EXHIBIT 10.19
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REVOLVING CREDIT, TERM LOAN,
EQUIPMENT LINE OF CREDIT
AND
SECURITY AGREEMENT
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PNC BANK, NATIONAL ASSOCIATION
(AS LENDER AND AS AGENT)
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WITH
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AIR INDUSTRIES MACHINING, CORP.
(BORROWER)
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November 30, 2005
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TABLE OF CONTENTS
PAGE
I. DEFINITIONS..............................................................................................1
1.1 Accounting Terms................................................................................1
1.2 General Terms...................................................................................1
1.3 Uniform Commercial Code Terms..................................................................21
1.4 Certain Matters of Construction................................................................21
II. ADVANCES, PAYMENTS......................................................................................22
2.1 Revolving Advances.............................................................................22
2.2 Procedure for Revolving Advances and Equipment Loan Borrowing..................................23
2.3 Disbursement of Advance Proceeds...............................................................25
2.4 Loans..........................................................................................25
2.5 Maximum Advances...............................................................................26
2.6 Repayment of Advances..........................................................................26
2.7 Repayment of Excess Advances...................................................................27
2.8 Statement of Account...........................................................................27
2.9 Additional Payments............................................................................28
2.10 Manner of Borrowing and Payment................................................................28
2.11 Mandatory Prepayments..........................................................................30
2.12 Use of Proceeds................................................................................30
2.13 Defaulting Lender..............................................................................31
III. INTEREST AND FEES.......................................................................................32
3.1 Interest.......................................................................................32
3.2 Closing Fee and Facility Fee...................................................................32
3.3 Collateral Evaluation Fee, Collateral Monitoring Fee and Fee Letter............................32
3.4 Computation of Interest and Fees...............................................................33
3.5 Maximum Charges................................................................................33
3.6 Increased Costs................................................................................33
3.7 Basis For Determining Interest Rate Inadequate or Unfair.......................................34
3.8 Capital Adequacy...............................................................................34
3.9 Gross Up for Taxes.............................................................................35
3.10 Withholding Tax Exemption......................................................................35
IV. COLLATERAL: GENERAL TERMS..............................................................................36
4.1 Security Interest in the Collateral............................................................36
4.2 Perfection of Security Interest................................................................36
4.3 Disposition of Collateral......................................................................37
4.4 Preservation of Collateral.....................................................................37
4.5 Ownership of Collateral........................................................................37
4.5 Defense of Agent's and Lenders' Interests......................................................38
4.7 Books and Records..............................................................................38
4.8 Financial Disclosure...........................................................................39
4.9 Compliance with Laws...........................................................................39
4.10 Inspection of Premises.........................................................................39
4.11 Insurance......................................................................................39
4.12 Failure to Pay Insurance.......................................................................40
4.13 Payment of Taxes...............................................................................40
4.14 Payment of Leasehold Obligations...............................................................41
4.15 Receivables....................................................................................41
4.16 Inventory......................................................................................43
4.17 Maintenance of Equipment.......................................................................43
4.18 Exculpation of Liability.......................................................................43
4.19 Environmental Matters..........................................................................44
4.20 Financing Statements...........................................................................46
V. REPRESENTATIONS AND WARRANTIES..........................................................................46
5.1 Authority......................................................................................46
5.2 Formation and Qualification....................................................................46
5.3 Survival of Representations and Warranties.....................................................47
5.4 Tax Returns....................................................................................47
5.5 Financial Statements...........................................................................47
5.6 Entity Name....................................................................................47
5.7 O.S.H.A. and Environmental Compliance..........................................................47
5.8 Solvency; No Litigation, Violation, Indebtedness or Default....................................48
5.9 Patents, Trademarks, Copyrights and Licenses...................................................49
5.10 Licenses and Permits...........................................................................50
5.11 Default of Indebtedness........................................................................50
5.12 No Default.....................................................................................50
5.13 No Burdensome Restrictions.....................................................................50
5.14 No Labor Disputes..............................................................................50
5.15 Margin Regulations.............................................................................50
5.16 Investment Company Act.........................................................................51
5.17 Disclosure.....................................................................................51
5.18 Delivery of Acquisition Agreement..............................................................51
5.19 Swaps..........................................................................................51
5.20 Conflicting Agreements.........................................................................51
5.21 Application of Certain Laws and Regulations....................................................51
5.22 Business and Property of Borrower..............................................................51
5.23 Section 20 Subsidiaries........................................................................52
5.24 Anti-Terrorism Laws............................................................................52
5.25 Trading with the Enemy.........................................................................52
5.26 Federal Securities Laws........................................................................53
VI. AFFIRMATIVE COVENANTS...................................................................................53
6.1 Payment of Fees................................................................................53
6.2 Conduct of Business and Maintenance of Existence and Assets....................................53
6.3 Violations.....................................................................................53
6.4 Government Receivables.........................................................................53
6.5 Financial Covenants............................................................................53
6.6 Execution of Supplemental Instruments..........................................................54
6.7 Payment of Indebtedness........................................................................54
6.8 Standards of Financial Statements..............................................................54
6.9 Federal Securities Laws........................................................................54
6.10 Exercise of Rights.............................................................................54
6.11 Inventory Audits...............................................................................54
VII. NEGATIVE COVENANTS......................................................................................54
7.1 Merger, Consolidation, Acquisition and Sale of Assets..........................................55
7.2 Creation of Liens..............................................................................55
7.3 Guarantees.....................................................................................55
7.4 Investments....................................................................................55
7.5 Loans..........................................................................................55
7.6 Capital Expenditures...........................................................................55
7.7 Dividends......................................................................................55
7.8 Indebtedness...................................................................................56
7.9 Nature of Business.............................................................................56
7.10 Transactions with Affiliates...................................................................56
7.11 Leases.........................................................................................56
7.12 Subsidiaries...................................................................................56
7.13 Fiscal Year and Accounting Changes.............................................................56
7.14 Pledge of Credit...............................................................................56
7.15 Amendment of Articles of Incorporation, By-Laws................................................56
7.16 Compliance with ERISA..........................................................................57
7.17 Prepayment of Indebtedness.....................................................................57
7.18 Anti-Terrorism Laws............................................................................57
7.18 Membership/Partnership Interests...............................................................57
7.19 Trading with the Enemy Act.....................................................................58
7.21 Other Agreements...............................................................................58
7.22 Progress Payments..............................................................................58
VIII. CONDITIONS PRECEDENT....................................................................................58
8.1 Conditions to Initial Advances.................................................................58
8.2 Conditions to Each Advance.....................................................................62
8.3 Conditions to Each Equipment Loan..............................................................63
IX. INFORMATION AS TO BORROWERS.............................................................................63
9.1 Disclosure of Material Matters.................................................................63
9.2 Schedules......................................................................................63
9.3 Environmental Reports..........................................................................64
9.4 Litigation.....................................................................................64
9.5 Material Occurrences...........................................................................64
9.6 Government Receivables.........................................................................64
9.7 Annual Financial Statements....................................................................64
9.8 Quarterly Financial Statements.................................................................65
9.9 Monthly Financial Statements...................................................................65
9.10 Other Reports..................................................................................65
9.11 Additional Information.........................................................................65
9.12 Projected Operating Budget.....................................................................65
9.13 Variances From Operating Budget................................................................66
9.14 Notice of Suits, Adverse Events................................................................66
9.15 ERISA Notices and Requests.....................................................................66
9.16 Additional Documents...........................................................................66
X. EVENTS OF DEFAULT.......................................................................................67
10.1 Nonpayment.....................................................................................67
10.2 Breach of Representation.......................................................................67
10.3 Financial Information..........................................................................67
10.4 Judicial Actions...............................................................................67
10.5 Noncompliance..................................................................................67
10.6 Judgments......................................................................................67
10.7 Bankruptcy....................................................................................67
10.8 Inability to Play..............................................................................68
10.9 Affiliate Bankruptcy...........................................................................68
10.10 Material Adverse Effect........................................................................68
10.11 Lien Priority..................................................................................68
10.12 Cross Default..................................................................................68
10.13 Change of Ownership............................................................................68
10.14 Invalidity.....................................................................................68
10.15 Licenses.......................................................................................68
10.16 Seizures.......................................................................................68
10.17 Operations.....................................................................................69
10.18 Pension Plans..................................................................................69
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT..............................................................69
11.1 Rights and Remedies............................................................................69
11.2 Agent's Discretion.............................................................................71
11.3 Setoff.........................................................................................71
11.4 Rights and Remedies not Exclusive..............................................................71
11.5 Allocation of Payments After Event of Default..................................................71
XII. WAIVERS AND JUDICIAL PROCEEDINGS........................................................................72
12.1 Waiver of Notice...............................................................................72
12.2 Delay..........................................................................................72
12.3 Jury Waiver....................................................................................72
XIII. EFFECTIVE DATE AND TERMINATION..........................................................................72
13.1 Term...........................................................................................72
13.2 Termination....................................................................................73
XIV. REGARDING AGENT.........................................................................................73
14.1 Appointment....................................................................................73
14.2 Nature of Duties...............................................................................74
14.3 Lack of Reliance on Agent and Resignation......................................................74
14.4 Certain Rights of Agent........................................................................75
14.5 Reliance.......................................................................................75
14.6 Notice of Default..............................................................................75
14.7 Indemnification................................................................................75
14.8 Agent in its Individual Capacity...............................................................75
14.9 Delivery of Documents..........................................................................76
14.10 Borrower's Undertaking to Agent................................................................76
14.11 No Reliance on Agent's Customer Identification Program.........................................76
14.12 Other Agreements...............................................................................76
XV. MISCELLANEOUS...........................................................................................76
15.1 Governing Law..................................................................................76
15.2 Entire Understanding...........................................................................77
15.3 Successors and Assigns; Participations; New Lenders............................................79
15.4 ________________________.............................................Error! Bookmark not defined.
15.4 Application of Payments........................................................................81
15.5 Indemnity......................................................................................81
15.6 Notice.........................................................................................81
15.7 Survival.......................................................................................83
15.8 Severability...................................................................................83
15.9 Expenses.......................................................................................83
15.10 Injunctive Relief..............................................................................84
15.11 Damages........................................................................................84
15.12. Captions.......................................................................................84
15.13 Counterparts; Facsimile Signatures.............................................................84
15.14 Construction...................................................................................84
15.15 Confidentiality; Sharing Information...........................................................84
15.16 Publicity......................................................................................85
15.17 Certifications From Banks and Participants; US PATRIOT Act.....................................85
REVOLVING CREDIT, TERM LOAN, EQUIPMENT LINE OF CREDIT
AND
SECURITY AGREEMENT
Revolving Credit, Term Loan, Equipment Line of Credit and Security
Agreement dated November 30, 2005 among AIR INDUSTRIES MACHINING, CORP. (as
successor by merger with ▇▇▇▇▇ Industries Acquisition Corp., Inc.), a
corporation organized under the laws of the State of New York ("Borrower"), the
financial institutions which are now or which hereafter become a party hereto
(collectively, the "Lenders" and individually a "Lender") and PNC BANK, NATIONAL
ASSOCIATION ("PNC"), as agent for Lenders (PNC, in such capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, Borrower, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
1.1 Accounting Terms. As used in this Agreement, the Other Documents
or any certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP as applied in preparation of the
audited financial statements of Borrower for the fiscal year ended December 31,
2004.
1.2 General Terms. For purposes of this Agreement the following
terms shall have the following meanings:
"2005 Phase 1" shall mean that certain Phase 1 Environmental Site
Assessment dated October 12, 2005 prepared by CA Rich Consultants, Inc.
"Accountants" shall have the meaning set forth in Section 9.7
hereof.
"Acquisition Agreement" shall mean the Stock Purchase Agreement
including all exhibits and schedules thereto dated as of July 25, 2005 by and
among ▇▇▇▇▇ Industries Incorporated, as buyer (the "Original Buyer"), and Air
Industries Machining, Corp., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ Rettalliata
and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, as sellers (collectively, the "Seller"), as amended,
restated, modified and/or replaced from time to time, and as assigned by the
Original Buyer in favor of ▇▇▇▇▇ Industries Acquisition Corp., Inc. (the
"Buyer").
"Advance Rates" shall mean, collectively, the Receivables Advance
Rate and the Inventory Advance Rate.
"Advances" shall mean and include the Revolving Advances as well as
the Term Loan, the Converted Equipment Loans and the Equipment Loans.
"Affiliate" of any Person shall mean (a) any Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with such Person, or (b) any Person who is a director, managing member, general
partner or officer (i) of such Person, (ii) of any Subsidiary of such Person or
(iii) of any Person described in clause (a) above. For purposes of this
definition, control of a Person shall mean the power, direct or indirect, (x) to
vote 33% or more of the Equity Interests having ordinary voting power for the
election of directors of such Person or other Persons performing similar
functions for any such Person, or (y) to direct or cause the direction of the
management and policies of such Person whether by ownership of Equity Interests,
contract or otherwise.
"Agent" shall have the meaning set forth in the preamble to this
Agreement and shall include its successors and assigns.
"Agreement" shall mean this Revolving Credit, Term Loan, Equipment
Line of Credit and Security Agreement, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"Alternate Base Rate" shall mean, for any day, a rate per annum
equal to the higher of (i) the Base Rate in effect on such day and (ii) the
Federal Funds Open Rate in effect on such day plus 1/2 of 1%.
"Anti-Terrorism Laws" shall mean any Applicable Laws relating to
terrorism or money laundering, including Executive Order No. 13224, the USA
PATRIOT Act, the Applicable Laws comprising or implementing the Bank Secrecy
Act, and the Applicable Laws administered by the United States Treasury
Department's Office of Foreign Asset Control (as any of the foregoing Applicable
Laws may from time to time be amended, renewed, extended, or replaced).
"Applicable Law" shall mean all laws, rules and regulations
applicable to the Person, conduct, transaction, covenant, Other Document or
contract in question, including all applicable common law and equitable
principles; all provisions of all applicable state, federal and foreign
constitutions, statutes, rules, regulations and orders of any Governmental Body,
and all orders, judgments and decrees of all courts and arbitrators.
"Assignment of Rents, Leases and Profits" shall mean that certain
Assignment of Rents, Leases and Profits executed by the Borrower in favor of the
Agent for the benefit of the Lenders dated the date hereof with regard to the
Mortgaged Premises, together with all extensions, renewals, amendments,
supplements, modifications, substitutions and replacements thereto and thereof.
"Authority" shall have the meaning set forth in Section 4.19(d).
"Base Rate" shall mean the base commercial lending rate of PNC as
publicly announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by PNC as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by PNC to any particular class or category of customers of PNC.
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"Blocked Accounts" shall have the meaning set forth in Section
4.15(h).
"Blocked Account Bank" shall have the meaning set forth in Section
4.15(h).
"Blocked Person" shall have the meaning set forth in Section 5.24(b)
hereof.
"Borrower" shall have the meaning set forth in the preamble to this
Agreement and shall extend to all permitted successors and assigns of such
Person.
"Borrower's Account" shall have the meaning set forth in Section
2.8.
"Borrowing Base Certificate" shall mean a certificate in
substantially the form of Exhibit 1.2 duly executed by the President, Chief
Financial Officer or Controller of the Borrower and delivered to the Agent,
appropriately completed, by which such officer shall certify to Agent the
Formula Amount and calculation thereof as of the date of such certificate.
"Borrowing Period" shall have the meaning set forth in Section
2.4(b) hereof.
"Business Day" shall mean any day other than Saturday or Sunday or a
legal holiday on which commercial banks are authorized or required by law to be
closed for business in East Brunswick, New Jersey and, if the applicable
Business Day relates to any Eurodollar Rate Loans, such day must also be a day
on which dealings are carried on in the London interbank market.
"Capital Expenditures" shall mean expenditures made or liabilities
incurred for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year, including the total principal portion of Capitalized Lease Obligations,
which, in accordance with GAAP, would be classified as capital expenditures.
"Capitalized Lease Obligation" shall mean any Indebtedness of
Borrower represented by obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.ss.9601 et seq.
"Change of Control" shall mean (a) the occurrence of any event
(whether in one or more transactions) which results in a transfer of control of
Borrower to a Person who is not an Original Owner or (b) any merger or
consolidation of or with Borrower or sale of all or substantially all of the
property or assets of Borrower. For purposes of this definition, "control of
Borrower" shall mean the power, direct or indirect (x) to vote 50% or more of
the Equity Interests having ordinary voting power for the election of directors
(or the individuals performing similar functions) of Borrower or (y) to direct
or cause the direction of the management and policies of Borrower by contract or
otherwise.
"Change of Ownership" shall mean (a) 50% or more of the Equity
Interests of Borrower is no longer owned or controlled by (including for the
purposes of the calculation of percentage ownership, any Equity Interests into
3
which any Equity Interests of Borrower held by any of the Original Owners are
convertible or for which any such Equity Interests of Borrower or of any other
Person may be exchanged and any Equity Interests issuable to such Original
Owners upon exercise of any warrants, options or similar rights which may at the
time of calculation be held by such Original Owners) a Person who is an Original
Owner or (b) any merger, consolidation or sale of substantially all of the
property or assets of Borrower.
"Charges" shall mean all taxes, charges, fees, imposts, levies or
other assessments, including all net income, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, profits, inventory,
capital stock, license, withholding, payroll, employment, social security,
unemployment, excise, severance, stamp, occupation and property taxes, custom
duties, fees, assessments, liens, claims and charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts, imposed by any taxing or other authority, domestic or foreign
(including the Pension Benefit Guaranty Corporation or any environmental agency
or superfund), upon the Collateral, Borrower or any of its Affiliates.
"Closing Date" shall mean November 30, 2005 or such other date as
may be agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as the same may
be amended or supplemented from time to time, and any successor statute of
similar import, and the rules and regulations thereunder, as from time to time
in effect.
"Collateral" shall mean and include:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Investment Property;
(f) all Real Property;
(g) all Subsidiary Stock;
(h) the Leasehold Interests;
(i) all of Borrower's right, title and interest in and to,
whether now owned or hereafter acquired and wherever located, (i) its respective
goods and other property including, but not limited to, all merchandise returned
or rejected by Customers, relating to or securing any of the Receivables; (ii)
all of Borrower's rights as a consignor, a consignee, an unpaid vendor,
mechanic, artisan, or other lienor, including stoppage in transit, setoff,
detinue, replevin, reclamation and repurchase; (iii) all additional amounts due
to Borrower from any Customer relating to the Receivables; (iv) other property,
4
including warranty claims, relating to any goods securing the Obligations; (v)
all of Borrower's contract rights, rights of payment which have been earned
under a contract right, instruments (including promissory notes), documents,
chattel paper (including electronic chattel paper), warehouse receipts, deposit
accounts, letters of credit and money; (vi) all commercial tort claims (whether
now existing or hereafter arising); (vii) if and when obtained by Borrower, all
real and personal property of third parties in which Borrower has been granted a
lien or security interest as security for the payment or enforcement of
Receivables; (viii) all letter of credit rights (whether or not the respective
letter of credit is evidenced by a writing); (ix) all supporting obligations;
and (x) any other goods, personal property or real property now owned or
hereafter acquired in which Borrower has expressly granted a security interest
or may in the future grant a security interest to Agent hereunder, or in any
amendment or supplement hereto or thereto, or under any other agreement between
Agent and Borrower;
(j) all of Borrower's ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computers, computer
software (owned by Borrower or in which it has an interest), computer programs,
tapes, disks and documents relating to (a), (b), (c), (d), (e), (f), (g), (h) or
(i) of this Paragraph; and
(k) all proceeds and products of (a), (b), (c), (d), (e), (f),
(g), (h), (i) and (j) in whatever form, including, but not limited to: cash,
deposit accounts (whether or not comprised solely of proceeds), certificates of
deposit, insurance proceeds (including hazard, flood and credit insurance),
negotiable instruments and other instruments for the payment of money, chattel
paper, security agreements, documents, eminent domain proceeds, condemnation
proceeds and tort claim proceeds.
"Commitment Percentage" of any Lender shall mean the percentage set
forth below such Lender's name on the signature page hereof as same may be
adjusted upon any assignment by a Lender pursuant to Section 15.3(b) hereof.
"Commitment Transfer Supplement" shall mean a document in the form
of Exhibit 15.3 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.
"Compliance Certificate" shall mean a compliance certificate to be
signed by the Chief Financial Officer or Controller of Borrower, which shall
state that, based on an examination sufficient to permit such officer 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 Borrower with respect to
such default and, such certificate shall have appended thereto calculations
which set forth Borrower's compliance with the requirements or restrictions
imposed by Sections 6.5, 7.4, 7.5, 7.6, 7.7, 7.8 and 7.11.
"Consents" shall mean all filings and all licenses, permits,
consents, approvals, authorizations, qualifications and orders of Governmental
Bodies and other third parties, domestic or foreign, necessary to carry on
Borrower's business or necessary (including to avoid a conflict or breach under
any agreement, instrument, other document, license, permit or other
5
authorization) for the execution, delivery or performance of this Agreement, the
Other Documents, or the Acquisition Agreement, including any Consents required
under all applicable federal, state or other Applicable Law.
"Consigned Inventory" shall mean Inventory of Borrower that is in
the possession of another Person on a consignment, sale or return, or other
basis that does not constitute a final sale and acceptance of such Inventory.
"Contract Rate" shall mean, as applicable, the Revolving Interest
Rate or the Term Loan Rate or the Equipment Line of Credit Rate, as more fully
described in Section 3.1 herein.
"Controlled Group" shall mean, at any time, the Borrower and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control and all other entities which,
together with Borrower, are treated as a single employer under Section 414 of
the Code.
"Conversion Date" shall have the meaning set forth in Section 2.4(b)
hereof.
"Converted Equipment Loan(s)" shall have the meaning set forth in
Section 2.4(b) hereof.
"Converted Equipment Line of Credit Note" shall mean the promissory
notes referred to in Section 2.4(b) hereof.
"Current Assets" at a particular date, shall mean all cash, cash
equivalents, accounts and inventory of Borrower and all other items which would,
in conformity with GAAP, be included under current assets on a balance sheet of
Borrower as at such date; provided, however, that such amounts shall not include
(a) any amounts for any Indebtedness owing by an Affiliate of Borrower, unless
such Indebtedness arose in connection with the sale of goods or rendition of
services in the Ordinary Course of Business and would otherwise constitute
current assets in conformity with GAAP, (b) any Equity Interests issued by an
Affiliate of Borrower, or (c) the cash surrender value of any life insurance
policy.
"Current Liabilities" at a particular date, shall mean all amounts
which would, in conformity with GAAP, be included under current liabilities on a
balance sheet of Borrower, as at such date, but in any event including the
amounts of (a) all Indebtedness of Borrower payable on demand, or, at the option
of the Person to whom such Indebtedness is owed, not more than twelve (12)
months after such date, (b) any payments in respect of any Indebtedness of
Borrower (whether installment, serial maturity, sinking fund payment or
otherwise) required to be made not more than twelve (12) months after such date,
(c) all reserves in respect of liabilities or Indebtedness payable on demand or,
at the option of the Person to whom such Indebtedness is owed, not more than
twelve (12) months after such date, the validity of which is not contested at
such date, and (d) all accruals for federal or other taxes measured by income
payable within a twelve (12) month period.
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"Customer" shall mean and include the account debtor with respect to
any Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with Borrower, pursuant
to which Borrower is to deliver any personal property or perform any services.
"Default" shall mean an event, circumstance or condition which, with
the giving of notice or passage of time or both, would constitute an Event of
Default.
"Default Rate" shall have the meaning set forth in Section 3.1
hereof.
"Defaulting Lender" shall have the meaning set forth in Section
2.13(a) hereof.
"Depository Accounts" shall have the meaning set forth in Section
4.15(h) hereof.
"Documents" shall have the meaning set forth in Section 8.1(c)
hereof.
"Dollar" and the sign "$" shall mean lawful money of the United
States of America.
"Domestic Rate Loan" shall mean any Advance that bears interest
based upon the Alternate Base Rate.
"Early Termination Date" shall have the meaning set forth in Section
13.1 hereof.
"Earnings Before Interest and Taxes" shall mean for any period the
sum of (i) net income (or loss) of Borrower for such period (excluding
extraordinary gains and losses), plus (ii) all interest expense of Borrower for
such period, plus (iii) all charges against income of Borrower for such period
for federal, state and local taxes actually paid.
"EBITDA" shall mean for any period the sum of (i) Earnings Before
Interest and Taxes for such period plus (ii) depreciation expenses for such
period, plus (iii) amortization expenses for such period.
"Eligible Inventory" shall mean and include Inventory, specifically
including work in process, valued at the lower of cost or market value,
determined on a first-in-first-out basis, which is not, in Agent's opinion,
obsolete, slow moving or unmerchantable and which Agent, in its sole discretion,
shall not deem ineligible Inventory, based on such considerations as Agent may
from time to time deem appropriate including whether the Inventory is subject to
a perfected, first priority security interest in favor of Agent and no other
Lien (other than a Permitted Encumbrance). In addition, Inventory shall not be
Eligible Inventory if it (i) does not conform to all standards imposed by any
Governmental Body which has regulatory authority over such goods or the use or
sale thereof, (ii) is in transit, (iii) is located outside the continental
United States or at a location that is not otherwise in compliance with this
Agreement, (iv) constitutes Consigned Inventory, (v) is the subject of an
Intellectual Property Claim; (vi) is subject to a License Agreement or other
agreement that limits, conditions or restricts Borrower's or Agent's right to
sell or otherwise dispose of such Inventory, unless Agent is a party to a
7
Licensor/Agent Agreement with the Licensor under such License Agreement; or
(vii) or is situated at a location not owned by Borrower unless the owner or
occupier of such location has executed in favor of Agent a Lien Waiver
Agreement. Eligible Inventory shall include all Inventory in-transit for which
title has passed to Borrower, which is insured to the full value thereof and for
which Agent shall have in its possession (a) all negotiable bills of lading
properly endorsed and (b) all non-negotiable bills of lading issued in Agent's
name.
"Eligible Receivables" shall mean and include with respect to
Borrower, each Receivable of Borrower arising in the Ordinary Course of Business
and which Agent, in its sole credit judgment, shall deem to be an Eligible
Receivable, based on such considerations as Agent may from time to time deem
appropriate. A Receivable shall not be deemed eligible unless such Receivable is
subject to Agent's first priority perfected security interest and no other Lien
(other than Permitted Encumbrances), and is evidenced by an invoice or other
documentary evidence satisfactory to Agent. In addition, no Receivable shall be
an Eligible Receivable if:
(a) it arises out of a sale made by Borrower to an Affiliate
of Borrower or to a Person controlled by an Affiliate of Borrower;
(b) it is due or unpaid more than ninety (90) days after the
original invoice date;
(c) fifty percent (50%) or more of the Receivables from such
Customer are not deemed Eligible Receivables hereunder. Such percentage may, in
Agent's sole discretion, be increased or decreased from time to time;
(d) any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached;
(e) the Customer shall (i) apply for, suffer, or consent to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property
or call a meeting of its creditors, (ii) admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present business, (iii) make a general assignment for the benefit of creditors,
(iv) commence a voluntary case under any state or federal bankruptcy laws (as
now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi)
file a petition seeking to take advantage of any other law providing for the
relief of debtors, (vii) acquiesce to, or fail to have dismissed, any petition
which is filed against it in any involuntary case under such bankruptcy laws, or
(viii) take any action for the purpose of effecting any of the foregoing;
(f) the sale is to a Customer outside the continental United
States of America, unless the sale is on letter of credit, guaranty or
acceptance terms, in each case acceptable to Agent in its sole discretion;
(g) the sale to the Customer is on a ▇▇▇▇-and-hold, guaranteed
sale, sale-and-return, sale on approval, consignment or any other repurchase or
return basis or is evidenced by chattel paper;
(h) Agent believes, in its sole judgment, that collection of
such Receivable is insecure or that such Receivable may not be paid by reason of
the Customer's financial inability to pay;
8
(i) the Customer is the United States of America, any state or
any department, agency or instrumentality of any of them, unless Borrower
assigns its right to payment of such Receivable to Agent pursuant to the
Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et seq.
and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with other
applicable statutes or ordinances;
(j) the goods giving rise to such Receivable have not been
delivered to and accepted by the Customer or the services giving rise to such
Receivable have not been performed by Borrower and accepted by the Customer or
the Receivable otherwise does not represent a final sale;
(k) the Receivables of the Customer exceed a credit limit
determined by Agent, in its sole discretion, to the extent such Receivable
exceeds such limit;
(l) the Receivable is subject to any offset, deduction,
defense, dispute, or counterclaim, the Customer is also a creditor or supplier
of Borrower or the Receivable is contingent in any respect or for any reason;
(m) Borrower has made any agreement with any Customer for any
deduction therefrom, except for discounts or allowances made in the Ordinary
Course of Business for prompt payment, all of which discounts or allowances are
reflected in the calculation of the face value of each respective invoice
related thereto;
(n) any return, rejection or repossession of the merchandise
has occurred or the rendition of services has been disputed;
(o) such Receivable is not payable to Borrower; or
(p) such Receivable is not otherwise satisfactory to Agent as
determined in good faith by Agent in the exercise of its discretion in a
reasonable manner.
"Environmental Complaint" shall have the meaning set forth in
Section 4.19(d) hereof.
"Environmental Indemnity Agreement" shall mean that certain
Environmental Indemnity Agreement executed by the Borrower in favor of the Agent
for the benefit of the Lenders dated the date hereof with regard to the
Mortgaged Premises, together with all extensions, renewals, amendments,
supplements, modifications, substitutions and replacements thereto and thereof.
"Environmental Laws" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
9
"Equipment" shall mean and include all of Borrower's goods (other
than Inventory) whether now owned or hereafter acquired and wherever located
including all equipment, machinery, apparatus, motor vehicles, fittings,
furniture, furnishings, fixtures, parts, accessories and all replacements and
substitutions therefor or accessions thereto.
"Equipment Line of Credit Note" shall mean the promissory note
referred to in Section 2.4(b) hereof.
"Equipment Line of Credit Rate" shall mean an interest rate per
annum equal to (a) the sum of the Alternate Base Rate plus one half of one
percent (.50%) with respect to Domestic Rate Loans and (b) the sum of the
Eurodollar Rate plus two and three quarters of one percent (2.75%) with respect
to Eurodollar Rate Loans.
"Equipment Loans" shall have the meaning set forth in Section 2.4(b)
hereof.
"Equipment Note" shall mean, collectively, the promissory notes
referred to in Section 2.4(b) hereof.
"Equity Interests" of any Person shall mean any and all shares,
rights to purchase, options, warrants, general, limited or limited liability
partnership interests, member interests, participation or other equivalents of
or interest in (regardless of how designated) equity of such Person, whether
voting or nonvoting, including common stock, preferred stock, convertible
securities or any other "equity security" (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the SEC under the
Exchange Act).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and the rules and regulations promulgated
thereunder.
"Eurodollar Rate" shall mean for any Eurodollar Rate Loan for the
then current Interest Period relating thereto the interest rate per annum
determined by Agent by dividing (the resulting quotient rounded upwards, if
necessary, to the nearest 1/100th of 1% per annum) (i) the rate of interest
determined by Agent in accordance with its usual procedures (which determination
shall be conclusive absent manifest error) to be the average of the London
interbank offered rates for U.S. Dollars quoted by the British Bankers'
Association as set forth on Moneyline Telerate (or appropriate successor or, if
British Banker's Association or its successor ceases to provide such quotes, a
comparable replacement determined by Agent) display page 3750 (or such other
display page on the Moneyline Telerate system as may replace display page 3750)
two (2) Business Days prior to the first day of such Interest Period for an
amount comparable to such Eurodollar Rate Loan and having a borrowing date and a
maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus
the Reserve Percentage. The Eurodollar Rate may also be expressed by the
following formula:
Average of London interbank offered rates quoted by BBA as
shown on Moneyline Telerate Service display page 3750
Eurodollar Rate = or appropriate successor
----------------------------------------------------------
1.00 - Reserve Percentage.
The Eurodollar Rate shall be adjusted with respect to any Eurodollar Rate Loan
that is outstanding on the effective date of any change in the Reserve
10
Percentage as of such effective date. The Agent shall give prompt notice to the
Borrower of the Eurodollar Rate as determined or adjusted in accordance
herewith, which determination shall be conclusive absent manifest error.
"Eurodollar Rate Loan" shall mean an Advance at any time that bears
interest based on the Eurodollar Rate.
"Event of Default" shall have the meaning set forth in Article X
hereof.
"Exchange Act" shall have the mean the Securities Exchange Act of
1934, as amended.
"Executive Order No. 13224" shall mean the Executive Order No. 13224
on Terrorist Financing, effective September 24, 2001, as the same has been, or
shall hereafter be, renewed, extended, amended or replaced.
"Existing Environmental Due Diligence" shall mean, collectively, (i)
that certain Phase 1 Environmental Site Assessment dated October 12, 2005
prepared by CA Rich Consultants, Inc. and (ii) that certain letter from the
County of Suffolk, New York with regard to Project No. ▇▇▇-▇▇-▇▇ dated January
8, 1998.
"Federal Funds Effective Rate" for any day shall mean the rate per
annum (based on a year of 360 days and actual days elapsed and rounded upward to
the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or
any successor) on such day as being the weighted average of the rates on
overnight federal funds transactions arranged by federal funds brokers on the
previous trading day, as computed and announced by such Federal Reserve Bank (or
any successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; provided, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.
"Federal Funds Open Rate" shall mean the rate per annum determined
by the Agent in accordance with its usual procedures (which determination shall
be conclusive absent manifest error) to be the "open" rate for federal funds
transactions as of the opening of business for federal funds transactions among
members of the Federal Reserve System arranged by federal funds brokers on such
day, as quoted by ▇▇▇▇▇▇ Guybutler Corporation, any successor entity thereto, or
any other broker selected by the Agent, as set forth on the applicable Telerate
display page; provided, however; that if such day is not a Business Day, the
Federal Funds Open Rate for such day shall be the "open" rate on the immediately
preceding Business Day, or if no such rate shall be quoted by a Federal funds
broker at such time, such other rate as determined by the Agent in accordance
with its usual procedures.
"Fixed Charge Coverage Ratio" shall mean and include, with respect
to any fiscal period, the ratio of (a) EBITDA, minus the aggregate amount of
unfunded capitalized expenditures made during such period, minus the aggregate
amount of distributions made during such period, minus the aggregate amount of
cash taxes paid during such period to (b) the aggregate amount of principal
and/or interest payments made on Funded Debt during such period.
11
"Foreign Subsidiary" of any Person, shall mean any Subsidiary of
such Person that is not organized or incorporated in the United States or any
State or territory thereof.
"Formula Amount" shall have the meaning set forth in Section 2.1(a).
"Funded Debt" shall mean, with respect to any Person, without
duplication, all Indebtedness for borrowed money evidenced by notes, bonds,
debentures, or similar evidences of Indebtedness that by its terms matures more
than one year from, or is directly or indirectly renewable or extendible at such
Person's option under a revolving credit or similar agreement obligating the
lender or lenders to extend credit over a period of more than one year from the
date of creation thereof, and specifically including Capitalized Lease
Obligations, current maturities of long-term debt, revolving credit and
short-term debt extendible beyond one year at the option of the debtor, and also
including, in the case of Borrower, the Obligations and, without duplication,
Indebtedness consisting of guaranties of Funded Debt of other Persons.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to ---- time.
"General Intangibles" shall mean and include all of Borrower's
general intangibles, whether now owned or hereafter acquired, including all
payment intangibles, all choses in action, causes of action, corporate or other
business records, inventions, designs, patents, patent applications, equipment
formulations, manufacturing procedures, quality control procedures, trademarks,
trademark applications, service marks, trade secrets, goodwill, copyrights,
design rights, software, computer information, source codes, codes, records and
updates, registrations, licenses, franchises, customer lists, tax refunds, tax
refund claims, computer programs, all claims under guaranties, security
interests or other security held by or granted to Borrower to secure payment of
any of the Receivables by a Customer (other than to the extent covered by
Receivables) all rights of indemnification and all other intangible property of
every kind and nature (other than Receivables).
"Governmental Body" shall mean any nation or government, any state
or other political subdivision thereof or any entity, authority, agency,
division or department exercising the legislative, judicial, regulatory or
administrative functions of or pertaining to a government.
"Hazardous Discharge" shall have the meaning set forth in Section
4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New York State Environmental Conservation Law or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
12
"Hazardous Wastes" shall mean all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous
waste disposal.
"Hedge Liabilities" shall have the meaning provided in the
definition of "Lender-Provided Interest Rate Hedge".
"Indebtedness" of a Person at a particular date shall mean all
obligations of such Person which in accordance with GAAP would be classified
upon a balance sheet as liabilities (except capital stock and surplus earned or
otherwise) and in any event, without limitation by reason of enumeration, shall
include all indebtedness, debt and other similar monetary obligations of such
Person whether direct or guaranteed, and all premiums, if any, due at the
required prepayment dates of such indebtedness, and all indebtedness secured by
a Lien on assets owned by such Person, whether or not such indebtedness actually
shall have been created, assumed or incurred by such Person. Any indebtedness of
such Person resulting from the acquisition by such Person of any assets subject
to any Lien shall be deemed, for the purposes hereof, to be the equivalent of
the creation, assumption and incurring of the indebtedness secured thereby,
whether or not actually so created, assumed or incurred.
"Ineligible Security" shall mean any security which may not be
underwritten or dealt in by member banks of the Federal Reserve System under
Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as
amended.
"Intellectual Property" shall mean property constituting under any
Applicable Law a patent, patent application, copyright, trademark, service ▇▇▇▇,
trade name, mask work, trade secret or license or other right to use any of the
foregoing.
"Intellectual Property Claim" shall mean the assertion by any Person
of a claim (whether asserted in writing, by action, suit or proceeding or
otherwise) that Borrower's ownership, use, marketing, sale or distribution of
any Inventory, Equipment, Intellectual Property or other property or asset is
violative of any ownership of or right to use any Intellectual Property of such
Person.
"Interest Period" shall mean the period provided for any Eurodollar
Rate Loan pursuant to Section 2.2(b).
"Interest Rate Hedge" shall mean an interest rate exchange, collar,
cap, swap, adjustable strike cap, adjustable strike corridor or similar
agreements entered into by the Borrower or its Subsidiaries in order to provide
protection to, or minimize the impact upon, the Borrower, any guarantor and/or
their respective Subsidiaries of increasing floating rates of interest
applicable to Indebtedness.
"Inventory" shall mean and include all of Borrower's now owned or
hereafter acquired goods, merchandise and other personal property, wherever
located, to be furnished under any consignment arrangement, contract of service
or held for sale or lease, all raw materials, work in process, finished goods
and materials and supplies of any kind, nature or description which are or might
be used or consumed in Borrower's business or used in selling or furnishing such
goods, merchandise and other personal property, and all documents of title or
other documents representing them.
13
"Inventory Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(ii) hereof.
"Inventory Sublimit" shall mean $6,000,000.
"Investment Property" shall mean and include all of Borrower's now
owned or hereafter acquired securities (whether certificated or uncertificated),
securities entitlements, securities accounts, commodities contracts and
commodities accounts.
"Leasehold Interests" shall mean all of Borrower's right, title and
interest in and to the premises set forth on Schedule 1.2(a) attached hereto.
"Lender" and "Lenders" shall have the meaning ascribed to such term
in the preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender.
"Lender-Provided Interest Rate Hedge" shall mean an Interest Rate
Hedge which is provided by any Lender and with respect to which the Agent
confirms meets the following requirements: such Interest Rate Hedge (i) is
documented in a standard International Swap Dealer Association Agreement, (ii)
provides for the method of calculating the reimbursable amount of the provider's
credit exposure in a reasonable and customary manner, and (iii) is entered into
for hedging (rather than speculative) purposes. The liabilities of the Borrower
to the provider of any Lender-Provided Interest Rate Hedge (the "Hedge
Liabilities") shall be "Obligations" hereunder and otherwise treated as
Obligations for purposes of each of the Other Documents. The Liens securing the
Hedge Liabilities shall be pari passu with the Liens securing all other
Obligations under this Agreement and the Other Documents.
"License Agreement" shall mean any agreement between Borrower and a
Licensor pursuant to which Borrower is authorized to use any Intellectual
Property in connection with the manufacturing, marketing, sale or other
distribution of any Inventory of Borrower or otherwise in connection with
Borrower's business operations.
"Licensor" shall mean any Person from whom Borrower obtains the
right to use (whether on an exclusive or non-exclusive basis) any Intellectual
Property in connection with Borrower's manufacture, marketing, sale or other
distribution of any Inventory or otherwise in connection with Borrower's
business operations.
"Licensor/Agent Agreement" shall mean an agreement between Agent and
a Licensor, in form and content satisfactory to Agent, by which Agent is given
the unqualified right, vis-a-vis such Licensor, to enforce Agent's Liens with
respect to and to dispose of Borrower's Inventory with the benefit of any
Intellectual Property applicable thereto, irrespective of Borrower's default
under any License Agreement with such Licensor.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, claim or encumbrance, or preference, priority or other
14
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including any conditional sale or
other title retention agreement, any lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement under the Uniform Commercial Code or comparable
law of any jurisdiction.
"Lien Waiver Agreement" shall mean an agreement which is executed in
favor of Agent by a Person who owns or occupies premises at which any Collateral
may be located from time to time and by which such Person shall waive any Lien
that such Person may ever have with respect to any of the Collateral and shall
authorize Agent from time to time to enter upon the premises to inspect or
remove the Collateral from such premises or to use such premises to store or
dispose of such Inventory.
"Loans" shall mean, collectively, the Revolving Advances, the Term
Loan, the Equipment Loans and the Converted Equipment Loans.
"Material Adverse Effect" shall mean a material adverse effect on
(a) the condition (financial or otherwise), results of operations, assets,
business, properties or prospects of Borrower or any guarantor, (b) Borrower's
ability to duly and punctually pay or perform the Obligations in accordance with
the terms thereof, (c) the value of the Collateral, or Agent's Liens on the
Collateral or the priority of any such Lien or (d) the practical realization of
the benefits of Agent's and each Lender's rights and remedies under this
Agreement and the Other Documents.
"Maximum Equipment Loan Amount" shall mean $1,500,000 less the
aggregate outstanding principal amount of all Equipment Loans, whether or not
such have been converted to Converted Equipment Loans.
"Maximum Loan Amount" shall mean $14,000,000 less repayments of the
Term Loan, the Converted Equipment Loans and Equipment Loans.
"Maximum Revolving Advance Amount" shall mean $9,000,000.
"Mortgage" shall mean that certain Mortgage and Security Agreement
executed by Borrower in favor of the Agent for the benefit of the Lenders with
regard to the Mortgaged Premises dated the date hereof, together with all
extensions, renewals, amendments, supplements, modifications, substitutions and
replacements thereto and thereof.
"Mortgaged Premises" shall mean, collectively, the real property
located at (i) ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, (▇▇) ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ and (iii) ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Sections 3(37) and 4001(a)(3) of ERISA.
"Multiple Employer Plan" shall mean a Plan which has two or more
contributing sponsors (including the Borrower or any member of the Controlled
Group) at least two of whom are not under common control, as such a plan is
described in Section 4064 of ERISA.
15
"Note" shall mean collectively, the Term Note, , the Converted
Equipment Line of Credit Note, the Equipment Line of Credit Note and the
Revolving Credit Note.
"Obligations" shall mean and include any and all loans, advances,
debts, liabilities, obligations, covenants and duties owing by the Borrower to
Lenders or Agent or to any other direct or indirect subsidiary or affiliate of
Agent or any Lender of any kind or nature, present or future (including any
interest accruing thereon after maturity, or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether or not evidenced
by any note, guaranty or other instrument, whether arising under any agreement,
instrument or document, (including this Agreement and the Other Documents)
whether or not for the payment of money, whether arising by reason of an
extension of credit, opening of a letter of credit, loan, equipment lease or
guarantee, under any interest or currency swap, future, option or other similar
agreement, or in any other manner, whether arising out of overdrafts or deposit
or other accounts or electronic funds transfers (whether through automated
clearing houses or otherwise) or out of the Agent's or any Lenders non-receipt
of or inability to collect funds or otherwise not being made whole in connection
with depository transfer check or other similar arrangements, whether direct or
indirect (including those acquired by assignment or participation), absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising, contractual or tortious, liquidated or unliquidated, regardless of how
such indebtedness or liabilities arise or by what agreement or instrument they
may be evidenced or whether evidenced by any agreement or instrument, including,
but not limited to, any and all of Borrower's Indebtedness and/or liabilities
under this Agreement, the Other Documents or under any other agreement between
Agent or Lenders and Borrower and any amendments, extensions, renewals or
increases and all costs and expenses of Agent and any Lender incurred in the
documentation, negotiation, modification, enforcement, collection or otherwise
in connection with any of the foregoing, including but not limited to reasonable
attorneys' fees and expenses and all obligations of Borrower to Agent or Lenders
to perform acts or refrain from taking any action.
"Ordinary Course of Business" shall mean the ordinary course of
Borrower's business as conducted on the Closing Date.
"Original Owners" shall mean ▇▇▇▇▇ Industries Incorporated, a
Delaware corporation.
"Other Documents" shall mean the Note, the Mortgage, the Assignment
of Rents, Leases and Profits, the Environmental Indemnity Agreement, any
Lender-Provided Interest Rate Hedge and any and all other agreements,
instruments and documents, including guaranties, pledges, powers of attorney,
consents, interest or currency swap agreements or other similar agreements and
all other writings heretofore, now or hereafter executed by Borrower or any
guarantor and/or delivered to Agent or any Lender in respect of the transactions
contemplated by this Agreement.
"Out-of-Formula Loans" shall have the meaning set forth in Section
15.2(b).
16
"Parent" of any Person shall mean a corporation or other entity
owning, directly or indirectly at least 50% of the shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
directors of the Person, or other Persons performing similar functions for any
such Person.
"Participant" shall mean each Person who shall be granted the right
by any Lender to participate in any of the Advances and who shall have entered
into a participation agreement in form and substance satisfactory to such
Lender.
"Payment Office" shall mean initially ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇; thereafter, such other office of Agent, if
any, which it may designate by notice to Borrower and to each Lender to be the
Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any successor.
"Pension Benefit Plan" shall mean at any time any employee pension
benefit plan (including a Multiple Employer Plan, but not a Multiemployer Plan)
which is covered by Title IV of ERISA or is subject to the minimum funding
standards under Section 412 of the Code and either (i) is maintained by any
member of the Controlled Group for employees of any member of the Controlled
Group; or (ii) has at any time within the preceding five years been maintained
by any entity which was at such time a member of the Controlled Group for
employees of any entity which was at such time a member of the Controlled Group.
"Permitted Encumbrances" shall mean (a) Liens in favor of Agent for
the benefit of Agent and Lenders; (b) Liens for taxes, assessments or other
governmental charges not delinquent or being contested in good faith and by
appropriate proceedings and with respect to which proper reserves have been
taken by Borrower; provided, that, the Lien shall have no effect on the priority
of the Liens in favor of Agent or the value of the assets in which Agent has
such a Lien and a stay of enforcement of any such Lien shall be in effect; (c)
Liens disclosed in the financial statements referred to in Section 5.5, the
existence of which Agent has consented to in writing; (d) deposits or pledges to
secure obligations under worker's compensation, social security or similar laws,
or under unemployment insurance; (e) deposits or pledges to secure bids,
tenders, contracts (other than contracts for the payment of money), leases,
statutory obligations, surety and appeal bonds and other obligations of like
nature arising in the Ordinary Course of Business; (f) Liens arising by virtue
of the rendition, entry or issuance against Borrower or any Subsidiary, or any
property of Borrower or any Subsidiary, of any judgment, writ, order, or decree
for so long as each such Lien (a) is in existence for less than 20 consecutive
days after it first arises or is being Properly Contested and (b) is at all
times junior in priority to any Liens in favor of Agent; (g) mechanics',
workers', materialmen's or other like Liens arising in the Ordinary Course of
Business with respect to obligations which are not due or which are being
contested in good faith by Borrower; (h) Liens placed upon fixed assets
hereafter acquired to secure a portion of the purchase price thereof, provided
that (x) any such lien shall not encumber any other property of Borrower and (y)
17
the aggregate amount of Indebtedness secured by such Liens incurred as a result
of such purchases during any fiscal year shall not exceed the amount provided
for in Section 7.6; (i) other Liens incidental to the conduct of Borrower's
business or the ownership of its property and assets which were not incurred in
connection with the borrowing of money or the obtaining of advances or credit,
and which do not in the aggregate materially detract from Agent's or Lenders'
rights in and to the Collateral or the value of Borrower's property or assets or
which do not materially impair the use thereof in the operation of Borrower's
business; and (j) Liens disclosed on Schedule 1.2.
"Person" shall mean any individual, sole proprietorship,
partnership, corporation, business trust, joint stock company, trust,
unincorporated organization, association, limited liability company, limited
liability partnership, institution, public benefit corporation, joint venture,
entity or Governmental Body (whether federal, state, county, city, municipal or
otherwise, including any instrumentality, division, agency, body or department
thereof).
"Plan" shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA (including a Pension Benefit Plan), maintained for
employees of Borrower or any member of the Controlled Group or any such Plan to
which Borrower or any member of the Controlled Group is required to contribute
on behalf of any of its employees.
"PNC" shall have the meaning set forth in the preamble to this
Agreement and shall extend to all of its successors and assigns.
"Properly Contested" shall mean, in the case of any Indebtedness of
any Person (including any taxes) that is not paid as and when due or payable by
reason of such Person's bona fide dispute concerning its liability to pay same
or concerning the amount thereof, (i) such Indebtedness is being properly
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted; (ii) such Person has established appropriate reserves as
shall be required in conformity with GAAP; (iii) the non-payment of such
Indebtedness will not have a Material Adverse Effect and will not result in the
forfeiture of any assets of such Person; (iv) no Lien is imposed upon any of
such Person's assets with respect to such Indebtedness unless such Lien is at
all times junior and subordinate in priority to the Liens in favor of the Agent
(except only with respect to property taxes that have priority as a matter of
applicable state law) and enforcement of such Lien is stayed during the period
prior to the final resolution or disposition of such dispute; (v) if such
Indebtedness results from, or is determined by the entry, rendition or issuance
against a Person or any of its assets of a judgment, writ, order or decree,
enforcement of such judgment, writ, order or decree is stayed pending a timely
appeal or other judicial review; and (vi) if such contest is abandoned, settled
or determined adversely (in whole or in part) to such Person, such Person
forthwith pays such Indebtedness and all penalties, interest and other amounts
due in connection therewith.
"Purchasing Lender" shall have the meaning set forth in Section 16.3
hereof.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42
U.S.C. ▇▇.▇▇. 6901 et seq., as same may be amended from time to time.
"Real Property" shall mean all of Borrower's right, title and
interest in and to the owned and leased premises identified on Schedule 4.19
hereto.
"Receivables" shall mean and include, as to Borrower, all of
Borrower's accounts, contract rights, instruments (including those evidencing
indebtedness owed to Borrower by its Affiliates), documents, chattel paper
(including electronic chattel paper), general intangibles relating to accounts,
18
drafts and acceptances, credit card receivables and all other forms of
obligations owing to Borrower arising out of or in connection with the sale or
lease of Inventory or the rendition of services, all supporting obligations,
guarantees and other security therefor, whether secured or unsecured, now
existing or hereafter created, and whether or not specifically sold or assigned
to Agent hereunder.
"Receivables Advance Rate" shall have the meaning set forth in
Section 2.1(a)(y)(i) hereof.
"Release" shall have the meaning set forth in Section 5.7(c)(i)
hereof.
"Reportable Event" shall mean a reportable event described in
Section 4043(c) of ERISA or the regulations promulgated thereunder.
"Required Lenders" shall mean Lenders holding at least fifty one
percent (51%) of the Advances and, if no Advances are outstanding, shall mean
Lenders holding fifty one percent (51%) of the Commitment Percentages; provided,
however, if there are fewer than three (3) Lenders, Required Lenders shall mean
all Lenders.
"Reserve Percentage" shall mean as of any day the maximum percentage
in effect on such day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding (currently referred to as "Eurocurrency
Liabilities".
"Revolving Advances" shall mean Advances made other than Equipment
Loans, the Converted Equipment Loans and the Term Loan.
"Revolving Credit Note" shall mean the promissory note referred to
in Section 2.1(a) hereof.
"Revolving Interest Rate" shall mean an interest rate per annum
equal to (a) the sum of the Alternate Base Rate plus one quarter of one percent
(.25%)with respect to Domestic Rate Loans and (b) the sum of the Eurodollar Rate
plus two and one half of one percent (2.50%)with respect to Eurodollar Rate
Loans.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Section 20 Subsidiary" shall mean the Subsidiary of the bank
holding company controlling PNC, which Subsidiary has been granted authority by
the Federal Reserve Board to underwrite and deal in certain Ineligible
Securities.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller Note Payable Reserve" shall mean a reserve established by
the Agent in the amount of $11,800.
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"Settlement Date" shall mean the Closing Date and thereafter
Wednesday or Thursday of each week or more frequently if Agent deems appropriate
unless such day is not a Business Day in which case it shall be the next
succeeding Business Day.
"Subsidiary" of any Person shall mean a corporation or other entity
of whose Equity Interests having ordinary voting power (other than Equity
Interests having such power only by reason of the happening of a contingency) to
elect a majority of the directors of such corporation, or other Persons
performing similar functions for such entity, are owned, directly or indirectly,
by such Person.
"Subsidiary Stock" shall mean all of the issued and outstanding
Equity Interests of any Subsidiary owned by the Borrower (not to exceed 65% of
the Equity Interests of any Foreign Subsidiary).
"Tangible Net Worth" shall mean, at a particular date, (a) the
aggregate amount of all assets of Borrower as may be properly classified as such
in accordance with GAAP consistently applied excluding such other assets as are
properly classified as intangible assets under GAAP, less (b) the aggregate
amount of all liabilities of Borrower.
"Term" shall have the meaning set forth in Section 13.1 hereof.
"Term Loan" shall mean the Advances made pursuant to Section 2.4
hereof.
"Term Loan Rate" shall mean an interest rate per annum equal to (a)
the sum of the Alternate Base Rate plus one half of one percent (.50%) with
respect to Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus two
and three quarters of one percent (2.75%) with respect to Eurodollar Rate Loans.
"Term Note" shall mean the promissory note described in Section 2.4
hereof.
"Termination Date" shall mean November 30, 2009 or such other date
as the Lenders may agree in writing to extend the Termination Date until,
without there being any obligation on the part of the Lenders to extend the
Termination Date.
"Termination Event" shall mean (i) a Reportable Event with respect
to any Plan or Multiemployer Plan; (ii) the withdrawal of Borrower or any member
of the Controlled Group from a Plan or Multiemployer Plan during a plan year in
which such entity was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; (iii) the providing of notice of intent to terminate a Plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the institution
by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any
event or condition (a) which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan or Multiemployer Plan, or (b) that may result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of
Borrower or any member of the Controlled Group from a Multiemployer Plan.
"Toxic Substance" shall mean and include any material present on the
Real Property or the Leasehold Interests which has been shown to have
significant adverse effect on human health or which is subject to regulation
20
under the Toxic Substances Control Act (TSCA), 15 U.S.C. ▇▇.▇▇. 2601 et seq.,
applicable state law, or any other applicable Federal or state laws now in force
or hereafter enacted relating to toxic substances. "Toxic Substance" includes
but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based
paints.
"Trading with the Enemy Act" shall mean the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) and any enabling legislation or executive order relating
thereto.
"Transaction" shall mean the transaction evidenced by this Agreement
and the Other Documents.
"Transferee" shall have the meaning set forth in Section 15.3(c)
hereof.
"Undrawn Availability" at a particular date shall mean an amount
equal to (a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving
Advance Amount, minus (b) the sum of (i) the outstanding amount of Advances
(other than the Equipment Loans, Converted Equipment Loans and Term Loan) plus
(ii) all amounts due and owing to Borrower's trade creditors which are
outstanding beyond normal trade terms , plus (iii) fees and expenses for which
Borrower is liable but which have not been paid or charged to Borrower's
Account.
"Uniform Commercial Code" shall have the meaning set forth in
Section 1.3 hereof.
"USA PATRIOT Act" shall mean the Uniting and Strengthening America
by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act
of 2001, Public Law 107-56, as the same has been, or shall hereafter be,
renewed, extended, amended or replaced.
"Week" shall mean the time period commencing with the opening of
business on a Wednesday and ending on the end of business the following Tuesday.
1.3 Uniform Commercial Code Terms. All terms used herein and defined
in the Uniform Commercial Code as adopted in the State of New York from time to
time (the "Uniform Commercial Code") shall have the meaning given therein unless
otherwise defined herein. Without limiting the foregoing, the terms "accounts",
"chattel paper", "instruments", "general intangibles", "payment intangibles",
"supporting obligations", "securities", "investment property", "documents",
"deposit accounts", "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. To the extent the definition of any category or type of
collateral is expanded by any amendment, modification or revision to the Uniform
Commercial Code, such expanded definition will apply automatically as of the
date of such amendment, modification or revision.
1.4 Certain Matters of Construction. The terms "herein", "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular section, paragraph or subdivision. All
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement. Any pronoun used shall be deemed to cover all genders. Wherever
appropriate in the context, terms used herein in the singular also include the
21
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 Agent is a party, including references to any of the Other Documents,
shall include any and all modifications or amendments thereto and any and all
extensions or renewals thereof. All references herein to the time of day shall
mean the time in New York, New York. Unless otherwise provided, all financial
calculations shall be performed with Inventory valued on a first-in, first-out
basis. Whenever the words "including" or "include" shall be used, such words
shall be understood to mean "including, without limitation" or "include, without
limitation". A Default or Event of Default shall be deemed to exist at all times
during the period commencing on the date that such Default or Event of Default
occurs to the date on which such Default or Event of Default is waived in
writing pursuant to this Agreement or, in the case of a Default, is cured within
any period of cure expressly provided for in this Agreement; and an Event of
Default shall "continue" or be "continuing" until such Event of Default has been
waived in writing by the Required Lenders. Any Lien referred to in this
Agreement or any of the Other Documents as having been created in favor of
Agent, any agreement entered into by Agent pursuant to this Agreement or any of
the Other Documents, any payment made by or to or funds received by Agent
pursuant to or as contemplated by this Agreement or any of the Other Documents,
or any act taken or omitted to be taken by Agent, shall, unless otherwise
expressly provided, be created, entered into, made or received, or taken or
omitted, for the benefit or account of Agent and Lenders. Wherever the phrase
"to the best of Borrower's knowledge" or words of similar import relating to the
knowledge or the awareness of Borrower are used in this Agreement or Other
Documents, such phrase shall mean and refer to (i) the actual knowledge of a
senior officer of Borrower or (ii) the knowledge that a senior officer would
have obtained if he had engaged in good faith and diligent performance of his
duties, including the making of such reasonably specific inquiries as may be
necessary of the employees or agents of Borrower and a good faith attempt to
ascertain the existence or accuracy of the matter to which such phrase relates.
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or otherwise within the
limitations of, another covenant shall not avoid the occurrence of a default if
such action is taken or condition exists. In addition, all representations and
warranties hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject matter
is correct or is not breached will not affect the incorrectness of a breach of a
representation or warranty hereunder.
II. ADVANCES, PAYMENTS.
2.1 Revolving Advances. (a) Subject to the terms and conditions set
forth in this Agreement including Section 2.1(b), each Lender, severally and not
jointly, will make Revolving Advances to Borrower in aggregate amounts
outstanding at any time equal to such Lender's Commitment Percentage of the
lesser of (x) the Maximum Revolving Advance Amount or (y) an amount equal to the
sum of:
(i) up to 85%, subject to the provisions of Section
2.1(b) hereof ("Receivables Advance Rate"), of Eligible
Receivables, plus
22
(ii) up to the lesser of (A) 50%, subject to the
provisions of Section 2.1(b) hereof, of the value of the
Eligible Inventory, (B) 85% of the appraised net orderly
liquidation value of Eligible Inventory (as evidenced by an
Inventory appraisal satisfactory to Agent in its sole
discretion exercised in good faith) or (C) the Inventory
Sublimit in the aggregate at any one time ("Inventory Advance
Rate" and together with the Receivables Advance Rate,
collectively, the "Advance Rates"), minus
(iii) such reserves as Agent may reasonably deem proper
and necessary from time to time including, but not limited to,
the Seller Note Payable Reserve.
The amount derived from the sum of (x) Sections 2.1(a)(y)(i) and (ii)
minus (y) Section 2.1 (a)(y)(iii) at any time and from time to time shall be
referred to as the "Formula Amount". The Revolving Advances shall be evidenced
by one or more secured promissory notes (collectively, the "Revolving Credit
Note") substantially in the form attached hereto as Exhibit 2.1(a).
(b) Discretionary Rights. The Advance Rates may be increased
or decreased by Agent at any time and from time to time in the exercise of its
reasonable discretion. Borrower consents to any such increases or decreases and
acknowledges that decreasing the Advance Rates or increasing or imposing
reserves may limit or restrict Advances requested by Borrower. The rights of
Agent under this subsection are subject to the provisions of Section 15.2(b).
2.2 Procedure for Revolving Advances and Equipment Loan Borrowing.
(a) Borrower may notify Agent prior to 10:00 a.m. on a Business Day of
Borrower's request to incur, on that day, a Revolving Advance hereunder. Subject
to the satisfaction of the conditions set forth in Section 8.3 hereof, in the
event Borrower desires an Equipment Loan, Borrower shall give Agent at least
three (3) Business Days' prior written notice. Should any amount required to be
paid as interest hereunder, or as fees or other charges under this Agreement or
any other agreement with Agent or Lenders, or with respect to any other
Obligation, become due, same shall be deemed a request for a Revolving Advance
as of the date such payment is due, in the amount required to pay in full such
interest, fee, charge or Obligation under this Agreement or any other agreement
with Agent or Lenders, and such request shall be irrevocable.
(b) Notwithstanding the provisions of subsection (a) above, in
the event Borrower desires to obtain a Eurodollar Rate Loan, Borrower shall give
Agent written notice by no later than 10:00 a.m. on the day which is three (3)
Business Days prior to the date such Eurodollar Rate Loan is to be borrowed,
specifying (i) the date of the proposed borrowing (which shall be a Business
Day), (ii) the type of borrowing and the amount on the date of such Advance to
be borrowed, which amount shall be an integral multiple of $250,000, and (iii)
the duration of the first Interest Period therefor. Interest Periods for
Eurodollar Rate Loans shall be for one, two or three months; provided, if an
Interest Period would end on a day that is not a Business Day, it shall end on
the next succeeding Business Day unless such day falls in the next succeeding
calendar month in which case the Interest Period shall end on the next preceding
Business Day. No Eurodollar Rate Loan shall be made available to Borrower during
the continuance of a Default or an Event of Default. After giving effect to each
requested Eurodollar Rate Loan, including those which are converted from a
Domestic Rate Loan under Section 2.2(d), there shall not be outstanding more
than four (4) Eurodollar Rate Loans, in the aggregate.
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(c) Each Interest Period of a Eurodollar Rate Loan shall
commence on the date such Eurodollar Rate Loan is made and shall end on such
date as Borrower may elect as set forth in subsection (b)(iii) above provided
that the exact length of each Interest Period shall be determined in accordance
with the practice of the interbank market for offshore Dollar deposits and no
Interest Period shall end after the last day of the Term.
(d) Borrower shall elect the initial Interest Period
applicable to a Eurodollar Rate Loan by its notice of borrowing given to Agent
pursuant to Section 2.2(b) or by its notice of conversion given to Agent
pursuant to Section 2.2(d), as the case may be. Borrower shall elect the
duration of each succeeding Interest Period by giving irrevocable written notice
to Agent of such duration not later than 10:00 a.m. on the day which is three
(3) Business Days prior to the last day of the then current Interest Period
applicable to such Eurodollar Rate Loan. If Agent does not receive timely notice
of the Interest Period elected by Borrower, Borrower shall be deemed to have
elected to convert to a Domestic Rate Loan subject to Section 2.2(d)
hereinbelow.
(e) At its option and upon written notice given prior to 10:00
a.m. (New York time) at least three (3) Business Days' prior to the date of such
prepayment, Borrower may prepay the Eurodollar Rate Loans in whole at any time
or in part from time to time with accrued interest on the principal being
prepaid to the date of such repayment. Borrower shall specify the date of
prepayment of Advances which are Eurodollar Rate Loans and the amount of such
prepayment. In the event that any prepayment of a Eurodollar Rate Loan is
required or permitted on a date other than the last Business Day of the then
current Interest Period with respect thereto, Borrower shall indemnify Agent and
Lenders therefor in accordance with Section 2.2(f) hereof.
(f) Borrower shall indemnify Agent and Lenders and hold Agent
and Lenders harmless from and against any and all losses or expenses that Agent
and Lenders may sustain or incur as a consequence of any prepayment, conversion
of or any default by Borrower in the payment of the principal of or interest on
any Eurodollar Rate Loan or failure by Borrower to complete a borrowing of, a
prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof
has been given, including, but not limited to, any interest payable by Agent or
Lenders to lenders of funds obtained by it in order to make or maintain its
Eurodollar Rate Loans hereunder. A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by Agent or any Lender to
Borrower shall be conclusive absent manifest error.
(g) Notwithstanding any other provision hereof, if any
Applicable Law, treaty, regulation or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Lender
(for purposes of this subsection (g), the term "Lender" shall include any Lender
and the office or branch where any Lender or any corporation or bank controlling
such Lender makes or maintains any Eurodollar Rate Loans) to make or maintain
its Eurodollar Rate Loans, the obligation of Lenders to make Eurodollar Rate
Loans hereunder shall forthwith be cancelled and Borrower shall, if any affected
Eurodollar Rate Loans are then outstanding, promptly upon request from Agent,
either pay all such affected Eurodollar Rate Loans or convert such affected
Eurodollar Rate Loans into loans of another type. If any such payment or
24
conversion of any Eurodollar Rate Loan is made on a day that is not the last day
of the Interest Period applicable to such Eurodollar Rate Loan, Borrower shall
pay Agent, upon Agent's request, such amount or amounts as may be necessary to
compensate Lenders for any loss or expense sustained or incurred by Lenders in
respect of such Eurodollar Rate Loan as a result of such payment or conversion,
including (but not limited to) any interest or other amounts payable by Lenders
to lenders of funds obtained by Lenders in order to make or maintain such
Eurodollar Rate Loan. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Lenders to Borrower shall be
conclusive absent manifest error.
2.3 Disbursement of Advance Proceeds. All Advances shall be
disbursed from whichever office or other place Agent may designate from time to
time and, together with any and all other Obligations of Borrower to Agent or
Lenders, shall be charged to Borrower's Account on Agent's books. During the
Term, Borrower 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 Borrower or deemed to have been
requested by Borrower under Section 2.2(a) hereof shall, with respect to
requested Revolving Advances to the extent Lenders make such Revolving Advances,
be made available to Borrower on the day so requested by way of credit to
Borrower's operating account at PNC, or such other bank as Borrower may
designate following notification to Agent, in immediately available federal
funds or other immediately available funds or, with respect to Revolving
Advances deemed to have been requested by Borrower, be disbursed to Agent to be
applied to the outstanding Obligations giving rise to such deemed request.
2.4 Loans.
(a) Term Loan. Subject to the terms and conditions of this
Agreement, each Lender, severally and not jointly, will make a Term Loan to
Borrower in the sum equal to such Lender's Commitment Percentage of $3,500,000.
The Term Loan shall be advanced on the Closing Date and shall be, with respect
to principal, payable as follows, subject to acceleration upon the occurrence of
an Event of Default under this Agreement or termination of this Agreement:
eighty four (84) consecutive monthly principal installments, the first eighty
three (83) of which shall be in the amount of $31,667 commencing on the first
Business Day of January, 2006, and continuing on the first Business Day of each
month thereafter, with an eighty fourth (84th) and final payment of any unpaid
balance of principal and interest payable on the first Business Day of December,
2012, subject to mandatory prepayment and acceleration upon the occurrence of an
Event of Default hereunder or earlier termination of the Loan Agreement pursuant
to the terms hereof. Notwithstanding anything to the contrary herein, in the
Term Note and/or in any Other Document, all outstanding principal and interest
hereunder is due and payable on the Termination Date in the event that the
Termination Date is before the first Business Day of December, 2012. The Term
Loan shall be evidenced by one or more secured promissory notes (collectively,
the "Term Note") in substantially the form attached hereto as Exhibit 2.4a.
(b) Equipment Loans. Subject to the terms and conditions of
this Agreement, each Lender, severally and not jointly, shall, from time to
time, make available Advances to Borrower (each, an "Equipment Loan" and
collectively, the "Equipment Loans") to finance Borrower's purchase of Equipment
for use in Borrower's business. All such Equipment Loans shall be in such
amounts as are requested by Borrower, but in no event shall any Equipment Loan
25
exceed eighty percent (80%) of the net invoice cost (excluding taxes, shipping,
delivery, handling, installation, overhead and other so called "soft" costs) of
the Equipment then to be purchased by Borrower and the total amount of all
Equipment Loans outstanding hereunder (whether or not such Equipment Loans have
been converted to a Converted Equipment Loan) shall not exceed, in the
aggregate, the Maximum Equipment Loan Amount. Once repaid (whether or not such
Equipment Loans have been converted to and repaid as a Converted Equipment Loan)
Equipment Loans may not be reborrowed. Notwithstanding anything in the contrary
herein, the maximum amount of Equipment Loans advanced by the Lenders in any
fiscal year shall not exceed $750,000. The Equipment Loans shall be evidenced by
a secured promissory note (the "Equipment Line of Credit Note"), executed by
Borrower in substantially the form annexed hereto as Exhibit 2.4(b)(i). Until
the Termination Date, Advances constituting Equipment Loans shall be accumulated
during at the end of each fiscal year of the Borrower (each a "Borrowing
Period") during the Term. Notwithstanding the foregoing, the first Borrowing
Period shall commence on the Closing Date and end on December 31, 2006. Each
subsequent Borrowing Period shall consist of twelve month periods commencing on
January 1, 2007 provided, however, that no Borrowing Period shall extend beyond
the Termination Date. During each Borrowing Period, the Borrower shall pay to
the Agent interest accrued on the outstanding balance of the Equipment Loans on
the first day of each month. At the end of each Borrowing Period (each a
"Conversion Date"), the sum of all Equipment Loans made during the Borrowing
Period shall be converted to a term loan (each a "Converted Equipment Loan") and
shall amortize on the basis of a sixty (60) month schedule (such amount
converted shall be referred to as the "Amortization Amount") provided, however,
if, for any such Borrowing Period, the sum of all Equipment Loans made during
such Borrowing Period is less than $500,000, then such Equipment Loans shall not
convert to a Converted Equipment Loan until the earliest Conversion Date
thereafter on which the sum of all outstanding Equipment Loans are equal to or
greater than $500,000. Each Converted Equipment Loan shall be, with respect to
principal, payable in equal monthly installments based upon the amortization
schedule set forth above, commencing on the first day of the first month
following the applicable Conversion Date and continuing on the first day of each
month thereafter with the balance payable upon the first day of the sixtieth
(60th) month thereafter, subject to acceleration upon the occurrence and during
the continuance of an Event of Default under this Agreement or termination of
this Agreement. Notwithstanding anything to the contrary herein, in any
Converted Equipment Line of Credit Note and/or in any Other Document, all
outstanding principal and interest hereunder is due and payable on the
Termination Date. Each Converted Equipment Loan shall be evidenced by a secured
promissory note (the "Converted Equipment Line of Credit Note"), executed by
Borrower in substantially the form annexed hereto as Exhibit 2.4(b)(ii).
2.5 Maximum Advances. The aggregate balance of Revolving Advances
outstanding at any time shall not exceed the lesser of (a) the Maximum Revolving
Advance Amount or (b) the Formula Amount.
2.6 Repayment of Advances.
(a) The Revolving Advances shall be due and payable in full on
the Termination Date subject to earlier prepayment as herein provided. The Term
Loan shall be due and payable as provided in Section 2.4(a) hereof and in the
26
Term Note, subject to mandatory prepayments as herein set forth provided,
however, notwithstanding anything to the contrary herein or in any Other
Document, all outstanding principal and interest with regard to the Term Note
shall be due and payable on the Termination Date. The Equipment Loans shall be
due and payable as provided in Section 2.4(b) hereof and in the Equipment Line
of Credit Note, subject to mandatory prepayments as herein provided, however,
notwithstanding anything to the contrary herein or in any Other Document, all
outstanding principal and interest with regard to the Equipment Line of Credit
Note shall be due and payable on the Termination Date. The Converted Equipment
Loans shall be due and payable as provided in Section 2.4(b) and in the
Converted Equipment Line of Credit Note, subject to mandatory prepayments as
herein provided, however, notwithstanding anything to the contrary herein or in
any Other Document, all outstanding principal and interest with regard to the
Converted Equipment Line of Credit Note shall be due and payable on the
Termination Date.
(b) Borrower recognizes that the amounts evidenced by checks,
notes, drafts or any other items of payment relating to and/or proceeds of
Collateral may not be collectible by Agent on the date received. In
consideration of Agent's agreement to conditionally credit Borrower's Account as
of the Business Day on which Agent receives those items of payment, Borrower
agrees that, in computing the charges under this Agreement, all items of payment
shall be deemed applied by Agent on account of the Obligations one (1) Business
Day after (i) the Business Day Agent receives such payments via wire transfer or
electronic depository check or (ii) in the case of payments received by Agent in
any other form, the Business Day such payment constitutes good funds in Agent's
account. Agent is not, however, required to credit Borrower's Account for the
amount of any item of payment which is unsatisfactory to Agent and Agent may
charge Borrower's Account for the amount of any item of payment which is
returned to Agent unpaid.
(c) All payments of principal, interest and other amounts
payable hereunder, or under any of the Other Documents shall be made to Agent at
the Payment Office not later than 1:00 P.M. (New York time) on the due date
therefor in lawful money of the United States of America in federal funds or
other funds immediately available to Agent. Agent shall have the right to
effectuate payment on any and all Obligations due and owing hereunder by
charging Borrower's Account or by making Advances as provided in Section 2.2
hereof.
(d) Borrower shall pay principal, interest, and all other
amounts payable hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
2.7 Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall be immediately due and payable without the necessity of any
demand, at the Payment Office, whether or not a Default or Event of Default has
occurred.
2.8 Statement of Account. Agent shall maintain, in accordance with
its customary procedures, a loan account ("Borrower's Account") in the name of
Borrower in which shall be recorded the date and amount of each Advance made by
Agent and the date and amount of each payment in respect thereof; provided,
however, the failure by Agent to record the date and amount of any Advance shall
not adversely affect Agent or any Lender. Each month, Agent shall send to
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Borrower a statement showing the accounting for the Advances made, payments made
or credited in respect thereof, and other transactions between Agent and
Borrower, during such month. The monthly statements shall be deemed correct and
binding upon Borrower in the absence of manifest error and shall constitute an
account stated between Lenders and Borrower unless Agent receives a written
statement of Borrower's specific exceptions thereto within thirty (30) days
after such statement is received by Borrower. The records of Agent with respect
to the loan account shall be conclusive evidence absent manifest error of the
amounts of Advances and other charges thereto and of payments applicable
thereto.
2.9 Additional Payments. Any sums expended by Agent or any Lender
due to Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document including Borrower's obligations under Sections
4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to Borrower's Account
as a Revolving Advance and added to the Obligations.
2.10 Manner of Borrowing and Payment.
(a) Each borrowing of Revolving Advances shall be advanced
according to the applicable Commitment Percentages of Lenders. The Term Loan
shall be advanced according to the Commitment Percentages of Lenders. Each
borrowing of Equipment Loans shall be advanced according to the applicable
Commitment Percentages of Lenders. The Converted Equipment Loan shall be
advanced according to the applicable Commitment Percentages of Lenders.
(b) Each payment (including each prepayment) by Borrower on
account of the principal of and interest on the Revolving Advances, shall be
applied to the Revolving Advances pro rata according to the applicable
Commitment Percentages of Lenders. Each payment (including each prepayment) by
Borrower on account of the principal of and interest on the Term Note, shall be
made from or to, or applied to that portion of the Term Loan evidenced by the
Term Note pro rata according to the Commitment Percentages of Lenders. Each
payment (including each prepayment) by Borrower on account of the principal of
and interest on the Equipment Note, shall be applied to that portion of the
Equipment Loan evidenced by the Equipment Note pro rata according to the
Commitment Percentages of Lenders. Each payment (including each prepayment) by
Borrower on account of the principal of and interest on the Converted Equipment
Line of Credit Note, shall be applied to that portion of the Converted Equipment
Loan evidenced by the Converted Equipment Line of Credit Note pro rata according
to the Commitment Percentages of Lenders. Except as expressly provided herein,
all payments (including prepayments) to be made by Borrower on account of
principal, interest and fees shall be made without set off or counterclaim and
shall be made to Agent on behalf of the Lenders to the Payment Office, in each
case on or prior to 1:00 P.M., New York time, in Dollars and in immediately
available funds.
(c)
(i) Notwithstanding anything to the contrary contained
in Sections 2.10(a) and (b) hereof, commencing with the first
Business Day following the Closing Date, each borrowing of
Revolving Advances shall be advanced by Agent and each payment
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by Borrower on account of Revolving Advances shall be applied
first to those Revolving Advances advanced by Agent. On or
before 1:00 P.M., New York time, on each Settlement Date
commencing with the first Settlement Date following the
Closing Date, Agent and Lenders shall make certain payments as
follows: (I) if the aggregate amount of new Revolving Advances
made by Agent during the preceding Week (if any) exceeds the
aggregate amount of repayments applied to outstanding
Revolving Advances during such preceding Week, then each
Lender shall provide Agent with funds in an amount equal to
its applicable Commitment Percentage of the difference between
(w) such Revolving Advances and (x) such repayments and (II)
if the aggregate amount of repayments applied to outstanding
Revolving Advances during such Week exceeds the aggregate
amount of new Revolving Advances made during such Week, then
Agent shall provide each Lender with funds in an amount equal
to its applicable Commitment Percentage of the difference
between (y) such repayments and (z) such Revolving Advances.
(ii) Each Lender shall be entitled to earn interest at
the applicable Contract Rate on outstanding Advances which it
has funded.
(iii) Promptly following each Settlement Date, Agent
shall submit to each Lender a certificate with respect to
payments received and Advances made during the Week
immediately preceding such Settlement Date. Such certificate
of Agent shall be conclusive in the absence of manifest error.
(d) If any Lender or Participant (a "benefited Lender") shall
at any time receive any payment of all or part of its Advances, or interest
thereon, or receive any Collateral in respect thereof (whether voluntarily or
involuntarily or by set-off) in a greater proportion than any such payment to
and Collateral received by any other Lender, if any, in respect of such other
Lender's Advances, or interest thereon, and such greater proportionate payment
or receipt of Collateral is not expressly permitted hereunder, such benefited
Lender shall purchase for cash from the other Lenders a participation in such
portion of each such other Lender's Advances, or shall provide such other Lender
with the benefits of any such Collateral, or the proceeds thereof, as shall be
necessary to cause such benefited Lender to share the excess payment or benefits
of such Collateral or proceeds ratably with each of the other Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Each Lender so purchasing a portion of another
Lender's Advances may exercise all rights of payment (including rights of
set-off) with respect to such portion as fully as if such Lender were the direct
holder of such portion.
(e) Unless Agent shall have been notified by telephone,
confirmed in writing, by any Lender that such Lender will not make the amount
which would constitute its applicable Commitment Percentage of the Advances
available to Agent, Agent may (but shall not be obligated to) assume that such
Lender shall make such amount available to Agent on the next Settlement Date
and, in reliance upon such assumption, make available to Borrower a
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corresponding amount. Agent will promptly notify Borrower of its receipt of any
such notice from a Lender. If such amount is made available to Agent on a date
after such next Settlement Date, such Lender shall pay to Agent on demand an
amount equal to the product of (i) the daily average Federal Funds Effective
Rate (computed on the basis of a year of 360 days) during such period as quoted
by Agent, times (ii) such amount, times (iii) the number of days from and
including such Settlement Date to the date on which such amount becomes
immediately available to Agent. A certificate of Agent submitted to any Lender
with respect to any amounts owing under this paragraph (e) shall be conclusive,
in the absence of manifest error. If such amount is not in fact made available
to Agent by such Lender within three (3) Business Days after such Settlement
Date, Agent shall be entitled to recover such an amount, with interest thereon
at the rate per annum then applicable to such Revolving Advances hereunder, on
demand from Borrower; provided, however, that Agent's right to such recovery
shall not prejudice or otherwise adversely affect Borrower's rights (if any)
against such Lender.
2.11 Mandatory Prepayments. Subject to Section 4.3 hereof, when
Borrower sells or otherwise disposes of any Collateral other than Inventory in
the Ordinary Course of Business, Borrower 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 one (1) Business Day following receipt of such net
proceeds, and until the date of payment, such proceeds shall be held in trust
for Agent. 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 (i) if the Collateral disposed of is Equipment the purchase of
which was financed by an Equipment Loan, (x) first, to the outstanding principal
installments of the Equipment Loans and/or the Converted Equipment Loans in the
inverse order of the maturities thereof, (y) second, to the outstanding
principal installments of the Term Loan in the inverse order of the maturities
thereof and (z) third, to the remaining Advances in such order as Agent may
determine, subject to Borrower's ability to reborrow Revolving Advances in
accordance with the terms hereof, (ii) if the Collateral disposed of is
Equipment other than as set forth in (i) above, (x) first, to the outstanding
principal installments of the Term Loan in the inverse order of the maturities
thereof, (y) second, to the outstanding principal installments of the Equipment
Loans and/or the Converted Equipment Loans in the inverse order of the
maturities thereof and (z) third, to the remaining Advances in such order as
Agent may determine, subject to Borrower's ability to reborrow Revolving
Advances in accordance with the terms hereof, or (ii) if the Collateral disposed
of is the Mortgaged Premises, (y) first, to the outstanding principal
installments of the Term Loan in the inverse order of the maturities thereof up
to $2,800,000, and (z) second, to the Revolving Advances in such order as Agent
may determine, subject to Borrower's ability to reborrow Revolving Advances in
accordance with the terms hereof.
2.12 Use of Proceeds. Borrower shall apply the proceeds of Advances
to (i) purchase the Mortgaged Premises, (ii) repay existing indebtedness owed to
Citibank, (iii) pay fees and expenses relating to this transaction, and (iv)
provide for its working capital needs.
Without limiting the generality of Section 2.12(a) above, neither the
Borrower nor any other Person which may in the future become party to this
Agreement or the Other Documents as Borrower, intends to use nor shall they use
any portion of the proceeds of the Advances, directly or indirectly, for any
purpose in violation of the Trading with the Enemy Act.
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2.13 Defaulting Lender.
(a) Notwithstanding anything to the contrary contained herein,
in the event any Lender (x) has refused (which refusal constitutes a breach by
such Lender of its obligations under this Agreement) to make available its
portion of any Advance or (y) notifies either Agent or Borrower that it does not
intend to make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement)
(each, a "Lender Default"), all rights and obligations hereunder of such Lender
(a "Defaulting Lender") as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.13 while such Lender Default remains in effect.
(b) Advances shall be incurred pro rata from Lenders (the
"Non-Defaulting Lenders") which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender pro rata based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that, the aggregate amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage
of all Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to give
instructions to Agent or to approve, disapprove, consent to or vote on any
matters relating to this Agreement and the Other Documents. All amendments,
waivers and other modifications of this Agreement and the Other Documents may be
made without regard to a Defaulting Lender and, for purposes of the definition
of "Required Lenders", a Defaulting Lender shall be deemed not to be a Lender
and not to have Advances outstanding.
(d) Other than as expressly set forth in this Section 2.13,
the rights and obligations of a Defaulting Lender (including the obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing in
this Section 2.13 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which Borrower, Agent or any Lender may
have against any Defaulting Lender as a result of any default by such Defaulting
Lender hereunder.
(e) In the event a Defaulting Lender retroactively cures to
the satisfaction of Agent the breach which caused a Lender to become a
Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting Lender
and shall be treated as a Lender under this Agreement.
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III. INTEREST AND FEES.
3.1 Interest. Interest on Advances shall be payable in arrears on
the first day of each month with respect to Domestic Rate Loans and, with
respect to Eurodollar Rate Loans, at the end of each Interest Period or, for
Eurodollar Rate Loans with an Interest Period in excess of three months, at the
earlier of (a) each three months from the commencement of such Eurodollar Rate
Loan or (b) the end of the Interest Period. Interest charges shall be computed
on the actual principal amount of Advances outstanding during the month at a
rate per annum equal to (i) with respect to Revolving Advances, the applicable
Revolving Interest Rate and (ii) with respect to the Term Loan, the applicable
Term Loan Rate and (iii) with respect to the Equipment Loans and the Converted
Equipment Loan, the applicable Equipment Line of Credit Rate (as applicable, the
"Contract Rate"). Whenever, subsequent to the date of this Agreement, the
Alternate Base Rate is increased or decreased, the applicable Contract Rate for
Domestic Rate Loans shall be similarly changed without notice or demand of any
kind by an amount equal to the amount of such change in the Alternate Base Rate
during the time such change or changes remain in effect. The Eurodollar Rate
shall be adjusted with respect to Eurodollar Rate Loans without notice or demand
of any kind on the effective date of any change in the Reserve Percentage as of
such effective date. Upon and after the occurrence of an Event of Default, and
during the continuation thereof, (i) at the option of Agent or at the direction
of Required Lenders, the Obligations other than Eurodollar Rate Loans shall bear
interest at the applicable Contract Rate for Domestic Loans plus two percent
(2%) per annum and (ii) Eurodollar Rate Loans shall bear interest at the
Revolving Interest Rate for Eurodollar Rate Loans plus two percent (2%) per
annum (as applicable, the "Default Rate").
3.2 Closing Fee and Facility Fee.
(a) Closing Fee. Upon the execution of this Agreement,
Borrower shall pay to Agent for the ratable benefit of Lenders a closing fee of
$140,000 less that portion of the commitment fee of $40,000 heretofore paid by
Borrower to Agent remaining after application of such fee to out of pocket
expenses.
(b) Facility Fee. If, for any calendar quarter during the
Term, the average daily unpaid balance of the Revolving Advances for each day of
such calendar quarter does not equal the Maximum Revolving Advance Amount, then
Borrower shall pay to Agent for the ratable benefit of Lenders a fee at a rate
equal to one half of one percent (.50%) per annum on the amount by which the
Maximum Revolving Advance Amount exceeds such average daily unpaid balance. Such
fee shall be payable to Agent in arrears on the first day of each calendar
quarter with respect to the previous calendar quarter.
3.3 Collateral Evaluation Fee, Collateral Monitoring Fee and Fee
Letter.
(a) Collateral Evaluation Fee. Borrower shall pay Agent a
collateral evaluation fee equal to $1,500.00 per month commencing on the first
day of the month following the Closing Date and on the first day of each month
thereafter during the Term. The collateral evaluation fee shall be deemed earned
in full on the date when same is due and payable hereunder and shall not be
subject to rebate or proration upon termination of this Agreement for any
reason.
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(b) Collateral Monitoring Fee. Borrower shall pay to Agent on
the first day of each month following any month in which Agent performs any
collateral monitoring - namely any field examination, collateral analysis or
other business analysis, the need for which is to be determined by Agent and
which monitoring is undertaken by Agent or for Agent's benefit - a collateral
monitoring fee in an amount equal to $750.00 per day for each person employed to
perform such monitoring, plus all costs and disbursements incurred by Agent in
the performance of such examination or analysis.
3.4 Computation of Interest and Fees. Interest and 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 for Domestic Rate Loans during such extension.
3.5 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 Borrower, and if the then remaining
excess amount is greater than the previously unpaid principal balance, Lenders
shall promptly refund such excess amount to Borrower and the provisions hereof
shall be deemed amended to provide for such permissible rate.
3.6 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
3.6, the term "Lender" shall include Agent or any Lender and any corporation or
bank controlling Agent or any Lender) and the office or branch where Agent or
any Lender (as so defined) makes or maintains any Eurodollar Rate Loans 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 Agent or any Lender to any tax of any kind
whatsoever with respect to this Agreement or any Other Document or change the
basis of taxation of payments to Agent or any 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 Agent or any
Lender by the jurisdiction in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or deposits
in or for the account of, advances or loans by, or other credit extended by, any
office of Agent or any Lender, including pursuant to Regulation D of the Board
of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender or the London interbank
Eurodollar market any other condition with respect to this Agreement or any
Other Document;
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material, then, in
33
any case Borrower shall promptly pay Agent or such Lender, upon its demand, such
additional amount as will compensate Agent or such Lender for such additional
cost or such reduction, as the case may be , provided that the foregoing shall
not apply to increased costs which are reflected in the Eurodollar Rate, as the
case may be. Agent or such Lender shall certify the amount of such additional
cost or reduced amount to Borrower, and such certification shall be conclusive
absent manifest error.
3.7 Basis For Determining Interest Rate Inadequate or Unfair. In the
event that Agent or any Lender shall have determined that:
(a) reasonable means do not exist for ascertaining the
Eurodollar Rate applicable pursuant to Section 2.2 hereof for any Interest
Period; or
(b) Dollar deposits in the relevant amount and for the
relevant maturity are not available in the London interbank Eurodollar market,
with respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate
Loan, or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate
Loan,
then Agent shall give Borrower prompt written, telephonic or telegraphic notice
of such determination. If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrower
shall notify Agent no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the date of such proposed borrowing, that its request for
such borrowing shall be cancelled or made as an unaffected type of Eurodollar
Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have
been converted to an affected type of Eurodollar Rate Loan shall be continued as
or converted into a Domestic Rate Loan, or, if Borrower shall notify Agent, no
later than 10:00 a.m. (New York City time) two (2) Business Days prior to the
proposed conversion, shall be maintained as an unaffected type of Eurodollar
Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans shall be
converted into a Domestic Rate Loan, or, if Borrower shall notify Agent, no
later than 10:00 a.m. (New York City time) two (2) Business Days prior to the
last Business Day of the then current Interest Period applicable to such
affected Eurodollar Rate Loan, shall be converted into an unaffected type of
Eurodollar Rate Loan, on the last Business Day of the then current Interest
Period for such affected Eurodollar Rate Loans. Until such notice has been
withdrawn, Lenders shall have no obligation to make an affected type of
Eurodollar Rate Loan or maintain outstanding affected Eurodollar Rate Loans and
Borrower shall not have the right to convert a Domestic Rate Loan or an
unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar Rate
Loan.
3.8 Capital Adequacy.
(a) In the event that Agent or any 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 Body, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by Agent or any Lender (for purposes of this Section 3.8, the term "Lender"
shall include Agent or any Lender and any corporation or bank controlling Agent
or any Lender) and the office or branch where Agent or any Lender (as so
defined) makes or maintains any Eurodollar Rate Loans with any request or
34
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 Agent or any Lender's capital as a
consequence of its obligations hereunder to a level below that which Agent or
such Lender could have achieved but for such adoption, change or compliance
(taking into consideration Agent's and each Lender's policies with respect to
capital adequacy) by an amount deemed by Agent or any Lender to be material,
then, from time to time, Borrower shall pay upon demand to Agent or such Lender
such additional amount or amounts as will compensate Agent or such Lender for
such reduction. In determining such amount or amounts, Agent or such Lender may
use any reasonable averaging or attribution methods. The protection of this
Section 3.8 shall be available to Agent and each Lender regardless of any
possible contention of invalidity or inapplicability with respect to the
Applicable Law, regulation or condition.
(b) A certificate of Agent or such Lender setting forth such
amount or amounts as shall be necessary to compensate Agent or such Lender with
respect to Section 3.8(a) hereof when delivered to Borrower shall be conclusive
absent manifest error.
3.9 Gross Up for Taxes. Subject to Section 3.6(a) herein, if
Borrower shall be required by Applicable Law to withhold or deduct any taxes
from or in respect of any sum payable under this Agreement or any of the Other
Documents to Agent, or any Lender, assignee of any Lender, or Participant (each,
individually, a "Payee" and collectively, the "Payees"), (a) the sum payable to
such Payee or Payees, as the case may be, shall be increased as may be necessary
so that, after making all required withholding or deductions, the applicable
Payee or Payees receives an amount equal to the sum it would have received had
no such withholding or deductions been made (the "Gross-Up Payment"), (b)
Borrower shall make such withholding or deductions, and (c) Borrower shall pay
the full amount withheld or deducted to the relevant taxation authority or other
authority in accordance with Applicable Law. Notwithstanding the foregoing,
Borrower shall not be obligated to make any portion of the Gross-Up Payment that
is attributable to any withholding or deductions that would not have been paid
or claimed had the applicable Payee or Payees properly claimed a complete
exemption with respect thereto pursuant to Section 3.10 hereof.
3.10 Withholding Tax Exemption. (a) Each Payee that is not
incorporated under the Laws of the United States of America or a state thereof
(and, upon the written request of Agent, each other Payee) agrees that it will
deliver to Borrower and Agent two (2) duly completed appropriate valid
Withholding Certificates (as defined under ss.1.1441-1(c)(16) of the Income Tax
Regulations ("Regulations")) certifying its status (i.e., U.S. or foreign
person) and, if appropriate, making a claim of reduced, or exemption from, U.S.
withholding tax on the basis of an income tax treaty or an exemption provided by
the Code. The term "Withholding Certificate" means a Form W-9; a Form W-8BEN; a
Form W-8ECI; a Form W-8IMY and the related statements and certifications as
required under ss.1.1441-1(e)(2) and/or (3) of the Regulations; a statement
described in ss.1.871-14(c)(2)(v) of the Regulations; or any other certificates
under the Code or Regulations that certify or establish the status of a payee or
beneficial owner as a U.S. or foreign person.
35
(b) Each Payee required to deliver to Borrower and Agent a valid
Withholding Certificate pursuant to Section 3.10(a) hereof shall deliver such
valid Withholding Certificate as follows: (A) each Payee which is a party hereto
on the Closing Date shall deliver such valid Withholding Certificate at least
five (5) Business Days prior to the first date on which any interest or fees are
payable by Borrower hereunder for the account of such Payee; (B) each Payee
shall deliver such valid Withholding Certificate at least five (5) Business Days
before the effective date of such assignment or participation (unless Agent in
its sole discretion shall permit such Payee to deliver such Withholding
Certificate less than five (5) Business Days before such date in which case it
shall be due on the date specified by Agent). Each Payee which so delivers a
valid Withholding Certificate further undertakes to deliver to Borrower and
Agent two (2) additional copies of such Withholding Certificate (or a successor
form) on or before the date that such Withholding Certificate expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent Withholding Certificate so delivered by it, and such amendments thereto
or extensions or renewals thereof as may be reasonably requested by Borrower or
Agent.
(c) Notwithstanding the submission of a Withholding Certificate
claiming a reduced rate of or exemption from U.S. withholding tax required under
Section 3.10(b) hereof, Agent shall be entitled to withhold United States
federal income taxes at the full 30% withholding rate if in its reasonable
judgment it is required to do so under the due diligence requirements imposed
upon a withholding agent under ss.1.1441-7(b) of the Regulations. Further, Agent
is indemnified under ss.1.1461-1(e) of the Regulations against any claims and
demands of any Payee for the amount of any tax it deducts and withholds in
accordance with regulations under ss.1441 of the Code.
IV. COLLATERAL: GENERAL TERMS
4.1 Security Interest in the Collateral. To secure the prompt
payment and performance to Agent and each Lender of the Obligations, Borrower
hereby assigns, pledges and grants to Agent for its benefit and for the ratable
benefit of each Lender a continuing security interest in and to and Lien on all
of its Collateral, whether now owned or existing or hereafter acquired or
arising and wheresoever located. Borrower shall ▇▇▇▇ its books and records as
may be necessary or appropriate to evidence, protect and perfect Agent's
security interest and shall cause its financial statements to reflect such
security interest. Borrower shall promptly provide Agent with written notice of
all commercial tort claims, such notice to contain the case title together with
the applicable court and a brief description of the claim(s). Upon delivery of
each such notice, Borrower shall be deemed to hereby grant to Agent a security
interest and lien in and to such commercial tort claims and all proceeds
thereof.
4.2 Perfection of Security Interest. Borrower shall take all action
that may be necessary or desirable, or that Agent may request, so as at all
times to maintain the validity, perfection, enforceability and priority of
Agent's security interest in and Lien on the Collateral or to enable Agent 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 Lien Waiver Agreements, (iii) delivering
to Agent, endorsed or accompanied by such instruments of assignment as Agent may
specify, and stamping or marking, in such manner as Agent may specify, any and
all chattel paper, instruments, letters of credits and advices thereof and
documents evidencing or forming a part of the Collateral, (iv) entering into
36
warehousing, lockbox and other custodial arrangements satisfactory to Agent, and
(v) executing and delivering financing statements, control agreements,
instruments of pledge, mortgages, notices and assignments, in each case in form
and substance satisfactory to Agent, relating to the creation, validity,
perfection, maintenance or continuation of Agent's security interest and Lien
under the Uniform Commercial Code or other Applicable Law. By its signature
hereto, Borrower hereby authorizes Agent to file against Borrower, one or more
financing, continuation or amendment statements pursuant to the Uniform
Commercial Code in form and substance satisfactory to Agent (which statements
may have a description of collateral which is broader than that set forth
herein). All charges, expenses and fees Agent may incur in doing any of the
foregoing, and any local taxes relating thereto, shall be charged to Borrower's
Account as a Revolving Advance of a Domestic Rate Loan and added to the
Obligations, or, at Agent's option, shall be paid to Agent for its benefit and
for the ratable benefit of Lenders immediately upon demand.
4.3 Disposition of Collateral. Borrower will safeguard and protect
all Collateral for Agent'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
worn-out Equipment in the Ordinary Course of Business during any fiscal year
having an aggregate fair market value of not more than $100,000 and only to the
extent that (i) the proceeds of any such disposition are used to acquire
replacement Equipment which is subject to Agent's first priority security
interest or (ii) the proceeds of which are remitted to Agent to be applied
pursuant to Section 2.11.
4.4 Preservation of Collateral. In addition to the rights and
remedies set forth in Section 11.1 hereof, Agent: (a) may at any time take such
steps as Agent deems necessary to protect Agent's interest in and to preserve
the Collateral, including the hiring of such security guards or the placing of
other security protection measures as Agent may deem appropriate; (b) may employ
and maintain at any of Borrower's premises a custodian who shall have full
authority to do all acts necessary to protect Agent's interests in the
Collateral; (c) may lease warehouse facilities to which Agent may move all or
part of the Collateral; (d) may use 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 of Borrower's owned or leased property. Borrower shall cooperate
fully with all of Agent's efforts to preserve the Collateral and will take such
actions to preserve the Collateral as Agent may direct. All of Agent's expenses
of preserving the Collateral, including any expenses relating to the bonding of
a custodian, shall be charged to Borrower's Account as a Revolving Advance and
added to the Obligations.
4.5 Ownership of Collateral. (a) With respect to the Collateral, at
the time the Collateral becomes subject to Agent's security interest: (i)
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 the its respective Collateral to Agent; and, except for Permitted
Encumbrances the Collateral shall be free and clear of all Liens and
encumbrances whatsoever; (ii) each document and agreement executed by Borrower
or delivered to Agent or any Lender in connection with this Agreement shall be
true and correct in all respects; (iii) all signatures and endorsements of
Borrower that appear on such documents and agreements shall be genuine and
Borrower shall have full capacity to execute same; and (iv) Borrower's Equipment
and Inventory shall be located as set forth on Schedule 4.5 and shall not be
removed from such location(s) without the prior written consent of Agent except
with respect to the sale of Inventory in the Ordinary Course of Business and
Equipment to the extent permitted in Section 4.3 hereof.
37
(b) (i) There is no location at which Borrower has any Inventory (except
for Inventory in transit) other than those locations listed on Schedule 4.5;
(ii) Schedule 4.5 hereto contains a correct and complete list, as of the Closing
Date, of the legal names and addresses of each warehouse at which Inventory of
Borrower is stored; (iii) Schedule 4.5 hereto sets forth a correct and complete
list as of the Closing Date of (A) each place of business of Borrower and (B)
the chief executive office of Borrower; and (iv) Schedule 4.5 hereto sets forth
a correct and complete list as of the Closing Date of the location, by state and
street address, of all Real Property owned or leased by Borrower, together with
the names and addresses of any landlords.
4.6 Defense of Agent's and Lenders' Interests. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. During such period Borrower shall not, without Agent'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. Borrower shall defend Agent's interests in the Collateral against
any and all Persons whatsoever. At any time following demand by Agent for
payment of all Obligations, Agent shall have the right to take possession of the
indicia of the Collateral and the Collateral in whatever physical form
contained, including: labels, stationery, documents, instruments and advertising
materials. If Agent exercises this right to take possession of the Collateral,
Borrower shall, upon demand, assemble it in the best manner possible and make it
available to Agent at a place reasonably convenient to Agent. In addition, with
respect to all Collateral, Agent and Lenders 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. Borrower shall, and Agent may, at its
option, instruct all suppliers, carriers, forwarders, warehousers or others
receiving or holding cash, checks, Inventory, documents or instruments in which
Agent holds a security interest to deliver same to Agent and/or subject to
Agent's order and if they shall come into Borrower's possession, they, and each
of them, shall be held by Borrower in trust as Agent's trustee, and Borrower
will immediately deliver them to Agent in their original form together with any
necessary endorsement.
4.7 Books and Records. Borrower shall (a) keep proper books of
record and account in which full, true and correct entries will be made of all
dealings or transactions of or in relation to its business and affairs; (b) set
up on its books accruals with respect to all taxes, assessments, charges, levies
and claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including 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 such independent public accountant as
shall then be regularly engaged by Borrower.
38
4.8 Financial Disclosure. Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by Borrower at any time during the
Term to exhibit and deliver to Agent and each Lender copies of any of 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 Agent and each
Lender any information such accountants may have concerning Borrower's financial
status and business operations provided, however, so long as no Default and/or
Event of Default has occurred, the Agent and each Lender will attempt to obtain
such information or materials directly from Borrower prior to obtaining such
information or materials from such accountants and is hereby authorized to
obtain such information or materials from such accountants if the Borrower does
not provide such information and materials to the Agent within ten (10) Business
Days of any request for such information and materials.. Borrower hereby
authorizes all Governmental Bodies to furnish to Agent and each Lender copies of
reports or examinations relating to Borrower, whether made by Borrower or
otherwise provided, however, so long as no Default and/or Event of Default has
occurred, the Agent and each Lender will attempt to obtain such information or
materials directly from Borrower prior to obtaining such information or
materials from such Governmental Bodies and is hereby authorized to obtain such
information or materials from such Governmental Bodies if the Borrower does not
provide such information and materials to the Agent within ten (10) Business
Days of any request for such information and materials.
4.9 Compliance with Laws. Borrower shall comply with all Applicable
Laws with respect to the Collateral or any part thereof or to the operation of
Borrower's business the non-compliance with which could reasonably be expected
to have a Material Adverse Effect. Borrower may, however, contest or dispute any
Applicable Laws in any reasonable manner, provided that any related Lien is
inchoate or stayed and sufficient reserves are established to the reasonable
satisfaction of Agent to protect Agent's Lien on or security interest in the
Collateral. The assets of Borrower at all times shall be maintained in
accordance with the requirements of all insurance carriers which provide
insurance with respect to the assets of Borrower so that such insurance shall
remain in full force and effect.
4.10 Inspection of Premises. At all reasonable times Agent and each
Lender shall have full access to and the right to audit, check, inspect and make
abstracts and copies from Borrower's books, records, audits, correspondence and
all other papers relating to the Collateral and the operation of Borrower's
business. Agent, any Lender and their agents may 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 Borrower's business.
4.11 Insurance. The assets and properties of Borrower at all times
shall be maintained in accordance with the requirements of all insurance
carriers which provide insurance with respect to the assets and properties of
Borrower so that such insurance shall remain in full force and effect. Borrower
shall bear the full risk of any loss of any nature whatsoever with respect to
the Collateral. At Borrower's own cost and expense in amounts and with carriers
reasonably acceptable to Agent, Borrower shall (a) keep all its insurable
properties and properties in which Borrower has an interest insured against the
hazards of fire, flood, sprinkler leakage, those hazards covered by extended
39
coverage insurance and such other hazards, and for such amounts, as is customary
in the case of companies engaged in businesses similar to Borrower's including
business interruption insurance; (b) maintain a bond in such amounts as is
customary in the case of companies engaged in businesses similar to 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 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 Agent with (i) copies of all liability and property
insurance 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
Agent, naming Agent as an additional insured, mortgagee and lender loss payee as
its interests may appear with respect to all insurance coverage referred to in
clauses (a) and (c) above, and providing (A) that all proceeds thereunder in
excess of $100,000 shall be payable to Agent, (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 Agent. In the event of any loss thereunder in excess of
$100,000, the carriers named therein hereby are directed by Agent and Borrower
to make payment for such loss to Agent and not to Borrower and Agent jointly. If
any insurance losses are paid by check, draft or other instrument payable to
Borrower and Agent jointly, Agent may endorse Borrower's name thereon and do
such other things as Agent may deem advisable to reduce the same to cash. Agent
is hereby authorized to adjust and compromise claims under insurance coverage
referred to in clauses (a) and (b) above. So long as no Default and/or Event of
Default has occurred, the Agent shall consult the Borrower with regard to such
adjustments and compromises. All loss recoveries received by Agent upon any such
insurance may be applied to the Obligations, in such order as Agent in its sole
discretion shall determine. Any surplus shall be paid by Agent to Borrower or
applied as may be otherwise required by law. Any deficiency thereon shall be
paid by Borrower to Agent, on demand.
4.12 Failure to Pay Insurance. If Borrower fails to obtain insurance
as hereinabove provided, or to keep the same in force, Agent, if Agent so
elects, may obtain such insurance and pay the premium therefor on behalf of
Borrower, and charge Borrower's Account therefor as a Revolving Advance of a
Domestic Rate Loan and such expenses so paid shall be part of the Obligations.
4.13 Payment of Taxes. Borrower will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon Borrower or any
of the Collateral including 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 Body is or may be
imposed on or as a result of any transaction between Borrower and Agent or any
Lender which Agent or any 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 Agent's or any Lender's
opinion, may possibly create a valid Lien on the Collateral, Agent may without
notice to Borrower pay the taxes, assessments or other Charges and Borrower
40
hereby indemnifies and holds Agent and each Lender harmless in respect thereof,
subject to Sections 3.6(a) and 3.10 herein. Agent will not pay any taxes,
assessments or Charges to the extent that 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 Agent to protect Agent's security interest in or Lien
on the Collateral. The amount of any payment by Agent under this Section 4.13
shall be charged to Borrower's Account as a Revolving Advance and added to the
Obligations and, until Borrower shall furnish Agent with an indemnity therefor
(or supply Agent with evidence satisfactory to Agent that due provision for the
payment thereof has been made), Agent may hold without interest any balance
standing to Borrower's credit and Agent shall retain its security interest in
and Lien on any and all Collateral held by Agent.
4.14 Payment of Leasehold Obligations. 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 Agent's
request will provide evidence of having done so.
4.15 Receivables.
(a) Nature of Receivables. Each of the Receivables shall be a
bona fide and valid account representing a bona fide indebtedness incurred by
the Customer therein named, for a fixed sum as set forth in the invoice relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of Borrower, or work, labor or services theretofore
rendered by Borrower as of the date each Receivable is created. Same shall be
due and owing in accordance with Borrower's standard terms of sale without
dispute, setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by Borrower to Agent.
(b) Solvency of Customers. Each Customer, to the best of
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 Borrower who are not solvent
Borrower has set up on its books and in its financial records bad debt reserves
adequate to cover such Receivables.
(c) Location of Borrower. Borrower's chief executive office is
located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. Until written
notice is given to Agent by Borrower of any other office at which Borrower keeps
its records pertaining to Receivables, all such records shall be kept at such
executive office.
(d) Collection of Receivables. Until Borrower's authority to
do so is terminated by Agent (which notice Agent may give at any time following
the occurrence of an Event of Default or a Default or when Agent in its sole
discretion deems it to be in Lenders' best interest to do so), Borrower will, at
Borrower's sole cost and expense, but on Agent's behalf and for Agent's account,
collect as Agent's property and in trust for Agent all amounts received on
Receivables, and shall not commingle such collections with Borrower's funds or
use the same except to pay Obligations. Borrower shall deposit in the Blocked
Account or, upon request by Agent, deliver to Agent, in original form and on the
date of receipt thereof, all checks, drafts, notes, money orders, acceptances,
cash and other evidences of Indebtedness.
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(e) Notification of Assignment of Receivables. At any time
Agent shall have the right to send notice of the assignment of, and Agent's
security interest in and Lien on, the Receivables to any and all Customers or
any third party holding or otherwise concerned with any of the Collateral.
Thereafter, Agent shall have the sole right to collect the Receivables, take
possession of the Collateral, or both. Agent's actual collection expenses,
including, but not limited to, stationery and postage, telephone and telegraph,
secretarial and clerical expenses and the salaries of any collection personnel
used for collection, may be charged to Borrower's Account and added to the
Obligations.
(f) Power of Agent to Act on Borrower's Behalf. Agent shall
have the right to receive, endorse, assign and/or deliver in the name of Agent
or Borrower any and all checks, drafts and other instruments for the payment of
money relating to the Receivables, and Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Borrower
hereby constitutes Agent or Agent's designee as Borrower's attorney with power
(i) to endorse Borrower's name upon any notes, acceptances, checks, drafts,
money orders or other evidences of payment or Collateral; (ii) to sign
Borrower's name on any invoice or ▇▇▇▇ of lading relating to any of the
Receivables, drafts against Customers, assignments and verifications of
Receivables; (iii) to send verifications of Receivables to any Customer; (iv) to
sign Borrower's name on all financing statements or any other documents or
instruments deemed necessary or appropriate by Agent to preserve, protect, or
perfect Agent's interest in the Collateral and to file same; (v) to demand
payment of the Receivables upon notice to the Borrower; (vi) to enforce payment
of the Receivables by legal proceedings or otherwise upon notice to the
Borrower; (vii) to exercise all of Borrower's rights and remedies with respect
to the collection of the Receivables and any other Collateral upon notice to the
Borrower; (viii) to settle, adjust, compromise, extend or renew the Receivables
upon notice to the Borrower; (ix) to settle, adjust or compromise any legal
proceedings brought to collect Receivables upon notice to the Borrower; (x) to
prepare, file and sign Borrower's name on a proof of claim in bankruptcy or
similar document against any Customer upon notice to the Borrower; (xi) to
prepare, file and sign Borrower's name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with the Receivables; and
(xii) to do all other acts and things necessary to carry out this Agreement. All
acts of said attorney or designee are hereby ratified and approved, and said
attorney or designee shall not be liable for any acts of omission or commission
nor for any error of judgment or mistake of fact or of law, unless done
maliciously or with gross (not mere) negligence (as determined by a court of
competent jurisdiction in a final non-appealable judgment); this power being
coupled with an interest is irrevocable while any of the Obligations remain
unpaid. Upon the occurrence of a Default and/or an Event of Default, Agent shall
have the right at any time to change the address for delivery of mail addressed
to Borrower to such address as Agent may designate and to receive, open and
dispose of all mail addressed to Borrower.
(g) No Liability. Neither Agent nor any Lender shall, under
any circumstances or in any event whatsoever, have any liability for any error
or omission or delay of any kind occurring in the settlement, collection or
payment of any of the Receivables or any instrument received in payment thereof,
42
or for any damage resulting therefrom. Agent may, with notice to Borrower and
without consent from 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. Agent is authorized and empowered to accept
the return of the goods represented by any of the Receivables, with notice to
Borrower and without consent from Borrower, all without discharging or in any
way affecting Borrower's liability hereunder.
(h) Establishment of a Lockbox Account, Dominion Account. All
proceeds of Collateral shall be deposited by Borrower into either (i) a lockbox
account, dominion account or such other "blocked account" ("Blocked Accounts")
established at a bank or banks (each such bank, a "Blocked Account Bank")
pursuant to an arrangement with such Blocked Account Bank as may be selected by
Borrower and be acceptable to Agent or (ii) depository accounts ("Depository
Accounts") established at the Agent for the deposit of such proceeds. Borrower,
Agent and each Blocked Account Bank shall enter into a deposit account control
agreement in form and substance satisfactory to Agent directing such Blocked
Account Bank to transfer such funds so deposited to Agent, either to any account
maintained by Agent at said Blocked Account Bank or by wire transfer to
appropriate account(s) of Agent. All funds deposited in such Blocked Accounts
shall immediately become the property of Agent and Borrower shall obtain the
agreement by such Blocked Account Bank to waive any offset rights against the
funds so deposited. Neither Agent nor any Lender assumes any responsibility for
such blocked account arrangement, including any claim of accord and satisfaction
or release with respect to deposits accepted by any Blocked Account Bank
thereunder. All deposit accounts and investment accounts of Borrower and its
Subsidiaries are set forth on Schedule 4.15(h).
(i) Adjustments. Borrower will not, without Agent's consent,
compromise or adjust any Receivables (or extend the time for payment thereof) or
accept any returns of merchandise or grant any additional discounts, allowances
or credits thereon except for those compromises, adjustments, returns,
discounts, credits and allowances as have been heretofore customary in the
business of Borrower.
4.16 Inventory. To the extent Inventory held for sale or lease has
been produced by Borrower, it has been and will be produced by Borrower in
accordance with the Federal Fair Labor Standards Act of 1938, as amended, and
all rules, regulations and orders thereunder.
4.17 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.
Borrower shall not use or operate the Equipment in violation of any law,
statute, ordinance, code, rule or regulation. Borrower shall have the right to
sell Equipment to the extent set forth in Section 4.3 hereof.
4.18 Exculpation of Liability. Nothing herein contained shall be
construed to constitute Agent or any Lender as Borrower's agent for any purpose
whatsoever, nor shall Agent or any 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. Neither
43
Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assume any of Borrower's obligations under any contract or agreement
assigned to Agent or such Lender, and neither Agent nor any Lender shall be
responsible in any way for the performance by Borrower of any of the terms and
conditions thereof.
4.19 Environmental Matters. (a) Borrower shall ensure that the Real
Property and all operations and businesses conducted thereon remains in
compliance with all Environmental Laws and they shall not place or permit to be
placed any Hazardous Substances on any Real Property except as permitted by
Applicable Law or appropriate governmental authorities.
(b) Borrower 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) Borrower 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.
Borrower shall use its 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 Borrower in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.
(d) In the event 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
Borrower's interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority"), then Borrower
shall, within five (5) Business Days, give written notice of same to Agent
detailing facts and circumstances of which Borrower is aware giving rise to the
Hazardous Discharge or Environmental Complaint. Such information is to be
provided to allow Agent to protect its security interest in and Lien on the Real
Property and the Collateral and is not intended to create nor shall it create
any obligation upon Agent or any Lender with respect thereto.
(e) Borrower shall promptly forward to Agent 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
Borrower to dispose of Hazardous Substances and shall continue to forward copies
of correspondence between Borrower and the Authority regarding such claims to
Agent until the claim is settled. Borrower shall promptly forward to Agent
copies of all documents and reports concerning a Hazardous Discharge at the Real
Property that Borrower is required to file under any Environmental Laws. Such
information is to be provided solely to allow Agent to protect Agent's security
interest in and Lien on the Real Property and the Collateral. The Agent and
other Lenders hereby acknowledge receipt of the Existing Environmental Due
Diligence.
44
(f) Borrower 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 Borrower shall fail to respond promptly to any Hazardous
Discharge or Environmental Complaint or Borrower shall fail to comply with any
of the requirements of any Environmental Laws, Agent on behalf of Lenders may,
but without the obligation to do so, for the sole purpose of protecting Agent's
interest in the 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 Agent (or such third parties as directed by Agent) 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 Agent and Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Domestic Rate Loans constituting Revolving Advances shall
be paid upon demand by Borrower, 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 Agent, any Lender and Borrower.
(g) Promptly upon the written request of Agent from time to
time, Borrower shall provide Agent, at Borrower's expense, with an environmental
site assessment or environmental audit report prepared by an environmental
engineering firm acceptable in the reasonable opinion of Agent, 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 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 Agent. If such estimates, individually or in
the aggregate, exceed $100,000, Agent shall have the right to require Borrower
to post a bond, letter of credit or other security reasonably satisfactory to
Agent to secure payment of these costs and expenses.
(h) Borrower shall defend and indemnify Agent and Lenders and
hold Agent, Lenders and their 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 Agent or Lenders under or on account of any Environmental Laws,
including 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 Agent or any Lender. Borrower's obligations under this Section 4.19
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. Borrower's obligation and the indemnifications hereunder
shall survive the termination of this Agreement.
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(i) Borrower shall perform all testing and remediation
recommended and set forth in the Existing Environmental Due Diligence including,
but not limited to, as recommended in Section 10 of the 2005 Phase 1, in
accordance with the requirements of the Existing Environmental Due Diligence and
all applicable laws. Borrower shall provide to the Agent copies of all
documentation with regard thereto.
(j) For purposes of Section 4.19 and 5.7, all references to
Real Property shall be deemed to include all of Borrower's right, title and
interest in and to its owned and leased premises.
4.20 Financing Statements. Except the financing statements filed by
Agent and the financing statements described on Schedule 1.2, no financing
statement covering any of the Collateral or any proceeds thereof is on file in
any public office.
V. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 Authority. 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. This Agreement and the Other
Documents have been duly executed and delivered by Borrower, and this Agreement
and the Other Documents constitute the legal, valid and binding obligation of
Borrower enforceable in accordance with their terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally. The execution,
delivery and performance of this Agreement and of the Other Documents (a) are
within Borrower's corporate powers, have been duly authorized by all necessary
corporate action, are not in contravention of law or the terms of Borrower's
by-laws, certificate of incorporation or other applicable documents relating to
Borrower's formation or to the conduct of Borrower's business or of any material
agreement or undertaking to which Borrower is a party or by which Borrower is
bound, including the Acquisition Agreement, (b) will not conflict with or
violate any law or regulation, or any judgment, order or decree of any
Governmental Body, (c) will not require the Consent of any Governmental Body or
any other Person, except those Consents set forth on Schedule 5.1 hereto, all of
which will have been duly obtained, made or compiled prior to the Closing Date
and which are in full force and effect and (d) 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 Borrower under the provisions of any agreement, charter document,
instrument, by-law or other instrument to which Borrower is a party or by which
it or its property is a party or by which it may be bound, including under the
provisions of the Acquisition Agreement.
5.2 Formation and Qualification.
(a) Borrower is duly incorporated and in good standing under
the laws of the state listed on Schedule 5.2(a) and is qualified to do business
and is in good standing in the states listed on Schedule 5.2(a) which constitute
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all states in which qualification and good standing are necessary for 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. Borrower has
delivered to Agent true and complete copies of its certificate of incorporation
and by-laws and will promptly notify Agent of any amendment or changes thereto.
(b) The only Subsidiaries of Borrower are listed on Schedule
5.2(b).
5.3 Survival of Representations and Warranties. All representations
and warranties of Borrower contained in this Agreement and the Other Documents
shall be true at the time of 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.
5.4 Tax Returns. Borrower's federal tax identification number is set
forth on Schedule 5.4. Borrower has filed all federal, state and local tax
returns and other reports it is required by law to file and has paid all taxes,
assessments, fees and other governmental charges that are due and payable.
Federal, state and local income tax returns of 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 and including the fiscal
year ended December 31, 2002. Federal, state and local income tax returns of
Borrower have been filed for all fiscal years prior to and including the fiscal
year ended December 31, 2004. The provision for taxes on the books of Borrower
is adequate for all years not closed by applicable statutes, and for its current
fiscal year, and Borrower has no knowledge of any deficiency or additional
assessment in connection therewith not provided for on its books.
5.5 Financial Statements. The consolidated and consolidating balance
sheets of Borrower, its Subsidiaries and such other Persons described therein
(including the accounts of all Subsidiaries for the respective periods during
which a subsidiary relationship existed) as of December 31, 2004, and the
related statements of income, changes in stockholder's equity, and changes in
cash flow for the period ended on such date, all accompanied by reports thereon
containing opinions without qualification by independent certified public
accountants, copies of which have been delivered to Agent, have been prepared in
accordance with GAAP, consistently applied (except for changes in application in
which such accountants concur) and present fairly the financial position of
Borrower and its Subsidiaries at such date and the results of their operations
for such period. Since June 30, 2005 there has been no change in the condition,
financial or otherwise, of Borrower or its Subsidiaries as shown on the
consolidated balance sheet as of such date and no change in the aggregate value
of machinery, equipment and Real Property owned by Borrower and its
Subsidiaries, except changes in the Ordinary Course of Business, none of which
individually or in the aggregate has been materially adverse.
5.6 Entity Name. Borrower has not been known by any other corporate
name in the past five years and does not sell Inventory under any other name
except as set forth on Schedule 5.6, nor has Borrower been the surviving
corporation of a merger or consolidation or acquired all or substantially all of
the assets of any Person during the preceding five (5) years.
5.7 O.S.H.A. and Environmental Compliance.
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(a) Except as set forth in the Existing Environmental Due
Diligence, Borrower has duly complied with, and its facilities, business,
assets, property, leaseholds, Real Property 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 Borrower or relating to its business, assets,
property, leaseholds or Equipment under any such laws, rules or regulations.
(b) Borrower has been issued all required federal, state and
local licenses, certificates or permits relating to all applicable Environmental
Laws as set forth on Schedule 5.7(b) attached hereto.
(c) Borrower shall perform all testing and remediation
recommended and set forth in the Existing Environmental Due Diligence including,
but not limited to, as recommended in Section 10 of the 2005 Phase 1, in
accordance with the requirements of the Existing Environmental Due Diligence and
all applicable laws. Borrower shall provide to the Agent copies of all
documentation with regard thereto.
(d) Except as set forth in the Existing Environmental Due
Diligence, (i) there are no visible signs 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 Borrower; (ii)
there are no underground storage tanks or polychlorinated biphenyls on the Real
Property or any premises leased by Borrower; (iii) neither the Real Property nor
any premises leased by Borrower has ever been used as a treatment, storage or
disposal facility of Hazardous Waste; and (iv) no Hazardous Substances are
present 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 Borrower or of
its tenants.
5.8 Solvency; No Litigation, Violation, Indebtedness or Default.
(a) Borrower is solvent, able to pay its debts as they mature,
has capital sufficient to carry on its business and all businesses in which it
is about to engage, and (i) as of the Closing Date, the fair present saleable
value of its assets, calculated on a going concern basis, is in excess of the
amount of its liabilities and (ii) subsequent to the Closing Date, the fair
saleable value of its assets (calculated on a going concern basis) will be in
excess of the amount of its liabilities.
(b) Except as disclosed in Schedule 5.8(b), Borrower has no
(i) pending or threatened litigation, arbitration, actions or proceedings which
involve the possibility of having a Material Adverse Effect, and (ii)
liabilities or indebtedness for borrowed money other than the Obligations.
(c) Borrower is not in violation of any applicable statute,
law, rule, regulation or ordinance in any respect which could reasonably be
expected to have a Material Adverse Effect, nor is Borrower in violation of any
order of any court, Governmental Body or arbitration board or tribunal.
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(d) Neither Borrower nor any member of the Controlled Group
maintains or contributes to any Plan other than those listed on Schedule 5.8(d)
hereto. (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 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) neither 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 neither 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) neither
Borrower nor any member of the Controlled Group has breached any of the
responsibilities, obligations or duties imposed on it by ERISA with respect to
any Plan; (vii) neither 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)
neither 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) 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 has not been waived; (xi) neither 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 Borrower and any member of the Controlled
Group; (xii) neither Borrower nor any member of the Controlled Group maintains
or contributes to any Plan which provides health, accident or life insurance
benefits to former employees, their spouses or dependents, other than in
accordance with Section 4980B of the Code; (xiii) neither 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 and there exists no fact which would reasonably be
expected to result in any such liability; and (xiv) no Plan fiduciary (as
defined in Section 3(21) of ERISA) has any liability for breach of fiduciary
duty or for any failure in connection with the administration or investment of
the assets of a Plan.
5.9 Patents, Trademarks, Copyrights and Licenses. All patents,
patent applications, trademarks, trademark applications, service marks, service
▇▇▇▇ applications, copyrights, copyright applications, design rights,
tradenames, assumed names, trade secrets and licenses owned or utilized by
Borrower are set forth on Schedule 5.9, are valid and have been duly registered
or filed with all appropriate Governmental Bodies 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 patent, trademark, copyright, design rights, tradename, trade secret or
49
license and Borrower is not aware of any grounds for any challenge, except as
set forth in Schedule 5.9 hereto. Each patent, patent application, patent
license, trademark, trademark application, trademark license, service ▇▇▇▇,
service ▇▇▇▇ application, service ▇▇▇▇ license, design rights, copyright,
copyright application and copyright license owned or held by Borrower and all
trade secrets used by Borrower consist of original material or property
developed by Borrower or was lawfully acquired by Borrower from the proper and
lawful owner thereof. Each of such items has been maintained so as to preserve
the value thereof from the date of creation or acquisition thereof. With respect
to all software used by Borrower, 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, each such source code escrow agreement being listed on
Schedule 5.9 hereto.
5.10 Licenses and Permits. Except as set forth in Schedule 5.10,
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, rule 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 could have a Material
Adverse Effect.
5.11 Default of Indebtedness. Borrower is not in default in the
payment of the principal of or interest on any Indebtedness or under any
instrument or agreement under or subject to which any Indebtedness has been
issued and no event has occurred under the provisions of any such instrument or
agreement which with or without the lapse of time or the giving of notice, or
both, constitutes or would constitute an event of default thereunder.
5.12 No Default. Borrower is not in default in the payment or
performance of any of its contractual obligations and no Default has occurred.
5.13 No Burdensome Restrictions. Borrower is not party to any
contract or agreement the performance of which could have a Material Adverse
Effect. Borrower has heretofore delivered to Agent true and complete copies of
all material contracts to which it is a party or to which it or any of its
properties is subject. Borrower has not agreed or consented to cause or permit
in the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a Lien which
is not a Permitted Encumbrance.
5.14 No Labor Disputes. Borrower is not involved in any labor
dispute; there are no strikes or walkouts or union organization of Borrower's
employees threatened or in existence and no labor contract is scheduled to
expire during the Term other than as set forth on Schedule 5.14 hereto.
5.15 Margin Regulations. Borrower is not engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any Advance
will be used for "purchasing" or "carrying" "margin stock" as defined in
Regulation U of such Board of Governors.
50
5.16 Investment Company Act. Borrower is not an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.17 Disclosure. No representation or warranty made by Borrower in
this Agreement or in the Acquisition Agreement, or in any financial statement,
report, certificate or any other document furnished in connection herewith or
therewith contains any untrue statement of fact or omits to state any fact
necessary to make the statements herein or therein not misleading. There is no
fact known to Borrower or which reasonably should be known to Borrower which
Borrower has not disclosed to Agent in writing with respect to the transactions
contemplated by the Acquisition Agreement or this Agreement which could
reasonably be expected to have a Material Adverse Effect.
5.18 Delivery of Acquisition Agreement. Agent has received complete
copies of the Acquisition Agreement (including all exhibits, schedules and
disclosure letters referred to therein or delivered pursuant thereto, if any)
and all amendments thereto, waivers relating thereto and other side letters or
agreements affecting the terms thereof. None of such documents and agreements
has been amended or supplemented, nor have any of the provisions thereof been
waived, except pursuant to a written agreement or instrument which has
heretofore been delivered to Agent.
5.19 Swaps. Borrower is not a party to, nor will it be a party to,
any swap agreement whereby Borrower has agreed or will agree to swap interest
rates or currencies unless same provides that damages upon termination following
an event of default thereunder are payable on an unlimited "two-way basis"
without regard to fault on the part of either party.
5.20 Conflicting Agreements. No provision of any mortgage,
indenture, contract, agreement, judgment, decree or order binding on 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.
5.21 Application of Certain Laws and Regulations. Neither Borrower
nor any Affiliate of Borrower is subject to any law, statute, rule or regulation
which regulates the incurrence of any Indebtedness, including laws, statutes,
rules or regulations relative to common or interstate carriers or to the sale of
electricity, gas, steam, water, telephone, telegraph or other public utility
services.
5.22 Business and Property of Borrower. Upon and after the Closing
Date, Borrower does not propose to engage in any business other than the
manufacturing of aircraft structural parts and assemblies and activities
necessary to conduct the foregoing. On the Closing Date, Borrower will own all
the property and possess all of the rights and Consents necessary for the
conduct of the business of Borrower.
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5.23 Section 20 Subsidiaries. Borrower does not intend to use and
shall not use any portion of the proceeds of the Advances, directly or
indirectly, to purchase during the underwriting period, or for 30 days
thereafter, Ineligible Securities being underwritten by a Section 20 Subsidiary.
5.24 Anti-Terrorism Laws.
(a) General. Neither Borrower nor any Affiliate of Borrower is
in violation of any Anti-Terrorism Law or engages in or conspires to engage in
any transaction that evades or avoids, or has the purpose of evading or
avoiding, or attempts to violate, any of the prohibitions set forth in any
Anti-Terrorism Law.
(b) Executive Order No. 13224. Neither Borrower nor any
Affiliate of Borrower or their respective agents acting or benefiting in any
capacity in connection with the Advances or other transactions hereunder, is any
of the following (each a "Blocked Person"):
(i) a Person that is listed in the annex to, or is
otherwise subject to the provisions of, the Executive Order
No. 13224;
(ii) a Person owned or controlled by, or acting for or
on behalf of, any Person that is listed in the annex to, or is
otherwise subject to the provisions of, the Executive Order
No. 13224;
(iii) a Person or entity with which any Lender is
prohibited from dealing or otherwise engaging in any
transaction by any Anti-Terrorism Law;
(iv) a Person or entity that commits, threatens or
conspires to commit or supports "terrorism" as defined in the
Executive Order No. 13224;
(v) a Person or entity that is named as a "specially
designated national" on the most current list published by the
U.S. Treasury Department Office of Foreign Asset Control at
its official website or any replacement website or other
replacement official publication of such list, or
(vi) a Person or entity who is affiliated or associated
with a Person or entity listed above.
(c) Neither Borrower or to the knowledge of Borrower, any of
its agents acting in any capacity in connection with the Advances or other
transactions hereunder (i) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of
any Blocked Person, or (ii) deals in, or otherwise engages in any transaction
relating to, any property or interests in property blocked pursuant to the
Executive Order No. 13224.
5.25 Trading with the Enemy. Borrower has not engaged, nor does it
intend to engage, in any business or activity prohibited by the Trading with the
Enemy Act.
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5.26 Federal Securities Laws. Neither Borrower nor any of its
Subsidiaries (i) is required to file periodic reports under the Exchange Act,
(ii) has any securities registered under the Exchange Act or (iii) has filed a
registration statement that has not yet become effective under the Securities
Act.
VI. AFFIRMATIVE COVENANTS.
Borrower shall, until payment in full of the Obligations and termination
of this Agreement:
6.1 Payment of Fees. Pay to Agent on demand all usual and customary
fees and expenses which Agent incurs in connection with (a) the forwarding of
Advance proceeds and (b) the establishment and maintenance of any Blocked
Accounts or Depository Accounts as provided for in Section 4.15(h). Agent may,
without making demand, charge Borrower's 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
and except as may be disposed of in accordance with the terms of this
Agreement), including all licenses, patents, copyrights, design rights,
tradenames, trade secrets and trademarks and take all actions necessary to
enforce and protect the validity of any intellectual property right or other
right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect; and (c) make all such
reports and pay all such franchise and other taxes and license fees and do all
such other acts and things as may be lawfully required to maintain its rights,
licenses, leases, powers and franchises under the laws of the United States or
any political subdivision thereof.
6.3 Violations. Promptly notify Agent in writing of any violation of
any law, statute, regulation or ordinance of any Governmental Body, or of any
agency thereof, applicable to Borrower which could reasonably be expected to
have a Material Adverse Effect.
6.4 Government Receivables. Take all steps necessary to protect
Agent's interest in the Collateral under the Federal Assignment of Claims Act
(if such Collateral is to be deemed Eligible Receivables), the Uniform
Commercial Code and all other applicable state or local statutes or ordinances
and deliver to Agent appropriately endorsed, any instrument or chattel paper
connected with any Receivable arising out of contracts between Borrower and the
United States, any state or any department, agency or instrumentality of any of
them.
6.5 Financial Covenants.
(a) Tangible Net Worth. Maintain at all times a Tangible Net Worth
in an amount not less than (i) $3,500,000 as of the Closing Date and from the
Closing Date through and including December 30, 2006 and (ii) as of December 31,
2006, an amount equal to the Borrower's Tangible Net Worth for the fiscal year
ended December 31, 2005 plus an amount equal to fifty (50%) percent of the
Borrower's Net Income for fiscal year ending December 31, 2006, which amount
shall increase annually on December 31st of each year thereafter by not less
than an amount equal to fifty (50%) percent of the Borrower's Net Income for the
immediately ended fiscal year, tested annually on a consolidated basis.
53
(b) Fixed Charge Coverage Ratio. Maintain at all times a Fixed
Charge Coverage Ratio of not less than 1.20 to 1.00, tested quarterly on a
consolidated, rolling four quarter basis.
6.6 Execution of Supplemental Instruments. Execute and deliver to
Agent 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 Agent may request, in order that the
full intent of this Agreement may be carried into effect.
6.7 Payment of Indebtedness. Pay, discharge or otherwise satisfy at
or before maturity (subject, where applicable, to specified grace periods and,
in the case of the trade payables, to normal payment practices) all its
obligations and liabilities of whatever nature, except when the failure to do so
could not reasonably be expected to have a Material Adverse Effect or when the
amount or validity thereof is currently being contested in good faith by
appropriate proceedings and Borrower shall have provided for such reserves as
Agent may reasonably deem proper and necessary, subject at all times to any
applicable subordination arrangement in favor of Lenders.
6.8 Standards of Financial Statements. Cause all financial
statements referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and
9.14 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).
6.9 Federal Securities Laws. Promptly notify Agent in writing if
Borrower or any of its Subsidiaries (i) is required to file periodic reports
under the Exchange Act, (ii) registers any securities under the Exchange Act or
(iii) files a registration statement under the Securities Act.
6.10 Exercise of Rights. Enforce all of its rights under the
Acquisition Agreement and the Indemnification Agreement executed in connection
therewith including, but not limited to, all indemnification rights and pursue
all remedies available to it with diligence and in good faith in connection with
the enforcement of any such rights.
6.11 Inventory Audits. Perform physical audits on its Inventory no
less than two (2) times each fiscal year until Agent has approved in writing a
perpetual inventory accounting system acceptable to the Agent in its sole
discretion and such perpetual inventory accounting system has been implemented
to the satisfaction of the Agent.
VII. NEGATIVE COVENANTS.
Borrower shall not, until satisfaction in full of the Obligations and
termination of this Agreement:
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7.1 Merger, Consolidation, Acquisition and Sale of Assets.
(a) Enter into any merger, consolidation or other
reorganization with or into any other Person or acquire all or a substantial
portion of the assets or Equity Interests of any Person or permit any other
Person to consolidate with or merge with it.
(b) Sell, lease, transfer or otherwise dispose of any of its
properties or assets, except (i) dispositions of Inventory and Equipment to the
extent expressly permitted by Section 4.3, (ii) any other sales or dispositions
expressly permitted by this Agreement and (iii) Borrower may sell the Mortgaged
Premises and enter into a sale and lease-back transaction with regard thereto so
long as (I) no Default and/or Event of Default has occurred and (II) the sales
price with regard thereto is not less than $2,800,000.
7.2 Creation of Liens. Create or suffer to exist any Lien or
transfer upon or against any of its property or assets now owned or hereafter
acquired, except Permitted Encumbrances.
7.3 Guarantees. Become liable upon the obligations or liabilities of
any Person by assumption, endorsement or guaranty thereof or otherwise (other
than to Lenders) except the endorsement of checks in the Ordinary Course of
Business.
7.4 Investments. Purchase or acquire obligations or Equity Interests
of, or any other interest in, any Person, except (a) obligations issued or
guaranteed by the United States of America or any agency thereof, (b) commercial
paper with maturities of not more than 180 days and a published rating of not
less than A-1 or P-1 (or the equivalent rating), (c) certificates of time
deposit and bankers' acceptances having maturities of not more than 180 days and
repurchase agreements backed by United States government securities of a
commercial bank if (i) such bank has a combined capital and surplus of at least
$500,000,000, or (ii) its debt obligations, or those of a holding company of
which it is a Subsidiary, are rated not less than A (or the equivalent rating)
by a nationally recognized investment rating agency, and (d) U.S. money market
funds that invest solely in obligations issued or guaranteed by the United
States of America or an agency thereof.
7.5 Loans. Make advances, loans or extensions of credit to any
Person, including any Parent, Subsidiary or Affiliate except with respect to (a)
the extension of commercial trade credit in connection with the sale of
Inventory in the Ordinary Course of Business and (b) loans to its employees in
the Ordinary Course of Business not to exceed the aggregate amount of $200,000
at any time outstanding.
7.6 Capital Expenditures. Contract for, purchase or make any
expenditure or commitments for Capital Expenditures in any fiscal year in an
aggregate amount in excess of $1,100,000.
7.7 Dividends. Declare, pay or make any dividend or distribution on
any shares of the common stock or preferred stock of Borrower (other than
dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds, property or assets to
the purchase, redemption or other retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of common or preferred
stock of Borrower provided, however, that dividends may be paid in cash to the
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shareholders of the Borrower as long as (a) after payment of said dividend,
Undrawn Availability is equal to or greater than $2,000,000, (b) no Default
and/or Event of Default exists at the time of payment of any such dividend, and
(c) no Default and/or Event of Default shall exist after giving effect to the
payment of any such dividend..
7.8 Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) except in respect of (i) Indebtedness to
Lenders; and (ii) Indebtedness incurred for Capital Expenditures permitted under
Section 7.6 hereof.
7.9 Nature of Business. Substantially change the nature of the
business in which it is presently engaged, nor except as specifically permitted
hereby purchase or invest, directly or indirectly, in any assets or property
other than in the Ordinary Course of Business for assets or property which are
useful in, necessary for and are to be used in its business as presently
conducted.
7.10 Transactions with Affiliates. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise enter into any transaction or deal with, any Affiliate, except
transactions disclosed to the Agent, which are in the Ordinary Course of
Business, on an arm's-length basis on terms and conditions no less favorable
than terms and conditions which would have been obtainable from a Person other
than an Affiliate.
7.11 Leases. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 7.6 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $250,000 in any one fiscal year in the aggregate for
Borrower exclusive of any and all amounts paid by the Borrower as lease payments
with regard to the Mortgaged Premises if it enters into a sale and lease-back
transaction with regard to the Mortgaged Premises.
7.12 Subsidiaries.
(a) Form any Subsidiary.
(b) Enter into any partnership, joint venture or similar
arrangement.
7.13 Fiscal Year and Accounting Changes. Change its fiscal year from
December 31st or make any 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. Now or hereafter pledge Agent's or any
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 Borrower's business as
conducted on the date of this Agreement.
7.15 Amendment of Articles of Incorporation, By-Laws. Amend, modify
or waive any term or material provision of its Articles of Incorporation or
By-Laws unless required by law.
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7.16 Compliance with ERISA. (i) (x) Maintain, or permit any member
of the Controlled Group to maintain, or (y) become obligated to contribute, or
permit any member of the Controlled Group to become obligated to contribute, to
any Plan, other than those Plans disclosed on Schedule 5.8(d), (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
"prohibited transaction", as that term is defined in section 406 of ERISA and
Section 4975 of the Code, (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 Borrower or any member of the Controlled Group or the
imposition of a lien on the property of 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 5.8(d), (vi) incur, or permit any member of the
Controlled Group to incur, any withdrawal liability to any Multiemployer Plan;
(vii) fail promptly to notify Agent 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. Except as permitted pursuant to
Section 7.21 hereof, at any time, directly or indirectly, prepay any
Indebtedness (other than to Lenders), or repurchase, redeem, retire or otherwise
acquire any Indebtedness of Borrower.
7.18 Anti-Terrorism Laws. Borrower shall not, until satisfaction in
full of the Obligations and termination of this Agreement, nor shall it permit
any Affiliate or agent to:
(a) Conduct any business or engage in any transaction or
dealing with any Blocked Person, including the making or receiving any
contribution of funds, goods or services to or for the benefit of any Blocked
Person.
(b) Deal in, or otherwise engage in any transaction relating
to, any property or interests in property blocked pursuant to the Executive
Order No. 13224.
(c) Engage in or conspire to engage in any transaction that
evades or avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in the Executive Order No. 13224, the
USA PATRIOT Act or any other Anti-Terrorism Law. Borrower shall deliver to
Lenders any certification or other evidence requested from time to time by any
Lender in its sole discretion, confirming Borrower's compliance with this
Section.
7.19 Membership/Partnership Interests. Elect to treat or permit any
of its Subsidiaries to (x) treat its limited liability company membership
interests or partnership interests, as the case may be, as securities as
contemplated by the definition of "security" in Section 8-102(15) and by Section
8-103 of Article 8 of Uniform Commercial Code or (y) certificate its limited
liability company membership interests or partnership interests, as the case may
be.
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7.20 Trading with the Enemy Act. Engage in any business or activity
in violation of the Trading with the Enemy Act.
7.21 Other Agreements. Enter into any material amendment, waiver or
modification of the Acquisition Agreement or any related agreements.
7.22 Progress Payments. Allow the aggregate amount of progress
payments on Indebtedness not evidenced by invoices owed by the Borrower to
exceed $1,500,000 at any time.
VIII. CONDITIONS PRECEDENT.
8.1 Conditions to Initial Advances. The agreement of Lenders to make
the initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Agent, immediately prior to or concurrently with the
making of such Advances, of the following conditions precedent:
(a) Note. Agent shall have received the Note duly executed and
delivered by an authorized officer of Borrower;
(b) Filings, Registrations and Recordings. Each document
(including any Uniform Commercial Code financing statement) required by this
Agreement, any related agreement or under law or reasonably requested by the
Agent to be filed, registered or recorded in order to create, in favor of Agent,
a perfected security interest in or lien upon the Collateral shall have been
properly filed, registered or recorded in each jurisdiction in which the filing,
registration or recordation thereof is so required or requested, and Agent 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;
(c) Corporate Proceedings of Borrower. Agent shall have
received a copy of the resolutions in form and substance reasonably satisfactory
to Agent, of the Board of Directors of Borrower authorizing (i) the execution,
delivery and performance of this Agreement and the Other Documents (collectively
the "Documents") and (ii) the granting by Borrower of the security interests in
and liens upon the Collateral in each case certified by the Secretary or an
Assistant Secretary of Borrower as of the Closing Date; and, such certificate
shall state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded as of the date of such certificate;
(d) Incumbency Certificates of Borrower. Agent shall have
received a certificate of the Secretary or an Assistant Secretary of Borrower,
dated the Closing Date, as to the incumbency and signature of the officers of
Borrower executing this Agreement, the Other Documents, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
(e) Certificates. Agent shall have received a copy of the
Articles or Certificate of Incorporation of Borrower, and all amendments
thereto, certified by the Secretary of State or other appropriate official of
its jurisdiction of incorporation together with copies of the By-Laws of
Borrower and all agreements of Borrower's shareholders certified as accurate and
complete by the Secretary of Borrower;
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(f) Good Standing Certificates. Agent shall have received good
standing certificates for Borrower dated not more than 30 days prior to the
Closing Date, issued by the Secretary of State or other appropriate official of
Borrower's jurisdiction of incorporation and each jurisdiction where the conduct
of Borrower's business activities or the ownership of its properties
necessitates qualification;
(g) Legal Opinion. Agent shall have received the executed
legal opinion of ▇▇▇▇▇ & ▇▇▇ ▇▇▇▇▇▇ LLP in form and substance satisfactory to
Agent which shall cover such matters incident to the transactions contemplated
by this Agreement and the Other Documents and related agreements as Agent may
reasonably require and Borrower hereby authorizes and directs such counsel to
deliver such opinions to Agent and Lenders;
(h) No Litigation. (i) No litigation, investigation or
proceeding before or by any arbitrator or Governmental Body shall be continuing
or threatened against Borrower or against the officers or directors of Borrower
(A) in connection with this Agreement, the Other Documents or any of the
transactions contemplated thereby and which, in the reasonable opinion of Agent,
is deemed material or (B) which could, in the reasonable opinion of Agent, have
a Material Adverse Effect; and (ii) no injunction, writ, restraining order or
other order of any nature materially adverse to Borrower or the conduct of its
business or inconsistent with the due consummation of the Transactions shall
have been issued by any Governmental Body. Agent shall have received a summary
of all existing litigation regarding the Borrower;
(i) Financial Condition Certificates. Agent shall have
received an executed Financial Condition Certificate in the form of Exhibit
8.1(i).
(j) Collateral Examination. Agent shall have completed
Collateral examinations and received appraisals, the results of which shall be
satisfactory in form and substance to Lenders, of the Receivables, Inventory,
General Intangibles, Real Property, Leasehold Interest and Equipment of Borrower
and all books and records in connection therewith;
(k) Fees. Agent shall have received all fees payable to Agent
and Lenders on or prior to the Closing Date hereunder, including pursuant to
Article III hereof;
(l) Financial Statements. Agent shall have received a copy of
the Borrower's most recent financial statements and federal and state income tax
returns and income tax reports (if any), which shall be satisfactory in all
respects to the Agent;
(m) Acquisition Agreement. Agent shall have received final
executed copies of the Acquisition Agreement and all related agreements,
documents and instruments as in effect on the Closing Date all of which shall be
satisfactory in form and substance to Agent and the transactions contemplated by
such documentation shall be consummated prior to or simultaneously with the
making of the initial Advance Such documentation shall include, but not be
limited to, all documentation with regard to the $6,500,000 preferred equity
investment;
(n) Fictitious, Assumed or Alternate Names. Agent shall have
received certified copies of any fictitious, assumed or alternate names of the
Borrower;
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(o) Insurance. Agent shall have received in form and substance
satisfactory to Agent, certified copies of Borrower's casualty insurance
policies, together with loss payable endorsements on Agent's standard form of
loss payee endorsement, and certified copies of Borrower's liability insurance
and property insurance policies, together with endorsements naming Agent as
additional insured, mortgagee and lender loss payee;
(p) Title Insurance. Agent shall have received fully paid
mortgagee title insurance policies (or binding commitments to issue title
insurance policies, marked to Agent's satisfaction to evidence the form of such
policies to be delivered with respect to the Mortgage), in standard ALTA form,
issued by a title insurance company satisfactory to Agent, each in an amount
equal to not less than the fair market value of the Mortgaged Premises subject
to the Mortgage, insuring the Mortgage to create a valid Lien on the Mortgaged
Premises with no exceptions which Agent shall not have approved in writing and
no survey exceptions;
(q) Environmental Reports. Agent shall have received all
environmental studies and reports prepared by independent environmental
engineering firms with respect to all Mortgaged Premises owned or leased by
Borrower;
(r) Payment Instructions. Agent shall have received written
instructions from Borrower directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(s) Blocked Accounts. Agent shall have received duly executed
agreements establishing the Blocked Accounts or Depository Accounts with
financial institutions acceptable to Agent for the collection or servicing of
the Receivables and proceeds of the Collateral;
(t) Consents. Agent shall have received any and all Consents
necessary to permit the effectuation of the transactions contemplated by this
Agreement and the Other Documents; and, Agent shall have received such Consents
and waivers of such third parties as might assert claims with respect to the
Collateral, as Agent and its counsel shall deem necessary;
(u) No Adverse Material Change. (i) since June 30, 2005, there
shall not have occurred any event, condition or state of facts which could
reasonably be expected to have a Material Adverse Effect and (ii) no
representations made or information supplied to Agent or Lenders shall have been
proven to be inaccurate or misleading in any material respect;
(v) Leasehold Agreements. Agent shall have received landlord,
mortgagee or warehouseman agreements satisfactory to Agent with respect to all
premises leased by Borrower at which Inventory and books and records are
located;
(w) Mortgage Documents. Agent shall have received in form and
substance satisfactory to Lenders for the Mortgaged Premises (i) an executed
Mortgage, Assignment of Rents, Leases and Profits and Environmental Indemnity
Agreement, (ii) affidavit of title, (iii) survey certified to Agent and the
title company, (iv) appraisal in form, substance and amount satisfactory to the
Agent, and (v) flood hazard certification (life of the loan) and flood
insurance, if necessary;
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(x) ERISA Compliance. Agent shall have received in form and
substance satisfactory to Agent evidence that Borrower is in compliance with
ERISA as required in Section 7.16 herein along with a certificate from
Borrower's accountant, attorney or actuary delineating all existing pension
and/or profit sharing plans, if any;
(y) Other Documents. Agent shall have received the executed
Other Documents, all in form and substance satisfactory to Agent;
(z) Projections. Agent shall have received monthly and annual
projections of the Borrower for the immediately succeeding year demonstrating
Borrower's' ability to make payments under this Agreement;
(aa) Contract Review. Agent shall have received copies of all
material contracts of Borrower including, without limitation, leases, union
contracts, labor contracts, vendor supply contracts, management agreements,
option agreements, warrant agreements, royalty agreements, member agreements,
purchase agreements, warranty agreements, employment agreements, license
agreements and distributorship agreements and such contracts and agreements
shall be satisfactory in all reasonable respects to Agent;
(bb) Closing Certificate. Agent shall have received a closing
certificate signed by the Chief Financial Officer of Borrower dated as of the
date hereof, 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) Borrower is 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;
(cc) Borrowing Base. Agent shall have received a Borrowing
Base Certificate from Borrower evidencing that the Borrower will have a minimum
aggregate Undrawn Availability of at least $1,000,000 at closing (after all fees
and expenses and subtraction of trade payables 60 days or more past due and not
otherwise on formal extended terms);
(dd) Operating Accounts. Agent shall have received evidence
that the Borrower has established and is maintaining operating accounts with the
Agent;
(ee) Compliance with Laws. Agent shall be reasonably satisfied
that Borrower is in compliance with all pertinent federal, state, local or
territorial regulations, including those with respect to the Federal
Occupational Safety and Health Act, the Environmental Protection Act, ERISA and
the Trading with the Enemy Act;
(ff) Searches. Agent shall have received UCC searches, Federal
and State Litigation searches, Upper Court and Local Judgment searches,
franchise tax searches, bankruptcy searches, Federal and State Tax Lien searches
and any other Lien searches run against the names of the Borrower as well as any
previous, alternate and fictitious names, and against the names of all entities
which were acquired by or merged into the Borrower, or orders of applicable
bankruptcy courts reflecting lien releases (as applicable), showing no existing
security interests in or Liens on the Collateral other than Permitted
Encumbrances and other Liens permitted by the Agent;
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(gg) Intellectual Property. Agent shall have received a list
of intellectual property of the Borrower including trademarks and trademark
applications, patents and patent applications, copyrights and copyright
applications, together with a search/abstract relating to the same;
(hh) Trade References. Receipt and satisfactory review by
Agent of trade references with regard to the Borrower;
(ii) Review of Records. Agent shall have reviewed to its
satisfaction all of Borrower's books and records;
(jj) Privity Letter. Agent shall have received a privity
letter from Borrower's accountant authorizing the Agent to rely on the financial
statements and other documentation prepared by such accountant;
(kk) 1st West Investigation. Receipt and satisfactory review
by Agent of 1st West investigation;
(ll) Federal Acquisition Regulations. Satisfactory legal
review by Agent of the Federal Acquisition Regulations requirements and customer
military contracts to confirm that no offset shall occur with regard to accounts
receivable availability based on advanced/progress ▇▇▇▇▇▇▇▇;
(mm) Orderly Liquidation Valuation Appraisal. Satisfactory
review by Agent of an Orderly Liquidation Valuation Appraisal of the Borrower's
machinery and equipment from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇; and
(nn) Other. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
Transactions shall be satisfactory in form and substance to Agent and its
counsel.
8.2 Conditions to Each Advance. The agreement of Lenders to make any
Advance requested to be made on any date (including the initial Advance), is
subject to the satisfaction of the following conditions precedent as of the date
such Advance is made:
(a) Representations and Warranties. Each of the
representations and warranties made by Borrower in or pursuant to this
Agreement, the Other Documents and any related agreements 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, the Other Documents 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
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contemplated by the Acquisition Agreement; provided, however that Agent, in its
sole discretion, may continue to make Advances notwithstanding the existence of
an Event of Default or Default and that any Advances so made shall not be deemed
a waiver of any such Event of Default or Default; and
(c) Maximum Advances. In the case of any type of Advance
requested to be made, after giving effect thereto, the aggregate amount of such
type of Advance shall not exceed the maximum amount of such type of Advance
permitted under this Agreement.
Each request for an Advance by Borrower hereunder shall constitute a
representation and warranty by Borrower as of the date of such Advance that the
conditions contained in this subsection shall have been satisfied.
8.3 Conditions to Each Equipment Loan. The agreement of Lenders to
make any Equipment Loan is subject to satisfaction of the following conditions
precedent: (a) receipt by Agent of (i) a copy of the invoice relating to the
Equipment being purchased, (ii) evidence that such Equipment has been shipped to
Borrower, (iii) evidence that the requested Equipment Loan does not exceed
eighty percent (80%) of the net invoice cost of such Equipment purchased by
Borrower (which shall be exclusive of shipping, delivery, handling, taxes,
overhead, installation and all other "soft" costs), and (iv) such other
documentation and evidence that Agent may request; and (b) after giving effect
thereto, the aggregate outstanding principal amount of Equipment Loans shall not
exceed the Maximum Equipment Loan Amount.
IX. INFORMATION AS TO BORROWERS.
Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
9.1 Disclosure of Material Matters. Immediately upon learning
thereof, report to Agent all matters materially affecting the value,
enforceability or collectibility of any portion of the Collateral, including
Borrower's reclamation or repossession of, or the return to Borrower of, a
material amount of goods or claims or disputes asserted by any Customer or other
obligor.
9.2 Schedules. Deliver to Agent (I) on or before the fifteenth
(15th) day of each month as and for the prior month (a) accounts receivable
ageings inclusive of reconciliations to the general ledger, and (b) a Borrowing
Base Certificate in form and substance satisfactory to Agent (which shall be
calculated as of the last day of the prior month and which shall not be binding
upon Agent or restrictive of Agent's rights under this Agreement) and (II) on
Tuesday of each week as and for the immediately preceding week, sales, cash
remittances, credits and collection reports. In addition, Borrower will deliver
to Agent at such intervals as Agent may require: (i) confirmatory assignment
schedules, (ii) copies of Customer's invoices, (iii) evidence of shipment or
delivery, and (iv) such further schedules, documents and/or information
regarding the Collateral as Agent may require including trial balances and test
verifications. Agent shall have the right to confirm and verify all Receivables
by any manner and through any medium it considers advisable and do whatever it
may deem reasonably necessary to protect its interests hereunder. The items to
be provided under this Section are to be in form satisfactory to Agent and
executed by Borrower and delivered to Agent from time to time solely for Agent's
convenience in maintaining records of the Collateral, and Borrower's failure to
deliver any of such items to Agent shall not affect, terminate, modify or
otherwise limit Agent's Lien with respect to the Collateral.
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9.3 Environmental Reports. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Sections 9.7 and 9.8, with a
certificate signed by the President of Borrower stating, to the best of his
knowledge, that Borrower is in compliance in all material respects with all
federal, state and local Environmental Laws. To the extent 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.
9.4 Litigation. Promptly notify Agent in writing of any claim,
litigation, suit or administrative proceeding affecting Borrower, whether or not
the claim is covered by insurance, and of any litigation, suit or administrative
proceeding, which in any such case affects the Collateral or which could
reasonably be expected to have a Material Adverse Effect.
9.5 Material Occurrences. Promptly notify Agent 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
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of 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 Borrower to a
tax imposed by Section 4971 of the Code; (d) each and every default by Borrower
which might result in the acceleration of the maturity of any Indebtedness,
including the names and addresses of the holders of such Indebtedness with
respect to which there is a default existing or with respect to which the
maturity has been or could be accelerated, and the amount of such Indebtedness;
and (e) any other development in the business or affairs of Borrower which could
reasonably be expected to have a Material Adverse Effect; in each case
describing the nature thereof and the action Borrower propose to take with
respect thereto.
9.6 Government Receivables. Notify Agent immediately if any of its
Receivables arise out of contracts between Borrower and the United States, any
state, or any department, agency or instrumentality of any of them.
9.7 Annual Financial Statements. Furnish Agent within ninety (90)
days after the end of each fiscal year of Borrower, audited financial statements
of Borrower 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
Borrower and satisfactory to Agent (the "Accountants"). The report of the
Accountants shall be accompanied by a statement of the Accountants certifying
that (i) they have caused this Agreement to be reviewed, (ii) in making the
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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 Borrower's compliance with
the requirements or restrictions imposed by Sections 6.5, 7.4, 7.5,7.6, 7.7, 7.8
and 7.11 hereof. In addition, the reports shall be accompanied by a Compliance
Certificate.
9.8 Quarterly Financial Statements. Furnish Agent within 45 days
after the end of each fiscal quarter, an unaudited balance sheet of Borrower and
unaudited statements of income and stockholders' equity and cash flow of
Borrower 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 and complete and correct in all material respects, subject
to normal and recurring year end adjustments that individually and in the
aggregate are not material to Borrower's business. The reports shall be
accompanied by a Compliance Certificate.
9.9 Monthly Financial Statements. Commencing with the month of July,
2006, furnish Agent within thirty (30) days after the end of each month, an
unaudited balance sheet of Borrower and unaudited statements of income and
stockholders' equity and cash flow of Borrower reflecting results of operations
from the beginning of the fiscal year to the end of such month and for such
month, prepared on a basis consistent with prior practices and complete and
correct in all material respects, subject to normal and recurring year end
adjustments that individually and in the aggregate are not material to
Borrower's business. The reports shall be accompanied by a Compliance
Certificate.
9.10 Other Reports. Furnish Agent 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 Borrower shall send to its
stockholders.
9.11 Additional Information. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement have been complied with by Borrower including, without the necessity
of any request by Agent, (a) copies of all environmental audits and reviews, (b)
at least thirty (30) days prior thereto, notice of Borrower's opening of any new
office or place of business or Borrower's closing of any existing office or
place of business, and (c) promptly upon Borrower's learning thereof, notice of
any labor dispute to which 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 Borrower is a party or by which Borrower is bound.
9.12 Projected Operating Budget. Furnish Agent, no later than thirty
(30) days prior to the beginning of Borrower's fiscal years commencing with
fiscal year 2005, a month by month projected operating budget and cash flow of
Borrower for such fiscal year (including an income statement for each month and
a balance sheet as at the end of the last month in each fiscal quarter), such
projections to be accompanied by a certificate signed by the President or Chief
Financial Officer of Borrower to the effect that such projections have been
prepared on the basis of sound financial planning practice consistent with past
budgets and financial statements and that such officer has no reason to question
the reasonableness of any material assumptions on which such projections were
prepared.
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9.13 Variances From Operating Budget. Furnish Agent, concurrently
with the delivery of the financial statements referred to in Section 9.7 and
each quarterly report, a written report summarizing all material variances from
budgets submitted by Borrower pursuant to Section 9.12 and a discussion and
analysis by management with respect to such variances.
9.14 Notice of Suits, Adverse Events. Furnish Agent with prompt
written notice of (i) any lapse or other termination of any Consent issued to
Borrower by any Governmental Body or any other Person that is material to the
operation of 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 Borrower with any Governmental Body or
Person, if such reports indicate any material change in the business,
operations, affairs or condition of 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 Borrower.
9.15 ERISA Notices and Requests. Furnish Agent with immediate
written notice in the event that (i) 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 Borrower or any member of the Controlled Group has taken,
is taking, or proposes to take with respect thereto and, when known, any action
taken or threatened by the Internal Revenue Service, Department of Labor or PBGC
with respect thereto, (ii) 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 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 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 Borrower or any member of the Controlled
Group was not previously contributing shall occur, (v) 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) 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) 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) 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) 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.
9.16 Additional Documents. Execute and deliver to Agent, upon
request, such documents and agreements as Agent may, from time to time,
reasonably request to carry out the purposes, terms or conditions of this
Agreement.
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X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall constitute
an "Event of Default":
10.1 Nonpayment. Failure by Borrower to pay any principal or
interest on the Obligations when due, whether at maturity or by reason of
acceleration pursuant to the terms of this Agreement or by 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;
10.2 Breach of Representation. Any representation or warranty made
or deemed made by Borrower in this Agreement, any Other Document 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;
10.3 Financial Information. Failure by Borrower to (i) furnish
financial information when due or when requested which is unremedied for a
period of fifteen (15) days, or (ii) permit the inspection of its books or
records as set forth in Section 4.10 herein;
10.4 Judicial Actions. Issuance of a notice of Lien, levy,
assessment, injunction or attachment against Borrower's Inventory or Receivables
or against a material portion of Borrower's other property which is not stayed
or lifted within thirty (30) days;
10.5 Noncompliance. Except as otherwise provided for in Sections
10.1, 10.3 and 10.5(ii), (i) failure or neglect of Borrower to perform, keep or
observe any term, provision, condition, covenant herein contained, or contained
in any Other Document or any other agreement or arrangement, now or hereafter
entered into between Borrower and Agent or any Lender, or (ii) failure or
neglect of Borrower to perform, keep or observe any term, provision, condition
or covenant, contained in Sections 4.6, 4.7, 4.9, 6.1, 6.3, 6.4, 9.4 or 9.6
hereof which is not cured within ten (10) days from the occurrence of such
failure or neglect;
10.6 Judgments. Any judgment or judgments are rendered against
Borrower for an aggregate amount in excess of $250,000 which (i) is/are not
contested in good faith by the Borrower, and (ii) the Borrower does not
establish reserves with regard thereto in an amount reasonably satisfactory to
the Agent, unless any such judgment is fully covered by insurance and evidence
thereof acceptable to the Agent in it sole discretion is provided to the Agent;
10.7 Bankruptcy. Borrower shall (i) apply for, consent to or suffer
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, liquidator or similar fiduciary of itself or of all or a substantial
part of its property, (ii) make a general assignment for the benefit of
creditors, (iii) commence a voluntary case under any state or federal bankruptcy
laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or
insolvent, (v) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vi) acquiesce to, or fail to have
dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) take any action for the
purpose of effecting any of the foregoing;
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10.8 Inability to Play. Borrower shall admit in writing its
inability, or be generally unable, to pay its debts as they become due or cease
operations of its present business;
10.9 Affiliate Bankruptcy. Any Affiliate or any Subsidiary of
Borrower 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) admit
in writing its inability, or be generally unable, to pay its debts as they
become due or cease operations of its present business, (iii) make a general
assignment for the benefit of creditors, (iv) commence a voluntary case under
any state or federal bankruptcy laws (as now or hereafter in effect), (v) be
adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (vii) acquiesce
to, or fail to have dismissed, within thirty (30) days, any petition filed
against it in any involuntary case under such bankruptcy laws, or (viii) take
any action for the purpose of effecting any of the foregoing;
10.10 Material Adverse Effect. Any change in Borrower's results of
operations or condition (financial or otherwise) which in Agent's opinion has a
Material Adverse Effect;
10.11 Lien Priority. 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;
10.12 Cross Default. A default of the obligations of Borrower under
any other agreement to which it is a party shall occur which adversely affects
its condition, affairs or prospects (financial or otherwise) which default is
not cured within any applicable grace period;
10.13 Change of Ownership. Any Change of Ownership or Change of
Control shall occur;
10.14 Invalidity. Any material provision of this Agreement or any
Other Document shall, for any reason, cease to be valid and binding on Borrower,
or Borrower shall so claim in writing to Agent or any Lender;
10.15 Licenses. (i) Any Governmental Body shall (A) revoke,
terminate, suspend or adversely modify any license, permit, patent trademark or
tradename of Borrower, or (B) commence proceedings to suspend, revoke, terminate
or adversely modify any such license, permit, trademark, tradename or patent and
such proceedings shall not be dismissed or discharged within sixty (60) days, or
(c) schedule or conduct a hearing on the renewal of any license, permit,
trademark, tradename or patent necessary for the continuation of 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, tradename or patent; (ii) any agreement which
is necessary or material to the operation of Borrower's business shall be
revoked or terminated and not replaced by a substitute acceptable to Agent
within thirty (30) days after the date of such revocation or termination, and
such revocation or termination and non-replacement would reasonably be expected
to have a Material Adverse Effect;
10.16 Seizures. Any portion of the Collateral shall be seized or
taken by a Governmental Body, or Borrower or the title and rights of Borrower or
any Original Owner which is the owner of any material portion of the Collateral
shall have become the subject matter of claim, litigation, suit or other
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proceeding which might, in the opinion of Agent, upon final determination,
result in impairment or loss of the security provided by this Agreement or the
Other Documents;
10.17 Operations. The operations of Borrower's manufacturing
facility are interrupted at any time for more than twelve (12) hours during any
period of ten (10) consecutive days, unless Borrower 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 described 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
Borrower shall be receiving the proceeds of business interruption insurance for
a period of thirty (30) consecutive days; or
10.18 Pension Plans. An event or condition specified in Sections
7.16 or 9.15 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, Borrower or any member of the Controlled Group shall incur, or in
the opinion of Agent be reasonably likely to incur, a liability to a Plan or the
PBGC (or both) which, in the reasonable judgment of Agent, would have a Material
Adverse Effect.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1 Rights and Remedies. Upon the occurrence of (i) an Event of
Default pursuant to Section 10.7 all Obligations shall be immediately due and
payable and this Agreement and the obligation of Lenders to make Advances shall
be deemed terminated; and, (ii) any of the other Events of Default and at any
time thereafter (such default not having previously been cured), at the option
of Required Lenders all Obligations shall be immediately due and payable and
Lenders shall have the right to terminate this Agreement and to terminate the
obligation of Lenders to make Advances and (iii) a filing of a petition against
Borrower in any involuntary case under any state or federal bankruptcy laws, all
Obligations shall be immediately due and payable and the obligation of Lenders
to make Advances hereunder shall be terminated other than as may be required by
an appropriate order of the bankruptcy court having jurisdiction over Borrower.
Upon the occurrence of any Event of Default, Agent shall have the right to
exercise any and all rights and remedies provided for herein, under the Other
Documents, under the Uniform Commercial Code and at law or equity generally,
including 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. Agent may enter any of Borrower's premises or other premises without
legal process and without incurring liability to Borrower therefor, and Agent
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 Agent may deem
advisable and Agent may require Borrower to make the Collateral available to
Agent at a convenient place. With or without having the Collateral at the time
or place of sale, Agent 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
Agent 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, Agent shall give Borrower reasonable notification of such
sale or sales, it being agreed that in all events written notice mailed to
Borrower at least ten (10) days prior to such sale or sales is reasonable
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notification. At any public sale Agent or any Lender may bid for and become the
purchaser, and Agent, any 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 all such
claims, rights and equities are hereby expressly waived and released by
Borrower. In connection with the exercise of the foregoing remedies, including
the sale of Inventory, Agent is granted a perpetual nonrevocable, royalty free,
nonexclusive license and Agent is granted permission to use all of Borrower's
(a) trademarks, trade styles, trade names, patents, patent applications,
copyrights, service marks, licenses, franchises and other proprietary rights
which are used or useful in connection with Inventory for the purpose of
marketing, advertising for sale and selling or otherwise disposing of such
Inventory and (b) Equipment for the purpose of completing the manufacture of
unfinished goods. The cash proceeds realized from the sale of any Collateral
shall be applied to the Obligations in the order set forth in Section 11.5
hereof. Noncash proceeds will only be applied to the Obligations as they are
converted into cash. If any deficiency shall arise, Borrower shall remain liable
to Agent and Lenders therefor.
To the extent that Applicable Law imposes duties on the Agent to exercise
remedies in a commercially reasonable manner, Borrower acknowledges and agrees
that it is not commercially unreasonable for the Agent (i) to fail to incur
expenses reasonably deemed significant by the Agent to prepare Collateral for
disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (ii) to fail to
obtain third party consents for access to Collateral to be disposed of, or to
obtain or, if not required by other law, to fail to obtain governmental or third
party consents for the collection or disposition of Collateral to be collected
or disposed of, (iii) to fail to exercise collection remedies against Customers
or other Persons obligated on Collateral or to remove Liens on or any adverse
claims against Collateral, (iv) to exercise collection remedies against
Customers and other Persons obligated on Collateral directly or through the use
of collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (vi) to contact other
Persons, whether or not in the same business as the Borrower, for expressions of
interest in acquiring all or any portion of such Collateral, (vii) to hire one
or more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capacity of
doing so, or that match buyers and sellers of assets, (ix) to dispose of assets
in wholesale rather than retail markets, (x) to disclaim disposition warranties,
such as title, possession or quiet enjoyment, (xi) to purchase insurance or
credit enhancements to insure the Agent against risks of loss, collection or
disposition of Collateral or to provide to the Agent a guaranteed return from
the collection or disposition of Collateral, or (xii) to the extent deemed
appropriate by the Agent, to obtain the services of other brokers, investment
bankers, consultants and other professionals to assist the Agent in the
collection or disposition of any of the Collateral. Borrower acknowledges that
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the purpose of this Section 11.1(b) is to provide non-exhaustive indications of
what actions or omissions by the Agent would not be commercially unreasonable in
the Agent's exercise of remedies against the Collateral and that other actions
or omissions by the Agent shall not be deemed commercially unreasonable solely
on account of not being indicated in this Section 11.1(b). Without limitation
upon the foregoing, nothing contained in this Section 11.1(b) shall be construed
to grant any rights to Borrower or to impose any duties on Agent that would not
have been granted or imposed by this Agreement or by Applicable Law in the
absence of this Section 11.1(b).
11.2 Agent's Discretion. Agent shall have the right in its sole
discretion to determine which rights, Liens, security interests or remedies
Agent 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 Agent's or Lenders' rights hereunder.
11.3 Setoff. Subject to Section 14.12, in addition to any other
rights which Agent or any Lender may have under Applicable Law, upon the
occurrence of an Event of Default hereunder, Agent and such Lender shall have a
right, immediately and without notice of any kind, to apply Borrower's property
held by Agent and such Lender to reduce the Obligations.
11.4 Rights and Remedies not Exclusive. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the exercise
of any rights or remedy shall not preclude the exercise of any other right or
remedies provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
11.5 Allocation of Payments After Event of Default. Notwithstanding
any other provisions of this Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by the Agent on account of the Obligations or any other amounts outstanding
under any of the Other Documents or in respect of the Collateral may, at Agent's
discretion, be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys' fees) of the Agent in connection with enforcing
its rights and the rights of the Lenders under this Agreement and the Other
Documents and any protective advances made by the Agent with respect to the
Collateral under or pursuant to the terms of this Document;
SECOND, to payment of any fees owed to the Agent;
THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys' fees) of each of the Lenders in connection with
enforcing its rights under this Agreement and the Other Documents or otherwise
with respect to the Obligations owing to such Lender;
FOURTH, to the payment of all of the Obligations consisting of accrued
fees and interest;
FIFTH, to the payment of the outstanding principal amount of the
Obligations;
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SIXTH, to all other Obligations and other obligations which shall have
become due and payable under the Other Documents or otherwise and not repaid
pursuant to clauses "FIRST" through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully
entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the Lenders shall receive (so long as it is
not a Defaulting Lender) an amount equal to its pro rata share (based on the
proportion that the then outstanding Advances held by such Lender bears to the
aggregate then outstanding Advances) of amounts available to be applied pursuant
to clauses "FOURTH", "FIFTH" and "SIXTH" above.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1 Waiver of Notice. 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.
12.2 Delay. No delay or omission on Agent's or any 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 or Event of Default.
12.3 Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY
HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1 Term. This Agreement, which shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of
Borrower, Agent and each Lender, shall become effective on the date hereof and
shall continue in full force and effect until the Termination Date (the "Term")
unless sooner terminated as herein provided. Borrower may terminate this
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Agreement at any time upon thirty (30) days' prior written notice upon payment
in full of the Obligations. In the event the Obligations other than any
Obligations with regard to the Term Loan are prepaid in full prior to the last
day of the Term (the date of such prepayment hereinafter referred to as the
"Early Termination Date"), Borrower shall pay to Agent for the benefit of
Lenders an early termination fee in an amount equal to (y) $140,000 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, and (z) $70,000
if the Early Termination Date occurs on or after the first anniversary of the
Closing Date to and including the date immediately preceding the second
anniversary of the Closing Date.
13.2 Termination. The termination of the Agreement shall not affect
Borrower's, Agent's or any Lender'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 and
indefeasibly paid, disposed of, concluded or liquidated. The security interests,
Liens and rights granted to Agent and Lenders hereunder and the financing
statements filed hereunder shall continue in full force and effect,
notwithstanding the termination of this Agreement or the fact that Borrower's
Account may from time to time be temporarily in a zero or credit position, until
all of the Obligations of Borrower have been indefeasibly paid and performed in
full after the termination of this Agreement or Borrower has furnished Agent and
Lenders with an indemnification satisfactory to Agent and Lenders with respect
thereto. Accordingly, Borrower waives any rights which it may have under the
Uniform Commercial Code to demand the filing of termination statements with
respect to the Collateral, and Agent shall not be required to send such
termination statements to 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 have been indefeasibly paid in full in immediately
available funds. All representations, warranties, covenants, waivers and
agreements contained herein shall survive termination hereof until all
Obligations are indefeasibly paid and performed in full.
XIV. REGARDING AGENT.
14.1 Appointment. Each Lender hereby designates PNC to act as Agent
for such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Sections
3.2(a) and 3.3), charges and collections (without giving effect to any
collection days) received pursuant to this Agreement, for the ratable benefit of
Lenders. Agent may perform any of its duties hereunder by or through its agents
or employees. As to any matters not expressly provided for by this Agreement
(including collection of the Note) Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Lenders, and such instructions shall be
binding; provided, however, that Agent shall not be required to take any action
which exposes Agent to liability or which is contrary to this Agreement or the
Other Documents or Applicable Law unless Agent is furnished with an
indemnification reasonably satisfactory to Agent with respect thereto.
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14.2 Nature of Duties. Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and the
Other Documents. Neither Agent nor any of its officers, directors, employees or
agents shall be (i) liable for any action taken or omitted by them as such
hereunder or in connection herewith, unless caused by their gross (not mere)
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final non-appealable judgment), or (ii) responsible in any
manner for any recitals, statements, representations or warranties made by
Borrower or any officer thereof contained in this Agreement, or in any of the
Other Documents or in any certificate, report, statement or other document
referred to or provided for in, or received by Agent under or in connection
with, this Agreement or any of the Other Documents or for the value, validity,
effectiveness, genuineness, due execution, enforceability or sufficiency of this
Agreement, or any of the Other Documents or for any failure of Borrower to
perform its obligations hereunder. Agent shall not be under any obligation to
any Lender to ascertain or to inquire as to the observance or performance of any
of the agreements contained in, or conditions of, this Agreement or any of the
Other Documents, or to inspect the properties, books or records of Borrower. The
duties of Agent as respects the Advances to Borrower shall be mechanical and
administrative in nature; Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender; and nothing in this Agreement,
expressed or implied, is intended to or shall be so construed as to impose upon
Agent any obligations in respect of this Agreement except as expressly set forth
herein.
14.3 Lack of Reliance on Agent and Resignation. Independently and
without reliance upon Agent or any other Lender, each Lender has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of Borrower in connection with the making and the
continuance of the Advances hereunder and the taking or not taking of any action
in connection herewith, and (ii) its own appraisal of the creditworthiness of
Borrower. Agent shall have no duty or responsibility, either initially or on a
continuing basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before making of the
Advances or at any time or times thereafter except as shall be provided by
Borrower pursuant to the terms hereof. Agent shall not be responsible to any
Lender for any recitals, statements, information, representations or warranties
herein or in any agreement, document, certificate or a statement delivered in
connection with or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any Other
Document, or of the financial condition of Borrower, or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement, the Note, the Other Documents or the
financial condition of Borrower, or the existence of any Event of Default or any
Default.
Agent may resign on sixty (60) days' written notice to each of Lenders and
Borrower and upon such resignation, the Required Lenders will promptly designate
a successor Agent reasonably satisfactory to Borrower.
Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term "Agent" shall mean such successor agent effective upon its
appointment, and the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent. After any Agent's resignation as Agent, the provisions of this Article
XIV shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
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14.4 Certain Rights of Agent. If Agent shall request instructions
from Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
14.5 Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
14.6 Notice of Default. Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default hereunder or
under the Other Documents, unless Agent has received notice from a Lender or
Borrower referring to this Agreement or the Other Documents, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided, that, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of Lenders.
14.7 Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrower, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; provided that, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
(not mere) negligence or willful misconduct (as determined by a court of
competent jurisdiction in a final non-appealable judgment).
14.8 Agent in its Individual Capacity. With respect to the
obligation of Agent to lend under this Agreement, the Advances made by it shall
have the same rights and powers hereunder as any other Lender and as if it were
not performing the duties as Agent specified herein; and the term "Lender" or
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any similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity as a Lender. Agent may engage in business with
Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from Borrower for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
14.9 Delivery of Documents. To the extent Agent receives financial
statements required under Sections 9.7, 9.8, 9.9, 9.12 and 9.13 or Borrowing
Base Certificates from Borrower pursuant to the terms of this Agreement which
Borrower is not obligated to deliver to each Lender, Agent will promptly furnish
such documents and information to Lenders.
14.10 Borrower's Undertaking to Agent. Without prejudice to its
obligations to Lenders under the other provisions of this Agreement, Borrower
hereby undertakes with Agent to pay to Agent from time to time on demand all
amounts from time to time due and payable by it for the account of Agent or
Lenders or any of them pursuant to this Agreement to the extent not already
paid. Any payment made pursuant to any such demand shall pro tanto satisfy the
relevant Borrower's obligations to make payments for the account of Lenders or
the relevant one or more of them pursuant to this Agreement.
14.11 No Reliance on Agent's Customer Identification Program. Each
Lender acknowledges and agrees that neither such Lender, nor any of its
Affiliates, participants or assignees, may rely on the Agent to carry out such
Lender's, Affiliate's, participant's or assignee's customer identification
program, or other obligations required or imposed under or pursuant to the USA
PATRIOT Act or the regulations thereunder, including the regulations contained
in 31 CFR 103.121 (as hereafter amended or replaced, the "CIP Regulations"), or
any other Anti-Terrorism Law, including any programs involving any of the
following items relating to or in connection with Borrower, its Affiliates or
its agents, this Agreement, the Other Documents or the transactions hereunder or
contemplated hereby: (1) any identity verification procedures, (2) any
record-keeping, (3) comparisons with government lists, (4) customer notices or
(5) other procedures required under the CIP Regulations or such other laws.
14.12 Other Agreements. Each of the Lenders agrees that it shall
not, without the express consent of Agent, and that it shall, to the extent it
is lawfully entitled to do so, upon the request of Agent, set off against the
Obligations, any amounts owing by such Lender to Borrower or any deposit
accounts of Borrower now or hereafter maintained with such Lender. Anything in
this Agreement to the contrary notwithstanding, each of the Lenders further
agrees that it shall not, unless specifically requested to do so by Agent, take
any action to protect or enforce its rights arising out of this Agreement or the
Other Documents, it being the intent of Lenders that any such action to protect
or enforce rights under this Agreement and the Other Documents shall be taken in
concert and at the direction or with the consent of Agent or Required Lenders.
XV. MISCELLANEOUS.
15.1 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 Borrower with respect to any of the
Obligations, this Agreement, the Other Documents or any related agreement may be
brought in any court of competent jurisdiction in the State of New York, United
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States of America, and, by execution and delivery of this Agreement, 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. 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 Borrower at its address
set forth in Section 15.6 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. Nothing herein shall affect the right to serve process in any
manner permitted by law or shall limit the right of Agent or any Lender to bring
proceedings against Borrower in the courts of any other jurisdiction. 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. Borrower waives the right to remove
any judicial proceeding brought against Borrower in any state court to any
federal court. Any judicial proceeding by Borrower against Agent or any Lender
involving, directly or indirectly, any matter or claim in any way arising out
of, related to or connected with this Agreement or any related agreement, shall
be brought only in a federal or state court located in the County of New York,
State of New York.
15.2 Entire Understanding.
(a) This Agreement and the documents executed concurrently
herewith contain the entire understanding between Borrower, Agent and each
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 Borrower's, Agent's and each Lender's
respective officers. Neither this Agreement nor any portion or provisions hereof
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. Borrower
acknowledges that it has been advised by counsel in connection with the
execution of this Agreement and Other Documents and is not relying upon oral
representations or statements inconsistent with the terms and provisions of this
Agreement.
(b) The Required Lenders, Agent with the consent in writing of
the Required Lenders, and Borrower may, subject to the provisions of this
Section 15.2 (b), from time to time enter into written supplemental agreements
to this Agreement or the Other Documents executed by Borrower, for the purpose
of adding or deleting any provisions or otherwise changing, varying or waiving
in any manner the rights of Lenders, Agent or Borrower thereunder or the
conditions, provisions or terms thereof of waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall, without the
consent of all Lenders:
(i) increase the Commitment Percentage, the maximum
dollar commitment of any Lender or the Maximum Revolving
Advance Amount.
(ii) extend the maturity of any Note or the due date for
any amount payable hereunder, or decrease the rate of interest
or reduce any fee payable by Borrower to Lenders pursuant to
this Agreement.
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(iii) alter the definition of the term Required Lenders
or alter, amend or modify this Section 15.2(b).
(iv) release any Collateral during any calendar year
(other than in accordance with the provisions of this
Agreement) having an aggregate value in excess of $75,000
(exclusive of the Mortgaged Premises upon the sale thereof).
(v) change the rights and duties of Agent.
(vi) permit any Revolving Advance to be made if after
giving effect thereto the total of Revolving Advances
outstanding hereunder would exceed the Formula Amount for more
than sixty (30) consecutive Business Days or exceed one
hundred and five percent (105%) of the Formula Amount.
(vii) increase the Advance Rates above the Advance Rates
in effect on the Closing Date.
(viii) release any guarantor.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrower, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrower, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
In the event that Agent requests the consent of a Lender pursuant to this
Section 15.2 and such Lender shall not respond or reply to Agent in writing
within five (5) days of delivery of such request, such Lender shall be deemed to
have consented to the matter that was the subject of the request. In the event
that Agent requests the consent of a Lender pursuant to this Section 15.2 and
such consent is denied, then PNC may, at its option, require such Lender to
assign its interest in the Advances to PNC or to another Lender or to any other
Person designated by the Agent (the "Designated Lender"), for a price equal to
the then outstanding principal amount thereof plus accrued and unpaid interest
and fees due such Lender, which interest and fees shall be paid when collected
from Borrower. In the event PNC elects to require any Lender to assign its
interest to PNC or to the Designated Lender, PNC will so notify such Lender in
writing within forty five (45) days following such Lender's denial, and such
Lender will assign its interest to PNC or the Designated Lender no later than
five (5) days following receipt of such notice pursuant to a Commitment Transfer
Supplement executed by such Lender, PNC or the Designated Lender, as
appropriate, and Agent.
Notwithstanding (a) the existence of a Default or an Event of Default, (b)
that any of the other applicable conditions precedent set forth in Section 8.2
hereof have not been satisfied or (c) any other provision of this Agreement,
Agent may at its discretion and without the consent of the Required Lenders,
voluntarily permit the outstanding Revolving Advances at any time to exceed the
Formula Amount by up to ten percent (10%) of the Formula Amount for up to thirty
(30) consecutive Business Days (the "Out-of-Formula Loans"). If Agent is willing
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in its sole and absolute discretion to make such Out-of-Formula Loans, such
Out-of-Formula Loans shall be payable on demand and shall bear interest at the
Default Rate for Revolving Advances consisting of Domestic Rate Loans; provided
that, if Lenders do make Out-of-Formula Loans, neither Agent nor Lenders shall
be deemed thereby to have changed the limits of Section 2.1(a). For purposes of
this paragraph, the discretion granted to Agent hereunder shall not preclude
involuntary overadvances that may result from time to time due to the fact that
the Formula Amount was unintentionally exceeded for any reason, including, but
not limited to, Collateral previously deemed to be either "Eligible Receivables"
or "Eligible Inventory", as applicable, becomes ineligible, collections of
Receivables applied to reduce outstanding Revolving Advances are thereafter
returned for insufficient funds or overadvances are made to protect or preserve
the Collateral. In the event Agent involuntarily permits the outstanding
Revolving Advances to exceed the Formula Amount by more than ten percent (10%),
Agent shall use its efforts to have Borrower decrease such excess in as
expeditious a manner as is practicable under the circumstances and not
inconsistent with the reason for such excess. Revolving Advances made after
Agent has determined the existence of involuntary overadvances shall be deemed
to be involuntary overadvances and shall be decreased in accordance with the
preceding sentence.
In addition to (and not in substitution of) the discretionary Revolving
Advances permitted above in this Section 15.2, the Agent is hereby authorized by
Borrower and the Lenders, from time to time in the Agent's sole discretion, (A)
after the occurrence and during the continuation of a Default or an Event of
Default, or (B) at any time that any of the other applicable conditions
precedent set forth in Section 8.2 hereof have not been satisfied, to make
Revolving Advances to Borrower on behalf of the Lenders which the Agent, in its
reasonable business judgment, deems necessary or desirable (a) to preserve or
protect the Collateral, or any portion thereof, (b) to enhance the likelihood
of, or maximize the amount of, repayment of the Advances and other Obligations,
or (c) to pay any other amount chargeable to Borrower pursuant to the terms of
this Agreement; provided, that at any time after giving effect to any such
Revolving Advances the outstanding Revolving Advances do not exceed one hundred
and ten percent (110%) of the Formula Amount.
15.3 Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure to the
benefit of Borrower, Agent, each Lender, all future holders of the Obligations
and their respective successors and assigns, except that Borrower may not assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of Agent and each Lender.
(b) Borrower acknowledges that in the regular course of
commercial banking business one or more Lenders 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
"Participant") and shall provide notice to the Borrower thereof. Each
Participant may exercise all rights of payment (including 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 Participant were the direct holder thereof
provided that Borrower shall not be required to pay to any Participant 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
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Participant had such Lender retained such interest in the Advances hereunder or
other Obligations payable hereunder and in no event shall Borrower 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 Participant. Borrower hereby grants to any Participant a continuing
security interest in any deposits, moneys or other property actually or
constructively held by such Participant as security for the Participant's
interest in the Advances.
(c) Any Lender may with the consent of Agent which shall not
be unreasonably withheld or delayed 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", and together with each Participant, each a "Transferee" and
collectively the "Transferees"), in minimum amounts of not less than $5,000,000,
pursuant to a Commitment Transfer Supplement, executed by a Purchasing Lender,
the transferor Lender, and Agent and delivered to Agent for recording. Upon such
execution, delivery, acceptance and recording, from and after the transfer
effective date determined pursuant to such Commitment Transfer Supplement, (i)
Purchasing Lender thereunder shall be a party hereto and, to the extent provided
in such Commitment Transfer Supplement, have the rights and obligations of a
Lender thereunder with a Commitment Percentage as set forth therein, and (ii)
the transferor Lender thereunder shall, to the extent provided in such
Commitment Transfer Supplement, be released from its obligations under this
Agreement, the Commitment Transfer Supplement creating a novation for that
purpose. Such Commitment Transfer Supplement shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the purchase by such Purchasing Lender of
all or a portion of the rights and obligations of such transferor Lender under
this Agreement and the Other Documents. Borrower hereby consents to the addition
of such Purchasing Lender and the resulting adjustment of the Commitment
Percentages arising from the purchase by such Purchasing Lender of all or a
portion of the rights and obligations of such transferor Lender under this
Agreement and the Other Documents. Borrower shall execute and deliver such
further documents and do such further acts and things in order to effectuate the
foregoing.
(d) Agent shall maintain at its address a copy of each
Commitment Transfer Supplement delivered to it and a register (the "Register")
for the recordation of the names and addresses of each Lender and the
outstanding principal, accrued and unpaid interest and other fees due hereunder.
The entries in the Register shall be conclusive, in the absence of manifest
error, and Borrower, Agent and Lenders may treat each Person whose name is
recorded in the Register as the owner of the Advance recorded therein for the
purposes of this Agreement. The Register shall be available for inspection by
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice. Agent shall receive a fee in the amount of $3,500
payable by the applicable Purchasing Lender upon the effective date of each
transfer or assignment to such Purchasing Lender.
(e) Borrower authorizes each Lender to disclose to any
Transferee and any prospective Transferee any and all financial information in
such Lender's possession concerning Borrower which has been delivered to such
Lender by or on behalf of Borrower pursuant to this Agreement or in connection
with such Lender's credit evaluation of Borrower.
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15.4 Application of Payments. Agent 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
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for 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 Agent or such
Lender.
15.5 Indemnity. Borrower shall indemnify Agent, each Lender and each
of their respective officers, directors, Affiliates, attorneys, employees and
agents from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including fees and disbursements of counsel) which
may be imposed on, incurred by, or asserted against Agent or any Lender in any
claim, litigation, proceeding or investigation instituted or conducted by any
Governmental Body 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 Agent or any
Lender is a party thereto, except to the extent that any of the foregoing arises
out of the willful misconduct of the party being indemnified (as determined by a
court of competent jurisdiction in a final and non-appealable judgment). Without
limiting the generality of the foregoing, this indemnity shall extend to any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature whatsoever (including
fees and disbursements of counsel) asserted against or incurred by any of the
indemnitees described above in this Section 15.5 by any Person under any
Environmental Laws or similar laws by reason of Borrower's or any other Person's
failure to comply with laws applicable to solid or hazardous waste materials,
including Hazardous Substances and Hazardous Waste, or other Toxic Substances.
Additionally, if any taxes (excluding taxes imposed upon or measured solely by
the net income of Agent and Lenders, but including any intangibles taxes, stamp
tax, recording tax or franchise tax) shall be payable by Agent, Lenders or
Borrower on account of the execution or delivery of this Agreement, or the
execution, delivery, issuance or recording of any of the Other Documents, or the
creation or repayment of any of the Obligations hereunder, by reason of any
Applicable Law now or hereafter in effect, Borrower will pay (or will promptly
reimburse Agent and Lenders for payment of) all such taxes, including interest
and penalties thereon, and will indemnify and hold the indemnitees described
above in this Section 15.5 harmless from and against all liability in connection
therewith.
15.6 Notice. Any notice or request hereunder may be given to
Borrower or to Agent or any 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, request, demand,
direction or other communication (for purposes of this Section 15.6 only, a
"Notice") to be given to or made upon any party hereto under any provision of
this Loan Agreement shall be given or made by telephone or in writing (which
includes by means of electronic transmission (i.e., "e-mail") or facsimile
transmission or by setting forth such Notice on a site on the World Wide Web (a
"Website Posting") if Notice of such Website Posting (including the information
81
necessary to access such site) has previously been delivered to the applicable
parties hereto by another means set forth in this Section 15.6) in accordance
with this Section 15.6. Any such Notice must be delivered to the applicable
parties hereto at the addresses and numbers set forth under their respective
names on Section 15.6 hereof or in accordance with any subsequent unrevoked
Notice from any such party that is given in accordance with this Section 15.6.
Any Notice shall be effective:
(a) In the case of hand-delivery, when delivered;
(b) If given by mail, four days after such Notice is deposited
with the United States Postal Service, with first-class postage prepaid, return
receipt requested;
(c) In the case of a telephonic Notice, when a party is
contacted by telephone, if delivery of such telephonic Notice is confirmed no
later than the next Business Day by hand delivery, a facsimile or electronic
transmission, a Website Posting or an overnight courier delivery of a
confirmatory Notice (received at or before noon on such next Business Day);
(d) In the case of a facsimile transmission, when sent to the
applicable party's facsimile machine's telephone number, if the party sending
such Notice receives confirmation of the delivery thereof from its own facsimile
machine;
(e) In the case of electronic transmission, when actually
received;
(f) In the case of a Website Posting, upon delivery of a
Notice of such posting (including the information necessary to access such site)
by another means set forth in this Section 15.6; and
(g) If given by any other means (including by overnight
courier), when actually received.
Any Lender giving a Notice to Borrower shall
concurrently send a copy thereof to the Agent, and the Agent shall promptly
notify the other Lenders of its receipt of such Notice.
(A) If to Agent or PNC at: PNC Bank, National Association
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Vice President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: PNC Bank, National Association
PNC Agency Services
PNC Firstside Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with an additional copy to: Wilentz, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ P.A.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(B) If to a Lender other than Agent, as specified on the signature pages hereof
(C) If to Borrower: Air Industries Machining, Corp.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Vice Chairman & CFO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇ & ▇▇▇ ▇▇▇▇▇▇ LLP
▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
15.7 Survival. The obligations of Borrower under Sections 2.2(f),
3.6, 3.7, 3.8, 4.19(h), and 15.5 and the obligations of Lenders under Section
14.7, shall survive termination of this Agreement and the Other Documents and
payment in full of the Obligations.
15.8 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.
15.9 Expenses. All costs and expenses including reasonable
attorneys' fees (including the allocated costs of in house counsel) and
disbursements incurred by Agent on its behalf or on behalf of Lenders and
Lenders (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 or thereunder and all related agreements,
documents and instruments, or (c) in instituting, maintaining, preserving,
enforcing and foreclosing on Agent's security interest in or Lien on any of the
Collateral, or maintaining, preserving or enforcing any of Agent's or any
Lender's rights hereunder and under all related agreements, documents and
83
instruments, whether through judicial proceedings or otherwise, or (d) in
defending or prosecuting any actions or proceedings arising out of or relating
to Agent's or any Lender's transactions with Borrower or any guarantor or (e) in
connection with any advice given to Agent or any Lender with respect to its
rights and obligations under this Agreement and all related agreements,
documents and instruments, may be charged to Borrower's Account and shall be
part of the Obligations.
15.10 Injunctive Relief. Borrower recognizes that, in the event
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, or threatens to fail to perform, observe or
discharge such obligations or liabilities, any remedy at law may prove to be
inadequate relief to Lenders; therefore, Agent, if Agent 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.
15.11 Damages. Neither Agent nor any Lender, nor any agent or
attorney for any of them, shall be liable to Borrower (or any Affiliate of any
such Person) for indirect, punitive, exemplary or consequential damages arising
from any breach of contract, tort or other wrong relating to the establishment,
administration or collection of the Obligations or as a result of any
transaction contemplated under this Agreement or any Other Document.
15.12 Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
15.13 Counterparts; Facsimile Signatures. This Agreement may be
executed in any number of and by different parties hereto on separate
counterparts, all of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
15.14 Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
15.15 Confidentiality; Sharing Information.
(a) Agent, each Lender and each Transferee shall hold all
non-public information obtained by Agent, such Lender or such Transferee
pursuant to the requirements of this Agreement in accordance with Agent's, such
Lender's and such Transferee's customary procedures for handling confidential
information of this nature; provided, however, Agent, each Lender and each
Transferee may disclose such confidential information (a) to its examiners,
Affiliates, outside auditors, counsel and other professional advisors, (b) to
Agent, any Lender or to any prospective Transferees, 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, Agent, each Lender and each Transferee shall use
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its reasonable best efforts prior to disclosure thereof, to notify Borrower 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 Agent, any Lender or any Transferee be obligated to return any
materials furnished by Borrower other than those documents and instruments in
possession of Agent or any Lender in order to perfect its Lien on the Collateral
once the Obligations have been paid in full and this Agreement has been
terminated.
(b) Borrower acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
Borrower or one or more of its Affiliates (in connection with this Agreement or
otherwise) by any Lender or by one or more Subsidiaries or Affiliates of such
Lender and Borrower hereby authorizes each Lender to share any information
delivered to such Lender by Borrower and its Subsidiaries pursuant to this
Agreement, or in connection with the decision of such Lender to enter into this
Agreement, to any such Subsidiary or Affiliate of such Lender, it being
understood that any such Subsidiary or Affiliate of any Lender receiving such
information shall be bound by the provisions of this Section 15.15 as if it were
a Lender hereunder. Such authorization shall survive the repayment of the other
Obligations and the termination of this Agreement.
15.16 Publicity. Borrower and each Lender hereby authorizes Agent to
make appropriate announcements of the financial arrangement entered into among
Borrower, Agent and Lenders, including announcements which are commonly known as
tombstones, in such publications and to such selected parties as Agent shall in
its sole and absolute discretion deem appropriate.
15.17 Certifications From Banks and Participants; US PATRIOT Act.
Each Lender or assignee or participant of a Lender that is not incorporated
under the Laws of the United States of America or a state thereof (and is not
excepted from the certification requirement contained in Section 313 of the USA
PATRIOT Act and the applicable regulations because it is both (i) an affiliate
of a depository institution or foreign bank that maintains a physical presence
in the United States or foreign country, and (ii) subject to supervision by a
banking authority regulating such affiliated depository institution or foreign
bank) shall deliver to the Agent the certification, or, if applicable,
recertification, certifying that such Lender is not a "shell" and certifying to
other matters as required by Section 313 of the USA PATRIOT Act and the
applicable regulations: (1) within 10 days after the Closing Date, and (2) as
such other times as are required under the USA PATRIOT Act.
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Each of the parties has signed this Agreement as of the day and year first
above written.
ATTEST: AIR INDUSTRIES MACHINING, CORP.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------- ----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Secretary Title: President
PNC BANK, NATIONAL ASSOCIATION,
as Lender and as Agent
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Commitment Percentage: 100%
List of Exhibits and Schedules
Exhibits
Exhibit 1.2 Borrowing Base Certificate
Exhibit 2.1(a) Revolving Credit Note
Exhibit 2.4(a) Term Note
Exhibit 2.4(b)(i) Equipment Line of Credit Note
Exhibit 2.4(b)(ii) Converted Equipment Line of Credit Note
Exhibit 8.1(i) Financial Condition Certificate
Exhibit 15.3 Commitment Transfer Supplement
Schedules
Schedule 1.2 Permitted Encumbrances
Schedule 1.2(a) Leasehold Interests
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.15(h) Deposit and Investment Accounts
Schedule 4.19 Real Property
Schedule 5.1 Consents
Schedule 5.2(a) States of Qualification and Good Standing
Schedule 5.2(b) Subsidiaries
Schedule 5.4 Federal Tax Identification Number
Schedule 5.6 Prior Names
Schedule 5.7(b) Environmental Licenses, Certificates and Permits
Schedule 5.8(b) Litigation
Schedule 5.8(d) Plans
Schedule 5.9 Intellectual Property, Source Code Escrow Agreements
Schedule 5.10 Licenses and Permits
Schedule 5.14 Labor Disputes