LOAN AND SECURITY AGREEMENT
BY AND AMONG
UNIVERSAL AUTOMOTIVE, INC.
UNIVERSAL AUTOMOTIVE OF VIRGINIA, INC.
UNIVERSAL BRAKE PARTS, INC.
THE AUTOMOTIVE COMMODITY CONNECTION, INC.
AS BORROWERS
AND
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
UBP HUNGARY, INC.
AS GUARANTORS
CONGRESS FINANCIAL CORPORATION (CENTRAL)
AS AGENT
AND
THE LENDERS FROM TIME TO TIME PARTY HERETO
AS LENDERS
DATED: JANUARY 9, 2004
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS............................................................................................ 1
SECTION 2. CREDIT FACILITIES...................................................................................... 23
2.1 Loans........................................................................................................... 23
2.2 Letter of Credit Accommodations................................................................................. 24
2.3 Commitments..................................................................................................... 28
SECTION 3. INTEREST AND FEES...................................................................................... 28
3.1 Interest........................................................................................................ 28
3.2 Fees............................................................................................................ 30
3.3 Changes in Laws and Increased Costs of Loans.................................................................... 30
SECTION 4. CONDITIONS PRECEDENT................................................................................... 32
4.1 Conditions Precedent to Initial Loans and
Letter of Credit Accommodations................................................................................. 32
4.2 Conditions Precedent to All Loans and Letter of
Credit Accommodations........................................................................................... 35
SECTION 5. GRANT AND PERFECTION OF SECURITY
INTEREST........................................................................................................ 35
5.1 Grant of Security Interest...................................................................................... 35
5.2 Perfection of Security Interests................................................................................ 36
SECTION 6. COLLECTION AND ADMINISTRATION.......................................................................... 40
6.1 Borrowers' Loan Accounts........................................................................................ 40
6.2 Statements...................................................................................................... 40
6.3 Collection of Accounts.......................................................................................... 41
6.4 Payments........................................................................................................ 42
6.5 Authorization to Make Loans..................................................................................... 43
6.6 Use of Proceeds................................................................................................. 43
6.7 Appointment of Administrative Borrower as Agent for Requesting
Loans and Receipts of Loans and Statements...................................................................... 43
6.8 Pro Rata Treatment.............................................................................................. 44
6.9 Sharing of Payments, Etc........................................................................................ 44
6.10 Settlement Procedures........................................................................................... 45
6.11 Obligations Several; Independent Nature of
Lenders' Rights................................................................................................. 47
SECTION 7. COLLATERAL REPORTING AND COVENANTS..................................................................... 47
7.1 Collateral Reporting............................................................................................ 47
7.2 Accounts Covenants.............................................................................................. 49
7.3 Inventory Covenants............................................................................................. 49
(i)
7.4 Equipment and Real Property Covenants........................................................................... 50
7.5 Power of Attorney............................................................................................... 51
7.6 Right to Cure................................................................................................... 52
7.7 Access to Premises.............................................................................................. 52
SECTION 8. REPRESENTATIONS AND WARRANTIES......................................................................... 52
8.1 Corporate Existence, Power and Authority........................................................................ 53
8.2 Name; State of Organization; Chief Executive
Office; Collateral Locations.................................................................................... 53
8.3 Financial Statements; No Material Adverse
Change.......................................................................................................... 53
8.4 Priority of Liens; Title to Properties.......................................................................... 54
8.5 Tax Returns..................................................................................................... 54
8.6 Litigation...................................................................................................... 54
8.7 Compliance with Other Agreements and Applicable
Laws............................................................................................................ 54
8.8 Environmental Compliance........................................................................................ 55
8.9 Employee Benefits............................................................................................... 55
8.10 Bank Accounts................................................................................................... 56
8.11 Intellectual Property........................................................................................... 56
8.12 Subsidiaries; Affiliates; Capitalization;
Solvency........................................................................................................ 57
8.13 Labor Disputes.................................................................................................. 58
8.14 Restrictions on Subsidiaries.................................................................................... 58
8.15 Material Contracts.............................................................................................. 58
8.16 Payable Practices............................................................................................... 58
8.17 Acquisition of Purchased Assets................................................................................. 58
8.18 Solvency........................................................................................................ 59
8.19 Accuracy and Completeness of Information........................................................................ 59
8.20 Survival of Warranties; Cumulative.............................................................................. 59
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS..................................................................... 60
9.1 Maintenance of Existence........................................................................................ 60
9.2 New Collateral Locations........................................................................................ 60
9.3 Compliance with Laws, Regulations, Etc.......................................................................... 60
9.4 Payment of Taxes and Claims..................................................................................... 61
9.5 Insurance....................................................................................................... 62
9.6 Financial Statements and Other Information...................................................................... 62
9.7 Sale of Assets, Consolidation, Merger,
Dissolution, Etc................................................................................................ 64
9.8 Encumbrances.................................................................................................... 66
9.9 Indebtedness.................................................................................................... 68
9.10 Loans, Investments, Etc......................................................................................... 70
9.11 Dividends and Redemptions....................................................................................... 72
9.12 Transactions with Affiliates.................................................................................... 73
9.13 Compliance with ERISA........................................................................................... 74
9.14 End of Fiscal Years; Fiscal Quarters............................................................................ 74
9.15 Change in Business.............................................................................................. 74
9.16 Limitation of Restrictions Affecting
Subsidiaries.................................................................................................... 74
9.17 Minimum EBITDA.................................................................................................. 75
9.18 Minimum Excess Availability..................................................................................... 75
9.19 Capital Expenditures............................................................................................ 75
9.20 License Agreements.............................................................................................. 75
9.21 After Acquired Real Property.................................................................................... 76
(ii)
9.22 Costs and Expenses.............................................................................................. 76
9.23 Further Assurances.............................................................................................. 77
SECTION 10. EVENTS OF DEFAULT AND REMEDIES......................................................................... 77
10.1 Events of Default............................................................................................... 77
10.2 Remedies........................................................................................................ 79
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND
CONSENTS; GOVERNING LAW......................................................................................... 83
11.1 Governing Law; Choice of Forum; Service of
Process; Jury Trial Waiver...................................................................................... 83
11.2 Waiver of Notices............................................................................................... 84
11.3 Amendments and Waivers.......................................................................................... 84
11.4 Waiver of Counterclaims......................................................................................... 86
11.5 Indemnification................................................................................................. 86
SECTION 12. THE AGENT.............................................................................................. 87
12.1 Appointment, Powers and Immunities.............................................................................. 87
12.2 Reliance by Agent............................................................................................... 87
12.3 Events of Default............................................................................................... 87
12.4 Congress in its Individual Capacity............................................................................. 88
12.5 Indemnification................................................................................................. 88
12.6 Non-Reliance on Agent and Other Lenders......................................................................... 89
12.7 Failure to Act.................................................................................................. 89
12.8 Additional Loans................................................................................................ 89
12.9 Concerning the Collateral and the Related
Financing Agreements............................................................................................ 90
12.10 Field Audit, Examination Reports and other
Information; Disclaimer by Lenders.............................................................................. 90
12.11 Collateral Matters.............................................................................................. 90
12.12 Agency for Perfection........................................................................................... 92
12.13 Successor Agent................................................................................................. 92
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS....................................................................... 93
13.1 Term............................................................................................................ 93
13.2 Interpretative Provisions....................................................................................... 94
13.3 Notices......................................................................................................... 96
13.4 Partial Invalidity.............................................................................................. 97
13.5 Confidentiality................................................................................................. 97
13.6 Successors...................................................................................................... 98
13.7 Assignments; Participations..................................................................................... 98
13.8 Entire Agreement................................................................................................ 100
13.9 Counterparts, Etc............................................................................................... 101
(iii)
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Borrowing Base Certificate
Exhibit C Information Certificate
Exhibit D Form of Compliance Certificate
Schedule 1.40 Existing Lenders
Schedule 1.41 Existing Letters of Credit
Schedule 1.75 Permitted Holders
Schedule 9.17 Minimum EBITDA
-i-
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated January 9, 2004 is entered into by
and among UNIVERSAL AUTOMOTIVE, INC., an Illinois corporation ("Universal"),
UNIVERSAL AUTOMOTIVE OF VIRGINIA, INC., a Virginia corporation ("Virginia"),
UNIVERSAL BRAKE PARTS, INC., a Canadian corporation ("Brake Parts") and THE
AUTOMOTIVE COMMODITY CONNECTION, INC., an Illinois corporation ("Connection",
and together with Universal, Virginia and Brake Parts, each individually a
"Borrower" and collectively, "Borrowers"), UNIVERSAL AUTOMOTIVE INDUSTRIES,
INC., a Delaware corporation ("Parent"), UBP HUNGARY, INC., a Delaware
corporation ("Hungary" and together with Parent, each individually a "Guarantor"
and collectively, "Guarantors"), the parties hereto from time to time as
lenders, whether by execution of this Agreement or an Assignment and Acceptance
(each individually, a "Lender" and collectively, "Lenders") and Congress
Financial Corporation (Central) , an Illinois corporation, in its capacity as
agent for Lenders (in such capacity, "Agent").
W I T N E S S E T H:
WHEREAS, Borrowers and Guarantors have requested that Agent and Lenders
enter into financing arrangements with Borrowers pursuant to which Lenders may
make loans and provide other financial accommodations to Borrowers; and
WHEREAS, each Lender is willing to agree (severally and not jointly) to
make such loans and provide such financial accommodations to Borrowers on a pro
rata basis according to its Commitment (as defined below) on the terms and
conditions set forth herein and Agent is willing to act as agent for Lenders on
the terms and conditions set forth herein and the other Financing Agreements;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall mean, as to each Borrower and Guarantor, all present
and future rights of such Borrower and Guarantor to payment of a monetary
obligation, whether or not earned by performance, which is not evidenced by
chattel paper or an instrument, (a) for property that has been or is to be sold,
leased, licensed, assigned, or otherwise disposed of, (b) for services rendered
or to be rendered, (c) for a secondary obligation incurred or to be incurred, or
(d) arising out of the use of a credit or charge card or information contained
on or for use with the card.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) determined by
dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage
equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof,
"Reserve Percentage" shall mean the reserve percentage, expressed as a decimal,
prescribed by any United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits of United States
dollars in a non-United States or an international banking office of Reference
Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with
the proceeds of such deposit, whether or not the Reference Bank actually holds
or has made any such deposits or loans. The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.
1.3 "Administrative Borrower" shall mean Universal Automotive, Inc., an
Illinois corporation in its capacity as Administrative Borrower on behalf of
itself and the other Borrowers pursuant to Section 6.7 hereof and it successors
and assigns in such capacity.
1.4 "Affiliate" shall mean, with respect to a specified Person, any other
Person which directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with such Person, and
without limiting the generality of the foregoing, includes (a) any Person which
beneficially owns or holds five (5%) percent or more of any class of Voting
Stock of such Person or other equity interests in such Person, (b) any Person of
which such Person beneficially owns or holds five (5%) percent or more of any
class of Voting Stock or in which such Person beneficially owns or holds five
(5%) percent or more of the equity interests and (c) any director or executive
officer of such Person. For the purposes of this definition, the term "control"
(including with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of Voting
Stock, by agreement or otherwise.
1.5 "Agent" shall mean Congress Financial Corporation (Central), in its
capacity as agent on behalf of Lenders pursuant to the terms hereof and any
replacement or successor agent hereunder.
1.6 "Agent Payment Account" shall mean account no. 5000000030266 of Agent
at Wachovia Bank, National Association, or such other account of Agent as Agent
may from time to time designate to Administrative Borrower as the Agent Payment
Account for purposes of this Agreement and the other Financing Agreements.
1.7 "Applicable Margin" means, at any time, as to the interest rate for
Prime Rate Loans and the interest rate for Eurodollar Rate Loans the applicable
percentage (on a per annum basis) set forth below if the Monthly Average Excess
Availability for the immediately preceding calendar month is at or within the
amounts indicated for such percentage:
2
Applicable Applicable
Monthly Average Prime Eurodollar
Tier Excess Availability Rate Margin Rate Margin
---- --------------------------- ----------- -----------
1 $5,000,000 or more .25% 2.50%
Greater than or equal to
2 $2,500,000 and less than .50% 2.75%
$5,000,000
3 Less than $2,500,000 .75% 3%
provided, that, (a) the Applicable Margin shall be calculated and established
once each calendar month and shall remain in effect until adjusted thereafter as
of the first day of the next month and (b) notwithstanding the amount of the
Monthly Average Excess Availability, for each month prior to the month
commencing August 1, 2004, in no event shall the Applicable Margin be less than
the percentages set forth in Tier 2 of the schedule above for the applicable
category of Loans.
1.8 "Assignment and Acceptance" shall mean an Assignment and Acceptance
substantially in the form of Exhibit A attached hereto (with blanks
appropriately completed) delivered to Agent in connection with an assignment of
a Lender's interest hereunder in accordance with the provisions of Section 13.7
hereof.
1.9 "Autospecialty Inventory" shall mean all finished goods Inventory
acquired under the Purchase Agreement relating to TRW's North American
Independent Aftermarket unit.
1.10 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.11 "Borrowing Base Certificate" shall mean a certificate substantially
in the form of Exhibit B hereto, as such form may from time to time be modified
by Agent, which is duly completed (including all schedules thereto) and executed
by the chief financial officer, treasurer or controller of Parent and delivered
to Agent.
1.12 "Borrowing Base" shall mean, at any time, as to each Borrower, the
amount equal to:
(a) the lesser of:
(i) the amount equal to: (A) eighty-five (85%) percent of the
Net Amount of the Eligible Accounts of such Borrower, plus (B) the lesser of (1)
the Inventory Loan Limit for such Borrower or (2) the sum of: (x) the lesser of
the Finished Goods Advance Rate multiplied by the Value of the Eligible
Inventory of such Borrower consisting of finished goods or of the Net Recovery
Percentage multiplied by the Value of such Eligible Inventory, plus (y) the
lesser of (aa) fifteen (15%) percent multiplied by the Value of the Eligible
Inventory of such Borrower consisting of raw materials or (bb) the Raw Materials
Inventory Sublimit, or (3) eighty-five (85%) percent of the Net Recovery
Percentage multiplied by the Value of such Inventory, or
(ii) the Revolving Loan Limit for such Borrower,
3
minus
(b) Reserves attributable to such Borrower.
For purposes only of applying the Inventory Loan Limit, Agent may treat the then
undrawn amounts of outstanding Letter of Credit Accommodations for the purpose
of purchasing Eligible Inventory as Revolving Loans to the extent Agent is in
effect basing the issuance of the Letter of Credit Accommodations on the Value
of the Eligible Inventory being purchased with such Letter of Credit
Accommodations. In determining the actual amounts of such Letter of Credit
Accommodations to be so treated for purposes of the sublimit, the outstanding
Revolving Loans and Reserves shall be attributed first to any components of the
lending formulas set forth above that are not subject to such sublimit, before
being attributed to the components of the lending formulas subject to such
sublimit. The amounts of Eligible Inventory of any Borrower shall, at Agent's
option, be determined based on the lesser of the amount of Inventory set forth
in the general ledger of such Borrower or the perpetual inventory record
maintained by such Borrower, without duplication, in Agent's determination of
Reserves, of any reserves reflected in such Borrower's general ledger and
included in the determination of Eligible Inventory.
1.13 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of Illinois, or the State of North Carolina, and a day on
which Agent is open for the transaction of business, except that if a
determination of a Business Day shall relate to any Eurodollar Rate Loans, the
term Business Day shall also exclude any day on which banks are closed for
dealings in dollar deposits in the London interbank market or other applicable
Eurodollar Rate market.
1.14 "Capital Leases" shall mean, as applied to any Person, any lease of
(or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such Person.
1.15 "Capital Stock" shall mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's capital stock or partnership, limited liability company or other
equity interests at any time outstanding, and any and all rights, warrants or
options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.16 "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of ninety (90) days or less issued or directly
and fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof; provided, that, the full faith and credit of the United
States of America is pledged in support thereof; (b) certificates of deposit or
bankers' acceptances with a maturity of ninety (90) days or less of any
financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$250,000,000; (c) commercial paper (including variable rate demand notes) with a
maturity of ninety (90) days or less issued by a corporation (except an
Affiliate of any Borrower or Guarantor) organized under the laws of any State of
the United States of America or the District of Columbia and rated at least A-1
by Standard & Poor's
4
Ratings Service, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or at least P-1
by ▇▇▇▇▇'▇ Investors Service, Inc.; (d) repurchase obligations with a term of
not more than thirty (30) days for underlying securities of the types described
in clause (a) above entered into with any financial institution having combined
capital and surplus and undivided profits of not less than $250,000,000; (e)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the United States of
America or issued by any governmental agency thereof and backed by the full
faith and credit of the United States of America, in each case maturing within
ninety (90) days or less from the date of acquisition; provided, that, the terms
of such agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions with Securities Dealers and Others, as
adopted by the Comptroller of the Currency on October 31, 1985; and (f)
investments in money market funds and mutual funds which invest substantially
all of their assets in securities of the types described in clauses (a) through
(e) above.
1.17 "Change of Control" shall mean (a) the transfer (in one transaction
or a series of transactions) of all or substantially all of the assets of any
Borrower or Guarantor to any Person or group (as such term is used in Section
13(d)(3) of the Exchange Act), other than as permitted in Section 9.7 hereof;
(b) the liquidation or dissolution of any Borrower or Guarantor or the adoption
of a plan by the stockholders of any Borrower or Guarantor relating to the
dissolution or liquidation of such Borrower or Guarantor, other than as
permitted in Section 9.7 hereof; (c) the acquisition by any Person or group (as
such term is used in Section 13(d)(3) of the Exchange Act), except for one or
more Permitted Holders, of beneficial ownership, directly or indirectly, of a
majority of the voting power of the total outstanding Voting Stock of any
Borrower or Guarantor or the Board of Directors of any Borrower or Guarantor
(not including acquisitions of Voting Stock pursuant to the exercise of
outstanding warrants or options or the conversion of outstanding convertible
debt instruments in each case in existence as of the date of this Agreement and
disclosed in writing to Agent on or prior to the date of this Agreement); (d)
during any period of two (2) consecutive years, individuals who at the beginning
of such period constituted the Board of Directors of any Borrower or Guarantor
(together with any new directors who have been appointed by any Permitted
Holder, or whose nomination for election by the stockholders of such Borrower or
Guarantor, as the case may be, was approved by a vote of at least sixty-six and
two-thirds (66 2/3%) percent of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of any Borrower or Guarantor then still in
office; or (e) the failure of Parent to own directly or indirectly one hundred
(100%) percent of the total outstanding Capital Stock of each Borrower and other
Guarantor.
1.18 "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.19 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.20 "Collateral Access Agreement" shall mean an agreement in writing, in
form and substance satisfactory to Agent, from any lessor of premises to any
Borrower or Guarantor, or any other person to whom any Collateral is consigned
or who has custody, control or possession
5
of any such Collateral or is otherwise the owner or operator of any premises on
which any of such Collateral is located, pursuant to which such lessor,
consignee or other person, inter alia, acknowledges the first priority security
interest of Agent in such Collateral, agrees to waive any and all claims such
lessor, consignee or other person may, at any time, have against such
Collateral, whether for processing, storage or otherwise, and agrees to permit
Agent access to, and the right to remain on, the premises of such lessor,
consignee or other person so as to exercise Agent's rights and remedies and
otherwise deal with such Collateral and in the case of any consignee or other
person who at any time has custody, control or possession of any Collateral,
acknowledges that it holds and will hold possession of the Collateral for the
benefit of Agent and Lenders and agrees to follow all instructions of Agent with
respect thereto.
1.21 "Commitment" shall mean, at any time, as to each Lender, the
principal amount set forth below such Lender's signature on the signatures pages
hereto designated as the Commitment or on Schedule 1 to the Assignment and
Acceptance Agreement pursuant to which such Lender became a Lender hereunder in
accordance with the provisions of Section 13.7 hereof, as the same may be
adjusted from time to time in accordance with the terms hereof; sometimes being
collectively referred to herein as "Commitments".
1.22 "Congress" shall mean Congress Financial Corporation (Central), an
Illinois corporation, in its individual capacity, and its successors and
assigns.
1.23 "Credit Facility" shall mean the Loans and Letter of Credit
Accommodations provided to or for the benefit of any Borrower pursuant to
Sections 2.1 and 2.2 hereof.
1.24 "Default" shall mean an act, condition or event which with notice or
passage of time or both would constitute an Event of Default.
1.25 "Defaulting Lender" shall have the meaning set forth in Section 6.10
hereof.
1.26 "Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Agent, by and among Agent, the
Borrower or Guarantor with a deposit account at any bank and the bank at which
such deposit account is at any time maintained which provides that such bank
will comply with instructions originated by Agent directing disposition of the
funds in the deposit account without further consent by such Borrower or
Guarantor and such other terms and conditions as Agent may require, including as
to any such agreement with respect to any Blocked Account, providing that all
items received or deposited in the Blocked Accounts are the property of Agent,
that the bank has no lien upon, or right to setoff against, the Blocked
Accounts, the items received for deposit therein, or the funds from time to time
on deposit therein and that the bank will wire, or otherwise transfer, in
immediately available funds, on a daily basis to the Agent Payment Account all
funds received or deposited into the Blocked Accounts.
1.27 "Eligible Accounts" shall mean Accounts created by a Borrower which
are and continue to be acceptable to Agent based on the criteria set forth
below. In general, Accounts shall be Eligible Accounts if:
6
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by such Borrower or rendition of services by such Borrower in
the ordinary course of its business which transactions are completed in
accordance with the terms and provisions contained in any documents related
thereto;
(b) such Accounts are not unpaid (i) for Accounts with stated terms
of thirty-one (31) days or greater, more than sixty (60) days after the original
due date thereof or more than one hundred twenty (120) days after the original
invoice or statement date (as applicable) or (ii) for Accounts with stated terms
of less than thirty-one (31) days, more than sixty (60) days after the original
due date thereof or more than ninety (90) days after the original invoice or
statement date (as applicable) (or longer as may be acceptable to Agent in
Agent's sole discretion);
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(b) of this Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America or Canada (provided,
that, at any time promptly upon Agent's request, such Borrower shall execute and
deliver, or cause to be executed and delivered, such other agreements, documents
and instruments as may be required by Agent to perfect the security interests of
Agent in those Accounts of an account debtor with its chief executive office or
principal place of business in Canada in accordance with the applicable laws of
the Province of Canada in which such chief executive office or principal place
of business is located and take or cause to be taken such other and further
actions as Agent may request to enable Agent as secured party with respect
thereto to collect such Accounts under the applicable Federal or Provincial laws
of Canada) or, at Agent's option, if the chief executive office and principal
place of business of the account debtor with respect to such Accounts is located
other than in the United States of America or Canada, then if either: (i) the
account debtor has delivered to such Borrower an irrevocable letter of credit
issued or confirmed by a bank satisfactory to Agent and payable only in the
United States of America and in U.S. dollars, sufficient to cover such Account,
in form and substance satisfactory to Agent and if required by Agent, the
original of such letter of credit has been delivered to Agent or Agent's agent
and the issuer thereof, and such Borrower has complied with the terms of Section
5.2(f) hereof with respect to the assignment of the proceeds of such letter of
credit to Agent or naming Agent as transferee beneficiary thereunder, as Agent
may specify, or (ii) such Account is subject to credit insurance payable to
Agent issued by an insurer and on terms and in an amount acceptable to Agent, or
(iii) such Account is otherwise acceptable in all respects to Agent (subject to
such lending formula with respect thereto as Agent may determine);
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇ (such that the
obligation of the account debtors with respect to such Accounts is conditioned
upon such Borrower's satisfactory completion of any further performance under
the agreement giving rise thereto), ▇▇▇▇ and hold invoices or retainage
invoices, except as to ▇▇▇▇ and hold invoices, if Agent shall have
7
received an agreement in writing from the account debtor, in form and substance
satisfactory to Agent, confirming the unconditional obligation of the account
debtor to take the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and is not owed any amounts that may
give rise to any right of setoff or recoupment against such Accounts (but the
portion of the Accounts of such account debtor in excess of the amount at any
time and from time to time owed by such Borrower to such account debtor or
claimed owed by such account debtor may be deemed Eligible Accounts),
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Agent and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement that are subject to an intercreditor agreement in
form and substance satisfactory to Agent between the holder of such security
interest or lien and Agent;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee, agent or
other Affiliate of any Borrower or Guarantor;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Agent's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Agent;
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition (including, without limitation, any bankruptcy, dissolution,
liquidation, reorganization or similar proceeding);
(m) the aggregate amount of such Accounts owing by a single account
debtor do not constitute more than ten (10%) percent of the aggregate amount of
all otherwise Eligible Accounts, provided that, in the case of Accounts owing by
each of Advanced Auto Parts, Inc. and ▇▇▇▇▇▇ Discount Auto Stores Inc., such
Accounts do not constitute more than fifteen (15%) percent of the aggregate
amount of all otherwise Eligible Accounts (but the portion of the Accounts not
in excess of the applicable percentages may be deemed Eligible Accounts);
(n) such Accounts are not unpaid (i) for Accounts with stated terms
of thirty-one (31) days or greater, more than sixty (60) days after the original
due date thereof or more than one hundred twenty (120) days after the original
invoice or statement date (as applicable) or (ii) for Accounts with stated terms
of less then thirty-one (31) days, more than sixty (60) days
8
after the original due date thereof or more than ninety (90) days after the
original invoice or statement date (as applicable), in any case which constitute
more than fifty (50%) percent of the total Accounts of such Account Debtor;
(o) the account debtor is not located in a state requiring the
filing of a Notice of Business Activities Report or similar report in order to
permit such Borrower to seek judicial enforcement in such State of payment of
such Account, unless such Borrower has qualified to do business in such state or
has filed a Notice of Business Activities Report or equivalent report for the
then current year or such failure to file and inability to seek judicial
enforcement is capable of being remedied without any material delay or material
cost;
(p) such Accounts are owed by account debtors whose total
indebtedness to such Borrower does not exceed the credit limit, if any, with
respect to such account debtors as determined by such Borrower from time to
time, to the extent such credit limit as to any account debtor is established
consistent with the current practices of such Borrower as of the date hereof and
such credit limit is acceptable to Agent (but the portion of the Accounts not in
excess of such credit limit may be deemed Eligible Accounts); and
(q) such Accounts are owed by account debtors deemed creditworthy at
all times by Agent.
The criteria for Eligible Accounts set forth above may only be changed and any
new criteria for Eligible Accounts may only be established by Agent in good
faith based on either: (i) an event, condition or other circumstance arising
after the date hereof, or (ii) an event, condition or other circumstance
existing on the date hereof to the extent Agent has no written notice thereof
from a Borrower prior to the date hereof, in either case under clause (i) or
(ii) which adversely affects or could reasonably be expected to adversely affect
the Accounts in the good faith determination of Agent. Any Accounts which are
not Eligible Accounts shall nevertheless be part of the Collateral.
1.28 "Eligible Inventory" shall mean, as to each Borrower, Inventory of
such Borrower consisting of finished goods held for resale in the ordinary
course of the business of such Borrower and raw materials (including, without
limitation, cores) for such finished goods, in each case which are acceptable to
Agent based on the criteria set forth below. In general, Eligible Inventory
shall not include (a) work-in-process; (b) components which are not part of
finished goods; (c) spare parts for equipment; (d) packaging and shipping
materials; (e) supplies used or consumed in such Borrower's business; (f)
Inventory at premises other than those owned or leased and controlled by any
Borrower; provided, that, (i) as to locations which are leased by a Borrower, if
Agent shall not have received a Collateral Access Agreement from the owner and
lessor with respect to such location, duly authorized, executed and delivered by
such owner and lessor (or Agent shall determine to accept a Collateral Access
Agreement that does
9
not include all required provisions or provisions in the form otherwise required
by Agent), Agent may, at its option, establish such Reserves in respect of
amounts at any time due or to become due to the owner and lessor thereof as
Agent shall determine, and (ii) as to locations owned and operated by a third
person, if Agent shall not have received a Collateral Access Agreement from the
owner and operator with respect to such location, duly authorized, executed and
delivered by such owner and operator (or Agent shall determine to accept a
Collateral Access Agreement that does not include all required provisions or
provisions in the form otherwise required by Agent), Agent may, at its option,
establish such Reserves in respect of amounts at any time due or to become due
to the owner and operator thereof as Agent shall determine, provided that, in
addition, if required by Agent, in order for such Inventory at locations owned
and operated by a third person to be Eligible Inventory, Agent shall have
received: (A) UCC financing statements between the owner and operator, as
consignee or bailee and such Borrower, as consignor or ▇▇▇▇▇▇, in form and
substance satisfactory to Agent, which are duly assigned to Agent and (B) a
written notice to any lender to the owner and operator of the first priority
security interest in such Inventory of Agent; (g) Inventory subject to a
security interest or lien in favor of any Person other than Agent except those
permitted in this Agreement subject to any liens except those permitted in this
Agreement that are subject to an intercreditor agreement in form and substance
satisfactory to Agent between the holder of such security interest or lien and
Agent; (h) ▇▇▇▇ and hold goods; (i) unserviceable, obsolete or slow moving
Inventory; (j) Inventory which is not subject to the first priority, valid and
perfected security interest of Agent; (k) returned, damaged and/or defective
Inventory; (l) Inventory purchased or sold on consignment and (m) Inventory
located outside the United States of America. The criteria for Eligible
Inventory set forth above may only be changed and any new criteria for Eligible
Inventory may only be established by Agent in good faith based on either: (i) an
event, condition or other circumstance arising after the date hereof, or (ii) an
event, condition or other circumstance existing on the date hereof to the extent
Agent has no written notice thereof from a Borrower prior to the date hereof, in
either case under clause (i) or (ii) which adversely affects or could reasonably
be expected to adversely affect the Inventory in the good faith determination of
Agent. Any Inventory which is not Eligible Inventory shall nevertheless be part
of the Collateral.
1.29 "Eligible Transferee" shall mean (a) any Lender; (b) the parent
company of any Lender and/or any Affiliate of such Lender which is at least
fifty (50%) percent owned by such Lender or its parent company; (c) any person
(whether a corporation, partnership, trust or otherwise) that is engaged in the
business of making, purchasing, holding or otherwise investing in bank loans and
similar extensions of credit in the ordinary course of its business and is
administered or managed by a Lender or with respect to any Lender that is a fund
which invests in bank loans and similar extensions of credit, any other fund
that invests in bank loans and similar extensions of credit and is managed by
the same investment advisor as such Lender or by an Affiliate of such investment
advisor, and in each case is approved by Agent; and (d) any other commercial
bank, financial institution or "accredited investor" (as defined in Regulation D
under the Securities Act of 1933) approved by Agent, provided, that, (i) neither
any Borrower nor any Guarantor or any Affiliate of any Borrower or Guarantor
shall qualify as an Eligible Transferee and (ii) no Person to whom any
Indebtedness which is in any way subordinated in right of payment to any other
Indebtedness of any Borrower or Guarantor shall qualify as an Eligible
Transferee, except as Agent may otherwise specifically agree.
1.30 "Environmental Laws" shall mean all foreign, Federal, State and local
laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between any Borrower or
Guarantor and any Governmental Authority, (a) relating to pollution and the
protection, preservation or restoration of the environment (including air, water
vapor, surface water, ground water, drinking water, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural
resource), or to human health or safety, (b)
10
relating to the exposure to, or the use, storage, recycling, treatment,
generation, manufacture, processing, distribution, transportation, handling,
labeling, production, release or disposal, or threatened release, of Hazardous
Materials, or (c) relating to all laws with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous
Materials. The term "Environmental Laws" includes (i) the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Federal
Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act, the
Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii)
applicable state counterparts to such laws and (iii) any common law or equitable
doctrine that may impose liability or obligations for injuries or damages due
to, or threatened as a result of, the presence of or exposure to any Hazardous
Materials.
1.31 "Equipment" shall mean, as to each Borrower and Guarantor, all of
such Borrower's and Guarantor's now owned and hereafter acquired equipment,
wherever located, including machinery, data processing and computer equipment
(whether owned or licensed and including embedded software), vehicles, tools,
furniture, fixtures, all attachments, accessions and property now or hereafter
affixed thereto or used in connection therewith, and substitutions and
replacements thereof, wherever located.
1.32 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, together with all rules, regulations and interpretations thereunder or
related thereto.
1.33 "ERISA Affiliate" shall mean any person required to be aggregated
with any Borrower, any Guarantor or any of its or their respective Subsidiaries
under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.
1.34 "ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a
Plan; (b) the adoption of any amendment to a Plan that would require the
provision of security pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA; (c) the existence with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (d) the filing pursuant to Section 412 of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (e) the occurrence of a "prohibited
transaction" with respect to which any Borrower, Guarantor or any of its or
their respective Subsidiaries is a "disqualified person" (within the meaning of
Section 4975 of the Code) or with respect to which any Borrower, Guarantor or
any of its or their respective Subsidiaries could otherwise be liable; (f) a
complete or partial withdrawal by any Borrower, Guarantor or any ERISA Affiliate
from a Multiemployer Plan or a cessation of operations which is treated as such
a withdrawal or notification that a Multiemployer Plan is in reorganization; (g)
the filing of a notice of intent to terminate, the treatment of a Plan amendment
as a termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the Pension Benefit Guaranty Corporation to terminate a Plan; (h)
an event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan; (i) the
11
imposition of any liability under Title IV of ERISA, other than the Pension
Benefit Guaranty Corporation premiums due but not delinquent under Section 4007
of ERISA, upon any Borrower, Guarantor or any ERISA Affiliate in excess of
$250,000 and (j) any other event or condition with respect to a Plan including
any Plan subject to Title IV of ERISA maintained, or contributed to, by any
ERISA Affiliate that could reasonably be expected to result in liability of any
Borrower in excess of $250,000.
1.35 "Eurodollar Rate" shall mean with respect to the Interest Period for
a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by a Borrower or Administrative Borrower
on behalf of such Borrower and approved by Agent) on or about 9:00 a.m. (New
York time) two (2) Business Days prior to the commencement of such Interest
Period in amounts substantially equal to the principal amount of the Eurodollar
Rate Loans requested by and available to such Borrower in accordance with this
Agreement, with a maturity of comparable duration to the Interest Period
selected by or on behalf of a Borrower.
1.36 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.37 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.38 "Excess Availability" shall mean, as to each Borrower, the amount, as
determined by Agent, calculated at any date, equal to: (a) the lesser of: (i)
the Borrowing Base of such Borrower and (ii) the Revolving Loan Limit of such
Borrower (in each case under (i) or (ii) after giving effect to any Reserves
other than any Reserves in respect of Letter of Credit Accommodations), minus
(b) the sum of: (i) the amount of all then outstanding and unpaid Obligations of
such Borrower (but not including for this purpose Obligations of such Borrower
arising pursuant to any guarantees in favor of Agent and Lenders of the
Obligations of the other Borrowers or the then outstanding aggregate principal
amount of any outstanding Letter of Credit Accommodations), plus (ii) the amount
of all Reserves then established in respect of Letter of Credit Accommodations,
plus (iii) the aggregate amount of all then outstanding and unpaid trade
payables and other obligations of such Borrower which are outstanding more than
sixty (60) days past due as of such time (other than trade payables or other
obligations being contested or disputed by such Borrower in good faith), plus
(iv) without duplication, the amount of checks issued by such Borrower to pay
trade payables and other obligations which are more than sixty (60) days past
due as of such time (other than trade payables or other obligations being
contested or disputed by such Borrower in good faith), but not yet sent.
1.39 "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.40 "Existing Lenders" shall mean the lenders to Borrowers listed on
Schedule 1.40 hereto (and including LaSalle Business Credit Corp.) in its
capacity as agent acting for such lenders) and their respective predecessors,
successors and assigns.
12
1.41 "Existing Letters of Credit" shall mean, collectively, the letters of
credit issued for the account of a Borrower or Guarantor or for which such
Borrower or Guarantor is otherwise liable listed on Schedule 1.41 hereto, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.42 "Fee Letter" shall mean the letter agreement, dated of even date
herewith, by and among Borrowers, Guarantors and Agent, setting forth certain
fees payable by Borrowers to Agent for the benefit of itself and Lenders, as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.43 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements, deposit account control agreements,
investment property control agreements, intercreditor agreements and all other
agreements, documents and instruments now or at any time hereafter executed
and/or delivered by any Borrower or Obligor in connection with this Agreement.
1.44 "Finished Goods Advance Rate" shall mean with respect to all finished
goods Inventory (other than Autospecialty Inventory) seventy (70%) percent and
in the case of Autospecialty Inventory, sixty (60%) percent, provided, that,
commencing February 1, 2004 and on the first day of each successive calendar
month thereafter, each of the respective advance rates set forth above shall be
reduced by one (1%) percentage point per month until the Finished Goods Advance
Rate for all finished goods Inventory (other than Autospecialty Inventory) is
sixty (60%) percent and the Finished Goods Advance Rate for all Autospecialty
Inventory is forty-two (42%) percent.
1.45 "Finova Note" shall mean the Subordinated Debenture dated July 11,
1997 by Parent to Finova Mezzanine Capital, Inc. a Tennessee corporation
formerly known as Sirrom Capital Corporation, in the original principal amount
of $4,500,000 and with a current principal balance, as of the date of this
Agreement, of $750,000, as amended.
1.46 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 9.17 and 9.18 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the most recent audited financial statements
delivered to Agent prior to the date hereof.
1.47 "Global Capital Notes" shall mean (i) the $1,550,000 Convertible Note
by Parent to Global Capital Funding Group, L.P. dated July 7, 2003; (ii) the
$1,200,000 Convertible Note by Parent to GCA Strategic Investment Fund Limited
dated November 26, 2003; and (iii) the $300,000 Convertible Note by Parent to
GCA Strategic Investment Fund Limited dated January __, 2004.
1.48 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or
13
regulatory authority) thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
1.49 "Guarantors" shall mean, collectively, the following (together with
their respective successors and assigns): (a) Universal Automotive Industries,
Inc., a Delaware corporation; and (b) UBP Hungary, Inc., a Delaware corporation;
each sometimes being referred to herein individually as a "Guarantor".
1.50 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.51 "Indebtedness" shall mean, with respect to any Person, any liability,
whether or not contingent, (a) in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof) or evidenced by bonds, notes, debentures or similar
instruments; (b) representing the balance deferred and unpaid of the purchase
price of any property or services (except any such balance that constitutes an
account payable to a trade creditor (whether or not an Affiliate) created,
incurred, assumed or guaranteed by such Person in the ordinary course of
business of such Person in connection with obtaining goods, materials or
services that is not overdue by more than ninety (90) days, unless the trade
payable is being contested in good faith); (c) all obligations as lessee under
leases which have been, or should be, in accordance with GAAP recorded as
Capital Leases; (d) any contractual obligation, contingent or otherwise, of such
Person to pay or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, or any agreement to purchase,
repurchase, or otherwise acquire such indebtedness, obligation or liability or
any security therefor, or to provide funds for the payment or discharge thereof,
or to maintain solvency, assets, level of income, or other financial condition;
(e) all obligations with respect to redeemable stock and redemption or
repurchase obligations under any Capital Stock or other equity securities issued
by such Person; (f) all reimbursement obligations and other liabilities of such
Person with respect to surety bonds (whether bid, performance or otherwise),
letters of credit, banker's acceptances, drafts or similar documents or
instruments issued for such Person's account; (g) all indebtedness of such
Person in respect of indebtedness of another Person for borrowed money or
indebtedness of another Person otherwise described in this definition which is
secured by any consensual lien, security interest, collateral assignment,
conditional sale, mortgage, deed of trust, or other encumbrance on any asset of
such Person, whether or not such obligations, liabilities or indebtedness are
assumed by or are a personal liability of such Person, all as of such time; (h)
all obligations, liabilities and indebtedness of such Person (marked to market)
arising under swap agreements, cap agreements and collar agreements and other
agreements or arrangements designed to protect such person against fluctuations
in interest rates or currency or commodity values; (i) all obligations owed by
such Person under License Agreements with respect to non-
14
refundable, advance or minimum guarantee royalty payments; and (j) the principal
and interest portions of all rental obligations of such Person under any
synthetic lease or similar off-balance sheet financing where such transaction is
considered to be borrowed money for tax purposes but is classified as an
operating lease in accordance with GAAP.
1.52 "Information Certificate" shall mean, collectively, the Information
Certificates of Borrowers and Guarantors constituting Exhibit C hereto
containing material information with respect to Borrowers and Guarantors, their
respective businesses and assets provided by or on behalf of Borrowers and
Guarantors to Agent in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.53 "Intellectual Property" shall mean, as to each Borrower and
Guarantor, such Borrower's and Guarantor's now owned and hereafter arising or
acquired: patents, patent rights, patent applications, copyrights, works which
are the subject matter of copyrights, copyright registrations, trademarks, trade
names, trade styles, trademark and service ▇▇▇▇ applications, and licenses and
rights to use any of the foregoing; all extensions, renewals, reissues,
divisions, continuations, and continuations-in-part of any of the foregoing; all
rights to ▇▇▇ for past, present and future infringement of any of the foregoing;
inventions, trade secrets, formulae, processes, compounds, drawings, designs,
blueprints, surveys, reports, manuals, and operating standards; goodwill
(including any goodwill associated with any trademark or the license of any
trademark); customer and other lists in whatever form maintained; trade secret
rights, copyright rights, rights in works of authorship, domain names and domain
name registration; software and contract rights relating to computer software
programs, in whatever form created or maintained.
1.54 "Interest Period" shall mean for any Eurodollar Rate Loan, a period
of approximately one (1), two (2), or three (3) months duration as any Borrower
(or Administrative Borrower on behalf of such Borrower) may elect, the exact
duration to be determined in accordance with the customary practice in the
applicable Eurodollar Rate market; provided, that, such Borrower (or
Administrative Borrower on behalf of such Borrower) may not elect an Interest
Period which will end after the last day of the then-current term of this
Agreement.
1.55 "Interest Rate" shall mean,
(a) Subject to clauses (b) and (c) of this definition below:
(i) as to Prime Rate Loans, a rate equal to one-half (.50%)
percent per annum in excess of the Prime Rate;
(ii) as to Eurodollar Rate Loans, a rate equal to two and
three-quarters (2.75%) percent per annum in excess of the Adjusted Eurodollar
Rate (in each case, based on the Eurodollar Rate applicable for the relevant
Interest Period, whether such rate is higher or lower than any rate previously
quoted to a Borrower);
(b) Subject to clause (c) of this definition below, effective as of
August 1, 2004, the Interest Rate payable by each Borrower shall be increased or
decreased, as the case may be, (i) as to Prime Rate Loans, to the rate equal to
the Applicable Margin for Prime Rate
15
Loans on a per annum basis in excess of the Prime Rate, and (ii) as to
Eurodollar Rate Loans, to the rate equal to the Applicable Margin for Eurodollar
Rate Loans on a per annum basis in excess of the Adjusted Eurodollar Rate.
(c) Notwithstanding anything to the contrary contained in clauses
(a) and (b) of this definition, the Applicable Margin otherwise used to
calculate the Interest Rate for Prime Rate Loans and Eurodollar Rate Loans shall
be the highest percentage set forth in the definition of the term Applicable
Margin for each category of Loans (without regard to the amount of Monthly
Average Excess Availability) plus two (2%) percent per annum, at Agent's option,
(i) for the period (A) from and after the effective date of termination or
non-renewal hereof until Agent and Lenders have received full and final payment
of all outstanding and unpaid Obligations which are not contingent and cash
collateral or letter of credit, as Agent may specify, in the amounts and on the
terms required under Section 13.1 hereof for contingent Obligations
(notwithstanding entry of a judgment against any Borrower or Guarantor) and (B)
from and after the date of the occurrence of an Event of Default and for so long
as such Event of Default is continuing and (ii) on Loans to a Borrower at any
time outstanding in excess of the Borrowing Base of such Borrower (whether or
not such excess(es) arise or are made with or without the knowledge or consent
of Agent or any Lender and whether made before or after an Event of Default).
1.56 "Inventory" shall mean, as to each Borrower and Guarantor, all of
such Borrower's and Guarantor's now owned and hereafter existing or acquired
goods, wherever located, which (a) are leased by such Borrower or Guarantor as
lessor; (b) are held by such Borrower for sale or lease or to be furnished under
a contract of service; (c) are furnished by such Borrower or Guarantor under a
contract of service; or (d) consist of raw materials, work in process, finished
goods or materials used or consumed in its business.
1.57 "Inventory Loan Limit" shall mean, as to each Borrower, at any time,
the amount equal to $20,000,000 (the "Closing Inventory Limit") minus the then
outstanding principal amount of Revolving Loans to the other Borrowers (and
including Letter of Credit Accommodations to the extent provided in the
definition of the term Borrowing Base) based on Eligible Inventory. During the
first year of this Agreement, commencing February 1, 2004 and on the first day
of each successive calendar month thereafter, the Closing Inventory Loan Limit
shall be reduced by the amount of $208,333 per month so that on the first
anniversary of this Agreement, the Inventory Loan Limit shall be, as to each
Borrower, at any time, the amount equal to $17,500,000 minus the then
outstanding principal amount of Revolving Loans to the other Borrowers (and
including Letter of Credit Accommodations to the extent provided in the
definition of the term Borrowing Base) based on Eligible Inventory.
1.58 "Investment Property Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Agent, by and among Agent, any
Borrower or Guarantor (as the case may be) and any securities intermediary,
commodity intermediary or other person who has custody, control or possession of
any investment property of such Borrower or Guarantor acknowledging that such
securities intermediary, commodity intermediary or other person has custody,
control or possession of such investment property on behalf of Agent, that it
will comply with entitlement orders originated by Agent with respect to such
investment property, or other instructions of Agent, or (as the case may be)
apply any value distributed on account of any
16
commodity contract as directed by Agent, in each case, without the further
consent of such Borrower or Guarantor and including such other terms and
conditions as Agent may require.
1.59 "Laurus Notes" shall mean: (i) the $2,500,000 Convertible Term Note
dated October 31, 2003 by Parent to Laurus Master Fund, Ltd. and (ii) the
$2,000,000 Convertible Term Note dated January 9, 2004 by Parent to Laurus
Master Fund, Ltd.
1.60 "Lenders" shall mean the financial institutions who are signatories
hereto as Lenders and other persons made a party to this Agreement as a Lender
in accordance with Section 13.7 hereof, and their respective successors and
assigns; each sometimes being referred to herein individually as a "Lender".
1.61 "Letter of Credit Accommodations" shall mean, collectively, the
letters of credit, merchandise purchase or other guaranties which are from time
to time either (a) issued or opened by Agent or any Lender for the account of
any Borrower or Obligor or (b) with respect to which Agent or Lenders have
agreed to indemnify the issuer or guaranteed to the issuer the performance by
any Borrower or Obligor of its obligations to such issuer; sometimes being
referred to herein individually as "Letter of Credit Accommodation".
1.62 "License Agreements" shall have the meaning set forth in Section 8.11
hereof.
1.63 "Loan Limit" shall mean, as to each Borrower, at any time, the amount
equal to the Maximum Credit minus the then outstanding principal amount of the
Loans and the Letter of Credit Accommodations provided to the other Borrowers.
1.64 "Loans" shall mean the Revolving Loans.
1.65 "Material Adverse Effect" shall mean a material adverse effect on (a)
the financial condition, business, performance or operations of Borrowers or the
legality, validity or enforceability of this Agreement or any of the other
Financing Agreements; (b) the legality, validity, enforceability, perfection or
priority of the security interests and liens of Agent upon the Collateral; (c)
the Collateral or its value, (d) the ability of the Borrowers (taken as a whole)
to repay the Obligations or of the Borrowers (taken as a whole) to perform their
obligations under this Agreement or any of the other Financing Agreements as and
when to be performed; or (e) the ability of Agent or any Lender to enforce the
Obligations or realize upon the Collateral or otherwise with respect to the
rights and remedies of Agent and Lenders under this Agreement or any of the
other Financing Agreements.
1.66 "Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements), written or oral, of any Borrower or
Guarantor involving monetary liability of or to any Person in an amount in
excess of $1,000,000 in any fiscal year and (b) any other contract or other
agreement (other than the Financing Agreements), whether written or oral, to
which any Borrower or Guarantor is a party as to which the breach,
nonperformance, cancellation or failure to renew by any party thereto would have
a Material Adverse Effect.
1.67 "Maximum Credit" shall mean the amount of $35,000,000.
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1.68 "Multiemployer Plan" shall mean a "multi-employer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding six (6) years contributed to by any Borrower,
Guarantor or any ERISA Affiliate.
1.69 "Net Amount of Eligible Accounts" shall mean, as to any Borrower, the
gross amount of the Eligible Accounts of such Borrower less (a) sales, excise or
similar taxes included in the amount thereof and (b) returns, discounts, claims,
credits and allowances of any nature at any time issued, owing, granted,
outstanding, available or claimed with respect thereto, without duplication of
Reserves.
1.70 "Net Recovery Percentage" shall mean the fraction, expressed as a
percentage, (a) the numerator of which is the amount equal to the amount of the
recovery in respect of the Inventory at such time on a "net orderly liquidation
value" basis as set forth in the most recent acceptable appraisal of Inventory
received by Agent in accordance with Section 7.3, net of operating expenses,
liquidation expenses and commissions, and (b) the denominator of which is the
applicable original cost of the aggregate amount of the Inventory subject to
such appraisal.
1.71 "Obligations" shall mean any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by any or all of Borrowers to Agent or any
Lender and/or any of their Affiliates, including principal, interest, charges,
fees, costs and expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, arising under this Agreement or any of the
other Financing Agreements, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of this
Agreement or after the commencement of any case with respect to such Borrower
under the United States Bankruptcy Code or any similar statute (including the
payment of interest and other amounts which would accrue and become due but for
the commencement of such case, whether or not such amounts are allowed or
allowable in whole or in part in such case), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, or secured or unsecured.
1.72 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations (including, without
limitation, Guarantors), other than Borrowers.
1.73 "Parent" shall mean Universal Automotive Industries, Inc., a Delaware
corporation, and its successors and assigns.
1.74 "Participant" shall mean any financial institution that acquires and
holds a participation in the interest of any Lender in any of the Loans and
Letter of Credit Accommodations in conformity with the provisions of Section
13.7 of this Agreement governing participations.
1.75 "Permitted Holders" shall mean the persons listed on Schedule 1.75
hereto and their respective successors and assigns.
1.76 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Code), limited
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liability company, limited liability partnership, business trust, unincorporated
association, joint stock corporation, trust, joint venture or other entity or
any government or any agency or instrumentality or political subdivision
thereof.
1.77 "Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which any Borrower or Guarantor sponsors, maintains, or to which it
makes, is making, or is obligated to make contributions, or in the case of a
Multiemployer Plan has made contributions at any time during the immediately
preceding six (6) plan years.
1.78 "Prime Rate" shall mean the rate from time to time publicly announced
by Wachovia Bank, National Association, or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
1.79 "Prime Rate Loans" shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.80 "Pro Rata Share" shall mean as to any Lender, the fraction (expressed
as a percentage) the numerator of which is such Lender's Commitment and the
denominator of which is the aggregate amount of all of the Commitments of
Lenders, as adjusted from time to time in accordance with the provisions of
Section 13.7 hereof; provided, that, if the Commitments have been terminated,
the numerator shall be the unpaid amount of such Lender's Loans and its interest
in the Letter of Credit Accommodations and the denominator shall be the
aggregate amount of all unpaid Loans and Letter of Credit Accommodations.
1.81 "Provision for Taxes" shall mean an amount equal to all taxes imposed
on or measured by net income, whether Federal, State, Provincial, county or
local, and whether foreign or domestic, that are paid or payable by any Person
in respect of any period in accordance with GAAP.
1.82 "Purchase Agreements" shall mean, individually and collectively, the
Autospecialty Asset Purchase Agreement, dated January 9, 2004, between
Administrative Borrower and Seller, together with bills of sale, quitclaim
deeds, assignment and assumption agreements and such other instruments of
transfer as are referred to therein and all side letters with respect thereto,
and all agreements, documents and instruments executed and/or delivered in
connection therewith, as all of the foregoing now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced;
sometimes being referred to herein individually as a "Purchase Agreement".
1.83 "Purchased Assets" shall mean all of the assets and properties
acquired by Administrative Borrower from Seller pursuant to the Purchase
Agreements.
1.84 "Raw Materials Inventory Loan Limit" shall mean $1,250,000.
1.85 "Real Property" shall mean all now owned and hereafter acquired real
property of each Borrower and Guarantor, including leasehold interests, together
with all buildings, structures, and other improvements located thereon and all
licenses, easements and
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appurtenances relating thereto, wherever located, including the real property
and related assets more particularly described in the Mortgages.
1.86 "Receivables" shall mean all of the following now owned or hereafter
arising or acquired property of each Borrower and Guarantor: (a) all Accounts;
(b) all interest, fees, late charges, penalties, collection fees and other
amounts due or to become due or otherwise payable in connection with any
Account; (c) all payment intangibles of such Borrower or Guarantor; (d) letters
of credit, indemnities, guarantees, security or other deposits and proceeds
thereof issued payable to any Borrower or Guarantor or otherwise in favor of or
delivered to any Borrower or Guarantor in connection with any Account; or (e)
all other accounts, contract rights, chattel paper, instruments, notes, general
intangibles and other forms of obligations owing to any Borrower or Guarantor,
whether from the sale and lease of goods or other property, licensing of any
property (including Intellectual Property or other general intangibles),
rendition of services or from loans or advances by any Borrower or Guarantor or
to or for the benefit of any third person (including loans or advances to any
Affiliates or Subsidiaries of any Borrower or Guarantor) or otherwise associated
with any Accounts, Inventory or general intangibles of any Borrower or Guarantor
(including, without limitation, choses in action, causes of action, tax refunds,
tax refund claims, any funds which may become payable to any Borrower or
Guarantor in connection with the termination of any Plan or other employee
benefit plan and any other amounts payable to any Borrower or Guarantor from any
Plan or other employee benefit plan, rights and claims against carriers and
shippers, rights to indemnification, business interruption insurance and
proceeds thereof, casualty or any similar types of insurance and any proceeds
thereof and proceeds of insurance covering the lives of employees on which any
Borrower or Guarantor is a beneficiary).
1.87 "Records" shall mean, as to each Borrower and Guarantor, all of such
Borrower's and Guarantor's present and future books of account of every kind or
nature, purchase and sale agreements, invoices, ledger cards, bills of lading
and other shipping evidence, statements, correspondence, memoranda, credit files
and other data relating to the Collateral or any account debtor, together with
the tapes, disks, diskettes and other data and software storage media and
devices, file cabinets or containers in or on which the foregoing are stored
(including any rights of any Borrower or Guarantor with respect to the foregoing
maintained with or by any other person).
1.88 "Reference Bank" shall mean Wachovia Bank, National Association, or
such other bank as Agent may from time to time designate.
1.89 "Renewal Date" shall the meaning set forth in Section 13.1 hereof.
1.90 "Register" shall have the meaning set forth in Section 13.7 hereof.
1.91 "Required Lenders" shall mean, at any time, those Lenders whose Pro
Rata Shares aggregate sixty-six and two-thirds (66 2/3%) percent or more of the
aggregate of the Commitments of all Lenders, or if the Commitments shall have
been terminated, Lenders to whom at least sixty-six and two-thirds (66 2/3%)
percent of the then outstanding Obligations are owing.
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1.92 "Reserves" shall mean as of any date of determination, such amounts
as Agent may from time to time establish and revise in good faith reducing the
amount of Revolving Loans and Letter of Credit Accommodations which would
otherwise be available to any Borrower under the lending formula(s) provided for
herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Agent in good faith, adversely affect, or would have a reasonable
likelihood of adversely affecting, either (i) the Collateral or any other
property which is security for the Obligations or its value or (ii) the assets,
business or prospects of any Borrower or Obligor or (iii) the security interests
and other rights of Agent or any Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Agent's good
faith belief that any collateral report or financial information furnished by or
on behalf of any Borrower or Obligor to Agent is or may have been incomplete,
inaccurate or misleading in any material respect or (c) to reflect outstanding
Letter of Credit Accommodations as provided in Section 2.2 hereof or (d) in
respect of any state of facts which Agent determines in good faith constitutes a
Default or an Event of Default. Without limiting the generality of the
foregoing, Reserves may be established to reflect that dilution with respect to
the Accounts (based on the ratio of the aggregate amount of non-cash reductions
in Accounts for any period to the aggregate dollar amount of the sales of
Borrower for such period) as calculated by Agent for any period is or is
reasonably anticipated to be greater than five (5%) percent. To the extent Agent
may revise the lending formulas used to determine the Borrowing Base or
establish new criteria or revise existing criteria for Eligible Accounts or
Eligible Inventory so as to address any circumstances, condition, event or
contingency in a manner satisfactory to Agent, Agent shall not establish a
Reserve for the same purpose. The amount of any Reserve established by Agent
shall have a reasonable relationship to the event, condition or other matter
which is the basis for such reserve as determined by Agent in good faith.
1.93 "Revolving Loan Limit" shall mean, as to each Borrower, at any time,
the amount equal to the $35,000,000 minus the then outstanding principal amount
of the Revolving Loans and Letter of Credit Accommodations provided to the other
Borrowers.
1.94 "Revolving Loans" shall mean the loans now or hereafter made by or on
behalf of any Lender or by Agent for the account of any Lender on a revolving
basis pursuant to the Credit Facility (involving advances, repayments and
readvances) as set forth in Section 2.1 hereof.
1.95 "Seller" shall mean ▇▇▇▇▇▇-▇▇▇▇▇ Company, a Delaware corporation, and
its successors and assigns.
1.96 "Solvent" shall mean, at any time with respect to any Person, that at
such time such Person (a) is able to pay its debts as they mature and has (and
has a reasonable basis to believe it will continue to have) sufficient capital
(and not unreasonably small capital) to carry on its business consistent with
its practices as of the date hereof, and (b) the assets and properties of such
Person at a fair valuation (and including as assets for this purpose at a fair
valuation all rights of subrogation, contribution or indemnification arising
pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).
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1.97 "Special Agent Advances" shall have the meaning set forth in Section
12.11 hereof.
1.98 "Subsidiary" or "subsidiary" shall mean, with respect to any Person,
any corporation, limited liability company, limited liability partnership or
other limited or general partnership, trust, association or other business
entity of which an aggregate of at least a majority of the outstanding Capital
Stock or other interests entitled to vote in the election of the board of
directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), managers, trustees
or other controlling persons, or an equivalent controlling interest therein, of
such Person is, at the time, directly or indirectly, owned by such Person and/or
one or more subsidiaries of such Person.
1.99 "UCC" shall mean the Uniform Commercial Code as in effect in the
State of Illinois and any successor statute, as in effect from time to time
(except that terms used herein which are defined in the Uniform Commercial Code
as in effect in the State of Illinois on the date hereof shall continue to have
the same meaning notwithstanding any replacement or amendment of such statute
except as Agent may otherwise determine).
1.100 "Value" shall mean, as determined by Agent in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in first-out
basis in accordance with GAAP or (b) market value, provided, that, for purposes
of the calculation of the Borrowing Base, (i) the Value of the Inventory shall
not include: (A) the portion of the value of Inventory equal to the profit
earned by any Affiliate on the sale thereof to any Borrower or (B) write-ups or
write-downs in value with respect to currency exchange rates and (ii)
notwithstanding anything to the contrary contained herein, the cost of the
Inventory shall be computed in the same manner and consistent with the most
recent appraisal of the Inventory received and accepted by Agent prior to the
date hereof, if any.
1.101 "Voting Stock" shall mean with respect to any Person, (a) one (1) or
more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) of this definition.
1.102 "Working Capital" shall mean as to any Person, at any time, in
accordance with GAAP, on a consolidated basis for such Person and its
subsidiaries (if any), the amount equal to the difference between: (a) the
aggregate net book value of all current assets of such Person and its
subsidiaries (as determined in accordance with GAAP), calculating the book value
of inventory for this purpose on a first-in-first-out basis, and (b) all current
liabilities of such Person and its subsidiaries (as determined in accordance
with GAAP), provided, that, as to Parent, for purposes of Section 9.18, the
liabilities of Administrative Borrower and its Subsidiaries to Agent and Lenders
under this Agreement shall not be considered current liabilities (whether or not
classified as current liabilities in accordance with GAAP).
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SECTION 2. CREDIT FACILITIES
2.1 Loans.
(a) Subject to and upon the terms and conditions contained herein,
each Lender severally (and not jointly) agrees to make its Pro Rata Share of
Revolving Loans to each Borrower from time to time in amounts requested by such
Borrower (or Administrative Borrower on behalf of such Borrower) up to the
amount outstanding at any time equal to the lesser of: (i) the Borrowing Base of
such Borrower at such time or (ii) the Revolving Loan Limit of such Borrower at
such time.
(b) Agent may, in its discretion, from time to time, upon not less
than five (5) days prior notice to Administrative Borrower, reduce the lending
formula(s) with respect to Eligible Inventory to the extent that Agent
determines in good faith that: (i) the number of days of the turnover of the
Inventory for any period has adversely changed or (ii) the liquidation value of
the Eligible Inventory, or any category thereof, has decreased, including any
decrease attributable to a change in the nature, quality or mix of the Inventory
(determined based on the most recent appraisal received by Agent, or otherwise
as reasonably determined in good faith by Agent). The amount of any decrease in
the lending formulas shall have a reasonable relationship to the event,
condition or circumstance which is the basis for such decrease as determined by
Agent in good faith. In determining whether to reduce the lending formula(s),
Agent may consider events, conditions, contingencies or risks which are also
considered in determining Eligible Accounts, Eligible Inventory or in
establishing Reserves.
(c) Except in Agent's discretion, with the consent of all Lenders,
or as otherwise provided herein, (i) the aggregate amount of the Loans and the
Letter of Credit Accommodations outstanding at any time shall not exceed the
Maximum Credit, (ii) the aggregate principal amount of the Revolving Loans and
Letter of Credit Accommodations outstanding at any time to a Borrower shall not
exceed the lesser of the Borrowing Base of such Borrower or the Revolving Loan
Limit of such Borrower, (iii) the aggregate principal amount of the Loans and
Letter of Credit Accommodations outstanding at any time to a Borrower shall not
exceed the Loan Limit of such Borrower, (iv) the aggregate principal amount of
the Revolving Loans outstanding at any time to Borrowers based on the Eligible
Inventory of Borrowers shall not exceed the Inventory Loan Limit and (v) the
aggregate principal amount of the Revolving Loans outstanding at any time to
Borrowers based on the Eligible Inventory of Borrowers consisting raw materials
shall not exceed the Inventory Loan Limit.
(d) In the event that the aggregate principal amount of the
Revolving Loans and Letter of Credit Accommodations outstanding to a Borrower
exceed the Borrowing Base of such Borrower or the Revolving Loan Limit of such
Borrower, or the aggregate principal amount of Revolving Loans and Letter of
Credit Accommodations based on the Eligible Inventory of a Borrower exceed the
Inventory Loan Limit of such Borrower, or the aggregate principal amount of
Revolving Loans and Letter of Credit Accommodations based on the Eligible
Inventory of all Borrowers exceeds the sublimit set forth above, or the
aggregate amount of the outstanding Letter of Credit Accommodations exceed the
sublimit for Letter of Credit Accommodations set forth in Section 2.2(e), or the
aggregate amount of the Loans and Letter of Credit Accommodations exceed the
Maximum Credit, such event shall not limit, waive or otherwise
23
affect any rights of Agent or Lenders in such circumstances or on any future
occasions and Borrowers shall, upon demand by Agent, which may be made at any
time or from time to time, immediately repay to Agent the entire amount of any
such excess(es) for which payment is demanded.
2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained herein,
at the request of a Borrower (or Administrative Borrower on behalf of such
Borrower), Agent agrees, for the ratable risk of each Lender according to its
Pro Rata Share, to provide or arrange for Letter of Credit Accommodations for
the account of such Borrower containing terms and conditions acceptable to Agent
and the issuer thereof. Any payments made by or on behalf of Agent or any Lender
to any issuer thereof and/or related parties in connection with the Letter of
Credit Accommodations provided to or for the benefit of a Borrower shall
constitute additional Revolving Loans to such Borrower pursuant to this Section
2 (or Special Agent Advances as the case may be).
(b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, Borrowers
shall pay to Agent, for the benefit of Lenders, monthly a letter of credit fee
at a rate equal to two and one-half (2.50%) percent per annum on the daily
outstanding balance of the Letter of Credit Accommodations during the
immediately preceding month (or part thereof), payable in arrears as of the
first day of each succeeding month, provided, that, effective as of the first
(1st) day of the second calendar month after the date hereof, such percentage
shall be increased or decreased, as the case may be, to the percentage (on a per
annum basis) set forth below if the Monthly Average Excess Availability for the
immediately preceding calendar month is at or within the amounts indicated for
such percentages:
Applicable
Monthly Average Letter of Credit
Tier Excess Availability Fee Margin
----- ---------------------------------------- -----------------
1 $5,000,000 or more 2.25%
Greater than or equal to $2,500,000 and
2 less than $5,000,000 2.50%
3 Less than $2,500,000 2.75%
provided, that, (i) the applicable percentage shall be calculated and
established once each calendar month and shall remain in effect until adjusted
thereafter after the end of the next calendar month, (ii) notwithstanding the
amount of the Monthly Average Excess Availability, for each month prior to the
month commencing August 1, 2004, in no event shall the Applicable Letter of
Credit Fee Margin be less than the percentage set forth in Tier 2 of the
schedule above and (iii) notwithstanding anything to the contrary contained
herein, Agent may, and upon the written direction of Required Lenders shall,
require Borrowers to pay to Agent for the benefit of Lenders, such letter of
credit fee at a rate equal to four and three-quarters (4.75%) percent per annum
on such daily outstanding balance (A) for the period (1) from and after the
effective date
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of termination or non-renewal hereof until Agent and Lenders have
received full and final payment of all outstanding and unpaid Obligations which
are not contingent and cash collateral or letter of credit, as Agent may
specify, in the amounts and on the terms required under Section 13.1 hereof for
contingent Obligations (notwithstanding entry of a judgment against any Borrower
or Guarantor) and (2) from and after the date of the occurrence of an Event of
Default and for so long as such Event of Default is continuing. Such letter of
credit fee shall be calculated on the basis of a three hundred sixty (360) day
year and actual days elapsed and the obligation of Borrowers to pay such fee
shall survive the termination of this Agreement.
(c) The Borrower requesting such Letter of Credit Accommodation (or
Administrative Borrower on behalf of such Borrower) shall give Agent two (2)
Business Days' prior written notice of such Borrower's request for the issuance
of a Letter of Credit Accommodation. Such notice shall be irrevocable and shall
specify the original face amount of the Letter of Credit Accommodation
requested, the effective date (which date shall be a Business Day and in no
event shall be a date less than ten (10) days prior to the end of the then
current term of this Agreement) of issuance of such requested Letter of Credit
Accommodation, whether such Letter of Credit Accommodations may be drawn in a
single or in partial draws, the date on which such requested Letter of Credit
Accommodation is to expire (which date shall be a Business Day), the purpose for
which such Letter of Credit Accommodation is to be issued, and the beneficiary
of the requested Letter of Credit Accommodation. The Borrower requesting the
Letter of Credit Accommodation (or Administrative Borrower on behalf of such
Borrower) shall attach to such notice the proposed terms of the Letter of Credit
Accommodation.
(d) In addition to being subject to the satisfaction of the
applicable conditions precedent contained in Section 4 hereof and the other
terms and conditions contained herein, no Letter of Credit Accommodations shall
be available unless each of the following conditions precedent have been
satisfied in a manner satisfactory to Agent: (i) the Borrower requesting such
Letter of Credit Accommodation (or Administrative Borrower on behalf of such
Borrower) shall have delivered to the proposed issuer of such Letter of Credit
Accommodation at such times and in such manner as such proposed issuer may
require, an application, in form and substance satisfactory to such proposed
issuer and Agent, for the issuance of the Letter of Credit Accommodation and
such other documents as may be required pursuant to the terms thereof, and the
form and terms of the proposed Letter of Credit Accommodation shall be
satisfactory to Agent and such proposed issuer, (ii) as of the date of issuance,
no order of any court, arbitrator or other Governmental Authority shall purport
by its terms to enjoin or restrain money center banks generally from issuing
letters of credit of the type and in the amount of the proposed Letter of Credit
Accommodation, and no law, rule or regulation applicable to money center banks
generally and no request or directive (whether or not having the force of law)
from any Governmental Authority with jurisdiction over money center banks
generally shall prohibit, or request that the proposed issuer of such Letter of
Credit Accommodation refrain from, the issuance of letters of credit generally
or the issuance of such Letters of Credit Accommodation; and (iii) the Excess
Availability of the Borrower requesting such Letter of Credit Accommodation,
prior to giving effect to any Reserves with respect to such Letter of Credit
Accommodations, on the date of the proposed issuance of any Letter of Credit
Accommodations, shall be equal to or greater than: (A) if the proposed Letter of
Credit Accommodation is for the purpose of purchasing Eligible Inventory and the
documents of title with respect thereto are consigned to the issuer, the sum of
(1) the percentage equal to one hundred (100%) percent
25
minus the then applicable percentage with respect to Eligible Inventory set
forth in the definition of the term Borrowing Base multiplied by the Value of
such Eligible Inventory, plus (2) freight, taxes, duty and other amounts which
Agent estimates must be paid in connection with such Inventory upon arrival and
for delivery to one of such Borrower's locations for Eligible Inventory within
the United States of America and (B) if the proposed Letter of Credit
Accommodation is for any other purpose or the documents of title are not
consigned to the issuer in connection with a Letter of Credit Accommodation for
the purpose of purchasing Inventory, an amount equal to one hundred (100%)
percent of the face amount thereof and all other commitments and obligations
made or incurred by Agent with respect thereto. Effective on the issuance of
each Letter of Credit Accommodation, a Reserve shall be established in the
applicable amount set forth in Section 2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).
(e) Except in Agent's discretion, with the consent of all Lenders,
the amount of all outstanding Letter of Credit Accommodations and all other
commitments and obligations made or incurred by Agent or any Lender in
connection therewith shall not at any time exceed $7,500,000.
(f) Borrowers and Guarantors shall indemnify and hold Agent and
Lenders harmless from and against any and all losses, claims, damages,
liabilities, costs and expenses which Agent or any Lender may suffer or incur in
connection with any Letter of Credit Accommodations and any documents, drafts or
acceptances relating thereto, including any losses, claims, damages,
liabilities, costs and expenses due to any action taken by any issuer or
correspondent with respect to any Letter of Credit Accommodation, except for
such losses, claims, damages, liabilities, costs or expenses that are a direct
result of the gross negligence or willful misconduct of Agent or any Lender as
determined pursuant to a final non-appealable order of a court of competent
jurisdiction. Each Borrower and Guarantor assumes all risks with respect to the
acts or omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
such Borrower's agent. Each Borrower and Guarantor assumes all risks for, and
agrees to pay, all foreign, Federal, State and local taxes, duties and levies
relating to any goods subject to any Letter of Credit Accommodations or any
documents, drafts or acceptances thereunder. Each Borrower and Guarantor hereby
releases and holds Agent and Lenders harmless from and against any acts,
waivers, errors, delays or omissions, whether caused by any Borrower, Guarantor,
by any issuer or correspondent or otherwise with respect to or relating to any
Letter of Credit Accommodation, except for the gross negligence or willful
misconduct of Agent or any Lender as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction. The provisions of
this Section 2.2(f) shall survive the payment of Obligations and the termination
of this Agreement.
(g) In connection with Inventory purchased pursuant to Letter of
Credit Accommodations, Borrowers and Guarantors shall, at Agent's request,
instruct all suppliers, carriers, forwarders, customs brokers, warehouses or
others receiving or holding cash, checks, Inventory, documents or instruments in
which Agent holds a security interest to deliver them to Agent and/or subject to
Agent's order, and if they shall come into such Borrower's or Guarantor's
possession, to deliver them, upon Agent's request, to Agent in their original
form. Borrowers and Guarantors shall also, at Agent's request, designate Agent
as the consignee on all bills of lading and other negotiable and non-negotiable
documents.
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(h) Each Borrower and Guarantor hereby irrevocably authorizes and
directs any issuer of a Letter of Credit Accommodation to name such Borrower or
Guarantor as the account party therein and to deliver to Agent all instruments,
documents and other writings and property received by issuer pursuant to the
Letter of Credit Accommodations and to accept and rely upon Agent's instructions
and agreements with respect to all matters arising in connection with the Letter
of Credit Accommodations or the applications therefor. Nothing contained herein
shall be deemed or construed to grant any Borrower or Guarantor any right or
authority to pledge the credit of Agent or any Lender in any manner. Agent and
Lenders shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Agent or any Lender unless Agent
has duly executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrowers and Guarantors shall be bound by any reasonable interpretation made in
good faith by Agent, or any other issuer or correspondent under or in connection
with any Letter of Credit Accommodation or any documents, drafts or acceptances
thereunder, notwithstanding that such interpretation may be inconsistent with
any instructions of any Borrower or Guarantor.
(i) So long as no Event of Default exists or has occurred and is
continuing, a Borrower may (i) approve or resolve any questions of
non-compliance of documents, (ii) give any instructions as to acceptance or
rejection of any documents or goods, (iii) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (iv) with
Agent's consent, grant any extensions of the maturity of, time of payment for,
or time of presentation of, any drafts, acceptances, or documents, and agree to
any amendments, renewals, extensions, modifications, changes or cancellations of
any of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral.
(j) At any time an Event of Default exists or has occurred and is
continuing, Agent shall have the right and authority to, and Borrowers shall
not, without the prior written consent of Agent, (i) approve or resolve any
questions of non-compliance of documents, (ii) give any instructions as to
acceptance or rejection of any documents or goods, (iii) execute any and all
applications for steamship or airway guaranties, indemnities or delivery orders,
(iv) grant any extensions of the maturity of, time of payments for, or time of
presentation of, any drafts, acceptances, or documents, and (v) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Agent may take such actions either in its own
name or in any Borrower's name.
(k) Any rights, remedies, duties or obligations granted or
undertaken by any Borrower or Guarantor to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement in
favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been granted or undertaken by such
Borrower or Guarantor to Agent for the ratable benefit of Lenders. Any duties or
obligations undertaken by Agent to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Agent in favor of any issuer or correspondent to the extent relating to any
Letter of Credit Accommodation, shall be deemed to have been undertaken
27
by Borrowers and Guarantors to Agent for the ratable benefit of Lenders and to
apply in all respects to Borrowers and Guarantors.
(l) Immediately upon the issuance or amendment of any Letter of
Credit Accommodation, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received, without recourse or warranty, an
undivided interest and participation to the extent of such Lender's Pro Rata
Share of the liability with respect to such Letter of Credit Accommodation
(including, without limitation, all Obligations with respect thereto).
(m) Each Borrower is irrevocably and unconditionally obligated,
without presentment, demand or protest, to pay to Agent any amounts paid by an
issuer of a Letter of Credit Accommodation with respect to such Letter of Credit
Accommodation (whether through the borrowing of Loans in accordance with Section
2.2(a) or otherwise). In the event that any Borrower fails to pay Agent on the
date of any payment under a Letter of Credit Accommodation in an amount equal to
the amount of such payment, Agent (to the extent it has actual notice thereof)
shall promptly notify each Lender of the unreimbursed amount of such payment and
each Lender agrees, upon one (1) Business Day's notice, to fund to Agent the
purchase of its participation in such Letter of Credit Accommodation in an
amount equal to its Pro Rata Share of the unpaid amount. The obligation of each
Lender to deliver to Agent an amount equal to its respective participation
pursuant to the foregoing sentence is absolute and unconditional and such
remittance shall be made notwithstanding the occurrence or continuance of any
Event of Default, the failure to satisfy any other condition set forth in
Section 4 or any other event or circumstance. If such amount is not made
available by a Lender when due, Agent shall be entitled to recover such amount
on demand from such Lender with interest thereon, for each day from the date
such amount was due until the date such amount is paid to Agent at the interest
rate then payable by any Borrower in respect of Loans that are Prime Rate Loans
as set forth in Section 3.1(a) hereof.
2.3 Commitments. The aggregate amount of each Lender's Pro Rata Share of
the Loans and Letter of Credit Accommodations shall not exceed the amount of
such Lender's Commitment, as the same may from time to time be amended in
accordance with the provisions hereof.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrowers shall pay to Agent, for the benefit of Lenders,
interest on the outstanding principal amount of the Loans at the Interest Rate.
All interest accruing hereunder on and after the date of any Event of Default or
termination hereof shall be payable on demand.
(b) Each Borrower (or Administrative Borrower on behalf of such
Borrower) may from time to time request Eurodollar Rate Loans or may request
that Prime Rate Loans be converted to Eurodollar Rate Loans or that any existing
Eurodollar Rate Loans continue for an additional Interest Period. Such request
from a Borrower (or Administrative Borrower on behalf of such Borrower) shall
specify the amount of the Eurodollar Rate Loans or the amount of the Prime Rate
Loans to be converted to Eurodollar Rate Loans or the amount of the Eurodollar
Rate
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Loans to be continued (subject to the limits set forth below) and the Interest
Period to be applicable to such Eurodollar Rate Loans. Subject to the terms and
conditions contained herein, three (3) Business Days after receipt by Agent of
such a request from a Borrower (or Administrative Borrower on behalf of such
Borrower), such Eurodollar Rate Loans shall be made or Prime Rate Loans shall be
converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue,
as the case may be, provided, that, (i) no Default or Event of Default shall
exist or have occurred and be continuing, (ii) no party hereto shall have sent
any notice of termination of this Agreement, such Borrower (or Administrative
Borrower on behalf of such Borrower) shall have complied with such customary
procedures as are established by Agent and specified by Agent to Administrative
Borrower from time to time for requests by Borrowers for Eurodollar Rate Loans,
(iii) no more than four (4) Interest Periods may be in effect at any one time,
(iv) the aggregate amount of the Eurodollar Rate Loans must be in an amount not
less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof,
and (v) Agent and each Lender shall have determined that the Interest Period or
Adjusted Eurodollar Rate is available to Agent and such Lender and can be
readily determined as of the date of the request for such Eurodollar Rate Loan
by such Borrower. Any request by or on behalf of a Borrower for Eurodollar Rate
Loans or to convert Prime Rate Loans to Eurodollar Rate Loans or to continue any
existing Eurodollar Rate Loans shall be irrevocable. Notwithstanding anything to
the contrary contained herein, Agent and Lenders shall not be required to
purchase United States Dollar deposits in the London interbank market or other
applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the
provisions hereof shall be deemed to apply as if Agent and Lenders had purchased
such deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless Agent has
received and approved a request to continue such Eurodollar Rate Loan at least
three (3) Business Days prior to such last day in accordance with the terms
hereof. Any Eurodollar Rate Loans shall, at Agent's option, upon notice by Agent
to Parent, be subsequently converted to Prime Rate Loans in the event that this
Agreement shall terminate or not be renewed. Borrowers shall pay to Agent, for
the benefit of Lenders, upon demand by Agent (or Agent may, at its option,
charge any loan account of any Borrower) any amounts required to compensate any
Lender or Participant for any loss (including loss of anticipated profits), cost
or expense incurred by such person, as a result of the conversion of Eurodollar
Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrowers to Agent, for the account
of Lenders, monthly in arrears not later than the first day of each calendar
month and shall be calculated on the basis of a three hundred sixty (360) day
year and actual days elapsed. The interest rate on non-contingent Obligations
(other than Eurodollar Rate Loans) shall increase or decrease by an amount equal
to each increase or decrease in the Prime Rate effective on the first day of the
month after any change in such Prime Rate is announced based on the Prime Rate
in effect on the last day of the month in which any such change occurs. In no
event shall charges constituting interest payable by Borrowers to Agent and
Lenders exceed the maximum amount or the rate permitted under any applicable law
or regulation, and if any such part or provision of this Agreement is in
contravention of any such law or regulation, such part or provision shall be
deemed amended to conform thereto.
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3.2 Fees.
(a) Borrowers shall pay to Agent, for the account of Lenders,
monthly an unused line fee at a rate equal to three hundred seventy-five one
thousandths of one percent (0.375%) per annum calculated upon the amount by
which the Maximum Credit exceeds the average daily principal balance of the
outstanding Revolving Loans and Letter of Credit Accommodations during the
immediately preceding month (or part thereof) while this Agreement is in effect
and for so long thereafter as any of the Obligations are outstanding, which fee
shall be payable on the first day of each month in arrears.
(b) Borrowers agree to pay to Agent the other fees and amounts set
forth in the Fee Letter in the amounts and at the times specified therein.
3.3 Changes in Laws and Increased Costs of Loans.
(a) If after the date hereof, either (i) any change in, or in the
interpretation of, any law or regulation is introduced, including, without
limitation, with respect to reserve requirements, applicable to Lender or any
banking or financial institution from whom any Lender borrows funds or obtains
credit (a "Funding Bank"), or (ii) a Funding Bank or any Lender complies with
any future guideline or request from any central bank or other Governmental
Authority or (iii) a Funding Bank or any Lender determines that the adoption of
any applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof has or would have the effect described
below, or a Funding Bank or any Lender complies with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, and in the case of any event set
forth in this clause (iii), such adoption, change or compliance has or would
have the direct or indirect effect of reducing the rate of return on any
Lender's capital as a consequence of its obligations hereunder to a level below
that which Lender could have achieved but for such adoption, change or
compliance (taking into consideration the Funding Bank's or Lender's policies
with respect to capital adequacy) by an amount deemed by such Lender to be
material, and the result of any of the foregoing events described in clauses
(i), (ii) or (iii) is or results in an increase in the cost to any Lender of
funding or maintaining the Loans, the Letter of Credit Accommodations or its
Commitment, then Borrowers and Guarantors shall from time to time upon demand by
Agent pay to Agent additional amounts sufficient to indemnify Lenders against
such increased cost on an after-tax basis (after taking into account applicable
deductions and credits in respect of the amount indemnified). A certificate as
to the amount of such increased cost, together with reasonable supporting
documentation, shall be submitted to Administrative Borrower by Agent and shall
be conclusive, absent manifest error.
(b) If prior to the first day of any Interest Period, (i) Agent
shall have determined in good faith (which determination shall be conclusive and
binding upon Borrowers and Guarantors) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Interest Period, (ii) Agent has
received notice from the Required Lenders that the Eurodollar Rate determined or
to be determined for such Interest Period will not adequately and fairly reflect
the cost to Lenders
30
of making or maintaining Eurodollar Rate Loans during such Interest Period, or
(iii) Dollar deposits in the principal amounts of the Eurodollar Rate Loans to
which such Interest Period is to be applicable are not generally available in
the London interbank market, Agent shall give telecopy or telephonic notice
thereof to Administrative Borrower as soon as practicable thereafter, and will
also give prompt written notice to Administrative Borrower when such conditions
no longer exist. If such notice is given (A) any Eurodollar Rate Loans requested
to be made on the first day of such Interest Period shall be made as Prime Rate
Loans, (B) any Loans that were to have been converted on the first day of such
Interest Period to or continued as Eurodollar Rate Loans shall be converted to
or continued as Prime Rate Loans and (C) each outstanding Eurodollar Rate Loan
shall be converted, on the last day of the then-current Interest Period thereof,
to Prime Rate Loans. Until such notice has been withdrawn by Agent, no further
Eurodollar Rate Loans shall be made or continued as such, nor shall any Borrower
(or Administrative Borrower on behalf of any Borrower) have the right to convert
Prime Rate Loans to Eurodollar Rate Loans.
(c) Notwithstanding any other provision herein, if the adoption of
or any change in any law, treaty, rule or regulation or final, non-appealable
determination of an arbitrator or a court or other Governmental Authority or in
the interpretation or application thereof occurring after the date hereof shall
make it unlawful for Agent or any Lender to make or maintain Eurodollar Rate
Loans as contemplated by this Agreement, (i) Agent or such Lender shall promptly
give written notice of such circumstances to Administrative Borrower (which
notice shall be withdrawn whenever such circumstances no longer exist), (ii) the
commitment of such Lender hereunder to make Eurodollar Rate Loans, continue
Eurodollar Rate Loans as such and convert Prime Rate Loans to Eurodollar Rate
Loans shall forthwith be canceled and, until such time as it shall no longer be
unlawful for such Lender to make or maintain Eurodollar Rate Loans, such Lender
shall then have a commitment only to make a Prime Rate Loan when a Eurodollar
Rate Loan is requested and (iii) such Lender's Loans then outstanding as
Eurodollar Rate Loans, if any, shall be converted automatically to Prime Rate
Loans on the respective last days of the then current Interest Periods with
respect to such Loans or within such earlier period as required by law. If any
such conversion of a Eurodollar Rate Loan occurs on a day which is not the last
day of the then current Interest Period with respect thereto, Borrowers and
Guarantors shall pay to such Lender such amounts, if any, as may be required
pursuant to Section 3.3(d) below.
(d) Borrowers and Guarantors shall indemnify Agent and each Lender
and hold Agent and each Lender harmless from any loss or expense which Agent or
such Lender may sustain or incur as a consequence of (i) default by Borrower in
making a borrowing of, conversion into or extension of Eurodollar Rate Loans
after such Borrower (or Administrative Borrower on behalf of such Borrower) has
given a notice requesting the same in accordance with the provisions of this
Loan Agreement, (ii) default by any Borrower in making any prepayment of a
Eurodollar Rate Loan after such Borrower has given a notice thereof in
accordance with the provisions of this Agreement, and (iii) the making of a
prepayment of Eurodollar Rate Loans on a day which is not the last day of an
Interest Period with respect thereto. With respect to Eurodollar Rate Loans,
such indemnification may include an amount equal to the excess, if any, of (A)
the amount of interest which would have accrued on the amount so prepaid, or not
so borrowed, converted or extended, for the period from the date of such
prepayment or of such failure to borrow, convert or extend to the last day of
the applicable Interest Period (or, in the
31
case of a failure to borrow, convert or extend, the Interest Period that would
have commenced on the date of such failure) in each case at the applicable rate
of interest for such Eurodollar Rate Loans provided for herein over (B) the
amount of interest (as determined by such Agent or such Lender) which would have
accrued to Agent or such Lender on such amount by placing such amount on deposit
for a comparable period with leading banks in the interbank Eurodollar market.
This covenant shall survive the termination or non-renewal of this Loan
Agreement and the payment of the Obligations.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Agent and
Lenders making the initial Loans and providing the initial Letter of Credit
Accommodations hereunder:
(a) Agent shall have received, in form and substance satisfactory to
Agent, all releases, terminations and such other documents as Agent may request
to evidence and effectuate the termination by the Existing Lenders of their
respective financing arrangements with Borrowers and Guarantors and the
termination and release by it or them, as the case may be, of any interest in
and to any assets and properties of each Borrower and Guarantor, duly
authorized, executed and delivered by it or each of them, including, but not
limited to, (i) UCC termination statements for all UCC financing statements
previously filed by it or any of them or their predecessors, as secured party
and any Borrower or Guarantor, as debtor; and (ii) satisfactions and discharges
of any mortgages, deeds of trust or deeds to secure debt by any Borrower or
Guarantor in favor of it or any of them, in form acceptable for recording with
the appropriate Governmental Authority;
(b) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be satisfactory in
form and substance to Agent, and Agent shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Agent may have requested in connection therewith, such
documents where requested by Agent or its counsel to be certified by appropriate
corporate officers or Governmental Authority (and including a copy of the
certificate of incorporation of each Borrower and Guarantor certified by the
Secretary of State (or equivalent Governmental Authority) which shall set forth
the same complete corporate name of such Borrower or Guarantor as is set forth
herein and such document as shall set forth the organizational identification
number of each Borrower or Guarantor, if one is issued in its jurisdiction of
incorporation);
(c) no material adverse change shall have occurred in the assets,
business or prospects of Borrowers since the date of Agent's latest field
examination (not including for this purpose the field review referred to in
clause (d) below) and no change or event shall have occurred which would impair
the ability of any Borrower or Obligor to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Agent
or any Lender to enforce the Obligations or realize upon the Collateral;
(d) Agent shall have completed a field review of the Records and
such other information with respect to the Collateral as Agent may require to
determine the amount of
32
Loans available to Borrowers (including, without limitation, current perpetual
inventory records and/or roll-forwards of Accounts and Inventory through the
date of closing and test counts of the Inventory in a manner satisfactory to
Agent, together with such supporting documentation as may be necessary or
appropriate, and other documents and information that will enable Agent to
accurately identify and verify the Collateral), the results of which in each
case shall be satisfactory to Agent, not more than three (3) Business Days prior
to the date hereof;
(e) Agent shall have received, in form and substance satisfactory to
Agent, all consents, waivers, acknowledgments and other agreements from third
persons which Agent may deem necessary or desirable in order to permit, protect
and perfect its security interests in and liens upon the Collateral or to
effectuate the provisions or purposes of this Agreement and the other Financing
Agreements, including, without limitation, Collateral Access Agreements by
owners and lessors of leased premises of each Borrower and by processors and
warehouses at which Collateral is located;
(f) the Excess Availability as determined by Agent, as of the date
hereof, shall be not less than $5,000,000 after giving effect to the initial
Loans made or to be made and Letter of Credit Accommodations issued or to be
issued in connection with the initial transactions hereunder;
(g) Agent shall have received, in form and substance satisfactory to
Agent, Deposit Account Control Agreements by and among Agent, each Borrower and
Guarantor, as the case may be and each bank where such Borrower (or Guarantor)
has a deposit account, in each case, duly authorized, executed and delivered by
such bank and Borrower or Guarantor, as the case may be (or Agent shall be the
bank's customer with respect to such deposit account as Agent may specify);
(h) Agent shall have received evidence, in form and substance
satisfactory to Agent, that Agent has a valid perfected first priority security
interest in all of the Collateral (subject only to liens securing the Laurus
Notes and the Global Capital Notes and expressly permitted under Section 9.8
below);
(i) Agent shall have received a Borrowing Base Certificate setting
forth the Loans available to Borrowers as completed in a manner satisfactory to
Agent and duly authorized, executed and delivered on behalf of Administrative
Borrower;
(j) Agent shall have received and reviewed lien and judgment search
results for the jurisdiction of incorporation of each Borrower and Guarantor,
the jurisdiction of the chief executive office of each Borrower and Guarantor
and all jurisdictions in which assets of Borrowers and Guarantors are located,
which search results shall be in form and substance satisfactory to Agent;
(k) Agent shall have received originals of the shares of the stock
certificates representing all of the issued and outstanding shares of the
Capital Stock of each Borrower and Guarantor (other than Parent) and owned by
any Borrower or Guarantor, in each case together with stock powers duly executed
in blank with respect thereto;
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(l) Agent shall have received, in form and substance satisfactory to
Agent, the opinion letter of counsel(s) to Borrowers with respect to the
Purchase Agreements, the Financing Agreements and the security interests and
liens of Agent with respect to the Collateral and such other matters as Agent
may request;
(m) Agent shall have received, in form and substance satisfactory to
Agent, evidence that the Purchase Agreements have been duly executed and
delivered by and to the appropriate parties thereto and the transactions
contemplated under the terms of the Purchase Agreements have been consummated
prior to or contemporaneously with the execution of this Agreement;
(n) Agent shall have received, in form and substance satisfactory to
Agent, a pro-forma balance sheet of Borrowers reflecting the initial
transactions contemplated hereunder, including, but not limited to, (i) the
consummation of the acquisition of the Purchased Assets by Borrowers from Seller
and the other transactions contemplated by the Purchase Agreements and (ii) the
Loans and Letter of Credit Accommodations provided by Agent to Borrowers on the
date hereof and the use of the proceeds of the initial Loans as provided herein,
accompanied by a certificate, dated of even date herewith, of the chief
financial officer of Borrowers stating that such pro-forma balance sheet
represents the reasonable, good faith opinion of such officer as to the subject
matter thereof as of the date of such certificate;
(o) Agent shall have received, in form and substance satisfactory to
Agent, copies of the Laurus Capital Notes and Global Capital Notes, and evidence
that Borrower has received aggregate net cash proceeds from the Laurus Capital
Notes and Global Capital Notes of not less than $5,200,000;
(p) Agent shall have received, in form and substance satisfactory to
Agent, the agreement of the Seller consenting to the collateral assignment by
Borrower to Agent of all of any Borrower's rights and remedies and claims for
damages or other relief under the Purchase Agreements and granting Agent such
other rights as Agent may require, duly authorized, executed and delivered by
Seller and Agent under of any transition services agreements, supply agreements,
or other agreements as Agent deems necessary, and Agent relating to the
assignment or use of any trademarks or other intangible property licensed to
Borrowers;
(q) Agent shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Agent, and certificates of insurance policies
and/or endorsements naming Agent as loss payee;
(r) Agent shall have received, in form and substance satisfactory to
Agent, written appraisals as to the Inventory in form, scope and methodology
acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent
and Lenders and upon which Agent and Lenders are expressly permitted to rely;
(s) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Agent,
in form and substance satisfactory to Agent.
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4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.
Each of the following is an additional condition precedent to the Loans and/or
providing Letter of Credit Accommodations to Borrowers, including the initial
Loans and Letter of Credit Accommodations and any future Loans and Letter of
Credit Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct all material respects with
the same effect as though such representations and warranties had been made on
and as of the date of the making of each such Loan or providing each such Letter
of Credit Accommodation and after giving effect thereto, except to the extent
that such representations and warranties expressly relate solely to an earlier
date (in which case such representations and warranties shall have been true and
accurate on and as of such earlier date);
(b) no law, regulation, order, judgment or decree of any
Governmental Authority shall exist, and no action, suit, investigation,
litigation or proceeding shall be pending or threatened in any court or before
any arbitrator or Governmental Authority, which (i) purports to enjoin,
prohibit, restrain or otherwise affect (A) the making of the Loans or providing
the Letter of Credit Accommodations, or (B) the consummation of the transactions
contemplated pursuant to the terms hereof or the other Financing Agreements or
(ii) has or has a reasonable likelihood of having a Material Adverse Effect; and
(c) no Default or Event of Default shall exist or have occurred and
be continuing on and as of the date of the making of such Loan or providing each
such Letter of Credit Accommodation and after giving effect thereto.
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
5.1 Grant of Security Interest. To secure payment and performance of all
Obligations, each Borrower and Guarantor hereby grants to Agent, for itself and
the benefit of Lenders, a continuing security interest in, a lien upon, and a
right of set off against, and hereby assigns to Agent, for itself and the
benefit of Lenders, as security, all personal and real property and fixtures,
and interests in property and fixtures, of each Borrower and Guarantor, whether
now owned or hereafter acquired or existing, and wherever located (together with
all other collateral security for the Obligations at any time granted to or held
or acquired by Agent or any Lender, collectively, the "Collateral"), including:
(a) all Accounts;
(b) all general intangibles, including, without limitation, all
Intellectual Property;
(c) all goods, including, without limitation, Inventory and
Equipment;
(d) all Real Property and fixtures;
(e) all chattel paper, including, without limitation, all tangible
and electronic chattel paper;
35
(f) all instruments, including, without limitation, all promissory
notes;
(g) all documents;
(h) all deposit accounts;
(i) all letters of credit, banker's acceptances and similar
instruments and including all letter-of-credit rights;
(j) all supporting obligations and all present and future liens,
security interests, rights, remedies, title and interest in, to and in respect
of Receivables and other Collateral, including (i) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and credit
and other insurance related to the Collateral, (ii) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (iii) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Receivables or other Collateral, including returned, repossessed
and reclaimed goods, and (iv) deposits by and property of account debtors or
other persons securing the obligations of account debtors;
(k) all (i) investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts) and (ii) monies, credit balances,
deposits and other property of any Borrower or Guarantor now or hereafter held
or received by or in transit to Agent, any Lender or its Affiliates or at any
other depository or other institution from or for the account of any Borrower or
Guarantor, whether for safekeeping, pledge, custody, transmission, collection or
otherwise;
(l) all commercial tort claims, including, without limitation, those
identified in the Information Certificate;
(m) to the extent not otherwise described above, all Receivables;
(n) all Records; and
(o) all products and proceeds of the foregoing, in any form,
including insurance proceeds and all claims against third parties for loss or
damage to or destruction of or other involuntary conversion of any kind or
nature of any or all of the other Collateral.
5.2 Perfection of Security Interests.
(a) Each Borrower and Guarantor irrevocably and unconditionally
authorizes Agent (or its agent) to file at any time and from time to time such
financing statements with respect to the Collateral naming Agent or its designee
as the secured party and such Borrower or Guarantor as debtor, as Agent may
require, and including any other information with respect to such Borrower or
Guarantor or otherwise required by part 5 of Article 9 of the Uniform Commercial
Code of such jurisdiction as Agent may determine, together with any amendment
and continuations with respect thereto, which authorization shall apply to all
financing statements filed on, prior to or after the date hereof. Each Borrower
and Guarantor hereby ratifies and approves all financing statements naming Agent
or its designee as secured party and
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such Borrower or Guarantor, as the case may be, as debtor with respect to the
Collateral (and any amendments with respect to such financing statements) filed
by or on behalf of Agent prior to the date hereof and ratifies and confirms the
authorization of Agent to file such financing statements (and amendments, if
any). Each Borrower and Guarantor hereby authorizes Agent to adopt on behalf of
such Borrower and Guarantor any symbol required for authenticating any
electronic filing. In the event that the description of the collateral in any
financing statement naming Agent or its designee as the secured party and any
Borrower or Guarantor as debtor includes assets and properties of such Borrower
or Guarantor that do not at any time constitute Collateral, whether hereunder,
under any of the other Financing Agreements or otherwise, the filing of such
financing statement shall nonetheless be deemed authorized by such Borrower or
Guarantor to the extent of the Collateral included in such description and it
shall not render the financing statement ineffective as to any of the Collateral
or otherwise affect the financing statement as it applies to any of the
Collateral. In no event shall any Borrower or Guarantor at any time file, or
permit or cause to be filed, any correction statement or termination statement
with respect to any financing statement (or amendment or continuation with
respect thereto) naming Agent or its designee as secured party and such Borrower
or Guarantor as debtor.
(b) Each Borrower and Guarantor does not have any chattel paper
(whether tangible or electronic) or instruments as of the date hereof, except as
set forth in the Information Certificate. In the event that any Borrower or
Guarantor shall be entitled to or shall receive any chattel paper or instrument
after the date hereof, Borrowers and Guarantors shall promptly notify Agent
thereof in writing. Promptly upon the receipt thereof by or on behalf of any
Borrower or Guarantor (including by any agent or representative), such Borrower
or Guarantor shall deliver, or cause to be delivered to Agent, all tangible
chattel paper and instruments that such Borrower or Guarantor has or may at any
time acquire, accompanied by such instruments of transfer or assignment duly
executed in blank as Agent may from time to time specify, in each case except as
Agent may otherwise agree. At Agent's option, each Borrower and Guarantor shall,
or Agent may at any time on behalf of any Borrower or Guarantor, cause the
original of any such instrument or chattel paper to be conspicuously marked in a
form and manner acceptable to Agent with the following legend referring to
chattel paper or instruments as applicable: "This [chattel paper][instrument] is
subject to the security interest of Congress Financial Corporation and any sale,
transfer, assignment or encumbrance of this [chattel paper][instrument] violates
the rights of such secured party."
(c) In the event that any Borrower or Guarantor shall at any time
hold or acquire an interest in any electronic chattel paper or any "transferable
record" (as such term is defined in Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or in Section 16 of the Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction), such
Borrower or Guarantor shall promptly notify Agent thereof in writing. Promptly
upon Agent's request, such Borrower or Guarantor shall take, or cause to be
taken, such actions as Agent may request to give Agent control of such
electronic chattel paper under Section 9-105 of the UCC and control of such
transferable record under Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as in effect in such jurisdiction.
(d) Each Borrower and Guarantor does not have any deposit accounts
as of the date hereof, except as set forth in the Information Certificate.
Borrowers and Guarantors
37
shall not, directly or indirectly, after the date hereof open, establish or
maintain any deposit account unless each of the following conditions is
satisfied: (i) Agent shall have received not less than five (5) Business Days
prior written notice of the intention of any Borrower or Guarantor to open or
establish such account which notice shall specify in reasonable detail and
specificity acceptable to Agent the name of the account, the owner of the
account, the name and address of the bank at which such account is to be opened
or established, the individual at such bank with whom such Borrower or Guarantor
is dealing and the purpose of the account, (ii) the bank where such account is
opened or maintained shall be acceptable to Agent, and (iii) on or before the
opening of such deposit account, such Borrower or Guarantor shall as Agent may
specify either (A) deliver to Agent a Deposit Account Control Agreement with
respect to such deposit account duly authorized, executed and delivered by such
Borrower or Guarantor and the bank at which such deposit account is opened and
maintained or (B) arrange for Agent to become the customer of the bank with
respect to the deposit account on terms and conditions acceptable to Agent. The
terms of this subsection (d) shall not apply to deposit accounts specifically
and exclusively used for payroll, payroll taxes and other employee wage and
benefit payments to or for the benefit of any Borrower's or Guarantor's salaried
employees.
(e) No Borrower or Guarantor owns or holds, directly or indirectly,
beneficially or as record owner or both, any investment property, as of the date
hereof, or have any investment account, securities account, commodity account or
other similar account with any bank or other financial institution or other
securities intermediary or commodity intermediary as of the date hereof, in each
case except as set forth in the Information Certificate.
(i) In the event that any Borrower or Guarantor shall be
entitled to or shall at any time after the date hereof hold or acquire any
certificated securities, such Borrower or Guarantor shall promptly endorse,
assign and deliver the same to Agent, accompanied by such instruments of
transfer or assignment duly executed in blank as Agent may from time to time
specify. If any securities, now or hereafter acquired by any Borrower or
Guarantor are uncertificated and are issued to such Borrower or Guarantor or its
nominee directly by the issuer thereof, such Borrower or Guarantor shall
immediately notify Agent thereof and shall as Agent may specify, either (A)
cause the issuer to agree to comply with instructions from Agent as to such
securities, without further consent of any Borrower or Guarantor or such
nominee, or (B) arrange for Agent to become the registered owner of the
securities.
(ii) Borrowers and Guarantors shall not, directly or
indirectly, after the date hereof open, establish or maintain any investment
account, securities account, commodity account or any other similar account
(other than a deposit account) with any securities intermediary or commodity
intermediary unless each of the following conditions is satisfied: (A) Agent
shall have received not less than five (5) Business Days prior written notice of
the intention of such Borrower or Guarantor to open or establish such account
which notice shall specify in reasonable detail and specificity acceptable to
Agent the name of the account, the owner of the account, the name and address of
the securities intermediary or commodity intermediary at which such account is
to be opened or established, the individual at such intermediary with whom such
Borrower or Guarantor is dealing and the purpose of the account, (B) the
securities intermediary or commodity intermediary (as the case may be) where
such account is opened or maintained shall be acceptable to Agent, and (C) on or
before the opening of such investment account, securities account or other
similar account with a securities
38
intermediary or commodity intermediary, such Borrower or Guarantor shall as
Agent may specify either (1) execute and deliver, and cause to be executed and
delivered to Agent, an Investment Property Control Agreement with respect
thereto duly authorized, executed and delivered by such Borrower or Guarantor
and such securities intermediary or commodity intermediary or (2) arrange for
Agent to become the entitlement holder with respect to such investment property
on terms and conditions acceptable to Agent.
(f) Borrowers and Guarantors are not the beneficiary or otherwise
entitled to any right to payment under any letter of credit, banker's acceptance
or similar instrument as of the date hereof, except as set forth in the
Information Certificate. In the event that any Borrower or Guarantor shall be
entitled to or shall receive any right to payment under any letter of credit,
banker's acceptance or any similar instrument, whether as beneficiary thereof or
otherwise after the date hereof, such Borrower or Guarantor shall promptly
notify Agent thereof in writing. Such Borrower or Guarantor shall immediately,
as Agent may specify, either (i) deliver, or cause to be delivered to Agent,
with respect to any such letter of credit, banker's acceptance or similar
instrument, the written agreement of the issuer and any other nominated person
obligated to make any payment in respect thereof (including any confirming or
negotiating bank), in form and substance satisfactory to Agent, consenting to
the assignment of the proceeds of the letter of credit to Agent by such Borrower
or Guarantor and agreeing to make all payments thereon directly to Agent or as
Agent may otherwise direct or (ii) cause Agent to become, at Borrowers' expense,
the transferee beneficiary of the letter of credit, banker's acceptance or
similar instrument (as the case may be).
(g) Borrowers and Guarantors do not have any commercial tort claims
as of the date hereof, except as set forth in the Information Certificate. In
the event that any Borrower or Guarantor shall at any time after the date hereof
have any commercial tort claims, such Borrower or Guarantor shall promptly
notify Agent thereof in writing, which notice shall (i) set forth in reasonable
detail the basis for and nature of such commercial tort claim and (ii) include
the express grant by such Borrower or Guarantor to Agent of a security interest
in such commercial tort claim (and the proceeds thereof). In the event that such
notice does not include such grant of a security interest, the sending thereof
by such Borrower or Guarantor to Agent shall be deemed to constitute such grant
to Agent. Upon the sending of such notice, any commercial tort claim described
therein shall constitute part of the Collateral and shall be deemed included
therein. Without limiting the authorization of Agent provided in Section 5.2(a)
hereof or otherwise arising by the execution by such Borrower or Guarantor of
this Agreement or any of the other Financing Agreements, Agent is hereby
irrevocably authorized from time to time and at any time to file such financing
statements naming Agent or its designee as secured party and such Borrower or
Guarantor as debtor, or any amendments to any financing statements, covering any
such commercial tort claim as Collateral. In addition, each Borrower and
Guarantor shall promptly upon Agent's request, execute and deliver, or cause to
be executed and delivered, to Agent such other agreements, documents and
instruments as Agent may require in connection with such commercial tort claim.
(h) Borrowers and Guarantors do not have any goods, documents of
title or other Collateral in the custody, control or possession of a third party
as of the date hereof, except as set forth in the Information Certificate and
except for goods located in the United States in transit to a location of a
Borrower or Guarantor permitted herein in the ordinary course of
39
business of such Borrower or Guarantor in the possession of the carrier
transporting such goods. In the event that any goods, documents of title or
other Collateral are at any time after the date hereof in the custody, control
or possession of any other person not referred to in the Information Certificate
or such carriers, Borrowers and Guarantors shall promptly notify Agent thereof
in writing. Promptly upon Agent's request, Borrowers and Guarantors shall
deliver to Agent a Collateral Access Agreement duly authorized, executed and
delivered by such person and the Borrower or Guarantor that is the owner of such
Collateral.
(i) Borrowers and Guarantors shall take any other actions reasonably
requested by Agent from time to time to cause the attachment, perfection and
first priority (except for the security interest of Agent in the Equipment,
which shall be junior to the security interest in the Equipment of Laurus Master
Fund, Ltd.) of, and the ability of Agent to enforce, the security interest of
Agent in any and all of the Collateral, including, without limitation, (i)
executing, delivering and, where appropriate, filing financing statements and
amendments relating thereto under the UCC or other applicable law, to the
extent, if any, that any Borrower's or Guarantor's signature thereon is required
therefor, (ii) causing Agent's name to be noted as secured party on any
certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of Agent to enforce, the
security interest of Agent in such Collateral, (iii) complying with any
provision of any statute, regulation or treaty of the United States as to any
Collateral if compliance with such provision is a condition to attachment,
perfection or priority of, or ability of Agent to enforce, the security interest
of Agent in such Collateral, (iv) obtaining the consents and approvals of any
Governmental Authority or third party, including, without limitation, any
consent of any licensor, lessor or other person obligated on Collateral, and
taking all actions required by any earlier versions of the UCC or by other law,
as applicable in any relevant jurisdiction.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrowers' Loan Accounts. Agent shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of any Borrower or Guarantor and (c) all other appropriate
debits and credits as provided in this Agreement, including fees, charges,
costs, expenses and interest. All entries in the loan account(s) shall be made
in accordance with Agent's customary practices as in effect from time to time.
6.2 Statements. Agent shall render to Administrative Borrower each month a
statement setting forth the balance in the Borrowers' loan account(s) maintained
by Agent for Borrowers pursuant to the provisions of this Agreement, including
principal, interest, fees, costs and expenses. Each such statement shall be
subject to subsequent adjustment by Agent but shall, absent manifest errors or
omissions, be considered correct and deemed accepted by Borrowers and Guarantors
and conclusively binding upon Borrowers and Guarantors as an account stated
except to the extent that Agent receives a written notice from Administrative
Borrower of any specific exceptions of Administrative Borrower thereto within
thirty (30) days after the date such statement has been received by Parent.
Until such time as Agent shall have rendered to Administrative Borrower a
written statement as provided above, the balance in any Borrower's loan
account(s) shall be presumptive evidence of the amounts due and owing to Agent
and Lenders by Borrowers and Guarantors.
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6.3 Collection of Accounts.
(a) Borrowers shall establish and maintain, at their expense,
blocked accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts"), as Agent may specify, with such banks as are acceptable to
Agent into which Borrowers shall promptly deposit and direct their respective
account debtors to directly remit all payments on Receivables and all payments
constituting proceeds of Inventory or other Collateral in the identical form in
which such payments are made, whether by cash, check or other manner. Borrowers
shall deliver, or cause to be delivered to Agent a Deposit Account Control
Agreement duly authorized, executed and delivered by each bank where a Blocked
Account is maintained as provided in Section 5.2 hereof or at any time and from
time to time Agent may become the bank's customer with respect to any of the
Blocked Accounts and promptly upon Agent's request, Borrowers shall execute and
deliver such agreements and documents as Agent may require in connection
therewith. Each Borrower and Guarantor agrees that all payments made to such
Blocked Accounts or other funds received and collected by Agent or any Lender,
whether in respect of the Receivables, as proceeds of Inventory or other
Collateral or otherwise shall be treated as payments to Agent and Lenders in
respect of the Obligations and therefore shall constitute the property of Agent
and Lenders to the extent of the then outstanding Obligations.
(b) For purposes of calculating the amount of the Loans available to
each Borrower, such payments will be applied (conditional upon final collection)
to the Obligations on the Business Day of receipt by Agent of immediately
available funds in the Agent Payment Account provided such payments and notice
thereof are received in accordance with Agent's usual and customary practices as
in effect from time to time and within sufficient time to credit such Borrower's
loan account on such day, and if not, then on the next Business Day. For the
purposes of calculating interest on the Obligations, such payments or other
funds received will be applied (conditional upon final collection) to the
Obligations one (1) Business Day following the date of receipt of immediately
available funds by Agent in the Agent Payment Account provided such payments or
other funds and notice thereof are received in accordance with Agent's usual and
customary practices as in effect from time to time and within sufficient time to
credit such Borrower's loan account on such day, and if not, then on the next
Business Day. In the event that at any time or from time to time there are no
Revolving Loans outstanding, Agent shall be entitled to an administrative fee in
an amount equivalent to the Interest Rate for Prime Rate Loans (on a per annum
basis) multiplied by the amount of the funds received in the Blocked Account for
such day as calculated by Agent in accordance with its customary practice. The
economic benefit of the timing in the application of payments (and the
administrative charge with respect thereto, if applicable) shall be for the sole
benefit of Agent.
(c) Each Borrower and Guarantor and their respective shareholders,
directors, employees, agents, Subsidiaries or other Affiliates shall, acting as
trustee for Agent, receive, as the property of Agent, any monies, checks, notes,
drafts or any other payment relating to and/or proceeds of Accounts or other
Collateral which come into their possession or under their control and
immediately upon receipt thereof, shall deposit or cause the same to be
deposited in the Blocked Accounts, or remit the same or cause the same to be
remitted, in kind, to Agent. In no event shall the same be commingled with any
Borrower's or Guarantor's own funds. Borrowers agree to reimburse Agent on
demand for any amounts owed or paid to any bank or other financial institution
at which a Blocked Account or any other deposit account or investment
41
account is established or any other bank, financial institution or other person
involved in the transfer of funds to or from the Blocked Accounts arising out of
Agent's payments to or indemnification of such bank, financial institution or
other person. The obligations of Borrowers to reimburse Agent for such amounts
pursuant to this Section 6.3 shall survive the termination of this Agreement.
6.4 Payments.
(a) All Obligations shall be payable to the Agent Payment Account as
provided in Section 6.3 or such other place as Agent may designate from time to
time. Agent shall apply payments received or collected from any Borrower or
Guarantor or for the account of any Borrower or Guarantor (including the
monetary proceeds of collections or of realization upon any Collateral) as
follows: first, to pay any fees, indemnities or expense reimbursements then due
to Agent and Lenders from any Borrower or Guarantor; second, to pay interest due
in respect of any Loans (and including any Special Agent Advances); third, to
pay or prepay principal in respect of Special Agent Advances; fourth, to pay
principal due in respect of the Loans; fifth, to pay or prepay any other
Obligations whether or not then due, in such order and manner as Agent
determines. Notwithstanding anything to the contrary contained in this
Agreement, (i) unless so directed by Administrative Borrower, or unless a
Default or an Event of Default shall exist or have occurred and be continuing,
Agent shall not apply any payments which it receives to any Eurodollar Rate
Loans, except (A) on the expiration date of the Interest Period applicable to
any such Eurodollar Rate Loans or (B) in the event that there are no outstanding
Prime Rate Loans and (ii) to the extent any Borrower uses any proceeds of the
Loans or Letter of Credit Accommodations to acquire rights in or the use of any
Collateral or to repay any Indebtedness used to acquire rights in or the use of
any Collateral, payments in respect of the Obligations shall be deemed applied
first to the Obligations arising from Loans and Letter of Credit Accommodations
that were not used for such purposes and second to the Obligations arising from
Loans and Letter of Credit Accommodations the proceeds of which were used to
acquire rights in or the use of any Collateral in the chronological order in
which such Borrower acquired such rights in or the use of such Collateral.
(b) At Agent's option, all principal, interest, fees, costs,
expenses and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of any Borrower
maintained by Agent. Agent shall provide reasonable documentation of any such
charge promptly upon Borrower's written request. Borrowers and Guarantors shall
make all payments to Agent and Lenders on the Obligations free and clear of, and
without deduction or withholding for or on account of, any setoff, counterclaim,
defense, duties, taxes, levies, imposts, fees, deductions, withholding,
restrictions or conditions of any kind. If after receipt of any payment of, or
proceeds of Collateral applied to the payment of, any of the Obligations, Agent
or any Lender is required to surrender or return such payment or proceeds to any
Person for any reason, then the Obligations intended to be satisfied by such
payment or proceeds shall be reinstated and continue and this Agreement shall
continue in full force and effect as if such payment or proceeds had not been
received by Agent or such Lender. Borrowers and Guarantors shall be liable to
pay to Agent, and do hereby indemnify and hold Agent and Lenders harmless for
the amount of any payments or proceeds surrendered or returned. This Section
6.4(b) shall remain effective notwithstanding any contrary action which
42
may be taken by Agent or any Lender in reliance upon such payment or proceeds.
This Section 6.4 shall survive the payment of the Obligations and the
termination of this Agreement.
6.5 Authorization to Make Loans. Agent and Lenders are authorized to make
the Loans and provide the Letter of Credit Accommodations based upon telephonic
or other instructions received from anyone purporting to be an officer of
Administrative Borrower or any Borrower or other authorized person or, at the
discretion of Agent, if such Loans are necessary to satisfy any Obligations. All
requests for Loans or Letter of Credit Accommodations hereunder shall specify
the date on which the requested advance is to be made or Letter of Credit
Accommodations established (which day shall be a Business Day) and the amount of
the requested Loan. Requests received after 12:00 noon Chicago, Illinois time on
any day shall be deemed to have been made as of the opening of business on the
immediately following Business Day. All Loans and Letter of Credit
Accommodations under this Agreement shall be conclusively presumed to have been
made to, and at the request of and for the benefit of, any Borrower or Guarantor
when deposited to the credit of any Borrower or Guarantor or otherwise disbursed
or established in accordance with the instructions of any Borrower or Guarantor
or in accordance with the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrowers shall use the initial proceeds of the Loans
provided by Agent to Borrowers hereunder only for: (a) payments to each of the
persons listed in the disbursement direction letter furnished by Borrowers to
Agent on or about the date hereof and (b) costs, expenses and fees in connection
with the preparation, negotiation, execution and delivery of this Agreement and
the other Financing Agreements. All other Loans made or Letter of Credit
Accommodations provided to or for the benefit of any Borrower pursuant to the
provisions hereof shall be used by such Borrower only for general operating,
working capital and other proper corporate purposes of such Borrower not
otherwise prohibited by the terms hereof. None of the proceeds will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security or for the purposes of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Loans to be considered a "purpose credit"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended.
6.7 Appointment of Administrative Borrower as Agent for Requesting Loans
and Receipts of Loans and Statements.
(a) Each Borrower hereby irrevocably appoints and constitutes
Administrative Borrower as its agent to request and receive Loans and Letter of
Credit Accommodations pursuant to this Agreement and the other Financing
Agreements from Agent or any Lender in the name or on behalf of such Borrower.
Agent and Lenders may disburse the Loans to such bank account of Administrative
Borrower or a Borrower or Guarantor or otherwise make such Loans to a Borrower
and provide such Letter of Credit Accommodations to a Borrower as Administrative
Borrower may designate or direct, without notice to any other Borrower or
Obligor. Notwithstanding anything to the contrary contained herein, Agent may at
any time and from time to time require that Loans to or for the account of any
Borrower be disbursed directly to an operating account of such Borrower.
43
(b) Administrative Borrower hereby accepts the appointment by
Borrowers to act as the agent of Borrowers pursuant to this Section 6.7.
Administrative Borrower shall ensure that the disbursement of any Loans to each
Borrower requested by or paid to or for the account of Parent, or the issuance
of any Letter of Credit Accommodations for a Borrower hereunder, shall be paid
to or for the account of such Borrower.
(c) Each Borrower and other Guarantor hereby irrevocably appoints
and constitutes Administrative Borrower as its agent to receive statements on
account and all other notices from Agent and Lenders with respect to the
Obligations or otherwise under or in connection with this Agreement and the
other Financing Agreements.
(d) Any notice, election, representation, warranty, agreement or
undertaking by or on behalf of any other Borrower or any Guarantor by
Administrative Borrower shall be deemed for all purposes to have been made by
such Borrower or Guarantor, as the case may be, and shall be binding upon and
enforceable against such Borrower or Guarantor to the same extent as if made
directly by such Borrower of Guarantor.
(e) No purported termination of the appointment of Administrative
Borrower as agent as aforesaid shall be effective, except after ten (10) days'
prior written notice to Agent.
6.8 Pro Rata Treatment. Except to the extent otherwise provided in this
Agreement: (a) the making and conversion of Loans shall be made among the
Lenders based on their respective Pro Rata Shares as to the Loans and (b) each
payment on account of any Obligations to or for the account of one or more of
Lenders in respect of any Obligations due on a particular day shall be allocated
among the Lenders entitled to such payments based on their respective Pro Rata
Shares and shall be distributed accordingly.
6.9 Sharing of Payments, Etc.
(a) Each Borrower and Guarantor agrees that, in addition to (and
without limitation of) any right of setoff, banker's lien or counterclaim Agent
or any Lender may otherwise have, each Lender shall be entitled, at its option
(but subject, as among Agent and Lenders, to the provisions of Section 12.3(b)
hereof), to offset balances held by it for the account of such Borrower or
Guarantor at any of its offices, in dollars or in any other currency, against
any principal of or interest on any Loans owed to such Lender or any other
amount payable to such Lender hereunder, that is not paid when due (regardless
of whether such balances are then due to such Borrower or Guarantor), in which
case it shall promptly notify Administrative Borrower and Agent thereof;
provided, that, such Lender's failure to give such notice shall not affect the
validity thereof.
(b) If any Lender (including Agent) shall obtain from any Borrower
or Guarantor payment of any principal of or interest on any Loan owing to it or
payment of any other amount under this Agreement or any of the other Financing
Agreements through the exercise of any right of setoff, banker's lien or
counterclaim or similar right or otherwise (other than from Agent as provided
herein), and, as a result of such payment, such Lender shall have received more
than its Pro Rata Share of the principal of the Loans or more than its share of
such other amounts then due hereunder or thereunder by any Borrower or Guarantor
to such Lender
44
than the percentage thereof received by any other Lender, it shall promptly pay
to Agent, for the benefit of Lenders, the amount of such excess and
simultaneously purchase from such other Lenders a participation in the Loans or
such other amounts, respectively, owing to such other Lenders (or such interest
due thereon, as the case may be) in such amounts, and make such other
adjustments from time to time as shall be equitable, to the end that all Lenders
shall share the benefit of such excess payment (net of any expenses that may be
incurred by such Lender in obtaining or preserving such excess payment) in
accordance with their respective Pro Rata Shares or as otherwise agreed by
Lenders. To such end all Lenders shall make appropriate adjustments among
themselves (by the resale of participation sold or otherwise) if such payment is
rescinded or must otherwise be restored.
(c) Each Borrower and Guarantor agrees that any Lender purchasing a
participation (or direct interest) as provided in this Section may exercise, in
a manner consistent with this Section, all rights of setoff, banker's lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender were a direct holder of Loans or other amounts (as the case may be)
owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise
any right of setoff, banker's lien, counterclaims or similar rights or shall
affect the right of any Lender to exercise, and retain the benefits of
exercising, any such right with respect to any other Indebtedness or obligation
of any Borrower or Guarantor. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a setoff to
which this Section applies, such Lender shall, to the extent practicable, assign
such rights to Agent for the benefit of Lenders and, in any event, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of Lenders entitled under this Section to share in the benefits of any recovery
on such secured claim.
6.10 Settlement Procedures.
(a) In order to administer the Credit Facility in an efficient
manner and to minimize the transfer of funds between Agent and Lenders, Agent
may, at its option, subject to the terms of this Section, make available, on
behalf of Lenders, the full amount of the Loans requested or charged to any
Borrower's loan account(s) or otherwise to be advanced by Lenders pursuant to
the terms hereof, without requirement of prior notice to Lenders of the proposed
Loans.
(b) With respect to all Loans made by Agent on behalf of Lenders as
provided in this Section, the amount of each Lender's Pro Rata Share of the
outstanding Loans shall be computed weekly, and shall be adjusted upward or
downward on the basis of the amount of the outstanding Loans as of 5:00 p.m.
Chicago, Illinois time on the Business Day immediately preceding the date of
each settlement computation; provided, that, Agent retains the absolute right at
any time or from time to time to make the above described adjustments at
intervals more frequent than weekly, but in no event more than twice in any
week. Agent shall deliver to each of the Lenders after the end of each week, or
at such lesser period or periods as Agent shall determine, a summary statement
of the amount of outstanding Loans for such period (such week or lesser period
or periods being hereinafter referred to as a "Settlement Period"). If the
summary statement is sent by Agent and received by a Lender prior to 12:00 p.m.
Chicago,
45
Illinois time, then such Lender shall make the settlement transfer described in
this Section by no later than 3:00 p.m. Chicago, Illinois time on the same
Business Day and if received by a Lender after 12:00 p.m. Chicago, Illinois
time, then such Lender shall make the settlement transfer by not later than 3:00
p.m. Chicago, Illinois time on the next Business Day following the date of
receipt. If, as of the end of any Settlement Period, the amount of a Lender's
Pro Rata Share of the outstanding Loans is more than such Lender's Pro Rata
Share of the outstanding Loans as of the end of the previous Settlement Period,
then such Lender shall forthwith (but in no event later than the time set forth
in the preceding sentence) transfer to Agent by wire transfer in immediately
available funds the amount of the increase. Alternatively, if the amount of a
Lender's Pro Rata Share of the outstanding Loans in any Settlement Period is
less than the amount of such Lender's Pro Rata Share of the outstanding Loans
for the previous Settlement Period, Agent shall forthwith transfer to such
Lender by wire transfer in immediately available funds the amount of the
decrease. The obligation of each of the Lenders to transfer such funds and
effect such settlement shall be irrevocable and unconditional and without
recourse to or warranty by Agent. Agent and each Lender agrees to ▇▇▇▇ its books
and records at the end of each Settlement Period to show at all times the dollar
amount of its Pro Rata Share of the outstanding Loans and Letter of Credit
Accommodations. Each Lender shall only be entitled to receive interest on its
Pro Rata Share of the Loans to the extent such Loans have been funded by such
Lender. Because the Agent on behalf of Lenders may be advancing and/or may be
repaid Loans prior to the time when Lenders will actually advance and/or be
repaid such Loans, interest with respect to Loans shall be allocated by Agent in
accordance with the amount of Loans actually advanced by and repaid to each
Lender and the Agent and shall accrue from and including the date such Loans are
so advanced to but excluding the date such Loans are either repaid by Borrowers
or actually settled with the applicable Lender as described in this Section.
(c) To the extent that Agent has made any such amounts available and
the settlement described above shall not yet have occurred, upon repayment of
any Loans by a Borrower, Agent may apply such amounts repaid directly to any
amounts made available by Agent pursuant to this Section. In lieu of weekly or
more frequent settlements, Agent may, at its option, at any time require each
Lender to provide Agent with immediately available funds representing its Pro
Rata Share of each Loan, prior to Agent's disbursement of such Loan to Borrower.
In such event, all Loans under this Agreement shall be made by the Lenders
simultaneously and proportionately to their Pro Rata Shares. No Lender shall be
responsible for any default by any other Lender in the other Lender's obligation
to make a Loan requested hereunder nor shall the Commitment of any Lender be
increased or decreased as a result of the default by any other Lender in the
other Lender's obligation to make a Loan hereunder.
(d) If Agent is not funding a particular Loan to a Borrower (or
Administrative Borrower for the benefit of such Borrower) pursuant to this
Section on any day, Agent may assume that each Lender will make available to
Agent such Lender's Pro Rata Share of the Loan requested or otherwise made on
such day and Agent may, in its discretion, but shall not be obligated to, cause
a corresponding amount to be made available to or for the benefit of such
Borrower on such day. If Agent makes such corresponding amount available to a
Borrower and such corresponding amount is not in fact made available to Agent by
such Lender, Agent shall be entitled to recover such corresponding amount on
demand from such Lender together with interest thereon for each day from the
date such payment was due until the date such amount is paid to Agent at the
Federal Funds Rate for each day during such period (as published by the
46
Federal Reserve Bank of New York or at Agent's option based on the arithmetic
mean determined by Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by
each of the three leading brokers of Federal funds transactions in New York City
selected by Agent) and if such amounts are not paid within three (3) days of
Agent's demand, at the highest Interest Rate provided for in Section 3.1 hereof
applicable to Prime Rate Loans. During the period in which such Lender has not
paid such corresponding amount to Agent, notwithstanding anything to the
contrary contained in this Agreement or any of the other Financing Agreements,
the amount so advanced by Agent to or for the benefit of any Borrower shall, for
all purposes hereof, be a Loan made by Agent for its own account. Upon any such
failure by a Lender to pay Agent, Agent shall promptly thereafter notify
Administrative Borrower of such failure and Borrowers shall pay such
corresponding amount to Agent for its own account within five (5) Business Days
of Administrative Borrower's receipt of such notice. A Lender who fails to pay
Agent its Pro Rata Share of any Loans made available by the Agent on such
Lender's behalf, or any Lender who fails to pay any other amount owing by it to
Agent, is a "Defaulting Lender". Agent shall not be obligated to transfer to a
Defaulting Lender any payments received by Agent for the Defaulting Lender's
benefit, nor shall a Defaulting Lender be entitled to the sharing of any
payments hereunder (including any principal, interest or fees). Amounts payable
to a Defaulting Lender shall instead be paid to or retained by Agent. Agent may
hold and, in its discretion, relend to a Borrower the amount of all such
payments received or retained by it for the account of such Defaulting Lender.
For purposes of voting or consenting to matters with respect to this Agreement
and the other Financing Agreements and determining Pro Rata Shares, such
Defaulting Lender shall be deemed not to be a "Lender" and such Lender's
Commitment shall be deemed to be zero (0). This Section shall remain effective
with respect to a Defaulting Lender until such default is cured. The operation
of this Section shall not be construed to increase or otherwise affect the
Commitment of any Lender, or relieve or excuse the performance by any Borrower
or Obligor of their duties and obligations hereunder.
(e) Nothing in this Section or elsewhere in this Agreement or the
other Financing Agreements shall be deemed to require Agent to advance funds on
behalf of any Lender or to relieve any Lender from its obligation to fulfill its
Commitment hereunder or to prejudice any rights that any Borrower may have
against any Lender as a result of any default by any Lender hereunder in
fulfilling its Commitment.
6.11 Obligations Several; Independent Nature of Lenders' Rights. The
obligation of each Lender hereunder is several, and no Lender shall be
responsible for the obligation or commitment of any other Lender hereunder.
Nothing contained in this Agreement or any of the other Financing Agreements and
no action taken by the Lenders pursuant hereto or thereto shall be deemed to
constitute the Lenders to be a partnership, an association, a joint venture or
any other kind of entity. The amounts payable at any time hereunder to each
Lender shall be a separate and independent debt, and subject to Section 12.3
hereof, each Lender shall be entitled to protect and enforce its rights arising
out of this Agreement and it shall not be necessary for any other Lender to be
joined as an additional party in any proceeding for such purpose.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting.
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(a) Borrowers shall provide Agent with the following documents in a
form satisfactory to Agent:
(i) on a regular basis as required by Agent, schedules of
sales made, credits issued and cash received;
(ii) as soon as possible after the end of each month (but in
any event within ten (10) Business Days after the end thereof), on a monthly
basis or more frequently as Agent may request, (A) perpetual inventory reports,
(B) inventory reports by location and category (and including the amounts of
Inventory and the value thereof at any leased locations and at premises of
warehouses, processors or other third parties and the amounts, value and
locations of all consigned Inventory), (C) agings of accounts receivable
(together with a reconciliation to the previous month's aging and general
ledger) and (D) agings of accounts payable (and including information indicating
the amounts owing to owners and lessors of leased premises, warehouses,
processors and other third parties from time to time in possession of any
Collateral);
(iii) as soon as possible after the end of each week (but in
any event on or prior to Wednesday of the immediately following week), or more
frequently as Agent may request at any time that Excess Availability is less
than $3,500,000 or a Default or Event of Default shall exist or have occurred
and be continuing, a Borrowing Base Certificate setting forth the calculation of
the Borrowing Base as of the last Business Day of the immediately preceding
period as to the Accounts and Inventory, duly completed and executed by the
chief financial officer, treasurer or controller of Administrative Borrower,
together with all schedules required pursuant to the terms of the Borrowing Base
Certificate duly completed (including a schedule of all Accounts created,
collections received and credit memos issued for each day of the immediately
preceding period);
(iv) upon Agent's request, (A) copies of customer statements,
purchase orders, sales invoices, credit memos, remittance advices and reports,
and copies of deposit slips and bank statements, (B) copies of shipping and
delivery documents, and (C) copies of purchase orders, invoices and delivery
documents for Inventory and Equipment acquired by any Borrower or Guarantor;
(v) such other reports as to the Collateral as Agent shall
request from time to time.
(b) Nothing contained in any Borrowing Base Certificate shall be
deemed to limit, impair or otherwise affect the rights of Agent contained herein
and in the event of any conflict or inconsistency between the calculation of the
Borrowing Base as set forth in any Borrowing Base Certificate and as determined
by Agent in good faith, the determination of Agent shall govern and be
conclusive and binding upon Borrowers and Guarantors. Without limiting the
foregoing, Borrowers shall furnish to Agent any information which Agent may
reasonably request regarding the determination and calculation of any of the
amounts set forth in any Borrowing Base Certificate. The Borrowing Base may be
adjusted based on the information set forth in the reports received by Agent
under Section 7.1(a)(i) above. If any Borrower's or Guarantor's records or
reports of the Collateral are prepared or maintained by an accounting
48
service, contractor, shipper or other agent, such Borrower and Guarantor hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Agent and to follow Agent's
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrowers shall notify Agent promptly of: (i) any material delay
in any Borrower's performance of any of its material obligations to any account
debtor or the assertion of any material claims, offsets, defenses or
counterclaims by any account debtor, or any material disputes with account
debtors, or any settlement, adjustment or compromise thereof, (ii) all material
adverse information known to any Borrower or Guarantor relating to the financial
condition of any account debtor and (iii) any event or circumstance which, to
the best of any Borrower's or Guarantor's knowledge, would cause Agent to
consider any then existing Accounts as no longer constituting Eligible Accounts.
No credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor without Agent's consent, except
in the ordinary course of a Borrower's or Guarantor's business in accordance
with practices and policies previously disclosed in writing to Agent and except
as set forth in the schedules delivered to Agent pursuant to Section 7.1(a)
above. So long as no Event of Default exists or has occurred and is continuing,
Borrowers and Guarantors shall settle, adjust or compromise any claim, offset,
counterclaim or dispute with any account debtor. At any time that an Event of
Default exists or has occurred and is continuing, Agent shall, at its option,
have the exclusive right to settle, adjust or compromise any claim, offset,
counterclaim or dispute with account debtors or grant any credits, discounts or
allowances.
(b) With respect to each Account: (i) the amounts shown on any
invoice delivered to Agent or schedule thereof delivered to Agent shall be true
and complete, (ii) no payments shall be made thereon except payments immediately
delivered to Agent pursuant to the terms of this Agreement, (iii) no credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor except as reported to Agent in accordance with
this Agreement and except for credits, discounts, allowances or extensions made
or given in the ordinary course of each Borrower's business in accordance with
practices and policies previously disclosed to Agent, (iv) there shall be no
setoffs, deductions, contras, defenses, counterclaims or disputes existing or
asserted with respect thereto except as reported to Agent in accordance with the
terms of this Agreement, (v) none of the transactions giving rise thereto will
violate any applicable foreign, Federal, State or local laws or regulations, all
documentation relating thereto will be legally sufficient under such laws and
regulations and all such documentation will be legally enforceable in accordance
with its terms.
(c) Agent shall have the right at any time or times, in Agent's name
or in the name of a nominee of Agent, to verify the validity, amount or any
other matter relating to any Receivables or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
7.3 Inventory Covenants. With respect to the Inventory: (a) each Borrower
and Guarantor shall at all times maintain inventory records reasonably
satisfactory to Agent, keeping correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, such Borrower's or
Guarantor's cost therefor and daily withdrawals therefrom and
49
additions thereto; (b) Borrowers and Guarantors shall conduct a physical count
or cycle count (with such cycle count encompassing not less than ninety (90%)
percent of the then-existing Inventory) of the Inventory at least once each year
but at any time or times as Agent may request on or after an Event of Default,
and promptly following such physical inventory or cycle count shall supply Agent
with a report in the form and with such specificity as may be satisfactory to
Agent concerning such physical or cycle count; (c) Borrowers and Guarantors
shall not remove any Inventory from the locations set forth or permitted herein,
without the prior written consent of Agent, except for sales of Inventory in the
ordinary course of its business and except to move Inventory directly from one
location set forth or permitted herein to another such location and except for
Inventory shipped from the manufacturer thereof to such Borrower or Guarantor
which is in transit to the locations set forth or permitted herein; (d) upon
Agent's request, Borrowers shall, at their expense, no more than one (1) time in
any twelve (12) month period, but at any time or times as Agent may request on
or after an Event of Default, deliver or cause to be delivered to Agent written
appraisals as to the Inventory in form, scope and methodology acceptable to
Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders
and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers
and Guarantors shall produce, use, store and maintain the Inventory with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with applicable laws (including the requirements of
the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto); (f) none of the Inventory or other
Collateral constitutes farm products or the proceeds thereof; (g) each Borrower
and Guarantor assumes all responsibility and liability arising from or relating
to the production, use, sale or other disposition of the Inventory; (h)
Borrowers and Guarantors shall not sell Inventory to any customer on approval,
or any other basis which entitles the customer to return or may obligate any
Borrower or Guarantor to repurchase such Inventory, provided that, Borrowers may
continue to provide "stocking adjustments" consistent with past practice (as
disclosed to Agent on or prior to the date of this Agreement) to Borrowers'
customers, provided further that, such stocking adjustments shall not exceed,
with respect to each customer, four (4%) percent of Borrowers' sales to such
customer in the immediately preceding twelve (12) months (ended as of the last
day of the immediately preceding month); (i) Borrowers and Guarantors shall keep
the Inventory in good and marketable condition; and (j) Borrowers and Guarantors
shall not, without prior written notice to Agent or the specific identification
of such Inventory in a report with respect thereto provided by Administrative
Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any
Inventory on consignment or approval, provided that, Borrowers may sell
inventory on consignment to [AutoZone], which consigned inventory shall not
exceed $400,000 in sale price at any time, and which consigned inventory shall
not in any event constitute Eligible Inventory.
7.4 Equipment and Real Property Covenants. With respect to the Equipment
and Real Property: (a) upon Agent's request, Borrowers and Guarantors shall, at
their expense, at any time or times as Agent may request on or after an Event of
Default, deliver or cause to be delivered to Agent written appraisals as to the
Equipment and/or the Real Property in form, scope and methodology acceptable to
Agent and by an appraiser acceptable to Agent, addressed to Agent and upon which
Agent is expressly permitted to rely; (b) Borrowers and Guarantors shall keep
the Equipment in good order, repair, running and marketable condition (ordinary
wear and tear excepted); (c) Borrowers and Guarantors shall use the Equipment
and Real Property
50
with all reasonable care and caution and in accordance with applicable standards
of any insurance and in conformity with all applicable laws; (d) the Equipment
is and shall be used in the business of Borrowers and Guarantors and not for
personal, family, household or farming use; (e) Borrowers and Guarantors shall
not remove any Equipment from the locations set forth or permitted herein,
except to the extent necessary to have any Equipment repaired or maintained in
the ordinary course of its business or to move Equipment directly from one
location set forth or permitted herein to another such location and except for
the movement of motor vehicles used by or for the benefit of such Borrower or
Guarantor in the ordinary course of business; (f) the Equipment is now and shall
remain personal property and Borrowers and Guarantors shall not permit any of
the Equipment to be or become a part of or affixed to real property such that it
becomes or may be deemed to be a fixture; and (g) each Borrower and Guarantor
assumes all responsibility and liability arising from the use of the Equipment
and Real Property.
7.5 Power of Attorney. Each Borrower and Guarantor hereby irrevocably
designates and appoints Agent (and all persons designated by Agent) as such
Borrower's and Guarantor's true and lawful attorney-in-fact, and authorizes
Agent, in such Borrower's, Guarantor's or Agent's name, to: (a) at any time an
Event of Default exists or has occurred and is continuing (i) demand payment on
Receivables or other Collateral, (ii) enforce payment of Receivables by legal
proceedings or otherwise, (iii) exercise all of such Borrower's or Guarantor's
rights and remedies to collect any Receivable or other Collateral, (iv) sell or
assign any Receivable upon such terms, for such amount and at such time or times
as the Agent deems advisable, (v) settle, adjust, compromise, extend or renew an
Account, (vi) discharge and release any Receivable, (vii) prepare, file and sign
such Borrower's or Guarantor's name on any proof of claim in bankruptcy or other
similar document against an account debtor or other obligor in respect of any
Receivables or other Collateral, (viii) notify the post office authorities to
change the address for delivery of remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral to an address
designated by Agent, and open and dispose of all mail addressed to such Borrower
or Guarantor and handle and store all mail relating to the Collateral; and (ix)
do all acts and things which are necessary, in Agent's determination, to fulfill
such Borrower's or Guarantor's obligations under this Agreement and the other
Financing Agreements and (b) at any time to (i) take control in any manner of
any item of payment in respect of Receivables or constituting Collateral or
otherwise received in or for deposit in the Blocked Accounts or otherwise
received by Agent or any Lender, (ii) have access to any lockbox or postal box
into which remittances from account debtors or other obligors in respect of
Receivables or other proceeds of Collateral are sent or received, (iii) endorse
such Borrower's or Guarantor's name upon any items of payment in respect of
Receivables or constituting Collateral or otherwise received by Agent and any
Lender and deposit the same in Agent's account for application to the
Obligations, (iv) endorse such Borrower's or Guarantor's name upon any chattel
paper, document, instrument, invoice, or similar document or agreement relating
to any Receivable or any goods pertaining thereto or any other Collateral,
including any warehouse or other receipts, or bills of lading and other
negotiable or non-negotiable documents, (v) clear Inventory the purchase of
which was financed with Letter of Credit Accommodations through U.S. Customs or
foreign export control authorities in such Borrower's or Guarantor's name,
Agent's name or the name of Agent's designee, and to sign and deliver to customs
officials powers of attorney in such Borrower's or Guarantor's name for such
purpose, and to complete in such Borrower's or Guarantor's or Agent's name, any
order, sale or transaction, obtain the
51
necessary documents in connection therewith and collect the proceeds thereof,
and (vi) sign such Borrower's or Guarantor's name on any verification of
Receivables and notices thereof to account debtors or any secondary obligors or
other obligors in respect thereof. Each Borrower and Guarantor hereby releases
Agent and Lenders and their respective officers, employees and designees from
any liabilities arising from any act or acts under this power of attorney and in
furtherance thereof, whether of omission or commission, except as a result of
Agent's or any Lender's own gross negligence or willful misconduct as determined
pursuant to a final non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Agent may, at its option, upon notice to Administrative
Borrower, (a) cure any default by any Borrower or Guarantor under any material
agreement with a third party that affects the Collateral, its value or the
ability of Agent to collect, sell or otherwise dispose of the Collateral or the
rights and remedies of Agent or any Lender therein or the ability of any
Borrower or Guarantor to perform its obligations hereunder or under any of the
other Financing Agreements, (b) pay or bond on appeal any judgment entered
against any Borrower or Guarantor, (c) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and pay any amount, incur any expense or perform any act
which, in Agent's judgment, is necessary or appropriate to preserve, protect,
insure or maintain the Collateral and the rights of Agent and Lenders with
respect thereto. Agent may add any amounts so expended to the Obligations and
charge any Borrower's account therefor, such amounts to be repayable by
Borrowers on demand. Agent and Lenders shall be under no obligation to effect
such cure, payment or bonding and shall not, by doing so, be deemed to have
assumed any obligation or liability of any Borrower or Guarantor. Any payment
made or other action taken by Agent or any Lender under this Section shall be
without prejudice to any right to assert an Event of Default hereunder and to
proceed accordingly.
7.7 Access to Premises. From time to time as requested by Agent, at the
cost and expense of Borrowers, (a) Agent or its designee shall have complete
access to all of each Borrower's and Guarantor's premises during normal business
hours and after notice to Parent, or at any time and without notice to
Administrative Borrower if an Event of Default exists or has occurred and is
continuing, for the purposes of inspecting, verifying and auditing the
Collateral and all of each Borrower's and Guarantor's books and records,
including the Records, and (b) each Borrower and Guarantor shall promptly
furnish to Agent such copies of such books and records or extracts therefrom as
Agent may request, and Agent or any Lender or Agent's designee may use during
normal business hours such of any Borrower's and Guarantor's personnel,
equipment, supplies and premises as may be reasonably necessary for the
foregoing and if an Event of Default exists or has occurred and is continuing
for the collection of Receivables and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Each Borrower and Guarantor hereby represents and warrants to Agent and
Lenders the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy of which are a continuing condition of the
making of Loans and providing Letter of Credit Accommodations to Borrowers:
52
8.1 Corporate Existence, Power and Authority. Each Borrower and Guarantor
is a corporation duly organized and in good standing under the laws of its state
of incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on such Borrower's or Guarantor's
financial condition, results of operation or business or the rights of Agent in
or to any of the Collateral. The execution, delivery and performance of this
Agreement, the other Financing Agreements and the transactions contemplated
hereunder and thereunder (a) are all within each Borrower's and Guarantor's
corporate powers, (b) have been duly authorized, (c) are not in contravention of
law or the terms of any Borrower's or Guarantor's certificate or articles of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which any Borrower or Guarantor is a party or by
which any Borrower or Guarantor or its property are bound and (d) will not
result in the creation or imposition of, or require or give rise to any
obligation to grant, any lien, security interest, charge or other encumbrance
upon any property of any Borrower or Guarantor. This Agreement and the other
Financing Agreements to which any Borrower or Guarantor is a party constitute
legal, valid and binding obligations of such Borrower and Guarantor enforceable
in accordance with their respective terms.
8.2 Name; State of Organization; Chief Executive Office; Collateral
Locations.
(a) The exact legal name of each Borrower and Guarantor is as set
forth on the signature page of this Agreement and in the Information
Certificate. No Borrower or Guarantor has, during the five years prior to the
date of this Agreement, been known by or used any other corporate or fictitious
name or been a party to any merger or consolidation, or acquired all or
substantially all of the assets of any Person, or acquired any of its property
or assets out of the ordinary course of business, except as set forth in the
Information Certificate.
(b) Each Borrower and Guarantor is an organization of the type and
organized in the jurisdiction set forth in the Information Certificate. The
Information Certificate accurately sets forth the organizational identification
number of each Borrower and Guarantor or accurately states that such Borrower or
Guarantor has none and accurately sets forth the federal employer identification
number of each Borrower and Guarantor.
(c) The chief executive office and mailing address of each Borrower
and Guarantor and each Borrower's and Guarantor's Records concerning Accounts
are located only at the address identified as such in Schedule 8.2 to the
Information Certificate and its only other places of business and the only other
locations of Collateral, if any, are the addresses set forth in Schedule 8.2 to
the Information Certificate, subject to the rights of any Borrower or Guarantor
to establish new locations in accordance with Section 9.2 below. The Information
Certificate correctly identifies any of such locations which are not owned by a
Borrower or Guarantor and sets forth the owners and/or operators thereof.
8.3 Financial Statements; No Material Adverse Change. All financial
statements relating to any Borrower or Guarantor which have been or may
hereafter be delivered by any Borrower or Guarantor to Agent and Lenders have
been prepared in accordance with GAAP (except as to any interim financial
statements, to the extent such statements are subject to normal
53
year-end adjustments and do not include any notes) and fairly present in all
material respects the financial condition and the results of operation of such
Borrower and Guarantor as at the dates and for the periods set forth therein.
Except as disclosed in any interim financial statements furnished by Borrowers
and Guarantors to Agent prior to the date of this Agreement, there has been no
act, condition or event which has had or is reasonably likely to have a Material
Adverse Effect since the date of the most recent audited financial statements of
any Borrower or Guarantor furnished by any Borrower or Guarantor to Agent prior
to the date of this Agreement.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Agent under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens in the Equipment in favor of
Laurus Master Fund, Ltd., and the other liens indicated on Schedule 8.4 to the
Information Certificate and the other liens permitted under Section 9.8 hereof.
Each Borrower and Guarantor has good and marketable fee simple title to or valid
leasehold interests in all of its Real Property and good, valid and merchantable
title to all of its other properties and assets subject to no liens, mortgages,
pledges, security interests, encumbrances or charges of any kind, except those
granted to Agent and such others as are specifically listed on Schedule 8.4 to
the Information Certificate or permitted under Section 9.8 hereof.
8.5 Tax Returns. Each Borrower and Guarantor has filed, or caused to be
filed, in a timely manner all tax returns, reports and declarations which are
required to be filed by it. All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Each Borrower
and Guarantor has paid or caused to be paid all taxes due and payable or claimed
due and payable in any assessment received by it, except taxes the validity of
which are being contested in good faith by appropriate proceedings diligently
pursued and available to such Borrower or Guarantor and with respect to which
adequate reserves have been set aside on its books. Adequate provision has been
made for the payment of all accrued and unpaid Federal, State, county, local,
foreign and other taxes whether or not yet due and payable and whether or not
disputed.
8.6 Litigation. Except as set forth on Schedule 8.6 to the Information
Certificate, (a) there is no investigation by any Governmental Authority
pending, or to the best of any Borrower's or Guarantor's knowledge threatened,
against or affecting any Borrower or Guarantor, its or their assets or business
and (b) there is no action, suit, proceeding or claim by any Person pending, or
to the best of any Borrower's or Guarantor's knowledge threatened, against any
Borrower or Guarantor or its or their assets or goodwill, or against or
affecting any transactions contemplated by this Agreement, in each case, which
if adversely determined against such Borrower or Guarantor has or could
reasonably be expected to have a Material Adverse Effect.
8.7 Compliance with Other Agreements and Applicable Laws.
(a) Borrowers and Guarantors are not in default in any respect
under, or in violation in any respect of the terms of, any material agreement,
contract, instrument, lease or other commitment to which it is a party or by
which it or any of its assets are bound. Borrowers and Guarantors are in
compliance with the requirements of all applicable laws, rules, regulations and
orders of any Governmental Authority relating to their respective businesses,
including,
54
without limitation, those set forth in or promulgated pursuant to the
Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards
Act of 1938, as amended, ERISA, the Code, as amended, and the rules and
regulations thereunder, and all Environmental Laws.
(b) Borrowers and Guarantors have obtained all material permits,
licenses, approvals, consents, certificates, orders or authorizations of any
Governmental Authority required for the lawful conduct of its business (the
"Permits"). All of the Permits are valid and subsisting and in full force and
effect. There are no actions, claims or proceedings pending or to the best of
any Borrower's or Guarantor's knowledge, threatened that seek the revocation,
cancellation, suspension or modification of any of the Permits.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 to the Information
Certificate, Borrowers, Guarantors and any Subsidiary of any Borrower or
Guarantor have not generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Materials, on or off its premises
(whether or not owned by it) in any manner which at any time violates in any
material respect any applicable Environmental Law or Permit, and the operations
of Borrowers, Guarantors and any Subsidiary of any Borrower or Guarantor
complies in all material respects with all Environmental Laws and all Permits.
(b) Except as set forth on Schedule 8.8 to the Information
Certificate, there has been no investigation by any Governmental Authority or
any proceeding, complaint, order, directive, claim, citation or notice by any
Governmental Authority or any other person nor is any pending or to the best of
any Borrower's or Guarantor's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
any Borrower or Guarantor and any Subsidiary of any Borrower or Guarantor or the
release, spill or discharge, threatened or actual, of any Hazardous Material or
the generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental,
health or safety matter, which adversely affects or could reasonably be expected
to adversely affect in any material respect any Borrower or Guarantor or its or
their business, operations or assets or any properties at which such Borrower or
Guarantor has transported, stored or disposed of any Hazardous Materials.
(c) Except as set forth on Schedule 8.8 to the Information
Certificate, Borrowers, Guarantors and their Subsidiaries have no material
liability (contingent or otherwise) in connection with a release, spill or
discharge, threatened or actual, of any Hazardous Materials or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.
(d) Borrowers, Guarantors and their Subsidiaries have all Permits
required to be obtained or filed in connection with the operations of Borrowers
and Guarantors under any Environmental Law and all of such licenses,
certificates, approvals or similar authorizations and other Permits are valid
and in full force and effect.
8.9 Employee Benefits.
55
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Federal or State law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the Internal Revenue Service and to the
best of any Borrower's or Guarantor's knowledge, nothing has occurred which
would cause the loss of such qualification. Each Borrower and its ERISA
Affiliates have made all required contributions to any Plan subject to Section
412 of the Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.
(b) There are no pending, or to the best of any Borrower's or
Guarantor's knowledge, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) the current value of each Plan's assets (determined in accordance
with the assumptions used for funding such Plan pursuant to Section 412 of the
Code) are not less than such Plan's liabilities under Section 4001(a)(16) of
ERISA; (iii) each Borrower and Guarantor, and their ERISA Affiliates, have not
incurred and do not reasonably expect to incur, any liability under Title IV of
ERISA with respect to any Plan (other than premiums due and not delinquent under
Section 4007 of ERISA); (iv) each Borrower and Guarantor, and their ERISA
Affiliates, have not incurred and do not reasonably expect to incur, any
liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Section 4201 or
4243 of ERISA with respect to a Multiemployer Plan; and (v) each Borrower and
Guarantor, and their ERISA Affiliates, have not engaged in a transaction that
would be subject to Section 4069 or 4212(c) of ERISA.
8.10 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by any Borrower or Guarantor maintained at
any bank or other financial institution are set forth on Schedule 8.10 to the
Information Certificate, subject to the right of each Borrower and Guarantor to
establish new accounts in accordance with Section 5.2 hereof.
8.11 Intellectual Property. Each Borrower and Guarantor owns or licenses
or otherwise has the right to use all Intellectual Property necessary for the
operation of its business as presently conducted or proposed to be conducted. As
of the date hereof, Borrowers and Guarantors do not have any Intellectual
Property registered, or subject to pending applications, in the United States
Patent and Trademark Office or any similar office or agency in the United
States, any State thereof, any political subdivision thereof or in any other
country, other than those described in Schedule 8.11 to the Information
Certificate and has not granted any licenses with respect thereto other than as
set forth in Schedule 8.11 to the Information Certificate. No event has occurred
which permits or would permit after notice or passage of time or both, the
revocation, suspension or termination of such rights. To the best of any
Borrower's and Guarantor's knowledge, no slogan or other advertising device,
product, process, method, substance or other Intellectual Property or goods
bearing or using any Intellectual Property presently contemplated to be sold by
or employed by any Borrower or Guarantor infringes any patent, trademark,
servicemark, tradename, copyright, license or other Intellectual Property
56
owned by any other Person presently and no claim or litigation is pending or
threatened against or affecting any Borrower or Guarantor contesting its right
to sell or use any such Intellectual Property. Schedule 8.11 to the Information
Certificate sets forth all of the agreements or other arrangements of each
Borrower and Guarantor pursuant to which such Borrower or Guarantor has a
license or other right to use any trademarks, logos, designs, representations or
other Intellectual Property owned by another person as in effect on the date
hereof and the dates of the expiration of such agreements or other arrangements
of such Borrower or Guarantor as in effect on the date hereof (collectively,
together with such agreements or other arrangements as may be entered into by
any Borrower or Guarantor after the date hereof, collectively, the "License
Agreements" and individually, a "License Agreement"). No trademark, servicemark,
copyright or other Intellectual Property at any time used by any Borrower or
Guarantor which is owned by another person, or owned by such Borrower or
Guarantor subject to any security interest, lien, collateral assignment, pledge
or other encumbrance in favor of any person other than Agent, is affixed to any
Eligible Inventory, except (a) to the extent permitted under the term of the
license agreements listed on Schedule 8.11 to the Information Certificate and
(b) to the extent the sale of Inventory to which such Intellectual Property is
affixed is permitted to be sold by such Borrower or Guarantor under applicable
law (including the United States Copyright Act of 1976).
8.12 Subsidiaries; Affiliates; Capitalization; Solvency.
(a) Each Borrower and Guarantor does not have any direct or indirect
Subsidiaries or Affiliates and is not engaged in any joint venture or
partnership except as set forth in Schedule 8.12 to the Information Certificate.
(b) Each Borrower and Guarantor is the record and beneficial owner
of all of the issued and outstanding shares of Capital Stock of each of the
Subsidiaries listed on Schedule 8.12 to the Information Certificate as being
owned by such Borrower or Guarantor and there are no proxies, irrevocable or
otherwise, with respect to such shares and no equity securities of any of the
Subsidiaries are or may become required to be issued by reason of any options,
warrants, rights to subscribe to, calls or commitments of any kind or nature and
there are no contracts, commitments, understandings or arrangements by which any
Subsidiary is or may become bound to issue additional shares of it Capital Stock
or securities convertible into or exchangeable for such shares.
(c) The issued and outstanding shares of Capital Stock of each
Borrower and Guarantor are directly and beneficially owned and held by the
persons indicated in the Information Certificate, and in each case all of such
shares have been duly authorized and are fully paid and non-assessable, free and
clear of all claims, liens, pledges and encumbrances of any kind, except as
disclosed in writing to Agent prior to the date hereof.
(d) (i) On a consolidated basis, the Borrowers and Guarantors are
Solvent and will continue to be Solvent after the creation of the Obligations,
the security interests of Agent, consummation of the Purchase Agreements, and
the other transactions contemplated hereunder, and (ii) Administrative Borrower
is solvent after the creation of the Obligations, the security interests of
Agent, consummation of the Purchase Agreements and the other transactions
contemplated hereunder.
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8.13 Labor Disputes.
(a) Set forth on Schedule 8.13 to the Information Certificate is a
list (including dates of termination) of all collective bargaining or similar
agreements between or applicable to each Borrower and Guarantor and any union,
labor organization or other bargaining agent in respect of the employees of any
Borrower or Guarantor on the date hereof.
(b) There is (i) no significant unfair labor practice complaint
pending against any Borrower or Guarantor or, to the best of any Borrower's or
Guarantor's knowledge, threatened against it, before the National Labor
Relations Board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement is
pending on the date hereof against any Borrower or Guarantor or, to best of any
Borrower's or Guarantor's knowledge, threatened against it, and (ii) no
significant strike, labor dispute, slowdown or stoppage is pending against any
Borrower or Guarantor or, to the best of any Borrower's or Guarantor's
knowledge, threatened against any Borrower or Guarantor.
8.14 Restrictions on Subsidiaries. Except for restrictions contained in
this Agreement or any other agreement with respect to Indebtedness of any
Borrower or Guarantor permitted hereunder as in effect on the date hereof
(including, without limitation, under the Laurus Notes and the Global Capital
Notes), there are no contractual or consensual restrictions on any Borrower or
Guarantor or any of its Subsidiaries which prohibit or otherwise restrict (a)
the transfer of cash or other assets (i) between any Borrower or Guarantor and
any of its or their Subsidiaries or (ii) between any Subsidiaries of any
Borrower or Guarantor or (b) the ability of any Borrower or Guarantor or any of
its or their Subsidiaries to incur Indebtedness or grant security interests to
Agent or any Lender in the Collateral.
8.15 Material Contracts. Schedule 8.15 to the Information Certificate sets
forth all Material Contracts to which any Borrower or Guarantor is a party or is
bound as of the date hereof. Borrowers and Guarantors have delivered true,
correct and complete copies of such Material Contracts to Agent on or before the
date hereof. Borrowers and Guarantors are not in breach or in default in any
material respect of or under any Material Contract and have not received any
notice of the intention of any other party thereto to terminate any Material
Contract.
8.16 Payable Practices. Each Borrower and Guarantor have not made any
material change in the historical accounts payable practices from those in
effect immediately prior to the date hereof.
8.17 Acquisition of Purchased Assets.
(a) The Purchase Agreements and the transactions contemplated
thereunder have been duly executed, delivered and performed in accordance with
their terms by the respective parties thereto in all respects, including the
fulfillment (not merely the waiver, except as may be disclosed to Agent and
consented to in writing by Agent) of all conditions precedent set forth therein
and giving effect to the terms of the Purchase Agreements and the assignments to
be executed and delivered by Seller (or any of its affiliates or subsidiaries)
thereunder, Borrowers acquired and have good and marketable title to the
Purchased Assets, free and clear of all claims, liens, pledges and encumbrances
of any kind, except as permitted hereunder.
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(b) All actions and proceedings, required by the Purchase
Agreements, applicable law or regulation (including, but not limited to,
compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Anti-Trust Improvements Act of 1976, as
amended) have been taken and the transactions required thereunder have been duly
and validly taken and consummated.
(c) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the
transactions described in the Purchase Agreements and no governmental or other
action or proceeding has been threatened or commenced, seeking any injunction,
restraining order or other order which seeks to void or otherwise modify the
transactions described in the Purchase Agreements.
(d) Borrowers have delivered, or caused to be delivered, to Agent,
true, correct and complete copies of the Purchase Agreements.
8.18 Solvency. The Borrowers and Guarantors, on a consolidated basis, and
Administrative Borrower individually, are solvent and will continue to be
solvent after the creation of the Obligations, the security interests of Agent
and the other transaction contemplated hereunder, and each Borrower is able to
pay its debts as they mature and has (and has reason to believe it will continue
to have) sufficient capital (and not unreasonably small capital) to carry on its
business and all businesses in which it is about to engage. The assets and
properties of each Borrower at a fair valuation and at their present fair
salable value are, and will be, greater than the Indebtedness of such Borrower,
and including subordinated and contingent liabilities computed at the amount
which, to the best of such Borrower's knowledge, represents an amount which can
reasonably be expected to become an actual or matured liability.
8.19 Accuracy and Completeness of Information. All information furnished
by or on behalf of any Borrower or Guarantor in writing to Agent or any Lender
in connection with this Agreement or any of the other Financing Agreements or
any transaction contemplated hereby or thereby, including all information on the
Information Certificate is true and correct in all material respects on the date
as of which such information is dated or certified and does not omit any
material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could reasonably be expected
to have a Material Adverse Affect, which has not been fully and accurately
disclosed to Agent in writing prior to the date hereof.
8.20 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Agent and Lenders on the date of each additional
borrowing or other credit accommodation hereunder and shall be conclusively
presumed to have been relied on by Agent and Lenders regardless of any
investigation made or information possessed by Agent or any Lender. The
representations and warranties set forth herein shall be cumulative and in
addition to any other representations or warranties which any Borrower or
Guarantor shall now or hereafter give, or cause to be given, to Agent or any
Lender.
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SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence.
(a) Each Borrower and Guarantor shall at all times preserve, renew
and keep in full force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
licenses, trademarks, tradenames, approvals, authorizations, leases, contracts
and Permits necessary to carry on the business as presently or proposed to be
conducted, except as to any Guarantor other than Parent as permitted in Section
9.7 hereto.
(b) No Borrower or Guarantor shall change its name unless each of
the following conditions is satisfied: (i) Agent shall have received not less
than thirty (30) days prior written notice from Administrative Borrower of such
proposed change in its corporate name, which notice shall accurately set forth
the new name; and (ii) Agent shall have received a copy of the amendment to the
Certificate or Articles of Incorporation of such Borrower or Guarantor providing
for the name change certified by the Secretary of State of the jurisdiction of
incorporation or organization of such Borrower or Guarantor as soon as it is
available.
(c) No Borrower or Guarantor shall change its chief executive office
or its mailing address or organizational identification number (or if it does
not have one, shall not acquire one) unless Agent shall have received not less
than thirty (30) days' prior written notice from Administrative Borrower of such
proposed change, which notice shall set forth such information with respect
thereto as Agent may require and Agent shall have received such agreements as
Agent may reasonably require in connection therewith. No Borrower or Guarantor
shall change its type of organization, jurisdiction of organization or other
legal structure.
9.2 New Collateral Locations. Each Borrower and Guarantor may only open
any new location within the continental United States provided such Borrower or
Guarantor (a) gives Agent thirty (30) days prior written notice of the intended
opening of any such new location and (b) executes and delivers, or causes to be
executed and delivered, to Agent such agreements, documents, and instruments as
Agent may deem reasonably necessary or desirable to protect its interests in the
Collateral at such location.
9.3 Compliance with Laws, Regulations, Etc.
(a) Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, at all times, comply in all material respects with all laws,
rules, regulations, licenses, approvals, orders and other Permits applicable to
it and duly observe all requirements of any foreign, Federal, State or local
Governmental Authority, including ERISA, the Code, the Occupational Safety and
Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as
amended, and all statutes, rules, regulations, orders, permits and stipulations
relating to environmental pollution and employee health and safety, including
all of the Environmental Laws.
(b) Borrowers and Guarantors shall give written notice to Agent
immediately upon any Borrower's or Guarantor's receipt of any notice of, or any
Borrower's or Guarantor's otherwise obtaining knowledge of, (i) the occurrence
of any event involving the release, spill or
60
discharge, threatened or actual, of any Hazardous Material or (ii) any
investigation, proceeding, complaint, order, directive, claims, citation or
notice with respect to: (A) any non-compliance with or violation of any
Environmental Law by any Borrower or Guarantor or (B) the release, spill or
discharge, threatened or actual, of any Hazardous Material other than in the
ordinary course of business and other than as permitted under any applicable
Environmental Law. Copies of all environmental surveys, audits, assessments,
feasibility studies and results of remedial investigations shall be promptly
furnished, or caused to be furnished, by such Borrower or Guarantor to Agent.
Each Borrower and Guarantor shall take prompt action to respond to any material
non-compliance with any of the Environmental Laws and shall regularly report to
Agent on such response.
(c) Without limiting the generality of the foregoing, whenever Agent
reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of any Borrower or Guarantor in order to
avoid any non-compliance, with any Environmental Law, Borrowers shall, at
Agent's request and Borrowers' expense: (i) cause an independent environmental
engineer reasonably acceptable to Agent to conduct such tests of the site where
non-compliance or alleged non-compliance with such Environmental Laws has
occurred as to such non-compliance and prepare and deliver to Agent a report as
to such non-compliance setting forth the results of such tests, a proposed plan
for responding to any environmental problems described therein, and an estimate
of the costs thereof and (ii) provide to Agent a supplemental report of such
engineer whenever the scope of such non-compliance, or such Borrower's or
Guarantor's response thereto or the estimated costs thereof, shall change in any
material respect.
(d) Each Borrower and Guarantor shall indemnify and hold harmless
Agent and Lenders and their respective directors, officers, employees, agents,
invitees, representatives, successors and assigns, from and against any and all
losses, claims, damages, liabilities, costs, and expenses (including reasonable
attorneys' fees and expenses) directly or indirectly arising out of or
attributable to the use, generation, manufacture, reproduction, storage,
release, threatened release, spill, discharge, disposal or presence of a
Hazardous Material, including the costs of any required or necessary repair,
cleanup or other remedial work with respect to any property of any Borrower or
Guarantor and the preparation and implementation of any closure, remedial or
other required plans. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination of this Agreement.
9.4 Payment of Taxes and Claims. Each Borrower and Guarantor shall, and
shall cause any Subsidiary to, duly pay and discharge all taxes, assessments,
contributions and governmental charges upon or against it or its properties or
assets, except for taxes the validity of which are being contested in good faith
by appropriate proceedings diligently pursued and available to such Borrower,
Guarantor or Subsidiary, as the case may be, and with respect to which adequate
reserves have been set aside on its books. Each Borrower and Guarantor shall be
liable for any tax or penalties imposed on Agent or any Lender as a result of
the financing arrangements provided for herein and each Borrower and Guarantor
agrees to indemnify and hold Agent harmless with respect to the foregoing, and
to repay to Agent, for the benefit of Lenders, on demand the amount thereof, and
until paid by such Borrower or Guarantor such amount shall be added and deemed
part of the Loans, provided, that, nothing contained herein
61
shall be construed to require any Borrower or Guarantor to pay any income or
franchise taxes attributable to the income of Lenders from any amounts charged
or paid hereunder to Lenders. The foregoing indemnity shall survive the payment
of the Obligations and the termination of this Agreement.
9.5 Insurance. Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, at all times, maintain with financially sound and reputable
insurers insurance with respect to the Collateral against loss or damage and all
other insurance of the kinds and in the amounts customarily insured against or
carried by corporations of established reputation engaged in the same or similar
businesses and similarly situated. Said policies of insurance shall be
reasonably satisfactory to Agent as to form, amount and insurer. Borrowers and
Guarantors shall furnish certificates, policies or endorsements to Agent as
Agent shall reasonably require as proof of such insurance, and, if any Borrower
or Guarantor fails to do so, Agent is authorized, but not required, to obtain
such insurance at the expense of Borrowers. All policies shall provide for at
least thirty (30) days prior written notice to Agent of any cancellation or
reduction of coverage and that Agent may act as attorney for each Borrower and
Guarantor in obtaining, and at any time an Event of Default exists or has
occurred and is continuing, adjusting, settling, amending and canceling such
insurance. Borrowers and Guarantors shall cause Agent to be named as a loss
payee and an additional insured (but without any liability for any premiums)
under such insurance policies and Borrowers and Guarantors shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Agent. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Agent as its interests may appear and further specify that Agent and Lenders
shall be paid regardless of any act or omission by any Borrower, Guarantor or
any of its or their Affiliates. Without limiting any other rights of Agent or
Lenders, any insurance proceeds received by Agent at any time may be applied to
payment of the Obligations, whether or not then due, in any order and in such
manner as Agent may determine. Upon application of such proceeds to the
Revolving Loans, Revolving Loans may be available subject and pursuant to the
terms hereof to be used for the costs of repair or replacement of the Collateral
lost or damages resulting in the payment of such insurance proceeds.
9.6 Financial Statements and Other Information.
(a) Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, keep proper books and records in which true and complete entries
shall be made of all dealings or transactions of or in relation to the
Collateral and the business of such Borrower, Guarantor and its Subsidiaries in
accordance with GAAP. Borrowers and Guarantors shall promptly furnish to Agent
and Lenders all such financial and other information as Agent shall reasonably
request relating to the Collateral and the assets, business and operations of
Borrowers and Guarantors, and Borrower shall notify the auditors and accountants
of Borrowers and Guarantors that Agent is authorized to obtain such information
directly from them. Without limiting the foregoing, Borrowers and Guarantors
shall furnish or cause to be furnished to Agent, the following: (i) within
thirty (30) days after the end of each fiscal month, monthly unaudited
consolidated financial statements, and unaudited consolidating financial
statements (including in each case balance sheets, statements of income and
loss, statements of cash flow (consolidated only), and statements of
shareholders' equity (consolidated only)), all in reasonable detail, fairly
presenting the financial position and the results of the operations of Parent
and its Subsidiaries as
62
of the end of and through such fiscal month, certified to be correct by the
chief financial officer of Parent, subject to normal year-end adjustments and no
footnotes and accompanied by a compliance certificate substantially in the form
of Exhibit D hereto, along with a schedule in a form satisfactory to Agent of
the calculations used in determining, as of the end of such month, whether
Borrowers and Guarantors are in compliance with the covenants set forth in
Sections 9.17 and 9.18 of this Agreement for such month and (ii) within ninety
(90) days after the end of each fiscal year, audited consolidated financial
statements and unaudited consolidating financial statements of Parent and its
Subsidiaries (including in each case balance sheets, statements of income and
loss, statements of cash flow (consolidated only), and statements of
shareholders' equity (consolidated only)), and the accompanying notes thereto,
all in reasonable detail, fairly presenting the financial position and the
results of the operations of Parent and its Subsidiaries as of the end of and
for such fiscal year, together with the unqualified opinion of independent
certified public accountants with respect to the audited consolidated financial
statements, which accountants shall be an independent accounting firm selected
by Borrowers and acceptable to Agent, that such audited consolidated financial
statements have been prepared in accordance with GAAP, and present fairly the
results of operations and financial condition of Parent and its Subsidiaries as
of the end of and for the fiscal year then ended.
(b) Borrowers and Guarantors shall promptly notify Agent in writing
of the details of (i) any loss, damage, investigation, action, suit, proceeding
or claim relating to Collateral having a value of more than $100,000 or which if
adversely determined would result in any material adverse change in any
Borrower's or Guarantor's business, properties, assets, goodwill or condition,
financial or otherwise, (ii) any Material Contract being terminated or amended
or any new Material Contract entered into (in which event Borrowers and
Guarantors shall provide Agent with a copy of such Material Contract), (iii) any
order, judgment or decree in excess of $1,000,000 shall have been entered
against any Borrower or Guarantor any of its or their properties or assets, (iv)
any notification of a material violation of laws or regulations received by any
Borrower or Guarantor, (v) any ERISA Event, and (vi) the occurrence of any
Default or Event of Default.
(c) Borrowers and Guarantors shall promptly after the sending or
filing thereof furnish or cause to be furnished to Agent copies of all reports
which any Borrower or Guarantor sends to its stockholders generally and copies
of all reports and registration statements which any Borrower or Guarantor files
with the Securities and Exchange Commission, any national securities exchange or
the National Association of Securities Dealers, Inc.
(d) Borrowers and Guarantors shall furnish or cause to be furnished
to Agent such budgets, forecasts, projections and other information respecting
the Collateral and the business of Borrowers and Guarantors, as Agent may, from
time to time, reasonably request. Agent is hereby authorized to deliver a copy
of any financial statement or any other information relating to the business of
Borrowers and Guarantors to any court or other Governmental Authority or to any
Lender or Participant or prospective Lender or Participant or any Affiliate of
any Lender or Participant. Each Borrower and Guarantor hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Agent, at
Borrowers' expense, copies of the financial statements of any Borrower and
Guarantor and any reports or management letters prepared by such accountants or
auditors on behalf of any Borrower or Guarantor and to disclose to Agent and
Lenders such information as they may have regarding the business of any Borrower
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and Guarantor. Any documents, schedules, invoices or other papers delivered to
Agent or any Lender may be destroyed or otherwise disposed of by Agent or such
Lender one (1) year after the same are delivered to Agent or such Lender, except
as otherwise designated by Administrative Borrower to Agent or such Lender in
writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Each Borrower
and Guarantor shall not, and shall not permit any Subsidiary to, directly or
indirectly,
(a) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it except that
any wholly-owned Subsidiary of Parent (other than any Borrower) may merge with
and into or consolidate with any other wholly-owned Subsidiary of Parent (other
than any Borrower), provided, that, each of the following conditions is
satisfied as determined by Agent in good faith: (i) Agent shall have received
not less than ten (10) Business Days' prior written notice of the intention of
such Subsidiaries to so merge or consolidate, which notice shall set forth in
reasonable detail satisfactory to Agent, the persons that are merging or
consolidating, which person will be the surviving entity, the locations of the
assets of the persons that are merging or consolidating, and the material
agreements and documents relating to such merger or consolidation, (ii) Agent
shall have received such other information with respect to such merger or
consolidation as Agent may reasonably request, (iii) as of the effective date of
the merger or consolidation and after giving effect thereto, no Default or Event
of Default shall exist or have occurred, (iv) Agent shall have received, true,
correct and complete copies of all agreements, documents and instruments
relating to such merger or consolidation, including, but not limited to, the
certificate or certificates of merger to be filed with each appropriate
Secretary of State (with a copy as filed promptly after such filing), (v) the
surviving corporation shall expressly confirm, ratify and assume the Obligations
and the Financing Agreements to which it is a party in writing, in form and
substance satisfactory to Agent, and Borrowers and Guarantors shall execute and
deliver such other agreements, documents and instruments as Agent may request in
connection therewith;
(b) sell, issue, assign, lease, license, transfer, abandon or
otherwise dispose of any Capital Stock or Indebtedness to any other Person or
any of its assets to any other Person, except for
(i) sales of Inventory in the ordinary course of business,
(ii) the sale or other disposition of Equipment (including
worn-out or obsolete Equipment or Equipment no longer used or useful in the
business of any Borrower or Guarantor) so long as such sales or other
dispositions do not involve Equipment having an aggregate fair market value in
excess of $250,000 for all such Equipment disposed of in any fiscal year of
Borrowers or as Agent may otherwise agree, and
(iii) the issuance and sale by any Borrower or Guarantor of
Capital Stock of such Borrower or Guarantor after the date hereof; provided,
that, (A) Agent shall have received not less than ten (10) Business Days' prior
written notice of such issuance and sale by such Borrower or Guarantor, which
notice shall specify the parties to whom such shares are to be sold, the terms
of such sale, the total amount which it is anticipated will be realized from the
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issuance and sale of such stock and the net cash proceeds which it is
anticipated will be received by such Borrower or Guarantor from such sale, (B)
such Borrower or Guarantor shall not be required to pay any cash dividends or
repurchase or redeem such Capital Stock or make any other payments in respect
thereof, except as otherwise permitted in Section 9.11 hereof, (C) the terms of
such Capital Stock, and the terms and conditions of the purchase and sale
thereof, shall not include any terms that include any limitation on the right of
any Borrower to request or receive Loans or Letter of Credit Accommodations or
the right of any Borrower and Guarantor to amend or modify any of the terms and
conditions of this Agreement or any of the other Financing Agreements or
otherwise in any way relate to or affect the arrangements of Borrowers and
Guarantors with Agent and Lenders or are more restrictive or burdensome to any
Borrower or Guarantor than the terms of any Capital Stock in effect on the date
hereof, (D) except as Agent may otherwise agree in writing, all of the proceeds
of the sale and issuance of such Capital Stock shall be paid to Agent for
application to the Obligations in such order and manner as Agent may determine
or at Agent's option, to be held as cash collateral for the Obligations and (E)
as of the date of such issuance and sale and after giving effect thereto, no
Default or Event of Default shall exist or have occurred,
(iv) the issuance of Capital Stock of any Borrower or
Guarantor consisting of common stock pursuant to an employee stock option or
grant or similar equity plan or 401(k) plans of such Borrower or Guarantor for
the benefit of its employees, directors and consultants, provided, that, in no
event shall such Borrower or Guarantor be required to issue, or shall such
Borrower or Guarantor issue, Capital Stock pursuant to such stock plans or
401(k) plans which would result in a Change of Control or other Event of
Default,
(v) the issuance of Capital Stock pursuant to the exercise of
options or warrants issued and outstanding as of the date hereof,
(vi) the issuance of Capital Stock pursuant to the conversion
of notes or other debt instruments currently issued and outstanding as of the
date hereof or contemplated to be issued and outstanding substantially
contemporaneous herewith,
(vii) the issuance of Capital Stock to Finova Mezzanine
Capital, Inc., Laurus Master Fund, Ltd., Global Capital Group, L.P. or GCA
Strategic Investment Fund Limited pursuant to the exercise of warrants or the
conversion of debt issued and outstanding as of the date hereof or described
herein, or
(viii) the issuance of Capital Stock of Parent in accordance
with secondary public or private offerings of the Parent's common stock.
(c) wind up, liquidate or dissolve except that any Guarantor (other
than Parent) may wind up, liquidate and dissolve, provided, that, each of the
following conditions is satisfied, (i) the winding up, liquidation and
dissolution of such Guarantor shall not violate any law or any order or decree
of any court or other Governmental Authority in any material respect and shall
not conflict with or result in the breach of, or constitute a default under, any
indenture, mortgage, deed of trust, or any other agreement or instrument to
which any Borrower or Guarantor is a party or may be bound, (ii) such winding
up, liquidation or dissolution shall be done in accordance with the requirements
of all applicable laws and regulations, (iii) effective
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upon such winding up, liquidation or dissolution, all of the assets and
properties of such Guarantor shall be duly and validly transferred and assigned
to a Borrower, free and clear of any liens, restrictions or encumbrances other
than the security interest and liens of Agent (and Agent shall have received
such evidence thereof as Agent may require) and Agent shall have received such
deeds, assignments or other agreements as Agent may request to evidence and
confirm the transfer of such assets to of such Guarantor to a Borrower, (iv)
Agent shall have received all documents and agreements that any Borrower or
Guarantor has filed with any Governmental Authority or as are otherwise required
to effectuate such winding up, liquidation or dissolution, (v) no Borrower or
Guarantor shall assume any Indebtedness, obligations or liabilities as a result
of such winding up, liquidation or dissolution, or otherwise become liable in
respect of any obligations or liabilities of the entity that is winding up,
liquidating or dissolving, unless such Indebtedness is otherwise expressly
permitted hereunder, (vi) Agent shall have received not less than ten (10)
Business Days prior written notice of the intention of such Guarantor to wind
up, liquidate or dissolve, and (vii) as of the date of such winding up,
liquidation or dissolution and after giving effect thereto, no Default or Event
of Default shall exist or have occurred; or
(d) agree to do any of the foregoing.
9.8 Encumbrances. Each Borrower and Guarantor shall not, and shall not
permit any Subsidiary to, create, incur, assume or suffer to exist any security
interest, mortgage, pledge, lien, charge or other encumbrance of any nature
whatsoever on any of its assets or properties, including the Collateral, or file
or permit the filing of, or permit to remain in effect, any financing statement
or other similar notice of any security interest or lien with respect to any
such assets or properties, except:
(a) the security interests and liens of Agent for itself and the
benefit of Lenders;
(b) liens securing the payment of taxes, assessments or other
governmental charges or levies either not yet overdue or the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to such Borrower, or Guarantor or Subsidiary, as the case may be
and with respect to which adequate reserves have been set aside on its books;
(c) non-consensual statutory liens (other than liens securing the
payment of taxes) arising in the ordinary course of such Borrower's, Guarantor's
or Subsidiary's business to the extent: (i) such liens secure Indebtedness which
is not overdue or (ii) such liens secure Indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to such Borrower,
Guarantor or such Subsidiary, in each case prior to the commencement of
foreclosure or other similar proceedings and with respect to which adequate
reserves have been set aside on its books;
(d) zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of Real Property which do not interfere in any
material respect with the use of such Real Property or ordinary conduct of the
business of such Borrower, Guarantor or such
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Subsidiary as presently conducted thereon or materially impair the value of the
Real Property which may be subject thereto;
(e) purchase money security interests in Equipment (including
Capital Leases) and purchase money mortgages on Real Property to secure
Indebtedness permitted under Section 9.9(b) hereof;
(f) pledges and deposits of cash by any Borrower or Guarantor after
the date hereof in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security benefits
consistent with the current practices of such Borrower or Guarantor as of the
date hereof;
(g) pledges and deposits of cash by any Borrower or Guarantor after
the date hereof to secure the performance of tenders, bids, leases, trade
contracts (other than for the repayment of Indebtedness), statutory obligations
and other similar obligations in each case in the ordinary course of business
consistent with the current practices of such Borrower or Guarantor as of the
date hereof; provided, that, in connection with any performance bonds issued by
a surety or other person, the issuer of such bond shall have waived in writing
any rights in or to, or other interest in, any of the Collateral in an
agreement, in form and substance satisfactory to Agent;
(h) liens arising from (i) operating leases and the precautionary
UCC financing statement filings in respect thereof and (ii) equipment or other
materials which are not owned by any Borrower or Guarantor located on the
premises of such Borrower or Guarantor (but not in connection with, or as part
of, the financing thereof) from time to time in the ordinary course of business
and consistent with current practices of such Borrower or Guarantor and the
precautionary UCC financing statement filings in respect thereof;
(i) judgments and other similar liens arising in connection with
court proceedings that do not constitute an Event of Default, provided, that,
(i) such liens are being contested in good faith and by appropriate proceedings
diligently pursued, (ii) adequate reserves or other appropriate provision, if
any, as are required by GAAP have been made therefor, (iii) a stay of
enforcement of any such liens is in effect and (iv) Agent may establish a
Reserve with respect thereto;
(j) the security interests and liens set forth on Schedule 8.4 to
the Information Certificate; and
(k) extensions, renewals and replacements of liens and security
interests referred to in paragraphs (a) through (j) of this Section 9.8;
provided that, that any such extension, renewal or replacement lien, other than
with respect to Subsection 9.8(a), shall be limited to the property or assets
covered by the lien extended, renewed or replaced and provided further that,
other than with respect to Subsection 9.8(a), the obligations secured by any
such extension, renewal or replacement lien shall be in an amount not greater
than the amount of the obligation secured by the lien extended, renewed or
replaced.
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9.9 Indebtedness. Each Borrower and Guarantor shall not, and shall not
permit any Subsidiary to, incur, create, assume, become or be liable in any
manner with respect to, or permit to exist, any Indebtedness, or guarantee,
assume, endorse, or otherwise become responsible for (directly or indirectly),
the Indebtedness, performance, obligations or dividends of any other Person,
except:
(a) the Obligations;
(b) purchase money Indebtedness (including Capital Leases) arising
after the date hereof to the extent secured by purchase money security interests
in Equipment (including Capital Leases) and purchase money mortgages on Real
Property not to exceed $500,000 in the aggregate at any time outstanding so long
as such security interests and mortgages do not apply to any property of such
Borrower, Guarantor or Subsidiary other than the Equipment or Real Property so
acquired, and the Indebtedness secured thereby does not exceed the cost of the
Equipment or Real Property so acquired, as the case may be;
(c) guarantees by any Borrower or Guarantor of the Obligations of
the other Borrowers or Guarantors in favor of Agent for the benefit of Lenders;
(d) Indebtedness of Borrowers evidenced by the Laurus Notes, the
Global Capital Notes and the Finova Note, each as in effect on the date hereof
or as permitted to be amended pursuant to the terms hereof, provided, that:
(i) the aggregate amount of such Indebtedness shall not exceed
$8,500,000 less the aggregate amount of all repayments or redemptions, whether
optional or mandatory, in respect thereof, plus interest thereon at the rate
provided for in the Laurus Notes and Global Capital Notes as in effect on the
date hereof,
(ii) Borrowers and Guarantors shall not, directly or
indirectly, make any payments in respect of such Indebtedness, except that they
may make (A) regularly scheduled payments of interest and fees, if any, in
respect of such Indebtedness when due in accordance with the terms of the Laurus
Notes and Global Capital Notes, in each case as in effect on the date hereof and
(B) payments of principal in respect of such Indebtedness when scheduled to
mature in accordance with the terms of the Laurus Notes, Global Capital Notes
and the Finova Note, each as in effect on the date hereof,
(iii) Borrowers and Guarantors shall not, directly or
indirectly, amend, modify, alter or change in any material respect any terms of
such Indebtedness or any of the Laurus Notes, Global Capital Notes and/or the
Finova Note or any related agreements, documents and instruments, except that
Borrowers may, after prior written notice to Agent, amend, modify, alter or
change the terms thereof so as to extend the maturity thereof or defer the
timing of any payments in respect thereof, or to forgive or cancel any portion
of such Indebtedness other than pursuant to payments thereof, or to reduce the
interest rate or any fees in connection therewith, or to make any covenant less
restrictive,
(iv) Except as expressly required in the Laurus Notes, the
Global Capital Notes and/or the Finova Note, each as in effect on the date of
this Agreement, Borrowers
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and Guarantors shall not, directly or indirectly, redeem, retire, defease,
purchase, make any prepayments or otherwise acquire such Indebtedness other than
at maturity (as set forth in the Laurus Notes, Global Capital Notes or the
Finova Note, as in effect on the date hereof or as extended after the date
hereof), or set aside or otherwise deposit or invest any sums for such purpose,
except that Borrowers may prepay, redeem or purchase such Indebtedness,
provided, that, as of the date of any such redemption or purchase or any payment
in respect thereof and after giving effect thereto, (A) Agent shall have
received prior written notice of the intention of Borrowers to so redeem or
purchase such Indebtedness no later than 12:00 noon Chicago time on the Business
Day prior to any such purchase or redemption, which notice shall specify the
time period within which Borrowers will redeem or purchase such Indebtedness
(which shall be no earlier than the next Business Day and no later than five (5)
Business Days after the receipt by Agent of the notice), the maximum amount that
Borrowers will pay in respect thereof and the range of the principal amount of
the Laurus Notes and Global Capital Notes Borrowers anticipate will be so
redeemed or purchased, and (B) as of the date of any such payment and after
giving effect thereto, no Default or Event of Default shall exist or have
occurred and be continuing; and
(v) Borrowers and Guarantors shall furnish to Agent all
material written notices or demands in connection with such Indebtedness either
received by any Borrower or Guarantor or on its behalf, promptly after the
receipt thereof, or sent by any Borrower or Guarantor or on its behalf,
concurrently with the sending thereof, as the case may be;
(e) the Indebtedness of any Borrower or Guarantor to any other
Borrower or Guarantor arising after the date hereof pursuant to loans by any
Borrower or Guarantor permitted under Section 9.10(g) hereof;
(f) unsecured Indebtedness of any Borrower or Guarantor arising
after the date hereof to any third person (but not to any other Borrower or
Guarantor), provided, that, each of the following conditions is satisfied as
determined by Agent: (i) such Indebtedness shall be on terms and conditions
acceptable to Agent and shall be subject and subordinate in right of payment to
the right of Agent and Lenders to receive the prior indefeasible payment and
satisfaction in full payment of all of the Obligations pursuant to the terms of
an intercreditor agreement between Agent and such third party, in form and
substance satisfactory to Agent, (ii) Agent shall have received not less than
ten (10) days prior written notice of the intention of such Borrower or
Guarantor to incur such Indebtedness, which notice shall set forth in reasonable
detail satisfactory to Agent the amount of such Indebtedness, the person or
persons to whom such Indebtedness will be owed, the interest rate, the schedule
of repayments and maturity date with respect thereto and such other information
as Agent may request with respect thereto, (iii) Agent shall have received true,
correct and complete copies of all agreements, documents and instruments
evidencing or otherwise related to such Indebtedness, (iv) except as Agent may
otherwise agree in writing, all of the proceeds of the loans or other
accommodations giving rise to such Indebtedness shall be paid to Agent for
application to the Obligations in such order and manner as Agent may determine
or at Agent's option, to be held as cash collateral for the Obligations, (v) as
of the date of incurring such Indebtedness and after giving effect thereto, no
Default or Event of Default shall exist or have occurred, (vi) such Borrower and
Guarantor shall not, directly or indirectly, (A) amend, modify, alter or change
the terms of such Indebtedness or any agreement, document or instrument related
thereto, except, that, such Borrower or Guarantor
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may, after prior written notice to Agent, amend, modify, alter or change the
terms thereof so as to extend the maturity thereof, or defer the timing of any
payments in respect thereof, or to forgive or cancel any portion of such
Indebtedness (other than pursuant to payments thereof), or to reduce the
interest rate or any fees in connection therewith, or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness (except pursuant to
regularly scheduled payments permitted herein), or set aside or otherwise
deposit or invest any sums for such purpose, and (vii) Borrowers and Guarantors
shall furnish to Agent all notices or demands in connection with such
Indebtedness either received by any Borrower or Guarantor or on its behalf
promptly after the receipt thereof, or sent by any Borrower or Guarantor or on
its behalf concurrently with the sending thereof, as the case may be;
(g) the Indebtedness set forth on Schedule 9.9 to the Information
Certificate (other than the Indebtedness pursuant to the Laurus Notes, the
Global Capital Notes and/or the Finova Note; provided, that, (i) Borrowers and
Guarantors may only make regularly scheduled payments of principal and interest
in respect of such Indebtedness in accordance with the terms of the agreement or
instrument evidencing or giving rise to such Indebtedness as in effect on the
date hereof so long as (x) the aggregate amount of the Excess Availability of
Borrowers for each of the immediately preceding thirty (30) consecutive days
shall have been not less than $5,000,000 and as of the date of any such payment
and after giving effect thereto, the aggregate amount of the Excess Availability
of Borrowers shall be not less than $5,000,000; and (y) as of the date of any
such payment and after giving effect thereto, no Default or Event of Default
shall exist or have occurred and be continuing, (ii) Borrowers and Guarantors
shall not, directly or indirectly, (A) amend, modify, alter or change the terms
of such Indebtedness or any agreement, document or instrument related thereto as
in effect on the date hereof except, that, Borrowers and Guarantors may, after
prior written notice to Agent, amend, modify, alter or change the terms thereof
so as to extend the maturity thereof, or defer the timing of any payments in
respect thereof, or to forgive or cancel any portion of such Indebtedness (other
than pursuant to payments thereof), or to reduce the interest rate or any fees
in connection therewith, or (B) redeem, retire, defease, purchase or otherwise
acquire such Indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose, and (iii) Borrowers and Guarantors shall furnish to Agent all
notices or demands in connection with such Indebtedness either received by any
Borrower or Guarantor or on its behalf, promptly after the receipt thereof, or
sent by any Borrower or Guarantor or on its behalf, concurrently with the
sending thereof, as the case may be;
(h) Indebtedness incurred in the ordinary course of business of a
Borrower or a Guarantor with respect to customer deposits, trade payables and
other unsecured current liabilities not the result of borrowing and not
evidenced by any note or other evidence of indebtedness and not secured by any
collateral.
9.10 Loans, Investments, Etc. Except as expressly disclosed on the
Information Certificate, each Borrower and Guarantor shall not, and shall not
permit any Subsidiary to, directly or indirectly, make any loans or advance
money or property to any person, or invest in (by capital contribution, dividend
or otherwise) or purchase or repurchase the Capital Stock or Indebtedness or all
or a substantial part of the assets or property of any person, or form or
acquire any Subsidiaries, or agree to do any of the foregoing, except:
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(a) the endorsement of instruments for collection or deposit in the
ordinary course of business;
(b) investments in cash or Cash Equivalents, provided, that, (i) no
Loans are then outstanding and (ii) the terms and conditions of Section 5.2
hereof shall have been satisfied with respect to the deposit account, investment
account or other account in which such cash or Cash Equivalents are held;
(c) the existing equity investments of each Borrower and Guarantor
as of the date hereof in its Subsidiaries, provided, that, no Borrower or
Guarantor shall have any further obligations or liabilities to make any capital
contributions or other additional investments or other payments to or in or for
the benefit of any of such Subsidiaries;
(d) loans and advances by any Borrower or Guarantor to employees of
such Borrower or Guarantor not to exceed the principal amount of $400,000 in the
aggregate at any time outstanding for: (i) reasonably and necessary work-related
travel or other ordinary business expenses to be incurred by such employee in
connection with their work for such Borrower or Guarantor and (ii) reasonable
and necessary relocation expenses of such employees (including home mortgage
financing for relocated employees);
(e) stock or obligations issued to any Borrower or Guarantor by any
Person (or the representative of such Person) in respect of Indebtedness of such
Person owing to such Borrower or Guarantor in connection with the insolvency,
bankruptcy, receivership or reorganization of such Person or a composition or
readjustment of the debts of such Person; provided, that, the original of any
such stock or instrument evidencing such obligations shall be promptly delivered
to Agent, upon Agent's request, together with such stock power, assignment or
endorsement by such Borrower or Guarantor as Agent may request;
(f) obligations of account debtors to any Borrower or Guarantor
arising from Accounts which are past due evidenced by a promissory note made by
such account debtor payable to such Borrower or Guarantor; provided, that,
promptly upon the receipt of the original of any such promissory note by such
Borrower or Guarantor, such promissory note shall be endorsed to the order of
Agent by such Borrower or Guarantor and promptly delivered to Agent as so
endorsed;
(g) loans by a Borrower or Guarantor to another Borrower or
Guarantor after the date hereof, provided, that,
(i) as to all of such loans, (A) within thirty (30) days after
the end of each fiscal month, Borrowers shall provide to Agent a report in form
and substance satisfactory to Agent of the outstanding amount of such loans as
of the last day of the immediately preceding month and indicating any loans made
and payments received during the immediately preceding month, (B) the
Indebtedness arising pursuant to any such loan shall not be evidenced by a
promissory note or other instrument, unless the single original of such note or
other instrument is promptly delivered to Agent upon its request to hold as part
of the Collateral, with such endorsement and/or assignment by the payee of such
note or other instrument as Agent may require, (C) as of the date of any such
loan and after giving effect thereto, the Borrower or
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Guarantor making such loan shall be Solvent, and (D) as of the date of any such
loan and after giving effect thereto, no Default or Event of Default shall exist
or have occurred and be continuing,
(ii) as to loans by a Guarantor to a Borrower, (A) the
Indebtedness arising pursuant to such loan shall be subject to, and subordinate
in right of payment to, the right of Agent and Lenders to receive the prior
final payment and satisfaction in full of all of the Obligations on terms and
conditions acceptable to Agent, (B) promptly upon Agent's request, Agent shall
have received a subordination agreement, in form and substance satisfactory to
Agent, providing for the terms of the subordination in right of payment of such
Indebtedness of such Borrower to the prior final payment and satisfaction in
full of all of the Obligations, duly authorized, executed and delivered by such
Guarantor and such Borrower, and (C) such Borrower shall not, directly or
indirectly make, or be required to make, any payments in respect of such
Indebtedness prior to the end of the then current term of this Agreement;
(iii) as to loans by a Borrower to a Guarantor or another
Borrower, as of the date of any such loan and after giving effect thereto, (A)
with respect to any such loans by any Borrower to any other Borrower, the Excess
Availability of such lending Borrower shall be not less than $500,000, and (B)
with respect to any such loans by any Borrower to any Guarantor, the Excess
Availability of such Borrower shall be not less than $1,000,000;
(h) the loans and advances set forth on Schedule 9.10 to the
Information Certificate; provided, that, as to such loans and advances,
Borrowers and Guarantors shall not, directly or indirectly, amend, modify, alter
or change the terms of such loans and advances or any agreement, document or
instrument related thereto and Borrowers and Guarantors shall furnish to Agent
all notices or demands in connection with such loans and advances either
received by any Borrower or Guarantor or on its behalf, promptly after the
receipt thereof, or sent by any Borrower or Guarantor or on its behalf,
concurrently with the sending thereof, as the case may be.
9.11 Dividends and Redemptions. Each Borrower and Guarantor shall not,
directly or indirectly, declare or pay any dividends on account of any shares of
class of any Capital Stock of such Borrower or Guarantor now or hereafter
outstanding, or set aside or otherwise deposit or invest any sums for such
purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of
any class of Capital Stock (or set aside or otherwise deposit or invest any sums
for such purpose) for any consideration or apply or set apart any sum, or make
any other distribution (by reduction of capital or otherwise) in respect of any
such shares or agree to do any of the foregoing, except that:
(a) any Borrower or Guarantor may declare and pay such dividends or
redeem, retire, defease, purchase or otherwise acquire any shares of any class
of Capital Stock for consideration in the form of shares of common stock (so
long as after giving effect thereto no Change of Control or other Default or
Event of Default shall exist or occur);
(b) Borrowers and Guarantors may pay dividends to the extent
permitted in Section 9.12 below;
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(c) any Subsidiary of a Borrower or Guarantor may pay dividends to a
Borrower;
(d) Borrowers and Guarantors may repurchase Capital Stock consisting
of common stock held by employees pursuant to any employee stock ownership plan
thereof upon the termination, retirement or death of any such employee in
accordance with the provisions of such plan, provided, that, as to any such
repurchase, each of the following conditions is satisfied: (i) as of the date of
the payment for such repurchase and after giving effect thereto, no Default or
Event of Default shall exist or have occurred and be continuing, (ii) such
repurchase shall be paid with funds legally available therefor, (iii) such
repurchase shall not violate any law or regulation or the terms of any
indenture, agreement or undertaking to which such Borrower or Guarantor is a
party or by which such Borrower or Guarantor or its or their property are bound,
and (iv) the aggregate amount of all payments for such repurchases in any
calendar year shall not exceed $100,000, and
(e) Any Borrower or Guarantor may from time to time pay non-cash
dividends in respect of its outstanding shares of Capital Stock consisting of
common stock; provided, that,
(i) as of the date of the payment for any such dividend or
repurchase and after giving effect thereto, no Default or Event of Default shall
exist or have occurred and be continuing,
(ii) such dividend or repurchase shall not violate any law or
regulation or the terms of any indenture, agreement or undertaking to which any
Borrower or Guarantor or its or their property are bound,
(iii) Agent shall have received not less than ten (10)
Business Days' prior written notice thereof setting forth in reasonable detail
the amount of the dividend or the shares to be repurchased and the amount that
Borrowers anticipate that it will be required to pay for such repurchase and
such other information with respect thereto as Agent may request, and
(iv) No Borrower or Guarantor shall declare or pay any cash
dividend, or make any payments in cash or other immediately available funds on
account of or in lieu of any dividend on Capital Stock.
9.12 Transactions with Affiliates. Each Borrower and Guarantor shall not,
directly or indirectly:
(a) Except pursuant to the Supply Agreement between Parent and ▇▇▇▇
▇▇▇▇▇ American Corporation dated August 28, 2001, purchase, acquire or lease any
property from, or sell, transfer or lease any property to, any officer, director
or other Affiliate of such Borrower or Guarantor, except in the ordinary course
of and pursuant to the reasonable requirements of such Borrower's or Guarantor's
business (as the case may be) and upon fair and reasonable terms no less
favorable to such Borrower or Guarantor than such Borrower or Guarantor would
obtain in a comparable arm's length transaction with an unaffiliated person; or
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(b) make any payments (whether by dividend, loan or otherwise) of
management, consulting or other fees for management or similar services, or of
any Indebtedness owing to any officer, employee, shareholder, director or any
other Affiliate of such Borrower or Guarantor, except (i) reasonable
compensation to officers, employees and directors for services rendered to such
Borrower or Guarantor in the ordinary course of business, and (ii) payments by
any such Borrower or Guarantor to Parent for actual and necessary reasonable
out-of-pocket legal and accounting, insurance, marketing, payroll and similar
types of services paid for by Parent on behalf of such Borrower or Guarantor, in
the ordinary course of their respective businesses or as the same may be
directly attributable to such Borrower or Guarantor and for the payment of taxes
by or on behalf of Parent, provided, that, the aggregate amount of all such
payments under this Subsection (ii) or in any fiscal year shall not exceed
$100,000.
9.13 Compliance with ERISA. Each Borrower and Guarantor shall, and shall
cause each of its ERISA Affiliates, to: (a) maintain each Plan in compliance in
all material respects with the applicable provisions of ERISA, the Code and
other Federal and State law; (b) cause each Plan which is qualified under
Section 401(a) of the Code to maintain such qualification; (c) not terminate any
of such Plans so as to incur any material liability to the Pension Benefit
Guaranty Corporation; (d) not allow or suffer to exist any prohibited
transaction involving any of such Plans or any trust created thereunder which
would subject such Borrower, Guarantor or such ERISA Affiliate to a material tax
or penalty or other liability on prohibited transactions imposed under Section
4975 of the Code or ERISA; (e) make all required contributions to any Plan which
it is obligated to pay under Section 302 of ERISA, Section 412 of the Code or
the terms of such Plan; (f) not allow or suffer to exist any accumulated funding
deficiency, whether or not waived, with respect to any such Plan; or (g) allow
or suffer to exist any occurrence of a reportable event or any other event or
condition which presents a material risk of termination by the Pension Benefit
Guaranty Corporation of any such Plan that is a single employer plan, which
termination could result in any material liability to the Pension Benefit
Guaranty Corporation.
9.14 End of Fiscal Years; Fiscal Quarters. Each Borrower and Guarantor
shall, for financial reporting purposes, cause its, and each of its
Subsidiaries' (a) fiscal years to end on December 31 of each year and (b) fiscal
quarters to end on March 31, June 30, September 30 and December 31 of each year.
9.15 Change in Business. Each Borrower and Guarantor shall not engage in
any business other than the business of such Borrower or Guarantor on the date
hereof and any business reasonably related, ancillary or complimentary to the
business in which such Borrower or Guarantor is engaged on the date hereof.
9.16 Limitation of Restrictions Affecting Subsidiaries. Each Borrower and
Guarantor shall not, directly, or indirectly, create or otherwise cause or
suffer to exist any encumbrance or restriction which prohibits or limits the
ability of any Subsidiary of such Borrower or Guarantor to (a) pay dividends or
make other distributions or pay any Indebtedness owed to such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor; (b) make loans or
advances to such Borrower or Guarantor or any Subsidiary of such Borrower or
Guarantor, (c) transfer any of its properties or assets to such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor; or (d) create, incur,
assume or suffer to exist any lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, other than encumbrances and
restrictions
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arising under (i) applicable law, (ii) this Agreement, (iii) customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest of such Borrower or Guarantor or any Subsidiary of such
Borrower or Guarantor, (iv) customary restrictions on dispositions of real
property interests found in reciprocal easement agreements of such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor, (v) any agreement
relating to permitted Indebtedness incurred by a Subsidiary of such Borrower or
Guarantor prior to the date on which such Subsidiary was acquired by such
Borrower or such Guarantor and outstanding on such acquisition date, and (vi)
the extension or continuation of contractual obligations in existence on the
date hereof; provided, that, any such encumbrances or restrictions contained in
such extension or continuation are no less favorable to Agent and Lenders than
those encumbrances and restrictions under or pursuant to the contractual
obligations so extended or continued.
9.17 Minimum EBITDA. At any time that Excess Availability is less than
$5,000,000 or a Default or Event of Default has occurred and is continuing, the
EBITDA of Parent and its Subsidiaries for the Applicable Period (treated as a
single accounting period) shall be not less than the amounts set forth in
Schedule 9.17 hereto with respect to such period then ending. The "Applicable
Period" shall mean, until November 30, 2004, the period from the date of this
Agreement through the end of the immediately prior month, and from and after
December 1, 2004, it shall mean the twelve (12) consecutive month period then
ended.
9.18 Minimum Excess Availability. The aggregate amount of the Excess
Availability of Borrowers shall at all times be equal to or greater than
$1,000,000.
9.19 Capital Expenditures. Borrowers and Guarantors shall not permit the
aggregate amount of all Capital Expenditures of Borrowers and Guarantors during
the fiscal year ended December 31, 2004 to exceed $2,000,000 or to exceed
$1,100,000 in each fiscal year thereafter.
9.20 License Agreements.
(a) Each Borrower and Guarantor shall (i) promptly and faithfully
observe and perform all of the material terms, covenants, conditions and
provisions of the material License Agreements to which it is a party to be
observed and performed by it, at the times set forth therein, if any, (ii) not
do, permit, suffer or refrain from doing anything that could reasonably be
expected to result in a default under or breach of any of the terms of any
material License Agreement, (iii) not cancel, surrender, modify, amend, waive or
release any material License Agreement in any material respect or any term,
provision or right of the licensee thereunder in any material respect, or
consent to or permit to occur any of the foregoing; except, that, subject to
Section 9.20(b) below, such Borrower or Guarantor may cancel, surrender or
release any material License Agreement in the ordinary course of the business of
such Borrower or Guarantor; provided, that, such Borrower or Guarantor (as the
case may be) shall give Agent not less than thirty (30) days prior written
notice of its intention to so cancel, surrender and release any such material
License Agreement, (iv) give Agent prompt written notice of any material License
Agreement entered into by such Borrower or Guarantor after the date hereof,
together with a true, correct and complete copy thereof and such other
information with respect thereto as Agent may request, (v) give Agent prompt
written notice of any material breach of any obligation, or any default, by any
party under any material License Agreement, and deliver to
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Agent (promptly upon the receipt thereof by such Borrower or Guarantor in the
case of a notice to such Borrower or Guarantor and concurrently with the sending
thereof in the case of a notice from such Borrower or Guarantor) a copy of each
notice of default and every other notice and other communication received or
delivered by such Borrower or Guarantor in connection with any material License
Agreement which relates to the right of such Borrower or Guarantor to continue
to use the property subject to such License Agreement, and (vi) furnish to
Agent, promptly upon the request of Agent, such information and evidence as
Agent may reasonably require from time to time concerning the observance,
performance and compliance by such Borrower or Guarantor or the other party or
parties thereto with the material terms, covenants or provisions of any material
License Agreement.
(b) Except as Borrowers have advised Agent in writing on or prior to
the date of this Agreement, each Borrower and Guarantor will either exercise any
option to renew or extend the term of each material License Agreement to which
it is a party in such manner as will cause the term of such material License
Agreement to be effectively renewed or extended for the period provided by such
option and give prompt written notice thereof to Agent or give Agent prior
written notice that such Borrower or Guarantor does not intend to renew or
extend the term of any such material License Agreement or that the term thereof
shall otherwise be expiring, not less than sixty (60) days prior to the date of
any such non-renewal or expiration. In the event of the failure of such Borrower
or Guarantor to extend or renew any material License Agreement to which it is a
party, Agent shall have, and is hereby granted, the irrevocable right and
authority, at its option, to renew or extend the term of such material License
Agreement, whether in its own name and behalf, or in the name and behalf of a
designee or nominee of Agent or in the name and behalf of such Borrower or
Guarantor, as Agent shall determine at any time that an Event of Default shall
exist or have occurred and be continuing. Agent may, but shall not be required
to, perform any or all of such obligations of such Borrower or Guarantor under
any of the License Agreements, including, but not limited to, the payment of any
or all sums due from such Borrower or Guarantor thereunder. Any sums so paid by
Agent shall constitute part of the Obligations.
9.21 After Acquired Real Property. If any Borrower or Guarantor hereafter
acquires any Real Property at any location, without limiting any other rights of
Agent or any Lender, or duties or obligations of any Borrower or Guarantor,
promptly upon Agent's request, such Borrower or Guarantor shall execute and
deliver to Agent a mortgage, deed of trust or deed to secure debt, as Agent may
determine, in form and substance satisfactory to Agent and in form appropriate
for recording in the real estate records of the jurisdiction in which such Real
Property is located, granting to Agent a first and only lien and mortgage on and
security interest in such Real Property and related fixtures (except as such
Borrower or Guarantor would otherwise be permitted to incur under Section 9.9(b)
or otherwise hereunder or as otherwise consented to in writing by Agent) and
such other agreements, documents and instruments as Agent may require in
connection therewith.
9.22 Costs and Expenses. Borrowers and Guarantors shall pay to Agent on
demand all costs, expenses, filing fees and taxes paid or payable in connection
with the preparation, negotiation, execution, delivery, recording, syndication,
administration, collection, liquidation, enforcement and defense of the
Obligations, Agent's rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any
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amendments, supplements or consents which may hereafter be contemplated (whether
or not executed) or entered into in respect hereof and thereof, including: (a)
all costs and expenses of filing or recording (including Uniform Commercial Code
financing statement filing taxes and fees, documentary taxes, intangibles taxes
and mortgage recording taxes and fees, if applicable); (b) costs and expenses
and fees for insurance premiums, environmental audits, title insurance premiums,
surveys, assessments, engineering reports and inspections, appraisal fees and
search fees, costs and expenses of remitting loan proceeds, collecting checks
and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Agent's customary charges and fees with respect thereto;
(c) charges, fees or expenses charged by any bank or issuer in connection with
the Letter of Credit Accommodations; (d) costs and expenses of preserving and
protecting the Collateral; (e) costs and expenses paid or incurred in connection
with obtaining payment of the Obligations, enforcing the security interests and
liens of Agent, selling or otherwise realizing upon the Collateral, and
otherwise enforcing the provisions of this Agreement and the other Financing
Agreements or defending any claims made or threatened against Agent or any
Lender arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters); (f)
all out-of-pocket expenses and costs heretofore and from time to time hereafter
incurred by Agent during the course of periodic field examinations of the
Collateral and such Borrower's or Guarantor's operations, plus a per diem charge
at Agent's then standard rate for Agent's examiners in the field and office
(which rate as of the date hereof is $800 per person per day); and (g) the fees
and disbursements of counsel (including legal assistants) to Agent in connection
with any of the foregoing.
9.23 Further Assurances. At the request of Agent at any time and from time
to time, Borrowers and Guarantors shall, at their expense, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing
Agreements. Agent may at any time and from time to time request a certificate
from an officer of any Borrower or Guarantor representing that all conditions
precedent to the making of Loans and providing Letter of Credit Accommodations
contained herein are satisfied. In the event of such request by Agent, Agent and
Lenders may, at Agent's option, cease to make any further Loans or provide any
further Letter of Credit Accommodations until Agent has received such
certificate and, in addition, Agent has determined that such conditions are
satisfied.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) any Borrower fails to pay any of the Obligations when due or
(ii) any Borrower or Obligor fails to perform any of the covenants contained in
Sections 9.3, 9.4, 9.13, 9.14, 9.15, and 9.16 of this Agreement and such failure
shall continue for ten (10) Business Days; provided, that, such ten (10)
Business Day period shall not apply in the case of: (A) any failure to observe
any such covenant which is not capable of being cured at all or within such ten
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(10) day period or which has been the subject of a prior failure within a six
(6) month period or (B) an intentional breach by any Borrower or Obligor of any
such covenant or (iii) any Borrower or Obligor fails to perform any of the
terms, covenants, conditions or provisions contained in this Agreement or any of
the other Financing Agreements other than those described in Sections 10.1(a)(i)
and 10.1(a)(ii) above;
(b) any representation, warranty or statement of fact made by any
Borrower or Guarantor to Agent in this Agreement, the other Financing Agreements
or any other written agreement, schedule, confirmatory assignment or otherwise
shall when made or deemed made be false or misleading in any material respect;
(c) any Obligor revokes or terminates or purports to revoke or
terminate or fails to perform any of the terms, covenants, conditions or
provisions of any guarantee, endorsement or other agreement of such party in
favor of Agent or any Lender;
(d) any judgment for the payment of money is rendered against any
Borrower or Obligor in excess of $250,000 in any one case or in excess of
$1,000,000 in the aggregate (to the extent not covered by insurance where the
insurer has assumed responsibility in writing for such judgment) and shall
remain undischarged or unvacated for a period in excess of thirty (30) days or
execution shall at any time not be effectively stayed, or any judgment other
than for the payment of money, or injunction, attachment, garnishment or
execution is rendered against any Borrower or Obligor or any of the Collateral
having a value in excess of $250,000;
(e) any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or any Borrower or Obligor, which is a
partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
(f) any Borrower or Obligor makes an assignment for the benefit of
creditors, makes or sends notice of a bulk transfer or calls a meeting of its
creditors or principal creditors in connection with a moratorium or adjustment
of the Indebtedness due to them;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or Obligor or all or any part of its
properties and such petition or application is not dismissed within thirty (30)
days after the date of its filing or any Borrower or Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or Obligor or for all or any part of its
property;
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(i) any default in respect of any Indebtedness of any Borrower or
Obligor (other than Indebtedness owing to Agent and Lenders hereunder), in any
case in an amount in excess of $250,000, which default continues for more than
the applicable cure period, if any, with respect thereto or any default by any
Borrower or Obligor under any Material Contract, which default continues for
more than the applicable cure period, if any, with respect thereto and/or is not
waived in writing by the other parties thereto;
(j) any material provision hereof or of any of the other Financing
Agreements shall for any reason cease to be valid, binding and enforceable with
respect to any party hereto or thereto (other than Agent) in accordance with its
terms, or any such party shall challenge the enforceability hereof or thereof,
or shall assert in writing, or take any action or fail to take any action based
on the assertion that any provision hereof or of any of the other Financing
Agreements has ceased to be or is otherwise not valid, binding or enforceable in
accordance with its terms, or any security interest provided for herein or in
any of the other Financing Agreements shall cease to be a valid and perfected
first priority security interest in any of the Collateral purported to be
subject thereto (except as otherwise permitted herein or therein);
(k) an ERISA Event shall occur which results in or could reasonably
be expected to result in liability of any Borrower in an aggregate amount in
excess of $250,000;
(l) any Change of Control;
(m) the indictment by any Governmental Authority, or as Agent may
reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of any Borrower or Obligor of which any Borrower, Obligor
or Agent receives notice, in either case, as to which there is a reasonable
possibility of an adverse determination, in the good faith determination of
Agent, under any criminal statute, or commencement or threatened commencement of
criminal or civil proceedings against such Borrower or Obligor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of (i) any of the Collateral having a value in excess of
$250,000 or (ii) any other property of any Borrower or Guarantor which is
necessary or material to the conduct of its business;
(n) there shall be a material adverse change in the business, assets
or prospects of any Borrower or Obligor after the date hereof; or
(o) there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Agent and Lenders shall have all rights and remedies provided in
this Agreement, the other Financing Agreements, the UCC and other applicable
law, all of which rights and remedies may be exercised without notice to or
consent by any Borrower or Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Agent and Lenders hereunder, under any of the
other Financing Agreements, the UCC or other applicable law, are cumulative, not
exclusive and enforceable, in
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Agent's discretion, alternatively, successively, or concurrently on any one or
more occasions, and shall include, without limitation, the right to apply to a
court of equity for an injunction to restrain a breach or threatened breach by
any Borrower or Obligor of this Agreement or any of the other Financing
Agreements. Subject to Section 12 hereof, Agent may, and at the direction of the
Required Lenders shall, at any time or times, proceed directly against any
Borrower or Obligor to collect the Obligations without prior recourse to the
Collateral.
(b) Without limiting the generality of the foregoing, at any time an
Event of Default exists or has occurred and is continuing, Agent may, at its
option and shall upon the direction of the Required Lenders, (i) upon notice to
Administrative Borrower, accelerate the payment of all Obligations and demand
immediate payment thereof to Agent for itself and the benefit of Lenders
(provided, that, upon the occurrence of any Event of Default described in
Sections 10.1(g) and 10.1(h), all Obligations shall automatically become
immediately due and payable), and (ii) terminate the Commitments and this
Agreement (provided, that, upon the occurrence of any Event of Default described
in Sections 10.1(g) and 10.1(h), the Commitments and any other obligation of the
Agent or a Lender hereunder shall automatically terminate).
(c) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Agent may, in its discretion, and upon
the direction of the Required Lenders, shall (i) with or without judicial
process or the aid or assistance of others, enter upon any premises on or in
which any of the Collateral may be located and take possession of the Collateral
or complete processing, manufacturing and repair of all or any portion of the
Collateral, (ii) require any Borrower or Obligor, at Borrowers' expense, to
assemble and make available to Agent any part or all of the Collateral at any
place and time designated by Agent, (iii) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (iv) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (v) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Agent or elsewhere) at such prices or terms as Agent may deem
reasonable, for cash, upon credit or for future delivery, with the Agent having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
any Borrower or Obligor, which right or equity of redemption is hereby expressly
waived and released by Borrowers and Obligors and/or (vi) terminate this
Agreement. If any of the Collateral is sold or leased by Agent upon credit terms
or for future delivery, the Obligations shall not be reduced as a result thereof
until payment therefor is finally collected by Agent. If notice of disposition
of Collateral is required by law, ten (10) days prior notice by Agent to
Administrative Borrower designating the time and place of any public sale or the
time after which any private sale or other intended disposition of Collateral is
to be made, shall be deemed to be reasonable notice thereof and Borrowers and
Obligors waive any other notice. In the event Agent institutes an action to
recover any Collateral or seeks recovery of any Collateral by way of prejudgment
remedy, each Borrower and Obligor waives the posting of any bond which might
otherwise be required. At any time an Event of Default exists or has occurred
and is continuing, upon Agent's request, Borrowers will either, as Agent shall
specify, furnish cash collateral to the issuer to be used to secure and fund
Agent's reimbursement obligations to the issuer in connection with any Letter of
Credit Accommodations or furnish cash collateral to Agent for the Letter of
Credit Accommodations. Such cash
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collateral shall be in the amount equal to one hundred ten (110%) percent of the
amount of the Letter of Credit Accommodations plus the amount of any fees and
expenses payable in connection therewith through the end of the latest
expiration date of such Letter of Credit Accommodations.
(d) At any time or times that an Event of Default exists or has
occurred and is continuing, Agent may, in its discretion, enforce the rights of
any Borrower or Obligor against any account debtor, secondary obligor or other
obligor in respect of any of the Accounts or other Receivables. Without limiting
the generality of the foregoing, Agent may, in its discretion, at such time or
times (i) notify any or all account debtors, secondary obligors or other
obligors in respect thereof that the Receivables have been assigned to Agent and
that Agent has a security interest therein and Agent may direct any or all
accounts debtors, secondary obligors and other obligors to make payment of
Receivables directly to Agent, (ii) extend the time of payment of, compromise,
settle or adjust for cash, credit, return of merchandise or otherwise, and upon
any terms or conditions, any and all Receivables or other obligations included
in the Collateral and thereby discharge or release the account debtor or any
secondary obligors or other obligors in respect thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Receivables or
such other obligations, but without any duty to do so, and Agent and Lenders
shall not be liable for any failure to collect or enforce the payment thereof
nor for the negligence of its agents or attorneys with respect thereto and (iv)
take whatever other action Agent may deem necessary or desirable for the
protection of its interests and the interests of Lenders. At any time that an
Event of Default exists or has occurred and is continuing, at Agent's request,
all invoices and statements sent to any account debtor shall state that the
Accounts and such other obligations have been assigned to Agent and are payable
directly and only to Agent and Borrowers and Obligors shall deliver to Agent
such originals of documents evidencing the sale and delivery of goods or the
performance of services giving rise to any Accounts as Agent may require. In the
event any account debtor returns Inventory when an Event of Default exists or
has occurred and is continuing, Borrowers shall, upon Agent's request, hold the
returned Inventory in trust for Agent, segregate all returned Inventory from all
of its other property, dispose of the returned Inventory solely according to
Agent's instructions, and not issue any credits, discounts or allowances with
respect thereto without Agent's prior written consent.
(e) To the extent that applicable law imposes duties on Agent or any
Lender to exercise remedies in a commercially reasonable manner (which duties
cannot be waived under such law), each Borrower and Guarantor acknowledges and
agrees that it is not commercially unreasonable for Agent or any Lender (i) to
fail to incur expenses reasonably deemed significant by Agent or any Lender to
prepare Collateral for disposition or otherwise to complete raw material or work
in process into finished goods or other finished products for disposition, (ii)
to fail to obtain third party consents for access to Collateral to be disposed
of, or to obtain or, if not required by other law, to fail to obtain consents of
any Governmental Authority or other third party for the collection or
disposition of Collateral to be collected or disposed of, (iii) to fail to
exercise collection remedies against account debtors, secondary obligors or
other persons obligated on Collateral or to remove liens or encumbrances on or
any adverse claims against Collateral, (iv) to exercise collection remedies
against account debtors and other persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (v) to
advertise dispositions of Collateral through publications or media of general
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circulation, whether or not the Collateral is of a specialized nature, (vi) to
contact other persons, whether or not in the same business as any Borrower or
Guarantor, for expressions of interest in acquiring all or any portion of the
Collateral, (vii) to hire one or more professional auctioneers to assist in the
disposition of Collateral, whether or not the collateral is of a specialized
nature, (viii) to dispose of Collateral by utilizing Internet sites that provide
for the auction of assets of the types included in the Collateral or that have
the reasonable capability of doing so, or that match buyers and sellers of
assets, (ix) to dispose of assets in wholesale rather than retail markets, (x)
to disclaim disposition warranties, (xi) to purchase insurance or credit
enhancements to insure Agent or Lenders against risks of loss, collection or
disposition of Collateral or to provide to Agent or Lenders a guaranteed return
from the collection or disposition of Collateral, or (xii) to the extent deemed
appropriate by Agent, to obtain the services of other brokers, investment
bankers, consultants and other professionals to assist Agent in the collection
or disposition of any of the Collateral. Each Borrower and Guarantor
acknowledges that the purpose of this Section is to provide non-exhaustive
indications of what actions or omissions by Agent or any Lender would not be
commercially unreasonable in the exercise by Agent or any Lender of remedies
against the Collateral and that other actions or omissions by Agent or any
Lender shall not be deemed commercially unreasonable solely on account of not
being indicated in this Section. Without limitation of the foregoing, nothing
contained in this Section shall be construed to grant any rights to any Borrower
or Guarantor or to impose any duties on Agent or Lenders that would not have
been granted or imposed by this Agreement or by applicable law in the absence of
this Section.
(f) For the purpose of enabling Agent to exercise the rights and
remedies hereunder, each Borrower and Obligor hereby grants to Agent, to the
extent assignable, an irrevocable, non-exclusive license (exercisable at any
time an Event of Default shall exist or have occurred and for so long as the
same is continuing) without payment of royalty or other compensation to any
Borrower or Obligor, to use, assign, license or sublicense any of the
trademarks, service-marks, trade names, business names, trade styles, designs,
logos and other source of business identifiers and other Intellectual Property
and general intangibles now owned or hereafter acquired by any Borrower or
Obligor, wherever the same maybe located, including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer programs used for the compilation or printout thereof.
(g) Agent may apply the cash proceeds of Collateral actually
received by Agent from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in accordance
with the terms hereof, whether or not then due. Borrowers and Guarantors shall
remain liable to Agent and Lenders for the payment of any deficiency with
interest at the highest rate provided for herein and all costs and expenses of
collection or enforcement, including attorneys' fees and expenses.
(h) Without limiting the foregoing, upon the occurrence of a Default
or an Event of Default, (i) Agent and Lenders may, at Agent's option, and upon
the occurrence of an Event of Default at the direction of the Required Lenders,
Agent and Lenders shall, without notice, (A) cease making Loans or arranging for
Letter of Credit Accommodations or reduce the lending formulas or amounts of
Loans and Letter of Credit Accommodations available to Borrowers and/or (B)
terminate any provision of this Agreement providing for any future Loans or
Letter of Credit Accommodations to be made by Agent and Lenders to Borrowers and
(ii)
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Agent may, at its option, establish such Reserves as Agent determines, without
limitation or restriction, notwithstanding anything to the contrary contained
herein.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements (except as otherwise provided therein) and
any dispute arising out of the relationship between the parties hereto, whether
in contract, tort, equity or otherwise, shall be governed by the internal laws
of the State of Illinois but excluding any principles of conflicts of law or
other rule of law that would cause the application of the law of any
jurisdiction other than the laws of the State of Illinois.
(b) Borrowers, Guarantors, Agent and Lenders irrevocably consent and
submit to the non-exclusive jurisdiction of the Circuit Court of ▇▇▇▇ County,
Illinois and the United States District Court for the Northern District of
Illinois, whichever Agent may elect, and waive any objection based on venue or
forum non conveniens with respect to any action instituted therein arising under
this Agreement or any of the other Financing Agreements or in any way connected
with or related or incidental to the dealings of the parties hereto in respect
of this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Agent and Lenders shall have the right to bring any
action or proceeding against any Borrower or Guarantor or its or their property
in the courts of any other jurisdiction which Agent deems necessary or
appropriate in order to realize on the Collateral or to otherwise enforce its
rights against any Borrower or Guarantor or its or their property).
(c) Each Borrower and Guarantor hereby waives personal service of
any and all process upon it and consents that all such service of process may be
made by certified mail (return receipt requested) directed to its address set
forth herein and service so made shall be deemed to be completed five (5) days
after the same shall have been so deposited in the U.S. mails, or, at Agent's
option, by service upon any Borrower or Guarantor (or Administrative Borrower on
behalf of such Borrower or Guarantor) in any other manner provided under the
rules of any such courts. Within thirty (30) days after such service, such
Borrower or Guarantor shall appear in answer to such process, failing which such
Borrower or Guarantor shall be deemed in default and judgment may be entered by
Agent against such Borrower or Guarantor for the amount of the claim and other
relief requested.
(d) BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING
UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN
RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS
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OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.
BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY AND THAT ANY BORROWER, ANY GUARANTOR, AGENT OR ANY LENDER
MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
(e) Agent and Lenders shall not have any liability to any Borrower
or Guarantor (whether in tort, contract, equity or otherwise) for losses
suffered by such Borrower or Guarantor in connection with, arising out of, or in
any way related to the transactions or relationships contemplated by this
Agreement, or any act, omission or event occurring in connection herewith,
unless it is determined by a final and non-appealable judgment or court order
binding on Agent and such Lender, that the losses were the result of acts or
omissions constituting gross negligence or willful misconduct. In any such
litigation, Agent and Lenders shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Agreement. Each Borrower and
Guarantor: (i) certifies that neither Agent, any Lender nor any representative,
agent or attorney acting for or on behalf of Agent or any Lender has
represented, expressly or otherwise, that Agent and Lenders would not, in the
event of litigation, seek to enforce any of the waivers provided for in this
Agreement or any of the other Financing Agreements and (ii) acknowledges that in
entering into this Agreement and the other Financing Agreements, Agent and
Lenders are relying upon, among other things, the waivers and certifications set
forth in this Section 11.1 and elsewhere herein and therein.
11.2 Waiver of Notices. Each Borrower and Guarantor hereby expressly
waives demand, presentment, protest and notice of protest and notice of dishonor
with respect to any and all instruments and chattel paper, included in or
evidencing any of the Obligations or the Collateral, and any and all other
demands and notices of any kind or nature whatsoever with respect to the
Obligations, the Collateral and this Agreement, except such as are expressly
provided for herein. No notice to or demand on any Borrower or Guarantor which
Agent or any Lender may elect to give shall entitle such Borrower or Guarantor
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers.
(a) Neither this Agreement nor any other Financing Agreement nor any
terms hereof or thereof may be amended, waived, discharged or terminated unless
such amendment, waiver, discharge or termination is in writing signed by Agent
and the Required Lenders or at Agent's option, by Agent with the authorization
of the Required Lenders, and as to amendments to any of the Financing Agreements
(other than with respect to any provision of Section 12 hereof), by any
Borrower; except, that, no such amendment, waiver, discharge or termination
shall:
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(i) reduce the interest rate or any fees or extend the time of
payment of principal, interest or any fees or reduce the principal amount of any
Loan or Letter of Credit Accommodations, in each case without the consent of
each Lender directly affected thereby,
(ii) increase the Commitment of any Lender over the amount
thereof then in effect or provided hereunder, in each case without the consent
of the Lender directly affected thereby,
(iii) release any Collateral (except as expressly required
hereunder or under any of the other Financing Agreements or applicable law and
except as permitted under Section 12.11(b) hereof), without the consent of Agent
and all of Lenders,
(iv) reduce any percentage specified in the definition of
Required Lenders, without the consent of Agent and all of Lenders,
(v) consent to the assignment or transfer by any Borrower or
Guarantor of any of their rights and obligations under this Agreement, without
the consent of Agent and all of Lenders,
(vi) amend, modify or waive any terms of this Section 11.3
hereof, without the consent of Agent and all of Lenders, or
(vii) increase the advance rates constituting part of the
Borrowing Base, without the consent of Agent and all of Lenders.
(b) Agent and Lenders shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its or their
rights, powers and/or remedies unless such waiver shall be in writing and signed
as provided herein. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Agent or any Lender of any right,
power and/or remedy on any one occasion shall not be construed as a bar to or
waiver of any such right, power and/or remedy which Agent or any Lender would
otherwise have on any future occasion, whether similar in kind or otherwise.
(c) Notwithstanding anything to the contrary contained in Section
11.3(a) above, in connection with any amendment, waiver, discharge or
termination, in the event that any Lender whose consent thereto is required
shall fail to consent or fail to consent in a timely manner (such Lender being
referred to herein as a "Non-Consenting Lender"), but the consent of any other
Lenders to such amendment, waiver, discharge or termination that is required are
obtained, if any, then Congress shall have the right, but not the obligation, at
any time thereafter, and upon the exercise by Congress of such right, such
Non-Consenting Lender shall have the obligation, to sell, assign and transfer to
Congress or such Eligible Transferee as Congress may specify, the Commitment of
such Non-Consenting Lender and all rights and interests of such Non-Consenting
Lender pursuant thereto. Congress shall provide the Non-Consenting Lender with
prior written notice of its intent to exercise its right under this Section,
which notice shall specify on date on which such purchase and sale shall occur.
Such purchase and sale shall be pursuant to the terms of an Assignment and
Acceptance (whether or not executed by the Non-Consenting Lender), except that
on the date of such purchase and sale, Congress, or such Eligible
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Transferee specified by Congress, shall pay to the Non-Consenting Lender (except
as Congress and such Non-Consenting Lender may otherwise agree) the amount equal
to: (i) the principal balance of the Loans held by the Non-Consenting Lender
outstanding as of the close of business on the business day immediately
preceding the effective date of such purchase and sale, plus (ii) amounts
accrued and unpaid in respect of interest and fees payable to the Non-Consenting
Lender to the effective date of the purchase (but in no event shall the
Non-Consenting Lender be deemed entitled to any early termination fee), minus
(iii) the amount of the closing fee received by the Non-Consenting Lender
pursuant to the terms hereof or of any of the other Financing Agreements
multiplied by the fraction, the numerator of which is the number of months
remaining in the then current term of the Credit Facility and the denominator of
which is the number of months in the then current term thereof. Such purchase
and sale shall be effective on the date of the payment of such amount to the
Non-Consenting Lender and the Commitment of the Non-Consenting Lender shall
terminate on such date.
(d) The consent of Agent shall be required for any amendment, waiver
or consent affecting the rights or duties of Agent hereunder or under any of the
other Financing Agreements, in addition to the consent of the Lenders otherwise
required by this Section and the exercise by Agent of any of its rights
hereunder with respect to Reserves or Eligible Accounts or Eligible Inventory
shall not be deemed an amendment to the advance rates provided for in this
Section 11.3.
11.4 Waiver of Counterclaims. Each Borrower and Guarantor waives all
rights to interpose any claims, deductions, setoffs or counterclaims of any
nature (other then compulsory counterclaims) in any action or proceeding with
respect to this Agreement, the Obligations, the Collateral or any matter arising
therefrom or relating hereto or thereto.
11.5 Indemnification. Each Borrower and Guarantor shall, jointly and
severally, indemnify and hold Agent and each Lender, and its officers,
directors, agents, employees, advisors and counsel and their respective
Affiliates (each such person being an "Indemnitee"), harmless from and against
any and all losses, claims, damages, liabilities, costs or expenses (including
attorneys' fees and expenses) imposed on, incurred by or asserted against any of
them in connection with any litigation, investigation, claim or proceeding
commenced or threatened related to the negotiation, preparation, execution,
delivery, enforcement, performance or administration of this Agreement, any
other Financing Agreements, or any undertaking or proceeding related to any of
the transactions contemplated hereby or any act, omission, event or transaction
related or attendant thereto, including amounts paid in settlement, court costs,
and the fees and expenses of counsel except that Borrowers and Guarantors shall
not have any obligation under this Section 11.5 to indemnify an Indemnitee with
respect to a matter covered hereby resulting from the gross negligence or
willful misconduct of such Indemnitee as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction (but without limiting
the obligations of Borrowers or Guarantors as to any other Indemnitee). To the
extent that the undertaking to indemnify, pay and hold harmless set forth in
this Section may be unenforceable because it violates any law or public policy,
Borrowers and Guarantors shall pay the maximum portion which it is permitted to
pay under applicable law to Agent and Lenders in satisfaction of indemnified
matters under this Section. To the extent permitted by applicable law, no
Borrower or Guarantor shall assert, and each Borrower and Guarantor hereby
waives, any claim against any Indemnitee, on any theory of liability, for
special, indirect, consequential
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or punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement, any of the other Financing
Agreements or any undertaking or transaction contemplated hereby. All amounts
due under this Section shall be payable upon demand. The foregoing indemnity
shall survive the payment of the Obligations and the termination or non-renewal
of this Agreement.
SECTION 12. THE AGENT
12.1 Appointment, Powers and Immunities. Each Lender irrevocably
designates, appoints and authorizes Congress to act as Agent hereunder and under
the other Financing Agreements with such powers as are specifically delegated to
Agent by the terms of this Agreement and of the other Financing Agreements,
together with such other powers as are reasonably incidental thereto. Agent (a)
shall have no duties or responsibilities except those expressly set forth in
this Agreement and in the other Financing Agreements, and shall not by reason of
this Agreement or any other Financing Agreement be a trustee or fiduciary for
any Lender; (b) shall not be responsible to Lenders for any recitals,
statements, representations or warranties contained in this Agreement or in any
of the other Financing Agreements, or in any certificate or other document
referred to or provided for in, or received by any of them under, this Agreement
or any other Financing Agreement, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
Financing Agreement or any other document referred to or provided for herein or
therein or for any failure by any Borrower or any Obligor or any other Person to
perform any of its obligations hereunder or thereunder; and (c) shall not be
responsible to Lenders for any action taken or omitted to be taken by it
hereunder or under any other Financing Agreement or under any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful misconduct
as determined by a final non-appealable judgment of a court of competent
jurisdiction. Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. Agent may deem and treat the
payee of any note as the holder thereof for all purposes hereof unless and until
the assignment thereof pursuant to an agreement (if and to the extent permitted
herein) in form and substance satisfactory to Agent shall have been delivered to
and acknowledged by Agent.
12.2 Reliance by Agent. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent. As to any matters not expressly
provided for by this Agreement or any other Financing Agreement, Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
or thereunder in accordance with instructions given by the Required Lenders or
all of Lenders as is required in such circumstance, and such instructions of
such Agents and any action taken or failure to act pursuant thereto shall be
binding on all Lenders.
12.3 Events of Default.
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(a) Agent shall not be deemed to have knowledge or notice of the
occurrence of a Default or an Event of Default or other failure of a condition
precedent to the Loans and Letter of Credit Accommodations hereunder, unless and
until Agent has received written notice from a Lender, or a Borrower specifying
such Event of Default or any unfulfilled condition precedent, and stating that
such notice is a "Notice of Default or Failure of Condition". In the event that
Agent receives such a Notice of Default or Failure of Condition, Agent shall
give prompt notice thereof to the Lenders. Agent shall (subject to Section 12.7)
take such action with respect to any such Event of Default or failure of
condition precedent as shall be directed by the Required Lenders; provided,
that, unless and until Agent shall have received such directions, Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to or by reason of such Event of Default or failure of condition
precedent, as it shall deem advisable in the best interest of Lenders. Without
limiting the foregoing, and notwithstanding the existence or occurrence and
continuance of an Event of Default or any other failure to satisfy any of the
conditions precedent set forth in Section 4 of this Agreement to the contrary,
Agent may, but shall have no obligation to, continue to make Loans and issue or
cause to be issued Letter of Credit Accommodations for the ratable account and
risk of Lenders from time to time if Agent believes making such Loans or issuing
or causing to be issued such Letter of Credit Accommodations is in the best
interests of Lenders.
(b) Except with the prior written consent of Agent, no Lender may
assert or exercise any enforcement right or remedy in respect of the Loans,
Letter of Credit Accommodations or other Obligations, as against any Borrower or
Obligor or any of the Collateral or other property of any Borrower or Obligor.
12.4 Congress in its Individual Capacity. With respect to its Commitment
and the Loans made and Letter of Credit Accommodations issued or caused to be
issued by it (and any successor acting as Agent), so long as Congress shall be a
Lender hereunder, it shall have the same rights and powers hereunder as any
other Lender and may exercise the same as though it were not acting as Agent,
and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include Congress in its individual capacity as Lender hereunder.
Congress (and any successor acting as Agent) and its Affiliates may (without
having to account therefor to any Lender) lend money to, make investments in and
generally engage in any kind of business with Borrowers (and any of its
Subsidiaries or Affiliates) as if it were not acting as Agent, and Congress and
its Affiliates may accept fees and other consideration from any Borrower or
Guarantor and any of its Subsidiaries and Affiliates for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
12.5 Indemnification. Lenders agree to indemnify Agent (to the extent not
reimbursed by Borrowers hereunder and without limiting any obligations of
Borrowers hereunder) ratably, in accordance with their Pro Rata Shares, for any
and all claims of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against Agent (including by any Lender) arising out of
or by reason of any investigation in or in any way relating to or arising out of
this Agreement or any other Financing Agreement or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses that Agent is
obligated to pay hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided, that, no Lender shall be
liable for any of the foregoing to the extent it arises from the gross
negligence or willful misconduct of
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the party to be indemnified as determined by a final non-appealable judgment of
a court of competent jurisdiction. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
12.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it
has, independently and without reliance on Agent or other Lender, and based on
such documents and information as it has deemed appropriate, made its own credit
analysis of Borrowers and Obligors and has made its own decision to enter into
this Agreement and that it will, independently and without reliance upon Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Financing
Agreements. Agent shall not be required to keep itself informed as to the
performance or observance by any Borrower or Obligor of any term or provision of
this Agreement or any of the other Financing Agreements or any other document
referred to or provided for herein or therein or to inspect the properties or
books of any Borrower or Obligor. Agent will use reasonable efforts to provide
Lenders with any information received by Agent from any Borrower or Obligor
which is required to be provided to Lenders or deemed to be requested by Lenders
hereunder and with a copy of any Notice of Default or Failure of Condition
received by Agent from any Borrower or any Lender; provided, that, Agent shall
not be liable to any Lender for any failure to do so, except to the extent that
such failure is attributable to Agent's own gross negligence or willful
misconduct as determined by a final non-appealable judgment of a court of
competent jurisdiction. Except for notices, reports and other documents
expressly required to be furnished to Lenders by Agent hereunder, Agent shall
not have any duty or responsibility to provide any Lender with any other credit
or other information concerning the affairs, financial condition or business of
any Borrower or Obligor that may come into the possession of Agent.
12.7 Failure to Act. Except for action expressly required of Agent
hereunder and under the other Financing Agreements, Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 12.5 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
12.8 Additional Loans. Agent shall not make any Revolving Loans or provide
any Letter of Credit Accommodations to any Borrower on behalf of Lenders
intentionally and with actual knowledge that such Revolving Loans or Letter of
Credit Accommodations would cause the aggregate amount of the total outstanding
Revolving Loans and Letter of Credit Accommodations to such Borrower to exceed
the Borrowing Base of such Borrower, without the prior consent of all Lenders,
except, that, Agent may make such additional Revolving Loans or provide such
additional Letter of Credit Accommodations on behalf of Lenders, intentionally
and with actual knowledge that such Revolving Loans or Letter of Credit
Accommodations will cause the total outstanding Revolving Loans and Letter of
Credit Accommodations to such Borrower to exceed the Borrowing Base of such
Borrower, as Agent may deem necessary or advisable in its discretion, provided,
that: (a) the total principal amount of the additional Revolving Loans or
additional Letter of Credit Accommodations to any Borrower which Agent may make
or provide after obtaining such actual knowledge that the aggregate principal
amount of the Revolving Loans equal or exceed the Borrowing Bases of Borrowers,
plus the amount of
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Special Agent Advances made pursuant to Section 12.11(a)(ii) hereof then
outstanding, shall not exceed the aggregate amount equal to ten (10%) percent of
the Maximum Credit and shall not cause the total principal amount of the Loans
and Letter of Credit Accommodations to exceed the Maximum Credit and (b) no such
additional Revolving Loan or Letter of Credit Accommodation shall be outstanding
more than ninety (90) days after the date such additional Revolving Loan or
Letter of Credit Accommodation is made or issued (as the case may be), except as
the Required Lenders may otherwise agree. Each Lender shall be obligated to pay
Agent the amount of its Pro Rata Share of any such additional Revolving Loans or
Letter of Credit Accommodations.
12.9 Concerning the Collateral and the Related Financing Agreements. Each
Lender authorizes and directs Agent to enter into this Agreement and the other
Financing Agreements. Each Lender agrees that any action taken by Agent or
Required Lenders in accordance with the terms of this Agreement or the other
Financing Agreements and the exercise by Agent or Required Lenders of their
respective powers set forth therein or herein, together with such other powers
that are reasonably incidental thereto, shall be binding upon all of the
Lenders.
12.10 Field Audit, Examination Reports and other Information; Disclaimer
by Lenders. By signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or examination
report and report with respect to the Borrowing Base prepared or received by
Agent (each field audit or examination report and report with respect to the
Borrowing Base being referred to herein as a "Report" and collectively,
"Reports"), appraisal and financial statements;
(b) expressly agrees and acknowledges that Agent (i) does not make
any representation or warranty as to the accuracy of any Report, appraisal or
financial statement or (ii) shall not be liable for any information contained in
any Report, appraisal or financial statement;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or any other party performing
any audit or examination will inspect only specific information regarding
Borrowers and Guarantors and will rely significantly upon Borrowers' and
Guarantors' books and records, as well as on representations of Borrowers' and
Guarantors' personnel; and
(d) agrees to keep all Reports confidential and strictly for its
internal use in accordance with the terms of Section 13.5 hereof, and not to
distribute or use any Report in any other manner.
12.11 Collateral Matters.
(a) Agent may, at its option, from time to time, at any time on or
after an Event of Default and for so long as the same is continuing or upon any
other failure of a condition precedent to the Loans and Letter of Credit
Accommodations hereunder, make such disbursements and advances ("Special Agent
Advances") which Agent, in its sole discretion, (i)
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deems necessary or desirable either to preserve or protect the Collateral or any
portion thereof or (ii) to enhance the likelihood or maximize the amount of
repayment by Borrowers and Guarantors of the Loans and other Obligations,
provided, that, the aggregate principal amount of the Special Agent Advances
pursuant to this clause (ii), plus the then outstanding principal amount of the
additional Loans and Letter of Credit Accommodations which Agent may make or
provide as set forth in Section 12.8 hereof, shall not exceed the aggregate
amount of ten (10%) percent of the Maximum Credit or (iii) to pay any other
amount chargeable to any Borrower or Guarantor pursuant to the terms of this
Agreement or any of the other Financing Agreements consisting of (A) costs, fees
and expenses and (B) payments to any issuer of Letter of Credit Accommodations.
Special Agent Advances shall be repayable on demand and together with all
interest thereon shall constitute Obligations secured by the Collateral. Special
Agent Advances shall not constitute Loans but shall otherwise constitute
Obligations hereunder. Interest on Special Agent Advances shall be payable at
the Interest Rate then applicable to Prime Rate Loans and shall be payable on
demand. Without limitation of its obligations pursuant to Section 6.10, each
Lender agrees that it shall make available to Agent, upon Agent's demand, in
immediately available funds, the amount equal to such Lender's Pro Rata Share of
each such Special Agent Advance. If such funds are not made available to Agent
by such Lender, such Lender shall be deemed a Defaulting Lender and Agent shall
be entitled to recover such funds, on demand from such Lender together with
interest thereon for each day from the date such payment was due until the date
such amount is paid to Agent at the Federal Funds Rate for each day during such
period (as published by the Federal Reserve Bank of New York or at Agent's
option based on the arithmetic mean determined by Agent of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York City time) on that day by each of the three leading brokers of Federal
funds transactions in New York City selected by Agent) and if such amounts are
not paid within three (3) days of Agent's demand, at the highest Interest Rate
provided for in Section 3.1 hereof applicable to Prime Rate Loans.
(b) Lenders hereby irrevocably authorize Agent, at its option and in
its discretion to release any security interest in, mortgage or lien upon, any
of the Collateral (i) upon termination of the Commitments and payment and
satisfaction of all of the Obligations and delivery of cash collateral to the
extent required under Section 13.1 below, or (ii) constituting property being
sold or disposed of if Administrative Borrower or any Borrower or Guarantor
certifies to Agent that the sale or disposition is made in compliance with
Section 9.7 hereof (and Agent may rely conclusively on any such certificate,
without further inquiry), or (iii) constituting property in which any Borrower
or Guarantor did not own an interest at the time the security interest, mortgage
or lien was granted or at any time thereafter, or (iv) having a value in the
aggregate in any twelve (12) month period of less than $3,500,000, and to the
extent Agent may release its security interest in and lien upon any such
Collateral pursuant to the sale or other disposition thereof, such sale or other
disposition shall be deemed consented to by Lenders, or (v) if required or
permitted under the terms of any of the other Financing Agreements, including
any intercreditor agreement, or (vi) approved, authorized or ratified in writing
by all of Lenders. Except as provided above, Agent will not release any security
interest in, mortgage or lien upon, any of the Collateral without the prior
written authorization of all of Lenders. Upon request by Agent at any time,
Lenders will promptly confirm in writing Agent's authority to release particular
types or items of Collateral pursuant to this Section.
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(c) Without any manner limiting Agent's authority to act without any
specific or further authorization or consent by the Required Lenders, each
Lender agrees to confirm in writing, upon request by Agent, the authority to
release Collateral conferred upon Agent under this Section. Agent shall (and is
hereby irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the security interest, mortgage or liens
granted to Agent upon any Collateral to the extent set forth above; provided,
that, (i) Agent shall not be required to execute any such document on terms
which, in Agent's opinion, would expose Agent to liability or create any
obligations or entail any consequence other than the release of such security
interest, mortgage or liens without recourse or warranty and (ii) such release
shall not in any manner discharge, affect or impair the Obligations or any
security interest, mortgage or lien upon (or obligations of any Borrower or
Guarantor in respect of) the Collateral retained by such Borrower or Guarantor.
(d) Agent shall have no obligation whatsoever to any Lender or any
other Person to investigate, confirm or assure that the Collateral exists or is
owned by any Borrower or Guarantor or is cared for, protected or insured or has
been encumbered, or that any particular items of Collateral meet the eligibility
criteria applicable in respect of the Loans or Letter of Credit Accommodations
hereunder, or whether any particular reserves are appropriate, or that the liens
and security interests granted to Agent pursuant hereto or any of the Financing
Agreements or otherwise have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent in this Agreement or in any
of the other Financing Agreements, it being understood and agreed that in
respect of the Collateral, or any act, omission or event related thereto, Agent
may act in any manner it may deem appropriate, in its discretion, given Agent's
own interest in the Collateral as a Lender and that Agent shall have no duty or
liability whatsoever to any other Lender.
12.12 Agency for Perfection. Each Lender hereby appoints Agent and each
other Lender as agent and bailee for the purpose of perfecting the security
interests in and liens upon the Collateral of Agent in assets which, in
accordance with Article 9 of the UCC can be perfected only by possession (or
where the security interest of a secured party with possession has priority over
the security interest of another secured party) and Agent and each Lender hereby
acknowledges that it holds possession of any such Collateral for the benefit of
Agent as secured party. Should any Lender obtain possession of any such
Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's
request therefor shall deliver such Collateral to Agent or in accordance with
Agent's instructions.
12.13 Successor Agent. Agent may resign as Agent upon thirty (30) days'
notice to Lenders and Parent. If Agent resigns under this Agreement, the
Required Lenders shall appoint from among the Lenders a successor agent for
Lenders. If no successor agent is appointed prior to the effective date of the
resignation of Agent, Agent may appoint, after consulting with Lenders and
Parent, a successor agent from among Lenders. Upon the acceptance by the Lender
so selected of its appointment as successor agent hereunder, such successor
agent shall succeed to all of the rights, powers and duties of the retiring
Agent and the term "Agent" as used herein and in the other Financing Agreements
shall mean such successor agent and the retiring Agent's appointment, powers and
duties as Agent shall be terminated. After any retiring Agent's
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resignation hereunder as Agent, the provisions of this Section 12 shall inure to
its benefit as to any actions taken or omitted by it while it was Agent under
this Agreement. If no successor agent has accepted appointment as Agent by the
date which is thirty (30) days after the date of a retiring Agent's notice of
resignation, the retiring Agent's resignation shall nonetheless thereupon become
effective and Lenders shall perform all of the duties of Agent hereunder until
such time, if any, as the Required Lenders appoint a successor agent as provided
for above.
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS
13.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof (the "Renewal Date"), and from year to year thereafter, unless
sooner terminated pursuant to the terms hereof. Agent may, at its option (or
shall at the direction of any Lender in writing received by Agent at least
ninety (90) days prior to the Renewal Date or the anniversary of any Renewal
Date, as the case may be), terminate this Agreement and the other Financing
Agreements, or Administrative Borrower or any Borrower may terminate this
Agreement and the other Financing Agreements, each case, effective on the
Renewal Date or on the anniversary of the Renewal Date in any year by giving to
the other party at least sixty (60) days prior written notice; provided, that,
this Agreement and all other Financing Agreements must be terminated
simultaneously. In addition, Borrowers may terminate this Agreement at any time
upon ten (10) days prior written notice to Agent (which notice shall be
irrevocable) and Agent may, at its option, and shall at the direction of
Required Lenders, terminate this Agreement at any time on or after an Event of
Default. Upon the Renewal Date or any other effective date of termination of the
Financing Agreements, Borrowers shall pay to Agent all outstanding and unpaid
Obligations and shall furnish cash collateral to Agent (or at Agent's option, a
letter of credit issued for the account of Borrowers and at Borrowers' expense,
in form and substance satisfactory to Agent, by an issuer acceptable to Agent
and payable to Agent as beneficiary) in such amounts as Agent determines are
reasonably necessary to secure Agent and Lenders from loss, cost, damage or
expense, including attorneys' fees and expenses, in connection with any
contingent Obligations, including issued and outstanding Letter of Credit
Accommodations and checks or other payments provisionally credited to the
Obligations and/or as to which Agent or any Lender has not yet received final
and indefeasible payment and any continuing obligations of Agent or any Lender
pursuant to any Deposit Account Control Agreement. The amount of such cash
collateral (or letter of credit, as Agent may determine) as to any Letter of
Credit Accommodations shall be in the amount equal to one hundred ten (110%)
percent of the amount of the Letter of Credit Accommodations plus the amount of
any fees and expenses payable in connection therewith through the end of the
latest expiration date of such Letter of Credit Accommodations. Such payments in
respect of the Obligations and cash collateral shall be remitted by wire
transfer in Federal funds to the Agent Payment Account or such other bank
account of Agent, as Agent may, in its discretion, designate in writing to
Administrative Borrower for such purpose. Interest shall be due until and
including the next Business Day, if the amounts so paid by Borrowers to the
Agent Payment Account or other bank account designated by Agent are received in
such bank account later than 12:00 noon, Chicago, Illinois time.
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(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge any Borrower or Guarantor of its
respective duties, obligations and covenants under this Agreement or the other
Financing Agreements until all Obligations have been fully and finally
discharged and paid, and Agent's continuing security interest in the Collateral
and the rights and remedies of Agent and Lenders hereunder, under the other
Financing Agreements and applicable law, shall remain in effect until all such
Obligations have been fully and finally discharged and paid. Accordingly, each
Borrower and Guarantor waives any rights it may have under the UCC to demand the
filing of termination statements with respect to the Collateral and Agent shall
not be required to send such termination statements to Borrowers or Guarantors,
or to file them with any filing office, unless and until this Agreement shall
have been terminated in accordance with its terms and all Obligations paid and
satisfied in full in immediately available funds.
(c) If for any reason this Agreement is terminated prior to the
Renewal Date, in view of the impracticality and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of Agent's and each Lender's lost profits as a result
thereof, Borrowers agree to pay to Agent for itself and the ratable benefit of
Lenders, upon the effective date of such termination, an early termination fee
in the amount equal to
Amount Period
------------------------------------------ ----------------------------------------------------------
(i) 1% of Maximum Credit From the date hereof to and including the first
anniversary of the date hereof
(ii) .50% of Maximum Credit From and after the first anniversary of the date
hereof to and including the second anniversary
of the date hereof
(iii) .25% of Maximum Credit From and after the second anniversary of the
date hereof to but not including the third
anniversary of the date hereof or if the term
of this Agreement is extended, at any time prior to the
end of the then current term.
Such early termination fee shall be presumed to be the amount of damages
sustained by Agent and Lenders as a result of such early termination and
Borrowers and Guarantors agree that it is reasonable under the circumstances
currently existing. In addition, Agent and Lenders shall be entitled to such
early termination fee upon the occurrence of any Event of Default described in
Sections 10.1(g) and 10.1(h) hereof, even if Agent and Lenders do not exercise
the right to terminate this Agreement, but elect, at their option, to provide
financing to any Borrower or permit the use of cash collateral under the United
States Bankruptcy Code. The early termination fee provided for in this Section
13.1 shall be deemed included in the Obligations.
13.2 Interpretative Provisions.
(a) All terms used herein which are defined in Article 1, Article 8
or Article 9 of the UCC shall have the meanings given therein unless otherwise
defined in this Agreement.
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(b) All references to the plural herein shall also mean the singular
and to the singular shall also mean the plural unless the context otherwise
requires.
(c) All references to any Borrower, Guarantor, Agent and Lenders
pursuant to the definitions set forth in the recitals hereto, or to any other
person herein, shall include their respective successors and assigns.
(d) The words "hereof", "herein", "hereunder", "this Agreement" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(e) The word "including" when used in this Agreement shall mean
"including, without limitation" and the word "will" when used in this Agreement
shall be construed to have the same meaning and effect as the word "shall".
(f) An Event of Default shall exist or continue or be continuing
until such Event of Default is waived in accordance with Section 11.3 or is
cured in a manner satisfactory to Agent, if such Event of Default is capable of
being cured as determined by Agent.
(g) All references to the term "good faith" used herein when
applicable to Agent or any Lender shall mean, notwithstanding anything to the
contrary contained herein or in the UCC, honesty in fact in the conduct or
transaction concerned. Borrowers and Guarantors shall have the burden of proving
any lack of good faith on the part of Agent or any Lender alleged by any
Borrower or Guarantor at any time.
(h) Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of Parent most recently received
by Agent prior to the date hereof. Notwithstanding anything to the contrary
contained in GAAP or any interpretations or other pronouncements by the
Financial Accounting Standards Board or otherwise, the term "unqualified
opinion" as used herein to refer to opinions or reports provided by accountants
shall mean an opinion or report that is not only unqualified but also does not
include any explanatory note or language, including any explanation,
supplemental comment or other comment concerning the ability of the applicable
person to continue as a going concern or otherwise.
(i) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including", the words "to"
and "until" each mean "to but excluding" and the word "through" means "to and
including".
(j) Unless otherwise expressly provided herein, (i) references
herein to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other
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Financing Agreement, and (ii) references to any statute or regulation are to be
construed as including all statutory and regulatory provisions consolidating,
amending, replacing, recodifying, supplementing or interpreting the statute or
regulation.
(k) The captions and headings of this Agreement are for convenience
of reference only and shall not affect the interpretation of this Agreement.
(l) This Agreement and other Financing Agreements may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(m) This Agreement and the other Financing Agreements are the result
of negotiations among and have been reviewed by counsel to Agent and the other
parties, and are the products of all parties. Accordingly, this Agreement and
the other Financing Agreements shall not be construed against Agent or Lenders
merely because of Agent's or any Lender's involvement in their preparation.
13.3 Notices. All notices, requests and demands hereunder shall be in
writing and deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
Business Day, one (1) Business Day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing. All notices, requests and
demands upon the parties are to be given to the following addresses (or to such
other address as any party may designate by notice in accordance with this
Section):
If to any Borrower or Guarantor: c/o Universal Automotive Industries, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone No.: ▇▇▇ ▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Ltd.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone No.: ▇▇▇ ▇▇▇-▇▇▇▇
Telecopy No.: 312 527-3294
If to Agent: Congress Financial Corporation (Central)
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Portfolio Administrator
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Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
13.4 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
13.5 Confidentiality.
(a) Agent and each Lender shall use all reasonable efforts to keep
confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by any Borrower pursuant to this Agreement which is
clearly and conspicuously marked as confidential at the time such information is
furnished by such Borrower to Agent or such Lender, provided, that, nothing
contained herein shall limit the disclosure of any such information: (i) to the
extent required by statute, rule, regulation, subpoena or court order, (ii) to
bank examiners and other regulators, auditors and/or accountants, in connection
with any litigation to which Agent or such Lender is a party, (iii) to any
Lender or Participant (or prospective Lender or Participant) or to any Affiliate
of any Lender so long as such Lender or Participant (or prospective Lender or
Participant) or Affiliate shall have been instructed to treat such information
as confidential in accordance with this Section 13.5, or (iv) to counsel for
Agent or any Lender or Participant (or prospective Lender or Participant).
(b) In the event that Agent or any Lender receives a request or
demand to disclose any confidential information pursuant to any subpoena or
court order, Agent or such Lender, as the case may be, agrees (i) to the extent
permitted by applicable law or if permitted by applicable law, to the extent
Agent or such Lender determines in good faith that it will not create any risk
of liability to Agent or such Lender, Agent or such Lender will promptly notify
Administrative Borrower of such request so that Administrative Borrower may seek
a protective order or other appropriate relief or remedy and (ii) if disclosure
of such information is required, disclose such information and, subject to
reimbursement by Borrowers of Agent's or such Lender's expenses, cooperate with
Administrative Borrower in the reasonable efforts to obtain an order or other
reliable assurance that confidential treatment will be accorded to such portion
of the disclosed information which Administrative Borrower so designates, to the
extent permitted by applicable law or if permitted by applicable law, to the
extent Agent or such Lender determines in good faith that it will not create any
risk of liability to Agent or such Lender.
(c) In no event shall this Section 13.5 or any other provision of
this Agreement, any of the other Financing Agreements or applicable law be
deemed: (i) to apply to or restrict disclosure of information that has been or
is made public by any Borrower, Guarantor or any third party or otherwise
becomes generally available to the public other than as a result of a disclosure
in violation hereof, (ii) to apply to or restrict disclosure of information that
was or becomes available to Agent or any Lender (or any Affiliate of any Lender)
on a non-confidential basis from a person other than a Borrower or Guarantor,
(iii) to require Agent or any Lender to return any materials furnished by a
Borrower or Guarantor to Agent or a Lender or prevent
97
Agent or a Lender from responding to routine informational requests in
accordance with the Code of Ethics for the Exchange of Credit Information
promulgated by The ▇▇▇▇▇▇ ▇▇▇▇▇▇ Associates or other applicable industry
standards relating to the exchange of credit information. The obligations of
Agent and Lenders under this Section 13.5 shall supersede and replace the
obligations of Agent and Lenders under any confidentiality letter signed prior
to the date hereof.
(d) Notwithstanding anything to the contrary set forth herein or in
any of the other Financing Agreements or any other written or oral understanding
or agreement, (i) any obligations of confidentiality contained herein, in any of
the other Financing Agreements or any such other understanding or agreement do
not apply and have not applied from the commencement of discussions between the
parties to the tax treatment and tax structure of the transactions contemplated
herein (and any related transactions or arrangements), and (ii) each party (and
each of its employees, representatives, or other agents) may disclose to any and
all persons the tax treatment and tax structuring of the transactions
contemplated herein and all materials of any kind (including opinions or other
tax analyses) that are provided to such party relating to such tax treatment and
tax structure, all within the meaning of Treasury Regulation Section 1.6011-4;
provided, that, each party recognizes that the privilege that it may, in its
discretion, maintain with respect to the confidentiality of a communication
relating to the transactions contemplated herein, including a confidential
communication with its attorney or a confidential communication with a federally
authorized tax practitioner under Section 7525 of the Internal Revenue Code, is
not intended to be affected by the foregoing. Borrowers and Guarantors do not
intend to treat the Loans and related transactions as being a "reportable
transaction" (within the meaning of Treasury Regulation Section 1.6011-4). In
the event Borrowers or Guarantors determine to take any action inconsistent with
such intention, it will promptly notify Agent thereof. Each Borrower and
Guarantor acknowledges that one or more of Lenders may treat its Loans as part
of a transaction that is subject to Treasury Regulation Section 1.6011-4 or
Section 301.6112-1, and the Agent and such Lender or Lenders, as applicable, may
file such IRS forms or maintain such lists and other records as they may
determine is required by such Treasury Regulations.
13.6 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Agent, Lenders, Borrowers, Guarantors and
their respective successors and assigns, except that Borrower may not assign its
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Agent and Lenders. Any such purported assignment without such express prior
written consent shall be void. No Lender may assign its rights and obligations
under this Agreement without the prior written consent of Agent, except as
provided in Section 13.7 below. The terms and provisions of this Agreement and
the other Financing Agreements are for the purpose of defining the relative
rights and obligations of Borrowers, Guarantors, Agent and Lenders with respect
to the transactions contemplated hereby and there shall be no third party
beneficiaries of any of the terms and provisions of this Agreement or any of the
other Financing Agreements.
13.7 Assignments; Participations.
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(a) Each Lender may, with the prior written consent of Agent, assign
all or, if less than all, a portion equal to at least $5,000,000 in the
aggregate for the assigning Lender, of such rights and obligations under this
Agreement to one or more Eligible Transferees (but not including for this
purpose any assignments in the form of a participation), each of which assignees
shall become a party to this Agreement as a Lender by execution of an Assignment
and Acceptance; provided, that, (i) such transfer or assignment will not be
effective until recorded by Agent on the Register and (ii) Agent shall have
received for its sole account payment of a processing fee from the assigning
Lender or the assignee in the amount of $5,000.
(b) Agent shall maintain a register of the names and addresses of
Lenders, their Commitments and the principal amount of their Loans (the
"Register"). Agent shall also maintain a copy of each Assignment and Acceptance
delivered to and accepted by it and shall modify the Register to give effect to
each Assignment and Acceptance. The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and any Borrowers,
Obligors, Agent and Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by Administrative Borrower and any Lender at
any reasonable time and from time to time upon reasonable prior notice.
(c) Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in each Assignment and Acceptance, the
assignee thereunder shall be a party hereto and to the other Financing
Agreements and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations (including, without limitation, the obligation to participate in
Letter of Credit Accommodations) of a Lender hereunder and thereunder and the
assigning Lender shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under this Agreement.
(d) By execution and delivery of an Assignment and Acceptance, the
assignor and assignee thereunder confirm to and agree with each other and the
other parties hereto as follows: (i) other than as provided in such Assignment
and Acceptance, the assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any of the other
Financing Agreements or the execution, legality, enforceability, genuineness,
sufficiency or value of this Agreement or any of the other Financing Agreements
furnished pursuant hereto, (ii) the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any Borrower, Obligor or any of their Subsidiaries or the performance or
observance by any Borrower or Obligor of any of the Obligations; (iii) such
assignee confirms that it has received a copy of this Agreement and the other
Financing Agreements, together with such other documents and information it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance, (iv) such assignee will, independently and
without reliance upon the assigning Lender, Agent and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement and the
other Financing Agreements, (v) such assignee appoints and authorizes Agent to
take such action as agent on its behalf and to exercise such powers under this
99
Agreement and the other Financing Agreements as are delegated to Agent by the
terms hereof and thereof, together with such powers as are reasonably incidental
thereto, and (vi) such assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement and the
other Financing Agreements are required to be performed by it as a Lender. Agent
and Lenders may furnish any information concerning any Borrower or Obligor in
the possession of Agent or any Lender from time to time to assignees and
Participants.
(e) Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement and the other Financing Agreements (including, without
limitation, all or a portion of its Commitments and the Loans owing to it and
its participation in the Letter of Credit Accommodations, without the consent of
Agent or the other Lenders); provided, that, (i) such Lender's obligations under
this Agreement (including, without limitation, its Commitment hereunder) and the
other Financing Agreements shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, and Borrowers, Guarantors, the other Lenders and Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and the other Financing
Agreements, and (iii) the Participant shall not have any rights under this
Agreement or any of the other Financing Agreements (the Participant's rights
against such Lender in respect of such participation to be those set forth in
the agreement executed by such Lender in favor of the Participant relating
thereto) and all amounts payable by any Borrower or Obligor hereunder shall be
determined as if such Lender had not sold such participation.
(f) Nothing in this Agreement shall prevent or prohibit any Lender
from pledging its Loans hereunder to a Federal Reserve Bank in support of
borrowings made by such Lenders from such Federal Reserve Bank; provided, that,
no such pledge shall release such Lender from any of its obligations hereunder
or substitute any such pledgee for such Lender as a party hereto.
(g) Borrowers and Guarantors shall assist Agent or any Lender
permitted to sell assignments or participations under this Section 13.7 in
whatever manner reasonably necessary in order to enable or effect any such
assignment or participation, including (but not limited to) the execution and
delivery of any and all agreements, notes and other documents and instruments as
shall be requested and the delivery of informational materials, appraisals or
other documents for, and the participation of relevant management in meetings
and conference calls with, potential Lenders or Participants. Borrowers shall
certify the correctness, completeness and accuracy, in all material respects, of
all descriptions of Borrowers and Guarantors and their affairs provided,
prepared or reviewed by any Borrower or Guarantor that are contained in any
selling materials and all other information provided by it and included in such
materials.
13.8 Entire Agreement. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral
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or written. In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this Agreement shall
govern.
13.9 Counterparts, Etc. This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement or any of the
other Financing Agreements by telefacsimile shall have the same force and effect
as the delivery of an original executed counterpart of this Agreement or any of
such other Financing Agreements. Any party delivering an executed counterpart of
any such agreement by telefacsimile shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Agent, Lenders, Borrowers and Guarantors have caused
these presents to be duly executed as of the day and year first above written.
AGENT BORROWERS
CONGRESS FINANCIAL CORPORATION UNIVERSAL AUTOMOTIVE, INC.
(CENTRAL), as Agent
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
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Title: Vice President Title: President
UNIVERSAL AUTOMOTIVE OF
VIRGINIA, INC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
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Title: President
UNIVERSAL BRAKE PARTS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
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Title: President
THE AUTOMOTIVE COMMODITY
CONNECTION, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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Title: Chief Financial Officer
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LENDERS
CONGRESS FINANCIAL CORPORATION
(CENTRAL)
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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Title: Vice President
Commitment: $___________
GUARANTORS
UNIVERSAL AUTOMOTIVE INDUSTRIES,
INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
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Title: President
UBP HUNGARY, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
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Title: President