EXHIBIT 10.1
[▇▇▇▇▇▇▇ ▇▇▇▇▇ LOGO] WCMA* LOAN AND SECURITY AGREEMENT
WCMA LOAN AND SECURITY AGREEMENT NO. 586-07067 ("Loan Agreement") dated as of
December 16, 2003, between COLLEGIATE PACIFIC INC., a corporation organized and
existing under the laws of the State of Delaware having its principal office at
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Customer"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇
BUSINESS FINANCIAL SERVICES INC., a corporation organized and existing under the
laws of the State of Delaware having its principal office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇. ▇▇ ▇▇▇▇▇ ("MLBFS").
Pursuant to that certain WORKING CAPITAL MANAGEMENT* ACCOUNT AGREEMENT NO.
586-07067 and the accompanying Program Description (as the same may be, or have
been, amended, modified or supplemented, the "WCMA Agreement") between Customer
and MLBFS' affiliate, ▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇ INCORPORATED
("MLPF&S"). Customer opened, or shall prior to the Activation Date open, a
Working Capital Management Account pursuant to the "WCMA Service" and the "WCMA
Program" described in the WCMA Agreement and any documents incorporated therein.
The WCMA Agreement is by this reference incorporated as a part hereof. In
conjunction therewith and as part of the WCMA Program. Customer has requested
that MLBFS provide, and subject to the terms and conditions herein set forth
MLBFS has agreed to provide, a commercial line of credit for Customer.
Accordingly, and in consideration of the premises and of the mutual covenants of
the parties hereto, Customer and MLBFS hereby agree as follows:
ARTICLE I. DEFINITIONS
1.1 SPECIFIC TERMS. In addition to terms defined elsewhere in this Loan
Agreement, when used herein the following terms shall have the following
meanings'
"Activation Date" shall mean the date upon which MLBFS shall cause the WCMA Line
of Credit to be fully activated under MLPF&S' computer system as part of the
WCMA Program.
"Bankruptcy Event" shall mean any of the following: (i) a proceeding under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
liquidation, winding up or receivership law or statute shall be commenced, filed
or consented to by any Credit Party; or (ii) any such proceeding shall be filed
against any Credit Party and shall not be dismissed or withdrawn within sixty
(60) days after filing, or (iii) any Credit Party shall make a general
assignment for the benefit of creditors; or (iv) any Credit Party shall
generally fail to pay or admit in writing its inability to pay its debts as they
become due; or (v) any Credit Party shall be adjudicated a bankrupt or
insolvent; or (vi) any Credit Party shall take advantage of any other law or
procedure for the relief of debtors or shall take any action for the purpose of
or with a view towards effecting any of the foregoing; or (vii) a receiver,
trustee, custodian, fiscal agent or similar official for any Credit Party or for
any substantial part of any of their respective property or assets shall be
sought by such Credit Party or appointed.
"Business Day" shall mean any day other than a Saturday, Sunday, federal holiday
or other day on which the New York Stock Exchange is regularly closed.
"Business Guarantor" shall mean every Guarantor that is not a natural person.
"Certificate of Compliance" shall mean, as applicable, that duly executed
certificate, substantially the same form as Exhibit B attached hereto to the
extent such certificate shall be applicable, of the president, chief financial
officer or chief executive officer of Customer, certifying as to the matters
set forth in such certificate.
"Collateral" shall mean the WCMA Account, all Accounts, Chattel Paper, Contract
Rights, Inventory, Equipment, Fixtures, General Intangibles, Deposit Accounts,
Documents, Instruments, Investment Property and Financial Assets of Customer,
howsoever arising, whether now owned or existing of hereafter acquired or
arising, and wherever located; together with all parts thereof (including spare
parts), all accessories and accessions thereto, all books and records (including
computer records) directly related thereto, all proceeds thereof (including,
without limitation, proceeds in the form of Accounts and insurance proceeds),
and the additional collateral described in Section 3.6 (b) hereof
"Commitment Expiration Date" shall mean December 30, 2003.
"Credit Party" and "Credit Parties" shall mean, individually or collectively,
the Customer, all Guarantors and all Pledgors.
"Default" shall mean either an "Event of Default" as defined in Section 3.5
hereof, or an event which with the giving of notice, passage of time, or both,
would constitute such an Event of Default.
"Default Rate" shall mean an annual interest rate equal to the lesser of; (i)
two percentage points over the Interest Rate; or (ii) the highest interest rate
allowed by applicable law.
"Event of Loss" shall mean the occurrence whereby any tangible Collateral is
damaged beyond repair, lost, totally destroyed or confiscated.
"Excess Interest" shall mean any amount or rate of interest (including the
Default Rate and. to the extent that they may be deemed to constitute interest,
any prepayment fees, late charges and other fees and charges) payable, charged
or received in connection with any of the Loan Documents which exceeds the
maximum amount or rate of interest permitted under applicable law.
"GAAP" shall mean the generally accepted accounting principles in effect in the
United States of America from time to time.
"General Funding Conditions" shall mean each of the following conditions to any
WCMA Loan by MLBFS hereunder: (i) Customer shall have validly subscribed to and
continued to maintain the WCMA Account with MLPF&S, and the WCMA Account shall
then be reflected as an active "commercial" WCMA Account (i.e., one with line of
credit capabilities) on MLPF&S' WCMA computer system; (ii) no Default or Event
of Default shall have occurred and be continuing or would result from the making
of any WCMA Loan hereunder by MLBFS; (iii) there shall not have occurred and be
continuing any material adverse change in the business or financial condition of
any Credit Party; (iv) all representations and warranties of all of the Credit
Parties herein or in any of the Loan Documents shall then be true and correct in
all material respects; (v) MLBFS shall have received this Loan Agreement and all
of the other Loan Documents duly executed and filed or recorded where
applicable, all of which shall be in form and substance satisfactory to MLBFS;
(vi) MLBFS shall have received evidence satisfactory to it as to the ownership
of the Collateral and the perfection and priority of MLBFS' liens and security
interests thereon, as well as the ownership of and the perfection and priority
of MLBFS' liens and security interests on any other collateral for the
Obligations furnished pursuant to any of the Loan Documents; (vii) MLBFS shall
have received evidence satisfactory to it of the insurance required hereby or by
any of the Loan Documents; and (viii) any additional conditions specified in the
"WCMA Line of Credit Approval" letter executed by MLBFS with respect to the
transactions contemplated hereby shall have been met to the satisfaction of
MLBFS.
"Guarantor" shall mean each Person obligated under a guaranty, endorsement or
other undertaking by which such Person guarantees or assumes responsibility in
any capacity for the payment or performance of any of the Obligations.
"Initial Maturity Date" shall mean the first date upon which the WCMA Line of
Credit will expire (subject to renewal in accordance with the terms hereof); to
wit: December 31, 2004.
"Individual Guarantor" shall mean each Guarantor who is a natural person.
"Interest Due Date" shall mean the first Business Day of each calendar month
during the term hereof.
"Interest Rate" shall mean a variable per annum rate of interest equal to the
sum of 2.25% plus the One-Month LIBOR. "One-Month LIBOR" shall mean, as of the
date of any determination, the interest rate then most recently published in the
"Money Rates" section of The Wall Street Journal as the one-month London
Interbank Offered Rate. The Interest Rate will change as of the date of
publication in The Wall Street Journal of a One-Month LIBOR that is different
from that published on the preceding Business Day, if more than one rate is
published, then the highest of such rates. In the event that The Wall Street
Journal shall, for any reason, fail or cease to publish the One-Month LIBOR,
MLBFS will choose a reasonably comparable index or source to use as the basis
for the Interest Rate.
"Line Fee" shall mean a fee of $37,500.00 payable periodically by Customer to
MLBFS in accordance with the provisions of Section 2.2 hereof.
"Loan Documents" shall mean this Loan Agreement, any indenture, any guaranty of
any of the Obligations and all other security and other instruments,
assignments, certificates, certifications and agreements of any kind relating to
any of the Obligations, whether obtained, authorized, authenticated, executed,
sent or received concurrently with or subsequent to this Loan Agreement, or
which evidence the creation, guaranty or collateralization of any of the
Obligations or the granting or perfection of liens or security interests upon
any Collateral or any other collateral for the Obligations, including any
modifications, amendments or restatements of the foregoing.
"Location of Tangible Collateral" shall mean the address of Customer set forth
at the beginning of this Loan Agreement, together with any other address or
addresses set forth on an exhibit hereto as being a Location of Tangible
Collateral.
"Maturity Date" shall mean the date of expiration of the WCMA Line of Credit.
"Maximum WCMA Line of Credit" shall mean, as of any date of determination
thereof, an amount Equal of the lesser of: (A) $5,000,000.00, or (B) 80% of
Customer's Accounts and Chattel Paper, as shown on its regular books and records
(excluding Accounts over 90 days old, Accounts directly or indirectly due from
any person or entity not domiciled in the United States. Accounts arising out of
bonded jobs, retainage or from any shareholder, officer or employee of Customer
or any affiliated entity), and 50% of Customer's Inventory as shown on its
regular books and records (excluding all work-in-process inventory).
"Obligations" shall mean all liabilities, indebtedness and other obligations of
Customer to MLBFS, howsoever created, arising or evidenced, whether now existing
or hereafter arising. whether direct or indirect, absolute or contingent, due
or to become due, primary or secondary or joint or several, and, without
limiting the generality of the foregoing, shall include principal, accrued
interest (including without limitation interest accruing after the filing of any
petition in bankruptcy), all advances made by or on behalf of MLBFS under the
Loan Documents, collection and other costs and expenses incurred by or on behalf
of MLBFS, whether incurred before or after judgment and all present and future
liabilities, indebtedness and obligations of Customer under this Loan Agreement.
"Permitted Liens" shall mean with respect to the Collateral: (i) liens for
current taxes not yet due and payable, other non-consensual liens arising in the
ordinary course of business for sums not due, and, if MLBFS' rights to and
interests in the Collateral are not materially and adversely affected thereby,
any such liens for taxes or other non-consensual liens arising in the ordinary
course of business being contested in good faith by appropriate proceedings;
(ii) liens in favor of MLBFS; (iii) liens which will be discharged with the
proceeds of the initial WCMA Loan; and (iv) any other liens expressly permitted
in writing by MLBFS.
"Person" shall mean any natural person and any corporation, partnership
(general, limited or otherwise), limited liability company, trust, association,
joint venture, governmental body or agency or other entity having legal status
of any kind.
"Pledgor" shall mean each Person who at any time provides collateral, or
otherwise now or hereinafter agrees to grant MLBFS a security interest in any
assets as security for Customer's Obligations.
2
"Renewal Year" shall mean and refer to the 12-month period immediately following
the Initial Maturity Date and each 12-month period thereafter.
"WCMA Account" shall mean and refer to the Working Capital Management Account of
Customer with MLPF&S identified as Account No 586-07067 and any successor
Working Capital Management Account of Customer with MLPF&S.
"WCMA Line of Credit" shall mean a line of credit funded by MLBFS through the
WCMA Account.
"WCMA Loan" shall mean each advance made by MLBFS pursuant to this Loan
Agreement.
"WCMA Loan Balance" shall mean an amount equal to the aggregate unpaid principal
amount of all WCMA Loans.
"UCC" shall mean the Uniform Commercial Code of Illinois as in effect in
Illinois from time to time.
1.2 OTHER TERMS. Except as otherwise defined herein: (i) all terms used in this
Loan Agreement which are defined in the UCC shall have the meanings set forth in
the UCC, and (ii) capitalized terms used herein which are defined in the WCMA
Agreement (including, without limitation, "Money Accounts", "Minimum Money
Accounts Balance", and "WCMA Directed Reserve Program") shall have the meanings
set forth in the WCMA Agreement, and (iii) accounting terms not defined herein
shall have the meaning ascribed to them in GAAP.
1.3 UCC FILING. Customer hereby authorizes MLBFS to file a record or records (as
defined or otherwise specified under the UCC), including, without limitation,
financing statements, in all jurisdictions and with all filing offices as MLBFS
may determine, in its sole discretion, are necessary or advisable to perfect
the security interest granted to MLBFS herein. Such financing statements may
describe the Collateral in the same manner as described herein or may contain an
indication or description of collateral that describes such property in any
other manner as MLBFS may determine, in its sole discretion, is necessary,
advisable or prudent to ensure the perfection of the security interest in the
Collateral granted to the MLBFS herein.
ARTICLE II. THE WCMA LINE OF CREDIT
2.1 WCMA PROMISSORY NOTE. FOR VALUE RECEIVED Customer hereby promises to pay to
the order of MLBFS, at the times and in the manner set forth in this Loan
Agreement, of in such other manner and at such place as MLBFS may hereafter
designate in writing, the following: (a) on the Maturity Date, or if earlier, on
the date of termination of the WCMA Line of Credit, the WCMA Loan Balance; (b)
interest at the Interest Rate (or, if applicable, at the Default Rate) on the
outstanding WCMA Loan Balance, from and including the date on which the initial
WCMA Loan is made until the date of payment of all WCMA Loans in full; and (c)
on demand, all other sums payable pursuant to this Loan Agreement, including,
but not limited to, the periodic Line Fee. Except as otherwise expressly set
forth herein, Customer hereby waives presentment, demand for payment, protest
and notice of protest, notice of dishonor, notice of acceleration, notice of
intent to accelerate and all other notices and formalities in connection with
this WCMA Promissory Note and this Loan Agreement.
2.2 WCMA LOANS
(a) ACTIVATION DATE. Provided that: (i) the Commitment Expiration Date shall not
then have occurred, and (ii) Customer shall have subscribed to the WCMA Program
and its Subscription to the WCMA Program shall then be in effect, the Activation
Date shall occur on or promptly after the date, Following the acceptance of this
Loan Agreement by MLBFS at its office in Chicago, Illinois, upon which each of
the General Funding Conditions shall have been met or satisfied to the
reasonable satisfaction of MLBFS. No activation by MLBFS of the WCMA Line of
Credit for a nominal amount shall be deemed evidence of the satisfaction of any
of the conditions herein set forth, or a waiver of any of the terms or
conditions hereof. Customer hereby authorizes MLBFS to pay out of and charge to
Customer's WCMA Account on the Activation Date any and all amounts necessary to
fully pay off any bank or other financial institution having a lien upon any of
the Collateral other than a Permitted Lien.
(b) WCMA LOANS. Subject to the terms and conditions hereof, during the period
from and after the Activation Date to the first to occur of the Maturity Date or
the date of termination of the WCMA Line of Credit pursuant to the terms hereof,
and in addition to WCMA Loans automatically made to pay accrued interest, as
hereafter provided. (i) MLBFS will make WCMA Loans to Customer in such amounts
as Customer may from time to time request in accordance with the terms hereof,
up to an aggregate outstanding amount not to exceed the Maximum WCMA Line of
Credit, and (ii) Customer may repay any WCMA Loans in whole or in part at any
time, and request a re-borrowing of amounts repaid on a revolving basis.
Customer may request such WCMA Loans by use of WCMA Checks. FTS, Visa(6)
charges, wire transfers, or such other means of access to the WCMA Line of
Credit as may be permitted by MLBFS from time to time; it being understood that
so long as the WCMA Line of Credit shall be in effect, any charge or debit to
the WCMA Account which but for the WCMA Line of Credit would under the terms of
the WCMA Agreement result in an overdraft, shall be deemed a request by Customer
for a WCMA Loan.
(c) CONDITIONS OF WCMA LOANS. Notwithstanding the foregoing, MLBFS shall not be
obligated to make any WCMA Loan, and may without notice refuse to honor any such
request by Customer, if at the time of receipt by MLBFS o Customer's request:
(i) the making of such WCMA Loan would cause the Maximum WCMA Line of Credit to
be exceeded; or (ii) the Maturity Date shall have occurred, or the WCMA Line of
Credit shall have otherwise been terminated in accordance with the terms hereof;
or (iii) Customer's subscription to the WCMA Program shall have been terminated,
or (iv) an event shall have occurred and be continuing which shall have caused
any of the General Funding Conditions to not then be met or satisfied to the
reasonable satisfaction of MLBFS. The making by MLBFS of any WCMA Loan at a time
when any one or more of said conditions shall not have been met shall not in any
event be construed as a waiver of said condition or conditions or of any
Default, and shall not prevent MLBFS at any time thereafter while any condition
shall not have been met from refusing to honor any request by Customer for a
WCMA Loan.
(d) LIMITATION OF LIABILITY. MLBFS shall not be responsible, and shall have no
liability to Customer or any other party, for any delay or failure of MLBFS to
honor any request of Customer for a WCMA Loan or any other act or omission of
MLBFS. MLPF&S or any of their affiliates due to or resulting from any system
failure, error or delay in posting or other clerical error, loss of power, fire,
Act of God or other cause beyond the reasonable control of MLBFS, MLPF&S or any
of their affiliates unless directly arising out of the willful wrongful act or
active gross negligence of MLBFS. In no event shall MLBFS be liable
3
to Customer or any other party for any incidental or consequential damages
arising from any act or omission by MLBFS, MLPF&S or any of their affiliates in
connection with the WCMA Line of Credit or this Loan Agreement.
(e) INTEREST. (i) An amount equal to accrued interest on the daily WCMA Loan
Balance shall be payable by Customer monthly on each Interest Due Date,
commencing with the first Interest Due Date after the Activation Date. Unless
otherwise hereafter directed in writing by MLBFS on or after the first to occur
of the Maturity Date or the date of termination of the WCMA Line of Credit
pursuant to the terms hereof, such interest will be automatically charged to the
WCMA Account on the applicable Interest Due Date, and, to the extent not paid
with free credit balances or the proceeds of sales of any Money Accounts then in
the WCMA Account, as hereafter provided, paid by a WCMA Loan and added to the
WCMA Loan Balance. All interest shall be computed for the actual number of days
elapsed on the basis of a year consisting of 360 days.
(ii) Upon the occurrence and during the continuance of any Default, but without
limiting the rights and remedies otherwise available to MLBFS hereunder or
waiving such Default, the interest payable by Customer hereunder shall at the
option of MLBFS accrue and be payable at the Default Rate. The Default Rate,
once implemented, shall continue to apply to the Obligations under this Loan
Agreement and be payable by Customer until the date MLBFS gives written notice
that such Default has been cured to the satisfaction of MLBFS.
(iii) Notwithstanding any provision to the contrary in any of the Loan
Documents, no provision of any of the Loan Documents, shall require the payment
or permit the collection of Excess Interest. If any Excess Interest is provided
for, or is adjudicated as being provided for, in any of the Loan Documents,
then: (A) Customer shall not be obligated to pay any Excess Interest and (B) any
Excess Interest that MLBFS may have received hereunder or under any of the Loan
Documents shall, at the option of MLBFS, be ether applied as a credit against
the then unpaid WCMA Loan Balance or refunded to the payer thereof.
(f) PAYMENTS. All payments required or permitted to be made pursuant to this
Loan Agreement shall be made in lawful money of the United States. Unless
otherwise directed by MLBFS, payments on account of the WCMA Loan Balance may be
made by the delivery of checks (other than WCMA Checks), or by means of FTS or
wire transfer of funds (other than funds from the WCMA Line of Credit) to MLPF&S
for credit to Customer's WCMA Account. Notwithstanding anything in the WCMA
Agreement to the contrary, Customer hereby irrevocably authorizes and directs
MLPF&S to apply available free credit balances in the WCMA Account to the
repayment of the WCMA Loan Balance prior to application for any other purpose.
Payments to MLBFS from funds in the WCMA Account shall be deemed to be made by
Customer upon the same basis and schedule as funds are made available for
investment in the Money Accounts in accordance with the terms of the WCMA
Agreement. All funds received by MLBFS from MLPF&S pursuant to the aforesaid
authorization shall be applied by MLBFS to repayment of the WCMA Loan Balance.
The acceptance by or on behalf of MLBFS of a check or other payment for a lesser
amount than shall be due from Customer, regardless of any endorsement or
statement thereon or transmitted therewith, shall not be deemed an accord and
satisfaction or anything other than a payment on account, and MLBFS or anyone
acting on behalf of MLBFS may accept such check or other payment without
prejudice to the rights of MLBFS to recover the balance actually due o' to
pursue any other remedy under this Loan Agreement or applicable law for such
balance. All checks accepted by or on behalf of MLBFS in connection with the
WCMA Line of Credit are subject to final collection.
(g) IRREVOCABLE INSTRUCTIONS TO MLPF&S. In order to minimize the WCMA Loan
Balance, Customer hereby irrevocably authorizes and directs MLPF&S, effective on
the Activation Date and continuing thereafter so long as this Loan Agreement
shall be in effect: (i) to immediately and prior to application for any other
purpose pay to MLBFS to the extent of any WCMA Loan Balance or other amounts
payable by Customer hereunder all available free credit balances from time to
time in the WCMA Account: and (ii) if such available free credit balances are
insufficient to pay the WCMA Loan Balance and such other amounts, and there are
in the WCMA Account at any time any investments in Money Accounts (other than
any investments constituting any Minimum Money Accounts Balance under the WCMA
Directed Reserve Program), to immediately liquidate such investments and pay to
MLBFS to the extent of any WCMA Loan Balance and such other amounts the
available proceeds from the liquidation of any such Money Accounts.
(h) LATE CHARGE. Any payment or deposit required to be made by Customer pursuant
to the Loan Documents not paid or made within ten (10) days of the applicable
due date shall be subject to a late charge in an amount equal to the lesser of:
(a) 5% of the overdue amount, or (b) the maximum amount permitted by applicable
law. Such late charge shall be payable on demand, or, without demand, may in the
sole discretion of MLBFS be paid by a Subsequent WCMA Loan and added to the WCMA
Loan Balance in the same manner as provided herein for accrued interest with
respect to the WCMA Line of Credit.
(i) STATEMENTS. MLPF&S will include in each monthly statement it issues under
the WCMA Program information with respect to WCMA Loans and the WCMA Loan
Balance. Any questions that Customer may have with respect to such information
should be directed to MLBFS; and any questions with respect to any other matter
in such statements or about or affecting the WCMA Program should be directed to
MLPF&S.
(j) USE OF WCMA LOAN PROCEEDS. The proceeds of each WCMA Loan initiated by
Customer shall be used by Customer solely for working capital in the ordinary
course of its business, or, with the prior written consent of MLBFS. for other
lawful business purposes of Customer not prohibited hereby. CUSTOMER AGREES THAT
UNDER NO CIRCUMSTANCES WILL THE PROCEEDS OF ANY WCMA LOAN BE USED: (i) FOR
PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OF ANY PERSON WHATSOEVER, OR (ii) TO
PURCHASE, CARRY OR TRADE IN SECURITIES, OR REPAY DEBT INCURRED TO PURCHASE,
CARRY OR TRADE IN SECURITIES, WHETHER IN OR IN CONNECTION WITH THE WCMA ACCOUNT,
ANOTHER ACCOUNT OF CUSTOMER WITH MLPF&S OR AN ACCOUNT OF CUSTOMER AT ANY OTHER
BROKER OR DEALER IN SECURITIES, OR (iii) UNLESS OTHERWISE CONSENTED TO IN
WRITING BY MLBFS, TO PAY ANY AMOUNT TO ▇▇▇▇▇▇▇ ▇▇▇▇▇ AND CO., INC. OR ANY OF ITS
SUBSIDIARIES, OTHER ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ BANK USA, ▇▇▇▇▇▇▇ ▇▇▇▇▇ BANK & TRUST CO.
OR ANY SUBSIDIARY OF EITHER OF THEM (INCLUDING MLBFS AND ▇▇▇▇▇▇▇ ▇▇▇▇▇ CREDIT
CORPORATION).
(k) RENEWAL AT OPTION OF MLBFS; RIGHT OF CUSTOMER TO TERMINATE. MLBFS may at any
time, in its sole discretion and at its sole option, renew the WCMA Line of
Credit for one or more Renewal Years or extend the Maturity Date; it being
understood, however, that no such renewal or extension shall be effective unless
set forth in a writing executed by a duly authorized representative of MLBFS and
delivered to Customer. Unless any such renewal or extension is accompanied by a
proposed change in the terms of the WCMA Line of Credit (other than the
extension of the Maturity Date), no Customer approval shall be
4
required. Customer shall, however, have the right to terminate the WCMA Line of
Credit at any time upon written notice to MLBFS. Concurrently with any such
termination. Customer shall pay to MLBFS the entire WCMA Loan Balance and all
other Obligations.
(I) LINE FEES. (i) In consideration of the extension of the WCMA Line of Credit
by MLBFS to Customer during the period from the Activation Date to and including
the last day of December. 2004 (the "Initial Line Period"), Customer has paid or
shall pay the intel Line Fee to MLBFS. If the initial Line Fee has not
heretofore been paid by Customer. Customer hereby authorizes MLBFS. at its
option, to either cause the initial Line Fee to be paid on the Activation
Date with a WCMA Loan, or invoice Customer for such initial Line Fee (in which
event Customer shall pay said fee within 5 Business Days after receipt of such
invoice). No delay in the Activation Date, howsoever caused, shall entitle
Customer to any rebate or reduction in the Line Fee or to any extension of the
Initial Maturity Date.
(ii) Customer shall pay to MLBFS an additional Line Fee for each 12-month period
following the Initial Maturity Date, and for each Renewal Year, or an extension
fee for any extension of the Maturity Date (each extension fee shall be equal to
the pro rate amount of the Line Fee corresponding to the length of the extension
period). In connection therewith. Customer hereby authorizes MLBFS, at its
option, to either cause each such fee to be paid with a WCMA Loan on or at any
time after the first Business Day of such 12-month period or Renewal Year or
extension period as applicable, or invoiced to Customer at such time (in which
event Customer shall pay such Line Fee within 5 Business Days after receipt of
such invoice). Each Line Fee and extension fee shall be deemed fully earned by
MLBFS on the date payable by Customer, and no termination of the WCMA Line of
Credit, howsoever caused, shall entitle Customer to any rebate or refund of any
portion of such fee provided, however that if Customer shall terminate the
WCMA Line of Credit not later than 5 Business Days after the receipt by Customer
of notice from MLBFS of a renewal of the WCMA Line of Credit. Customer shall be
entitled to a refund of any Line Fee charged by MLBFS (or the ensuing Renewal
Year
ARTICLE III. GENERAL PROVISIONS
3.1 REPRESENTATIONS AND WARRANTIES
Customer represents and warrants to MLBFS that:
(a) ORGANIZATION AND EXISTENCE. Customer is a corporation, duly organized and
validly existing in good standing under the laws of the Stale of Delaware and is
qualified to do business and in good standing in each other state where the
nature of its business or the property owned by it make such qualification
necessary.
(b) EXECUTION, DELIVERY AND PERFORMANCE. Each Credit Party has the requisite
power and authority to enter into and perform the Loan Documents. The Customer
holds all necessary permits, licenses, certificates of occupancy and other
governmental authorizations and approvals required in order to own and operate
the Customer's business. The execution, delivery and performance by Customer of
this Loan Agreement and by each of the other Credit Parties of such of the other
Loan Documents to which it is a party: (i) have been duly authorized by all
requisite action, (ii) do not and will not violate or conflict with any law,
order or other governmental requirement, or any of the agreements, instruments
or documents which formed or govern any of the Credit Parties, and (iii) do not
and will not breach or violate any of the provisions of and will not result in
a default by any of the Credit Parties under, any other agreement, instrument or
document to which it is a party or is subject.
(c) NOTICES AND APPROVALS. Except as may have been given or obtained, no notice
to or consent or approval of any governmental body or authority or other third
party whatsoever (including, without limitation, any other creditor) is required
in connection with the execution, delivery or performance by any Credit Party of
such of this Loan Agreement and the Loan Documents to which it is a party.
(d) ENFORCEABILITY. The Loan Documents to which any Credit Party is a party are
the respective legal, valid and binding obligations of such Credit Party,
enforceable against it or them, as the case may be, in accordance with their
respective terms, except as enforceability may be limited by bankruptcy and
other similar laws affecting the rights of creditors generally or by general
principles of equity.
(e) COLLATERAL. Except for priorities afforded to any Permitted Liens: (i)
Customer has good and marketable title to the Collateral, (ii) none of the
Collateral is subject to any lien, encumbrance or security interest, and (iii)
upon the filing of all Uniform Commercial Code financing statements
authenticated or otherwise authorized by Customer with respect to the Collateral
in the appropriate jurisdiction(s) and/or the completion of any other action
required by applicable law to perfect its tens and security interests. MLBFS
will have valid and perfected first liens and security interests upon all of the
Collateral.
(f) FINANCIAL STATEMENTS. Except as expressly set forth in Customer's financial
statements, all financial statements of Customer furnished to MLBFS have been
prepared in conformity with GAAP, as in effect on the ▇▇▇▇ the financial
statements are prepared, consistently applied, are true and correct in all
material respects, and fairly present the financial condition of it as at such
dales and the results of its operations for the periods then ended (subject, in
the case of interim unaudited financial statements, to normal year-end
adjustments); and since the most recent date covered by such financial
statements, there has been no material adverse change in any such financial
condition or operation.
(g) LITIGATION; COMPLIANCE WITH ALL LAWS. No litigation, arbitration,
administrative or governmental proceedings are pending or, to the knowledge of
Customer, threatened against any Credit Party, which would, if adversely
determined, materially and adversely affect (i) such Credit Party's interest in
the Collateral or the liens and security interests of MLBFS hereunder or under
any of the Loan Documents, or (ii) the financial condition of any Credit Party
or its continued operations. Each Credit Party is in compliance in all material
respects with all laws, regulations, requirements and approvals applicable to
such Credit Party.
(h) TAX RETURNS. All federal, state and local lax returns, reports and
statements required to be filed by any Credit Party have been filed with the
appropriate governmental agencies and all taxes due and payable by any Credit
Party have been timely paid (except to the extent that any such failure to
5
file or pay will not materially and adversely affect (i) either the liens and
security interests of MLBFS hereunder or under any of the Loan Documents, (ii)
the financial condition of any Credit Party, or (iii) its continued operations).
(i) COLLATERAL LOCATION. All of the tangible Collateral is located at a
Location, of Tangible Collateral.
(j) NO DEFAULT. No "Default or 'Event of Default" (each as defined in this Loan
Agreement or any of the other Loan Documents) has occurred and is continuing.
(k) NO OUTSIDE BROKER. Except for employees of MLBFS, MLPF&S or one of their
affiliates. Customer has not in connection with the transactions contemplated
hereby directly or indirectly engaged or dealt with, and was not introduced or
referred to MLBFS by, any broker or other loan arranger.
Each of the foregoing representations and warranties: (i) has been and will be
relied upon as an inducement to MLBFS to provide the WCMA Line of Credit, and
(ii) is continuing and shall be deemed remade by Customer concurrently with each
request for a WCMA Loan.
3.2 FINANCIAL AND OTHER INFORMATION
(a) Customer shall furnish or cause to be furnished to MLBFS during the term of
this Loan Agreement all of the following:
(i) CERTIFICATE OF COMPLIANCE. Within 45 days after the close of each fiscal
quarter of Customer, a Certificate of Compliance, duly executed by an authorized
officer of Customer, in the form of Exhibit B attached hereto, or such other
form as reasonably required by MLBFS from time to time;
(ii) A/R AGINGS. Within 30 days after the close of each fiscal month of
Customer, a copy of the Accounts Receivable Aging of Customer as of the end of
such fiscal month;
(iii) INVENTORY REPORTS. Within 30 days after the close of each fiscal month of
Customer, a copy of the Inventory Report (as and to the extent applicable,
breaking out Inventory by location, and separately reporting any work in
process) of Customer as of the end of such fiscal month;
(iv) SEC REPORTS. Customer shall furnish or cause to be furnished to MLBFS not
later than 10 days after the date of filing with the Securities and Exchange
Commission ('SEC'), a copy of each 10-K, 10-Q and other report required to be
filed with the SEC during the term hereof by Customer; and
(v) OTHER INFORMATION. Such other information as MLBFS may from time to time
reasonably request relating to Customer or the Collateral.
(b) GENERAL AGREEMENTS WITH RESPECT TO FINANCIAL INFORMATION. Customer agrees
that except as otherwise specified herein or otherwise agreed to in writing by
MLBFS: (i) all annual financial statements required to be furnished by Customer
to MLBFS hereunder will be prepared by either the current independent
accountants for Customer or other independent accountants reasonably acceptable
to MLBFS, and (ii) all other financial information required to be furnished by
Customer to MLBFS hereunder will be certified as correct in all material
respects by the party who has prepared such information, and, in the case of
internally prepared information with respect to Customer, certified as correct
by its chief financial officer.
3.3 OTHER COVENANTS
Customer further covenants and agrees during the term of this Loan Agreement
that:
(a) FINANCIAL RECORDS; INSPECTION. Each Credit Party (other than any Individual
Guarantor) will; (i) maintain at its principal place of business complete and
accurate books and records, and maintain all of its financial records in a
manner consistent with the financial statements heretofore furnished to MLBFS,
or prepared on such other basis as may be approved in writing by MLBFS: and (ii)
permit MLBFS or its duly authorized representatives, upon reasonable notice and
at reasonable times, to inspect its properties (both real and personal),
operations, books and records
(b) TAXES. Each Credit Party will pay when due all of its respective taxes,
assessments and other governmental charges, howsoever designated, and all other
liabilities and obligations, except to the extent that any such failure to file
or pay will not materially and adversely affect either the liens and security
interests of MLBFS hereunder or under any of the Loan Documents, the financial
condition of any Credit Party or its continued operations.
(c) COMPLIANCE WITH LAWS AND AGREEMENTS. No Credit Party will violate (i) any
law. regulation or other governmental requirement, any judgment or order of any
court or governmental agency or authority; (ii) any agreement, instrument or
document which is material to its operations or to the operation or use of any
Collateral, in each case as contemplated by the Loan Documents; or (iii) any
agreement, instrument or document to which it is a party or by which it is
bound, if any such violation will materially and adversely affect either the
liens and security interests of MLBFS hereunder or under any of the Loan
Documents, or the financial condition or the continued operations of Customer.
(d) NO USE OF ▇▇▇▇▇▇▇ ▇▇▇▇▇ NAME. No Credit Party will directly or indirectly
publish, disclose or otherwise use in any advertising or promotional material,
or press release or interview, the name, logo or any trademark of MLBFS, MLPF&S,
▇▇▇▇▇▇▇ ▇▇▇▇▇ and Co., Incorporated or any of their affiliates.
(e) NOTIFICATION BY CUSTOMER. Customer shall provide MLBFS with prompt written
notification of; (i) any Default; (ii) any material adverse charge in the
business, financial condition or operations of any Credit Party, (iii) any
information which indicates that any financial statements of any Credit Party
fail in any material respect to present fairly the financial condition and
results of operations purported to be presented in such statements; (iv) any
threatened or pending litigation involving any Credit Party; (v) any casualty
loss, attachment, lien, judicial process, encumbrance or claim affecting or
involving $25,000 or more of any Collateral; and (vi) any change in Customer's
outside accountants. Each notification by Customer pursuant hereto shall specify
the event or information causing such notification, and, to the extent
applicable, shall specify the steps being taken to rectify or remedy such event
or information.
6
(f) ENTITY ORGANIZATION. Each Credit Party which is an entity will (i) remain
(A) validly existing and in good standing in the state of its organization and
(B) qualified to do business and in good standing in each other state where the
nature of its business or the property owned by it make such qualification
necessary, and (ii) maintain all governmental permits, licenses and
authorizations. Customer shall give MLBFS not less than 30 days prior written
notice of any change in name (including any fictitious name) or chief executive
office, place of business, or as applicable the principal residence of any
Credit Party.
(g) MERGER CHANGE IN BUSINESS. Except upon the prior written consent of MLBFS
Customer shall not cause or permit any Credit Party to: (i) be a party to any
merger or consolidation with, or purchase or otherwise acquire all or
substantially all of the assets of or any material stock, partnership, joint
venture or other equity interest in any Person or sell transfer or lease all
or any substantial part of its assets; (ii) engage in any material business
substantially different from its business in effect as of the date of
application by Customer for credit from MLBFS or cease operating any such
material business, or (iii) cause or permit any other Person to assume or
succeed to any material business or operations of such Credit Party.
(h) FIXED CHARGE COVERAGE. Customer's "Fixed Charge Coverage Ratio" shall at all
times exceed 1.5 to 1. For purposes hereof, "Fixed Charge Coverage Ratio" shall
mean the ratio of: (a) income before interest (including payments in the nature
of interest under capital leases), taxes, depreciation, amortization, and other
similar non-cash charges, minus any internally financed capital expenditures, to
(b) the sum of (i) any dividends and other distributions paid or payable to
shareholders, any taxes paid in cash, and interest expense, as determined on a
trailing 12-month basis, plus (ii) the aggregate principal scheduled to be paid
or accrued over the next 12 month period and the aggregate rental under capital
leases schedule to be paid or accrued over the next 12 month period; all as set
forth in Customer's regular annual financial statements prepared in accordance
with GAAP.
(i) TOTAL LIABILITIES TO TANGIBLE NET WORTH. Customer's "Leverage Ratio" shall
not at any time exceed 1.0 to 1. For purposes hereof, "Leverage Ratio" shall
mean the ratio of Customer's total liabilities to Customer's Tangible Net Worth.
The term "Tangible Net Worth" shall mean Customer's net worth as shown on
Customer's regular financial statements prepared in accordance with GAAP, but
excluding an amount equal to (i) any Intangible Assets, and (ii) any amounts now
or hereafter directly or indirectly owing to Customer by officers, shareholders
or affiliates of Customer. "Intangible Assets" shall mean the total amount of
goodwill, patents, trade names, trade or service marks, copyrights, experimental
expense, organization expense, unamortized debt discount and expense, the excess
of cost of shares acquired over book value of related assets, and such other
assets as are properly classified as "intangible assets" of the Customer
determined in accordance with GAAP.
(j) NO LOANS/TRANSFERS OF ASSETS EXCEPT Except upon the prior written consent of
MLBFS, Customer shall not directly or indirectly lend any moneys, or transfer
any assets or property to any other person or entity other than arms length
transfers for fair consideration in the ordinary course of business.
(k) NO ACQUISITION OF ASSETS OR STOCK OF ANY KIND. Notwithstanding the terms in
Section 3.3(g), Customer shall not without the prior written consent of MLBFS
directly or indirectly acquire the assets or stock of any other entity, except
upon satisfaction of the following conditions (each a "Permitted Acquisition"):
(i) before and after giving effect to the contemplated Permitted Acquisition,
there is no default under this Loan Agreement or any of the other Loan
Documents; (ii) the entity Customer is requesting to purchase or the business
from which Customer is requesting to purchase assets is in the same line of
business as the Customer and had reported positive EBITDA for the immediately
preceding fiscal year, (iii) MLBFS receives a first lien on all assets to be
acquired, (iv) Customer shall have delivered to MLBFS notice not less than 60
Days poor to the consummation of such acquisition, a "Deal Term Sheet" outlining
the terms of such proposed acquisition and pro-forma covenant compliance sheets,
projected as of the close of such acquisition with CFO certification in form and
substance satisfactory to MLBFS reflecting pro-forma compliance with this Loan
Agreement and the other Loan Documents after the consummation of any such
acquisition; (v) within any 12 month period, whether for one acquisition or more
than one acquisition, the "Acquisition Costs" shall not exceed an aggregate
amount in excess of $500,000.00 ("Acquisition Costs" herein shall mean the sum
of (A) the cash consideration paid or agreed to be paid, plus (B) the fair
market value of all non-cash consideration to be paid, plus (C) an amount equal
to the principal or stated amount of all liabilities to be assumed or incurred
in connection therewith plus (D) capital expenditures anticipated to be incurred
for the 12 month period following any such acquisition) and (vi) Customer shall
have provided and MLBFS shall be satisfied with such other information,
documents and other items as MLBFS shall have requested, including but not
limited to the financial statements of the acquisition target, copies of
acquisition documents, full and complete subordination of all indebtedness
incurred by Customer in connection with the acquisition to the Obligations owed
to MLBFS until such Obligations are paid in full and amendments to this Loan
Agreement and any of the other Loan Documents required by MLBFS, containing such
terms as MLBFS requires and as are customary for senior debt incurred to finance
acquisitions, including without limitation any opinion of counsel.
3.4 COLLATERAL
(a) PLEDGE OF COLLATERAL. To secure payment and performance of the Obligations,
Customer hereby pledges, assigns, transfers and sets over to MLBFS, and grants
to MLBFS first liens and security interests in and upon all of the Colateral,
subject only to priorities afforded to Permitted Liens.
(b) LIENS. Except upon the prior written consent of MLBFS, Customer shall not
create or permit to exist any lien, encumbrance or security interest upon or
with respect to any Collateral now owned or hereafter acquired other than
Permitted Liens.
(c) PERFORMANCE OF OBLIGATIONS. Customer shall perform all of its obligations
owing on account of or with respect to the Collateral; it being understood that
nothing herein, and no action or inaction by MLBFS, under this Loan Agreement or
otherwise, shall be deemed an assumption by MLBFS of any of Customer's said
obligations.
(d) SALES AND COLLECTIONS. Customer shall not sell, transfer or otherwise
dispose of any Collateral, except that so long as no Event of Default shall have
occurred and be continuing. Customer may in the ordinary course of its business:
(i) sell any Inventory normally held by Customer for sale, (ii) use or consume
any materials and supplies normally held by Customer for use or consumption, and
(ii) collect all of its Accounts.
(e) ACCOUNT SCHEDULES. Upon the request of MLBFS, which may be made from time to
time. Customer shall deliver to MLBFS, in addition to the other information
required hereunder, a schedule identifying, for each Account and all Chattel
Paper subject to MLBFS security interests hereunder, each account debtor by
name and address and amount, invoice or contract number and date of each invoice
or contract. Customer shall furnish to MLBFS such additional
7
information with respect to the Collateral, and amounts received by Customer as
proceeds of any of the Collateral, as MLBFS may from time to time reasonably
request.
(f) ALTERATIONS AND MAINTENANCE. Except upon the prior written consent of MLBFS,
Customer shall not make or permit any material alterations to any tangible
Collateral which might materially reduce or impair its market value or utility.
Customer shall at all times (i) keep the tangible Collateral in good condition
and repair, reasonable wear and tear excepted, (ii) protect the Collateral
against loss, damage or destruction and (iii) pay or cause to be paid all
obligations arising from the repair and maintenance of such Collateral, as well
as all obligations with respect to any Location of Tangible Collateral (e.g.,
all obligations under any lease, mortgage or bailment agreement), except for any
such obligations being contested by Customer in good faith by appropriate
proceedings.
(g) LOCATION. Except for movements required in the ordinary course of Customer's
business, Customer shall give MLBFS 30 days' prior written notice of the placing
at or movement of any tangible Collateral to any location other than a Location
of Tangible Collateral. In no event shall Customer cause or permit any material
tangible Collateral to be removed from the United States without the express
prior written consent of MLBFS. Customer will keep its books and records at its
principal office address specified in the first paragraph of this Loan
Agreement. Customer will not change the address where books and records are
kept, or change its name or taxpayer identification number. Customer will place
a legend acceptable to MLBFS on all Chattel Paper that is Collateral in the
possession or control of Customer from time to time indicating that MLBFS has a
security interest therein.
(h) INSURANCE. Customer shall insure all of the tangible Collateral under a
policy or policies of physical damage insurance for the full replacement value
thereof against such [ILLEGIBLE] as MLBFS shall reasonably require and also
providing that losses will be payable to MLBFS as its interests may appear
pursuant to a lender's or mortgagee's long form loss payable endorsement and
containing such other provisions as may be reasonably required by MLBFS.
Customer shall further provide and maintain a policy or policies of commercial
general liability insurance naming MLBFS as an additional party insured.
Customer shall maintain such other insurance as may be required by law or is
customarily maintained by companies in a similar business or otherwise
reasonably required by MLBFS. All such insurance policies shall provide that
MLBFS will receive not less than 10 days prior written notice of any
cancellation, and shall otherwise be in form and amount and with an insurer or
insurers reasonably acceptable to MLBFS. Customer shall furnish MLBFS with a
copy or certificate of each such policy or policies and, prior to any expiration
or cancellation, each renewal or replacement thereof.
(i) EVENT OF LOSS. Customer shall at its expense promptly repair all repairable
damage to any tangible Collateral. In the event that there is an Event of Loss
and the affected Collateral had a value prior to such Event of Loss of
$25,000.00 or more, then, on or before the first to occur of (i) 90 days after
the occurrence of such Event of Loss, or (ii) 10 Business Days after the date on
which either Customer or MLBFS shall receive any proceeds of insurance on
account of such Event of Loss, or any underwriter of insurance on such
Collateral shall advise either Customer or MLBFS that it disclaims liability in
respect of such Event of Loss, Customer shall, at Customer's option, either
replace the Collateral subject to such Event of Loss with comparable Collateral
free of all lens other than Permitted Liens (in which event Customer shall be
entitled to utilize the proceeds of insurance on account of such Event of Loss
for such purpose, and may retain any excess proceeds of such insurance), or
permanently prepay the Obligations by an amount equal to the actual cash value
of such Collateral as determined by either the insurance company's payment (plus
any applicable deductible) or, in absence of insurance company payment, as
reasonably determined by MLBFS; it being further understood that any such
permanent prepayment shall cause an immediate permanent reduction in the Maximum
WCMA Line of Credit in the amount of such prepayment and shall not reduce the
amount of any future reductions in the Maximum|WCMA Line of Credit that may be
required hereunder. Notwithstanding the foregoing, if at the time of occurrence
of such Event of Loss or any time thereafter prior to replacement or line
reduction, as aforesaid, an Event of Default shall have occurred and be
continuing hereunder, then MLBFS may at its sole option, exercisable at any time
while such Event of Default shall be continuing, require Customer to either
replace such Collateral or prepay the Obligations and reduce the Maximum WCMA
Line of Credit, as aforesaid.
(j) NOTICE OF CERTAIN EVENTS. Customer shall give MLBFS immediate notice of any
attachment, lien, judicial process, encumbrance or claim affecting or involving
$25.000.00 or more of the Collateral.
(k) INDEMNIFICATION. Customer shall indemnify, defend and save MLBFS harmless
from and against any and all claims, liabilities, losses, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses) of any
nature whatsoever which may be asserted against or incurred by MLBFS arising out
of or in any manner occasioned by (i) the ownership, collection, possession, use
or operation of any Collateral, or (ii) any failure by Customer to perform any
of its obligations hereunder, excluding, however, from said indemnity any such
claims, liabilities, etc. arising directly out of the willful wrongful act or
active gross negligence of MLBFS. This indemnity shall survive the expiration or
termination of this Loan Agreement as to all matters arising or accruing prior
to such expiration or termination.
3.5 EVENTS OF DEFAULT
The occurrence of any of the following events shall constitute an "Event of
Default" under this Loan Agreement:
(a) EXCEEDING THE MAXIMUM WCMA LINE OF CREDIT. If the WCMA Loan Balance shall at
any time exceed the Maximum WCMA Line of Credit and Customer shall fail to
deposit sufficient funds into the WCMA Account to reduce the WCMA Loan Balance
below the Maximum WCMA Line of Credit within five (5) Business Days after
written notice thereof shall have been given by MLBFS to Customer.
(b) OTHER FAILURE TO PAY. Customer shall fail to pay to MLBFS or deposit into
the WCMA Account when due any other amount owing or required to be paid or
deposited by Customer under this Loan Agreement or any of the Loan Documents, or
shall fail to pay when due any other Obligations, and any such failure shall
continue for more than five (5) Business Days after written notice thereof shall
have been given by MLBFS to Customer.
(c) FAILURE TO PERFORM. Any Credit Party shall default in the performance or
observance of any covenant or agreement on its part to be performed or observed
under any of the Loan Documents (not constituting an Event of Default under any
other clause of this Section), and such default shall continue
8
unremedied for ten (10) Business Days (i) after written notice thereof shall
have been given by MLBFS to Customer, Or (ii) from Customer's receipt of any
notice Of knowledge of such default from any other source.
(d) BREACH OF WARRANTY. Any representation or warranty made by any Credit Party
contained in this Loan Agreement or any of the Loan Documents shall at any time
prove to have been incorrect in any material respect when made.
(e) DEFAULT UNDER OTHER ML AGREEMENT. A default or event of default by any
Credit Party shall occur under the terms of any other agreement, instrument or
document with or intended for the benefit of MLBFS, MLPF&S or any of their
affiliates, and any required notice shall have been given and required passage
of time shall have elapsed, or the WCMA Agreement shall be terminated for any
reason.
(f) BANKRUPTCY EVENT. Any Bankruptcy Event shall occur.
(g) MATERIAL IMPAIRMENT. Any event shall occur which shall reasonably cause
MLBFS to in good faith believe that the prospect of full payment or performance
by the Credit Parties of any of their respective liabilities or obligations
under any of the Loan Documents has been materially impaired. The existence of
such a material impairment shall be determined in a manner cons stent with the
intent of Section 1-208 of the UCC.
(h) DEFAULT UNDER OTHER AGREEMENTS. Any event shall occur which results in any
default of any material agreement involving any Credit Party or any agreement
evidencing any indebtedness of any Credit Party of $100,000.00 or more.
(i) COLLATERAL IMPAIRMENT. The loss, theft or destruction of any Collateral, in
excess of $250,000.00, the occurrence of any material deterioration or
impairment of any Collateral or any material decline or depreciation in the
value or market price thereof (whether actual or reasonably anticipated), which
causes any Collateral, in the sole opinion of MLBFS, to become unsatisfactory as
to value or character, or any levy, attachment, seizure or confiscation of the
Collateral which is not released within ten (10) Business Days.
(j) CONTESTED OBLIGATION. (i) Any of the Loan Documents shall for any reason
cease to be, or are asserted by any Credit Party not to be a legal, valid and
binding obligations of any Credit Party, enforceable in accordance with their
terms; or (ii) the validity, perfection or priority of MLBFS' first lien and
security interest on any of the Collateral is contested by any Person; or (iii)
any Credit Party shall or shall attempt to repudiate, revoke, contest or
dispute, in whole or in part, such Credit Party's obligations under any Loan
Document.
(k) JUDGMENTS. A judgment shall be entered against any Credit Party in excess of
$25,000 and the judgment is not paid in full and discharged, or stayed and
bonded to the satisfaction of MLBFS.
(l) CHANGE IN CONTROL/CHANGE IN MANAGEMENT. (i) Any direct or indirect sale,
conveyance, assignment or other transfer of or grant of a security interest in
any ownership interest of any Credit Party which results, or if any rights
related thereto were exercised would result, in any change in the identity of
the individuals or entities in control of any Credit Party; or (ii) the owner(s)
of the controlling equity interest of any Credit Party on the date hereof shall
cease to own and control such Credit Party; or (iii) the Person (or a
replacement who is satisfactory to MLBFS in its sole discretion) who is the
chief executive officer or holds such similar position, on the date hereof shall
for any reason cease to be the chief executive officer.
(m) WITHDRAWAL, DEATH, ETC. The incapacity, death, withdrawal, dissolution, or
the filing for dissolution of: (i) any Credit Party, or (ii) any controlling
shareholder, partner, or member of any Credit Party.
3.6 REMEDIES
(a) REMEDIES UPON DEFAULT. Upon the occurrence and during the continuance of any
Event of Default, MLBFS may at its sole option do any one or more or all of the
following, at such time and in such order as MLBFS may in its sole discretion
choose:
(i) TERMINATION. MLBFS may without notice terminate the WCMA Line of Credit and
all obligations to extend any credit to or for the benefit of Customer (it being
understood, however, that upon the occurrence of any Bankruptcy Event all such
obligations shall automatically terminate without any action on the part of
MLBFS).
(ii) ACCELERATION. MLBFS may declare the principal of and interest on the WCMA
Loan Balance, and all other Obligations to be forthwith due and payable,
whereupon all such amounts shall be immediately due and payable, without
presentment, demand for payment, protest and notice of protest, notice of
dishonor, notice of acceleration, notice of intent to accelerate or other notice
or formality of any kind, all of which are hereby expressly waived; provided,
however, that upon the occurrence of any Bankruptcy Event all such principal,
interest and other Obligations shall automatically become due and payable
without any action on the part of MLBFS.
(iii) EXERCISE OTHER RIGHTS. MLBFS may exercise any or all of the remedies of a
secured party under applicable law and in equity, including, but not limited to,
the UCC, and any or all of its other rights and remedies under the Loan
Documents.
(iv) POSSESSION. MLBFS may require Customer to make the Collateral and the
records pertaining to the Collateral available to MLBFS at a place designated by
MLBFS which is reasonably convenient to Customer, or may take possession of the
Collateral and the records pertaining to the Collateral without the use of any
judicial process and without any prior notice to Customer.
(v) SALE. MLBFS may sell any or all of the Collateral at public or private sale
upon such terms and conditions as MLBFS may reasonably deem proper, whether for
cash, on credit, or for future delivery, in bulk or in lots. MLBFS may purchase
any Collateral at any such sale free of Customer's right of
9
redemption, if any, which Customer expressly waives to the extent not prohibited
by applicable law. The net proceeds of any such public or private sale and all
other amounts actually collected or received by MLBFS pursuant hereto, after
deducting all costs and expenses incurred at any time in the collection of the
Obligations and in the protection, collection and sale of the Collateral, will
be applied to the payment of the Obligations, with any remaining proceeds paid
to Customer or whoever else may be entitled thereto, and with Customer and each
Guarantor remaining jointly and severally liable for any amount remaining unpaid
after such application.
(vi) DELIVERY OF CASH, CHECKS, ETC. MLBFS may require Customer to forthwith upon
receipt, transmit and deliver to MLBFS in the form received, all cash, checks,
drafts and other instruments for the payment of money (properly endorsed, where
required, so that such items may be collected by MLBFS) which may be received by
Customer at any time in full or partial payment of any Collateral, and require
that Customer not commingle any such items which may be so received by Customer
with any other of its funds or property but instead hold them separate and apart
and in trust for MLBFS until delivery is made to MLBFS.
(vii) NOTIFICATION OF ACCOUNT DEBTORS. MLBFS may notify any account debtor that
its Account or Chattel Paper has been assigned to MLBFS and direct such account
debtor to make payment directly to MLBFS of all amounts due or becoming due with
respect to such Account or Chattel Paper; and MLBFS may enforce payment and
collect, by legal proceedings or otherwise, such Account or Chattel Paper.
(viii) CONTROL OF COLLATERAL. MLBFS may otherwise take control in any lawful
manner of any cash or non-cash items of payment or proceeds of Collateral and of
any rejected, returned, stopped in transit or repossessed goods included in the
Collateral and endorse Customer's name on any item of payment on or proceeds of
the Collateral.
(b) SET-OFF. MLBFS shall have the further right upon the occurrence and during
the continuance of an Event of Default to set-off, appropriate and apply toward
payment of any of the Obligations, in such order of application as MLBFS may
from time to time and at any time elect, any cash, credit, deposits, accounts,
financial assets, investment property, securities and any other property of
Customer which is in transit to or in the possession, custody or control of
MLBFS. MLPF&S or any agent, bailee, or affiliate or MLBFS or MLPF&S. Customer
hereby collaterally assigns and grants to MLBFS a continuing security interest
in all such property as Collateral and as additional security for the
Obligations. Upon the occurrence and during the continuance of an Event of
Default, MLBFS shall have all rights in such property available to collateral
assignees and secured parties under all applicable laws, including, without
limitation, the UCC.
(c) POWER OF ATTORNEY. Effective upon the occurrence and during the continuance
of an Event of Default, Customer hereby irrevocably appoints MLBFS as its
attorney-in-fact, with full power of substitution, in its place and stead and in
its name or in the name of MLBFS, to from time to time in MLBFS' sole discretion
take any action and to execute any instrument which MLBFS may deem necessary or
advisable to accomplish the purposes of this Loan Agreement and the other Loan
Documents, including, but not limited to, to receive, endorse and collect all
checks, drafts and other instruments for the payment of money made payable to
Customer included in the Collateral. The powers of attorney granted to MLBFS in
this Loan Agreement are coupled with an interest and are irrevocable until the
Obligations have been indefeasibly paid in full and fully satisfied and all
obligations of MLBFS under this Loan Agreement have been terminated.
(d) REMEDIES ARE SEVERABLE AND CUMULATIVE. All rights and remedies of MLBFS
herein are severable and cumulative and in addition to all other rights and
remedies available in the Loan Documents, at law or in equity, and any one or
more of such rights and remedies may be exercised simultaneously or
successively.
(e) NO MARSHALLING. MLBFS shall be under no duty or obligation to (i) preserve,
protect or ▇▇▇▇▇▇▇▇ the Collateral; (ii) preserve or protect the rights of any
Credit Party or any other Person claiming an interest in the Collateral; (iii)
realize upon the Collateral in any particular order or manner, (iv) seek
repayment of any Obligations from any particular source; (v) proceed or not
proceed against any Credit Party pursuant to any guaranty or security agreement
or against any Credit Party under the Loan Documents, with or without also
realizing on the Collateral; (vi) permit any substitution or exchange of all or
any part of the Collateral, or (vii) release any part of the Collateral from the
Loan Agreement or any of the other Loan Documents, whether or not such
substitution or release would leave MLBFS adequately secured.
(f) NOTICES. To the fullest extent permitted by applicable law. Customer hereby
irrevocably waives and releases MLBFS of and from any and all liabilities and
penalties for failure of MLBFS to comply with any statutory or other requirement
imposed upon MLBFS relating to notices of sale, holding of sale or reporting of
any sale, and Customer waives all rights of redemption or reinstatement from any
such sale. Any notices required under applicable law shall be reasonably and
properly given to Customer if given by any of the methods provided herein at
least 5 Business Days prior to taking action. MLBFS shall have the right to
postpone or adjourn any sale or other disposition of Collateral at any time
without giving notice of any such postponed or adjourned date. In the event
MLBFS seeks to take possession of any or all of the Collateral by court process,
Customer further irrevocably waives to the fullest extent permitted by law any
bonds and any surety or security relating thereto required by any statute, court
rule or otherwise as an incident to such possession, and any demand for
possession prior to the commencement of any suit or action.
3.7 MISCELLANEOUS
(a) NON-WAIVER. No failure or delay on the part of MLBFS in exercising any
right, power or remedy pursuant to this Loan Agreement or any of the other Loan
Documents shall operate as a waiver thereof, and no single or partial exercise
of any such right, power or remedy shall preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy. Neither any waiver
of any provision of any of the Loan Documents, nor any consent to any departure
by Customer therefrom, shall be effective unless the same shall be in writing
and signed by MLBFS. Any waiver of any provision of this Loan Agreement or any
of the other Loan Documents and any consent to any departure by Customer from
the terms of this Loan Agreement or any of the other Loan Documents shall be
effective only in the specific instance and for the specific purpose for which
given. Except as otherwise expressly provided herein, no notice to or demand on
Customer shall in any case entitle Customer to any other or further notice or
demand in similar or other circumstances.
10
(b) DISCLOSURE. Customer hereby irrevocably authorizes MLBFS and each of its
affiliates, including without limitation MLPF&S, to at any time (whether or not
an Event of Default shall have occurred) obtain from and disclose to each other,
and to any third party in connection with Section 3.7 (g) herein, any and all
financial and other information about Customer. In connection with said
authorization, the parties recognize that in order to provide a WCMA Line of
Credit certain information about Customer is required to be made available on a
computer network accessible by certain affiliates of MLBFS, including MLPF&S.
Customer further irrevocably authorizes MLBFS to contact, investigate, inquire
and obtain consumer reports, references and other information on Customer from
consumer reporting agencies and other credit reporting services, former or
current creditors, and other persons and sources (including, without limitation,
any Affiliate of MLBFS) and to provide to any references, consumer reporting
agencies, credit reporting services, creditors and other persons and sources
(including, without limitation, affiliates of MLBFS) all financial, credit and
other information obtained by MLBFS relating to the Customer.
(c) COMMUNICATIONS. Delivery of an agreement, instrument of other document may,
at the discretion of MLBFS, be by electronic transmission. Except as required by
law or otherwise provided herein or in a writing executed by the party to be
bound, all notices demands, requests, accountings, listings, statements, advices
or other communications to be given under the Loan Documents shall be in writing
and shall be served either personally, by deposit with a reputable overnight
courier with charges prepaid, or by deposit in the United States mail by
certified mail, return receipt required. Notices may be addressed to Customer as
set forth at its address shown in the preamble hereto, or to any office to which
billing or account statements are sent; to MLBFS at its address shown in the
preamble hereto, or at such other address designated in writing by MLBFS. Any
such communication shall be deemed to have been given upon, in the case of
personal delivery the date of delivery, one Business Day after deposit with an
overnight courier, two (2) Business Days after deposit in the United States by
certified mail (return receipt required), or receipt of electronic transmission
(which shall be presumed to be three hours after the time of transmission unless
an error message is received by the sender), except that any notice of change of
address shall not be effective until actually received.
(d) FEES, EXPENSES AND TAXES. Customer shall pay or reimburse MLBFS for: (i) all
UCC, real property or other filing, recording, and search fees and expenses
incurred by MLBFS in connection with the verification, perfection or
preservation of MLBFS' rights hereunder or in any Collateral or any other
collateral for the Obligations; (ii) any and all stamp, transfer, mortgage,
intangible, document, filing, recording and other taxes and fees payable or
determined to be payable in connection with the borrowings hereunder or the
execution, delivery, filing and/or recording of the Loan Documents and any
other instruments or documents provided for herein or delivered or to be
delivered hereunder or in connection herewith; and (iii) all reasonable lees and
out-of-pocket expenses (including, attorneys' fees and legal expenses) incurred
by MLBFS in connection with the preparation, execution, administration,
collection, enforcement, protection, waiver or amendment of this Loan Agreement,
the other Loan Documents and such other instruments or documents, and the rights
and remedies of MLBFS thereunder and all other matters in connection therewith.
Customer hereby authorizes MLBFS, at its option, to either cause any and all
such fees, expenses and taxes to be paid with a WCMA Loan, or invoice Customer
therefore (in which event Customer shall pay all such fees, expenses and taxes
within 5 Business Days after receipt of such invoice). The obligations of
Customer under this paragraph shall survive the expiration or termination of
this Loan Agreement and the discharge of the other Obligations.
(e) RIGHT TO PERFORM OBLIGATIONS. If Customer shall fail to do any act or thing
which it has covenanted to do under any of the Loan Documents or any
representation or warranty on the part of Customer contained in the Loan
Documents shall be breached, MLBFS may in its sole discretion, after 5 Business
Days written notice is sent to Customer (or such lesser notice, including no
notice, as is reasonable under the circumstances), do the same or cause it to be
done or remedy any such breach, and may expend its funds for such purpose. Any
and all reasonable amounts so expended by MLBFS shall be repayable to MLBFS by
Customer upon demand, with interest at the Interest Rate during the period from
and including the date funds are so expended by MLBFS to the date of repayment,
and all such amounts shall be additional Obligations. The payment or performance
by MLBFS of any of Customer's obligations hereunder shall not relieve Customer
of said obligations or of the consequences of having failed to pay or perform
the same, and shall not waive or be deemed a cure of any Default.
(f) FURTHER ASSURANCES. Customer agrees to do such further acts and things and
to execute and deliver to MLBFS such additional agreements, instruments, and
documents as MLBFS may reasonably require or deem advisable to effectuate the
purposes of the Loan Documents, to confirm the WCMA Loan Balance, or to
establish, perfect and maintain MLBFS' security interests and liens upon the
Collateral, including, but not limited to: (i) executing financing statements or
amendments thereto when and as reasonably requested by MLBFS; and (ii) if in the
reasonable judgment of MLBFS it is required by local law, causing the owners
and/or mortgagees of the real property on which any Collateral may be located to
execute and deliver to MLBFS waivers or subordinations reasonably satisfactory
to MLBFS with respect to any rights in such Collateral.
(g) BINDING EFFECT. This Loan Agreement and the Loan Documents shall be binding
upon, and shall inure to the benefit of MLBFS, Customer and their respective
successors and assigns. MLBFS reserves the right, at any time white the
Obligations remain outstanding, to sell, assign, syndicate or otherwise transfer
or dispose of any or all of MLBFS' rights and interests under the Loan
Documents. MLBFS also reserves the right at any time to pool the WCMA Loan with
one or more other loans originated by MLBFS or any other Person, and to
securitize or offer interests in such pool on whatever terms and conditions
MLBFS Shall determine. Customer consents to MLBFS releasing financial and other
information regarding Credit Parties, the Collateral and the WCMA Loan in
connection with any such sale, pooling, securitization or other offering.
Customer shall not assign any of its rights or delegate any of its obligations
under this Loan Agreement or any of the Loan Documents without the prior written
consent of MLBFS. Unless otherwise expressly agreed to in a writing signed by
MLBFS, no such consent shall in any event relieve Customer of any of its
obligations under this Loan Agreement or the Loan Documents.
(h) INTERPRETATION; CONSTRUCTION. (i) Captions and section and paragraph
headings in this Loan Agreement are inserted only as a matter of convenience,
and shall not affect the interpretation hereof; (ii) no provision of this Loan
Agreement shall be construed against a particular Person or in favor of another
Person merely because of which Person (or its representative) drafted or
supplied the wording for such provision; and (iii) where the context requires:
(a) use of the singular or plural incorporates the other, and (b) pronouns and
modifiers in the masculine, feminine or neuter gender shall be deemed to refer
to or include the other genders.
11
(i) GOVERNING LAW. This Loan Agreement, and, unless otherwise expressly provided
therein, each of the loan Documents, shall be governed in all respects by the
laws of the State of Illinois, not including its conflict of law provisions.
(j) SEVERABILITY OF PROVISIONS. Whenever possible, each provision of this Loan
Agreement and the other Loan Documents shall be interpreted in such manner as to
be effective and valid under applicable law. Any provision of this Loan
Agreement or any of the Loan Documents which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Loan Agreement and the loan Documents or affecting
the validity or enforceability of such provision in any other jurisdiction.
(k) TERM. This Loan Agreement shall become effective on the date accepted by
MLBFS at its office in Chicago, Illinois, and, Subject to the terms hereof,
shall continue in effect so long thereafter as the WCMA Line of Credit shall be
in effect or there shall be any Obligations outstanding. Customer hereby waives
notice of acceptance of this Loan Agreement by MLBFS.
(l) EXHIBITS. The exhibits to this Loan Agreement are hereby incorporated and
made a part hereof and are an integral part of this Loan Agreement
(m) COUNTERPARTS. This Loan Agreement may be executed in one or more
counterparts which, when taken together, constitute one and the same agreement.
(n) JURISDICTION; WAIVER. CUSTOMER ACKNOWLEDGES THAT THIS LOAN AGREEMENT IS
BEING ACCEPTED BY MLBFS IN PARTIAL CONSIDERATION OF MLBFS' RIGHT AND OPTION, IN
ITS SOLE DISCRETION, TO ENFORCE THIS LOAN AGREEMENT AND ALL OF THE LOAN
DOCUMENTS IN EITHER THE STATE OF ILLINOIS OR IN ANY OTHER JURISDICTION WHERE
CUSTOMER OR ANY COLLATERAL MAY BE LOCATED. CUSTOMER IRREVOCABLY SUBMITS ITSELF
TO JURISDICTION IN THE STATE OF ILLINOIS AND VENUE IN ANY STATE OR FEDERAL COURT
IN THE COUNTY OF ▇▇▇▇ FOR SUCH PURPOSES, AND CUSTOMER WAIVES ANY AND ALL RIGHTS
TO CONTEST SAID JURISDICTION AND VENUE AND THE CONVENIENCE OF ANY SUCH FORUM,
AND ANY AND ALL RIGHTS TO REMOVE SUCH ACTION FROM STATE TO FEDERAL COURT.
CUSTOMER FURTHER WAIVES ANY RIGHTS TO COMMENCE ANY ACTION AGAINST MLBFS IN ANY
JURISDICTION EXCEPT IN THE COUNTY OF ▇▇▇▇ AND STATE OF ILLINOIS. CUSTOMER AGREES
THAT ALL SUCH SERVICE OF PROCESS SHALL BE MADE BY MAIL OR MESSENGER DIRECTED TO
IT IN THE SAME MANNER AS PROVIDED FOR NOTICES TO CUSTOMER IN THIS LOAN AGREEMENT
AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF
ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN POSTED TO
CUSTOMER OR CUSTOMER'S AGENT. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF
MLBFS TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE
RIGHT OF MLBFS TO BRING ANY ACTION OR PROCEEDING AGAINST CUSTOMER OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION. CUSTOMER WAIVES, TO THE EXTENT
PERMITTED BY LAW, ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT
FOR THIS WAIVER, BE REQUIRED OF MLBFS. CUSTOMER FURTHER WAIVES THE RIGHT TO
BRING ANY NON-COMPULSORY COUNTERCLAIMS.
(o) JURY WAIVER. MLBFS AND CUSTOMER HEREBY EACH EXPRESSLY WAIVE ANY AND ALL
RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY
EITHER OF THE PARTIES AGAINST THE OTHER PARTY WITH RESPECT TO ANY MATTER
RELATING TO, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE WCMA LINE OF
CREDIT, THE OBLIGATIONS, THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS AND/OR
ANY OF THE TRANSACTIONS WHICH ARE THE SUBJECT MATTER OF THIS LOAN AGREEMENT.
(p) INTEGRATION. THIS LOAN AGREEMENT TOGETHER WITH THE OTHER LOAN DOCUMENTS,
CONSTITUTES THE ENTIRE UNDERSTANDING AND REPRESENTS THE FULL AND FINAL AGREEMENT
BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR WRITTEN AGREEMENTS OR PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS OF THE PARTIES. WITHOUT LIMITING THE FOREGOING, CUSTOMER ACKNOWLEDGES
THAT: (i) NO PROMISE OR COMMITMENT HAS BEEN MADE TO IT BY MLBFS, MLPF&S OR ANY
OF THEIR RESPECTIVE EMPLOYEES, AGENTS OR REPRESENTATIVES TO EXTEND THE
AVAILABILITY OF THE WCMA LINE OF CREDIT OR THE MATURITY DATE, OR TO INCREASE THE
MAXIMUM WCMA LINE OF CREDIT, OR TO MAKE ANY WCMA LOAN ON ANY TERMS OTHER THAN AS
EXPRESSLY SET FORTH HEREIN OR TO OTHERWISE EXTEND ANY OTHER CREDIT TO CUSTOMER
OR ANY OTHER PARTY; (ii) NO PURPORTED EXTENSION OF THE MATURITY DATE, INCREASE
IN THE MAXIMUM WCMA LINE OF CREDIT OR OTHER EXTENSION OR AGREEMENT TO EXTEND
CREDIT SHALL BE VALID OR BINDING UNLESS EXPRESSLY SET FORTH IN A WRITTEN
INSTRUMENT SIGNED BY MLBFS; AND (iii) THIS LOAN AGREEMENT SUPERSEDES AND
REPLACES ANY AND ALL PROPOSALS, LETTERS OF INTENT AND APPROVAL AND COMMITMENT
LETTERS FROM MLBFS TO CUSTOMER, NONE OF WHICH SHALL BE CONSIDERED A LOAN
DOCUMENT. NO AMENDMENT OR MODIFICATION OF ANY OF THE LOAN DOCUMENTS TO WHICH
CUSTOMER IS A PARTY SHALL BE EFFECTIVE UNLESS IN A WRITING SIGNED BY BOTH MLBFS
AND CUSTOMER.
(q) SURVIVAL. All representations, warranties, agreements and covenants
contained in the Loan Documents shall survive the signing and delivery of the
Loan Documents, and all of the waivers made and indemnification obligations
undertaken by Customer shall survive the termination, discharge or cancellation
of the Loan Documents.
(r) CUSTOMER'S ACKNOWLEDGMENTS. The Customer acknowledges that the Customer: (i)
has had ample opportunity to consult with counsel and such other parties as
deemed advisable prior to signing and delivering this Loan Agreement and the
other Loan Documents; (ii) understands the provisions of this Loan Agreement and
the other Loan Documents, including all waivers contained therein; and (iii)
signs and delivers this Loan Agreement and the other Loan Documents freely and
voluntanly, without duress or coercion.
THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE EXECUTED UNDER SEAL AND
ARE INTENDED TO TAKE EFFECT AS SEALED INSTRUMENTS.
12
IN WITNESS WHEREOF, this Loan Agreement has been executed as of the day and year
first above written.
COLLEGIATE PACIFIC INC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------------------------------------------
Signature(1) Signature(2)
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------------------------------------------
Printed Name Printed Name
CEO
------------------------------------------------------
Title Title
Accepted at Chicago, Illinois:
▇▇▇▇▇▇▇ ▇▇▇▇▇ BUSINESS FINANCIAL
SERVICES INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
13
Private Client Group
▇▇▇▇▇▇▇ ▇▇▇▇▇ BUSINESS
FINANCIAL SERVICES INC.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
17th Floor
[▇▇▇▇▇▇▇ ▇▇▇▇▇ LOGO] ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
December 23, 2003
Collegiate Pacific Inc
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇. ▇▇ ▇▇▇▇▇
RE: AMENDMENT TO LOAN DOCUMENTS
Dear ▇▇. ▇▇▇▇▇▇,
This Letter Agreement will serve to confirm certain agreements of ▇▇▇▇▇▇▇ ▇▇▇▇▇
Business Financial Services Inc. ("MLBFS") and Collegiate Pacific Inc.
("Customer") with respect to (i) that certain WCMA LOAN AND SECURITY AGREEMENT
NO. 586-07067 between MLBFS and Customer, including any previous amendments and
extensions thereof, the "Loan Agreement"), and (ii) all other agreements between
MLBFS and Customer or any party who has guaranteed or provided collateral for
Customer's obligations to MLBFS in connection therewith (collectively, the "Loan
Documents"). Capitalized terms used herein and not defined herein shall have the
meaning set forth in the Loan Documents.
Subject to the terms hereof, effective as of the "Effective Date" (as defined
below), the Loan Documents are hereby amended as follows:
Section 3.3 (l) shall be added to the Loan Agreement, and provide as follows:
(l) TOMARK ACQUISTION. Notwithstanding the terms in Section 3.3(g). Customer may
form a wholly owned subsidiary, Boo Merger Corporation ("Sub"), and acquire the
stock of Tomark, Inc. ("Tomark") from ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇
(collectively, ▇▇. ▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇, "Shareholders") and simultaneously
merge Tomark into the Sub with the Sub being the surving entity pursuant to
terms substantially similar to that (i) Letter of Intent for Merger dated
November 7, 2003 from Tomark to Customer, as amended by letter dated December
12, 2003, (ii) Agreement and Plan of Merger between Customer, Tomark, Sub and
the Shareholders provided to MLBFS on or about December 22, 2003, and (iii)
historical financial statements of Tomark and financial pro-forma projections of
Customer as of the projected closing, provided to MLBFS on or about December 22,
2003 (such transaction pursuant to the foregoing terms, the "Tomark
Acquisition") provided, however, the following terms and conditions are met: (a)
before and after giving effect to the Tomark Acquisition, there is no default
under this Loan Agreement or any of the other Loan Documents; (b) Customer shall
have delivered to MLBFS not less than 7 Business Days prior to the closing of
the Tomark Acquisition final drafts of all acquisition documents including all
schedules and exhibits, all in a form and substance acceptable to MLBFS; (c)
Customer shall have delivered to MLBFS not less than 5 Business Days prior to
the closing pro-forma financial statements and a pro-forma Certificate of
Compliance, projected as of the close of the Tomark Acquisition with CFO
certification in form and substance satisfactory to MLBFS reflecting pro-forma
compliance with this Loan Agreement, (d) on the date of closing of the Tomark
Acquisition MLBFS receives, in a form and substance acceptable to MLBFS' (A) a
guaranty from Sub pursuant
▇▇▇▇▇▇▇ ▇▇▇▇▇ BUSINESS FINANCIAL SERVICES INC.
Collegiate Pacific, Inc.
December 23, 2003.
Page No. 2
to MLBFS' standard form of business guaranty, (B) a first priority perfected
security interest on all personal property of Sub, and (C) debt subordination
agreements from each Shareholder, substantially in the form of the enclosed debt
subordination agreement; (e) Customer shall have provided and MLBFS shall be
satisfied with such other information, documents and other items as MLBFS shall
have requested in connection; and (f) the consummation of the Tomark Acquisition
occurs by January 31, 2004.
Except as expressly amended hereby, the Loan Documents shall continue in full
force and effect upon all of their terms and conditions.
Customer acknowledges, warrants and agrees, as a primary inducement to MLBFS to
enter into this Agreement, that: (a) no Default or Event of Default has occurred
and is continuing under the Loan Documents; (b) each of the warranties of
Customer in the Loan Documents are true and correct as of the date hereof and
shall be deemed remade as of the date hereof; (c) Customer does not have any
claim against MLBFS or any of its affiliates arising out of or in connection
with the Loan Documents or any other matter whatsoever; and (d) Customer does
not have any defense to payment of any amounts owing, or any right of
counterclaim for any reason under, the Loan Documents.
Provided that no Event of Default, or event which with the giving of notice,
passage of time, or both, would constitute an Event of Default, shall then have
occurred and be continuing under the terms of the Loan Documents, the amendments
and agreements in this Letter Agreement will become effective on the date (the
"Effective Date") upon which: (a) Customer shall have executed and returned the
duplicate copy of this Letter Agreement enclosed herewith; and (b) an officer of
MLBFS shall have reviewed and approved this Letter Agreement as being consistent
in all respects with the original internal authorization hereof.
Notwithstanding the foregoing, if Customer does not execute and return the
duplicate copy of this Letter Agreement within 2 days from the date hereof, or
if for any other reason the Effective Date shall not occur within said 2 day
period, then all of said amendments and agreements will at the sole option of
MLBFS, be void.
Very truly yours.
▇▇▇▇▇▇▇ ▇▇▇▇▇ BUSINESS FINANCIAL SERVICES INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
Senior Credit Manager
▇▇▇▇▇▇▇ ▇▇▇▇▇ BUSINESS FINANCIAL SERVICES INC.
Collegiate Pacific, Inc.
December 23, 2003.
Page No. 3
Accepted:
COLLEGIATE PACIFIC, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Printed Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: CFO
▇▇▇▇▇▇▇ ▇▇▇▇▇ BUSINESS FINANCIAL SERVICES INC.
Collegiate Pacific, Inc.
August 27, 2003
[▇▇▇▇▇▇▇ ▇▇▇▇▇ LOGO] ELECTRONIC MAILING AUTHORIZATION
The undersigned ("Customer") hereby authorized and directs ▇▇▇▇▇▇▇ ▇▇▇▇▇
BUSINESS FINANCIAL SERVICES INC. ("MLBFS") to forward and send electronically
all written communications and attachments from MLBFS to Customer, which may
include, but is not limited to, agreements between MLBFS, Customer and/or any
other party who at any time has guaranteed or provided collateral, or will
hereinafter guarantee or provide collateral for Customer's obligations to MLBFS
(collectively the "Loan Documents"). Customer DOES HEREBY REPRESENT, WARRANT AND
AGREE AS FOLLOWS:
1. CONSENT: The Customer authorizes and directs MLBFS to use the
following address(es) for electronic communication between the
Customer and MLBFS, including but not limited to the forwarding,
sending and mailing of the Loan Documents for review, approval and
execution by the Customer and any other appropriate signatories.
Authorized Electronic Mailing (E-mail) Address for Customer:
▇▇▇▇@▇▇▇▇▇▇.▇▇▇
Authorized Electronic Mailing (E-mail) Address and Names for
those other parties whom are to be included as receiving copies
of communications to Customer:
Email Address: ▇▇▇▇@▇▇▇▇▇▇.▇▇▇
Name and Title: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ CFO
Unless otherwise specified by Customer in a written notice to MLBFS
sent to ▇▇▇▇▇▇▇ ▇▇▇▇▇ BUSINESS FINANCIAL SERVICES INC., Attention:
Senior Counsel, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, of any
change or revocation of such above address(es), MLBFS is authorized to
continue to sent notices and other communications electronically to
the address(es) noted above.
2. COMMUNICATIONS. All notices and other communications required or
permitted under the Loan Documents or any of them shall be in writing,
and shall be deemed delivered by MLBFS to Customer one Business Day
after the electronic mailing by MLBFS pursuant to paragraph 1 above.
3. LIMITATION OF LIABILITY. MLBFS assumes no responsibility, and shall
not be liable for, and Customer does hereby and shall indemnify,
defend and save MLBFS harmless from and against any and all claims,
losses, costs, expenses (including, without limitation, reasonable
attorneys' fees and expenses), demands, liabilities, penalties, fines
and forfeitures of any nature whatsoever which may be asserted against
or incurred by MLBFS arising out of or in any manner occasioned by any
damages to, or viruses that may infect the computer equipment or other
property of Customer on account of (i) Customer's access to, use of,
or downloading the Loan Documents electronically sent to Customer by
MLBFS or (ii) Customer's access to, use of, or browsing of any site or
Customer's downloading of any materials, data, text, images, video or
audio from any site, including but not limited to ▇▇▇▇▇.▇▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇ BUSINESS FINANCIAL SERVICES INC.
Collegiate Pacific, Inc.
August 27, 2003
4. LIMITATION OF LIABILITY FOR ANY MISUSE OF CUSTOMER'S INFORMATION.
Customer acknowledges and agrees that electronic mail, commonly known
as e-mail, is an electronic message that is sent from one computer to
another, usually through a host computer on a network. E-mail messages
can be sent through a private or local area network (within a single
firm or organization), through an electronic mail service (such as
America Online), over the Internet, or through any combination of
these methods. Such methods do not provide or ensure any privacy or
security for the information being sent or received.
MLBFS does not use any encryption algorithm or software program or
otherwise encrypt or encode data or any communications to be sent to
Customer, including but not limited to the Loan Documents. Customer
waives any expectation of privacy with respect to the Loan Documents.
No attempts by MLBFS are made to identify individual users or
recipients of the Loan Documents. Customer hereby assumes any and all
risk of an unauthorized person (i) learning Customer's email address,
or (ii) accessing, intercepting or receiving any confidential or
personal information included in the MLBFS electronic mailing,
including but not limited to the Loan Documents.
5. This Authorization may be executed by Customer and delivered to MLBFS
via facsimile, in which event such facsimile execution shall
constitute a valid, original signature of Customer and of this
Authorization.
Dated this 5 day of November, 2003.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
Signature