10.1
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LOAN AND SECURITY AGREEMENT
BETWEEN
OVERHILL FARMS, INC.,
OVERHILL L.C. VENTURES, INC.
and
UNION BANK OF CALIFORNIA, N.A.
November 24, 1999
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TABLE OF CONTENTS
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Page
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1. AMOUNT AND TERMS OF CREDIT................................................................ 1
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1.1 Revolving Loans..................................................................... 1
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1.2 Letters of Credit................................................................... 2
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1.3 Interest Rate Election Provisions Applicable to all Loans........................... 4
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1.4 Payment of Interest................................................................. 6
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1.5 Maximum Rate of Interest............................................................ 6
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1.6 Fees................................................................................ 7
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1.7 Repayment and Prepayment............................................................ 8
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1.8 Term................................................................................ 8
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1.9 Early Termination................................................................... 8
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1.10 Notes and Accounting................................................................ 8
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1.11 Manner of Payment................................................................... 9
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1.12 Application of Payments............................................................. 9
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1.13 Use of Proceeds..................................................................... 10
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1.14 All Obligations to Constitute One Obligation........................................ 10
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1.15 Authorization to Make Loans......................................................... 10
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1.16 Authorization to Debit Accounts..................................................... 10
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2. CONDITIONS PRECEDENT...................................................................... 10
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2.1 Conditions Precedent to Closing..................................................... 10
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2.2 Further Conditions to the Loans..................................................... 11
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3. REPRESENTATIONS, WARRANTIES, AND AFFIRMATIVE COVENANTS.................................... 12
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3.1 Corporate Existence; Compliance with Law............................................ 12
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3.2 Executive Offices; Corporate or Other Names; Conduct of Business.................... 13
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3.3 Corporate Power; Authorization; Enforceable Obligations............................. 13
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3.4 Financial Statements and Projections; Books and Records............................. 14
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3.5 Material Adverse Change............................................................. 14
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3.6 Ownership of Property; Liens........................................................ 14
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3.7 Labor Matters....................................................................... 15
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3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness........... 15
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3.9 Government Regulation............................................................... 15
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3.10 Margin Regulations.................................................................. 15
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3.11 Taxes............................................................................... 16
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3.12 ERISA............................................................................... 16
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3.13 Litigation.......................................................................... 17
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3.14 Intellectual Property............................................................... 17
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3.15 Full Disclosure..................................................................... 17
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3.16 Hazardous Materials................................................................. 18
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3.17 Insurance........................................................................... 18
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3.18 Accounts............................................................................ 19
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3.19 Inventory......................................................................... 19
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3.20 Payment of Obligations............................................................ 20
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3.21 Conduct of Business............................................................... 20
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3.22 Further Assurances; Schedule Supplements.......................................... 20
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3.23 Collections and Proceeds of Collateral............................................ 20
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3.24 Financial Covenants............................................................... 21
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3.25 Year 2000......................................................................... 22
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3.26 Solvency.......................................................................... 23
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3.27 Subordinated Debt................................................................. 23
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4. NEGATIVE COVENANTS...................................................................... 23
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5. FINANCIAL REPORTS....................................................................... 25
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5.1 Reports and Notices............................................................... 25
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5.2 Other Reports..................................................................... 28
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6. CREATION OF SECURITY INTEREST........................................................... 29
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6.1 Grant of Security Interest........................................................ 29
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6.2 Bank's Rights..................................................................... 29
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6.3 Power of Attorney................................................................. 31
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6.4 Grant of License to Use Intellectual Property Collateral.......................... 31
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6.5 Reinstatement..................................................................... 32
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6.6 Termination of Liens.............................................................. 32
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6.7 Release of Liens on Stock......................................................... 32
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7. EVENTS OF DEFAULT; RIGHTS AND REMEDIES.................................................. 32
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7.1 Events of Default................................................................. 32
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7.2 Remedies.......................................................................... 35
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7.3 Waivers by Borrower............................................................... 36
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7.4 Proceeds.......................................................................... 37
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8. SUCCESSORS AND ASSIGNS.................................................................. 37
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9. DISPUTE RESOLUTION...................................................................... 37
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10. YIELD PROTECTION........................................................................ 38
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10.1 LIBOR Basis Determination......................................................... 38
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10.2 Illegality........................................................................ 38
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10.3 Increased Costs................................................................... 38
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10.4 Effect On Other Loans............................................................. 39
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10.5 Capital Adequacy.................................................................. 40
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10.6 Federal Reserve System/Wire Transfers............................................. 40
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11. MISCELLANEOUS........................................................................... 40
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11.1 Complete Agreement; Modification of Agreement; Interpretation..................... 40
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11.2 Reimbursement and Expenses........................................................ 40
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11.3 Indemnity........................................................................ 42
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11.4 No Waiver........................................................................ 42
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11.5 Severability..................................................................... 43
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11.6 Conflict of Terms................................................................ 43
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11.7 Notices.......................................................................... 43
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11.8 Confidentiality.................................................................. 44
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11.9 Section Titles................................................................... 45
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11.10 Counterparts..................................................................... 45
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11.11 Time of the Essence.............................................................. 45
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11.12 GOVERNING LAW; VENUE............................................................. 45
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11.13 WAIVER OF JURY TRIAL............................................................. 46
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INDEX OF EXHIBITS AND SCHEDULES
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Exhibit A Form of Revolving Note
Exhibit B Form of Alternative Dispute Resolution Agreement
Exhibit C Form of Guaranty
Exhibit D Form of Borrowing Base Certificate
Exhibit E Form of Compliance Certificate
Schedule A Definitions and Rules of Construction
Schedule B Schedule of Documents
Schedule C Non-standard Concentration Account Debtors
Schedule 1.2 Letter of Credit Fee
Schedule 1.15 Authorized Signatories
Schedule 3.2 Executive Offices and Collateral Locations; Corporate or
Other Names
Schedule 3.6 Real Estate and Leases
Schedule 3.7 Labor Matters
Schedule 3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness
Schedule 3.11 Taxes
Schedule 3.12 ERISA Plans
Schedule 3.13 Litigation
Schedule 3.14 Intellectual Property
Schedule 3.16 Hazardous Materials
Schedule 3.17 Insurance
Schedule 3.23 Deposit and Other Bank Accounts
Schedule 4(c) Other Indebtedness
Schedule 4(h) Permitted Liens
Schedule 6.1 Financing Statement Jurisdictions; Consigned Goods
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LOAN AND SECURITY AGREEMENT
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THIS LOAN AND SECURITY AGREEMENT ("Agreement") is entered into as of
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November 24, 1999, between OVERHILL FARMS, INC., a Nevada corporation
("Borrower"), OVERHILL L.C. VENTURES, INC., a California corporation ("Overhill
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Ventures"), and UNION BANK OF CALIFORNIA, N.A. ("Bank"). Capitalized terms used
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in this Agreement shall have the meanings ascribed to them in Schedule A and,
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for purposes of this Agreement and the other Loan Documents, the rules of
construction set forth in Schedule A shall govern.
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RECITALS
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A. Borrower has requested that Bank provide a revolving working
capital and letter of credit facility to Borrower.
B. Bank has agreed to provide such credit facility to Borrower, on
the terms and conditions set forth in this Agreement and the other Loan
Documents.
AGREEMENT
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NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Borrower and Bank agree as follows:
1. AMOUNT AND TERMS OF CREDIT
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1.1 Revolving Loans.
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(a) Advances. Subject to the terms and conditions of this
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Agreement, Bank shall extend Revolving Loans to Borrower from time to time until
the Commitment Maturity Date. The aggregate amount of Revolving Loans
outstanding at any time shall not exceed Borrowing Availability at such time.
Prior to the Commitment Maturity Date, Borrower may repay at any time any
outstanding Revolving Loans and any amounts so repaid may be reborrowed, up to
Borrowing Availability. Revolving Loans shall be evidenced by and repayable in
accordance with the terms of the Revolving Note and this Agreement. The entire
unpaid balance of the Revolving Loans shall be immediately due and payable in
full in immediately available funds on the Commitment Maturity Date.
(b) Overadvances. Borrower shall immediately repay any
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Overadvance. Overadvances constitute Obligations that are evidenced by the
Revolving Note, secured by the Collateral, and entitled to all of the benefits
of the Loan Documents.
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(c) Request and Disbursement. Borrower shall give to Bank
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irrevocable notice of a request for a Revolving Loan (i) that is to be made as a
Reference Rate Loan by telephone or facsimile transmission not later than 11:00
a.m. (California time) on the date of the proposed Reference Rate Loan and (ii)
that is to be made as a LIBOR Loan within the time period specified therefor in
Section 1.3(b). Any notice in connection with a requested Revolving Loan under
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this Agreement that is received by Bank after 11:00 a.m. (California time) on
any Business Day, or at any time on a day that is not a Business Day, shall be
deemed received by Bank on the next succeeding Business Day. Prior to 3:00 p.m.
(California time) on the date of a Revolving Loan, Bank shall, subject to
satisfaction of the conditions set forth in Section 2.2, disburse the amount of
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the requested Revolving Loan by deposit into the Disbursement Account.
1.2 Letters of Credit.
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(a) Issuance. Subject to the terms and conditions of this
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Agreement, Bank agrees to incur, from time to time until the Commitment Maturity
Date, upon the request of Borrower and for Borrower's account, Letter of Credit
Obligations by causing Letters of Credit to be issued by Bank. The aggregate
face amount of all Letters of Credit outstanding at any one time shall not
exceed the lowest of (i) $500,000, (ii) the Maximum Amount minus the aggregate
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outstanding amount at such time of the Revolving Loans, and (iii) the Borrowing
Base minus the aggregate outstanding amount at such time of the Revolving Loans,
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in each case less any reserves established by Bank in its reasonable credit
judgment from time to time. The expiration date of any Letter of Credit shall
not be later than the earlier of (A)(I) 365 days for commercial Letters of
Credit or (II) 180 days for standby Letters of Credit, in each case from the
date of issuance of such Letter of Credit and (B) the Commitment Maturity Date.
No Letter of Credit shall have any automatic or "evergreen" renewal provisions.
(b) Advances Automatic. In the event that Bank shall make any
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payment on or pursuant to any Letter of Credit Obligation, such payment shall
then be deemed automatically to constitute a Revolving Loan under Section 1.1(a)
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notwithstanding any failure by Borrower to satisfy the conditions precedent set
forth in Section 2.
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(c) Fees and Expenses. Borrower shall pay to Bank, as
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compensation for the Letter of Credit Obligations incurred hereunder,
immediately upon demand, (i) all amounts necessary for Bank to meet all
disbursements and payments of any kind or character that Bank has incurred or
will incur or to which Bank is entitled in connection with the Letters of Credit
or any draft drawn thereunder, (ii) the Letter of Credit Fee and (iii) any
interest, commissions, and other charges that Bank has incurred or will incur or
to which Bank is entitled in connection with the Letters of Credit or any draft
drawn thereunder; provided, that if no Default or Event of Default has occurred
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and is continuing, Borrower may, at its option, at any time prior to the
Commitment Maturity Date, finance all or part of its reimbursement obligations
under this Section 1.2 by requesting a Revolving Loan in an amount not to exceed
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Net Borrowing Availability at such time.
(d) Request for Incurrence of Letter of Credit Obligations.
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Borrower shall give Bank at least two Business Days' prior written notice
requesting the incurrence of any Letter of Credit Obligation, specifying the
date such Letter of Credit Obligation is to be incurred, identifying the
beneficiary to which such Letter of Credit Obligation relates and describing the
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nature of the transactions proposed to be supported thereby. Any such notice
shall be accompanied by the form of the Letter of Credit proposed to be issued
(which shall be acceptable to Bank). Notwithstanding anything contained herein
to the contrary, Letter of Credit applications by Borrower and approvals by Bank
may be made and transmitted pursuant to electronic codes and security measures
mutually agreed upon and established by Borrower and Bank.
(e) Reimbursement. The obligation of Borrower to reimburse Bank
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for payments made with respect to any Letter of Credit Obligation shall be
absolute, unconditional and irrevocable, without necessity of presentment,
demand, protest or other formalities. Such obligations of Borrower shall be paid
strictly in accordance with the terms hereof under all circumstances including
the following circumstances:
(i) any lack of validity or enforceability of any Letter
of Credit, this Agreement or the other Loan Documents, or any other
agreement;
(ii) the existence of any claim, setoff, defense or other
right that Borrower or any of its Affiliates may at any time have against a
beneficiary or any transferee of any Letter of Credit (or any Persons for
which any such transferee may be acting), Bank or any other Person, whether
in connection with this Agreement, the Letter of Credit, the transactions
contemplated herein or therein or any unrelated transaction (including any
underlying transaction between Borrower or any of its Affiliates and the
beneficiary for which the Letter of Credit was procured);
(iii) any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect (except as otherwise expressly
provided in Section 1.2(f)(iii)) or any statement therein being untrue or
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inaccurate in any respect;
(iv) payment by Bank (except as otherwise expressly
provided in Section 1.2(f)(iii)) under any Letter of Credit against
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presentation of a demand, draft or certificate or other document that does
not comply with the terms of such Letter of Credit;
(v) any other circumstance or happening whatsoever that is
related to any of the foregoing; or
(vi) the fact that a Default or an Event of Default shall
have occurred and be continuing.
(f) Assumption of Risk. As between Bank and Borrower, Borrower
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assumes all risks of the acts and omissions of, or misuse of, any Letter of
Credit by beneficiaries of any Letter of Credit. To the fullest extent
permitted by law, Bank shall not be responsible for: (i) the form, validity,
sufficiency, accuracy, genuineness, or legal effect of any document issued by
any Person in connection with the application for and issuance of any Letter of
Credit that has been applied for and issued in accordance with Section 1.2(h),
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even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent, or forged; (ii) the validity or
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sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, that may prove to be invalid or
ineffective for any reason; (iii) failure of the beneficiary of any Letter of
Credit to comply fully with conditions required in order to demand payment under
such Letter of Credit; provided, that, in the case of any payment by Bank under
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any Letter of Credit, Bank shall be liable to the extent such payment was made
solely as a result of its gross negligence or willful misconduct (as finally
determined by a court of competent jurisdiction) in determining that the demand
for payment under such Letter of Credit complies on its face with any applicable
requirements for a demand for payment under such Letter of Credit; (iv) errors,
omissions, interruptions, or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex, facsimile, or otherwise, whether or not they
be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or
delay in the transmission or otherwise of any document required in order to make
a payment under any Letter of Credit or of the proceeds thereof; (vii) the
credit of the proceeds of any drawing under any Letter of Credit; and (viii) any
consequences arising from causes beyond the control of Bank. None of the above
shall affect, impair, or prevent the vesting of any of Bank's rights or powers
under this Agreement.
(g) Governing Documents. Each Letter of Credit shall be governed
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by this Agreement and a Letter of Credit application agreement to be entered
into between Bank and Borrower, to the extent its terms are in addition to and
not inconsistent with the terms of this Agreement. The Uniform Customs and
Practice for Documentary Credits as published by the International Chamber of
Commerce most recently at the time of issuance of any Letter of Credit shall
apply to all such Letters of Credit. Borrower shall comply with Bank's
regulations and interpretations in connection with the Letters of Credit issued
by it and drafts related thereto, notwithstanding any difference in Borrower's
interpretation. Neither Bank nor any of Bank's correspondents shall be liable
for any error, negligence, or mistake, whether of omission or commission, in
following the instructions of an officer of Borrower listed on Schedule 1.15 or
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those contained in any Letter of Credit or draft related to any Letter of Credit
or any modification to, amendment of, or supplement to, any Letter of Credit;
provided, that Bank shall be liable to the extent that such error, negligence or
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mistake was the result of Bank's gross negligence or willful misconduct (as
finally determined by a court of competent jurisdiction).
(h) Authorized Signatories. Unless Bank has been previously
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notified in writing by an officer of Borrower listed on Schedule 1.15 to the
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contrary, Bank shall only accept an application for issuance of a Letter of
Credit that is executed by an officer of Borrower listed on Schedule 1.15.
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1.3 Interest Rate Election Provisions Applicable to all Loans.
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(a) Borrower shall give to Bank irrevocable notice of a request
for funding of any Revolving Loan that is to be made as a Reference Rate Loan no
later than the time and in the manner specified in Sections 1.1(c) or 1.3(b),
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respectively. Borrower shall give to Bank irrevocable notice of a request for
conversion of an outstanding LIBOR Loan into a Reference Rate Loan in accordance
with the provisions of Section 1.3(b). Each request for funding of a Reference
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Rate Loan shall, among other things, specify (i) the date of the proposed Loan,
which shall be a Business Day, and (ii) the amount of the Loan.
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(b) Subject to the additional conditions precedent set forth in
Section 2.2, and without limiting the notice requirements for requests for
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Revolving Loans set forth in Section 1.1(c), Borrower shall have the option at
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any time to (i) request that any Revolving Loan be made as a LIBOR Loan, (ii)
convert all or any portion of outstanding Loans from Reference Rate Loans to
LIBOR Loans, (iii) convert any LIBOR Loan to a Reference Rate Loan, subject to
payment of LIBOR breakage costs in accordance with Section 1.7(b)(ii) if such
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conversion is made prior to the expiration of the applicable LIBOR Loan Period,
or (iv) continue all or any portion of any Loan as a LIBOR Loan upon the
expiration of the applicable LIBOR Loan Period (with the succeeding LIBOR Loan
Period of such continued Loan commencing on the last day of the LIBOR Loan
Period of the Loan to be continued). Any Loan to be made or continued as, or
converted into, a LIBOR Loan must be in a minimum amount of $500,000 or integral
multiples of $500,000 in excess thereof. Borrower shall give to Bank irrevocable
notice of any such election by telephone or facsimile transmission no later than
11:00 a.m. (California time) on the second Business Day and no earlier than
11:00 a.m. (California time) on the fourth Business Day prior to (A) the date of
any proposed Revolving Loan that is to bear interest by reference to the LIBOR
Basis, (B) the end of each LIBOR Loan Period with respect to any LIBOR Loans to
be continued as such or converted into Reference Rate Loans, or (C) the date on
which Borrower wishes to convert any Reference Rate Loan to a LIBOR Loan for a
LIBOR Loan Period designated by Borrower in such election. If no election is
received within the time period specified in the immediately preceding sentence
(or if a Default or an Event of Default shall have occurred and be continuing or
if the additional conditions precedent set forth in Section 2.2 shall not have
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been satisfied), then the applicable Loan shall be made or continued as, or
converted to, a Reference Rate Loan (1) on the date of the proposed funding or
conversion of the requested Loan, with respect to initial fundings of requested
LIBOR Loans or proposed conversions of Reference Rate Loans to LIBOR Loans, and
(2) at the end of the applicable LIBOR Loan Period, with respect to proposed
continuations of outstanding LIBOR Loans. Each such election notice shall advise
Bank of (I) with respect to Loans to be made or continued as, or converted into,
LIBOR Loans, the LIBOR Basis quoted by Bank on the date such election notice is
provided, (II) the applicable principal amount of the proposed Loan (a) to be
made or continued as, or converted into, a LIBOR Loan, or (b) to be converted
into a Reference Rate Loan, as applicable, (III) the duration of the LIBOR Loan
Period of the proposed Loan, if applicable, and (IV) the date of the proposed
funding, continuation, or conversion of such Loan, which shall be a Business
Day. The amount of any LIBOR Basis quoted by Bank as of the date of receipt of
Borrower's notice for a requested LIBOR Loan shall be determined by Bank
consistent with this Agreement, and each determination by Bank of a LIBOR Basis
shall, absent manifest error, be deemed final, binding, and conclusive upon
Borrower. Bank shall, upon the reasonable request of Borrower from time to time,
provide to Borrower such information with regard to the LIBOR Basis as Borrower
may request. Bank shall confirm the terms of any such election notice by
notifying Borrower in writing promptly after such election is made. Failure to
send any such confirmation shall not affect the right of Bank to collect
interest at the rates selected by Borrower in any such election notice. If, on
the date any such election notice is received by Bank, the LIBOR Basis selected
is unavailable for any reason, then the election notice shall be void. Bank
reserves the right to fund the principal of any requested LIBOR Loan from any
source of funds notwithstanding any LIBOR Basis selected by Borrower.
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1.4 Payment of Interest.
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(a) Interest on Revolving Loans shall be payable as follows:
(i) Interest on each outstanding Revolving Loan made as or
converted into a Reference Rate Loan shall be computed for the actual number of
days elapsed on the basis of a year of 365 days or, in the event of a leap year,
366 days, and shall be payable to Bank in arrears (A) on the first Business Day
of each calendar month, (B) on the Commitment Maturity Date, and (C) if any
interest accrues or remains payable after the Commitment Maturity Date or during
the continuance of an Event of Default, upon demand by Bank. Interest shall
accrue and be payable on each such Reference Rate Loan at a per annum interest
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rate equal to the Reference Rate plus one-quarter of one percent (0.25%).
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(ii) Interest on each outstanding Revolving Loan made as or
converted into a LIBOR Loan shall be computed for the actual number of days
elapsed on the basis of a year of 365 days or, in the event of a leap year, 366
days, and shall be payable to Bank in arrears (A) on the last day of the
applicable LIBOR Loan Period in the case of any LIBOR Loan with a LIBOR Loan
Period of 30, 60 or 90 days, (B) on the 90th day and the last day of the
applicable LIBOR Loan Period in the case of any LIBOR Loan with a LIBOR Loan
Period of 180 days, (C) on the Commitment Maturity Date, and (D) if any interest
accrues or remains payable after the Commitment Maturity Date or during the
continuance of an Event of Default, upon demand by Bank. Interest shall accrue
and be payable on each such LIBOR Loan at a per annum interest rate equal to the
LIBOR Basis applicable to such LIBOR Loan plus two and three-quarters percent
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(2.75%).
(b) Default Rate. Upon the occurrence and during the continuance
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of an Event of Default, interest on all outstanding Obligations shall, upon the
election of Bank, confirmed by written notice from Bank to Borrower, accrue and
be payable at the Default Rate. Interest accruing at the Default Rate shall be
payable to Bank on demand. Bank shall not be required to (i) accelerate the
maturity of the Loans or (ii) exercise any other rights or remedies under the
Loan Documents, in order to charge the Default Rate. Upon the occurrence and
during the continuance of an Event of Default specified in Sections 7.1(e), (f),
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or (g), the interest rate applicable to the Obligations shall be increased
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automatically to the Default Rate without the necessity of any action by Bank.
1.5 Maximum Rate of Interest. In no event shall the aggregate of
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all interest on the Obligations charged or collected pursuant to the terms of
this Agreement or pursuant to the Revolving Note exceed the highest rate
permissible under any law that a court of competent jurisdiction shall, in a
final determination, deem applicable. In the event that such a court determines
that Bank has charged or received interest under this Agreement or the Revolving
Note in excess of the highest applicable rate, the rate in effect under this
Agreement and the Revolving Note shall automatically be reduced to the maximum
rate permitted by Applicable Law and Bank shall promptly apply such excess to
reduce the principal balance of the Obligations, or if the principal balance of
the Obligations has been paid in full, Bank shall promptly apply such excess to
reduce any other Obligations, and if all Obligations have been paid in full,
then Bank shall refund to Borrower any interest received by Bank in excess of
the maximum lawful rate;
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provided, that if at any time thereafter the rate of interest payable hereunder
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is less than the highest applicable rate, Borrower shall continue to pay
interest hereunder at the highest applicable rate until such time as the total
interest received by Bank from the making of Loans hereunder is equal to the
total interest that Bank would have received had the interest rate payable
hereunder been (but for the operation of this Section 1.5) the interest rate
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payable since the Closing Date as otherwise provided in this Agreement. It is
the intent of this Agreement that Borrower not pay or contract to pay, and that
Bank not receive or contract to receive, directly or indirectly, interest in
excess of that which may be paid by Borrower under Applicable Law.
1.6 Fees. Bank shall be paid the following fees:
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(a) Unused Line Fee. Borrower shall pay to Bank an Unused Line
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Fee, payable in arrears on the first Business Day of each calendar month
beginning on the first Business Day of the month following the month in which
the Closing Date occurs and on the Commitment Maturity Date.
(b) Letter of Credit Fee. Borrower shall pay to Bank a Letter of
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Credit Fee, payable in arrears on the first Business Day of each calendar month
and on the Commitment Maturity Date, together with all other standard and
customary fees of Bank in connection with the Letters of Credit, including those
standard and customary fees provided for in any Letter of Credit application
agreement to be entered into between Bank and Borrower and Bank's regulations,
interpretations, and published schedule of fees in connection with the Letters
of Credit. Upon the occurrence and during the continuance of an Event of
Default, Borrower shall, upon the election of Bank confirmed by written notice
from Bank to Borrower, pay to Bank the Default Letter of Credit Fee, which shall
be payable in lieu of the Letter of Credit Fee. Upon the occurrence and during
the continuance of an Event of Default specified in Sections 7.1(e), (f) or (g),
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the Letter of Credit Fee shall be increased automatically to the Default Letter
of Credit Fee without the necessity of any action by Bank.
(c) Audit Fee. Borrower shall pay to Bank an audit fee of $600
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per day per field auditor, plus reasonable out-of-pocket expenses for each
financial analysis and examination of Borrower and the Collateral performed by
Bank or its agents, plus any other out-of-pocket fees and expenses reasonably
incurred by Bank with respect to any field examination of Borrower or the
Collateral, when and as incurred up to a maximum of $7,500 in the aggregate for
each 12 month period prior to the Commitment Maturity Date; provided, that if a
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Default or an Event of Default has occurred and is continuing, there shall be no
maximum limit on the audit fees payable by Borrower under this Section 1.6(c).
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Such fee shall be fully earned when due and non-refundable when paid.
1.7 Repayment and Prepayment.
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(a) Revolving Loans. Borrower shall pay the principal balance of
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the Revolving Loans and all other Obligations in full on the Commitment Maturity
Date. Prior to the Commitment Maturity Date, Borrower may repay at any time any
outstanding Revolving Loans and any amounts so repaid may be reborrowed up to
Borrowing Availability.
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(b) Prepayment. Notwithstanding the foregoing clause (a), and
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subject to the requirements of Section 1.9, (i) the principal amount of any Loan
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made as a Reference Rate Loan may be prepaid prior to the Commitment Maturity
Date at any time and (ii) the principal amount of any Loan made as a LIBOR Loan
together with all accrued and unpaid interest thereon may be prepaid prior to
the applicable Payment Date therefor upon five Business Days' prior notice to
Bank; Provided, that Borrower shall (A) reimburse Bank at such time for any
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reasonable direct loss or out-of-pocket expense incurred by Bank in connection
with such prepayment as set forth in Sections 1.9 and 11.2 and (B) pay to Bank
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the applicable LIBOR Prepayment Premium. Each notice of prepayment shall be
irrevocable.
1.8 Term. The Credit Facilities shall be in effect until the
----
Commitment Maturity Date. The Credit Facilities and all other Obligations
related thereto shall be immediately due and payable in full in immediately
available funds on the Commitment Maturity Date, if not sooner paid in full.
1.9 Early Termination. Borrower may, at any time on the last
-----------------
Business Day of any calendar month, upon not less than five Business Days' prior
written notice to Bank, voluntarily prepay, in whole and not in part, all of the
Loans and terminate the Revolving Loan Commitments; provided, that at such time
--------
Borrower shall (a) pay all Loans and other Obligations, (b) cause the
outstanding Letters of Credit to be cancelled and returned to Bank or provide
Bank with a standby letter of credit or collateral therefor acceptable to Bank
in its sole discretion, (c) pay any LIBOR breakage costs in accordance with
Section 1.7 (b)(ii), and (d) reimburse Bank for any reasonable direct loss or
-------------------
out-of-pocket expenses incurred by Bank in connection with such prepayment and
termination. If the Revolving Loans are terminated prior to the Commitment
Maturity Date, Borrower shall pay to Bank, in addition to amounts payable as
provided in Sections 1.7(b)(ii) and 11.2, an amount equal to the Applicable
------------------- ----
Percentage multiplied by the Maximum Amount as liquidated damages and
-------------
compensation for the costs of being prepared to make funds available hereunder.
Upon any such prepayment and termination of the Revolving Loan Commitments,
Borrower shall have no further right to request Loans or other financial
accommodations under this Agreement.
1.10 Notes and Accounting. Bank shall provide a monthly accounting to
--------------------
Borrower of the Loans and Letter of Credit Obligations and other transactions
under this Agreement, including Bank's calculation of principal, interest,
expenses, and the Borrowing Base for the preceding month. Each and every such
accounting shall, absent clear error, be deemed final, binding, and conclusive
upon Borrower unless Borrower, within 90 days after the date any such accounting
is rendered, provides Bank with written notice of any objection that Borrower
may have to any item in such accounting, describing the basis for such objection
with specificity. In that event, only those items expressly objected to in such
notice shall be deemed to be disputed by Borrower and Bank's determination,
based upon the facts available, of any such disputed item shall, absent clear
error, be deemed final, binding, and conclusive upon Borrower.
8
1.11 Manner of Payment.
-----------------
(a) When Payments Due.
-----------------
(i) Each payment (including any prepayment) by Borrower on
account of the principal of or interest on the Loans and any other amount owed
to Bank on account of the Obligations shall be made not later than 11:00 a.m.
(California time) on the date specified for payment under this Agreement to Bank
in Dollars and in immediately available funds. Any payment received by Bank on a
day that is not a Business Day or after 11:00 a.m. (California time) on a
Business Day shall be deemed received on the next succeeding Business Day.
(ii) If any payment on any Obligation is specified to be
made upon a day that is not a Business Day, it shall be deemed to be specified
to be made on the next succeeding day that is a Business Day, and such extension
of time shall in such case be included in computing interest and fees, if any,
in connection with such payment.
(b) No Deductions. Borrower shall pay principal, interest,
-------------
fees, and all other amounts due on the Obligations without setoff or
counterclaim or any deduction whatsoever.
(c) Inadequate Payments. If, on the date on which any amount
-------------------
(including any payment of principal, interest, or other costs and expenses)
shall be due and payable by Borrower to Bank, the amount received by Bank from
Borrower or withdrawn by Bank from the Control Account pursuant to Section
-------
3.23(c) shall not be adequate to pay the entire amount then due and payable,
-------
then Bank shall be authorized, but shall not be obligated, to make a Reference
Rate Loan to Borrower in the amount of the deficiency.
1.12 Application of Payments. Borrower irrevocably waives the right
-----------------------
to direct the application of any and all payments received at any time by Bank
from or on behalf of Borrower and specifically waives the provisions of
California Civil Code Sections 1479 and 2822 or similar provisions under any
other Applicable Law giving Borrower the right to designate application of
payments. Borrower irrevocably agrees that Bank shall have the continuing
exclusive right to determine the order and method of the application of payments
against the then due and payable Obligations of Borrower in Bank's sole
discretion and to revise such application prospectively or retroactively in
Bank's sole discretion. In the absence of a specific determination by Bank with
respect thereto, payments shall be applied to amounts then due and payable in
the following order: (i) to Fees and Bank's expenses reimbursable hereunder; (ii
to interest on the Loans; (ii to principal payments on the Loans and to cash
collateralize the Letter of Credit Obligations; and (iv to all other
Obligations, including expenses of Bank to the extent reimbursable under
Section 12.3.
------------
1.13 Use of Proceeds. The proceeds of the Loans shall be used by
---------------
Borrower (a) to refinance Borrower's existing debt with Prior Lender, (b)
together with a portion of the proceeds of the Subordinated Note, to refinance
Borrower's existing debt with LHF and (c) for general working capital needs and
other corporate purposes.
9
1.14 All Obligations to Constitute One Obligation. All Obligations
--------------------------------------------
related to the Credit Facilities constitute one general obligation of Borrower
and shall be secured by Bank's Liens upon all of the Collateral, and by all
other Liens previously, now, or at any time in the future granted by Borrower to
Bank, to the extent provided in the Collateral Documents.
1.15 Authorization to Make Loans. Bank is authorized to make any
---------------------------
Loan and issue any Letter of Credit (a) based on telephonic or other oral or
written instructions received from any Person that Bank believes in good faith
to be an officer of Borrower listed on Schedule 1.15 or (b) if, at the
-------------
discretion of Bank, such Loan is necessary to satisfy any of the Obligations.
Borrower consents to the recordation of any telephonic or other communications
between Bank and Borrower for the purpose of maintaining Bank's business records
of such transactions.
1.16 Authorization to Debit Accounts. Borrower immediately
-------------------------------
authorizes Bank to debit any of Borrower's loan accounts or bank accounts with
Bank for the purpose of Borrower's payment of principal, interest, or other
costs and expenses payable by Borrower to Bank under this Agreement.
2. CONDITIONS PRECEDENT
--------------------
2.1 Conditions Precedent to Closing. Bank shall not be obligated to
-------------------------------
make any of the Loans or incur any Letter of Credit Obligations, or to take,
fulfill, or perform any other action under this Agreement, until the following
conditions have been satisfied in a manner satisfactory to Bank or waived in
writing by Bank:
(a) Bank shall have received each of the documents set forth on
the Schedule of Documents, each duly executed by the appropriate parties and in
form and substance satisfactory to Bank;
(b) (i) (A) Bank shall have received a fully executed original
of a pay-off letter satisfactory to Bank confirming that all of the Prior Lender
Obligations will be repaid in full from the proceeds of the initial Loan and all
Liens upon any of the property of Borrower or any of its Subsidiaries in favor
of Prior Lender shall be terminated by Prior Lender immediately upon such
payment; and (B) all letters of credit issued or guaranteed by Prior Lender
shall have been cash collateralized, supported by a guaranty of Bank or
supported by a Letter of Credit issued pursuant to this Agreement as mutually
agreed upon by Bank, Borrower and Prior Lender; and (ii) Bank shall have
received a fully executed original of a pay-off letter satisfactory to Bank
confirming that all of obligations of Borrower to LHF will be repaid in full on
the Closing Date, and all Liens upon any of the property of Borrower or any of
its Subsidiaries in favor of LHF shall be terminated by LHF immediately upon
such payment.
(c) Bank shall have received satisfactory evidence that Borrower
and its Subsidiaries have obtained all required consents and approvals of all
Persons, including all requisite Governmental Authorities, to the execution,
delivery and performance of this Agreement and the other Loan Documents and the
consummation of the Related Transactions;
10
(d) all of the assets supporting the initial Loans to be made and
Letters of Credit to be issued and the amount, if any, of the reserves to be
established on the Closing Date shall be sufficient in value, as determined by
Bank, to provide Borrower with Net Borrowing Availability of not less than
$1,750,000 (after giving effect to such initial Loans and Letters of Credit and
the amount, if any, of the reserves to be established on the Closing Date in
accordance with this Agreement), without any deterioration in Borrower's
accounts payable or increase in Borrower's other current liabilities above the
average of those reflected on Borrower's balance sheet for the three months
preceding the Closing Date;
(e) payment by Borrower of all fees, costs, and expenses of closing
(including reasonable fees of consultants and counsel to Bank presented as of
the Closing Date);
(f) no action, proceeding, investigation, regulation, or legislation
shall have been instituted, threatened, or proposed before any court,
Governmental Authority, or legislative body to enjoin, restrain, or prohibit, or
to obtain damages in respect of, or that is related to or arises out of, this
Agreement or any other Loan Document or the consummation of the transactions
contemplated hereby or thereby and that, in Bank's sole judgment, would make it
inadvisable to consummate the transactions contemplated by this Agreement or any
other Loan Document;
(g) Bank shall have completed its business and legal due diligence,
including a roll forward of its previous Collateral audit, with results
satisfactory to Bank;
(h) (i) Bank shall have received fully executed copies of the
Subordinated Note and each of the other Related Transactions Documents, each of
which shall be in form and substance satisfactory to Bank and its counsel, and
(ii) the Related Transactions shall have been consummated in accordance with the
terms of the Subordinated Note and the other Related Transactions Documents; and
(i) no Material Adverse Effect shall have occurred since the most
recent audited Financial Statements delivered to Bank prior to the Closing Date.
If any other term of any Loan Document should conflict, or appear to
conflict, with this Section 2.1, the terms of this Section 2.1 shall control,
----------- -----------
and Borrower shall have no rights under this Agreement or any other Loan
Document until each of the conditions of this Section 2.1 has been complied with
-----------
to Bank's satisfaction or specifically waived in writing by Bank.
2.2 Further Conditions to the Loans. It shall be a further condition to
-------------------------------
the funding or advance of any Loan or the incurrence of any Letter of Credit
Obligation that the following statements be true on the date of each such
funding, advance or incurrence, as the case may be:
(a) all of the representations and warranties of Borrower under this
Agreement and the other Loan Documents shall be true and correct as of such
date, except to the extent any such representation or warranty relates to an
earlier date, both before and after giving
11
effect to the funding of such Loan or the incurrence of such Letter of Credit
Obligation, and Bank shall have received, if it so elects, a certification to
that effect signed by an Authorized Signatory;
(b) Bank shall determine that, after giving effect to any
requested Revolving Loan or the incurrence of such Letter of Credit Obligation,
an Overadvance will not occur;
(c) no event shall have occurred and be continuing, or would
result from the funding, advance, or incurrence of any Loan or Letter of Credit
Obligation, that constitutes or would constitute a Default or an Event of
Default or result in a Material Adverse Effect; and
(d) Bank shall have received all other reports, certificates,
statements, or opinions in connection with the funding or incurrence of any Loan
or Letter of Credit Obligation as Bank may reasonably request.
The request and acceptance by Borrower of the proceeds of the Loans
and the incurrence of any Letter of Credit Obligations by Bank shall be deemed
to constitute, as of the date of such Loan or incurrence of such Letter of
Credit Obligations, (i) a representation and warranty by Borrower that the
conditions in this Section 2.2 have been satisfied and (ii) a confirmation by
-----------
Borrower of the granting and continuance of Bank's Liens pursuant to the
Collateral Documents.
3. REPRESENTATIONS, WARRANTIES, AND AFFIRMATIVE COVENANTS
------------------------------------------------------
Borrower represents, warrants and agrees that from and after the Closing
Date and until the Termination Date:
3.1 Corporate Existence; Compliance with Law. Borrower and each of
----------------------------------------
its Subsidiaries: (a) is, as of the Closing Date, and will continue to be, (i) a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation, (ii) duly qualified to do
business and in good standing in each other jurisdiction where its ownership or
lease of property or the conduct of its business requires such qualification and
in which the failure to be so qualified and in good standing could reasonably be
expected to have a Material Adverse Effect, (iii) in compliance with its
articles or certificate of incorporation, as the case may be, and bylaws, and
(iv) in compliance with all Applicable Laws and for which the failure to be in
compliance could reasonably be expected to have a Material Adverse Effect; and
(b) has and will continue to have (i) the requisite corporate power and
authority and the legal right to own, pledge, mortgage, or otherwise encumber
and operate its properties, to lease the property it operates under lease, and
to conduct its business as now, previously, or proposed to be conducted, and
(ii) all licenses, permits, franchises, rights, powers, consents, or approvals
from or by all Persons or Governmental Authorities having jurisdiction over
Borrower or any of its Subsidiaries that are necessary or appropriate for the
conduct of its business. As of the Closing Date, Borrower and each of its
Subsidiaries has made and will continue to make all filings with any
Governmental Authority that are necessary or appropriate for the conduct of its
business and
12
has given and will continue to give all notices to the extent required for the
ownership and operation of its property and the conduct of its business.
3.2 Executive Offices; Corporate or Other Names; Conduct of Business.
-----------------------------------------------------------------
The locations of Borrower's and each of its Subsidiaries' executive offices,
principal place of business, corporate offices, warehouses, other locations of
Collateral and locations where all of Borrower's and each of its Subsidiaries'
records with respect to Collateral are kept are as set forth in Schedule 3.2
------------
and, except as set forth in such schedule, such locations have not changed
during the preceding 12 months. During the five years preceding the Closing
Date, except as set forth in Schedule 3.2, neither Borrower nor any of its
------------
Subsidiaries has been known as or conducted business in any other name. Neither
Borrower nor any of its Subsidiaries shall change its (a) name, (b) chief
executive office, (c) principal place of business, (d) corporate offices, (e)
warehouses or other Collateral locations, or (f) location of its records
concerning the Collateral, without, in each instance, giving 30 days' prior
written notice thereof to Bank and taking all actions deemed necessary or
appropriate by Bank to protect and continuously perfect Bank's Liens upon the
Collateral.
3.3 Corporate Power; Authorization; Enforceable Obligations. The
-------------------------------------------------------
execution, delivery, and performance by Borrower and each of its Subsidiaries of
the Loan Documents to which it is a party, and the creation of all Liens
provided for in this Agreement and the other Loan Documents: (a) are and will
continue to be within Borrower's and each of its Subsidiaries' corporate power;
(b) have been and will continue to be duly authorized by all necessary or proper
corporate and shareholder action; (c) are not and will not be in contravention
of any provision of Borrower's or any of its Subsidiaries' charter or bylaws;
(d) do not and will not violate any Applicable Law or any order or decree of any
court or Governmental Authority; (e) do not and will not conflict with or result
in the breach or termination of, constitute a default under, or accelerate any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement, or other instrument to which Borrower or any of its Subsidiaries is a
party or by which Borrower or any of its Subsidiaries or any of their property
is bound; (f) do not and will not result in the creation or imposition of any
Lien (other than Permitted Liens) upon any of the Collateral; and (g) do not and
will not require the consent or approval of any Governmental Authority or any
other Person, except those specifically referred to in the Schedule of Documents
(all of which will have been duly obtained, made, or complied with on or before
the Closing Date). As of the Closing Date, each Loan Document shall have been
executed and delivered for the benefit of or on behalf of Borrower and each of
its Subsidiaries, and each such Loan Document to which it is a party shall then
be and will continue to be a legal, valid, and binding obligation of Borrower
and each of its Subsidiaries, enforceable against it in accordance with its
terms, subject, as to enforceability, to applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws affecting creditors' rights
generally, and to general principles of equity.
3.4 Financial Statements and Projections; Books and Records.
-------------------------------------------------------
Borrower has delivered as of the Closing Date (a) the Financial Statements for
its Fiscal Year ending September 27, 1998, and the Fiscal Month ending September
26, 1999, which Financial Statements are true, correct, and complete and fairly
and accurately present the financial condition of Borrower as of the date of
each Financial Statement, in accordance with GAAP, and (b) the Projections,
which Projections have been prepared in good faith and are based upon facts and
13
assumptions that are reasonable under the current and foreseeable circumstances
and are disclosed in the Projections.
3.5 Material Adverse Change. Since the date of Borrower's most
-----------------------
recently audited Financial Statements delivered to Bank: (a) neither Borrower
nor any of its Subsidiaries, has incurred any obligations, contingent or non-
contingent liabilities, or liabilities for Charges, long-term leases or unusual
forward or long-term commitments that are not reflected in the pro forma balance
sheet of Borrower and that could, alone or in the aggregate, reasonably be
expected to have a Material Adverse Effect; (b) there has been no material
adverse deviation from the Projections delivered at or prior to the Closing
Date; (c) no contract, lease, agreement, or other instrument to which Borrower
has become a party or by which it or any of its properties or assets is bound or
affected, and no provision of Applicable Law, has had or could reasonably be
expected to have a Material Adverse Effect; (d) neither Borrower nor any of its
Subsidiaries is in default, and to such Person's knowledge no third party is in
default under or with respect to any material contract, agreement, lease, or
other instrument to which it is a party that could, alone or in the aggregate,
reasonably be expected to have a Material Adverse Effect; and (e) no event has
occurred, and Borrower will not and will not allow any of its Subsidiaries to,
permit any event or events to occur, that could, alone or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
3.6 Ownership of Property; Liens. As of the Closing Date, the real
----------------------------
estate listed in Schedule 3.6 constitutes all of the real property owned,
------------
leased, or used in Borrower's or its Subsidiaries' business, and Borrower and
each of its Subsidiaries will not execute any material agreement or contract in
respect of any real estate after the Closing Date without giving 30 days' prior
written notice thereof to Bank. Borrower and each of its Subsidiaries holds and
will continue to hold good and marketable fee simple title to all of its owned
real estate, good and marketable title to all of its other properties and
assets, and valid and marketable leasehold interests in all of its leased
assets, and none of the properties and assets of Borrower or any of its
Subsidiaries are or will be subject to any Liens, except Permitted Liens.
Borrower and each of its Subsidiaries has received and will continue to obtain
all deeds, agreements, and other documents affecting real estate, and has duly
effected and will duly effect all recordings and filings and take other actions
necessary, in each case to establish and protect its right, title, and interest
in and to all real property and other properties and assets and to perfect the
interest of Bank in and to all real property and other properties and assets
constituting Collateral. All material permits required to allow the real
property owned or leased by Borrower and each of its Subsidiaries to be lawfully
occupied and used for all of the purposes for which they are occupied and used
on the Closing Date have been lawfully issued and are in full force and effect,
and all such permits will be maintained. Except as otherwise set forth therein,
with respect to each of the premises identified in Schedule 3.2 a landlord,
------------
mortgagee, or bailee agreement acceptable to Bank has been obtained, and
Borrower shall obtain and shall cause each of its Subsidiaries to obtain a
landlord's, mortgagee's, or bailee's agreement in form acceptable to Bank from
any lessor or mortgagee of any premises leased or acquired after the Closing
Date.
3.7 Labor Matters. As of the Closing Date, there are no strikes or
-------------
other material labor disputes against Borrower or any of its Subsidiaries that
are pending or, to Borrower's knowledge, threatened. Schedule 3.7 identifies
------------
each labor dispute, collective
14
bargaining agreement, management agreement with an executive officer, or any
other material employment agreement to which Borrower or any of its Subsidiaries
is a party that is in effect as of the Closing Date, and a copy of each such
agreement has been made available to Bank. Promptly upon the execution of any
such agreement or incurrence of such obligation after the Closing Date and until
the Termination Date, Borrower shall provide and shall cause each of its
Subsidiaries to provide to Bank prompt written notice of such event and a copy
of such agreement. As of the Closing Date (a) there is no organizing activity
involving Borrower or any of its Subsidiaries pending or, to Borrower's
knowledge, threatened, planned, or contemplated by any labor union or group of
employees, (b) there are no representation proceedings pending or, to Borrower's
knowledge, threatened, planned, or contemplated with the National Labor
Relations Board, and (c) no labor organization or group of employees of Borrower
or any of its Subsidiaries has pending any demand for recognition, and Borrower
shall give to Bank prompt written notice of the occurrence of any of the
foregoing after the Closing Date.
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
------------------------------------------------------------
Indebtedness. As of the Closing Date, Borrower has one operating Subsidiary,
------------
Overhill Ventures. Schedule 3.8 sets forth, as of the Closing Date, all
------------
outstanding Stock and Indebtedness of Borrower and its Subsidiary and the
holders (including affiliated holders known to Borrower or its Subsidiary) of
10% or more of the Stock of each such Person. Borrower will give Bank prompt
notice of (a) each issuance of Stock or change in ownership representing a sale
or issuance of 10% or more of the ownership of any of its or any of its
Subsidiaries' Stock, (b) any issuance or transfer of its Stock or 10% or more of
any of its Subsidiaries' Stock, and (c) each Change of Control of Borrower or
any of its Subsidiaries.
3.9 Government Regulation. Neither Borrower nor any of its
---------------------
Subsidiaries is (a) in violation of any Applicable Law, which violation has or
could reasonably be expected to have a Material Adverse Effect, or (b) subject
to or in default with respect to any final judgment, writ, injunction,
restraining order or order of any nature, decree, rule, or regulation of any
court or Governmental Authority, in each case that has or could reasonably be
expected to have a Material Adverse Effect. The making of the Loans by Bank to
Borrower, the incurrence of the Letter of Credit Obligations on behalf of
Borrower, the application of the proceeds thereof and repayment thereof, and the
consummation of the Related Transactions will not violate any provision of any
Applicable Law or any rule, regulation or order issued by the Securities and
Exchange Commission binding on Borrower or its Subsidiaries.
3.10 Margin Regulations. Borrower does not and will not own and
------------------
Borrower will not permit any of its Subsidiaries to own any "margin security,"
as that term is defined in Regulation U of the Federal Reserve Board, and none
of the proceeds of the Loans will be used directly or indirectly for (a)
purchasing or carrying any margin security, (b) reducing or retiring any
indebtedness that was originally incurred to purchase or carry any margin
security, or (c) any purpose that might cause any of the Loans or this Agreement
to be considered a "purpose credit" within the meaning of Regulations T, U or X
of the Federal Reserve Board.
15
3.11 Taxes.
-----
(a) All tax returns, reports, and statements required by any
Governmental Authority to be filed by or on behalf of Borrower or any of its
Subsidiaries have, as of the Closing Date, been filed and will, until all
Obligations have been paid or performed in full, be filed with the appropriate
Governmental Authority, and all Charges and other impositions shown thereon have
been and will be paid when due, subject to Section 3.11(b). Proper and accurate
---------------
amounts have been and will be withheld by Borrower and each of its Subsidiaries
from its respective employees for all periods in full and complete compliance
with the tax, social security, and unemployment withholding provisions of all
Applicable Law, and such withholdings have and will be timely paid to the
respective Governmental Authorities. Except as set forth in Schedule 3.11,
-------------
neither Borrower nor any of its Subsidiaries: (i) has executed or filed with
any Governmental Authority, any agreement or other document extending, or having
the effect of extending, the period for assessment or collection of any Charges;
(ii) has agreed or been requested to make any adjustment in accounting method;
(iii) is a party to any tax sharing agreement other than tax sharing
arrangements with Polyphase and its Subsidiaries that are currently in effect;
or (iv) is currently being audited by any Governmental Authority. Borrower will
notify Bank promptly after it enters into any agreement or other document with
any Governmental Authority extending, or having the effect of extending, the
period for assessment or collection of any Charges. There are no assessments
or, to Borrower's knowledge, threatened assessments outstanding against Borrower
or any of its Subsidiaries.
(b) Borrower and each of its Subsidiaries may contest, by proper
legal actions or proceedings, the validity or amount of any Charges; provided,
that at the time of commencement of any such action or proceeding: (i) adequate
reserves with respect thereto are established on the books of the contesting
Person in accordance with GAAP; (ii) such contest operates to suspend collection
of the contested Charges and is maintained and prosecuted continuously with
diligence; (iii) none of the Collateral would be subject to forfeiture or loss
of Lien thereby; (iv) no Lien shall be imposed or be attempted to be imposed by
any Governmental Authority for such Charges or claims during such action or
proceeding; (v) the contesting Person shall promptly pay or discharge any
contested Charge and shall deliver to Bank evidence acceptable to Bank of such
compliance, payment, or discharge if such contest is terminated or discontinued
adversely; and (vi) Bank has not advised Borrower in writing that Bank
reasonably believes that nonpayment or nondischarge thereof could reasonably be
expected to have a Material Adverse Effect.
3.12 ERISA.
-----
(a) Schedule 3.12 lists all of Borrower's and each of its ERISA
-------------
Affiliates' Plans. Borrower is and will remain and will cause each of its ERISA
Affiliates to remain in compliance with (i) ERISA and (ii) all requirements of
each Plan, and each Plan complies with and is administered, and will continue to
be administered, in compliance with ERISA and all other Applicable Law in all
respects. All required contributions have been and will continue to be made in
accordance with the provisions of each of Borrower's and its ERISA Affiliates'
Plans, Borrower has not engaged or will engage, nor will it permit any of its
ERISA
16
Affiliates to engage, in a "prohibited transaction," as defined in Section
4975 of the IRC or Section 406 of ERISA.
(b) Borrower shall notify Bank immediately in writing upon the
occurrence of any Reportable Event or a prohibited transaction with respect to
any Plan of Borrower or any of its ERISA Affiliates, or the institution or
threatened institution by the PBGC of proceedings under ERISA to terminate or to
partially terminate any such Plan, or the commencement or threatened
commencement of any litigation against any Plan, its fiduciaries or its assets,
or against Borrower or any of its Subsidiaries or any ERISA Affiliate in
connection with any Plan.
3.13 Litigation. As of the Closing Date, except as disclosed in
----------
Schedule 3.13, no Claim is pending or, to Borrower's knowledge, threatened
-------------
against Borrower or any of its Subsidiaries that (a) challenges any such
Person's right or ability to enter into or perform any of its Obligations under
the Loan Documents or the validity or enforceability of any Loan Document or any
action taken thereunder or (b) if determined adversely, could reasonably be
expected to have a Material Adverse Effect. Borrower shall notify Bank in
writing promptly upon learning of the existence or commencement of any Claim
commenced or threatened against it or any of its Subsidiaries that (y) could
reasonably be expected to have a Material Adverse Effect whether or not
determined adversely or (z) regardless of amount (i) includes any demand for
injunctive relief, (ii) alleges criminal misconduct by Borrower or any of its
Subsidiaries, or (iii) alleges the violation of any law regarding, or seeks
remedies in connection with, any Environmental Liabilities and Costs.
3.14 Intellectual Property. As of the Closing Date, Borrower and each
---------------------
of its Subsidiaries owns or has the right to use and will own or have the right
to use all Intellectual Property necessary to continue to conduct its business
as now or heretofore conducted by it, and each such item (that is registrable)
of Intellectual Property is listed, together with application or registration
numbers, where applicable, in Schedule 3.14. Borrower will give Bank prompt
-------------
written notice of any change in the status of any of its or its Subsidiaries'
Intellectual Property. Borrower conducts and will continue to conduct and will
cause each of its Subsidiaries to conduct its affairs and business without
infringing upon any Intellectual Property of any other Person in a manner that
could reasonably be expected to have a Material Adverse Effect. Borrower shall
notify Bank immediately if it knows or discovers that its or any of its
Subsidiaries' Intellectual Property is or may become infringed upon,
misappropriated, or abandoned in a manner that could reasonably be expected to
have a Material Adverse Effect or of any other adverse determination or
development that could reasonably be expected to have a Material Adverse Effect.
3.15 Full Disclosure. No information contained in the Loan Documents,
---------------
the Financial Statements, or any written statement furnished by or on behalf of
Borrower under this Agreement or to induce Bank to execute the Loan Documents
contains any untrue statement of a material fact or, to Borrower's knowledge,
omits to state a material fact necessary to make the statements contained herein
or therein not misleading in light of the circumstances under which they were
made. Borrower has provided Bank and will continue to provide Bank with a true,
complete, and correct copy of each material contract executed by Borrower and
each of its Subsidiaries.
17
3.16 Hazardous Materials. As of the Closing Date, Schedule 3.16
------------------- -------------
discloses any contamination of any Subject Property known to Borrower resulting
from any Hazardous Materials and any existing or potential environmental
liabilities of Borrower and each of its Subsidiaries known to Borrower that
could result in Environmental Liabilities and Costs, and, in each case, that
could reasonably be expected to have a Material Adverse Effect. As of the
Closing Date, neither Borrower nor any of its Subsidiaries has caused or, to the
knowledge of Borrower, suffered, or will cause, permit, or, to the knowledge of
Borrower, suffer to occur, any Release at, under, above, or within any Subject
Property, or the presence, use, generation, manufacture, installation, or
storage of any Hazardous Materials on, under, in, or about any Subject Property,
or the transportation of any Hazardous Materials to or from any Subject
Property, in each case that could reasonably be expected to have a Material
Adverse Effect, except to the extent such use, generation, manufacture,
installation, storage, or transportation is conducted in compliance with all
Environmental Laws and Environmental Permits. Borrower shall: (a) comply and
shall cause each of its Subsidiaries to comply with all applicable Environmental
Laws and Environmental Permits; (b) notify Bank in writing within seven days if
and when it becomes aware of any incident or ongoing case of non-compliance with
Environmental Laws or any past or present Release upon any Subject Property; (c)
promptly forward to Bank a copy of any written document or communication
received by it or any of its Subsidiaries in connection with any such Release or
any other matter relating to Environmental Laws that may affect Borrower or any
of its Subsidiaries; and (d) promptly notify Bank in writing of any
Environmental Liabilities and Costs that could reasonably be expected to have a
Material Adverse Effect. Borrower is not and will not become, nor will it permit
any of its Subsidiaries to become, involved in operations that could lead to the
imposition of Environmental Liabilities or Costs other than Environmental
Liabilities or Costs that could not reasonably be expected to have a Material
Adverse Effect, and no sub-tenant of such Person is permitted, or will be
permitted, to engage in any such activity.
3.17 Insurance. Schedule 3.17 lists all insurance of any nature
--------- -------------
maintained for current occurrences by Borrower and each of its Subsidiaries, as
well as a summary of the terms of such insurance. Borrower shall deliver to
Bank endorsements to all of its and its Subsidiaries' (a) "All Risk" and
business interruption insurance policies naming Bank as a loss payee, and (b)
general liability and other liability policies naming Bank as an additional
insured. All policies of insurance on real and personal property will include
an endorsement (Form 438 BFU or equivalent), in form and substance acceptable to
Bank, showing loss payable to Bank and extra expense and business interruption
endorsements. Each such endorsement, or an independent instrument furnished to
Bank, will provide that the insurer will give at least 30 days' prior written
notice to Bank before any such policy or policies of insurance shall be altered
or cancelled and that no act or default of Borrower or any other Person shall
affect the right of Bank to recover under such policy or policies of insurance
in case of loss or damage. Borrower hereby directs all present and future
insurers under its "All Risk" policies of insurance to pay all proceeds payable
thereunder directly to Bank. Bank acknowledges that, based on its current
understanding of Borrower's current risk profile, Borrower's insurance coverage
in existence on the Closing Date is satisfactory based on Borrower's current
operations. If the nature of the business of Borrower or its Subsidiaries
becomes subject to additional insurable risks at any time, then Bank shall the
right at such time to require additional forms and limits of insurance to
adequately protect Bank's
18
interests in accordance with Bank's normal practices for similarly-situated
borrowers, and if the circumstances warrant, in Bank's sole discretion.
3.18 Accounts. Borrower represents and warrants that, with respect to
--------
each Account of Borrower:
(a) except as specifically disclosed in the most recent Schedule
of Accounts delivered to Bank: (i) such Account arises out of a bona fide sale
---- ----
and delivery of goods or rendition of services by Borrower in the ordinary
course of its business and is not evidenced by a judgment, Instrument or Chattel
Paper; (ii) there are no known setoffs, claims, or disputes existing or asserted
with respect thereto, and Borrower has not agreed and will not agree with the
applicable Account Debtor without Bank's consent to (A) any deduction therefrom,
(B) any extension of time for the payment thereof, (C) any compromise or
settlement for less than the full amount thereof, or (D) any release, in whole
or in part, of any Person liable therefor, except as to all of the foregoing
deductions, extensions, compromises, settlements, or releases allowed by
Borrower in the ordinary course of its business and disclosed to Bank; provided,
--------
that the aggregate amount of such deductions, extensions, compromises,
settlements, or releases shall not exceed $10,000 in any Fiscal Month; (iii)
there are no facts, events, or occurrences that Borrower knows or should know
that in any way impair the validity, collectibility, or enforceability thereof
or tend to reduce the amount payable thereunder as reflected on the invoices,
statements, and Schedules of Accounts delivered to Bank with respect thereto, or
that might result in any material adverse change in the financial condition of
the applicable Account Debtor or the collectibility thereof; and (iv) Borrower
has no knowledge that the applicable Account Debtor is unable generally to pay
its debts as they become due;
(b) the amounts reflected on all records, invoices, statements,
and Schedules of Accounts with respect thereto (i) to the knowledge of Borrower,
are actually and absolutely owing to Borrower as indicated thereon and (ii) are
not in any way contingent;
(c) (i) as of such date, no payments have been made on such
Account, and (ii) no payment shall be made on such Account except payments in
accordance with the provisions of Section 3.23; and
------------
(d) to the best of Borrower's knowledge, the applicable Account
Debtor has the capacity to contract.
3.19 Inventory. Borrower represents and warrants that, with respect
---------
to all Inventory of Borrower, (a) such Inventory (i) is, and will continue to
be, located at one of the locations set forth on Schedule 3.2 or (ii) is being
------------
shipped directly (A) to a customer of Borrower and such Inventory is scheduled
to arrive at its destination within 15 days after shipment or (B) between two of
the locations set forth on Schedule 3.2, (b) such Inventory has not been
------------
consigned to any Person, (c) such Inventory has been and will be produced in
compliance with all Applicable Laws, including the minimum wage and overtime pay
provisions of the Fair Labor Standards Act, (d) Borrower has good, indefeasible,
and merchantable title to such Inventory and such Inventory is not subject to
any Lien or document whatsoever except for Liens in favor of Bank and other
Permitted Liens, (e) except for Inventory that is manufactured by Borrower
19
pursuant to confidential specifications for particular customers of Borrower and
that is subject to certain restrictions on the sale or disposition thereof that
have been disclosed to Bank and have been consented to by Bank (which consent
may be subject to terms and conditions satisfactory to Bank, including the
treatment of such Inventory as ineligible Inventory for the purpose of the
calculation of the Borrowing Base), such Inventory is not subject to any
licensing, patent, royalty, trademark, trade name, or copyright agreements with
any third parties that would require any consent of any third party upon sale or
disposition thereof or the payment of any monies to any third party as a
condition precedent to any such sale or other disposition, and (f) the
completion of manufacture, sale, or other disposition of such Inventory by Bank
following an Event of Default shall not require the consent of any Person and
shall not constitute a breach or default under any contract or agreement to
which Borrower is a party or to which any of its property is subject.
3.20 Payment of Obligations. Borrower will and will cause each of its
----------------------
Subsidiaries to: (a) pay and discharge or cause to be paid and discharged all
Obligations in a timely manner; and (b) (i) pay and discharge, or cause to be
paid and discharged, its Indebtedness in the ordinary course of business, (ii)
subject to Section 3.11(b), pay and discharge, or cause to be paid and
---------------
discharged promptly, all Charges, and (iii) pay all lawful claims for labor,
materials, supplies, and services or otherwise, before any thereof shall become
in default.
3.21 Conduct of Business. Borrower shall and shall cause each of its
-------------------
Subsidiaries to: (a) conduct its business substantially as now conducted or as
otherwise permitted hereunder and (b) at all times maintain, preserve, and
protect all of the Collateral and its other property in use or useful in the
conduct of its business and keep the same in good repair, working order, and
condition (taking into consideration ordinary wear and tear) and from time to
time make, or cause to be made, all necessary or appropriate repairs,
replacements, and improvements thereto consistent with industry practices, so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
3.22 Further Assurances; Schedule Supplements. At any time and from
----------------------------------------
time to time, upon the written request of Bank and at the sole expense of
Borrower, Borrower shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further action as Bank may
reasonably request to obtain the full benefits of this Agreement and to protect,
preserve and maintain Bank's rights in the Collateral and under this Agreement.
On each anniversary of the Closing Date (or as often as Bank may require upon
the occurrence and continuation of a Default or an Event of Default), Borrower
will supplement each schedule to this Agreement with respect to any matter
hereafter arising that, if existing or occurring as of the Closing Date, would
have been required to be set forth or described in such Schedule; provided, that
--------
such supplement shall not be deemed to be an amendment thereof unless expressly
consented to in writing by Bank.
3.23 Collections and Proceeds of Collateral.
--------------------------------------
(a) All proceeds of the Collateral shall be deposited into a
Collection Account or the Control Account, as applicable. If Borrower or any of
its Subsidiaries receives any payments on account of such Person's Accounts or
any other Collateral, then Borrower shall
20
hold or cause its Subsidiaries to hold such payments in trust for Bank and shall
deposit or cause its Subsidiaries to deposit promptly, and in any event no later
than the first Business Day after the date of receipt thereof, all such payments
into a Collection Account or the Control Account, as applicable. All amounts
deposited into a Collection Account or the Control Account shall immediately
become the property of Bank subject to application in accordance with Section
-------
3.23.
----
(b) Borrower shall maintain a Disbursement Account in its name
at Bank into which Bank shall, from time to time, deposit proceeds of Revolving
Loans made to Borrower pursuant to Section 1.1 for use by Borrower solely in
accordance with the provisions of Section 1.13.
------------
(c) Bank shall apply any amount that is deposited into the
Control Account in immediately available funds against the Obligations in the
manner provided for in Section 1.12; provided, that so long as no Event of
------------
Default has occurred and is continuing, (i) no money on deposit in the Control
Account shall be applied against any LIBOR Loan if such application would
constitute a prepayment of such LIBOR Loan prior to its Payment Date and such
funds shall be retained in the Control Account until the earlier of (A) the
Payment Date for such LIBOR Loan and (B) the next Business Day on which
additional Obligations arise, at which time such amount shall be applied to such
LIBOR Loan or such Obligations, as the case may be, in the manner provided in
this Agreement, and (ii) if (A) Borrower has repaid all Reference Rate Loans and
LIBOR Loans for which a LIBOR Loan Period has expired and (B) any funds are
being transferred to the Control Account in accordance with this Section 3.23,
------------
then, at Borrower's request made pursuant to a written notice delivered by
Borrower to Bank, such funds may be transferred to the Disbursement Account or
another bank account at Bank designated by Borrower. For purposes of calculating
interest and the Unused Line Fee, all collections and other proceeds of
Collateral will be deemed to be received by Bank one day after Bank's receipt of
immediately available funds therefor.
(d) Borrower shall not maintain any deposit, checking,
disbursement, operating, or other bank accounts except for those identified in
Schedule 3.23. So long as no Default or Event of Default has occurred and is
-------------
continuing, Borrower may amend Schedule 3.23 to add or replace a Collection
-------------
Account or Disbursement Account if: (i) Bank has consented to the opening of
such account and the bank at which such account is to be maintained is
satisfactory to Bank in its sole discretion and (ii) Borrower and the bank at
which such account is to be maintained have executed and delivered to Bank a
tri-party blocked or pledged account agreement in form and substance
satisfactory to Bank in its sole discretion.
3.24 Financial Covenants. Borrower shall perform, comply with and
-------------------
observe the following financial covenants, each of which shall be calculated in
accordance with GAAP consistently applied:
(a) Tangible Net Worth. Tangible Net Worth at any time during
each of the periods set forth below shall not be less than the amounts set forth
opposite such period:
Minimum
Period: Tangible Net Worth
-------------------------------------------------------
21
from November 1, 1999 through and
including March 31, 2000................. $ 9,200,000
from April 1, 2000 through and
including June 30, 2000.................. $10,200,000
from July 1, 2000 through and
including September 30, 2000............. $10,800,000
from October 1, 2000 through and
including September 30, 2001............. $12,800,000
October 1, 2001 and thereafter........... $13,500,000
(b) Minimum Fixed Charge Coverage Ratio. For each of the four
-----------------------------------
(4) consecutive Fiscal Quarter periods listed in the table below, the Fixed
Charge Coverage Ratio shall not be less than the ratio set forth opposite such
period in the table:
Four (4) Consecutive Fiscal Minimum Fixed Charge
Quarter Period Ending in Coverage Ratio
------------------------ ---------------
December 1999......................... 1.42
March 2000............................ 1.38
June 2000............................. 1.33
September 2000........................ 1.33
December 2000......................... 1.51
March 2001............................ 1.55
June 2001............................. 1.58
September 2001........................ 1.62
December 2001......................... 1.68
March 2002............................ 1.74
June 2002............................. 1.80
September 2002........................ 1.86
and thereafter........................ 1.95
3.25 Year 2000. Borrower has performed all acts reasonably necessary
---------
to ensure that Borrower and any business in which Borrower holds a substantial
interest, become Year 2000 Compliant in a timely manner, including performing a
comprehensive review and assessment of all of Borrower's systems and, if
necessary, adopting a detailed plan, with itemized budget, for the remediation,
monitoring and testing of such systems. The replacement of internally developed
business critical software or other solutions necessary to be Year 2000
Compliant is expected to be completed by November 30, 1999. As of the Closing
Date the cost
22
to Borrower and its Subsidiaries of such replacement or other solution, to the
extent not reflected or reserved for on the balance sheet of Borrower, could not
reasonably be expected to have a Material Adverse Effect on the financial
condition of Borrower.
3.26 Solvency. Both before and after giving effect to: (a) the Loans
--------
and Letter of Credit Obligations to be made or incurred on the Closing Date or
such other date as Loans and Letter of Credit Obligations requested hereunder
are made or incurred; (b) the disbursement of the proceeds of such Loans
pursuant to the instructions of Borrower; (c) the Refinancing, and the
consummation of the other Related Transactions; and (d) the payment and accrual
of all transaction costs in connection with the foregoing, Borrower is and will
be Solvent.
3.27 Subordinated Debt. As of the Closing Date, Borrower has
-----------------
delivered to Bank a complete and correct copy of the Subordinated Notes
(including all schedules, exhibits, amendments, supplements, modifications,
assignments and all other documents delivered pursuant thereto or in connection
therewith). Borrower has the corporate power and authority to incur the
Indebtedness evidenced by the Subordinated Note. To Borrower's knowledge, the
subordination provisions of the Subordinated Notes are enforceable against the
holder of the Subordinated Note by Bank. To Borrower's knowledge, all
Obligations, including the Obligations to pay principal of and interest on the
Loans, constitute senior Indebtedness entitled to the benefits of the
subordination provisions contained in the Subordinated Note. To Borrower's
knowledge, the principal of and interest on the Revolving Note, all Letter of
Credit Obligations and all other Obligations will constitute "senior debt" as
that or any similar term is or may be used in any other instrument evidencing or
applicable to any other Subordinated Debt. Borrower acknowledges that Bank is
entering into this Agreement in reliance upon the subordination provisions of
the Subordinated Note and this Section 3.27.
------------
3.28 Compliance with the Packers Acts. Borrower has promptly paid
--------------------------------
trade payables with respect to Inventory of Borrower subject to any lien or
trust arising under any state producers' lien statute or any of the other
Packers Acts and is in compliance with all applicable provisions of the Packers
Acts and for which the failure to be in compliance could reasonably be expected
to have a Material Adverse Effect, and no claims have been made by or against
Borrower in connection therewith that have not been or will not be promptly
reimbursed by Borrower, subject to Borrower's right to contest such claims in
accordance with Section 3.11(b). Borrower shall notify Bank of any Liens
---------------
asserted with respect to contracts or sales arrangements entered into by
Borrower for the purchase of Farm Products that are the subject of the Packers
Acts.
4. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees (for itself and each of its
Subsidiaries) that, without Bank's prior written consent, from the Closing Date
until the Termination Date, Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, by operation of law or otherwise:
(a) merge with, consolidate with, acquire all or substantially
all of the assets or capital Stock of, or otherwise combine with, any Person or
form any Subsidiary, except
23
that (i) any Subsidiary of Borrower may merge or consolidate with Borrower or
another Subsidiary of Borrower (so long as Borrower is the surviving corporation
from any such transaction) and (ii) Borrower or any Subsidiary of Borrower may
acquire all or substantially all of the assets or capital Stock of another
Subsidiary of Borrower;
(b) except as otherwise permitted in this Section 4, make any
---------
investment in, or make or accrue loans or advances of money to, any of its
Subsidiaries, Affiliates or any other Person;
(c) create, incur, assume, or permit to exist any Indebtedness,
except (i) the Obligations, (ii) Indebtedness incurred in the ordinary course of
its business, (iii) Indebtedness of up to $500,000 outstanding at any time for
Capital Expenditures secured by purchase money Liens permitted in clause (d) in
the definition of "Permitted Liens," (iv) deferred taxes, (v) the Subordinated
Debt, (vi) either (A) Borrower's obligations to LLCP evidenced by the
Subordinated Note and the documents entered into in connection therewith or (B)
obligations of Borrower arising out of a Permitted Subordinated Note
Refinancing, (vii) other Indebtedness set forth in Schedule 4(c), and (viii) as
-------------
otherwise permitted in this Section 4;
---------
(d) enter into any lending, borrowing or other commercial
transaction with any of its officers or directors or other Affiliates or any of
its Subsidiaries (including upstreaming and downstreaming of cash and
intercompany advances), except (i) loans or advances to officers or employees
under special circumstances in an amount not to exceed (A) $25,000 to any
officer or employee and (B) $100,000 in the aggregate at any one time, (ii)
advances of funds to Borrower's officers or employees for business-related
travel or other expenses in the ordinary course of Borrower's business, (iii)
payments permitted by Section 4(l), and (iv) payments made by Xx. Xxxxxx Xxxxxxx
-----------
to Overhill Ventures pursuant to the Promissory Note made by Xx. Xxxxxxx to the
order of Overhill Ventures dated as of October 23, 1999;
(e) make any changes in any of its business objectives,
purposes, or operations that could have or reasonably be expected to have a
Material Adverse Effect;
(f) amend its articles or certificate of incorporation, as the
case may be, or bylaws;
(g) incur any Guaranteed Indebtedness except (i) by endorsement
of Instruments or items of payment for deposit to the general account of
Borrower and (ii) for Guaranteed Indebtedness incurred for the benefit of
Borrower if the primary obligation is permitted by this Agreement;
(h) create or permit any Lien on any of its properties or
assets, except for the Liens set forth in Schedule 4(h) and other Permitted
------------
Liens;
(i) sell, transfer, convey, assign, or otherwise dispose of any
its assets or properties, including its Accounts; provided, that the foregoing
--------
shall not prohibit the sale of Inventory or obsolete or unnecessary Equipment or
real estate in the ordinary course of its business;
24
(j) take any action or omit to take any action, which act or
omission would constitute a material default or an event of default pursuant to,
or noncompliance with, any contract, lease, mortgage, deed of trust, or
Instrument or any document creating a Lien to which it is a party or by which it
or any of its property is bound;
(k) (i) cancel any Indebtedness owing to it except for
reasonable consideration and in the ordinary course of its business or (ii)
prepay any Indebtedness owing by it to any other Person; provided, that Borrower
--------
may prepay (A) Subordinated Debt owing to LLCP pursuant to a Permitted
Subordinated Debt Refinancing or (B) Indebtedness of less than $250,000 so long
as no Default or Event of Default has occurred and is continuing at the time of
any such prepayment or would result after giving effect to any such prepayment;
(l) make or permit any Restricted Payment other than (i)
dividends to Borrower by Overhill Ventures and (ii) other payments by Borrower
to Polyphase that qualify as a Permitted Affiliate Transaction; provided, that
--------
any funds or proceeds or any such payment made by Borrower to Polyphase shall
not be loaned or advanced to, invested in or otherwise used for, any Subsidiary
of Polyphase (other than Borrower) or any Subsidiary of any such Subsidiary or
the business of any such Subsidiaries; provided, that no Default or Event of
--------
Default shall have occurred and be continuing or would result after giving
effect to any such dividend or other payment under clauses (i), (ii), (iii) of
- -- ---
this Section 4(l);
------------
(m) (i) voluntarily terminate any Plan so as to result in
liability of Borrower to PBGC, (ii) enter into any "Prohibited Transaction" (as
defined in ERISA) involving any Plan that could result in liability of Borrower
to PBGC, (iii) cause an occurrence of any Reportable Event that could result in
liability of Borrower to PBGC, or (iv) allow or suffer to exist any other event
or condition known to Borrower that could result in liability of Borrower to
PBGC;
(n) engage in any business other than that presently engaged in
by it;
(o) change its corporate name, its federal employer
identification number (or obtain additional numbers), the timing of its Fiscal
Year or the location of its chief executive office or principal place of
business; or
(p) make aggregate Capital Expenditures (other than Capital
Expenditures financed through the incurrence of Indebtedness (excluding
Revolving Loans)) in (i) any Fiscal Quarter in excess of $250,000 or (ii) any
Fiscal Year in excess of $800,000.
5. FINANCIAL REPORTS
-----------------
5.1 Reports and Notices. Borrower represents, warrants, and agrees
-------------------
that, from and after the Closing Date until the Termination Date, Borrower shall
deliver to Bank, or cause to be delivered to Bank:
(a) if requested by Bank, copies of sales journals or invoices,
customer's purchase orders or the equivalent, and shipping or delivery receipts
for all Inventory
25
sold, and a report summarizing dilution of Borrower's Accounts, each of which
shall be prepared for the immediately preceding Business Day;
(b) On Wednesday of each week (to be furnished by facsimile
transmission), a package of information with respect to the prior week (the
"Weekly Reporting Package"), including: (i) the weekly internal sales report of
-------------------------
Borrower and its Subsidiaries; (ii) the consolidated Accounts of Borrower and
its Subsidiaries as of the end of such prior week; (iii) the Accounts that are
then outstanding 90 days past the invoice date as of the end of such prior week;
(iv) the consolidated accounts payable aging report for Borrower and its
Subsidiaries as of the end of such prior week; (v) the Borrowing Base
Certificate; and (vi) any additional information mutually agreed upon by
Borrower and Bank;
(c) as frequently as Bank may request and in any event no later
than 30 days following the end of each Fiscal Month, each of the following,
certified by Borrower, in each case in form and substance acceptable to Bank and
prepared as of the last day of such Fiscal Month:
(i) a monthly summary report that rolls forward activity
in the Accounts of Borrower, certified by Borrower (each such report, a "Monthly
-------
Summary Report");
--------------
(ii) a schedule of Accounts that provides a detailed
Accounts aging, a summary of Accounts, and a calculation of the Dilution of
Borrower's Accounts (each such schedule, a "Schedule of Accounts"); and
--------------------
(iii) a schedule of Inventory, certified by Borrower,
specifying the value of Borrower's Inventory valued at the lower of cost
(determined on a first-in, first-out basis) or wholesale market value, by
location and type with a supporting perpetual Inventory report, and further
specifying in-transit Inventory (enclosing copies of supporting documentation
such as bills of lading) and any other information that Bank may request (each
such schedule, a "Schedule of Inventory"), together with all stock status
---------------------
reports;
(d) as soon as practicable and in any event within (I) 30 days
following the end of each Fiscal Month (other than the end of any Fiscal Month
that is also the end of a Fiscal Quarter) or (II) 45 days after the end of any
Fiscal Month that is also the end of a Fiscal Quarter, each of the following:
(i) the Financial Statements for such Fiscal Month, which
Financial Statements shall provide comparisons to budget and actual results for
the corresponding period during the prior Fiscal Year, both on a monthly and
year-to-date basis;
(ii) a certification by the Chief Executive Officer or Chief
Financial Officer of Borrower that such Financial Statements are complete and
correct and are prepared in accordance with GAAP (subject to the inclusion of
footnotes and changes resulting from normal year-end audit adjustments) and that
no Default or Event of Default has occurred and is continuing (or specifying
those Defaults or Events of Default that have occurred and are continuing of
which he was aware); and
26
(iii) a Compliance Certificate in respect of each of the
financial covenants set forth in Section 3.24 tested on a monthly (or, as
------------
applicable, quarterly or annual) basis;
(e) as soon as practicable and in any event within 90 days
following the close of each Fiscal Year (as such number of days may be extended
for an additional 15 days for such Fiscal Year if Borrower delivers to Bank in
draft form, not later than 90 days after the end of such Fiscal Year, copies of
the draft audited Financial Statements, including the notes thereto, required to
be furnished to Bank under this clause (e)), the Financial Statements for such
-----------
Fiscal Year certified without qualification in any respect (other than as to the
recharacterization of the intercompany accounts receivable owing from Polyphase
to Borrower as a dividend as opposed to an intercompany account receivable) by
an independent certified accounting firm acceptable to Bank, which Financial
Statements shall provide comparisons to budget and actual results for the prior
Fiscal Year, both on a monthly and annual basis, accompanied by each of the
following:
(i) a statement in reasonable detail showing the
calculations used in determining compliance with the financial covenants set
forth in Section 3.24; and
------------
(ii) any management letter that may be issued;
(f) not less than 30 days prior to the close of each Fiscal
Year, board-approved projections for the next succeeding Fiscal Year showing
forecasted monthly income statement, balance sheet, cash flow statement, and
Borrowing Availability, in each case prepared in a manner consistent with
Borrower's historical financial statements and GAAP, together with appropriate
supporting details and a statement of underlying assumptions;
(g) as frequently as Bank may request, a certification by the
chief executive officer or chief financial officer of Borrower to each of the
following matters:
(i) that all salaries and wages of Borrower's employees
have been paid through the most recent payroll date;
(ii) specifying any wage claims that have been filed
against Borrower by employees or former employees of Borrower since the previous
certification; and
(iii) that all Inventory has been and will be produced in
compliance with Applicable Law, including the minimum wage and overtime pay
provisions of the Fair Labor Standards Act;
(h) promptly upon receipt thereof, copies of all final reports,
if any, submitted to Borrower by its independent certified public accountants in
connection with any annual or interim audit of Borrower;
(i) upon Bank's request, a customer list specifying the address
and telephone number of each of Borrower's Account Debtors;
27
(j) as soon as practicable and in any event within 10 Business
Days thereafter, notice to Bank of Borrower's acquisition of or agreement to
acquire, whether by purchase, lease, or otherwise, any tangible property in
excess of $250,000, other than purchases of Inventory in the ordinary course of
business;
(k) promptly after the sending thereof, copies of all financial
statements, reports and other information that Borrower or any of its
Subsidiaries sends to any holder of its Indebtedness or its securities;
(l) within 10 Business Days after filing with the appropriate
Governmental Authority, copies of Borrower's annual federal and state income tax
returns;
(m) promptly after (and in any event, within five Business Days)
any officer of Borrower has actual knowledge (i) of any condition or event that
constitutes a Default or an Event of Default, or becoming aware that Bank has
given any written notice with respect to a claimed Default or Event of Default,
(ii) that any Person (including any landlord under any real property lease) has
given any written notice to Borrower or any of its Subsidiaries or taken any
other action with respect to a claimed default, or (iii) of any condition or
event that has or could reasonably be expected to have a Material Adverse Effect
or materially and adversely affect the value of, or Bank's interest in, the
Collateral, Borrower shall deliver to Bank a certificate specifying (A) the
nature and period of existence of any such claimed default, Default, Event of
Default, condition, or event, (B) the notice given or action taken by such
Person in connection therewith, and (C) the remedial action that Borrower has
taken, is taking, and proposes to take with respect thereto;
(n) promptly (and in any event not later than five days) after
the issuance of any Compliance Report, or series of Compliance Reports, that
could reasonably be expected to have a Material Adverse Effect, a copy (or
copies) of such report or reports (or written summaries of any oral
determination(s)); and
(o) such other information respecting the business, financial
condition, prospects, or projections of Borrower or any of its Affiliates as
Bank reasonably may request from time to time.
5.2 Other Reports. Borrower shall notify Bank promptly of any
-------------
occurrence causing a material loss or decline in value of any Collateral and the
estimated (or actual, if available) amount of such loss or decline. Borrower
shall, upon the request of Bank, furnish to Bank such other reports in
connection with the affairs, business, financial condition, operations,
prospects, or management of Borrower or any of its Subsidiaries or the
Collateral as Bank may request, all in reasonable detail, and Borrower shall
advise Bank promptly, in reasonable detail, of: (a) any Lien, other than
Permitted Liens, attaching to or asserted against any of the Collateral; (b) any
material change in the composition of the Collateral; and (c) the occurrence of
any other event that could reasonably be expected to have a Material Adverse
Effect.
28
6. CREATION OF SECURITY INTEREST
-----------------------------
6.1 Grant of Security Interest. Each of Borrower and each of its
--------------------------
Subsidiaries grants to Bank a Lien upon all of its right, title, and interest in
the Collateral to secure the prompt payment and performance of the Obligations.
Each of Borrower and each of its Subsidiaries represents, warrants, and agrees
as follows: (i) upon and as a result of the filing by Bank of appropriate
financing statements in the jurisdictions listed in Schedule 6.1, Bank's Liens
------------
in the Collateral are and will be fully perfected Liens on all Collateral with
respect to which Liens can be perfected by filing, which Liens are and will,
until the Termination Date, be enforceable as first priority, fully perfected
Liens as against all other creditors of, and purchasers from, Borrower and each
of its Subsidiaries (other than purchasers of Inventory in the ordinary course
of business); (ii) upon the filing by Bank of appropriate financing statements
as aforesaid, all action necessary or desirable to protect and perfect such
Liens in favor of Bank in all of the Collateral will have been duly taken as to
all Collateral with respect to which Liens can be perfected by filing; (iii)
except for Permitted Liens on Collateral, Borrower (and any of its Subsidiaries
granting a Lien in Collateral) is and will be the sole owner of each such item
of the Collateral (other than consigned goods specifically identified in
Schedule 6.1), and has and will have good and marketable title to such
------------
Collateral free and clear of any and all other Liens except for Liens in favor
of Bank; and (iv) no effective security agreement, mortgage, deed of trust,
financing statement, equivalent security or Lien instrument, or continuation
statement covering all or any part of the Collateral is or will be on file or of
record in any public office, except those filed by Borrower (and any of its
Subsidiaries granting a Lien to Bank in the Collateral) in favor of Bank
pursuant to the Loan Documents, and those relating to other Permitted Liens.
Each of Borrower and each of its Subsidiaries shall defend the right, title and
interest of Bank in and to the Collateral against the claims and demands of all
Persons, and shall take such actions, including (A) the prompt delivery of all
original Instruments, Chattel Paper, and certificated Stock owned by Borrower to
Bank, (B) notification of Bank's interest in Collateral at Bank's request, and
(C) the institution of litigation against third parties, as shall be prudent in
order to protect and preserve Borrower's, such Subsidiaries', and Bank's
respective and several interests in the Collateral. Borrower (and any of its
Subsidiaries granting a Lien in Collateral) shall xxxx its Books and Records
pertaining to the Collateral to evidence the Loan Documents and the Liens
granted under the Loan Documents. All Chattel Paper shall be marked with the
following legend: "THIS WRITING AND THE OBLIGATIONS EVIDENCED OR SECURED HEREBY
ARE SUBJECT TO THE LIEN OF UNION BANK OF CALIFORNIA, N.A."
6.2 Bank's Rights.
-------------
(a) Bank may, at any time in Bank's own name or in the name of
Borrower, (i) communicate with Account Debtors of Borrower or any of its
Subsidiaries, parties to Contracts of Borrower or any of its Subsidiaries, and
obligors in respect of Instruments or Chattel Paper of Borrower or any of its
Subsidiaries or other Collateral to verify to Bank's satisfaction the existence,
amount, and terms of any such Accounts, Contracts, Instruments, Chattel Paper,
or other Collateral, and (ii) at any time after the occurrence and during the
continuance of a Default or an Event of Default, and without prior notice to
Borrower, notify such Account Debtors, parties to such Contracts, and obligors
in respect of such Chattel Paper, Instruments, or other Collateral that such
Collateral has been assigned to Bank and that payments
29
shall be made directly to Bank. Upon the request of Bank, Borrower or any of its
Subsidiaries shall so notify such Account Debtors, parties to such Contracts,
and obligors in respect of such Instruments, Chattel Paper, or other Collateral.
(b) It is expressly agreed by each of Borrower and each of its
Subsidiaries that such Person shall remain liable under each of its Contracts
and Licenses to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, and Bank shall have no obligation or
liability whatsoever to any other Person under any such Contract or License
(between Borrower or any of its Subsidiaries and any Person other than Bank) by
reason of or arising out of the execution, delivery, or performance of this
Agreement, and Bank shall not be required or obligated in any manner (i) to
perform or fulfill any of the obligations of Borrower or any of its Subsidiaries
thereunder, (ii) to make any payment or inquiry, or (iii) to take any action of
any kind to collect or enforce any performance or the payment of any amounts
that may have been assigned to it or to which it may be entitled at any time or
times under or pursuant to any such Contract or License.
(c) Each of Borrower and each of its Subsidiaries shall, with
respect to each of its owned, leased, or controlled properties or facilities,
during normal business hours and upon reasonable advance notice (unless an Event
of Default has occurred and is continuing, in which event no notice shall be
required and Bank shall have access at any and all times): (i) provide access to
such facilities or properties to Bank and any of its officers, employees, and
agents, as frequently as Bank determines to be appropriate; (ii) permit Bank and
any of its officers, employees, and agents to inspect, audit, and make extracts
from all of such Person's Books and Records; and (iii) permit Bank to inspect,
review, evaluate, and make physical verifications and appraisals of such
Person's Inventory and other Collateral in any manner and through any medium
that Bank considers advisable, and each of Borrower and each of its Subsidiaries
shall provide to Bank, at Borrower's cost and expense, such clerical and other
assistance as may be reasonably requested with respect thereto. Each of Borrower
and each of its Subsidiaries shall make available to Bank and its counsel, as
quickly as practicable under the circumstances, originals or copies of all of
such Person's Books and Records and any other instruments and documents that
Bank may request. Each of Borrower and each of its Subsidiaries shall deliver
any document or instrument reasonably necessary for Bank, as it may from time to
time request, to obtain records from any service bureau or other Person that
maintains records for Borrower or any of its Subsidiaries.
(d) Upon the occurrence and during the continuance of an Event
of Default, Borrower, at its own expense, shall cause its independent certified
public accountants to prepare and deliver to Bank at any time and from time to
time, promptly upon Bank's request: (i) a reconciliation of all of its and its
Subsidiaries' Accounts; (ii) an aging of all such Accounts; (iii) trial
balances; and (iv) test verifications of such Accounts as Bank may request.
Borrower, at its own expense, shall cause its independent certified public
accountants to deliver to Bank the results of (A) any physical verifications of
all or any portion of its and its Subsidiaries' Inventory made or observed by
such accountants and (B) any verifications of its and its Subsidiaries'
Accounts, in each case when and if any such verifications are conducted. Bank
shall be permitted to observe and consult with Borrower or any of its
Subsidiaries and Borrower's certified public accountants in the performance of
these tasks.
30
6.3 Power of Attorney. Each of Borrower and each of its Subsidiaries
-----------------
hereby irrevocably makes, constitutes, and appoints Bank (and any of Bank's
officers, employees, or agents designated by Bank), as its true and lawful
attorney-in-fact, with power to: (a) sign the name of Borrower or any of
Borrower's Subsidiaries on any document to be executed, recorded, or filed in
order to perfect or continue perfected Bank's Lien upon the Collateral if
Borrower or any of Borrower's Subsidiaries fails to do so promptly after request
therefor by Bank, including filing any financing or continuation statement
without the signature of Borrower or any of Borrower's Subsidiaries to the
extent permitted by applicable law; (b) upon the occurrence and during the
continuance of an Event of Default, sign Borrower's or any of Borrower's
Subsidiaries' name on any invoice or xxxx of lading relating to any Account,
drafts against Account Debtors, schedules and assignments of Accounts,
verifications of Accounts, and notices to Account Debtors; (c) send requests for
verification of Accounts; (d) upon the occurrence and during the continuance of
an Event of Default, endorse Borrower's or any of Borrower's Subsidiaries' name
on any checks, notices, acceptances, money orders, drafts, or other forms of
payment or security that may come into Bank's possession; and (e) upon the
occurrence and during the continuance of an Event of Default, (i) notify the
post office authorities to change the address for delivery of Borrower's or any
of Borrower's Subsidiaries' mail to an address designated by Bank, to receive
and open all mail addressed to Borrower or any of Borrower's Subsidiaries, and
to retain all mail relating to the Collateral and forward all other mail to
Borrower or any of Borrower's Subsidiaries, (ii) make, settle, and adjust all
claims under Borrower's or any of Borrower's Subsidiaries' policies of insurance
and make all determinations and decisions with respect to such policies of
insurance, and (iii) settle and adjust disputes and claims respecting any of
Borrower's or its Subsidiaries' Accounts directly with the applicable Account
Debtors for amounts and upon terms that Bank determines to be reasonable, and
Bank may cause to be executed and delivered any documents and releases that Bank
determines to be necessary. The appointment of Bank as each of Borrower's and
each of its Subsidiaries' attorney-in-fact, and each and every one of Bank's
rights and powers, being coupled with an interest, is irrevocable until all of
the Obligations have been fully repaid and performed and Bank's obligation to
provide Loans and incur Letter of Credit Obligations hereunder is terminated.
NEITHER BANK, NOR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, AGENTS
OR REPRESENTATIVES SHALL BE RESPONSIBLE TO BORROWER OR ANY OF BORROWER'S
SUBSIDIARIES FOR ANY ACT OR FAILURE TO ACT PURSUANT TO THE POWERS GRANTED UNDER
THE POWER OF ATTORNEY HEREIN OR OTHERWISE, EXCEPT FOR ITS OR THEIR OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. IN THE EVENT THAT BORROWER OR OVERHILL
VENTURES OBTAINS AN AWARD FOR PUNITIVE DAMAGES AGAINST BANK OR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS OR AGENTS, THE PARTIES HERETO AGREE
THAT THE AMOUNT OF SUCH PUNITIVE DAMAGE AWARD SHALL NOT EXCEED AN AMOUNT EQUAL
TO THREE TIMES THE AMOUNT OF THE ACTUAL DAMAGES AWARDED TO BORROWER.
6.4 Grant of License to Use Intellectual Property Collateral. For
--------------------------------------------------------
the purpose of enabling Bank to exercise its rights and remedies under the Loan
Documents, Borrower hereby grants to Bank an irrevocable, non-exclusive license
(exercisable upon the occurrence of an Event of Default without payment of
royalty or other compensation to Borrower) to use, transfer, license, or
sublicense any Intellectual Property of Borrower or any of Borrower's
Subsidiaries,
31
including access to all media in which any of the licensed items may be recorded
or stored and to all computer and automatic machinery software and programs used
for the compilation or printout thereof, and each of Borrower and each of
Borrower's Subsidiaries represents, warrants, and agrees that any such license
or sublicense is not and will not be in conflict with the contractual or
commercial rights of any other Person; provided, that such license will
--------
terminate on the Termination Date.
6.5 Reinstatement. The provisions of this Section 6 shall remain in
------------- ---------
full force and effect and continue to be effective even if: (a) any petition is
filed by or against Borrower or any of Borrower's Subsidiaries for liquidation
or reorganization; (b) Borrower or any of Borrower's Subsidiaries becomes
insolvent or makes an assignment for the benefit of creditors; (c) a receiver or
trustee is appointed for all or any significant part of the assets of Borrower
or any of Borrower's Subsidiaries; or (d) at any time payment and performance of
the Obligations, or any part thereof, is, pursuant to Applicable Law, rescinded
or reduced in amount or must otherwise be restored or returned by any obligee of
the Obligations, whether as a "voidable preference," "fraudulent transfer," or
otherwise, all as though such payment or performance had not been made. In the
event that any payment or any part thereof is rescinded, reduced, restored, or
returned, the Obligations and Bank's Liens in the Collateral shall be reinstated
and deemed reduced only by any amount paid and not so rescinded, reduced,
restored, or returned.
6.6 Termination of Liens. Upon Borrower's payment in full in cash to
--------------------
Bank of all Obligations, Bank shall execute a termination of all security
agreements and Liens granted by Borrower or any of its Subsidiaries to Bank.
6.7 Release of Liens on Stock. Upon exercise of any of the options,
-------------------------
warrants, calls or commitments relating to the Stock of Borrower or Overhill
Ventures set forth on Schedule III to the Pledge Agreement (which options
------------
warrants, calls and commitments are hereby consented to by Bank), Bank shall
release its Lien on such Stock to effectuate such exercise.
7. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
--------------------------------------
7.1 Events of Default. The occurrence of any one or more of the
-----------------
following events (regardless of the reason therefor) shall constitute an "Event
of Default" under this Agreement:
(a) Borrower shall fail to make any payment in respect of any
Obligations when due and payable or declared due and payable; or
(b) Borrower or any of its Subsidiaries shall fail or neglect to
perform, keep, or observe any of the other covenants, promises, agreements,
requirements, conditions, or other terms or provisions contained in this
Agreement or any of the other Loan Documents (other than any provision embodied
in or covered by any other clause of this Section 7.1), and such default shall
-----------
have continued for a period of 10 Business Days after the earlier to occur of
Borrower's receipt of notice of such breach from Bank or the date on which such
failure or neglect first becomes known to any officer of Borrower; provided,
--------
that there shall be no grace period for Borrower's failure to perform, keep, or
observe any of the covenants, promises,
32
agreements, requirements, conditions, or other terms or provisions contained in
Section 3.23, Section 3.24, and Section 4; or
------------ ------------ ---------
(c) an event of default shall occur under (i) any other material
agreement, document, or instrument to which Borrower or any of its Subsidiaries
is a party, or by which any such Person or its property is bound, and such event
of default (A) involves the failure to make any payment, whether of principal,
interest, or otherwise, and whether due by scheduled maturity, required
prepayment, acceleration, demand, or otherwise, in respect of any Indebtedness
(other than the Obligations) of such Person in an aggregate amount exceeding
$100,000 or (B) causes (or permits any holder of such Indebtedness or a trustee
to cause) such Indebtedness, or a portion thereof in an aggregate amount
exceeding $100,000, to become due prior to its stated maturity or prior to its
regularly scheduled dates of payment or (ii) the Subordinated Note or any of the
documents entered into in connection therewith; or
(d) any representation or warranty in this Agreement, any other Loan
Document, or in any written statement pursuant hereto or thereto, or in any
report, financial statement, or certificate made or delivered to Bank by
Borrower or any of its Subsidiaries shall be untrue or incorrect in any respect
as of the date when made or deemed made; or
(e) (i) any of the assets of Borrower or any of its Subsidiaries with
a fair market value in excess of $200,000 in the aggregate shall be attached,
seized, levied upon, or subjected to a writ or distress warrant, or come within
the possession of any receiver, trustee, custodian, or assignee for the benefit
of creditors of such Person, and such condition shall remain unstayed or
undismissed for 60 consecutive days; (ii) any Person other than Borrower shall
apply for the appointment of a receiver, trustee, or custodian for the assets of
Borrower (or those of any of its Subsidiaries) and the order appointing such
receiver, trustee, or custodian shall remain unstayed or undismissed for 60
consecutive days; or (iii) Borrower or any of its Subsidiaries shall have
concealed, removed, or permitted to be concealed or removed any part of its
property with intent to hinder, delay, or defraud its creditors or any of them
or made or suffered a transfer of any of its property or the incurring of an
obligation that may be fraudulent under any bankruptcy, fraudulent transfer, or
other similar law; or
(f) a case or proceeding shall have been commenced involuntarily
against Borrower or any of its Subsidiaries in a court having competent
jurisdiction seeking a decree or order (i) under the Bankruptcy Code or any
other applicable federal, state, or foreign bankruptcy or other similar law,
(ii) for (A) the appointment of a custodian, receiver, liquidator, assignee,
trustee, or sequestrator (or similar official) of such Person or of any
substantial part of its properties or (B) the reorganization or winding up or
liquidation of the affairs of any such Person, or (iii) invalidating or denying
(A) any Person's right, power, or competence to enter into or perform any of its
obligations under any Loan Document or (B) the validity or enforceability of
this Agreement or any other Loan Document or any action taken hereunder or
thereunder, and such case or proceeding shall remain undismissed or unstayed for
60 days or more or a decree or order granting the relief sought in such case or
proceeding shall be entered by a court of competent jurisdiction over such case
or proceeding; or
33
(g) Borrower or any of its Subsidiaries shall (i) file a petition for
an order for relief under the Bankruptcy Code or any other applicable federal,
state, or foreign bankruptcy or other similar law, (ii) consent to the
institution of proceedings thereunder or to the filing of any such petition or
to the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, or sequestrator (or similar official) of any such Person or
of any substantial part of its properties, (iii) fail generally to pay (or admit
in writing its inability to pay) its debts as such debts become due, or (iv)
take any corporate action in furtherance of any such action; or
(h) a final judgment or judgments (after the expiration of all times
to appeal therefrom) for the payment of money in excess of $250,000 in the
aggregate shall be rendered against Borrower or any of its Subsidiaries, unless
the same shall be (i) fully covered by insurance (exclusive of any applicable
deductible under any insurance policies insuring Borrower or its Subsidiaries
against such judgment) and the issuer(s) of the applicable policies shall have
acknowledged full coverage in writing within 30 days of such judgment, or (ii)
vacated, stayed, bonded, paid, or discharged within a period of 30 days from the
date of such judgment; or
(i) any Guarantor, (i) if an individual, dies, (ii) terminates, or
gives Bank notice of its intention to terminate, its Guaranty, (iii) becomes the
subject of a case or proceeding commenced under the Bankruptcy Code or any other
applicable federal, state, or foreign bankruptcy or other similar law seeking
either (A) the appointment of a custodian, receiver, liquidator, assignee,
trustee, or sequestrator (or similar official) of any such Guarantor or of any
substantial part of its properties, or (B) the reorganization, winding up, or
liquidation of the affairs of any such Guarantor and any such case or proceeding
under the foregoing clauses (A) or (B) shall remain undismissed or unstayed for
------------------
60 days or more or a decree or order granting the relief sought in such case or
proceeding shall be entered by a court of competent jurisdiction over such case
or proceeding, or (iv) such Guaranty otherwise becomes unenforceable or
ineffective; or
(j) any Person subordinating its claims against Borrower to those of
Bank (i) terminates, or gives Bank notice of its intention to terminate, its
subordination agreement, or (ii) such subordination agreement otherwise becomes
unenforceable or ineffective; or
(k) Borrower voluntarily or involuntarily dissolves or is dissolved,
terminates, or is terminated; or
(l) Borrower or any Guarantor is enjoined, restrained, or in any way
prevented by the order of any court or other Governmental Authority from
conducting all or any material part of its business; or
(m) any loss, suspension, revocation, or failure to renew any License
or permit now held or hereafter acquired by Borrower or any Guarantor, the
result of which might have a Material Adverse Effect; or
34
(n) any Lien or any provision of any Loan Document shall for any
reason cease to be valid, binding, and enforceable in accordance with its terms,
or any Lien granted, or intended by the Loan Documents to be granted, to Bank
shall cease to be a valid and perfected Lien having the first priority (or a
lesser priority if expressly permitted in the Loan Documents) in any of the
Collateral covered or purported to be covered thereby; or
(o) any failure by Borrower or any of its Subsidiaries to (i) pay
salaries and wages when due or (ii) make all required withholding payments; or
(p) any Change of Control of Borrower or any of its Subsidiaries
shall have occurred; or
(q) a default or an event of default shall occur under any material
agreement, document, or instrument to which any Guarantor or Stockholder of
Borrower or any of its Subsidiaries is a party, or by which any such Person or
its property is bound, and such agreement, document, or instrument evidences any
Indebtedness of such Person owing to Bank.
7.2 Remedies.
--------
(a) If any Default or Event of Default has occurred and is continuing,
then Bank may terminate or suspend its obligation to make further Loans or incur
further Letter of Credit Obligations. In addition, if any Event of Default
shall have occurred and be continuing, then Bank may, without notice, take any
one or more of the following actions: (A) declare all or any portion of the
Obligations to be forthwith due and payable, including contingent liabilities
with respect to Letter of Credit Obligations, whereupon such Obligations shall
become and be due and payable; (B) require that all Letter of Credit Obligations
be fully collateralized; (C) upon notice to Borrower from Bank, increase the
rate of interest applicable to the Loans to the Default Rate, and increase the
Letter of Credit Fee to the Default Letter of Credit Fee, effective as of the
date of the initial Event of Default or (D) exercise any rights and remedies
provided to Bank under the Loan Documents or at law or in equity, including all
remedies provided under the UCC; provided, that upon the occurrence of an Event
--------
of Default specified in Sections 7.1 (e), (f), or (g), the Obligations shall
------------ --- --- ---
become immediately due and payable (and any obligation of Bank to make further
Loans or incur any further Letter of Credit Obligations, if not previously
terminated, shall immediately be terminated) without declaration, notice, or
demand by Bank.
(b) In addition to all other rights and remedies of Bank under this
Agreement, Borrower expressly agrees that, upon the occurrence of any Event of
Default, Bank may collect, receive, assemble, process, appropriate, and realize
upon the Collateral, or any part thereof, and may forthwith sell, lease, assign,
give an option or options to purchase or otherwise dispose of and deliver said
Collateral (or contract to do so), or any part thereof, in one or more parcels
at public or private sale or sales, at any exchange and at such prices as it may
deem best, for cash, on credit, or for future delivery without assumption of any
credit risk. Bank shall have the right, upon any such public sale or sales and,
to the extent permitted by law, upon any such private sale or sales, to purchase
for the benefit of Bank by credit bid the whole or any part of said Collateral
so sold, free of any right or equity of redemption, which equity of redemption
Borrower hereby releases. Such sales may be adjourned or continued from time to
time with or
35
without notice. Bank shall have the right to conduct such sales on Borrower's
premises or elsewhere and shall have the right to use Borrower's premises
without rent or other charge for such sales or other action with respect to the
Collateral for such time or times as Bank deems necessary or advisable.
(c) Borrower further agrees, upon the occurrence of an Event of
Default and at Bank's request, to assemble and cause its Subsidiaries to
assemble the Collateral and make it available to Bank at places that Bank shall
reasonably select, whether at Borrower's premises or elsewhere. Until Bank is
able to effect a sale, lease, or other disposition of the Collateral, Bank shall
have the right to complete, assemble, use, or operate the Collateral or any part
thereof, to the extent that Bank deems appropriate, for the purpose of
preserving such Collateral or its value or for any other purpose. Bank shall
have no obligation to Borrower to maintain or preserve the rights of Borrower as
against third parties with respect to any Collateral while such Collateral is in
the possession of Bank. Bank may, if it so elects, seek, and Borrower and its
Subsidiaries hereby consent in advance to, the appointment of a receiver or
keeper to take possession of any Collateral and to enforce any of Bank's
remedies with respect to such appointment without prior notice or hearing. To
the maximum extent permitted by Applicable Law, each of Borrower and Overhill
Ventures waives all claims, damages, and demands against Bank, its Affiliates,
agents, and the officers and employees of any of them arising out of the
repossession, retention, or sale of any Collateral except such as are determined
in a final judgment by a court of competent jurisdiction to have arisen solely
out of the gross negligence or willful misconduct of such Person. Borrower
agrees that five days' prior notice by Bank to Borrower of the time and place of
any public sale or of the time after which a private sale may take place is
reasonable notification of such matters. Borrower shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all amounts to which Bank is entitled.
(d) Bank's rights and remedies under this Agreement shall be
cumulative and nonexclusive of any other rights and remedies that Bank may have
under any Loan Document or at law or in equity. Recourse to the Collateral
shall not be required. All rights, remedies, and powers provided in this
Agreement may be exercised only to the extent that the exercise thereof does not
violate any Applicable Law, and all provisions of this Agreement are intended to
be subject to any Applicable Law that may be controlling and to be limited, to
the extent necessary, so that they do not render this Agreement invalid or
unenforceable, in whole or in part.
7.3 Waivers by Borrower. Except as otherwise provided for in this
-------------------
Agreement and to the fullest extent permitted by Applicable Law, Borrower
waives: (a) presentment, demand, and protest, and notice of presentment,
dishonor, intent to accelerate, acceleration, protest, default, nonpayment,
maturity, release, compromise, settlement, extension, or renewal of any or all
Loan Documents, the Revolving Note, or any other notes, commercial paper,
Accounts, Contracts, Documents, Instruments, Chattel Paper, and guaranties at
any time held by Bank on which Borrower may in any way be liable, and hereby
ratifies and confirms whatever Bank may do in this regard; (b) all rights to
notice and a hearing prior to Bank's taking possession or control of, or to
Bank's replevy, attachment, or levy upon, any Collateral or any bond or security
that might be required by any court prior to allowing Bank to exercise any of
its remedies; and (c) the benefit
36
of all valuation, appraisal, and exemption laws. Borrower acknowledges that it
has been advised by counsel with respect to this Agreement, the other Loan
Documents, and the transactions evidenced hereby and thereby.
7.4 Proceeds. The Proceeds of any sale, disposition, or other
--------
realization upon any Collateral shall be applied by Bank upon receipt in the
following order of priority: first, to reimburse or pay in full the actual and
-----
reasonable expenses of Bank incurred in connection with such sale, disposition,
or other realization, including all other expenses, liabilities and advances
incurred or made by Bank in connection therewith; second, to Bank as specified
------
in Section 1.12; third, to collateralize any outstanding Letter of Credit
------------ -----
Obligations; and fourth, after payment and satisfaction in full in cash of all
------
of the Obligations and after the payment by Bank of any other amount required by
any provision of law, including Section 9504(1)(c) of the UCC (but only after
Bank has received what Bank considers reasonable proof of a subordinate party's
Lien), the surplus, if any, to Borrower or its representatives or to whomsoever
may be lawfully entitled to receive the same, or as a court of competent
jurisdiction may direct.
8. SUCCESSORS AND ASSIGNS
----------------------
Each Loan Document shall be binding on and shall inure to the benefit
of Borrower and its Subsidiaries, Bank, and their respective successors and
permitted assigns, except as otherwise provided herein or therein. Neither
Borrower nor any of its Subsidiaries shall assign, transfer, hypothecate, or
otherwise convey its rights, benefits, obligations, or duties under any Loan
Document without the prior written consent of Bank. Any such purported
assignment, transfer, hypothecation, or other conveyance by Borrower or any of
its Subsidiaries without the prior express written consent of Bank shall be
void. The terms and provisions of this Agreement and the other Loan Documents
are for the purpose of defining the relative rights and obligations of Borrower
and its Subsidiaries and Bank with respect to the transactions contemplated
hereby and thereby, and there shall be no third party beneficiaries of any of
the terms and provisions of any of the Loan Documents. Bank reserves the right
at any time to create and sell a participation in any portion of the Loans and
the Loan Documents and to sell, transfer or assign any or all of its rights in
the Loans and under the Loan Documents, and Borrower consents to Bank's sale of
participations in, at any time or times, the Loan Documents, Loans and Letter of
Credit Obligations, or of any portion thereof or interest therein, including
Bank's rights, title, interests, remedies, powers, or duties thereunder, whether
evidenced by a writing or not, to any bank or other financial institution.
9. DISPUTE RESOLUTION
------------------
(a) Any controversy or claim between or among the parties and their
agents, employees, and Affiliates, including (i) those arising out of or
relating to this Agreement or any of the other Loan Documents, (ii) any
negotiations, correspondence, or communications relating to this Agreement or
any of the other Loan Documents, whether or not incorporated herein or therein,
or to any Indebtedness evidenced hereby or thereby, (iii) the administration or
management of this Agreement or any of the other Loan Documents or any
Indebtedness evidenced hereby or thereby, or (iv) any alleged agreements,
promises, representations, or transactions in connection herewith or therewith,
including any claim or controversy that arises
37
out of or is based upon an alleged tort, shall be subject to and resolved in
accordance with the Alternative Dispute Resolution Agreement.
(b) No provision of, or the exercise of any rights under, Section 9(a)
------------
shall limit the right of Bank to exercise self-help remedies such as offset
rights, to foreclose against any Collateral, or to obtain provisional or
ancillary remedies such as injunctive relief or the appointment of a receiver
from a court having jurisdiction before, during, or after the pendency of any
mediation or arbitration.
(c) To the extent any provision of the Alternative Dispute Resolution
Agreement is inconsistent with the other terms of this Agreement, the terms of
the Alternative Dispute Resolution Agreement shall prevail.
10. YIELD PROTECTION
----------------
10.1 LIBOR Basis Determination. If, with respect to any proposed
-------------------------
LIBOR Loan for any LIBOR Loan Period, Bank determines that deposits in Dollars
(in the applicable amount) are not being offered to Bank in the relevant market
for such LIBOR Loan Period, then Bank shall give notice thereof to Borrower,
whereupon the obligations of Bank to make LIBOR Loans shall be suspended until
Bank notifies Borrower that the circumstances giving rise to such situation no
longer exist.
10.2 Illegality. If any (a) Applicable Law or any change therein, (b)
----------
interpretation or change in interpretation or administration thereof by any
Governmental Authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or (c) compliance by Bank with any
request or directive (whether or not having the force of law) of any such
authority, central bank, or comparable agency shall make it unlawful or
impossible for Bank to make, maintain, or fund any LIBOR Loans, then Bank shall
give notice thereof to Borrower. Upon receipt of such notice, Borrower shall
repay in full the then outstanding principal amount of each affected LIBOR Loan,
together with accrued interest thereon, either (i) on the last day of the then
current LIBOR Loan Period applicable to such LIBOR Loan if Bank may lawfully
continue to maintain and fund such LIBOR Loan to such day or (ii) immediately if
Bank determines it may not lawfully continue to fund and maintain such LIBOR
Loan to such day. Concurrently with repaying each affected LIBOR Loan, Borrower
shall borrow a Reference Rate Loan (or another type of LIBOR Loan, if available)
from Bank, and Bank shall make such Loan in an amount such that the outstanding
principal amount of the Loans immediately following such repayment shall equal
the outstanding principal amount of the Loans immediately prior to such
repayment.
10.3 Increased Costs.
---------------
(a) If any Applicable Law or any change therein, or any
interpretation or change in interpretation or administration thereof by any
Governmental Authority, central bank, or comparable agency charged with the
interpretation or administration thereof or compliance by Bank with any request
or directive (whether or not having any such authority) by any Governmental
Authority, central bank, or comparable agency:
38
(i) shall subject Bank to any tax (other than taxes imposed on
or measured by the net income of Bank), duty, or other charge with respect to
its obligation to make LIBOR Loans, or its LIBOR Loans, or shall change the
basis of taxation of payments to Bank of the principal of or interest on its
LIBOR Loans or in respect of any other amounts due under this Agreement in
respect of its LIBOR Loans or its obligation to make LIBOR Loans (except for
changes in the rate of tax on the overall net income of Bank imposed by the
jurisdiction in which Bank's principal executive office is located); or
(ii) shall impose, modify, or deem applicable any reserve
(including any reserve imposed by the Federal Reserve Board, but excluding with
respect to any LIBOR Loan any such requirement included in any applicable LIBOR
Basis determination), special deposit, capital adequacy, assessment, or other
requirement or condition against assets of, deposits with or for the account of,
or commitments or credit extended by Bank, or shall impose on Bank or the London
interbank borrowing market any other condition affecting its obligation to make
such LIBOR Loans or its LIBOR Loans;
and the result of any of the foregoing is to increase the cost to Bank of making
or maintaining any such LIBOR Loans, or to reduce the amount of any sum received
or receivable by Bank under this Agreement or under the Revolving Note, and such
increase is not given effect in the determination of LIBOR Basis, then, on the
earlier of demand by Bank or the applicable Payment Date of such LIBOR Loan,
Borrower shall pay to Bank such additional amount or amounts as will compensate
Bank for such increased costs. Bank will promptly notify Borrower, of any event
of which it has knowledge occurring after the date hereof that will entitle Bank
to compensation pursuant to this Section 10.3, and will designate a different
------------
lending office if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the sole judgment of Bank, be otherwise
disadvantageous to Bank.
(b) A certificate of Bank claiming compensation under this Section
-------
10.3 and setting forth the additional amount or amounts to be paid to it
----
hereunder and calculations therefor shall, absent manifest error, be deemed
final, binding and conclusive upon Borrower. In determining such amount, Bank
may use any reasonable averaging and attribution methods. If Bank demands
compensation under this Section 10.3, Borrower may at any time, upon at least
------------
five Business Days' prior notice to Bank, prepay in full the then outstanding
affected LIBOR Loans, together with accrued interest thereon to the date of
prepayment, along with any reimbursement required under Sections 1.9 and 11.2.
------------ ----
Concurrently with prepaying such LIBOR Loans Borrower shall borrow a Reference
Rate Loan, or a LIBOR Loan not so affected, from Bank, and Bank shall make such
Loan in an amount such that the outstanding principal amount of the Loans
immediately following such prepayment shall equal the outstanding principal
amount of the Loans immediately prior to such prepayment.
10.4 Effect On Other Loans. If notice has been given pursuant to
---------------------
Sections 10.1, 10.2, or 10.3 suspending the obligation of Bank to make any LIBOR
------------- ---- ----
Loan, or requiring LIBOR Loans to be repaid or prepaid, then, unless and until
Bank notifies Borrower that the circumstances giving rise to such repayment no
longer apply, all LIBOR Loans that would have been made by Bank shall be made
instead as Reference Rate Loans.
39
10.5 Capital Adequacy. If, after the date hereof, Bank (or any
----------------
Affiliate of Bank) shall have reasonably determined that the adoption after the
date hereof of any Applicable Law, governmental rule, regulation, or order
regarding the capital adequacy of banks or bank holding companies, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank (or any
Affiliate of Bank) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such Governmental Authority,
central bank, or comparable agency, has or would have the effect of reducing the
rate of return on the capital of Bank (or any Affiliate of Bank) as a
consequence of any of Bank's Credit Facilities or obligations hereunder to a
level below that which it could have achieved but for such adoption, change, or
compliance (taking into consideration the policies of Bank (or Affiliate of
Bank) with respect to capital adequacy immediately before such adoption, change,
or compliance and assuming that the capital of Bank (or Affiliate of Bank) was
fully utilized prior to such adoption, change or compliance), then, upon demand
by Bank, Borrower shall immediately pay to Bank such additional amounts as shall
be sufficient to compensate Bank for any such reduction actually suffered;
provided, that there shall be no duplication of amounts paid to Bank pursuant to
--------
this sentence and Section 10.3. A certificate of Bank setting forth the amount
------------
to be paid to Bank by Borrower as a result of any event referred to in this
Section 10.5 shall, absent manifest error, be deemed final, binding, and
------------
conclusive upon Borrower.
10.6 Federal Reserve System/Wire Transfers. The obligation of Bank to
-------------------------------------
make any Loan by wire transfer to Borrower or any other Person shall be subject
to all Applicable Laws, including the policy of the Federal Reserve Board on
Reduction of Payments System Risk as in effect from time to time. Borrower
acknowledges that such laws, regulations, and policy may delay the transmission
of any funds to Borrower.
11. MISCELLANEOUS
-------------
11.1 Complete Agreement; Modification of Agreement; Interpretation.
-------------------------------------------------------------
This Agreement and the other Loan Documents constitute the complete agreement
between the parties with respect to the subject matter hereof and thereof,
supersede all prior agreements, commitments, understandings, or inducements
(oral or written, expressed or implied), and may not be modified, altered, or
amended except by a written agreement signed by Bank, Borrower and each other
Person executing this Agreement or any other Loan Document, as applicable. No
provision of this Agreement shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party's having or being deemed to have structured,
drafted or dictated such provision.
11.2 Reimbursement and Expenses. Borrower will promptly pay:
--------------------------
(a) all reasonable out-of-pocket expenses of Bank in connection
with the preparation, negotiation, execution, and delivery of this Agreement,
the Notes, and the other Loan Documents, including all post-closing matters, and
the transactions contemplated hereunder and the Related Transactions and the
making of the Loans and the incurrence of the Letter of Credit Obligations,
including outside auditor costs, title and other insurance premiums, recording
and filing fees, intangible, documentary stamp, and other taxes, and the
reasonable attorneys' fees
40
and disbursements of counsel for Bank and the reasonable allocated costs for
services of internal counsel for Bank;
(b) all reasonable out-of-pocket expenses of Bank in connection with
the administration, making, or monitoring of the Loans, the Letters of Credit,
and this Agreement and the other Loan Documents in accordance with the
provisions thereof, the restructuring and refinancing of the transactions herein
and therein contemplated, and the preparation, negotiation, execution, and
delivery of any waiver, amendment, or consent by Bank relating to any of the
Loan Documents or the Related Transactions Documents, including the reasonable
attorneys' fees and disbursements of counsel for Bank and the reasonable
allocated costs for services of internal counsel for Bank and a fee to
compensate Bank for any such waiver, amendment, or consent; provided, that audit
--------
fees and other out-of-pocket fees and expenses incurred by Bank with respect to
any field examination of Borrower or the Collateral shall be subject to the
limitation set forth in Section 1.6(c).
--------------
(c) all of Bank's costs and out-of-pocket expenses of obtaining
performance under this Agreement or the other Loan Documents and collection of
the Obligations in any arbitration, mediation, legal action, or proceeding
(including any case under the Bankruptcy Code or similar laws), which, in each
case, shall include reasonable fees and expenses of counsel for Bank and the
reasonable allocated fees and disbursements for the services of internal counsel
for Bank; provided, that Borrower shall not be required to reimburse Bank for
--------
any fees or expenses of Bank incurred in connection with any action (i) between
Borrower and Bank on this Agreement or any other Loan Document pending before a
referee or a court of competent jurisdiction, (ii) that has not been voluntarily
dismissed by Borrower or dismissed pursuant to a settlement thereof, and (iii)
in which a final, non-appealable judgment or order shall have been entered in
favor of Borrower containing a determination that Borrower is the prevailing
party;
(d) all taxes (other than taxes imposed on or measured by the net
income of Bank), assessments (general or special), and other Charges levied on,
or assessed, placed, or made against any Collateral, the Revolving Note or the
other Loan Documents, or the Obligations;
(e) Bank's standard and customary charges for the forwarding to
Borrower or any other Person on behalf of Borrower by Bank of the proceeds of
any of the Loans (including by wire transfer); and
(f) whenever Bank sustains or incurs any reasonable direct losses or
out-of-pocket expenses in connection with (i) the failure by Borrower to borrow
or reborrow any LIBOR Loan, or reborrow any Loan as a LIBOR Loan, in each case,
after having given notice of its intention to borrow in accordance with Section
-------
1.1 (whether by the election of Borrower not to proceed or the failure to
---
satisfy of any of the conditions set forth in Section 2) or (ii) prepayment of
---------
any LIBOR Loan in whole or in part, then Borrower shall pay to Bank, upon the
earlier of Bank's demand or the applicable Payment Date for such Loan, an amount
sufficient to compensate Bank for all such losses and out-of-pocket expenses.
Bank's good faith determination of the amount of such losses and out-of-pocket
expenses shall, absent manifest error, be deemed final, binding, and conclusive
upon Borrower. Losses subject to reimbursement under this
41
Agreement shall include expenses incurred by Bank or any participant of Bank
permitted under this Agreement in connection with the re-employment of funds
prepaid, repaid, not borrowed, or paid, as the case may be, and any lost profit
of Bank or any participant of Bank over the remainder of the LIBOR Loan Period
for such prepaid LIBOR Loan.
11.3 Indemnity.
---------
(a) Borrower and each of its Subsidiaries shall indemnify and
hold each Indemnified Person harmless from and against any Claim that may be
instituted or asserted against or incurred by any such Indemnified Person by a
Person other than Borrower or Overhill Ventures as the result of credit having
been extended or not extended under this Agreement and the other Loan Documents
or otherwise in connection with or arising out of the transactions contemplated
hereunder, thereunder or the Related Transactions, including any Claim for
Environmental Liabilities and Costs and legal costs and expenses of disputes
between the parties to this Agreement; provided, that Borrower and its
--------
Subsidiaries shall not be liable for indemnification of an Indemnified Person to
the extent that any such Claim is finally determined by a court of competent
jurisdiction to have resulted solely from Indemnified Person's gross negligence
or willful misconduct.
(b) In any suit, proceeding, or action brought by Bank relating
to any item of Collateral or any amount owing hereunder, or to enforce any
provision of any item of Collateral, Borrower shall save, indemnify, and keep
Bank harmless from and against all expense, loss, or damage suffered by reason
of such action or any defense, setoff, or counterclaim asserted for any reason
by the other party or parties to such litigation and howsoever arising;
provided, that Borrower shall not be required to indemnify Bank under this
--------
sentence in connection with any action (i) between Borrower and Bank on this
Agreement or any other Loan Document pending before a referee or a court of
competent jurisdiction, (ii) that has not been voluntarily dismissed by Borrower
or dismissed pursuant to a settlement thereof, and (iii) in which a final, non-
appealable judgment or order shall have been entered in favor of Borrower
containing a determination that Borrower is the prevailing party. All
obligations of Borrower or any of its Subsidiaries with respect to any item of
Collateral shall be and remain enforceable against, and only against, Borrower
or such Subsidiary, as the case may be, and shall not be enforceable against
Bank. This Section 11.3 shall survive the Termination Date.
------------
11.4 No Waiver. Neither Bank's failure, at any time or times, to
---------
require strict performance by Borrower or any of its Subsidiaries of any
provision of any Loan Document, nor Bank's failure to exercise, nor any delay in
exercising, any right, power, or privilege under this Agreement, (a) shall
waive, affect, or diminish any right of Bank thereafter to demand strict
compliance and performance therewith or (b) shall operate as a waiver thereof.
Any suspension or waiver of a Default, Event of Default, or other provision
under the Loan Documents must be in writing signed by an authorized employee of
Bank to be effective and shall not suspend, waive, or affect any other Default
or Event of Default, whether the same is prior or subsequent thereto and whether
of the same or of a different type, and shall not be construed as a bar to any
right or remedy that Bank would otherwise have had on any future occasion.
42
11.5 Severability. Wherever possible, each provision of the Loan
------------
Documents shall be interpreted in such a manner as to be effective and valid
under Applicable Law, but if any provision of any Loan Document shall be
prohibited by or invalid under Applicable Law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of such
Loan Document. Except as otherwise expressly provided herein or in any other
Loan Document, all undertakings, agreements, covenants, warranties, and
representations of or binding upon Borrower or any of its Subsidiaries and all
rights of Bank, all as contained in the Loan Documents, shall not terminate or
expire, but rather shall survive such termination or cancellation and shall
continue in full force and effect until the Termination Date; provided, that the
--------
reimbursement and expense provisions of Section 11.2, the indemnity provisions
------------
of Section 11.3, the governing law and venue provisions of Section 11.12, and
------------ -------------
the Alternative Dispute Resolution Agreement shall all survive the Termination
Date.
11.6 Conflict of Terms. Except as otherwise provided in any Loan
-----------------
Document by specific reference to the applicable provisions of this Agreement,
if any provision contained in this Agreement is in conflict with, or
inconsistent with, any provision in any other Loan Document, the provision
contained in this Agreement shall govern and control.
11. Notices.
-------
(a) All notices and other communications under this Agreement
and the other Loan Documents shall be in writing and shall be deemed to have
been given three days after deposit in the United States mail, first class mail,
postage prepaid, or one day after being entrusted to a reputable commercial
overnight delivery service, or when sent out by facsimile transmission addressed
to the party to which such notice is directed at its address determined as
provided in this Section 11.7. All notices and other communications under this
------------
Agreement shall be given to the parties hereto at the following addresses:
(i) if to Borrower or Overhill Ventures:
Overhill Farms, Inc.
0000 Xxxxxxxx Xxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn: Xx. Xxxxx Xxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
43
with a copy to:
Xxxxxxx, Xxxxxxx & Smiley
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Arbiter, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(ii) If to Bank:
Union Bank of California, N.A.
000 Xxxxx Xxxxxxxx Xxxxxx, 00/xx/ Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Commercial Finance Division
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxxx Xxxxxx & Xxxxxx
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) Any party to this Agreement may change the address to which
notices shall be directed under this Section 11.7 by giving ten days' written
------------
notice of such change to the other parties.
11.8 Confidentiality.
---------------
(a) Borrower agrees to keep the terms of this Agreement
confidential and not, without the Bank's prior written consent, deliver copies
of any portion hereof, nor divulge to or discuss with any other Person (other
than to (i) Borrower's accountants and legal counsel, (ii) LLCP or its
successors and assigns (iii) any Person that refinances the Subordinated Note
pursuant to a Permitted Subordinated Note Refinancing, or (iv) as required by
law), the provisions hereof. Borrower agrees that neither it nor its Affiliates
will in the future issue any press releases or other public disclosure using the
name of Bank or its Affiliates or referring to this Agreement, the other Loan
Documents or the Related Transactions Documents (other than direct disclosures
to any of its customers, vendors, advisors, auditors, employees, other lenders,
credit agencies or any other Person requiring such information as determined by
Borrower in its reasonable business judgment or disclosures made pursuant to
filings with the Securities and Exchange Commission or any Governmental
Authority or set forth in Borrower's Financial Statements) without at least two
Business Days' prior notice to Bank and without the prior
44
written consent of Bank unless (and only to the extent that) Borrower or its
Affiliate is required to do so under law and then, in any event, Borrower or its
Affiliate will consult with Bank before issuing such press release or other
public disclosure.
(b) Bank agrees to use commercially reasonable efforts
(equivalent to the efforts Bank applies to maintain the confidentiality of its
own confidential information or the confidential information of its other
borrowers that are similarly situated to Borrower) to maintain as confidential
all confidential information provided to them by Borrower and designated as
confidential, except that Bank may disclosure such information: (a) to Bank's
examiners or auditors or as required or requested by any Governmental Authority
or reasonably believed by Bank to be compelled by any court decree, subpoena or
legal or administrative order or process; (b) as, on the advice of counsel, is
required by law; (c) in connection with the exercise of any right or remedy
under the Loan Documents or in connection with any litigation to which Bank is a
party; or (d) that ceases to be confidential through no fault of Bank; provided,
--------
that with respect to clauses (a) and (b) above, Bank shall notify Borrower as
----------- ---
soon as is reasonably practicable under the circumstances prior to any proposed
disclosure and afford Borrower the opportunity, at Borrower's expense, to limit
or eliminate the required disclosure or obtain one or more protective orders
with respect thereto, in each case only to the extent that Bank has determined
that the failure to immediately disclose would not subject it to any liability.
11.9 Section Titles. The section titles and table of contents
--------------
contained in this Agreement and any other Loan Document are and shall be without
substantive meaning or content of any kind whatsoever and are not a part of the
agreement between the parties hereto.
11.10 Counterparts. Each Loan Document may be executed in any number
------------
of identical counterparts, each of which shall constitute an original and all of
which shall collectively and separately constitute a single instrument or
agreement.
11.11 Time of the Essence. Time is of the essence for payment and
-------------------
performance of the Obligations.
11.12 GOVERNING LAW; VENUE. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
--------------------
ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY, AND PERFORMANCE, THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT
REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS, AND ANY APPLICABLE
LAWS OF THE UNITED STATES. BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE OR
FEDERAL COURTS LOCATED IN LOS ANGELES, CALIFORNIA SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND
BANK PERTAINING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR TO ANY MATTER
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS;
PROVIDED, THAT BANK, AND BORROWER
--------
45
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF LOS ANGELES, CALIFORNIA; PROVIDED FURTHER, THAT NOTHING IN
-------- -------
THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE BANK FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF BANK. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE, OR FORUM NON CONVENIENS AND HEREBY
----- --- ----------
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT, AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT, AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN
SECTION 11.7 AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER
------------
OF BORROWER'S ACTUAL RECEIPT THEREOF OR THREE DAYS AFTER DEPOSIT IN THE UNITED
STATES MAIL, PROPER POSTAGE PREPAID.
11.13 WAIVER OF JURY TRIAL. AS SET FORTH IN THE ALTERNATIVE DISPUTE
--------------------
RESOLUTION AGREEMENT, EACH PARTY TO THIS AGREEMENT EXPRESSLY, INTENTIONALLY AND
DELIBERATELY WAIVES ITS RIGHT TO A TRIAL BY JURY AND AGREES TO HAVE ANY CLAIM,
CAUSE OF ACTION, ACTION, DISPUTE, OR CONTROVERSY BETWEEN IT AND THE OTHER PARTY
TO THIS AGREEMENT, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, RESOLVED
PURSUANT TO THE TERMS OF THE ALTERNATIVE DISPUTE RESOLUTION AGREEMENT.
46
IN WITNESS WHEREOF, this Loan and Security Agreement has been duly
executed as of the date first written above.
"BORROWER" "OVERHILL VENTURES"
OVER
HILL FARMS, INC., OVERHILL L.C. VENTURES, INC.,
a Nevada corporation a California corporation
By:________________________ By:_________________________
Xxxxx Xxxxx Xxxxx Xxxxx
President and Chief Executive President and Chief Executive
Officer Officer
By:________________________ By:_________________________
Xxxxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxxx
Vice President and Chief Financial Vice President and Chief
Officer Financial Officer
"BANK"
UNION BANK OF CALIFORNIA, N.A.
By:________________________
Name:______________________
Title:_____________________
47
SCHEDULE A - DEFINITIONS AND RULES OF CONSTRUCTION
1. Capitalized terms used in the Agreement and the other Loan
Documents shall have (unless otherwise provided elsewhere in the Agreement or in
the other Loan Documents) the following respective meanings:
"Account Debtor" means any Person who is obligated under an Account.
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"Accounts" means all "accounts," as such term is defined in the UCC,
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now owned or hereafter acquired by any Person, including (a) all accounts
receivable, other receivables, book debts, and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper, Documents, or
Instruments), whether arising out of goods sold or services rendered by it or
from any other transaction (including any such obligations that may be
characterized as an account or contract right under the UCC), (b) all purchase
orders or receipts for goods or services, (c) all rights to any goods
represented by any of the foregoing (including unpaid sellers' rights of
rescission, replevin, reclamation, and stoppage in transit and rights to
returned, reclaimed, or repossessed goods), (d) all monies due or to become due
to such Person under all purchase orders and contracts for the sale of goods or
the performance of services or both by such Person or in connection with any
other transaction (whether or not yet earned by performance on the part of such
Person), including the right to receive the proceeds of said purchase orders and
contracts, and (e) all collateral security and guaranties of any kind given by
any Person with respect to any of the foregoing.
"Affiliate" means, with respect to any Person: (a) each Person that,
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directly or indirectly, owns or controls, whether beneficially or as a trustee,
guardian, or other fiduciary, 5% or more of the Stock having ordinary voting
power in the election of directors of such Person; (b) each Person that
controls, is controlled by, or is under common control with such Person or any
Affiliate of such Person; (c) each of such Person's officers, directors,
partners, and Subsidiaries; or (d) with respect to Borrower, each Related
Person. For the purpose of this definition, "control" of a Person shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract, or otherwise.
"Agreement" means the Loan and Security Agreement to which this
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Schedule A is attached or otherwise identified.
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"Alternative Dispute Resolution Agreement" means (a) the Alternative
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Dispute Resolution Agreement between Bank and Borrower and (b) the Alternative
Dispute Resolution Agreement between Bank and Overhill Ventures, each in
substantially the form of Exhibit B.
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"Applicable Law" means, in respect of any Person, all provisions of
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constitutions, statutes, rules, regulations, and orders of governmental bodies
or regulatory agencies applicable to such Person and all orders and decrees of
all courts and arbitrators in proceedings or actions to which such Person is a
party or by which it or its properties are bound, including Environmental Laws
and the Fair Labor Standards Act.
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"Applicable Percentage" means (a) two percent (2%), in the case of
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termination of the Agreement and the Credit Facilities during the period
commencing on the Closing Date and ending one year after the Closing Date, (b)
one percent (1%), in the case of termination of the Agreement and the Credit
Facilities during the period commencing after the date that is one year after
the Closing Date and ending two years after the Closing Date, and (c) one-half
of one percent (0.5%) in case of a termination of the Agreement and the Credit
Facilities during the period commencing after the date that is two years after
the Closing Date and ending at any time thereafter prior to the Commitment
Maturity Date.
"Authorized Signatory" means such senior personnel of Borrower as may
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be duly authorized and designated in writing by Borrower to execute documents,
agreements, and instruments on behalf of Borrower and to xxxxx x xxxx upon
Borrower's real and personal property.
"Bank" means Union Bank of California, N.A. and its successors and
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assigns.
"Bankruptcy Code" means the provisions of title 11 of the United
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States Code, 11 U.S.C. Sections 101 et seq.
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"Books and Records" means, with respect to any Person, all books,
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records, board minutes, contracts, licenses, insurance policies, environmental
audits, business plans, files, accounting books and records, financial
statements (actual and pro forma), and filings with Governmental Authorities.
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"Borrower" means Overhill Farms, Inc., a Nevada corporation.
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"Borrowing Availability" means, at any time, the lesser of (a) the
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Maximum Amount minus the aggregate face amount of the Letters of Credit
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outstanding at such time or (b) the Borrowing Base minus the sum of (i)
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aggregate face amount of the Standby Letters of Credit outstanding at such time
and (ii) 45% of the outstanding amount of commercial Letters of Credit, in each
case less Producer Payable Reserves and any other reserves established by Bank
in its reasonable credit judgment from time to time. Bank reserves the right,
at any time and from time to time after the Closing Date, to establish and
modify reserves in its reasonable credit judgment.
"Borrowing Base" means, at any time, an amount equal to:
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(a) up to 85% of the value, as determined by Bank based on the
Schedule of Accounts most recently delivered by Borrower to Bank or on any other
information available to Bank, of Eligible Accounts, and less any Dilution
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Reserve or other reserve established by Bank in its reasonable credit judgment;
plus
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(b) the lesser of (i) 8,000,000 and (ii) up to 55% of the value
of Eligible Inventory, and less any reserve established by Bank in its
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reasonable credit judgment, in each case as determined by Bank based on the
Schedule of Inventory most recently delivered by Borrower to Bank or on any
other information available to Bank, valued at the lower of cost (determined on
a first-in, first-out basis) or market. Bank reserves the right, in its
reasonable
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credit judgment, at any time and from time to time after the Closing Date, to
(x) establish and modify the criteria set forth in, or establish new criteria
for, the definition of "Eligible Accounts" and "Eligible Inventory," (y)
establish and modify reserves, and (z) to adjust advance rates based on the
results of field examinations or inventory appraisals or reviews conducted by a
firm acceptable to Bank.
"Borrowing Base Certificate" means a certificate to be delivered by
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Borrower to Bank pursuant to Section 5.1(b), which shall be substantially in the
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form of Exhibit D.
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"Business Day" means any day that is not a Saturday, Sunday, or other
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day on which banks in the State of California are authorized or required to
close, and in reference to LIBOR Loans means a Business Day that is also a day
on which banks in the city of London are open for interbank or foreign exchange
transactions.
"Capital Expenditures" means, with respect to any Person, all payments
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or accruals (including Capital Lease Obligations) for any fixed assets or
improvements or for replacements, substitutions, or additions thereto, that have
a useful life of more than one year and that are required to be capitalized
under GAAP.
"Capital Lease Obligation" means, with respect to any Person, that
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portion of any obligation as lessee under a lease that is required to be
capitalized on, or disclosed in a footnote to, the balance sheet of such Person
in accordance with GAAP.
"Cash Interest Expense" means, for any period, without duplication and
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only to the extent deducted in determining Net Income (Loss), calculated without
regard to any limitation on the payment thereof and determined in accordance
with GAAP, (i) total consolidated interest expense of Borrower and its
Subsidiaries (including, without limitation, interest paid to Affiliates and the
portion of any Capital Lease Obligations allocable to interest expense), whether
paid or accrued, minus (ii) to the extent included in total consolidated
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interest expense, any non-cash interest expense, including, without limitation,
any payment-in-kind interest, amortization of original issue discount, non-cash
losses on hedging agreements and amortization of capitalized up-front costs.
"Change of Control" means, with respect to any Person, that (a) any
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other Person or "group" shall increase its "beneficial ownership" (as such terms
are defined under Section 13d-3 of and Regulation 13D under the Securities
Exchange Act), either directly or indirectly, by more than 10% of the
outstanding shares of Stock of such Person having the right to vote for the
election of directors of such Person under ordinary circumstances, (b) any
change in the composition of such Person's Stockholders as of the Closing Date
shall occur that would result in any Stockholder or group that does not, as of
the Closing Date, own 50% or more of any class of Stock of such Person owning
50% or more of any class of Stock of such Person, or (c) any other Person (or
group of Persons acting in concert) shall otherwise acquire the power to direct
the management or affairs of such Person by obtaining proxies, entering into
voting agreements or trusts, acquiring securities, or otherwise, in each case
from and after the Closing Date. Nothing contained in this Agreement shall be
deemed or construed to prohibit or restrict in any way, or require notice to
Bank of, any change in control of Polyphase.
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"Charges" means all federal, state, county, city, municipal, local,
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foreign or other governmental taxes (including taxes owed to PBGC at the time
due and payable), levies, assessments, charges, liens, and all additional
charges, interest, penalties, expenses, claims, or encumbrances upon or relating
to (a) the Collateral, (b) the Obligations, (c) the employees, payroll, income,
or gross receipts of Borrower, (d) the ownership or use of any assets by
Borrower, or (e) any other aspect of Borrower's business.
"Chattel Paper" means all "chattel paper," as such term is defined in
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the UCC, now owned or hereafter acquired by any Person, wherever located.
"Claim" means any and all: (a) suits, actions, or proceedings in any
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court or forum, at law, in equity or otherwise; (b) costs, fines, deficiencies,
or penalties; (c) asserted claims or demands by any Person; (d) arbitration
demands, proceedings, or awards; (e) damages, losses, liabilities, and expenses
(including reasonable attorneys' fees and disbursements and other costs of
collection, defense, or appeal); (f) enforcement of rights and remedies; or (g)
criminal, civil, or regulatory investigations.
"Closing Date" means November 24, 1999.
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"Collateral" means all right, title, and interest of Borrower or any
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Subsidiary of Borrower in, to and under any property, whether now existing or
hereafter acquired, real or personal, tangible or intangible, and whether owned
by, consigned to, held by, or under the care, custody, or control of, Borrower
or such Subsidiary, including all Accounts, Books and Records, Chattel Paper,
Contracts, Documents, Equipment, Fixtures, General Intangibles (including all
Intellectual Property, Stock, Claims, contract rights, payment intangibles, and
choses in action), Goods, Instruments, Inventory, Investment Property, Letter of
Credit Rights, money, cash, and cash equivalents, real property interests,
Supporting Obligations, the Disbursement Accounts and other Deposit Accounts
(including the Collection Accounts, the Control Account, the Disbursement
Accounts, and any other bank accounts maintained by Borrower at Bank), and all
of Borrower's or such Subsidiary's other interests in property of every kind and
description, and the products, profits, and rents of, dividends or distributions
on, accessions to, and all Proceeds (including insurance proceeds) of any of the
foregoing, regardless of whether the foregoing, or any portion of it,
constitutes property as to which the UCC provides for the perfection of a Lien,
and all rights and remedies applicable to such property, but excluding, in all
events, Hazardous Materials.
"Collateral Documents" means the Pledge Agreement, the Intellectual
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Property Security Agreement and all other Loan Documents granting Liens to Bank
to secure the Obligations or other rights with respect to the Collateral.
"Collection Accounts" means any of the bank accounts in the name of
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Borrower maintained at Bank and designated as collection accounts on Schedule
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3.23.
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"Commitment Maturity Date" means the earliest of (a) November 24,
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2002, (b) the date Bank's obligation to make Loans and incur Letter of Credit
Obligations is terminated and the Obligations are declared to be due and payable
pursuant to Section 7.2, and (c) the date of
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prepayment in full by Borrower of the Obligations in accordance with the
provisions of Section 1.9.
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"Compliance Certificate" means a statement in reasonable detail
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certified by the Chief Financial Officer of Borrower showing the calculations
used in determining compliance with each of the financial covenants set forth in
Section 3.24, which shall be substantially in the form of Exhibit E.
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"Contracts" means all "contracts," as such term is defined in the UCC,
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now owned or hereafter acquired by any Person, including all contracts,
undertakings, or agreements (other than rights evidenced by Chattel Paper,
Documents, or Instruments), including any agreement relating to the terms of
payment or the terms of performance of any Account.
"Control Account" means account number 3350183662 in the name of
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Borrower maintained at Bank.
"Credit Facilities" means the Revolving Loans and the Letters of
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Credit.
"Default" means any event that, with the passage of time or notice or
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both, would, unless cured or waived, become an Event of Default.
"Default Letter of Credit Fee" means a per annum default rate equal to
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two percentage points in excess of the otherwise applicable Letter of Credit Fee
(calculated on the basis of a 360-day year and actual days elapsed) on the face
amount of the Letters of Credit then outstanding.
"Default Rate" means a per annum default rate equal to two percentage
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points in excess of the maximum interest rate(s) otherwise applicable to the
Obligations.
"Deposit Account" means any demand, time, savings, passbook or similar
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account maintained by any Person with Bank or any other bank or financial
institution.
"Dilution" means, for any period of 12 consecutive months, (a) non-
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cash reductions in the Accounts of Borrower during such period divided by (b)
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Borrower's gross sales for such period. The amounts of any non-cash reductions
to Borrower's accounts receivable and Borrower's gross sales shall each be
determined in accordance with GAAP.
"Dilution Reserve" means the reserve established by Bank and applied
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from time to time to reduce the portion of the Borrowing Base for Eligible
Accounts, which reserve shall be implemented in the event that Dilution exceeds
five percent (5%), and such reserve shall be in an amount equal to one percent
(1%) of Eligible Accounts for each one percent (1%) of Dilution that is in
excess of five percent (5%).
"Disbursement Account" means account number 3350183654 in the name of
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Borrower maintained at Bank.
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"Documents" means all "documents," as such term is defined in the UCC,
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now owned or hereafter acquired by any Person, wherever located, including all
bills of lading, dock warrants, dock receipts, warehouse receipts, and other
documents of title, whether negotiable or non-negotiable.
"Dollars" means lawful currency of the United States.
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"EBITDA" shall mean, for any period, without duplication and
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determined on a consolidated basis and in accordance with GAAP:
(i) the sum of (A) Net Income (Loss), (B) interest expense
deducted in determining Net Income (Loss) (including cash interest, payment-in-
kind interest and amortization of original issue discount), (C) the amount of
Taxes deducted in determining Net Income (Loss), (D) the amount of depreciation
and amortization expense deducted in determining Net Income (Loss), and (E) any
extraordinary or unusual non-cash losses (provided that such extraordinary or
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unusual non-cash losses do not result in any cash outlay at any time after the
Closing Date), in each case for such period; minus
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(ii) any extraordinary or unusual income or gains for such
period.
"Eligible Account" means, as of any date of determination, an Account
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of Borrower:
(a) that is due and payable within 90 days following its
original invoice date;
(b) that conforms to all of the representations and warranties
pertaining to Accounts set forth in the Agreement or any other Loan Document;
(c) (i) that arises from the sale of goods of, or the
performance of services by, Borrower in the ordinary course of its business,
(ii) that is subject to a valid, perfected, and continuing first priority Lien
in favor of Bank and is owned by Borrower free and clear of any rights, claims,
Liens, or other interests of any Person other than (A) Liens in favor of Bank,
(B) Liens that secure the Subordinated Debt, and (C) other Permitted Liens, and
(iii) with respect to which an invoice, in form and substance acceptable to
Bank, has been sent to the applicable Account Debtor;
(d) that (i) is a bona fide, valid, and enforceable obligation
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of the applicable Account Debtor upon which Borrower's right to receive payment
is absolute and not contingent upon the fulfillment of any condition whatsoever
and (ii) does not arise with respect to goods that are placed on consignment or
delivered on a guaranteed sale, sale or return or sale on approval, xxxx-and-
hold, or cash-on-delivery basis or upon other terms by reason of which payment
by the applicable Account Debtor is or may be conditional;
(e) with respect to which the applicable Account Debtor has not
asserted any defense, counterclaim, offset or dispute, and such Account is not a
"contra" Account;
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(f) with respect to which the applicable Account Debtor (i) is
not a federal, state, or local governmental entity or agency unless Bank, in its
sole discretion, has agreed to the contrary in writing and Borrower, if
necessary or desirable, has complied with the Federal Assignment of Claims Act
of 1940 or any applicable state statute or municipal ordinance of similar
purpose and effect with respect thereto, (ii) is not an Affiliate, a Subsidiary,
a Related Person, or an employee of Borrower, and (iii) has its principal place
of business located outside of or is not a resident of the United States unless
such Account is supported by a letter of credit assigned to Bank in form and
substance, and issued by an institution, satisfactory to Bank in Bank's sole
discretion;
(g) with respect to which the applicable Account Debtor: (i) is
not the subject of a case or proceeding under the Bankruptcy Code or any other
federal, state, foreign receivership, or any other insolvency or bankruptcy
laws; (ii) has not made a general assignment for the benefit of creditors; (iii)
has not failed to pay its debts generally as they come due, suspended business,
or become insolvent; or (iv) has not consented to or suffered the appointment of
a receiver, trustee, liquidator, or custodian for it or for all or a significant
portion of its assets or affairs and such receiver, trustee, liquidator, or
custodian has not been dismissed;
(h) the collection of which, in Bank's sole discretion, is not
doubtful by reason of the applicable Account Debtor's financial condition or
otherwise;
(i) that is not evidenced by any Chattel Paper, Instrument, or
judgment;
(j) to the extent that the total unpaid amount of such Account,
when added together with all other Accounts due to Borrower from the applicable
Account Debtor, does not exceed fifteen percent (15%) of all Accounts of
Borrower (except for those Account Debtors identified in Schedule C, with
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respect to which the concentration limit shall be 25%);
(k) that is payable only in Dollars;
(l) that is not in default (an Account shall be deemed to be in
default under this clause (l) if (i) such Account is not paid within the earlier
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of 60 days following its due date or 90 days following its original invoice date
or (ii) such Account is an obligation of an Account Debtor with respect to which
more than 50% of all Accounts due to Borrower from such Account Debtor are not
otherwise eligible under the other criteria set forth in clause (i) of this
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subparagraph);
(m) that does not consist of a credit balance that is more than
90 days following its due date; and
(n) that is otherwise acceptable to Bank in its reasonable
credit judgment.
"Eligible Inventory" means, as of any date of determination, Inventory
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of Borrower:
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(a) that (i) consists of first quality raw materials consisting
of Ingredients or finished goods held for sale in the ordinary course of
Borrower's business, (ii) is subject to a valid, perfected, and continuing first
priority Lien in favor of Bank and (iii) is owned by Borrower free and clear of
any rights, claims, Liens, or other interests of any Person, other than (A)
Liens in favor of Bank, (B) Liens that secure the Subordinated Debt, and (C)
other Permitted Liens;
(b) that is located only on premises owned, leased, or operated
by Borrower and referenced in Schedule 3.2, and (i) if such location is a public
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warehouse, then the warehouseman has executed a bailee letter in form and
substance acceptable to Bank, and Bank has determined the amount of, and is
maintaining, a reserve against the Borrowing Base with respect to the Inventory
located at such public warehouse, or (ii) if such location is one of Borrower's
owned or leased locations, either the landlord has executed a mortgagee's waiver
or a landlord's waiver, as the case may be, in form and substance acceptable to
Bank, or Bank has determined the amount of, and is maintaining, a reserve
against the Borrowing Base with respect to the Inventory located at such owned
or leased location;
(c) that is not located at any outside processing facility;
(d) that conforms to all of the representations or warranties
pertaining to Inventory set forth in this Agreement or any other Loan Document;
(e) that is not (i) placed on consignment or (ii) in transit;
(f) that does not consist of (i) work-in-process, (ii) fresh
poultry, beef or produce, (iii) refurbished goods, (iv) goods that have spoiled
or are past spoilage dating, (v) goods that have been returned by the buyer,
(vi) packaging or shipping materials, (vii) display items, (viii) samples, (ix)
labels, (x) supplies, or (xi) spare, replacement or repair parts;
(g) that does not constitute Slow Moving Inventory or obsolete,
shopworn, unmerchantable, unsalable, returned, damaged, defective, off-season or
out-of-season, excess, unusable, or unworkable goods or goods unfit for further
processing;
(h) that is covered by property and casualty insurance
acceptable to Bank;
(i) that consists of goods that can be transported or sold only
with licenses that are readily available;
(j) that does not consist of any costs associated with "freight-
in" charges;
(k) that is only covered by non-negotiable documents of title
unless the negotiable document representing such Inventory has been delivered to
Bank; and
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(l) that is otherwise acceptable to Bank in its reasonable
credit judgment.
"Environmental Laws" means any and all federal, state, local, and
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municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, or requirements of any Governmental Authority regulating, relating to,
or imposing liability or standards of conduct concerning, environmental
protection matters, including Hazardous Materials, as now or hereafter in
effect.
"Environmental Liabilities and Costs" means all liabilities,
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obligations, responsibilities, remedial actions, removal costs, losses, damages,
costs, and expenses that relate to any health or safety condition regulated
under any Environmental Law or in connection with any other environmental matter
or Release, threatened Release, or the presence of any Hazardous Material.
"Environmental Permits" means all permits, licenses, administrative
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orders, consent orders, consent decrees, governmental agency agreements, or
other written documents detailing required environmental performance expected of
Borrower or any of its Subsidiaries by any Governmental Authority.
"Equipment" means all "equipment," as such term is defined in the UCC,
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now owned or hereafter acquired by any Person, wherever located, including all
machinery and equipment, including processing equipment, conveyors, machine
tools, data processing and computer equipment with software and peripheral
equipment, and all engineering, processing, and manufacturing equipment, office
machinery, furniture, materials handling equipment, tools, attachments,
accessories, automotive equipment, trailers, trucks, forklifts, molds, dies,
stamps, motor vehicles, rolling stock, and other equipment of every kind and
nature, trade fixtures, and fixtures, together with all additions and accessions
thereto, replacements therefor, all parts therefor, all substitutes for any of
the foregoing, fuel therefor, and all manuals, drawings, instructions,
warranties, and rights with respect thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
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any regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
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incorporated) that is a member of a "controlled group of corporations," a group
of trades or businesses under "common control," or an "affiliated service
group," that includes Borrower, in each case within the meaning of Sections
414(b), (c), (m), or (o) of the IRC.
"Event of Default" means any of the events specified in Section 7.1.
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"Fair Labor Standards Act" means the provisions of the Fair Labor
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Standards Act, 29 U.S.C. (S)(S) 201 et seq.
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"Farm Products" shall mean "farm products," as such term is defined in
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the UCC, now owned or hereafter acquired by any Person, including all livestock,
livestock products,
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poultry, poultry products, seafood, seafood products, and all other products or
byproducts produced therefrom.
"FDA" means the United States Food and Drug Administration.
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"Federal Reserve Board" means the Board of Governors of the Federal
---------------------
Reserve System.
"Financial Statements" means the consolidated and consolidating income
--------------------
statement, balance sheet, and statement of cash flows of Borrower and each of
its Subsidiaries, including all notes and schedules thereto, internally prepared
for each Fiscal Month, and audited for each Fiscal Year, in each case prepared
in accordance with GAAP.
"Fiscal Month" means any of the monthly accounting periods of
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Borrower.
"Fiscal Quarter" means any of the quarterly accounting periods of
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Borrower.
"Fiscal Year" means the 12 month period of Borrower ending on (i) the
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last Sunday in September of each year, if September 30 does not fall on a
Saturday, or (ii) October 1, if September 30 falls on a Saturday. Subsequent
changes to the Fiscal Year of Borrower shall not change the term "Fiscal Year"
unless Bank shall consent in writing to such change.
"Fixed Charge Coverage Ratio" means, with respect to any period, the
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ratio of (i) EBITDA for such period to (ii) Fixed Charges for such period.
"Fixed Charges" means, for any period and without duplication, the sum
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of (i) Cash Interest Expense, (ii) scheduled payments of principal on any
Indebtedness of Borrower and its Subsidiaries, (iii) scheduled Capital Lease
Obligations of Borrower or any of its Subsidiaries for such period representing
principal, (iv) Taxes estimated to be paid by Borrower and its Subsidiaries,
after giving effect to the net operating loss carryforward of Polyphase, (v)
cash dividends or distributions, if any, paid by Borrower or any of its
Subsidiaries, (vi) Capital Expenditures, and (vii) all Tax Sharing Cash
Payments, in each case for such period.
"Fixtures" means "fixtures," as such term is defined in the UCC, now
--------
owned or hereafter acquired by any Person, wherever located.
"GAAP" means generally accepted accounting principles as in effect
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from time to time in the United States, applied on a basis consistent with past
practices, subject to the exceptions set forth in paragraph 2 of this
Schedule A.
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"General Intangibles" means all "general intangibles," as such term is
-------------------
defined in the UCC, now owned or hereafter acquired by any Person, including all
customer lists, licenses, copyrights, trademarks, patents, and all applications
therefor and reissues, extensions, or renewals thereof, rights in Intellectual
Property, interests in partnerships, joint ventures, and other business
associations, Licenses, permits, trade secrets, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge,
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know-how, software, data bases, data, skill, expertise, experience, processes,
models, drawings, materials and records, Goodwill (including the Goodwill
associated with any Intellectual Property), all rights and claims in or under
insurance policies (including insurance for fire, damage, loss, and casualty,
whether covering personal property, real property, tangible rights or intangible
rights, all liability, life, key man, and business interruption insurance, and
all unearned premiums), uncertificated securities, certificated securities,
choses in action, deposit, checking, and other bank accounts, rights to receive
tax refunds and other payments, rights to receive dividends, distributions,
cash, instruments, and other property in respect of or exchange for pledged
shares or other equity interests, rights of indemnification, all Books and
Records, correspondence, credit files, invoices and other papers, including all
tapes, cards, computer runs, and other papers and documents in the possession or
under the control of such Person or any computer bureau or service company from
time to time acting for such Person.
"Goods" means all "goods," as such term is defined in the UCC, now
-----
owned or hereafter acquired by any Person, wherever located, including movables,
fixtures, equipment, inventory, or other tangible property.
"Goodwill" means all goodwill, trade secrets, proprietary or
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confidential information, technical information, procedures, formulae, quality
control standards, designs, operating and training manuals, customer lists, and
distribution agreements now owned or hereafter acquired by any Person.
"Governmental Authority" means any nation or government, any state or
----------------------
other political subdivision thereof, or any agency, department, or other entity
exercising executive, legislative, judicial, regulatory, or administrative
functions of or pertaining to government.
"Guaranteed Indebtedness" means, with respect to any Person, any
-----------------------
obligation of such Person guaranteeing any indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner, including any obligation or arrangement of such Person
(a) to purchase or repurchase any such primary obligation, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet condition
of the primary obligor, (c) to purchase property, securities, or services
primarily for the purpose of assuring the holder of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (d) to indemnify the holder of such primary obligation against
loss in respect thereof. The amount of any "Guaranteed Indebtedness" at any
time shall be deemed to be an amount equal to the lesser at such time of (x) the
stated or determinable amount of the primary obligation in respect of which such
Guaranteed Indebtedness is made and (y) the maximum amount for which such Person
may be liable pursuant to the terms of the instrument embodying such Guaranteed
Indebtedness; or, if not stated or determinable, the maximum reasonably
anticipated liability (assuming full performance) in respect thereof.
"Guarantor" means each of Polyphase and Overhill Ventures and each
---------
other Person, if any, that executes a guaranty or other similar agreement in
favor of Bank in connection with the transactions contemplated by this Agreement
and the other Loan Documents.
A-11
"Guaranty" means that certain guaranty executed by each Guarantor in
--------
favor of Bank, in substantially the form of Exhibit C.
---------
"Hazardous Material" means any substance, material, or waste, the
------------------
generation, handling, storage, treatment, or disposal of which is regulated by
any Governmental Authority, or forms the basis of liability under any
Environmental Law in any jurisdiction in which Borrower or any of its
Subsidiaries has owned, leased, or operated real property or disposed of
hazardous materials.
"Indebtedness" of any Person means: (a) all indebtedness of such
------------
Person for borrowed money or for the deferred purchase price of property or
services (including reimbursement and all other obligations with respect to
surety bonds, letters of credit, and bankers' acceptances, whether or not
matured, but excluding (i) obligations to trade creditors incurred in the
ordinary course of business and not more than 45 days past due and (ii) deferred
taxes); (b) all obligations evidenced by notes, bonds, debentures, or similar
instruments; (c) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property); (d) all Capital Lease Obligations; (e) all Guaranteed Indebtedness;
(f) all indebtedness referred to in clauses (a), (b), (c), (d) or (e) above
----------- --- --- --- ---
secured by (or for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including Accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such indebtedness
therefor; (g) the Obligations; and (h) all liabilities under Title IV of ERISA.
"Indemnified Person" means Bank, Bank's Affiliates, and each of their
------------------
respective employees, and agents.
"Ingredients" means food items used in the preparation of finished
-----------
goods Inventory.
"Instruments" means all "instruments," as such term is defined in the
-----------
UCC, now owned or hereafter acquired by any Person, wherever located, including
all certificated securities, all certificates of deposit, and all notes and
other evidences of indebtedness, other than Instruments that constitute, or are
a part of a group of writings that constitute, Chattel Paper.
"Intangible Assets" means the book value of all intangible assets (as
-----------------
defined under GAAP) shown on the consolidated balance sheet of Borrower and its
Subsidiaries, including organization costs, securities issuance costs, goodwill
(including any amounts, however designated on such balance sheet, representing
the excess of the purchase price paid for assets or Stock acquired over the
value assigned thereto on the books of Borrower and its Subsidiaries), covenants
not to compete, patents, trademarks, copyrights, trade secrets, customer lists,
know-how, licenses, contracts, franchises, software costs, research and
development costs, deferred financing costs, investments in and monies from
Affiliates (including the intercompany accounts receivable owing from Polyphase
to Borrower referred to clause (ii) of the definition of Permitted Affiliate
-----------
Transaction), and any other intangible assets.
A-12
"Intellectual Property" means all of the following now owned or
---------------------
hereafter acquired by any Person: (a) patents, trademarks, trade dress, trade
names, service marks, copyrights, trade secrets, and all other intellectual
property or Licenses thereof; and (b) all Proceeds of the foregoing.
"Intellectual Property Security Agreement" shall mean the Patent,
----------------------------------------
Trademark and Copyright Security Agreement of even date herewith executed by
Borrower and Overhill Ventures in favor of Bank.
"Intercreditor Agreement" shall mean an Intercreditor and
-----------------------
Subordination Agreement, in form and substance satisfactory to Bank, between
Bank and LLCP, acknowledged by Borrower, Polyphase and Overhill Ventures.
"Inventory" means all "inventory," as such term is defined in the UCC,
---------
now owned or hereafter acquired by any Person, wherever located, including
inventory, merchandise, goods, and other personal property that are held by or
on behalf of such Person for sale or lease or are furnished or are to be
furnished under a contract of service, or that constitute raw materials, work in
process, or materials used or consumed or to be used or consumed in such
Person's business or in the processing, production, packaging, promotion,
delivery, or shipping of the same, including other supplies.
"Investment Property" means all "investment property," as such term is
-------------------
defined in the UCC in those jurisdictions in which such definition has been
adopted, now owned or hereafter acquired by any Person, including (a) all
securities, whether certificated or uncertificated, including stocks, bonds,
interests in limited liability companies, partnership interests, treasuries,
certificates of deposit, and mutual fund shares; (b) all securities entitlements
of such Person, including the rights of such Person to any securities account
and the financial assets held by a securities intermediary in such securities
account and any free credit balance or other money owing by any securities
intermediary with respect to that account; (c) all securities accounts held by
any Person, (d) all commodity contracts held by any Person; and (e) all
commodity accounts held by any Person.
"IRC" means the Internal Revenue Code of 1986 and any regulations
---
promulgated thereunder.
"Letter of Credit" means an irrevocable commercial or standby letter
----------------
of credit issued for the account of Borrower pursuant to Section 1.2.
-----------
"Letter of Credit Fee" means the fee to be paid by Borrower to Bank
--------------------
for each Letter of Credit, as set forth on Schedule 1.2.
------------
"Letter of Credit Rights" means all "letter of credit rights," as such
-----------------------
term is defined in the UCC in those jurisdictions in which such definition has
been adopted, now owned or hereafter acquired by any Person, including any right
to payment under a Letter of Credit.
A-13
"Letter of Credit Obligations" means all obligations incurred by Bank
----------------------------
at the request of Borrower in connection with the issuance of Letters of Credit.
"LHF" means The Long Horizons Fund L.P., a New York limited
---
partnership, or Ableco Finance LLC, a Delaware limited liability company, as
assignee of The Long Horizons Fund, L.P., as the case may be, and any other
assignees of LHF or any assignees of Ableco Finance LLC.
"LIBOR" means, for any LIBOR Loan Period, the rate determined by Bank
-----
to be the per annum rate of interest (rounded upward to the nearest one-
--- -----
hundredth of one percent (1/100%)) at which Dollar deposits in immediately
available funds would be offered to Bank in the London interbank market at
approximately 11:00 a.m. (California time) on the date Borrower provides its
irrevocable notice to Bank of its request for the applicable LIBOR Loan in
accordance with Section 1.3(b), in an amount approximately equal to the
--------------
principal amount of, and for a length of time approximately equal to the LIBOR
Loan Period for, such LIBOR Loan.
"LIBOR Basis" means a per annum interest rate equal to (a) LIBOR, as
----------- ---------
adjusted for reserve requirements imposed on Bank from time to time, divided by
------- --
(b) one minus the LIBOR Reserve Percentage, stated as a decimal. The LIBOR
Basis shall be rounded upward to the nearest one-hundredth of one percent
(1/100%) and, once determined, shall remain unchanged during the applicable
LIBOR Loan Period, except for changes to reflect adjustments for the LIBOR
Reserve Percentage or other reserve requirements.
"LIBOR Loan" means a Loan or any portion thereof bearing interest by
----------
reference to the LIBOR Basis.
"LIBOR Loan Period" means, with respect to any Loan made or continued
-----------------
as or converted into a LIBOR Loan, any fixed calendar period of 30, 60, 90 or
180 days, as selected by Borrower pursuant to Section 1.3(b), during which
--------------
period LIBOR applicable to such LIBOR Loan shall remain unchanged; provided,
--------
that (a) any applicable LIBOR Loan Period that would otherwise end on a day that
is not a Business Day shall be extended to the next succeeding Business Day,
unless such Business Day falls in another calendar month, in which case such
LIBOR Loan Period shall end on the immediately preceding Business Day, (b) any
applicable LIBOR Loan Period that begins on a day for which there is no
numerically corresponding day in the calendar month during which such LIBOR Loan
Period is to end shall (subject to clause (a) above) end on the last day of such
----------
calendar month, (c) no LIBOR Loan Period shall extend beyond the Commitment
Maturity Date, and (d) Borrower shall select LIBOR Loan Periods so that there
shall be no more than three separate LIBOR Loans in existence at any one time.
"LIBOR Prepayment Premium" means, for any LIBOR Loan that Borrower
------------------------
intends to prepay, an amount equal to (a)(i) the LIBOR Basis on the principal
amount of such LIBOR Loan minus (ii) the Yield Rate, multiplied by (b)(i) the
----- -------------
number of days in the period between the date of prepayment and the applicable
Payment Date divided by (ii) 365 or, in the event of a leap year, 366,
----------
multiplied by (c) the amount of the principal so prepaid, which product is then
-------------
discounted to present value using the Yield Rate as the annual discount factor.
A-14
"LIBOR Reserve Percentage" means the percentage in effect from time to
------------------------
time under Regulation D of the Federal Reserve Board as the maximum reserve
requirement applicable with respect to Eurocurrency Liabilities (as that term is
defined in Regulation D), whether or not Bank has any Eurocurrency Liabilities
subject to such reserve requirement at that time. The LIBOR Basis for any LIBOR
Loan shall be adjusted as of the effective date of any change in the LIBOR
Reserve Percentage.
"License" means any license under any written agreement now owned or
-------
hereafter acquired by any Person granting the right to use any Intellectual
Property or other license of rights or interests now held or hereafter acquired
by any Person.
"Lien" means, with respect to any property, any security deed,
----
mortgage, deed to secure debt, deed of trust, lien, pledge, assignment, charge,
security interest, title retention agreement, negative pledge, levy, execution,
seizure, attachment, garnishment, or other encumbrance of any kind in respect of
such property, whether or not xxxxxx, vested, or perfected.
"LLCP" means Xxxxxx Xxxxxxxxx Capital Partners II, L.P.
----
"Loan Documents" means, collectively, the Agreement, the Revolving
--------------
Note, the Collateral Documents, the Alternative Dispute Resolution Agreements,
the Guaranty, the Schedule of Accounts, the Schedule of Inventory, and any and
all other agreements, documents, or instruments (including financing statements)
identified in the Schedule of Documents and entered into in connection with the
transactions contemplated by the Agreement, together with all alterations,
amendments, changes, extensions, modifications, refinancings, refundings,
renewals, replacements, restatements, or supplements of or to any of the
foregoing.
"Loans" means all loans and advances made by Bank to or for the
-----
benefit of Borrower under the Agreement or under any of the other Loan
Documents, including the Revolving Loans.
"Material Adverse Effect" means a material adverse effect on or
-----------------------
adverse change in, as the case may be, (a) the business, assets, operations,
prospects, or financial or other condition of Borrower, its Subsidiaries, or any
Guarantor, individually or taken as a whole, (b) the ability of Borrower or any
Guarantor to pay or perform in accordance with the terms of any of its
respective agreements with Bank or any other Person, or (c) the rights and
remedies of Bank under any of the Loan Documents.
"Maximum Amount" means $16,000,000.
--------------
"Monthly Summary Report" has the meaning set forth in Section 5.1(b).
---------------------- --------------
"Net Borrowing Availability" means, at any time, the lesser of (a) the
--------------------------
Maximum Amount minus the aggregate outstanding amount at such time of (i) the
-----
Revolving Loans and (ii) the face amount of the Letters of Credit and (b) the
Borrowing Base minus the aggregate outstanding amount at such time of (i) the
-----
Revolving Loans and (ii) the face amount of the Letters of Credit, in each case
less any reserves established by Bank in its reasonable credit judgment
A-15
from time to time. Bank reserves the right, at any time and from time to time
after the Closing Date, to establish and modify reserves in its reasonable
credit judgment.
"Net Income (Loss)" means, with respect to any Person, on a
-----------------
consolidated basis, for any period, the aggregate net income (or loss) after
taxes and extraordinary items of such Person for such period, determined in
accordance with GAAP.
"Obligations" means all loans, advances, debts, expense
-----------
reimbursements, fees, liabilities, and obligations for the performance of
covenants, tasks, or duties or for payment of monetary amounts (whether or not
such performance is then required or contingent, or such amounts are liquidated
or determinable) owing by Borrower or any of its Subsidiaries to Bank, of any
kind or nature, present or future, whether or not evidenced by any note,
agreement or other instrument, arising under this Agreement or any of the other
Loan Documents, and all covenants and duties regarding such amounts. This term
includes all principal, interest (including interest that accrues after the
commencement of any case or proceeding by or against Borrower in bankruptcy or
for the reorganization of Borrower whether or not allowed in such case or
proceeding), fees, Charges, expenses, attorneys' fees and any other sum
chargeable to Borrower or its Subsidiaries under the Agreement or any of the
other Loan Documents.
"Overadvance" means the amount, if any, by which the aggregate
-----------
outstanding amount of Revolving Loans at any time exceeds Borrowing
Availability.
"Packers Acts" shall mean (i) the PSA, (ii) any state or local law,
------------
rule or regulation that provides protection that is similar to that provided by
the PSA, (iii) any state or local law, rule or regulation that provides
protection to producers of seafood or seafood products, or (iv) the rules or
regulations promulgated under any of the foregoing by any Government Authority.
"Payment Date" means the last day of each LIBOR Loan Period for a
------------
LIBOR Loan.
"PBGC" means the Pension Benefit Guaranty Corporation.
----
"Permitted Affiliate Transaction" means any one or more of the
-------------------------------
following transactions:
(i) the payment by Borrower of the salary and
other compensation of Xxxxx Xxxxx in his capacity
as the President and Chief Executive Officer of
Polyphase, which salary and other compensation
shall be determined annually by the Boards of
Directors of Borrower and Polyphase (or the
compensation committees thereof, if any);
(ii) the intercompany accounts receivable owing
from Polyphase to Borrower and reflected on the
consolidated balance sheet of Borrower and its
A-16
Subsidiaries as of September 26, 1999 in an amount
not to exceed $11,038,000; provided, that the
--------
amount of such intercompany accounts receivable
may be increased by the one-time payment permitted
under clause (iv) of this definition;
-----------
(iii) the payment by Borrower to Polyphase out of
legally available funds of the Tax Sharing Cash
Payments; provided, that any such payment is
--------
recorded as an expense on the books of Borrower
that is deducted from Net Income (Loss) with
respect to such Fiscal Year; and provided further,
that no such payment shall in any event exceed
$150,000 in any Fiscal Quarter; and
(iv) a one-time payment by Borrower to Polyphase out
of legally available funds at or immediately
following the Closing Date of an amount not
exceeding $1,250,000 in the aggregate.
"Permitted Liens" means: (a) Liens securing taxes, assessments, and
---------------
other governmental Charges or levies (excluding any Lien imposed pursuant to any
of the provisions of ERISA) or the claims of materialmen, suppliers, mechanics,
carriers, warehousemen, or landlords for labor, materials, supplies, or rentals
incurred in the ordinary course of business, (i) in each case only if payment
shall not at the time be required to be made and (ii) in the case of
warehousemen or landlords, only if such Liens are junior to the Liens granted
and conveyed by Borrower and each of its Subsidiaries to secure the Obligations;
(b) Liens consisting of deposits or pledges made in the ordinary course of
business in connection with, or to secure payment of, obligations under worker's
compensation, unemployment insurance, or similar legislation; (c) Liens
constituting encumbrances in the nature of zoning restrictions, easements, and
rights or restrictions of record on use of real property that, in the reasonable
judgment of Bank, do not materially detract from the value of such property or
impair the use thereof in the business of Borrower; (d) Liens created after the
Closing Date by conditional sale or other title retention agreements or for
purchase money security interests, in each case with respect to Equipment
acquired by Borrower in the ordinary course of business, securing Indebtedness
within the total permitted under clause (iii) of Section 4(c), provided, that
------------ ------------ --------
such Liens attach only to the particular Equipment being purchased and the
Indebtedness secured does not exceed 100% of the purchase price of such
Equipment; (e) Liens on Borrower's Accounts, Inventory or the proceeds thereof
under any of the Packers Acts to the extent such Liens do not exceed the
Producer Payables Reserves maintained by Bank; (f) Liens of record set forth in
Schedule 4(h); (g) Liens in favor of LLCP or its permitted assigns under the
-------------
Intercreditor Agreement that secure the Subordinated Debt or any Indebtedness
resulting from a Permitted Subordinated Note Refinancing and (h) Liens in favor
of Bank under the Loan Documents.
"Permitted Subordinated Note Refinancing" means a refinancing of the
---------------------------------------
Subordinated Note that does not increase the aggregate principal amount of the
Subordinated Debt and is on the same terms as the Subordinated Note or terms and
conditions no less favorable
A-17
to the interests of Borrower and Bank, and which refinanced Indebtedness is
subordinated to the Obligations pursuant to an intercreditor and subordination
agreement that is identical to the Intercreditor Agreement or otherwise in form
and substance satisfactory to Bank in its sole discretion.
"Person" means any individual, sole proprietorship, partnership,
------
limited liability partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability company, institution,
public benefit corporation, entity or government (whether federal, state,
county, city, municipal, or otherwise, including any instrumentality, division,
agency, body, or department thereof).
"Plan" means, with respect to Borrower or any of its Affiliates, at
----
any time, an "employee benefit plan," as defined in Section 3(3) of ERISA, that
Borrower or any of its Subsidiaries or Affiliates maintains, contributes to, or
has an obligation to contribute to on behalf of participants who are or were
employed by any of them.
"Pledge Agreement" means the Pledge Agreement of even date herewith
----------------
executed by Borrower, Overhill Ventures and Polyphase in favor of Bank.
"Polyphase" means Polyphase Corporation, a Nevada corporation.
---------
"Prior Lender" means FINOVA Capital Corporation.
------------
"Prior Lender Obligations" shall mean all obligations of Borrower to
------------------------
Prior Lender pursuant to that certain Loan Agreement dated as of May 5, 1995,
between Borrower and Prior Lender, as amended, and all other agreements,
instruments, or documents executed and delivered to, or in favor of, Prior
Lender in connection therewith or the transactions contemplated thereby.
"Proceeds" means "proceeds," as such term is defined in the UCC,
--------
including: (a) any and all proceeds of any insurance, indemnity, warranty, or
guaranty payable to any Person from time to time with respect to any Collateral;
(b) any and all payments (in any form whatsoever) made or due and payable to any
Person from time to time in connection with any requisition, confiscation,
condemnation, seizure, or forfeiture of any Collateral by any Governmental
Authority (or any Person acting under color of Governmental Authority); (c) any
claim of any Person against third parties for past, present, or future
infringement or dilution of any Intellectual Property or for injury to the
Goodwill associated with any Intellectual Property; (d) any recoveries by any
Person against third parties with respect to any litigation or dispute
concerning any Collateral; and (e) any and all other amounts from time to time
paid or payable under or in connection with any Collateral, upon disposition or
otherwise.
"Producer Payables Reserves" means the reserves, if any, against
--------------------------
Borrowing Availability established by Bank from time to time based upon the
aggregate amount of unpaid trade payables for Inventory of Borrower subject to
any asserted lien or trust arising under any state producers' lien statute or
any of the other Packers Acts, which lien or trust is senior to or pari passu
with the Liens in favor of Bank.
A-18
"Projections" means the consolidated and consolidating balance sheet,
-----------
statements of income, and cash flow for Borrower and each of Borrower's
Subsidiaries delivered to Bank on the Closing Date (including forecasted Capital
Expenditures and Net Borrowing Availability) by month for the Fiscal Year
immediately following the Fiscal Year in which the Closing Date occurs, in each
case prepared in a manner consistent with GAAP and accompanied by senior
management's discussion and analysis thereof.
"PSA" shall mean the Packers and Stockyards Act of 1921, together with
---
the rules and regulations of any Governmental Authority promulgated thereunder.
"Reference Rate" means the variable per annum rate of interest most
--------------
recently announced by Bank at its corporate headquarters as the "Union Bank of
California, N.A. Reference Rate," with the understanding that the "Union Bank of
California, N.A. Reference Rate" (a) is one of Bank's index rates and is not
directly tied to any external rate of interest or index, (b) merely serves as a
basis upon which effective rates of interest are calculated for loans making
reference thereto, and (c) may not be the lowest or best rate at which Bank
calculates interest or extends credit. The Reference Rate shall be adjusted as
of the effective date of any change in the "Union Bank of California, N.A.
Reference Rate." The Reference Rate, as adjusted, shall constitute the
Reference Rate on the date when such adjustment is made and shall continue as
the applicable Reference Rate until further adjustment.
"Reference Rate Loan" means a Loan or any portion thereof bearing
-------------------
interest by reference to the Reference Rate.
"Refinancing" means the repayment in full by Borrower of the Prior
-----------
Lender Obligations, which repayment shall occur on the Closing Date.
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement between Borrower and LLCP.
"Related Person" means any (a) individual (i.e., natural person) that
-------------- ----
is an employee, officer, director, Stockholder, partner or member of Borrower or
any Affiliate of Borrower (other than corporate Stockholders of Polyphase that
own less than five percent of the common Stock of Polyphase) , (b) individual
spouse, descendant, or other individual related by blood or marriage to any
officer, director, Stockholder, partner, or member of Borrower or any Subsidiary
of Borrower, or (c) trust in which any such individual is a grantor, settlor, or
beneficiary.
"Related Transactions" means the initial borrowing under the Revolving
--------------------
Loan on the Closing Date, the Refinancing, the repayment in full by Borrower on
the Closing Date of all of the obligations of Borrower to LHF, the issuance of
the Subordinated Note, the payment of all fees, costs and expenses associated
with all of the foregoing, and the execution and delivery of all of the Related
Transactions Documents.
"Related Transactions Documents" means the Loan Documents, the
------------------------------
Subordinated Note, and all other documents executed in connection with the
Related Transactions.
A-19
"Release" means, as to any Person, any release, spill, emission,
-------
leaking, pumping, injection, deposit, disposal, discharge, dispersal, dumping,
leaching, or migration of Hazardous Materials in the indoor or outdoor
environment by such Person, including the movement of Hazardous Materials
through or in the air, soil, surface water, ground water, or property.
"Reportable Event" has the meaning set forth in Title IV of ERISA.
----------------
"Restricted Payment" means (a) the declaration or payment of any
------------------
dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets on or in respect of Borrower's
or any of its Subsidiaries' Stock (other than any dividend or other distribution
on account of any Stock of Borrower or any of its Subsidiaries that is payable
solely in shares of the same class of Stock of such Person), (b) any payment on
account of the purchase, redemption, defeasance, or other retirement (other than
pursuant to a Permitted Subordinated Note Refinancing) of Borrower's or any of
its Subsidiaries' Stock or Indebtedness other than (i) the Obligations or (ii)
so long as no Default or Event of Default has occurred and is continuing, or
shall be caused thereby, interest and principal, when due, under Indebtedness
described in Schedule 3.8 or otherwise permitted under Section 4 of the
------------ ---------
Agreement or that is secured by Permitted Liens, without acceleration or
modification of the amortization thereof as in effect on the Closing Date, or
any other payment or distribution made in respect thereof, either directly or
indirectly, or (c) any payment, loan, contribution, or other transfer of funds
or other property to any Stockholder of such Person that is not expressly
permitted in the Agreement; provided, that neither (I) any payment to Bank nor
--------
(II) any payment to LLCP permitted by the Intercreditor Agreement shall
constitute a Restricted Payment.
"Revolving Loan Commitment" means the commitment of Bank to make
-------------------------
Revolving Loans or issue Letters of Credit Obligations which commitment shall be
Sixteen Million Dollars ($16,000,000) on the Closing Date, as such amount may be
adjusted, if at all, from time to time in accordance with the Agreement.
"Revolving Loans" means the revolving loans made to Borrower pursuant
---------------
to Section 1.1(a).
--------------
"Revolving Note" means the Revolving Credit Note executed and
--------------
delivered by Borrower to Bank, dated as of the Closing Date, in the original
principal amount of $16,000,000, substantially in the form of Exhibit A,
---------
together with any other notes executed and delivered by Borrower to Bank
evidencing at any time any portion of the Revolving Loans.
"Schedule of Accounts" has the meaning set forth in Section 5.1(c).
-------------------- --------------
"Schedule of Documents" means the schedule, including all appendices,
---------------------
exhibits or schedules thereto, listing certain documents and information to be
delivered in connection with the Agreement and the transactions contemplated
thereunder, substantially in the form of Schedule B.
----------
"Schedule of Inventory" has the meaning set forth in Section 5.1(c).
--------------------- --------------
A-20
"Securities Act" shall mean the provisions of the Securities Act of
--------------
1933, 15 U.S.C. Sections 77a et seq.
-- ----
"Securities Exchange Act" shall mean the provisions of the Security
-----------------------
Exchange Act of 1934, 15 U.S.C. Sections 78a et seq.
-- ----
"Slow Moving Inventory" means, as of any date, Inventory produced by
---------------------
Borrower more than 12 months prior to such date.
"Solvent" means, with respect to any Person on a particular date, that
-------
on such date (a) the fair value of the property of such Person is greater than
the total amount of liabilities, including contingent liabilities, of such
Person; (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured; (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature; and
(d) such Person is not engaged in a business or transaction, and is not about to
engage in a business or transaction, for which such Person's property would
constitute an unreasonably small capital. The amount of contingent liabilities
(such as litigation, guaranties and pension plan liabilities) at any time shall
be computed as the amount that, in light of all the facts and circumstances
existing at the time, represents the amount that can be reasonably be expected
to become an actual or matured liability.
"Stock" means all certificated and uncertificated shares, options,
-----
warrants, general or limited partnership interests, participation or other
equivalents (regardless of how designated) of or in a corporation, partnership,
limited liability company, or equivalent entity, whether voting or nonvoting,
including common stock, preferred stock, or any other "equity security" (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the Securities and Exchange Commission under the Securities Exchange Act.
"Stockholder" means, with respect to any Person, each holder of Stock
-----------
of such Person.
"Subject Property" means each real property location owned, leased, or
----------------
occupied by Borrower or any of its Subsidiaries.
"Subordinated Debt" means the Indebtedness of Borrower evidenced by
-----------------
the Subordinated Note and any Indebtedness of Borrower subordinated to the
Obligations in a manner and form satisfactory to Bank in its sole discretion, as
to right and time of payment and as to any other rights and remedies thereunder.
"Subordinated Note" means the Secured Senior Subordinated Note due
-----------------
2004, made by Borrower to the order of LLCP in an original principal amount of
$26,000,000 in the aggregate, together with the Intercreditor and Subordination
Agreement between LLCP and Bank dated as of the Closing Date.
"Subsidiary" means, with respect to any Person, (a) any corporation or
----------
limited liability company whose stock (other than directors' qualifying shares)
having ordinary voting
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power to elect a majority of its board of directors (or other governing body) is
50% or more owned, directly or indirectly, by such Person, or (b) a partnership
or joint venture whose partnership or venture interests are 50% or more owned,
directly or indirectly, by such Person. The term "Subsidiary," when used in this
Agreement without reference to any particular Person, means a Subsidiary of
Borrower.
"Supporting Obligations" means "supporting obligations," as such term
----------------------
is defined in the UCC in those jurisdictions in which such definition has been
adopted, now owned or hereafter acquired by any Person.
"Tangible Net Worth" means, with respect to Borrower and its
------------------
Subsidiaries on any date, (i) the sum of, without duplication, (a) the excess of
the book value of assets over liabilities at such time, determined on a
consolidated basis in accordance with GAAP, plus (b) the amount shown for
----
redeemable warrants on the consolidated balance sheet of Borrower and its
Subsidiaries at such time, plus (c) the Tax Sharing Payable determined at such
----
time, plus (d) the principal amount of the Subordinated Note, minus (ii)
---- -----
Intangible Assets at such time.
"Tax" or "Taxes" means any present and future income, excise, sales,
--- -----
use, stamp or franchise taxes and any other taxes, fees, duties, levies,
withholdings or other charges of any nature whatsoever imposed by any taxing
authority, whether federal, state, local or foreign, together with any interest
and penalties and additions to tax.
"Tax Sharing Cash Payments" means, for any period, all cash payments
-------------------------
actually made by Borrower to Polyphase during such period on account of the Tax
Sharing Payable.
"Tax Sharing Payable" means, at any time, the total amount owed by
-------------------
Borrower to Polyphase at such time arising from accrued payments of all income
or franchise Taxes that Borrower would have incurred if Borrower had filed its
income or franchise Tax returns on a stand-alone basis.
"Termination Date" means the date on which the Loans, the Letters of
----------------
Credit and all other Obligations under the Agreement and the other Loan
Documents are indefeasibly paid in full, in cash (other than amounts in respect
of Letter of Credit Obligations, if any, then outstanding, provided that
Borrower shall have paid to Bank, in immediately available funds, the maximum
amount then available to be drawn under outstanding Letters of Credit), and
Borrower shall have no further right to borrow any moneys or obtain other credit
extensions or financial accommodations under the Agreement.
"UCC" means the Uniform Commercial Code as the same may, from time to
---
time, be enacted and in effect in the State of California; provided, that in the
--------
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection, or priority of Bank's Lien on any Collateral is governed
by the Uniform Commercial Code as enacted and in effect in a jurisdiction other
than the State of California, the term "UCC" shall mean the Uniform Commercial
---
Code as enacted and in effect in such other jurisdiction solely for purposes of
the provisions hereof relating to such attachment, perfection, or priority and
for purposes of definitions related to such provisions.
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"Unused Line Fee" means an amount equal to (a) (i) the Maximum Amount
---------------
minus (ii) the average for the period of the daily closing balances of the
-----
Revolving Loans during the period for which such fee is due, multiplied by (b)
---------- --
(i) 0.25% multiplied by (ii) (A) the number of days in such period divided by
---------- -- ------- --
(B) 365 or, in the event of a leap year, 366.
"USDA" means the United States Department of Agriculture.
----
"Weekly Reporting Package" has the meaning set forth in Section
------------------------ -------
5.1(b).
"Weekly Settlement Date" means the third Business Day of each week (or
----------------------
such other day of the week as may be designated from time to time by Bank).
"Year 2000 Compliant" means, with respect to Borrower and any other
-------------------
Person, that all Year 2000 Date-Sensitive System/Components utilized by or
material to the business, operations or financial condition of such Person will
properly perform data sensitive functions before, during and after the year
2000.
"Year 2000 Date-Sensitive System/Component" means any system software,
-----------------------------------------
network software, applications software, data base, computer file, embedded
microchip, firmware, hardware, equipment, goods or other systems; such systems
and components shall include mainframe computers, file server/client systems,
computer workstations, routers, hubs, other network-related hardware, and other
computer-related software, firmware or hardware and information processing and
delivery systems of any kind and telecommunications systems and other
communications processors, security systems, alarms, elevators and HVAC systems.
"Yield Rate" means the return that Bank could obtain if it used the
----------
amount of each prepayment of principal of any LIBOR Loan to purchase, at bid
price, regularly quoted securities (a) issued by the United States having a
maturity date most closely coinciding with the relevant Payment Date and (b)
held by Bank until the relevant Payment Date.
2. Accounting Terms and Computations. The term "GAAP" and all
---------------------------------
accounting terms used, but not specifically defined, in the Agreement shall be
construed and defined in accordance with generally accepted accounting
principles and practices set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession, all as of the
date hereof, applied on a basis consistent with past practices, except that any
such financial statements or other financial information (a) that are unaudited
may be subject to year-end audit adjustments and may omit footnotes and (b) may
be qualified only with respect to the characterization or recharacterization of
the intercompany receivable owing from Polyphase to Borrower and referred to in
clause (ii) of the definition of "Permitted Affiliate Transaction" as a dividend
-----------
rather than an intercompany loan.
3. UCC. Any terms that are defined in the UCC and used, but not
---
specifically defined, in the Agreement shall be construed and defined in
accordance with the UCC.
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4. Knowledge of Borrower. Whenever the term "knowledge of Borrower"
---------------------
or words of similar import are used in this Agreement or any other Loan Document
with respect to the existence or absence of any fact, it shall mean that any one
or more of the following Persons knows or should have known, based upon the
reasonable inquiry of such Person, of the existence or absence of such fact:
Xxxxx Xxxxx, Xxxxxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxxx.
5. Construction. For purposes of the Agreement and the other Loan
------------
Documents, the following rules of construction shall apply, unless specifically
indicated to the contrary: (a) wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include the
singular and the plural, and pronouns stated in the masculine, feminine, or
neuter gender shall include the masculine, the feminine, and the neuter; (b) the
term "or" is not exclusive; (c) the term "including" (or any form thereof) shall
not be limiting or exclusive; (d) all references to statutes and related
regulations shall include any amendments thereof and any successor statutes and
regulations; (e) references to Persons include their respective successors and
assigns (to the extent and only to the extent permitted by the Loan Documents)
or, in the case of governmental Persons, Persons succeeding to the relevant
functions of such Persons; (f) the words "herein," "hereof," and "hereunder" or
other words of similar import refer to the Agreement as a whole, including the
exhibits and schedules hereto, as the same may from time to time be amended,
modified, or supplemented, and not to any particular section, subsection, or
clause contained in the Agreement; (g) all references in the Agreement or in the
schedules to the Agreement to sections, schedules, disclosure schedules,
exhibits, and attachments shall refer to the corresponding sections, schedules,
disclosure schedules, exhibits, and attachments of or to the Agreement; and (h)
all references to any instruments or agreements, including references to any of
the Loan Documents, shall include any and all modifications or amendments
thereto and any and all extensions or renewals thereof.
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SCHEDULE B - SCHEDULE OF DOCUMENTS
----------------------------------
See attached.
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SCHEDULE C - NON-STANDARD CONCENTRATION ACCOUNT DEBTORS
-------------------------------------------------------
Xxxxx Xxxxx
Xxxx'x Hawaiian
American Airlines
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