders and directives of federal, state
and local governmental agencies and authorities with respect thereto and any
regulations promulgated pursuant to any of the foregoing.
"Equipment" shall mean and include as to each Loan Party all of such Loan
Party's goods (other than Inventory) whether now owned or hereafter acquired and
wherever located including, without limitation, all equipment, machinery,
apparatus, vehicles, fittings, furniture, furnishings, fixtures, parts,
accessories and all replacements and substitutions therefor or accessions
thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and the rules and regulations promulgated thereunder.
"Eurocurrency Reserve Percentage" means, for any Interest Period in respect
of any Libor Rate Loan, as of any date of determination, the aggregate of the
then stated maximum reserve percentages (including any marginal, special,
emergency or supplemental reserves), expressed as a decimal, applicable to such
Interest Period (if more than one such percentage is applicable, the daily
average of such percentages for those days in such Interest Period during
-10-
which any such percentages shall be so applicable) by the Board of Governors of
the Federal Reserve System, any successor thereto, or any other banking
authority, domestic or foreign, to which the Lender may be subject in respect to
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Federal Reserve Board) or in respect of any other category
of liabilities including deposits by reference to which the interest rate on
Libor Rate Loans is determined or any category of extension of credit or other
assets that include the Libor Rate Loans. For purposes hereof, such reserve
requirements shall include, without limitation, those imposed under Regulation D
of the Federal Reserve Board and the Libor Rate Loans shall be deemed to
constitute Eurocurrency Liabilities subject to such reserve requirements without
benefit of credits for proration, exceptions or offsets which may be available
from time to time to the Lender under said Regulation D.
"Event of Default" shall mean the occurrence of any of the events set forth
in Article X hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Executive Order No. 13224" shall mean the Executive Order No. 13224 on
Terrorist Financing, effective September 24, 2001, as the same has been, or
shall hereafter be, renewed, extended, amended or replaced.
"Existing Lender" shall mean Commerce Bank, N.A.
"Federal Funds Effective Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest one hundredth of one percent
(1/100th of 1%) equal to the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged by
federal funds brokers on such day, as published by the Federal Reserve Bank of
New York on the Business Day next succeeding such day; provided, however, that:
(a) if the day for which such rate is to be determined is not a Business Day,
the Federal Funds Rate for such day shall be such a rate on such transactions on
the immediately preceding Business Day as so published on the next succeeding
Business Day and (b) if such rate is not so published for any Business Day, the
Federal Funds Rate for such Business Day shall be the average of quotations for
such day on such transactions received by the Lender from three (3) federal
funds brokers of recognized standing selected by the Lender.
"Fixed Charge Coverage Ratio" shall mean and include, with respect to any
fiscal period, the ratio of (a) EBITDA, minus Capital Expenditures that were not
specifically funded by Indebtedness (other than a Revolving Advance) of BTL and
its Subsidiaries on a consolidated basis with respect to such period, minus cash
taxes paid by BTL and its Subsidiaries on a consolidated basis with respect to
such period, to (b) Fixed Charges.
"Fixed Charges" shall mean, with respect to any fiscal period, the sum of
(a) interest expense of BTL and its Subsidiaries determined on a consolidated
basis with respect to such period in accordance with GAAP, plus (b) scheduled
principal payments on Indebtedness of BTL and its Subsidiaries on a consolidated
basis with respect to such period, plus (c) the Eligible Rights of Entry
Amortization Amount with respect to such period.
-11-
"Foreign Subsidiary" shall mean any Subsidiary that is not organized under
the laws of any state of the United States of America or the District of
Columbia.
"Formula Amount" shall have the meaning set forth in Section 2.1(a).
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
"General Intangibles" shall mean and include as to each Loan Party all of
such Loan Party's general intangibles, whether now owned or hereafter acquired
including, without limitation, all payment intangibles, choses in action, causes
of action, corporate or other business records, inventions, designs, patents,
patent applications, equipment formulations, manufacturing procedures, quality
control procedures, trademarks, service marks, trade secrets, goodwill,
copyrights, design rights, software, computer information, source codes, codes,
records and dates, registration, licenses, franchises, customer lists, tax
refunds, tax refund claims, computer programs, all claims under guaranties,
security interests or other security, held by or granted to such Loan Party to
secure payment of any of the Receivables by a Customer (other than to the extent
covered by Receivables), all rights of indemnification and all other intangible
property of every kind and nature (other than Receivables).
"Governmental Body" shall mean any nation or government, any state or other
political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.
"Guarantor" shall mean BTIC and any other Person who may hereafter
guarantee payment or performance of the whole or any part of the Obligations and
"Guarantors" means collectively all such Persons.
"Guaranty" shall mean any guaranty of the obligations of the Borrowers
executed by a Guarantor in favor of the Lender for its benefit and the benefit
of the Issuer, together with all amendments, supplements, modifications,
substitutions and replacements thereto and thereof.
"Gross Orderly Liquidation Value" shall mean with regard to any Inventory,
the gross proceeds that could be expected from an orderly liquidation sale of
such Inventory, professionally managed, with the seller obligated to sell over a
defined period not to exceed ninety (90) days, as applicable, from the
commencement of such sale, assuming that (a) the Borrowers' facilities are in
limited operation, utilizing select current employees of the Borrowers, for the
purpose of liquidating the Inventory, (b) the Inventory would be disposed of on
a piecemeal basis or through appropriate groupings, under a scenario whereby the
purchasers are buying "as is, where is" for cash or cash equivalent, (c) the
terms are sold on a Free On Board ("FOB") warehouse basis, and (d) taking into
consideration current economic trends, condition, location and marketability.
"Hazardous Discharge" shall have the meaning set forth in Section 4.18(d)
hereof.
"Hazardous Substance" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes,
-12-
hazardous or Toxic Substances or related materials as defined in CERCLA, the
Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et
seq.), the Toxic Substances Control Act, as amended ("TSCA") (15 U.S.C. Section
2601, et seq.), RCRA or any other applicable Environmental Law and in the
regulations adopted pursuant thereto.
"Hazardous Wastes" shall have the meaning as defined under RCRA or
applicable state law, and any other applicable Federal and state laws now in
force or hereafter enacted relating to hazardous waste disposal.
"Hedging Contracts" shall mean foreign exchange contracts, currency swap
agreements, futures contracts, commodities xxxxxx, interest rate protection
agreements, interest rate future agreements, interest rate swap agreements,
interest rate cap agreements, interest rate collar agreements, option agreements
or any other similar hedging agreements or arrangements entered into by a Loan
Party in the ordinary course of business and not for speculative purposes.
"Hedging Obligations" shall mean all liabilities of a Loan Party under
Hedging Contracts.
"Indebtedness" of a Person at a particular date shall mean all obligations
of such Person which in accordance with GAAP would be classified upon a balance
sheet as liabilities (except capital stock and surplus earned or otherwise) and
in any event, without limitation by reason of enumeration, shall include all
Hedging Obligations, indebtedness, debt and other similar monetary obligations
of such Person whether direct or guaranteed, and all premiums, if any, due at
the required prepayment dates of such indebtedness, and all indebtedness secured
by a Lien on assets owned by such Person, whether or not such indebtedness
actually shall have been created, assumed or incurred by such Person. Any
indebtedness of such Person resulting from the acquisition by such Person of any
assets subject to any Lien shall be deemed, for the purposes hereof, to be the
equivalent of the creation, assumption and incurring of the indebtedness secured
thereby, whether or not actually so created, assumed or incurred.
"Ineligible Security" shall mean any security which may not be underwritten
or dealt in by member banks of the Federal Reserve System under Section 16 of
the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.
"Intellectual Property Security Agreement" shall mean the Patent and
Trademark Security Agreement, dated of even date herewith, made by BTIC for the
benefit of the Lender, together with all amendments, supplements, modifications,
substitutions and replacements thereto and thereof.
"Interest Period" shall mean the period provided for any Libor Rate Loan
pursuant to Section 2.2(b) hereof.
"Inventory" shall mean and include as to each Loan Party all of such Loan
Party's now owned or hereafter acquired goods, merchandise and other personal
property, wherever located, to be furnished under any consignment arrangement,
contract of service or held for sale or lease, all raw materials, work in
process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in such Loan Party's
-13-
business or used in selling or furnishing such goods, merchandise and other
personal property, and all documents of title or other documents representing
them.
"Inventory Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(ii) hereof.
"Investment Property" shall mean and include as to each Loan Party, all of
such Loan Party's now owned or hereafter acquired securities (whether
certificated or uncertificated), securities entitlements, securities accounts,
commodities contracts and commodities accounts.
"Issuer" means, with respect to any Letter of Credit, the issuer of such
Letter of Credit and shall be, with respect to any Letter of Credit hereunder,
National City Bank, and each of its successors and assigns (and which may be
replaced at the sole discretion of the Lender).
"Lease Assignment" shall mean the Assignment of Rents and Leases executed
and delivered by BTL to the Lender with respect to the Mortgaged Property,
together with all amendments, supplements, modifications, substitutions and
replacements thereto and thereof.
"Lender" shall mean, initially, NCBC, and shall include each Person which
becomes a transferee, successor or assign of the Lender.
"Letter of Credit Application" shall have the meaning set forth in Section
2.10(a) hereof.
"Letter of Credit Fees" shall have the meaning set forth in Section 3.2
hereof.
"Letters of Credit" shall have the meaning set forth in Section 2.9 hereof.
"Libor Rate" means, for any Interest Period with respect to a Libor Rate
Loan, the quotient (rounded upwards, if necessary, to the nearest one hundredth
of one percent (1/100th of 1%) of: (x) the per annum rate of interest,
determined by the Lender in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) as of approximately
12:00 noon (London time) two (2) Business Days prior to the beginning of such
Interest Period pertaining to such Libor Rate Loan, as provided by Bloomberg's
or Reuters (or any other similar company or service that provides rate
quotations comparable to those currently provided by such companies as the rate
in the London interbank market), as determined by the Lender from time to time
for purposes of providing quotations of interest rates applicable to deposits in
Dollars or in the London interbank market) as the rate in the London interbank
market for deposits in Dollars in immediately available funds with a maturity
comparable to such Interest Period divided by (y) a number equal to 1.00 minus
the Eurocurrency Reserve Percentage. In the event that such rate quotation is
not available for any reason, then the rate (for purposes of clause (x) hereof)
shall be the rate, determined by the Lender as of approximately 12:00 noon
(London time) two (2) Business Days prior to the beginning of such Interest
Period pertaining to such Libor Rate Loan, to be the average (rounded upwards,
if necessary, to the nearest one hundredth of one percent (1/100th of 1%)) of
the per annum rates at which deposits in Dollars in immediately available funds
in an amount comparable to such Libor borrowing and with a maturity comparable
to such Interest Period are offered to the prime banks by leading banks in the
-00-
Xxxxxx xxxxxxxxx market. The Libor Rate shall be adjusted automatically on and
as of the effective date of any change in the Eurocurrency Reserve Percentage.
"Libor Rate Loan" shall mean an Advance at any time that bears interest
based on the Libor Rate.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), Charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including, without limitation, any conditional sale or other
title retention agreement, any lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement under the Uniform Commercial Code or comparable law of any
jurisdiction.
"Loan Account" shall have the meaning set forth in Section 2.8 hereof.
"Loan Party" or "Loan Parties" shall mean, singularly or collectively, as
the context may require, each Borrower and each Guarantor.
"Lockbox" shall mean a post office box rented by and in the name of the
Borrowing Agent (or any other Borrower acceptable to the Lender) as required by
this Agreement and as to which only the applicable Lockbox Bank and the Lender
have access pursuant to the requirements of this Agreement and which cannot be
closed by the applicable Lockbox Bank without the consent of the Lender pursuant
to the applicable Blocked Account Agreement.
"Lockbox Agreement" shall have the meaning set forth in Section 4.15(g)
hereof.
"Lockbox Bank" shall mean National City Bank and, for such period as is
acceptable to the Lender, any other financial institution acceptable to the
Lender.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
financial condition, results of operations, business or prospects of the
applicable Person or Persons, (b) any Loan Party's ability to pay the
Obligations in accordance with the terms thereof, (c) the value of the
Collateral, or the Lender's Liens on the Collateral or, subject to Permitted
Encumbrances, the priority of any such Lien or (d) the practical realization of
the benefits of the Lender's rights and remedies under this Agreement and the
Other Documents.
"Maximum Revolving Advance Amount" shall mean Ten Million Dollars
($10,000,000.00).
"Monthly Advances" shall have the meaning set forth in Section 3.1(a)
hereof.
"Mortgage" shall mean the Mortgage, dated of even date herewith, made by
BTL to the Lender with respect to the Real Property owned by BTL located in
Middlesex County, New Jersey (the "Mortgaged Property"), together with all
amendments, supplements, modifications, substitutions and replacements thereto
and thereof.
-15-
"Mortgaged Property" shall have the meaning set forth in the definition of
Mortgage.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Sections 3(37) and 4001(a)(3) of ERISA to which any Loan Party or any member of
the Controlled Group is required to contribute or has been required to
contribute within the past six (6) years.
"National City Bank" shall mean National City Bank, a national banking
association, and its successors and assigns.
"NCBC" shall have the meaning set forth in the preamble to this Agreement
and shall include its successors and assigns.
"Note" shall mean each Revolving Credit Note and Term Note and "Notes"
shall collectively mean all of the Revolving Credit Notes and Term Notes.
"Offshore Venture" shall mean the joint venture contemplated by the
Offshore Joint Venture Agreement.
"Offshore Joint Venture Agreement" shall mean that certain joint venture
agreement, dated as of November 11, 2005, by and among BTL, BTFE and Master Gain
International Industrial Limited, a Hong Kong corporation.
"Obligations" shall mean and include any and all loans, advances, debts,
liabilities, obligations, covenants and duties (absolute, contingent, matured or
unmatured) owing by the Loan Parties to the Lender or the Issuer or to any other
direct or indirect subsidiary or affiliate of the Issuer or the Lender of any
kind or nature, present or future (including, without limitation, any interest
accruing thereon after maturity, or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding relating to any Loan Party, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether or not evidenced
by any note, guaranty or other instrument, whether arising under any agreement,
instrument or document, (including, without limitation, this Agreement and the
Other Documents) whether or not for the payment of money, whether arising by
reason of an extension of credit, opening of a letter of credit, loan, equipment
lease or guarantee, under any Hedging Contract or in connection with any cash
management or treasury administration services or in any other manner, whether
arising out of overdrafts or deposit or other accounts or electronic funds
transfers (whether through automated clearing houses or otherwise) or out of the
Issuer's or the Lender's non-receipt of or inability to collect funds or
otherwise not being made whole in connection with depository transfer check or
other similar arrangements, whether direct or indirect (including those acquired
by assignment or participation), absolute or contingent, joint or several, due
or to become due, now existing or hereafter arising, contractual or tortious,
liquidated or unliquidated, regardless of how such indebtedness or liabilities
arise or by what agreement or instrument they may be evidenced or whether
evidenced by any agreement or instrument, including, but not limited to, any and
all of any Loan Party's Indebtedness and/or liabilities under this Agreement,
the Other Documents or under any other agreement between the Issuer or the
Lender and any Loan Party and any
-16-
amendments, extensions, renewals or increases and all costs and expenses of the
Lender and the Issuer incurred in the documentation, negotiation, modification,
enforcement, collection or otherwise in connection with any of the foregoing,
including but not limited to, reasonable attorneys' fees and expenses and all
obligations of any Loan Party to the Lender or the Issuer to perform acts or
refrain from taking any action.
"Other Documents" shall mean the Revolving Credit Notes, the Term Notes,
the Questionnaire, the Letters of Credit, the Blocked Account Agreements, the
Waivers, any Guaranty, the Pledge Agreements, the Intellectual Property Security
Agreement, the Mortgage, the Lease Assignment, the Environmental Indemnity and
any and all other agreements, instruments and documents, including, without
limitation, guaranties, pledges, powers of attorney, consents, and all other
writings heretofore, now or hereafter executed by any Loan Party and/or
delivered to the Issuer or the Lender in respect of the transactions
contemplated by this Agreement.
"Parent" of any Person shall mean a corporation or other entity owning,
directly or indirectly at least fifty percent (50%) of the shares of stock or
other ownership interests having ordinary voting power to elect a majority of
the directors of the Person, or other Persons performing similar functions for
any such Person.
"Payment Office" shall mean initially 0000 Xxxx Xxxxx Xxxxxx, 0xx Xxxxx,
Xxxxxxxxx, Xxxx 00000; thereafter, such other office of the Lender, if any,
which it may designate by notice to the Borrowing Agent to be the Payment
Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" shall mean (a) Liens in favor of the Lender; (b)
Liens for taxes, assessments or other governmental charges not delinquent or
being contested in good faith and by appropriate proceedings and with respect to
which proper reserves have been taken by BTL and its Subsidiaries in accordance
with GAAP; provided, that, such Liens shall have no effect on the priority of
the Liens in favor of the Lender or the value of the assets in which the Lender
has such a Lien and a stay of enforcement of any such Lien shall be in effect;
(c) deposits or pledges to secure obligations under worker's compensation,
social security or similar laws, or under unemployment insurance or general
liability or product liability insurance; (d) deposits or pledges to secure
bids, tenders, contracts (other than contracts for the payment of money),
leases, statutory obligations, performance bonds, surety and appeal bonds and
other obligations of like nature arising in the ordinary course of any of BTL's
or such applicable Subsidiary's business; (e) mechanics, workers, materialmen's,
warehousemen's, common carriers, landlord's or other like Liens arising in the
ordinary course of BTL's or such applicable Subsidiary's business with respect
to obligations which are not due or which are being contested in good faith by
BTL or the applicable Subsidiary of BTL; (f) Liens placed upon equipment and
real estate assets acquired to secure a portion of the purchase price thereof,
provided that (x) any such lien shall not encumber any other property of BTL and
its Subsidiaries and (y) the aggregate amount of Indebtedness secured by such
Liens incurred as a result of such purchases during any fiscal year shall not
exceed the amount provided for in Section 7.6; (g) zoning restrictions,
easements, encroachments, rights of way, restrictions, leases, licenses,
restrictive covenants and other similar title exceptions or Liens affecting Real
Property, none of which materially impairs the
-17-
use of such Real Property or the value thereof, and none of which is violated in
any material respect by existing or supporting structures or land use; (h)
attachment and judgment liens which do not constitute an Event of Default under
Section 10.6; (i) Liens disclosed on Schedule 1.2 provided that the principal
amount secured thereby is not hereafter increased, and no additional assets
become subject to such Lien.
"Permitted Holders" shall mean Xxxxx X. Xxxxxx, Xxxxxx X. Xxxxx, Xx. or
Xxxxx X. Xxxxxxxx.
"Person" shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, institution, public
benefit corporation, joint venture, entity or government (whether federal,
state, county, city, municipal or otherwise, including any instrumentality,
division, agency, body or department thereof).
"Plan" shall mean any employee benefit plan within the meaning of Section
3(3) of ERISA, maintained for employees of the Loan Parties or any member of the
Controlled Group or any such Plan to which any Loan Party or any member of the
Controlled Group is required to contribute on behalf of any of its employees.
"Pledge Agreement" shall mean (i) the Pledge Agreement executed and
delivered by BTL to the Lender for the benefit of itself and the Issuer with
respect to all of the issued and outstanding capital stock of BTIC owned by BTL,
(ii) the Pledge Agreement executed and delivered by BTL to the Lender for the
benefit of itself and the Issuer with respect to all of the issued and
outstanding membership interests of BDR owned by BTL, and (iii) any other Pledge
Agreement executed and delivered by any Loan Party to the Lender with respect to
the Subsidiary Stock, together with all amendments, supplements, modifications,
substitutions and replacements thereto and thereof and "Pledge Agreements" means
collectively, all such Pledge Agreements.
"Projections" shall have the meaning set forth in Section 5.5(a) hereof.
"Questionnaire" shall mean the Documentation Information Questionnaire and
the responses thereto provided by the Loan Parties and delivered to the Lender.
"Real Property" shall mean all real property, both owned and leased, of the
Loan Parties.
"Receivables" shall mean and include, as to each Loan Party, all of such
Loan Party's accounts, contract rights, instruments (including those evidencing
indebtedness owed to the Loan Parties by their Affiliates), documents, chattel
paper (including electronic chattel paper), general intangibles relating to
accounts, drafts and acceptances, credit card receivables, and all other forms
of obligations owing to such Loan Party arising out of or in connection with the
sale or lease of Inventory or the rendition of services (including, but not
limited to, tolling arrangements), all supporting obligations, guarantees and
other security therefor, whether secured or unsecured, now existing or hereafter
created, and whether or not specifically sold or assigned to the Lender
hereunder.
-18-
"Receivables Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(i) hereof.
"Releases" shall have the meaning set forth in Section 5.7(c)(i) hereof.
"Reportable Event" shall mean a reportable event described in Section
4043(c) of ERISA or the regulations promulgated thereunder.
"Required Pledge Amount" shall mean sixty-five percent (65%).
"Revolving Advances" shall mean Advances made other than Letters of Credit
and the Term Loan.
"Revolving Credit Note" or "Revolving Credit Notes" shall mean, singularly
or collectively, as the context may require, the promissory notes referred to in
Section 2.1(a) hereof, together with all amendments, restatements, extensions,
renewals, replacements, refinancings or refundings thereof in whole or part.
"Revolving Interest Rate" shall mean an interest rate per annum equal to
(a) the Alternate Base Rate with respect to Domestic Rate Loans, and (b) the sum
of the Libor Rate plus two and one quarter of one percent (2.25%) with respect
to Libor Rate Loans.
"Rights of Entry" shall mean the rights set forth in each agreement by and
between any Loan Party and a property owner pursuant to which such Loan Party
has the right to provide such property owner's tenants with various services
including, but not limited to, telephone, cable television, internet and alarm
services.
"SEC" shall mean the United States Securities and Exchange Commission, or
any successor governmental entity charged with the supervision and oversight of
the federal securities laws.
"Section 20 Subsidiary" shall mean the Subsidiary of the bank holding
company controlling NCBC, which Subsidiary has been granted authority by the
Federal Reserve Board to underwrite and deal in certain Ineligible Securities.
"Subsidiary" shall mean a corporation or other entity of whose shares of
stock or other ownership interests having ordinary voting power (other than
stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"Subsidiary Stock" shall mean with respect to each Subsidiary of each Loan
Party, (a) all of the issued and outstanding shares of capital stock, membership
interests and partnership interests, as applicable, of each such Subsidiary
which is a Domestic Subsidiary, and (b) sixty-five percent (65%) or such lesser
percentage actually owned of the issued and outstanding shares of capital stock,
membership interests and partnership interests, as applicable, of each such
Subsidiary which is a first tier Foreign Subsidiary.
-19-
"Term" shall have the meaning set forth in Section 13.1 hereof.
"Term Loan" shall mean the Advances made pursuant to Section 2.4 hereof.
"Term Note" or "Term Notes" shall mean, singularly or collectively, as the
context may require, the promissory notes referred to in Section 2.4 hereof,
together with all amendments, restatements, extensions, renewals, replacements,
refinancings or refundings thereof in whole or part.
"Term Loan Rate" shall mean an interest rate per annum equal to (a) the sum
of the Alternate Base Rate and one half of one percent (.50%) with respect to
Domestic Rate Loans, and (b) the sum of the Libor Rate plus two and three
quarters of one percent (2.75%) with respect to Libor Rate Loans.
"Termination Event" shall mean (i) a Reportable Event with respect to any
Plan or Multiemployer Plan for which the thirty (30) day notice period contained
in 29 CFR Section 4043.3 has not been waived; (ii) the withdrawal of any Loan
Party or any member of the Controlled Group from a Plan during a plan year in
which such entity was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; (iii) the providing of notice of intent to terminate a Plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the institution
by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any
event or condition (a) which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan or Multiemployer Plan, or (b) that may result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of
any Loan Party or any member of the Controlled Group from a Multiemployer Plan.
"Toxic Substance" shall mean and include any material present on the Real
Property which is subject to regulation under the Toxic Substances Control Act
(TSCA), 15 U.S.C. Sections 2601 et seq., applicable state law, or any other
applicable Federal or state laws now in force or hereafter enacted relating to
toxic substances.
"UCP" shall have the meaning set forth in Section 2.10(b) hereof.
"Undrawn Availability" shall mean, at a particular date, an amount equal to
(a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving Advance
Amount, minus the aggregate amount of outstanding Letters of Credit, minus (b)
the sum of (x) the outstanding amount of Revolving Advances plus (y) all amounts
due and owing to the Borrowers' trade creditors which are outstanding sixty (60)
days or more beyond the due date (without duplication with respect to any such
amount deducted from the Formula Amount), plus (z) fees and expenses for which
the Borrowers are liable but which have not been paid or charged to the Loan
Account.
"Uniform Commercial Code" shall mean the Uniform Commercial Code or other
similar law of the Commonwealth of Pennsylvania as in effect on the date of this
Agreement and as amended from time to time.
"USA Patriot Act" shall mean the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001, Public
-20-
Law 107-56, as the same has been, or shall hereafter be, renewed, extended,
amended or replaced.
"VTCI" shall mean Vu-Tech Communications, Inc., a Georgia corporation and
its successors and assigns.
"Waivers" shall mean, collectively, any and all landlord's waivers,
warehouseman's waivers, creditor's waivers, mortgagee waivers and processing
facility and similar bailee's waivers, executed and delivered in connection with
this Agreement, in form and substance satisfactory to the Lender, together with
all amendments, supplements, modifications, substitutions and replacements
thereto and thereof.
"Website Posting" shall have the meaning set forth in Section 16.6 hereof.
"Week" shall mean the time period commencing with the opening of business
on a Wednesday and ending on the end of business the following Tuesday.
1.3 Uniform Commercial Code Terms.
All terms used herein and defined in the Uniform Commercial Code as adopted
in the Commonwealth of Pennsylvania from time to time shall have the meaning
given therein unless otherwise defined herein. To the extent the definition of
any category or type of Collateral is expanded by any amendment, modification or
revision to the Uniform Commercial Code, such expanded definition will apply
automatically as of the date of such amendment, modification or revision.
1.4 Certain Matters of Construction.
The terms "herein", "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular section,
paragraph or subdivision. Any pronoun used shall be deemed to cover all genders.
Wherever appropriate in the context, terms used herein in the singular also
include the plural and vice versa. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. Unless otherwise provided, all references to any instruments or
agreements to which the Lender is a party, including, without limitation,
references to any of the Other Documents, shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.
II. ADVANCES, PAYMENTS.
2.1 Revolving Advances.
(a) Subject to the terms and conditions set forth in this Agreement
including, without limitation, Section 2.1(b), the Lender will make Revolving
Advances to the Borrowers in aggregate amounts outstanding at any time equal to
the lesser of (x) the Maximum Revolving Advance Amount less the aggregate amount
of outstanding Letters of Credit or (y) an amount equal to the sum of:
-21-
(i) up to eighty-five percent (85%), subject to the provisions of
Section 2.1(b) hereof ("Receivables Advance Rate"), of Eligible
Receivables, plus
(ii) up to the lesser of (A) eighty-five percent (85%) of the Gross
Orderly Liquidation Value (expressed as a percentage of cost based on the
most recent inventory appraisal) of Eligible Inventory, subject to the
provisions of Section 2.1(b) hereof (the "Inventory Advance Rate") (the
Receivables Advance Rate and the Inventory Advance Rate are collectively,
the "Advance Rates"), or (B) Three Million Five Hundred Thousand and 00/100
Dollars ($3,500,000.00) in the aggregate at any one time, plus
(iii) One Million Four Hundred Seventy One Thousand Four Hundred and
00/100 Dollars ($1,471,400.00); provided, however, that for each fiscal
quarter ending after the Closing Date the amount set forth in this Section
2.1(a)(y)(iii) shall reduce by the Eligible Rights of Entry Amortization
Amount, minus
(iv) the aggregate amount of outstanding Letters of Credit, minus
(v) such reserves as the Lender may reasonably deem proper and
necessary from time to time.
The amount derived from the sum of Sections 2.1(a)(i), (ii) and (iii) minus
the sum of Section 2.1(a)(iv) and (v) at any time and from time to time shall be
referred to as the "Formula Amount".
Revolving Advances shall be evidenced by one or more secured promissory
notes (collectively, the "Revolving Credit Note") substantially in the form
attached hereto as Exhibit 2.1(a).
(b) Discretionary Rights. The Advance Rates may be increased or decreased
by the Lender at any time and from time to time in the exercise of its
reasonable discretion. Each Borrower consents to any such increases or decreases
and acknowledges that decreasing the Advance Rates or increasing the reserves
may limit or restrict Advances requested by the Borrowing Agent.
2.2 Procedure for Borrowing Advances.
(a) The Borrowing Agent on behalf of any Borrower may notify the Lender
prior to 12:00 noon (Cleveland, Ohio time) on a Business Day of a Borrower's
request to obtain, on that day, a Revolving Advance hereunder. Should any amount
required to be paid as interest hereunder, or as fees or other charges under
this Agreement or any other agreement with the Lender, or with respect to any
other Obligation, become due, same shall be deemed a request for a Revolving
Advance as of the date such payment is due, in the amount required to pay in
full such interest, fee, charge or Obligation under this Agreement or any other
agreement with the Lender, and such request shall be irrevocable.
-22-
(b) Notwithstanding the provisions of (a) above, in the event any Borrower
desires to obtain a Libor Rate Loan, the Borrowing Agent shall notify the Lender
in writing no later than 11:00 a.m. (Cleveland, Ohio time) at least three (3)
Business Days' prior to the date of such proposed borrowing, specifying (i) the
date of the proposed borrowing (which shall be a Business Day), (ii) the amount
of such Revolving Advance to be borrowed, which amount shall be in a minimum
amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) and in integral
multiples of One Hundred Thousand and 00/100 Dollars ($100,000.00) thereafter,
and (iii) the duration of the first Interest Period therefor. Interest Periods
for Libor Rate Loans shall be for one (1), two (2), three (3) months or six (6)
months; provided, (A) if an Interest Period would end on a day that is not a
Business Day, it shall end on the next succeeding Business Day unless such day
falls in the next succeeding calendar month in which case the Interest Period
shall end on the next preceding Business Day and (B) the Borrowing Agent shall
not select, convert to or renew any Interest Period for any portion of the
Revolving Advances that ends after the last day of the Term. No Libor Rate Loan
shall be made available to a Borrower during the continuance of a Default or an
Event of Default.
(c) Each Interest Period of a Libor Rate Loan shall commence on the date
such Libor Rate Loan is made and shall end on such date as the Borrowing Agent
may elect as set forth in subsection (b)(iii) above, provided that the exact
length of each Interest Period shall be determined in accordance with the
practice of the interbank market for offshore Dollar deposits and no Interest
Period shall end after the last day of the Term. The Borrowing Agent shall elect
the initial Interest Period applicable to a Libor Rate Loan by its notice of
borrowing given to the Lender pursuant to Section 2.2(b) or by its notice of
conversion given to the Lender pursuant to Section 2.2(d), as the case may be.
The Borrowing Agent shall elect the duration of each succeeding Interest Period
by giving irrevocable written notice to the Lender of such duration not less
than three (3) Business Days prior to the last day of then current Interest
Period applicable to such Libor Rate Loan. If the Lender does not receive timely
notice of the Interest Period elected by the Borrowing Agent, the Borrowers
shall be deemed to have elected to convert to a Domestic Rate Loan subject to
Section 2.2(d) hereinbelow.
(d) Any Borrower may, on the last Business Day of then current Interest
Period applicable to any outstanding Libor Rate Loan, or on any Business Day
with respect to Domestic Rate Loans, convert any such loan into a loan of
another type in the same aggregate principal amount, provided that any
conversion of a Libor Rate Loan shall be made only on the last Business Day of
then current Interest Period applicable to such Libor Rate Loan. If a Borrower
desires to convert a loan, the Borrowing Agent shall give the Lender not less
than three (3) Business Days' prior written notice to convert from a Domestic
Rate Loan to a Libor Rate Loan or one (1) Business Day's prior written notice to
convert from a Libor Rate Loan to a Domestic Rate Loan, specifying the date of
such conversion, the loans to be converted and if the conversion is from a
Domestic Rate Loan to any other type of loan, the duration of the first Interest
Period therefor; provided, however, a Borrower shall not be permitted to convert
a Domestic Rate Loan to a Libor Rate Loan or continue to select a Libor Rate
Loan during the continuance of a Default or an Event of Default. After giving
effect to each such conversion, there shall not be outstanding more than five
(5) Libor Rate Loans, in the aggregate.
-23-
(e) At its option and upon three (3) Business Days' prior written notice,
any Borrower may prepay the Libor Rate Loans in whole at any time or in part
from time to time, without premium or penalty, but with accrued interest on the
principal being prepaid to the date of such repayment. Such Borrower shall
specify the date of prepayment of Advances which are Libor Rate Loans and the
amount of such prepayment. In the event that any prepayment of a Libor Rate Loan
is required or permitted on a date other than the last Business Day of then
current Interest Period with respect thereto, such Borrower shall indemnify the
Lender therefor in accordance with Section 2.2(f) hereof.
(f) Each Borrower shall indemnify the Lender and hold the Lender harmless
from and against any and all losses or expenses that the Lender may sustain or
incur as a consequence of any prepayment, conversion of or any default by any
Borrower in the payment of the principal of or interest on any Libor Rate Loan
or failure by any Borrower to complete a borrowing of, a prepayment of or
conversion of or to a Libor Rate Loan after notice thereof has been given,
including, but not limited to, any interest payable by the Lender to lenders of
funds obtained by it in order to make or maintain its Libor Rate Loans
hereunder. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by the Lender to the Borrowing Agent shall be
presumed correct absent manifest error.
(g) Notwithstanding any other provision hereof, if any applicable law,
treaty, regulation or directive, or any change therein or in the interpretation
or application thereof, shall make it unlawful for the Lender (for purposes of
this subsection (g), the term "Lender" shall include the Lender and the office
or branch where the Lender or any corporation or bank controlling the Lender
makes or maintains any Libor Rate Loans) to make or maintain its Libor Rate
Loans, the obligation of the Lender to make Libor Rate Loans hereunder shall
forthwith be cancelled and the Borrowers shall, if any affected Libor Rate Loans
are then outstanding, promptly upon request from the Lender, either pay all such
affected Libor Rate Loans or convert such affected Libor Rate Loans into loans
of another type. If any such payment or conversion of any Libor Rate Loan is
made on a day that is not the last day of the Interest Period applicable to such
Libor Rate Loan, the Borrowers shall pay the Lender, upon the Lender's request,
such amount or amounts as may be necessary to compensate the Lender for any loss
or expense sustained or incurred by the Lender in respect of such Libor Rate
Loan as a result of such payment or conversion, including (but not limited to)
any interest or other amounts payable by the Lender to lenders of funds obtained
by the Lender in order to make or maintain such Libor Rate Loan. A certificate
as to any additional amounts payable pursuant to the foregoing sentence
submitted by the Lender to the Borrowing Agent shall be presumed correct absent
manifest error.
2.3 Disbursement of Advance Proceeds.
All Advances shall be disbursed from whichever office or other place the
Lender may designate from time to time and, together with any and all other
Obligations of the Borrowers to the Lender, shall be charged to the Loan Account
on the Lender's books. During the Term, the Borrowers may use the Revolving
Advances by borrowing, repaying and
-24-
reborrowing, all in accordance with the terms and conditions hereof. The
proceeds of each Revolving Advance requested by the Borrowers or deemed to have
been requested by the Borrowers under Section 2.2(a) hereof shall, with respect
to requested Revolving Advances to the extent the Lender makes such Revolving
Advances, be made available to the applicable Borrower on the day so requested
by way of credit to the Borrowing Agent's operating account at National City
Bank, or such other bank as the Borrowing Agent may designate following
notification to the Lender, in immediately available federal funds or other
immediately available funds or, with respect to Revolving Advances deemed to
have been requested by any Borrower, be disbursed to the Lender to be applied to
the outstanding Obligations giving rise to such deemed request.
2.4 Term Loan.
Subject to the terms and conditions of this Agreement, the Lender will make
a Term Loan to the Borrowers in the amount of Three Million Five Hundred
Thousand and 00/100 Dollars ($3,500,000.00). The Term Loan shall be advanced on
the Closing Date and shall be, with respect to principal, payable as follows,
subject to acceleration upon the occurrence of an Event of Default under this
Agreement or termination of this Agreement: equal monthly installments beginning
on January 1, 2006 and on the first (1st) Business Day of each calendar month
thereafter in the amount of Nineteen Thousand Four Hundred Forty Four and 00/100
Dollars ($19,444.00) with the remaining balance due on the last day of the Term
and shall be evidenced by one or more secured promissory notes (collectively,
the "Term Notes") in substantially the form attached hereto as Exhibit 2.4.
2.5 Maximum Revolving Advances.
The aggregate balance of outstanding Revolving Advances outstanding at any
time shall not exceed the lesser of (a) the Maximum Revolving Advance Amount or
(b) the Formula Amount.
2.6 Repayment of Advances.
(a) The Revolving Advances shall be due and payable in full on the last day
of the Term subject to earlier prepayment as herein provided. The Term Loan
shall be due and payable as provided in Section 2.4 hereof and in the Term
Notes.
(b) Any Customer payment with respect to Receivables which is evidenced by
a check, note, draft or any other similar item of payment may not be immediately
collectible. In calculating outstanding Revolving Advances and Undrawn
Availability, the Lender agrees that any such item of payment will be deemed to
have been received by the Lender and will be provisionally credited to the Loan
Account by the Lender on the Business Day immediately following the day on which
the Lender has actual possession of such item of payment for deposit to the Cash
Concentration Account. With respect to such calculation of outstandings and
Undrawn Availability, the Lender also agrees that any Customer payment
consisting of a federal wire transfer pursuant to the United States Treasury
Fedwire Deposit System, an automatic clearing house credit or other similar
payment mechanism will be deemed to have been received by the Lender
-25-
and will be credited to the Loan Account by the Lender on the Business Day on
which the Lender has received such payment prior to 11:00 a.m. (Cleveland, Ohio
time) in immediately available funds for deposit to the Cash Concentration
Account. In consideration of the Lender's agreement for provisional crediting of
items of payment, the Borrowers agree that, in calculating interest and other
charges on the Obligations, all Customer payments will be treated as having been
credited to the Loan Account on the Business Day immediately following the
Business Day on which such payments are deemed to have been received by the
Lender pursuant to this paragraph.
(c) The Lender shall not be required to credit the Loan Account for the
amount of any item of payment or other payment which is unsatisfactory to the
Lender. All credits (other than federal wire transfers) shall be provisional,
subject to verification and final settlement. The Lender may charge the Loan
Account for the amount of any item of payment or other payment which is returned
to the Lender unpaid or otherwise not collected. The Borrowers agree that any
information and data reported to the Borrowers pursuant to any service which is
received prior to final posting and confirmation is subject to correction and is
not to be construed as final posting information. The Lender shall have no
liability for the content of such preliminary service related information.
(d) All payments of principal, interest and other amounts payable
hereunder, or under any of the Other Documents shall be made to the Lender at
the Payment Office not later than 11:00 a.m. (Cleveland, Ohio time) on the due
date in lawful money of the United States of America in federal funds or other
funds immediately available to the Lender. The Lender shall have the right to
effectuate payment on any and all Obligations due and owing hereunder by
charging the Loan Account or by making Advances as provided in Section 2.2
hereof.
(e) The Borrowers shall pay principal, interest, and all other amounts
payable hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
2.7 Repayment of Excess Advances.
The aggregate balance of outstanding Advances at any time in excess of the
maximum amount of such Advances permitted hereunder shall be immediately due and
payable without the necessity of any demand, at the Payment Office, whether or
not a Default or Event of Default has occurred.
2.8 Statement of Account.
The Lender shall maintain, in accordance with its customary procedures, a
loan account ("Loan Account") in the name of the Borrowers in which shall be
recorded the date and amount of each Advance made by the Lender and the date and
amount of each payment in respect thereof; provided, however, the failure by the
Lender to record the date and amount of any Advance shall not adversely affect
the Lender. Each calendar month, the Lender shall send to the Borrowing Agent a
statement showing the accounting for the Advances made, payments
-26-
made or credited in respect thereof, and other transactions between the Lender
and the Borrowers, during such month. The monthly statements shall be deemed
correct and binding upon the Borrowers in the absence of manifest error and
shall constitute an account stated between the Lender and the Borrowers unless
the Lender receives a written statement of the Borrowers' specific exceptions
thereto within forty five (45) days after such statement is received by the
Borrowing Agent. The records of the Lender with respect to the Loan Account
shall be presumed correct evidence absent manifest error of the amounts of
Advances and other charges thereto and of payments applicable thereto.
2.9 Letters of Credit.
Subject to the terms and conditions hereof, the Issuer shall (a) issue or
cause the issuance of Letters of Credit ("Letters of Credit") on behalf of any
Borrower; provided, however, that the Issuer will not be required to issue or
cause to be issued any Letters of Credit to the extent that the face amount of
such Letters of Credit would then cause the sum of (i) the outstanding Revolving
Advances plus (ii) the outstanding amount of Letters of Credit to exceed the
lesser of (x) the Maximum Revolving Advance Amount or (y) the Formula Amount.
The maximum amount of the amount of Letters of Credit outstanding shall not
exceed One Million Five Hundred Thousand Dollars and 00/100 ($1,500,000.00) in
the aggregate at any time. All disbursements or payments related to Letters of
Credit shall be deemed to be Domestic Rate Loans (in Dollars) consisting of
Revolving Advances and shall bear interest at the Alternate Base Rate; Letters
of Credit that have not been drawn upon shall not bear interest.
2.10 Issuance of Letters of Credit.
(a) The Borrowing Agent, on behalf of any Borrower, may request the Issuer
to issue or cause the issuance of a Letter of Credit by delivering to the Issuer
at the Payment Office, the Issuer's form of Letter of Credit Application (the
"Letter of Credit Application") completed to the satisfaction of the Issuer;
and, such other certificates, documents and other papers and information as the
Issuer may reasonably request no later than 12:00 noon (Cleveland, Ohio time) at
least four (4) Business Days' prior to the date of such proposed issuance. The
Borrowing Agent, on behalf of the Borrowers, also has the right to give
instructions and make agreements with respect to any application, any applicable
letter of credit and security agreement, any applicable letter of credit
reimbursement agreement and/or any other applicable agreement, any letter of
credit and the disposition of documents, disposition of any unutilized funds,
and to agree with the Issuer upon any amendment, extension or renewal of any
Letter of Credit.
(b) Each Letter of Credit shall, among other things, (i) provide for the
payment of sight drafts or other forms of written demand for payment or,
acceptances of issued drafts when presented for honor thereunder in accordance
with the terms thereof and when accompanied by the documents described therein
and (ii) have an expiry date not later than the earlier of one (1) year from the
date of issuance or, unless agreed to by the Lender and the Issuer, the last day
of the Term. Each trade Letter of Credit shall be subject to the Uniform Customs
and Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500, and any amendments or revisions thereof adhered to
by the Issuer (the "UCP"). Each standby Letter of Credit
-27-
shall be subject to the International Standby Practices 1998, International
Chamber of Commerce Publication 590 and any amendments or revisions thereof
adhered to by the Issuer (the "ISP") or the UCP, as determined by the Issuer.
Each Letter of Credit shall be governed, to the extent not inconsistent with the
UCP or the ISP, as applicable, by the laws of the Commonwealth of Pennsylvania
(provided, however, upon the request of the Borrowing Agent and the consent of
the Issuer, a Letter of Credit may be governed by the laws of a State other than
Pennsylvania).
(c) The Issuer shall have absolute discretion whether to accept any draft.
Without in any way limiting the Issuer's absolute discretion whether to accept
any draft, the Borrowing Agent will not present for acceptance any draft, and
the Issuer will generally not accept any drafts (i) that arise out of
transactions involving the sale of goods by any Borrower not in the ordinary
course of its business, (ii) that involve a sale to an Affiliate of any
Borrower, (iii) that involve any purchase for which the Issuer has not received
all related documents, instruments and forms requested by the Issuer, or (iv)
that is not eligible for discounting with Federal Reserve Banks pursuant to
paragraph 7 of Section 13 of the Federal Reserve Act, as amended.
2.11 Requirements For Issuance of Letters of Credit.
(a) In connection with the issuance of any Letter of Credit, the Borrowers
shall indemnify, save and hold the Lender and the Issuer harmless from any loss,
cost, expense or liability, including, without limitation, payments made by the
Lender or the Issuer and expenses and reasonable attorneys' fees incurred by the
Lender or the Issuer arising out of, or in connection with, any Letter of Credit
to be issued or created for any Borrower. The Borrowers shall be bound by the
Lender's or the Issuer's regulations and good faith interpretations of any
Letter of Credit issued or created for the Loan Account, although this
interpretation may be different from its own; and, neither the Lender, nor the
Issuer nor any of their correspondents shall be liable for any error,
negligence, or mistakes, whether of omission or commission, in following the
Borrowing Agent's or any Borrower's instructions or those contained in any
Letter of Credit or of any modifications, amendments or supplements thereto or
in issuing or paying any Letter of Credit, except for the Lender's, the Issuer's
or such correspondents' gross negligence or willful misconduct.
(b) The Borrowing Agent shall authorize and direct the Issuer to name the
applicable Borrower as the "Applicant" or "Account Party" of each Letter of
Credit. The Borrowing Agent shall authorize and direct the Issuer to deliver to
the Lender all instruments, documents, and other writings and property received
by the Issuer pursuant to the Letter of Credit and to accept and rely upon the
Lender's instructions and agreements with respect to all matters arising in
connection with the Letter of Credit, the application therefor or any acceptance
therefor.
(c) In connection with all Letters of Credit issued by the Issuer under
this Agreement, each Borrower hereby appoints the Issuer, or its designee, as
its attorney, with full power and authority upon the occurrence and during the
continuance of an Event of Default or Default, (i) to sign and/or endorse such
Borrower's name upon any
-28-
warehouse or other receipts, letter of credit applications and acceptances; (ii)
to sign such Borrower's name on bills of lading; (iii) to clear Inventory
through the United States of America Customs Department ("Customs") in the name
of such Borrower or Issuer or Issuer's designee, and to sign and deliver to
Customs officials powers of attorney in the name of such Borrower for such
purpose; and (iv) to complete in such Borrower's name or Issuer's, or in the
name of Issuer's designee, any order, sale or transaction, obtain the necessary
documents in connection therewith, and collect the proceeds thereof. Neither
Issuer nor its attorneys will be liable for any acts or omissions nor for any
error of judgment or mistakes of fact or law, except for Issuer's or its
attorney's willful misconduct or gross negligence. This power, being coupled
with an interest, is irrevocable as long as any Letters of Credit remain
outstanding.
(d) The Lender shall be deemed to have irrevocably purchased a one hundred
percent (100%) participation in each unpaid reimbursement obligation. In the
event the Issuer makes a disbursement in respect of a Letter of Credit, the
Lender shall pay to the Issuer, upon the Issuer's demand, the amount of such
disbursement together with the Issuer's reasonable unreimbursed costs and
expenses relating to such disbursement. The Lender's participation commitment
shall continue until the last to occur of any of the following events: (A) the
Issuer ceases to be obligated to issue or cause to be issued Letters of Credit
hereunder; (B) no Letter of Credit issued hereunder remains outstanding and
uncancelled or (C) all Persons (other than the applicable Borrower) have been
fully reimbursed for all payments made under or relating to Letters of Credit.
(e) Immediately upon the request of the Lender, (i) after the occurrence
and during the continuance of a Default or an Event of Default, each of the
Borrowers will deposit and maintain in an account with the Lender in cash, as
cash collateral, in an amount equal to one hundred five percent (105%) of the
amount of outstanding Letters of Credit. In each case, each Borrower hereby
irrevocably authorizes the Lender, in its discretion, on such Borrower's behalf
and in such Borrower's name, to open such an account and to make and maintain
deposits in such account or in an account opened by such Borrower, in the
amounts required to be made by such Borrower, out of the proceeds of Receivables
or other Collateral or out of any other funds of such Borrower coming into the
Lender's possession at any time. The Lender will invest such cash collateral
(less applicable reserves) in such short-term money-market items as to which the
Lender and such Borrower mutually agree and the net return on such investments
shall be credited to such account and constitute additional cash collateral. So
long as such Default or Event of Default is continuing, no Borrower may withdraw
amounts credited to any such account except upon payment and performance in full
of all Obligations and termination of this Agreement.
2.12 Additional Payments.
Any sums reasonably expended by the Lender due to any Borrower's failure to
perform or comply with its obligations under this Agreement or any Other
Document including, without limitation, any Borrower's obligations under
Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1
-29-
hereof, may be charged to the Loan Account as a Revolving Advance and added to
the Obligations.
2.13 Use of Proceeds.
The Borrowers shall apply the proceeds of Advances (i) to repay existing
Indebtedness owed to the Existing Lender, (ii) to pay fees and expenses relating
to the transaction contemplated by this Agreement, (iii) for general corporate
purposes and (iv) to provide for working capital needs.
III. INTEREST AND FEES.
3.1 Interest.
(a) Interest on Advances shall be payable in arrears on the first (1st) day
of each calendar month with respect to Domestic Rate Loans and on the last day
of the Term and, with respect to Libor Rate Loans, at the end of each Interest
Period or, for Libor Rate Loans with an Interest Period in excess of three (3)
months, at the earlier of (a) each three (3) months on the anniversary date of
the commencement of such Libor Rate Loan or (b) the end of the Interest Period.
Interest charges shall be computed on the actual principal amount of Advances
outstanding during the calendar month (the "Monthly Advances") at a rate per
annum equal to (i) with respect to Revolving Advances, the applicable Revolving
Interest Rate, and (ii) with respect to the Term Loan, the applicable Term Loan
Rate (as applicable, the "Contract Rate").
(b) Whenever, subsequent to the date of this Agreement, the Alternate Base
Rate is increased or decreased, the Contract Rate for Domestic Rate Loans shall
be similarly changed without notice or demand of any kind by an amount equal to
the amount of such change in the Alternate Base Rate during the time such change
or changes remain in effect. The Libor Rate shall be adjusted with respect to
Libor Rate Loans without notice or demand of any kind on the effective date of
any change in the Eurocurrency Reserve Percentage as of such effective date.
Upon and after the occurrence of an Event of Default, and during the
continuation thereof, the Obligations shall bear interest at the applicable
Contract Rate plus two percent (2%) per annum (the "Default Rate").
3.2 Letter of Credit Fees.
(a) The Borrowers shall pay (y) to the Lender, fees for each Letter of
Credit, for the period from and excluding the date of issuance of same to and
including the date of expiration or termination, equal to the average daily face
amount of each outstanding Letter of Credit multiplied by two and one quarter of
one percent (2.25%) per annum, such fee to be calculated on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed and to be
payable monthly in arrears on the first day of each calendar month and on the
last day of the Term and (z) to the Issuer, for its own account, any and all
fees and expenses as agreed upon by the Issuer and the Borrowing Agent in
connection with any Letter of Credit, including, without limitation, in
connection with the opening, amendment or renewal of any such Letter of Credit
and any
-30-
acceptances created thereunder and shall reimburse the Lender for any and all
fees and expenses, if any, paid by the Lender to the Issuer (all of the
foregoing fees, the "Letter of Credit Fees"). All such charges shall be deemed
earned in full on the date when the same are due and payable hereunder and shall
not be subject to rebate or proration upon the termination of this Agreement for
any reason. Any such charge in effect at the time of a particular transaction
shall be the charge for that transaction, notwithstanding any subsequent change
in the Issuer's prevailing charges for that type of transaction. All Letter of
Credit Fees payable hereunder shall be deemed earned in full on the date when
the same are due and payable hereunder and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason. Upon and after
the occurrence of an Event of Default, and during the continuation thereof, the
Letter of Credit Fees otherwise applicable pursuant to this Section 3.2 shall be
increased by two percent (2.0%) per annum.
3.3 Closing Fee/Facility Fee.
(a) The Borrowers shall pay to the Lender on the Closing Date a closing fee
of Sixty Seven Thousand Five Hundred and 00/100 Dollars ($67,500.00) less the
commitment fee of Thirty Three Thousand Seven Hundred Fifty and 00/100 Dollars
($33,750.00) previously paid by the Borrowers to the Lender.
(b) If, for any calendar month during the Term, the average daily unpaid
balance of the Revolving Advances for each day of such calendar month does not
equal the Maximum Revolving Advance Amount, then the Borrowers shall pay to the
Lender a fee at a rate per annum equal to 0.1875% per annum multiplied by the
amount by which the Maximum Revolving Advance Amount exceeds such average daily
unpaid balance, such fees shall be payable to the Lender in arrears on the first
(1st) day of each calendar month after the date hereof until the termination
hereof and on the earlier of (i) such termination date or (ii) the last day of
the Term.
3.4 Collateral Fees.
(a) Collateral Monitoring Fee. The Borrowers shall pay to the Lender a
collateral monitoring fee equal to One Thousand Dollars ($1,000.00) per calendar
month commencing on the first day of the calendar month following the Closing
Date and on the first day of each calendar month thereafter during the Term. The
collateral monitoring fee shall be deemed earned in full on the date when same
is due and payable hereunder and shall not be subject to rebate or proration
upon termination of this Agreement for any reason.
(b) Collateral Evaluation Fee. The Borrowers shall pay to Lender on the
first day of each calendar month following any calendar month in which the
Lender performs any collateral evaluation, including any field examination,
collateral analysis or other business analysis, the need for which is to be
determined by the Lender and which evaluation is undertaken by the Lender or for
the Lender's benefit, a collateral evaluation fee in an amount equal to Eight
Hundred Fifty Dollars ($850.00) per day for each person
-31-
performing such evaluation, plus all costs and disbursements incurred by the
Lender in the performance of such examination or analysis.
3.5 Computation of Interest and Fees.
Interest and fees hereunder shall be computed on the basis of a year of
three hundred sixty (360) days and for the actual number of days elapsed. If any
payment to be made hereunder becomes due and payable on a day other than a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day and interest thereon shall be payable at the applicable Contract
Rate during such extension.
3.6 Maximum Charges.
In no event whatsoever shall interest and other charges charged hereunder
exceed the highest rate permissible under law. In the event interest and other
charges as computed hereunder would otherwise exceed the highest rate permitted
under law, such excess amount shall be first applied to any unpaid principal
balance owed by the Borrowers, and if then remaining excess amount is greater
than the previously unpaid principal balance, the Lender shall promptly refund
such excess amount to the Borrowers and the provisions hereof shall be deemed
amended to provide for such permissible rate.
3.7 Increased Costs.
In the event that, (a) the introduction after the date of this Agreement of
any law, treaty, rule or regulation or any change therein after the date of this
Agreement, (b) any change after the date of this Agreement in the interpretation
or administration of any law, treaty, rule or regulation by any central bank or
other governmental authority or (c) the compliance by the Lender or the Issuer
with any guideline, request or directive from any central bank or other
governmental authority (whether or not having the force of Law) after the date
of this Agreement (for purposes of this Section 3.7, the term "Lender" shall
include the Lender and any corporation or bank controlling the Lender and the
office or branch where the Lender (as so defined) makes or maintains any Libor
Rate Loans), shall:
(a) subject the Lender to any tax of any kind whatsoever with respect to
this Agreement or any Other Document or change the basis of taxation of payments
to the Lender of principal, fees, interest or any other amount payable hereunder
or under any Other Documents (except for changes in the rate of tax on the
overall net income of the Lender by the jurisdiction in which it maintains its
principal office);
(b) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by, any office of
the Lender, including (without limitation) pursuant to Regulation D of the Board
of Governors of the Federal Reserve System; or
(c) impose on the Lender or the London interbank offered rate market any
other condition with respect to this Agreement or any Other Document;
-32-
and the result of any of the foregoing is to increase the cost to the Lender of
making, renewing or maintaining its Advances hereunder by an amount that the
Lender deems to be material or to reduce the amount of any payment (whether of
principal, interest or otherwise) in respect of any of the Advances by an amount
that the Lender deems to be material, then, in any case the Borrowers shall
promptly pay the Lender, upon its demand, such additional amount as will
compensate the Lender for such additional cost or such reduction, as the case
may be, provided that the foregoing shall not apply to increased costs which are
reflected in the Libor Rate. The Lender shall certify the amount of such
additional cost or reduced amount to the Borrowers, and such certification shall
be presumed correct absent manifest error.
3.8 Basis For Determining Interest Rate Inadequate or Unfair.
In the event that the Lender shall have determined that:
(a) reasonable means do not exist for ascertaining the Libor Rate
applicable pursuant to Section 2.2 hereof for any Interest Period; or
(b) Dollar deposits in the relevant amount and for the relevant maturity
are not available in the London interbank Libor market, with respect to an
outstanding Libor Rate Loan, a proposed Libor Rate Loan, or a proposed
conversion of a Domestic Rate Loan into a Libor Rate Loan,
then the Lender shall give the Borrowing Agent prompt written, telephonic or
telegraphic notice of such determination. If such notice is given, (i) any such
requested Libor Rate Loan shall be made as a Domestic Rate Loan, unless the
Borrowing Agent shall notify the Lender no later than 10:00 a.m. (Cleveland,
Ohio time) two (2) Business Days prior to the date of such proposed borrowing,
that its request for such borrowing shall be cancelled or made as an unaffected
type of Libor Rate Loan, (ii) any Domestic Rate Loan or Libor Rate Loan which
was to have been converted to an affected type of Libor Rate Loan shall be
continued as or converted into a Domestic Rate Loan, or, if the Borrowing Agent
shall notify the Lender, no later than 10:00 a.m. (Cleveland, Ohio time) two (2)
Business Days prior to the proposed conversion, shall be maintained as an
unaffected type of Libor Rate Loan, and (iii) any outstanding affected Libor
Rate Loans shall be converted into a Domestic Rate Loan, or, if the Borrowing
Agent shall notify the Lender, no later than 10:00 a.m. (Cleveland, Ohio time)
two (2) Business Days prior to the last Business Day of then current Interest
Period applicable to such affected Libor Rate Loan, shall be converted into an
unaffected type of Libor Rate Loan, on the last Business Day of then current
Interest Period for such affected Libor Rate Loans. Until such notice has been
withdrawn, the Lender shall have no obligation to make an affected type of Libor
Rate Loan or maintain outstanding affected Libor Rate Loans and no Borrower
shall have the right to convert a Domestic Rate Loan or an unaffected type of
Libor Rate Loan into an affected type of Libor Rate Loan.
3.9 Capital Adequacy.
(a) In the event that the Lender shall have determined that (a) the
introduction after the date of this Agreement of any law, treaty, rule or
regulation or any change therein after the date of this Agreement, (b) any
change after the date of this
-33-
Agreement in the interpretation or administration of any law, treaty, rule or
regulation by any central bank or other governmental authority or (c) the
compliance by the Lender or the Issuer with any guideline, request or directive
from any central bank or other governmental authority (whether or not having the
force of Law) after the date of this Agreement (for purposes of this Section
3.9, the term "Lender" shall include the Lender and any corporation or bank
controlling the Lender and the office or branch where the Lender (as so defined)
makes or maintains any Libor Rate Loans), has or would have the effect of
reducing the rate of return on the Lender's capital as a consequence of its
obligations hereunder to a level below that which the Lender could have achieved
but for such adoption, change or compliance (taking into consideration the
Lender's policies with respect to capital adequacy) by an amount deemed by the
Lender to be material, then, from time to time, the Borrowers shall pay upon
demand to the Lender such additional amount or amounts as will compensate the
Lender for such reduction. In determining such amount or amounts, the Lender may
use any reasonable averaging or attribution methods. The protection of this
Section 3.9 shall be available to the Lender regardless of any possible
contention of invalidity or inapplicability with respect to the applicable law,
regulation or condition.
(b) A certificate of the Lender setting forth such amount or amounts as
shall be necessary to compensate the Lender with respect to Section 3.9(a)
hereof when delivered to the Borrowers shall be presumed correct absent manifest
error.
IV. COLLATERAL: GENERAL TERMS.
4.1 Security Interest in the Collateral.
To secure the prompt payment and performance to the Lender and the Issuer
of the Obligations, each Loan Party hereby assigns, pledges and grants to the
Lender for its benefit and for the benefit of the Issuer a continuing security
interest in and to all of its Collateral, whether now owned or existing or
hereafter acquired or arising and wheresoever located. Each Loan Party shall
xxxx its books and records as may be necessary or appropriate to evidence,
protect and perfect the Lender's security interest and shall cause its financial
statements to reflect such security interest. Each Loan Party shall promptly
provide the Lender with written notice of all commercial tort claims, such
notice to contain the case title together with the applicable court and a brief
description of the claim(s). Upon delivery of each such notice, such Borrower
shall be deemed to hereby grant to the Lender a security interest and lien in
and to such commercial tort claims and all proceeds thereof.
4.2 Perfection of Security Interest.
Each Loan Party shall take all action that may be necessary or desirable,
or that the Lender may request, so as at all times to maintain the validity,
perfection, enforceability and priority of the Lender's security interest in the
Collateral or to enable the Lender to protect, exercise or enforce its rights
hereunder and in the Collateral, including, but not limited to, (i) immediately
discharging all Liens other than Permitted Encumbrances, (ii) using commercially
reasonable efforts to obtain applicable Waivers, as the Lender may reasonably
request, (iii) delivering to the Lender, endorsed or accompanied by such
instruments of
-34-
assignment as the Lender may specify, and stamping or marking, in such manner as
the Lender may specify, any and all chattel paper, instruments, letters of
credits and advices thereof and documents evidencing or forming a part of the
Collateral, (iv) entering into warehousing, lockbox and other custodial
arrangements satisfactory to the Lender as and to the extent required hereunder,
and (v) executing and delivering control agreements, instruments of pledge,
notices and assignments, in each case in form and substance satisfactory to the
Lender, relating to the creation, validity, perfection, maintenance or
continuation of the Lender's security interest in Collateral under the Uniform
Commercial Code or other applicable law. The Lender is hereby authorized to file
financing statements in accordance with the Uniform Commercial Code from time to
time. By its signature hereto, each Loan Party hereby authorizes the Lender to
file against such Loan Party, one or more financing, continuation, or amendment
statements pursuant to the Uniform Commercial Code to perfect Liens securing
Obligations arising hereunder in form and substance satisfactory to the Lender.
All charges, expenses and fees the Lender may incur in doing any of the
foregoing, and any local taxes relating thereto, shall be charged to the Loan
Account as a Revolving Advance of a Domestic Rate Loan and added to the
Obligations, or, at the Lender's option, shall be paid to the Lender for the
benefit of the Issuer and the Lender immediately upon demand.
4.3 Disposition of Collateral.
Each Loan Party will safeguard and protect all Collateral for the Lender's
general account and make no disposition thereof whether by sale, lease or
otherwise (including, but not limited to, with respect to the Rights of Entry,
expiration) except as may be otherwise permitted under this Agreement.
4.4 Preservation of Collateral.
Following the occurrence and during the continuation of a Default or Event
of Default in addition to the rights and remedies set forth in Section 11.1
hereof, the Lender: (a) may at any time take such steps as the Lender deems
necessary to protect the Lender's interest in and to preserve the Collateral,
including the hiring of such security guards or the placing of other security
protection measures as the Lender may deem appropriate; (b) may employ and
maintain at any of any Loan Party's premises a custodian who shall have full
authority to do all acts necessary to protect the Lender's interests in the
Collateral; (c) may lease warehouse facilities to which the Lender may move all
or part of the Collateral; (d) may use any Loan Party's owned or leased lifts,
hoists, trucks and other facilities or equipment for handling or removing the
Collateral; and (e) shall have, and is hereby granted, a right of ingress and
egress to the places where the Collateral is located, and may proceed over and
through any of any Loan Party's owned or leased property. Each Borrower shall
cooperate fully with all of the Lender's efforts to preserve the Collateral as
permitted in the foregoing sentence and will take such actions to preserve the
Collateral as the Lender may direct. All of the Lender's expenses of preserving
the Collateral in accordance with the foregoing, including any expenses relating
to the bonding of a custodian, shall be charged to the Loan Account as a
Revolving Advance of a Domestic Rate Loan and added to the Obligations.
-35-
4.5 Ownership of Collateral.
With respect to the Collateral, at the time the Collateral becomes subject
to the Lender's security interest: (a) each Loan Party shall be the sole owner
of and fully authorized and able to sell, transfer, pledge and/or grant a first
priority security interest in each and every item of its respective Collateral
to the Lender; and, except for Permitted Encumbrances, the Collateral shall be
free and clear of all Liens and encumbrances whatsoever; (b) each document and
agreement executed by each Loan Party or delivered to the Lender in connection
with this Agreement shall be true and correct in all material respects; (c) all
signatures and endorsements of each Loan Party that appear on such documents and
agreements shall be genuine and each Loan Party shall have full capacity to
execute same; and (d) each Loan Party's Inventory shall be located as set forth
on Schedule 4.5 (as such Schedule may be updated from time to time) and shall
not be removed from such location(s) without the prior written consent of the
Lender except with respect to the sale of Inventory in the ordinary course of
business and with respect to Inventory in transit from one location identified
on Schedule 4.5 (as such Schedule may be updated from time to time) to another
location identified on Schedule 4.5.
4.6 Defense of the Lender's Interests.
Until (a) payment and performance in full of all of the Obligations and (b)
termination of this Agreement, the Lender's interests in the Collateral shall
continue in full force and effect. During such period no Loan Party shall,
without the Lender's prior written consent, pledge, sell (except Inventory in
the ordinary course of business), assign, transfer, create or suffer to exist a
Lien upon or encumber or allow or suffer to be encumbered in any way except for
Permitted Encumbrances, and except for sales, assignments, and transfers
expressly permitted elsewhere herein, any part of the Collateral. Each Loan
Party shall defend the Lender's interests in the Collateral against any and all
Persons whatsoever. At any time after an Event of Default or Default has
occurred after demand by the Lender for payment of all Obligations, the Lender
shall have the right to take possession of the indicia of the Collateral and the
Collateral in whatever physical form contained, including without limitation:
labels, stationery, documents, instruments and advertising materials. If the
Lender exercises such right to take possession of the Collateral, the Loan
Parties shall, upon demand, assemble it in the best manner possible and make it
available to the Lender at a place reasonably convenient to the Lender. In
addition, with respect to all Collateral, the Lender and the Issuer shall be
entitled to all of the rights and remedies set forth herein and further provided
by the Uniform Commercial Code or other applicable law. After the occurrence and
during the continuance of a Default or an Event of Default, each Loan Party
shall, and the Lender may, at its option, instruct all suppliers, carriers,
forwarders, warehousers or others receiving or holding cash, checks, Inventory,
documents or instruments in which the Lender holds a security interest to
deliver same to the Lender and/or subject to the Lender's order, and, if they
shall come into any Loan Party's possession, they, and each of them, shall be
held by such Loan Party in trust as the Lender's trustee, and such Loan Party
will immediately deliver them to the Lender in their original form together with
any necessary endorsement.
-36-
4.7 Books and Records.
Each Loan Party shall (a) keep proper books of record and account in which
full, true and correct entries will be made of all dealings or transactions of
or in relation to its business and affairs; (b) set up on its books accruals
with respect to all taxes, assessments, charges, levies and claims; and (c) on a
reasonably current basis set up on its books, from its earnings, allowances
against doubtful Receivables, advances and investments and all other proper
accruals (including without limitation by reason of enumeration, accruals for
premiums, if any, due on required payments and accruals for depreciation,
obsolescence, or amortization of properties), which should be set aside from
such earnings in connection with its business. All determinations pursuant to
this subsection shall be made in all material respects in accordance with, or as
required by, GAAP consistently applied in the opinion of such independent public
accountant as shall then be regularly engaged by the Loan Parties.
4.8 Financial Disclosure.
Each Loan Party hereby irrevocably authorizes and directs all accountants
and auditors employed by such Loan Party at any time during the Term and
promptly after the request of the Lender to exhibit and deliver to the Lender
copies of any Loan Party's financial statements (if any exist at or prior to the
date of such request), trial balances or other accounting records of any sort in
the accountant's or auditor's possession, and to disclose to the Lender any
information such accountants may have concerning such Loan Party's financial
status and business operations. Each Loan Party hereby authorizes all federal,
state and municipal authorities to furnish to the Lender copies of reports or
examinations relating to such Loan Party, whether made by such Loan Party or
otherwise; however, the Lender will attempt to obtain such information or
materials directly from such Loan Party prior to obtaining such information or
materials from such accountants or such authorities.
4.9 Compliance with Laws.
Each Loan Party shall comply with all laws, acts, rules, regulations and
orders of any Governmental Body with jurisdiction over it or its respective
Collateral or any part thereof or to the operation of such Loan Party's business
the non-compliance with which could reasonably be expected to have a Material
Adverse Effect. Each Loan Party may, however, contest or dispute any acts,
rules, regulations, orders and directions of those bodies or officials in any
reasonable manner, provided that any related Lien is inchoate or stayed and
sufficient reserves are established to the reasonable satisfaction of the Lender
to protect the Lender's Lien on or security interest in the Collateral. The
Collateral at all times shall be maintained in accordance with the material
requirements of all insurance carriers which provide insurance with respect to
the Collateral so that such insurance shall remain in full force and effect.
4.10 Inspection of Premises.
At all reasonable times as the Lender deems necessary, after one (1) day's
prior notice, the Lender shall have full access to and the right to audit,
check, inspect and make abstracts and copies from each Loan Party's books,
records, audits, correspondence and all other papers relating to the Collateral
and the operation of each Loan Party's business. The Lender and
-37-
its agents may, after one (1) day's prior notice, enter upon any of each Loan
Party's premises at any time during business hours and at any other reasonable
time, and from time to time as the Lender deems necessary, for the purpose of
inspecting and appraising the Collateral and any and all records pertaining
thereto and the operation of such Loan Party's business. Notwithstanding
anything herein to the contrary, (i) prior to the occurrence of a Default or
Event of Default that is continuing, the Lender shall conduct such audits,
inspections, field examinations and appraisals no more frequently than once per
fiscal quarter, and (ii) after the occurrence of a Default or Event of Default
that is continuing, the Lender may conduct such audits, inspections, field
examinations and appraisals at any time and from time to time and the Lender
shall not be required to provide advance notice to the Loan Parties with respect
to conducting such audits, inspections and appraisals.
4.11 Insurance.
Each Loan Party shall bear the full risk of any loss of any nature
whatsoever with respect to the Collateral. At each Loan Party's own cost and
expense in amounts and with carriers acceptable to the Lender, each Loan Party
shall (a) keep all its insurable properties and properties in which each Loan
Party has an interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies engaged
in businesses similar to such Loan Party's including, without limitation,
business interruption insurance; (b) maintain a bond in such amounts as is
customary in the case of companies engaged in businesses similar to such Loan
Party insuring against larceny, embezzlement or other criminal misappropriation
of insured's officers and employees who may either singly or jointly with others
at any time have access to the assets or funds of such Loan Party either
directly or through authority to draw upon such funds or to direct generally the
disposition of such assets; (c) maintain public and product liability insurance
against claims for personal injury, death or property damage suffered by others;
(d) maintain all such worker's compensation or similar insurance as may be
required under the laws of any state or jurisdiction in which such Loan Party is
engaged in business; (e) furnish the Lender with (i) a status report with
respect to the renewal of all such insurance no later than ten (10) days before
the expiration date thereof, (ii) evidence of the maintenance of all such
insurance by the renewal thereof no later than the expiration date thereof, and
(iii) appropriate loss payable endorsements in form and substance satisfactory
to the Lender, naming the Lender as a co-insured, loss payee and mortgagee as
its interests may appear but only with respect to all insurance coverage
covering damage, loss or destruction of Collateral, and providing (A) that all
proceeds thereunder covering a loss of or damage to Collateral shall be payable
to the Lender, (B) no such insurance shall be affected by any act or neglect of
the insured or owner of the property described in such policy, and (C) that such
policy and loss payable clauses may not be cancelled, amended or terminated
unless at least thirty (30) days' prior written notice is given to the Lender.
The Loan Parties shall provide copies of all such insurance policies (including
the appropriate lender loss payee, additional insured and mortgagee
endorsements) within thirty (30) days after the Lender's request, however, only
certificates of such insurance shall be required at Closing. In the event of any
loss under any insurance covering Collateral, the carriers named in such
insurance policies covering Collateral hereby are directed by the Lender and the
applicable Loan Party to make payment for such loss to the Lender and not to
such Loan Party and the Lender jointly. If any insurance losses with respect to
Collateral are paid by check, draft or other instrument payable to any Loan
Party and the Lender
-38-
jointly, the Lender may endorse such Loan Party's name thereon and do such other
things as the Lender may deem advisable to reduce the same to cash. The Lender
is hereby authorized to adjust and compromise claims under insurance coverage
with respect to Collateral. All loss recoveries with respect to Collateral
received by the Lender upon any such insurance may be applied to the
Obligations, in such order as the Lender in its sole discretion shall determine.
Any surplus with respect to Collateral shall be paid by the Lender to the Loan
Parties or applied as may be otherwise required by law. Any deficiency thereon
shall be paid by the Loan Parties to the Lender, on demand. Any loss recoveries
not relating to items of Collateral shall be payable directly to the Loan
Parties and, if received by the Lender, the Lender shall promptly deliver same
to the Loan Parties. Anything hereinabove to the contrary notwithstanding, and
subject to the fulfillment of the conditions set forth below and, with respect
to the Mortgaged Property, the provisions of the Mortgage, the Lender shall
remit to the Loan Parties insurance proceeds with respect to Collateral received
by the Lender during any calendar year under insurance policies procured and
maintained by the Loan Parties which insure the Loan Parties' insurable
Collateral to the extent such insurance proceeds do not exceed Five Hundred
Thousand and 00/100 Dollars ($500,000.00) in the aggregate during such calendar
year or Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) per
occurrence. In the event the amount of insurance proceeds with respect to
Collateral received by the Lender for any occurrence exceeds Two Hundred Fifty
Thousand and 00/100 Dollars ($250,000.00), then the Lender shall not be
obligated to remit the insurance proceeds to the Loan Parties unless the Loan
Parties provide the Lender with evidence reasonably satisfactory to the Lender
that the insurance proceeds will be used by the Loan Parties to repair, replace
or restore the insured Collateral which was the subject of the insurable loss.
In the event the Loan Parties have previously received (or, after giving effect
to any proposed remittance by the Lender to the Loan Parties would receive)
insurance proceeds with respect to Collateral which equal or exceed Five Hundred
Thousand and 00/100 Dollars ($500,000.00) in the aggregate during any calendar
year, then the Lender may, in its sole discretion, either remit the insurance
proceeds to the Loan Parties upon the Loan Parties providing the Lender with
evidence reasonably satisfactory to the Lender that the insurance proceeds will
be used by the Loan Parties to repair, replace, restore or reuse the insured
Collateral which was the subject of the insurable loss, or apply the proceeds to
the Obligations, as aforesaid. The agreement of the Lender to remit insurance
proceeds in the manner above provided shall be subject in each instance to
satisfaction of each of the following conditions: (x) no Event of Default or
Default shall then have occurred and be continuing, and (y) the Loan Parties
shall use the insurance proceeds with respect to Collateral to repair, replace,
restore or reuse the insured Collateral which was the subject of the insurable
loss and for no other purpose.
4.12 Failure to Pay Insurance.
If any Loan Party fails to obtain insurance as hereinabove provided, or to
keep the same in force, the Lender, if the Lender so elects, may obtain such
insurance and pay the premium therefor on behalf of such Loan Party, and charge
the Loan Account therefor as a Revolving Advance of a Domestic Rate Loan and
such expenses so paid shall be part of the Obligations.
-39-
4.13 Payment of Taxes.
Each Loan Party will pay, when due, all taxes, assessments and other
Charges lawfully levied or assessed upon such Loan Party or any of the
Collateral including, without limitation, real and personal property taxes,
assessments and charges and all franchise, income, employment, social security
benefits, withholding, and sales taxes, except those taxes, assessments or
Charges to the extent that any Loan Party has contested or disputed those taxes,
assessments or Charges in good faith, by expeditious protest, administrative or
judicial appeal or similar proceeding, provided that any related tax Lien is
stayed and sufficient reserves are established to the reasonable satisfaction of
the Lender to protect the Lender's security interest in or Lien on the
Collateral. If any tax by any governmental authority is or may be imposed on or
as a result of any transaction between any Loan Party and the Lender or the
Issuer which the Lender or the Issuer may be required to withhold or pay or if
any taxes, assessments, or other Charges remain unpaid after the date fixed for
their payment, or if any claim shall be made which, in the Lender's opinion, may
possibly create a valid Lien on the Collateral, the Lender may without notice to
the Loan Parties pay the taxes, assessments or other Charges and each Loan Party
hereby indemnifies and holds the Lender and the Issuer harmless in respect
thereof. The Lender will not pay any taxes, assessments or Charges to the extent
that any Loan Party has contested or disputed those taxes, assessments or
Charges in good faith, by expeditious protest, administrative or judicial appeal
or similar proceeding, provided that any related tax lien is stayed and
sufficient reserves are established to the reasonable satisfaction of the Lender
to protect the Lender's security interest in or Lien on the Collateral. The
amount of any payment by the Lender under this Section 4.13 shall be charged to
the Loan Account as a Revolving Advance of a Domestic Rate Loan and added to the
Obligations and, until the Loan Parties shall furnish the Lender with an
indemnity therefor (or supply the Lender with evidence satisfactory to the
Lender that due provision for the payment thereof has been made), the Lender may
hold without interest any balance standing to the Loan Parties' credit and the
Lender shall retain its security interest in any and all Collateral held by the
Lender.
4.14 Payment of Leasehold Obligations.
Each Loan Party shall at all times pay, when and as due, its rental
obligations under all leases under which it is a tenant, and shall otherwise
comply, in all material respects, with all other terms of such leases and keep
them in full force and effect and, at the Lender's reasonable request will
provide evidence of having done so.
4.15 Receivables.
(a) Nature of Receivables. Each of the Receivables shall be a bona fide and
valid account representing a bona fide indebtedness incurred by the Customer
therein named, for a fixed sum as set forth in the invoice relating thereto
(provided immaterial or unintentional invoice errors shall not be deemed to be a
breach hereof) with respect to an absolute sale or lease and delivery of goods
upon stated terms of a Loan Party, or work, labor or services theretofore
rendered by a Loan Party as of the date each Receivable is created. Same shall
be due and owing without dispute, setoff or counterclaim except as may be stated
on the accounts receivable schedules delivered by the Loan Parties to the
Lender.
-40-
(b) Solvency of Customers. Each Customer, to the Loan Parties knowledge, as
of the date each Receivable is created, is and will be solvent and able to pay
all Receivables on which the Customer is obligated in full when due or with
respect to such Customers of any Loan Party who are not solvent such Loan Party
has set up on its books and in its financial records bad debt reserves adequate
to cover the uncollectible portion.
(c) Locations of Loan Parties. Each Loan Party's state of organization and
chief executive office are located at the addresses set forth on Schedule
4.15(c) hereto. Until written notice is given to the Lender by the Borrowing
Agent of any other office at which any Loan Party keeps its records pertaining
to Receivables, all such records shall be kept at such executive office.
(d) Notification of Assignment of Receivables. At any time following the
occurrence of an Event of Default or a Default, the Lender shall have the right
to send notice of the assignment of, and the Lender's security interest in, the
Receivables to any and all Customers or any third party holding or otherwise
concerned with any of the Collateral. Thereafter, the Lender shall have the sole
right to collect the Receivables, take possession of the Collateral, or both.
The Lender's actual collection expenses, including, but not limited to,
stationery and postage, telephone and telegraph, secretarial and clerical
expenses and the salaries of any collection personnel used for collection, may
be charged to the Loan Account and added to the Obligations.
(e) Power of Lender to Act on Loan Parties' Behalf. The Lender shall have
the right, at any time after the occurrence of a Default or an Event of Default,
to receive, endorse, assign and/or deliver in the name of the Lender or any Loan
Party any and all checks, drafts and other instruments for the payment of money
relating to the Receivables, and each Loan Party hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Each Loan
Party hereby constitutes the Lender or the Lender's designee as such Loan
Party's attorney with power at any time after the occurrence of an Event of
Default or Default (i) to endorse such Loan Party's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
Collateral; (ii) to sign such Loan Party's name on any invoice or xxxx of lading
relating to any of the Receivables, drafts against Customers, assignments and
verifications of Receivables; (iii) to send verifications of Receivables to any
Customer; (iv) to demand payment of the Receivables; (v) to enforce payment of
the Receivables by legal proceedings or otherwise; (vi) to exercise all of the
Loan Parties' rights and remedies with respect to the collection of the
Receivables and any other Collateral; (vii) to settle, adjust, compromise,
extend or renew the Receivables; (viii) to settle, adjust or compromise any
legal proceedings brought to collect Receivables; (ix) to prepare, file and sign
such Loan Party's name on a proof of claim in bankruptcy or similar document
against any Customer; (x) to prepare, file and sign such Loan Party's name on
any notice of Lien, assignment or satisfaction of Lien or similar document in
connection with the Receivables; and (xi) to do all other acts and things
necessary to carry out this Agreement. All acts of said attorney or designee are
hereby ratified and approved, and said attorney or designee shall not be liable
for any acts of omission or commission nor for any error of judgment or mistake
of fact or of law, unless done with gross negligence
-41-
or willful misconduct; this power being coupled with an interest is irrevocable
while any of the Obligations remain unpaid. The Lender shall have the right at
any time following the occurrence of an Event of Default or Default, to change
the address for delivery of mail addressed to any Loan Party to such address as
the Lender may designate and to receive, open and dispose of all mail addressed
to any Loan Party.
(f) No Liability. Neither the Issuer nor the Lender shall, under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Receivables or any instrument received in payment thereof, or for
any damage resulting therefrom unless such liability arises from the Issuer's or
the Lender's willful misconduct or gross negligence as finally determined by a
court of competent jurisdiction. Following the occurrence of an Event of Default
or Default, the Lender may, without notice or consent from any Loan Party, xxx
upon or otherwise collect, extend the time of payment of, compromise or settle
for cash, credit or upon any terms any of the Receivables or any other
securities, instruments or insurance applicable thereto and/or release any
obligor thereof. The Lender is authorized and empowered to accept following the
occurrence and during the continuance of an Event of Default or Default the
return of the goods represented by any of the Receivables, without notice to or
consent by any Loan Party, all without discharging or in any way affecting any
Loan Party's liability hereunder.
(g) Establishment of Lockboxes, Collection Account. The Borrowers have
established and shall maintain one or more Lockboxes with National City Bank and
with each other Lockbox Bank in the name of the Borrowing Agent or such other
Borrowers as are acceptable to the Lender, in its sole discretion. The Borrowers
have established and will maintain a deposit account (each a "Collection
Account") with each Lockbox Bank in the name of the Borrowing Agent or such
other Borrowers, as are acceptable to the Lender, in its sole discretion. In the
case of National City Bank, the Cash Concentration Account maintained at
National City Bank shall function as the Collection Account maintained at
National City Bank for all purposes of this Section 4.15(g). Each Lockbox Bank
and the Borrowing Agent (or other applicable Borrower) have entered into
agreements establishing the Lockboxes maintained by such Lockbox Bank (each a
"Lockbox Agreement") and agreements with respect to the Collection Account
maintained at such Lockbox Bank (each a "Deposit Account Agreement"), each such
Lockbox Agreement and Deposit Account Agreement to be in form and substance
satisfactory to the Lender. The Borrowing Agent (or other applicable Borrower)
and the Lender shall have entered into a Blocked Account Agreement with each
Lockbox Bank relating to rights of the Lender with respect to the Lockboxes and
the Collection Accounts maintained at such Lockbox Bank. Each of the Borrowers
shall notify all of its Customers to forward all collections of every kind due
such Borrower to a Lockbox (such notices to be in such form and substance as the
Lender may reasonably require to from time to time). Schedule 4.15(g) hereto
lists the following information with respect to each Borrower: (i) all present
Lockboxes, all Collection Accounts and the Cash Concentration Account, (ii) the
name and address of each Lockbox, (iii) the account number of each Collection
Account and the Cash Concentration Account, (iv) a contact Person at each
Lockbox Bank, and (v) a list describing all Lockbox Agreements, Deposit
-42-
Account Agreements and Blocked Account Agreements, and all other agreements
establishing each Lockbox and Collection Account.
(h) Processing Collections; Cash Concentration Account. In accordance with
the terms of the applicable Blocked Account Agreement, each Lockbox Bank shall
be instructed to deposit on a daily basis all collections from Customers of the
Borrowers sent to the Lockbox maintained by such Lockbox Bank directly into the
applicable Collection Account in the identical form in which such collections
were made (except for any necessary endorsements) whether by cash or check. In
accordance with the terms of the applicable Blocked Account Agreement, such
Lockbox Bank shall be instructed to deposit on a daily basis all funds from
collections deposited into such Collection Account to the Cash Concentration
Account. The Cash Concentration Account shall not be subject to any deduction,
set off, banker's lien or any other right in favor of any Person. All funds
deposited into the Cash Concentration Account shall be the exclusive property of
the Lender and shall be subject to the sole and exclusive control of the Lender
and only to such signing authority designated from time to time by the Lender.
The Borrowers shall not have control over or any interest in such funds. Any
collections received directly by any Borrower shall be deemed held by such
Borrower in trust and as fiduciary for the Lender. Each of the Borrowers agrees
not to commingle any such collections with any of such Borrower's other funds or
property, but to hold such funds separate and apart in trust and as fiduciary
for the Lender until deposit is made into the applicable Collection Account or
the Cash Concentration Account. Each of the Borrowers hereby agrees to deposit
immediately such directly received collections into any Collection Account
maintain by or on behalf of such Borrower or directly into the Cash
Concentration Account.
(i) Adjustments. No Loan Party will, without the Lender's consent,
compromise or adjust any Receivables (or extend the time for payment thereof) or
accept any returns of merchandise or grant any additional discounts, allowances
or credits thereon except for those compromises, adjustments, returns,
discounts, credits and allowances as have been heretofore (A) customary in the
business or industry of such Loan Party, and (B) done in the ordinary course of
such Loan Party's business.
4.16 Maintenance of Equipment.
The Equipment necessary for and used in the operation of each Loan Party's
business shall be maintained in good operating condition and repair in
substantial accordance with industry standards (reasonable wear and tear
excepted) and all necessary replacements of and repairs thereto shall be made so
that the value and operating efficiency of the Equipment shall be maintained and
preserved. No Loan Party shall use or operate the Equipment in violation of any
law, statute, ordinance, code, rule or regulation.
4.17 Exculpation of Liability.
Nothing herein contained shall be construed to constitute the Lender or the
Issuer as any Loan Party's agent for any purpose whatsoever, nor shall the
Issuer or the Lender be responsible or liable for any shortage, discrepancy,
damage, loss or destruction of any part of the
-43-
Collateral wherever the same may be located and regardless of the cause thereof
except to the extent that such damage, loss or destruction has resulted from the
gross negligence or willful misconduct of the Lender or the Issuer. Neither the
Issuer nor the Lender, whether by anything herein or in any assignment or
otherwise, assume any of any Loan Party's obligations under any contract or
agreement assigned to the Issuer or the Lender, and neither the Issuer nor the
Lender shall be responsible in any way for the performance by any Loan Party of
any of the terms and conditions thereof.
4.18 Environmental Matters.
(a) The Loan Parties shall ensure that the Real Property remains in
compliance with all Environmental Laws, and they shall not place or permit to be
placed any Hazardous Substances on any Real Property except as permitted by
applicable law or appropriate governmental authorities.
(b) The Loan Parties shall establish and maintain a system to assure and
monitor continued compliance with all applicable Environmental Laws with respect
to their operations except to the extent that such failure to comply would not
reasonably be expected to have a Material Adverse Effect.
(c) The Loan Parties shall (i) employ in connection with the use of the
Real Property appropriate technology necessary to maintain compliance with any
applicable Environmental Laws except to the extent that such failure to comply
would not reasonably be expected to have a Material Adverse Effect and (ii)
dispose of any and all Hazardous Waste generated at the Real Property only at
facilities and with carriers that maintain valid permits under RCRA and any
other applicable Environmental Laws.
(d) In the event any Loan Party obtains, gives or receives notice of any
Release (as that term is defined in CERCLA) or threat of Release of a Reportable
Quantity (as such terms are defined in CERCLA) of any Hazardous Substances at
the Real Property (any such event being hereinafter referred to as a "Hazardous
Discharge") or receives any notice of violation, request for information or
notification that it is potentially responsible for investigation or cleanup of
environmental conditions at the Real Property, demand letter or complaint,
order, citation, or other written notice with regard to any Hazardous Discharge
or violation of Environmental Laws affecting the Real Property or any Loan
Party's interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority"), then the
Borrowing Agent shall, as soon as practicable but in any event within ten (10)
Business Days, give written notice of same to the Lender detailing facts and
circumstances of which any Loan Party is aware giving rise to the Hazardous
Discharge or Environmental Complaint. Such information is to be provided to
allow the Lender to protect its security interest in the Real Property and the
Collateral and is not intended to create nor shall it create any obligation upon
the Lender with respect thereto.
-44-
(e) The Loan Parties shall promptly forward to the Lender copies of any
request for information, notification of potential liability, demand letter
relating to potential responsibility with respect to the investigation or
cleanup of Hazardous Substances at any other site owned, operated or used by any
Loan Party to dispose of Hazardous Substances and shall continue to forward
copies of correspondence between any Loan Party and the Authority regarding such
claims to the Lender until the claim is settled. The Loan Parties shall promptly
forward to the Lender copies of all documents and reports concerning a Hazardous
Discharge at the Real Property that any Loan Party is required to file under any
Environmental Laws. Such information is to be provided solely to allow the
Lender to protect the Lender's security interest in the Real Property and the
Collateral.
(f) The Loan Parties shall respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral or Real Property to
any Lien. If any Loan Party shall fail to respond promptly to any Hazardous
Discharge or Environmental Complaint or any Loan Party shall fail to comply with
any of the requirements of any Environmental Laws, the Lender may, but without
the obligation to do so, for the sole purpose of protecting the Lender's
interest in Collateral: (A) give such notices or (B) enter onto the Real
Property (or authorize third parties to enter onto the Real Property) and take
such actions as the Lender (or such third parties as directed by the Lender)
deem reasonably necessary or advisable, to clean up, remove, mitigate or
otherwise deal with any such Hazardous Discharge or Environmental Complaint (a
Loan Party shall be considered to be responding promptly to an Environmental
Complaint if it asserts a defense to any allegations in the Environmental
Complaint in good faith and as to the same in an expeditious manner and, where
applicable, establishes sufficient reserves or posts a bond reasonably
satisfactory to the Lender to protect the Lender's security interest or Lien in
the Collateral). All reasonable costs and expenses incurred by the Lender and
the Issuer (or such third parties) in the exercise of any such rights, including
any sums paid in connection with any judicial or administrative investigation or
proceedings, fines and penalties, together with interest thereon from the date
expended at the Default Rate for Domestic Rate Loans constituting Revolving
Advances shall be paid upon demand by the Loan Parties, and until paid shall be
added to and become a part of the Obligations secured by the Liens created by
the terms of this Agreement or any other agreement between the Issuer, the
Lender and any Loan Party.
(g) Promptly upon the written request of the Lender from time to time, the
Loan Parties shall provide the Lender, at the Loan Parties' expense, with an
environmental assessment or environmental audit report prepared by an
environmental engineering firm acceptable in the reasonable opinion of the
Lender, to assess with a reasonable degree of certainty the existence of a
Hazardous Discharge and the potential costs in connection with abatement,
cleanup and removal of any Hazardous Substances found on or at the Real
Property; provided, however, so long as no Default or Event of Default has
occurred and is continuing, the Lender may not request such environmental
assessment or environmental audit report more frequently than once per calendar
year; and provided further that the Lender shall not request any such
environmental assessment or environmental audit report without having reasonable
suspicion of the existence of a
-45-
Hazardous Discharge. Any report or investigation of such Hazardous Discharge
proposed and acceptable to an appropriate Authority that is charged to oversee
the clean-up of such Hazardous Discharge shall be acceptable to the Lender. If
such estimates to remove or remediate such Hazardous Discharge, individually or
in the aggregate, exceed Five Hundred Thousand and 00/100 Dollars ($500,000.00),
the Lender shall have the right to require the Loan Parties to post a bond,
letter of credit or other security reasonably satisfactory to the Lender to
secure payment of these costs and expenses.
(h) The Loan Parties shall defend and indemnify the Lender and the Issuer
and hold the Lender and the Issuer and their respective employees, agents,
directors and officers harmless from and against all loss, liability, damage and
expense, claims, costs, fines and penalties, including reasonable attorney's
fees, suffered or incurred by the Lender or the Issuer under or on account of
any Environmental Laws, including, without limitation, the assertion of any Lien
thereunder, with respect to any Hazardous Discharge, the presence of any
Hazardous Substances affecting the Real Property, whether or not the same
originates or emerges from the Real Property or any contiguous real estate,
including any loss of value of the Real Property as a result of the foregoing
except to the extent such loss, liability, damage and expense is attributable to
any Hazardous Discharge resulting from actions or failure to act on the part of
the Lender or the Issuer. The Loan Parties' obligations under this Section 4.18
shall arise upon the discovery of the presence of any Hazardous Substances at
the Real Property, whether or not any federal, state, or local environmental
agency has taken or threatened any action in connection with the presence of any
Hazardous Substances. The Loan Parties' obligation and the indemnifications
hereunder shall survive the termination of this Agreement.
4.19 Financing Statements.
Except as respects (i) the financing statements filed by the Lender, (ii)
the financing statements described on Schedule 1.2, and (iii) those financing
statements permitted to be filed hereunder, no financing statement covering any
of the Collateral or any proceeds thereof is on file in any public office.
V. REPRESENTATIONS AND WARRANTIES.
Each Loan Party represents and warrants as follows:
5.1 Authority.
Each Loan Party has the full power, authority and legal right to enter into
this Agreement and the Other Documents to which it is a party and to perform all
of its respective Obligations hereunder and thereunder, as the case may be. This
Agreement and the Other Documents to which each Loan Party is a party constitute
the legal, valid and binding obligations of such Loan Party, enforceable in
accordance with their terms, except as such enforceability may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally. The execution, delivery and performance
of this Agreement and of the Other Documents by each Loan Party a party hereto
or thereto (a) are within such Loan Party's corporate, limited partnership or
limited liability company powers, as
-46-
the case may be, have been duly authorized, are not in contravention of law or
the terms of such Loan Party's by-laws, operating agreement, articles of
incorporation, certificate of limited partnership, articles of organization,
limited partnership agreement or other applicable documents relating to such
Loan Party's formation or organization, as the case may be, or to the conduct of
such Loan Party's business or of any material agreement or undertaking to which
such Loan Party is a party or by which such Loan Party is bound, and (b) will
not conflict with nor result in any breach in any of the provisions of or
constitute a default under or result in the creation of any Lien except
Permitted Encumbrances upon any asset of such Loan Party under the provisions of
any material agreement, charter document, instrument, by-law, or other
instrument to which such Loan Party is a party or by which it or its property
may be bound.
5.2 Formation and Qualification.
(a) Each Loan Party is duly incorporated or organized, as the case may be,
and in good standing under the laws of the jurisdictions listed on Schedule
5.2(a) and is qualified to do business and is in good standing in the
jurisdictions listed on Schedule 5.2(a) which constitute all jurisdictions in
which qualification and good standing are necessary for such Loan Party to
conduct its business and own its property and where the failure to so qualify
could reasonably be expected to have a Material Adverse Effect. Each Loan Party
has delivered to the Lender true and complete copies of its articles of
incorporation and by-laws, certificate of limited partnership and limited
partnership agreement, articles of organization and operating agreement or other
organizational documents, as the case may be, and will promptly notify the
Lender of any amendment or changes thereto.
(b) The only Subsidiaries of each Loan Party are listed on Schedule 5.2(b).
5.3 Survival of Representations and Warranties.
All representations and warranties of each Loan Party contained in this
Agreement and the Other Documents, as the case may be, shall be true at the time
of such Loan Party's execution of this Agreement and the Other Documents, as the
case may be, and shall survive the execution, delivery and acceptance thereof by
the parties thereto and the closing of the transactions described therein or
related thereto.
5.4 Tax Returns.
Each Loan Party's federal tax identification number is set forth on
Schedule 5.4. Each Loan Party has filed all federal, state and local tax returns
and other reports such Loan Party is required by law to file and has paid all
taxes, assessments, fees and other governmental charges that are due and
payable. All applicable income tax returns of each Loan Party have been examined
and reported upon by the appropriate taxing authority or closed by applicable
statute and satisfied for all fiscal years prior to and including the fiscal
year ending December 31, 2001. The provision for taxes on the books of each Loan
Party is adequate for all years not closed by applicable statutes, and for its
current fiscal year, and no Loan Party has any
-47-
knowledge of any deficiency or additional assessment in connection therewith not
provided for on its books.
5.5 Financial Statements.
(a) The twelve-month cash flow projections of BTL and its Subsidiaries on a
consolidated basis and their projected balance sheets as of the Closing Date,
copies of which have been provided to the Lender referencing this Section 5.5
(the "Projections") were prepared by the Chief Financial Officer of BTL, are
based on underlying assumptions and estimates which provide a reasonable basis
for the projections contained therein and reflect BTL's judgment based on
present circumstances of the most likely set of conditions and course of action
for the projected period.
(b) The consolidated balance sheets of BTL and its Subsidiaries as of
December 31, 2004, and the related statements of operations, stockholders'
equity, and cash flow for the period ended on such date, all accompanied by
reports thereon containing opinions without qualification by independent
certified public accountants (as set forth in BTL's annual report of form 10K/A,
as filed with the SEC on September 2, 2005), copies of which have been delivered
to the Lender, have been prepared in accordance with GAAP, consistently applied
and present fairly in all material respects the financial condition of BTL and
its Subsidiaries at such date and the results of their operations for such
period. Since December 31, 2004, there has been no change in the financial
condition of BTL and its Subsidiaries as shown on the consolidated balance sheet
as of such date and no change in the aggregate value of Equipment and Real
Property owned by BTL and its Subsidiaries, except for the inventory write down
as disclosed to the Lender and changes in the ordinary course of business, none
of which individually or in the aggregate has had, or reasonably could be
believed to cause in the future, a Material Adverse Effect.
5.6 Corporate Name.
Except as set forth on Schedule 5.6, no Loan Party has been known by any
other corporate name in the past five (5) years and does not sell Inventory
under any other name, nor has any Loan Party been the surviving entity of a
merger or consolidation or acquired all or substantially all of the assets of
any Person during the preceding five (5) years.
5.7 O.S.H.A. and Environmental Compliance.
(a) Except as set forth on Schedule 5.7, each Loan Party has duly complied
with, and (i) its facilities, business, assets, property, and Equipment, and
(ii) to its knowledge, its leaseholds are in compliance in all material respects
with, the provisions of the Federal Occupational Safety and Health Act, RCRA and
all other Environmental Laws; there are no outstanding and unresolved citations,
notices or orders of non-compliance issued to any Loan Party or relating to its
business, assets, property, leaseholds or Equipment under any such laws, rules
or regulations.
(b) Each Loan Party has been issued all required federal, state and local
licenses, certificates or permits relating to all applicable Environmental Laws.
-48-
(c) (i) There are no Releases (as that term is defined in CERCLA), spills,
discharges, leaks or disposal of Hazardous Substances at, upon, under or within
any Real Property; (ii) there are no underground storage tanks or Toxic
Substances on the Real Property; (iii) to the knowledge of any Loan Party, the
Real Property has not ever been used as a treatment, storage or disposal
facility of Hazardous Waste and (iv) no Hazardous Substances are present on the
Real Property, except in compliance with Environmental Laws.
5.8 Solvency; No Litigation, Violation, Indebtedness or Default.
(a) After giving effect to the transactions contemplated by this Agreement,
the Loan Parties will be solvent, able to pay their debts as they mature, have
capital sufficient to carry on their business and all businesses in which they
are about to engage, and (i) as of the Closing Date, the fair present saleable
value of their assets, calculated on a going concern basis, is in excess of the
amount of their liabilities and (ii) subsequent to the Closing Date, the fair
saleable value of their assets (calculated on a going concern basis) will be in
excess of the amount of their liabilities.
(b) Except as disclosed in Schedule 5.8(b), no Loan Party has (i) any
pending or threatened litigation, arbitration, actions or proceedings which
could reasonably be expected to have a Material Adverse Effect, and (ii) any
liabilities or Indebtedness other than the Obligations.
(c) No Loan Party is in violation of any applicable statute, regulation or
ordinance in any respect which could reasonably be expected to have a Material
Adverse Effect, nor is any Loan Party in violation of any order of any court,
governmental authority or arbitration board or tribunal.
(d) No Loan Party nor any member of the Controlled Group maintains or
contributes to any Plan other than those listed on Schedule 5.8(d) hereto.
Except as set forth in Schedule 5.8(d), (i) no Plan has incurred any
"accumulated funding deficiency," as defined in Section 302(a) (2) of ERISA and
Section 412(a) of the Code, whether or not waived, and each Loan Party and each
member of the Controlled Group has met all applicable minimum funding
requirements under Section 302 of ERISA in respect of each Plan, (ii) each Plan
which is intended to be a qualified plan under Section 401(a) of the Code as
currently in effect has been determined by the Internal Revenue Service to be
qualified under Section 401(a) of the Code and the trust related thereto is
exempt from federal income tax under Section 501(a) of the Code, each as to its
written terms, (iii) no Loan Party nor any member of the Controlled Group has
incurred any liability to the PBGC other than for the payment of premiums, and
there are no premium payments which have become due which are unpaid, (iv) no
Plan has been terminated by the plan administrator thereof nor by the PBGC, and
there is no occurrence which would cause the PBGC to institute proceedings under
Title IV of ERISA to terminate any Plan, (v) at this time, the current value of
the assets of each Plan exceeds the present value of the accrued benefits and
other liabilities of such Plan and no Loan Party nor any member of the
Controlled Group knows of any facts or circumstances which would materially
change the value of such assets and accrued benefits and other liabilities and
could reasonably be
-49-
expected to have a Material Adverse Effect, (vi) no Loan Party nor any member of
the Controlled Group has breached any of the responsibilities, obligations or
duties imposed on it by ERISA with respect to any Plan, except to the extent
that any such breach would not reasonably be expected to have a Material Adverse
Effect, (vii) no Loan Party nor any member of a Controlled Group has incurred
any liability for any excise tax arising under Section 4972 or 4980B of the
Code, and no fact exists which could give rise to any such liability, (viii) no
Loan Party nor any member of the Controlled Group nor any fiduciary of, nor any
trustee to, any Plan, has engaged in a "prohibited transaction" described in
Section 406 of ERISA or Section 4975 of the Code that could reasonably be
expected to have a Material Adverse Effect nor taken any action which would
constitute or result in a Termination Event with respect to any such Plan which
is subject to ERISA, (ix) each Loan Party and each member of the Controlled
Group has made all contributions due and payable with respect to each Plan, (x)
there exists no Reportable Event described in Section 4043(c) of ERISA, for
which the thirty (30) day notice period contained in 29 CFR Section 4043.3 has
not been waived, (xi) no Loan Party nor any member of the Controlled Group has
any fiduciary responsibility for investments with respect to any plan existing
for the benefit of persons other than employees or former employees of any Loan
Party and any member of the Controlled Group, and (xii) no Loan Party nor any
member of the Controlled Group has withdrawn, completely or partially, from any
Multiemployer Plan so as to incur liability under the Multiemployer Pension Plan
Amendments Act of 1980.
5.9 Patents, Trademarks, Copyrights and Licenses.
All material patents, patent applications, trademarks, trademark
applications, service marks, service xxxx applications, copyrights, copyright
applications, design rights, tradenames, assumed names, trade secrets and
licenses owned or utilized by any Loan Party are set forth on Schedule 5.9, are
valid to the extent noted as such on Schedule 5.9 and have been duly registered
or filed with all appropriate governmental authorities and constitute all of the
patents, trademarks, service marks, copyrights, design rights, tradenames,
assumed names, trade secrets and licenses which are necessary for the operation
of its business; there is no objection to or pending challenge to the validity
of any such patent, trademark, copyright, design right, tradename, trade secret
or license and no Loan Party is aware of any grounds for any challenge, except
as set forth in Schedule 5.9 hereto. Each material patent, patent application,
patent license, trademark, trademark application, trademark license, service
xxxx, service xxxx application, service xxxx license, design right, copyright,
copyright application and copyright license owned or held by any Loan Party
consists of original material or property developed by such Loan Party or was
lawfully acquired by such Loan Party from the proper and lawful owner thereof.
Each of such items has been maintained so as to preserve the value thereof from
the date of creation or acquisition thereof. With respect to all customized
software licensed by any Loan Party which is material to the conduct of its
business, such Loan Party is in possession of all source and object codes
related to each piece of software or is the beneficiary of a source code escrow
agreement, each such source code escrow agreement being listed on Schedule 5.9
hereto.
-50-
5.10 Licenses and Permits.
Except as set forth in Schedule 5.10, each Loan Party (a) is in compliance
with and (b) has procured and is now in possession of, all material licenses or
permits required by any applicable federal, state or local law or regulation for
the operation of its business in each jurisdiction wherein it is now conducting
or proposes to conduct business and where the failure to comply with or procure
such licenses or permits would reasonably be expected to have a Material Adverse
Effect.
5.11 Default of Indebtedness.
No Loan Party is in default in the payment of the principal of or interest
on any Indebtedness that individually, or in the aggregate, is in excess of One
Hundred Thousand and 00/100 Dollars ($100,000.00) or under any instrument or
agreement under or subject to which any Indebtedness has been issued and no
event has occurred under the provisions of any such instrument or agreement
which with or without the lapse of time or the giving of notice, or both,
constitutes or would constitute an event of default thereunder.
5.12 No Default.
No Loan Party is in default in the payment or performance of any of its
material contractual obligations and no Default has occurred.
5.13 No Burdensome Restrictions.
No Loan Party is party to any contract or agreement, its default in the
performance of which could reasonably be expected to have a Material Adverse
Effect. No Loan Party has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien which is not a
Permitted Encumbrance.
5.14 No Labor Disputes.
No Loan Party is involved in any labor dispute; there are no strikes or
walkouts or union organization of any of the Loan Party's employees threatened
or in existence and no labor contract is scheduled to expire during the Term
other than as set forth on Schedule 5.14 hereto.
5.15 Margin Regulations.
No Borrower is engaged, nor will it engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective meanings of
each of the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect. No part
of the proceeds of any Advance will be used for "purchasing" or "carrying"
"margin stock" as defined in Regulation U of such Board of Governors.
-51-
5.16 Investment Company Act.
No Borrower is an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, nor is it
controlled by such a company.
5.17 Disclosure.
No representation or warranty made by any Loan Party in this Agreement or
in any financial statement, report, certificate or any other document furnished
in connection herewith contains any untrue statement of fact or omits to state
any fact necessary to make the statements herein or therein not misleading.
There is no fact known to any Loan Party or which reasonably should be known to
such Loan Party which such Loan Party has not disclosed to the Lender in writing
with respect to the transactions contemplated by this Agreement which could
reasonably be expected to have a Material Adverse Effect.
5.18 Hedging Contracts.
No Loan Party is a party to, nor will it be a party to, any Hedging
Contract unless same provides that damages upon termination following an event
of default thereunder are payable on a "two-way basis" without regard to fault
on the part of either party.
5.19 Conflicting Agreements.
No provision of any mortgage, indenture, contract, agreement, judgment,
decree or order binding on any Loan Party or affecting the Collateral conflicts
with, or requires any Consent which has not already been obtained and where a
failure to obtain such Consent would in any way prevent the execution, delivery
or performance of, the terms of this Agreement or the Other Documents.
5.20 Application of Certain Laws and Regulations.
No Loan Party nor any Affiliate of any Loan Party is subject to any
statute, rule or regulation which regulates the incurrence of any Indebtedness,
including without limitation, statutes or regulations relative to common or
interstate carriers or to the sale of electricity, gas, steam, water, telephone,
telegraph or other public utility services.
5.21 Business and Property of the Loan Parties.
Upon and after the Closing Date, the Loan Parties do not propose to engage
in any business other than as set forth on Schedule 5.21 hereto and activities
necessary to conduct the foregoing. On the Closing Date, each Loan Party will
own or lease all the property and possess all of the rights and Consents
necessary for the conduct of the business of such Loan Party.
5.22 Section 20 Subsidiaries.
The Borrowers do not intend to use and shall not use any portion of the
proceeds of the Advances, directly or indirectly, to purchase during the
underwriting period, or for thirty (30) days thereafter, Ineligible Securities
being underwritten by a Section 20 Subsidiary.
-52-
5.23 Anti-Terrorism Laws.
(a) No Loan Party nor any Affiliate of any Loan Party, is in violation in
any material respect of any Anti-Terrorism Law or engages in or conspires to
engage in any transaction that evades or avoids, or has the purpose of evading
or avoiding, or attempts to violate, any of the prohibitions set forth in any
Anti-Terrorism Law.
(b) No Loan Party, nor any Affiliate of any Loan Party or their respective
agents acting or benefiting in any capacity in connection with the Advances or
other transactions hereunder, is any of the following (each a "Blocked Person"):
(i) a Person that is listed in the annex to, or is otherwise subject
to the provisions of, the Executive Order No. 13224;
(ii) a Person owned or controlled by, or acting for or on behalf of,
any Person that is listed in the annex to, or is otherwise subject to the
provisions of, the Executive Order No. 13224;
(iii) a Person with which the Lender or the Issuer is prohibited from
dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;
(iv) a Person that commits, threatens or conspires to commit or
supports "terrorism" as defined in the Executive Order No. 13224;
(v) a Person that is named as a "specially designated national" on the
most current list published by the U.S. Treasury Department Office of
Foreign Asset Control at its official website or any replacement website or
other replacement official publication of such list, or
(vi) a Person who is affiliated or associated with a Person listed
above.
No Loan Party or, to the knowledge of any Loan Party, any of its agents acting
or benefiting in any capacity in connection with the Advances or other
transactions hereunder, (i) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of
any Blocked Person, or (ii) deals in, or otherwise engages in any transaction
relating to, any property or interests in property blocked pursuant to the
Executive Order No. 13224.
5.24 Inactive Subsidiaries.
Each of BTII and VTCI are inactive entities with no material assets.
VI. AFFIRMATIVE COVENANTS.
Each Borrower shall, and if applicable, each Loan Party shall, until
payment in full of the Obligations and termination of this Agreement:
-53-
6.1 Payment of Fees.
Pay to the Lender on demand all usual and customary fees and expenses which
the Lender incurs in connection with (a) the forwarding of Advance proceeds and
(b) the establishment and maintenance of any Collection Accounts as provided for
in Section 4.15(g). The Lender may, without making demand, charge the Loan
Account for all such fees and expenses.
6.2 Conduct of Business and Maintenance of Existence and Assets.
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
design rights, tradenames, trade secrets and trademarks and take all actions
necessary to enforce and protect the validity of any intellectual property right
or other right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect; and (c) make all such
reports and pay all such franchise and other taxes and license fees and do all
such other acts and things as may be lawfully required to maintain its rights,
licenses, leases, powers and franchises under the laws of the United States or
any political subdivision thereof.
6.3 Violations.
Promptly notify the Lender in writing of any violation of any law, statute,
regulation or ordinance of any Governmental Body, or of any agency thereof,
applicable to any Loan Party or the Collateral which could reasonably be
expected to have a Material Adverse Effect.
6.4 Government Receivables.
To the extent any Borrower desires such Receivables to constitute Eligible
Receivables, take all steps necessary to protect the Lender's interest in the
Collateral under the Federal Assignment of Claims Act or other applicable state
or local statutes or ordinances and deliver to the Lender appropriately
endorsed, any instrument or chattel paper connected with any Receivable arising
out of contracts between any Borrower and the United States, any state or any
department, agency or instrumentality of any of them.
6.5 Fixed Charge Coverage Ratio.
Maintain a Fixed Charge Coverage Ratio (for BTL and its Subsidiaries on a
consolidated basis) of not less than 1.00 to 1.00 calculated as of the last day
of the fiscal month ending December 31, 2005, for the period equal to the twelve
(12) consecutive fiscal months then ending and as of the last day of each fiscal
month thereafter, for the period equal to the twelve (12) consecutive fiscal
months then ending. Notwithstanding any other provisions of this Agreement to
the contrary, so long as no Event of Default has occurred and is continuing,
effective January 1, 2007, the Loan Parties shall maintain a Fixed Charge
Coverage Ratio (for
-54-
BTL and its Subsidiaries on a consolidated basis) of not less than 1.00 to 1.00
calculated as of the last day of the fiscal quarter ending March 31, 2007, for
the period equal to the four (4) consecutive fiscal quarters then ending, and as
of the last day of each fiscal quarter thereafter, for the period equal to the
four (4) consecutive fiscal quarters then ending.
6.6 Execution of Supplemental Instruments.
Execute and deliver to the Lender from time to time, upon demand, such
supplemental agreements, statements, assignments and transfers, or instructions
or documents relating to the Collateral, and such other instruments as the
Lender may reasonably request, in order for the full intent of this Agreement to
be carried into effect.
6.7 Payment of Indebtedness.
Pay, discharge or otherwise satisfy at or before maturity (subject, where
applicable, to specified grace periods and, in the case of the trade payables,
to normal payment practices) all its obligations and liabilities of whatever
nature, except when the failure to do so could not reasonably be expected to
have a Material Adverse Effect or when the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and each Loan
Party shall have provided for such reserves with respect thereto as the Lender
may reasonably deem proper and necessary, subject at all times to any applicable
subordination arrangement in favor of the Lender and the Issuer.
6.8 Standards of Financial Statements.
Cause all financial statements referred to in Sections 9.7, 9.8, 9.9, 9.10,
9.11 and 9.12 as to which GAAP is applicable to be complete and correct in all
material respects (subject, in the case of interim financial statements, to
notes and normal year-end audit adjustments) and to be prepared in reasonable
detail and in accordance with GAAP applied consistently throughout the periods
reflected therein (except as concurred in by such reporting accountants or
officer, as the case may be, and disclosed therein).
6.9 Anti-Terrorism Laws.
The Loan Parties and their respective Affiliates and agents shall not (i)
conduct any business or engage in any transaction or dealing with any Blocked
Person, including the making or receiving of any contribution of funds, goods or
services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise
engage in any transaction relating to, any property or interests in property
blocked pursuant to the Executive Order No. 13224; or (iii) engage in or
conspire to engage in any transaction that evades or avoids, or has the purpose
of evading or avoiding, or attempts to violate, any of the prohibitions set
forth in the Executive Order No. 13224, the USA Patriot Act or any other
Anti-Terrorism Law. The Loan Parties shall deliver to the Lender and/or the
Issuer any certification or other evidence requested from time to time by the
Lender or the Issuer in its sole reasonable discretion, confirming the Loan
Parties' compliance with this Section 6.9.
-69-
VII. NEGATIVE COVENANTS.
No Loan Party shall, and no Loan Party shall permit any of its Subsidiaries
to, until satisfaction in full of the Obligations and termination of this
Agreement:
7.1 Merger, Consolidation, Acquisition and Sale of Assets.
(a) Enter into any merger, consolidation or other reorganization with or
into any other Person or acquire all or a substantial portion of the assets or
stock of any Person or permit any other Person to consolidate with or merge with
it; provided however, that (i) any Borrower may merge or consolidate into
another Borrower; (ii) any Loan Party that is not a Borrower may merge or
consolidate into another Loan Party that is not a Borrower; (iii) any Loan Party
that is not a Borrower may merge or consolidate into a Borrower so long as the
Borrower survives such consolidation or merger; and (iv) a Loan Party may merge
or consolidate into a Subsidiary that is not a Loan Party so long as the Loan
Party survives such consolidation or merger.
(b) Sell, lease, transfer or otherwise dispose of any of its properties or
assets, except:
1) transactions involving the sale, lease or transfer of Inventory in
the ordinary course of business; and
2) transactions involving the sale or other disposition of damaged or
obsolete Equipment so long as (i) such sale or disposition is completed in
the ordinary course of such Loan Party's business, (ii) on such date no
Default or Event of Default has occurred or is continuing, (iii) the value
of such Equipment does not exceed One Hundred Thousand and 00/100 Dollars
($100,000.00) in the aggregate for all Loan Parties in any fiscal year of
the Loan Parties and (iv) the proceeds of each such sale are immediately
deposited by such Loan Party in the Cash Concentration Account.
7.2 Creation of Liens.
Create or suffer to exist any Lien or transfer upon or against any of its
property or assets now owned or hereafter acquired, except Permitted
Encumbrances.
7.3 Guarantees.
Become liable upon the obligations of any Person by assumption, endorsement
or guaranty thereof or otherwise (other than to the Lender or the Issuer) except
(a) as disclosed on Schedule 7.3, (b) the endorsement of checks in the ordinary
course of business, and (c) guarantees made by a Loan Party with respect to the
obligations of another Loan Party.
7.4 Investments.
Purchase or acquire obligations or stock of, or any other interest in, any
Person, except (a) investments existing on the Closing Date and set forth on
Schedule 7.4, (b) obligations
-56-
issued or guaranteed by the United States of America or any agency thereof, (c)
commercial paper with maturities of not more than one hundred eighty (180) days
and a published rating of not less than A-1 or P-1 (or the equivalent rating),
(d) certificates of time deposit and bankers' acceptances having maturities of
not more than one hundred eighty (180) days and repurchase agreements backed by
United States government securities of a commercial bank if (i) such bank has a
combined capital and surplus of at least Five Hundred Million Dollars
($500,000,000.00), or (ii) its debt obligations, or those of a holding company
of which it is a Subsidiary, are rated not less than A (or the equivalent
rating) by a nationally recognized investment rating agency, (e) U.S. money
market funds (i) rated AAA by Standard & Poors, Inc. or with an equivalent
rating from Xxxxx'x Investors Service, Inc., or (ii) that invest solely in
obligations issued or guaranteed by the United States of America or an agency
thereof, (f) investments by a Loan Party in a Loan Party, (g) investments
(whether in cash or in kind) in the Offshore Venture, provided, however, that
immediately prior to and after giving effect to such investment, (A) the
Borrowers' Undrawn Availability shall exceed One Million Five Hundred Thousand
and 00/100 Dollars ($1,500,000.00) on average for the most recently ended thirty
(30) consecutive days; and (B) the aggregate amount of such investments shall
not exceed Five Hundred Thousand and 00/100 Dollars ($500,000.00) during the
Term, and (h) investments in BTL's stock repurchase and stock option repurchase
programs, provided, however, that immediately prior to and after giving effect
to such investment, (A) the Borrowers' Undrawn Availability shall exceed One
Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00) on average for
the most recently ended thirty (30) consecutive days; and (B) the amount of such
investments shall not exceed Three Hundred Thousand and 00/100 Dollars
($300,000.00) in the aggregate in any fiscal year of the Loan Parties and Five
Hundred Thousand and 00/100 Dollars ($500,000.00) in the aggregate during the
Term.
7.5 Loans.
Make advances, loans or extensions of credit to any Person (other than
another Loan Party), including, without limitation, any Parent, Subsidiary or
Affiliate except with respect to (a) the existing advances, loans and extensions
of credit set forth on Schedule 7.5 attached hereto and made a part hereof, (b)
the extension of commercial trade credit in connection with the sale of
Inventory in the ordinary course of its business, (c) loans to its employees in
the ordinary course of business for travel and other business expenses not to
exceed the aggregate amount of Twenty-Five Thousand and 00/100 Dollars
($25,000.00) for all Loan Parties at any time outstanding, and (d) loans and
advances in or to any shareholder of BTL the proceeds of which are used solely
to enable such shareholder to exercise any stock option, provided, however, that
(A) such loans or advances are repaid immediately following such shareholder's
exercise of such stock option, but in no event later than five (5) Business Days
following the making of such loan or advance.
7.6 Capital Expenditures.
Make or incur any Capital Expenditure or commitments for Capital
Expenditures (including capitalized leases) in calendar year 2006 or in any
calendar year thereafter in an aggregate amount for BTL and its Subsidiaries on
a consolidated basis with respect to each such year in excess of One Million and
00/100 Dollars ($1,000,000.00).
-57-
7.7 Dividends.
Except as permitted by Section 7.4 [Investments], declare, pay or make any
dividend or distribution on any shares of the common stock or preferred stock or
other equity interest, as the case may be, of any Loan Party (other than
dividends or distributions payable in stock or other equity interest, as the
case may be, or split-ups, or reclassifications of its stock or cash or other
dividends paid by any Subsidiary of BTL to (i) BTL or (ii) any Subsidiary of BTL
that is a Loan Party), or apply any of its funds, property or assets to the
purchase, redemption or other retirement of any common or preferred stock or
other equity interest, as the case may be, or of any options to purchase or
acquire any such shares of common or preferred stock or other equity interest,
as the case may be, of any Loan Party.
In addition, the Loan Parties shall not permit their Subsidiaries to enter
into or otherwise be bound by any agreement prohibiting or restricting the
payment of dividends to a Loan Party.
7.8 Indebtedness.
Create, incur, assume or suffer to exist any Indebtedness (exclusive of
trade debt) except in respect of:
(a) Indebtedness existing on the Closing Date and set forth on Schedule 7.8
(including any extensions, renewals or refinancings thereof), provided that the
principal amount of such Indebtedness shall not be increased without the prior
written consent of the Lender;
(b) Indebtedness to the Lender and the Issuer under or pursuant to this
Agreement or the Other Documents;
(c) Indebtedness incurred for Capital Expenditures permitted under Section
7.6 hereof;
(d) Indebtedness as permitted under Section 7.3 hereof;
(e) Indebtedness of any Loan Party to any other Loan Party to the extent
the loan pursuant to which such Indebtedness is created is permitted under
Section 7.5 hereof; and
(f) Indebtedness arising from Hedging Contracts entered into in the
ordinary course of business consisting of bona fide hedging transactions.
7.9 Nature of Business.
Substantially change the nature of the business in which it is currently
engaged, nor, except as specifically permitted hereby, purchase or invest,
directly or indirectly, in any assets or property other than in the ordinary
course of business or other than those which are useful in, necessary for and
are to be used in its business, as presently conducted.
-58-
7.10 Transactions with Affiliates.
Directly or indirectly, purchase, acquire or lease any property from, or
sell, transfer or lease any property to, or otherwise deal with, any Affiliate,
except transactions in the ordinary course of business, on an arm's length basis
on terms no less favorable than terms which would have been obtainable from a
Person other than an Affiliate.
7.11 Leases.
Enter as lessee into any lease arrangement for real or personal property
(unless capitalized and permitted under Section 7.6 hereof) if after giving
effect thereto, aggregate annual rental payments for all leased property would
exceed Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) in any one
fiscal year in the aggregate for all Loan Parties.
7.12 Subsidiaries.
(a) Form any (i) Domestic Subsidiary unless, promptly, but in any event
within five (5) Business Days, following the formation and capitalization
thereof, (A) such Subsidiary expressly becomes a Borrower and becomes jointly
and severally liable for the obligations of the Borrowers hereunder, under the
Notes and under any other agreement between any Borrower and the Lender, or such
Subsidiary becomes a Guarantor for the Obligations and, among other things,
executes a Guaranty in form and substance reasonably satisfactory to the Lender,
(B) Lender shall have received all documents, including organizational documents
and legal opinions it may reasonably require in connection therewith, (C) such
Subsidiary grants first (1st) priority perfected Liens in its assets to the
Lender for the benefit of the Issuer and the Lender, provided, however, to the
extent such Subsidiary becomes a Borrower, none of such assets which become
Collateral shall be included in the Formula Amount in accordance with the terms
of this Agreement until such time as the Lender makes such determination in is
sole reasonable discretion, and (D) the applicable Loan Party shall pledge all
of the capital stock or other ownership interests in such Subsidiary owned by
such Loan Party to the Lender pursuant to a Pledge Agreement, or (ii) any
Subsidiary that is a First Tier Foreign Subsidiary, unless the applicable Loan
Party shall pledge the Required Pledge Amount of the capital stock or other
ownership interests in such Subsidiary owned by such Loan Party to the Lender
pursuant to a Pledge Agreement; or
(b) Enter into any partnership, joint venture or similar agreement other
than the Offshore Joint Venture Agreement.
7.13 Fiscal Year and Accounting Changes.
Change its fiscal year from a calendar year or make any material change (i)
in accounting treatment and reporting practices except as required by GAAP or
(ii) in tax reporting treatment except as required or permitted by law.
-59-
7.14 Pledge of Credit.
Now or hereafter pledge the Lender's credit on any purchase or for any
purpose whatsoever or use any portion of any Advance in or for any business
other than such Borrower's business as conducted on the date of this Agreement.
7.15 Amendment of Articles of Incorporation, By-Laws, Certificate of Limited
Partnership, Limited Partnership Agreement, Articles of Organization, Operating
Agreement, Etc.
Amend, modify or waive any material term or material provision of its
Articles of Incorporation, By-Laws, Certificate of Limited Partnership, Limited
Partnership Agreement, Certificate of Formation, Operating Agreement or other
organizational documents unless required by law.
7.16 Compliance with ERISA.
(i) (x) Maintain, or permit any member of the Controlled Group to maintain,
or (y) become obligated to contribute, or permit any member of the Controlled
Group to become obligated to contribute, to any Plan, other than those Plans
disclosed on Schedule 5.8(d), (ii) engage, or permit any member of the
Controlled Group to engage, in any non-exempt "prohibited transaction", as that
term is defined in Section 406 of ERISA and Section 4975 of the Code that could
reasonably be expected to have a Material Adverse Effect, (iii) incur, or permit
any member of the Controlled Group to incur, any "accumulated funding
deficiency", as that term is defined in Section 302 of ERISA or Section 412 of
the Code, (iv) terminate, or permit any member of the Controlled Group to
terminate, any Plan where such event could result in any liability of any Loan
Party or any member of the Controlled Group or the imposition of a lien on the
property of any Loan Party or any member of the Controlled Group pursuant to
Section 4068 of ERISA, (v) assume, or permit any member of the Controlled Group
to assume, any obligation to contribute to any Multiemployer Plan not disclosed
on Schedule 5.8(d), (vi) incur, or permit any member of the Controlled Group to
incur, any withdrawal liability to any Multiemployer Plan; (vii) fail promptly
to notify the Lender of the occurrence of any Termination Event, (viii) fail to
comply, or permit a member of the Controlled Group to fail to comply, with the
requirements of ERISA or the Code or other applicable laws in respect of any
Plan except to the extent that such failure to comply would not reasonably be
expected to have a Material Adverse Effect, (ix) fail to meet, or permit any
member of the Controlled Group to fail to meet, all minimum funding requirements
under ERISA or the Code or postpone or delay or allow any member of the
Controlled Group to postpone or delay any funding requirement with respect of
any Plan.
7.17 Prepayment of Indebtedness.
At any time, directly or indirectly, prepay any Indebtedness (other than to
the Lender or the Issuer) or repurchase, redeem, retire or otherwise acquire any
Indebtedness of any Loan Party.
-60-
7.18 Inactive Subsidiaries.
Permit either BTII or VTCI to become active entities or hold material
assets.
VIII. CONDITIONS PRECEDENT.
8.1 Conditions to Initial Advances.
The agreement of the Lender and the Issuer, as the case may be, to make the
initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by the Lender and the Issuer, immediately prior to or
concurrently with the making of such Advances, of the following conditions
precedent:
(a) Notes. The Lender shall have received the Notes duly executed and
delivered by an authorized officer of each Borrower;
(b) Pledge Agreements. The Lender shall have received in form and substance
satisfactory to the Lender (i) the Pledge Agreements, (ii) all stock
certificates or other certificates evidencing the Subsidiary Stock, and (iii)
appropriate stock powers or other transfer powers with respect thereto;
(c) Filings, Registrations and Recordings. Each document (including,
without limitation, any Uniform Commercial Code financing statement) required by
this Agreement, any related agreement or under law or reasonably requested by
the Lender to be filed, registered or recorded in order to create, in favor of
the Lender, a perfected security interest in or Lien upon the Collateral shall
have been properly filed, registered or recorded in each jurisdiction in which
the filing, registration or recordation thereof is so required or requested, and
the Lender shall have received an acknowledgment copy, or other evidence
satisfactory to it, of each such filing, registration or recordation and
satisfactory evidence of the payment of any necessary fee, tax or expense
relating thereto;
(d) Corporate Proceedings of Loan Parties. The Lender shall have received a
copy of the resolutions in form and substance reasonably satisfactory to the
Lender, of the board of directors, partners, managers or members, as the case
may be, of each Loan Party authorizing (i) the execution, delivery and
performance of this Agreement, the Notes, and any related agreements to which
such Loan Party is a party, and (ii) the granting by each Loan Party of the
security interests in and Liens upon the Collateral in each case certified by
the Secretary of each Loan Party (or the General Partner of each Loan Party that
is a limited partnership) as of the Closing Date; and, such certificate shall
state that the resolutions thereby certified have not been amended, modified,
revoked or rescinded as of the date of such certificate;
(e) Incumbency Certificates of Loan Parties. The Lender shall have received
a certificate of the Secretary or an Assistant Secretary of each Loan Party or
the General Partner of each Loan Party that is a limited partnership, dated the
Closing Date, as to the incumbency and signature of the officers of each Loan
Party or such General Partner of such Loan Party executing this Agreement, any
certificate or other documents
-61-
to be delivered by it pursuant hereto, together with evidence of the incumbency
of such Secretary;
(f) Certificates. The Lender shall have received a copy of the Articles or
Certificate of Incorporation, Certificate of Limited Partnership or Articles of
Organization, as the case may be, of each Loan Party, together with all
amendments thereto, certified by the Secretary of State or other appropriate
official of such entity's jurisdiction of incorporation or organization, as the
case may be, together with copies of the By-Laws, Partnership Agreement or
Operating Agreement, as the case may be, of each Loan Party and all agreements
of each Loan Party's shareholders, partners or members, as the case may be,
certified as accurate and complete by the Secretary of each Loan Party or the
General Partner of each Loan Party that is a limited partnership, as the case
may be, of each Loan Party;
(g) Good Standing and Tax Lien Certificates. The Lender shall have received
copies of good standing and tax lien certificates, or similar certifications, as
applicable, for each Loan Party dated not more than sixty (60) days prior to the
Closing Date, issued by the Secretary of State, Department of Revenue or other
appropriate official of each such entity's jurisdiction of incorporation or
formation, as the case may be, and each jurisdiction where the conduct of each
entity's business activities or the ownership of each such entity's properties
necessitates qualification;
(h) Legal Opinion. The Lender shall have received the executed legal
opinion of Xxxxxxxx Ronon Xxxxxxx & Xxxxx, LLP and local counsel opinions, in
form and substance satisfactory to the Lender which shall cover such matters
incident to the transactions contemplated by this Agreement, the Notes, and
related agreements as the Lender may reasonably require and each Loan Party
hereby authorizes and directs such counsel to deliver such opinion to the Lender
and the Issuer;
(i) No Litigation. (i) No litigation, investigation or proceeding before or
by any arbitrator or Governmental Body shall be continuing or threatened against
any Loan Party or against the officers, directors or managers of any Loan Party,
(A) in connection with the Other Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of the Lender, is
deemed material or (B) which could, in the reasonable opinion of the Lender,
have a Material Adverse Effect; and (ii) no injunction, writ, restraining order
or other order of any nature materially adverse to any Loan Party or the conduct
of its business or inconsistent with the due consummation of the transactions
contemplated by this Agreement shall have been issued by any Governmental Body;
(j) Financial Condition Certificate. The Lender shall have received an
executed Financial Condition Certificate in the form of Exhibit 8.1(j);
(k) Collateral Examination; Trade References. The Lender shall have (i)
completed and/or received a Collateral examination and received appraisals of
the Inventory, Equipment, Rights of Entry and Mortgaged Property, the results of
which shall be satisfactory in form and substance to the Lender and the Issuer,
(ii) reviewed all books
-62-
and records in connection with the Collateral, and (iii) reviewed various trade
references with respect to the Loan Parties, in form and substance satisfactory
to the Lender;
(l) Fees. The Lender shall have received all fees payable to the Lender and
the Issuer on or prior to the Closing Date pursuant to Article III hereof;
(m) Projections. The Lender shall have received a copy of the Projections
which shall be satisfactory in all respects to the Lender and the Issuer;
(n) Insurance. The Lender shall have received in form and substance
satisfactory to the Lender, certificates of insurance for the Loan Parties'
casualty insurance policies, together with loss payable endorsements on the
Lender's standard form of loss payee endorsement naming the Lender as lender
loss payee and mortgagee with respect to the Collateral, and certificates of
insurance for the Loan Parties' liability insurance policies, together with
endorsements naming the Lender as an additional insured;
(o) Payment Instructions. The Lender shall have received written
instructions from the Borrowers directing the application of proceeds of the
initial Advances made pursuant to this Agreement;
(p) Collection Accounts. The Lender shall have received the duly executed
(i) Blocked Account Agreements, (ii) Lockbox Agreements, (iii) Deposit Account
Agreements or other agreements establishing the Collection Accounts with
financial institutions acceptable to the Lender for the collection or servicing
of the Receivables and proceeds of the Collateral and evidence satisfactory to
the Lender that the Borrowers have directed all Customers to remit payments to
the Collection Accounts;
(q) Consents. The Lender shall have received any and all Consents necessary
to permit the effectuation of the transactions contemplated by this Agreement
and the Other Documents; and, such Consents and waivers of such third parties as
might assert claims with respect to the Collateral, as the Lender and its
counsel shall deem necessary;
(r) No Adverse Material Change. (i) since September 30, 2005, there shall
not have occurred any event, condition or state of facts which could reasonably
be expected to have a Material Adverse Effect and (ii) no representations made
or information supplied to the Lender shall have been proven to be inaccurate or
misleading in any material respect;
(s) Title Insurance. With respect to the Mortgage, the Lender shall have
received a fully paid mortgagee title insurance policy (or binding commitment to
issue title insurance policy, marked to the Lender's satisfaction to evidence
the form of such policy to be delivered with respect to the Mortgage), in
standard ALTA form, issued by a title insurance company satisfactory to the
Lender, in an amount equal to not less than the fair market value of the
Mortgaged Property, insuring the Mortgage to create a valid Lien on the
Mortgaged Property with no exceptions which the Lender shall not have approved
in writing and no survey exceptions;
-63-
(t) Environmental Reports. The Lender shall have received all environmental
studies and reports prepared by independent environmental engineering firms with
respect to the Real Property and such studies shall be in form and substance
satisfactory to the Lender;
(u) Leasehold and Similar Agreements. The Lender shall have received the
landlord, mortgagee, warehouseman, consignment, processing or similar agreements
satisfactory to the Lender with respect to all premises leased by the Loan
Parties or at which Inventory is located as set forth on Schedule 8.1(s);
(v) Guarantees, Collateral Assignments and Other Documents. The Lender
shall have received the executed (i) Guarantees, (ii) the Collateral Assignments
and (iii) the Other Documents, all in form and substance satisfactory to the
Lender;
(w) Contract Review. The Lender shall have reviewed all material contracts
of the Loan Parties including, without limitation all Rights of Entry, leases,
union contracts, labor contracts, vendor supply contracts, license agreements,
loan documents and distributorship agreements and such contracts and agreements
shall be satisfactory in all respects to the Lender.
(x) Existing Indebtedness. The Lender shall have received (i) a payoff
letter, in form and substance satisfactory to the Lender, pursuant to which any
existing Indebtedness that is to be paid by initial Advances hereunder will be
paid in full, and (ii) evidence satisfactory to the Lender that all necessary
termination statements, satisfaction documents and any other applicable releases
in connection with any existing Indebtedness and all other Liens with respect to
the Loan Parties that are not Permitted Encumbrances have been filed or
arrangements satisfactory to the Lender have been made for such filing;
(y) Closing Certificate. The Lender shall have received a closing
certificate signed by the Chief Financial Officer of each Loan Party, dated as
of the date hereof, stating that (i) all representations and warranties set
forth in this Agreement and the Other Documents to which such Loan Party is a
party are true and correct in all material respects on and as of such date, (ii)
the Loan Parties are on such date in compliance with all the terms and
provisions set forth in this Agreement and the Other Documents, as the case may
be, and (iii) on such date no Default or Event of Default has occurred or is
continuing;
(z) Borrowing Base. The Lender shall have received evidence from the
Borrowers that the aggregate amount of Eligible Receivables, Eligible Inventory
and Eligible Rights of Entry is sufficient in value and amount to support the
Advances in the amount requested by the Borrowers on the Closing Date;
(aa) Undrawn Availability. After giving effect to the initial Advances
hereunder and all closing costs, fees and expenses, the Borrowers shall have
Undrawn Availability of at least Two Million and 00/100 Dollars ($2,000,000.00);
and
-64-
(bb) Intellectual Property Security Agreement. The Lender shall have
received in form and substance satisfactory to the Lender (i) an executed
Intellectual Property Security Agreement, and (ii) all notices and powers of
attorney with respect thereto;
(cc) Mortgage Documents. The Lender shall have received in form and
substance satisfactory to the Lender (i) the executed Mortgage, (ii) the
executed Lease Assignment, (iii) the executed Environmental Indemnity and (iv)
an ALTA survey of the Mortgaged Property in form and substance satisfactory to
the Lender;
(dd) Hedging Contract. The Lender shall have received in form and substance
satisfactory to the Lender, evidence that the Borrowers have entered into a
Hedging Contract with the Issuer with respect to the Term Loan and upon terms
and conditions satisfactory to the Lender;
(ee) Other. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement shall be satisfactory in form and substance to
the Lender and its counsel.
8.2 Conditions to Each Advance.
The agreement of the Lender and the Issuer to make any Advance requested to
be made on any date (including, without limitation, the initial Advance), is
subject to the satisfaction of the following conditions precedent as of the date
such Advance is made.
(a) Representations and Warranties. Each of the representations and
warranties made by any Loan Party in or pursuant to this Agreement and any
related agreements to which it is a party, as the case may be, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement or any related agreement shall be true and correct in all
material respects on and as of such date as if made on and as of such date,
except to the extent that such representations and warranties expressly relate
solely to an earlier date (in which case such representations and warranties
shall have been true and correct in all material respects on and as of such
earlier date).
(b) No Default. No Event of Default or Default shall have occurred and be
continuing on such date, or would exist after giving effect to the Advances
requested to be made, on such date; provided, however that, the Lender, in its
sole discretion, may continue to make Advances notwithstanding the existence of
an Event of Default or Default and that any Advances so made shall not be deemed
a waiver of any such Event of Default or Default.
(c) Maximum Advances. In the case of any Advances requested to be made,
after giving effect thereto, the aggregate Advances shall not exceed the maximum
amount of Advances permitted under Section 2.1 hereof.
-65-
Each request for an Advance by the Borrowing Agent hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.
IX. INFORMATION AS TO THE LOAN PARTIES.
Each Borrower shall, on behalf of itself and the other Loan Parties, until
satisfaction in full of the Obligations and the termination of this Agreement:
9.1 Disclosure of Material Matters.
Immediately upon learning thereof, report to the Lender all matters
materially affecting the value, enforceability or collectibility of any portion
of the Collateral including, without limitation, any Loan Party's reclamation or
repossession of, or the return to any Loan Party of, a material amount of goods
or material claims or material disputes asserted by any Customer or other
obligor.
9.2 Schedules.
(a) Deliver to the Lender on or before the fifteenth (15th) day of each
calendar month as and for the prior calendar month (a) accounts receivable
agings of the Borrowers (reconciled to the general ledger and the Borrowing Base
Certificate), (b) accounts payable schedules of the Borrowers (reconciled to the
general ledger), (c) Inventory reports of the Borrowers (which shall include a
lower of cost or market calculation as well as the then current amount of
Inventory reserves and details regarding any increase or release of such
Inventory reserves) and (d) a Borrowing Base Certificate (which shall be
calculated as of the last day of the prior calendar month and which shall not be
binding upon the Lender or restrictive of the Lender's rights under this
Agreement). In addition, each Borrower shall deliver to the Lender on or before
the first (1st) day of each Week as and for the prior Week an interim Borrowing
Base Certificate (which shall be calculated as of the last day of the prior Week
and which shall not be binding upon the Lender or restrictive of the Lender's
rights under this Agreement) reflecting all activity (sales, collections,
credits, etc.) impacting the accounts of the Borrowers for all Business Days of
the immediately preceding Week. The amount derived as being excluded from
Eligible Receivables used on such interim Borrowing Base Certificate shall be
the amount that is calculated and updated monthly pursuant to this Section 9.2
and which is satisfactory to the Lender. The amount of Eligible Inventory to be
included on such interim Borrowing Base Certificate shall be calculated and
updated monthly pursuant to this Section 9.2 and which is satisfactory to the
Lender. In addition, each Borrower will deliver to the Lender at such intervals
as the Lender may reasonably require: (i) confirmatory assignment schedules,
(ii) copies of Customer's invoices, (iii) evidence of shipment or delivery, and
(iv) such further schedules, documents and/or information regarding the
Collateral as the Lender may require including, without limitation, trial
balances and test verifications. The Lender shall have the right to confirm and
verify all Receivables by any manner and through any medium it considers
advisable and do whatever it may deem reasonably necessary to protect its
interests hereunder. The items to be provided under this Section are to be in
form
-66-
satisfactory to the Lender (including, but not limited to, with respect to
electronic transmissions, in an excel or text file format) and executed by each
applicable Borrower and delivered to the Lender from time to time solely for the
Lender's convenience in maintaining records of the Collateral, and any
Borrower's failure to deliver any of such items to the Lender shall not affect,
terminate, modify or otherwise limit the Lender's Lien with respect to the
Collateral.
(b) Deliver to the Lender on or before the fifteenth (15th) day of each
calendar month as and for the prior calendar month a listing of Rights of Entry
on a property by property basis including current penetration rates and revenue
per subscriber.
9.3 Environmental Reports.
Furnish the Lender, concurrently with the delivery of the financial
statements referred to in Sections 9.7, 9.9, 9.9 and 9.10, with a certificate
signed by the President, Chief Financial Officer or Treasurer of BTL stating, to
the best of his knowledge, that each Loan Party is in compliance in all material
respects with all federal, state and local laws relating to environmental
protection and control and occupational safety and health. To the extent any
Loan Party is not in compliance with the foregoing laws, the certificate shall
set forth with specificity all areas of non-compliance and the proposed action
such Loan Party will implement in order to achieve full compliance.
9.4 Litigation.
Promptly notify the Lender in writing of any litigation, suit or
administrative proceeding affecting any Loan Party, whether or not the claim is
covered by insurance, and of any suit or administrative proceeding, which in any
such case could reasonably be expected to have a Material Adverse Effect.
9.5 Material Occurrences.
Promptly notify the Lender in writing upon the occurrence of (a) any Event
of Default or Default; (b) any event, development or circumstance whereby any
financial statements or other reports furnished to the Lender fail in any
material respect to present fairly, in accordance with GAAP consistently
applied, the financial condition or operating results of BTL and its
Subsidiaries on a consolidated basis as of the date of such statements; (c) any
accumulated retirement plan funding deficiency which, if such deficiency
continued for two (2) plan years and was not corrected as provided in Section
4971 of the Code, could subject any Loan Party to a tax imposed by Section 4971
of the Code; (d) each and every default by any Loan Party which would reasonably
be expected to result in the acceleration of the maturity of any Indebtedness,
including the names and addresses of the holders of such Indebtedness with
respect to which there is a default existing or with respect to which the
maturity has been or could be accelerated, and the amount of such Indebtedness;
and (e) any other development in the business or affairs of any Loan Party which
could reasonably be expected to have a Material Adverse Effect; in each case, to
the extent permitted by applicable law, describing the nature thereof and the
action the Loan Parties propose to take with respect thereto.
-67-
9.6 Government Receivables.
Notify the Lender immediately if any of its Receivables arise out of
contracts between any Borrower and the United States, any state, or any
department, agency or instrumentality of any of them.
9.7 Annual Financial Statements.
Furnish the Lender within five (5) days after submission to the SEC in
accordance with all applicable SEC rules and regulations, but in any event no
later than one hundred twenty (120) days after the end of each fiscal year of
BTL, annual financial statements of BTL and its Subsidiaries on a consolidated
basis including, but not limited to, statements of operations and stockholders'
equity and cash flow from the beginning of the applicable fiscal year to the end
of such fiscal year and the balance sheet as at the end of such fiscal year, all
prepared in accordance with GAAP applied on a basis consistent with prior
practices, and in reasonable detail and, reported upon without qualification by
Xxxxxx & Xxxxxxxx, LLP or such other independent certified public accounting
firm selected by BTL and satisfactory to the Lender (the "Accountants"). In
addition, the reports shall be accompanied by a certificate of BTL signed by
BTL's Chief Financial Officer which shall state that, based on an examination
sufficient to permit him to make an informed statement, no Default or Event of
Default exists, or, if such is not the case, specifying such Default or Event of
Default, its nature, when it occurred, whether it is continuing and the steps
being taken by BTL with respect to such event, and such certificate shall have
appended thereto calculations which set forth compliance with the requirements
or restrictions imposed by Sections 6.5, 7.6 and 7.11 hereof.
9.8 Quarterly Financial Statements.
Furnish the Lender within five (5) days after submission to the SEC in
accordance with all applicable SEC rules and regulations, but in any event no
later than sixty (60) days after the end of each fiscal quarter of BTL, an
unaudited balance sheet of BTL and its Subsidiaries on a consolidated basis and
unaudited statements of operations (including income statements and balance
sheets) and cash flow of BTL and its Subsidiaries on a consolidated basis
reflecting results of operations from the beginning of the fiscal year to the
end of each of the first, second and third fiscal quarters of BTL, prepared on a
basis consistent with prior practices and complete and correct in all material
respects, subject to normal and recurring year end adjustments that individually
and in the aggregate are not material to the business of BTL and its
Subsidiaries. The reports shall be accompanied by a certificate of BTL signed by
BTL's Chief Financial Officer which shall state that, based on an examination
sufficient to permit him to make an informed statement, no Default or Event of
Default exists, or, if such is not the case, specifying such Default or Event of
Default, its nature, when it occurred, whether it is continuing and the steps
being taken by BTL with respect to such event, and such certificate shall have
appended thereto calculations which set forth compliance with the requirements
or restrictions imposed by Sections 6.5, 7.6 and 7.11 hereof.
-68-
9.9 Monthly Financial Statements.
Furnish the Lender within thirty (30) days after the end of each calendar
month, an unaudited balance sheet of BTL and its Subsidiaries on a consolidated
and consolidating basis and unaudited statements of operations (including income
statements and balance sheets) of BTL and its Subsidiaries on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
fiscal year to the end of such month and for such month, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal and recurring year end adjustments that individually
and in the aggregate are not material to the business of BTL and its
Subsidiaries. The reports shall be accompanied by a certificate of BTL's Chief
Financial Officer, which shall state that, based on an examination sufficient to
permit him to make an informed statement, no Default or Event of Default exists,
or, if such is not the case, specifying such Default or Event of Default, its
nature, when it occurred, whether it is continuing and the steps being taken by
BTL with respect to such event and, such certificate shall have appended thereto
calculations which set forth compliance with the requirements or restrictions
imposed by Sections 6.5, 7.6 and 7.11 hereof.
9.10 Other Reports.
Furnish the Lender as soon as available, but in any event within ten (10)
days after the filing thereof, with copies of such financial statements, proxy
statements, registration statements, reports and returns as each Loan Party is
or may be required to file with the United States Securities Exchange Commission
or any State Securities Commission.
9.11 Additional Information.
Furnish the Lender with such additional information as the Lender shall
reasonably request in order to enable the Lender to determine whether the terms,
covenants, provisions and conditions of this Agreement and the Notes have been
complied with by the Loan Parties including, without limitation and without the
necessity of any request by the Lender, (a) copies of all environmental audits
and reviews, (b) at least thirty (30) days prior thereto, notice of any Loan
Party's opening of any new place of business or any Loan Party's closing of any
existing place of business, and (c) promptly upon any Loan Party's learning
thereof, notice of any material labor dispute to which any Loan Party may become
a party, any strikes or walkouts relating to any of its plants or other
facilities, and the expiration of any labor contract to which any Loan Party is
a party or by which any Loan Party is bound.
9.12 Projected Operating Budget.
Furnish the Lender, prior to the beginning of each fiscal year of BTL
during the Term, a month by month projected operating budget and cash flow of
BTL and its Subsidiaries on a consolidated basis for such fiscal year (including
an income statement for each calendar month and a balance sheet as at the end of
each calendar month and a separate operating budget and cash flow for BDR), such
projections to be accompanied by a certificate signed by the Chief Financial
Officer of BTL to the effect that such projections have been prepared on the
basis of sound financial planning practice consistent with past budgets and
financial statements and that
-69-
such officer has no reasonable basis to question the reasonableness of any
material assumptions on which such projections were prepared.
9.13 Notice of Suits, Adverse Events.
Furnish the Lender with prompt notice of (i) any lapse or other termination
of any Consent issued to any Loan Party by any Governmental Body or any other
Person that is material to the operation of any Loan Party's business, (ii) any
refusal by any Governmental Body or any other Person to renew or extend any such
Consent; (iii) copies of any periodic or special reports filed by any Loan Party
with any Governmental Body or Person, if such reports indicate any material
change in the business, operations, affairs or condition of any Loan Party, or
if copies thereof are requested by the Lender and/or the Issuer, and (iv) copies
of any material notices and other communications from any Governmental Body
which specifically relate to any Loan Party.
9.14 ERISA Notices and Requests.
Furnish the Lender with immediate written notice in the event that (i) any
Loan Party or any member of the Controlled Group knows or has reason to know
that a Termination Event has occurred, together with a written statement
describing such Termination Event and the action, if any, which such Loan Party
or any member of the Controlled Group has taken, is taking, or proposes to take
with respect thereto and, when known, any action taken or threatened by the
Internal Revenue Service, Department of Labor or PBGC with respect thereto, (ii)
any Loan Party or any member of the Controlled Group knows or has reason to know
that a prohibited transaction (as defined in Sections 406 of ERISA and 4975 of
the Code) has occurred that would reasonably be expected to have a Material
Adverse Effect, together with a written statement describing such transaction
and the action which such Loan Party or any member of the Controlled Group has
taken, is taking or proposes to take with respect thereto, (iii) a funding
waiver request has been filed with respect to any Plan together with all
communications received by any Loan Party or any member of the Controlled Group
with respect to such request, (iv) any increase in the benefits of any existing
Plan or the establishment of any new Plan or the commencement of contributions
to any Plan to which any Loan Party or any member of the Controlled Group was
not previously contributing shall occur, (v) any Loan Party or any member of the
Controlled Group shall receive from the PBGC a notice of intention to terminate
a Plan or to have a trustee appointed to administer a Plan, together with copies
of each such notice, (vi) any Loan Party or any member of the Controlled Group
shall receive any favorable or unfavorable determination letter from the
Internal Revenue Service regarding the qualification of a Plan under Section
401(a) of the Code, together with copies of each such letter; (vii) any Loan
Party or any member of the Controlled Group shall receive a notice regarding the
imposition of withdrawal liability, together with copies of each such notice;
(viii) any Loan Party or any member of the Controlled Group shall fail to make a
required installment or any other required payment under Section 412 of the Code
on or before the due date for such installment or payment; (ix) any Loan Party
or any member of the Controlled Group knows that (a) a Multiemployer Plan has
been terminated, (b) the administrator or plan sponsor of a Multiemployer Plan
intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or
will institute proceedings under Section 4042 of ERISA to terminate a
Multiemployer Plan.
-70-
9.15 Additional Documents.
Execute and deliver to the Lender, upon request, such documents and
agreements as the Lender may, from time to time, reasonably request to carry out
the purposes, terms or conditions of this Agreement.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall constitute
an "Event of Default":
10.1 Payment of Obligations.
Failure by any Borrower to pay any principal or interest on the Obligations
when due, whether at maturity or by reason of acceleration pursuant to the terms
of this Agreement, or by required prepayment or failure to pay any other
liabilities or make any other payment, fee or charge provided for herein when
due or in any Other Document;
10.2 Misrepresentations.
Any representation or warranty made or deemed made by any Loan Party in
this Agreement or any related agreement or in any certificate, document or
financial or other statement furnished at any time in connection herewith or
therewith, as the case may be, shall prove to have been misleading in any
material respect on the date when made or deemed to have been made;
10.3 Failure to Furnish Information.
Failure by any Loan Party to (i) furnish financial information required to
be provided hereunder when due, (ii) furnish financial information requested by
the Lender within fifteen (15) days after such information is requested, or
(iii) permit the inspection of its books or records;
10.4 Liens Against Assets.
Issuance of a notice of Lien, levy, assessment, injunction or attachment
against a material portion of any Loan Party's property which is not stayed or
lifted within thirty (30) days;
10.5 Breach of Covenants.
(i) Except as otherwise provided for in Sections 10.1 and 10.3, failure or
neglect of any Loan Party to perform, keep or observe any term, provision,
condition or covenant herein contained (other than those in Sections 4.6, 4.7,
4.9, 4.16 or 6.3 hereof), or contained in any other agreement or arrangement,
now or hereafter entered into between any Loan Party and the Lender or the
Issuer; or (ii) failure or neglect of any Loan Party to perform, keep or observe
any term, provision, condition, covenant herein contained in Sections 4.6, 4.7,
4.9, 4.16 or 6.3 hereof and such failure shall continue for thirty (30) days
from the occurrence of such failure or neglect;
-71-
10.6 Judgment.
Any judgment or judgments are rendered or judgment liens filed against any
Loan Party for an aggregate amount in excess of Two Hundred Fifty Thousand and
00/100 Dollars ($250,000.00) which within thirty (30) days of such rendering or
filing is not either appealed, satisfied, stayed or discharged of record;
10.7 Insolvency and Related Proceedings of the Loan Parties.
Any Loan Party shall (i) apply for, consent to or suffer the appointment
of, or the taking of possession by, a receiver, custodian, trustee, liquidator
or similar fiduciary of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within sixty (60) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing;
10.8 Insolvency; Cessation of Operations.
Any Loan Party shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business;
10.9 Bankruptcy.
Any Affiliate or Subsidiary of any Loan Party shall (i) apply for, consent
to or suffer the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar fiduciary of itself or of all or a
substantial part of its property, (ii) make a general assignment for the benefit
of creditors, (iii) admit in writing its inability, or be generally unable to
pay its debts as they become due or cease operations of its present business,
(iv) commence a voluntary case under any state or federal bankruptcy laws (as
now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi)
file a petition seeking to take advantage of any other law providing for the
relief of debtors, (vii) acquiesce to, or fail to have dismissed, within sixty
(60) days, any petition filed against it in any involuntary case under such
bankruptcy laws, or (viii) take any action for the purpose of effecting any of
the foregoing;
10.10 Material Adverse Effect.
Any change in any Loan Party's condition or affairs (financial or
otherwise) which in the Lender's reasonable opinion has a Material Adverse
Effect;
10.11 Loss of Priority Lien.
Any Lien created hereunder or provided for hereby or under any related
agreement for any reason ceases to be or is not a valid and perfected Lien
having a first priority interest;
-72-
10.12 Breach of Material Agreements.
A default of the obligations of any Loan Party under any other material
agreement to which it is a party shall occur which adversely affects its
condition, affairs or prospects (financial or otherwise) which default is not
cured within any applicable cure period;
10.13 Cross Default; Cross Acceleration.
Any Loan Party shall (a) default in any payment of principal of or interest
on any Indebtedness that individually, or in the aggregate, is in excess of One
Hundred Thousand and 00/100 Dollars ($100,000.00) beyond any period of grace
with respect to such payment or (b) default in the observance of any other
covenant, term or condition contained in any agreement or instrument pursuant to
which such Indebtedness is created, secured or evidenced, if the effect of such
default is to cause the acceleration of any such Indebtedness (whether or not
such right shall have been waived);
10.14 Termination of Guaranty.
Termination or breach of any Guaranty or similar agreement executed and
delivered to the Lender in connection with the Obligations of any Loan Party, or
if any Guarantor attempts to terminate, challenges the validity of, or its
liability under, any such Guaranty or similar agreement;
10.15 Change of Control.
Any Change of Control shall occur;
10.16 Invalidity of Credit Agreement.
Any material provision of this Agreement shall, for any reason, cease to be
valid and binding on any Loan Party, or any Loan Party shall so claim in writing
to the Lender;
10.17 Loss of Material Intellectual Property.
(i) any Governmental Body shall (A) revoke, terminate, suspend or adversely
modify any material license, permit, patent, trademark or tradename of any Loan
Party, or (B) commence proceedings to suspend, revoke, terminate or adversely
modify any such material license, permit, trademark, tradename or patent and
such proceedings shall not be dismissed or discharged within sixty (60) days, or
(C) schedule or conduct a hearing on the renewal of any material license,
permit, trademark, tradename or patent necessary for the continuation of any
Loan Party's business and the staff of such Governmental Body issues a report
recommending the termination, revocation, suspension or material, adverse
modification of such license, permit, trademark, tradename or patent; (ii) any
agreement which is necessary or material to the operation of any Loan Party's
business shall be revoked or terminated and not replaced by a substitute
reasonably acceptable to the Lender within thirty (30) days after the date of
such revocation or termination, and such revocation or termination and
non-replacement would reasonably be expected to have a Material Adverse Effect;
-73-
10.18 Destruction of Collateral.
Any portion of the Collateral shall be seized or taken by a Governmental
Body, or any Loan Party or the title and rights of any Loan Party shall have
become the subject matter of litigation which might, in the reasonable opinion
of the Lender, upon final determination, result in material impairment or loss
of the security provided by this Agreement or the Other Documents;
10.19 Business Interruption.
The operations of any Loan Party's manufacturing facility are interrupted
at any time for more than ten (10) consecutive days, excluding, however, plant
shut downs implemented from time to time by any Loan Party consistent in both
scope and duration with such Loan Party's historic practice, which interruption
would reasonably be expected to have a Material Adverse Effect; or
10.20 ERISA Events.
An event or condition specified in Sections 7.16 or 9.14 hereof shall occur
or exist with respect to any Plan and, as a result of such event or condition,
together with all other such events or conditions, any Loan Party or any member
of the Controlled Group shall incur, or in the opinion of the Lender be
reasonably likely to incur, a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of the Lender, would have a Material Adverse Effect.
XI. LENDER'S RIGHTS AND REMEDIES AFTER DEFAULT.
11.1 Rights and Remedies.
Upon the occurrence of (i) an Event of Default pursuant to Section 10.7 or
10.8, all Obligations shall be immediately due and payable and this Agreement
and the obligation of the Lender and the Issuer to make Advances shall be deemed
terminated; and, (ii) any of the other Events of Default and at any time
thereafter (such default not having previously been cured), at the option of the
Lender, all Obligations shall be immediately due and payable and the Lender and
the Issuer shall have the right to terminate this Agreement and to terminate the
obligation of the Lender and the Issuer to make Advances and (iii) a filing of a
petition against any Loan Party in any involuntary case under any state or
federal bankruptcy laws, the obligation of the Lender and the Issuer to make
Advances hereunder shall be terminated other than as may be required by an
appropriate order of the bankruptcy court having jurisdiction over any Loan
Party. Upon the occurrence of any Event of Default, the Lender shall have the
right to exercise any and all other rights and remedies provided for herein,
under the Uniform Commercial Code and at law or equity generally, including,
without limitation, the right to foreclose the security interests granted herein
and to realize upon any Collateral by any available judicial procedure and/or to
take, to the extent permitted by applicable law, possession of and sell any or
all of the Collateral with or without judicial process. The Lender may enter any
of any Loan Party's premises or other premises without legal process and without
incurring liability to any Loan Party therefor, and the Lender may thereupon, or
at any time thereafter, in its discretion without notice or demand, take the
Collateral and remove the same to such place as the Lender may deem advisable
and the Lender may require the Loan Parties to make the Collateral available to
the
-74-
Lender at a convenient place. With or without having the Collateral at the time
or place of sale, the Lender may sell the Collateral, or any part thereof, at
public or private sale, at any time or place, in one or more sales, at such
price or prices, and upon such terms, either for cash, credit or future
delivery, as the Lender may elect. Except as to that part of the Collateral
which is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, the Lender shall give the Loan Parties
reasonable notification of such sale or sales, it being agreed that in all
events written notice delivered to the Loan Parties at least five (5) days prior
to such sale or sales is reasonable notification. At any public sale the Lender
or the Issuer may bid for and become the purchaser, and the Lender, the Issuer
or any other purchaser at any such sale thereafter shall hold the Collateral
sold absolutely free from any claim or right of whatsoever kind, including any
equity of redemption, and such right and equity are hereby expressly waived and
released by each Loan Party. In connection with the exercise of the foregoing
remedies, the Lender is granted permission to use all of each Loan Party's
trademarks, trade styles, trade names, patents, patent applications, licenses,
franchises and other proprietary rights which are used in connection with (a)
Inventory for the purpose of disposing of such Inventory and (b) Equipment for
the purpose of completing the manufacture of unfinished goods. The proceeds
realized from the sale of any Collateral shall be applied as set forth in
Section 11.5. If any deficiency shall arise, the Loan Parties shall remain
liable to the Lender and the Issuer therefor.
11.2 Lender Discretion.
The Lender shall have the right in its sole discretion to determine which
rights, Liens, security interests or remedies the Lender may at any time pursue,
relinquish, subordinate, or modify or to take any other action with respect
thereto and such determination will not in any way modify or affect any of the
Lender's or the Issuer's rights hereunder.
11.3 Setoff.
In addition to any other rights which the Lender or the Issuer may have
under applicable law, upon the occurrence of an Event of Default hereunder, the
Lender and the Issuer, including any branch, Subsidiary or Affiliate of the
Lender or the Issuer, shall have a right to apply any Loan Party's property held
by the Lender or the Issuer, such branch, Subsidiary or Affiliate to reduce the
Obligations.
11.4 Rights and Remedies not Exclusive.
The enumeration of the foregoing rights and remedies is not intended to be
exhaustive and the exercise of any right or remedy shall not preclude the
exercise of any other right or remedies provided for herein or otherwise
provided by law, all of which shall be cumulative and not alternative.
11.5 Allocation of Payments After Event of Default.
Notwithstanding any other provisions of this Agreement to the contrary,
after the occurrence and during the continuance of an Event of Default, all
amounts collected or received by the Lender on account of the Obligations or any
other amounts outstanding under any of the Other Documents or in respect of the
Collateral shall be paid over or delivered as follows:
-75-
FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including without limitation, reasonable attorneys' fees) of the Lender in
connection with enforcing the rights of the Lender and the Issuer under this
Agreement and the Other Documents and any protective advances made by the Lender
with respect to the Collateral under or pursuant to the terms of this Agreement;
SECOND, to the payment of all reasonable out-of-pocket costs and expenses
(including without limitation, reasonable attorneys' fees) of the Lender and the
Issuer in connection with enforcing their rights under this Agreement and the
Other Documents or otherwise with respect to the Obligations owing to the Lender
or the Issuer;
THIRD, to the payment of all of the Obligations consisting of accrued fees
and interest arising under or pursuant to this Agreement or the Other Documents;
FOURTH, to the payment of the outstanding principal amount of the
Obligations constituting Advances (including the payment or cash
collateralization of the outstanding amount of Letters of Credit);
FIFTH, to all other Obligations and other obligations which shall have
become due and payable under the Other Documents or otherwise and not repaid
pursuant to clauses "FIRST" through "FOURTH" above;
SIXTH, to the payment of the surplus, if any, to whomever may be lawfully
entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) the Lender and the Issuer shall receive an amount
equal to its pro rata share (based on the proportion that then outstanding
Advances held by the Lender or the Issuer bears to the aggregate then
outstanding Advances) of amounts available to be applied pursuant to clauses
"SECOND", "THIRD", "FOURTH" and "FIFTH" above; and (iii) to the extent that any
amounts available for distribution pursuant to clause "FOURTH" above are
attributable to the issued but undrawn amount of outstanding Letters of Credit,
such amounts shall be held by the Lender in a cash collateral account and
applied (A) first, to reimburse the Issuer from time to time for any drawings
under such Letters of Credit and (B) then, following the expiration of all
Letters of Credit, to all other obligations of the types described in clauses
"FOURTH" and "FIFTH" above in the manner provided in this Section 11.5.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1 Waiver of Notice.
Each Loan Party hereby waives notice of non-payment of any of the
Receivables, demand, presentment, protest and notice thereof with respect to any
and all instruments, notice of acceptance hereof, notice of loans or advances
made, credit extended, Collateral received or delivered, or any other action
taken in reliance hereon, and all other demands and notices of any description,
except such as are expressly provided for herein.
-76-
12.2 Delay.
No delay or omission on the Lender's or the Issuer's part in exercising any
right, remedy or option shall operate as a waiver of such or any other right,
remedy or option or of any default.
12.3 Jury Waiver.
EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1 Term.
This Agreement, which shall inure to the benefit of and shall be binding
upon the respective successors and permitted assigns of each Loan Party, the
Lender and the Issuer, shall become effective on the date hereof and shall
continue in full force and effect until December 28, 2008 (the "Term") unless
sooner terminated as herein provided. The Loan Parties may terminate this
Agreement at any time upon ninety (90) days' prior written notice upon payment
in full of the Obligations. In the event the Obligations are prepaid in full
prior to the last day of the Term (the date of such prepayment hereinafter
referred to as the "Early Termination Date"), the Borrowers shall pay to the
Lender an early termination fee in an amount equal to (x) two percent (2%) of
the sum of the Maximum Revolving Advance Amount and the original principal
amount of the Term Loan if the Early Termination Date occurs on or after the
Closing Date to and including the date immediately preceding the first (1st)
anniversary of the Closing Date, and (y) one percent (1%) of the sum of the
Maximum Revolving Advance Amount and the original principal amount of the Term
Loan if the Early Termination Date occurs on or after the first (1st)
anniversary of the Closing Date to and including the date immediately preceding
the second (2nd) anniversary of the Closing Date. In the event that the Early
Termination Date occurs prior to the second (2nd) anniversary of the Closing
Date and the Borrowers obtain replacement financing from the Lender or the
Issuer, no prepayment fee will be due.
-77-
13.2 Termination.
The termination of this Agreement shall not affect any Loan Party's, the
Lender's or the Issuer's rights, or any of the Obligations having their
inception prior to the effective date of such termination, and the provisions
hereof shall continue to be fully operative until all transactions entered into,
rights or interests created or Obligations have been fully disposed of,
concluded or liquidated. The security interests, Liens and rights granted to the
Lender and the Issuer hereunder and the financing statements filed hereunder
shall continue in full force and effect, notwithstanding the termination of this
Agreement or the fact that the Loan Account may from time to time be temporarily
in a zero or credit position, until all of the Obligations of each Loan Party
have been paid or performed in full after the termination of this Agreement or
each Loan Party has furnished the Lender and the Issuer with an indemnification
satisfactory to the Lender and the Issuer with respect thereto. Accordingly,
each Loan Party waives any rights which it may have under the Uniform Commercial
Code to demand the filing of termination statements with respect to the
Collateral, and the Lender shall not be required to send such termination
statements to each Loan Party, or to file them with any filing office, unless
and until this Agreement shall have been terminated in accordance with its terms
and all Obligations paid in full in immediately available funds. All
representations, warranties, covenants, waivers and agreements contained herein
shall survive termination hereof until all Obligations are paid or performed in
full. Without limitation, all indemnification obligations contained herein shall
survive the termination hereof and payment in full of the Obligations.
XIV. REGARDING LENDER AS COLLATERAL AGENT.
14.1 Appointment.
The Issuer hereby designates NCBC to act as collateral agent for the Issuer
under this Agreement and the Other Documents. The Lender shall hold all
Collateral, payments of principal and interest, fees, charges and collections
(without giving effect to any collection days) received pursuant to this
Agreement, for the benefit of the Lender and the Issuer.
14.2 Lack of Reliance on Lender.
Independently and without reliance upon the Lender, the Issuer has made and
shall continue to make (i) its own independent investigation of the financial
condition and affairs of each Loan Party in connection with the making and the
continuance of the Advances hereunder and the taking or not taking of any action
in connection herewith, and (ii) its own appraisal of the creditworthiness of
each Loan Party. The Lender shall have no duty or responsibility, either
initially or on a continuing basis, to provide the Issuer with any credit or
other information with respect thereto, whether coming into its possession
before making of the Advances or at any time or times thereafter except as shall
be provided by any Loan Party pursuant to the terms hereof. The Lender shall not
be responsible to the Issuer for any recitals, statements, information,
representations or warranties herein or in any agreement, document, certificate
or a statement delivered in connection with or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility or sufficiency of this
Agreement or any Other Document, or of the financial condition of any Loan
Party, or be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of
-78-
this Agreement, the Note, the Other Documents or the financial condition of any
Loan Party, or the existence of any Event of Default or any Default.
14.3 Reliance.
The Lender shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, statement, certificate,
telex, teletype or telecopier message, cablegram, order or other document or
telephone message believed by it to be genuine and correct and to have been
signed, sent or made by the proper person or entity, and, with respect to all
legal matters pertaining to this Agreement and the Other Documents and its
duties hereunder, upon advice of counsel selected by it. The Lender may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by the Lender with
reasonable care.
14.4 Notice of Default.
The Lender shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder or under the Other
Documents, unless the Lender has received notice from the Issuer or a Loan Party
referring to this Agreement or the Other Documents, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Lender receives such a notice, the Lender shall give notice
thereof to the Issuer.
14.5 Delivery of Documents.
To the extent the Lender receives financial statements required under
Sections 9.7, 9.8, 9.9, 9.10, 9.11 and 9.13 and a Borrowing Base Certificate
pursuant to the terms of this Agreement, the Lender will promptly furnish such
documents and information to the Issuer.
14.6 No Reliance on Lender's Customer Identification Program.
The Issuer acknowledges and agrees that neither the Issuer, nor any of its
Affiliates, participants or assignees, may rely on the Lender to carry out the
Issuer's, or such Affiliate's, participant's or assignee's customer
identification program, or other obligations required or imposed under or
pursuant to the USA Patriot Act or the regulations thereunder, including the
regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the
"CIP Regulations"), or any other Anti-Terrorism Law, including any programs
involving any of the following items relating to or in connection with any of
the Loan Parties, their Affiliates or their agents, this Agreement, the Other
Documents or the transactions hereunder or contemplated hereby: (1) any identity
verification procedures, (2) any record keeping, (3) comparisons with government
lists, (4) customer notices or (5) other procedures required under the CIP
Regulations or such other laws.
-79-
XV. BORROWING AGENCY.
15.1 Borrowing Agency Provisions.
(a) Each Borrower hereby irrevocably designates the Borrowing Agent to be
its attorney and agent and in such capacity to borrow, sign and endorse notes,
and execute and deliver all instruments, documents, writings and further
assurances now or hereafter required hereunder, on behalf of such Borrower or
the Borrowers, and hereby authorizes the Lender to pay over or credit all loan
proceeds hereunder in accordance with the request of the Borrowing Agent.
(b) The handling of this credit facility as a co-borrowing facility with a
borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to the Borrowers and at their request. Neither the Lender nor the
Issuer shall incur liability to the Borrowers as a result thereof. To induce the
Lender and the Issuer to do so and in consideration thereof, each Borrower
hereby indemnifies the Lender and the Issuer and holds the Lender and the Issuer
harmless from and against any and all liabilities, expenses, losses, damages and
claims of damage or injury asserted against the Lender or the Issuer by any
Person arising from or incurred by reason of the handling of the financing
arrangements of the Borrowers as provided herein, reliance by the Lender or the
Issuer on any request or instruction from the Borrowing Agent or any other
action taken by the Lender or the Issuer with respect to this Section 15.1
except due to willful misconduct or gross negligence by the indemnified party.
(c) All Obligations shall be joint and several, and each Borrower shall
make payment upon the maturity of the Obligations by acceleration or otherwise,
and such obligation and liability on the part of each Borrower shall in no way
be affected by any extensions, renewals and forbearance granted to the Lender or
the Issuer to any Borrower, failure of the Lender or the Issuer to give any
Borrower notice of borrowing or any other notice, any failure of the Lender or
the Issuer to pursue or preserve its rights against any Borrower, the release by
the Lender or the Issuer of any Collateral now or thereafter acquired from any
Borrower, and such agreement by each Borrower to pay upon any notice issued
pursuant thereto is unconditional and unaffected by prior recourse by the Lender
or the Issuer to the other Borrowers or any Collateral for such Borrower's
Obligations or the lack thereof. Each Borrower waives all suretyship defenses.
Without limiting the generality of the foregoing, each of the Borrowers hereby
acknowledges and agrees that any and all actions, inactions or omissions by any
one or more, or all, of the Borrowers in connection with, related to or
otherwise affecting this Agreement or any of the Other Documents are the
obligations of, and inure to and are binding upon, each and all of the
Borrowers, jointly and severally.
15.2 Waivers.
Each Borrower expressly waives (i) any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution or any other claim which
such Borrower may now or hereafter have against the other Borrowers or other
Person directly or contingently liable for the Obligations hereunder, or against
or with respect to the other Borrowers' property
-80-
(including, without limitation, any property which is Collateral for the
Obligations), arising from the existence or performance of this Agreement, until
termination of this Agreement and repayment in full of the Obligations and (ii)
any defense it may otherwise have to the payment and performance of the
Obligations based on any contention that its liability hereunder and under the
Other Documents is limited and not joint and several. Each Borrower acknowledges
and agrees that the foregoing waivers serve as a material inducement to the
agreement of the Lender and the Issuer to make the Advances, and that the Lender
and the Issuer are relying on each specific waiver and all such waivers in
entering into this Agreement. The undertakings of each Borrower hereunder secure
the Obligations of itself and the other Borrowers.
XVI. MISCELLANEOUS.
16.1 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania. Any judicial proceeding brought by or
against any Loan Party with respect to any of the Obligations, this Agreement or
any related agreement may be brought in any court of competent jurisdiction in
the Commonwealth of Pennsylvania, United States of America, and, by execution
and delivery of this Agreement, each Loan Party accepts for itself and in
connection with its properties, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement. Each Loan Party
hereby waives personal service of any and all process upon it and consents that
all such service of process may be made by registered mail (return receipt
requested) directed to the Borrowing Agent at its address set forth in Section
16.6 and service so made shall be deemed completed five (5) days after the same
shall have been so deposited in the mails of the United States of America, or,
at the Lender's and/or the Issuer's option, by service upon the Borrowing Agent
which each Loan Party irrevocably appoints as such Loan Party's agent for the
purpose of accepting service within the Commonwealth of Pennsylvania. Nothing
herein shall affect the right to serve process in any manner permitted by law or
shall limit the right of the Lender or the Issuer to bring proceedings against
any Loan Party in the courts of any other jurisdiction. Each Loan Party waives
any objection to jurisdiction and venue of any action instituted hereunder and
shall not assert any defense based on lack of jurisdiction or venue or based
upon forum non conveniens. Any judicial proceeding by any Loan Party against the
Lender or the Issuer involving, directly or indirectly, any matter or claim in
any way arising out of, related to or connected with this Agreement or any
related agreement, shall be brought only in a federal or state court located in
the County of Allegheny, Commonwealth of Pennsylvania.
16.2 Entire Understanding.
(a) This Agreement and the documents executed concurrently herewith contain
the entire understanding between each Loan Party, the Lender and the Issuer and
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof. Any promises, representations, warranties or guarantees
not herein contained and hereinafter made shall have no force and effect unless
in writing, signed by each Loan Party's, the Lender's and the Issuer's
respective officers. Neither this Agreement nor any portion or provisions hereof
may be changed, modified, amended,
-81-
waived, supplemented, discharged, cancelled or terminated orally or by any
course of dealing, or in any manner other than by an agreement in writing,
signed by the party to be charged. Each Loan Party acknowledges that it has been
advised by counsel in connection with the execution of this Agreement and Other
Documents and is not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement.
(b) The Lender and the Loan Parties may, subject to the provisions of this
Section 16.2(b), from time to time enter into written supplemental agreements to
this Agreement or the Other Documents executed by the Loan Parties, for the
purpose of adding or deleting any provisions or otherwise changing, varying or
waiving in any manner the rights of the Lender, the Issuer or the Loan Parties
thereunder or the conditions, provisions or terms thereof or waiving any Event
of Default thereunder, but only to the extent specified in such written
agreements; provided, however, the consent of the Issuer must be obtained with
respect to any amendment, waiver or consent with respect to Sections 2.9, 2.10,
2.11 or any other provisions, the amendment or waivers of which would adversely
affect the Issuer. Any such supplemental agreement shall apply equally to the
Lender and the Issuer and shall be binding upon the Loan Parties, the Lender,
the Issuer and all future holders of the Obligations. In the case of any waiver,
the Loan Parties, the Lender and the Issuer shall be restored to their former
positions and rights, and any Event of Default waived shall be deemed to be
cured and not continuing, but no waiver of a specific Event of Default shall
extend to any subsequent Event of Default (whether or not the subsequent Event
of Default is the same as the Event of Default which was waived), or impair any
right consequent thereon.
16.3 Transfers and Assignments.
(a) The Loan Parties. The Loan Parties may not assign or otherwise transfer
any of their rights or obligations hereunder without the prior written consent
of the Lender.
(b) Transfers and Assignments by the Lender. The Lender shall have the
right to assign its rights and obligations under this Agreement, and, in any
way, in its sole discretion to participate with other financial institutions in
any outstanding Advances or in making Advances available to the Borrowers; all
of the rights, privileges, remedies and options given to the Lender hereunder
shall inure to the benefit of the Lender's successors and assigns; and all the
terms, conditions, promises, covenants, provisions and warranties of this
Agreement shall inure to the benefit of and shall bind the representatives,
successors and assigns of the Lender.
(c) Transfers and Assignments by the Issuer. The Issuer shall have the
right to assign its rights and obligations under this Agreement, and, in any
way, in its sole discretion to participate with other financial institutions in
issuing Letters of Credit; all of the rights, privileges, remedies and options
given to the Issuer hereunder shall inure to the benefit of the Issuer's
successors and assigns; and all the terms, conditions, promises, covenants,
provisions and warranties of this Agreement shall inure to the benefit of and
shall bind the representatives, successors and assigns of the Issuer.
-82-
(d) Pledge of Interests. The Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement to
secure obligations of the Lender, including without limitation any pledge or
assignment to secure obligations to a Federal Reserve Bank; provided that no
such pledge or assignment shall release the Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for the Lender as a party
hereto.
16.4 Application of Payments.
The Lender shall have the continuing and exclusive right to apply or
reverse and re-apply any payment and any and all proceeds of Collateral to any
portion of the Obligations. To the extent that any Loan Party makes a payment or
the Lender or the Issuer receives any payment or proceeds of the Collateral for
any Loan Party's benefit, which are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver, custodian or any other party under any
bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by the Lender or
the Issuer.
16.5 Indemnity.
Each Loan Party shall indemnify the Lender, the Issuer and each of their
respective officers, directors, Affiliates, employees and agents from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, fees and disbursements of
counsel) which may be imposed on, incurred by, or asserted against the Lender or
the Issuer in any litigation, proceeding or investigation instituted or
conducted by any governmental agency or instrumentality or any other Person with
respect to any aspect of, or any transaction contemplated by, or referred to in,
or any matter related to, this Agreement or the Other Documents, whether or not
the Lender or the Issuer is a party thereto, except to the extent that any of
the foregoing arises out of the gross negligence or willful misconduct of the
party being indemnified.
16.6 Notice.
Any notice or request hereunder may be given to the Borrowing Agent or any
Loan Party or to the Lender or the Issuer at their respective addresses set
forth below or at such other address as may hereafter be specified in a notice
designated as a notice of change of address under this Section. Any notice,
request, demand, direction or other communication (for purposes of this Section
16.6 only, a "Notice") to be given to or made upon any party hereto under any
provision of this Agreement shall be given or made by telephone or in writing
(which includes by means of electronic transmission (i.e., "e-mail") or
facsimile transmission or by setting forth such Notice on a site on the World
Wide Web (a "Website Posting") if Notice of such Website Posting (including the
information necessary to access such site) has previously been delivered to the
applicable parties hereto by another means set forth in this 16.6) in accordance
with this Section 16.6. Any such Notice must be delivered to the applicable
parties hereto at the addresses and numbers set forth under their respective
names on Section 16.6 hereof
-83-
or in accordance with any subsequent unrevoked Notice from any such party that
is given in accordance with this Section 16.6. Any Notice shall be effective:
(a) In the case of hand-delivery, when delivered;
(b) If given by mail, five (5) days after such Notice is deposited with the
United States Postal Service, with first-class postage prepaid, return receipt
requested;
(c) In the case of a telephonic Notice, when a party is contacted by
telephone, if delivery of such telephonic Notice is confirmed no later than the
next Business Day by hand delivery, a facsimile or electronic transmission, a
Website Posting or an overnight courier delivery of a confirmatory Notice
(received at or before noon on such next Business Day);
(d) In the case of a facsimile transmission, when sent to the applicable
party's facsimile machine's telephone number, if the party sending such Notice
receives confirmation of the delivery thereof from its own facsimile machine;
(e) In the case of electronic transmission, when actually received;
(f) In the case of a Website Posting, upon delivery of a Notice of such
posting (including the information necessary to access such site) by another
means set forth in this Section 16.6; and
(g) If given by any other means (including by overnight courier), when
actually received.
(h) When the Lender gives a Notice to the Borrowing Agent or any Loan
Party, the Lender shall concurrently send a copy thereof to the Issuer. When the
Issuer gives a Notice to the Borrowing Agent or any Loan Party, the Issuer shall
concurrently send a copy thereof to the Lender.
(A) If to the Lender at: National City Business Credit, Inc.
Xxx Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Email: xxxxxxx.xxxxx@xxxxxxxxxxxx.xxx
-84-
With a copy to: National City Business Credit, Inc.
0000 Xxxx 0xx Xxxxxx
4th Floor
Locator 01-3049
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxxx
Telephone: 000-000-0000
Telecopier: 000-000-0000
Email: xxxxx.xxxxxxx@xxxxxxxxxxxx.xxx
And a copy to: Xxxxx Xxxx & Xxxxxxxxx, LLP
One Oxford Centre
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx, Esquire
Telephone: 000-000-0000
Telecopier: 000-000-0000
Email: xxxxx@xxxxxxxxx.xxx
(B) If to the Issuer at: National City Bank
0000 Xxxx 0xx Xxxxxx
4th Floor
Locator 01-3049
Xxxxxxxxx, Xxxx 00000
Attention: M. Xxxx Xxxxxx
Telephone: 000-000-0000
Telecopier: 000-000-0000
Email: xxxx.xxxxxx@xxxxxxxxxxxx.xxx
(C) If to Borrowing Agent
or any Loan Party, at:
Blonder Tongue Laboratories, Inc.
Xxx Xxxx Xxxxx Xxxx
Xxx Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx X. Xxxxxx and Xxxx Xxxxxxx
Telephone: 000-000-0000
Telecopier: 000-000-0000
Email: xxxxxxx@xxxxxxxxxxxxx.xxx and
xxxxxxxx@xxxxxxxxxxxxx.xxx
With a copy to: Xxxxxxxx Ronon Xxxxxxx & Xxxxx, LLP
0000 Xxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxxxxx, Esquire
Telephone: (000) 000-0000
-85-
Telecopier: (000) 000-0000
Email: xxxxxxxxxx@xxxxxxxx.xxx
Notwithstanding anything in this Section 16.6 to the contrary, any Notice
of Default or an Event of Default provided by the Lender or Issuer to a Loan
Party pursuant to this Section 16.6 shall be (i) in writing (which shall not
include an e-mail or Website Posting), (ii) sent by overnight courier or similar
means and (iii) otherwise in accordance with the requirements of this Section
16.6.
16.7 Survival.
The obligations of the Loan Parties under Sections 2.2(f), 3.7, 3.8, 3.9,
4.18(h) and 16.5 shall survive termination of this Agreement and the Other
Documents and payment in full of the Obligations.
16.8 Severability.
If any part of this Agreement is contrary to, prohibited by, or deemed
invalid under applicable laws or regulations, such provision shall be
inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.
16.9 Expenses.
All costs and expenses including, without limitation, reasonable attorneys'
fees (including the allocated costs of in house counsel) and disbursements
incurred by the Lender on its behalf or on behalf of the Issuer (a) in all
efforts made to enforce payment of any Obligation or effect collection of any
Collateral, or (b) in connection with the entering into, modification,
amendment, administration and enforcement of this Agreement or any consents or
waivers hereunder and all related agreements, documents and instruments, or (c)
in instituting, maintaining, preserving, enforcing and foreclosing on the
Lender's security interest in or Lien on any of the Collateral, whether through
judicial proceedings or otherwise, or (d) in defending or prosecuting any
actions or proceedings arising out of or relating to the Lender's or the
Issuer's transactions with any Loan Party, or (e) in connection with any advice
given to the Lender or the Issuer with respect to its rights and obligations
under this Agreement and all related agreements, may be charged to the Loan
Account and shall be part of the Obligations.
16.10 Injunctive Relief.
Each Loan Party recognizes that, in the event any Loan Party fails to
perform, observe or discharge any of its obligations or liabilities under this
Agreement, any remedy at law may prove to be inadequate relief to the Lender
and/or the Issuer; therefore, the Lender, if the Lender so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving that actual damages are not an adequate remedy.
-86-
16.11 Consequential Damages.
Neither the Lender, nor the Issuer, nor any agent or attorney for any of
them, shall be liable to any Loan Party for any special, incidental,
consequential or punitive damages arising from any breach of contract, tort or
other wrong relating to the establishment, administration or collection of the
Obligations.
16.12 Captions.
The captions at various places in this Agreement are intended for
convenience only and do not constitute and shall not be interpreted as part of
this Agreement.
16.13 Counterparts; Telecopied Signatures.
This Agreement may be executed in any number of and by different parties
hereto on separate counterparts, all of which, when so executed, shall be deemed
an original, but all such counterparts shall constitute one and the same
agreement. Any signature delivered by a party by facsimile transmission shall be
deemed to be an original signature hereto.
16.14 Construction.
The parties acknowledge that each party and its counsel have reviewed this
Agreement and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments, schedules or exhibits
thereto.
16.15 Confidentiality; Sharing Information.
(a) The Lender, the Issuer and each transferee of the Lender or the Issuer
pursuant to Section 16.3 (a "Transferee") shall hold all non-public information
obtained by the Lender, the Issuer or such Transferee in accordance with the
Lender's, the Issuer's and such Transferee's customary procedures for handling
confidential information of this nature; provided, however, the Lender, the
Issuer and such Transferee may disclose such confidential information (a) to its
examiners, affiliates, outside auditors, counsel and other professional
advisors, (b) to the Lender, the Issuer and such Transferee and (c) as required
or requested by any Governmental Body or representative thereof or pursuant to
legal process; provided, further that (i) unless specifically prohibited by
applicable law or court order, the Lender, the Issuer and such Transferee shall
use its best efforts prior to disclosure thereof, to notify the applicable Loan
Party of the applicable request for disclosure of such non-public information
(A) by a Governmental Body or representative thereof (other than any such
request in connection with an examination of the financial condition of the
Lender, the Issuer or such Transferee by such Governmental Body) or (B) pursuant
to legal process and (ii) in no event shall the Lender, the Issuer or such
Transferee be obligated to return any materials furnished by any Loan Party
other than those documents and instruments in possession of the Lender or the
Issuer in order to perfect its Lien on the Collateral once the Obligations have
been paid in full and this Agreement has been terminated.
-87-
(b) Each Loan Party acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided to such Loan
Party or one or more of its Affiliates (in connection with this Agreement or
otherwise) by the Lender, the Issuer or by one or more Subsidiaries or
Affiliates of the Lender or the Issuer and each Loan Party hereby authorizes the
Lender and the Issuer to share any information delivered to the Lender or the
Issuer by such Loan Party and its Subsidiaries pursuant to this Agreement, or in
connection with the decision of the Lender or the Issuer to enter into this
Agreement, to any such Subsidiary or Affiliate of the Lender or the Issuer, it
being understood that any such Subsidiary or Affiliate of the Lender or the
Issuer receiving such information shall be bound by the provisions of Section
16.15 as if it were the Lender or the Issuer, as the case may be, hereunder.
Such authorization shall survive the repayment of the other Obligations and the
termination of the Agreement.
16.16 Tax Withholding Clause.
Any assignee or participant of the Lender or the Issuer that is not
incorporated under the Laws of the United States of America or a state thereof
(and, upon the written request of the Lender, the Issuer or assignee or
participant of the Lender or the Issuer) agrees that it will deliver to each of
the Borrowing Agent and the Lender two (2) duly completed appropriate valid
Withholding Certificates certifying its status (as a U.S. or foreign person)
and, if appropriate, making a claim of reduced, or exemption from, U.S.
withholding tax on the basis of an income tax treaty or an exemption provided by
the Code. The term "Withholding Certificate" means a Form W-9; a Form W-8BEN; a
Form W-8ECI; a Form W-8IMY and the related statements and certifications as
required under Section 1.1441-1(e)(2) and/or (3) of the Income Tax Regulations
(the "Regulations"); a statement described in Section 1.871-14(c)(2)(v) of the
Regulations; or any other certificates, statements or other documents under the
Code or Regulations that certify or establish the status of a payee or
beneficial owner as a U.S. or foreign person. Any assignee or participant
required to deliver to the Borrowing Agent and the Lender a Withholding
Certificate pursuant to the preceding sentence shall deliver such valid
Withholding Certificate as follows: at least five (5) Business Days prior to the
effective date of such assignment or participation (unless the Lender in its
sole discretion shall permit such assignee or participant to deliver such valid
Withholding Certificate less than five (5) Business Days before such date in
which case it shall be due on the date specified by the Lender but in no event
later than the date by which the Withholding Certificate is required to be
delivered under the Code and applicable Regulations). Each assignee or
participant which so delivers a valid Withholding Certificate further undertakes
to deliver to each of the Borrowing Agent and the Lender two (2) additional
copies of such Withholding Certificate (or a successor form) on or before the
date that such Withholding Certificate expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent Withholding
Certificate so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by the Borrowing Agent or the
Lender. Notwithstanding the submission of a Withholding Certificate claiming a
reduced rate of or exemption from U.S. withholding tax, the Lender shall be
entitled to withhold United States federal income taxes at the full thirty
percent (30%) withholding rate if in its reasonable judgment it is required to
do so. Further, the Lender is indemnified underss.1.1461-1(e) of the Regulations
against any claims and demands of any assignee or participant of the Lender for
the amount of any tax it deducts and withholds in accordance with Regulations
underss.1441 of the Code.
-88-
16.17 USA Patriot Act.
Any assignee or participant of the Lender or the Issuer that is not
incorporated under the Laws of the United States of America or a state thereof
(and is not excepted from the certification requirement contained in Section 313
of the USA Patriot Act and the applicable regulations because it is both (i) an
affiliate of a depository institution or a foreign bank that maintains a
physical presence in the United States or foreign country, and (ii) subject to
supervision by a banking authority regulating such affiliated depository
institution or foreign bank) shall deliver to the Lender the certification, or,
if applicable, recertification, certifying that such Person is not a "shell" and
certifying to other matters as required by Section 313 of the USA Patriot Act
and the applicable regulations: (1) within ten (10) days after the Closing Date,
and (2) as such other times as are required under the USA Patriot Act.
16.18 Publicity.
Each Loan Party and the Issuer hereby authorizes the Lender to make
appropriate announcements of the financial arrangement entered into among the
Loan Parties, the Lender and the Issuer, including, without limitation,
announcements which are commonly known as tombstones, in such publications and
to such selected parties as the Lender shall in its sole and absolute discretion
deem appropriate.
[INTENTIONALLY LEFT BLANK]
-89-
Each of the parties has signed this Agreement on the day and year first
above written to be effective on the Effective Date.
BORROWERS:
Blonder Tongue Laboratories, Inc.
By: /s/Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Chairman of the Board and CEO
BDR Broadband, LLC
By: /s/Xxxxxx X. Xxxxx, Xx.
Name: Xxxxxx X. Xxxxx, Xx.
Title: Managing Member
GUARANTORS:
Blonder Tongue Investment Company
By: /s/Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: CEO, President and Director
LENDER:
National City Business Credit, Inc., as Lender
By: /s/Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: Director
ISSUER:
National City Bank, a national banking association,
as Issuer
By: /s/Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: Senior Vice President
LIST OF SCHEDULES AND EXHIBITS
All Schedules to the Credit and Security Agreement:
a. Schedule 1.2 Liens
b. Schedule 4.5 Inventory Locations
c. Schedule 4.15(c) Loan Parties' Chief Executive Offices
d. Schedule 4.15(g) Accounts
e. Schedule 5.2(a) Incorporation/Organization
f. Schedule 5.2(b) Subsidiaries
g. Schedule 5.4 Tax Identification Numbers
h. Schedule 5.6 Corporate Name
i. Schedule 5.7 O.S.H.A. and Environmental Compliance
j. Schedule 5.8(b) Litigation
k. Schedule 5.8(d) Plans
l. Schedule 5.9 Patents, Trademarks, Copyrights and Licenses
m. Schedule 5.10 Licenses and Permits
n. Schedule 5.14 Labor Disputes
o. Schedule 5.21 Business and Property
p. Schedule 7.3 Guarantees
q. Schedule 7.4 Investments
r. Schedule 7.5 Loans and Advances
s. Schedule 7.8 Indebtedness
t. Schedule 8.1(s) Leasehold and Other Non Owned Locations of Inventory
All Exhibits to the Credit and Security Agreement:
a. Exhibit A Form of Borrowing Base Certificate
b. Exhibit 2.1(a) Form of Revolving Credit Note
c. Exhibit 2.4 Form of Term Note
d. Exhibit 5.5(a) Projections
e. Exhibit 8.1(j) Financial Condition Certificate
-1-
