LOAN AND SECURITY AGREEMENT
BETWEEN
DRYCLEAN USA, INC.
("BORROWER")
AND
FIRST UNION NATIONAL BANK
("LENDER")
DATED AS OF DECEMBER 19, 2001
TABLE OF CONTENTS
PAGE
1. Definitions; Financial and Other Terms...................................................1
1.1. Definitions..................................................................1
1.2. Financial Terms..............................................................8
1.3. Other Terms..................................................................8
2. Representations and Warranties...........................................................8
2.1. Valid Existence and Power....................................................8
2.2. Authority....................................................................8
2.3. Condition....................................................................8
2.4. Financial Statements.........................................................9
2.5. Litigation; Government Regulation............................................9
2.6. Agreements, Etc..............................................................9
2.7. Authorizations...............................................................9
2.8. Title; Collateral............................................................9
2.9. Location and Names...........................................................9
2.10. Taxes.......................................................................10
2.11. Labor Law Matters...........................................................10
2.12. Accounts....................................................................10
2.13. Use and Location of Collateral..............................................10
2.14. Judgment Liens..............................................................10
2.15. Intent and Effect of Transactions; Borrower's Solvency......................10
2.16. Subsidiaries................................................................11
2.17. Hazardous Materials.........................................................11
2.18. ERISA.......................................................................11
2.19. Investment Company Act......................................................11
2.20. Trade Relations.............................................................11
2.21. Maintenance of Business and Properties......................................11
2.22. Full Disclosure.............................................................11
3. Loans...................................................................................12
3.1. Advances of Loans...........................................................12
3.2. The Notes...................................................................12
3.3. Notice and Manner of Borrowing..............................................13
3.4. Interest....................................................................13
3.5. Repayment of Loans..........................................................13
3.6. Costs, Fees and Expenses....................................................13
3.7. Prepayments.................................................................13
3.8. Payments and Computations...................................................14
3.9. Facility for Letters of Credit..............................................14
3.10. Facility for Foreign Exchange...............................................16
4. Conditions Precedent to Borrowing.......................................................17
4.1. Advance.....................................................................17
4.2. Conditions Precedent to Each Advance of a Loan or
Issuance of a Letter of Credit or
Purchasing Forward Exchange.................................................19
4.3. Waiver of Conditions Precedent..............................................20
5. Covenants of the Borrower...............................................................20
5.1. Use of Loan Proceeds........................................................20
5.2. Maintenance of Business and Properties......................................20
5.3. Insurance...................................................................20
5.4. Notice of Default...........................................................21
5.5. Inspections.................................................................21
5.6. Financial Information.......................................................21
5.8. Liens.......................................................................23
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5.9. Redemptions.................................................................23
5.10. Merger, Sale, Etc...........................................................23
5.11. Loans, Guaranties and Other Investments.....................................23
5.12. Change in Business..........................................................23
5.13. Accounts....................................................................23
5.14. Transactions with Affiliates................................................24
5.15. No Change in Name or Offices; Removal of Collateral.........................24
5.16. No Sale, Leaseback..........................................................24
5.17. Margin Stock................................................................24
5.18. Payment of Taxes, Etc.......................................................24
5.19. Comply with ERISA...........................................................24
5.20. Compliance; Hazardous Materials.............................................24
5.21. Subsidiaries................................................................24
5.22. Compliance with Assignment Laws.............................................24
5.23. Further Assurances..........................................................25
5.24. Withholding Taxes...........................................................25
5.25. Financial Covenants.........................................................25
5.26. Lender Account..............................................................25
5.27. Fiscal Year; Accounting Method..............................................25
5.28. Default on Other Obligations................................................25
5.29. SEC Filing..................................................................25
5.30. Compliance with Laws........................................................25
5.31. Chattel Paper...............................................................25
6. Default.................................................................................26
6.1. Events of Default...........................................................26
6.2. Acceleration of the Indebtedness............................................27
6.3. Default Rate................................................................28
6.4. Rights and Remedies.........................................................28
6.5. Application of Proceeds.....................................................29
6.6. Appointment of the Lender as the Borrower's Lawful Attorney.................29
6.7. Collections; The Lender's Right to Notify Account Debtors
and to Endorse Borrower's Name...........................................29
7. Security Agreement; Collateral..........................................................30
7.1. Security Interest...........................................................30
7.2. Inspection of Collateral....................................................30
7.3. Other Rights................................................................31
7.4. Tangible Collateral; Inventory..............................................31
7.5. The Lender's Payment of Claims Asserted Against the Collateral..............31
8. Term of Agreement.......................................................................31
8.1. Term and Right to Terminate.................................................31
8.2. Effect of Termination.......................................................32
9. Miscellaneous...........................................................................32
9.1. Rights and Remedies Cumulative; Non-Waiver; Etc.............................32
9.2. Survival of Representations; Reinstatement of Indebtedness..................32
9.3. Expenses; Indemnification...................................................33
9.4. Notices.....................................................................33
9.5. Successors and Assigns......................................................34
9.6. Counterparts; Construction; Gender..........................................34
9.7. Powers......................................................................34
9.8. Approvals...................................................................34
9.9. Indemnification of the Lender...............................................34
9.10. Waivers by the Borrower.....................................................34
9.11. Lawful Charges; Late Charge.................................................35
9.12. Amendment...................................................................35
9.13. Severability................................................................35
9.14. Entire Agreement............................................................35
9.15. Separate Legal Counsel......................................................35
9.16. Right of Setoff.............................................................35
9.17. Arbitration; Preservation and Limitation of Remedies........................36
9.18. GOVERNING LAW; JURISDICTION AND VENUE; WAIVER OF JURY TRIAL.................36
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LOAN AND SECURITY AGREEMENT
AGREEMENT, dated as of December 19, 2001, between DRYCLEAN USA, INC., a
Delaware corporation (the "Borrower"), and FIRST UNION NATIONAL BANK, a national
banking association (the "Lender");
W I T N E S S E T H:
WHEREAS, Xxxxxxx-Atlantic Corporation, a Florida corporation
("Xxxxxxx-Atlantic") and Lender are parties to a Loan and Security Agreement,
dated as of November 2, 1998, pursuant to which Lender has made, and continues
to make loans to the Borrower (the "Existing Facility");
WHEREAS, Xxxxxxx-Atlantic is a wholly-owned subsidiary of Borrower,
and, as a condition precedent to Lender providing the Existing Facility to
Xxxxxxx Atlantic, Lender required Borrower to guaranty Xxxxxxx-Atlantic's
obligations under the Existing Facility pursuant to the terms and conditions of
a Guaranty and Security Agreement, dated November 2, 1998, executed by Borrower
in favor of Lender;
WHEREAS, Lender has requested, and Borrower and Xxxxxxx-Atlantic have
agreed, to change the borrowing relationship among the Borrower,
Xxxxxxx-Atlantic and Lender;
WHEREAS, as a condition precedent to so agreeing, Lender has required
Borrower enter into this Agreement.
In consideration of the mutual covenants herein contained and to induce
the Lender to extend credit to the Borrower, the parties agree as follows:
1. Definitions; Financial and Other Terms.
---------------------------------------
1.1. Definitions. In addition to the terms defined elsewhere
in this Agreement, the following terms shall have the meanings set forth below:
"Accounts" means all accounts, accounts receivable, contract
rights, notes, bills, acceptances, choses in action, chattel paper, instruments,
documents, and other forms of obligations at any time owing to a Person, and all
"Accounts," as that term is defined in the Code, the proceeds thereof and all of
such Person's rights with respect to any goods represented thereby, whether or
not delivered, goods returned by customers and all rights as an unpaid vendor or
lienor, including rights of stoppage in transit and of recovering possession by
proceedings including replevin and reclamation, together with all customer
lists, books and records, ledger and account cards, computer tapes, disks,
printouts and records, whether now in existence or hereafter created, relating
to Accounts.
"Account Debtor" means any Person who is or who may become
obligated to a Person, under, with respect to, or on account of an Account.
"Adjusted LIBOR Market Index Rate (Revolving)" means the LIBOR
Market Index Rate plus two and one-half percent (2.50%) per annum.
"Adjusted LIBOR Market Index Rate (Term)" means the LIBOR
Market Index Rate plus two and sixty-five one hundredths percent (2.65%) per
annum.
"Advance" means the advance of funds under a Revolving Credit
Loan.
"Advance Date" means the date a Revolving Credit Loan is
advanced hereunder.
"Advance Request" means a request for an Advance of a
Revolving Credit Loan under Section 3.3, substantially in the form as Lender
shall request.
"Affiliate" of a named Person means (a) any Person owning 5%
or more of the voting stock or rights of such named Person or of which the named
Person owns 5% or more of such voting stock or rights; (b) any Person
controlling, controlled by or under common control with such named Person; (c)
any officer or director of such named Person or any Affiliates of the named
Person; and (d) any family member of the named Person or any Affiliate of such
named Person. For the purposes of this definition, "control" means the
possession, directly or indirectly, to direct or cause the direction of
management and policies of such Person, whether through ownership of securities,
by control or otherwise.
"Beneficiary" means the person who is the beneficiary of a
Letter of Credit.
"Borrower Collateral" means all property, assets and rights of
the Borrower (other than real estate), wherever located and whether now owned by
Borrower or hereafter acquired, including, but not limited to all of Borrower's:
(a) Inventory; (b) General Intangibles; (c) Accounts and Chattel Paper and any
other instrument or intangible representing payment for goods or services; (d)
Equipment; (e) Instruments; (f) Investment Property; (g) Documents; (h) Deposit
Accounts; (i) Letter of Credit Rights; (j) General Intangibles; and (k) parts,
replacements, additions, accessions, substitutions, profits, and products and
cash and non-cash proceeds of any of the foregoing (including insurance proceeds
payable by reason of loss or damage thereto) in any form and wherever located.
Borrower Collateral shall include all written or electronically recorded records
relating to any such Borrower Collateral and other rights relating thereto.
"Borrowing Base" means the lesser of (i) $2,250,000 or (ii)
60% of Eligible Accounts plus 50% of Eligible Inventory consisting of spare
parts plus 60% of Eligible Inventory consisting of equipment.
"Borrowing Base Certificate" means the Borrowing Base
Certificate substantially in the form of Exhibit A or such other form as Lender
may request.
"Business Day" means a weekday on which commercial banks are
open for business in Miami, Florida.
"Chattel Paper" means all writing or writings which evidence
both a monetary obligation and a security interest in or the lease of specific
goods and in addition includes all property included in the definition of
"chattel paper" as used in the Code.
"Closing Date" means the date first above written.
"Code" means the Uniform Commercial Code, as in effect in
Florida and in any other jurisdiction, as applicable, from time to time, and
includes without limitation Article 9 thereof as currently in effect in Florida
and as the same will be in effect as of January 1, 2002.
"Collateral" means all Borrower Collateral and all Guarantor
Collateral.
"Consolidated Tangible Total Assets" means all assets which
would properly be shown on Borrower's consolidated balance sheet in accordance
with GAAP, less the aggregate
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amount of such assets which are General Intangibles or are classified as
intangible assets in accordance with GAAP.
"Consolidated Tangible Net Worth" means Consolidated Tangible
Total Assets less Consolidated Total Liabilities.
"Consolidated Total Liabilities" means all liabilities which
would properly be shown on Borrower's consolidated balance sheet in accordance
with GAAP, except indebtedness for borrowed money which is subordinated in a
manner satisfactory to Lender in its sole discretion.
"Debt" means all liabilities of a Person as determined under
GAAP and all obligations which such Person has guaranteed or endorsed or for
which such Person is otherwise secondarily or jointly liable, and shall include,
without limitation (a) all obligations for borrowed money or purchased assets,
(b) obligations secured by assets whether or not any personal liability exists,
(c) the capitalized amount of any capital or finance lease obligations, (d) the
unfunded portion of pension or benefit plans or other similar liabilities, (e)
obligations as a general partner, (f) contingent obligations pursuant to
guaranties, endorsements, letters of credit and other secondary liabilities and
(g) obligations for deposits.
"Default" means any event which with the passage of time or
the giving of notice or both would become an Event of Default.
"Default Rate" means a rate equal to the lesser of (a) the
Prime Rate plus five percent per annum or (b) the highest rate of interest
allowed by applicable law.
"Eligible Accounts" shall mean all genuine, bona fide Accounts
(valued net of the maximum amount of any discounts or other reductions) of the
Borrower arising in the ordinary course of Borrower's business from the sale and
delivery of Inventory or the rendition of services as to which the Lender has a
first priority perfected Lien subject only to Permitted Liens, excluding: (a)
Accounts outstanding for 91 days or more from the date of invoice; (b) Accounts
owing from any Affiliate of the Borrower; (c) Accounts owed by a creditor of the
Borrower or which are in dispute or subject to any counterclaim, deduction,
contra-account or offset; (d) Accounts owing by any Account Debtor which is not
Solvent; (e) Accounts arising from a sale on a xxxx-and-hold, guaranteed sale,
sale-or-return, sale-on-approval, consignment or similar basis or which is
subject to repurchase, return, rejection, repossession, loss or damage; (f)
Accounts owed by an Account Debtor in the State of Minnesota or the State of New
Jersey (unless Borrower has qualified to do business in such State or filed a
current Notice of Business Activities report in such State); (g) Accounts as to
which the goods giving rise to the Account have not been delivered to and
accepted by the Account Debtor or the service giving rise to the Account has not
been completely performed or which do not represent a final sale; (h) Accounts
owed by the United States of America unless the Borrower shall have complied to
the Lender's satisfaction with the Federal Assignment of Claims Act; (i) the
total Accounts owed by an Account Debtor and its Affiliates exceeds a credit
limit established by the Lender in its discretion (to the extent of such
excess); (j) the Account is evidenced by a note or other instrument, (other than
Chattel Paper) or reduced to judgment; (k) Accounts which, by contract,
subrogation, mechanics' lien laws or otherwise, are subject to claims by the
Borrower's creditors or other third parties or which are owed by Account Debtors
as to whom any creditor of the Borrower (including any bonding company) has lien
rights; (l) other Accounts for which the validity, collectibility or amount of
which is determined in good faith by the Borrower or the Lender to be doubtful;
(m) any Account for which there is any discount, allowance, claim, set-off,
counterclaim or Lien which has not been disclosed in writing to the Lender; (n)
any Account to the extent it is not for a liquidated amount; and (o) any other
Account which the Lender, upon notice to the Borrower, deems ineligible in its
sole credit judgment. No Accounts shall be
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Eligible Accounts if any representation, warranties or covenants herein relating
thereto shall be inaccurate or violated. Unless the Borrower notifies the Lender
in writing to the contrary, the Borrower shall be deemed to have made a
continuing representation and warranty that each Eligible Account has not become
ineligible. For the purposes of this definition, Borrower shall also include
Xxxxxxx-Atlantic Corporation, a Florida corporation.
"Eligible Inventory" shall mean Inventory created or acquired
in the ordinary course of the Borrower's business consisting of finished goods
and raw materials of the Borrower as to which the Lender has a first priority
perfected Lien subject only to Permitted Liens, of a kind usually and
customarily sold by the Borrower and which is not, because of damage, age,
unmerchantability, obsolescence or any other condition or circumstance, impaired
in condition, value or marketability in the credit judgment of the Lender or the
Borrower, and which is not, in the good faith credit judgment of the Lender,
deemed ineligible after notice to the Borrower. No Inventory shall be eligible
if it is consigned or if it fails to meet all applicable governmental standards
for its use and sale. No Inventory shall be eligible unless it is located at the
location of Borrower set forth on Schedule 2.9, or if it is stored with a
warehouseman, bailee or similar party. Eligible Inventory shall be computed at
the lesser of cost or fair market value. No Inventory shall be Eligible
Inventory if any representation, warranty, or covenant herein relating to such
Inventory is inaccurate or violated. Unless the Borrower notifies the Lender in
writing to the contrary, the Borrower shall be deemed to have made a continuing
representation and warranty that none of the Eligible Inventory has become
ineligible. For the purposes of this definition, Borrower shall also include
Xxxxxxx-Atlantic Corporation, a Florida corporation.
"Equipment" means all furniture, fixtures, equipment, motor
vehicles, rolling stock and other tangible property of a Person of every
description, except Inventory, and in addition includes all property included in
the definition of "equipment" as used in the Code.
"Event of Default" means any event specified as such in
Section 6.1, provided that there shall have been satisfied any requirement in
connection with such event for the giving of notice or the lapse of time, or
both.
"Foreign Exchange Subfacility" has the meaning set forth in
Section 3.10.
"Forward" shall have the meaning set forth in Section 3.10.
"GAAP" shall have the meaning ascribed thereto in Section 1.2.
"General Intangibles" means all intangible personal property
(including things in action) except Accounts, Chattel Paper and Instruments (as
defined in the Code), including all contract rights, copyrights, trademarks,
trade names, service marks, patents, patent drawings, designs, formulas, rights
to a Person's name itself, customer lists, rights to all prepaid expenses,
marketing expenses, rights to receive future contracts, fees, commissions and
orders relating in any respect to any business of a Person, all licenses and
permits, all computer programs and other software owned by a Person, or which a
Person has the right to use, and all rights for breach of warranty or other
claims for funds to which a Person may be entitled, and in addition includes all
property included in the definition of "general intangibles" as used in the
Code.
"Guarantor" or "Guarantors" shall mean any Person now or
hereafter guaranteeing, endorsing or otherwise becoming liable for any
Indebtedness, including without limitation Xxxxxxx-Atlantic Corporation, a
Florida corporation, Xxxxxxx-Atlantic Brokerage Company, Inc., a Florida
corporation, Dryclean USA Development Corp., a Florida corporation, Dryclean USA
License Corp., a Florida corporation.
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"Guarantor Collateral means all property, assets and rights of
any Guarantor (other than real estate), wherever located and whether now owned
by such Guarantor or hereafter acquired, including, but not limited to all of
such Guarantor's: (a) Inventory; (b) General Intangibles; (c) Accounts and
Chattel Paper and any other instrument or intangible representing payment for
goods or services; (d) Equipment; (e) Instruments; (f) Investment Property; (g)
Documents; (h) Deposit Accounts; (i) Letter of Credit Rights; (j) General
Intangibles; and (k) parts, replacements, additions, accessions, substitutions,
profits, and products and cash and non-cash proceeds of any of the foregoing
(including insurance proceeds payable by reason of loss or damage thereto) in
any form and wherever located. Guarantor Collateral shall include all written or
electronically recorded records relating to any such Guarantor Collateral and
other rights relating thereto.
"Guaranty Agreement" or "Guaranty" shall mean any guaranty
instrument now or hereinafter executed by a Guarantor in favor of Lender.
"Indebtedness" means all obligations now or hereafter owed to
the Lender and/or its Affiliates by the Borrower and/or its Affiliates, whether
fixed, contingent or otherwise, and whether related or unrelated to the Loans,
including, without limitation, amounts owed or to be owed under the terms of the
Loan Documents, or arising out of the transactions described therein, including,
without limitation, the Loans, Letter of Credit Obligations, obligations
relating to the Foreign Exchange Subfacility, sums advanced to pay overdrafts on
any account maintained by the Borrower with the Lender, reimbursement
obligations for outstanding letters of credit issued at the request of the
Borrower, amounts paid by the Lender under letters of credit or drafts accepted
by the Lender for the account of the Borrower, together with all interest
accruing thereon, and all fees, costs or expenses payable by Borrower under any
Loan Document, including, but not limited to, all costs of collection,
reasonable attorneys' fees, and expenses of or advances by the Lender which the
Lender pays or incurs in discharge of obligations of the Borrower or to
repossess, protect, preserve, store or dispose of any Collateral, whether such
amounts are now due or hereafter become due, direct or indirect and whether such
amounts due are from time to time reduced or entirely extinguished and
thereafter re-incurred. The term also includes, but without limitation, the
obligations of the Borrower under any Interest Rate Swap Agreement for any and
all "Loss", "Settlement Amount" and "Unpaid Amounts", as such terms are defined
in such Interest Rate Swap Agreement.
"Interest Rate Swap Agreement" means each and every ISDA
Master Agreement, including all schedules, confirmations and exhibits thereto,
entered into at any time between Lender and the Borrower, as such agreement may
be amended or otherwise modified from time to time hereafter.
"Inventory" means all goods, merchandise and other personal
property of a Person which is held for sale or lease or furnished or to be
furnished under a contract for services or raw materials, and all work in
process and materials used or consumed or to be used or consumed in a Person's
business, and in addition, includes all property included in the definition of
"inventory" as used in the Code.
"Letter of Credit" means a Trade Letter of Credit.
"Letter of Credit Agreement" shall mean any form of letter of
credit agreement utilized from time to time by the Lender (and each Application
by Applicant for a Credit as referenced therein), it being understood that each
Letter of Credit issued thereunder or in connection therewith shall be issued
pursuant to and subject to the terms and conditions of this Agreement.
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"Letter of Credit Obligations" shall mean all outstanding
obligations incurred by Lender at the request of the Borrower, whether direct or
indirect, contingent or otherwise, due or not due, in connection with the
issuance by Lender of Letters of Credit. The amount of such Letter of Credit
Obligations shall equal the maximum amount which may be payable by Lender
thereupon or pursuant thereto.
"LIBOR Market Index Rate Loan" means, at any time, any
outstanding Loan that bears interest at the Adjusted LIBOR Market Index Rate
(Revolving) or Adjusted LIBOR Market Index Rate (Term) at such time.
"LIBOR Market Index Rate", for any day, is the rate for one
month U.S. dollar deposits as reported on Telerate page 3750 as of 11:00 a.m.,
London time, on such day, or if such day is not a Business Day, then the
immediately preceding Business Day (or if not so reported, then as may be
determined by Lender from another recognized source or interbank quotation).
"Lien" means any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any lease or title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
under the UCC or comparable law of any jurisdiction).
"Loans" means the Term Loan and the Revolving Credit Loans.
"Loan Documents" means this Agreement, all other Security
Agreements, the Notes, all Guaranty Agreements, all Letter of Credit Agreements
(and all agreements and documents executed in connection therewith), all UCC-1
financing statements required under this Agreement or any of the other Loan
Documents, all Interest Rate Swap Agreements, and all other agreements,
documents and instruments now or hereafter evidencing, describing, guaranteeing,
relating to or securing the Indebtedness.
"Material Adverse Change" means a material adverse change in
any of: (i) the condition (financial or otherwise), business, performance,
profits, cash flows, operations, properties or prospects of the Borrower or any
Guarantor; (ii) the legality, validity or enforceability of any Loan Document
which substantially deprives the Lender of the benefits thereof; (iii) the
ability of the Borrower or any Guarantor to repay the Indebtedness or to perform
its obligations under any Loan Document; (iv) the rights and remedies of the
Lender under the Loan Documents which substantially deprives the Lender of the
benefits thereof; or (v) the Collateral or the Lender's Liens in the Collateral
or the priority of such Liens.
"Material Adverse Effect" means an effect that has a
reasonable likelihood of resulting in or causing a Material Adverse Change.
"Notes" means the Term Note and the Revolving Credit Note.
"Permitted Debt" means (a) the Indebtedness; (b) Debt payable
to suppliers and other trade creditors in the ordinary course of business on
ordinary and customary trade terms and which is not past due more than 30 days;
(c) Debt secured by Permitted Liens; (d) Debt which is subordinated in right and
time of payment to all Indebtedness in a manner reasonably satisfactory in form
and substance to the Lender; and (e) such other Debt as the Lender may consent
to in writing from time to time.
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"Permitted Liens" means (a) Liens securing the Indebtedness;
(b) Liens for taxes and other statutory Liens, landlord's Liens and similar
Liens arising by operation of law (provided they are subordinate to the Lender's
Liens on Collateral) so long as the obligations secured thereby are not past due
more than 30 days; (c) Liens described on Schedule 1.1 hereto (if any),
provided, however, that no Debt not now secured by such Liens shall become
secured by such Liens hereafter other than Liens arising by operation of law
(provided they are subordinate to the Lender's Liens on Collateral) and such
Liens shall not encumber any other assets; and (d) purchase money Liens to the
extent such Liens secure not more than 100% of the purchase price of assets
purchased without violating the terms hereof and cover only assets purchased.
"Person" means any natural person, corporation, unincorporated
organization, trust, joint stock company, joint venture, association, limited or
general partnership, limited liability company, any government, or any agency or
political subdivision of any government.
"Prime Rate" shall be (for any day) that rate of interest
announced by Lender from time to time as its Prime Rate and is one of several
interest rate bases used by Lender. Lender lends at rates both above and below
its Prime Rate, and Borrower acknowledges that Lender's Prime Rate is not
represented or intended to be the lowest or most favorable rate of interest
offered by Lender.
"Revolving Credit Loan" shall have the meaning set forth in
Section 3.1(b).
"Revolving Credit Loan Maturity Date" shall mean the earlier
of (i) October 30, 2002 or (ii) the date the Lender demands repayment of the
Revolving Credit Loans, unless renewed, extended or modified in writing by
Lender, in its sole discretion.
"Revolving Credit Note" shall mean the revolving credit note
referenced in Section 3.2.
"Security Agreement" means this Agreement as it relates to a
Lien on any or all of the Collateral, and any other mortgage, security agreement
or similar instrument now or hereafter executed by the Borrower, any Guarantor
or any other Person granting the Lender a Lien on any Collateral to secure the
Indebtedness.
"Solvent" means, as to any Person, that such Person has
capital sufficient to carry on its business and transactions and all business
and transactions in which it is about to engage and is able to pay its debts as
they mature and owns property having a value, both at fair valuation and at
present fair saleable value, greater than the amount required to pay its debts.
"Spot" shall have the meaning set forth in Section 3.10.
"Subsidiary" means any corporation, partnership or other
Person in which the Borrower, directly or indirectly, owns 50% or more of the
stock, capital or income interests, or other beneficial interests.
"Term" shall have the meaning ascribed thereto in Section 8.1.
"Term Loan" shall have the meaning set forth in Section
3.1(a).
"Term Loan Maturity Date" shall mean December 30, 2004.
"Term Note" means the term note referenced in Section 3.2.
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"Trade Letter of Credit" shall mean a letter of credit (sight
or time) issued by the Lender for the account of the Borrower payable to a
supplier of Borrower upon presentation of appropriate supporting documentation.
1.2. Financial Terms. All financial terms used herein shall
have the meanings assigned to them under generally accepted accounting
principles consistently applied and maintained on a basis for the Borrower
throughout the period indicated and consistent with the prior financial practice
of the Borrower on a consolidated basis ("GAAP"), unless another meaning shall
be specified.
1.3. Other Terms. All other capitalized terms contained in
this Agreement shall, when the context so indicates, have the meanings provided
for by the Code to the extent the same are used or defined therein. Any
reference to this Agreement or any other Loan Document shall include any
amendment, supplement, enlargement, extension, renewal, restatement or other
modification thereof.
2. Representations and Warranties. In order to induce the Lender
to enter into this Agreement and to make the Loans, to issue the Letters of
Credit and to extend credit accommodations under the Foreign Exchange
Subfacility, the Borrower makes the following representations and warranties,
all of which shall survive the execution and delivery of the Loan Documents and
the making of the Loans and the issuance of Letters of Credit hereunder, and
shall be deemed to be made on each day on which any Loan is outstanding (except
to the extent a representation and warranty is made as of a particular date, in
which case they shall be true and correct as of such date).
2.1. Valid Existence and Power. Borrower and each Guarantor is
a corporation duly organized, validly existing and in good standing (or its
status is active, as applicable), under the laws of the jurisdiction of its
organization and is duly qualified or licensed to transact business in all
places where the failure to be so qualified could reasonably be expected to have
a Material Adverse Effect. Borrower and each Guarantor has the power to make and
perform the Loan Documents executed by each and all such instruments will
constitute the legal, valid and binding obligations of such Person, enforceable
in accordance with their respective terms, except to the extent enforceability
may be limited by bankruptcy, fraudulent conveyance, insolvency, moratorium or
other laws relating to creditors' rights generally and general principles of
equity.
2.2. Authority. The execution, delivery and performance of the
Loan Documents by Borrower and each Guarantor have been duly authorized by all
necessary action of such Person, and do not and will not violate any provision
of law or regulation, or any writ, order or decree of any court or governmental
or regulatory authority or agency or any provision of the governing instruments
of such Person, and do not and will not, with the passage of time or the giving
of notice, result in a breach of, or constitute a default or require any consent
under, or result in the creation of any Lien, other than Permitted Liens, upon
any property or assets of such Person pursuant to, any law, regulation,
instrument or agreement to which such Person is a party or by which such Person
or its respective properties may be subject, bound or affected.
2.3. Condition. Other than as disclosed in the financial
statements most recently delivered to the Lender, neither Borrower nor any
Guarantor has any direct or contingent obligations or liabilities required to be
disclosed therein under GAAP (including any guarantees or leases) or any
material unrealized or anticipated losses from any commitments required to be
disclosed therein under GAAP, except for executory contracts. To the Borrower's
knowledge, there is no fact which the Borrower has not disclosed to the Lender
in writing which could reasonably be expected to have a Material Adverse Effect.
8
2.4. Financial Statements. The financial statements of
Borrower and each Guarantor delivered to Lender have been prepared in accordance
with GAAP, contain no material misstatements or omissions, and fairly present in
all material respects the financial position, assets and liabilities of such
Person as of the respective dates thereof and the results of operations and cash
flows of such Person for the respective periods then ended.
2.5. Litigation; Government Regulation. There are no actions,
suits or proceedings pending or threatened against or affecting the Borrower or
any Guarantor at law or in equity before any court or administrative officer or
agency which, if adversely determined, could reasonably be expected to have a
Material Adverse Effect. Neither Borrower nor any Guarantor is in violation of
or in default under any applicable statute, rule, order, decree, writ,
injunction or regulation of any governmental body (including any court), the
violation of which could reasonably be expected to have a Material Adverse
Effect.
2.6. Agreements, Etc. Neither Borrower nor any Guarantor is a
party to any agreement or instrument or subject to any court order, governmental
decree or any charter or other corporate restriction which could reasonably be
expected to have a Material Adverse Effect. Neither Borrower nor any Guarantor
is in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument to
which it is a party, or any law, regulation, decree, order or the like which
could reasonably be expected to have a Material Adverse Effect. No Default or
Event of Default has occurred.
2.7. Authorizations. All authorizations, consents, approvals
and licenses required under applicable law or regulation for the ownership or
operation of the property owned or operated by the Borrower or any Guarantor or
for the conduct of any business in which the Borrower or any Guarantor is
engaged have been duly issued and are in full force and effect, and neither the
Borrower nor any Guarantor is in default, nor has any event occurred which, with
the passage of time or the giving of notice, or both, would constitute a
default, under any of the terms or provisions of any part thereof, or under any
order, decree, ruling, regulation or other decision or instrument of any
governmental commission, bureau or other administrative agency or public
regulatory body having jurisdiction over the Borrower or any Guarantor, which
default is reasonably likely to have a Material Adverse Effect. Except as noted
herein, no approval, consent or authorization of, or filing or registration
with, any governmental commission, bureau or other regulatory authority or
agency is required with respect to the execution, delivery or performance of any
Loan Document by the Borrower or any Guarantor.
2.8. Title; Collateral. The Borrower and/or each Guarantor
have good title to the Collateral and to all of the assets set forth in the
financial statements most recently delivered to the Lender (except Inventory
sold since the date of such financial statements in the ordinary course of
business), free and clear of all Liens, except Permitted Liens. The Borrower and
the Guarantors alone have full ownership rights in all Collateral, subject only
to Permitted Liens. The Liens granted to the Lender herein and pursuant to any
other Security Agreement (a) constitute and, as to subsequently acquired
property, will constitute, Liens under applicable law including, without
limitation, the Code, entitled to all of the rights, benefits and priorities
provided by applicable law including, without limitation, the Code and (b) are,
and as to such subsequently acquired property will be, first priority, fully
perfected, superior and prior to the rights of all third persons, now existing
or hereafter arising, subject only to Permitted Liens. All of the Collateral is
intended for use solely in the Borrower's business. Except as set forth on
Schedule 2.8, no Affiliate of Borrower has any interest in any assets used in
Borrower's business.
2.9. Location and Names. The chief executive office and
principal place of business of the Borrower, where its business records are
located, is the address designated for notices in Section 9.4. Borrower has no
other places of business, except as shown on Schedule
9
2.9. Borrower has not, during the past five years, been known as or used any
other corporate, fictitious or trade names or been the subject of any bankruptcy
or similar proceeding.
2.10. Taxes. Neither Borrower nor any Guarantor is delinquent
in the payment of any taxes which have been levied or assessed by any
governmental authority against it or its assets. The Borrower and each Guarantor
has timely filed all tax returns which are required by law to be filed, and have
paid all taxes and all other assessments or fees levied upon the Borrower and
any Guarantor or upon its properties to the extent that such taxes, assessments
or fees have become due. No controversy in respect of taxes is pending or, to
the knowledge of the Borrower, threatened against the Borrower or any Guarantor.
The Borrower and each Guarantor has paid all withholding, FICA and other
payments required by federal, state or local governments with respect to any
wages paid to employees.
2.11. Labor Law Matters. None of Borrower's nor any
Guarantor's employees is a member of a labor union, and the Borrower is not a
party to or otherwise bound by, or threatened with any labor or collective
bargaining agreement. None of the Borrower's nor any Guarantor's employees is
known to be engaged in organizing any labor union or other employee group that
is seeking recognition as a bargaining unit. No goods or services have been or
will be produced by the Borrower or any Guarantor in violation of any applicable
labor laws or regulations or in violation of any minimum wage, wage-and-hour or
other similar laws or regulations. Neither Borrower nor any Guarantor is subject
to any material labor dispute.
2.12. Accounts. Each Account, instrument, Chattel Paper and
other writing constituting any portion of the Collateral is (a) genuine and
enforceable in accordance with its terms except for such limits thereon arising
from bankruptcy and similar laws relating to creditors' rights; (b) not subject
to any defense, setoff, claim or counterclaim of any nature against the Borrower
or any Guarantor (i) for claims not exceeding $50,000 in the aggregate incurred
in the ordinary course of business or (ii) as to which the Borrower has notified
the Lender in writing; and (c) not subject to any other circumstances that would
impair the validity, enforceability or amount of such Collateral except as to
which the Borrower has notified the Lender in writing. Each Account and all
Inventory included in any Advance Request or Borrowing Base Certificate or
calculation delivered to Lender as an Eligible Account or Eligible Inventory
meets and will meet all requirements of an Eligible Account or Eligible
Inventory, as the case may be.
2.13. Use and Location of Collateral. The Collateral is
located only, and shall at all times be kept and maintained only, at the
location or locations as described on Schedule 2.9, which are (i) owned and
operated by the Borrower and/or any Guarantor (and for each of which a
mortgagee's waiver has been delivered in accordance with Section 4.1(f)), or
(ii) leased and operated by the Borrower and/or any Guarantor (and for each of
which a landlord's lien waiver has been delivered in accordance with Section
4.1(f)).
2.14. Judgment Liens. Neither the Borrower nor any Guarantor
nor any of their assets is subject to any unpaid judgments (whether or not
stayed) or any judgment liens in any jurisdiction.
2.15. Intent and Effect of Transactions; Borrower's Solvency.
This Agreement and the transactions contemplated herein are not made or incurred
with intent to hinder, delay or defraud any Person to whom the Borrower or any
Guarantor has been, is now, or may hereafter become indebted. The Borrower and
each Guarantor are Solvent. After giving effect to this Agreement, and the
transactions contemplated hereby (including the uses of proceeds permitted by
this Agreement), the Borrower and each Guarantor will be Solvent and will not be
left with an unreasonably small capital with which to engage in their businesses
or in any businesses or transactions in which Borrower or any Guarantor intends
to engage. This Agreement is not
10
entered into with the intent to incur, or with the belief that the Borrower or
any Guarantor would incur, debts that would be beyond Borrower's or any
Guarantor's ability to pay as such debts mature.
2.16. Subsidiaries. Borrower has the following Subsidiaries:
Xxxxxxx-Atlantic Corp., a Florida corporation, Xxxxxxx Atlantic Brokerage
Company, Inc., a Florida corporation, Dryclean USA Development Corp., a Florida
corporation, DryClean USA License Corp., a Florida corporation.
2.17. Hazardous Materials. Except as disclosed on Schedule
2.17, the Borrower's and Guarantors' properties and improvements thereon have
not in the past been used, are not presently being used, and will not in the
future be used for, nor does the Borrower or any Guarantor engage in, the
handling, storage, manufacture, disposition, processing, transportation, use or
disposal of hazardous or toxic materials, in any such instance in violation of
applicable environmental laws.
2.18. ERISA. Neither the Borrower nor any Guarantor has any
pension, profit-sharing or other benefit plan subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or they have furnished to the
Lender true and complete copies of the latest annual report required to be filed
pursuant to Section 104 of ERISA, with respect to each employee benefit plan or
other plan maintained for employees of the Borrower or any Guarantor and covered
by Title IV of ERISA (a "Plan"), and no Termination Event (as hereinafter
defined) with respect to any Plan has occurred and is continuing and no fact
exists which might constitute grounds for a Termination Event or for the
appointment of a trustee to administer any such plan. For the purposes of this
Agreement, a "Termination Event" means a "reportable event" as defined in
Section 4043(b) of ERISA ("Reportable Event"), or the filing of a notice of
intent to terminate under Section 4041 of ERISA. Neither the Borrower nor any
Guarantor has any unfunded liability with respect to any such Plan. No
"prohibited transaction" (as defined under ERISA) has occurred with respect to
any such Plan. Each such Plan has been administered in accordance with ERISA and
the Code.
2.19. Investment Company Act. Neither the Borrower nor any
Guarantor is an "investment company" as defined in the Investment Company Act of
1940, as amended.
2.20. Trade Relations. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship of the Borrower or any Guarantor with any customer or
any group of customers whose purchases individually or in the aggregate are
material to the business of the Borrower or any Guarantor, or with any material
supplier.
2.21. Maintenance of Business and Properties. Borrower and
each Guarantor shall at all times maintain, preserve and protect its property
used or useful in the conduct of its business, and keep the same in good repair,
working order and condition, and from time to time make, or cause to be made,
all material needful and proper repairs, renewals, replacements, betterments and
improvements thereto so that the business carried on in connection therewith may
be conducted properly and in accordance with standards generally accepted in
businesses of a similar type and size at all times, and maintain and keep in
full force and effect all licenses and permits necessary to the proper conduct
of its business.
2.22. Full Disclosure. The Loan Documents, together with the
statements furnished by or on behalf of the Borrower and each Guarantor to the
Lender in connection with the Loan Documents do not, contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading. To the
11
Borrower's knowledge, there is no fact which the Borrower or any Guarantor has
not disclosed to the Lender in writing which might reasonably be expected to
have a Material Adverse Effect.
3. Loans.
3.1. Advances of Loans.
(a) Advance of Term Loan. Upon the terms and subject to
the conditions of this Agreement and the other Loan Documents, and provided
there has not occurred a Default or Event of Default, the Lender agrees to make
a term loan (the "Term Loan") to the Borrower on the Closing Date, in the
principal amount of $960,000. The Lender will disburse the proceeds of the Term
Loan to the Borrower in accordance with written instructions furnished to the
Lender by the Borrower on or before the Closing Date.
(b) Advance of Revolving Credit Loans. Upon the terms and
subject to the conditions of this Agreement and the other Loan Documents, and
provided there has not occurred a Default or Event of Default and Lender has not
demanded repayment of the Revolving Credit Loans (as defined herein) (and
provided a Default or Event of Default would not occur as a result of the making
of a Revolving Credit Loan), from time to time upon the request of the Borrower
until the Revolving Credit Loan Maturity Date, upon Lender's receipt from
Borrower of an Advance Request, the Lender may, in its sole discretion make
revolving credit loans ("Revolving Credit Loans") to Borrower, provided that,
after giving to such Advance Request, the total principal of all Revolving
Credit Loans outstanding shall not exceed the Borrowing Base less all Letter of
Credit Obligations less the total value of outstanding Forward and Spot
transactions. Upon the terms and subject to the conditions of this Agreement and
the other Loan Documents, and provided that there has not occurred a Default or
Event of Default and Lender has not demanded repayment of the Revolving Credit
Loans, the outstanding principal balance of the Revolving Credit Loans may
increase and decrease from time to time, and Advances thereunder may be repaid
and reborrowed, so long as the total principal balance of all outstanding
Revolving Credit Loans does not at any time exceed the Borrowing Base less all
Letter of Credit Obligations less the total value of outstanding Forward and
Spot transactions. Should there occur any overdraft of any deposit account
maintained by the Borrower with the Lender, the Lender may, at its option,
disburse funds (whether or not in excess of the Borrowing Base) to eliminate
such overdraft and such disbursement shall be deemed an advance of Revolving
Credit Loan proceeds hereunder entitled to all of the benefits of the Loan
Documents. Nothing herein shall be deemed an authorization of or consent to the
creation of an overdraft in any account or create any obligations on the part of
the Lender. The Borrower shall immediately repay to the Lender any amount by
which the principal amount of Revolving Credit Loans outstanding exceeds the
Borrowing Base less all Letter of Credit Obligations less the total value of
outstanding Forward and Spot transactions. All Advances, whether or not in
excess of the Borrowing Base shall be part of the Revolving Credit Loans and
Indebtedness, shall bear interest as provided herein, shall be payable in
accordance herewith and shall be entitled to all rights and security provided
for herein and in the other Loan Documents. In determining the Borrowing Base,
the Lender shall have the right from time to time upon notice to the Borrower to
establish and re-establish such reserves as it deems appropriate in its sole
credit judgment.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, BORROWER SHALL REPAY ALL REVOLVING CREDIT
LOANS IN FULL IMMEDIATELY UPON DEMAND OF LENDER, REGARDLESS OF WHETHER OR NOT
ANY DEFAULT OR EVENT OF DEFAULT HAS OCCURRED OR IS CONTINUING.
3.2. The Notes. The obligation of the Borrower to repay (i)
the Term Loan shall be evidenced by the term note in the form of Exhibit C
hereto (the "Term Note") and, (ii)
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the Revolving Credit Loan shall be evidenced by the revolving credit note in the
form of Exhibit D hereto (the "Revolving Credit Note"); in each instance, duly
executed by the Borrower, dated the Closing Date and payable to the order of the
Lender.
3.3. Notice and Manner of Borrowing. Upon the terms and
subject to the conditions hereof, Borrower shall give Lender irrevocable written
notice ("Advance Request") of each proposed Advance not later than 11:00 a.m.,
Miami time, on the same Business Day as such proposed borrowing. Each such
notice shall include or be accompanied by a Borrowing Base Certificate and
specify (i) the date of such Advance, which shall be a Business Day, (ii) the
amount to be Advanced, and (iii) containing such other information as Lender
shall reasonably request. Advance Requests received after 11:00 a.m. shall be
deemed received on the next Business Day. Once delivered, any Advance Request
shall be irrevocable. All obligations hereunder and under the other Loan
Documents shall constitute one general obligation of the Borrower. The interest
rate applicable to each of the Adjusted LIBOR Market Index Rate Loans shall be
adjusted daily as applicable to reflect the LIBOR Market Index Rate on such
date.
3.4 Interest. All interest accrued on any Loan shall be due
and payable on each date when all or any amount of the unpaid principal balance
of such Loan shall be due (whether by maturity, optional or mandatory
prepayment, acceleration or otherwise). Interest on all Loans shall also be due
and payable in arrears first Business Day of each month. Except as otherwise
expressly provided herein, interest on Revolving Credit Loans shall be payable
at a rate per annum equal to the Adjusted LIBOR Market Index Rate (Revolving).
Except as otherwise expressly provided herein, interest on the Term Loan shall
be payable at a rate per annum equal to the Adjusted LIBOR Market Index Rate
(Term).
3.5 Repayment of Loans. The principal amount of the Loans
shall be repaid as follows:
(a) Term Loan. Borrower shall repay the principal amount
of the Term Loan in thirty-six (36) consecutive monthly installments of
$26,666.67 on the last day of each month, commencing on January 31, 2002.
Notwithstanding anything to the contrary set forth herein, the entire remaining
unpaid principal balance of Term Loan shall be repaid on the earlier of the Term
Loan Maturity Date or the date upon which Borrower's obligations hereunder have
been accelerated upon the occurrence of an Event of Default.
(b) Revolving Credit Loans. Borrower shall repay the
entire principal amount of all Revolving Credit Loans immediately upon the
earliest of (i) the Revolving Credit Loan Maturity Date, (ii) the acceleration
of Borrower's obligations hereunder upon the occurrence of an Event of Default,
(iii) at such time and to the extent that the amount of Revolving Credit Loans
outstanding exceeds the amount permitted hereby or (iv) upon DEMAND by Lender.
3.6. Costs, Fees and Expenses. Costs, fees and expenses which
are payable pursuant to this Agreement or any other Loan Document shall be
payable by Borrower to Lender or Lender's designee upon written demand by Lender
to Borrower. Borrower irrevocably authorizes and directs Lender, at Lender's
option, to cause all sums payable hereunder or under any Loan Document to be
paid on the date due by charging such payment as a Revolving Credit Loan.
Without limiting the generality of the foregoing, all such amounts which are not
paid when due hereunder shall be Indebtedness secured by the Collateral and
shall bear interest at the Default Rate.
3.7. Prepayments. Subject to the terms and conditions of any
Interest Rate Swap Agreement, Borrower may prepay any Loan in whole at any time
or in part from time to
13
time on any Business Day by notifying Lender by 9:00 a.m., Miami, Florida time,
on such Business Day, without penalty or premium; provided, however, that
(i) each such prepayment shall be accompanied by the
payment of accrued interest to the date of such prepayment on the
amount prepaid and shall designate whether it is a payment of a Term
Loan or a Revolving Credit Loan, and
(ii) each partial prepayment of any Term Loan shall be
applied to the remaining scheduled payments of principal prepaid in
the inverse order of their maturities.
Notwithstanding anything to the contrary set forth herein or
in any Loan Document, any prepayment will not affect Borrower's obligation to
continue making payments in connection with any Interest Rate Swap Agreement,
which will remain in full force and effect, notwithstanding such prepayment.
3.8. Payments and Computations.
(a) The Borrower shall make each payment hereunder and
under the Notes not later than 12:00 noon, Miami, Florida time, on the day when
due in lawful money of the United States of America to the Lender at its office
at Commercial Loan Payment Center, X.X. Xxx 000000, Xxxxxxx, Xxxxxxx 00000-0000
or such other address as Lender shall designate from time to time.
(b) The Borrower hereby authorizes the Lender, if and to
the extent payment is not made when due hereunder or under any Note, to charge
from time to time against the Borrower's accounts, if any, with the Lender any
amount so due.
(c) All computations of interest shall be made by the
Lender on the basis of a year of three hundred sixty (360) days for the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such interest is payable.
(d) Whenever any payment to be made hereunder or under
any Note shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of payment of interest.
3.9. Facility for Letters of Credit.
(a) Subject to all of the terms and conditions of this
Agreement and the other Loan Documents, and provided there does not then exist a
Default or Event of Default and provided that no Default or Event of Default
would result from the issuance of a Letter of Credit, the Lender will issue,
upon the Borrower's written request therefor, from time to time on and after the
Closing Date until the Revolving Credit Loan Maturity Date or demand by Lender
of repayment of the Revolving Credit Loans, Trade Letters of Credit for the
account of the Borrower, upon the execution of such documents and agreements as
Lender shall require. In no event shall Letter of Credit Obligations outstanding
at any time hereunder exceed $1,000,000 in the aggregate. Subject to the terms
and conditions set forth in this Agreement and the other Loan Documents, Lender
shall be under no obligation to issue any Letter of Credit on the Borrower's
behalf if, after giving effect to the requested issuance, the sum of outstanding
Revolving Credit Loans plus all Letter of Credit Obligations plus the total
value of outstanding Forward and Spot transactions would exceed the Borrowing
Base.
14
(b) Notwithstanding anything to the contrary set forth in
this Section 3.9, Lender shall be under no obligation to issue any Letter of
Credit having a maturity date or expiry date which is later than the Revolving
Credit Loan Maturity Date or which is payable in a currency other than United
States Dollars, Italian Lira or Euro-currency (at such time Lender issues
letters of credit generally in Euro-currency).
(c) In the event that Lender shall make any payment on,
or pursuant to, any Letter of Credit, the Borrower shall be obligated to,
following notice of such payment by Lender, immediately reimburse Lender for any
such payment. If the Borrower does not reimburse Lender on the same day that
Lender provides such notice, the Lender shall have the right (but not the
obligation) to make a Revolving Credit Loan in an amount equal to such
unreimbursed portion of such payment; and if Lender elects not to make such
advance of a Revolving Credit Loan, the entire unreimbursed amount and fees and
costs shall continue to be Indebtedness secured by the Collateral and shall
accrue interest at the Default Rate.
(d) In the event that any Letter of Credit Obligations,
whether or not then due and payable, shall for any reason be outstanding on the
date Lender demands repayment of the Revolving Credit Loans or the Revolving
Credit Loan Maturity Date, the Borrower will either (i) provide the Lender with
a letter of credit or other guaranty of payment for all then outstanding Letters
of Credit issued by Lender, satisfactory to the Lender in its discretion, or
(ii) pay to the Lender for the account of Lender cash in an amount equal to the
maximum amount then available to be drawn under such Letters of Credit and fees
and costs. All funds delivered to the Lender pursuant to this subsection (d)
shall be held by Lender for the account of the Borrower.
(e) The Borrower shall comply with all of the terms and
conditions imposed upon the Borrower under each Letter of Credit Agreement
executed by Borrower.
(f) In the event of the Borrower's failure to pay to the
Lender, upon demand, the total amount of liabilities incurred or sums paid by
the Lender in connection with any such Letter of Credit, the Lender shall, in
addition to its rights under the UCC of the State of Florida and under this
Agreement, be fully subrogated to the rights of any Beneficiary of the Letters
of Credit with respect to any obligation of the Borrower to such Beneficiary
discharged with the proceeds of any Letter of Credit
(g) The Borrower hereby unconditionally agrees to
reimburse the Lender for the total amount of the sums paid by Lender in
connection with the issuance of any Letters of Credit or any additional or
further liability which may accrue against Lender in connection with the same.
(h) The Borrower hereby unconditionally agrees to
indemnify the Lender and hold the Lender harmless from any and all losses,
claims or liabilities arising from any transactions or occurrences relating to
Letters of Credit issued for the Borrower's account, and all obligations
incurred in connection therewith, including any loss or claim due to any action
taken or omitted by any Beneficiary thereof. The Borrower's unconditional
obligation to the Lender shall not be modified or diminished for any reason or
in any amount whatsoever. The Borrower agrees that any action taken by the
Lender in connection with a Letter of Credit, if taken in good faith, shall be
binding upon the Borrower and shall not impose any resulting liability on the
Lender.
(i) In the event that this Agreement is terminated for
any reason by the Borrower or the Lender as herein provided, the Lender demands
repayment of the Revolving Credit Loans or there are any Letter of Credit
Obligations outstanding on the Business Day prior to the Revolving Credit Loan
Maturity Date, the Lender shall be entitled to charge immediately
15
the Borrower's Revolving Credit Loan account hereunder or any of its other
accounts with the full amount of any outstanding Letter of Credit Obligations,
whether the Borrower's obligations with respect thereto are absolute or
contingent at any time. All funds related to such charge shall be held by Lender
to be applied against Indebtedness. The Lender shall also be entitled to hold an
amount which the Lender may deem reasonably necessary to cover possible claims
under any outstanding Letters of Credit unless and until the Lender is supplied
with an indemnity reasonably satisfactory to it with respect to any possible
liability under such Letters of Credit or a release of its liabilities
thereunder.
(j) As additional consideration for Lender's issuing
Letters of Credit for the account of Borrower, Borrower agrees to such fees and
costs in connection therewith as Lender specifies.
(k) All Trade Letters of Credit shall be used only for
the purpose of supporting Borrower's obligations with respect to the purchase of
Inventory or for any other purpose approved in writing by Lender.
3.10. Facility for Foreign Exchange.
(a) Subject to all of the terms and conditions set forth
in this Agreement and the other Loan Documents and provided that there does not
then exist a Default or Event of Default and provided that no Default or Event
of Default would result from the Lender's purchase of foreign exchange for
Borrower, the Lender shall, upon Borrower's written request, purchase foreign
exchange (the "Foreign Exchange Subfacility") for the Borrower's use from time
to time on and after the Closing Date and until the Revolving Credit Loan
Maturity Date, upon Borrower's execution of such documents and agreements as
Lender may request.
(b) The Borrower may request (i) that the Lender engage
in spot foreign exchange ("Spot") for a value in U.S. Dollars for the purpose of
hedging currency exposure in connection with the Borrower's import activities,
and (ii) that the Lender enter into forward foreign exchange contracts
("Forward") to hedge currency exposure in connection with the Borrower's import
activities; provided, however, that neither the amount of Spot nor amount of
Forward contracts shall exceed $250,000 in the aggregate at any one time
outstanding unless otherwise agreed to in writing by the Lender. Subject to the
terms and conditions set forth in this Agreement and the other Loan Documents,
Lender shall be under no obligation to enter into any Spot or Forward
transactions on Borrower's behalf if, after giving effect to the requested
transaction, the sum of outstanding Revolving Credit Loans plus all Letter of
Credit Obligations plus the total value of outstanding Forward and Spot
transactions would exceed the Borrowing Base.
(c) Obligations under Spot transactions shall be due and
payable by Borrower in U.S. Dollar or foreign currency equivalent, whichever the
case may be, within two Business Days from the date Borrower buys the Spot
foreign exchange (the "Spot Value Date"). Obligations under Forward transactions
shall be due and payable by the Borrower in U.S. Dollar or foreign currency
equivalent, whichever the case may be, on or prior to the maturity date of the
respective contract (the "Forward Value Date"). The Spot Value Date and the
Forward Value Date shall be collectively referred to hereinafter as the "Value
Date".
(d) The Borrower hereby gives the Lender the authority to
make Revolving Credit Loans for all amounts due under the Spot or Forward
transaction on the Value Date.
(e) In the event that any Spot or Forward is outstanding
on the Revolving Credit Loan Maturity Date, the Borrower will provide or pay to
the Lender for any
16
settlement of outstanding Spot or Forwards either of the following: (i) a
standby letter of credit acceptable to the Lender or other guaranty of payment
acceptable to the Lender; or (ii) cash funds to be directed into an escrow
account. The amount required of the Borrower in (i) and (ii) shall be determined
by Lender. Such determination shall be the maximum amount sufficient for any
settlement of outstanding Spot or Forwards engaged in or entered into with the
Borrower.
(f) The Borrower agrees that Lender's internal books and
records, and any other documents required by Lender to evidence such
indebtedness shall be conclusive evidence (absent manifest error) with respect
to all repayments and repayment dates and of the Borrower's indebtedness to
Lender under the Foreign Exchange Subfacility.
(g) The Borrower hereby unconditionally agrees to
indemnify the Lender and hold the Lender harmless from any and all losses,
claims or liabilities arising from any transactions or occurrences relating to
the Foreign Exchange Subfacility, including any loss or claim due to any action
taken or omitted by any third party which is not an Affiliate of the Lender. The
Borrower's unconditional obligation to the Lender shall not be modified or
diminished for any reason or in any amount whatsoever. The Borrower agrees that
any action taken by the Lender in connection with the Foreign Exchange
Subfacility, if taken in good faith, shall be binding upon the Borrower and
shall not impose any resulting liability on the Lender. The Borrower
specifically acknowledges and agrees that all transactions hereunder shall be
undertaken solely on the order of, and at and for the risk of the Borrower. The
Borrower further acknowledges and understands that Lender may engage in similar
transactions for its own account or provide similar facilities for its own
customers. The Borrower recognizes and acknowledges that Lender may, to the
extent permitted by law, engage in transactions and take action for its own
account or in the performance of its duties to other customers, which
transactions or action may differ from the transactions engaged in, or the
action taken (including, without limitation, the timing and nature of such
transaction or action) with respect to the Borrower's account. Nothing in this
Agreement shall be deemed to impose upon Lender any obligation to cause to be
engaged in, for the Borrower's account or the account of any other customer, any
transaction which Lender may engage in for its own account or recommend for the
account of any other customer.
4. Conditions Precedent to Borrowing.
4.1. Advance. In addition to any other requirement or
condition precedent set forth herein, Lender shall not be required to make an
initial advance on any Loan, issue an initial Letter of Credit or engage in any
transactions under the Foreign Exchange Subfacility, unless and until, in the
sole discretion of Lender, each of the following conditions shall have been
satisfied:
(a) Loan Documents. The Borrower, the Guarantors and each
other party to any Loan Documents, as applicable, shall have executed and
delivered this Agreement, any Interest Rate Swap Agreement, the Letter of Credit
Agreement, the Term Note, the Revolving Credit Note, each Guaranty, any
subordination agreements, all Forms UCC-1, the Notes and other required Loan
Documents, all in form and substance satisfactory to the Lender.
(b) Supporting Documents. The Borrower shall cause to be
delivered to the Lender the following documents:
(i) A copy of the Certificate or Articles of
Incorporation of the Borrower and each Guarantor and a good
standing or active status certificate of the Borrower and each
Guarantor, certified by the Secretary of State of each applicable
state
17
of organization and each state in which such corporation is
qualified to do business;
(ii) Bylaws of the Borrower and each Guarantor,
certified by an officer thereof;
(iii) Incumbency certificate and certified resolutions
of the board of directors of the Borrower and each Guarantor
authorizing the execution, delivery and performance of the Loan
Documents to which each is a party;
(iv) UCC-11 searches and other Lien searches showing
no existing Liens on the Collateral other than the Liens of the
Lender and Permitted Liens, or except as approved by the Lender
in its sole and absolute discretion; and
(v) a letter to Borrower's and Guarantors' independent
accountants, in form and substance satisfactory to the Lender,
authorizing such accountants to disclose information requested
from time to time by the Lender with respect to the Borrower and
Guarantors to the Lender.
(c) Insurance. The Borrower shall have delivered to the
Lender satisfactory evidence of insurance meeting the requirements of Section
5.3.
(d) Perfection of Liens. UCC-1 financing statements
executed by the Borrower and each Guarantor shall have been duly executed and
delivered to Lender in a form appropriate for recordation or filing in the
manner and places required by law to establish, preserve, protect and perfect
the interests and rights created or intended to be created by this Agreement and
any other Security Agreement; and all taxes, fees and other charges in
connection with the execution, delivery and filing of this Agreement, each
Security Agreement and the financing statements shall duly have been paid.
(e) Landlord's Waivers; Mortgagee's Waivers. The Lender
shall have received, in form and content satisfactory to Lender (i) waivers from
all lessors that might have landlord's Liens on any Collateral and (ii) waivers
from all mortgagees of the Borrower's and Guarantors' premises in which any
Collateral is located.
(f) Swap Agreement. The Borrower shall have executed and
delivered to the Lender the Interest Rate Swap Agreement, if the Borrower
desires to do so.
(g) Taxes and Expenses. All taxes, fees and other charges
in connection with the execution, recordation, filing, registration and delivery
hereof shall have been paid.
(h) Commitment Fee and Expenses. Borrower shall pay
Lender at closing a (i) commitment fee of $5,000, (ii) all reasonable costs and
expenses incurred by Lender in connection herewith, (iii) an out of state
closing fee in the amount of $450 and a maritime closing fee in the amount of
$580, and (iii) the fees and disbursements of counsel to the Lender in
connection with this Agreement and the transactions contemplated hereby.
(i) Interim Financial Statements. The most current
interim financial statements of Borrower shall have been delivered to Lender and
shall be satisfactory to Lender.
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(j) SEC Filings. All of Borrower's filings with the
Securities and Exchange Commission since September 30, 2001, shall have been
received by and shall be satisfactory to Lender.
(k) Trade References. Borrower shall have provided such
trade and credit references to Lender as Lender shall request, which shall be
satisfactory to Lender.
4.2. Conditions Precedent to Each Advance of a Loan or
Issuance of a Letter of Credit or Purchasing Forward Exchange. In addition to
any other requirement or condition precedent set forth herein, Lender shall not
be required to make any advance of any Loan or issue any Letter of Credit or
enter into any Spot or Forward transaction unless and until, in the sole
discretion of Lender, each of the following conditions shall have been
satisfied:
(a) Prior Conditions. At or prior to Closing, Borrower
shall have satisfied (i) all conditions precedent set forth in Section 4.1, and
(ii) all conditions precedent set forth elsewhere in this Agreement and in any
other Loan Document.
(b) Advance Request. Borrower shall have delivered to the
Lender an Advance Request and Borrowing Base Certificate and other information,
in such form and containing such information as Lender shall request.
(c) No Default. No Default or Event of Default shall have
occurred or will occur upon the making of the advance, the issuance of the
Letter of Credit in question or enter into any Spot or Forward transaction, and
Borrower shall have delivered to Lender an officer's certificate to such effect
which may be incorporated in the advance request.
(d) Correctness of Representations and Compliance with
Covenants. All representations and warranties made by Borrower and each
Guarantor herein or otherwise in writing in connection herewith shall be true
and correct in all material respects (except where such representations and
warranties are subject to a materiality caveat, in which case they shall be true
and correct in all respects, and except where such representations and
warranties are made as of a particular date, in which case, they shall be true
and correct as of such date) with the same effect as though the representations
and warranties had been made on and as of the proposed Advance Date, and
Borrower and each Guarantor shall have delivered to Lender an officer's
certificate to such effect which may be incorporated in the Advance Request.
Borrower and each Guarantor shall have complied in all material respects (except
where such covenants are subject to a materially caveat, in which case they
shall have been complied with in all respects) with all of its covenants and
agreements set forth in any Loan Document, and Borrower and each Guarantor shall
have delivered to Lender an officer's certificate to such effect, which may be
incorporated in the Advance Request.
(e) No Injunction, Etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to enjoin,
restrain, or prohibit, or to obtain damages in respect of, or which is related
to or arises out of this Agreement or the consummation of the transactions
contemplated hereby, or which, in the Lender's reasonable discretion, would make
it inadvisable to consummate any transactions contemplated by this Agreement.
(f) No Adverse Change. There shall have been no Material
Adverse Change from such condition as it existed on the date of the most recent
financial statements of the Borrower delivered to the Lender prior to the date
hereof, and no Material Adverse Effect shall have occurred.
19
(g) Further Assurances. Borrower shall have delivered
such further documentation, opinions, certificates, agreements and assurances as
Lender may reasonably require.
4.3. Waiver of Conditions Precedent. If the Lender makes any
Loan or issues any Letter of Credit or enters into any Forward or Spot
transaction hereunder prior to the fulfillment of any of the conditions
precedent set forth in this Section 4, the making of such Loan or the issuance
of such Letter of Credit shall constitute only an extension of time for the
fulfillment of such condition and not a waiver thereof, and the Borrower shall
thereafter fulfill each such condition promptly.
5. Covenants of the Borrower. The Borrower covenants and agrees
that from the date hereof and until payment in full of the Indebtedness unless
the Lender shall otherwise consent in writing, it will comply, and will cause
each Guarantor to comply, with the following:
5.1. Use of Loan Proceeds. The proceeds of the Loans shall be
used only to finance working capital of the Borrower and the Subsidiaries and
for the purposes permitted herein, including the payment of all outstanding
obligations under the Existing Facility, and Borrower shall furnish the Lender
all evidence that it may require with respect to such use.
5.2. Maintenance of Business and Properties. Borrower shall
and shall cause each Guarantor to at all times maintain, preserve and protect
all Collateral and all the remainder of their respective properties used or
useful in the conduct of their respective business, and keep the same in good
repair, working order and condition, and from time to time make, or cause to be
made, all material needful and proper repairs, renewals, replacements,
betterments and improvements thereto so that the business carried on in
connection therewith may be conducted properly and in accordance with standards
generally accepted in businesses of a similar type and size at all times, and
maintain and keep in full force and effect all licenses and permits necessary to
the proper conduct of their respective businesses.
5.3. Insurance. Borrower shall maintain (or cause to be
maintained) and pay for insurance upon all Collateral, wherever located, and
otherwise covering casualty, hazard, workers' compensation, business
interruption, public liability and such other risks (as is customary in the
businesses in which Borrower or any Guarantor is engaged) and in such amounts
and with such insurance companies as shall be reasonably satisfactory to the
Lender and in compliance with law. The Borrower and each Guarantor shall deliver
such certificates of insurance to the Lender with loss payable endorsements
naming the Lender as loss payee thereunder in form reasonably satisfactory to
the Lender. Borrower and each Guarantor shall maintain and pay for insurance in
such amount, with such companies and in such form as shall be reasonably
satisfactory to the Lender insuring the Borrower and each Guarantor against any
claims, suits, loss or damages suffered by any Person on any property owned or
leased by the Borrower or any Guarantor and against such other casualties and
contingencies as is customary in the business in which the Borrower is engaged,
and deliver such certificates of insurance to the Lender with satisfactory
endorsements naming the Lender as additional insured thereunder. Each policy of
insurance shall contain a clause requiring the insurer to give not less than
thirty (30) days' prior written notice to the Lender before any cancellation of
the policies for any reason whatsoever and a clause that the interest of the
Lender shall not be impaired or invalidated by any act or neglect of the
Borrower or any Guarantor or the owner of the property nor by the occupation of
the premises wherein such property is located for purposes more hazardous than
are permitted by said policy. The Borrower hereby directs all insurers under
such policies of insurance on the Collateral to pay all proceeds payable
thereunder directly to the Lender following an Event of Default. The Borrower
hereby irrevocably makes, constitutes and appoints the Lender (and all officers,
employees or agents designated by the Lender) as the Borrower's true and lawful
attorney (and agent-in-fact) for the purpose of making, settling and
20
adjusting claims under such policies of insurance, endorsing the name of the
Borrower on any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance and for making all determinations and
decisions with respect to such policies of insurance; provided, however, that
such power shall not be used until after the occurrence of and during the
continuation of an Event of Default. Prior to the occurrence of an Event of
Default, neither the Borrower nor any Guarantor will make, settle or adjust any
material claim without the prior written consent of the Lender, which consent
will not be unreasonably withheld. If the Borrower fails to obtain and maintain
any of the policies of insurance or to pay any premium in whole or in part, then
the Lender may, at the Borrower's expense, without waiving or releasing any
obligation or default by the Borrower hereunder, procure the same, but shall not
be required to do so. All sums so disbursed by the Lender, including attorneys'
fees, court costs, expenses and other charges related thereto, shall be payable
on demand by the Borrower to the Lender and shall be additional Indebtedness
hereunder secured by the Collateral.
5.4. Notice of Default. Borrower shall provide to the Lender
immediate notice of (a) the occurrence of a Default or an Event of Default, (b)
any material threatened or pending litigation or material changes in existing
litigation or any material judgment against the Borrower, its assets, any
Guarantor or the assets of any Guarantor, (c) any material damage or loss to
property or material labor controversy with respect to Borrower or any
Guarantor, (d) any notice from taxing authorities as to claimed deficiencies or
any tax Lien or any notice relating to alleged ERISA violations, (e) any
Reportable Event, as defined in ERISA, (f) any rejection, return, offset,
dispute, loss or other circumstance reasonably likely to have a material adverse
effect on the Collateral (or Lender's Lien or priority therein) or the Borrower
or any Guarantor or their respective businesses, operations, conditions,
properties or prospects, (g) any loss or threatened loss of material licenses or
permits, (h) any notice of any material violation of any law, rule or
regulations and (i) the occurrence of any event which is reasonably likely to
have a Material Adverse Effect.
5.5. Inspections. Borrower and each Guarantor shall permit
inspections of the Collateral and the records pertaining thereto, at such
reasonable times and in such manner as may be reasonably required by the Lender
and shall further permit such inspection, review and audits of its other records
and its properties (with such frequency and at such times as the Lender may
reasonably request) by the Lender as the Lender may reasonably deem necessary or
desirable from time to time. The reasonable cost of such audits, reviews and
inspections shall be borne by the Borrower.
5.6. Financial Information. Borrower shall maintain its books
and records in accordance with GAAP and shall furnish to Lender the following
periodic information in form reasonably satisfactory to Lender:
(a) Within forty-five (45) days after the close of each fiscal
quarter, beginning with the current fiscal quarter, consolidated balance sheets
of the Borrower and each Guarantor as of the close of such quarter, and
consolidated statements of income and cash flows (along with supporting
schedules and in detail reasonably acceptable to Lender) for such quarter and
for that portion of the fiscal year to date then ended, prepared in accordance
with GAAP (subject to ordinary course, non-material audit and year-end
adjustments), applied on a basis consistent with that of the preceding period or
containing disclosure of the effect on the financial position or results of
operations of any change in the application of accounting principles and
practices during the period, and certified by the Chief Financial Officer of the
Borrower; and within thirty (30) days after the close of each quarter, beginning
with the current quarter, agings of Accounts of Borrower by invoice date
(including summary reports as prepared by Borrower) and an inventory listing of
Borrower, all in such detail and with such supporting schedules and information
as shall be reasonably required by Lender;
21
(b) Within one hundred and twenty (120) days after the
close of each fiscal year of the Borrower and Guarantors audited consolidated
balance sheets of the Borrower and each Guarantor as of the close of such fiscal
year and audited consolidated statements of income and retained earnings and
cash flows, for the fiscal year then ended, prepared in accordance with GAAP,
applied on a basis consistent with the preceding year or containing disclosure
of the effect on financial position or results of operation of any change in the
application of accounting principles and practices during the year, and (i)
accompanied by a report thereon (from Borrower's and Guarantors' existing
independent certified public accounting firm or another regional or national
accounting firm reasonably acceptable to Lender), containing an unqualified
opinion, without scope limitations imposed by the Borrower, from such firm, and
(ii) within thirty (30) days after delivery of the financial statements required
under this subsection (b), a copy of each "management letter", if any, from such
accountants to the Borrower and Guarantors in connection with such accountants'
audit and management-prepared financial projections with respect to next fiscal
year, in form and detail reasonably acceptable to Lender, along with such
supporting schedules and other information and certificates as Lender shall
reasonably request.
(c) Concurrently with the delivery of the financial
statements described in subsection (b) above, a certificate from the firm of
independent certified public accountants that in making their examination of the
financial statements of the Borrower and Guarantors, no knowledge of the
occurrence or existence of any Default or any Event of Default, was disclosed by
their examination or a statement specifying the nature and period of existence
of any such condition or event;
(d) Concurrently with the delivery of the financial
statements described in subsections (a) and (b) above, a certificate from the
Chief Financial Officer of the Borrower certifying to the Lender on behalf of
Borrower that to the best of his knowledge, Borrower kept, observed, performed
and fulfilled each and every covenant, obligation and agreement binding upon the
Borrower and each Guarantor contained in this Agreement and the other Loan
Documents, and that no Default or Event of Default has occurred or specifying
any such Default or Event of Default, together with financial covenant
compliance worksheet, in form satisfactory to the Lender, reflecting the
computation of the financial covenants set forth in Section 5.25 hereof as of
the end of the period covered by such financial statements;
(e) Upon the Lender's written request, such other
information about the Collateral or the financial condition and operations of
the Borrower as the Lender may from time to time reasonably request. The Lender
may reasonably require more frequent rendering of the reports and certificates
described in (a) through (d) above.
(f) Within thirty (30) days of the filing thereof with
any governmental authority, Borrower shall deliver to Lender copies of
Borrower's and each Guarantor's federal, state and local income tax returns, as
applicable.
(g) Within forty-five (45) days after the close of each
month, beginning with the current month, a Borrowing Base Certificate
substantially in the form of Exhibit A ("Borrowing Base Certificate"), along
with the latest month-end accounts receivable aging report and within forty-five
(45) days after the close of each quarter beginning with the current quarter, a
current inventory listing, in each case certified as true and correct by
Borrower's Chief Financial Officer.
(h) Within two Business Days after any report or filing
is made with the Securities and Exchange Commission by Borrower, a copy of such
report or filing.
22
(i) Within two Business Days after any written
communication is sent to Borrower's shareholders, a copy of such correspondence.
5.7. [INTENTIONALLY OMITTED].
5.8. Liens. Borrower shall not create or permit to exist any
Liens on any of the Collateral, except Permitted Liens.
5.9. Redemptions. Neither Borrower nor any Guarantor shall
purchase, redeem or otherwise acquire any stock or other equity interests, and
neither of them shall declare or pay any dividend or distribution, in any case
that would be reasonably likely to cause Borrower to not comply at any time with
Section 5.25.
5.10. Merger, Sale, Etc. Borrower and each Guarantor shall
maintain its corporate existence, good standing and necessary qualifications to
do business, and shall not, except as expressly agreed to by Lender in writing,
(i) merge or consolidate with or into any Person or acquire all or substantially
all of the assets of, or any equity interest of, any Person, (ii) permit any
Person to transfer to it, directly or indirectly, any of its issued and
outstanding stock or securities (except as permitted in Section 5.11), or (iii)
permit the sale, lease, assignment or other disposition of any Collateral or any
of its or any Guarantor's other assets (other than sales of obsolete or worn-out
Equipment and sales of Inventory in the ordinary course of business consistent
with past practices or other than sales of Equipment for less than $50,000 in
the aggregate in any fiscal year).
5.11. Loans, Guaranties and Other Investments. Neither
Borrower nor any Guarantor shall make or permit to exist any advances or loans
to, or guarantee or become contingently liable, directly or indirectly, in
connection with the obligations, leases, stock or dividends of, or own, purchase
or make any commitment to purchase any stock, bonds, notes, debentures or other
securities of, or any interest in, or make any capital contributions to (all of
which are sometimes collectively referred to herein as "Investments"), any
Person except for (a) purchases of direct obligations of the federal government,
(b) deposits in commercial banks, (c) commercial paper of any U.S. corporation
having at least an A rating by Xxxxx'x Investors Service, Inc. or Standard &
Poor's Corporation, (d) endorsement of negotiable instruments for collection in
the ordinary course of business, (e) advances in the ordinary course of the
Borrower's business not in the aggregate in excess of $50,000, or (f) overnight
bank repurchase agreements.
5.12. Change in Business. Neither Borrower nor any Guarantor
shall, except as expressly agreed to in writing by Lender, enter into any
business which is substantially different from the business or businesses in
which it is presently engaged.
5.13. Accounts. Neither Borrower nor any Guarantor shall sell,
assign or discount any of its Accounts or Chattel Paper or any promissory notes
or other Payment Intangibles held by it other than the discount of promissory
notes or other Payment Intangibles in the ordinary course of business for
collection; and Borrower shall notify Lender promptly in writing of any
discount, offset or other deductions not shown on the face of any Account of
Borrower or any Guarantor invoice in excess of $50,000 and any dispute over any
Account in excess of $50,000, and any information known to Borrower relating to
any material adverse change in any Account Debtor's financial condition or
ability to pay its obligations.
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5.14. Transactions with Affiliates. Except as set forth on
Schedule 5.14, neither Borrower or any Guarantor shall, directly or indirectly
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, or otherwise deal with, in the ordinary course of business or
otherwise, any Affiliate in an aggregate amount exceeding $50,000 at any time
outstanding; provided, however, that any acts or transactions prohibited by this
Section 5.14 may be performed or engaged in, after written notice to the Lender,
if upon terms not less favorable to the Borrower than if no such Affiliate
relationship existed.
5.15. No Change in Name or Offices; Removal of Collateral.
Neither Borrower nor any Guarantor shall, (a) change its name or the location of
its chief executive office or other office where books or records are kept or
(b) permit any Inventory or other tangible Collateral to be located at any
location other than as specified on Schedule 2.9.
5.16. No Sale, Leaseback. Neither Borrower nor any Guarantor
shall enter into any sale-and-leaseback or similar transaction.
5.17. Margin Stock. Borrower shall not use any proceeds of any
Loan to purchase or carry any margin stock (within the meaning of Regulation U
of the Board of Governors of Federal Reserve System) or extend credit to others
for the purpose of purchasing or carrying any margin stock.
5.18. Payment of Taxes, Etc. Neither Borrower nor any
Guarantor shall pay before delinquent all of its debts and taxes except that the
Lender shall not unreasonably withhold its consent to nonpayment of taxes being
actively contested in good faith and in accordance with law (provided that the
Lender may require bonding or other assurances of any amount in excess of
$50,000).
5.19. Comply with ERISA. Borrower and each Guarantor shall at
all times make prompt payment of contributions required to meet the minimum
funding standards set forth in ERISA with respect to any employee benefit plan;
promptly after the filing thereof, furnish to the Lender copies of any annual
report required to be filed under ERISA in connection with each employee benefit
plan; not withdraw from participation in, permit the termination or partial
termination of, or permit the occurrence of any other event with respect to any
employee benefit plan that could result in liability to the Pension Benefit
Guaranty Corporation; notify the Lender as soon as practicable of any Reportable
Event and of any additional act or condition arising in connection with any
employee benefit plan which the Borrower believes might constitute grounds for
the termination thereof by the Pension Benefit Guaranty Corporation or for the
appointment by the appropriate United States district court of a trustee to
administer such plan; and furnish to the Lender upon the Lender's request, such
additional information about any employee benefit plan as may be reasonably
requested.
5.20. Compliance; Hazardous Materials. Except as disclosed on
Schedule 2.17, Borrower and each Guarantor shall comply with all laws,
regulations, ordinances and other legal requirements, specifically including,
without limitation, ERISA, all securities laws and all laws relating to
hazardous materials and the environment. Neither Borrower nor any Guarantor
shall engage in the storage, manufacture, disposition, processing, handling, use
or transportation of any hazardous or toxic materials, not in compliance with
applicable laws and regulations.
5.21. Subsidiaries. Neither Borrower nor any Guarantor shall
acquire or form any Subsidiary that would result in a Material Adverse Change.
5.22. Compliance with Assignment Laws. Borrower and each
Guarantor shall, if reasonably required by the Lender, comply with the Federal
Assignment of Claims Act and
24
any other applicable law relating to assignment of government contracts and
Accounts arising from the performance thereof.
5.23. Further Assurances. Borrower and each Guarantor shall
take such further action and provide to the Lender such further assurances as
may be reasonably requested by the Lender to ensure compliance with the intent
of this Agreement and the other Loan Documents.
5.24. Withholding Taxes. Borrower and each Guarantor shall pay
as and when due all employee withholding, FICA and other payments required by
federal, state and local governments with respect to wages paid to employees.
5.25. Financial Covenants. Borrower shall at all times be in
compliance with the following financial covenants:
(a) Debt Service Coverage Ratio. As of the last day of
each fiscal year of Borrower, Borrower shall not permit the ratio of (i) the sum
of consolidated net income after tax for the fiscal year then ended plus
consolidated depreciation and amortization for the fiscal year then ended less
dividends declared or paid by Borrower for the fiscal year then ended to (ii)
current maturities of long-term debt (including capitalized leases and excluding
Revolving Loans) to be less than 1.25 to 1.0; provided, however, that such ratio
shall not be less than 1.00 to 1.0 for the fiscal year 2002 of the Borrower
(b) Leverage. Borrower shall not, at any time, permit the
ratio of Consolidated Total Liabilities to Consolidated Tangible Net Worth to
exceed 2.0 to 1.0.
5.26. Lender Account. Borrower and each Guarantor shall, at
all times, maintain with Lender its primary operating and depository account
including cash management accounts.
5.27. Fiscal Year; Accounting Method. Neither Borrower nor any
Guarantor shall change its fiscal year, or change its method of accounting to a
method inconsistent with current practices.
5.28. Default on Other Obligations. Neither Borrower nor any
Guarantor shall default on any material contract or obligation to any other
Person nor shall either of them default in the timely and due performance of any
material obligation to any other Person relating to indebtedness for borrowed
money.
5.29. SEC Filing. Borrower shall timely file with the
Securities and Exchange Commission all filings and reports required by the
Securities Act of 1933, as amended, and under applicable law in order for it to
continue to be a public company, and no such filings and reports will contain
any untrue statement of a material fact or omit a material fact necessary to
make the statement made therein not misleading.
5.30. Compliance with Laws. Borrower and each Guarantor shall,
in all material respects, at all times operate their business in accordance with
(and otherwise be in material compliance with) all applicable laws, rules and
regulations.
5.31. Chattel Paper. Neither Borrower, any Guarantor nor any
of the in customers shall execute any security agreement, note or other
instrument, agreement or document evidencing or securing any sale by Borrower,
unless such security agreement, note or other instrument, agreement or document
constitutes Chattel Paper; and none of Borrower's or any Guarantor's Accounts or
other receivables shall be represented by any security agreement, note or other
instrument, agreement or document unless it is Chattel Paper.
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6. Default.
6.1. Events of Default. Each of the following shall constitute
an Event of Default:
(a) Any representation or warranty made by the Borrower
or any Guarantor in any Loan Document or in any certificate or report furnished
in connection herewith or therewith shall have been untrue or incorrect in any
material respect when made (except where such representations and warranties are
subject to a materiality caveat, in which case they shall be true and correct in
all respects, and except where such representations and warranties are made as
of a particular date, in which case, they shall be a true and correct as of such
date); or
(b) There shall occur any failure by the Borrower or any
Guarantor in the payment, when due, of any principal of or interest on any Note,
or under any other Loan Document; or Borrower or any Guarantor shall fail to pay
on demand any returned or dishonored draft, check or other item which has been
presented to Lender and for which Borrower has received provisional credit; or
(c) There shall occur (i) any default by the Borrower or
any Guarantor in the performance of any agreement, covenant or obligation
contained in this Agreement or any other Loan Document not provided for
elsewhere in this Section 6.1 and such Default or other default is not cured
within seven Business Days of notice from Lender, or (ii) a "Potential Event of
Default" or "Event of Default", as such terms are defined in the Interest Rate
Swap Agreement, if an Interest Rate Swap Agreement has been executed; or
(d) The Borrower or any Guarantor shall be in default
under any Debt owed to any other obligee in an amount in excess of $50,000,
which default entitles the obligee to accelerate any such Debt or exercise other
remedies with respect thereto; or
(e) The Borrower or any Guarantor shall (i) voluntarily
liquidate or terminate operations or apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or liquidator of
Borrower or any Guarantor or of all or of a substantial part of its assets, (ii)
admit in writing its inability, or be generally unable, to pay its debts as the
debts become due, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under any federal bankruptcy law (as
now or hereafter in effect), (v) file a petition seeking to take advantage of
any other law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, or (vi) take any corporate action for the
purpose of effecting any of the foregoing; or
(f) Without its application, approval or consent, a
proceeding shall be commenced and remain undismissed or unstayed for more than
sixty (60) days, in any court of competent jurisdiction, seeking, in respect of
the Borrower or any Guarantor, any remedy under any federal bankruptcy law, or
any law pertaining to liquidation, reorganization, dissolution, winding-up, or
composition or readjustment of debt, or seeking the appointment of a trustee,
receiver, liquidator or the like with respect to the Borrower, or any of its
assets or other like relief under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts; or
(g) Any Lien of the Lender hereunder or under any other
Security Agreement shall not constitute a perfected first priority Lien in the
Collateral thereby encumbered, subject only to Permitted Liens; or
26
(h) A judgment, writ of garnishment or attachment in
excess of $50,000 shall be rendered against the Borrower or any Guarantor or any
of their assets and shall remain undischarged, undismissed and unstayed for more
than twenty (20) days; or
(i) The Borrower or any Guarantor is enjoined, restrained
or in any way prevented by the order of any court or governmental entity from
conducting any material part of its business; or
(j) The Borrower or any Guarantor shall cease to be
Solvent, or ceases to conduct any material part of its business as now
conducted; or
(k) There shall occur any Material Adverse Change; or
(l) A notice of lien, levy or assessment is filed of
record with respect to all or any portion of the Borrower's or any Guarantor's
assets by the United States, or any department, agency or instrumentality
thereof, or by any state, county, municipal or other governmental agency, or if
any taxes or debts in excess of $50,000 owing at any time or times hereafter to
any one of them becomes a Lien upon the Collateral or any other asset of the
Borrower and the same is not dismissed, released, discharged, or bonded in a
manner satisfactory to Lender within ten (10) days after the same becomes a Lien
or, in the case of ad valorem taxes, prior to the last day when payment may be
made without penalty; or
(m) Any of the Loan Documents for any reason ceases to be
in full force and effect or is declared to be null and void, or the Borrower or
any Guarantor's denies that it has any further liability (including, but not
limited to any full or partial repudiation or revocation of any Guaranty) under
any Loan Document to which it is a party, or gives notice to such effect; or
(n) The loss, suspension or revocation of, or failure to
renew, any material license or permit now held or hereafter acquired by the
Borrower or any Guarantor's; or
(o) The occurrence of any of the following events: (i)
the happening of a Reportable Event with respect to any profit sharing or
pension plan of the Borrower governed by ERISA which has a Material Adverse
Effect; (ii) the termination of any such plan which has a Material Adverse
Effect; (iii) the appointment of a trustee by an appropriate United States
District Court to administer any such plan; or (iv) the institution of any
proceedings by the Pension Benefit Guaranty Corporation to terminate any such
plan or to appoint a trustee to administer any such plan;
(p) The occurrence of any material casualty or damage to
the Collateral; or
(q) Xxxxxxx Xxxxxxx and Xxxxxxx Xxxxxxx and/or any
Xxxxxxx family trust shall fail to own (beneficially and of record) in the
aggregate, at least 51% of each outstanding class and series of Borrower's
equity securities (including all securities convertible into equity securities);
or any Person other than Borrower shall own (beneficially and of record) any of
any Guarantor's equity securities (including all securities convertible into
equity securities);
6.2. Acceleration of the Indebtedness. Without in any way
limiting the right of the Lender to demand payment of any portion of the
Indebtedness (a) upon and after an Event of Default (other than an Event of
Default specified in Subsections 6.1(e) or (f)), all of the Indebtedness may, at
the option of the Lender, and without notice or legal process of any kind, be
declared, and immediately shall become, due and payable, and (b) Borrower upon
and after
27
the occurrence of an Event of Default specified in Subsections 6.1(e) or (f),
all of the Indebtedness shall automatically become due and payable, without
demand, notice or legal process of any kind, anything in any Note or other
instrument or document evidencing any such Indebtedness or in the Loan Documents
or in any other agreement to the contrary notwithstanding. If any Default or
Event of Default occurs, Lender shall have no obligation to make any additional
advances of Loans or issue or accept additional Letters of Credit or enter into
any further Spot or Forward transactions.
6.3. Default Rate. Upon the occurrence and during the
continuation of an Event of Default, all of the Indebtedness shall bear interest
at the Default Rate.
6.4. Rights and Remedies. Upon and after the occurrence of any
Event of Default, the Lender shall have, in addition to all other rights and
remedies which the Lender may have under this Agreement, the other Loan
Documents, and applicable law, the following rights and remedies, all of which
may be exercised with or without further notice to the Borrower: (a) all of the
rights and remedies of a secured party under applicable law; (b) to foreclose
the Liens created under this Agreement and the other Loan Documents or under any
other agreement relating to the Collateral, by any available judicial procedure
or without judicial process; (c) to enter any premises where the Collateral may
be located, through self-help and without judicial process, without first
obtaining a final judgment or giving the Borrower notice and opportunity for a
hearing on the validity of the Lender's claim, for the purpose of taking
possession or removing the same; and/or (d) to sell, assign, lease, or otherwise
dispose of the Collateral or any part thereof, either at public or private sale,
in lots or in bulk, for cash, on credit or otherwise, with or without
representations or warranties, and upon such terms as shall be acceptable to the
Lender, in its sole discretion, and the Lender may bid or become the purchaser
at any such public sale, free from any right of redemption which is hereby
expressly waived by the Borrower, and the Lender shall have the option to apply
or be credited with the amount of all or any part of the Indebtedness against
the purchase price bid by the Lender at any such sale. The Borrower agrees that
the Lender has no obligation to preserve rights to the Collateral against prior
Persons or to xxxxxxxx any Collateral for the benefit of any Person. The Lender
is hereby granted a license or other right to use, without charge, the
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and the Borrower's rights under
all licenses and franchise agreements shall inure to the Lender's benefit; and
in each instance, Lender shall only utilize such license after the occurrence of
an Event of Default. In addition, the Borrower agrees that in the event notice
is necessary under applicable law, written notice mailed to the Borrower in the
manner specified herein five (5) days prior to the date of public sale of any of
the Collateral or prior to the date after which any private sale or other
disposition of the Collateral will be made shall constitute commercially
reasonable notice to the Borrower. Upon the occurrence of an Event of Default,
the Lender shall also have the right to seek the appointment of a receiver to
take possession of and operate and dispose of Borrower's assets. The Lender may,
at any time during the continuance of an Event of Default, and at Borrower's
expense, employ and maintain custodians at the Borrower's premises who shall
have full authority to protect Lender's interests. Upon the occurrence and
during the continuation of an Event of Default, the Borrower authorizes the
Lender to collect and set-off and apply against the Indebtedness when due any
cash or deposit accounts in its possession, and any refund of insurance premiums
or any insurance proceeds payable on account of the loss or damage to any of the
Collateral and irrevocably appoints the Lender as its attorney-in-fact to
endorse any check or draft or take other action necessary to obtain such funds.
All or any part of the Collateral may be liquidated and sold by Lender for
failure of Borrower to pay any of the Indebtedness, regardless of whether any of
the Loans have been accelerated or whether the Interest Rate Swap Agreement has
been terminated early. Notwithstanding anything to the contrary set forth
herein, Collateral may be liquidated upon
28
Borrower's failure to pay any Indebtedness on a timely basis, whether or not any
acceleration has occurred or the Interest Rate Swap Agreement has been
terminated early.
6.5. Application of Proceeds. After an Event of Default, the
net cash proceeds resulting from the collection, liquidation, sale, lease or
other disposition of the Collateral shall be applied first to the expenses
(including all reasonable attorneys' fees) of retaking, holding, storing,
processing and preparing for sale, selling, collecting, liquidating and the
like, and then to the satisfaction of all Indebtedness. The Borrower irrevocably
waives the right to direct the application of any and all payments and
collections at any time or times hereafter received by the Lender from or on
behalf of the Borrower, and the Borrower does hereby irrevocably agree that the
Lender shall have the continuing exclusive right to apply and to reapply any and
all such payments and collections received at any time or times hereafter by the
Lender or its agent against the Indebtedness which is due and payable at the
time of such application, in such manner as the Lender, in its sole discretion,
may determine, notwithstanding any entry by the Lender upon any of its books and
records. The Borrower shall be liable to the Lender and shall pay to the Lender
on demand any deficiency which may remain after such sale, disposition,
collection or liquidation of the Collateral. The Lender shall remit to the
Borrower or the Person entitled thereto any surplus remaining after all
Indebtedness have been paid in full. If any of the Collateral shall require
repairs, maintenance, preparation or the like, or is in process or other
unfinished state, the Lender shall have the right, but shall not be obligated to
perform such repairs, maintenance, preparation, processing or completion of
manufacturing for the purpose of putting the same in such saleable form as the
Lender shall deem appropriate, but the Lender shall have the right to sell or
dispose of the Collateral without such processing. The Borrower will, at the
Lender's request, assemble all the Collateral and make it available to the
Lender at places which the Lender may select, whether at premises of the
Borrower or elsewhere, and will make available to the Lender all premises and
facilities of the Borrower for the purpose of the Lender's taking possession of
the Collateral or of removing or putting the Collateral in saleable form.
6.6. Appointment of the Lender as the Borrower's Lawful
Attorney. The Borrower hereby irrevocably designates, makes, constitutes and
appoints the Lender (and all Persons designated by the Lender) as the Borrower's
true and lawful attorney (and agent-in-fact) and the Lender, or the Lender's
agent, may, upon and after the occurrence and during the continuation of an
Event of Default, in the Borrower's or the Lender's name: (i) exercise all of
the Borrower's rights and remedies with respect to the Accounts and the other
Collateral; (ii) take control, in any manner, of any item of payment or
proceeds; (iii) prepare, file and sign the Borrower's name on a proof of claim
in bankruptcy or similar document against any Account Debtor; (iv) do all acts
and things necessary, in the Lender's sole discretion, to fulfill the Borrower's
obligations under this Agreement; (v) endorse the name of the Borrower upon any
of the items of payment or proceeds referred to herein and deposit the same to
the account of the Lender on account of the Indebtedness; (vi) endorse the name
of the Borrower upon any chattel paper, document, instrument, invoice, freight
xxxx, xxxx of lading or similar document or agreement relating to the Accounts
or Inventory; (vii) use the Borrower's stationery and sign the name of the
Borrower to verifications of the Accounts and notices thereof to Account
Debtors; and (viii) use the information, recorded on or contained in any data
processing equipment and computer hardware and software relating to the Accounts
and Inventory to which the Borrower has access. All acts of the Lender or its
designee, except the Lender's or its designees' acts of gross negligence or
willful misconduct, taken pursuant to this Section 6.6 are hereby ratified and
confirmed and the Lender or its designee shall not be liable for any acts of
omission or commission nor for any error of judgment or mistake of fact or law.
6.7. Collections; The Lender's Right to Notify Account Debtors
and to Endorse Borrower's Name. Borrower hereby authorizes Lender (i) upon the
occurrence and during the continuation of a Default or an Event of Default, to
open Borrower's mail and collect any and all
29
amounts due to Borrower from Account Debtors;(ii) after the occurrence and
during the continuation of a Default or an Event of Default, notify any or all
Account Debtors that the Accounts have been assigned to Lender and that Lender
has a security interest therein; and (iii) after the occurrence and during the
continuation of a Default or an Event of Default, direct such Account Debtors to
make all payments due from them to Borrower upon the Accounts directly to Lender
or to a lock box designated by Lender. Lender shall promptly furnish Borrower
with a copy of any such notice sent and Borrower hereby agrees that any such
notice may be sent on Borrower's stationery, in which event Borrower shall
co-sign such notice with Lender. Borrower irrevocably makes, constitutes and
appoints Lender (and all Persons designated by Lender for that purpose) as
Borrower's true and lawful attorney (and agent-in-fact) to endorse Borrower's
name on any checks, notes, drafts or any other payment relating to and/or
proceeds of the Collateral which come into either Lender's possession or
control.
7. Security Agreement; Collateral.
7.1. Security Interest.
(a) As security for the payment and performance of any
and all of the Indebtedness and the performance of all other obligations and
covenants of the Borrower hereunder and under the other Loan Documents, absolute
or contingent, now existing or hereafter arising, which are now, or may at any
time or times hereafter be owing by the Borrower to the Lender, the Borrower
hereby pledges and assigns to the Lender and gives and grants the Lender a
continuing and general security interest in and Lien upon and right of set-off
against, all right, title and interest of the Borrower in and to the Borrower
Collateral, whether now owned or hereafter acquired by the Borrower; provided,
however, that notwithstanding anything to the contrary herein, none of the
Borrower's obligations hereunder shall be secured by real property.
(b) At the Lender's request, the Borrower shall cause the
execution and delivery to the Lender, in form and substance reasonably
satisfactory to the Lender, of all such agreements, documents, financing
statements and other writings reasonably requested by the Lender to perfect and
maintain the perfection and priority of its security interests in and Liens on
the Borrower Collateral and to consummate the other transactions contemplated
hereby, and the Borrower shall pay all filing fees and documentary stamp,
intangible and similar taxes in connection therewith. The Borrower irrevocably
designates the Lender as its attorney-in-fact to effectuate the foregoing.
(c) Except as herein or by applicable law otherwise
expressly provided, the Lender shall not be obligated to exercise any degree of
care in connection with any Borrower Collateral, to take any steps necessary to
preserve any rights in any of the Borrower Collateral or to preserve any rights
therein against prior parties. No segregation or specific allocation by the
Lender of specified items of Borrower Collateral against any liability of the
Borrower shall waive or affect any Lien against other items of Borrower
Collateral or any of the Lender's options, powers or rights under this Agreement
or otherwise arising.
(d) All collateral which the Lender may at any time
acquire from any other source as security for the payment of any Indebtedness
shall constitute cross-collateral for all Indebtedness without apportionment or
designation as to particular Indebtedness, and all Indebtedness shall be secured
by all such collateral; and the Lender shall have the right, in its sole
discretion, to determine the order in which its rights in or remedies against
such collateral are to be exercised and which types or portions of the
collateral are to be proceeded against and the order of application of proceeds
of Borrower Collateral against particular Indebtedness.
7.2. Inspection of Collateral. The Borrower hereby irrevocably
consents to any act by the Lender or its agents in entering upon any premises
for the purposes of either
30
(i) following reasonable prior notice to Borrower inspecting the Borrower
Collateral and making extracts from and copies of any books and records relating
thereto during regular business hours or (ii) taking possession of the Borrower
Collateral at any time following the occurrence and during the continuation of
an Event of Default; and the Borrower hereby waives its right to assert against
the Lender or its agents any claim based upon trespass or any similar cause of
action for entering upon any premises where the Borrower Collateral may be
located. Following the occurrence and during the continuation of an Event of
Default, the Borrower irrevocably consents to the Lender's requesting
information pertaining to the Borrower from any Person and to the Lender's
verifying such or any other information pertaining to the Borrower, including,
but not limited to the amount, quality, existence, quantity, value and condition
of any Account or any other Borrower Collateral.
7.3. Other Rights. The Borrower authorizes the Lender without
affecting either the Borrower's or the Lender's obligations hereunder or under
any other Loan Document from time to time to take from any party and hold
additional collateral or guaranties for the payment of the Indebtedness or any
part thereof, and to exchange, enforce, substitute or release such collateral or
guaranty of payment of the Indebtedness or any part thereof and to release or
substitute any endorser or guarantor or any party who has given any Lien on any
collateral as security for the payment of the Indebtedness or any part thereof
or any party in any way obligated to pay the Indebtedness or any part thereof.
7.4. Tangible Collateral; Inventory. No Inventory, Equipment
or other tangible Borrower Collateral shall be commingled with, or become an
accession to or part of, any property of any other Person so long as such
property is Collateral. No tangible Borrower Collateral is or shall be allowed
to become a fixture. No tangible Collateral shall be stored with any
warehouseman, bailee or similar party.
7.5. The Lender's Payment of Claims Asserted Against the
Collateral. In the event a Lien, other than a Permitted Lien, is asserted by any
Person against the Collateral and if the Lender has given Borrower five days'
prior written notice and Borrower has failed to either (i) satisfy the Lien or
(ii) cause the Lien to be transferred to a bond acceptable to the Lender, then
the Lender may at any time after such five-day period in its discretion without
waiving or releasing any obligation, liability or duty of the Borrower under
this Agreement, the other Loan Documents or any Default or Event of Default,
pay, acquire and/or accept an assignment of such Lien. All sums paid by the
Lender in respect thereof and all costs, fees and expenses, including, without
limitation, attorneys' fees, court costs, expenses and other charges relating
thereto, which are incurred by the Lender on account thereof, shall be payable,
upon demand, by the Borrower to the Lender and shall be additional Indebtedness
hereunder secured by the Collateral.
8. Term of Agreement.
8.1. Term and Right to Terminate. Subject to the other
provisions herein, and without prejudice to the Lender's right to DEMAND payment
of any and all Revolving Credit Loans at any time or times, the provisions of
this Agreement shall continue in full force and effect until December 30, 2004
(the "Term"). Notwithstanding any term herein to the contrary or any other term
in any of the other Loan Documents, the Borrower and the Lender agree that all
Indebtedness hereunder shall be payable in accordance with Section 3.
Notwithstanding any provision to the contrary set forth in any Loan Document,
the Lender may terminate the financing arrangements under this Agreement and the
Notes at any time, upon notice to Borrower but without legal process of any
kind, upon the occurrence and during the continuation of an Event of Default;
provided, however, that the Lender shall retain the right to payment of the
Indebtedness in accordance with Section 3.
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8.2. Effect of Termination. Without limiting the generality of
the other provisions regarding Default and acceleration hereunder, upon the
effective date of termination, all Indebtedness to the Lender, whether or not
incurred under this Agreement (and notwithstanding any term of any other Loan
Document), shall become immediately due and payable, including, but not limited
to, all Indebtedness (contingent or otherwise) with respect to any Interest Rate
Swap Agreement and all Letters of Credit and Forward and Spot transactions.
Notwithstanding any provision to the contrary in any Loan Document, and
notwithstanding any such termination, the obligations of the Borrower and the
rights, remedies and Liens of the Lender hereunder and under each Loan Document
shall remain in full force and effect until the Indebtedness is indefeasibly and
finally paid and discharged in full and all Letters of Credit and Forward and
Spot transactions and the Interest Rate Swap Agreement have been terminated or
canceled and Lender is released from all liability in connection therewith;
provided, however, that Lender shall promptly release its Liens in the
Collateral upon the indefeasible and final payment and discharge in full of all
Indebtedness.
9. Miscellaneous.
9.1. Rights and Remedies Cumulative; Non-Waiver; Etc. The
enumeration of the Lender's rights and remedies set forth in this Agreement is
not intended to be exhaustive and the exercise by the Lender of any right or
remedy shall not preclude the exercise of any other rights or remedies, all of
which shall be cumulative, and shall be in addition to any other right or remedy
given hereunder, under the Loan Documents or under any other agreement to which
the Borrower and the Lender are now or hereafter become parties, or which may
hereafter exist in law or in equity or by suit or otherwise. No delay or failure
to take action on the part of the Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between the Borrower and the Lender or the Lender's employees shall be effective
to change, modify or discharge any provision of this Agreement or to constitute
a waiver of any Event of Default. The Lender shall not, under any circumstances
or in any event whatsoever, have any liability for any error, omission or delay
of any kind occurring in the liquidation of the Collateral or for any damages
resulting therefrom except damages directly attributable to the Lender's gross
negligence or willful misconduct.
9.2. Survival of Representations; Reinstatement of
Indebtedness. All covenants, agreements, representations and warranties made by
Borrower or any Guarantor in connection herewith shall survive the making of the
Loans hereunder and the delivery of the Notes, and shall continue in full force
and effect so long as any Indebtedness is outstanding. The Borrower further
agrees that to the extent that the Borrower makes a payment or payments to the
Lender, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy, insolvency or similar state or federal law, common law or equitable
cause, then, to the extent of such payment or repayment, the Indebtedness or
part thereof intended to be satisfied shall be revived and continued in full
force and effect as if such payment had not been received by the Lender.
9.3. Expenses; Indemnification. Whether or not the
transactions contemplated by this Agreement shall be consummated, the Borrower
will pay or reimburse the Lender upon demand for all reasonable expenses
(including, without limitation, reasonable attorneys' and paralegals' fees,
costs and expenses) incurred or paid by the Lender in connection with: (a) the
preparation, execution and delivery of this Agreement or the other Loan
Documents; (b) charges for examiners, auditors or similar Persons whom the
Lender may engage with respect to rendering opinions concerning the Borrower's
or any Guarantor's financial condition and the condition and value of the
Collateral in accordance with the terms hereof; (c) any arbitration,
32
litigation, contest, dispute, suit, proceeding, enforcement or action (whether
instituted by the Lender or the Borrower or any other Person) in any way
relating to the Collateral, this Agreement or the other Loan Documents, or the
Borrower's business or affairs; (d) any attempt to enforce any rights of the
Lender against the Borrower or any other Person which may be obligated to the
Lender by virtue of this Agreement or the other Loan Documents, including
without limitation, the Account Debtors; (e) any attempt to inspect, verify,
protect, collect, sell, liquidate or otherwise dispose of the Collateral in
accordance with the terms hereof; (f) the filing and recording of all documents
required by the Lender to perfect the Lender's Liens in the Collateral,
including without limitation, any documentary stamp tax or any other taxes
incurred because of such filing or recording; (g) all costs incurred in
connection with any lockbox; and (h) all costs of modifying or amending any Loan
Document. The Borrower shall indemnify and hold the Lender harmless from and
against any and all finder's or brokerage fees and commissions which may be
payable in connection with the transactions contemplated by this Agreement other
than any fees or commissions of finders or brokers engaged by the Lender. If the
Borrower should fail to pay any tax or other amount required by this Agreement
to be paid or which may be necessary to protect or preserve any Collateral or
the Borrower's or Lender's interests therein, the Lender may make such payment
and the amount thereof shall be payable on demand, shall bear interest at the
Default Rate from the date of demand until paid and shall be deemed to be
Indebtedness entitled to the benefit and security of the Loan Documents. In
addition, the Borrower agrees to pay and save the Lender harmless against any
liability for payment of any state documentary stamp taxes, intangible taxes or
similar taxes (including interest or penalties, if any) and fees which may now
or hereafter be determined to be payable with respect to the execution, delivery
or recording of any Loan Document or the making of any Advance, whether
originally thought to be due or not, and regardless of any mistake of fact or
law on the part of the Lender or the Borrower with respect to the applicability
of such tax or fee. The provisions of this Section 9.3 shall survive payment in
full of the Loans and termination of this Agreement.
9.4. Notices. Any notice or other communication hereunder to
any party hereto shall be by hand delivery, facsimile transmission, nationally
recognized overnight courier for next business day delivery or registered or
certified mail and unless otherwise provided herein shall be deemed to have been
received when delivered personally or three days after deposit in such mail or
with such courier postage prepaid, addressed to the party at its address
specified below (or at any other address that the party may hereafter specify to
the other parties in writing):
The Lender: First Union National Bank
Portfolio Management Group
0000 X.X. 00xx Xxxxxx, 0xx Xxxxx
Xxxxx Xxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
With a copy to: Xxxxxxx Xxxxxx Xxxxxx Xxxxxxxx
Xxxxxxxx & Xxxxxxxxx, P.A.
Suite 2200
000 Xxxx Xxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxx, Esquire
Fax: (000) 000-0000
The Borrower: Dryclean USA, Inc.
000 00xx Xxxxxx
Xxxxx, Xxxxxxx 00000
33
Fax : (000) 000-0000
Attn: Xxxxxxx Xxxxxxx
9.5. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the Borrower and the Lender, and their
respective successors and assigns; provided that the Borrower may not assign any
of its rights or duties hereunder without the prior written consent of the
Lender and any such assignment made without such consent will be void. Nothing
in this Agreement or any other Loan Document shall prohibit or restrict Lender
from pledging or assigning the Loan Documents, including the Collateral, to any
Federal Reserve Bank in accordance with applicable law.
9.6. Counterparts; Construction; Gender. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original and all of which when taken together shall constitute but one
and the same instrument. Any telecopied version of a signature shall be deemed a
manually executed and delivered original. This Agreement shall be construed
without any presumption that it be construed against the party causing it to be
drafted. All references in this Agreement or any of the other Loan Documents to
the masculine, feminine or neuter gender shall include all such genders unless
the context clearly indicates otherwise. Each representation, warranty, covenant
and agreement set forth in any Loan Document shall be construed independently.
The parties acknowledge that a Default or an Event of Default shall be deemed
continuing until cured, as determined by Lender in accordance with this
Agreement or any other Loan Document.
9.7. Powers. All powers of attorney granted to the Lender are
coupled with an interest and are irrevocable until all indebtedness is
irrevocably paid in full and Lender has no further obligations hereunder.
9.8. Approvals. If this Agreement calls for the approval or
consent of the Lender, such approval or consent may be given or withheld in the
sole credit judgment of the Lender.
9.9. Indemnification of the Lender. From and at all times
after the date of this Agreement, and in addition to all of the Lender's other
rights and remedies against the Borrower, the Borrower agrees to hold the Lender
harmless from, and to indemnify the Lender against, all losses, damages, costs
and expenses (including, but not limited to, reasonable attorneys' and
paralegals' fees, costs and expenses) incurred or paid by the Lender, whether
direct, indirect or consequential, as a result of or arising from or relating to
any suit, action or proceeding by any Person, whether threatened or initiated,
asserting a claim for any legal or equitable remedy against any Person under any
statute or regulation, including, but not limited to, any federal or state
securities or tax laws, or under any common law or equitable cause or otherwise,
arising from or in connection with the negotiation, preparation, execution or
performance of, or the financing transactions contemplated by, this Agreement
and the other Loan Documents or the Lender's furnishing of funds to the Borrower
pursuant to this Agreement; provided, however, that the foregoing
indemnification shall not protect the Lender from loss, damage, cost or expense
directly attributable to the Lender's willful misconduct or gross negligence.
All of the foregoing losses, damages, costs and expenses of the Lender shall be
payable by the Borrower upon demand by the Lender, as the case may be, and shall
be additional Indebtedness hereunder secured by the Collateral.
9.10. Waivers by the Borrower. Except as otherwise provided
for in this Agreement, the Borrower waives (a) presentment, demand and protest
and notice of presentment, protest, non-payment, maturity and all other notices;
(b) notice prior to taking possession or control of the Collateral or any bond
or security which might be required by any court prior to allowing the Lender to
exercise any of its remedies; and (c) the benefit of all valuation,
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appraisement and exemption laws. The Borrower consents to all extensions of
time, renewals and postponements of time of payment with respect to any Loan
Document from time to time prior to or after the end of the Term or any Default
or Event of Default, without notice, consent or consideration to any of the
foregoing.
9.11. Lawful Charges; Late Charge. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to the
Loans, together with all fees, charges and other amounts which are treated as
interest on the Loans under applicable law (collectively the "Charges"), shall
exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for,
charged, taken, received or reserved by the Lender in accordance with applicable
law, the rate of interest payable in respect of the Loans, together with all
Charges payable in respect thereof, shall be limited to the Maximum Rate, and,
to the extent lawful, the interest and Charges that would have been payable in
respect of the Loans but were not payable as a result of the operation of these
provisions shall be cumulated and the interest and Charges payable to the Lender
in respect of other Indebtedness or periods shall be increased (but not above
the Maximum Rate therefor) until such cumulated amount, together with interest
thereon at the Adjusted LIBOR Market Index Rate (Revolving) or Adjusted LIBOR
Market Rate Index (Term), as applicable, to the date of repayment, shall have
been received by the Lender. A late charge of five percent (5%) of any payment
required hereunder shall be imposed on each and every payment, including the
final payment due hereunder, not received by the Lender within 10 days after it
is due. The late charge is not a penalty, but liquidated damages to defray
administrative and related expenses due to such late payment. The late charge
shall be immediately due and payable and shall be paid by the Borrower to the
Lender without notice or demand. This provision for a late charge is not and
shall not be deemed a grace period, and Lender has no obligation to accept a
late payment. Further, the acceptance of a late payment shall not constitute a
waiver of any Default or other default then existing or thereafter arising under
any Loan Document.
9.12. Amendment. This Agreement and the other Loan Documents
cannot be amended, changed, discharged or terminated orally, but only by an
instrument in writing signed by the Lender and the Borrower.
9.13. Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall endeavor
in good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
9.14. Entire Agreement. This Agreement and the other
documents, certificates and instruments referred to herein constitute the entire
agreement between the parties and supersede and rescind any prior agreements
relating to the subject matter hereof. In the event of any conflict between the
terms of any other Loan Document and the terms of this Agreement, the terms of
this Agreement shall govern.
9.15. Separate Legal Counsel. Borrower and each Guarantor have
been represented by its own legal counsel (and not that of the Lender) in
connection with the negotiation and documentation of the Loan Documents.
9.16. Right of Setoff. If an Event of Default shall have
occurred and be continuing, the Lender is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by the
35
Lender to or for the credit or the account of the Borrower against any of and
all the obligations of the Borrower now or hereafter existing under this
Agreement and other Loan Documents, irrespective of whether or not the Lender
shall have made any demand under this Agreement or such other Loan Documents and
although such obligations may be unmatured. The rights of the Lender under this
Section 9.16 are in addition to other rights and remedies (including other
rights of setoff) which the Lender may have.
9.17. Arbitration; Preservation and Limitation of Remedies.
Upon demand of any party hereto, whether made before or after institution of any
judicial proceeding, any dispute, claim or controversy arising out of, connected
with or relating to this Agreement or any other Loan Documents ("Disputes")
between parties to this Agreement shall be resolved by binding arbitration as
provided herein. Institution of a judicial proceeding by a party does not waive
the right of that party to demand arbitration hereunder. Disputes may include,
without limitation, tort claims, counterclaims, disputes as to whether a matter
is subject to arbitration, claims brought as class actions, claims arising from
Loan Documents executed in the future, or claims arising out of or connected
with the transaction reflected by this Agreement. Arbitration shall be conducted
under and governed by the Commercial Financial Disputes Arbitration Rules (the
"Arbitration Rules") of the American Arbitration Association (the "AAA") and
Title 9 of the U.S. Code. All arbitration hearings shall be conducted in the
city in which the office of Lender first stated above is located. The expedited
procedures set forth in Rules 51 et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000. All applicable statutes of
limitation shall apply to any Dispute. A judgment upon the award may be entered
in any court having jurisdiction. The panel from which all arbitrators are
selected shall be comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general jurisdiction, state or federal, of the state where the hearing will
be conducted or if such person is not available to serve, the single arbitrator
may be a licensed attorney. Notwithstanding the foregoing, this arbitration
provision does not apply to disputes under or related to the Interest Rate Swap
Agreement. Notwithstanding the preceding binding arbitration provisions, the
parties agree to preserve, without diminution, certain remedies that any party
hereto may employ or exercise freely, independently or in connection with an
arbitration proceeding or after an arbitration action is brought. The parties
shall have the right to proceed in any court of proper jurisdiction or by
self-help to exercise or prosecute the following remedies, as applicable: (i)
all rights to foreclose against any real or personal property or other security
by exercising a power of sale granted under Loan Documents or under applicable
law or by judicial foreclosure and sale, including a proceeding to confirm the
sale; (ii) all rights of self-help including peaceful occupation of real
property and collection of rents, set-off, and peaceful possession of personal
property; (iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver and
filing an involuntary bankruptcy proceeding; and (iv) when applicable, a
judgment by confession of judgment. Preservation of these remedies does not
limit the power of an arbitrator to grant similar remedies that may be requested
by a party in a Dispute. The parties agree that they shall not have a remedy of
punitive or exemplary damages against the other in any Dispute and hereby waive
any right or claim to punitive or exemplary damages they have now or which may
arise in the future in connection with any Dispute whether the Dispute is
resolved by arbitration or judicially.
9.18. GOVERNING LAW; JURISDICTION AND VENUE; WAIVER OF JURY
TRIAL. SUBJECT TO THE TERMS OF SECTION 9.17, THIS AGREEMENT SHALL BE
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF
THE STATE OF FLORIDA. SUBJECT TO THE TERMS OF SECTION 9.17, AS PART OF THE
CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, THE BORROWER HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN DADE
36
COUNTY, STATE OF FLORIDA, AND CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY
REGISTERED OR CERTIFIED MAIL DIRECTED TO THE BORROWER AT THE ADDRESS STATED IN
SECTION 9.4 AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER
OF ACTUAL RECEIPT THEREOF OR THREE DAYS AFTER DEPOSIT IN THE UNITED STATES
MAILS, PROPER POSTAGE PREPAID. SUBJECT TO THE TERMS OF SECTION 9.17, EACH OF THE
BORROWER AND THE LENDER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY
JURY IN ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR
THE OTHER LOAN DOCUMENTS. SUBJECT TO THE TERMS OF SECTION 9.17, THE BORROWER
WAIVES ANY OBJECTION WHICH THE BORROWER MAY HAVE BASED ON LACK OF JURISDICTION
OR IMPROPER VENUE OR FORUM NON CONVENIENS TO ANY SUIT OR PROCEEDING INSTITUTED
BY THE LENDER UNDER THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN ANY STATE OR
FEDERAL COURT LOCATED WITHIN DADE COUNTY, FLORIDA AND CONSENTS TO THE GRANTING
OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. SUBJECT
TO THE TERMS OF SECTION 9.17, NOTHING IN THIS SECTION 9.18 SHALL AFFECT THE
RIGHT OF THE LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR AFFECT THE RIGHT OF THE LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE
BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH HAS
JURISDICTION OVER THE BORROWER OR ITS PROPERTY. SUBJECT TO THE TERMS OF SECTION
9.17, THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER TO ENTER INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS, MAKE THE LOANS AND EXTEND THE OTHER
FINANCIAL ACCOMMODATIONS CONTEMPLATED HEREUNDER AND THEREUNDER.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
DRYCLEAN USA, INC.
By: /s/ Xxxxxxx Xxxxxxx, Pres.
----------------------------------
Xxxxxxx Xxxxxxx, President
FIRST UNION NATIONAL BANK,
a national banking association
By: /s/ Xxxxx Xxxx
----------------------------------
Xxxxx Xxxx, Vice President
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INDEX OF SCHEDULES
Schedule 1.1 Permitted Liens
Schedule 2.8 Affiliates' Assets
Schedule 2.9 Locations
Schedule 2.17 Environmental Compliance
Schedule 5.14 Affiliated Transactions
INDEX OF EXHIBITS
Exhibit A Borrowing Base Certificate
Exhibit B Intentionally omitted
Exhibit C Term Note
Exhibit D Revolving Credit Note
