LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (this "Agreement"), dated as of June
25, 1996, is entered into by and between Xxxxxxxxx Opthalmic Manufacturing
Corporation, a Florida corporation (the "Company"), and Fidelity Funding of
California, Inc., a California corporation ("Fidelity"). In consideration of the
mutual covenants and agreements contained herein, the Company and Fidelity
hereby agree as follows:
SECTION 1. DEFINITIONS AND CONSTRUCTION.
1.1 When used herein, the following terms shall have the following
meanings:
"ACCOUNT" means the right of the Company to payment for goods sold or
leased or for services rendered which is not evidenced by an instrument or
chattel paper, whether or not earned by performance.
"ACCOUNT DEBTOR" means the Person obligated to make payment on an
Account.
"ADVANCE" has the meaning given to it in Section 2.1.
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly controls, or is controlled by or under common control
with, such Person.
"AFFILIATE ADVANCE" means any "Advance" made to the other Affiliate
Company pursuant to Section 2.1 of the Affiliate Agreement.
"AFFILIATE AGREEMENTS" means this Agreement and the Loan and Security
Agreement dated of even date herewith between Carolina Contact Lens, Inc. and
Fidelity.
"AFFILIATED ACCOUNT" means an "Account" as defined in the other
Affiliate Agreement.
"AFFILIATED COMPANIES" means the Company and Carolina Contact Lens, Inc.
"BORROWING BASE" means an amount determined by Fidelity from time to
time in its sole discretion, equal to 65% of the face amount of Eligible
Accounts.
"BORROWING BASE CERTIFICATE" means a certificate in the form attached
hereto as Exhibit A, duly executed by an authorized officer of the Company.
"CASH COLLATERAL" has the meaning given to it in Section 7.
"COMMITMENT" means $2,000,000.
"CONCENTRATION LIMIT" means, as of any date, an amount equal to 20% of
the face amount of Accounts and Affiliated Accounts outstanding on such date.
"CONTRACT RATE" means a rate of interest equal to the lesser of (a) the
Prime Rate in effect from time to time plus 1.50% per annum and (b) the maximum
rate permitted by applicable law. The Contract Rate shall be automatically
increased or decreased, as the case may be, without notice to the Company from
time to time as of the effective date of each change in the Prime Rate.
"CURRENT ASSETS" means, as of any date, only those assets of the
Company that may, in the ordinary course of business, be converted into cash
within a period of one year from such date, but excluding (a) amounts due from
employees, officers, shareholders or directors of the Company, (b) prepaid
expenses for services or for supplies that are not purchased for resale, and (C)
amounts due from Affiliates of the Company.
"CURRENT LIABILITIES" means, as of any date, all obligations of the
Company that are due within one year from such date.
"DEBT" means, with respect to any Person, all indebtedness, obligations
and liabilities of such Person, including without limitation: (a) all
liabilities which would be reflected on a balance sheet of such Person prepared
in accordance with GAAP, (b) all obligations of such Person in respect of any
guaranty of any Debt of another person, or (c) all obligations, indebtedness and
liabilities secured by any lien on or security interest in any property or
assets of such Person.
"ELIGIBLE ACCOUNTS" means, at the time of determination thereof, all
Accounts other than (i) any Account which is payable more than 30 days from
invoice date (unless the Account Debtor is America's Best Contacts, in which
case, any such Account, which is payable more than 60 days from invoice date),
(ii) any Account which has been outstanding for more than 90 days from invoice
date, (iii) any Account as to which Fidelity does not have a valid and
perfected, first priority security interest, (iv) to the extent that the
aggregate outstanding Accounts owed by any single Account Debtor exceeds the
Concentration Limit, any Account owed by such Account Debtor, (v) any Account
that is owed by an Account Debtor that is an Affiliate of the Company or an
officer or employee of the Company, (vi) any Account that arises out of a sale
made or services performed outside of the United States or that
is owed by an Account Debtor located outside the United States, (vii) any
Account that is owed by a creditor or supplier of the Company or with respect to
which any defense, counterclaim or right of set off has been asserted, (viii)
any Account owed by an Account Debtor if more than 25% (in dollar amount) of
such Account Debtor's Accounts are 90 or more days past due, (ix) any Account
that is owed by the United States or any department, agency or instrumentality
thereof, unless the right to payment under such Account is assigned to Fidelity
as Collateral in full compliance with the Assignment of Claims Act of 1940, as
amended (31 U.S.C. 3727), and (x) any Account that has not been approved by
Fidelity, in its sole and absolute discretion, for inclusion in the Borrowing
Base.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, regulations, rules, orders, licenses, agreements or
other governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants or industrial, toxic or hazardous
substances into the environment, or otherwise relating to the manufacture,
processing, treatment, transport or handling of pollutants or industrial, toxic
or hazardous substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA PLAN" means any pension benefit plan subject to Title IV of
ERISA maintained by the Company or any Affiliate thereof with respect to which
the Company has a fixed or contingent liability.
"EVENT OF DEFAULT" has the meaning given it in Section 9.
"GAAP" means generally accepted accounting principles and practices as
promulgated by the American Institute of Certified Public Accountants, applied
on basis consistent with past practices.
"INDEMNIFIED CLAIMS" means any and all claims, demands, actions, causes
of action, judgments, liabilities, damages and consequential damages, penalties,
fines, costs, fees, expenses and disbursements (including, without limitation,
fees and expenses of attorneys and other professional consultants and experts in
connection with any investigation or defense) of every kind, known or unknown,
existing or hereafter arising, foreseeable or unforeseeable, which may be
imposed upon, threatened or asserted against or incurred or paid by any
Indemnified Person at any time and from time to time, because of, resulting
from, in connection with or arising out of any transaction, act, omission, event
or circumstance in any way connected with the Collateral or the Transaction
Documents (including but not limited to enforcement of Fidelity's rights
thereunder or the defense of Fidelity's actions thereunder), excluding with
respect to any Indemnified Persons, any of the foregoing resulting from such
Indemnified Person's gross negligence or willful misconduct.
"INDEMNIFIED PERSONS" means Fidelity and its officers, directors,
shareholders, employees, attorneys, representatives and Affiliates.
"INTANGIBLE ASSETS" means such of the Company's assets as are treated
as intangible pursuant to GAAP, including without limitation: (a) obligations
owing by officers, directors, shareholders, employees, subsidiaries, Affiliates
or any Person in which any such officer, director, shareholder, employee,
subsidiary, or Affiliate owns any interest and (b) any asset which is intangible
or lacks intrinsic or marketable value or collectibility, including but not
limited to, goodwill, noncompetition agreements, patents, copyrights,
trademarks, franchises, organization or research and development costs.
"INVENTORY" means all goods, now owned or hereafter acquired by the
Company, wherever located, that are held for sale or lease or are to be
furnished under any contract of service (including, but not limited to raw
materials, work in process, finished goods and materials used or consumed in the
manufacture or production thereof, goods in which the Company has an interest in
mass or a joint or other interest or rights of any kind, and goods which have
been returned to or repossessed or stopped in transit by the Company).
"LATE PAYMENT RATE" means a per annum rate of interest equal to the
lesser of (a) the Contract Rate plus four percent and (b) the maximum rate
permitted by applicable law.
"OBLIGATIONS" means all indebtedness, obligations and liabilities of
the Company to Fidelity arising under the Transaction Documents, all other
indebtedness, obligations and liabilities of the Company to Fidelity, whether
presently existing or hereafter arising, direct or indirect, primary or
secondary, joint or several, fixed or contingent, and whether originally payable
to Fidelity or to a third party and subsequently acquired by Fidelity, and all
indebtedness and obligations of American Consolidated Laboratories, Inc. to
Fidelity under the Warrant, dated as of the date hereof, issued by American
Consolidated Laboratories, Inc. to Fidelity for the purchase of 150,000 shares
of the Common Stock of American Consolidated Laboratories, Inc.
"PERSON" means any individual, corporation, joint venture, partnership,
trust, unincorporated organization or governmental entity or agency.
"PRIME RATE" means the rate per annum published from time to time by
THE WALL STREET JOURNAL as the base rate for corporate loans at large commercial
banks (or, if more than one such rate is published, the higher or highest of the
rates so published). If such rate is no longer published by THE WALL STREET
JOURNAL, then Fidelity shall, in its sole discretion substitute the base or
prime rate for corporate loans at a large commercial bank for the
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base rate published in THE WALL STREET JOURNAL. Such rate may not necessarily be
the lowest or best rate actually charged to any customer of such commercial
bank.
"REMITTANCE ADDRESS" means such address as Fidelity shall direct the
Company from time to time in writing in accordance with the terms hereof.
"SHAREHOLDERS EQUITY" means, as of any date, the shareholders' equity
of the Company as of such date determined in accordance with GAAP.
"TANGIBLE NET WORTH" means, as of any date, the amount obtained by
subtracting the Company's Intangible Assets as of such date from the Company's
Shareholders' Equity as of such date.
"TERM" has the meaning given to it in Section 11.4.
"TERMINATION EVENT" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) of ERISA or (ii)
any other reportable event described in Section 4043(b) of ERISA other than a
reportable event not subject to the provision for 30-day notice to the Pension
Benefit Guaranty Corporation pursuant to a waiver by such corporation under
Section 4043(a) of ERISA or (b) the withdrawal of the Company or any Affiliate
of the Company from any ERISA Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c) any
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination, or the appointment of a trustee to administer, any ERISA
plan.
"TRANSACTION DOCUMENTS" means this Agreement and all other documents
and instruments executed and delivered in connection therewith.
"UCC" means the Uniform Commercial Code as in effect in the applicable
jurisdiction.
"WORKING CAPITAL" means, as of any date, the excess of Current Assets
over Current Liabilities as of such date.
1.2 Terms defined in the UCC and used but not defined herein shall have
the meanings ascribed to them in the UCC.
1.3 References herein to a particular agreement, instrument or document
also shall be deemed to refer to and include all renewals, extensions and
modifications of such agreement, instrument or document. All addenda, exhibits
and schedules attached to this Agreement are a part hereof for all purposes.
Words in the singular form shall be construed to include the plural and vice
versa, unless the context otherwise requires.
1.4 All interest accruing hereunder shall be calculated on the basis of
actual days elapsed (including the first but excluding the last day) plus five
business days and a year of 360 days. Unless otherwise expressly provided herein
or unless Fidelity otherwise consents, all financial statements and reports
furnished to Fidelity hereunder shall be prepared, and all financial
computations and determinations pursuant hereto shall be made, in accordance
with GAAP. All payments received by Fidelity after its internally established
time for closing business on any business day shall be applied as of the next
succeeding business day. Any payment which is due on a day which is not a
business day shall instead be deemed to be due on the next succeeding business
day, and interest thereon shall accrue and be payable at the then applicable
rate during the time of such extension. Fidelity's records in respect of loans
advanced, accrued interest, payments received and applied and other matters in
respect of calculation of the amount of the Obligations shall be deemed
conclusive absent demonstration of error. All statements of account rendered by
Fidelity to the Company relating to principal, accrued interest or costs owing
by the Company under this Agreement shall be presumed to be correct and accurate
unless, within 30 days after receipt thereof, the Company shall notify Fidelity
in writing of any claimed error therein.
SECTION 2. ADVANCES.
2.1 Subject to the terms of this Agreement, including without
limitation, Section 3, Fidelity shall make advances to the Company (each an
"Advance and collectively the "Advances") from time to time during the Term;
provided, however, that the aggregate principal amount of Advances outstanding
at any time shall not exceed the lesser of the (i) Borrowing Base determined by
Fidelity from time to time and (ii) the difference obtained by subtracting the
aggregate principal balance of all Affiliate Advances then outstanding from the
Commitment. Each Advance must be greater than or equal to $5,000 or must equal
the unadvanced portion of the Borrowing Base. The Company hereby agrees to repay
to Fidelity all Advances made to the Company hereunder, together with interest
thereon, in the manner provided herein. The principal owing hereunder in respect
of the Advances at any given time shall equal the aggregate amount of Advances
made hereunder minus all principal payments thereon received by Fidelity
hereunder. Subject to the terms and conditions hereof, the Company may borrow,
repay and reborrow under this Agreement.
2.2 Each request by the Company to Fidelity for an Advance hereunder
must be in writing or promptly confirmed in writing. Each such written request
or confirmation shall be accompanied by a "Borrowing Base Certificate" in the
form attached hereto as Exhibit "A," together with the sales journal for each
Account included in such Borrowing Base Certificate and such other information
with respect thereto as Fidelity shall request in its sole and absolute
discretion.
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2.3 Promptly after receiving each Borrowing Base Certificate, Fidelity
shall, based upon such Borrowing Base Certificate and such other information
available to Fidelity, redetermine the Borrowing Base, which redetermination
shall take effect immediately and remain in effect until the next such
redetermination. If all conditions precedent to any Advance requested have been
met, Fidelity will on the date requested make such Advance available to the
Company by wire transfer to the account designated in writing by the Company. In
the event Fidelity does not receive an appropriately completed Borrowing Base
Certificate, Fidelity shall have no obligation to redetermine the Borrowing Base
or made any additional Advances hereunder.
2.4 If the aggregate unpaid principal balance of the Advances exceeds
the Borrowing Base at any time, the Company shall, upon receipt of notice
thereof from Fidelity, immediately repay the principal of the Advances in an
amount at least equal to such excess. Any principal repaid pursuant to this
Section 2.4 shall be in addition to, and not in lieu of, all payments otherwise
required to be paid under the Transaction Documents.
2.5 The aggregate unpaid principal balance of the Advances plus all
accrued but unpaid interest thereon shall be payable by the Company to Fidelity
on demand, or if no demand is made, on the last day of the Term.
2.6 The aggregate unpaid principal balance of all Advances shall bear
interest at the Contract Rate in effect from time to time. Except as provided in
Section 2.5, all accrued but unpaid interest thereon shall be due and payable by
the Company to Fidelity on the last day of each calendar month.
2.7 The Affiliated Companies shall, pursuant to this Agreement and the
other Affiliate Agreement, pay to Fidelity an aggregate initial commitment fee
in the amount of 1.5% of the Commitment, payable on the date hereof, and an
aggregate annual commitment fee in the amount of 1.0% of Commitment, payable on
each anniversary of the date hereof during the Term. The Company hereby
authorizes Fidelity, at its sole discretion, to deduct the commitment fee from
any Advance hereunder.
2.8 As consideration for Fidelity's commitment to make Advances
hereunder and Affiliate Advances under the other Affiliate Agreement, the
Affiliated Companies shall, pursuant to this Agreement and the other Affiliate
Agreement, pay to Fidelity an aggregate minimum usage fee (in this section
called the "Minimum Usage Fee" of not less than $8,400 for each calendar month
(or fraction thereof, on a prorated basis) during the Term for interest and fees
payable pursuant to Sections 2.6 and 2.9 hereof and Sections 2.6 and 2.9 of the
other Affiliate Agreement. In the event that the income earned by Fidelity
during any calendar month (or fraction thereof on a prorated basis) pursuant to
Sections 2.6 and 2.9 hereof and Sections 2.6 and 2.9 of the other Affiliate
Agreement is less than the Minimum Usage Fee, the Affiliated Companies shall,
pursuant to this Agreement and the other Affiliate Agreement, pay to Fidelity
the difference between the amount so earned by Fidelity and the Minimum Usage
Fee, regardless of Fidelity's prior compensation. The Minimum Usage Fee for each
calendar month shall be due and payable on the first day of the next calendar
month.
2.9 The Affiliated Companies shall, pursuant to this Agreement and the
other Affiliate Agreement, pay to Fidelity an aggregate collateral monitoring
fee in the amount of $3,500 for each calendar month. The collateral monitoring
fee for each calendar month shall be due and payable on the first day of the
next calendar month.
2.10 In addition to, and not in lieu of, any termination fee required
by Section 11.4, the Affiliated Companies shall pay to Fidelity a liquidation
fee (in this section called the "Liquidation Fee") in the amount of five percent
of the face amount of each Eligible Account included in the Borrowing Base that
is outstanding at any time during the Liquidation Period (as defined below). The
Liquidation Fee shall be payable on the earlier to occur of (I) the date on
which Fidelity collects the applicable Eligible Account and (ii) the ninetieth
day after the invoice date of the applicable Eligible Account. For purposes of
this section, the term "Liquidation Period" means a period beginning on the
earliest of (I) the date of commencement against or by any of the Affiliated
Companies of any voluntary or involuntary case under the federal Bankruptcy
Code, (ii) the date of any general assignment by any of the Affiliated Companies
for the benefit of its creditors; (iii) the date of any appointment or taking
possession by a receiver, liquidator, assignee, custodian or similar official of
all or a substantial part of any of the Affiliated Companies' assets, or (iv)
the date of the cessation s of business of any of the Affiliated Companies, and
ending on the date on which Fidelity as actually received all fees, costs,
expenses and other amounts owing to it hereunder.
2.11 Contemporaneously with the execution and delivery hereof, the
Affiliated Companies shall, pursuant to this Agreement and the other Affiliate
Agreement, pay to Fidelity an aggregate fee of $7,500 to cover the costs of the
negotiation, preparation, execution and delivery of the Transaction Documents,
including the fees, if any, of outside legal counsel. In addition, the
Affiliated Companies shall pay or reimburse Fidelity upon demand for all other
costs and expenses incurred by Fidelity in connection with its due diligence
review of the Affiliated Companies and the closing of the transactions
contemplated hereby, all documentary stamp taxes and intangible taxes, if any,
payable under Florida law in connection with the execution and delivery of the
Transaction Documents and all reasonable attorney's fees, court costs and other
expenses incurred by Fidelity (whether or not litigation is commenced or
judgment issued, and if litigation is commenced whether at trial or any
appellate level) in connection with the enforcement by Fidelity of this
Agreement or any other Transaction Document, the protection or enforcement of
Fidelity's interest in the Collateral, the collection by Fidelity of the
Collateral, or the representation of Fidelity in connection with any bankruptcy
case or insolvency proceeding involving the Company, the Collateral, any
Affiliated Company or any Account Debtor, including, without limitation, any
representation involving relief from a stay motion, a cash collateral dispute,
an assumption or rejection motion or a dispute concerning any proposed
disclosure statement and plan proposed in any such proceeding.
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2.12 Fidelity shall be entitled to collect upon demand its normal and
customary charges for the following routine services provided or obtained in the
course of performing its functions with respect to the Collateral: appraisals,
lock box charges, long-distance telephone charges, postage, credit reports, wire
transfers, check copying charges, overnight mail delivery, UCC, judgment,
litigation and tax lien searches and filings.
2.13 All interest fees and other amounts due to Fidelity pursuant to
this Section 2 shall be payable on demand, and may, in Fidelity's sole
discretion, be deducted from Advances paid from the Cash Collateral. All past
due amounts owed hereunder, including but not limited to, past due interest,
fees and other amounts, that are not paid when due shall bear interest from the
date due until paid at the Late Payment Rate.
2.14 Should any interest or other charges paid hereunder result in the
computation or earning of interest in excess of the maximum rate or amount of
interest permitted by applicable law, such excess interest and charges shall be
and hereby are waived by Fidelity, and the amount of such excess interest and
charges shall be automatically credited against, and be deemed to have been
payments in reduction of, the principal then due hereunder, and any portion of
such excess which exceeds the principal then due hereunder shall be paid by
Fidelity to the Company.
SECTION 3. CONDITIONS PRECEDENT TO ADVANCES.
SECTION 3. CONDITIONS PRECEDENT TO ADVANCES.
3.1 Fidelity shall not be obligated to make any Advance hereunder
(including the first) until it shall have received the following documents,
duly executed in form and substance satisfactory to Fidelity and its
counsel:
(a) continuing unconditional and absolute guarantees by American
Consolidated Laboratories, Inc., Carolina Contact Lens, Inc., S-O
Nebraska, Inc. and Wolcon Laboratories, Inc. of all Obligations,
and a security agreement (the "Security Agreement") executed by
S-O Nebraska, Inc. pursuant to which S-O Nebraska, Inc. pledges
substantially all of its assets to Fidelity to secure the payment
of the Obligations.
(b) a certificate executed by the President and the Secretary of the
Company certifying (i) the names and signatures of the officers of
the Company authorized to execute Transaction Documents, (ii) the
resolutions duly adopted by the Board of Directors of the Company
authorizing the execution of this Agreement and the other
Transaction Documents, and (iii) correctness and completeness of
the copy of the bylaws of the Company attached thereto;
(c) a certificate executed by the President and the Chief Financial
Officer of the Company certifying the satisfaction of the conditions
set forth in Section 3.2;
(d) certificates regarding the due formation, valid existence and
good standing of the Company in the state of its organization issued
by the appropriate governmental authorities in such jurisdiction;
(e) releases executed by Bausch & Lomb and Polymer Technology releasing
all liens and security interests of Bausch & Lomb and Polymer
Technology in the Collateral;
(f) a landlord's lien waiver subordinating the security interest of
High Associates, Ltd. in the Collateral to the security interest
therein of Fidelity granted herein;
(g) an intercreditor agreement with Xxxxxx-Xxxxxxxxx Capital Focus
L.P., pursuant to which Xxxxxx-Xxxxxxxxx Captial Focus L.P.
subordinates its right to receive payment of the Debt
owed by American Consolidated Laboratories, Inc. to it
to the payment and performance by American Consolidated
Laboratories, Inc. of its obligations to
Fidelity under the general continuing guaranty referred to in
Section 3.1(a) (the "Guaranty");
(h) an intercreditor agreement with American Consolidated Laboratories,
Inc. pursuant to which American Consolidated Laboratories,
Inc. subordinates its right to receive payment of the Debt
owed by the Company to it to the payment of the Obligations;
(i) a favorable opinion of Schifino Xxxxxxxxx, counsel for the Company,
covering such matters as Fidelity may request in its sole discretion;
(j) endorsements naming Fidelity as an additional insured or loss
payee, as appropriate, on all liability insurance and all property
insurance policies of the Company; and
(k) a warrant (the "Warrant") executed by American Consolidated
Laboratories, Inc. initially for the purchase of 150,000 shares
of the common stock of American Consolidated Laboratories, Inc.
3.2 Furthermore, Fidelity shall not be obligated to make any Advance
hereunder (including the first), unless: (i) all representatives and
warranties made by the Company in the Transaction Documents are true on and
as of the date of such Advance as if such representations and warranties had
been made as of the date of such Advance, (ii) the Company has performed and
compiled with all agreements and conditions required in the Transaction
Documents to be performed or complied with by it on or prior to the date of
such Advance, (iii) no Event of Default or any event or circumstance that,
with the passage of time, the giving of notice or both, would
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become an Event of Default shall have occurred, (iv) such Advance
shall not be prohibited by any law or any regulation or any
order of any court or governmental agency or authority, (v) the
Company shall have not repudiated or made any anticipatory breach
of any of its obligations under any Transaction Document, and (vi)
Fidelity shall have approved such Advance in its sole discretion.
Section 4. The Company's Representations and Warranties. The
Company represents and warrants to Fidelity on the date hereof, and shall
be deemed to represent and warrant to Fidelity on each date on which an
Advance is made to the Company hereunder, that:
4.1 The Company is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation, with all
requisite power and authority to execute, deliver and perform its obligations
under this Agreement and the other Transaction Documents to which it is a
party and to conduct its business as presently conducted. The Company is
duly qualified and authorized to do business as a foreign corporation and is
in good standing in all states in which such qualification and good standing
are necessary or desirable for the conduct by the Company of its business
or the performance by the Company of its obligations hereunder. The
execution, delivery and performance by the Company of this Agreement and the
other Transaction Documents to which it is a party do not and will not
constitute (a) a violation of any applicable law or the Company's
articles or certificate of incorporation or bylaws or (b) a
material breach of any other document, agreement or instrument to
which the Company is a party or by which the Company is bound. This
Agreement and the other Transaction Documents to which the Company is
a party have been duly authorized, executed and delivered by
the Company, and are legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their terms. No consent of,
approval by, registration or filing with or authorization from any governmental
authority or agency is required in connection with the execution, delivery or
performance by the Company of this Agreement or the other
Transaction Documents to which it is a party.
4.2 None of the Eligible Accounts or any other Collateral is subject to
any lien, encumbrance, security interest or other claim of any kind or nature.
The Company has not transferred, sold, pledged or given a security interest
in any of its Accounts, Inventory, machinery or equipment to anyone other than
Fidelity. There are no financing statements on file in any public office
governing any property of the Company of any kind, real or personal, in which
the Company is named in or has signed as the debtor, except the financing
statement or statements filed or to be filed in respect of this Agreement or
those statements on file that were disclosed in writing by the Company to
Fidelity prior to the execution and delivery of this Agreement.
4.3 The Company is the sole owner and holder of, and has good and
marketable title to, all Collateral.
4.4 The amount of each Eligible Account is due and owing to the Company
and represents an accurate statement of a bona fide sale, delivery and
acceptance of Inventory or performance of service by the Company to or for
an Account Debtor. The terms for payment of the Eligible Accounts are
30 days from date of invoice and the payment of the Eligible Accounts is
not contingent upon the fulfillment by the Company of any
further performance of any nature whatsoever.
Except for set-offs, allowances, discounts, deductions and counterclaims
arising in the ordinary course of business that are accurately reflected in all
Borrowing Base Certificates delivered after they arise, there are no set-offs,
allowances, discounts, deductions, counterclaims against the Eligible Accounts
or any claims by Account Debtors, of any kind whatsoever, valid or invalid,
that have been or may be asserted as a basis for refusing to pay an Eligible
Account, in whole or in part, either at the time it is accepted by Fidelity for
inclusion in the Borrowing Base or prior to the date it is to be paid. To
the best of the Company's knowledge, each Account Debtor's business is solvent.
The Company has served or caused to be served any and all preliminary notices
required by law to perfect or enforce any mechanic's lien or stop notice or
bonded stop notice for the Eligible Accounts and the information contained
in those notices is true and correct to be the best of the Company's knowledge.
4.5 The address set forth below the Company's signature hereon is, and for
at least the last six months has been, the Company's mailing address, its
chief executive office, its principal place of business, the office where all
of the books and records concerning the Eligible Accounts are maintained and
the location of all Collateral. The Company does not transact business, and has
not transacted business during the past five years, under any trade, fictitious
or assumed name other than those set forth under the Company's signature
hereon. During the past five years, the Company has not been a party to a
merger or consolidation and has not acquired all or substantially all of
the assets of any Person.
4.6 The Company has filed all tax reports and returns required to be
filed by it and has paid all federal, state and local taxes and governmental
charges imposed upon the Company, other than taxes which are not yet due
and payable, and other than those contested in good faith and for which
adequate reserves have been established in accordance with GAAP.
4.7 The Company is in compliance with ERISA, and is not required to
contribute to any "multiemployer plan" as defined in Section 4001 of ERISA.
The Company has conducted its business in material compliance with all
applicable laws, including but not limited to, applicable Environmental Laws,
and maintains and is in compliance with all licenses and permits required
under any such laws to conduct its business and perform its obligations
hereunder. The Company does not have any known material contingent liability
under any Environmental Law.
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4.8 The application made by the Company to Fidelity in connection with
this Agreement and the statements made therein and in any materials furnished
in connection therewith are true and correct as of the date hereof. All
financial statements furnished by the Company to Fidelity in connection with
such application were prepared in accordance with GAAP, except to the extent
provided in the notes to such financial statements, and fairly present the
financial condition and results of operations of the Company as of the dates
and for the periods indicated therein.
4.9 There is no fact which the Company has not disclosed to Fidelity in
writing which could materially adversely affect the properties, business or
financial condition of the Company, or any of the Collateral, or which it
is necessary to disclose in order to keep the foregoing representations and
warranties from being misleading.
Section 5. Covenants of the Company. From the date hereof and until the
payment and performance is full of all of the Obligations, the Company
covenants with Fidelity that:
5.1 The Company shall preserve and maintain its corporate existence,
good standing and authority to transact business in all jurisdiction where
necessary for the proper conduct of its business, and shall maintain all of
its properties, rights, privileges and franchises necessary or desirable in
the normal conduct of its business.
5.2 The Company shall permit Fidelity and its representatives, including
any appraisers, auditors and accountants selected by Fidelity, to inspect any
of the Collateral at any time during normal business hours. In addition,
Fidelity shall have the right, from time to time, to audit the Company's books
and records upon reasonable notice to the Company. The Company shall pay all
costs associated with any such audits at the rate of $700 per day per auditor
plus reasonable out-of-pocket expenses.
5.3 The Company shall maintain its books and records in accordance with
GAAP. The Company shall furnish Fidelity, upon request, such information and
statements as Fidelity shall request from time to time regarding the Company's
business affairs, financial condition and results of its operations. Without
limiting the generality of the foregoing, the Company shall provide Fidelity,
on or prior to the last day of each month, unaudited consolidated and
consolidating financial statements with respect to the prior month and, within
90 days after the end of each of the Company's fiscal years, audited annual
consolidated and consolidating financial statements and such certificates
relating to the foregoing as Fidelity may request including, without
limitation, a monthly certificate from the president and chief financial
officer of the Company stating whether any Events of Default have occurred
and stating in detail the nature thereof. The Company shall provide Fidelity
a Borrowing Base Certificate, appropriately completed and with all attach-
ments, at any time that Fidelity shall request and on or before the last day
of any calendar week in which the Company does not request an Advance. In
addition, the Company shall furnish to Fidelity upon request a current
listing of all open and unpaid accounts payable and accounts receivable,
names, addresses and contact persons for Account Debtors, and such other items
of information that Fidelity may deem necessary or appropriate from time to
time. The Company immediately shall notify Fidelity in writing upon becoming
aware of the existence of any condition or circumstance that constitutes
an Event of Default or that would, with the giving of notice, the passage of
time or both, constitute an Event of Default. Any such written notice shall
specify the nature of such condition or circumstance, the period of the
existence thereof and the action that the Company proposes to take with
respect thereto.
5.4 The Company promptly shall notify Fidelity of any attachment or any
other legal process levied against the Company and any action, suit,
proceeding or other similar claim initiated against the Company.
5.5 The Company shall keep and maintain adequate insurance by insurers
acceptable to Fidelity with respect to its business and all Collateral. Such
insurance shall cover loss, damages and liability of amounts not less than
reasonably requested by Fidelity and shall include, at a minimum, insurance
for workers compensation, general liability, fire, casualty, theft and all
risk. The Company shall cause Fidelity to be an additional insured and loss
payee under all policies of insurance covering any of the Collateral, to the
extent of Fidelity's interest. The Company shall deliver copies of each
insurance policy to Fidelity upon request.
5.6 The Company shall file all tax reports and returns required to be
filed by it in the manner and at the times required by applicable law, and
shall pay all federal, state and local taxes and charges imposed upon the
Company when due; provided, that the Company will not be required to pay any
such tax or charge which is being contested in good faith and by proper
proceedings if it has maintained adequate reserves with respect thereto in
accordance with GAAP.
5.7 The Company shall comply with ERISA and shall not become required
to contribute to any "multiemployee plan" as defined in Section 4001 of
ERISA. The Company shall conduct its business in material compliance with
all applicable laws, and shall maintain and comply with all licenses and
permits required under any such laws to conduct its business and perform
its obligations hereunder. Without limiting the generality of the foregoing,
the Company shall comply in all material respects with all Environmental Laws
now or hereafter applicable to the Company and shall obtain, at or prior to
the time required by applicable Environmental Laws, all environmental, health
and safety permits, licenses and other authorizations necessary for its
operations. The Company promptly shall furnish to Fidelity all written notices
of violation, complaints, penalty assessments, suits or other proceedings
received by the Company with respect to any alleged violation of or non-
compliance with any Environmental Laws.
7
5.8 The Affiliated Companies shall together at all times maintain
finished goods Inventory on hand having a value of at least $700,000 until
August 31, 1996 and at least $750,000 after August 31, 1996, in either case,
valued at the lower of cost or market.
5.9 The Company shall not grant, create or allow to exist any security
interest, lien or other encumbrance on any of the Collateral other than (a) the
lien and security interest granted to Fidelity herein; (b) inchoate liens
for taxes, assessments or governmental charges or levies not yet due or liens
for taxes, assessments or governmental charges or levies being contested in
good faith and by appropriate proceedings for which adequate reserves have
been established in accordance with GAAP; (c) liens arising from precautionary
UCC financing statements filed regarding operating leases; and (d) liens
arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default under Section 9(f) or (j), and the Company
shall not execute any financing statement (other than as provided herein) in
favor of any Person other than Fidelity. The Company shall not change its
mailing address, chief executive office, principal place of business or place
where such records are maintained, open any new place of business, close any
existing place of business or change the location of any of the Collateral or
transact business under any trade, fictitious or assumed name other than those
set forth under the Company's signature hereon without providing at least 30
days' prior written notice thereof to Fidelity.
5.10 The Company shall not accept any returns or grant any allowance or
credit (other than those returns, allowances and credits accepted or granted
in the ordinary course of the Company's business) to any Account Debtor
without notice to and the prior written approval of Fidelity. The Company shall
provide to Fidelity for each Account Debtor on Eligible Accounts a weekly
report, in form and substance satisfactory to Fidelity, itemizing all such
returns and allowances made during the previous week with respect to such
Eligible Accounts.
5.11 The Company shall not incur, directly, or indirectly, any Debt for
money borrowed, other than in favor of Fidelity or in the normal and ordinary
course of the Company's business.
5.12 The Company shall not use any of the funds paid to the Company
hereunder directly or indirectly for personal, family, household or
agricultural purposes.
5.13 The Company shall not directly or indirectly become liable in
connection with the Debt of any Person, whether by guarantee, surety,
endorsement (other than endorsement of negotiable instruments for
collection in the ordinary course of business), agreement to purchase
or repurchase, agreement to make investments, agreement to provide
funds or maintain working capital, or any agreement to assure a
creditor against loss, other than in favor of Fidelity.
5.14 Without the prior written consent of Fidelity (which consent shall
not be unreasonably withheld), the Company shall not discontinue, or make
any material change in, its business as currently established, or enter
any new or different line of business not directly related to the Company's
existing line of business.
5.15 The Company shall not declare, pay or issue any dividends or
other distributions in respect of its capital stock or distribute, reserve,
secure, or otherwise make or commit distributions on account of its
capital stock, or make any payment on account of the purchase, redemption
or other acquisition or retirement of any shares of its capital stock.
5.16 The Company shall not make any loans or advances to or for the
benefit of any officer, director or shareholder of the Company except advances
for routine expense allowances in the ordinary course of business. The
Company shall not make any loans or advances to or for the benefit of any
Affiliate of the Company. The Company shall not make any payment on any
obligation owing to any officer, director, shareholder or Affiliate of the
Company.
5.17 Without the prior written consent of Fidelity (which consent shall
not be unreasonably withheld), the Company shall not purchase or otherwise
acquire assets from any Person outside the ordinary course of business of
the Company.
5.18 The Company shall not invest in or otherwise purchase or acquire
the securities of any Person.
5.19 The Company shall not sell or dispose of any of its assets other
than the sale of Inventory in the ordinary course of business, and the Company
shall not dissolve or liquidate or become a party to any merger or xxxxxxx-
dation with any Person.
Section 6. Collateral. In order to secure the payment of all
Obligations and all other indebtedness and obligations of the other Affiliated
Company to Fidelity, whether arising under the other Affiliate Agreement or
otherwise, the Company hereby grants to Fidelity a security interest in and
lien upon all of the Company's right, title and interest in and to (a) all
Accounts, contract rights and general intangibles, receivables and claims
whether now or hereafter arising, all guaranties and security therefor and
all of the Company's right title and interest in the goods purchased and
represented thereby including all of the Company's rights in and to returned
goods and rights of stoppage in transit, replevin and reclamation as unpaid
vendor; (b) all Inventory and all accessions thereto and products thereof
and documents therefor; (c) all equipment and machinery, wherever located
and whether now or hereafter existing, and all parts thereof, accessions
thereto, and replacements therefor and all documents and general intangibles
covering or relating thereto; (d) all books and records pertaining to the
foregoing, including but not limited to computer programs, data, certificates,
records, circulation lists, subscriber lists, advertiser lists, supplier
lists, customer lists, customer and supplier contracts, sales orders, and
purchasing records; and (e) all
8
proceeds of the foregoing (collectively,
the "Collateral"). The Company agrees to comply with all appropriate laws
in order and to take all actions necessary or desirable in Fidelity's
judgment to perfect Fidelity's security interest in and to the Collateral,
to execute any financing statement or additional documents as Fidelity may
request and to deliver to Fidelity a list of all locations of its Inventory,
equipment and machinery and landlord and or mortgagee lien waivers with
respect to each site where Inventory, equipment or machinery is located and
which is either leased by the Company or has been mortgaged by the Company,
upon request by Fidelity.
Section 7. Collection. Each invoice representing an Account shall
state on its face that amounts payable thereunder are payable only at the
Remittance Address. Fidelity shall have the right at any time, either before
or after the occurrence of an Event of Default and without notice to the
Company, to notify any or all Account Debtors on the Collateral of the
assignment of the Collateral to Fidelity and to direct such Account Debtors
to make payment of all amounts due or to become due to the Company directly
to Fidelity, and to the extent permitted by law, to enforce collection of
any Collateral and to adjust, settle or compromise the amount or payment
thereof. So long as no Event of Default or event that, with the passage of
time, the giving of notice or both, would become an Event of Default has
occurred and is continuing, all collections of Collateral received by
Fidelity shall be applied by Fidelity to the payment of the Obligations
of the Company to Fidelity whether or not then due and any remaining funds
shall be delivered to the Company. Upon the occurrence of an Event of
Default or an event that, with the passage of time, the giving of notice
or both, would become an Event of Default, any such remaining funds may
be held by Fidelity as cash collateral ("Cash Collateral") until all
Obligations have been paid in full and Fidelity has no further obligation
to advance funds to the Company. All amounts and proceeds (including
instruments and writings) received by the Company in respect of the
Collateral shall be received in trust for the benefit of Fidelity
hereunder, shall be segregated from other funds of the Company and shall
be promptly paid over to Fidelity in the same form as received (with any
necessary endorsement) to be applied in the same manner as payments
received directly by Fidelity.
Section 8. Power of Attorney. The Company grants to Fidelity an
irrevocable power of attorney coupled with an interest authorizing and
permitting Fidelity, at its option, with or without notice to the Company,
to do any or all of the following: (a) endorse the name of the Company on
any checks or other evidences of payment whatsoever that may come into the
possession of Fidelity regarding Collateral, including checks received
by Fidelity pursuant to Section 7 hereof; (b) receive, open and forward
any mail addressed to the Company and put Fidelity's address on any
statements mailed to Account Debtors; (c) pay, settle, compromise,
prosecute or defend any action, claim, conditional waiver and release,
or proceeding relating to Collateral; (d) upon the occurrence of an
Event of Default, notify, in the name of the Company, the U.S. Post Office
to change the address for delivery of mail addressed to the Company to
such address as Fidelity may designate (provided that Fidelity shall turn
over to the Company all such mail not relating to Collateral; (e) verify,
sign, acknowledge, record, file for recording, serve as required by law,
any claim of mechanic's lien, stop notice or bonded stop notice in the sole
and absolute discretion of Fidelity relating to any Collateral; (f) insert
all recording or service information in any mechanic's lien or assignment
of rights under stop notice/bonded stop notice which the Company has
signed in connection with this Agreement, recorded or served to enforce
payment of the Collateral; (g) execute and file on behalf of the Company
any financing statement, amendment thereto or continuation thereof (i)
deemed necessary or appropriate by Fidelity to protect Fidelity's interest
in and to the Collateral or (ii) required or permitted under any provision
of this Agreement; and (h) do all other things necessary and proper in order
to carry out this Agreement. The authority granted to Fidelity herein is
irrevocable until this Agreement is terminated and all amounts due to
Fidelity hereunder have been paid in full.
Section 9. Default. An event of default ("Event of Default") shall
be deemed to have occurred hereunder, Fidelity shall have no further
obligation to make any further Advances and may immediately
exercise its rights and remedies with respect to the Collateral under
this Agreement, the Uniform Commercial Code and applicable law,
upon the happening of one or more of the following:
(a) The Company shall fail to pay on demand or otherwise as and when
due any amount owed by the Company to Fidelity, whether hereunder or otherwise.
(b) The Company shall breach any covenant or agreement made herein or
in any other Transaction Document and the same shall not be cured to Fidelity's
satisfaction within ten days after such covenant or agreement is breached.
(c) Any warranty or representation made herein or in any other Transaction
Document shall be untrue when made or any report, certificate, schedule,
financial statement, profit and loss statement or other statement furnished
by the Company, or by any other person on behalf of the Company, to Fidelity
is not true and correct when furnished.
(d) There shall be commenced by or against the Company or any guarantor
of the Obligations any voluntary or involuntary case under the federal
Bankruptcy Code, or the Company or any guarantor of the Obligations shall
make an assignment for the benefit of its creditors, or of a receiver or
custodian shall be appointed for the Company or any guarantor of the
Obligations for a substantial portion of its assets.
(e) The Company shall become insolvent in that its debts are greater
than the fair value of its assets, or the Company is generally not paying
its debts as they become due.
(f) Any involuntary lien, garnishment, attachment or the like shall
be issued against or shall attach to the Collateral and the same is not
released within ten days.
9
(g) An event or circumstance shall have occurred which Fidelity believes
has or may result in a material adverse change in the Company's financial
condition, business or operations.
(h) The Company shall have a federal or state tax lien filed against
any of its properties, or shall fail to pay any federal or state tax when
due, or shall fail to file any federal or state tax form or report within 30
days after the date due.
(i) Either (i) any "accumulated funding deficiency" (as defined in
Section 412(a) of the Internal Revenue Code of 1986, as amended) in excess
of $25,000 exists with respect to any ERISA Plan, or (ii) any Termination
Event occurs with respect to any ERISA Plan and the then current value of
such ERISA Plan's benefit liabilities exceeds the then current value of
such ERISA Plan's assets available for the payment of such benefit liabilities
by more than $25,000.
(j) The Company shall suffer the entry against it a final judgement for
the payment of money in excess of $25,000.
(k) Fidelity shall believe that the prospect for payment or performance
of the Obligations has become impaired.
(l) Any guarantor of the Obligations shall repudiate his, her or
its obligations in respect of such guaranty.
(m) American Consolidated Laboratories, Inc. shall cease to own at
least 100% of the outstanding capital stock of the Company.
(n) An Event of Default shall occur under the other Affiliate Agreement.
(o) American Consolidated Laboratories, Inc. shall breach any covenant
or agreement made in the Warrant or the Guaranty, and the same shall not be
cured to Fidelity's satisfaction within ten days after such covenant or
agreement is breached.
(p) An event of default shall have occurred under the Security Agreement.
Upon the occurrence of an Event of Default described in subsections (d) or
(c) of this section, all of the Obligations owing by the Company to Fidelity
under any of the Transaction Documents shall thereupon be immediately due
and payable, without demand, presentment, notice of demand or of dishonor
and nonpayment, or any other notice or declaration of any kind, all of which
are hereby expressly waived by the Company. During the continuation of any
other Event of Default, Fidelity, at any time and from time to time, may
declare any or all of the Obligations owing by the Company to Fidelity
under any of the Transaction Documents immediately due and payable, all
without notice, demand, presentment, notice of demand or of dishonor and
nonpayment, or any notice or declaration of any kind, all of which are
hereby expressly waived by the Company. After any such acceleration (whether
automatic or due to declaration by Fidelity), any obligation of Fidelity to
make any further Advances or loans of any kind under this Agreement or
any other agreement with the Company shall terminate.
The enumeration of Events of Default shall not impair the nature of the
Obligations as demand obligations, at all times payable upon demand pursuant
hereto. All Advances hereunder are subject to approval by Fidelity in its
sole discretion, and may be declined in whole or in part, without prior
notice to the Company, whether or not an Event of Default may then be in
existence.
Section 10. Remedies and Application of Proceeds.
10.1 In addition to, and without limitation of, the foregoing
provisions of this Agreement, if an Event of Default shall have occurred
and be continuing, Fidelity may from time to time in its discretion,
without limitation and without notice except as expressly herein: (a)
exercise in respect of the Collateral, in addition to other rights and
remedies of a secured party on default under the UCC (whether or not the
UCC applies to the affected Collateral); (b) require the Company to, and
the Company hereby agrees that it will at its expense, assemble all or
part of the Collateral as directed by Fidelity and make it available to
Fidelity at a place to be designated by Fidelity that is reasonably
convenient to both parties; (c) reduce its claim to judgment or foreclose
or otherwise enforce, in whole or in part, the security interest created
hereby by any available judicial procedure; (d) dispose of, at its office,
on the premises or the Company or elsewhere, all or any part of the
Collateral, as a unit or in parcels, by public or private proceedings; (e)
buy the Collateral, or any part thereof, at any public sale, or at
any private sale if the Collateral is of a type customarily sold in a
recognized market or is of a type that is the subject to widely
distributed standard price quotations; (f) apply by appropriate judicial
proceedings for appointment of a receiver for the Collateral, or any part
thereof, and the Company hereby consents to any such appointment; and (g)
at its discretion, retain the Collateral in satisfaction of the Obligations
whenever the circumstances are such that Fidelity is entitled to do so
under the UCC or otherwise. The Company agrees that, to the extent notice
of sale shall be required by law, at least five days' notice to the
Company of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification.
Fidelity shall not be obligated to make any sale of Collateral regardless
of whether any notice of sale has been given. Fidelity may adjourn any
public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
10
10.2 If any Event of Default shall have occurred and be continuing,
Fidelity may in its discretion apply any Cash Collateral, and any cash
proceeds received by Fidelity in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral, to any or all of
the following in such order as Fidelity may elect: (a) the repayment of
all or any portion of the Obligations or any "Obligations" owed to Fidelity
by the other Affiliate Company under the other Affiliate Agreement; (b) the
repayment of reasonable costs and expenses, including reasonable attorneys'
fees and legal expenses, incurred by Fidelity (whether or not litigation
has been commenced or a judgement has been issued, and if litigation has
been commenced, whether at trial or any appellate level) in connection with
(i) the administration of this Agreement, (ii) the custody, preservation,
use or operation of, or the sale of, collection from , or other realization
upon, any Collateral, (iii) the exercise or enforcement of any of the rights
of Fidelity hereunder, or (iv) the failure of the Company to perform or
observe any of the provisions hereof; (c) the payment or other satisfaction
of any liens and other encumbrances upon any of the Collateral; (d) the
reimbursement of Fidelity for the amount of any obligations of the Company
paid or discharged by Fidelity, and of any expenses of Fidelity payable by
the Company hereunder or under the other Transaction Documents; (e) by holding
the same as Collateral; (f) the payment of any other amounts required by
applicable law (including, without limitation, Part 5 of Article 9 of the
UCC or any successor or similar applicable statutory provision); and (g) by
delivery to the Company or to whomsoever shall be lawfully entitled to
receive the same or as a court of competent jurisdiction shall direct.
Section 11. Miscellaneous.
11.1 In the event that the Company commits any act or omission that
prevents or unreasonably interferes with (a) Fidelity's exercise of the
rights and privileges arising under the power of attorney granted in
Section 8 of this Agreement or (b) Fidelity's perfection of or levy upon the
security interest granted in the Collateral, including any seizure of any
Collateral, the Company acknowledges that such conduct will cause immediate,
severe, incalculable and irreparable harm and injury, and agrees that such
conduct shall constitute sufficient grounds to entitle Fidelity to an
injunction, writ of possession, or other applicable relief in equity, and
to make such application for such relief in any court of competent
jurisdiction, without any prior notice to the Company.
11.2 All rights, remedies and powers granted to Fidelity in this
Agreement, or in any other instrument or agreement given by the Company to
Fidelity or otherwise available to Fidelity in equity or at law, are
cumulative and may be exercised singularly or concurrently with such
other rights as Fidelity may have. These rights may be exercised from time
to time as to all or any part of the Collateral as Fidelity in its discretion
may determine. In the event that Fidelity elects to purchase the Eligible
Accounts hereunder, such transaction shall constitute a purchase of
Accounts under the UCC, and the Company shall be deemed to have sold,
assigned, transferred, conveyed and delivered to Fidelity, as absolute owner,
all of the rights, title and interest of the Company in and to all Eligible
Accounts. No waiver by Fidelity of its rights and remedies shall be
effective unless the waiver is in writing and signed by Fidelity.
A waiver by Fidelity of a right or remedy under this Agreement or any
other Transaction Document on one occasion shall not be deemed to be a
waiver of such right or remedy on any subsequent occasion. An Advance
by Fidelity during the continuation of an Event of Default shall not
obligate Fidelity to make any further Advances during the continuation
of such Event of Default.
11.3 Any notice or communication with respect to this Agreement or any
other Transaction Document shall be given in writing, sent by (i) personal
delivery, (ii) expedited delivery service with proof of delivery, (iii)
United States mail, postage prepaid, registered or certified mail, or (iv)
prepaid telegram, telex or telecopy, addressed to each party hereto at its
address set forth below its signature hereon or to such other address or to
the attention of such other Person as hereafter shall be designated in writing
by the applicable party sent in accordance herewith. Any such notice or
communication shall be deemed to have been given either at the time of
personal delivery or, in the case of delivery service or mail, as of the date
of first attempted delivery at the address and in the manner provided
herein, or in the case of telegram, telex or telecopy, upon receipt. The
Company hereby agrees that Fidelity may publicize the transaction contemplated
by this Agreement in newspapers, trade and similar publications including,
without limitation, the publication of a "tombstone".
11.4 The term of this Agreement shall be for three years from the date
hereof (the "Term") (the original term and any extension thereof are herein
called the "Term") and from year to year thereafter unless either party
hereto gives notice to the other party hereto not more than 90 days or less
than 60 days prior to the end of the Term; provided, however, that Fidelity
may terminate this Agreement at any time effective immediately upon the
occurrence of an Event of Default. The Affiliated Companies acknowledge that
they shall have no right to terminate this Agreement or the other Affiliate
Agreement prior to the end of the Term, that termination of this Agreement
or the other Affiliate Agreement at any time prior to the end of the Term
would result in the loss by Fidelity of benefits under this Agreement and
the other Affiliate Agreement and that the damages incurred by Fidelity as
a result of such termination would be difficult and impractical to ascertain.
Therefore, in the event this Agreement or the other Affiliate Agreement is
terminated for any reason during the first year of the Term, the
Affiliated Companies shall, pursuant to this Agreement and the other
Affiliate Agreement, pay to Fidelity an early termination fee in the
aggregate amount of three percent of the Commitment; if this Agreement or
the other Affiliate Agreement is terminated for any reason during the
second year of the Term, the Affiliated Companies shall, pursuant to this
Agreement and the other Affiliate Agreement, pay to Fidelity an early
termination fee in the amount of two percent of the Commitment; and if
this Agreement or the other Affiliate Agreement is terminated for any
reason thereafter during the Term, the Affiliated Companies shall, pursuant
to this Agreement and the other Affiliate Agreement, pay to Fidelity an
early termination fee in the amount of one percent of the Commitment,
in each case to the maximum extent permitted by applicable law. Any
termination of this
11
Agreement shall not affect Fidelity's security interest
in the Collateral, and this Agreement shall continue to be effective, until
all transactions entered into and obligations incurred hereunder have been
completed and satisfied in full.
11.5 Each and every provision, condition, covenant and representation
contained in this Agreement is, and shall be construed, to be a separate
and independent covenant and agreement. If any term or provision of this
Agreement shall to any extent be invalid or unenforceable, the remainder
of the Agreement shall not be affected thereby.
11.6 The Company hereby indemnifies and agrees to hold harmless and
defend all Indemnified Persons from and against any and all Indemnified
Claims. THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH
INDEMNIFIED CLAIMS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN
PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN
WHOLE OR PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY INDEMNIFIED PERSON.
Upon notification and demand, the Company agrees to provide defense of any
Indemnified Claim and to pay all costs and expenses of counsel selected by
any Indemnified Person in respect thereof. Any Indemnified Person against
whom any Indemnified Claim may be asserted reserves the right to settle or
compromise any such Indemnified Claim as such Indemnified Person may
determine in its sole discretion, and the obligations of such Indemnified
person, if any, pursuant to any such settlement or compromise shall be
deemed included within the Indemnified Claims. Except as specifically
provided in this section, the Company waives all notices from any
Indemnified Person. The provisions of this Section 11.6 shall survive the
termination of this Agreement.
11.7 All grants, covenants and agreements contained in this Agreement
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that the Company may not
delegate or assign any of its duties or obligations under this Agreement
without the prior written consent of Fidelity. FIDELITY RESERVES THE
RIGHT TO ASSIGN ITS RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT IN WHOLE OR
IN PART TO ANY PERSON OR ENTITY; PROVIDED, HOWEVER, THAT SO LONG AS THE
COMPANY IS NOT THE SUBJECT OF ANY BANKRUPTCY OR INSOLVENCY PROCEEDING OR
ANY RECEIVERSHIP, FIDELITY SHALL NOT ASSIGN ITS RIGHTS OR OBLIGATIONS HEREUNDER
TO ANY DIRECT COMPETITOR OF THE COMPANY. Without limiting the generality of
the foregoing, Fidelity may from time to time grant participations in all or
any part of the Obligations to any Person on such terms and conditions as
may be determined by Fidelity in its sole and absolute discretion, provided
that the grant of such participation shall not relieve Fidelity of its
obligations hereunder nor create any additional obligation of the Company.
11.8 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA WITHOUT REFERENCE
TO THE RULES THEREOF RELATING TO CONFLICTS OF LAW. THE COMPANY HEREBY
IRREVOCABLY SUBMITS ITSELF TO THE EXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS LOCATED IN NORTH CAROLINA, AND AGREES AND CONSENTS THAT
SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO
THIS AGREEMENT, ANY BORROWING HEREUNDER OR ANY OTHER RELATIONSHIP BETWEEN
FIDELITY AND THE COMPANY BY ANY MEANS ALLOWED UNDER STATE OR FEDERAL LAW.
ANY LEGAL PROCEEDING ARISING OUT OF OR IN ANY WAY RELATED TO THIS
AGREEMENT, ANY BORROWING HEREUNDER OR ANY OTHER RELATIONSHIP BETWEEN
FIDELITY AND THE COMPANY SHALL BE BROUGHT AND LITIGATED EXCLUSIVELY IN ANY
ONE OF THE STATE OR FEDERAL COURTS LOCATED IN THE STATE OF NORTH CAROLINA
HAVING JURISDICTION. THE PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO
ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, THAT ANY SUCH
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF
IS IMPROPER.
11.9 EACH OF THE COMPANY AND FIDELITY HEREBY (A) IRREVOCABLY WAIVES, TO
THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY OR ASSOCIATED HEREWITH; (B) IRREVOCABLY WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARILY, PUNITIVE OR
CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES; (C) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT
OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVERS, AND (D) ACKNOWLEDGES THAT IT HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT, AND THE TRANSACTIONS CONTEMPLATED
HEREBY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
CONTAINED IN THIS PARAGRAPH.
11.10 THIS AGREEMENT, THE SECURITY DOCUMENTS DESCRIBED HEREIN AND
THE ACKNOWLEDGMENT DELIVERED IN CONNECTION HEREWITH SET FORTH THE ENTIRE
UNDERSTANDING AND AGREEMENT OF THE PARTIES HERETO WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED HEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
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