CREDIT AND SECURITY AGREEMENT
PREAMBLE. This Credit and Security Agreement (herein, together with all
schedules and exhibits hereto, and as it may be amended or modified from time to
time, called this "Agreement"), dated as of December 23, 2003 (the "Signing
Date"), is made among OMNI ENERGY SERVICES CORP., a Louisiana corporation
("Parent Company"); AMERICAN HELICOPTERS INC., a Texas corporation ("AMI"); and
OMNI ENERGY SERVICES CORP.-MEXICO, a Louisiana corporation ("Mexico"; Mexico,
AHI and Parent Company herein sometimes called individually, "Initial Borrower"
and, collectively, if more than the "Initial Borrowers"), and together with each
other Person which, on or subsequent to the Closing Date, agrees in writing to
become a "Borrower" hereunder, herein called, individually, a "Borrower" and,
collectively, the "Borrowers," and pending the inclusion by written agreement of
any other such Person, besides each Initial Borrower, as a "Borrower" hereunder,
all references herein to "Borrowers," "each Borrower," the "applicable
Borrower," "such Borrower" or any similar variations thereof (whether singular
or plural) shall all mean and refer to the Initial Borrowers or each one of them
collectively); and WHITEHALL BUSINESS CREDIT CORPORATION, a corporation
organized under the laws of the State of New York ("WBCC"), individually, as
lender hereunder and as agent for itself and each other Lender Party (as
hereinafter defined) (WBCC, acting in both such capacities, herein called
"Lender").
STATEMENT OF THE TRANSACTION. Capitalized terms used in this statement of
the transaction shall have the meanings ascribed to such terms in Annex One. The
Initial Borrowers have applied to WBCC for financing to retire the Existing
Loans, to pay closing costs associated herewith, and to supplement its working
capital needs on an ongoing basis. WBCC, as Lender hereunder, has agreed to
provide this financing, subject, however, to the terms, covenants and conditions
hereinafter set forth.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and undertakings
herein contained, each Initial Borrower and Lender, each intending to be legally
bound hereby, hereby covenant and agree as follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, any Note, or any
certificate, report or Other Document, accounting terms not defined in Annex One
or elsewhere in this Agreement and accounting terms partly defined in Annex One
(to the extent not defined) shall have the respective meanings given to them
under GAAP; provided, however, whenever such accounting terms are used for the
purposes of determining compliance with financial covenants in this Agreement,
such accounting terms shall be defined in accordance with GAAP as applied in
preparation of the Historical Financial Statements. Certain other definitions,
used in the calculation of the Financial Covenants, are set forth in Section
8.1.
1.2. General Terms. Certain other terms which are capitalized
hereinbelow, but not expressly defined hereinbelow, shall have the meanings
given to such terms in Annex One.
1.3. Uniform Commercial Code Terms. All terms used herein and defined in
the Uniform Commercial Code shall have the meaning given therein unless
otherwise defined herein. Without limitation of the foregoing, the terms
"accounts," "chattel paper," "instruments," "general intangibles," "payment
intangibles," "securities," "investment property," "documents," "supporting
obligations," "deposit accounts," "payment intangibles," "software," "letter of
credit rights," "inventory," "equipment" and "fixtures," as and when used in the
description of Collateral, shall have the meanings given to such terms in
Articles 8 or 9 of the Uniform Commercial Code.
II. ADVANCES, PAYMENTS.
2.1. Revolving Advances and Term Loan.
(a) Subject to the terms and conditions set forth in this
Agreement, Lender will make Revolving Advances and, subject to Section 2.9,
Letters of Credit available to Borrowers in aggregate amounts outstanding at any
time equal to the lesser of (i) the Maximum Revolving Amount, or (ii) the
Borrowing Base. The Revolving Advances shall be evidenced by a secured
promissory note issued to Lender in a principal amount equal to the Maximum
Revolving Amount (the "Revolving Credit Note"), substantially in the form
attached hereto as Exhibit 2.1 (a).
(b) Subject to the terms and conditions of this Agreement, Lender
will make available to Borrowers the Term Loan. The Term Loan shall be advanced
on the Closing Date and shall be, with respect to principal, payable in monthly
installments, each equal in amount to Fifty Thousand Dollars ($50,000), due and
payable beginning on the first day of the first calendar month following the
Closing Date, and continuing on the same day of each succeeding calendar month,
with the entire remaining principal balance thereof being due and payable, in
full, in a balloon payment upon expiration of the Term; subject, however, to
acceleration upon (or following) the occurrence of an Event of Default under
this Agreement or earlier termination of this Agreement, as provided
hereinbelow. The Term Loan shall be evidenced by a secured promissory note
issued to Lender equal in principal amount to the Term Loan (the "Term Loan
Note") in substantially the form attached hereto as Exhibit 2.1(b). The Term
Loan shall be subject to mandatory prepayment as provided in Section 2.13. The
Term Loan may be voluntarily prepaid, in whole or in part, at any time or from
time to time, without premium or penalty; provided, however, that: (i) Lender
receives at least five (5) Business Days advance written notice of any intended
prepayment; (ii) any partial prepayments shall be made (A) only on a date
prescribed above for the payment of principal installments of the Term Loans,
and (B) only in an amount equal to the principal installment amount for the Term
Loan prescribed hereinabove (or integral multiples thereof); (iii) any partial
prepayments shall be applied to the principal installments of the Term Loan then
remaining to be repaid in the reverse order of their respective maturities; and
(iv) any full prepayments of the principal balance of the Term Loan shall be
accompanied by the payment of accrued interest thereon through the date of
prepayment.
2.2. Procedure for Borrowing. Borrowing Representative, on behalf of any
Borrowers, may notify Lender prior to 11:00 a.m. on a Business Day of a
Borrower's request to incur, on that day, a Revolving Advance hereunder. Should
any amount required to be paid as interest
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hereunder, or as fees or other charges under this Agreement or any other
agreement with any Lender Party, or with respect to any other Obligation, become
due, the same shall be deemed a request for a Revolving Advance as of the date
such payment is due, in the amount required to pay in full such interest, fee,
charge or Obligation under this Agreement or any other agreement with any Lender
Party and such request shall be irrevocable. Lender shall cause the proceeds of
such Revolving Advance to be paid to such Person. If requested by Lender, each
notice of borrowing shall be made (or confirmed after telephonic notice) in
writing in such form as may be required or approved by Lender from time to time.
2.3. Disbursement of Advance Proceeds. All Advances shall be disbursed
from whichever office or other place Lender may designate from time to time and,
together with any and all other Obligations of Borrowers to Lender, shall be
charged to Borrowers' Account on Lender's books. During the Term, Borrowers may
use the Revolving Advances by borrowing, prepaying and reborrowing, all in
accordance with the terms and conditions hereof. The proceeds of each Revolving
Advance requested by Borrowers or deemed to have been requested by Borrowers
under Section 2.2 hereof shall, with respect to requested Revolving Advances to
the extent Lender makes such Revolving Advances, be made available to the
applicable Borrower on the day so requested by way of credit to such Borrower's
operating account at the Bank or such other bank as Borrowing Representative may
designate following notification to Lender, in immediately available federal
funds or other immediately available funds or, with respect to Revolving
Advances deemed to have been requested by any Borrower, be disbursed to Lender
to be applied to the outstanding Obligations giving rise to such deemed request.
2.4. Maximum Revolving Advances. The aggregate balance of Revolving
Advances and Letters of Credit outstanding at any time shall not exceed the
lesser of (a) the Maximum Revolving Amount or (b) the Borrowing Base, in any
event.
2.5. Repayment of Advances.
(a) All Advances shall be due and payable in full on the last day
of the Term, subject to earlier prepayment, in whole or in part, as provided in
this Agreement or in any Other Document.
(b) All payments of principal, interest fees and other amounts
payable hereunder, or under any of the Other Documents shall be made to Lender
at the Payment Office not later than 2:00 P.M. on the due date therefor in
lawful money of the United States of America in federal funds or other funds
immediately available to Lender. Lender shall have the right to effectuate
payment on any and all Obligations due and owing hereunder by charging
Borrowers' Account or by making Revolving Advances as provided in Section 2.2
hereof.
(c) Borrowers shall be obliged to pay principal, interest, fees and
all other amounts payable hereunder, or under any Other Documents as and when
due, without any deduction whatsoever, including, but not limited to, any
deduction for any setoff or counterclaim.
2.6. Repayment of Overadvances. The aggregate balance of Advances (other
than the Term Loan) outstanding at any time in excess of the maximum amount of
Advances (other than
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the Term Loan) permitted to be hereunder, i.e. any "overadvances," shall be
immediately due and payable without the necessity of any demand, at the Payment
Office, whether or not a Default or Event of Default has occurred.
2.7. Statement of Account. Lender shall maintain, in accordance with its
customary procedures, a loan account ("Borrowers' Account") in the name of
Borrowers in which shall be recorded the date and amount of each Advance made by
Lender and the date and amount of each payment in respect thereof; provided,
however, the failure by Lender to record the date and amount of any Advance
shall not adversely affect Lender. Each month, Lender shall send to Borrowing
Representative a statement showing the accounting for the Advances made,
payments made or credited in respect thereof, and other transactions between
Lender and Borrowers, during such month. The monthly statements shall be deemed
correct and binding upon Borrowers in the absence of mathematical error and
shall constitute an account stated between Lender and Borrowers unless Lender
receives a written statement of Borrowers' specific exceptions thereto within
thirty (30) days after such statement is received by Borrowing Representative.
The records of Lender with respect to the Borrowers' Account shall be conclusive
evidence absent mathematical error of the amounts of Advances and other charges
thereto and of payments applicable thereto.
2.8. Letters of Credit. Subject to the terms and conditions hereof, Lender
may, in its sole discretion (without any obligation to do so) issue or cause the
issuance of letters of credit ("Letters of Credit") by the Issuer on behalf of
any Borrower; provided, however, that Lender will not, in any event, issue or
cause to be issued any Letters of Credit (i) unless Borrowers have executed in
favor of the Issuer: (A) its master letter of credit agreement (the "Master
Letter of Credit Agreement"), in substantially the form of Exhibit 2.8A; and (B)
its automatic letter of credit agreement (the "Automatic Letter of Credit
Agreement"), in substantially the form of Exhibit 2.8B (the Master Letter of
Credit Agreement and the Automatic Letter of Credit Agreement, together with the
Letter of Credit Documents defined below, are herein called, collectively, the
"Letter of Credit Documents"), (ii) unless Borrowers have complied with Sections
2.9 and 2.10 in regard to such issuance, and (iii) to the extent that the face
amount of such Letters of Credit would then cause either (A) outstanding Letters
of Credit to exceed any individual or aggregate dollar limit thereon established
by Lender from time to time, or (B) the sum of (1) the outstanding Revolving
Advances plus (2) all outstanding Letters of Credit to exceed the lesser of the
Maximum Revolving Amount or the Borrowing Base.
2.9. Issuance of Letters of Credit.
(a) Borrowing Representative, on behalf of Borrowers, may request
Lender to issue or cause the issuance of a Letter of Credit by delivering to
Lender at the Payment Office, Issuer's standard form of letter of credit
application (a "Letter of Credit Application") and any draft if applicable,
completed to the satisfaction of Lender, together with such other certificates,
documents and other papers and information as Lender or Issuer may reasonably
request. Borrowing Representative, on behalf of Borrowers, also has the right to
give instructions and make agreements with respect to any application, any
applicable letter of credit and security agreement, any applicable letter of
credit reimbursement agreement and/or any other applicable agreement, any Letter
of Credit and the disposition of documents, disposition of any unutilized
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funds, and to arrange for the issuance of any amendment, extension or renewal of
any Letter of Credit.
(b) Each Letter of Credit shall, among other things, (i) provide
for the payment of sight drafts or acceptances of issuance drafts when presented
for honor thereunder in accordance with the terms thereof and when accompanied
by the documents described therein and (ii) have an expiry date not later than
one (1) year after such Letter of Credit's date of issuance, in the case of
"standby" Letters of Credit, and six (6) months after such Letter of Credit's
date of issuance, in the case of "trade" Letters of Credit, and in no event
later than thirty (30) days prior to the last day of the Term. Each Letter of
Credit shall be subject to the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
and any amendments or revisions thereof adhered to by the Issuer and, to the
extent not inconsistent therewith, the laws of the State of New York.
(c) Lender and each Issuer shall each have absolute discretion
whether to accept any draft drawn on a Letter of Credit. Without in any way
limiting Lender's or any Issuer's absolute discretion whether to accept any
draft, Borrowing Representative will not present for acceptance any draft, and
Lender and each Issuer will generally not accept any drafts (i) that arise out
of transactions involving the sale of goods by any Borrower not in the ordinary
course of its business, (ii) that involve a sale to an Affiliate of any
Borrower, (iii) that involve any purchase for which Lender, or any Issuer, as
appropriate, has not received all related documents, instruments and forms
requested by Lender or such Issuer, (iv) for which Lender or any Issuer, as
appropriate, is unable to locate a purchaser in the ordinary course of business
on standard terms, or (v) that is not eligible for discounting with Federal
Reserve Banks pursuant to paragraph 7 of Section 13 of the Federal Reserve Act,
as amended.
(d) Subject to the terms and conditions hereof, Lender shall issue
or cause the issuance of air releases and steamship guarantees on behalf of
Borrower. Borrowing Representative may request Lender to issue or cause the
issuance of air releases and steamship guarantees by delivering to Lender at the
Payment Office such certificates, documents and other papers and information as
Lender may request. In addition, for purposes hereof, the definition of "Letters
of Credit" shall include all air releases and steamship guarantees issued or
caused to be issued by Lender.
2.10. Requirements For Issuance of Letters of Credit.
(a) In connection with the issuance of any Letter of Credit,
Borrowers shall indemnify, save and hold Lender and each Issuer harmless from
any loss, cost, expense or liability, including, without limitation, payments
made by Lender or any Issuer and expenses and reasonable attorneys' fees
incurred by Lender or any Issuer arising out of, or in connection with, any
Letter of Credit to be issued for any Borrower. Borrowers shall be bound by
Lender's and Issuer's regulations and good faith interpretations of any Letter
of Credit issued or created for Borrowers' Account, although this interpretation
may be different from Borrowers' own; and, neither Lender nor any Issuer nor any
of their respective correspondents shall be liable for any error, negligence, or
mistakes, whether of omission or commission, in following any Borrower's
instructions or those contained in any Letter of Credit or of any modifications,
amendments or
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supplements thereto or in issuing or paying any Letter of Credit, except for
Lender's, any Issuer's or such correspondents' willful misconduct or gross
negligence.
(b) Borrowing Representative shall authorize and direct any Issuer
of a Letter of Credit to name the applicable Borrower as the "applicant" or
"account party" therein, to deliver to Lender all related payment/acceptance
advices, to deliver to Lender all instruments, documents, and other writings and
property received by the Issuer pursuant to the Letter of Credit and to accept
and rely upon Lender's instructions and agreements with respect to all matters
arising in connection with the Letter of Credit or the application therefor.
(c) In connection with all Letters of Credit issued or caused to be
issued by Lender under this Agreement, each Borrower hereby appoints Lender, or
its designee, as its attorney, with full power and authority if an Event of
Default or Default shall have occurred, (i) to sign and/or endorse such
Borrower's name upon any warehouse or other receipts, letter of credit
applications and acceptances; (ii) to sign such Borrower's name on bills of
lading; (iii) to clear Inventory through the United States of America Customs
Department ("Customs") in the name of such Borrower or Lender or Lender's
designee, and to sign and deliver to Customs officials powers of attorney in the
name of such Borrower for such purpose; and (iv) to complete in such Borrower's
name or Lender's, or in the name of Lender's designee, any order, sale or
transaction, obtain the necessary documents in connection therewith, and collect
the proceeds thereof. Neither Lender nor its attorneys will be liable for any
acts or omissions nor for any error of judgment or mistakes of fact or law,
except for Lender's or its attorney's willful misconduct or gross negligence.
This power, being coupled with an interest, is irrevocable as long as any
Letters of Credit remain outstanding.
(d) Each Borrower shall be irrevocably and unconditionally
obligated forthwith without presentment, demand, protest or other formalities of
any kind, to reimburse Lender for any amounts paid by Lender with respect to any
Letter of Credit issued for the account of such Borrower, including all fees,
costs and expenses paid by Lender to any Issuer or correspondence bank that
issues or negotiates Letters of Credit. In connection with the foregoing,
Borrowers authorize and direct Lender to make a Revolving Advance in the amount
of any such reimbursement obligation when it becomes due and to pay or reimburse
itself (or the Issuer or correspondent bank as appropriate) with the proceeds
thereof; but, if at the time such payment becomes due the unpaid balance of
Revolving Advances exceeds or would exceed with the making of such disbursement
the maximum amount permitted under Section 2.1 hereof, then, no such Revolving
Advance shall be made and Borrowers shall be obligated to make such payment in
full or be in default of the payment thereof.
(e) On demand, during any time that an Event of Default exists, and
so long as such Event of Default shall be continuing (after which Lender shall
return any unapplied portion thereof to Borrowers) Borrowers will cause cash to
be deposited and maintained in an account with Lender, as cash Collateral, in an
amount equal to one hundred ten percent (110%) of the undrawn face amount of any
outstanding Letters of Credit, and each Borrower hereby irrevocably authorizes
Lender, in its discretion, on such Borrower's behalf and in such Borrower's
name, to open such an account and to make and maintain deposits therein, or in
an account opened by such Borrower, in the amounts required to be made by such
Borrower, out of the proceeds of Receivables or other Collateral or out of any
other funds of such Borrower
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coming into Lender's possession at any time. Lender will invest such cash
Collateral (less applicable reserves) in such short-term money-market items as
to which Lender and such Borrower mutually agree and the net return on such
investments shall be credited to such account and constitute additional cash
Collateral. No Borrower may withdraw amounts credited to any such account except
upon payment and performance in full of all Obligations and termination of this
Agreement.
2.11. Additional Payments. Any sums expended by Lender, in its Credit
Judgment, due to any Borrower's failure to perform or comply with its
obligations under this Agreement or any Other Document, may be charged to
Borrowers' Account as a Revolving Advance and added to the Obligations.
2.12. Manner of Payment. Except as otherwise may be expressly provided
herein, all payments (including prepayments) to be made by Borrower on account
of principal, interest and fees shall be made to Lender at the Payment Office,
in each case on or prior to 2:00 P.M., in Dollars and in immediately available
funds.
2.13. Mandatory Prepayments.
(a) When any Borrower sells or otherwise disposes of any Collateral
other than (i) Inventory in the ordinary course of business and (ii) sales or
other dispositions of Equipment having an individual fair market value not in
excess of Ten Thousand Dollars ($10,000) and an aggregate fair market value not
to exceed One Hundred Thousand Dollars ($100,000) in any one Fiscal Year (the
foregoing called herein "De Minimis Sales"), Borrowers shall repay the Advances
in an amount equal to the net proceeds of such sale, i.e., gross proceeds less
the reasonable costs of such sales or other dispositions, such repayments to be
made promptly but in no event more than three (3) Business Days following
receipt of such net proceeds, and until the date of payment, such proceeds shall
be held in trust for Lender. The foregoing shall not be deemed to be implied
consent to any such sale otherwise prohibited by the terms and conditions
hereof. Such repayments shall be applied, if derived from other than the sale of
Inventory or Receivables, first to the Term Loan, in the reverse order of the
respective installment maturities thereof (beginning with the last payment)
until the Term Loan is paid in full, but otherwise all such proceeds shall be
applied to Revolving Advances in such order as Lender may determine, without
reduction, however, in Borrowers' ability to reborrow Revolving Advances in
accordance with the terms hereof. Notwithstanding the foregoing, unless and
until a Default or Event of Default has occurred and is continuing, Borrower may
sell or otherwise dispose of Collateral (in addition to Inventory in the
ordinary course of business and De Minimis Sales) not to exceed, in aggregate
fair market value, the Materiality Threshold in the aggregate, in any Fiscal
Year and retain such net proceeds solely to acquire replacement Collateral
without making a mandatory prepayment hereunder so long as (A) the fair market
value of the acquired Collateral is equal to or greater than the fair market
value of the Collateral which was sold, (B) the acquired Collateral is purchased
by such Borrower within ninety (90) days before or after the date of the sale of
the Collateral, (C) the proceeds of such sale are remitted to Lender to be held
by Lender as security for the payment of the Obligations until the replacement
Collateral is acquired, (D) the acquired Collateral shall be deemed to be
acceptable Collateral by Lender in its sole discretion and (E) the acquired
Collateral shall be subject to Lender's first priority security interest created
hereunder, subject only to Permitted Encumbrances. If any Borrower fails to
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meet any of the conditions set forth above, such Borrower hereby authorizes
Lender to apply the proceeds held by Lender as a prepayment of the Advances in
the manner set forth above.
(b) Borrowers shall prepay the outstanding amount of the Term Loan
in an amount equal to fifty percent (50%) of Excess Cash Flow )(as hereinafter
defined) as follows: (i) for Borrowers' Fiscal Year ending December 31, 2003, no
prepayment shall be required; (ii) for Borrowers' Fiscal Year ending December
31, 2004, an annual prepayment shall be required, payable upon delivery of the
financial statements to Lender referred to in and required by Section 10.7 for
such Fiscal Year but in any event not later than ninety (90) days after the end
of each such Fiscal Year, based on Borrowers' Excess Cash Flow for such Fiscal
Year; and (iii) beginning with the Fiscal Year of Borrowers ending December 31,
2005, and continuing thereafter, a semi-annual prepayment shall be required,
payable (A) upon delivery of the financial statements to Lender referred to and
required by Section 10.8 for the Fiscal Quarter ending June 30, of each such
Fiscal Year, but in any event not later than forty-five (45) days after each
June 30, based on Borrowers' Excess Cash Flow for the six (6) Fiscal Months then
ended, and (B) upon delivery of the financial statements to Lender referred to
and required by Section 10.7 for the Fiscal Year then ended, but in any event
not later than ninety (90) days after the end of such Fiscal Year, based on
Borrowers' Excess Cash Flow for such Fiscal Year, provided that the amount of
any prepayment theretofore made based on Excess Cash Flow for the six (6) Fiscal
Months previously ended shall be deducted from the amount of such prepayment
based on Borrowers' Excess Cash Flow for the entire Fiscal Year. Such delivery
of payment is to be accompanied by the Excess Cash Flow Certificate attached
hereto as Exhibit 2.13(b). This prepayment shall be made without premium or
penalty. This payment of Excess Cash Flow shall be applied to the outstanding
principal installments of the Term Loan in the reverse order of the respective
installment maturities thereof (beginning with the last payment). In the event
that the aforesaid financial statement is not so delivered, then a calculation
based upon estimated amounts shall be made by Lender upon which calculation
Borrowers shall make the prepayment required by this Section, subject to
adjustment when the financial statement is delivered to Lender as required
hereby. The calculation made by Lender shall not be deemed a waiver of any
rights Lender has or may have as a result of the failure by Borrowers to deliver
such financial statement. "Excess Cash Flow," as used herein, shall mean an
amount equal to: (i) EBITDA, as defined in Article VIII, minus the sum of (a)
Unfinanced Capital Expenditures, as defined in Article VIII, and Fixed Charges,
as defined in Article VIII; in each case, for each covered Fiscal Year (or
portion thereof, as appropriate), of Borrowers.
2.14. Use of Proceeds. Borrowers shall apply the proceeds of (i) any
Revolving Advances and the Term Loan made on the Closing Date to retire the
Existing Loans and to pay closing costs and expenses associated with this
transaction and (ii) Revolving Advances made on and after the Closing Date to
provide for their respective working capital needs.
III. INTEREST AND FEES.
3.1. Interest. Interest on Advances shall be payable to Lender in arrears
on the first day of each month, commencing on the first day of the calendar
month immediately following the Closing Date. Interest charges shall be computed
on the actual principal amount of Advances outstanding during the month (the
"Monthly Advances") at a rate per annum equal to (i) the
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Revolving Interest Rate, in respect of Revolving Advances, and (ii) the Term
Loan Rate, in respect of the Term Loan (the Revolving Interest Rate and the Term
Loan Rate are herein sometimes called, individually or collectively, as the case
may be, the "Contract Rate"). Whenever, subsequent to the date of this
Agreement, the Base Rate is increased or decreased, the applicable Contract Rate
shall be similarly changed without notice or demand of any kind by an amount
equal to the amount of such change in the Base Rate during the time such change
or changes remain in effect. Upon and after the occurrence of an Event of
Default, and during the continuation thereof, the Obligations shall bear
interest at the otherwise applicable Contract Rate plus an additional two (2%)
percent per annum (as applicable, the "Default Rate").
3.2. Letter of Credit Fees. Borrowers shall pay (a) to Lender for its own
account such fees for each Letter of Credit (if any) issued pursuant hereto for
the period from and excluding the date of issuance of same to and including the
date of expiration or termination, at such rates at a rate per annum equal to
the Revolving Interest Rate increasing, in each instance, to the Default Rate
applicable to Revolving Advances from and after the occurrence of, and during
the continuation of, any Event of Default) and (b) to Lender for the benefit of
the Issuer any and all fees and expenses as agreed upon by the Issuer and the
Borrowing Representative in connection with any Letter of Credit, including,
without limitation, in connection with the opening, amendment or renewal of any
such Letter of Credit and any acceptances created thereunder and shall reimburse
Lender for any and all fees and expenses, if any, paid by Lender to the Issuer
(all of the foregoing fees, the "Letter of Credit Fees"). Such fees shall be
calculated on the basis of a 360-day year for the actual number of days elapsed
and be payable quarterly in arrears on the first day of each calendar quarter,
beginning with the first such date following the issuance of each Letter of
Credit and on the last day of the Term. All such charges shall be deemed earned
in full on the date when the same are due and payable hereunder and shall not be
subject to rebate or proration upon the termination of this Agreement for any
reason. Any such charge in effect at the time of a particular transaction shall
be the charge for that transaction, notwithstanding any subsequent change in the
Issuer's prevailing charges for that type of transaction. All Letter of Credit
Fees payable hereunder shall be deemed earned in full on the date when the same
are due and payable hereunder and shall not be subject to rebate or proration
upon the termination of this Agreement for any reason.
3.3. Closing Fee. On the Closing Date, Borrower shall pay to Lender a
fully earned, nonrefundable closing fee equal in amount to One Hundred Ten
Thousand Dollars ($110,000)), representing one percent (1%) of the Commitments;
less any portion thereof theretofore remitted to Lender in partial payment
thereof as a commitment fee, if so provided prior to or upon its payment in any
applicable Commitment Letter.
3.4. Facility Fee. Annually, on each anniversary of the Closing Date (or
the date of termination of this Agreement, should such date precede any such
anniversary date), Borrowers shall pay to Lender a fully earned, nonrefundable
facility fee equal in amount to the difference, if positive, between (i)
interest at the Revolving Interest Rate on Revolving Advances of Two Million
Five Hundred Thousand Dollars ($2,500,000) assumed to be outstanding (on a mean
daily average basis) during the one-year anniversary period (or, as appropriate,
upon any early termination, any shorter period) and (ii) the amount of interest
at the Revolving Interest Rate on Revolving Advances actually outstanding and
paid by Borrowers during the same said period.
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3.5. Unused Line. If, for any calendar month (or portion thereof) during
the Term, the average daily unpaid balance of Revolving Advances and Letters of
Credit outstanding for each day of such monthly period does not equal the
Maximum Revolving Amount as in effect on the first day of such monthly period,
then Borrowers shall pay to Lender a fully earned, nonrefundable fee equal to
one-fourth of one percent (1/4%) per annum on the amount by which the Maximum
Revolving Amount exceeds such average daily unpaid balance for such monthly
period. Such fee shall be due and payable monthly in arrears, commencing on the
first day of the first calendar month following the Closing Date, and continuing
thereafter on the first day of each succeeding calendar month through the end of
the Term. The initial fee shall be determined based on the period from the
Closing Date to the end of the calendar month containing the Closing Date.
3.6. Collateral Monitoring Fee. Monthly, commencing on the first day of
the first calendar month following the Closing Date, and continuing on the same
day of each succeeding calendar month until this Agreement is terminated,
Borrowers shall pay to Lender a fully earned, nonrefundable collateral
monitoring fee equal in amount to One Thousand Five Hundred Dollars ($1,500) per
month.
3.7. Audit Fees. Borrower shall pay to Lender audit fees in connection
with each field audit conducted by Lender equal in amount to (i) Lender's
customary per diem charges therefor (which as of the Closing Date, equal Seven
Hundred Fifty Dollars ($750) per diem per auditor, subject to change from time
to time thereafter) plus (ii) usual and customary out-of-pocket expenses for
internal auditors, and the usual and customary fees and charges (including
out-of-pocket expenses) of external auditors; provided, however, that,
notwithstanding the foregoing, absent an Event of Default then existing, audit
fees charged to Borrower pursuant to clause (i) above for any one (1) field
audit shall not exceed Seven Thousand Five Hundred Dollars ($7,500).
3.8. Computation of Interest and Fees; Collection Days. Interest and per
annum fees hereunder shall be computed on the basis of a year of 360 days and
for the actual number of days elapsed. If any payment to be made hereunder
becomes due and payable on a day other than a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and interest thereon shall
be payable at the applicable Contract Rate during such extension, provided,
however, that the foregoing extension shall not be considered when determining
Borrowers' ongoing compliance with any Financial Covenants that concern or
include scheduled principal payments within specified dates. For purposes of
computing interest and any fees based on the amount of Revolving Advances
outstanding from time to time, one (1) additional collection day shall be
charged, effective from the Application Date.
3.9. Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law. In the
event interest and other charges as computed hereunder would otherwise exceed
the highest rate permitted under law, such excess amount shall be first applied
to any unpaid principal balance owed by Borrowers, and if the then remaining
excess amount is greater than the previously unpaid principal balance, Lender
shall promptly refund such excess amount to Borrowers and the provisions hereof
shall be deemed amended to provide for such permissible rate.
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3.10. Increased Costs. In the event that any applicable law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of this Section
3.10, the term "Lender" shall include Lender and any corporation or bank
controlling Lender) with any request or directive (whether or not having the
force of law) from any central bank or other financial, monetary or other
authority, shall:
(a) subject Lender to any tax of any kind whatsoever (except for
tax on the overall net income of Lender by the jurisdiction in which it
maintains its principal office) with respect to this Agreement or any Other
Document or change the basis of taxation of payments to Lender of principal,
fees, interest or any other amount payable hereunder or under any Other
Documents (except for changes in the rate of tax on the overall net income of
Lender by the jurisdiction in which it maintains its principal office); or
(b) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or deposits
in or for the account of, advances or loans by, or other credit extended by, any
office of Lender, including (without limitation) pursuant to Regulation D of the
Board of Governors of the Federal Reserve System.
Borrowers shall promptly pay Lender, upon its demand, such additional amount as
will compensate Lender for such additional cost or such reduction, as the case
may be, Lender shall certify the amount of such additional cost or reduced
amount to Borrowers, and such certification shall be conclusive absent
mathematical error.
3.11. Capital Adequacy. In the event that Lender shall have determined
that any applicable law, rule, regulation or guideline regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by Lender (for purposes of this Section, the term "Lender" shall include Lender
and each other Lender Party) with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on Lender's capital as a consequence of its obligations hereunder to a
level below that which Lender could have achieved but for such adoption, change
or compliance (taking into consideration Lender's policies with respect to
capital adequacy) by an amount deemed by Lender to be material, then, from time
to time, Borrowers shall pay upon demand to Lender such additional amount or
amounts as will compensate Lender for such reduction. In determining such amount
or amounts, Lender may use any reasonable averaging or attribution methods. The
protection of this Section shall be available to Lender regardless of any
possible contention of invalidity or inapplicability with respect to the
applicable law, regulation or condition. A certificate of Lender setting forth
such amount or amounts as shall be necessary to compensate Lender with respect
to this Section when delivered to Borrowing Representative shall be conclusive
absent mathematical error.
IV. COLLATERAL; GENERAL TERMS.
4.1. Security Interest in the Collateral. To secure the prompt payment and
performance to each Lender Party of all Obligations, each Borrower hereby
assigns, pledges and
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grants to Lender, as agent for the ratable benefit of each Lender Party, a
continuing security interest in and to all of its Collateral, whether now owned
or existing or hereafter acquired or arising and wheresoever located. Each
Borrower shall ▇▇▇▇ its books and records as may be necessary or appropriate to
evidence, protect and perfect Lender's security interest in the Collateral and
shall cause its financial statements to reflect such security interest.
4.2. Perfection of Security Interest. Borrowers shall take all action that
may be necessary or desirable, or that Lender may request, so as at all times to
maintain the validity, perfection, enforceability and priority of Lender's
security interest in the Collateral or to enable Lender to protect, exercise or
enforce its rights hereunder and in the Collateral, including, but not limited
to, (i) immediately discharging all Liens other than Permitted Encumbrances,
(ii) obtaining landlords', warehouse operators', bailees' or mortgagees' lien
waivers and related agreements, (iii) delivering to Lender, endorsed or
accompanied by such instruments of assignment as Lender may specify, and
stamping or marking, in such manner as Lender may specify, any and all chattel
paper, instruments, letters of credit and advices thereof and documents
evidencing or forming a part of the Collateral, (iv) entering into warehousing,
lockbox and other custodial arrangements satisfactory to Lender, (v) executing
(as appropriate) and delivering authorizations for the recording of financing
statements, instruments of pledge, mortgages, notices and assignments, in each
case in form and substance satisfactory to Lender, relating to the creation,
validity, perfection, maintenance or continuation of Lender's security interest
under the Uniform Commercial Code or other applicable law; (vi) obtaining
acknowledgments, in form and substance satisfactory to Lender, from any bailee
having possession of any Collateral at any time, stating that the bailee holds
such Collateral on behalf of Lender, (vii) obtaining "control" of any investment
property, deposit account, letter-of-credit right or electronic chattel paper
(the term "control" as used in respect of the foregoing types of Collateral
having the meaning set forth in Articles 8 and 9 of the UCC), with any
agreements establishing such "control" to be in form and substance satisfactory
to Lender, and (viii) if a Borrower at any time has or acquires a commercial
tort claim, such Borrower shall promptly notify Lender thereof, in writing, and
grant a specific collateral assignment of such claim to Lender as additional
Collateral. Without limiting the generality of the foregoing, in the specific
case of in-transit Inventory, unless and except to the extent otherwise required
or approved by Lender from time to time, each Borrower shall (i) deliver (or
cause to be delivered) to Lender copies of all invoices, manifests and documents
of title pertaining to such Inventory promptly upon such Borrower's receipt
thereof, but in any event not later than five (5) Business Days after receipt,
(ii) cause all such documents of title to be issued in the Lender's name, or to
its order (or, if negotiable in form, Borrower may, instead, cause such
documents of title to be endorsed to Lender, or in "blank"); (iii) provide
Lender with evidence of appropriate marine or like insurance in respect of the
transit of such Inventory to Borrower, and (iv) as necessary, provide Lender
with access custodianship and similar agreements of Lender's selection from
warehouse operators, consolidators, customs house operators, custom brokers and
other third parties to facilitate Lender's control over, access to and/or
repossession of, such in-transit Inventory, including, without limitation, as
and where requested by Lender, a customs agent agreement. Lender is hereby
authorized to file financing statements in accordance with the applicable
provisions of the UCC, at any time or from time to time hereafter, in any
jurisdiction; and Borrowers hereby ratify, approve and affirm the filing of any
such financing statements heretofore filed by Lender in respect of any Borrower
(including any predecessor-in-interest thereof). All charges, expenses and fees
Lender may incur in doing any of the foregoing, and
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any local taxes relating thereto, shall be charged to Borrowers' Account as a
Revolving Advance and added to the Obligations, or, at Lender's option, shall be
paid to the Lender immediately upon demand.
4.3. Disposition of Collateral. Each Borrower will safeguard and protect
all Collateral for Lender's general account and make no disposition thereof
whether by sale, lease or otherwise except (a) the sale of Inventory in the
ordinary course of business and (b) the disposition or transfer of obsolete
and/or worn-out Equipment in the ordinary course of business during any Fiscal
Year having an aggregate fair market value not exceeding the Materiality
Threshold and only to the extent that (i) the proceeds of any such disposition
are used to acquire replacement Equipment which is subject to Lender's first
priority security interest or (ii) the proceeds of which are remitted to Lender
as a prepayment on the Term Loan, as required by Section 2.13 hereof.
4.4. Preservation of Collateral. Following the occurrence of a Default or
Event of Default and the demand by Lender for payment of all Obligations due and
owing, in addition to the rights and remedies set forth in Section 12.1 hereof,
Lender: (a) may at any time take such steps as Lender deems necessary to protect
Lender's interest in and to preserve the Collateral, including the hiring of
such security guards or the placing of other security protection measures as
Lender may deem appropriate; (b) may employ and maintain at any Borrower's
premises a custodian who shall have full authority to do all acts necessary to
protect Lender's interests in the Collateral; (c) may lease warehouse facilities
to which Lender may move all or part of the Collateral; (d) may use any
Borrower's owned or leased lifts, hoists, trucks and other facilities or
equipment for handling or removing the Collateral; and (e) shall have, and is
hereby granted, a right of ingress and egress to the places where the Collateral
is located, and may proceed over and through any Borrower's owned or leased
property to obtain such Collateral. Each Borrower shall cooperate fully with all
of Lender's efforts to preserve the Collateral and will take such actions to
preserve the Collateral as Lender may in its Credit Judgment, direct. All of
Lender's expenses, to the extent incurred in its Credit Judgment, of preserving
the Collateral, including any such expenses relating to the bonding of a
custodian, shall be charged to Borrowers' Account as a Revolving Advance and
added to the Obligations.
4.5. Ownership of Collateral. With respect to the Collateral, at the time
the Collateral becomes subject to Lender's security interest: (a) each Borrower
shall be the sole owner of and fully authorized and able to sell, transfer,
pledge and/or grant a first priority security interest in each and every item of
its respective Collateral to Lender; and, except for Permitted Encumbrances the
Collateral shall be free and clear of all Liens and encumbrances whatsoever; (b)
each document and agreement executed by each Borrower or delivered to Lender in
connection with this Agreement shall be true and correct in all respects; (c)
all signatures and endorsements of each Borrower that appear on such documents
and agreements shall be genuine and each Borrower shall have full capacity to
execute same; and (d) each Borrower's Equipment and Inventory shall be located
as set forth on Schedule 4.5 or at such other locations within the United States
of America as Lender may receive notice of, and approve, from time to time
pursuant to Section 10.12 (all such locations herein called, collectively, the
"Collateral Locations" and, individually, a "Collateral Location"); and shall
not be removed from such Collateral Locations without the prior written consent
of Lender except from time to time in the
13
ordinary course of, and pursuant to the reasonable requirements of, Borrowers'
business, but always within the United States of America.
4.6. Defense of Lender's Interests. Unless and until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Lender's security interests in the Collateral shall continue in full
force and effect. During such period no Borrower shall, without Lender's prior
written consent, pledge, sell (except Inventory in the ordinary course of
business and Equipment to the extent permitted in Section 4.3 hereof), assign,
transfer, create or suffer to exist a Lien upon or encumber or allow or suffer
to be encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. Each Borrower shall defend Lender's security interest in the
Collateral against any and all Persons whatsoever. At any time following a
Default or Event of Default, Lender shall have the right to take possession of
the indicia of the Collateral and the Collateral in whatever physical form
contained, including without limitation: labels, stationery, documents,
instruments and advertising materials. If Lender exercises this right to take
possession of the Collateral, Borrowers shall, upon demand, assemble it in the
best manner possible and make it available to Lender at a place reasonably
convenient to Lender. In addition, with respect to all Collateral, Lender shall
be entitled to all of the rights and remedies set forth herein and further
provided by the Uniform Commercial Code or other applicable law. During any
period that an Event of Default exists, each Borrower shall, and Lender may, at
its option, instruct all suppliers, carriers, forwarders, warehouses or others
receiving or holding cash, checks, Inventory, documents or instruments in which
Lender holds a security interest to deliver same to Lender and/or subject to
Lender's order and if they shall come into Borrower's possession, they, and each
of them, shall be held by such Borrower in trust as Lender's trustee, and
Borrower will immediately deliver them to Lender in their original form together
with any necessary endorsement.
4.7. Books and Records. Each Borrower shall (a) keep proper books of
record and account in which full, true and correct entries, in all material
respects will be made of all dealings or transactions of or in relation to its
business and affairs; (b) set up on its books accruals with respect to all
taxes, assessments, charges, levies and claims; and (c) on a reasonably current
basis set up on its books, from its earnings, allowances against doubtful
Receivables, advances and investments and all other proper accruals (including
without limitation by reason of enumeration, accruals for premiums, if any, due
on required payments and accruals for depreciation, obsolescence, or
amortization of properties), which should be set aside from such earnings in
connection with its business. All determinations pursuant to this subsection
shall be made in accordance with, or as required by, GAAP consistently applied
in the opinion of the Accountants.
4.8. Financial Disclosure. Each Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by such Borrower at any time
during the Term to exhibit and deliver to Lender copies of any of the Borrower's
financial statements, trial balances or other accounting records of any sort in
the accountant's or auditor's possession, and to disclose to Lender any
information such accountants may have concerning such Borrower's financial
status and business operations. In respect of the foregoing, Borrowing
Representative shall execute and deliver to its accountants and auditors
employee on the Closing Date and, as when such accountants and auditors are
charged by Borrowers subsequent to the Closing Date, a letter directly
authorizing them to act in the manner so provided hereinabove, such letter to be
14
substantially in the form of Exhibit 4.8. Each Borrower hereby authorizes all
federal, state and municipal authorities to furnish to Lender copies of reports
or examinations relating to such Borrower, whether made by such Borrower or
otherwise; however, Lender will attempt to obtain such information or materials
directly from such Borrower prior to obtaining such information or materials
from such accountants or such authorities.
4.9. Compliance with Laws. Each Borrower shall comply in all material
respects with all acts, rules, regulations and orders of any legislative,
administrative or judicial body or official applicable to its respective
Collateral or any part thereof or to the operation of such Borrower's business
the non-compliance with which could reasonably be expected to have a Material
Adverse Effect on such Borrower. Each Borrower may, however, contest or dispute
any acts, rules, regulations, orders and directions of those bodies or officials
in any reasonable manner, provided that any related Lien is inchoate or stayed
and sufficient reserves are established to the reasonable satisfaction of Lender
to protect Lender's Lien on or security interest in the Collateral.
4.10. Inspection of Premises. At all reasonable times, Lender shall have
full access to and the right to audit, check, inspect and make abstracts and
copies from each Borrower's books, records, audits, correspondence and all other
papers relating to the Collateral and the operation of each Borrower's business
from time to time in Lender's Credit Judgment. Lender may also enter upon any of
Borrower's premises at any time during business hours and at any other
reasonable time, and from time to time, for the purpose of inspecting the
Collateral and any and all records pertaining thereto and the operation of such
Borrower's business which, initially is intended by Lender to occur at least
quarterly (if not more frequently).
4.11. Insurance. Each Borrower shall bear the full risk of any loss of any
nature whatsoever with respect to the Collateral. At each Borrower's own cost
and expense in amounts and with carriers acceptable to Lender, each Borrower
shall (a) keep all its insurable properties and properties in which each
Borrower has an interest insured against the hazards of fire, flood (if any
property is in a special flood hazard area and flood insurance is available in
such area), sprinkler leakage, those hazards covered by extended coverage
insurance and such other hazards, and for such amounts, as is customary in the
case of companies engaged in businesses similar to such Borrower's including,
without limitation, products liability insurance; (b) maintain a bond or other
surety in such amounts as is customary in the case of companies engaged in
businesses similar to such Borrower insuring against larceny, embezzlement or
other criminal misappropriation of insured's officers and employees who may
either singly or jointly with others at any time have access to the assets or
funds of such Borrower either directly or through authority to draw upon such
funds or to direct generally the disposition of such assets; (c) maintain public
and product liability insurance against claims for personal injury, death or
property damage suffered by others; (d) maintain all such worker's compensation
or similar insurance as may be required under the laws of any state or
jurisdiction in which Borrower is engaged in business; (e) furnish Lender with
(i) copies of all policies and evidence of the maintenance of such policies by
the renewal thereof at least thirty (30) days before any expiration date, and
(ii) appropriate loss payable endorsements in form and substance satisfactory to
Lender, naming Lender as a co-insured and loss payee as its interests may appear
with respect to all insurance coverage referred to in clauses (a) and (c) above,
to the extent affecting or relating to Collateral and providing (A) that all
proceeds thereunder shall be payable
15
to Lender, (B) no such insurance shall be affected by any act or neglect of the
insured or owner of the property described in such policy, and (C) that such
policy and loss payable clauses may not be cancelled, amended or terminated
unless at least thirty (30) days' prior written notice is given to Lender. In
the event of any loss thereunder, the carriers named therein hereby are directed
by Lender and the applicable Borrower to make payment for such loss to Lender
and not to such Borrower and Lender jointly. If any insurance losses are paid by
check, draft or other instrument payable to any Borrower and Lender jointly,
Lender may endorse such Borrower's name thereon and do such other things as
Lender may deem advisable to reduce the same to cash. Lender is hereby
authorized to adjust and compromise claims under insurance coverage referred to
in clauses (a) and (b) above. All loss recoveries received by Lender upon any
such insurance shall either be paid over to Borrowers or applied by the Lender
as follows: (i) if no Event of Default or Default exists, and the loss recovery
so received by Lender is less than or equal to the Materiality Threshold, then
Lender shall remit such loss recovery to the Borrowers; (ii) if no Event of
Default or Default exists, and the loss recovery received by Lender is more than
the Materiality Threshold, then, Lender shall apply such loss recovery to the
Obligations in such order as Lender in its sole discretion shall determine. Any
surplus of such proceeds remaining after such application shall be paid by
Lender to Borrowers or applied as may be otherwise required by law. If, however,
after application of such proceeds to the Obligations, any "overadvance" (as
that term is described in Section 2.6) exists, then, Borrowers shall comply with
said Section 2.6 in respect of its elimination. Anything hereinabove to the
contrary notwithstanding, Lender shall not be obligated to remit any insurance
proceeds to Borrowers unless Borrowers shall have provided Lender with evidence
reasonably satisfactory to Lender that the insurance proceeds will be used by
Borrowers to repair, replace or restore the insured property which was the
subject of the insurable loss. The Collateral at all times shall be maintained
in accordance with the requirements of all insurance carriers which provide
insurance with respect to the Collateral so that such insurance shall remain in
full force and effect. If any Borrower fails to obtain insurance as hereinabove
provided, or to keep the same in force, Lender, if Lender so elects, may obtain
such insurance and pay the premium therefor for Borrowers' Account, and charge
Borrowers' Account therefor and such expenses so paid shall be part of the
Obligations.
4.12. Payment of Taxes. Each Borrower will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon such Borrower or
any of the Collateral including, without limitation, real and personal property
taxes, assessments and charges and all franchise, income, employment, social
security benefits, withholding, and sales taxes. If any tax by any governmental
authority is or may be imposed on or as a result of any transaction between any
Borrower and Lender which Lender may be required to withhold or pay or if any
taxes, assessments, or other Charges remain unpaid after the date fixed for
their payment, or if any claim shall be made which, in Lender's opinion, may
possibly create a valid Lien on the Collateral, Lender may, unless the Borrowers
have done so within five (5) Business Days after the Borrowing Representative
receives written notice from the Lender that they do so, pay the taxes,
assessments or other Charges and each Borrower hereby indemnifies and holds
Lender and each Lender harmless in respect thereof. Lender will not pay any
taxes, assessments or Charges to the extent that any Borrower has contested or
disputed those taxes, assessments or Charges in good faith, by expeditious
protest, administrative or judicial appeal or similar proceeding provided that
any related tax lien is stayed and sufficient reserves are established to the
reasonable satisfaction of Lender to protect Lender's security interest in or
Lien on the
16
Collateral. The amount of any payment by Lender under this Section shall be
charged to Borrowers' Account as a Revolving Advance and added to the
Obligations and, until Borrowers shall furnish Lender with an indemnity therefor
(or supply Lender with evidence satisfactory to Lender that due provision for
the payment thereof has been made), Lender may hold without interest any balance
standing to Borrowers' credit and Lender shall retain its security interest in
any and all Collateral held by Lender.
4.13. Payment of Leasehold Obligations. Each Borrower shall at all times
pay, when and as due, its rental obligations under all leases under which it is
a tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect and, at Lender's
request, will provide evidence of having done so.
4.14. Receivables.
(a) Each of the Receivables shall be a bona fide and valid account
representing a bona fide indebtedness incurred by the Customer therein named,
for a fixed sum as set forth in the invoice relating thereto (provided
immaterial or unintentional invoice errors shall not be deemed to be a breach
hereof) with respect to an absolute sale or lease and delivery of goods upon
stated terms of a Borrower, or work, labor or services theretofore rendered by a
Borrower as of the date each Receivable is created. Same shall be due and owing
in accordance with the applicable Borrower's standard terms of sale without
dispute, setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by Borrowers to Lender.
(b) Each Customer, to the best of each Borrower's knowledge, as of
the date each Receivable is created, is and will be solvent and able to pay all
Receivables on which the Customer is obligated in full when due or with respect
to such Customers of any Borrower who are not solvent such Borrower has set up
on its books and in its financial records bad debt reserves adequate to cover
such Receivables.
(c) Each Borrower's chief executive office is located at the
addresses set forth on Schedule 4.14(c) hereto. Until written notice is given to
Lender by Borrowing Representative of any other office at which any Borrower
keeps its records pertaining to Receivables, all such records shall be kept at
such executive office.
(d) As soon as practicable after, but not later than thirty (30)
days after the Closing Date, each Borrower shall establish a lock-box account
(the "Lock-Box Account") pursuant to a lock-box agreement, to be in form and
substance satisfactory to Lender (the "Lock-Box Agreement") with the Bank, any
Lender or any other financial institution as is acceptable to the Lender (a
"Lock-Box Bank") in which all Customers shall directly remit all payments on
their Receivables. Pending establishment of the Lock-Box Accounts and
Concentration Accounts, as provided hereinabove, not later than the Closing
Date, Borrower shall have entered into one or more agreements ("Blocked Account
Agreements"), to be in form and substance satisfactory to Lender, with the Bank,
any Lender or any other financial institution as is acceptable to the Lender (a
"Blocked Account Bank") pursuant to which all remittances on Borrower's
Receivables shall be deposited in one or more "blocked deposit accounts
("Blocked Accounts"), to be paid over and delivered to Lender for application to
the Obligations by the Blocked Account Banks. In such regard, for purposes of
this Section 4.14, in respect of any
17
Blocked Account substituted temporarily for the Lock-Box Account, any such
Blocked Account Bank shall be treated the same as a Lock-Box Bank and any such
Blocked Account shall be treated the same as the Lock-Box Account. All amounts
on deposit in each Lock-Box Account once established, shall be transferred on a
daily basis to the Concentration Account by wire transfer of immediately
available funds in a manner satisfactory to Lender. Unless otherwise agreed to
by the Lender, the Lock-Box Bank and the Concentration Bank shall acknowledge
and agree, pursuant to its respective Lock-Box Agreement, that all payments and
deposits made to the Lock-Box Account of such Lock-Box Bank or the Concentration
Account (in the case of the Concentration Bank) are the sole and exclusive
property of Lender, for the benefit of itself, the Bank, the Issuers and the
Lender, that each of such Lock-Box Bank and the Concentration Bank has no right
to setoff against its Lock-Box Account or the Concentration Account, as the case
may be, except as expressly provided in its respective Lock-Box Agreement, and
that such Lock-Box Bank will wire transfer immediately available funds in a
manner satisfactory to Lender, funds deposited into its Lock-Box Account to the
Concentration Account on a daily basis as soon as such funds are collected. Each
Borrower agrees that all payments, whether by cash, check, wire transfer or any
other instrument on deposit in the Lock-Box Account or the Concentration Account
shall be the sole and exclusive property of the Lender, for the benefit of
itself, the Bank, the Issuers and the Lender, and the Borrowers shall not have
any right, title or interest therein or in any Lock-Box Account or Concentration
Account unless and until this Agreement is terminated in accordance with its
terms and all Obligations are fully paid and satisfied in connection therewith.
None of the Bank, Lender, any Issuer or any Lender assumes any responsibility
for such Lock Box Account or Concentration Account (unless such Person shall
also be the applicable Lock-Box Bank or Concentration Bank and in such event
only as set forth in the applicable Concentration Account Agreement), including
without limitation, any claim of accord and satisfaction or release with respect
to deposits accepted by any bank thereunder. Borrower shall notify all Customers
of Borrowers to remit directly all payments constituting proceeds of Collateral
to an applicable Lock-Box Account in the form received. All such payments,
whether by cash, check, wire transfer or other instrument, made to each Lock-Box
Account, shall be the exclusive property of the Lender, for the benefit of
itself, the Bank, the Issuers and the Lender, and the Borrowers shall not have
any right, title or interest therein unless and until this Agreement is
terminated in accordance with its terms and all Obligations are fully paid and
satisfied in connection therewith. The Borrowers shall not, without obtaining
the prior consent of the Lender, establish any accounts, other than the Lock-Box
Accounts and the Concentration Account, pursuant to which payments on account of
Receivables are made to or on behalf of any of the Borrowers. In addition, the
Borrowers shall not modify in any respect, without the prior consent of the
Lender, any Lock-Box Agreement or other arrangement relating to the Lock-Box
Account or the Concentration Account.
(e) In addition to the requirements set forth in subsection (d)
above, not later than the Closing Date, each Borrower shall have caused all
Deposit Accounts existing on the Closing Date other than any constituting a
Lockbox Account or a Blocked Account (herein, a "Pledged Account"), to be made
the subject of a tri-party agreement among such Borrower, the bank having such
Pledged Account and Lender, to be in form and substance satisfactory to Lender
(a "Pledged Account Agreement"), pursuant to which the pledge of such Pledged
Account and all funds on deposit therein to Lender as security for the payment
and performance of all Obligations shall be established and confirmed.
18
(f) Notwithstanding terms of subsection (d) above, but in addition
thereto, if and to the extent that (i) Customers remit any payments on account
of the Receivables of the Borrowers directly to any of them or (ii) any Customer
is prohibited by law to remit payments to a given Lock-Box Account (due to such
Lock-Box Account's location outside the state where such Customer is located or
otherwise), or (iii) any Customer pays cash to Borrower for any Inventory or
other Collateral, then, such payments shall be held by the Borrowers in trust
for the Lender, on behalf of itself, the Bank, the Issuers and the Lender, and
shall, promptly upon receipt thereof, be sent via overnight delivery service for
deposit in the same form received (i.e., if received as a check, then such check
shall be the "same form") into the Lock-Box Account.
(g) All amounts deposited in the Concentration Account from time
to time shall be applied to the Obligations upon (i) final collection thereof
and (ii) their transfer from the Concentration Bank to the Lender in accordance
with this subsection, effective on the Business Day that each such payment is
received (such date being called herein the "Application Date"). For purposes of
the preceding sentence, the Lender shall be deemed to have received a payment
from the Concentration Bank on a particular Business Day only if it receives by
wire transfer the same prior to 2:00 p.m. on such Business Day or, if received
after such time, on the next following Business Day. Lender is not, however,
required to credit Borrowers' Account for the amount of any item of payment
which is unsatisfactory to Lender and Lender may charge Borrowers' Account for
the amount of any item of payment which is returned to Lender unpaid. The Lender
shall apply all amounts deposited in the Concentration Account as provided in
Section 16.4 or, as applicable, Section 12.2. If sufficient funds are not
available to fund all payments then to be made in respect of any Obligations,
the available funds being applied with respect to such Obligations shall be
allocated to the payment of such Obligations ratably, in such order and manner
as Lender shall elect, and Borrowers shall continue to be liable for any
deficiency.
(h) If at any time Lender determines that any funds held in the
Lock-Box Account or the Concentration Account are subject to the Lien of any
Person, other than the Lender as herein provided, (a) Borrowers agree, forthwith
upon demand by Lender, to pay to Lender as additional funds to be deposited and
held in the Concentration Account, an amount equal to the amount of funds
subject to such Lien, or (b) if no such payment is made, Lender shall establish
sufficient reserves in the amount of such funds.
(i) At any time following the occurrence of an Event of Default or
a Default, Lender shall have the right to send notice of the assignment of, and
Lender's security interest in, the Receivables to any and all Customers or any
third party holding or otherwise concerned with any of the Collateral.
Thereafter, Lender shall have the sole right to collect the Receivables, take
possession of the Collateral, or both. Lender's actual collection expenses,
including, but not limited to, stationery and postage, telephone and telecopy,
secretarial and clerical expenses and the salaries of any collection personnel
used for collection, to the extent incurred in Lender's Credit Judgment, may be
charged to Borrowers' Account and added to the Obligations.
(j) Lender shall have the right to receive, endorse, assign and/or
deliver in the name of Lender or any Borrower any and all checks, drafts and
other instruments for the payment of money relating to the Receivables, and each
Borrower hereby waives notice of presentment, protest and non-payment of any
instrument so endorsed. Each Borrower hereby
19
constitutes Lender or Lender's designee as such Borrower's attorney with power
at any time hereafter (i) to endorse such Borrower's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
Collateral; (ii) to sign such Borrower's name on any invoice or ▇▇▇▇ of lading
relating to any of the Receivables, drafts against Customers, assignments and
verifications of Receivables; (iii) in Lender's Credit Judgment, to send
verifications of Receivables to any Customer (but, absent an Event of Default
then existing, Lender agrees to consult with Borrower in respect of the manner
thereof); and (iv) to sign such Borrower's name on any documents or instruments
deemed necessary or appropriate by Lender to preserve, protect, or perfect
Lender's interest in the Collateral and to file same. Following the occurrence
of a Default or an Event of Default, and during its continuation, each Borrower
shall hereby constitute Lender or Lender's designee as such Borrower's attorney
with additional power (i) to demand payment of the Receivables; (ii) to enforce
payment of the Receivables by legal proceedings or otherwise; (iii) to exercise
all of Borrowers' rights and remedies with respect to the collection of the
Receivables and any other Collateral; (iv) to settle, adjust, compromise, extend
or renew the Receivables; and (v) to settle, adjust or compromise any legal
proceedings brought to collect Receivables. All acts of said attorney or
designee are hereby ratified and approved, and said attorney or designee shall
not be liable for any acts of omission or commission nor for any error of
judgment or mistake of fact or of law, unless done maliciously or with gross
(not mere) negligence; this power being coupled with an interest is irrevocable
while any of the Obligations remain unpaid. Lender shall have the right at any
time following the occurrence of an Event of Default or Default, to change the
address for delivery of mail addressed to any Borrower concerning the
Receivables or any other Collateral to such address as Lender may designate and
to receive, open and dispose of all mail concerning the Receivables or any other
Collateral addressed to any Borrower.
(k) Lender shall not, under any circumstances or in any event
whatsoever, have any liability for any error or omission or delay of any kind
occurring in the settlement, collection or payment of any of the Receivables or
any instrument received in payment thereof, or for any damage resulting
therefrom, except for any such errors or omissions or delays of any kind
determined by a court of competent jurisdiction in a final proceeding to have
resulted primarily from Lender's gross (not mere) negligence or willful
misconduct. Following the occurrence of an Event of Default or Default, Lender
may, without notice or consent from any Borrower, ▇▇▇ upon or otherwise collect,
extend the time of payment of, compromise or settle for cash, credit or upon any
terms any of the Receivables or any other securities, instruments or insurance
applicable thereto and/or release any obligor thereof. Lender is authorized and
empowered to accept following the occurrence of an Event of Default or Default
the return of the goods represented by any of the Receivables, without notice to
or consent by any Borrower, all without discharging or in any way affecting any
Borrower's liability hereunder.
(l) No Borrower will, without Lender's consent, compromise or
adjust any material amount of the Receivables (or extend the time for payment
thereof) or accept any material returns of merchandise or grant any additional
discounts, allowances or credits thereon except for those compromises,
adjustments, returns, discounts, credits and allowances as have been heretofore
customary in the business of such Borrower.
20
4.15. Inventory. To the extent Inventory held for sale or lease has been
produced by any Borrower, it has been and will be produced by such Borrower in
accordance with the Federal Fair Labor Standards Act of 1938, as amended, and
all rules, regulations and orders thereunder.
4.16. Maintenance of Equipment. The Equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved. No
Borrower shall use or operate the Equipment in violation of any law, statute,
ordinance, code, rule or regulation. Each Borrower shall have the right to sell
Equipment to the extent set forth in Section 4.3 hereof.
4.17. Exculpation of Lender. Nothing herein contained shall be construed
to constitute Lender as any Borrower's agent for any purpose whatsoever, nor
shall Lender be responsible or liable for any shortage, discrepancy, damage,
loss or destruction of any part of the Collateral wherever the same may be
located and regardless of the cause thereof (unless the same is caused by
Lender's gross negligence or willful misconduct). Lender shall not, whether by
anything herein or in any assignment or otherwise, assume any Borrower's
obligations under any contract or agreement assigned to Lender, and Lender shall
not be responsible in any way for the performance by Borrower of any of the
terms and conditions thereof.
4.18. Environmental Matters.
(a) Borrowers shall ensure that the Real Property remains in
compliance with all Environmental Laws and they shall not place or permit to be
placed any Hazardous Substances on any Real Property except as not prohibited by
applicable law or appropriate governmental authorities.
(b) Borrowers shall establish and maintain a system to assure and
monitor continued compliance with all applicable Environmental Laws which system
shall include periodic reviews of such compliance.
(c) Borrowers shall (i) employ in connection with the use of the
Real Property appropriate technology necessary to maintain compliance with any
applicable Environmental Laws and (ii) dispose of any and all Hazardous Waste
generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrowers shall use their best efforts to obtain certificates of disposal, such
as hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrowers in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.
(d) In the event any Borrower obtains, gives or receives notice of
any Release or threat of Release of a reportable quantity of any Hazardous
Substances at the Real Property (any such event being hereinafter referred to as
a "Hazardous Discharge") or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting the Real Property or any
Borrower's interest therein
21
(any of the foregoing is referred to herein as an "Environmental Complaint")
from any Person, including any state agency responsible in whole or in part for
environmental matters in the state in which the Real Property is located or the
United States Environmental Protection Agency (any such person or entity
hereinafter the "Authority"), then Borrowing Representative shall, within five
(5) Business Days, give written notice of same to Lender detailing facts and
circumstances of which any Borrower is aware giving rise to the Hazardous
Discharge or Environmental Complaint. Such information is to be provided to
allow Lender to protect its security interest in the Real Property and is not
intended to create nor shall it create any obligation upon Lender with respect
thereto.
(e) Borrowers shall promptly forward to Lender copies of any
request for information, notification of potential liability, demand letter
relating to potential responsibility with respect to the investigation or
cleanup of Hazardous Substances at any other site owned, operated or used by any
Borrower to dispose of Hazardous Substances and shall continue to forward copies
of correspondence between any Borrower and the Authority regarding such claims
to Lender until the claim is settled. Borrowers shall promptly forward to Lender
copies of all documents and reports concerning a Hazardous Discharge at the Real
Property that any Borrower is required to file under any Environmental Laws.
Such information is to be provided solely to allow Lender to protect Lender's
security interest in the Real Property and the Collateral.
(f) Borrowers shall respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral or Real Property to
any Lien. If any Borrower shall fail to respond promptly to any Hazardous
Discharge or Environmental Complaint or any Borrower shall fail to comply with
any of the requirements of any Environmental Laws, within thirty (30) days after
the Borrowing Representative receives written notice from the Lender that it do
so, Lender on behalf of Lender may, but without the obligation to do so, for the
sole purpose of protecting Lender's interest in Collateral: (A) give such
notices or (B) enter onto the Real Property (or authorize third parties to enter
onto the Real Property) and take such actions as Lender (or such third parties
as directed by Lender) deem reasonably necessary or advisable, to clean up,
remove, mitigate or otherwise deal with any such Hazardous Discharge or
Environmental Complaint. All reasonable costs and expenses incurred by Lender
and (or such third parties) in the exercise of any such rights, including any
sums paid in connection with any judicial or administrative investigation or
proceedings, fines and penalties, together with interest thereon from the date
expended at the Default Rate applicable to Revolving Advances shall be paid upon
demand by Borrowers, and until paid shall be added to and become a part of the
Obligations secured by the Liens created by the terms of this Agreement or any
other agreement between Lender, any Lender and any Borrower.
(g) Promptly upon the written request of Lender from time to time,
which may be made at any time following the discovery of any Hazardous Discharge
or the filing of any Environmental Complaint, Borrowers shall provide Lender, at
Borrowers' expense, with an environmental site assessment or environmental audit
report prepared by an environmental engineering firm acceptable in the
reasonable opinion of Lender, to assess with a reasonable degree of certainty
the existence of a Hazardous Discharge and the potential costs in connection
with abatement, cleanup and removal of any Hazardous Substances found on, under,
at or within
22
the Real Property. Any report or investigation of such Hazardous Discharge
proposed and acceptable to an appropriate Authority that is charged to oversee
the clean-up of such Hazardous Discharge shall be acceptable to Lender. If such
estimates, individually or in the aggregate, exceed the Materiality Threshold
Lender shall have the right to require Borrowers to post a bond, letter of
credit or other security reasonably satisfactory to Lender to secure payment of
these costs and expenses.
(h) Borrowers shall defend and indemnify each Lender Party and
hold each Lender Party, and its respective employees, agents, directors and
officers harmless from and against all loss, liability, damage and expense,
claims, costs, fines and penalties, including attorney's fees, suffered or
incurred by such Lender Party under or on account of any Environmental Laws,
including, without limitation, the assertion of any Lien thereunder, with
respect to any Hazardous Discharge, the presence of any Hazardous Substances
affecting the Real Property, whether or not the same originates or emerges from
the Real Property or any contiguous real estate, including any loss of value of
the Real Property as a result of the foregoing except to the extent such loss,
liability, damage and expense is attributable to any Hazardous Discharge
resulting from actions on the part of a Lender Party. Borrowers' obligations
under this Section shall arise upon the discovery of the presence of any
Hazardous Substances at the Real Property, whether or not any federal, state, or
local environmental agency has taken or threatened any action in connection with
the presence of any Hazardous Substances. Borrowers' obligation and the
indemnifications hereunder shall survive the termination of this Agreement.
4.19. No Other Financing Statements. Except as respects the financing
statements filed by Lender and financing statements giving notice of otherwise
Permitted Encumbrances, no financing statement covering any of the Collateral or
any proceeds thereof is on file in any public office.
4.20. Intellectual Property. Borrowers shall execute and deliver to Lender
for the benefit of all Lender Parties, immediately, either (i) on the Closing
Date with respect to any trademarks, patents or copyrights, registered, or to be
registered, with the applicable federal Governmental Body as of the Closing
Date, or (ii) upon the creation or acquisition by Borrower of any trademarks,
patents or copyrights, registered, or to be registered, with the applicable
federal Governmental Body subsequent to the Closing Date, security agreements
with respect thereto, in registrable form, in substantially the same forms as
set forth on Exhibit 4.20(i), Exhibit 4.20(ii) and Exhibit 4.20(iii),
respectively, or otherwise to be in form and substance satisfactory to Lender.
V. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants as follows:
5.1. Authority. Each Borrower has full power, authority and legal right to
enter into this Agreement and the Other Documents and to perform all its
respective Obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and of the Other Documents (a) are within such
Borrower's corporate (or other organizational) powers, have been
23
duly authorized, are not in contravention of law or the terms of such Borrower's
Organic Documents or to the conduct of such Borrower's business or of any
material agreement or undertaking to which such Borrower is a party or by which
such Borrower is bound, and (b) will not conflict with nor result in any breach
in any of the provisions of or constitute a default under or result in the
creation of any Lien (except Permitted Encumbrances) upon any asset of such
Borrower under the provisions of any Organic Document or other instrument to
which such Borrower or its property is a party or by which it may be bound.
5.2. Formation and Qualification.
(a) Each Borrower is duly organized and in good standing under the
laws of the state or other jurisdiction listed on Schedule 5.2 and is qualified
to do business and is in good standing in the states or other jurisdictions
listed on Schedule 5.2 which constitute all states in which qualification and
good standing are necessary for such Borrower to conduct its business and own
its property and where the failure to so qualify could reasonably be expected to
have a Material Adverse Effect on such Borrower. Each Borrower has delivered to
Lender true and complete copies of its Organic Documents and will promptly
notify Lender of any amendment or changes thereto.
(b) Each Borrower's identification number (if any) assigned to it
by the appropriate Governing Body of the state of its organization, if any, is
set forth on Schedule 5.2.
(c) The Subsidiaries (if any) of each Borrower as of the Signing
Date are as set forth in Schedule 5.2.
(d) The Equity Interests of each Borrower which are authorized,
issued and outstanding on the Signing Date are set forth and described in
Schedule 5.2.
(e) This Agreement is, and each Other Document executed by a
Borrower constitutes, the legal, valid and binding obligation of such Borrower,
enforceable against it in accordance with its terms, except as such enforcement
is subject to the effect of (i) any applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally, and (ii)
general principles of equity (regardless of whether considered in a proceeding
in equity or at law).
5.3. Tax Returns. Each Borrower's federal tax identification number is set
forth on Schedule 5.3. Each Borrower has filed all federal, state and local tax
returns and other reports each is required by law to file and has paid all
taxes, assessments, fees and other governmental charges that are due and
payable, excepting therefrom, any such charges which are being contested by
Borrowers in good faith in appropriate proceedings after the posting of adequate
reserves on the Borrowers' books to cover the costs thereof. Federal, state and
local income tax returns of each Borrower have been examined and reported upon
by the appropriate taxing authority or closed by applicable statute and
satisfied for all Fiscal Years prior to the current Fiscal Year. The provision
for taxes on the books of each Borrower are adequate for all years not closed by
applicable statutes, and for its current Fiscal Year, and no Borrower has any
knowledge of any deficiency or additional assessment in connection therewith not
provided for on its books.
24
5.4. Financial Statements.
(a) The historical audited financial statements of Borrowers and
their Subsidiaries on a consolidated basis for its most recently completed
Fiscal Year, and the related statements of income, changes in stockholder's
equity, and changes in cash flow for the annual fiscal period ended on such
date, all accompanied by reports thereon containing opinions without
qualification by the Accountants, and the historical unaudited financial
statements of Borrowers and their Subsidiaries on a consolidated and
consolidating basis for that portion of their current Fiscal Year ended with
their most recently completed Fiscal Quarter and Fiscal Month for which
financial statements have been reported and the related statements of income,
changes in stockholder's equity and changes in cash flow for the fiscal periods
ended on such date, (collectively, the "Historical Financial Statements"),
copies of which have been delivered to Lender, have been prepared in accordance
with GAAP, consistently applied (except for changes in application in which such
Accountants have concurred) and present fairly the financial position of the
Borrowers and their respective Subsidiaries on a consolidated and, as
appropriate, consolidating basis at such dates and the results of their
operations for such periods. Since the last day of the Borrowers' most recently
completed Fiscal Year, there has been no material change in the condition,
financial or otherwise, of either of the Borrowers as shown on the balance sheet
of each as of such date and no material change in the aggregate value of
machinery, equipment and Real Property owned by them, except changes in the
ordinary course of business, none of which individually or in the aggregate has
had a Material Adverse Effect.
(b) The one year cash flow projections (presented on a monthly
basis) of the Borrowers and their Subsidiaries on a consolidated and
consolidated basis and their projected balance sheets as of the Closing Date,
furnished to Lender on the Signing Date (the "Projections"), were prepared by
the chief financial officer of Borrowing Representative, are based on underlying
assumptions which provide a reasonable basis for the projections contained
therein and reflect Borrowers' collective judgment based on present
circumstances of the most likely set of conditions and course of action for the
projected period.
5.5. Name. No Borrower has been known by any other organization name in
the five (5) years preceding the Closing Date and does not sell Inventory under
any other name except as set forth on Schedule 5.5; nor has any Borrower been
the surviving organization of a merger or consolidation or acquired all or
substantially all of the assets of any Person during the five (5) years
preceding the Closing Date.
5.6. OSHA and Environmental Compliance. Except as may be set forth on
Schedule 5.6:
(a) Each Borrower has duly complied with, and its facilities,
business, assets, property, leaseholds and Equipment are in compliance in all
material respects with, the provisions of the Federal Occupational Safety and
Health Act, the Environmental Protection Act, RCRA and all other Environmental
Laws; there have been no outstanding citations, notices or orders of
non-compliance issued to any Borrower or relating to its business, assets,
property, leaseholds or Equipment under any such laws, rules or regulations.
25
(b) Each Borrower has been issued all required federal, state and
local licenses, certificates or permits relating to all applicable Environmental
Laws.
(c) (i) There are no visible signs, in any material amounts of
releases, spills, discharges, leaks or disposal (collectively referred to as
"Releases") of Hazardous Substances at, upon, under or within any Real Property
or any premises leased by any Borrower which do not comply in all material
respects with all applicable Environmental Laws in respect thereof; (ii) there
are no underground storage tanks or polychlorinated biphenyls on the Real
Property or any premises leased by any Borrower; (iii) neither the Real Property
nor any premises leased by any Borrower has ever been used as a treatment,
storage or disposal facility of Hazardous Waste; and (iv) no Hazardous
Substances are present, in any material amounts on the Real Property or any
premises leased by Borrower, excepting such quantities as are handled in
accordance with all applicable manufacturer's instructions and governmental
regulations and in proper storage containers and as are necessary for the
operation of the commercial business of any Borrower or of its tenants.
5.7. Solvency; No Litigation; No Violations; Indebtedness; and Default.
(a) (i) The Projections are based on underlying assumptions which
provide a reasonable basis for the Projections and which reflect the Borrowers'
judgment, based on present circumstances, of a reasonably likely set of
conditions and the Borrowers' reasonably likely course of action for the period
projected; (ii) the Projections demonstrate that the Borrowers on a consolidated
basis will have sufficient cash flow to enable them to pay their debts as they
mature; (iii) immediately following the execution of this Agreement and the
consummation of the transactions contemplated hereby, (A) the assets of the
Borrowers, on a consolidated basis, at a fair valuation and at their present
fair saleable value, will be in excess of the total amount of their liabilities
(including contingent and unmatured liabilities), (B) the Borrowers will be able
to pay their Indebtedness as it becomes due and (C) the Borrowers on a
consolidated basis will not have unreasonably small capital to carry on their
business; (iv) all material undisputed Indebtedness owing to third parties by
the Borrowers is current and not past due; (v) this Agreement is, and all Other
Documents will be, executed and delivered by the Borrowers, as applicable, to
Lender in good faith and in exchange for reasonably equivalent value and fair
consideration.
(b) Except as may be disclosed in Schedule 5.7(b), no Borrower has
(i) to its knowledge, any pending or threatened litigation, arbitration, actions
or proceedings which, if determined adversely to it, would be reasonably
expected to have a Material Adverse Effect, (ii) any Funded Indebtedness, other
than the Obligations and any Permitted Subordinated Debt, or has granted any
Liens in respect thereof, except Permitted Encumbrances, (iii) contracted or
committed to incur, or contemplates incurring, any Funded Indebtedness, other
than the Obligations and any Permitted Subordinated Debt except in respect of
the Excluded Equipment specified on Schedule 5.7(b) and, then, to the limited
extent specified in Section 7.9.
(c) To the best of each Borrower's knowledge and belief, after due
inquiry, no Borrower is in violation of any applicable statute, regulation or
ordinance in any respect which could reasonably be expected to have a Material
Adverse Effect on Borrower, nor is any
26
Borrower in violation of any order of any court, governmental authority or
arbitration board or tribunal.
(d) No Borrower nor any member of the Controlled Group maintains
or contributes to any Plan (or has assumed any liability in respect of any Plan)
other than those (if any) listed on Schedule 5.7(d) hereto. Except as set forth
in Schedule 5.7(d), to the best of each Borrower's knowledge and belief, (i) no
Plan has incurred any "accumulated funding deficiency," as defined in Section
302(a)(2) of ERISA and Section 412(a) of the Code, whether or not waived, and
each Borrower and each member of the Controlled Group has met all applicable
minimum funding requirements under Section 302 of ERISA in respect of each Plan,
(ii) each Plan which is intended to be a qualified plan under Section 401(a) of
the Code as currently in effect has been determined by the Internal Revenue
Service to be qualified under Section 401(a) of the Code and the trust related
thereto is exempt from federal income tax under Section 501(a) of the Code,
(iii) no Borrower nor any member of the Controlled Group has incurred any
liability to the PBGC other than for the payment of premiums, and there are no
premium payments which have become due which are unpaid, (iv) no Plan has been
terminated by the plan administrator thereof nor by the PBGC, and there is no
occurrence which would cause the PBGC to institute proceedings under Title IV of
ERISA to terminate any Plan, (v) at this time, the current value of the assets
of each Plan exceeds the present value of the accrued benefits and other
liabilities of such Plan and no Borrower nor any member of the Controlled Group
knows of any facts or circumstances which would materially change the value of
such assets and accrued benefits and other liabilities, (vi) no Borrower or any
member of the Controlled Group has breached any of the responsibilities,
obligations or duties imposed on it by ERISA with respect to any Plan, (vii) no
Borrower nor any member of a Controlled Group has incurred any liability for any
excise tax arising under Section 4972 or 4980B of the Code, and no fact exists
which could give rise to any such liability, (viii) no Borrower nor any member
of the Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has
engaged in a "prohibited transaction" described in Section 406 of the ERISA or
Section 4975 of the Code nor taken any action which would constitute or result
in a Termination Event with respect to any such Plan which is subject to ERISA,
(ix) each Borrower and each member of the Controlled Group has made all
contributions due and payable with respect to each Plan, (x) there exists no
event described in Section 4043(b) of ERISA, for which the thirty (30) day
notice period contained in 29 CFR Section 2615.3 has not been waived, (xi) no
Borrower nor any member of the Controlled Group has any fiduciary responsibility
for investments with respect to any plan existing for the benefit of persons
other than employees or former employees of any Borrower and any member of the
Controlled Group, and (xii) no Borrower nor any member of the Controlled Group
has withdrawn, completely or partially, from any Multiemployer Plan so as to
incur liability under the Multiemployer Pension Plan Amendments Act of 1980.
5.8. Patents, Trademarks, Copyrights and Licenses. To the best of each
Borrower's knowledge and belief, after due inquiry, all patents, patent
applications, trademarks, trademark applications, service marks, service ▇▇▇▇
applications, copyrights, copyright applications, design rights, trade names,
assumed names, trade secrets and licenses owned or utilized by any Borrower are
set forth on Schedule 5.8, are valid and have been duly registered or filed with
all appropriate governmental authorities and constitute all of the intellectual
property rights which are necessary for the operation of its business; there is
no objection to or pending challenge to the validity of any such material
patent, trademark, copyright, design right, trade name, trade
27
secret or license and no Borrower is aware of any grounds for any challenge,
except as set forth in Schedule 5.8. To the best of each Borrower's knowledge
and belief, each patent, patent application, patent license, trademark,
trademark application, trademark license, service ▇▇▇▇, service ▇▇▇▇
application, service ▇▇▇▇ license, copyright, copyright application and
copyright license owned or held by any Borrower and all trade secrets used by
any Borrower consist of original material or property developed by such Borrower
or which was lawfully acquired by such Borrower from the proper and lawful owner
thereof. Each of such items has been, or will be, maintained so as to preserve
the value thereof from the date of creation or acquisition thereof. With respect
to all proprietary software developed and used by any Borrower, to the best of
each Borrower's knowledge and belief, such Borrower is in possession of all
source and object codes related to each piece of software or is the beneficiary
of a source code escrow agreement.
5.9. Licenses and Permits. Each Borrower (a) is in compliance with and (b)
has procured and is now in possession of, all material licenses or permits
required by any applicable federal, state, provincial or local law or regulation
for the operation of its business in each jurisdiction wherein it is now
conducting or proposes to conduct business and where the failure to procure such
licenses or permits would reasonably be expected to have a Material Adverse
Effect.
5.10. No Default of Indebtedness. Except as may exist in respect of the
Existing Loans, no Borrower is in default in the payment of the principal of or
interest on any Indebtedness in excess of the Materiality Threshold in principal
amount or under any instrument or agreement under or subject to which any
Indebtedness has been issued and no event has occurred under the provisions of
any such instrument or agreement which with or without the lapse of time or the
giving of notice, or both, constitutes or would constitute an event of default
thereunder.
5.11. No Other Defaults. No Borrower is in default in the payment or
performance of any of its contractual obligations in respect of any Material
Agreement.
5.12. No Burdensome Restrictions. To the best of each Borrower's knowledge
and belief, no Borrower is party to any contract or agreement the performance of
which would reasonably be expected to have a Material Adverse Effect on such
Borrower. No Borrower has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien which is not a
Permitted Encumbrance.
5.13. No Labor Disputes. No Borrower is involved in any labor dispute;
there are no strikes or walkouts or union organization of any Borrower's
employees threatened or in existence and no labor contract presently existing
(if any) is scheduled to expire during the Term.
5.14. Margin Regulations. No Borrower is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. No part of the proceeds of any Advance will be used for
"purchasing" or "carrying" "margin stock," as those terms are defined in
Regulation U of such Board of Governors.
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5.15. Investment Company Act. No Borrower is an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.16. Disclosure. To the best of each Borrower's knowledge and belief, no
representation or warranty made by any Borrower in this Agreement, or in any
financial statement, report, certificate or any Other Document furnished in
connection herewith, including without limitation the Perfection Certificate,
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements herein or therein not misleading. There is
no fact known to Borrowers which Borrowers have not disclosed to Lender in
writing with respect to the transactions contemplated by this Agreement which
would reasonably be expected to have a Material Adverse Effect.
5.17. No Conflicting Agreements or Orders. To the best of each Borrower's
knowledge and belief, no provision of any Material Agreement or judgment, decree
or order binding on any Borrower or affecting the Collateral conflicts with, or
requires any consent which has not already been obtained to, or would in any way
prevent the execution, delivery or performance of, the terms of this Agreement
or the Other Documents.
5.18. Application of Certain Laws and Regulations. No Borrower nor any
Affiliate of any Borrower is subject to any statute, rule or regulation which
regulates the incurrence of any Indebtedness, including without limitation,
statutes or regulations relative to common or interstate carriers or to the sale
of electricity, gas, steam, water, telephone, telegraph or other public utility
services.
5.19. Business and Property of Borrower. Upon and after the Closing Date,
Borrowers do not propose to engage in any business other than business conducted
by the Borrowers on the Closing Date and activities necessary to conduct the
foregoing. On the Closing Date, each Borrower will own all the property and
possess all of the rights and Consents necessary for the conduct of the business
of such Borrower.
5.20. Hedge Contracts. On the Signing Date, no Borrower is party to any
Hedge Contract, except a Permitted Hedge Contract.
5.21. Real Property. On the Signing Date, Borrowers have no interest as
owner or tenant in any Real Property, except as disclosed on Schedule 5.21.
5.22. Deposit Accounts. On the Signing Date, no Borrower has any Deposit
Accounts, except as listed on Schedule 5.22.
5.23. Foreign Assets Control. No Borrower is a national of a designated
blocked country or a "Specially Designated National," "Blocked Entity,"
"Specially Designated Terrorist," "Specially Designated Narcotics Trafficker" or
"Foreign Terrorist Organization," as defined by the U.S. Office of Foreign
Assets Control.
5.24. Brokers. No Borrower has retained the services of any broker to
assist such Borrower in obtaining the benefits of this Agreement unless (i) such
broker has been paid (or is paid on the Closing Date) the full amount due such
broker in such regard, and (ii) such broker
29
executes in favor of Lender a broker's release and waiver letter in form and
substance satisfactory to Lender on or prior to the Closing Date.
5.25. Joint Ventures. As of the Signing Date, no Borrower is party to any
joint venture, except as listed on Schedule 5.25.
5.26. Inactive Subsidiaries. As of the Signing Date, none of the Inactive
Subsidiaries is conducting any business, and none has assets or properties
exceeding, in aggregate fair market value, the Materiality Threshold.
VI. AFFIRMATIVE COVENANTS.
Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
6.1. Payment of Fees. Pay to Lender on demand all usual and customary fees
and expenses which Lender incurs in connection with (a) the forwarding of
Advance proceeds and (b) the establishment and maintenance of any Lockbox
Account, Blocked Account, Pledged Account or Concentration Account. Lender may,
without making demand, charge Borrowers' Account for all such fees and expenses.
6.2. Conduct of Business and Maintenance of Existence and Assets. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted,
except that the foregoing shall not require any Equipment existing on the
Closing Date to be upgraded and except the Equipment may be disposed of from
time to time in accordance with the terms of this Agreement), including, without
limitation, all licenses, patents, copyrights, design rights, trade names, trade
secrets and trademarks and take all actions necessary to enforce and protect the
validity of any intellectual property right or other right included in the
Collateral; (b) keep in full force and effect its existence and Material
Agreements; (c) comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect on such Borrower; and
(d) make all such reports and pay all such franchise and other taxes and license
fees and do all such other acts and things as may be lawfully required to
maintain its rights, licenses, leases, powers and franchises under the laws of
the United States or any political subdivision thereof where the failure to do
so could reasonably be expected to have a Material Adverse Effect.
6.3. Violations. Promptly notify Lender in writing of any violation of any
law, statute, regulation or ordinance of any Governmental Body, or of any agency
thereof, applicable to any Borrower which could reasonably be expected to have a
Material Adverse Effect.
6.4. Government Receivables. If requested by Lender to do so in respect of
any Receivable in excess of the Materiality Threshold or at any time after a
Default or Event of Default exists, regardless of amount, take all steps
necessary to protect Lender's interest in the Collateral under the Federal
Assignment of Claims Act or other applicable state or local statutes or
ordinances and deliver to Lender appropriately endorsed, any instrument or
chattel paper
30
connected with any Receivable arising out of contracts between any Borrower and
the United States, any state or any department, agency or instrumentality of any
of them.
6.5. Execution of Supplemental Instruments. Execute and deliver to Lender
from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Lender may reasonably request, in
order that the full intent of this Agreement and the Other Documents may be
carried into effect.
6.6. Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, including any in respect of its Material
Agreements, except when the failure to do so could not reasonably be expected to
have a Material Adverse Effect or when the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and each
Borrower shall have provided for such reserves as Lender may reasonably deem
proper and necessary, subject at all times to any applicable subordination
arrangement in favor of Lender.
6.7. Standards of Financial Statements. Cause all financial statements
referred to herein as to which GAAP is applicable to be complete and correct in
all material respects (subject, in the case of interim financial statements, to
normal year-end audit adjustments) and to be prepared in reasonable detail and
in accordance with GAAP applied consistently throughout the periods reflected
therein (except as concurred in by such reporting accountants or officer, as the
case may be, and disclosed therein).
6.8. Inactive Subsidiaries. Either by the Closing Date or as soon as
practicable thereafter, but not later than thirty (30) days after the Closing
Date, Borrowers shall have caused each of the Inactive Subsidiaries to be merged
into one or more of the Borrowers or to be dissolved with its assets to be
distributed to one or more of the Borrowers.
6.9. Chief Financial Officer. By not later than March 31, 2004, either G.
▇▇▇▇▇ ▇▇▇▇ shall have been retained by the Parent Company to continue as its
chief financial officer for at least the 2004 Fiscal Year or a replacement chief
financial officer, acceptable to Lender in its Credit Judgment, shall have been
retained by the Parent Company for at least the same said period; and, in either
event, whoever is such chief financial officer on March 31, 2004, shall have
executed and delivered to Lender a Support Agreement by such date.
VII. NEGATIVE COVENANTS.
Subsequent to the Signing Date, except with the prior written consent of
Lender, no Borrower shall, nor shall any Borrower permit any of its Subsidiaries
to, until satisfaction in full of the Obligations and termination of this
Agreement:
7.1. Merger, Consolidation and Acquisitions. Enter into any merger,
consolidation or other reorganization with or into any other Person or acquire
all or a substantial portion of the assets or Equity Interests of any Person or
permit any other Person to consolidate with or merge with it, except that, to
the extent multiple Borrowers exist at any time, so long as Borrowing
Representative gives Lender at least thirty (30) days advance written notice to
such effect, (i) any
31
Borrower may merge into, or consolidate with, any other Borrower, so long as a
Borrower is the survivor of such merger or consolidation, (ii) any Borrower may
acquire all or any substantial portion of the assets or Equity Interests of any
other Borrower.
7.2. Sales of Assets. Sell, lease, transfer or otherwise dispose of any of
its properties or assets, including any Collateral, except for (i) the sale of
Inventory in the ordinary course of its business and (ii) the sale of certain
Equipment as provided in Section 4.3.
7.3. Creation of Liens. Create or suffer to exist any Lien or transfer
upon or against any of its property or assets now owned or hereafter acquired,
except Permitted Encumbrances.
7.4. Guarantees. Become liable upon the obligations of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to the
Lender, the Bank, the Issuers, or the Lender in connection with this Agreement
and the transactions contemplated herein) except (a) guarantees made in the
ordinary course of business up to an aggregate amount not exceeding the
Materiality Threshold; (b) the endorsement of checks for collection in the
ordinary course of business; and (c) guaranties made by one Borrower of the
Obligations of another Borrower or Borrowers.
7.5. Investments. Purchase or acquire obligations or Equity Interests of,
or any other interest in, any Person, including, without limitation, the
acquisition of all, or substantially all, or any material portion the assets of
a Person or of any division or line of business of a Person.
7.6. Loans. Make advances, loans or extensions of credit to any Person,
including particularly, but without limitation, to any Subsidiary or any other
Affiliate, except with respect to (a) the extension of commercial trade credit
to unaffiliated Persons in connection with the sale of Inventory in the ordinary
course of its business, (b) if multiple Borrowers exist, loans and advances may
be made to one Borrower by another Borrower, but all such loans and advance
shall be evidenced by one or more promissory notes (which may be "master" notes
evidencing multiple or "revolving" loans), issued to the order of the lending
Borrower, which promissory notes shall be pledged to Lender as additional
Collateral; and (c) loans and advances to its employees in the ordinary course
of business not to exceed in aggregate amount (as to all employees) the
Materiality Threshold. Without limitation of the foregoing, pending Borrowers'
compliance with Section 6.8, no advances, loans or extensions of credit shall be
made by any Borrower to any of the Inactive Subsidiaries.
7.7. Dividends. Declare, pay or make any dividend or distribution on any
shares of Equity Interests of any Borrower (other than dividends or
distributions payable in its Equity Interests (including, payments-in-kind, or
"PIK"), or split-ups or reclassifications of its Equity Interests) or apply any
of its funds, property or assets to the purchase, redemption or other retirement
of any Equity Interests, or of any options to purchase or acquire any Equity
Interests of any Borrower; provided, however, that, notwithstanding the
foregoing, if either (i) at any time and so long as any Borrower, if a
corporation, has maintained in effect a valid election to be have its income
taxed for federal income tax purposes under Subchapter "S" of the pertinent
section of the Internal Revenue Code of 1986, as amended, or (ii) any Borrower
is not a corporation, and the owners of its Equity Interests are directly
responsible for the payment of taxes on income of such Borrower, then, such
Borrower may make distributions from time to time to the owners of
32
its Equity Interests based on their respective federal income tax liability in
respect of that portion of such Borrower's income attributed to them each year
for federal income tax purposes (the foregoing called herein, "Alternative Tax
Distributions"'); but, in each case, the total amount of such Alternative Tax
Distributions in any one Fiscal Year of such Borrower shall not exceed the
amount of income tax payments which, but for such election, or status, such
Borrower would have obliged to pay on such income as a "C" corporation in such
Fiscal Year.
7.8. Compensation. Pay compensation (including, for this purpose, salary,
bonus, management or consulting fees, directors fees and any other forms of
remuneration, whether payable in cash or other property) to the Senior
Management of Borrowers in excess of the following: (i) for the Fiscal Year
ending December 31, 2003, the amounts prescribed on Schedule 7.8, (ii) for the
Fiscal Year ending December 31, 2004, the amounts to be set forth in a
comprehensive compensation plan for such Fiscal Year, to be prepared by
Borrowers' Representative and submitted to Lender for its review and approval on
or before January 31, 2004; and (iii) for each Fiscal Year ending after December
31, 2004, unless otherwise reviewed with and approved by Lender, (A) in respect
of salary and other forms of remuneration (excluding bonuses) an aggregate
amount not to exceed one hundred ten percent (110%) of the remuneration paid to
Senior Management in the prior Fiscal Year; and (B) in respect of bonus, an
amount not to exceed, in percentage amount of income (or like basis), the
percentage amount used to compute bonuses in the prior Fiscal Year.
7.9. Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of commercial trade debt incurred in the ordinary course
of business) except in respect of (i) Indebtedness to Lender; (ii) Permitted
Subordinated Debt; (iii) the Existing Loans, pending their full payment on the
Closing Date; (iv) Permitted Hedge Contracts; (v) Funded Indebtedness existing
on the Closing Date, and disclosed on Schedule 5.7(b); (vi) Funded Indebtedness
to be incurred by Borrowers subsequent to the Closing Date in respect of the
Specified Equipment, to reimburse Borrowers for the costs of prior acquisition
thereof (for cash), in an aggregate amount not to exceed Two Million Dollars
($2,000,000); and (vii) purchase money Indebtedness incurred for Capital
Expenditures otherwise permitted to be made under this Agreement.
7.10. Nature of Business. Substantially change the nature of the business
in which it is engaged, on the Closing Date, or, except as otherwise
specifically permitted hereby purchase or invest, directly or indirectly, in any
assets or property other than in the ordinary course of business for assets or
property which are useful in, necessary for and are to be used in its business
as presently conducted.
7.11. Transactions with Affiliates. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, any Affiliate, except (i) transactions which do not
exceed the Materiality Threshold, individually or collectively, (ii) other
transactions, in excess of the Materiality Threshold, individually or
collectively, which occur in the ordinary course of business, on an arm's length
basis on terms no less favorable than terms which would have been obtainable
from a Person other than an Affiliate, and which have been fully disclosed to
Lender, (iii) transactions described in, and governed by, Section 7.7 hereof (as
to which neither of clauses (i) or (ii) of this Section 7.10 shall be
applicable) and (iv) those transactions with Advantage Capital specified on
Schedule 7.11.
33
7.12. Subsidiaries, Etc. Either: (a) create or acquire any Subsidiary; (b)
enter into any partnership, joint venture or similar arrangement (excepting
therefrom those specified on Schedule 5.25); or (c) dispose of any Equity
Interests of any Subsidiary. Without limitation of the foregoing, if and to the
extent any Subsidiary is created or acquired hereafter with Lender's prior
written consent, then, as a condition to such consent becoming effective, each
such Subsidiary must be joined as a Borrower hereunder, or must become a
Guarantor hereof, on terms satisfactory to Lender and the Lender.
7.13. Fiscal Year and Accounting Changes. Change its Fiscal Year from that
in use on the Closing Date or make any significant change (i) in accounting
treatment and reporting practices except as required by GAAP or (ii) in tax
reporting treatment except as required by law.
7.14. Pledge of Credit. Pledge (or purport to pledge) Lender's credit on
any purchases or for any purpose whatsoever or use any portion of any Advance in
or for any business other than such Borrower's business as conducted on the
Closing Date.
7.15. Amendment of Documents. Amend, modify or waive any term or provision
of its Organic Documents or any Material Agreement, unless (i) required by law
to do so or (ii) such amendment, modification or waiver does not cause any
contravention of, or conflict with, any material term or condition of this
Agreement and would not otherwise reasonably be expected to have a Material
Adverse Effect.
7.16. Compliance with ERISA. (i) (x) Maintain, or permit any member of the
Controlled Group to maintain, or (y) become obligated to contribute, or permit
any member of the Controlled Group to become obligated to contribute, to any
Plan, other than those Plans disclosed on Schedule 5.7(d), (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
"prohibited transaction", as that term is defined in Section 406 of ERISA and
Section 4975 of the Code, (iii) incur, or permit any member of the Controlled
Group to incur, any "accumulated funding deficiency", as that term is defined in
Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any
member of the Controlled Group to terminate, any Plan where such event could
result in any liability of any Borrower or any member of the Controlled Group or
the imposition of a lien on the property of any Borrower or any member of the
Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any
member of the Controlled Group to assume, any obligation to contribute to any
Multiemployer Plan not disclosed on Schedule 5.7(d), (vi) incur, or permit any
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (vii) fail promptly to notify Lender of the occurrence of
any Termination Event, (viii) fail to comply, or permit a member of the
Controlled Group to fail to comply, with the requirements of ERISA or the Code
or other applicable laws in respect of any Plan, (ix) fail to meet, or permit
any member of the Controlled Group to fail to meet, all minimum funding
requirements under ERISA or the Code or postpone or delay or allow any member of
the Controlled Group to postpone or delay any funding requirement with respect
of any Plan.
7.17. Prepayment of Indebtedness. At any time, directly or indirectly,
either (i) prepay any Indebtedness (other than to Lender or Bank), or (ii) prior
to its stated maturity, repurchase, redeem, retire or otherwise acquire any
Indebtedness of any Borrower.
34
7.18. Payment of Subordinated Debt. At any time, directly or indirectly
pay the principal of, interest on or any other charge or fee in respect of any
Permitted Subordinated Debt then outstanding except as expressly permitted by
the Subordination Agreement applicable thereto.
7.19. Leases. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 8.3 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed the Materiality Threshold in any one Fiscal Year of
Borrowers.
7.20. Deposit Accounts. Open any Deposit Account unless a Lockbox Account
Agreement, Blocked Account Agreement or Pledged Account Agreement, as
appropriate, is first executed in respect thereof.
VIII. FINANCIAL COVENANTS.
Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
8.1. Controlling Definitions. As used in this Article VIII:
"Capital Expenditures" shall mean all expenditures (or commitments to make
expenditures) of a Borrower or Borrowers on a consolidated basis for fixed or
capital assets (including any made or committed to be made pursuant to
capitalized leases) which, in accordance with GAAP, constitute capital
expenditures in the period made.
"EBITDA" shall mean, for any fiscal period the sum of (i) net income (or
loss) of a Borrower or Borrowers on a consolidated basis (as applicable) for
such period (excluding extraordinary gains and losses), plus (ii) to the extent
deducted in determining such net income (or loss) of a Borrower or Borrowers,
the following: (A) all interest expense of a Borrower or Borrowers on a
consolidated basis for such period; and (B) all charges against income of a
Borrower or Borrowers on a consolidated basis for such period for federal, state
and local taxes actually paid; (C) depreciation expenses for such period; and
(D) amortization expenses for such period.
"Fixed Charge Coverage Ratio" shall mean and include, with respect to any
applicable fiscal period of Borrowers, the ratio of (a) EBITDA for such period,
minus any Unfinanced Capital Expenditures made during such period, to (b) Fixed
Charges for such period.
"Fixed Charges" shall mean and include, with respect to any applicable
fiscal period of Borrowers, the sum (without duplication) of (i) all scheduled
payments (excluding mandatory prepayments) made on Funded Indebtedness of
Borrowers and their Subsidiaries on a consolidated basis outstanding during such
period (excluding Revolving Advances), but including: (a) principal repayments
on borrowed funds (excluding Revolving Advances), and (b) the principal portion
on any deferred purchase price obligations constituting Funded Indebtedness,
plus (ii) all interest expense of a Borrower or Borrowers on a consolidated
basis (including Revolving Advances) during such period, plus (iii) all
capitalized lease payments of
35
Borrowers on a consolidated basis made during such period, plus (iv) all charges
against income of Borrowers on a consolidated basis for such period for federal,
state and local taxes actually paid during such period, plus (v) Alternative Tax
Distributions (if any) actually made during such period.
"Funded Indebtedness" shall mean all Indebtedness: (i) for money borrowed,
including the Advances (ii) for the deferred payment for a term of one (1) year
or more of the purchase price of any asset, and (iii) consisting of capitalized
lease obligations.
"Leverage Ratio" shall mean, as at any particular date, the ratio of (a)
Funded Indebtedness of Borrowers, determined on a consolidated basis in
accordance with GAAP, as of such date, to (b) EBITDA of Borrowers, for the
twelve (12) Fiscal Months then ended.
"Unfinanced Capital Expenditures" shall mean Capital Expenditures not
financed by the incurrence of purchase money Indebtedness permitted to be
incurred pursuant to Section 7.8.
8.2. Fixed Charge Coverage Ratio. Maintain as of the ending of each of its
Fiscal Quarters, beginning with the Fiscal Quarter ending March 31, 2004, a
Fixed Charge Coverage Ratio for the twelve (12) Fiscal Months then ending, of
not less than 1.50:1.
8.3. Capital Expenditures. Not contract for, purchase or make any Capital
Expenditure (other than for maintenance, and limited in such regard to
$1,000,000 per Fiscal Year), which would cause total Capital Expenditures to
exceed (i) $5,000,000, in the 2004 Fiscal Year; and (ii) $2,500,000, in any
Fiscal Year ending after the 2004 Fiscal Year.
8.4. Leverage Ratio. Fail to maintain a Leverage Ratio at the end of each
of its Fiscal Quarters, beginning with the Fiscal Quarter ending December
31, 2003, of not more than: (i) 2.75:1, for the Fiscal Quarters ending March 31,
2004 and June 30, 2004, (ii) 2.50:1, for the Fiscal Quarter ending September
30, 2004, and (iii) 2.25:1, for each Fiscal Quarter ending after September 30,
2004.
IX. CONDITIONS PRECEDENT.
9.1. Conditions to the Initial Advance. The agreement of Lender to make
the Initial Advance requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Lender, immediately prior to or concurrently with the
making of such Advance, of the following conditions precedent (in addition to,
and cumulative with, any such conditions precedent set forth and described in
the Commitment Letter relative hereto):
(a) Notes. Lender shall have received the Notes duly executed and
delivered by a Designated Officer of each Borrower;
(b) Filings, Registrations, Recordings and Searches. (i) Each
document (including, without limitation, any Uniform Commercial Code financing
statement) required by this Agreement, any Other Document, under applicable law
or otherwise as reasonably requested by the Lender to be filed, registered or
recorded in order to create, in favor of Lender, a perfected security interest
in or lien upon the Collateral shall have been properly filed, registered or
36
recorded in each jurisdiction in which the filing, registration or recordation
thereof is so required or requested, and Lender shall have received an
acknowledgment copy, or other evidence satisfactory to it, of each such filing,
registration or recordation and satisfactory evidence of the payment of any
necessary fee, tax or expense relating thereto; (ii) the Lender shall also have
received UCC, tax and judgment lien searches with respect to each Borrower in
such jurisdictions as Lender shall require, and the results of such searches
shall be satisfactory to Lender; and (iii) Lender shall have received from
Borrowing Representative, for each Borrower, a perfection certificate, the form
of which shall be supplied by Lender to Borrowing Representative prior to the
Closing Date;
(c) Secretary's Certificates. Lender shall have received a
certificate of the Secretary (or Assistant Secretary) of each Borrower, dated
the Closing Date, to be substantially in the form of Exhibit 9.1(c), unless
otherwise acceptable to or required by Lender, certifying as to (i) the
incumbency and signature of the officers (or other representatives) of each
Borrower executing this Agreement and any Other Documents, and (ii) the
authorizations by the board of directors (or other governing body) of such
Borrower to such officers or other representatives to enter into and carry out
such transactions as are contemplated pursuant to this Agreement and the Other
Documents; and including therewith copies of the Organic Documents of such
Borrower as in effect on the Signing Date;
(d) Good Standing Certificates. Lender shall have received good
standing certificates for each Borrower dated not more than thirty (30) days
prior to the Signing Date, issued by the secretary of state or other appropriate
official of each Borrower's jurisdiction of organization and each jurisdiction
where the conduct of each Borrower's business activities or the ownership of its
properties necessitates qualification;
(e) Legal Opinion. Lender shall have received the executed legal
opinion of legal counsel to the Borrowers, in substantially the form of Exhibit
9.1 (e), unless otherwise acceptable to or required by Lender, which shall cover
such matters incident to the transactions contemplated by this Agreement, the
Notes and all Other Documents such as Lender may reasonably require, and each
Borrower hereby authorizes and directs such counsel to deliver such opinions to
Lender;
(f) No Litigation. (i) No litigation, investigation or proceeding
before or by any arbitrator or Governmental Body shall be continuing or
threatened against any Borrower or against the officers or directors of any
Borrower (A) in connection with the Other Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of Lender, is deemed
material or (B) which could, in the reasonable opinion of Lender, have a
Material Adverse Effect; and (ii) no injunction, writ, restraining order or
other order of any nature materially adverse to any Borrower or the conduct of
its business or inconsistent with the due consummation of the Transactions shall
have been issued by any Governmental Body;
(g) Material Agreements. Lender shall have reviewed all Material
Agreements and been satisfied therewith, in its Credit Judgment;
(h) Collateral Examination. Lender shall have completed Collateral
examinations and received appraisals, the results of which shall be satisfactory
in form and
37
substance to Lender, of the Receivables, Inventory, General Intangibles, Real
Property, Leasehold Interest, and Equipment of each Borrower and all books and
records in connection therewith;
(i) Fees. Lender shall have received all fees and expenses payable
to Lender on or prior to the Closing Date pursuant hereto or under any Other
Document;
(j) Financial Statements. Lender shall have received copies of the
Projections and copies of the Historical Financial Statements, each of which
shall be satisfactory in all respects to Lender;
(k) Insurance. Lender shall have received in form and substance
satisfactory to Lender, certified copies of Borrowers' casualty insurance
policies, together with loss payable endorsements naming Lender as loss payee,
to be in form and substance satisfactory to Lender, and certified copies of
Borrowers' liability insurance policies, together with endorsements naming
Lender as a co-insured;
(l) Environmental Reports. [Not Applicable]
(m) Lock-Box Accounts. Lender shall have received duly executed
agreements establishing the Lock-Box Accounts, the Concentration Account and any
Blocked Accounts, to the extent required under Section 4.14 to be delivered on
the Closing Date;
(n) Consents. Lender shall have received any and all Consents
necessary to permit the effectuation of the transactions contemplated by this
Agreement and the Other Documents; and, Lender shall have received such Consents
and waivers of such third parties as might assert claims with respect to the
Collateral, as Lender and its counsel shall deem necessary (including, as
provided in Section 5.24, broker's release and waiver letters);
(o) No Adverse Material Change. Since the end of Borrowers' most
recently completed Fiscal Year for which audited financial statements have been
reported (or, if none, then since the date of the Lender's Commitment Letter in
respect of the transactions contemplated herein), there shall not have occurred
any event, condition or state of facts which could reasonably be expected to
have a Material Adverse Effect and no representations made or information
supplied to Lender shall have been proven to be inaccurate or misleading in any
material respect;
(p) Landlord's Agreements, Etc. Unless Lender otherwise has agreed
to waive such requirement in one or more instances (and impose reserves with the
Borrowing Base in regard thereto), Lender shall have received waivers or related
agreements satisfactory to Lender with respect to all premises leased by,
licensed to or otherwise used by Borrowers at which Inventory or Equipment is
located or in which Inventory is otherwise being processed, finished or stored,
such waivers or related agreements to be in form and substance satisfactory to
Lender;
(q) Pledge Agreements. Lender shall have received a pledge agreement
from each Borrower in respect of the Equity Interests of each Subsidiary owned
by it (limited, in the
38
case of Foreign Subsidiaries, to sixty-five percent (65%) of such Equity
Interests), in substantially the form of Exhibit 9.1(q) (the "Subsidiary Pledge
Agreement");
(r) Intellectual Property. To the extent any Borrower owns any
trademarks or patents (or applications therefor) which are registered with the
United States Patent and Trademark Office, or any copyrights (or applications
therefore) which are registered with the United States Copyright Office, such
Borrower shall have executed in favor, as appropriate, (i) a Patent Security
Agreement, to be substantially in the form of Exhibit 4.20(i); (ii) a Trademark
Security Agreement, to be substantially in the form of Exhibit 4.20(ii) and/or
(iii) a Copyright Security Agreement, to be substantially in the form of Exhibit
4.20(iii);
(s) Closing Certificate. If the Signing Date precedes the Closing
Date, Lender shall have received a closing certificate signed by a Designated
Officer of each Borrower dated the Closing Date, in substantially the form of
Exhibit 9.1(t), stating that (i) all representations and warranties set forth in
this Agreement and the Other Documents are true and correct on and as of such
date, (ii) Borrowers are on such date in compliance with all the terms and
provisions set forth in this Agreement and the Other Documents and (iii) on such
date, no Default or Event of Default has occurred or is continuing;
(t) Undrawn Availability at Closing. Lender shall have received
evidence satisfactory to it to the effect that after giving effect to the making
of the initial Advances hereunder, the imposition of all Availability Reserves
under the Borrowing Base, the payment of all closing costs associated therewith
(regardless whether required to be paid on the Closing Date) and the bringing
current of all trade accounts payable (if any) more than sixty (60) days past
due, Borrowers shall have Undrawn Availability of at least One Million Five
Hundred Thousand Dollars ($1,500,000);
(u) Existing Loans. The Existing Lender shall have issued a pay-off
letter in respect of the Existing Loans, to be in form and substance
satisfactory to Lender, pursuant to which it shall have agreed to release all
Existing Lender Liens upon receipt of full payment of the Existing Loan on the
Closing Date;
(v) Validity of Collateral and Support Agreement. Lender shall have
received from each of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇▇
a validity of collateral and support agreement in substantially the form of
Exhibit 9.1 (v) (a "Support Agreement")
(w) All Other Matters. Lender shall have received all Other
Documents which Lender determines to be necessary to consummate the transactions
contemplated to occur on or after the Closing Date pursuant to this Agreement,
and all corporate and other proceedings, and all documents, instruments and
other legal matters in connection with the transactions contemplated herein
shall be satisfactory in form and substance to Lender and its legal counsel.
9.2. Conditions to Each Advance. The agreement of Lender to make any
Advance requested to be made on any date (including, without limitation, the
Initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
39
(a) Representations and Warranties. Each of the representations and
warranties made by any Borrower in or pursuant to this Agreement and any Other
Document to which it is a party, and each of the representations and warranties
contained in any certificate, document or financial or other statement furnished
at any time under or in connection with this Agreement or any related agreement
shall be true and correct in all material respects on and as of such date as if
made on and as of such date;
(b) No Default. No Event of Default or Default shall have occurred
and be continuing on such date, or would exist after giving effect to the
Advances requested to be made, on such date and, in the case of the initial
Advance, after giving effect to the consummation of the transactions
contemplated hereby; provided, however that Lender, in its sole and absolute
discretion, may continue to make Advances notwithstanding the existence of an
Event of Default or Default and that any Advances so made shall not be deemed a
waiver of any such Event of Default or Default;
(c) Maximum Revolving Advances. In the case of any Revolving Advance
or Letter of Credit requested to be made, after giving effect thereto, the
aggregate amount of all Revolving Advances and Letters of Credit shall not
exceed the maximum amount of Advances permitted under Section 2.1 hereof; and
(d) Maximum Letters of Credit. In the case of any Letters of Credit
requested to be made, after giving effect thereto, the aggregate face amount and
reimbursement obligations outstanding in respect of Letters of Credit, when
aggregated with all then outstanding Revolving Advances, shall not exceed the
Maximum Revolving Advance Amount.
Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.
X. INFORMATION AS TO BORROWERS.
Each Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
10.1. Disclosure of Material Matters. Immediately upon learning thereof,
report to Lender all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral including, without limitation,
any Borrower's reclamation or repossession of, or the return to any Borrower of,
a material amount of goods or claims or disputes asserted by any Customer or
other obligor.
10.2. Schedules. Deliver to Lender on or before the fifteenth (15th) day
of each Fiscal Month as and for the prior Fiscal Month (a) Receivables agings,
(b) accounts payable agings and (c) Inventory reports. In addition, each
Borrower will deliver to Lender at such intervals as Lender may require (but,
absent an Event of Default then existing, not more frequently than monthly): (i)
confirmatory assignment schedules, (ii) copies of Customer's invoices, (iii)
evidence of shipment or delivery, and (iv) such further schedules, documents
and/or information regarding the Collateral as Lender, in its Credit Judgment,
may require including,
40
without limitation, trial balances and test verifications (but, absent an Event
of Default then existing, not more frequently than monthly). Lender shall also
have the right to confirm and verify all Receivables by any manner and through
any medium it considers commercially advisable and do whatever it may deem
commercially necessary to protect its interests hereunder. The items to be
provided under this Section shall be in form satisfactory to Lender and executed
by the Borrowing Representative and delivered to Lender from time to time solely
for Lender's convenience in maintaining records of the Collateral, and any
failure to deliver any of such items to Lender shall not affect, terminate,
modify or otherwise limit Lender's Lien with respect to the Collateral.
10.3. Environmental Compliance Certificate. Furnish Lender, at its request
from time to time, with a certificate signed by a Designated Officer of
Borrowing Representative stating, to the best of his knowledge, that each
Borrower is in compliance in all material respects with all federal, state and
local laws relating to environmental protection and control and occupational
safety and health. To the extent any Borrower is not in compliance with the
foregoing laws, the certificate shall set forth with specificity all areas of
non-compliance and the proposed action Borrower will implement in order to
achieve full compliance.
10.4. Litigation. Promptly notify Lender in writing of any litigation,
suit or administrative proceeding affecting any Borrower, whether or not the
claim is covered by insurance, which, in any such case, could reasonably be
expected to have a Material Adverse Effect on any Borrower.
10.5. Material Occurrences. Promptly notify Lender in writing upon the
occurrence of (a) any Event of Default or Default; (b) any event, development or
circumstance whereby any financial statements or other reports furnished to
Lender fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of any
Borrower as of the date of such statements; (c) any accumulated retirement plan
funding deficiency which, if such deficiency continued for two plan years and
was not corrected as provided in Section 4971 of the Code, could subject any
Borrower to a tax imposed by Section 4971 of the Code; (d) each and every
default by any Borrower in respect of any Indebtedness which, individually or
when aggregated, exceeds the Materiality Threshold which could reasonably be
expected to result in the acceleration of the maturity of any Indebtedness,
including the names and addresses of the holders of such Indebtedness with
respect to which there is a default existing or with respect to which the
maturity has been or could be accelerated, and the amount of such Indebtedness;
(e) the termination (or receipt of notice of pending termination) of any
Material Agreement; and (f) any other development in the business or affairs of
any Borrower which could reasonably be expected to have a Material Adverse
Effect; in each case describing the nature thereof and the action that Borrowers
propose to take with respect thereto.
10.6. Government Receivables. Notify Lender immediately if any of its
Receivables arise out of contracts between any Borrower and the United States,
any state, or any department, agency or instrumentality of any of them,
exceeding the Materiality Threshold.
10.7. Annual Financial Statements. Furnish Lender within ninety (90) days
after the end of each Fiscal Year of Borrowers, financial statements of
Borrowers on a consolidating and
41
consolidated basis including, but not limited to, statements of income and
stockholders' equity and cash flow from the beginning of the current Fiscal Year
to the end of such Fiscal Year and the balance sheet as at the end of such
Fiscal Year, all prepared in accordance with GAAP applied on a basis consistent
with prior practices, and in reasonable detail and reported upon without
qualification by an independent certified public accounting firm selected by
Borrowers and satisfactory to Lender (the "Accountants"). The report of the
Accountants shall, if requested by the Lender, be accompanied by a statement of
the Accountants certifying that (i) they have caused this Agreement to be
reviewed, (ii) in making the examination upon which such report was based either
no information came to their attention which to their knowledge constituted an
Event of Default or a Default under this Agreement or any related agreement or,
if such information came to their attention, specifying any such Default or
Event of Default, its nature, when it occurred and whether it is continuing, and
such report shall contain or have appended thereto calculations which set forth
Borrowers' compliance with the requirements or restrictions imposed by the
Financial Covenants. In addition, the reports shall be accompanied by a
certificate of a Designated Officer of the Borrowing Representative which shall
state that, based on an examination sufficient to permit him to make an informed
statement, no Default or Event of Default exists, or, if such is not the case,
specifying such Default or Event of Default, its nature, when it occurred,
whether it is continuing and the steps being taken by Borrowers with respect to
such event, and such certificate shall have appended thereto calculations which
set forth Borrowers' compliance with the requirements or restrictions imposed by
the Financial Covenants.
10.8. Quarterly Financial Statements. Furnish Lender within forty-five
(45) days after the end of each Fiscal Quarter, an unaudited balance sheet of
Borrowers on a consolidated and consolidating basis and unaudited statements of
income and stockholders' equity and cash flow of Borrowers reflecting results of
operations from the beginning of the Fiscal Year to the end of such quarter and
for such quarter, prepared on a basis consistent with prior practices but in
accordance with GAAP and complete and correct in all material respects, subject
to normal year end adjustments (together with comparative reports for the
corresponding period(s) in the prior Fiscal Year and for the projected reports
for the current Fiscal Year required under Section 10.13). The reports shall be
accompanied by a certificate signed by a Designated Officer of the Borrowing
Representative, substantially in the form of Exhibit 10.8, which shall state
that, based on an examination sufficient to permit him to make an informed
statement, no Default or Event of Default exists, or, if such is not the case,
specifying such Default or Event of Default, its nature, when it occurred,
whether it is continuing and the steps being taken by Borrowers with respect to
such default and, such certificate shall have appended thereto calculations
which set forth Borrowers' compliance with the requirements or restrictions
imposed by the Financial Covenants.
10.9. Monthly Financial Statements. Furnish Lender within thirty (30) days
after the end of each Fiscal Month, an unaudited balance sheet of Borrowers on a
consolidated and consolidating basis and unaudited statements of income and
stockholders' equity and cash flow of Borrowers on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
Fiscal Year to the end of such month and for such month, prepared on a basis
consistent with prior practices but in accordance with GAAP and complete and
correct in all material respects, subject to normal year end adjustments
(together with comparative reports for the corresponding period(s) in the prior
Fiscal Year and for the projected reports for the current
42
Fiscal Year required under Section 10.13). The reports shall be accompanied by a
certificate of a Designated Officer of the Borrowing Representative, likewise
substantially in the form of Exhibit 10.8, which shall state that, based on an
examination sufficient to permit him to make an informed statement, no Default
or Event of Default exists, or, if such is not the case, specifying such Default
or Event of Default, its nature, when it occurred, whether it is continuing and
the steps being taken by Borrowers with respect to such event and, such
certificate shall have appended thereto calculations which set forth Borrowers'
compliance with the requirements or restrictions imposed by the Financial
Covenants.
10.10. Borrowing Base Certificate. Deliver to Lender a certificate of a
Designated Officer of Borrowing Representative, in such form as may be required
or approved by Lender from time to time (a "Borrowing Base Certificate"), which
shall state Borrower's Borrowing Base as of the date thereof (including a
calculation of such Borrowing Base). This Borrowing Base Certificate shall be
delivered weekly, by the second Business Day of each calendar week, as of the
last Business Day of the preceding calendar week, and shall be supplemented by a
monthly reconciliation of the weekly Borrowing Base Certificate delivered
closest to (but within) each Fiscal Month, to (a) the Inventory reports for such
Fiscal Month delivered pursuant to Section 10.2 and (b) the financial statements
of Borrowers for such Fiscal Month delivered pursuant to Section 10.9, with each
such reconciliation to be delivered coincident with the delivery of such
financial statements pursuant to said Section 10.9, and to be in form
satisfactory to Lender, which shall include a reconciliation and "roll forward"
from the prior month's reporting thereof pursuant to Section 10.2.
10.11. Other Reports. Furnish Lender as soon as available, but in any
event within ten (10) days after the issuance thereof, with copies of such
financial statements, reports and returns as each Borrower shall send to the
owners of its Equity Interests generally.
10.12. Additional Information. Furnish Lender with such additional
information as Lender shall reasonably request in order to enable Lender to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Notes have been complied with by Borrowers including, without
limitation and without the necessity of any request by Lender, (a) copies of all
environmental audits and reviews, (b) at least thirty (30) days prior thereto,
notice of any Borrower's opening or establishing of any new Collateral Location
or any Borrower's closing of any existing Collateral Location, and (c) promptly
upon any Borrower's learning thereof, notice of any labor dispute to which any
Borrower may become a party, any strikes or walkouts relating to any of its
plants or other facilities, and the expiration of any labor contract to which
any Borrower is a party or by which any Borrower is bound.
10.13. Projected Operating Budget. Furnish Lender, no later than thirty
(30) days prior to the beginning of each Borrower's Fiscal Years, commencing
with its first Fiscal Year ending after the Closing Date, the following
projections, on a month-to-month basis for such Fiscal Year, for borrower and
its Subsidiaries, on a consolidated and consolidating basis, to-wit operating
budget, balance sheet, income statement, statement of cash flow, Financial
Covenant compliance (including projected amounts of all financial components
used in determining compliance) and borrowing availability, such projections to
be accompanied by a certificate signed by a Designated Officer of the Borrowing
Representative to the effect that such projections have been prepared on the
basis of sound financial planning practice consistent with
43
past budgets and financial statements and that such officer has no reason to
question the reasonableness of any material assumptions on which such
projections were prepared.
10.14. Variances From Operating Budget. Furnish Lender, concurrently with
the delivery of the quarterly financial statements referred to in Section 10.8,
summarizing all material variances from budgets submitted by Borrowers pursuant
to Section 10.13.
10.15. Notice of Suits, Adverse Events. Furnish Lender with prompt notice
of (i) any lapse or other termination of any Consent issued to any Borrower by
any Governmental Body or any other Person that is material to the operation of
any Borrower's business, (ii) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (iii) copies of any periodic or
special reports filed by any Borrower with any Governmental Body or Person, if
such reports indicate any material change in the business, operations, affairs
or condition of any Borrower, or if copies thereof are requested by Lender, and
(iv) copies of any material notices and other communications from any
Governmental Body or Person which specifically relate to any Borrower.
10.16. ERISA Notices and Requests. Furnish Lender with immediate written
notice in the event that (i) any Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which such Borrower or member of the Controlled Group has taken, is taking, or
proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, Department of Labor or PBGC with
respect thereto, (ii) any Borrower or any member of the Controlled Group knows
or has reason to know that a prohibited transaction (as defined in Sections 406
of ERISA and 4975 of the Code) has occurred together with a written statement
describing such transaction and the action which such Borrower or any member of
the Controlled Group has taken, is taking or proposes to take with respect
thereto, (iii) a funding waiver request has been filed with respect to any Plan
together with all communications received by any Borrower or any member of the
Controlled Group with respect to such request, (iv) any increase in the benefits
of any existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which any Borrower or any member of the Controlled
Group was not previously contributing shall occur, (v) any Borrower or any
member of the Controlled Group shall receive from the PBGC a notice of intention
to terminate a Plan or to have a trustee appointed to administer a Plan,
together with copies of each such notice, (vi) any Borrower or any member of the
Controlled Group shall receive any favorable or unfavorable determination letter
from the Internal Revenue Service regarding the qualification of a Plan under
Section 401 (a) of the Code, together with copies of each such letter; (vii) any
Borrower or any member of the Controlled Group shall receive a notice regarding
the imposition of withdrawal liability, together with copies of each such
notice; (viii) any Borrower or any member of the Controlled Group shall fail to
make a required installment or any other required payment under Section 412 of
the Code on or before the due date for such installment or payment; (ix) any
Borrower or any member of the Controlled Group knows that (a) a Multiemployer
Plan has been terminated, (b) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC
has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
44
10.17. Intellectual Property. Notify Lender promptly if, subsequent to the
Closing Date, any Borrower applies for, or acquires, any patent, trademark or
copyright registered (or registrable) under the federal law, and execute and
deliver to Lender, upon request, such documents and agreements (which may
include agreements substantially in the forms set forth in Exhibit 4.20(i), and
Exhibit 4.20(ii) and/or Exhibit 4.20(iii) in respect of patents, trademarks,
and/or copyrights, respectively) as Lender may request to evidence, confirm or
perfect Lender's Lien on and security interest in such Collateral.
10.18. Additional Documents. Execute and deliver to Lender, upon request,
such documents and agreements as Lender may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
XI. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall constitute
an "Event of Default":
11.1. Obligations. Failure by any Borrower to pay any Obligations when
due, whether at maturity or by reason of acceleration pursuant to the terms of
this Agreement or by notice of intention to prepay, or by required prepayment or
failure to pay any other liabilities or make any other payment, fee or charge
provided for herein when due or in any Other Document;
11.2. Misrepresentations. Any representation or warranty of any material
fact, circumstance or condition made (or deemed made pursuant to the terms
hereof) by any Borrower in this Agreement or any related agreement or in any
certificate, document or financial or other statement furnished at any time in
connection herewith or therewith shall prove to have been misleading in any
material respect on the date when made or deemed to have been made;
11.3. Financial Information. Failure by any Borrower to (i) furnish
financial or Collateral report required to be delivered pursuant to Sections
10.2, 10.7, 10.8, 10.9, 10.10, 10.13 or 10.14 when due or when requested
pursuant hereto which is unremedied for a period of three (3) Business Days, or
(ii) permit the inspection of its books or records by Lender when requested
pursuant hereto;
11.4. Liens. Issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of any Borrower's property which is not
stayed or lifted within thirty (30) days (but not later than its being executed,
however);
11.5. Covenants. Either (i) except as otherwise provided in Section
11.3(i) above or clause (ii) below of this Section 11.5, failure or neglect of
any Borrower to perform, keep or observe any term, provision, condition,
covenant herein contained, or contained in any Other Document, now or hereafter
entered into between any Borrower and Lender (without any cure or grace period);
or (ii) a failure or neglect of Borrowers to perform, keep or observe any term,
provision, condition or covenant, contained in Sections 4.6, 4.7, 4.9, 4.11,
6.3, 6.4, 10.4 or 10.6 hereof which is not cured within thirty (30) days from
the occurrence of such failure or neglect;
45
11.6. Judgments. Any judgment or judgments are rendered or judgment liens
filed against any Borrower for an aggregate amount in excess of the Materiality
Threshold which within thirty (30) days of such rendering or filing (but not
later than its being executed, however) is not either satisfied, stayed,
suspensively appealed or discharged of record;
11.7. Voluntary Bankruptcy. Any Borrower, any Subsidiary of any Borrower
or any Guarantor shall (i) apply for, consent to or suffer the appointment of,
or the taking of possession by, a receiver, custodian, trustee, liquidator or
similar fiduciary of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (iv) be adjudicated a bankrupt or insolvent, (v) apply for, consent
to or suffer the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar fiduciary of itself or of all or a
substantial part of its property, (vi) admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present business, (vii) file a petition seeking to take advantage of any other
law providing for the relief of debtors, or (viii) take any action for the
purpose of effecting any of the foregoing;
11.8. Insolvency. Any Borrower shall admit in writing its inability, or be
generally unable, to pay its Indebtedness as it becomes due or shall cease
operations of its present business;
11.9. Involuntary Bankruptcy. Any Borrower, any Subsidiary of a Borrower
or any Guarantor shall acquiesce in, or fail to have dismissed, within thirty
(30) days, any petition filed against it in any involuntary case under any state
or federal bankruptcy laws (as now or hereafter in effect), or take any action
for the purpose of effecting any of the foregoing;
11.10. Material Adverse Changes. Any material change in any Borrower's
condition or affairs (financial or otherwise) which in Lender's opinion has a
Material Adverse Effect unless such Borrower remedies to Lender's satisfaction
within thirty (30) days after the Borrowing Representative receives written
notice thereof from Lender;
11.11. Lender's Liens. Any Lien created hereunder or provided for hereby
or under any related agreement for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest unless not later than thirty
(30) days after Borrowers receive notice thereof from Lender, such Default is
remedied to Lender's Credit Judgment;
11.12. Subordinated Debt. An Event of Default shall occur under or in
respect of any Subordinated Debt which causes the acceleration of, or entitles
the holder thereof to cause the acceleration of, any Subordinated Debt, or any
payment is made or received in respect of any Subordinated Debt in violation of
the Subordination Agreement made with respect thereto.
11.13. Cross Default. A default of the obligations of any Borrower under
any Material Agreement shall occur which involves a monetary obligation in
excess of the Materiality Threshold, whether individually or in the aggregate,
or otherwise materially and adversely affects its condition, affairs or
prospects (financial or otherwise) which default is not cured within any
applicable grace period;
46
11.14. Guaranty. Termination or breach of any Guaranty or similar
agreement executed and delivered to Lender in connection with the Obligations of
any Borrower, or if any Guarantor attempts to terminate, challenges the validity
of, or its liability under, any such Guaranty or similar agreement;
11.15. Change of Ownership. Any Change of Ownership shall occur;
11.16. Change of Management. Any Change of Management shall occur;
11.17. Invalidity. Any material provision of this Agreement or any Other
Document shall, for any reason, cease to be valid and binding on any Borrower,
or any Borrower shall so claim in writing to Lender unless not later than thirty
(30) days after Borrowers receive (or give) notice thereof, the cessation of
validity or binding effect of such provision is remedied to Lender's Credit
Judgment;
11.18. Takings. (i) Any Governmental Body shall (A) revoke, terminate,
suspend or adversely modify any license, permit, patent trademark or trade name
of any Borrower, the continuation of which is material to the continuation of
any Borrower's business, or (B) commence proceedings to suspend, revoke,
terminate or adversely modify any such license, permit, trademark, trade name or
patent and such proceedings shall not be dismissed or discharged within sixty
(60) days, or (C) schedule or conduct a hearing on the renewal of any license,
permit, trademark, trade name or patent necessary for the continuation of any
Borrower's business and the staff of such Governmental Body issues a report
recommending the termination, revocation, suspension or material, adverse
modification of such license, permit, trademark, trade name or patent; (ii) any
agreement which is necessary or material to the operation of any Borrower's
business shall be revoked or terminated and not replaced by a substitute
acceptable to Lender within sixty (60) days after the date of such revocation or
termination, and such revocation or termination and non-replacement would
reasonably be expected to have a Material Adverse Effect on any Borrower;
11.19. Seizures. Any material portion of the Collateral shall be seized or
taken by a Governmental Body, or any Borrower or the title and rights of any
Borrower shall have become the subject matter of litigation which could
reasonably be expected, in the opinion of Lender, upon final determination, to
result in any material impairment or any material loss of the security provided
by this Agreement or the Other Documents;
11.20. Cessation of Operations. The operation of any Borrower's business
is interrupted at any time for more than five (5) Business Days during any
period of thirty (30) consecutive days, unless Borrowers shall (i) be entitled
to receive for such period of interruption, proceeds of business interruption
insurance sufficient to assure that its per diem cash needs during such period
is at least equal to its average per diem cash needs for the consecutive three
month period immediately preceding the initial date of interruption and (ii)
receive such proceeds in the amount desciibed in clause (i) preceding not later
than thirty (30) days following the initial date of any such interruption;
provided, however, that notwithstanding the provisions of clauses (i) and (ii)
of this section, an Event of Default shall be deemed to have occurred if such
Borrower shall be receiving the proceeds of business interruption insurance for
a period of thirty (30) consecutive days; or
47
11.21. Plans. An event or condition specified in Sections 7.16 or 10.15
hereof shall occur or exist with respect to any Plan and, as a result of such
event or condition, together with all other such events or conditions, any
Borrower or any member of the Controlled Group shall incur, or in the opinion of
Lender be reasonably likely to incur, a liability to a Plan or the PBGC (or
both) which, in the reasonable judgment of Lender, would have a Material Adverse
Effect on any Borrower.
11.22. Criminal Charges. Any Borrower (or any officer or director of any
Borrower) shall become the subject of a criminal indictment or investigation in
respect of or pertaining to, the operation or conduct of a Borrower's business,
its reporting of any financial data, its application for, or receipt of, any
credit, its "laundering" of any funds or its non-payment (or underpayment) of
any taxes or any other Charges, or shall admit its guilt or complicity in
respect of any of the foregoing, or shall pay any fine or suffer any penalty in
respect thereof (including as part of any plea bargain or arrangement).
XII. LENDER'S RIGHTS AND REMEDIES AFTER DEFAULT.
12.1. Rights and Remedies. Upon and after the occurrence of an Event of
Default pursuant to Sections 11.7, 11.8, 11.9 or 11.20, all Obligations shall be
immediately due and payable and this Agreement and all Commitments of Lender
shall be deemed terminated. Upon the occurrence of any other Event of Default
not specified in the preceding sentence, and at any time thereafter during the
continuation of such Event of Default, at Lender's option, all Obligations shall
be immediately due and payable and Lender shall have the right to terminate this
Agreement and to terminate the Commitments of Lender to make Advances. Upon and
after the occurrence of any Event of Default, and during its continuation,
Lender shall have the right to exercise any and all other rights and remedies
provided for herein, under the Uniform Commercial Code and at law or equity
generally, including, without limitation, the right to foreclose the security
interests granted herein and to realize upon any Collateral by any available
judicial procedure and/or to take possession of and sell any or all of the
Collateral with or without judicial process. Lender may enter any Borrower's
premises or other premises without legal process and without incurring liability
to any Borrower therefor, and Lender may thereupon, or at any time thereafter,
in its discretion without notice or demand, take the Collateral and remove the
same to such place as Lender may deem advisable and Lender may require Borrowers
to make the Collateral available to Lender at a convenient place. With or
without having the Collateral at the time or place of sale, Lender may sell the
Collateral, or any part thereof, at public or private sale, at any time or
place, in one or more sales, at such price or prices, and upon such terms,
either for cash, credit or future delivery, as Lender may elect. Except as to
that part of the Collateral which is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Lender shall
give Borrowers reasonable notification of such sale or sales, it being agreed
that in all events written notice mailed to Borrowers at least five (5) Business
Days prior to such sale or sales is reasonable notification. At any public sale
Lender may bid for and become the purchaser, and Lender, or any other purchaser
at any such sale thereafter shall hold the Collateral sold absolutely free from
any claim or right of whatsoever kind, including any equity of redemption and
such right and equity are hereby expressly waived and released by each Borrower.
In connection with the exercise of the foregoing remedies, Lender is granted
permission to use all of each Borrower's
48
trademarks, trade styles, trade names, patents, patent applications, licenses,
franchises and other proprietary rights which are used in connection with (a)
Inventory for the purpose of disposing of such Inventory and (b) Equipment for
the purpose of completing the manufacture of unfinished goods.
12.2. Application of Proceeds. The proceeds realized by Lender from the
sale or other disposition by Lender of any Collateral subsequent to an Event of
Default occurring and during its continuation, shall be applied as follows:
first, to the reasonable costs, expenses and attorneys' fees and expenses
incurred by Lender for collection and for acquisition, completion, protection,
removal, storage, sale and delivery of the Collateral; secondly, to interest due
upon any of the Obligations; thirdly, to fees payable in connection with this
Agreement; fourthly, to furnish to Lender cash Collateral in an amount not less
than one hundred ten percent (110%) of the aggregate undrawn amount of all
Letters of Credit, such cash collateral arrangements to be in form and substance
satisfactory to Lender; and, lastly, to the principal of the Obligations;
provided, however, that Lender reserves the right to adjust the foregoing
allocations as it sees fit from time to time, in its sole discretion, and apply
(or re-apply, as the case may be) such proceeds to the Obligations in a
different manner or order. If any deficiency shall arise, Borrowers shall remain
liable to Lender therefor. If any surplusage exists, such surplusage shall be
held as cash Collateral pending full payment and satisfaction of all Obligations
and termination of this Agreement, after which any remainder shall be returned
to the Borrowing Representative unless Lender is then otherwise required to
remit such remainder under applicable law.
12.3. Lender's Discretion. After an Event of Default exist, Lender shall
have the right in its sole discretion to determine which rights, Liens, security
interests or remedies Lender may at any time pursue, relinquish, subordinate, or
modify or to take any other action with respect thereto and such determination
will not in any way modify or affect any of Lender's rights hereunder.
12.4. Setoff. In addition to any other rights which any Lender Party may
have under applicable law, upon the occurrence of an Event of Default hereunder,
each Lender Party shall have a right to apply any Borrower's property held by it
to reduce the Obligations.
12.5. Rights and Remedies not Exclusive. The enumeration of the foregoing
rights and remedies is not intended to be exhaustive and the exercise of any
right or remedy shall not preclude the exercise of any other right or remedies
provided for herein or in any Other Document or otherwise provided by law, all
of which shall be cumulative and not alternative.
XIII. WAIVERS AND JUDICIAL PROCEEDINGS.
13.1. Waiver of Notice. Each Borrower hereby waives notice of non-payment
of any of the Receivables, demand, presentment, protest and notice thereof with
respect to any and all instruments, notice of acceptance hereof, notice of loans
or advances made, credit extended, Collateral received or delivered, or any
other action taken in reliance hereon, and all other demands and notices of any
description, except such as are expressly provided for herein.
49
13.2. Delay. No delay or omission on Lender's part in exercising any
right, remedy or option shall operate as a waiver of such or any other right,
remedy or option or of any default.
13.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER DOCUMENT, OR (B) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF
THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER DOCUMENT OR THE RELATED
TRANSACTIONS, IN EACH CASE, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIV. EFFECTIVE DATE AND TERMINATION.
14.1. Term; Early Termination Fee. This Agreement, which shall inure to
the benefit of and shall be binding upon, the respective successors and
permitted assigns of each Borrower and Lender, shall become effective on the
Signing Date and shall continue in full force and effect until that date which
is the third (3rd) anniversary of the Signing Date (the "Term") unless sooner
terminated as herein provided. Borrowers may terminate this Agreement at any
time upon thirty (30) days' prior written notice upon payment in full of the
Obligations. In the event the Obligations are prepaid in full prior to the last
day of the Term in conjunction with Borrowers' election to terminate this
Agreement (the date of such prepayment hereinafter referred to as the "Early
Termination Date"), Borrowers shall pay to Lender an early termination fee (the
"Early Termination Fee") for the loss of its bargain (and not as a penalty) in
an amount equal to (i) three percent (3%) of the Maximum Revolving Amount, if
the Early Termination Date occurs on or after the Closing Date to and including
the date immediately preceding the first anniversary of the Closing Date, (ii)
two percent (2%) of the Maximum Revolving Amount made to Borrower on the Closing
Date if the Early Termination Date occurs on or after the first anniversary of
the Closing Date but on or before the second anniversary of the Closing Date;
and (iii) one percent (1%) of the Maximum Revolving Amount, if the Early
Termination Date occurs on or after the second anniversary of the Closing Date
but on or before the third anniversary of the Closing Date. Notwithstanding any
term hereinabove to the contrary, no prepayment fee shall be charged to
Borrowers in respect of any prepayment of the Term Loan made in accordance with
Section 2.1(b).
14.2. Termination. The termination of the Agreement shall not affect any
Borrower's, Lender's, the Bank's, any Issuer's rights, or any of the Obligations
having their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The security interests, Liens and rights
granted to
50
Lender, the Bank, the Issuers hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrowers' Account may from time
to time be temporarily in a zero or credit position, until all of the
Obligations of each Borrower have been paid or performed in full after the
termination of this Agreement; or, in lieu of the foregoing, with Lender's
consent, to the extent that Borrowers request a termination of this Agreement
prior to all such Obligations having been fully paid and performed, each
Borrower has furnished Lender, the Bank, the Issuers with an indemnification
satisfactory to such parties with respect thereto and an unconditional release
from any liabilities hereunder. Accordingly, each Borrower waives any rights
which it may have under the applicable provisions of the Uniform Commercial Code
to demand the filing of termination statements with respect to the Collateral,
and Lender shall not be required to send such termination statements to each
Borrower, or to file them with any filing office, unless and until this
Agreement shall have been terminated in accordance with its terms and all
Obligations paid in full in immediately available funds. All representations,
warranties, covenants, waivers and agreements contained herein shall survive
termination hereof until all Obligations are paid or performed in full.
XV. MULTIPLE BORROWERS.
15.1. Borrowing Agency Provisions. If and to the extent that at any time
or from time to time there are multiple Borrowers, then:
(a) Each Borrower acknowledges that, together with each other
Borrower, it is part of an affiliated common enterprise in which any loans or
other financial accommodations extended to any one Borrower will result in
direct and substantial economic benefit to each other Borrower, and each
Borrower will likewise benefit from the economies of scale associated with the
Borrowers, as a group, applying for credit or other financial accommodations on
a collective basis.
(b) Each Borrower hereby irrevocably designates Borrowing
Representative to be its attorney and agent and in such capacity to borrow, sign
and endorse notes, and execute and deliver all instruments, documents, writings
and further assurances now or hereafter required hereunder, on behalf of such
Borrower or Borrowers, and hereby authorizes Lender to pay over or credit all
loan proceeds hereunder in accordance with the request of Borrowing
Representative.
(c) The handling of this credit facility as a co-borrowing facility
with a Borrowing Representative in the manner set forth in this Agreement is
solely as an accommodation to Borrowers and at their request. None of Lender,
the Bank, any Issuer or any Lender shall incur liability to Borrowers as a
result thereof. To induce Lender, the Bank, the Issuers, and the Lender to do so
and in consideration thereof, each Borrower hereby indemnifies Lender, Bank and
each Lender and holds Lender, Bank, each Issuer and each Lender harmless from
and against any and all liabilities, expenses, losses, damages and claims of
damage or injury asserted against Lender, Bank, any Issuer or any Lender by any
Person arising from or incurred by reason of the handling of the financing
arrangements of Borrowers as a co-borrowing facility as provided herein,
reliance by Lender on any request or instruction from Borrowing
51
Representative or any other action taken by Lender with respect to this Section,
except due to willful misconduct or gross (not mere) negligence by the
indemnified party.
(d) All Obligations shall be joint and several, and each Borrower
shall make payment upon the maturity of the Obligations by acceleration or
otherwise, and such obligation and liability on the part of each Borrower shall
in no way be affected by any extensions, renewals and forbearance granted by
Lender to any Borrower, failure of Lender to give any Borrower notice of
borrowing or any other notice, any failure of Lender to pursue or preserve its
rights against any Borrower, the release by Lender of any Collateral now or
thereafter acquired from any Borrower, and such agreement by each Borrower to
pay upon any notice issued pursuant thereto is unconditional and unaffected by
prior recourse by Lender to the other Borrowers or any Collateral for such
Borrower's Obligations or the lack thereof.
15.2. Waiver of Subrogation. Each Borrower expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution of
any other claim which such Borrower may now or hereafter have against the other
Borrowers or other Person directly or contingently liable for the Obligations
hereunder, or against or with respect to the other Borrowers' property
(including, without limitation, any property which is Collateral for the
Obligations), arising from the existence or performance of this Agreement, until
termination of this Agreement and repayment in full of the Obligations.
XVI. MISCELLANEOUS.
16.1. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLIED TO CONTRACTS TO BE
PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK. ANY JUDICIAL PROCEEDING BROUGHT
BY OR AGAINST ANY BORROWER WITH RESPECT TO ANY OF THE OBLIGATIONS, THIS
AGREEMENT OR ANY OTHER DOCUMENT MAY BE BROUGHT IN ANY COURT OF COMPETENT
JURISDICTION IN ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ OF
AMERICA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH BORROWER ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES
TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT
OR ANY OTHER DOCUMENT. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND
ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO BORROWING REPRESENTATIVE
AT ITS ADDRESS SET FORTH IN SECTION 17.6 AND SERVICE SO MADE SHALL BE DEEMED
COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE MAILS
OF THE UNITED STATES OF AMERICA, OR, AT THE LENDER'S AND/OR ANY LENDER'S OPTION,
BY SERVICE UPON CSC THE UNITED STATES CORPORATION COMPANY (OR ANY SUCCESSOR
CORPORATION) WHICH EACH BORROWER IRREVOCABLY APPOINTS AS SUCH BORROWER'S LENDER
FOR THE PURPOSE OF ACCEPTING SERVICE WITHIN THE STATE OF NEW YORK. NOTHING
HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY
52
LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST ANY
BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. EACH BORROWER WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREUNDER AND SHALL
NOT ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE OR BASED UPON
FORUM NON CONVENIENS. ANY JUDICIAL PROCEEDING BY ANY BORROWER AGAINST LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER OR CLAIM IN ANY WAY ARISING OUT
OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT OR ANY OTHER DOCUMENT, SHALL BE
BROUGHT ONLY IN A FEDERAL OR STATE COURT LOCATED IN ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ OF AMERICA.
16.2. Entire Understanding. This Agreement and the Other Documents
executed concurrently herewith contain the entire understanding between each
Borrower and Lender and supersedes all prior agreements and understandings, if
any, relating to the subject matter hereof. Any promises, representations,
warranties or guarantees not herein contained and hereinafter made shall have no
force and effect unless in writing, signed by the respective officers of the
party making such promises, representations, warranties, or guarantees. Neither
this Agreement nor any Other Document nor any portion or provisions hereof or
thereof may be changed, modified, amended, waived, supplemented, discharged,
cancelled or terminated orally or by any course of dealing, or in any manner
other than by an agreement in writing, signed by the party to be charged. Each
Borrower acknowledges that it has been advised by counsel in connection with the
execution of this Agreement and the Other Documents and is not relying upon oral
representations or statements inconsistent with the terms and provisions of this
Agreement or any Other Document.
16.3. Successors and Assigns; Participations; New Lender.
(a) This Agreement shall be binding upon and inure to the benefit of
Borrowers, Lender, the Bank, each Issuer and all future holders of the
Obligations and their respective successors and assigns, except that no Borrower
may assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of Lender.
(b) Each Borrower acknowledges that in the regular course of
commercial banking business Lender may at any time and from time to time sell
participating interests in the Advances to other financial institutions (each
such transferee or purchaser of a participating interest, a "Transferee"). Each
Transferee may exercise all rights of payment (including without limitation
rights of set-off) with respect to the portion of such Advances held by it or
other Obligations payable hereunder as fully as if such Transferee were the
direct holder thereof provided that Borrowers shall not be required to pay to
any Transferee more than the amount which it would have been required to pay to
Lender which granted an interest in its Advances or other Obligations payable
hereunder to such Transferee had Lender retained such interest in the Advances
hereunder or other Obligations payable hereunder and in no event shall Borrowers
be required to pay any such amount arising from the same circumstances and with
respect to the same Advances or other Obligations payable hereunder to both such
Lender and such Transferee. Each Borrower hereby grants to any Transferee a
continuing security interest in any deposits,
53
moneys or other property actually or constructively held by such Transferee as
security for the Transferee's interest in the Advances.
(c) Lender may sell, assign or transfer all or any part of its
rights under this Agreement and the Other Documents to one or more additional
banks or financial institutions and one or more additional banks or financial
institutions may commit to make Advances hereunder (each a "Purchasing Lender").
Borrowers hereby consent to the addition of such Purchasing Lender and the
transfer of all or a portion of the rights and obligations of Lender under this
Agreement and the Other Documents in connection therewith. Borrowers shall
execute and deliver such further documents and do such further acts and things
as Lender or Purchasing Lender may reasonably request in order to effectuate the
foregoing.
(d) Nothing contained herein, however, shall Limit in any way the
right of Lender to assign all or a portion of the Advances owing to it from time
to time to any Federal Reserve Bank or the United States Treasury as collateral
security pursuant to Regulation A of the Board of Governors of the Federal
Reserve System any Operating Circular issued by such Federal Reserve Bank, but
no such assignment shall release the assigning Lender from its obligations
hereunder.
(e) Borrowers authorize Lender to disclose to any Transferee or
Purchasing Lender and any prospective Transferee or Purchasing Lender any and
all financial information in such Lender's possession concerning Borrowers which
has been delivered to Lender by or on behalf of Borrowers pursuant to this
Agreement or in connection with Lender's credit evaluation of Borrowers.
16.4. Application of Payments. Lender shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that any
Borrower makes a payment or Lender receives any payment or proceeds of the
Collateral for any Borrower's benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Lender.
16.5. Indemnity. Each Borrower shall indemnify each Lender Party, and each
of its respective officers, directors, Affiliates, employees from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of any kind or nature
whatsoever (including, without limitation, fees and disbursements of counsel)
which may be imposed on, incurred by, or asserted against Lender, Bank, such
Issuer in any litigation, proceeding or investigation instituted or conducted by
any governmental agency or instrumentality or any other Person with respect to
any aspect of, or any transaction contemplated by, or referred to in, or any
matter related to, this Agreement or the Other Documents, whether or not such
Lender Party is a party thereto, except to the extent that any of the foregoing
arises out of the willful misconduct or gross negligence of the party being
indemnified.
54
16.6. Notice. Any notice or request hereunder may be given to any Borrower
or to Lender at their respective addresses set forth below or at such other
address as may hereafter be specified in a notice designated as a notice of
change of address under this Section. Any notice or request hereunder shall be
given by (a) hand delivery, (b) overnight courier, (c) registered or certified
mail, return receipt requested, (d) telex or telegram, subsequently confirmed by
registered or certified mail, or (e) telecopy to the number set out below (or
such other number as may hereafter be specified in a notice designated as a
notice of change of address) with electronic confirmation of its receipt. Any
notice or other communication required or permitted pursuant to this Agreement
shall be deemed given (a) when personally delivered to any officer of the party
to whom it is addressed, (b) upon actual receipt thereof, when sent by certified
or registered mail, postage prepaid, or (c) upon actual receipt thereof when
sent by a recognized overnight delivery service or (d) upon actual receipt
thereof, when sent by telecopier to the number set forth below with electronic
confirmation of its receipt, in each case addressed to each party at its address
set forth below or at such other address as has been furnished in writing by a
party to the other by like notice:
(A) If to Lender at: Whitehall Business Credit Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Account Executive - Omni
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: King & Spalding
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(B) If to Borrowing Representative
or any Borrower, at: Omni Energy Services Corp.
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: G. ▇▇▇▇▇ ▇▇▇▇, CFO
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇, Arata, McCollam, ▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier: (▇▇▇)▇▇▇-▇▇▇▇
16.7. Survival. The obligations of Borrowers under Sections 3.10,
3.11,4.18(h), 16.5 and 16.9 shall survive any termination of this Agreement and
the Other Documents and payment in full of the Obligations.
55
16.8. Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible,
16.9. Expenses. All costs and expenses including, without limitation,
reasonable attorneys' fees and disbursements incurred by Lender (a) in all
efforts made to enforce payment of any Obligation or effect collection of any
Collateral, or (b) in connection with the entering into, modification,
amendment, administration and enforcement of this Agreement or any consents or
waivers hereunder and all related agreements, documents and instruments, or (c)
in instituting, maintaining, preserving, enforcing and foreclosing on Lender's
security interest in or Lien on any of the Collateral, whether through judicial
proceedings or otherwise, or (d) in defending or prosecuting any actions or
proceedings arising out of or relating to Lender's transactions with any
Borrower, or (e) in connection with any advice given to Lender with respect to
its rights and obligations under this Agreement and all related agreements, may
be charged to Borrowers' Account and shall be part of the Obligations.
16.10. Injunctive Relief. Each Borrower recognizes that, in the event any
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to Lender; therefor, Lender, if Lender so requests, shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving that actual damages are not an adequate remedy.
16.11. Consequential Damages. None of the Borrowers, Lender, Bank, any
Issuer or Lender, nor any agent or attorney for any of them, shall be liable for
consequential damages arising from any breach of contract, tort or other wrong
relating to the execution, delivery or performance of this Agreement or any
Other Document, or the establishment, administration or collection of the
Obligations.
16.12. Captions. The captions at various places in this Agreement and any
Other Document are intended for convenience only and do not constitute and shall
not be interpreted as part of this Agreement or any Other Document.
16.13. Counterparts; Telecopied Signatures; Seal. This Agreement may be
executed in any number of and by different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto. If this Agreement or any Other Document provides for
imposition of a seal by any party thereto, the word "seal" shall be a sufficient
indication thereof,
16.14. Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and each Other Document and that the normal
rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed hi the interpretation of this
Agreement and each Other Document or any amendments, schedules or exhibits
thereto.
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16.15. Confidentiality. Lender and each Transferee shall hold all
non-public information obtained by Lender, such Lender or such Transferee
pursuant to the requirements of this Agreement and each Other Document in
accordance with Lender's and such Transferee's customary procedures for handling
confidential information of this nature; provided, however. Lender, and each
Transferee may disclose such confidential information (a) to its examiners,
affiliates, outside auditors, counsel and other professional advisors, (b) to
Lender or to any prospective Transferees and Purchasing Lender, and (c) as
required or requested by any Governmental Body or representative thereof or
pursuant to legal process; provided, further that (i) unless specifically
prohibited by applicable law or court order, Lender and each Transferee shall
use its best efforts prior to disclosure thereof, to notify the Borrowing
Representative of the applicable request for disclosure of such non-public
information (A) by a Governmental Body or representative thereof (other than any
such request in connection with an examination of the financial condition of a
Lender or a Transferee by such Governmental Body) or (B) pursuant to legal
process and (ii) in no event shall Lender, any Lender or any Transferee be
obligated to return any materials furnished by any Borrower other than those
documents and instruments in possession of Lender in order to perfect its Lien
on the Collateral once the Obligations have been paid in full and this Agreement
has been terminated.
16.16. Publicity. Each Borrower hereby authorizes Lender and the Bank to
make appropriate announcements of the financial arrangement entered into among
Borrowers and Lender, including, without limitation, announcements which are
commonly known as tombstones, in such publications and to such selected parties
as Lender and/or Bank shall in its sole and absolute discretion deem
appropriate. Without limiting the foregoing Borrowers authorize Lender and Bank
to utilize any logo or other distinctive symbol associated with the Borrowers in
connection with any such announcement or any other promotion, advertising or
marketing undertaken by Lender or Bank. In no event, however, shall any Borrower
use the name of Lender or Bank, or any logo or distinctive symbol associated
with any of them, unless, as appropriate, Lender, Bank or such Lender has given
its prior written consent thereto.
16.17. Survival of Representations and Warranties. All representations and
warranties of each Borrower contained in this Agreement and the Other Documents
shall be true at the time of such Borrower's execution of this Agreement and the
Other Documents, and shall survive the execution, delivery and acceptance
thereof by the parties thereto and the closing of the transactions described
therein or related thereto.
16.18. Certain Matters of Construction. The terms "herein", "hereof and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise provided, all
references to any instruments or agreements to which Lender is a party,
including, without limitation, references to any of the Other Documents, shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
16.19. Destruction of Invoices. Borrowing Representative hereby authorizes
and directs Lender in accordance with its standard document retention policies
in such regards to destroy all
57
invoices, agings, inventory reports, financial statements and other data
provided from time to time by Borrowers to Lender pursuant hereto.
16.20. TIME. TIME IS OF THE ESSENCE IN THIS AGREEMENT AND EACH OTHER
DOCUMENT. UNLESS OTHERWISE EXPRESSLY PROVIDED, ALL REFERENCES HEREIN AND IN ANY
OTHER DOCUMENTS TO TIME SHALL MEAN AND REFER TO NEW YORK TIME.
16.21. Patriot Act. Federal law requires Lender to obtain, verify and
record information that identifies each Person that opens an account or applies
for a loan or lease. Borrowers agree to cooperate with Lender in maintaining
compliance with such law on an ongoing basis.
[signature pages follow]
58
Each of the parties has signed this Agreement as of the day and year first
above written.
"BORROWER"
OMNI ENERGY SERVICES CORP.
By /s/ G. ▇▇▇▇▇ ▇▇▇▇
-------------------------------
G. ▇▇▇▇▇ ▇▇▇▇
Chief Financial Officer
AMERICAN HELICOPTERS INC.
By /s/ G. ▇▇▇▇▇ ▇▇▇▇
-------------------------------
G. ▇▇▇▇▇ ▇▇▇▇
Chief Financial Officer
OMNI ENERGY SERVICES CORP.-MEXICO
By /s/ G. ▇▇▇▇▇ ▇▇▇▇
-------------------------------
G. ▇▇▇▇▇ ▇▇▇▇
Chief Financial Officer
STATE OF LOUISIANA )
)ss
COUNTY (OR) PARISH OF LAFAYETTE )
On December 23, 2003, before me personally came G. ▇▇▇▇▇ ▇▇▇▇, to me
known, who, being by me duly sworn, did depose and say that he (she) is the
Chief Financial Officer of each entity described in and which executed the
foregoing instrument as a "Borrower"; and that he (she) signed his (her) name
thereto by order of the board of directors of said entity.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
NOTARY PUBLIC
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
NOTARY PUBLIC
STATE OF LOUISIANA
MY COMMISSION IS ISSUED FOR LIFE
LA. BAR ROLL NO. 1221
59
"LENDER"
WHITEHALL BUSINESS CREDIT
CORPORATION
By [ILLEGIBLE]
------------------------------------
Authorized Officer or Representative
60