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EXHIBIT 10.27
LOAN AND SECURITY AGREEMENT
DATED AS OF FEBRUARY 13, 1996
between
SUN SPORTSWEAR, INC.,
as Borrower,
and
▇▇▇▇▇▇ FINANCIAL, INC.,
as Lender
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LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is dated as of February 13, 1996
and entered into by and between SUN SPORTSWEAR, INC., a Washington corporation
("Borrower"), with its principal place of business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇▇ FINANCIAL, INC., a Delaware corporation
("Lender"), with offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. All capitalized terms used herein are defined in Section 1
of this Agreement.
WHEREAS, Borrower and Lender are parties to that certain Inter-Credit
Agreement dated December 31, 1992, as amended;
WHEREAS, Borrower now desires that Lender extend a credit facility to
provide working capital financing and to provide funds for other general
corporate purposes; and
WHEREAS, Borrower desires to secure its obligations under the Loan
Documents by granting to Lender a security interest in and lien upon certain
of Borrower's property;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Borrower and Lender
agree as follows:
SECTION 1 DEFINITIONS
1.1 Certain Defined Terms. The following terms used in this
Agreement shall have the following meanings:
"Accounts" means all presently existing and hereafter created
accounts, contract rights and general intangibles relating thereto, notes,
drafts and other forms of obligations owed to or owned by Borrower arising
or resulting from the sale of goods or the rendering of services, all
proceeds thereof, all guaranties and security therefor, and all goods and
rights represented thereby or arising therefrom including, but not limited
to, the right of stoppage in transit, replevin and reclamation.
"Affiliate" means any Person (other than Lender): (a) directly or
indirectly controlling, controlled by, or under common control with, Borrower;
(b) directly or indirectly owning or holding ten percent (10%) or more of any
equity interest in Borrower; or (c) ten percent (10%) or more of whose voting
stock or other equity interest is directly or indirectly owned or held by
Borrower. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under
common control with") means the possession directly or indirectly of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities or by contract or
otherwise.
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"Agreement" means this Loan and Security Agreement as it may be
amended, supplemented or otherwise modified from time to time.
"Approved Account" has the meaning set forth in the Inter-Credit
Agreement.
"Asset Disposition" means the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise, of any or all
of the assets of Borrower or any of its Subsidiaries other than sales of
Inventory in the ordinary course of business.
"Assignment of Monies Agreement" means that certain Assignment of
Monies Due under Inter-Credit Agreement dated as of even date herewith among
Borrower, ▇▇▇▇▇▇ and Lender and all other instruments, documents and agreements
executed in connection with the transactions contemplated thereby, all as
amended, restated, supplemented or modified from time to time.
"Bank Letters of Credit" means letters of credit issued by a bank
acceptable to Lender for the account of Borrower and supported by a Risk
Participation Agreement.
"Base Rate" means the variable rate of interest per annum equal to
the "reference rate", "prime rate", or other similar rate announced from time
to time by Bank of America National Trust and Savings Association (with
the understanding that any such rate may merely be a reference rate and may
not necessarily represent the lowest or best rate actually charged to any
customer by such bank).
"Borrower" has the meaning assigned to that term in the preamble to
this Agreement.
"Borrowing Base" has the meaning assigned to that term in subsection
2.1(A).
"Borrowing Base Certificate" means a certificate and assignment
schedule duly executed by an officer of Borrower appropriately completed
and in substantially the form of Exhibit A.
"Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the States of Illinois,
Pennsylvania, California or Washington or is a day on which banking
institutions located in any such state are closed.
"Capital Expenditures" means all expenditures (including deposits)
for, or contracts for expenditures (excluding contracts for expenditures
under or with respect to Capital Leases, but including cash down payments for
assets acquired under Capital Leases) with respect to any fixed assets or
improvements, or for replacements, substitutions or additions thereto, which
have a useful life of more than one year, including the direct or indirect
acquisition of such assets by way of increased product or service charges,
offset items or otherwise.
"Capital Lease" means any lease of any property (whether real,
personal or mixed) that, in conformity with GAAP, should be accounted for as
a capital lease.
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"Cash Equivalents" means: (a) marketable direct obligations issued
or unconditionally guarantied by the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within six (6) months from the date of
acquisition thereof; (b) commercial paper maturing no more than six (6)
months from the date issued and, at the time of acquisition, having a rating
of at least A-1 from Standard & Poor's Corporation or at least P-1 from
▇▇▇▇▇'▇ Investors Service, Inc.; and (c) certificates of deposit or bankers'
acceptances maturing within six (6) months from the date of issuance thereof
issued by, or overnight reverse repurchase agreements from, any commercial
bank organized under the laws of the United States of America or any state
thereof or the District of Columbia having combined capital and surplus of not
less than $250,000,000 and not subject to setoff rights in favor of such bank.
"Chargeback Interest" means interest owing by Borrower to ▇▇▇▇▇▇ on
Accounts charged back to Borrower under the terms of the Inter-Credit
Agreement.
"Closing Certificate" means a certificate duly executed by the chief
executive officer or chief financial officer of Borrower in a form reasonably
acceptable to Lender
"Closing Date" means February 14, 1996.
"Collateral" has the meaning assigned to that term in subsection 2.7.
"Commitment" or "Commitments" means the commitment or commitments
of Lender to make Loans as set forth in subsection 2.l(A) and to provide
Lender Letters of Credit as set forth in subsection 2.1(E).
"Compliance Certificate" means a certificate duly executed by the
chief executive officer or chief financial officer of Borrower appropriately
completed and in substantially the form of Exhibit B.
"Default" means a condition or event that, after notice or lapse
of time or both, would constitute an Event of Default if that condition or
event were not cured or removed within any applicable grace or cure period.
"Default Rate" has the meaning assigned to that term in subsection 2.2.
"Determination Period" means, (i) for the Fiscal Year ending in
1996, the period commencing on January 1, 1996 and ending on the last day of
the applicable fiscal quarter and (ii) for the Fiscal Year ending in 1997,
the four-quarter period ending on the last day of the applicable fiscal
quarter.
"EBITDA" means, for any period, without duplication, the total of
the following for Borrower and its Subsidiaries on a consolidated basis,
each calculated for such period: (1) net income determined in accordance with
GAAP; plus, to the extent included in the calculation of
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net income, (2) the sum of (a) income and franchise taxes paid or accrued; (b)
Interest Expenses, net of interest income, paid or accrued; (c) interest paid
in kind; (d) amortization and depreciation and (e) other non-cash charges
(excluding accruals for cash expenses made in the ordinary course of
business); less, to the extent included in the calculation of net income, (3)
the sum of (a) the income of any Person other than wholly-owned Subsidiaries
of Borrower in which Borrower or a wholly owned Subsidiary of Borrower has
an ownership interest unless such income is received by Borrower or such
wholly-owned Subsidiary in a cash distribution; (b) gains or losses from sales
or other dispositions of assets (other than Inventory in the normal course of
business); and (c) extraordinary or non-recurring gains, but not net of
extraordinary or non-recurring "cash" losses.
"Eligible Accounts" has the meaning assigned to that term in
subsection 2.1 (B).
"Eligible Inventory" has the meaning assigned to that term in
subsection 2.1 (B).
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of
any Loan Party or any ERISA Affiliate or (b) has at any time within the
preceding six (6) years been maintained for the employees of any Loan Party or
any current or former ERISA Affiliate.
"Environmental Claims" means claims, liabilities, investigations,
litigation, administrative proceedings, judgments or orders relating to
Hazardous Materials.
"Environmental Laws" means any present or future federal, state or
local law, rule, regulation or order relating to pollution, waste, disposal or
the protection of human health or safety, plant life or animal life, natural
resources or the environment.
"Equipment" means all "equipment" (as defined in the UCC),
wherever located, including, without limitation, all machinery, motor
vehicles, trucks, trailers, vessels, aircraft and rolling stock and all parts
thereof and all additions and accessions thereto and replacements therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.
"ERISA Affiliate", as applied to any Loan Party, means any Person
who is a member of a group which is under common control with any Loan
Party, who together with any Loan Party is treated as a single employer within
the meaning of Section 414(b) and (c) of the IRC.
"Event of Default" means each of the events set forth in subsection
8.1.
"Facility Documents" means, collectively, the Loan Documents and the
Inter-Credit Agreement.
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"Fiscal Year" means each twelve month period ending on the last day of
December in each year.
"Funding Date" means the date of each funding of a Loan or issuance of
a Lender Letter of Credit.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are applicable
to the circumstances as of the date of determination.
"Hazardous Material" means all or any of the following: (a)
substances that are defined or listed in, or otherwise classified pursuant to,
any Environmental Laws or regulations as "hazardous substances", "hazardous
materials", "hazardous wastes", "toxic substances" or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
reproductive toxicity or "EP toxicity"; (b) oil, petroleum or petroleum
derived substances, natural gas, natural gas liquids or synthetic gas and
drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (c) any flammable substances or explosives or any radioactive
materials; and (d) asbestos in any form or electrical equipment which
contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million.
"▇▇▇▇▇▇" means ▇▇▇▇▇▇ Financial, Inc., in its capacity as a party to
the Inter-Credit Agreement.
"▇▇▇▇▇▇ Factoring Clients" means Persons (other than Borrower) who
have entered into factoring or inter-credit agreements with any of ▇▇▇▇▇▇'▇
offices.
"Indebtedness", as applied to any Person, means without duplication:
(a) all indebtedness for borrowed money; (b) obligations under leases which
in accordance with GAAP constitute Capital Leases; (c) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all or any part
of the deferred purchase price of property or services if the purchase price
is due more than six months from the date the obligation is incurred or is
evidenced by a note or similar written instrument; and (e) all indebtedness
secured by any Lien on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been assumed
by that Person or is nonrecourse to the credit of that Person. Indebtedness
shall not include Borrower's guarantied royalty payments under licenses for
Intellectual Property.
"Intangible Assets" means all intangible assets (determined in
conformity with GAAP) including, without limitation, goodwill, trademarks,
trade names, licenses, organizational costs, deferred amounts, covenants not to
compete, unearned income and restricted funds.
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"Intellectual Property" means all present and future designs, art
designs, patents, patent rights and applications therefor, trademarks and
registrations or applications therefor, trade names, inventions, copyrights
and all applications and registrations therefor, software or computer
programs, license rights (except to the extent that the grant of a security
interest thereon would violate the terms of any license), trade secrets,
methods, processes, know-how, drawings, specifications, descriptions, and all
memoranda, notes and records with respect to any research and development,
whether now owned or hereafter acquired, all goodwill associated with any of
the foregoing, and proceeds of all of the foregoing, including, without
limitation, proceeds of insurance policies thereon.
"Inter-Credit Agreement" means that certain Inter-Credit Agreement
dated December 31, 1992 between ▇▇▇▇▇▇ and Borrower, as it may have been, or
may hereafter be, amended, supplemented or otherwise modified, and all other
instruments, documents and agreements executed by or on behalf of any Loan
Party and delivered to or for the benefit of ▇▇▇▇▇▇ in connection therewith.
"Interest Coverage Ratio" means, for any period, the ratio of
Operating Cash Flow to Interest Expenses.
"Interest Expenses" means, without duplication, for any period, the
following, for Borrower and its Subsidiaries each calculated for such period:
interest expenses deducted in the determination of net income (excluding (i)
the amortization of fees and costs with respect to the transactions
contemplated hereunder on the Closing Date which have been capitalized as
transaction costs; and (ii) interest paid in kind).
"Interest Rate" has the meaning assigned to that term in subsection
2.2(A).
"Inventory" means all "inventory" (as defined in the UCC) now owned
or hereafter acquired by Borrower including, without limitation, finished
goods, raw materials, work in process and other materials and supplies used
or consumed in Borrower's business, and goods which are returned or
repossessed.
"Inventory Report" means a report duly executed by an officer of
Borrower appropriately completed and in substantially the form of Exhibit C.
"IRC" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor statute and all rules and regulations promulgated
thereunder.
"Ledger Debt" means indebtedness owing by Borrower to ▇▇▇▇▇▇ as a
result of ▇▇▇▇▇▇'▇ purchase of invoices evidencing sales to Borrower by ▇▇▇▇▇▇
Factoring Clients.
"Ledger Debt Interest" means interest owing by Borrower to ▇▇▇▇▇▇
with respect to any Ledger Debt under the terms of the Inter-Credit
Agreement.
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"Lender" means ▇▇▇▇▇▇ Financial, Inc. together with its successors and
permitted assigns pursuant to subsection 9.1.
"Lender Letter of Credit" has the meaning assigned to that term
in subsection 2.1 (E).
"Lender's Account" means ABA No. ▇▇▇▇-▇▇▇▇-▇, Account No. 51-19618
at First National Bank of Chicago, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, Reference: ▇▇▇▇▇▇ Financial, Inc. -- Western CAMG -- Sun Sportswear,
Inc.
"Lender's Depository Account" has the meaning assigned to that term
in subsection 5.6. "Letter of Credit Liability" means, all reimbursement and
other liabilities of Borrower or any of its Subsidiaries with respect to each
Lender Letter of Credit, whether contingent or otherwise, including: (a) the
amount available to be drawn or which may become available to be drawn; (b)
all amounts which have been paid or made available by the issuing bank to the
extent not reimbursed; and (c) all unpaid interest, fees and expenses.
"Letter of Credit Reserve" means, at any time, an amount equal to
(a) the aggregate amount of Letter of Credit Liability with respect to all
Lender Letters of Credit outstanding at such time plus (b) the aggregate
amount theretofore paid by Lender under Lender Letters of Credit and not
debited to the Loan Account pursuant to subsection 2.1(E)(2) or otherwise
reimbursed by Borrower.
"Liabilities" shall have the meaning given that term in accordance
with GAAP and shall include Indebtedness.
"Lien" means any lien, mortgage, pledge, security interest, charge
or encumbrance of any kind, whether voluntary or involuntary, (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest).
"Loan" or "Loans" means an advance or advances under the Revolving
Loan Commitment.
"Loan Documents" means this Agreement, the Assignment of Monies
Agreement, and all other instruments, documents and agreements executed by or
on behalf of Borrower and delivered concurrently herewith or at any time
hereafter to or for Lender in connection with the Loans and other
transactions contemplated by this Agreement, all as amended, restated,
supplemented or modified from time to time.
"Loan Party" means, collectively, Borrower, Borrower's Subsidiaries,
and any other Person (other than Lender or ▇▇▇▇▇▇) which is or becomes a
party to any Loan Document.
"Loan Year" means each period of twelve (12) consecutive months
commencing on the Closing Date and on each anniversary thereof.
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"Material Adverse Effect" means a material adverse effect upon (a) the
business, operations, prospects, properties, assets or condition (financial or
otherwise) of any Loan Party on an individual basis or taken as a whole or
(b) the ability of any Loan Party to perform its obligations under any
Facility Document to which it is a party or Lender to enforce or collect any of
the Obligations.
"Maximum Revolving Loan Amount" has the meaning assigned to that term
in subsection 2.1(A).
"Net Worth" means, as of any date, the sum of the capital stock
and additional paid-in capital plus retained earnings (or minus accumulated
deficit) calculated in conformity with GAAP.
"Obligations" means all obligations, liabilities and indebtedness of
every nature of each Loan Party from time to time owed to Lender under the
Loan Documents including the principal amount of all debts, claims and
indebtedness (whether incurred before or after the Termination Date), accrued
and unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or
from time to time hereafter owing, due or payable.
"Operating Cash Flow" means, for any period, (a) EBITDA; less (b)
Capital Expenditures.
"Permitted Encumbrances" means the following types of Liens: (a)
Liens (other than Liens relating to Environmental Claims or ERISA) for
taxes, assessments or other governmental charges not yet due and payable;
(b) statutory Liens of landlords, carriers, warehousemen, mechanics,
materialmen and other similar liens imposed by law, which are incurred in
the ordinary course of business for sums not more than thirty (30) days
delinquent; (c) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, trade contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money); (d) easements, rights-of-way, restrictions, and other similar
charges or encumbrances not interfering in any material respect with the
ordinary conduct of the business of any Loan Party or any of its
Subsidiaries; (e) Liens for purchase money obligations, provided that (i) the
purchase of the asset subject to any such Lien is permitted under subsection
6.5, (ii) the Indebtedness secured by any such Lien is permitted under
subsection 7.1, and (iii) such Lien encumbers only the asset so purchased;
(f) Liens in favor of Lender; (g) Liens in favor of ▇▇▇▇▇▇ to secure
Borrower's obligations under the Inter-Credit Agreement; and (h) Liens set
forth on Schedule 1.1 (A).
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or
not legal entities, and governments and agencies and political subdivisions
thereof.
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"Projections" means Borrower's forecasted consolidated and
consolidating: (a) balance sheets; (b) profit and loss statements; (c) cash
flow statements; and (d) capitalization statements, all prepared on a
division by division and Subsidiary by Subsidiary basis and otherwise
consistent with Borrower's historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
"Restricted Junior Payment" means: (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
stock of Borrower or any of its Subsidiaries now or hereafter outstanding,
except a stock dividend; (b) any payment or prepayment of principal of,
premium, if any, or interest on, or any redemption, conversion, exchange,
retirement, defeasance, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of
stock of Borrower or any of its Subsidiaries now or hereafter outstanding;
(c) any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of stock of
Borrower or any of its Subsidiaries now or hereafter outstanding; and (d) any
payment by Borrower or any of its Subsidiaries of any management fees or
similar fees to any Affiliate, whether pursuant to a management agreement or
otherwise.
"Revolving Loan" means all advances made by Lender pursuant
to subsection 2.1(A) and any amounts added to the principal balance of the
Revolving Loan pursuant to this Agreement.
"Revolving Loan Commitment" means the commitment of Lender to make
the Revolving Loan and issue Lender Letters of Credit pursuant to subsection
2.1(E), in the aggregate not to exceed at anytime $24,000,000.00.
"Risk Participation Agreement" has the meaning assigned to that term
in subsection 2.1(E).
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than fifty percent (50%) of
the total voting power of shares of stock (or equivalent ownership or
controlling interest) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other subsidiaries of that Person or a combination
thereof.
"Tangible Net Worth" means, as of the date of determination, an
amount equal to: (a) Net Worth; less (b) Intangible Assets; less (c) prepaid
expenses; less (d) all obligations owed to such Person or any of its
Subsidiaries by any Affiliate of such Person or any of its Subsidiaries; and
less (e) all loans by such Person to its officers, stockholders or employees.
"Termination Date" means the date this Agreement is terminated as set
forth in subsection 2.5.
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"UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of California, as amended from time to time, and any
successor statute.
"Working Capital" means, for Borrower and its Subsidiaries on a
consolidated basis: (a) current assets; less (b) current liabilities; and less
(c) the amount of any obligations owed to Borrower or any of its Subsidiaries
by any Affiliate of Borrower or any of its Subsidiaries.
1.2 Accounting Terms. For purposes of this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to such terms in conformity with GAAP. Financial statements and other
information furnished to Lender pursuant to subsection 5.1 shall be prepared
in accordance with GAAP (as in effect at the time of such preparation) on a
consistent basis. In the event any "Accounting Changes" (as defined below)
shall occur and such changes affect financial covenants, standards or terms
in this Agreement, then Borrower and Lender agree to enter into negotiations
in order to amend such provisions of this Agreement so as to equitably reflect
such Accounting Changes with the desired result that the criteria for
evaluating the financial condition of Borrower shall be the same after such
Accounting Changes as if such Accounting Changes had not been made, and until
such time as such an amendment shall have been executed and delivered by
Borrower and Lender, (A) all financial covenants, standards and terms in this
Agreement shall be calculated and/or construed as if such Accounting Changes
had not been made, and (B) Borrower shall prepare footnotes to each
Compliance Certificate and the financial statements required to be
delivered hereunder that show the differences between the financial statements
delivered (which reflect such Accounting Changes) and the basis for
calculating financial covenant compliance (without reflecting such
Accounting Changes). "Accounting Changes" means: (a) changes in
accounting principles required by GAAP and implemented by Borrower; and
(b) changes in accounting principles recommended by Borrower's certified
public accountants.
1.3 Other Definitional Provisions. References to "Sections",
"subsections", "Exhibits" and "Schedules" shall be to Sections,
subsections, Exhibits and Schedules, respectively, of this Agreement unless
otherwise specifically provided. Any of the terms defined in subsection
1.1 may, unless the context otherwise requires, be used in the singular
or the plural depending on the reference. In this Agreement, words
importing any gender include the other genders; the words "including,"
"includes" and "include" shall be deemed to be followed by the words "without
limitation"; references to agreements and other contractual instruments shall
be deemed to include subsequent amendments, assignments, and other
modifications thereto, but only to the extent such amendments, assignments and
other modifications are not prohibited by the terms of this Agreement or any
other Loan Document; references to Persons include their respective permitted
successors and assigns or, in the case of governmental Persons, Persons
succeeding to the relevant functions of such Persons; and all references to
statutes and related regulations shall include any amendments of same and any
successor statutes and regulations.
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SECTION 2 LOANS AND COLLATERAL
2.1 Loans.
(A) Revolving Loan. Subject to the terms and
conditions of this Agreement and in reliance upon the representations and
warranties of Borrower herein set forth, Lender agrees to lend to Borrower
from time to time an aggregate amount not to exceed at any time
$24,000,000.00 as reduced by Section 2.4(B). Amounts borrowed under this
subsection 2.1(A) may be repaid and reborrowed at any time prior to the
earlier of (i) the termination of the Revolving Loan Commitment pursuant to
subsection 8.3 or (ii) the Termination Date. Lender shall have no obligation
to make advances under this subsection 2.1(A) to the extent any requested
advance would cause the balance of the Revolving Loan then outstanding (after
giving effect to any immediate application of the proceeds thereof) to
exceed the Maximum Revolving Loan Amount; provided that Lender may, in its
sole discretion, elect from time to time to make Loans in excess of the
Maximum Revolving Loan Amount or the Revolving Loan Commitment.
(1) "Maximum Revolving Loan Amount" means, as of any
date of determination, the lesser of (a) the Revolving Loan Commitment
minus the Letter of Credit Reserve and (b) the Borrowing Base minus the Letter
of Credit Reserve.
(2) "Borrowing Base" means, as of any date of
determination, an amount equal to the sum of (a) eighty-five percent (85%) of
Eligible Accounts plus (b) the lesser of (i) $8,500,000, and (ii) sixty
percent (60%) of Eligible Inventory less in each case such reserves as Lender
in its reasonable discretion elects to establish.
(B) Eligible Accounts and Eligible Inventory.
"Eligible Accounts" means, as at any date of determination, the
aggregate of all Accounts that Lender, in its reasonable judgment, deems to
be eligible for borrowing purposes. Without limiting the generality of
the foregoing, unless otherwise agreed by Lender, the following Accounts are
not Eligible Accounts:
(1) Accounts which, at the date of issuance of the
respective invoice therefor, were payable more than sixty (60) days after the
date of issuance of such invoice;
(2) Accounts which remain unpaid for more than sixty
(60) days after the due date specified in the original invoice or for more than
ninety (90) days after invoice date if no due date was specified;
(3) Accounts which are otherwise eligible with respect to
which the account debtor is owed a credit by Borrower, but only to the extent
of such credit;
(4) Accounts due from a customer whose principal place
of business is located outside the United States of America unless such
Account is backed by a letter of credit, in form and substance acceptable to
Lender, and issued or confirmed by a bank that is
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organized under the laws of the United States of America or a State thereof,
that is acceptable to Lender, provided that such letter of credit has been
issued for the benefit of Lender or is assignable and has been duly assigned
and delivered to Lender as additional collateral;
(5) Accounts due from a customer which Lender has
notified Borrower does not have a satisfactory credit standing;
(6) Accounts with respect to which the customer is the
United States of America, any state or any municipality, or any department,
agency or instrumentality thereof, unless Borrower has, with respect to such
Accounts, complied with the Federal Assignment of Claims Act (31 U.S.C.
Section 3727) or any applicable statute or municipal ordinance of similar
purpose and effect;
(7) Accounts with respect to which the customer is an
Affiliate of Borrower or a director, officer, agent, stockholder or employee
of Borrower or any of its Affiliates;
(8) Accounts due from a customer if more than
twenty-five percent (25%) of the aggregate amount of Accounts of such
customer have at the time remained unpaid for more than sixty (60) days after
the due date or ninety (90) days after the invoice date if no due date was
specified;
(9) Accounts with respect to which there is any
unresolved dispute with the respective customer (but only to the extent of
such dispute);
(10) Accounts evidenced by an "instrument" or "chattel
paper" (as defined in the UCC) not in the possession of Lender;
(11) Accounts with respect to which Lender does not have a
valid, first priority and fully perfected security interest;
(12) Accounts subject to any Lien except those in favor of
Lender;
(13) Accounts (other than Accounts purchased under the
Inter-Credit Agreement) with respect to which the customer is the subject of
any bankruptcy or other insolvency proceeding;
(14) Accounts due from (a) Wal-Mart Stores, Inc. its
Subsidiaries to the extent that such Accounts exceed in the aggregate an
amount equal to seventy percent (70%) of the aggregate of all Accounts at
said date; or (b) ▇▇▇▇▇▇ ▇▇▇▇▇▇ Corporation and its operating divisions and
Subsidiaries (including Target, Mervyn's, Dayton's, Hudson's, and ▇▇▇▇▇▇▇▇
▇▇▇▇▇'▇) to the extent that such Accounts exceed in the aggregate an amount
equal to fifty percent (50%) of the aggregate of all Accounts at said date;
(c) Kmart Corporation and its Subsidiaries to the extent that such Accounts
exceed in the aggregate an amount equal to thirty percent (30%) of the
aggregate of all Accounts at such date; or (d) any other customer to the
extent that
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such Accounts exceed in the aggregate an amount equal to twenty percent (20%)
of the aggregate of all Accounts at said date;
(15) Accounts with respect to which the customer's
obligation to pay is conditional or subject to a repurchase obligation or
right to return or with respect to which the goods or services giving rise
to such Account have not been delivered (or performed, as applicable) and
accepted by such account debtor, including progress ▇▇▇▇▇▇▇▇, ▇▇▇▇ and
hold sales, guarantied sales, sale or return transactions, sales on
approval or consignment sales;
(16) Accounts with respect to which the customer is
located in Indiana, New Jersey, Minnesota, or any other state denying
creditors access to its courts in the absence of a Notice of Business
Activities Report or other similar filing, unless Borrower has either
qualified as a foreign corporation authorized to transact business in such
state or has filed a Notice of Business Activities Report or similar filing
with the applicable state agency for the then current year no later than
sixty (60) days after the Closing Date and provided to Lender evidence of such
qualification or filing; and
(17) Accounts with respect to which the customer is a
creditor of Borrower, provided, however, that any such Account shall only be
ineligible as to that portion of such Account which is less than or equal to
the amount owed by Borrower to such Person.
"Eligible Inventory" means, as at any date of determination, the value
(determined at the lower of cost or market on a first-in, first- out basis)
of all unprinted finished goods Inventory owned by and in the possession of
Borrower and located in the United States of America that Lender, in its
reasonable credit judgment, deems to be eligible for borrowing purposes.
Without limiting the generality of the foregoing, unless otherwise agreed by
Lender, the following is not Eligible Inventory: (a) work-in-process; (b)
printed finished goods; (c) Inventory which Lender determines is unacceptable
for borrowing purposes due to age, quality, type, category and/or quantity,
including any Inventory for which at least twelve (12) months have elapsed
since Borrower's receipt of such Inventory; (d) Inventory with respect to
which Lender does not have a valid, first priority and fully perfected
security interest; (e) Inventory with respect to which there exists any Lien
in favor of any Person other than Lender; (f) Inventory produced in
violation of the Fair Labor Standards Act and subject to the so-called
"hot goods" provisions contained in Title 29 U.S.C. 215 (a)(i); and (g)
Inventory located at any location other than Borrower's principal location and
its warehouse in Kent, Washington.
(C) Borrowing Mechanics. On any day when Borrower desires to
borrow under this subsection 2.1, Borrower shall give Lender telephonic
notice of the proposed borrowing by 11:00 a.m. (Los Angeles time). Lender
shall not incur any liability to Borrower for acting upon any telephonic
notice Lender believes in good faith to have been given by a duly authorized
officer or other person authorized to borrow on behalf of Borrower or for
otherwise acting in good faith under this subsection 2.1 (C). Lender will
not make any advance pursuant to any telephonic notice unless Lender has also
received the most recent Borrowing Base Certificate and all other documents
required under subsection 5.1 (F) by 11:00 a.m. (Los Angeles time). Each
advance made to Borrower under the Revolving Loan shall be deposited
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by wire transfer in immediately available funds in such account as Borrower
may from time to time designate to Lender in writing. Unless payment is
otherwise timely made by Borrower, the becoming due of any amount required to
be paid under this Agreement or any of the other Loan Documents as principal,
accrued interest and fees shall be deemed irrevocably to be a request by
Borrower for a Revolving Loan on the due date of, and in the amount required
to pay, such principal, accrued interest and fees, and the proceeds of each
such Revolving Loan if made by Lender shall be disbursed by Lender by way of
direct payment of the relevant obligation.
(D) Evidence of Revolving Loan Obligations. The advances
constituting the Revolving Loan shall be evidenced by this Agreement and
notations made from time to time by Lender in its books and records, including
computer records. Lender's books and records shall constitute presumptive
evidence, absent manifest error, of the accuracy of the information contained
therein. Failure by the Lender to make any such notation or record shall not
affect the obligations of Borrower to Lender with respect to the Revolving
Loans.
(E) Letters of Credit. Subject to the terms and conditions
of this Agreement and in reliance upon the representations and warranties
of Borrower herein set forth, the Revolving Loan Commitment may, in addition to
advances under the Revolving Loan, be utilized, upon the request of Borrower,
for (i) the issuance of letters of credit by Lender or (ii) the issuance by
Lender of a risk participation agreement (a "Risk Participation Agreement")
to a bank acceptable to Lender to induce the bank to issue Bank Letters of
Credit for the account of Borrower (each of (i) and (ii) above, a "Lender
Letter of Credit"). In no event shall any Lender Letter of Credit be issued
to the extent that the issuance of such Lender Letter of Credit would cause
the sum of the Letter of Credit Reserve (after giving effect to such
issuance) plus the outstanding principal balance of the Revolving Loan to
exceed the lesser of (x) the Borrowing Base and (y) the Revolving Loan
Commitment.
(1) Maximum Amount. The aggregate amount of Letter of
Credit Liability with respect to all Lender Letters of Credit outstanding
at any time shall not exceed $8,000,000.
(2) Reimbursement. Borrower shall be irrevocably and
unconditionally obligated forthwith without presentment, demand, protest or
other formalities of any kind, to reimburse Lender for any amounts paid by
Lender with respect to a Lender Letter of Credit including all fees, costs
and expenses paid by Lender to any bank that issues Bank Letters of Credit.
Borrower hereby authorizes and directs Lender, at Lender's option, to debit
Borrower's account (by increasing the principal balance of the Revolving
Loan) in the amount of any payment made by Lender with respect to any Lender
Letter of Credit. All amounts paid with respect to any Lender Letter of
Credit that are not immediately repaid by Borrower with the proceeds of a
Revolving Loan or otherwise shall bear interest at the Default Rate
applicable to Revolving Loans.
(3) Conditions of Issuance. In addition to all other
terms and conditions set forth in this Agreement, the issuance of any Lender
Letter of Credit shall be
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subject to the conditions precedent that the letter of credit which Borrower
requests be in such form, be for such amount, contain such terms and support
such transactions as are reasonably satisfactory to Lender. The expiration
date of each Lender Letter of Credit shall be on a date which is at least
thirty (30) days prior to the Termination Date.
(4) Request for Letters of Credit. Borrower shall
give Lender at least two (2) Business Days (or such lesser time as
acceptable to Lender) prior notice specifying the date a Lender Letter of
Credit is to be issued, identifying the beneficiary and describing the nature
of the transactions proposed to be supported thereby. The notice shall be
accompanied by the form of the letter of credit being requested.
(F) Other Letter of Credit Provisions.
(1) Obligations Absolute. The obligation of Borrower
to reimburse Lender for payments made under any Lender Letter of Credit
shall be unconditional and irrevocable and shall be paid strictly in
accordance with the terms of this Agreement under all circumstances including
the following circumstances:
(a) any lack of validity or enforceability of
any Lender Letter of Credit or Bank Letter of Credit or any other agreement;
(b) the existence of any claim, set-off, defense
or other right which Borrower, any of its Affiliates, or Lender, on the one
hand, may at any time have against any beneficiary or transferee of any
Lender Letter of Credit or Bank Letter of Credit (or any Persons for whom any
such transferee may be acting), Lender or any other Person, on the other hand,
whether in connection with this Agreement, the transactions contemplated
herein or any unrelated transaction (including any underlying transaction
between Borrower or any of its Affiliates and the beneficiary of the letter
of credit);
(c) any draft, demand, certificate or any
other document presented under any Lender Letter of Credit or Bank Letter of
Credit which is forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect;
(d) payment under any Lender Letter of Credit or
Bank Letter of Credit against presentation of a demand, draft or certificate
or other document which does not comply with the terms of such Lender Letter
of Credit provided that, in the case of any payment by Lender under any
Lender Letter of Credit, Lender has not acted with gross negligence or
willful misconduct (as determined by a court of competent jurisdiction) in
determining that the demand for payment under such Lender Letter of Credit
complies on its face with any applicable requirements for a demand for payment
under such Lender Letter of Credit;
(e) any other circumstance or happening
whatsoever, which is similar to any of the foregoing; or
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(f) the fact that a Default or an Event of Default
shall have occurred and be continuing.
(2) Nature of Duties. As between Lender and Borrower,
Borrower assumes all risks of the acts and omissions of, or misuse of any
Lender Letter of Credit or Bank Letter of Credit by the beneficiary thereof.
In furtherance and not in limitation of the foregoing, Lender shall not be
responsible: (a) for the form, validity, sufficiency, accuracy, genuineness
or legal effect of any document by any party in connection with the
application for and issuance of any Lender Letter of Credit or Bank Letter of
Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; provided that, in the case of
any payment by Lender under any Lender Letter of Credit, Lender has not
acted with gross negligence or willful misconduct (as determined by a
court of competent jurisdiction) in determining that the demand for
payment under such Lender Letter of Credit complies on its face with any
applicable requirements for a demand for payment thereunder; (b) for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Lender Letter of Credit or Bank Letter
of Credit or the rights or benefits thereunder or proceeds thereof, in whole
or in part, which may prove to be invalid or ineffective for any reason;
provided that, in the case of any payment by Lender under any Lender Letter of
Credit, Lender has not acted with gross negligence or willful misconduct (as
determined by a court of competent jurisdiction) in determining that the
demand for payment under such Lender Letter of Credit complies on its face
with any applicable requirements for a demand for payment thereunder; (c)
for failure of the beneficiary of any Lender Letter of Credit or Bank
Letter of Credit to comply fully with conditions required in order to
demand payment thereunder; provided that, in the case of any payment by
Lender under any Lender Letter of Credit, Lender has not acted with gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction) in determining that the demand for payment under such Lender
Letter of Credit complies on its face with any applicable requirements for a
demand for payment thereunder; (d) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (e) for errors in
interpretation of technical terms; (f) for any loss or delay in the
transmission or otherwise of any document required in order to make a payment
under any Lender Letter of Credit or Bank Letter of Credit; (g) for the credit
of the proceeds of any drawing under any Lender Letter of Credit or Bank
Letter of Credit; and (h) for any consequences arising from causes beyond
the control of Lender. None of the above shall affect, impair, or prevent the
vesting of any of Lender's rights or powers hereunder.
(3) Liability. In furtherance and extension of
and not in limitation of, the specific provisions herein above set forth,
any action taken or omitted by Lender under or in connection with any Lender
Letter of Credit, if taken or omitted in good faith, shall not put Lender
under any resulting liability to Borrower.
(G) Ledger Debt and Chargebacks. To the extent Borrower
does not pay (a) any Ledger Debt within five days (5) from its due date,
unless Lender has been notified that Borrower has alleged a dispute with
respect thereto or (b) any Chargeback Interest or (c) Ledger Debt Interest,
upon demand by ▇▇▇▇▇▇ to Lender, Lender may, in its sole discretion, pay an
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amount equal to the amount of such Ledger Debt, Ledger Debt Interest or
Chargeback Interest to ▇▇▇▇▇▇ or establish an additional reserve against the
Borrowing Base or the Maximum Loan Amount for any such unpaid Ledger Debt,
Ledger Debt Interest or Chargeback Interest. Borrower hereby authorizes and
directs Lender, at Lender's option, to debit Borrower's account (by
increasing the principal balance of the Revolving Loan) for any Ledger Debt,
Ledger Debt Interest or Chargeback Interest then due and payable, or to
establish a reserve against the Borrowing Base or the Maximum Loan Amount for
any unpaid Ledger Debt, Ledger Debt Interest or Chargeback Interest, all as
set forth on ▇▇▇▇▇▇'▇ books and records. Such paid amounts shall, in the
absence of manifest or demonstrable error, be final and conclusive and binding
on all of the parties hereto. All amounts paid by Lender to ▇▇▇▇▇▇ with
respect to any Ledger Debt, Ledger Debt Interest or Chargeback Interest
that are not immediately repaid by Borrower with the proceeds of a Revolving
Loan or otherwise shall bear interest at the Default Rate.
2.2 Interest
(A) Rate of Interest. The Loans and all other
Obligations shall bear interest from the date such Loans are made or such
other Obligations become due to the date paid at a rate per annum equal to
the Base Rate. After the occurrence and during the continuance of an Event
of Default, the Loans and all other Obligations shall, at Lender's option,
bear interest at a rate per annum equal to two percent (2.0%) plus the Base
Rate (the "Default Rate").
(B) Computation and Payment of Interest. Interest on
the Loans and all other Obligations shall be computed on the daily principal
balance on the basis of a 360 day year for the actual number of days
elapsed in the period during which it accrues and shall be payable monthly in
arrears on the first day of each month. Any publicly announced change in the
Base Rate shall result in an adjustment to the Base Rate on the day such
change takes effect.
(C) Interest Laws. Notwithstanding any provision to the
contrary contained in this Agreement or any other Loan Document, Borrower
shall not be required to pay, and Lender shall not be permitted to collect,
any amount of interest in excess of the maximum amount of interest permitted
by law ("Excess Interest"). If any Excess Interest is provided for or
determined by a court of competent jurisdiction to have been provided for in
this Agreement or in any other Loan Document, then in such event: (1) the
provisions of this subsection shall govern and control; (2) neither Borrower
nor any Loan Party shall be obligated to pay any Excess Interest; (3) any
Excess Interest that Lender may have received hereunder shall be, at Lender's
option, (a) applied as a credit against the outstanding principal balance of
the Obligations or accrued and unpaid interest (not to exceed the maximum
amount permitted by law), (b) refunded to the payor thereof, or (c) any
combination of the foregoing; (4) the interest rate(s) provided for herein
shall be automatically reduced to the maximum lawful rate allowed from time to
time under applicable law (the "Maximum Rate"), and this Agreement and the
other Loan Documents shall be deemed to have been and shall be, reformed and
modified to reflect such reduction; and (5) neither Borrower nor any Loan
Party shall have any action against Lender for any damages arising out of
the payment or collection of any Excess Interest. Notwithstanding the
foregoing, if for any period of time interest on any Obligations is
calculated
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at the Maximum Rate rather than the applicable rate under this Agreement, and
thereafter such applicable rate becomes less than the Maximum Rate, the rate
of interest payable on such Obligations shall remain at the Maximum Rate until
Lender shall have received the amount of interest which Lender would have
received during such period on such Obligations had the rate of interest not
been limited to the Maximum Rate during such period.
2.3 Fees.
(A) Closing Fee. Borrower shall pay to Lender on the
Closing Date a closing fee in the amount of $25,000, which shall be fully
earned and non-refundable on such Closing Date.
(B) Letter of Credit Fees. Borrower shall reimburse
Lender for any and all fees and expenses, if any, paid by Lender to the
issuer of Bank Letters of Credit relating to Bank Letters of Credit.
(C) Prepayment Fees. If Borrower voluntarily prepays
the Obligations in full (other than voluntary prepayments of the Revolving
Loan which do not terminate the Revolving Loan Commitment) prior to the
Termination Date, Borrower at the time of prepayment shall pay to Lender, as
compensation for the costs of being prepared to make funds available to
Borrower under this Agreement, and not as a penalty, an amount equal to
$75,000.00 upon a prepayment during the first Loan Year and $37,500.00 upon a
prepayment during the second Loan Year.
(D) Audit and Appraisal Fees. Borrower agrees to pay
Lender an audit fee for each inspection equal to $500.00 per auditor per day
or any portion thereof, excluding all full days spent by Lender traveling to
or from Borrower's locations, and costs for appraisals required under
subsection 5.1(I), together in each case with out-of-pocket expenses
(provided, that unless a Default or Event of Default has occurred and is
continuing, such fees, costs and expenses shall not exceed $7,500 in any Loan
Year).
(E) Other Fees and Expenses. Borrower shall pay to
Lender, for its own account, all charges for returned items and all other
bank charges incurred by Lender, as well as Lender's standard wire transfer
charges for each wire transfer made under this Agreement.
2.4 Payments and Prepayments.
(A) Manner and Time of Payment. In its sole discretion,
Lender may charge interest and other amounts payable hereunder to the
Revolving Loan, all as set forth on Lender's books and records. If Lender
elects to ▇▇▇▇ Borrower for any amount due hereunder, such amount shall be
immediately due and payable with interest thereon as provided herein. All
payments made by Borrower with respect to the Obligations shall be made
without deduction, defense, setoff or counterclaim. All payments to
Lender hereunder shall, unless otherwise directed by Lender, be made in
accordance with subsection 5.6. Proceeds remitted to any Lender's Depository
Account shall be credited to the Obligations on the first Business Day
following the day such proceeds were received in Lender's Depository Account;
provided,
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however, for the purpose of calculating interest on the Obligations, such
funds shall be deemed received on the date such funds were received in such
account. Proceeds remitted to Lender's Account by wire transfer shall be
credited to the Obligations on the Business Day received. To compensate
Lender for collection clearance on all checks and other payments remitted
with respect to Accounts, Borrower shall pay to Lender each month, in
addition to interest, a collection clearance charge computed as follows:
(a) total collections on Accounts for the month, multiplied by (b) two (2)
days, multiplied by (c) the Base Rate, divided by (d) two hundred fifty (250)
days.
(B) Mandatory Prepayments.
(1) Overadvance. At any time that the principal
balance of the Revolving Loan exceeds the Maximum Revolving Loan Amount,
Borrower shall, upon demand by Lender, immediately repay the Revolving Loan
to the extent necessary to reduce the principal balance to an amount that is
equal to or less than the Maximum Revolving Loan Amount.
(2) Proceeds of Asset Dispositions. Immediately
upon receipt by Borrower or any of its Subsidiaries of proceeds of any Asset
Disposition (in one or a series of related transactions), which proceeds
exceed $10,000 (it being understood that if the proceeds exceed $10,000, the
entire amount and not just the portion above $10,000 shall be subject to this
subsection 2.4(B)(2)), Borrower shall prepay the Obligations in an amount equal
to such proceeds.
(C) Voluntary Prepayments and Repayments. Borrower
may, at any time upon not less than three (3) Business Days' prior notice to
Lender and payment of any fee required under subsection 2.3(C) terminate
the Revolving Loan Commitment. Upon termination of the Revolving Loan
Commitment, Borrower shall cause Lender to be released from all liability
under any Lender Letters of Credit, or, at Lender's option, Borrower will
deposit cash collateral with Lender in an amount equal to one hundred five
percent (105%) of the Letter of Credit Liability that will remain outstanding
after prepayment or repayment.
(D) Payments on Business Days. Whenever any payment to
be made hereunder shall be stated to be due on a day that is not a Business
Day, the payment may be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the amount of
interest or fees due hereunder.
2.5 Term of this Agreement. This Agreement shall be effective
until the second anniversary of the Closing Date (the "Termination Date").
The Commitments shall (unless earlier terminated) terminate upon the earlier of
(i) the occurrence of an event specified in subsection 8.3 or (ii) the
Termination Date. Upon termination in accordance with subsection 8.3 or on
the Termination Date, all Obligations shall become immediately due and
payable without notice or demand. Notwithstanding any termination, until
all Obligations (other than contingent indemnification obligations as to
which no claim has been made) have been fully paid and satisfied, Lender shall
be entitled to retain security interests in and liens upon all Collateral.
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Even after payment of all Obligations hereunder, Borrower's obligation to
indemnify Lender in accordance with the terms hereof shall continue.
2.6 Statements. Lender shall render a monthly statement of
account to Borrower within twenty (20) days after the end of each month.
Such statement of account shall constitute an account stated unless Borrower
makes written objection thereto within thirty (30) days from the date such
statement is mailed to Borrower. Borrower promises to pay all of its
Obligations as such amounts become due or are declared due pursuant to the
terms of this Agreement.
2.7 Grant of Security Interest. To secure the payment and
performance of the Obligations, including all renewals, extensions,
restructurings and refinancings of any or all of the Obligations, Borrower
hereby grants to Lender a continuing security interest, lien and mortgage in
and to all right, title and interest of Borrower in the following property of
Borrower, whether now owned or existing or hereafter acquired or arising and
regardless of where located (all being collectively referred to as the
"Collateral"): (A) Accounts, and all guaranties and security therefor, and
all goods and rights represented thereby or arising therefrom including the
right of stoppage in transit, replevin and reclamation; (B) Inventory; (C)
general intangibles (as defined in the UCC) (including rights to payments
under the Assignment of Monies Agreement); (D) documents (as defined in the
UCC) or other receipts covering, evidencing or representing goods; (E)
instruments (as defined in the UCC); (F) chattel paper (as defined in the
UCC); (G) Equipment; (H) Intellectual Property, including that listed on
Schedule 4.14; (I) all deposit accounts of Borrower maintained with any bank
or financial institution; (J) all cash and other monies and property of
Borrower in the possession or under the control of Lender or any
participant; (K) all books, records, ledger cards, files, correspondence,
computer programs, tapes, disks and related data processing software that at
any time evidence or contain information relating to any of the property
described above or are otherwise necessary or helpful in the collection
thereof or realization thereon; and (L) proceeds of all or any of the
property described above, including, without limitation, the proceeds of any
insurance policies covering any of the above described property.
2.8 Capital Adequacy and Other Adjustments. In the event Lender
shall have determined that the adoption after the date hereof of any law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar
requirements or compliance by Lender or any corporation controlling Lender
with any request or directive regarding capital adequacy, reserve requirements
or similar requirements (whether or not having the force of law and whether
or not failure to comply therewith would be unlawful) from any central bank
or governmental agency or body having jurisdiction does or shall have the
effect of increasing the amount of capital, reserves or other funds required
to be maintained by Lender or any corporation controlling Lender and thereby
reducing the rate of return on Lender's or such corporation's capital as a
consequence of its obligations hereunder, then Borrower shall from time to
time within fifteen (15) days after notice and demand from Lender (together
with the certificate referred to in the next sentence) pay to Lender
additional amounts sufficient to compensate such Lender for such reduction.
A certificate as to the amount of such cost and showing the basis of the
computation of such cost
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submitted by Lender to Borrower shall, absent manifest error, be final,
conclusive and binding for all purposes.
2.9 Taxes.
(A) No Deductions. Any and all payments or
reimbursements made hereunder shall be made free and clear of and without
deduction for any and all taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto; excluding, however,
the following: taxes imposed on the net income of Lender by the
jurisdiction under the laws of which Lender is organized or doing business or
any political subdivision thereof and taxes imposed on its net income by the
jurisdiction of Lender's applicable lending office or any political
subdivision thereof (all such taxes, levies, imposts, deductions, charges
or withholdings and all liabilities with respect thereto excluding such
taxes imposed on net income, herein "Tax Liabilities"). If Borrower shall
be required by law to deduct any such Tax Liabilities from or in respect of
any sum payable hereunder to Lender, then the sum payable hereunder shall be
increased as may be necessary so that, after making all required deductions,
Lender receives an amount equal to the sum it would have received had no such
deductions been made.
(B) Changes in Tax Laws. In the event that,
subsequent to the Closing Date, (i) any changes in any existing law,
regulation, treaty or directive or in the interpretation or application
thereof, (ii) any new law, regulation, treaty or directive enacted or any
interpretation or application thereof, or (iii) compliance by Lender with any
request or directive (whether or not having the force of law) from any
governmental authority, agency or instrumentality:
(1) does or shall subject Lender to any tax of
any kind whatsoever with respect to this Agreement, the other Loan Documents or
any Loans made or Lender Letters of Credit issued hereunder, or change the
basis of taxation of payments to Lender of principal, fees, interest or any
other amount payable hereunder (except for net income taxes, or franchise
taxes imposed in lieu of net income taxes, imposed generally by federal,
state or local taxing authorities with respect to interest or commitment or
other fees payable hereunder or changes in the rate of tax on the overall net
income of Lender); or
(2) does or shall impose on Lender any other
condition or increased cost in connection with the transactions contemplated
hereby or participations herein; and the result of any of the foregoing is
to increase the cost to Lender of issuing any Lender Letter of Credit or
making or continuing any Loan hereunder, as the case may be, or to reduce
any amount receivable hereunder, then, in any such case, Borrower shall
promptly pay to Lender, upon its demand, any additional amounts necessary
to compensate Lender, on an after-tax basis, for such additional cost or
reduced amount receivable, as determined by Lender with respect to this
Agreement or the other Loan Documents. If Lender becomes entitled to claim
any additional amounts pursuant to this subsection, it shall promptly notify
Borrower of the event by reason of which Lender has become so entitled. A
certificate as to any additional amounts payable pursuant to the foregoing
sentence submitted by Lender to Borrower shall, absent manifest error, be
final, conclusive and binding for all purposes.
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SECTION 3 CONDITIONS TO LOANS
3.1 Conditions to Loans. The obligations of Lender to make Loans
and to issue Lender Letters of Credit on the Closing Date and on each Funding
Date are subject to satisfaction of all of the conditions set forth below.
(A) Closing Deliveries. Lender shall have received,
in form and substance satisfactory to Lender, all documents, instruments
and information identified on Schedule 3.1(A) and all other agreements,
notes, certificates, orders, authorizations, financing statements, mortgages
and other documents which Lender may at any time reasonably request.
Borrower and ▇▇▇▇▇▇ shall have executed and delivered an amendment to the
Inter-Credit Agreement on terms and conditions acceptable to ▇▇▇▇▇▇.
(B) Security Interests. Lender shall have received
satisfactory evidence that all security interests and liens granted to Lender
pursuant to this Agreement or the other Loan Documents have been duly
perfected and constitute first priority liens on the Collateral, subject only
to Permitted Encumbrances.
(C) Closing Date Availability. After giving effect to
the consummation of the transactions contemplated hereunder on the Closing
Date and the payment by Borrower of all costs, fees and expenses relating
thereto, the Maximum Revolving Loan Amount on the Closing Date shall exceed
the principal balance of the Revolving Loans plus the Letter of Credit Reserve
by at least $1,000,000.
(D) Representations and Warranties. The representations
and warranties contained herein and in the Loan Documents shall be true,
correct and complete in all material respects on and as of that Funding Date
to the same extent as though made on and as of that date, except for any
representation or warranty limited by its terms to a specific date and taking
into account any amendments to the Schedules or Exhibits as a result of any
disclosures made by Borrower to Lender after the Closing Date and approved by
Lender.
(E) Fees. With respect to Loans or Lender Letters of
Credit to be made or issued on the Closing Date, Borrower shall have paid the
fees payable on the Closing Date referred to in subsection 2.3(A).
(F) No Default. No event shall have occurred and be
continuing or would result from the consummation of the requested borrowing
or notice requesting issuance of a Lender Letter of Credit that would
constitute an Event of Default or a Default.
(G) Performance of Agreements. Each Loan Party shall
have performed in all material respects all agreements and satisfied all
conditions which any Loan Document provides shall be performed by it on or
before that Funding Date.
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(H) No Prohibition. No order, judgment or decree of
any court, arbitrator or governmental authority shall purport to enjoin or
restrain Lender from making any Loans or issuing any Lender Letters of Credit.
(I) No Litigation. There shall not be pending or, to
the knowledge of Borrower, threatened, any action, charge, claim, demand,
suit, proceeding, petition, governmental investigation or arbitration by,
against or affecting any Loan Party or any of its Subsidiaries or any
property of any Loan Party or any of its Subsidiaries that has not been
disclosed by Borrower in writing, and there shall have occurred no
development in any such action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration that, in the opinion of
Lender, would reasonably be expected to have a Material Adverse Effect.
(J) No Material Adverse Change. There shall not have
occurred since December 1, 1995 any event or condition which, in the sole
determination of Lender, constitutes or could reasonably be expected to
constitute a Material Adverse Effect.
(K) Solvency. Lender shall have received, in form and
substance acceptable to it, evidence that Borrower's representation and
warranty in subsection 4.16 is true as of the Closing Date.
(L) Audit. Lender shall have completed its audit of
Borrower's business operations and Lender shall have determined that the
results thereof are acceptable.
(M) Consents. Lender shall have received, in form and
substance acceptable to it, all consents and approvals required for Borrower to
enter into and perform its obligations under the Loan Documents and the
Inter-Credit Agreement, including without limitation agreements from each of
Borrower's landlords permitting Lender access to the Inventory located in any
leased location or warehouse.
SECTION 4 BORROWER'S REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement, and to make Loans
and to issue Lender Letters of Credit, Borrower represents and warrants to
Lender that the following statements are and will be true, correct and
complete:
4.1 Organization, Powers, Capitalization.
(A) Organization and Powers. Each of the Loan Parties
is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation and qualified to do business in
all states where such qualification is required except where failure to be
so qualified could not be reasonably expected to have a Material Adverse
Effect. Each of the Loan Parties has all requisite corporate power and
authority to own and operate its properties, to carry on its business as
now conducted and proposed to be conducted and to enter into each Facility
Document.
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(B) Capitalization. The authorized capital stock of
each of the Loan Parties is as set forth on Schedule 4.1(B). All issued and
outstanding shares of capital stock of each of the Loan Parties are duly
authorized and validly issued, fully paid, nonassessable, free and clear of
all Liens and such shares were issued in compliance with all applicable state
and federal laws concerning the issuance of securities. The capital stock of
each of the Loan Parties is owned by the stockholders and in the amounts set
forth on Schedule 4.1(B). No shares of the capital stock of any Loan Party,
other than those described above, are issued and outstanding. There are no
preemptive or other outstanding rights, options, warrants, conversion rights
or similar agreements or understandings for the purchase or acquisition from
any Loan Party, of any shares of capital stock or other securities of any such
entity, except as set forth on Schedule 4.1(B).
4.2 Authorization of Borrowing, No Conflict. Borrower has the
corporate power and authority to incur the Obligations and to grant security
interests in the Collateral. On the Closing Date, the execution, delivery
and performance of the Facility Documents by each Loan Party signatory
thereto will have been duly authorized by all necessary corporate and
shareholder action. The execution, delivery and performance by each Loan
Party of each Facility Document to which it is a party and the consummation
of the transactions contemplated by this Agreement and the other Facility
Documents by each Loan Party do not contravene and will not be in
contravention of any applicable law, the corporate charter or bylaws of any
Loan Party or any agreement or order by which any Loan Party or any Loan
Party's property is bound. This Agreement is, and the other Facility
Documents when executed and delivered will be, the legally valid and binding
obligations of the applicable Loan Parties respectively, each enforceable
against the Loan Parties, as applicable, in accordance with their respective
terms.
4.3 Financial Condition. All financial statements concerning
Borrower and its Subsidiaries which have been or will hereafter be furnished
by Borrower and its Subsidiaries to Lender pursuant to this Agreement have
been or will be prepared in accordance with GAAP consistently applied
throughout the periods involved (except as disclosed therein) and do or will
present fairly the financial condition of the corporations covered thereby as
at the dates thereof and the results of their operations for the periods then
ended. The Projections delivered and to be delivered have been and will be
prepared by Borrower in light of the past operations of the business of
Borrower and its Subsidiaries, and such Projections represent and will
represent the good faith estimate of Borrower and its senior management
concerning the most probable course of its business as of the date such
Projections are prepared and delivered.
4.4 Indebtedness and Liabilities. As of the Closing Date,
neither Borrower nor any of its Subsidiaries has (a) any Indebtedness except
as reflected on the most recent financial statements delivered to Lender; or
(b) any Liabilities other than as reflected on the most recent financial
statements delivered to Lender or as incurred in the ordinary course of
business following the date of the most recent financial statements
delivered to Lender.
4.5 Account Warranties. Borrower represents, warrants and
covenants as to each Account that, at the time of its creation, the Account
is a valid, bona fide account, representing an undisputed indebtedness
incurred by the named account debtor for goods actually sold and delivered or
for services completely rendered; there are no setoffs, offsets or
counterclaims,
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genuine or otherwise, against the Account; the Account does not represent a
sale to an Affiliate or a consignment, sale or return or a ▇▇▇▇ and hold
transaction; no agreement exists permitting any deduction or discount (other
than the discount or allowance stated on the invoice or, as to a specific
customer, as set forth on Schedule 4.5); Borrower is the lawful owner of the
Account and has the right to assign the same to Lender; the Account is free
of all security interests, liens and encumbrances other than those in favor of
Lender and in favor of ▇▇▇▇▇▇, and the Account is due and payable in
accordance with its terms.
4.6 Names. Schedule 4.6 sets forth all names, tradenames,
fictitious names and business names under which Borrower currently conducts
business or has at any time during the past five years conducted business.
4.7 Locations; FEIN. Schedule 4.7 sets forth the location of
Borrower's principal place of business, the location of Borrower's books and
records, the location of all other offices of Borrower and all locations of
Eligible Inventory, and such locations are Borrower's sole locations for its
business and the Collateral, other than Inventory in an amount not in
excess of $4,000,000 at any time located with contractors or subcontractors.
Borrower's federal employer identification number is set forth on the signature
page hereof.
4.8 Title to Properties; Liens. Borrower and each of its
Subsidiaries has good, sufficient and legal title, subject to Permitted
Encumbrances, to all its respective material properties and assets. Borrower
owns no real property. Except for Permitted Encumbrances, all such
properties and assets are free and clear of Liens. To the best knowledge of
Borrower after due inquiry, there are no actual, threatened or alleged
defaults with respect to any leases of real property under which Borrower or
any of its Subsidiaries is lessee or lessor which would have a Material Adverse
Effect.
4.9 Litigation; Adverse Facts. There are no judgments
outstanding against any Loan Party or affecting any property of any Loan
Party nor is there any action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration now pending or, to the
best knowledge of Borrower after due inquiry, threatened against or affecting
any Loan Party or any property of any Loan Party which could reasonably be
expected to result in any Material Adverse Effect. No Loan Party has
received any opinion or memorandum or legal advice from legal counsel to the
effect that it is exposed to any liability which could reasonably be expected
to result in any Material Adverse Effect.
4.10 Payment of Taxes. All material tax returns and reports of
Borrower and each of its Subsidiaries required to be filed by any of them
have been timely filed, and all taxes, assessments, fees and other
governmental charges upon such Persons and upon their respective properties,
assets, income and franchises which are shown on such returns as due and
payable have been paid when due and payable. As of the Closing Date, none of
the United States income tax returns of Borrower or any of its Subsidiaries
are under audit. No tax liens have been filed and no claims (except as
otherwise permitted by Section 5.9) are being asserted with respect to any
such taxes. The charges, accruals and reserves on the books of Borrower and
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each of its Subsidiaries in respect of any taxes or other governmental charges
are in accordance with GAAP.
4.11 Performance of Agreements. None of the Loan Parties and
none of their respective Subsidiaries is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any contractual obligation of any such Person, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default.
4.12 Employee Benefit Plans. Borrower, each of its Subsidiaries
and each ERISA Affiliate is in compliance in all material respects with all
applicable provisions of ERISA, the IRC and all other applicable laws and the
regulations and interpretations thereof with respect to all Employee Benefit
Plans. No material liability has been incurred by Borrower, any of its
Subsidiaries or any ERISA Affiliate which remains unsatisfied for any funding
obligation, taxes or penalties with respect to any Employee Benefit Plan.
4.13 Intellectual Property. Borrower and each of its Subsidiaries
owns, is licensed to use or otherwise has the right to use, all Intellectual
Property used in or necessary for the conduct of its business as currently
conducted, and all such Intellectual Property is identified on Schedule 4.13.
All licenses of Intellectual Property material to Borrower's business are in
full force and effect, and, to the knowledge of Borrower, no party to such
licenses is in default thereunder.
4.14 Broker's Fees. No broker's or finder's fee or commission
will be payable with respect to any of the transactions contemplated hereby.
4.15 Environmental Compliance. Each Loan Party has been and is
currently in compliance with all applicable Environmental Laws, including
obtaining and maintaining in effect all permits, licenses or other
authorizations required by applicable Environmental Laws. There are no
claims, liabilities, investigations, litigation, administrative proceedings,
whether pending or threatened, or judgments or orders relating to any
Hazardous Materials asserted or threatened against any Loan Party or relating
to any real property currently or formerly owned, leased or operated by any
Loan Party.
4.16 Solvency. As of and from and after the date of this
Agreement, Borrower: (a) owns and will own assets the fair salable value of
which are (i) greater than the total amount of its liabilities (including
contingent liabilities) and (ii) greater than the amount that will be required
to pay the probable liabilities of Borrower as they mature; (b) has capital
that is not unreasonably small in relation to its business as presently
conducted or any contemplated or undertaken transaction; and (c) does not
intend to incur and does not believe that it will incur debts beyond its
ability to pay such debts as they become due. There is no material fact
known to Borrower that has or could have a Material Adverse Effect and that
has not been fully disclosed herein or in such other documents, certificates
and statements furnished to Lender for use in connection with the transactions
contemplated hereby.
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4.17 Disclosure. No representation or warranty of Borrower, any
of its Subsidiaries or any other Loan Party contained in this Agreement, the
financial statements, the other Facility Documents, or any other document,
certificate or written statement furnished to Lender or ▇▇▇▇▇▇ by or on behalf
of any such Person for use in connection with the Facility Documents contains
any untrue statement of a material fact or omitted, omits or will omit to
state a material fact necessary in order to make the statements contained
herein or therein not misleading in light of the circumstances in which the
same were made. The Projections and pro forma financial information
contained in such materials are based upon good faith estimates and
assumptions believed by such Persons to be reasonable at the time made, it
being recognized by Lender that such projections as to future events are not
to be viewed as facts and that actual results during the period or periods
covered by any such projections may differ from the projected results.
There is no material fact known to Borrower that has had or will have a
Material Adverse Effect and that has not been disclosed herein or in such
other documents, certificates and statements furnished to Lender for use in
connection with the transactions contemplated hereby.
4.18 Insurance. Borrower and each of its Subsidiaries maintains
adequate insurance policies for public liability, property damage for its
business and properties, product liability, and business interruption, no
notice of cancellation has been received with respect to such policies and
Borrower and each of its Subsidiaries is in compliance with all conditions
contained in such policies.
4.19 Compliance with Laws. Neither Borrower nor any of its
Subsidiaries is in violation of any law, ordinance, rule, regulation, order,
policy, guideline or other requirement of any domestic or foreign
government or any instrumentality or agency thereof, having jurisdiction
over the conduct of its business or the ownership of its properties,
including, without limitation, any violation relating to any use, release,
storage, transport or disposal of any Hazardous Material, which violation
would subject Borrower or any of its Subsidiaries, or any of their respective
officers to criminal liability or have a Material Adverse Effect and no such
violation has been alleged.
4.20 Bank Accounts. Schedule 4.20 sets forth the account
numbers and locations of all bank accounts of Borrower and its
Subsidiaries.
4.21 Subsidiaries. Borrower has no Subsidiaries.
4.22 Employee Matters. Except as set forth on Schedule 4.22, (a)
no Loan Party nor any of such Loan Party's employees is subject to any
collective bargaining agreement, (b) no petition for certification or union
election is pending with respect to the employees of any Loan Party and no
union or collective bargaining unit has sought such certification or
recognition with respect to the employees of any Loan Party and (c) there are
no strikes, slowdowns, work stoppages or controversies pending or, to the best
knowledge of Borrower after due inquiry, threatened between any Loan Party
and its respective employees, other than employee grievances arising in the
ordinary course of business which could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. Except as set
forth on Schedule 4.22, neither Borrower nor any of its Subsidiaries is
subject to an employment contract.
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4.23 Governmental Regulation. None of the Loan Parties is, or
after giving effect to any loan will be, subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act or the Investment
Company Act of 1940 or to any federal or state statute or regulation limiting
its ability to incur indebtedness for borrowed money.
Borrower may, at any time and from time to time and subject
to subsection 5.13, amend any one or more of the Schedules referred in this
Section 4 and any representation or warranty contained herein which refers
to any such Schedule shall from and after the date of any such amendment
refer to such Schedule as so amended; provided, however, that in no event may
the Borrower amend any such Schedule if such amendment would reflect or
evidence a Default or Event of Default.
SECTION 5 AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any of the
Commitments hereunder shall be in effect and until payment in full of all
Obligations and termination of all Lender Letters of Credit, unless Lender
shall otherwise give its prior written consent, Borrower shall perform, and
shall cause each of its Subsidiaries to perform, all covenants in this Section
5 applicable to such Person.
5.1 Financial Statements and Other Reports. Borrower will
maintain, and cause each of its Subsidiaries to maintain, a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in conformity with
GAAP. Borrower will deliver to Lender the financial statements and other
reports described below (which shall be in addition to any reports required
by the Inter-Credit Agreement), and hereby authorizes Lender to deliver any of
the following to ▇▇▇▇▇▇:
(A) Monthly Financials. As soon as available and in
any event within twenty (20) days after the end of each month, Borrower
will deliver (1) the consolidated and consolidating balance sheet of Borrower
and its Subsidiaries as at the end of such month and the related consolidated
and consolidating statements of income and cash flow for such month and for
the period from the beginning of the then current Fiscal Year to the end of
such month; and (2) upon Lender's request, a schedule of outstanding
royalties payable under Borrower's license agreements for Intellectual
Property.
(B) Quarterly Financials. As soon as available and in
any event within forty-five (45) days after the end of each quarter of a
Fiscal Year, Borrower will deliver Borrower's Form 10Q as filed or to be
filed with the Securities and Exchange Commission (or any successor agency).
(C) Year-End Financials. As soon as available and in any
event within ninety (90) days after the end of each Fiscal Year, Borrower will
deliver: (1) the consolidated balance sheet of Borrower and its
Subsidiaries as at the end of such year and the related consolidated
statements of income, stockholders' equity and cash flow for such Fiscal Year;
(2) a schedule
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of the outstanding Indebtedness of Borrower and its Subsidiaries describing in
reasonable detail each such debt issue or loan outstanding and the principal
amount and amount of accrued and unpaid interest with respect to each such
debt issue or loan; and (3) a report with respect to the financial statements
from a firm of independent certified public accountants selected by Borrower,
and acceptable to Lender, which report shall be unqualified as to going
concern and scope of audit of Borrower and its Subsidiaries and shall
state that (a) such consolidated financial statements present fairly the
consolidated financial position of Borrower and its Subsidiaries as at the
dates indicated and the results of their operations and cash flow for the
periods indicated in conformity with GAAP applied on a basis consistent with
prior years and (b) that the examination by such accountants in connection
with such consolidated financial statements has been made in accordance
with generally accepted auditing standards ; and (4) copies of the
consolidating financial statements of Borrower and its Subsidiaries,
including (a) consolidating balance sheets of Borrower and its Subsidiaries as
at the end of such Fiscal Year showing intercompany eliminations, if any and
(b) related consolidating statements of earnings of Borrower and its
Subsidiaries showing intercompany eliminations, if any.
(D) Accountants' Certification and Reports. Together
with each delivery of consolidated financial statements of Borrower and its
Subsidiaries pursuant to subsection 5.1(C), Borrower will deliver a written
statement by its independent certified public accountants (a) stating that
the examination has included a review of the terms of this Agreement as
same relate to accounting matters and (b) stating whether, in connection with
the examination, any condition or event that constitutes a Default or an
Event of Default has come to their attention and, if such a condition or
event has come to their attention, specifying the nature and period of
existence thereof. Promptly upon receipt thereof, Borrower will deliver
copies of all significant reports submitted to Borrower by independent public
accountants in connection with each annual, interim or special audit of the
financial statements of Borrower made by such accountants, including the
comment letter submitted by such accountants to management in connection with
their annual audit.
(E) Compliance Certificate. Together with the delivery
of each set of financial statements referenced in subparts (A), (B) and (C)
of this subsection 5.1, Borrower will deliver to Lender a Compliance
Certificate, together with copies of the calculations and work-up employed to
determine Borrower's compliance or noncompliance with the financial covenants
set forth in Section 6.
(F) Borrowing Base Certificates. On the first
Business Day of each week and on each day on which Borrower makes a
borrowing hereunder, Borrower shall deliver to Lender a Borrowing Base
Certificate updated to reflect the most recent sales and collections of
Borrower since the last Borrowing Base Certificate.
(G) Reconciliation Reports, Inventory Reports and
Listings and Agings. Borrower will deliver to Lender, the reports
described on Exhibit C attached hereto, within the periods set forth on
such Exhibit. All such reports shall be in form and substance
satisfactory
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to Lender.
(H) Management Report. Together with each delivery of
financial statements of Borrower and its Subsidiaries pursuant to
subdivisions (A), (B) and (C) of this subsection 5.1, Borrower will deliver a
management report: (1) describing the operations and financial condition of
Borrower and its Subsidiaries for the month then ended and the portion of the
current Fiscal Year then elapsed (or for the Fiscal Year then ended in the
case of year-end financials); (2) setting forth in comparative form the
corresponding figures for the corresponding periods of the previous Fiscal
Year and the corresponding figures from the most recent Projections for the
current Fiscal Year delivered to Lender pursuant to 5.1(P); and (3)
discussing the reasons for any significant variations from Borrower's
business plan and Projections. The information above shall be presented in
reasonable detail and shall be certified by the chief financial officer of
Borrower to the effect that such information fairly presents the results of
operations and financial condition of Borrower and its Subsidiaries as at the
dates and for the periods indicated.
(I) Appraisals. From time to time, upon the request of
Lender, Borrower will obtain and deliver to Lender, at Borrower's expense,
appraisal reports in form and substance and from appraisers satisfactory to
Lender, stating the then current fair market and orderly liquidation values of
all or any portion of the Collateral; provided, however, so long as no Event
of Default is continuing, Lender shall not request an appraisal as to any
particular category of Collateral to be performed more than once every Loan
Year at Borrower's expense, and subject to the limitations on fees payable
under subsection 2.3(D).
(J) Government Notices. Borrower will deliver to
Lender within three (3) Business Days after receipt copies of all notices,
requests, subpoenas, inquiries or other writings received from any
governmental agency concerning any Employee Benefit Plan, the violation or
alleged violation of any Environmental Laws, the storage, use or disposal of
any Hazardous Material, the violation or alleged violation of the Fair Labor
Standards Act or Borrower's payment or non-payment of any taxes including any
tax audit.
(K) Events of Default, etc. Within three (3) Business
Days after any officer of Borrower obtains knowledge of any of the following
events or conditions, Borrower shall deliver a certificate of Borrower's chief
executive officer specifying the nature and period of existence of such
condition or event and what action Borrower has taken, is taking and proposes
to take with respect thereto: (1) any condition or event that constitutes an
Event of Default or Default; (2) any notice of default that any Person has
given to Borrower or any of its Subsidiaries or any other action taken
with respect to a claimed default; (3) any Material Adverse Effect; or
(4) any termination or cancellation of any material license agreement for
Intellectual Property.
(L) Trade Names. Borrower and each of its Subsidiaries
will give Lender at least thirty (30) days advance written notice of any
change of name or of any new trade name or fictitious business name.
Borrower's use of any trade name or fictitious business name will be in
compliance with all laws regarding the use of such names.
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(M) Locations. Borrower will give Lender at least
thirty (30) days advance written notice of any change in Borrower's
principal place of business or any change in the location of its books and
records or the Collateral or of any new location for its books and records or
the Collateral; provided that Borrower shall only be required to update the
information on Borrower's contractors and subcontractors where Inventory
(other than Eligible Inventory) is located on a quarterly basis.
(N) Bank Accounts. Borrower will give Lender notice of
any new bank accounts Borrower intends to establish at least five (5) Business
Days prior to its opening same and shall deliver to Lender such agreements with
respect to such accounts as Lender may require.
(O) Litigation. Within three (3) Business Days after any
officer of Borrower or its Subsidiaries obtains knowledge of (1) the
institution of any action, suit, proceeding, governmental investigation or
arbitration against or directly affecting any Loan Party or any property of
any Loan Party not previously disclosed by Borrower to Lender or (2) any
material development in any action, suit, proceeding, governmental
investigation or arbitration at any time pending against or affecting any
Loan Party or any property of any Loan Party which is reasonably likely to
have a Material Adverse Effect, Borrower will promptly give notice thereof
to Lender and provide such other information as may be reasonably available to
them to enable Lender and its counsel to evaluate such matter.
(P) Projections. As soon as available and in any event
no later than thirty (30) days prior to the end of each Fiscal Year of
Borrower, Borrower will deliver consolidated and consolidating Projections of
Borrower and its Subsidiaries for the forthcoming Fiscal Year, month by month.
(Q) Indebtedness Notices. Within three (3) Business
Days after receipt, Borrower shall deliver copies of all notices given or
received by Borrower and any of its Subsidiaries with respect to
noncompliance with any material term or condition related to any
Indebtedness, and shall promptly notify Lender of any potential or actual event
of default with respect to any Indebtedness.
(R) Landlord Notices. Borrower will deliver copies of
any notices received from any landlord (or give notice of any oral notice)
immediately upon receipt. In addition, Borrower shall deliver to Lender
each month evidence of payment of all amounts due under Borrower's lease at
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ any other leased location
for which Lender has not received a landlord agreement in form and substance
acceptable to Lender.
(S) Other Information. With reasonable promptness,
Borrower will deliver such other information and data with respect to any Loan
Party, any Subsidiary of any Loan Party or the Collateral as Lender may
reasonably request from time to time.
5.2 Access to Accountants. Borrower authorizes Lender to discuss
the financial condition and financial statements of Borrower and its
Subsidiaries with Borrower's independent
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public accountants upon reasonable notice to Borrower of its intention to do
so, and authorizes such accountants to respond to all of Lender's inquiries.
5.3 Inspection. Borrower shall permit Lender and any authorized
representatives designated by Lender to visit and inspect any of the
properties of Borrower or any of its Subsidiaries, including its and their
financial and accounting records, and to make copies and take extracts
therefrom, and to discuss its and their affairs, finances and business with
its and their officers and independent public accountants, at such reasonable
times during normal business hours and as often as may be reasonably
requested. Borrower acknowledges that Lender intends to make such inspections
on at least a quarterly basis.
5.4 Collateral Records. Borrower shall keep full and accurate
books and records relating to the Collateral and shall ▇▇▇▇ such books and
records to indicate Lender's security interests in the Collateral.
5.5 Account Covenants; Verification. Borrower shall, at its
own expense: (a) cause all invoices evidencing Accounts and all copies
thereof to bear a notice that such invoices are payable to the lockboxes
established in accordance with subsection 5.6 and (b) use its best efforts to
assure prompt payment of all amounts due or to become due under the
Accounts. No discounts, credits or allowances will be issued, granted or
allowed by Borrower to customers except as set forth on Schedule 4.5 and no
returns will be accepted without Lender's prior written consent; provided,
that until Lender notifies Borrower to the contrary, Borrower may presume
consent. Borrower will immediately notify Lender in the event that a customer
alleges any dispute or claim with respect to an Account or of any other
circumstances known to Borrower that may impair the validity or
collectibility of an Account. Lender shall have the right, at any time or
times hereafter, to verify the validity, amount or any other matter relating
to an Account, by mail, telephone or in person. After the occurrence of a
Default or an Event of Default, Borrower shall not, without the prior consent
of Lender, adjust, settle or compromise the amount or payment of any Account,
or release wholly or partly any customer or obligor thereof, or allow any
credit or discount thereon. Lender may notify account debtors to make
payments directly to Lender's Depository Account(s) or to Lender's Account;
provided, however, that unless a Default or Event of Default has occurred,
Lender agrees that it will not deliver such notification unless it
determines in its discretion that such action is necessary in order to
protect the value of the Collateral or to ensure collection of the Accounts.
5.6 Collection of Accounts and Payments. Borrower and Lender
shall establish lockboxes and depository accounts ("Lender's Depository
Accounts") with such banks as are acceptable to Lender to which all account
debtors shall directly remit all payments on Accounts and in which Borrower
will immediately deposit all payments made for Inventory or other payments
constituting proceeds of Collateral in the identical form in which such
payment was made, whether by cash or check. Borrower hereby agrees that all
payments received by Lender, whether by cash, check, wire transfer or any
other instrument, made to such Lender Depository Accounts or otherwise
received by Lender and whether on the Accounts or as proceeds of other
Collateral or otherwise will be the sole and exclusive property of Lender.
Borrower, and any of its Affiliates, employees, agents, or other Persons
acting for or in concert with Borrower, shall, acting as trustee for Lender,
receive, as the sole and exclusive property of Lender, any monies, checks,
notes, drafts or any other payments relating to and/or proceeds of Accounts or
other Collateral which come into the possession or under the control of
Borrower or any of Borrower's Affiliates, employees,
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agents or other Persons acting for or in concert with Borrower,and
immediately upon receipt thereof, Borrower or such Persons shall remit the
same or cause the same to be remitted, in kind, to the Lender Depository
Account or to Lender at its address set forth in subsection 9.6 below.
5.7 Endorsement. Borrower hereby constitutes and appoints
Lender and all Persons designated by Lender for that purpose as Borrower's
true and lawful attorney-in-fact, with power to endorse Borrower's name to
any of the items of payment or proceeds described in subsection 5.6 above
and all proceeds of Collateral that come into Lender's possession or under
Lender's control. Both the appointment of Lender as Borrower's attorney
and Lender's rights and powers are coupled with an interest and are
irrevocable until payment in full and complete performance of all of the
Obligations.
5.8 Corporate Existence. Borrower will, and will cause each of
its Subsidiaries to, at all times preserve and keep in full force and effect
its corporate existence and all rights and franchises material to its
business. Borrower will promptly notify Lender of any change in its or its
Subsidiaries' ownership or corporate structure.
5.9 Payment of Taxes. Borrower will, and will cause each of
its Subsidiaries to, pay all taxes, assessments and other governmental
charges imposed upon it or any of its properties or assets or with respect to
any of its franchises, business, income or property before any penalty accrues
thereon provided that no such tax need be paid if Borrower or one of its
Subsidiaries is contesting same in good faith by appropriate proceedings
promptly instituted and diligently conducted and if Borrower or such
Subsidiary has established appropriate reserves as shall be required in
conformity with GAAP.
5.10 Maintenance of Properties; Insurance. Borrower will
maintain or cause to be maintained in good repair, working order and
condition all material properties used in the business of Borrower and its
Subsidiaries and will make or cause to be made all appropriate repairs,
renewals and replacements thereof. Borrower will maintain or cause to be
maintained, with financially sound and reputable insurers, public liability
and property damage insurance with respect to its business and properties and
the business and properties of its Subsidiaries against loss or damage of the
kinds customarily carried or maintained by corporations of established
reputation engaged in similar businesses and in amounts acceptable to
Lender. Borrower shall cause Lender to be named as loss payee on all
insurance policies relating to any Collateral and as additional insured
under all liability policies, in each case pursuant to appropriate
endorsements in form and substance satisfactory to Lender and shall
collaterally assign to Lender as security for the payment of the
Obligations all business interruption insurance of Borrower. Borrower shall
apply any proceeds received from any policies of insurance relating to any
Collateral to the Obligations as set forth in subsection 2.4(B).
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5.11 Compliance with Laws. Borrower will, and will cause each
of its Subsidiaries to, comply with the requirements of all applicable
laws, rules, regulations and orders of any governmental authority as now in
effect and which may be imposed in the future in all jurisdictions in which
Borrower or any of its Subsidiaries is now doing business or may hereafter be
doing business, other than those laws the noncompliance with which would not
have a Material Adverse Effect.
5.12 Further Assurances. Borrower shall, and shall cause each of
its Subsidiaries to, from time to time, execute such guaranties, financing or
continuation statements, documents, security agreements, reports and other
documents or deliver to Lender such instruments, certificates of title or
other documents as Lender at any time may reasonably request to evidence,
perfect or otherwise implement the guaranties and security for repayment of
the Obligations provided for in the Loan Documents. At Lender's request,
Borrower shall cause any Subsidiaries of Borrower promptly to guaranty the
Obligations and to grant to Lender security interests in the real,
personal and mixed property of such Subsidiary to secure the Obligations.
5.13 Collateral Locations. Borrower will keep the Collateral at
the locations specified on Schedule 4.7; provided that Borrower may keep no
more than $4,000,000 of Inventory with contractors or subcontractors. Except
as permitted by the foregoing sentence, with respect to any new location
(which in any event shall be within the continental United States), Borrower
will execute such documents and take such actions as Lender deems necessary
to perfect and protect the security interests of the Lender in the
Collateral prior to the transfer or removal of any Collateral to such new
location, and will obtain from the landlord of any leased location such
estoppel certificates and collateral access agreements as may be requested by
Lender, in form and substance acceptable to Lender.
5.14 Bailees. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of Borrower's agents or processors,
Borrower shall, upon the request of Lender, notify such warehouseman, bailee,
agent or processor of the security interests in favor of Lender created
hereby and shall instruct such Person to hold all such Collateral for
Lender's account subject to Lender's instructions.
5.15 Use of Proceeds and Margin Security. Borrower shall use the
proceeds of all Loans for proper business purposes (as described in the
recitals to this Agreement) consistent with all applicable laws, statutes,
rules and regulations. No portion of the proceeds of any Loan shall be used
by Borrower or any of its Subsidiaries for the purpose of purchasing or
carrying of margin stock within the meaning of Regulation G or Regulation
U, or in any manner that might cause the borrowing or the application of such
proceeds to violate Regulation T or Regulation X or any other regulation of
the Board of Governors of the Federal Reserve System, or to violate the
Exchange Act.
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SECTION 6 FINANCIAL COVENANTS
Borrower covenants and agrees that so long as any of the Commitments
remain in effect and until payment in full of all Obligations and termination
of all Lender Letters of Credit, Borrower shall comply with and shall cause
each of its Subsidiaries to comply with all covenants in this Section 6
applicable to such Person.
6.1 Tangible Net Worth. Borrower shall at all times maintain
Tangible Net Worth of at least $24,500,000.
6.2 Working Capital. Borrower shall at all times maintain Working
Capital of at least $19,000,000.
6.3 Minimum EBITDA. Borrower shall maintain EBITDA of at least
the amounts set forth below for the Determination Period ending on the last day
of each fiscal quarter set forth below.
Minimum EBITDA
Amount for
Determination Period
------------------- --------------------
3/96 $ 300,000
6/96 $1,050,000
9/96 $1,050,000
12/96 $1,750,000
3/97 $2,000,000
6/97 $2,500,000
9/97 $2,500,000
12/97 $3,000,000
6.4 Ratio of Liabilities to Tangible Net Worth. The ratio of
(a) Borrower's Liabilities, on a consolidated basis, to (b) Borrower's
Tangible Net Worth shall at no time be greater than 1.15:1.
6.5 Capital Expenditure Limits. The aggregate amount of all
Capital Expenditures of Borrower and its Subsidiaries (excluding trade-ins
and excluding Capital Expenditures in respect of replacement assets to the
extent funded with casualty insurance proceeds) will not exceed $1,300,000 in
any Fiscal Year. In the event that Borrower or any of its Subsidiaries enters
into a Capital Lease or other contract with respect to fixed assets, for
purposes of
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calculating Capital Expenditures under this subsection only, the amount of the
Capital Lease or contract initially capitalized on Borrower's or any
Subsidiary's balance sheet prepared in accordance with GAAP shall be
considered expended in full on the date that Borrower or any of its
Subsidiaries enters into such Capital Lease or contract.
6.6 Interest Coverage Ratio. Borrower shall not permit the
Interest Coverage Ratio for each Determination Period ending on the last day
of each fiscal quarter set forth below to be less than the ratio set forth
below for such period.
Interest Coverage
Determination Period Ratio for
Fiscal Quarter Ending Date Determination Period
-------------------------- --------------------
3/96 not applicable
6/96 0.5 to 1
9/96 0.5 to 1
12/96 1.0 to 1
3/97 1.5 to 1
6/97 2.0 to 1
9/97 2.0 to 1
12/97 3.0 to 1
6.7 Minimum Net Sales to Inventory Ratio. Borrower shall not
permit at the end of any month the ratio of (a) net sales of Inventory for
the prior twelve (12) month period ending on such date to (b) Inventory as
of such date to be less than 3.3 to 1 through and including December 31, 1996
or less than 3.6 to 1 thereafter.
SECTION 7 NEGATIVE COVENANTS
Borrower covenants and agrees that so long as any of the Commitments
remain in effect and until payment in full of all Obligations and termination
of all Lender Letters of Credit, unless Borrower has received the prior
written consent of Lender, Borrower shall not and will not permit any of its
Subsidiaries to:
7.1 Indebtedness and Liabilities. Directly or indirectly create,
incur, assume, guaranty, or otherwise become or remain directly or indirectly
liable, on a fixed or contingent basis, with respect to any Indebtedness or
any agreement with respect to the factoring or sale of Accounts except: (a)
the Obligations; (b) intercompany Indebtedness, not to exceed $250,000
outstanding at any time in the aggregate, among Borrower and its Subsidiaries;
provided that such Indebtedness is subordinated in right of payment to the
Obligations; (c) liabilities under
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the Inter-Credit Agreement; (d) Indebtedness not to exceed $3,000,000 in the
aggregate at any time outstanding secured by purchase money Liens or under
capital leases. Except for Indebtedness described permitted in the preceding
sentence, Borrower will not, and will not permit any of its Subsidiaries to,
incur any Liabilities except for trade payables and normal accruals in the
ordinary course of business not yet due and payable or with respect to which
Borrower or any of its Subsidiaries is contesting in good faith the amount or
validity thereof by appropriate proceedings and then only to the extent that
Borrower or any of its Subsidiaries has established adequate reserves
therefor, if appropriate under GAAP.
7.2 Guaranties. Except for endorsements of instruments or items
of payment for collection in the ordinary course of business, guaranty,
endorse, or otherwise in any way become or be responsible for any obligations
of any other Person, whether directly or indirectly by agreement to purchase
the indebtedness of any other Person or through the purchase of goods,
supplies or services, or maintenance of working capital or other balance
sheet covenants or conditions, or by way of stock purchase, capital
contribution, advance or loan for the purpose of paying or discharging any
indebtedness or obligation of such other Person or otherwise.
7.3 Transfers, Liens and Related Matters.
(A) Transfers. Sell, assign (by operation of law or
otherwise) or otherwise dispose of, or grant any option with respect to any of
the Collateral or the assets of such Person, except that Borrower and its
Subsidiaries may (i) sell Inventory in the ordinary course of business; (ii)
sell Accounts pursuant to the Inter-Credit Agreement; and (iii) make Asset
Dispositions if all of the following conditions are met: (1) the market
value of assets sold or otherwise disposed of in any single transaction or
series of related transactions does not exceed $500,000 and the aggregate
market value of assets sold or otherwise disposed of in any Fiscal Year does
not exceed $500,000; (2) the consideration received is at least equal to the
fair market value of such assets; (3) the sole consideration received is
cash; (4) the net proceeds of such Asset Disposition are applied as required
by subsection 2.4(B); (5) after giving effect to the sale or other
disposition of the assets included within the Asset Disposition and the
repayment of the Obligations with the proceeds thereof, Borrower is in
compliance on a pro forma basis with the covenants set forth in Section 6
recomputed for the most recently ended month for which information is
available and is in compliance with all other terms and conditions contained
in this Agreement; and (6) no Default or Event of Default shall then exist or
result from such sale or other disposition.
(B) Liens. Except for Permitted Encumbrances, directly
or indirectly create, incur, assume or permit to exist any Lien on or with
respect to any of the Collateral or the assets of such Person or any proceeds,
income or profits therefrom.
(C) No Negative Pledges. Enter into or assume any
agreement (other than the Loan Documents) prohibiting the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired.
▇▇
▇▇▇
▇▇
(▇) No Restrictions on Subsidiary Distributions to
Borrower. Except as provided herein, directly or indirectly create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such
Subsidiary to: (1) pay dividends or make any other distribution on any of
such Subsidiary's capital stock owned by Borrower or any Subsidiary of
Borrower; (2) subject to subordination provisions, pay any indebtedness owed to
Borrower or any other Subsidiary; (3) make loans or advances to Borrower or
any other Subsidiary; or (4) transfer any of its property or assets to Borrower
or any other Subsidiary.
7.4 Investments and Loans. Make or permit to exist investments
in or loans to any other Person, except: (a) Cash Equivalents; and (b) loans
and advances to employees for moving, entertainment, travel and other similar
expenses in the ordinary course of business in an aggregate outstanding
amount not in excess of $200,000 at any time.
7.5 Restricted Junior Payments. Directly or indirectly declare,
order, pay, make or set apart any sum for any Restricted Junior Payment,
except that Subsidiaries of Borrower may make Restricted Junior Payments with
respect to their common stock to the extent necessary to permit Borrower to pay
the Obligations, and to permit Borrower to pay expenses incurred in the
ordinary course of business.
7.6 Restriction on Fundamental Changes. (a) Enter into any
transaction of merger or consolidation; provided, however, that a Subsidiary
may merge into Borrower (so long as Borrower is the surviving corporation)
and any wholly-owned Subsidiary may merge with another wholly-owned
Subsidiary; (b) liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution); (c) convey, sell, lease, sublease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or
any substantial part of its business or assets, or the capital stock of any
of its Subsidiaries, whether now owned or hereafter acquired; or (d) acquire
by purchase or otherwise all or any substantial part of the business or assets
of, or stock or other evidence of beneficial ownership of, any Person.
7.7 [intentionally omitted]
7.8 Transactions with Affiliates. Directly or indirectly, enter
into or permit to exist any transaction (including the purchase, sale or
exchange of property or the rendering of any service) with any Affiliate or
with any officer, director or employee of any Loan Party, except for
transactions in the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and reasonable terms
which are fully disclosed to Lender and which are no less favorable to
Borrower than it would obtain in a comparable arm's length transaction with
an unaffiliated Person.
7.9 Environmental Liabilities. (a) Violate any applicable
Environmental Law; (b) dispose of any Hazardous Materials (except in
accordance with applicable law) into or onto or from, any real property
owned, leased or operated by any Loan Party; or (c) permit any Lien imposed
pursuant to any Environmental Law to be imposed or to remain on any real
property owned, leased or operated by any Loan Party.
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7.10 Conduct of Business. From and after the Closing Date, engage
in any business other than businesses of the type engaged in by Borrower or
such Subsidiary on the Closing Date.
7.11 Compliance with ERISA. Establish any new Employee Benefit
Plan or amend any existing Employee Benefit Plan if the liability or
increased liability resulting from such establishment or amendment is
material. Neither Borrower nor any Subsidiary shall fail to establish,
maintain and operate each Employee Benefit Plan in compliance in all material
respects with the provisions of ERISA, the IRC and all other applicable laws
and the regulations and interpretations thereof.
7.12 Tax Consolidations. File or consent to the filing of any
consolidated income tax return with any Person other than Borrower, or any of
its Subsidiaries.
7.13 Subsidiaries. Establish, create or acquire any new
Subsidiaries.
7.14 Fiscal Year. Change its Fiscal Year.
7.15 Press Release; Public Offering Materials. Disclose the
name of Lender in any press release or in any prospectus, proxy statement
or other materials filed with any governmental entity relating to a public
offering of the capital stock of any Loan Party except as may be required by
law.
7.16 Bank Accounts. Establish any new bank accounts, or amend
or terminate any Blocked Account or lockbox agreement without Lender's
prior written consent.
SECTION 8 DEFAULT, RIGHTS AND REMEDIES
8.1 Event of Default. "Event of Default" shall mean the
occurrence or existence of any one or more of the following:
(A) Payment. Failure to make payment of any of the
Obligations when due and in the case of interest, such failure shall not be
cured within five (5) days of the applicable due date; or
(B) Default in Other Agreements. (1) Failure of Borrower
or any of its Subsidiaries to pay when due any principal or interest on any
Indebtedness or (2) breach or default of Borrower or any of its Subsidiaries
with respect to any Indebtedness (other than the Obligations); if such failure
to pay, breach or default entitles the holder to cause such Indebtedness having
an individual principal amount in excess of $25,000 or having an aggregate
principal amount in excess of $50,000 to become or be declared due prior to its
stated maturity; or
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(C) Breach of Certain Provisions. Failure of Borrower to
perform or comply with any term or condition contained in subsections 5.1(F),
(G), or (J) through (S) inclusive, 5.3, 5.5 or 5.6 or contained in Section 6 or
Section 7; or
(D) Breach of Warranty. Any representation, warranty,
certification or other statement made by any Loan Party in any Loan Document or
in any statement or certificate at any time given by such Person in writing
pursuant or in connection with any Loan Document is false in any material
respect on the date made; or
(E) Other Defaults Under Loan Documents. Borrower or any
other Loan Party defaults in the performance of or compliance with any term
contained in this Agreement or the other Loan Documents and such default is not
remedied or waived within ten (10) days (or solely with respect to subsections
5.1(A), (B), (C), (D), (E), (H) or (I), five (5) days) after receipt by
Borrower of notice from Lender of such default (other than occurrences
described in other provisions of this subsection 8.1 for which a different
grace or cure period is specified or which constitute immediate Events of
Default); or
(F) [intentionally omitted]
(G) Involuntary Bankruptcy; Appointment of Receiver, etc.
(1) A court enters a decree or order for relief with respect to Borrower or any
of its Subsidiaries in an involuntary case under the Bankruptcy Code or any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, which decree or order is not stayed or other similar relief is not
granted under any applicable federal or state law; or (2) the continuance of
any of the following events for sixty (60) days unless dismissed, bonded or
discharged: (a) an involuntary case is commenced against Borrower or any of its
Subsidiaries, under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect; or (b) a decree or order of a court for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Borrower or any of its Subsidiaries,
or over all or a substantial part of their respective property, is entered; or
(c) an interim receiver, trustee or other custodian is appointed without the
consent of Borrower or any of its Subsidiaries, for all or a substantial part
of the property of Borrower or any such Subsidiary; or
(H) Voluntary Bankruptcy; Appointment of Receiver, etc.
(1) An order for relief is entered with respect to Borrower or any of its
Subsidiaries or Borrower or any of its Subsidiaries commences a voluntary case
under the Bankruptcy Code or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an order
for relief in an involuntary case or to the conversion of an involuntary case
to a voluntary case under any such law or consents to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or (2) Borrower or any of its Subsidiaries
makes any assignment for the benefit of creditors; or (3) the board of
directors of Borrower or any of its Subsidiaries adopts any resolution or
otherwise authorizes action to approve any of the actions referred to in this
subsection 8.1(H); or
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(I) Liens. Any lien, levy or assessment is filed or
recorded with respect to or otherwise imposed upon all or any part of the
Collateral or the assets of Borrower or any of its Subsidiaries by the United
States or any department or instrumentality thereof or by any state, county,
municipality or other governmental agency (other than Permitted Encumbrances)
and such lien, levy or assessment is not stayed, vacated, paid or discharged
within ten (10) days; or
(J) Judgment and Attachments. Any money judgment, writ
or warrant of attachment, or similar process involving (1) an amount in any
individual case in excess of $25,000 or (2) an amount in the aggregate at any
time in excess of $50,000 (in either case not adequately covered by insurance
as to which the insurance company has acknowledged coverage) is entered or
filed against Borrower or any of its Subsidiaries or any of their respective
assets and remains undischarged, unvacated, unbonded or unstayed for a period
of thirty (30) days or in any event later than five (5) days prior to the date
of any proposed sale thereunder; or
(K) Dissolution. Any order, judgment or decree is
entered against Borrower or any of its Subsidiaries decreeing the dissolution
or split up of Borrower or that Subsidiary and such order remains undischarged
or unstayed for a period in excess of twenty (20) days; or
(L) Solvency. Borrower ceases to be solvent (as
represented by Borrower in subsection 4.17) or admits in writing its present or
prospective inability to pay its debts as they become due; or
(M) Injunction. Borrower or any of its Subsidiaries is
enjoined, restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part of
its business and such order continues for more than thirty (30) days; or
(N) Invalidity of Loan Documents. Any of the Loan
Documents for any reason, other than a partial or full release in accordance
with the terms thereof, ceases to be in full force and effect or is declared to
be null and void, or any Loan Party denies that it has any further liability
under any Loan Documents to which it is party, or gives notice to such effect;
or
(O) Failure of Security. Lender does not have or ceases
to have a valid and perfected first priority security interest in the
Collateral (subject to Permitted Encumbrances), in each case, for any reason
other than the failure of Lender to take any action within its control or
except for Inventory not in excess of $4,000,000 located at Borrower's
contractors or subcontractors; or
(P) Damage, Strike, Casualty. (1) Any material damage
to, or loss, theft or destruction of, any Collateral, whether or not insured,
and, if such damage is insured and Borrower has business interruption insurance
relating to such casualty, the passage of 60 days or (2) any strike, lockout,
labor dispute, embargo, condemnation, act of God or public enemy, or other
casualty which causes, for more than sixty (60) consecutive days if Borrower
has business interruption insurance which is applicable or fifteen (15)
consecutive days if no such
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insurance is applicable, the cessation or substantial curtailment of revenue
producing activities at any facility of Borrower or any of its Subsidiaries, if
any such event or circumstance described in clauses (1) or (2) could reasonably
be expected to have a Material Adverse Effect.
(Q) Licenses and Permits. The loss, suspension or
revocation of, or failure to renew, any license or permit now held or hereafter
acquired by Borrower or any of its Subsidiaries, if such loss, suspension,
revocation or failure to renew could have a Material Adverse Effect.
(R) Forfeiture. There is filed against Borrower any
civil or criminal action, suit or proceeding under any federal or state
racketeering statute (including, without limitation, the Racketeer Influenced
and Corrupt Organization Act of 1970), which action, suit or proceeding (1) is
not dismissed within one hundred twenty (120) days; and (2) could result in the
confiscation or forfeiture of any material portion of the Collateral.
(S) Breach or Default under Inter-Credit Agreement.
(1) Failure of Borrower to pay when due any amounts under the Inter-Credit
Agreement or (2) the material breach by Borrower of any of the terms,
representations, covenants, conditions or provisions of the Inter-Credit
Agreement or (3) termination of the Inter-Credit Agreement.
8.2 Suspension of Commitments. Upon the occurrence of any Default
or Event of Default, notwithstanding any grace period or right to cure, Lender,
without notice or demand, may immediately cease making additional Loans and the
Commitments shall be suspended; provided that, in the case of a Default, if the
subject condition or event is waived or cured within any applicable grace or
cure period, the Commitments shall be reinstated.
8.3 Acceleration. Upon the occurrence of any Event of Default
described in the foregoing subsections 8.1(G) or 8.1(H), all Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Borrower, and the Commitments shall thereupon terminate. Upon the
occurrence and during the continuance of any other Event of Default, Lender
may, by written notice to Borrower, (a) declare all or any portion of the
Obligations to be, and the same shall forthwith become, immediately due and
payable and the Commitments shall thereupon terminate and (b) demand that
Borrower immediately deposit with Lender an amount equal to one hundred five
percent (105%) of the Letter of Credit Reserve to enable Lender to make
payments under the Lender Letters of Credit when required and such amount shall
become immediately due and payable.
8.4 Remedies. If any Event of Default shall have occurred and be
continuing, in addition to and not in limitation of any rights or remedies
available to Lender at law or in equity, Lender may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral) and may also (a) notify any or all obligors on the Accounts to make
all payments directly to Lender; (b) require Borrower to, and Borrower hereby
agrees that it will, at its expense and upon request
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of Lender forthwith, assemble all or part of the Collateral as directed by
Lender and make it available to Lender at a place to be designated by Lender
which is reasonably convenient to both parties; (c) without notice or demand or
legal process, enter upon any premises of Borrower and take possession of the
Collateral; and (d) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private
sale, at any of the Lender's offices or elsewhere, at such time or times, for
cash, on credit or for future delivery, and at such price or prices and upon
such other terms as Lender may deem commercially reasonable. Borrower agrees
that, to the extent notice of sale shall be required by law, at least ten (10)
days notice to Borrower of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. At any sale of the Collateral, if permitted by law, Lender may
bid (which bid may be, in whole or in part, in the form of cancellation of
indebtedness) for the purchase of the Collateral or any portion thereof for the
account of Lender. Lender shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Borrower shall
remain liable for any deficiency. Lender may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor,
and such sale may, without further notice, be made at the time and place to
which it was so adjourned. To the extent permitted by law, Borrower hereby
specifically waives all rights of redemption, stay or appraisal which it has or
may have under any law now existing or hereafter enacted. Lender shall not be
required to proceed against any Collateral but may proceed against Borrower
directly;
8.5 Appointment of Attorney-in-Fact. Borrower hereby constitutes
and appoints Lender as Borrower's attorney-in-fact with full authority in the
place and stead of Borrower and in the name of Borrower, Lender or otherwise,
from time to time in Lender's discretion while an Event of Default is
continuing to take any action and to execute any instrument that Lender may
deem necessary or advisable to accomplish the purposes of this Agreement,
including: (a) to ask, demand, collect, ▇▇▇ for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral; (b) to adjust, settle or compromise the
amount or payment of any Account, or release wholly or partly any customer or
obligor thereunder or allow any credit or discount thereon; (c) to receive,
endorse, and collect any drafts or other instruments, documents and chattel
paper, in connection with clause (a) above; (d) to file any claims or take any
action or institute any proceedings that Lender may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the rights
of Lender with respect to any of the Collateral; and (e) to sign and endorse
any invoices, freight or express bills, bills of lading, storage or warehouse
receipts, assignments, verifications and notices in connection with Accounts
and other documents relating to the Collateral. The appointment of Lender as
Borrower's attorney and Lender's rights and powers are coupled with an interest
and are irrevocable until payment in full and complete performance of all of
the Obligations.
8.6 Limitation on Duty of Lender with Respect to Collateral.
Beyond the safe custody thereof, Lender shall have no duty with respect to any
Collateral in its possession or control (or in the possession or control of any
agent or bailee) or with respect to any income thereon or the preservation of
rights against prior parties or any other rights pertaining thereto. Lender
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral
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in its possession if the Collateral is accorded treatment substantially equal
to that which Lender accords its own property. Lender shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by Lender in good faith.
8.7 Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, (a) Borrower irrevocably waives the right
to direct the application of any and all payments at any time or times
thereafter received by Lender from or on behalf of Borrower, and Borrower
hereby irrevocably agrees that Lender shall have the continuing exclusive right
to apply and to reapply any and all payments received at any time or times
after the occurrence and during the continuance of an Event of Default against
the Obligations in such manner as Lender may deem advisable notwithstanding any
previous entry by Lender upon any books and records and (b) the proceeds of
any sale of, or other realization upon, all or any part of the Collateral shall
be applied: first, to all fees, costs and expenses incurred by Lender with
respect to this Agreement, the other Loan Documents or the Collateral; second,
to all fees due and owing to Lender; third, to accrued and unpaid interest on
the Obligations; fourth, to the principal amounts of the Obligations
outstanding; and fifth, to any other indebtedness or obligations of Borrower
owing to Lender.
8.8 License of Intellectual Property. Borrower hereby assigns,
transfers and conveys to Lender, effective upon the occurrence of any Event of
Default hereunder, the non-exclusive right and license to use all Intellectual
Property owned or used by Borrower together with any goodwill associated
therewith, all to the extent necessary to enable Lender to realize on the
Collateral and any successor or assign to enjoy the benefits of the Collateral.
This right and license shall inure to the benefit of all successors, assigns
and transferees of Lender and its successors, assigns and transferees, whether
by voluntary conveyance, operation of law, assignment, transfer, foreclosure,
deed in lieu of foreclosure or otherwise. Such right and license is granted
free of charge, without requirement that any monetary payment whatsoever be
made to Borrower by Lender.
8.9 Waivers, Non-Exclusive Remedies. No failure on the part of
Lender to exercise, and no delay in exercising and no course of dealing with
respect to, any right under this Agreement or the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise by Lender
of any right under this Agreement or any other Loan Document preclude any other
or further exercise thereof or the exercise of any other right. The rights in
this Agreement and the other Loan Documents are cumulative and are not
exclusive of any other remedies provided by law.
SECTION 9 MISCELLANEOUS
9.1 Assignments and Participations. Lender may assign its rights
and delegate its obligations under this Agreement and further may assign, or
sell participations in, all or any part of the Loans, the Commitments or any
other interest herein to an Affiliate or to another Person.
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In the case of an assignment authorized under this subsection 9.1, the assignee
shall have, to the extent of such assignment, the same rights, benefits and
obligations as it would if it were a Lender hereunder. Lender shall be
relieved of its obligations hereunder with respect to the Commitments or
assigned portion thereof. Borrower hereby acknowledges and agrees that any
assignment will give rise to a direct obligation of Borrower to the assignee
and that the assignee shall be considered to be a "Lender". Lender may furnish
any information concerning Borrower and its Subsidiaries in its possession from
time to time to assignees and participants (including prospective assignees and
participants).
9.2 Set Off. In addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, Lender, each assignee of Lender's interest,
and each participant is hereby authorized by Borrower at any time or from time
to time, without notice to Borrower or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and to apply any
and all balances held by it at any of its offices for the account of Borrower
or any of its Subsidiaries (regardless of whether such balances are then due to
Borrower or its Subsidiaries) and any other property at any time held or owing
by that Lender or assignee to or for the credit or for the account of Borrower
against and on account of any of the Obligations then outstanding; provided,
that no participant shall exercise such right without the prior written consent
of Lender.
Borrower hereby agrees, to the fullest extent permitted by law, that
any Lender, assignee or participant may exercise its right of setoff with
respect to amounts in excess of its pro rata share of the Obligations (or, in
the case of a participant, in excess of its pro rata participation interest in
the Obligations) and that such Lender, assignee or participant, as the case may
be, shall be deemed to have purchased for cash in the amount of such excess,
participations in each other Lender's or holder's share of the Obligations.
9.3 Expenses and Attorneys' Fees. Whether or not the transactions
contemplated hereby shall be consummated, Borrower agrees to promptly pay all
reasonable fees, costs and expenses incurred by Lender and ▇▇▇▇▇▇ in connection
with any matters contemplated by or arising out of this Agreement or the other
Loan Documents or the Inter-Credit Agreement including the following, and all
such fees, costs and expenses shall be part of the Obligations, payable on
demand and secured by the Collateral: (a) fees, costs and expenses (including
attorneys' fees, allocated costs of internal counsel and fees of environmental
consultants, accountants and other professionals retained by Lender) incurred
in connection with the examination, review, due diligence investigation,
documentation and closing of the financing arrangements evidenced by the Loan
Documents, subject to the limitations in Lender's proposal letter to Borrower
dated November 30, 1995; (b) following the Closing Date, fees, costs and
expenses (including attorneys' fees, allocated costs of internal counsel and
fees of environmental consultants, accountants and other professionals retained
by Lender) incurred in connection with any amendments, waivers, consents,
forbearances, and other modifications relating to the Facility Documents or any
subordination or intercreditor agreements or actions taken by Lender following
any Default; (c) fees, costs and expenses incurred in creating, perfecting and
maintaining perfection of Liens in favor of Lender not in excess of $1,000 per
year unless an
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Event of Default has occurred; (d) fees, costs and expenses incurred in
connection with forwarding to Borrower the proceeds of Loans including Lender's
standard wire transfer fee; (e) fees, costs, expenses and bank charges,
including bank charges for returned checks, incurred by Lender in establishing,
maintaining and handling lock box accounts, blocked accounts or other accounts
for collection of the Collateral; (f) fees, costs, expenses (including
attorneys' fees and allocated costs of internal counsel) and costs of
settlement incurred in collecting upon or enforcing rights against the
Collateral or incurred in any action to enforce this Agreement or the other
Loan Documents or the Inter-Credit Agreement or to collect any payments due
from Borrower or any other Loan Party under this Agreement or any other Loan
Document or the Inter-Credit Agreement or incurred in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement, whether in the nature of a "workout" or in connection with any
insolvency or bankruptcy proceedings or otherwise.
9.4 Indemnity. In addition to the payment of expenses pursuant to
subsection 9.3, whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to indemnify, pay and hold Lender, and the
officers, directors, employees, agents, consultants, auditors, persons engaged
by Lender to evaluate or monitor the Collateral, affiliates and attorneys of
Lender and such holders (collectively called the "Indemnitees") harmless from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any
kind or nature whatsoever (including the fees and disbursements of counsel for
such Indemnitees in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not such Indemnitee
shall be designated a party thereto) that may be imposed on, incurred by, or
asserted against that Indemnitee, in any manner relating to or arising out of
this Agreement or the other Loan Documents, the consummation of the
transactions contemplated by this Agreement, the statements contained in the
commitment letters, if any, delivered by Lender, Lender's agreement to make the
Loans hereunder, the use or intended use of the proceeds of any of the Loans or
the exercise of any right or remedy hereunder or under the other Loan Documents
(the "Indemnified Liabilities"); provided that Borrower shall have no
obligation to an Indemnitee hereunder with respect to Indemnified Liabilities
arising from the gross negligence or willful misconduct of that Indemnitee as
determined by a court of competent jurisdiction.
9.5 Amendments and Waivers. No amendment, modification,
termination or waiver of any provision of this Agreement or of the other Loan
Documents, or consent to any departure by Borrower therefrom, shall be
effective unless the same shall be in writing and signed by Lender and
Borrower. Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given.
9.6 Notices. Unless otherwise specifically provided herein, all
notices shall be in writing addressed to the respective party as set forth
below and may be personally served, telecopied or sent by overnight courier
service or United States mail and shall be deemed to have been given: (a) if
delivered in person, when delivered; (b) if delivered by telecopy, on the date
of transmission if transmitted on a Business Day before 4:00 p.m. Los Angeles
time or, if not, on the next succeeding Business Day; (c) if delivered by
overnight courier, two (2) days after
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delivery to such courier properly addressed; or (d) if by U.S. Mail, four (4)
Business Days after depositing in the United States mail, with postage prepaid
and properly addressed.
If to Borrower: SUN SPORTSWEAR, INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lender: ▇▇▇▇▇▇ FINANCIAL, INC.
Attn: CAMG Portfolio Manager
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ FINANCIAL, INC.
Attn: Legal Department
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the party addressed shall have previously
designated by written notice to the serving party, given in accordance with
this subsection 9.6.
9.7 Survival of Warranties and Certain Agreements. All
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement and the making of the Loans hereunder.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Borrower set forth in subsections 9.3 and 9.4 shall survive
the payment of the Loans and the termination of this Agreement.
9.8 Indulgence Not Waiver. No failure or delay on the part of
Lender in the exercise of any power, right or privilege shall impair such
power, right or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of any
other right, power or privilege.
9.9 Marshaling; Payments Set Aside. Lender shall not be under any
obligation to marshal any assets in favor of any Loan Party or any other party
or against or in payment of any or all of the Obligations. To the extent that
any Loan Party makes a payment or payments to Lender or Lender enforces its
security interests or exercise its rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to
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a trustee, receiver or any other party under any bankruptcy law, state or
federal law, common law or equitable cause, then to the extent of such
recovery, the Obligations or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
9.10 Entire Agreement. This Agreement, and the other Loan
Documents referred to herein embody the final, entire agreement among the
parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto. There are no oral agreements among the parties hereto.
9.11 Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
9.12 Severability. The invalidity, illegality or unenforceability
in any jurisdiction of any provision in or obligation under this Agreement or
the other Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
or the other Loan Documents or of such provision or obligation in any other
jurisdiction.
9.13 Headings. Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute
a part of this Agreement for any other purpose or be given any substantive
effect.
9.14 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
9.15 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns except that Borrower may not assign its rights or obligations
hereunder without the prior written consent of Lender.
9.16 No Fiduciary Relationship; Limitation of Liabilities.
(A) No provision in this Agreement or in any of the other
Facility Documents and no course of dealing between the parties shall be deemed
to create any fiduciary duty by Lender to Borrower.
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(B) Neither Lender, nor any affiliate, officer, director,
shareholder, employee, attorney, or agent of Lender shall have any liability
with respect to, and Borrower hereby waives, releases, and agrees not to ▇▇▇
any of them upon, any claim for any special, indirect, incidental, or
consequential damages suffered or incurred by Borrower in connection with,
arising out of, or in any way related to, this Agreement or any of the other
Facility Documents, or any of the transactions contemplated by this Agreement
or any of the other Facility Documents. Borrower hereby waives, releases, and
agrees not to ▇▇▇ Lender or any of Lender's affiliates, officers, directors,
employees, attorneys, or agents for punitive damages in respect of any claim in
connection with, arising out of, or in any way related to, this Agreement or
any of the other Facility Documents, or any of the transactions contemplated by
this Agreement or any of the transactions contemplated hereby.
9.17 CONSENT TO JURISDICTION. BORROWER HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.
BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY
AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY FINAL JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS OR THE OBLIGATIONS.
9.18 WAIVER OF JURY TRIAL. BORROWER AND LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. BORROWER AND LENDER
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWER AND LENDER FURTHER
WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
9.19 Construction. Borrower and Lender each acknowledge that it
has had the benefit of legal counsel of its own choice and has been afforded an
opportunity to review this Agreement and the other Loan Documents with its
legal counsel and that this Agreement and the other Loan Documents shall be
construed as if jointly drafted by Borrower and Lender.
9.20 Counterparts; Effectiveness. This Agreement and any
amendments, waivers, consents, or supplements may be executed in any number of
counterparts and by different parties
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hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all of which counterparts together shall
constitute but one and the same instrument. This Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto.
9.21 No Duty. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by Lender shall have the right to
act exclusively in the interest of Lender and shall have no duty of disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or
nature whatsoever to Borrower or any of Borrower's shareholders or any other
Person.
9.22 Confidentiality. Lender shall hold all nonpublic information
identified as such by Borrower, including Projections and open customer order
reports, in accordance with such Person's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
business practices and in any event may make disclosure to such of its
respective Affiliates, officers, directors, employees, agents and
representatives as need to know such information in connection with the Loans.
If Lender is otherwise a creditor of Borrower, Lender may use the information
in connection with its other credits. Lender may also make disclosure
reasonably required by a bona fide offeree or assignee (or participation), or
as required or requested by any Governmental Authority or representative
thereof, or pursuant to legal process, or to its accountants, lawyers and other
advisors, and shall require any such offeree or assignee (or participant) to
agree (and require any of its offerees, assignees or participants to agree) to
comply with this Section 9.22. If Lender discloses confidential information to
its accountants, lawyers or other advisors, it agrees to advise such Persons
that such information is confidential, but Lender shall have no responsibility
for such Persons. In no event shall Lender be obligated or required to return
any materials furnished by Borrower; provided, however, each offeree shall be
required to agree that if it does not become a assignee (or participant) it
shall return all materials furnished to it by Borrower in connection herewith.
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Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
▇▇▇▇▇▇ FINANCIAL, INC. SUN SPORTSWEAR, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------- ------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇▇
----------------------- ------------------------
Title: Senior Vice President Title: Senior VP & CFO
----------------------- ------------------------
FEIN: ▇▇-▇▇▇▇▇▇▇
------------------------
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